ARGENTINA: Aguas Argentinas II

Environmental Review Summary


1. In 1993, Aguas Argentinas (AA), a consortium of French, Argentine, Spanish and English water operating companies/investors led by the French private water company Lyonnaise des Eaux, was awarded a 30 year exclusive concession to provide potable water and sewage services to metropolitan Buenos Aires. To meet the concession''s expansion and improvement objectives defined in the contract, AA is bound to realize an investment program of approximately US$4 billion over the life of the concession. The first five year plan (1993 to 1998), in which approximately US$1.2 billion will be invested, will rehabilitate and extend the potable water and sewage collection and treatment systems within the concession. In 1994, IFC provided debt financing of US$172.5 million and equity of US$7 million to assist in covering capital expenditures between May 1993 and May 1995 (AA I). IFC has been requested by AA to provide US$150 million for the July 1995 to June 1997 capital expenditure program (AA II). The AA II capital expenditure program involves the continued rehabilitation and expansion of the potable water distribution network as well as the sewage system, the construction of two new wastewater treatment plants (Planta Norte and Planta Berazategui) and the expansion of an existing wastewater treatment plant (Sudoeste).

2. This is a category B project according to IFC''s environmental review procedure because specific impacts may result which can be avoided or mitigated by adhering to generally recognized performance standards, guidelines or design criteria. The review of this project consisted of a site visit by IFC''s Technical and Environment Department, an assessment of the Company''s progress in implementing the mitigation measures proposed in the Montgomery/Watson "Aguas Argentinas: Environmental Audit of Concession Area", November, 1994 and an evaluation of the environmental aspects of the July 1995 to June 1997 capital expenditure program. The following key environmental, health and safety impacts of this project were reviewed and found satisfactory: progress made during AA I regarding concessional obligations; environmental and occupational health and safety management systems; groundwater management; sludge management; handling of hazardous materials; occupational health and safety; and environmental aspects of the new capital expenditure program.

3. Upon award of the concession for water supply and sewer services for a 1,200 km2 urban area sheltering nearly nine million inhabitants, the water distribution system served 73 percent of the population while the wastewater collection network served 58 percent of the inhabitants. Both networks, however, were inefficient and in a state of extensive disrepair. Only three to five percent of Buenos Aires'' total sewage loading was being treated at a sole wastewater treatment plant facility (Planta Sudoeste). During AA I, an additional 400,000 residents received water service and 250,000 received sewer collection service. Repairs of 1,200 water leaks were completed and 2,770 sewer blockages cleared and 80,000 meters were either installed or changed. Major upgrades were also made to the Concession''s two water treatment plants (San Martin and General Belgrano). Water production consequently increased from 3.5 million m3/day to 4.4 million m3/day resulting in the first summer in fifteen years without a water shortage.

4. In November, 1994, a Technical and Quality Control Department was created which includes a Water, Sewage and Environment Division. The Division has been proactive in studying river sewage loading within the concession, the potable water network, evaluating existing and developing new groundwater supplies and assessing alternatives for the disposal of sewage sludge. In addition, the Division has been actively implementing the environmental mitigation measures recommended in the Montgomery/Watson environmental audit. A Safety and Industrial Hygiene Department has also been created. The Department has completed occupational health and safety audits of all of the concession''s 46 sites. On the basis of these audits, an elaborate occupational health and safety program, together with a Company-wide computerized reporting system, are now operational.

5. Both the Water, Sewage and Environment Division and the Safety and Industrial Hygiene Department are actively engaged in community programs to improve environmental quality. For example, the Division has initiated limnological studies and a remediation program for Lago de Regatos (Palermo), an 11 hectare recreational lake adjacent to San Martin. The Safety and Industrial Hygiene Department is working with residents in the vicinity of the Wilde Wastewater Pumping Station on a noise abatement program. In addition, in areas where AA is extending the water distribution and sewage networks, extensive consultations with residents, neighborhood associations and municipal authorities are being conducted regularly.

