140121 water o&m asia jcordovilla_v1
TRANSCRIPT
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PlanningandpreparationofPPPsforwatersupplyservices.Indonesia
JoseCordovilla,IRSDP
WaterO&MAsia.Jakarta,21January2013
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INTRODUCTION
• Aboutthespeaker– CEngMICE,MCiccp– CEO@– 15years’experienceinwaterinfrastructure&PPPS
– TeamLeader@IRSDP
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SUBJECT
• SUBJECTOFTHISPRESENTATION– DeliveryofwatersupplyservicesusingPPPs.Aspectsofprojectplanningandpreparation.
–Watersupplydeficit– IRSDPandwater–WhywaterPPPsaremovingslow– Thefundamentalissueinwatersupply
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BOTTOMLINEMESSAGES
• Waterinfrastructurehasuniquecharacteristics
• PPPsplayanimportant,yetspecificandconditionalroleinthesolution
• Capacityofthepublicsectormustbebuiltinanycase
• There’snoeasywayout• PPPshavepositiveeffectsbeyondtheproject
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GAPINURBANWATERSUPPLY
• 394PDAMs• 6,622,733customers≈36millionpeople• 24%nationalservicecoverage– 45%inurbanareas(actuallydecliningsince2007)– 11%inrural
• Non-PDAMandnon-pipedarepredominant• 161,000l/sproductioncapacity• AveragelevelofNRW=35%• Good*52%;notsogood31%;poor17%
Source:PERPAMSI(2012)
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GAPINURBANWATERSUPPLY
• WATERSUPPLYDEVELOPMENTPROGRAM– TomeetMDGsby2015– Additional60,000l/scapacity• 78%expansionofexistingsystems• 22%newsystems
– BudgetrequirementUSD5,91bn• 54%NationalBudget• 19%LocalBudget• 27%PPP
Source:WaterSupplyDirectorate(2012)
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OBSTACLES
• Growingpollutionofwaterbodies• Uncontrolledabstractionofgroundwater• Rapidurbanization• PooroperationalandfinancialperformanceofPDAMs
• Weakgovernance• Lackofcapableworkforce• Insufficientparticipationoftheprivatesector
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IRSDP
• InfrastructureReformSectorDevelopmentProgram– ADBLoanNo.2264-INO(started2006),originallyincludedgrantfromGov.oftheNetherlands
– BAPPENASistheexecutingagency– Projectdevelopment+capacitybuilding– 14Projects,3forwatersupply:Lamongan,WestSemarangandSouthernBali
– Otherprojectsfellduetofundamentalfeasibilityissues
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IRSDP– Lamongan PPPPROBLEM- NorthLamongan.Population≈230,000.- PDAMservicecoverage:3%- MostwatersupplybyHIPPAMs&vendors- Increasingpopulation,industrial&
commercialdevelopmentSCOPE- Fullconcessioncontract(20years)with
KabupatenLamongan- Intake,rawwatertransmission,WTP200l/s,
treatedwatertransmission,reservoirs,distributionnetwork,18,000houseconnections,billing&customerservice
- Targetservicecoverage65%in2034- Tariff(Rp/m3):3,200domesticand8,000
industrialin2015.20%rebasingbi-yearlySTATUS- PQlaunched
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IRSDP– WestSemarangPPPPROBLEM- SemarangBaratarea.Population≈300,000- PDAMservicecoverage:40%- Continuity:aprox 12h/day- Groundwaterabstraction,settlement- Increasingpopulation,industrial&commercial
developmentSCOPE- BOT+BTcontractwithKotaSemarang- BOT(25yearsafterCOD):intake,rawwatermains,
WTP1,000l/s,treatedwatermains,5reservoirs- BT:primaryandsecondarydistributionnetwork- VGFandguaranteeonbulkwaterpurchase- PDAMresponsiblefortertiarynetworkandHCs- Targetservicecoverage75%in2025,24h/day- Tariff(Rp/m3):4,500domesticand7,400non
domesticin2016STATUS- PQinpreparation
