Pres on PSP Options

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The story of two recent water projects.. June
2005
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Two Projects

• Morocco Irrigation project Ground water
  depleting. Irrigation system badly maintained.
  PPP to bring tariffs to a reasonable level.
  BoTtwo local companies
• Greater Bangalore Water Piped water and
  sanitation for suburbs of Bangalore 12 per
  annum growth endangered by infrastructure
  bottlenecks

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Guerdane Project

• Introduction of
• Private Sector
• Participation
• in Irrigation

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A Conservation Project

• Covers 10,000 hectares in Souss-Massa region
  (near city of Agadir)
• Cultivated with citrus groves (including export
  products)
• Over 100,000 people estimated to be earning a
  living (directly or indirectly) from citrus
  farming in the region
• Land owned by 670 farmers, noted for high-level
  productivity and innovative commercialization
• Private wells are currently the only source of
  irrigation water
• Due to over-exploitation, the groundwater table
  level is diminishing by 2.5 meters per year on
  average
• Several farms are abandoned every year as wells
  dry up or water pumping costs become unaffordable

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The Project - Concept

• Delegation of public service to private sector
• 30-year concession
• Build-Transfer-Operate (BTO) scheme
• Private sector will be responsible for
  construction (including its financing)
• Upon completion, infrastructure is transferred to
  the state
• Operation of infrastructure is delegated to
  private sector
• Surface water allocation of about 45 million m3
• Cost of infrastructure estimated at USD85 million
  (conveyance pipe network) with working capital
  US100 million

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Public Sector Contribution

• 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

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Transaction Structure
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Results

• Bids received from 2 consortia, both led by local
  financial investors
• Both bidders met the criteria for technical and
  financial capabilities, and submitted responsive
  bids in accordance with the bidding procedures
• Results were outstanding, especially given the
  base price of 1.8-1.9 Dh/m3 estimated for the
  Project
• The losing bidders financial offer was 1.88
  Dh/m3
• The winning bidders financial offer was 1.48
  Dh/m3
• ONA, CDG, InfraMan, BRL
• Farmers are thus set to enjoy a substantially
  favorable tariff, on top of the high quality of
  service expected from private sector operation
• The winning bidder, led by the Moroccan
  conglomerate Omnium Nord-Africain (ONA), will be
  Moroccos first ever domestic private
  infrastructure operator in irrigation projects

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Greater Bangalore Water

• Chequered success of urban water privatizations
• The software rather than technical issues
• Tariff strucure/tariff level/tariff
  adjustment/service improvement/PPP/out-put based
  aid
• Level of Local industry involvement (vested
  interest), base line unrealistic
• Pro-poor program and public mobilizaiton
  (tariffs,NGOs,pilot projects,ward
  committees,monitoring report card)
• Transparency and Public relations
• Paced introduction of PSP

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Decision Criteria

• Technical Management
• Low Input Consumption Operating Cost ,
  Minimized Capital Cost
• Consumer Satisfaction
• Excellent service to consumers at reasonable
  Tariff, to achieve efficiency of 24/7
• Financial and Economic Sustainability
• NO Demand for funds from GOK, to maintain
  self funding system
• Risk Level Allocation
• Shifting of Risk to Private Sector
• Environmental/Social impact
• Efficient use of water resources. Reduction in
  losses. Effluent Treatment, Water safety
  standards significantly above WHO
• Political Sustainability
• Pro-Poor, Transparency Legitimacy,
  Communication, Partnership, Public Feedback

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Key Developments

• Greater Bangalore Water Supply and Sanitation
  Project
• Loss Reduction in Bangalore city
• Cauvery IV Phase II
• Others
• Addition of STPs
• Expansion of distribution system (WS) in
  Bangalore City
• Expansion / Replacement of WTP

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Current 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)
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.After Greater Bangalore Water Supply and
Sanitation Project
Bulk Water Supply (Cauvery Stages and WTP)
Contract for Bulk Water
Water and Sewerage Services in Bangalore City
Water and Sewerage Services in 8 ULBs
PSP in GBWS
Contract for Sewerage Treatment
Sewerage (STPs)
4 addnl STPs (BTO)
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.After City of Bangalore Loss Reduction Program
(2006-2010)
Spin-off Bulk Water to a new Public Sector Company
Bulk Water Supply (Cauvery Stages and WTP)
Contract for Bulk Water
Contract for Bulk Water
Water and Sewerage Services in Bangalore City
Water and Sewerage Services in 8 ULBs
5 year program to improve Losses and improve
sewerage
Contract for Sewerage Treatment
Sewerage (STPs)
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.After Implementation of Cauvery IV Phase II
Expansion of WTP or new WTP (BTO) or divestment
of Old WTP
Additional Raw Water Requirement
Cauvery Stages
WTP
Contract for Bulk - Raw Water
Contract for Bulk - Treated Water
WS Bangalore - North
WS Bangalore - Central
WS Bangalore - South
Three integrated WS utilities (Concession)
Contract for Sewerage Treatment
Sewerage (STPs)
STPs - BTO
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Characteristics of a Hybrid PSP

• Term 7 years water distribution and sewage
  collection.. New STPs will be BTOs
• Services
• Provide UWSS
• Detailed engineering and quality control on
  sewerage component
• EPC on ongoing capital investments
• Performance Based LOS
• Quality of H2O and availability
• Technical parameters
• Customer Satisfaction
• Major constraint government not ready to give up
  control of tariffs
• Financial Considerations
• Provides initial and ongoing incremental working
  capital
• Revenues are escrowed to cover with output based
  aid
• OM, Bulk Water, STP, MF, Ongoing Capex and Debt
  Service

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Hybrid Structure
Legislative Amendment Required
Amendment Not Required
Rules or Regulations required assuming that there
is a detailed amendment enabling PSP
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Combined Impact on Bangalore Metropolitan Area
Project Current Status GBWS Loss Reduction Progam Cauvery IV Phase II
PSP GBWS Bulk Water Separation 3 WS Concessions WTP BTO
Technical
100 Coverage
24 / 7
EU H2O Quality
15 UAW
Commercial
98 Collection
OFWAT Customer Service
UK Grievance Redressal
Financial
Access to Market
No Recourse to GoK
Risk Allocation
Borne by Operator
Environmental
Full effluent treatment
Phase out of Boreholes
Political
Pro poor Policy
Full Regulatory System
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..Thank You