Puerto Rico cancels $4bn water deal

Friday, January 16, 2004

SAN JUAN, Puerto Rico: Puerto Rico and Ondeo Services, a unit of French utilities group Suez, have cancelled a $4 billion contract agreed 20 months ago for management of the island's troubled water services.

According to a report by the Financial Times, the cancellation of the 10-year contract followed Ondeo Services' request for $93m more from the Caribbean island's government.

It claimed this was to compensate for losses it suffered because it was given false information about the condition of the Puerto Rico Aqueduct and Sewer Authority (Prasa). Sila Calderón, governor, said she was pleased with cancellation of the contract. "The negotiations were long, difficult and complex," she said. "The financial arrangements have been the basis for all the negotiations and for cancelling the contract."

Prasa will start to retake control of the water infrastructure on April 1 and will assume full control on June 30. The government had said it would save $1bn over the 10 years, eliminating Prasa's $204m deficit. However, the administration balked at Ondeo's request for more money. The company said it discovered discrepancies in the information it was given about the condition of the water system and on which it based its due diligence.  

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