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Semarang City
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IRSDP– SouthernBaliPPPPROBLEM- SouthernBaliarea:Denpasar,Badung,
Gianyar andKlungkung ≈ 2mpeople- Groundwaterabstractionbyhotels- Householdconnectionsonwaitinglist- Tourismdevelopmentconstrainedbylackof
waterresourcesSCOPE- BOT+OTwithBLUD(PEMPROVBali)25years- BOT(25yearsafterCOD)forUNDAsystem:
intake,rawwatertransmission,WTP1,000l/s,treatedwatertransmissionandreservoir
- OTforPETANU&PENETsystems(600l/s).- PDAMswillpurchasebulkwaterfromBLUDSTATUS- UnsolicitedproposalbyK-Water.PQunder
preparation- Singlebulkwatertariffstarts@4,500Rp/m3
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PPPWaterProjects
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PROJECT TYPE l/s IDRbn
PREPARATION
BekasiMunicipality Concession 300 210SemarangRegency BOT 100 103JatigedeRegionalScheme BOT 3.500 3.800Karyan-SerpongConveyance BOT 10.000 6.900WestSemarang BOT 1.000 750SouthernBali BOT 1.600 150Banjar+Banjarbaru2 Concession 500 60
TRANSACTION
BandarLampung Concession 500 929Umbulan BOT 4.000 2.068TangerangRegency Concession 900 503Lamongan Concession 200 15NorthBekasiRegency Concession 300 160
CONTRACT/CONSTRUCTION
Sampit BOT 280 55TangerangMunicipality BOT 1.920 1.063GresikRegencyLegundy BOT 200 47GresikRegencyDriyorejo BOT 400 86IndramayuRegency BOT 100 15Banjar+Banjarbaru1 BOT 500 71
B2B VARIOUSPROJECTS B2B 8.700 1.874
TOTAL: 35.000 18.859
Ø MostprojectsareBOT,especiallyforlarge-capacityonesØ Two-thirdsofthiscapacitywillnotbeavailablebefore2016
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WHYISPROGRESSSOSLOW?
CROSS-SECTORPPPCHALLENGES• CapacityofGCAs• AbilityofGCAstocommittolong-termpaymentobligations
• LackofregulatoryharmonisationWATERPPPCHALLENGES• Waterisparticularlycapitalintensive• Waterisgeographicallyintensive• Hasahighcostrecoverygap
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CROSS-SECTORPPPCHALLENGES
CAPACITYOFGCAs(GOVERNANCE)• Toidentifyandmeasuretheneeds• Toprioritizeinfrastructure• ToidentifysolidPPPcandidateprojects• Toidentifyrisksandrequisites• Topreparecredibleproposalsforfunding• Tomanage/monitortheproject• Totakereal‘ownership’
ØBAPPENASispreparingacapacitybuildingprogramforGCAs,toincludeVfM analysis
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CROSS-SECTORPPPCHALLENGES
ABILITYOFGCAsonlong-termpayments• Availability-basedcontractsrequireGCAtoenteramulti-yearpaymentobligation
• Budgetsareplannedandapprovedyearly• GuidelinesforbudgetingissuedbyMoHA donotaccountforPPPmulti-yeardisbursements
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CROSS-SECTORPPPCHALLENGES
LACKOFREGULATORYHARMONISATION• PresidentialRegulation67/2005onPPPs,amendedbyPresidentialRegulations13/2010,56/2011and66/2013
• Regulation6/2006onmanagementofstate/regional-ownedassets
• GovernmentRegulation50/2007onImplementationProcedureofRegionalCooperation(includingPPPs)
• Sectorlawsandregulations
Ø BAPPENASisdoingathoroughreviewoftheregulationstowardharmonisation
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WATER-SPECIFICCHALLENGES
CAPITALINTENSITYOFWATER• Waterinfrastructurerequiresmorecapitalinvestmentperunitofrevenue:– Twiceasmuchaselectricity– Threetimesasmuchasgas– Fourtimesasmuchastelecommunications
• Unitinvestmentrequiredgrowsexponentiallyasthesizeofthesystemdecreases
ØLimitedparticipationofprivatefinanceSource:AWWAandBeecher,MannandStanford.
