SAO warns authorities of the looming threat of losing control over water infrastructure - SAO

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SAO warns authorities of the looming threat of losing control over water infrastructure

Ondrej Hronec

Modified 1 Year ago.

Published: 26.06.2025

Bratislava, 26 June 2025 – The sustainable development and modernisation of water and sewer infrastructure, effective oversight by the shareholders of water companies – i.e. municipalities and towns – as well as efficient and independent supervision by central government bodies are the key risk areas long highlighted by the Supreme Audit Office of the Slovak Republic (SAO). These concerns are regularly addressed not only to the government and parliament but also to representatives of local self-governments. In recent months, the SAO has expressed particular concern regarding developments within the Eastern Slovakia Water Company (Východoslovenská vodárenská spoločnosť, a.s. – VVS), one of the largest companies responsible for operating critical national infrastructure. On Wednesday, SAO representatives met with officials from the Ministry of Finance, the National Bank of Slovakia, the regulatory authority, and municipal representatives to discuss the current risks and overall state of the water sector. The Ministry of Environment and the General Prosecutor’s Office have also been briefed on the basic findings from recent audits. Based on audit findings and risk analyses, the President of the SAO, Ľubomír Andrassy, called on relevant authorities to act. He emphasised the need for legislative changes to prevent the erosion of local governments' influence over municipal water companies and to minimise the risks of covert privatisation. More than two decades ago, the State transferred strategic water infrastructure free of charge to municipal water companies, whose shareholders are local governments. These authorities are, by law, responsible for ensuring the supply of drinking water to their residents.

Current water utility companies were established based on the government-approved privatisation strategy for state-owned water and sewer companies in 2001. Municipalities acquired the infrastructure and, through their own water companies, fulfil one of their core public service responsibilities – the provision of drinking water and wastewater management. A key issue remains that over 400 municipalities in Slovakia still lack a public water supply, and a quarter do not have sewer systems. The modernisation backlog in the water sector has reached nearly €10 billion, and water losses in the existing infrastructure approach an alarming 30% of processed water.

Another systemic risk is the lack of a founding entity for water companies. The responsibility for delivering public interest in this sector is fragmented across different levels of government, many of which lack the required attention or expertise. “This is one of the main reasons why some water company managers claim that their organisations are purely private entities – despite the fact that they operate predominantly under public law and are owned by public sector bodies, not private individuals,” said Andrassy. He further noted that neither the government nor parliament is informed about how water companies fulfil their public service role or about the condition of this critical infrastructure – except for audit reports issued by the SAO. Even this independent oversight is limited to water companies themselves and does not extend to business entities established by them.

According to the SAO, municipal water companies remain the most appropriate form for operating water systems. “Water and water infrastructure are integral parts of the public interest. Losing control over these systems could have serious consequences for everyday life and for future generations. Interest groups and lobbyists are aware of this and are attempting to take control of these companies under the guise of supporting shareholders. This happened in the Czech Republic in the recent past, prompting legal reforms,” the SAO President explained.

Thanks to the initiative of the Slovak SAO, legislation was amended in recent years to define shareholder rights and strengthen the obligation of water companies to disclose information to the public. “Had those changes not been made, these public corporations might already have been taken over by private entities. Because current legislation prevents lobbyists from directly gaining control of water company shares, they are now creating other commercial entities whose operations fall outside the core mission of municipal water companies and are not subject to shareholder or government oversight. Skilled entrepreneurs are exploiting legal loopholes, which makes updating the current legislation more than necessary,” concluded Ľubomír Andrassy, President of the Supreme Audit Office of the Slovak Republic.