BUCHAREST, ROMANIA, Jan. 29—The International Finance Corporation (IFC) has signed an agreement with the Municipality of Bucharest and Regia Generala de Apa Bucuresti (RGAB), Bucharest's water and sewerage company, to be its principal adviser for the corporatization, restructuring, and privatization of RGAB. The agreement was signed in Bucharest yesterday by Mr. Costin Berevoianu, RGAB, President and General Director, and Mr. Scott MacLeod, Manager of IFC's Corporate Finance Services.
IFC's appointment by RGAB follows on the Corporation's earlier assignments as principal adviser in the successful privatizations of the water utility of Metropolitan Manila (MWSS), and of the water and electricity services in Gabon (SEEG), both of which closed last year.
"We are very pleased to have IFC as our adviser on the restructuring and privatization of RGAB," said Mr. Berevoianu. "We believe that IFC's involvement will help guarantee the success of the transaction we are undertaking together."
RGAB is responsible for production and distribution of water and wastewater services for the Municipality of Bucharest. It presently supplies drinking water to about 93% of households in Bucharest, as well as to a large number of industrial, commercial, and institutional customers. Approximately 85% of households are connected to the sewerage system. Bucharest is the country's largest urban center with a population of approximately 2.1 million.
"This project will bring a cleaner, more reliable water supply and modern sewerage services to the citizens of Bucharest," said Mr. Paul Hinchey, Director of IFC's Corporate Finance Services. "IFC is very pleased to have been able to respond positively to the request from the Municipality of Bucharest for assistance in this endeavor. While we believe that privatization of RGAB will create significant benefits for Bucharest and its residents, we also hope that a successful infrastructure privatization such as this will serve as a model to encourage other public sector enterprises in Romania and elsewhere to take similar initiatives."
IFC's assignment involves two phases: a transaction structuring phase which includes corporatization, and a privatization implementation phase. Throughout, IFC will play the role of principal adviser to RGAB, providing financial advisory services and defining, coordinating, supervising, and integrating the work of its specialized consultants. IFC will supervise the competitive bidding procedures that will bring international operators and investors into the sector.
IFC is the largest multilateral source of equity and loan financing for private sector projects in developing countries. The Corporation has worldwide experience in the privatization of state-owned utilities and plays a crucial role in providing comfort to prospective private investors while ensuring protection of the host country's interests.
