Mexico: Merger of Municipal Water Authorities, 2000

The Situation

A State capital in Mexico, Puebla, was served by a state water utility and several small municipal water service providers, which were perceived to be failing on the quality and efficiency of provision. The state government wanted to know whether the small utilities could be merged together to create a combined entity, and to evaluate the options for injecting private finance into the industry.

NERA's Role

NERA provided economic, financial and regulatory advice on the creation of a regional water and sewerage entity to incorporate the utility serving the state capital and a number of smaller municipal utilities. The work focused on the necessary legal structures, governance arrangements and regulation required for the new entity. An investment ‘Master Plan,’ the business plan, financing arrangements and tariffs were also considered.

The Result

The study uncovered a range of impediments to the proposed merger and the proposals were consequently abandoned.