Presentation on theme: "PPP’s IN NIGERIA: Prospects in the Water Sector"— Presentation transcript:
1 PPP’s IN NIGERIA: Prospects in the Water Sector PATRICIA SIMON-HART
2 INTRODUCTIONWater and Sanitation Services are different from other infrastructure sectors!Many Governments are trying to figure out how to strike a balance between roles of the public and private sector in waterPPP approaches successful elsewhere (transport, power, etc) cannot be replicated directly in the water sectorDirect Private Investment should not be the focus in the Water SectorCombining efficient private operation with public/IDA financing is more appropriate PPP approach
3 THE NIGERIAN WATER SECTOR URBAN WATER SUPPLY(20,000+)SMALL TOWNS WATER SUPPLY (5,000 – 20,000)RURAL WATER SUPPLY(UNDER 5,000)
4 INSTITUTIONS IN THE NIGERIAN WATER SECTOR THE FEDERAL MINISTRY OF WATER RESOURCESSTATE MINISTRY OF WATER RESOURCESSTATE URBAN WATER UTILITIESSMALL TOWN WATER SUPPLY AGENCIESRURAL WATER SUPPLY AGENCIESWATER SERVICE REGULATORY BODIES
5 PPP’s IN WATERPromoting Public-Private Partnerships in the Water Sector requires striking the right balance between capabilities that public and private entities bring to the table.Public SectorAbility to provide commercial frameworks for infrastructure acquisition, financing, licensing – as well as creating the enabling environment to assist private firms operate and achieve full cost recovery.2. Private SectorAbility to invest and produce innovative, affordable products and reliable, efficient services based on profit motives.3. PartnershipEnabled through the Public Sectors Ability to regulate and facilitate operations contracts to private firms while not burdening them.
6 WHY DO WE NEED PPP’s IN WATER TO MOBILIZE PRIVATE FINANCETO INCREASE THE EFFICIENCY OF CAPITAL INVESTMENTRESTRUCTURE GOVERNMENT ESTABLISHMENTSTO REDUCE POLITICAL INTERFERENCEIMPROVE THE QUALITY OF SERVICEOPTIMIZE THE USE OF EXISTING INFRASTRUCTUREIMPROVE COMMERCIAL ORIENTATIONINTRODUCE TECHNICAL EXPERTISEIMPROVE OVERALL OPERATIONAL EFFICENCYREDUCE OPERATING COSTELIMINATE GOVERNEMENT INTERVENTION FOR O&MProfitability is linked to service delivery!
7 THE ENABLING ENVIRONMENT FOR PPP’s in Water Political will for changeSector Reforms - Policy and New LegislationPerformance based managementUtility reforms – Financial and Operational autonomy, Capacity DevelopmentWATER GOVERNANCEState Water and Sanitation RegulationTariff policy and modelStrong enforcementClear Government Communications StrategyREGULATIONAccess to affordable financeGovernment guaranteesGovernment subsidiesFavorable investment climateFINANCEDetailed PPP transaction modelingTransparent Private sector engagement processTransparent private sector playersEFFECTIE RISK MANAGEMENT
8 AREAS OF INTERVENTION IN THE VALUE CHAIN WATER PRODUCTIONDISTRIBUTION & SUPPLYSEWAGE AND SANITATIONOTHERSFresh/Ground Water collectionFresh/Ground Water TreatmentDesalination PlantsMunicipality/Household SupplySupply to IndustriesSupply to Unplanned Settlements UnplannedWaste Water CollectionWaste Water Treatment & disposalIrrigationBottled Water
9 PPP OPTIONS SERVICE/MANAGEMENT CONTRACTS LEASE/AFFERMAGE CONCESSION BOTFULL DIVESTITURETERM (YEARS)1-58-1520-30NAASSET OWNERSHIPPublicpublicPrivate then publicprivateINVESTMENT FINANCECOMMERCIAL RISKsharedPublic/sharedOPERATIONAL RISKSGOVERNMENT REVENUESTariffs minus service fees, taxesTariff minus affermage operating price, taxesConcession fee, taxesTariffs minus offtakeSales private, taxesPRIVATE REVENUESService feesAffermage operating priceTariffs minus concession feeBulk water salestariffs
10 CURRENT TRENDS IN THE NIGERIAN WATER SECOTR URBAN WATER SUPPLYSMALL TOWN WATER SUPPLYCONCESSIONLEASE/ AFFERMAGEMANAGEMENT CONTRACTSERVICE CONTRACTDBOO/ BOOMANAGEMENT CONTRACTSERVICE CONTRACTRURAL WATER SUPPLYCOMMUNITY OWNERSHIP
11 ASSESSING YOUR RISK VS REWARDS Divestiture(Investor-Owned Utility)HIGHDesign-Build-Operate(BOT)ConcessionREWARDSRETURN ON INVESTMENTLease/OperatingContractServiceContractManagementContractLOWLOWRISKHIGHREQUIRED INVESTMENTS
13 KEY CHALLENGES OF WATER PPP’s Access to Water is considered a Fundamental Human right. People still reluctant to payAbsence of proper Preparation of suitable PPP structure and viable Financial ModelsGovernments need be willing to share the associated risksThe Political economyLack of access to affordable finance
15 RECOMMENDATIONS AND CONCLUSION As the Nigerian Water Sector continues to implement reforms new prospects and opportunities shall continue to emerge for Private Sector participation.There has to be political will at State Level to reform and also to create the enabling environment for Private Sector participationSector Regulation at State Level must be in place and enforcement evidentThe must be detailed studies and financial modeling to determine Tariffs, Transfer and subsidiesState Governments must still be willing to invest in Infrastructure costs as and when requiredThe Private Sector should consider starting with Management contracts and gradually move ultimately to concessionsTariffs must be set for full recovery of O&M and any management feesUtilities should design networks to offer bulk water services to an area that can operate in isolationDevelopment funding should be structured to encourage the Private sector access at affordable rates for investment in the water and sanitation sectorIn the water Sector one solution does not fit all. Understand your environment and structure the PPP to the unique environment.
16 Thank you for listening. WATER IS LIFE. SANITATION IS DIGNITY Thank you for listening. WATER IS LIFE! SANITATION IS DIGNITY!! LET’S BUILD PARTNERSHIPS!!!