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A review and outlook of Public Private Partnerships (PPP) in the water sector Patrick. R. Cairo Executive Vice President United Water & Suez Environment.

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Presentation on theme: "A review and outlook of Public Private Partnerships (PPP) in the water sector Patrick. R. Cairo Executive Vice President United Water & Suez Environment."— Presentation transcript:

1 A review and outlook of Public Private Partnerships (PPP) in the water sector Patrick. R. Cairo Executive Vice President United Water & Suez Environment

2 A review and outlook of Water PPPsI 29/20/2006 Outline of Presentation 1.Fundamental Principles of PPPs --- value created and overall experience 2.Case Studies --- results from Argentina, Bolivia and Morocco 3.Successes and Failures --- why ? 4.Future of PPPs --- Lessons Learned

3 A review and outlook of Water PPPsI 39/20/2006 The fundamental principles of the PPP 1. Goal is continuous service improvement Requires some flexibility in the offering 2. Local anchoring 3. Transparency and dialogue for all Stakeholders

4 A review and outlook of Water PPPsI 49/20/2006 Public Private Partnerships --- Range of Alternatives Years Degree of Private Involvement Affermage Concession DBO BOT Operations & Maintenance Technical Assistance Management Support Infrastructure Contract Delegated Management Private Ownership Shared Ownership Privatisation or Asset Transfer Public Private Partnerships

5 A review and outlook of Water PPPsI 59/20/2006 Conditions required for the PPP to succeed --- Private Sector Perspective A clear definition of the roles of the partners Keeping operational control to achieve the goals Appropriate financial risk Political continuity An environment in which the law and legal certainty are ensured so that the contract is observed

6 A review and outlook of Water PPPsI 69/20/2006 Role of Government --- National, Regional & Local Ensure access to water and sanitation to all people Ownership of the Water Resources Develop and Implement Policies Planning and Oversight Tariffs and Subsidies Determine proper delivery of water and sanitation services (role for Local Government) OPTIONS : 1.Facilitate self-provision by the people themselves 2.Direct provision by municipal service 3.Engage private sector service company Monitoring/Control separate Delivery Functions

7 A review and outlook of Water PPPsI 79/20/2006 Creating a Sustainable Water and Sanitation Management Model USERS Expect Efficient Service Delivery Governance Investment Public Private Multilateral Agencies Management Local Municipal Public Private Partnership Participatory Approach is Utilizing to the Strength of Each Party

8 A review and outlook of Water PPPsI 89/20/2006 Value Created by PPP 1.Improve Infrastructures to provide water and wastewater services for all (financial investment ?) 2.Operate and maintain existing assets to extend their useful life and minimize the needs costly new investments 3.Insure the sustainable use of water resources (Integrated Water Resources Management – IWRM) 4.Provide affordable water costs for rich and poor In Developing countries: Provide sustainable water and sanitation services to those not presently served (i.e. the poor)

9 A review and outlook of Water PPPsI 99/20/2006 Water in Developing Countries: Public Utilities Performance (World Bank 2002)

10 A review and outlook of Water PPPsI 109/20/2006 Water and Sanitation for Developing Countries … Millennium Development Goals Millennium Development Goals (MDGs) : to halve the proportion of the population without sustainable access to safe water and sanitation by 2015 Who will pay for the needed infrastructure? Who will ensure sustainable operation and maintenance of these services? 1.1 billion people without access to water 2.4 billion people without access to sanitation 2.2 million deaths each year from diarrhoea, mainly children under 5

11 A review and outlook of Water PPPsI 119/20/2006 Source: WHO Global Assessment – Global Water Partnership/WB Estimates Millennium Development Goals --- Investments Needs Average Annual Investment Implications of MDG Targets ($USB) * Increase of ~$US 10 Billion (+70%) in annual investment is needed Water, Sanitation & Poverty *

12 A review and outlook of Water PPPsI 129/20/2006 The contribution of PPPs to Meeting the Millennium Development Goals in million inhabitants Additional population connected during the period with potable water in million inhabitants Additional population connected during the period to the sanitation system 4.5 MILLION PEOPLE HAVE BEEN CONNECTED TO THE SANITATION SYSTEM NEARLY 10 MILLION PEOPLE IN THE EMERGING COUNTRIES ARE NOW SUPPLIED WITH DRINKING WATER 8 million with individual access 1.8 million via a collective water supply

13 A review and outlook of Water PPPsI 139/20/2006 GROWTH RATE OF SUEZ ENVIRONMENT COVERAGE HIGHER THAN THE AVERAGE RATES IN THE URBAN AREAS FOR THE COUNTRIES CONCERNED Source: WHO/UNICEF Joint Monitoring Programme SUEZ ENVIRONMENT RATE RATE FOR URBAN AREAS IN THE COUNTRY LYDEC – Casablanca3.40%1.89% PALYJA - Jakarta7.46%1.60% AGUAS DEL ILLIMANI – La Paz/El Alto 2.07%1.75% AGUAS ARGENTINAS – Buenos Aires 3.24%0% SUEZ ENVIRONMENT RATE RATE FOR URBAN AREAS IN THE COUNTRY LYDEC – Casablanca3.40%0% PALYJA - Jakarta AGUAS DEL ILLIMANI – La Paz/El Alto 5.11%2.93% AGUAS ARGENTINAS – Buenos Aires 2.46%0% Potable water Sanitation

