Aguas Andinas: Can Do More With Less on Santiago Water

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Aguas Andinas SA, the second-largest publicly traded water company in Latin America, says it can guarantee water supplies to Santiago for at least another year with less reserves than previously estimated amid the lowest rainfall since at least 1966.

Chile’s biggest water provider is able to ensure supplies for another 12 months if it has 50 million cubic meters (1,770 million cubic feet) of water in its Yeso reservoir in October, Chairman Felipe Larrain said in an interview Wednesday. The company’s annual report published in April estimated it would need 90 million cubic meters by the end of October. The reservoir currently has about 120 million cubic meters.

Santiago has seen just 1.8 centimeters (0.7 inch) of rain this year, the lowest on record, and little snow has fallen on the Andes mountains that supply water to the capital over the summer months. Aguas Andinas, controlled by Spain’s Sociedad General de Aguas de Barcelona SA, has been investing to cope with drier conditions in Santiago for the past six years, Larrain said.

“The company’s policy is to buy all the water rights we can, everything we can rent or agree with farmers,” he said. “We haven’t saved on costs.”

Aguas Andinas is also investing in new drilling stations, though much of the water they pump is replacing older wells that have dried up, Larrain said. No-one knows how much water remains in the aquifers that currently account for about 15 percent of supply to the city, he said.

Closed Gates

Aguas Andinas has “borrowed” 50 million cubic meters of water from local farmers, enabling it to close the sluice gates on the Yeso reservoir between October of last year and March of 2015 to conserve water. The company doesn’t have to return the water if Santiago’s water supply is under threat, Larrain said.

The Maipo river that supplies most of Santiago’s water is at record lows. The river currently has a flow of about 32 cubic meters a second, of which 7 cubic meters comes from the Yeso reservoir. The company is taking out 58 percent to 60 percent of the water, Larrain said. The river typically has about 70 cubic meters a second at this time of year.

The other stream that used to supply water to the northeast of the city, the Mapocho, has “collapsed,” Larrain said. Aguas Andinas now pumps water across northern Santiago from the Maipo to compensate.

Cheapest Water

Aguas Andinas had an operating margin of 52 percent in the last reported quarter, the highest among major water utilities in the Americas tracked by Bloomberg.

At the same time, Santiago has one of the cheapest water rates in Chile and in the Organization for Economic Cooperation and Development, at about $1 a cubic meter, according to the company.

Aguas Andinas can supply water so cheaply because it just needs to capture water flowing down from the Andes, without almost any need for pumping stations. It hasn’t imposed restrictions during the drought because the water would flow to the sea if it wasn’t used in Santiago, Larrain said.

The company could take treated water in the west of Santiago and pump them back into the city, though that would require an increase in prices, he said.

Before any threat to Santiago, the drought “could put at risk agricultural zones,” similar to what has happened north of Santiago, Larrain said. “That is what we are trying to avoid.”

(Corrects profit margin in ninth paragraph.)
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