The story of two recent water projects…….. The story of two recent water projects……..
June 2005
Two ProjectsTwo Projects ………………
Morocco Irrigation project: Ground water Morocco Irrigation project: Ground water depleting. Irrigation system badly depleting. Irrigation system badly maintained. PPP to bring tariffs to a maintained. PPP to bring tariffs to a reasonable level. BoT…two local companiesreasonable level. BoT…two local companies
Greater Bangalore Water: Piped water and Greater Bangalore Water: Piped water and sanitation for suburbs of Bangalore… 12% sanitation for suburbs of Bangalore… 12% per annum growth endangered by per annum growth endangered by infrastructure bottlenecksinfrastructure bottlenecks
Introduction of
Private Sector
Participation
in Irrigation
GuerdaneProject
A Conservation ProjectA Conservation Project
Covers 10,000 hectares in Souss-Massa region (near city of Covers 10,000 hectares in Souss-Massa region (near city of Agadir)Agadir)
Cultivated with citrus groves (including export products) Cultivated with citrus groves (including export products) Over 100,000 people estimated to be earning a living (directly or Over 100,000 people estimated to be earning a living (directly or
indirectly) from citrus farming in the regionindirectly) from citrus farming in the region
Land owned by 670 farmers, noted for high-level productivity Land owned by 670 farmers, noted for high-level productivity and innovative commercializationand innovative commercialization
Private wells are currently the only source of irrigation waterPrivate wells are currently the only source of irrigation water
Due to over-exploitation, the groundwater table level is Due to over-exploitation, the groundwater table level is diminishing by 2.5 meters per year on averagediminishing by 2.5 meters per year on average
Several farms are abandoned every year as wells dry up or Several farms are abandoned every year as wells dry up or water pumping costs become unaffordablewater pumping costs become unaffordable
The Project - ConceptThe Project - Concept
Delegation of public service to private sectorDelegation of public service to private sector
30-year concession30-year concession
Build-Transfer-Operate (BTO) scheme:Build-Transfer-Operate (BTO) scheme: Private sector will be responsible for construction Private sector will be responsible for construction
(including its financing)(including its financing) Upon completion, infrastructure is transferred to the stateUpon completion, infrastructure is transferred to the state Operation of infrastructure is delegated to private sectorOperation of infrastructure is delegated to private sector
Surface water allocation of about 45 million mSurface water allocation of about 45 million m33
Cost of infrastructure estimated at USD85 million Cost of infrastructure estimated at USD85 million (conveyance pipe + network) with working capital… (conveyance pipe + network) with working capital… US$100 millionUS$100 million
Public Sector ContributionPublic Sector Contribution
Public Sector Contribution
Tariffs
No incentives for economical use of water Too high for farmers
Actual Cost Pumping Ground Water
Commercial tariffs based on the true economic cost of service may be too high relative to affordability/willingness to pay of farmers
Public sector contribution (subsidies) could reduce the tariffs required for the private investor to realize its return on investment
Balance is key between the public sector contribution and the incentives for economical use of water
Transaction StructureTransaction Structure
Private Sector Concessionaire –us$42 million
ORMVADelegating Authority
Users US$ 8 million Hassan II Funds$ 50 million Public Contribution
Agence de BassinWater Supply
WaterDistribution
TariffPayment
ResultsResults
