CBO Program IndII 2 – Outline Concept

31 January 2013

IndII Ratu Plaza Tower

2

Review of Phase 1 Project

Phase 1 Objectives : (i) assist 25 CBOs in 5 districts to access credit for expansion of their existing supplies; and (ii) support 20 CBOs in 2 districts to achieve CBO – commercial partnerships for service expansion and improvement.

Outputs from phase 1: 21 CBOs obtained loans totaling $225,000 for expansion of 3,108 connections;

2 CBOs signed build-lease-transfer investment contracts and 2 CBOs signed annual service/management contracts with local contractors.

3

What we learned from Phase 1

Credit model unwieldy – IndII MoU with Bank; IndII grant held in escrow; only kabupaten banks interested;

CBOs preferred grants – PDAMs get hibah, why do CBOs have to borrow ??

Strong demand from CBOs to expand.

IndII program generated interest at LG and Province.

CBOs not interested in ceding control – no PPP, but build lease transfer (BLT) contracts for expansion acceptable

CBOs not interested in multi user service contracts.

4

Summary of the Phase 2 CBO Project

• Phase 2 CBO program uses the on-granting mechanism.

• Phase 2 program increases the role and responsibility of the local governments >> mainstreaming and scaling up by GoI.

• CBO 2 will align with Pamsimas and only go to non Pamsimas LG

• The LGs will be responsible for preparation of CBO proposals for expansion.

• Local governments will be compensated by a grant for successful preparation of CBO proposals – on acceptance in the CBO grant program

• An IndII oversight consultant will assist the GoI implementing agency in the assessment the proposals.

• WSP parallel Capacity Development Program will support institutional strengthening and capacity development at CBO and LG.

• The CBOs will implement the expansions using an output based grant model requiring counterpart funding from LG and the CBOs.

• The grant is anticipated to cover approximately 60% of the cost of the expansion.

• CBOs may leverage the grant by borrowing from banks but this is optional.

5

Summary of the Phase 2 CBO Project

• Phase 2 CBO program uses the on-granting mechanism.

• Phase 2 program increases the role and responsibility of the local governments >> mainstreaming and scaling up by GoI.

• CBO 2 will align with Pamsimas and only go to non Pamsimas LG

• The LGs will be responsible for preparation of CBO proposals for expansion.

• Local governments will be compensated by a grant for successful preparation of CBO proposals – on acceptance in the CBO grant program

• An IndII oversight consultant will assist the GoI implementing agency in the assessment the proposals.

• WSP parallel Capacity Development Program will support institutional strengthening and capacity development at CBO and LG.

• The CBOs will implement the expansions using an output based grant model requiring counterpart funding from LG and the CBOs.

• The grant is anticipated to cover approximately 60% of the cost of the expansion.

• CBOs may leverage the grant by borrowing from banks but this is optional.

6

Summary of the Phase 2 CBO Project

• Phase 2 CBO program uses the on-granting mechanism.

• Phase 2 program increases the role and responsibility of the local governments >> mainstreaming and scaling up by GoI.

• CBO 2 will align with Pamsimas and only go to non Pamsimas LG

• The LGs will be responsible for preparation of CBO proposals for expansion.

• Local governments will be compensated by a grant for successful preparation of CBO proposals – on acceptance in the CBO grant program

• An IndII oversight consultant will assist the GoI implementing agency in the assessment the proposals.

• WSP parallel Capacity Development Program will support institutional strengthening and capacity development at CBO and LG.

• The CBOs will implement the expansions using an output based grant model requiring counterpart funding from LG and the CBOs.

• The grant is anticipated to cover approximately 60% of the cost of the expansion.

• CBOs may leverage the grant by borrowing from banks but this is optional.

7

More Lessons from Phase 1

• Many cases of investment to upgrade ‘overextended’ systems – yielded few new connections but upgraded connections to ‘normal’ service.

Description After

Actual Theoritical After

Investment Costs IDR - 163,375,000

Connection unit 742 353 793

New Connection unit - 51

Production Capacity l/sec 1.53 3.53

Water Consumption m3/unit/month 3.00 9.00 9.00

Before

Cap

acit

y /

Co

nsu

mp

tio

n

Connections

Cumulative demand

Supply Capacity

Design Point

Cap

acit

y /

Co

nsu

mp

tio

n

Connections

Cumulative demand

Supply Capacity

Design Point

Consumption per connection

BASELINE

Cap

acit

y /

Co

nsu

mp

tio

n

Connections

ApparentNew

Cumulative demand

Supply Capacity

Design Point

Upgrade SupplyConsumption per

connection

Actual New

11

More Lessons from Phase 1

• Many cases of investment to upgrade ‘overextended’ systems – yielded few new connections but upgraded connections to ‘normal’ service.

Description After

Actual Theoritical After

Investment Costs IDR - 163,375,000

Connection unit 742 353 793

New Connection unit - 51

Production Capacity l/sec 1.53 3.53

Water Consumption m3/unit/month 3.00 9.00 9.00

Before

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Formulating the “output based” Component

• Separate New and Expansion costs: – Expansion $160 /hh

– Upgrading $50/hh

• Preparation of CBO projects supported by LG: – $50,000 / CBO grant for preparation

• Expansion Financing: Average cost/CBO $25,000 – Grant 15,000; LG 8,000; CBO 2,000

13

Anticipated Output

• 40 local governments

• 1,300 CBOs upgraded – 650,000 hh

• 20 New CBO built – 4,000 hh

• Total benefiting population approximately 2,600,000

14

Alignment with Pamsimas 2

15

Number of LGs 40

Number of CBOs/LG 30

Number of CBOs 1,200

Number of HH/CBO 500

Total HH 600,000

AU $

LG CBO Grant

Preparation Cost/LG 100,000 50,000 50,000

Preparation Cost 4,000,000 2,000,000 2,000,000

Investment cost/CBO 25,000 2,000 8,000 15,000

Investment cost/LG 750,000 60,000 240,000 450,000

Total Investment 30,000,000 2,400,000 9,600,000 18,000,000

ANNEXE – Assumptions and Costs

16

Next Steps

• Feedback and finalise Concept Note

• AusAID Peer Review CN

• Parallel start on CBO PDD – in collaboartion with BoI and WSP

• GoI advance selection of Kabupaten and longlist of Desa

• Complete PDD May 2013.