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Brussels water company Vivaqua faces debt and disorganisation

14:43 15/06/2023

Vivaqua, Brussels’ water company, is facing IT problems, €1.2 billion in debt and prohibitively expensive sewer repair costs, according to a report by L’Echo newspaper.

Vivaqua director Laurence Bovy told L’Echo that Vivaqua needs to make a profit of €50 million a year to be able to make necessary investments in the water and sewage network, without running up further debts.

But renovation costs are estimated at €4,000 per metre of sewer and come at the same time as the company faces budget cuts and a mountain of debt.

The idea of turning such a high profit seems especially far-fetched considering Vivaqua ended last year with a loss of €400,000. Bovy has asked for additional funds from the Brussels region.

The news prompted a meeting in the environment committee of the Brussels parliament, Bruzz reports, during which Cieltje Van Achter (N-VA) expressed a desire to step in and help, saying: “Surely we are not going to endanger the population's water supply, and greatly increase the risk of road subsidence and sinkholes?”

But environment minister Alain Maron (Ecolo) pointed out that Vivaqua is an intercommunal association, meaning he has no power to intervene: 19 Brussels municipalities and four Walloon ones run Vivaqua.

While as minister, Maron is responsible for water policy, the intermunicipal company is under regional supervision and that region is guarantor in case of any default.

“Vivaqua does indeed have a large debt, a significant part of which is historical,” Maron said. “That debt has been compounded by high inflation in recent months and the necessary investments in renovating the sewer system, which is in a very poor state.”

According to the latest annual report, approved last week, Vivaqua’s debt at the end of 2022 was no less than €1.15 billion: already €122 million more than the previous year and almost four times Vivaqua's annual turnover.

The Brussels-based water company now has twice as much debt as equity: a very unhealthy financial situation. Those debts cannot grow any further without endangering the company and the region that guarantees €300 million in loans.

The fact that the old sewage system is in such a bad state is because the municipalities, which used to be responsible for it, neglected to invest heavily in things that voters cannot easily see for themselves, according to Bruzz.

When they jointly set up the intermunicipal company Hydrobru, a predecessor of Vivaqua, it immediately had to borrow heavily to be able to start the urgent works, accumulating €600 million in debts.

When drinking water producer Vivaqua merged with Hydrobru in 2017, it had to take over those debts.

The 15 Flemish municipalities that were still involved with Vivaqua left permanently after invoking a conflict of interest.

“Even then we saw that Vivaqua was doomed to hit a rock,” recalled Bart Nevens (N-VA), former first alderman of Kortenberg.

This was due not only to the old sewer network, but also to the structure of the organisation, which is not very lean: “During the separation of assets, it became very clear that Vivaqua had a much higher cost structure per water metre than Flemish water companies such as Farys or De Watergroep. A lot more people are employed to do the same work.”

That high cost structure was also noticed by Brugel, the Brussels regulator for electricity, gas and water pricing.

“The payroll there is bigger than at other water companies,” said coordinator Pascal Misselyn. “Whether that is due to the number of staff or the pay, I cannot say, but at least the product of the two is higher than elsewhere.”

In the committee meeting, Maron said Vivaqua was already making internal plans for cuts: “From the government, we have also ordered a study on the rationalisation of the water sector. The result of that is expected in early 2024.”

MP Aurélie Czekalski (MR) said politicians had been waiting for that for 12 years now, and Van Achter called the plan insufficient, calling instead for a thorough vetting process.

“Such a thing can only be done by the Court of Audit,” Van Achter argued. N-VA already submitted a resolution to that effect in 2017, in vain, but Van Achter is hoping for more support now.

Regardless, concerns for the future of Vivaqua are mounting: in addition to the expensive renovation of the sewers and the high cost structure, the company was also confronted with sharply increased prices for energy and building materials, IT problems - as a result of which many families did not receive an invoice or received an incorrect invoice - and a resulting negative cash flow. Vivaqua had to borrow from its own pension fund, Hydralis, to clear the accounts.

That very pension fund made a loss of no less than €104 million last year, meaning it is shrinking despite the fact that this is not allowed by financial watchdog FSMA.

“A poorly performing Hydralis is therefore a big risk for Vivaqua,” said Emmanuel De Bock (Défi). “The whole structure is opaque. How it is that the costs at Vivaqua are so high is unclear.”

The organisation could try to save on staff, but even then, the task remains enormous: it has to renovate 20 to 25 kilometres of worn-out sewers a year at that cost of €4,000 per metre, which comes on top of water production and distribution, maintenance of water mains, storm drains and so on.

Vivaqua only has residents’ water bills to pay for those, but it cannot simply raise the rates.

“One in three Brussels residents already has a social tariff, there's not much of a stretch left on that,” one board member told Bruzz anonymously, saying Vivaqua's hands are tied.

Vivaqua director Bovy is asking for a fully automatic indexation of the water price and an allocation from the Brussels region, so as to be able to set aside €50 million each year for investments, a measure which took Brugel (the Brussels electricity, gas and water price control regulator) by surprise.

“Tap water tariffs have already increased by 14.5% this year, at Bovy's own suggestion,” said coordinator Misselyn, adding that the reasons given were inflation and increased maintenance costs.

“It’s a bit strange to come and ask for another annual allocation just four months later.”

According to Bovy, however, that price increase was simply not enough: “We cannot pay the necessary investments with it.”

The 2023 price rise will bring in an additional €22 million, while the annual repayment of interest alone amounts to some €25 million – and interest rates are still rising.

Still, Maron and others are sceptical of pumping more funds into the water company without more structural solutions.

He and other Brussels politicians are calling for a hearing with Vivaqua’s director Bovy.

“We want to know what Vivaqua will now seriously do to operate more efficiently,” said Cieltje Van Achter.

Written by Helen Lyons