Private sector uncertainty won’t go away as Chile readies 1st-ever desal concession tender

Chile’s first-ever tender for a desalination concession is just around the corner, but private sector players have doubts over the long-term outlook for the desal segment due to a lack of clear rules and high entry costs.

The US$260mn project in Coquimbo region was submitted for environmental review last month, and the public works ministry (MOP) plans to publish the bidding documents this month, MOP head Jéssica López told a water-focused seminar held by state-owned concessionaire Econssa.

“[After the tender] we will have a better idea about how attractive it will be for the private sector, and like every project it faces significant challenges,” Carlos Foxley, president of the country’s desalination and water reuse association Acades, told BNamericas on the sidelines of the event.

Regarding the decision to seek environmental approval before tendering the concession, an unusual move by the MOP, Foxley said that it has the advantage of reducing risks and costs for the future concessionaire, while making it harder to make changes later. 

In his presentation, Foxley highlighted long approval periods as one of the main barriers for desalination in Chile, especially maritime concessions, which take an average of four years and up to seven for approval in some cases.

“A request for a maritime concession shouldn’t have to be a lottery,” he said.

Foxley also acknowledged the high costs of desalination, but warned that in the long term it was cheaper than relying on traditional water sources, pointing to Egypt, Saudi Arabia and Morrocco as countries that are doubling down on the technology, with the latter building one of the largest desalination facilities in the world with capacity of 300Mm3/y. 

This plant alone would have a larger capacity than all of Chile’s existing desalination facilities combined, he added. 

“While [desalination] is a lot more expensive than positioning a bucket to collect rainwater, it’s a lot cheaper than transporting it by ship for hundreds of kilometers,” he said, alluding to a failed plan in Barcelona to bring water treated in Valencia by ship. 

In terms of regulations, Foxley said that the desalination bill being debated in congress looked promising at the start, but could add even more red tape due to changes. 

“Many amendments were made, some of which in our opinion made the original bill worse. And now there’s a risk that some permits that the bill looked to shorten can end up taking longer,” he told BNamericas.

This concern is shared by Sergio Fuentes, desalination and water reuse manager at utility group Aguas Nuevas.  

“From our point of view, some important changes have been made that go against the bill’s initial objective,“ Fuentes told BNamericas at the same event.

Aguas Nuevas controls utilities Aguas del Altiplano, Nueva Atacama, Aguas Araucanía, Aguas Décima and Aguas Magallanes.

Aguas del Altiplano is currently developing a US$65mn desalination project for the city of Arica, while Nueva Atacama operates a separate plant that serves Atacama region. 

When speaking to BNamericas, Fuentes said that Aguas Nuevas does not rule out purchasing water from desalination plants owned by companies that serve multiple clients.