The year 1989 was not only a change in political and social field but also significant changes were brought into the water management. Act No. 367/1990 Coll., on the municipalities included in the so-called independent competence of the municipality also "the cleanliness of the municipality, the disposal of household waste and its safe liquidation, water supply, drainage and waste water treatment". In the case of water supply and sewerage systems, the municipalities assumed responsibility for the property that was formerly owned by the state and the right to manage was carried out by the organization of water supply and sewerage systems, in the case of North Bohemia it was the state-owned enterprise of the company Severočeské vodovody a kanalizace (SčVK).

The process of privatization of state-owned enterprises in the field of water supply and sewerage began by Resolution of the Government of the Czech Republic No. 222 on July 3, 1991. Privatization in the field of water supply and sewerage was carried out according to generally valid regulations on the privatization and de-privatization of the Czech Republic's property.

Privatization project SVS and SčVK

On May 13, 1993, the Ministry of National Property Administration approved the privatization project of the state enterprise SčVK.

Towns and municipalities that have decided to join the Severočeská vodárenská společnost (SVS) agreed on June 8, 1993 in Teplice to establish a preparatory committee for establishing the SVS company and then they delegated its representatives.

In September 1993, the National Property Fund in Prague issued the founding charter of the Severočeská vodárenská společnost (SVS).

The basic principles of the emerging company were agreed in the preparatory negotiations. Throughout its life the company follows these principles and the development has confirmed its suitability:

  • Unified solidarity award
  • The incorporation of profits into the company's assets
  • Decision making using rational economic methods
  • Maintaining a socially acceptable water price

On October 1, 1993, by the National Property Fund the SVS Inc. was based, owned by municipalities, as proprietary company, on which the state transferred water management property and also the company SčVK Inc. was founded, temporarily owned by the state, as a company operating property of SVS, on which transferred all state property related to operations - all buildings, machinery, laboratories, documentation, and all state-owned employees.

The primary interest of both companies was to show that maintaining a water company in the vast territory of North Bohemia was meaningful and economically beneficial and acknowledge mayors to the legitimacy of this decision.

On the ownership company (SVS) should be transferred infrastructure property at book value 8,134,971,000 CZK. The basic assets of the company amounting 7,395,428,000 CZK and was as a part of the privatization project divided as follows:

  • RIF (Residential Investment Fund): 3.00%
  • NIF (Foundation Investment Fund): 1.00%
  • Free transfer to municipalities: 87.25%
  • Free transfer to municipalities (investment): 8.75%.

Subsequently, the acquisition of water assets from 171 member municipalities in the total value of CZK 472,685,318 was completed during the first half of 1995. Basically, it was related to the buildings which were made in so-called "Z" events, mostly of poor quality, and historical property built before 1948. It was necessary to check these assets and propose technical measures to achieve standard quality. In the region, as well as throughout the Czech Republic, the construction of sewage treatment plants was also neglected for a long time and their construction was very urgent.

In the case of SčVK, the privatization project prepared by the Ministry recommended a so-called French model, i.e. the complete separation of the operating part and the infrastructure (ownership) part while preserving the original scope of the company. The operator provides water supply and drainage and pays the owner the rent from which the owner reimburses the renovation of the infrastructure facilities. The funds for investment construction are provided by the owner.

The operating property of the state enterprise SčVK, in the book amount of 583,494,000 CZK, was inserted in the operating company SčVK Inc. A substantial part of the property of the operating company SčVK was proposed for privatization by the coupon method with the reservation of the stake for sale to the selected foreign investor. The Company's registered capital of 385,802,000 CZK was divided as follows:

RIF (Residential Investment Fund) 3%
NIF (Foundation Investment Fund) 1%
Coupon privatization 58%
Social and Health Insurance Fund 12%
Shares deposited in the FNM for future foreigners 20%
Employee shares 6%
SVS 0%
Total 100%

Efforts to increase the influence of the company SVS in SČVK

In 1994, the first wave of coupon privatization took place, including 58% shares of Severočské vodovody  a kanalizace. The interest in these shares was considerable and the decision was made by the last round. The largest part of shares was acquired by investment funds. This changed the SČVK from a public limited company to a private entity.

At the same time, the state sold the determined 19 % share to the selected foreign "strategic" investor which was Welsh Water Int. (WWI). The purpose of the sale, besides the financial profit for the state, was to increase the quality of services and the long-term security of the large, non-speculative owner. WWI immediately approached the fund owners with the offer of cooperation and the redemption of their shares.