14 A review and outlook of Water PPPsI 149/20/2006 THE RECORD AFTER 13 YEARS WITH AGUAS ARGENTINAS 2 million inhabitants were connected to the potable water supply 1 million people were connected to the sanitation system A major effort was made to renew and expand the services 6,000 km of new networks were laid 2,000 km of networks were rehabilitated Network leaks were reduced Leaks dropped from 44% in 1993 to 32% in 2003, or an improvement of 25% $1.7 Billion Investments were made: on average, 200 Euro million a year, or 4 times more than OSN (Obras Sanitarias de la Nacion), and with lower rates. 91% of the resources were reinvested in the community

15 Case Study (see accompanying presentation) AGUAS ARGENTINAS

16 A review and outlook of Water PPPsI 169/20/2006 THE RECORD AFTER 8 YEARS WITH AGUAS DEL ILLIMANI (La Paz / El Alto Bolivia) 30% 40% 50% 60% 70% 80% 90% 100% La Paz WaterLa Paz SanitationEl Alto WaterEl Alto Sanitation Start of Contract2005

17 A review and outlook of Water PPPsI 179/20/2006 Infrastructures realised ( ) ConnectionsLa PazEl AltoTotal Potable water Sanitation Networks installedLa PazEl AltoTotal Potable water289 km683 km972 km Sanitation322 km263 km585 km People connected ( ) La PazEl AltoTotal Potable water310,000298,000608,000 Sanitation238,000235,000473,000

18 A review and outlook of Water PPPsI 189/20/2006 LYDEC (Casablanca, Morocco) Each year 20 to 25 million m 3 of water are saved, i.e. equivalent to the needs of a Moroccan city of 800,000 inhabitants. The percentage of "Non-revenue Water" (commercial and physical losses) has dropped from 38% to 28%. The number of subscribers has risen from 440,000 to 710,000 (1997- year-end 2005).

19 A review and outlook of Water PPPsI 199/20/2006 But --- Argentina and Bolivia PPPs have ended early … Are these failures ???

20 A review and outlook of Water PPPsI 209/20/2006 If you listen to the antis …

21 A review and outlook of Water PPPsI 219/20/2006 Conclusion --- Overall, Results of PPPs has been Mixed Successes --- Limeira, Brazil; Santiago, Chile; Casablanca; Jakarta; BOTTs South Africa; China; Eastern Europe Management contracts in Johannesburg; Amman; Algiers (also --- over 1,200 in US including Seattle Tolt and Cedar Projects) Ended by Mutual Consent --- Atlanta and Puerto Rico Poorly structured contract; inability of private sector to achieve needed efficiencies and lack of government support for labor reforms Ended in Disputes however, significant improvements in water and sanitation have been achieved Buenos Aires; Bolivia; Manila dramatic currency devaluation producing unsustainable financial operation

22 A review and outlook of Water PPPsI 229/20/2006 Water: an Economic or Social Good? This is Free … This has a cost ……… somebody must pay for it !

23 A review and outlook of Water PPPsI 239/20/2006 Water: an Economic or Social Good? She can pay for water ……… Can she pay for water ???

24 A review and outlook of Water PPPsI 249/20/2006 Water tariff (low-income) = 0.04 /m3 Jakarta 1 jerrycan (20 l.) = = /m3 The Poor often pay Times More for Water

25 A review and outlook of Water PPPsI 259/20/2006 Who Pays for What? Common situation in developing countries Poor --- usually not connected but pay high price Non-poor --- connected to the water network and pay a price below the cost of the service Municipal budget --- finances the operating deficit, or… Water system --- progressively falls into disrepair and ultimately collapses

26 Future of PPPs Lessons Learned

27 A review and outlook of Water PPPsI 279/20/2006 Observations from the Private Sector 1.Heavy Concession is not well adapted for developing countries Need political continuity Require an environment where the right and security of legal commitments are provided 2.Large financial debt obligation by the operator does not function Not adapted to the political rhythm which is often unstable in developing countries Periodic economic crises will occur Ideological reasons 3.Private sector moving toward a Light concession model Operation and maintenance of existing infrastructures No large new infrastructure construction requiring heavy investments Financing in local currency Shorter contract duration – 5 to 10 years This will insure sustainable water and wastewater utility

28 A review and outlook of Water PPPsI 289/20/2006 Actions Required by Local Governments and International Institutions (UN … WB … others) 1.Provide local / international Financing to insure the building of new infrastructures and the Renewal/Replacement of existing facilities that have met their useful life 2.Provide proper governance, high integrity and transparency of management 3.Engage all stakeholders in process (particularly the local users) 4.Implement affordable water tariffs For the Poor: 1.Provide financial assistance (subsidies) for new water and sanitary connections 2.Create affordable water services through cross subsidies in overall tariff structure

29 A review and outlook of Water PPPsI 299/20/2006 Public Private Partnerships --- Range of Alternatives Years Degree of Private Involvement Affermage Concession DBO BOT Operations & Maintenance Technical Assistance Management Support Infrastructure Contract Delegated Management Private Ownership Shared Ownership Privatisation or Asset Transfer Public Private Partnerships


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