Small-Scale Indonesia PPP Project on Water Supply and Sanitation

Viewing from Different Perspectives

Presented by Eko Bagus Delianto - INKINDOJakarta, 16 April 2010

Infrastructure Asia 2010 International Conference

“Breaking Down the Barriers to PPP”

�Email: eko.delianto@gmail.com, inkindo@inkindo.org, www.inkindo.org, mobile+62 811 105 026

Presentation Outline

1. Legal Framework analysis for PPP Business in

Indonesia water supply sector

2. MDG 2015 target for Indonesia water supply

sector as our challenge

3. PPP Project Screening and Prioritization (best

practices by private sector)practices by private sector)

4. PPP procurement process

5. Business case – O&M Contract WTP Ciasem

6. Best practices small scale PPP Business on

Sanitation sector

7. Potential PPP O&M Contract for WTPs

8. Conclusions

Legal Framework analysis for PPP Business in Indonesia Water Supply sector

� Law No. 7 /2004 regulates the Water Resource issues which explicitly elaborate the role of

Private Sector, cooperative and the community in the development of water supply (Article 40 Clause 4);

� Government Regulation No. 16 /2005 as the implementing regulation of Law No. 7 /2004

regulates the Development of Water Supply System (Articles 37 and 64);

� Presidential Regulation No 13 /2010 regulates the cooperation between Government and � Presidential Regulation No 13 /2010 regulates the cooperation between Government and

Business Entities in the provision of infrastructure stipulating the procurement process;

� Government Regulation No. 50/2007 regulates regulates cooperation between LG-owned

enterprise (i.e. PDAM) and Private Sector;

� MoHA Decree No. 43/2000 regulates cooperation between LG-owned enterprise (i.e.

PDAM) and Private Sector;

� MoHA Decree No. 23 /2006 regulates Water Tariff (full cost recovery, affordability, authority of local government, cross subsidize)

Source: Law 7/2004, PP 16/2005, PP 50/2007, Perpres 13/2010, Kepmendagri 43/2000 and 23/2006

MDG 2015 Target for Urban Water Supply Subsector

Small Scale PPP Life Cycle

PROJECT

PREPARATION

REVIEW OF

EX. CONDITION

REVIEW OF

EX. CONDITION

11111111

1.11.11.11.11.11.11.11.1

LOCAL GOV.

STATEMENT

LOCAL GOV.