Bids received from 2 consortia, both led by local financial investorsBids received from 2 consortia, both led by local financial investorsBoth bidders met the criteria for technical and financial capabilities, Both bidders met the criteria for technical and financial capabilities, and submitted responsive bids in accordance with the bidding and submitted responsive bids in accordance with the bidding proceduresproceduresResults were outstanding, especially given the base price of 1.8-1.9 Results were outstanding, especially given the base price of 1.8-1.9 Dh/mDh/m33 estimated for the Project: estimated for the Project: The losing bidder’s financial offer was 1.88 Dh/mThe losing bidder’s financial offer was 1.88 Dh/m33
The winning bidder’s financial offer was The winning bidder’s financial offer was 1.48 Dh/m1.48 Dh/m33
ONA, CDG, InfraMan, BRLONA, CDG, InfraMan, BRL
Farmers are thus set to enjoy a substantially favorable tariff, on top Farmers are thus set to enjoy a substantially favorable tariff, on top of the high quality of service expected from private sector operationof the high quality of service expected from private sector operationThe winning bidder, led by the Moroccan conglomerate Omnium The winning bidder, led by the Moroccan conglomerate Omnium Nord-Africain (ONA), will be Morocco’s first ever domestic private Nord-Africain (ONA), will be Morocco’s first ever domestic private infrastructure operator in irrigation projectsinfrastructure operator in irrigation projects
Greater Bangalore WaterGreater Bangalore Water
Chequered success of urban water privatizationsChequered success of urban water privatizationsThe “software” rather than “technical” issuesThe “software” rather than “technical” issues Tariff strucure/tariff level/tariff adjustment/service Tariff strucure/tariff level/tariff adjustment/service
improvement/PPP/out-put based aidimprovement/PPP/out-put based aid Level of Local industry involvement (vested interest), Level of Local industry involvement (vested interest),
base line unrealisticbase line unrealistic Pro-poor program and public mobilizaiton Pro-poor program and public mobilizaiton
(tariffs,NGOs,pilot projects,ward committees,monitoring (tariffs,NGOs,pilot projects,ward committees,monitoring report card)report card)
Transparency and Public relationsTransparency and Public relations Paced introduction of PSPPaced introduction of PSP
Decision CriteriaDecision Criteria
Technical ManagementTechnical Management““Low Input Consumption & Operating Cost , Minimized Capital Cost”Low Input Consumption & Operating Cost , Minimized Capital Cost”
Consumer Satisfaction Consumer Satisfaction ““Excellent service to consumers at reasonable Tariff, to achieve efficiency of Excellent service to consumers at reasonable Tariff, to achieve efficiency of 24/7”24/7”
Financial and Economic SustainabilityFinancial and Economic Sustainability “ “ NO Demand for funds from GOK, to maintain self funding system”NO Demand for funds from GOK, to maintain self funding system”
Risk Level AllocationRisk Level Allocation““Shifting of Risk to Private Sector”Shifting of Risk to Private Sector”
Environmental/Social impact Environmental/Social impact ““Efficient use of water resources. Reduction in losses. Effluent Treatment, Efficient use of water resources. Reduction in losses. Effluent Treatment,
Water safety standards significantly above WHO”Water safety standards significantly above WHO”Political SustainabilityPolitical Sustainability
““Pro-Poor, Transparency & Legitimacy, Communication, Partnership, Public Pro-Poor, Transparency & Legitimacy, Communication, Partnership, Public Feedback” Feedback”
Key DevelopmentsKey Developments
Greater Bangalore Water Supply and Greater Bangalore Water Supply and Sanitation ProjectSanitation ProjectLoss Reduction in Bangalore cityLoss Reduction in Bangalore cityCauvery IV – Phase IICauvery IV – Phase IIOthersOthers Addition of STPsAddition of STPs Expansion of distribution system (W&S) in Expansion of distribution system (W&S) in
Bangalore CityBangalore City Expansion / Replacement of WTPExpansion / Replacement of WTP
Current Status – Bangalore Metropolitan AreaCurrent Status – Bangalore Metropolitan Area
Bulk Water Supply (Cauvery Stages and WTP)
Water and Sewerage
Services in Bangalore City
8 ULBs – nominal or No
coverage
Sewerage (STPs)
BWSSB Public Third Party Private Third Party GB Contractor
…….After Greater Bangalore Water Supply and .After Greater Bangalore Water Supply and Sanitation ProjectSanitation Project
