PPP Project

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PPP Project New Cairo Wastewater Treatment
Plant Investors Conference December 3, 2007
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Tables of Contents

• Project Overview
• Project Description
• Project Structure
• Legal Basis for the Transaction
• Tender Process and Tentative Timeline

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I. Project Overview

• Project Management
• Water and Wastewater Institutions
• Project Summary
• Tentative Project Timeline

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Project Management
Ministry of Investment (MoI)
Ministry of Housing (MHUUD)
Ministry of Finance (MoF)
PPP Unit
Off-taker (NUCA)
Consultants
IFC
Tender/Construction (CAPWO)
Investors
WWTP Project
Operation (The Holding Co.)
Lenders
Regulator (EWRA)
End-users
Planning (GoPP)
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Water and Wastewater Institutions
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Project Summary

• Scope finance, design, construct, start-up,
  operate, maintain, repair, and renew the WWTP.
  Transfer the facility back to GoE at the end of
  the contract
• Term 20-30 years
• Capacity initial phase of 250,000 m3/day by end
  of 2010 and second phase (if applicable) of
  250,000 m3/day when justified by demand
• Payment sewage treatment charge based on
  availability and treatment volumes
• Grantor Ministry of Housing Utilities Urban
  Development
• Off-taker New Urban Communities Authority, a
  Government entity.

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Tentative Project Timeline
Months
Dec 07
Jul 08
2010
Mar 07
Dec 08
Apr 08
Jun 08
Contract Award
Invitation to Bid
Pre-Qualification
WWTP Construction
Data Room
Financial Closing
Bids
WWTP online
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II. Project Description

• Service Area
• Wastewater Flows
• Wastewater Plant Staging Plan
• Design Parameters

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Service Area
X
New Cairo City Extension Zone

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S1
S-5
Expansionarea
S-3
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Wastewater Flows
7.34

• High growth

5.68
Population (millions)
3.27

• Moderate growth

• Low growth

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Wastewater Plant Staging Plan
Scope of the PPP
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Design Parameters

• The following table summarizes the influent and
  effluent specifications for key design parameters

• To be set when agricultural re-use is
  implemented

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III. Project Structure

• Scope, Term Site
• Capacity Phasing
• SP Operating Obligations
• Grantor Operating Obligations
• Monitoring
• Sewage Treatment Charge
• Contract Re-equilibrium
• Force Majeure, Change in Law, Extr. Event
• Step-in Rights Direct Agreement
• Termination Clauses
• Settlement of Disputes

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Scope, Term Site

• Financing, design, construction, start-up,
  operation, maintenance, repair and renewal of
  WWTP
• Handover of facility upon termination
• Accept Influent Water from Purchaser at Reception
  Point meeting pre-defined specifications
• Treat and dispose of effluent in compliance with
  performance requirements for treated effluent
• Treat and dispose of sludge
• Term 20 to 30 years concession
• Site Grantor responsible for making site
  available and obtaining authorizations/approvals.

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Capacity Phasing

• First stage capacity 250,000 m3/day built in two
  phases
• 125,000 m3/day mid 2010
• 125,000 m3/day end of 2010
• Capacity might be expanded to 500,000 m3/day.

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SP Operating Obligations

• OM, repair, replacement and renewal of the WWTP
  to meet Performance Criteria and Good Industry
  Practice
• Meet performance criteria for effluent water
  provided influent water is within specification
• Treat and dispose of sludge in compliance with
  environmental norms and Sludge Strategy.

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Grantor Operating Obligations

• Ensure Influent Water meets Specifications
• Operate and maintain Influent Water Pipeline
  System so to not Materially and Adversely
  affect the WWTP
• Keep SP informed of proposed physical alterations
  to the Influent Water Pipeline System if
  Materially and Adversely affect the WWTP
• Implement, monitor and enforce a pre-treatment
  program for industrial wastewater
• Prior to consenting new industrial discharge,
  consult with SP if it can have Material and
  Adverse Effect on SPs treatment process.

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Monitoring

• Performance Monitoring Committee made up of
  representatives of Grantor, Service Provider,
  Independent Expert
• Grantor has right to appoint
• CAPWO as representative during construction
  phase
• Holding company as representative during
  operating phase
• Independent expert to prepare technical elements
  for decisions.