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WATER-SPECIFICCHALLENGES
GEOGRAPHICALINTENSITYOFWATER• Waterisincompressible:storageandtransmissionisexpensive
• Resourceoftencrossespoliticalboundaries,asdoespollution
• Manyoftheassetsareunderground:uncertaintyonconditionoftheassets
• Landacquisition/accessandcrossingswithotherservices/assets
Ø Increasedpolitical,cost&schedulerisks
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WATER-SPECIFICCHALLENGES
THEHIGHCOSTRECOVERYGAPOFWATER• Waterisgenerallyperceivedasnecessarybutthatshouldbeprovidedatlowcost
• Willingnesstopay(WTP)ismuchlowerthancostrecoverylevelandabilitytopay(ATP)
ØThisgeneratesafundamentaleconomicandfinancialprobleminthedevelopmentofwatersupplyschemes
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THEFUNDAMENTALPROBLEM
2016/12/16
FULLCOSTRECOVERYLEVEL
WILLINGESSTOPAY/TARIFF
Poorservice
LowWTP
LowRevenue
Insufficientinvestment
Deterioratingcapacity
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THEFUNDAMENTALPROBLEM
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EXISTINGSITUATION
TARGETSITUATIONFULLCOSTRECOVERYLEVEL
1. WHOPAYSFORTHISDEFICIT?
2. HOWDOWESHORTENTHISTIME?
DEFICIT
BOTHISSUESAREINTERRELATED
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ADDRESSINGTHEPROBLEM
• Government:buildingtheassetsdoesnotdirectlytranslateintogoodservice.– Maycombinewithleases/performance-basedmanagementcontractstoimproveefficiency
• PDAM:manyarenotfinanciallycapabletofundlargeinvestments(creditworthiness)– Managementcontractsand/orcapacitybuilding
• Privatesector– Expectedreturnsandguaranteesaredirectlyrelatedtoriskperceived
• Hybridfinancingsolutions2216/12/16
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KEYRISKS
• Resourceavailable• Demand– Publicimage– Lawenforcement,particularlygroundwaterextraction
• Construction– Costoverruns– Scheduleoverruns
• Availability– Meetingtheoutputspecifications– LoweringO&Mcosts
• Political– Tariffsetting
• Financial2316/12/16
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ADDRESSINGTHEPROBLEM
• Privateoperatorscanusuallymanage– Availabilityrisk– Constructionrisk(toanextent)– Demandinspecificcases– Financial(toanextent)
• Therisktakenwilldependon– Qualityofinformation– Expertise– Guarantees
ØTheplaceoftheprivatesectorisinbringingexpertiseandefficiency,notonlycapital
ØPublicpartnermustperforminanycase2416/12/16
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FORMSOFPPPENGAGEMENT
• Concessions:construction,demand&avail.risks– GoodRDSandassetbaselinerequired– Sensitivetopoliticalriskontariffrebasing– WillprobablyrequireVGF
• BOT:construction&availabilityrisks– Paymentguarantee(financial&legalcapacity)– MayrequireVGF
• Lease(avail+demand)/affermage (availabilityonly)– Complexityindefiningremuneration/incentivelevel
• Performance-basedmanagementcontracts– NRW,commercialmanagement– Complexityindefiningremuneration/incentivelevel– Investmentremainswiththegovernment
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REQUISITESFORPUBLICSECTOR
• Sufficient&reliabledata– Demand,WTP– Conditionoftheassets– Performanceindicators– Legalframework
• Understandtheprocessfromthestart– Risksandrewards:therightcompensation,penalisationandcontingencymechanisms
– Complexitiesoftheprocess• Buildandmaintaincapacity– Commitstaff– Sourcetherightadvisors
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‘SIDEEFFECTS’OFPPPs
• PPPshaveeffectsbeyondsingleprojects• Shiftofpublicinstitutionstodemand-basedattitudes,customer-focused
• Efficiencyprinciples• Duediligenceprocessesfostertransparency
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CONCLUSIONS
• Waterinfrastructurehasuniquecharacteristicsthatexplainthestatusquo
• TheroleofPPPsisspecificandconditional• GreatercapacityinthepublicsectorisneededtoknowwhentogoPPPandhow
• Qualityofinformationisessential• PPParrangementsareverycase-specific• PPPshaveeffectsbeyondtheproject
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Terima Kasih
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