Bulk Water Supply (Cauvery Stages and WTP)
Water and Sewerage
Services in Bangalore City
Water and Sewerage
Services in 8 ULBs
Sewerage (STPs)
BWSSB Public Third Party Private Third Party GB Contractor
Contract for Bulk Water
Contract for Sewerage Treatment
PSP in GBW&S
4 addnl STPs (BTO)
5 year program to improve Losses and improve sewerage
Spin-off Bulk Water to a new Public Sector Company
…….After City of Bangalore Loss Reduction .After City of Bangalore Loss Reduction Program (2006-2010)Program (2006-2010)
Bulk Water Supply (Cauvery Stages and WTP)
Water and Sewerage
Services in Bangalore City
Water and Sewerage
Services in 8 ULBs
Sewerage (STPs)
BWSSB Public Third Party Private Third Party GB Contractor
Contract for Bulk Water
Contract for Sewerage Treatment
Contract for Bulk Water
STPs - BTO
Additional Raw Water Requirement
Three integrated W&S utilities (Concession)
Expansion of WTP or new WTP (BTO) or divestment of Old WTP
…….After Implementation of Cauvery IV Phase .After Implementation of Cauvery IV Phase IIII
W&SBangalore
- North
Sewerage (STPs)
BWSSB Public Third Party Private Third Party GB Contractor
Contract for Bulk - Raw
Water
Contract for Sewerage Treatment
Contract for Bulk - Treated Water
Cauvery Stages WTP
W&SBangalore - Central
W&SBangalore
- South
Characteristics of a Hybrid PSPCharacteristics of a Hybrid PSP
Term: 7 years water distribution and sewage collection….. New STPs will be BTO’sTerm: 7 years water distribution and sewage collection….. New STPs will be BTO’s
ServicesServices Provide UWSSProvide UWSS Detailed engineering and quality control on sewerage componentDetailed engineering and quality control on sewerage component EPC on ongoing capital investmentsEPC on ongoing capital investments
Performance Based LOSPerformance Based LOS Quality of H2O and availabilityQuality of H2O and availability Technical parametersTechnical parameters Customer SatisfactionCustomer Satisfaction
Major constraint… government not ready to give up control of tariffs…Major constraint… government not ready to give up control of tariffs…
Financial ConsiderationsFinancial Considerations Provides initial and ongoing incremental working capitalProvides initial and ongoing incremental working capital Revenues are escrowed to cover with output based aidRevenues are escrowed to cover with output based aid
O&M, Bulk Water, STP, MF, Ongoing Capex and Debt ServiceO&M, Bulk Water, STP, MF, Ongoing Capex and Debt Service
Hybrid StructureHybrid StructureManagement Contract Affermage / Lease Hybrid
Technical OperationProvides UWSS Y Y YConnection/Disconnection Y Y YCommercial OperationsContract with Consumers N Y ?Access to Private Property Y Y YCollection of Revenues N Y YFinancial DetailsInitial Working Capital N Y YIncremental Working Capital N Y YManagement Fee N Y YOngoing Capital CostsSupervision N N YFunding N N NDebt servicing N N NStep-in/Security Rights N N NOwnershipTiltle / Leasehold N N / Y NRegulatoryTechnical N N / Y YEconomic N Y YEnvironmental N N N
Legislative Amendment Required
Rules or Regulations required assuming that there is a detailed amendment enabling PSP
Amendment Not Required
Combined Impact on Bangalore Metropolitan AreaCombined Impact on Bangalore Metropolitan AreaProjectProject Current StatusCurrent Status GBWSGBWS Loss Reduction ProgamLoss Reduction Progam Cauvery IV – Phase IICauvery IV – Phase II
PSPPSP GBWSGBWS Bulk Water SeparationBulk Water Separation 3 W&S Concessions + WTP 3 W&S Concessions + WTP BTOBTO
TechnicalTechnical
100% Coverage100% Coverage
24 / 724 / 7
EU HEU H22O QualityO Quality
15% UAW15% UAW
CommercialCommercial
98% Collection98% Collection
OFWAT Customer ServiceOFWAT Customer Service
UK Grievance RedressalUK Grievance Redressal
FinancialFinancial
Access to MarketAccess to Market
No Recourse to GoKNo Recourse to GoK
Risk AllocationRisk Allocation
Borne by OperatorBorne by Operator
EnvironmentalEnvironmental
Full effluent treatmentFull effluent treatment
Phase out of BoreholesPhase out of Boreholes
PoliticalPolitical
Pro –poor PolicyPro –poor Policy
Full Regulatory SystemFull Regulatory System
……..Thank You..Thank You