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

2. Outline of Presentation
Fundamental Principles of PPP’s --- value created and overall experience
Case Studies --- results from Argentina, Bolivia and Morocco
Successes and Failures --- why ?
Future of PPP’s --- Lessons Learned
9/20/2006

3. 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
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4. Public Private Partnerships --- Range of Alternatives
Privatisation or
Asset Transfer
Private Ownership
Shared Ownership
Degree
of Private
Involvement
Delegated
Management
Affermage
Concession
Infrastructure
Contract
DBO
BOT
Public
Private
Partnerships
Management
Support
Operations & Maintenance
Technical Assistance
Years 3 ∞ 5 25 10
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5. 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
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6. 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 :
Facilitate self-provision by the people themselves
Direct provision by municipal service
Engage private sector service company
Monitoring/Control  separate  Delivery Functions
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7. Creating a Sustainable Water and Sanitation Management Model
Governance
USERS
Expect Efficient Service Delivery
Investment
Management
Public
Private
Multilateral Agencies
Local
Municipal
Public Private Partnership
Participatory Approach is Utilizing to the Strength of Each Party
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8. Value Created by PPP
Improve Infrastructures to provide water and wastewater services for all (financial investment ?)
Operate and maintain existing assets to extend their useful life and minimize the needs costly new investments
Insure the sustainable use of water resources (Integrated Water Resources Management – IWRM)
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)
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9. Water in Developing Countries: Public Utilities Performance (World Bank 2002)
In 2002, the World Bank studied the performance of 246 water utilities in developed and developing countries. I have extracted some indicators showing that, in many countries, there is a need for significant improvement.
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10. Water and Sanitation for Developing Countries … Millennium Development Goals
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
During the last decade and despite huge investment, the number of people without access to water and sanitation services did not decrease: there is still 1.1 billion people without water and 2.4 without sanitation.
Water related diseases remain on of the major causes of morbidity and causes more than 2 million death every year, mainly among young children
In 2000 the international development communities met in New York and committed in a 8 goal agenda to be achieved during the next 15 years. Among those goals, there is the one to halve the number of people without access to water and sanitation services. To achieve this target, an additional 1,5 billion people will need to be served with water and an additional 2 billion with sanitation.
This goal raises two comments:
In 2015, there will still be a large number of poor people without access to those services. What will the international community do for them?
To Provide 1,5 billion people with water and 2 billions with sanitation services will require huge investments? At the Millennium summit, there was neither answer no specific proposal for the financing of those investments.
Millennium Development Goals (MDG’s) :
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?
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11. Millennium Development Goals --- Investments Needs
Source: WHO Global Assessment 2000
– Global Water Partnership/WB Estimates
Average Annual Investment Implications of MDG Targets ($USB)
* Increase of
~$US 10 Billion (+70%) in annual investment is needed
Water, Sanitation & Poverty *
______________________________________________________________
The average annual investment in WSS Sector in developing countries in last decade was taken from WHO Global Assessment 2000 report.
Note: WHO reports similar estimates as $20 Bn. Annually. The report projects increase in the current investments in percentage terms as follows:
Water Supply
39% in urban water supply
19% in rural water supply
Sanitation
28% in urban sanitation
100% in rural sanitation.
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12. The contribution of PPP’s to Meeting the Millennium Development Goals
 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  
4.5 MILLION PEOPLE HAVE BEEN CONNECTED TO THE SANITATION SYSTEM 5 9 5 8 4 7 4 6 3 5
in million inhabitants
in million inhabitants 3 4 2 3 2 2 1 1 1
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Additional population connected during the period with potable water
Additional population connected during the period to the sanitation system
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13. Potable water Sanitation
GROWTH RATE OF SUEZ ENVIRONMENT COVERAGE HIGHER THAN THE AVERAGE RATES IN THE URBAN AREAS FOR THE COUNTRIES CONCERNED
SUEZ ENVIRONMENT RATE
RATE FOR URBAN AREAS IN THE COUNTRY
LYDEC – Casablanca
3.40%
1.89%
PALYJA - Jakarta
7.46%
1.60%
AGUAS DEL ILLIMANI – La Paz/El Alto
2.07%
1.75%
AGUAS ARGENTINAS – Buenos Aires
3.24% 0%
Potable water
SUEZ ENVIRONMENT RATE
RATE FOR URBAN AREAS IN THE COUNTRY
LYDEC – Casablanca
3.40% 0%
PALYJA - Jakarta
AGUAS DEL ILLIMANI – La Paz/El Alto
5.11%
2.93%
AGUAS ARGENTINAS – Buenos Aires
2.46%
Sanitation
9/20/2006
Source: WHO/UNICEF Joint Monitoring Programme

14. 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
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15. Case Study (see accompanying presentation) AGUAS ARGENTINAS 1993-2005

16. THE RECORD AFTER 8 YEARS WITH AGUAS DEL ILLIMANI (La Paz / El Alto Bolivia)
100%
92%
100%
71%
82%
36%
63% 0%
10%
20%
90%
80%
70%
60%
50%
40%
30%
La Paz Water
La Paz Sanitation
El Alto Water
El Alto Sanitation
Start of Contract
2005
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17. Infrastructures realised (1997-2005)
Connections
La Paz
El Alto
Total
Potable water
32 338
64 703
97 031
Sanitation
24 768
51 173
75 941
People connected ( )
La Paz
El Alto
Total
Potable water
310,000
298,000
608,000
Sanitation
238,000
235,000
473,000
Networks installed
La Paz
El Alto
Total
Potable water
289 km
683 km
972 km
Sanitation
322 km
263 km
585 km
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18. LYDEC (Casablanca, Morocco)
 Each year 20 to 25 million m3 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).
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19. But --- Argentina and Bolivia PPPs have ended early … Are these failures ???
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20. If you listen to the anti’s …
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21. Conclusion --- Overall, Results of PPP’s has been Mixed
Successes ---
Limeira, Brazil; Santiago, Chile; Casablanca; Jakarta; BOTT’s 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
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22. Water: an Economic or Social Good?
This is Free …
This has a cost ………
somebody must pay for it !
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23. Water: an Economic or Social Good?
Can she pay for water ???
She can pay for water ………
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24. The Poor often pay 20-100 Times More for Water
Jakarta
1 jerrycan (20 l.) = €
= €/m3
Water tariff
(low-income) = 0.04 €/m3
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25. 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
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26. Future of PPP’s Lessons Learned

27. Observations from the Private Sector
“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
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
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
9/20/2006

28. Actions Required by Local Governments and International Institutions (UN … WB … others)
Provide local / international Financing to insure the building of new infrastructures and the Renewal/Replacement of existing facilities that have met their useful life
Provide proper governance, high integrity and transparency of management
Engage all stakeholders in process (particularly the local users)
Implement affordable water tariffs
For the Poor:
Provide financial assistance (subsidies) for new water and sanitary connections
Create affordable water services through cross subsidies in overall tariff structure
9/20/2006

29. Public Private Partnerships --- Range of Alternatives
Privatisation or
Asset Transfer
Private Ownership
Shared Ownership
Degree
of Private
Involvement
Delegated
Management
Affermage
Concession
Infrastructure
Contract
DBO
BOT
Public
Private
Partnerships
Management
Support
Operations & Maintenance
Technical Assistance
Years 3 ∞ 5 25 10
9/20/2006