1. Workshop Agenda Belgrade, 09.05.2008 1.Service Families 2.Regional Solutions 3.Public or Private 4.Operator Models 5.Regional Solid Waste Disposal Arrangements Developing Environmental Infrastructure Projects in the WASTE Sector in Serbia Public Utility Restructuring Options

2. The Communal Service Family consists of 3 members: Water supply Wastewater removal Solid waste disposal management All three are charged services, organised at municipal level and serving the same beneficiaries. Do not plan isolated restructuring of one of the family members without discussing possible synergies with the others. Developing Environmental Infrastructure Projects in the WASTE Sector in Serbia Restructuring Options Service Families

3. The most common reason for choosing a regional solutions is Cost Sharing Introduction of modern treatment and disposal technologies is costly in terms of capital investment as well as in terms of operation. Both cost elements are fairly inelastic (Serving 400.000 beneficiaries compared to 100.000 increases the total annual operating costs typically by a factor of 1.5 instead of 4) The Economy of Scale can reduce the Unit Costs dramatically! Developing Environmental Infrastructure Projects in the WASTE Sector in Serbia Restructuring Options Regional Solutions

4. Yesterdays ideology of privatising communal services as the ultimate ratio to reduce operating costs has lost much of its charm, after getting in touch with reality Private sector efficiency is driven by the intend to maximise profit. This control element has proved to work perfectly in open markets. The appropriate mechanism to harvest the benefits of private sector efficiency in natural monopoly environments is still to be found. Worldwide experience proves competitive efficiency of communal service providers, provided they granted sufficient freedom to act. Developing Environmental Infrastructure Projects in the WASTE Sector in Serbia Restructuring Options Public or Private

5. A)Publicly owned Private Company A public-private-company (e.g. Ltd owned by the municipality) is the option to choose, in cases: Municipal Department or the Public Enterprise are bound by Public Service Laws & Regulations, the Management in charge is competent enough increase operation efficiency / reduce operation costs, the municipality has access to sufficient funds to invest as required. Developing Environmental Infrastructure Projects in the WASTE Sector in Serbia Restructuring Options Operator Models

6. B)Public-Private-Partnership (PPP) is the latest fashion. The finance industry promotes PPP as the future model of public infrastructure financing. The private engagement might be limited to funding, but could include operation activities. The desire of the financing party is security plus market typical interest. The pre-condition for any private sector investment into infrastructure is an appropriate Legal Framework, which warrants an appropriate return of the investment. Developing Environmental Infrastructure Projects in the WASTE Sector in Serbia Restructuring Options Operator Models

7. C)Private Sector Participation Models (PSP) PSP options could be distributed into 3 main classes: 1) Know how transfer / Increase of operation efficiency (Management Contract or Service Contract); 2) Increase of operation efficiency + taking the commercial risk (Lease Arrangement or TOT); 3) Increase of operation efficiency + taking the commercial risk + incurring the investment risk (BOT or Concession). Developing Environmental Infrastructure Projects in the WASTE Sector in Serbia Restructuring Options Operator Models

8. C1)Build Operate Transfer (BOT) / Concession Both options allow investment in infrastructure, without utilising scarce public funds; BOT appears safe and is often used to build wastewater treatment plants, sanitary landfills and even roads. The arrangement is (should be) clear cut, hence, the potential for surprise is limited. Concession is a more risk attached option with gambling character. To enter today into a 30-year-waste-management-concession (covering waste collection, separation, transport, treatment and final disposal) would mean to predict all developments in the sector for the next 30 years…. Developing Environmental Infrastructure Projects in the WASTE Sector in Serbia Restructuring Options Operator Models

9. C2)TOT / Lease means to handover existing facilities (single or as a system) to a private operator to perform prudent operation and maintenance for a fixed term (10 to 20 years). Such arrangements make sense in absence of sufficient operating Know how and / or of sufficient commercial know how. Both options have shown their merits in distinct cases. They appear fair for both parties, but at times difficult to administer. Developing Environmental Infrastructure Projects in the WASTE Sector in Serbia Restructuring Options Operator Models

10. C3)Management Contract / Service Contract Most Management Contract currently known in the communal sector, are imposed by the World Bank, serving a double purpose: During the 5-year term of the contract the Manager is in charge of restructuring the operation company and of warranting the appropriate utilisation of WB-Loan funds. Service contracts could serve a broad range of purposes; starting at office cleaning and not closing at operating a treatment plant or even the entire landfill. Developing Environmental Infrastructure Projects in the WASTE Sector in Serbia Restructuring Options Operator Models

11. D)Regulation Private Sector Participation presupposes the availability of appropriate Regulation Rules. The Regulation Rules could be imposed nationwide by Law as well as individually by contract. No Rules, like with regard to road traffic = chaos and severely reduced progress. Developing Environmental Infrastructure Projects in the WASTE Sector in Serbia Restructuring Options Operator Models

12. Implementing a regional solution calls for review of the entire chain from the doorstep to final disposal. Economical utilisation of (collection) facilities would call for one single collection and disposal company. Experiences in former Yugoslavia suggest a split. The collection services remain with each municipality, delivering the collected waste to handover points, forming the interface with the new system. In the latter case the fee is collected by the municipality / PE. The disposal operator charges the municipality / PE according to quantity (t) delivered. Developing Environmental Infrastructure Projects in the WASTE Sector in Serbia Restructuring Options Regional Solid Waste Disposal Arrangements