Interview with Olivier Barbaroux
President and Chief Operating Officer, Vivendi Water
Interview by CBC Radio's Bob Carty
Paris, France | Dec. 5, 2002

Olivier Barbaroux, an engineer, is the president and chief operating officer for Vivendi Water

THERE HAS BEEN TREMENDOUS EXPANSION BY WATER COMPANIES -WHEN DID THIS START AND WHAT WAS THE STRATEGY?

Well as a matter of fact, we started the business. And it is not the business of privatization - it is the business of being professionals in water and solving the problems of the electoral bodies who have the responsibility for the water. We started 150 ago with the contract for Lyon. And then came the privatization at the end of the '80s and the models of either privatization or sub-contracting. And we have been leading this privatization, mainly in countries of high technology which have high demand - countries of Europe, North America and Asia.

ARE THOSE THE PRIORITY AREAS FOR VIVENDI?

We are putting our future in those three areas, namely Europe, North America and Asia. Europe is our main basis. The U.S. is our second basis. And Asia is the area of growth. We bring new technologies to sophisticated demands in terms of water problems - not just access to drinking water, but sophisticated access to drinking water, comfort solutions such as de-carbonization. And our sophistication is better suited and can be paid by countries which have already got to the point where the people or industrial groups are demanding more sophisticated solutions.

WHAT ARE YOUR INTERESTS IN AFRICA AND LATIN AMERICA?

We are present in Africa in some countries where the model is already sophisticated such as Gabon or Morocco. We have positions in Africa in what we call technical assistance, usually linked to big organizations like the World Bank. It is really more preparing for the future than a significant position because we do not significantly operate and it does not have significance in our activities. We also have activities in Latin America, namely Mexico, and in Brazil.

I always compare the service of water with a baker. Everybody in his home has the recipe for making bread. Everybody has some flour, an oven, so everybody can make bread themselves. Most people in developing countries go to the baker to buy their bread. It is the same for water. More than 90 per cent of the service of water of municipalities are done directly by the do-it-yourselves of the municipalities themselves. But what happens today is there is more sophistication. Today most North Americans do not repair their cars themselves because of the electronics, the sophistication of automobiles, you have to go to the car maker to repair your car. Well, more and more sophistication has to come to the professionals. So what we are doing is mutualizing the experience of 5,000 municipalities around the world to help the 5,001st to incorporate in the network.

WHY IS WATER AN ATTRACTIVE INVESTMENT?

We are bringing service. We are not a utility in the sense that we are not selling a commodity - and everybody who thought water was a commodity lost. We do not sell water. You take the water and you give it back. Exactly the same amount. What we are doing is bringing the water to your home, making it clean for you to use, and then taking it back and putting it back in nature clean. And that is the service we are bringing.

Everybody will continue to use water. It grows like population and double than population. Every additional human being consumes water. And needs service water. And you know the growth of population. But at the same time a more sophisticated, urban citizen of the USA uses more water than an inhabitant of a less developed country. So the potential for growth derives from the growth of humanity but at the same time with the development level of this humanity. More and more municipalities, more and more industrial groups, rather than doing it themselves unprofessionally will prefer to give it to us in a competitive way - to professionals who compete among themselves.

That's the first source of growth. The second one is the demand. The cubic metre of water of 30 years ago is not meeting the standards of today. Which means a litre of potable water 30 years ago would not be potable today - because the standards change constantly because the demand of the people is growing year after year. On an average we are changing the standards, putting them forward, every five years. And that is the other driver of growth.

Our chairman of Vivendi Environment has asked us and has committed to our shareholders to have a growth of around 10 per cent a year in terms of market. Ten percent a year is very feasible. We could go much faster. If we can't it is mainly because of the human resources restraint.

ANOTHER WAY TO ASK THIS – YOU ARE NOW SERVING 110 MILLION PEOPLE AROUND THE WORLD. HOW MANY WILL YOU SERVE IN 10 YEARS?

Well, 10% per year, that makes 10 million a year - so in ten years we would more than double - it would be more than 200 million. So compared with a population of 6-8 billion in ten years, it is still a very small impact of what we are doing. It is clear that a company like ours is only suitable to serve only urban cities. It is clear also that we would only chose big contracts. My vision is that we will do more than 200 million inhabitants.

THERE IS RESISTANCE TO PRIVATIZATION AROUND THE WORLD. HOW ARE YOU DEALING WITH IT?

It's an image issue for us, not a fundamental issue. We have more cities today wanting to work with professionals like us that we can cope with. In 2003, if all the cities who wanted to work with professional companies like us tried to make a tender, they would not get an answer, because we are unable to make an answer to all opportunities. So the resistance to us is not a business issue. We have more difficulty to convince some industrial groups to outsource their water than some municipalities. So that is not the issue.

THE WORLD BANK SEEMS QUITE IMPORTANT - NOW PROMOTING PPP MODELS IN WATER.

We work very close with the World Bank. For us the World Bank is a fundamental asset when we go in a certain number of countries. As I told you, the countries in which the World Bank is mostly acting are not our strategic zone - mostly because they are not in demand of our high technology. So as a professional we may be a little bit too oversized for this type of project. In some cases this problem may be solved by multi-activities - there is a model in Africa of combining water and electrical distribution which can justify a partnership with professionals like us.

It is clear that if the World Bank was the investor or the financial group, partnering with the municipality, and both of them were to ask us to operate the assets, that would be a solution where we would be applying our model. It is clear that if not it is almost impossible.

HAS WORLD BANK CONDITIONALITY BEEN USEFUL TO PRIVATE SECTOR INVOLVEMENT?

Typically that is the answer. When the World Bank decides to invest in the rehabilitation of a system of drinking water or sanitation and they say we accept it as long as they are managed professionally. We have a certain number of projects where we are working for the national water company, the World Bank is helping this national water company on the condition that they get the technology and know how - and it's clear that it is the invitation of the World Bank to us. We answer. Let us bear in mind that the number of companies able to project experience and people worldwide inside a tender for contract services, are very, very few.

HOW IS THE CANADIAN MARKET FOR VIVENDI?

I think it is a very interesting potential market. As in the U.S. or the western part of Europe, the standards and the demands of the people are very high. I think also that in terms of municipalities the political thinking has not integrated that our model is not privatization but is serving the municipality for better service to the public. Therefore, each time there is a mayor thinking about working with companies like us - and there are several - obviously the political obstacle of the privatization emerges immediately. We're working on it. We are working on it.

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