6. Approximately 800,000 wells are in the presently unserved zones of the concession area, with the majority of them shallow yielding on average one liter/hour. Currently, many of these wells have significant levels of bacteriological contamination. As the potable water distribution network is expanded, most of these wells will be abandoned. In the interim, the Water, Sewage and Environment Division is preparing a user manual on the proper maintenance, operation and monitoring of these wells to assist users in ensuring that they maximize water quality from these wells until they are connected to the network.

7. Upon assuming the concession, 250 deep wells supplemented the potable water being produced at San Martin and General Belgrano. Most of these wells are contaminated by nitrates, chromium and have high levels of salinity. Since May 1993, AA has been removing these wells from the system by closing them. By the end of the first five year plan (1998), all of these deep contaminated wells will be removed from the system. The Inter-American Development Bank is assisting in the financing of this program for wells contaminated with nitrates. To replace these sources, the Water, Sewage and Environment Division is researching the development and environmental protection of two large well fields within the concession area to replace water from these contaminated wells and to augment potable water supplies from San Martin and General Belgrano.

8. AA originally planned to continue disposing of sewage sludge at sea for the first twenty years of the concession and to incinerate the sludge after that up to the end of the concession. On the advice of the Water, Sewage and Environment Division, reinforced by the new Government of Argentina (GOA) Law 24,051 (Regulation 831/93) which now prohibits the disposal of sewage sludge at sea after December 31, 1995, alternatives to sea disposal are being assessed. These include land rehabilitation projects as well as applying sludge to agricultural lands. Both of these options hold out significant benefits for metropolitan Buenos Aires.

9. The Safety and Industrial Hygiene Department has made significant progress in introducing programs in the handling of hazardous materials. The Chlorine Institute Inc.''s recommendations for storage, handling and application of chlorine has been introduced across the Company. An off gas management program including ventilation and cyclones has been introduced at the aluminum sulfate production facility at the General Belgrano water treatment plant. Almost all transformers containing PCB''s have been removed from active service and they are now in storage in accordance with GOA''s Law 24,051 (January 8, 1992) regarding the storage and disposal of PCB containing material. Upgraded lime handling facilities are being built at both San Martin and General Belgrano.

10. Occupational health and safety practices, upon being awarded the concession, were extremely poor. The existing labor union waved their right to health and safety programs in exchange for "hazard bonuses". AA has since introduced a comprehensive program to address both health and safety. State-of-the-art bathroom and shower facilities are now available at most sites. AA has introduced OSHA requirements for workers and has nearly completed its concession wide program of installing railings around hazardous workareas. On December 21, 1994, Ente Tripartito de Obras y Servicios Sanitarios certified and approved AA''s Emergency and Prevention Plan.

11. GOA Resolution 105/92 requires that environmental impact statements (EIA''s) be prepared for new projects. A similar requirement was enacted in Buenos Aires in April 1995. In accordance with these requirements, AA is preparing (drafts were available in March, 1995) EIA''s in accordance with these requirements for Planta Norte and Planta Sudoeste. The draft EIA''s outline extensive measures to mitigate the potential impacts of these two plants on the surrounding environment and adjacent community. All other rehabilitations and expansions under AA II will continue to be monitored by the Water, Sewage and Environment Division and the Safety and Industrial Hygiene Department and their work will continue to be conducted in accordance with GOA and local requirements.

12. IFC will ensure ongoing compliance with World Bank environmental, health and safety policies and guidelines during the life of the project by evaluating monitoring reports submitted annually to IFC by AA and by conducting periodic supervision.

13. Based on its review of available information regarding potential environmental impacts and proposed mitigation measures, IFC concludes that AA I is in compliance with World Bank environmental, health and safety policies and guidelines, and host country requirements and that the proposed AA II project is designed to meet these same policies, guidelines and requirements.