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Sewage Treatment Charge (STC)

• STC divided into three components
• Capital Charge to compensate for the total costs
  of investments, made in designing, constructing
  and starting-up the project (including debt
  service and return on equity)
• Fixed Operation charge to compensate for fixed
  OM costs, overhead, working capital and
  provisions for replacement or renewal of plant
  and equipment
• Variable Operation Charge to compensate for
  variable unit OM costs such as chemicals and
  electricity consumption based on volume of
  wastewater treated.
• Fixed and Variable Operation Charge adjusted for
  inflation (basket of relevant indexes)

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Contract Re-equilibrium

• SP may request Grantor to re-examine the STC and
  other terms if one of the following events has
  caused or results in an increase in costs or a
  reduction in revenue
• Maximum Volumes have been exceeded for 3
  consecutive months
• Influent Water does not meet Influent Water
  specifications and actual operating costs exceed
  by more than 5 agreed operating costs
• Grantor initiates Capital Improvements that have
  an impact on SPs costs
• Grantor imposes new requirements in addition to
  those foreseen in contract.

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Force Majeure, Direct Change in Law,
Extraordinary Event

• Force Majeure affecting ability of SP to perform
  its obligations under the contract. Grantor to
  pay only Capital Charge and Fixed Operation
  Charge. Ability to terminate in case of prolonged
  Force Majeure
• Direct Change in Law that Materially and
  Adversely effects the SP. SP to be compensated
  for losses exceeding 5 of STC collected over a
  period of one quarter
• Extraordinary Event which causes a Material
  Adverse Effect and whereby SPs performance
  obligations become unduly burdensome. Grantor to
  compensate for actual losses or minimize
  burdensome obligations.

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Step-in Rights Direct Agreement

• Lenders to the Project Company will have Step-in
  rights in case of early termination by Grantor
  for Service Provider default
• Direct Agreement will be signed between the
  Grantor and the Lenders and co-signed by the
  Ministry of Finance
• The Direct Agreement will include a trapping
  account / proceeds account mechanism. All sums
  payable by the Grantor to the SP will be paid
  through the trapping account.

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Termination Clauses

• SP Breach
• Compensation 90 of senior debt (-) distributed
  dividends (-) cash available after payment of
  outstanding current liabilities (-) insurance
  proceeds
• Grantor Breach
• Compensation Senior debt () paid-in equity
  shareholder loans () termination costs () 75
  of expected profits (-) insurance proceeds (-)
  distributed dividends (-) net cash available
  after outstanding current liabilities (-)
  insurance proceeds for lenders
• Prolonged Force Majeure
• Compensation Senior Debt outstanding ()
  paid-in equity shareholder loans (-)
  distributed dividends (-) net cash available
  after payment of outstanding current liabilities
  (-) insurance proceeds

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Settlement of Disputes

• Notification in writing
• Parties shall settle any disputes as soon as
  possible by way of negotiations
• Should negotiations fail, any party can refer the
  dispute to a Technical Review Panel (TRP)
• Three TRP members (one chosen by SP, another by
  Grantor and third selected by common agreement)
• Required qualifications pre-defined in contract
• Panel is to investigate the dispute, write a
  report of findings and submit to each party
• In case the parties disagree they can submit the
  matter to arbitration under ICC rules (to take
  place in Cairo, Egypt)
• Governing Law Egyptian Law with international
  provisions.

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IV. Legal Basis for the Transaction

• Water and Wastewater Sector Law
• PPP Law

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Water and Wastewater Sector Law

• It is anticipated that a water and wastewater
  sector-specific law will be issued in time for
  the tender
• MHUDD and MoF have prepared a draft
  sector-specific law for water and wastewater and
  the law will be presented to Parliament soon
• Such a law would typically exclude the
  application of the Public Utilities Law (Law
  129 of 1947 and Law 61 of 1958) and set forth the
  legal basis for PPP projects in the water and
  wastewater sector.

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PPP Law

• Alternatively, a PPP law is being drafted and
  will likely be considered and presented to the
  Parliament during the current parliamentary
  session
• The PPP Law is expected to provide a one-stop
  shop for PPPs with provisions that could cover
  among other areas
• - clear list of sectors to be included by
  the Law
• - identification of the granting
  authorities
• - creation of clear tender rules for PPPs
  based on international best practice
• - guidance on the form and content of the
  PPP Contract and
• - dispute resolution including arbitration
  under International Chamber of Commerce rules.

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V. Tender Process Tentative Timeline

• Tender Process
• Tentative Timeline

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Tender Process

• Expression of Interest published in October
  2007
• Investors Conference organized by MHUUD, MoF
  and MoI on December 3, 2007
• Invitation for Pre-Qualification to be
  published in December
• Pre-Qualification to be evaluated on a
  pass/fail basis in January
• Bidders Due Diligence access to data room,
  ability to ask questions in writing and orally
  during Bidders conferences
• Tender (once the legal documents are finalized)
• Technical proposal reviewed first
• Financial proposal evaluated only if technical
  proposal meets required criteria.

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Tentative Timeline
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Thank you

• Questions?