STATEMENT

1.21.21.21.21.21.21.21.2

PROJECT IDENTIFICATION

Quick Scanning

PROJECT IDENTIFICATION

Quick Scanning

1111....33331111....3333

PROJECT

SOCIALITATION

PROJECT

SOCIALITATION

1.41.41.41.41.41.41.41.4

CAPACITY

BUILDING

CAPACITY

BUILDING

1.51.51.51.51.51.51.51.5

INSTITUTIONALINSTITUTIONAL

1.61.61.61.61.61.61.61.6

LEGAL

ASPECT

LEGAL

ASPECT

1.71.71.71.71.71.71.71.7

ASSET

TURN OVER

44444444

ASSET

EVALUATION

ASSET

EVALUATION

4.14.14.14.14.14.14.14.1

COMPESATIONCOMPESATION

4.24.24.24.24.24.24.24.2

PROJECT

TRANSFER

PROJECT

TRANSFER

4.34.34.34.34.34.34.34.3

PROJECT ARRAGEMENT

22222222

INITIAL

EXPLANATION

& MOU

INITIAL

EXPLANATION

& MOU

2.12.12.12.12.12.12.12.1

SCOPE OF

THE PROJECT

SCOPE OF

THE PROJECT

2.22.22.22.22.22.22.22.2

PREPARATION

DOCUMENTS

PREPARATION

DOCUMENTS

2.32.32.32.32.32.32.32.3

PRE

QUALIFICATION

PROCESS

PRE

QUALIFICATION

PROCESS

2.42.42.42.42.42.42.42.4

BIDDING

PROCESS

BIDDING

PROCESS

2.52.52.52.52.52.52.52.5

DPRD APPROVAL

& SIGNING

CONTRACT

DPRD APPROVAL

& SIGNING

CONTRACT

2.62.62.62.62.62.62.62.6

PROJECT IN

OPERATION

33333333

CONDITION

PRECEDENT

CONDITION

PRECEDENT

3.13.13.13.13.13.13.13.1

IMPLEMENTATIONIMPLEMENTATION

3.23.23.23.23.23.23.23.2

MONITORING &

EVALUATION

MONITORING &

EVALUATION

3.33.33.33.33.33.33.33.3

PPP Project Screening & Prioritization(Quick scanning process by Private Sector)

Start

Identification

Terms of

Reference (ToR)

�Phase 1: Identification for PPP Scheme

Collectexisting data

Update existing data

Define Terms

of Reference

�Projects

�Identification

�Collect basic

�project data�Desk study

Long List

(15 – 20 projects)

�Phase 2: Project Identification, long list

�Phase 3 : Project Identification, short list

�Phase 4 : Identification of project leads

Project Lead

(3 - 5 projects)

�Assess project based on

�project criteria

Identified client’s needs

�Develop project�finance and

�implementation

Check if the clientis open for

co-operation?

How do we add

Value to the

Project?

Are we able to

develop/execute

the Project?

Short List

(7 - 10 projects)

Outline Business Case

(OBC)

Final OBC

PHASE IV: CONTRACT

IN OPERATION

6-7 Months 15-16 Months

Project Readiness

Bid Implementation

1-2 Months

PPP Procurement Process

Large -Scale PPP(22 - 25 months)

PHASE II: PROJECT PREPARATION

PHASE I: PROJECT ID & PREPARATION (SCREENING & PRIORITIZATION)

PHASE III: TRANSACTION ADVISORY

PHASE II: PROJECT PREPARATION

Initial Assessment & Identify Project

Quick Scanning Process &

OBC

Assess Local Government Capacity

Legal Framework

PHASE III: PROJECT PREPARATION &

PRESENTATION

Final OBC & I Presentation

& MOU

Local Government Support

Bid Implementation & DPRD Approval

3-4 Months 1-2 Months 2-3 Months

Small -Scale PPP(6 – 9 months)

PRIORITIZATION)

1-2 Months

PHASE I: PROJECT ID & PREPARATION (SCREENING & PRIORITIZATION)

PHASE V: CONTRACT

IN OPERATION

PHASE IV: TRANSACTION ADVISORY

Operated PPP in Water Supply Sector

Cities Modalities of PPP Contract Investor / Operator

Jakarta (Western) Full Concession 6.200 l/sec PT PALYJA

Jakarta (Eastern) Full Concession 6.500 l/sec PT AETRA

Medan BOT WTP 550 l/Sec PT Tirta Lyonnaise Medan

Batam Full Concession 3.000 l/sec PT Adhya Tirta Batam

Tangerang O&M Contract WTP 300 l/sec PT Tirta Cisadane

Badung – Bali BOT - WTP 300 l/sec PT Tirta Arha Buana

Samarinda BOT - WTP 400 l/sec PT WATTS

Jambi BOT - WTP 200 l/sec PT Novco

Subang O&M Contract - WTP 40 l/sec PT MLD

Semarang RUOT – WTP 600 l/sec PT Gajah Mungkur

Pekanbaru Join Operation 580 l/sec PT KTDP and WFI

Sidoarjo BOT - Bulk Water 650 l/sec Vivendi/PT Harinda

Banjarmasin BTO – WTP 500 l/sec PT Adhi Karya

Tangerang RUOT – WTP 1.500 l/sec PT TKCM/Petrosea

Business Case: O&M Contract WTP Ciasem (Q=40 lps) Subang District, West Java Province

Benefits for District Government and PDAM Subang:

N P V (13.5%, 10 years) 2,149,688,927

F I R R 71.43%

Payback Period 2.57

Discounted Payback Period 2.40 Benefits for District Government and PDAM Subang:

� Accelerating the fulfillment of the increased community water demand from 1.800 HC (2002) to

4.000 HC (2005);

� Reducing public financing burden with private investment by MLD;

� Clarity of function between ‘owner’ and “operator”;

� Increasing income and profit for PDAM Subang;

� More professional and responsive service (operation in 24 hours, high quality and zero complaints);

� Introducing new technology to maintain efficiency;

� Assets maintenance and updating guaranteed (10 years O&M Contract, 2002 – 2012).

