Aquiris: Veolia's lost bet in Brussels

Aquiris is the name of a consortium that was created in 2001 by Veolia Environnement, the biggest water services corporation in the world, and other companies to bid for the building and operation of the North Brussels wastewater treatment plant (WWTP), a €1.2 billion contract. Prior to that, most of Brussels' wastewater was not treated but dumped raw in rivers, an option which is no longer acceptable under a 1991 EU Directive (91/271/EEC) concerning urban wastewater treatment which requires all European cities to treat their wastewater before disposal. Building wastewater treatment plants is expensive and, according to a Brussels MP, the Region could not make the investment required because of another EU legal requirement for local authorities that limit the amount of debt they are allowed to hold (the SEC 95 accountancy standards). This led the Region to chose a Build Own Operate Transfer (BOOT) contract to develop the plant, leading to the building of one of the biggest privately developed wastewater treatment plants in the world, because such contracts allow public authorities to develop infrastructure projects without the total investment costs appearing in their yearly accounts. Having won the contract in 2001 with a commitment to use a new non-combustion on-site sludge treatment technique, the wet air oxidation Athos process developed by Veolia, Aquiris started building the plant in June 2003 and completed it in 2007. The plant was given initial approval in 2007 by the Brussels region and officially started in March 2008, but there were technical problems, which stopped the Brussels authorities from giving final approval. Veolia's Athos process proved less flexible to operate than expected. Because of these unresolved problems, tensions grew between Aquiris and the public regional authority in charge of water and wastewater management, the Société Bruxelloise de Gestion des Eaux (SBGE). At the end of 2008, Aquiris asked the Brussels region for an extra € 40 million for complementary works, but SBGE refused to pay because this was not included in the contract. In May 2009, an SBGE inspection found that Aquiris was trying to build a new de-sanding installation (to remove sand from the wastewater) without permission, and the works were stopped. Aquiris complained that the wastewater quality was poorer than envisaged when they agreed the contract, because of the amount of sands and gravel, and that was why SBGE should pay an extra €40 millions to solve the problem. The SBGE denied there was any change in wastewater quality since the initial 2001 study and ordered a new audit of Brussels' wastewater quality by French consultants Merlin. Meanwhile, SBGE asked Acquiris in February 2009 whether the plant could at last become fully operational. But Aquiris said there were still problems with incoming wastewater quality. Press reports later found that Aquiris was beginning to lose lots of money, as it had to send 200 tons of sludge everyday by truck to Germany to fulfill its contractual requirements. Veolia Environnement tried to sell its shares in the consortium but couldn't find a buyer. In late November 2009, Aquiris shut down one of the three main collectors, saying that heavy rains had further deteriorated the quality of the incoming wastewater. However, the Merlin study, published on December 8th, found there was no substantial difference in Brussels' wastewater quality. On the same day, Aquiris shut the plant down completely, dumping the wastewater from 1.1 million people into three rivers leading to the Flanders region and the North Sea; it was only 10 days later that the plant was restarted, in the middle of a major public row. The story made the headlines in all the major newspapers in the country for more than a week, provoking much indignation. The SBGE accused Aquiris of environmental blackmail to get extra money, Aquiris maintained that Brussels' poor quality wastewater threatened the very security of the plant itself. The right-wing opposition (whose leader Didier Gosuin had signed the deal with Aquiris in 2001) launched a very active campaign against the Environment Minister, accusing her of irresponsible management and poor supervision. Beyond the environmental scandal, these events triggered fresh rivalry between the French and Flemish-speaking parts of the country, with Flanders suing the Brussels region for damages. Jean-Michel Herrewyn, the newly appointed chief executive of Veolia Water, was forced to come to Brussels and meet the top authorities in the Brussels Region and promise that Veolia Water would not let one of its subsidiaries go bankrupt. The plant's operations were gradually resumed from December 19th, among numerous lawsuits from all sides. Aquiris' manager was replaced, and Aquiris and SBGE now mostly communicate through their lawyers. Further investigations revealed that the Athos process had in fact not been tested on such a large scale before the plant was built (it had been tested for industrial wastewater, but not for urban wastewater treatment), and apparently suffered from a structural flaw in its design (the sand particles present in the sludge pose a serious threat to the infrastructure at the high pressures – 40 Bar – used in the Athos wet air oxidation process, and options for removing these particles are complicated and costly). This fact had been flagged up by Aquiris' competitors who had tried in vain to challenge the contract's award and by the Flanders Region which initially refused to pay its share of the costs because of these concerns (rumours of corruption surrounded this deal as many wondered why a technology that was only at an experimental stage had been allowed to compete). Aquiris however chose to claim that the poor quality of the wastewater was to blame, hoping to have the Brussels Region cover the costs of the extra works needed to get the plant to operate properly – if this plant can be operated at all. This also explains why the early calls for the Region to take the plant's management back into public hands were quickly silenced: taking this plant in to public management would severely indebt the Region... Behind these spectacular events is the story of how a private corporation used public money to develop a new technology which will be sold elsewhere for the company's sole profit (Veolia Water used the Aquiris case extensively in its marketing, because a safe and more environmentally-friendly method to dispose of wastewater sludge is much in demand at the moment). Unfortunately this proved to be a riskier bet than originally envisaged, and the two ”partners” of the costliest water Public Private Partnership (PPP) in Belgium now face mountains of sludge waiting to be treated, piles of debt and a brand new plant which has still not been shown as up to the job...