Simultaneously with coupon privatization, the SVS company negotiated with the Fund and the ministries to allocate part of the shares still managed by the National Property Fund. The negotiations lasted for a long time, SVS started to be gradually stabilized, elaborated and published the business plan and gained broad support from the mayors of the shareholder communities. The SVS´s Board of Directors succeeded in convincing the government of prof. Václav Klaus to revoke the original decision and to change the intention to divide the shares of the operating company in favor of the SVS company. Already in February 1997, the company became one of the major shareholders of the operating company:

Welsh Water Int. 35,82%
IKS KB 16,91%
SVS 13,00%
IS EXpandia 11,48%
Alpha Eff. KIS 8,75%
FNM 6,00%
Krušnohorský IF 3,41%
AAA KIS 1,20%
Patria finance 0,26%
Others 3,17%
Total 100%

Due to its efforts to strengthen the influence of the SVS in the operating company in favor of its shareholders, the relationship between the SVS and the other major shareholders was shaken and the WWI filed an appeal together with the larger investment funds to the Office for the Protection of Competition. They argued that their investments could be threatened in the future. After examining all the facts, the Office rejected their protest and confirmed their shares to the SVS. WWI succeeded in buying shares of a number of small investment funds and gradually increased its stake. The SVS, in response to the WWI negotiations, commissioned its financial partner Patria Finance in Prague to buy further shares from small owners in the previous stock market RMS.

In the first half of 1997, SVS bought the remaining shares from the FNM and the shares acquired by Patria and increased its stake to 19.26%. In 1998, afterwards, the SVS bought 14.9% from the investment fund Expandia and together with other small shareholders became the second largest shareholder with 34.74%.

It crosses the fund's plans, and because the Welsh water company has run into financial problems, together with the IKS and KIS Funds, they left SčVK and together offer almost 64% of shares in the London market through an English broker. The condition for sale was also the deferred purchase of 20% of the shares that Welsh received from the state as a strategic partner, subject to the requirement to remain in the SčVK until 2000.

Stock trading took place in London on April 7, 1999. The highest bid was submitted by Compagnie Generale des Eaux (CGE, later Vivendi, now Veolie) at a net rate of 3200 CZK per share. Holdings of the SčvK shares after the sale were as follows:

SVS (203 018 pcs) 34,74%
CGE/Veolia (252 217 pcs) 43,16%
Hyder (116 854 pcs) 19,19%
Other shareholders (12 182 pcs) 2,91%
Total 100%

Then there was a long and complicated negotiation between the Board of Directors of the SVS and the leadership of the European CGE Division about management, control and business directions of SčVK. CGE has declared interest in long-term contractual stabilization, which will ensure return on investment and the possibility of presenting the quality and solidity of the services for possible further acquisitions in the Czech Republic. The SVS required the possibility of controlling the entire business of SčVK, controlling profit distributions, influencing the quality of the operation and reconciling the SVS's long-term business plan with annual operational plans. Half a year later, negotiations came to a mutual agreement that has satisfied both sides, and is still valid today.

The shareholding was contracted by selling CGE´s 24,598 shares at the acquisition price after the signature of the SVS contract, and after buying the remaining shares from Hyder in 2000 will sell also the half of them. It was in the interest of both parties to extend the operating and lease contract to 20 years, i.e. by 2020, to ensure the long-term planning of both companies. The agreement was signed at the end of 1999 and 4.21% of the shares were acquired by the SVS in the same year. In the following year, the transfer of Hyder shares to CGE was completed and thus the sale of 58,427 shares of the SVS company too.

Actual status of SčVK shares:

SVS 49,1%
CGE(Veolia) 50,1%
Other shareholders 0,8%
Total 100%

Over the years following the conclusion of the agreement, both partners have focused on increasing the company's efficiency and productivity. Although the value of operating property has risen to nearly double, the number of employees has fallen from the original 3600 to the current 1830. Gradually, the number of operations ranges from ten to the current three. The SVS has thus secured influence in the operating company and can thus point to positive trends - the increase in rent for the SVS, which is reinvested in full, and the increase in the volume of repairs made directly by our SčVK operator.

The number of SVS shareholders gradually expanded to the current 458 towns and municipalities of the Ústí and the majority part of the Liberec Region.

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