�Source: Courtesy of PDAM Subang, March 2010

Best Practices Small Scale PPP on Sanitation

�Public Toilet managing by Private �Public Toilet of PT Pasadenta at

PLAZA PARAHYANGAN BANDUNG

�PT GMT’ s Truck for Solid Waste

Compost Producer at TPA Bantargebang Disposal Site

owned by PT WIRA GULFINDO SARANA (WGS)

�Courtesy pictures from ISSDP (Bappenas & World Bank) – quoted at Bisnis Sanitasi Book “100 Juta Konsumen Menunggu Anda”

Mr. Yusman’s Truck for human disposal sludge at Rawamangun, East Jakarta

Potential O&M Contracts for WTPs (Example)(Small Scale PPP Business in Water Supply)

WTP Subang (Q=10 lps) WTP Cililin - West Bandung Regency (Q = 20 lps) WTP TANJUNG SARI – SUMEDANG(Q = 40 lps)

WTP Nangorak – Sumedang Regency, Q = 100 lps

Source: Site Visit March 2010 in various WTPs in West Java Province

�SKEMATIK SISTEM PENYEDIAAN AIR BERSIH

INTAKE RESERVOIR

TRANSMISION PIPE

River

DISTRIBUTION PUMP

Gra

vit

y D

istr

ibu

tio

n S

yste

m

istr

ibu

tio

n S

yste

m

Reticulation System

TRANSMISI PUMP

Water Supply Production Unit

�Water Supply Scheme

Water Treatment Plant

PPP arrangements

Gra

vit

y D

istr

ibu

tio

n S

yste

m

Pu

mp

ing

Dis

tr

Main Distribution

System

Secondary Distribution

System

Distribution Unit

Service Area

Authority & Private

Ownership

�Level of involvement

�& Risk

�PPP Timeline (Years)

�Investm

ent ( Rp/$ )

Service Contract

“Low end”

O & M

ROT/RUOT

BOT/BOO

Concession

“High end”

Conclusions (1/2)A call for Governments, Private Sectors, and Business Development Partners to design

innovative solutions

1. Local Government perceptions on PPP

� Lack of know-how

2. Infrastructure Financing poses a complex set of issues:

� Lack of market-friendly policy framework

� Regulatory risks and uncertainty of contract enforcement� Regulatory risks and uncertainty of contract enforcement

� Institutional constraints on raising local financing

Pre-Construction risks significantly reducing private sector appetite for PPP contract

� Delays in land acquisition, failure to pay land acquisition compensation;

� Failure to provide regulatory approach, issues licenses, and permits, etc

� Failure to connect to existing infrastructure water supply networks;

� Bureaucratic delays in signing contract agreement.

Conclusions (2/2)

There are lot of Small Scale PPP Business Opportunities for Water Supply sector in cooperation with LGs/PDAMs

� PDAM Bekasi – West Java

� PDAM Makassar – South Sulawesi

� PDAM Donggala & Palu – Central Sulawesi

� PDAM Rantau Prapat – North Sumatra

� PDAM Kabupaten Bogor – West Java

� PDAM Indramayu – West Java

� PDAM Cirebon – West Java� PDAM Rantau Prapat – North Sumatra

� PDAM Purwakarta – West Java

� PDAM Karawang – West Java

� PDAM Semarang – Central Java

� PDAM Lamongan – East Java

� PDAM Balikpapan – East Kalimantan

� PDAM Jambi – Jambi (Sumatra)

� PDAM West Bandung – West Java, etc.

� PDAM Cirebon – West Java

� PDAM Palembang – South Sumatra