Market Sounding: The Bulacan Bulk Water Supply Project - MWSS

TA 7796-PHI

October 2013

Market Sounding: The Bulacan Bulk Water Supply

Project (BBWSP)

Market Sounding:

Bulacn Bulk Water Supply Project

TA 7796: PPP/ADB/IDCA12 1-0 IMC 5672-004

1 Introduction ................................................................................................................... 1-2

2 Project Background ....................................................................................................... 2-0

3 Project Description and Scope ..................................................................................... 3-1

4 Market Sounding ........................................................................................................... 4-0

5 Questions ........................................................................................................................ 5-0

Market Sounding:



Disclaimer

This document forms the basis for the discussion with parties who are participating in this market sounding. The Metropolitan Waterworks and Sewerage System (MWSS) of the Philippines:

Does not make any representation that it will proceed to procure the Project described in this document;

Reserves the right to alter the processes envisaged in the document; and

Reserves the right to decline to discuss further the participation of the private sector stakeholders in the Project described in this document.

Any party retaining this document or attending a meeting to discuss it by doing so acknowledges that:

Any discussion of or response to the document does not create an agreement with MWSS;

MWSS will not be under any obligation to act in any particular manner or refrain from acting in any particular manner;

The information provided in the document is preliminary, not exhaustive, and is subject to change; and

It will not rely, now or subsequently, on the information provided, for which no liability or responsibility is accepted by MWSS or any other department of the Government of Philippines, any of its authorities or agencies or any of their respective officers, employees, agents and advisers.

Market Sounding:



1 INTRODUCTION

The Public Private Partnership Center of the Philippines (PPP Center) is the nodal agency of the

Government of Philippines which was set up through an executive order in September 2010 to

facilitate the development of Public Private Partnership (PPP) projects in the country, provide PPP

advisory services and monitor the implementation of projects procured as PPPs in the Philippines.

The Asian Development Bank (ADB) is providing Technical Assistance (TA) to the Government of

the Philippines for the Strengthening of Public-Private Partnerships. The Public-Private

Partnership Center (PPP Center) is the implementing agency for the Project Development and

Monitoring Facility (PDMF) component of the TA and has been delegated the authority to recruit

and supervise consultants under the TA. The PPP Center appointed IMC Worldwide to Transaction

Advisory Services for the Bulacan Bulk Water Supply Project (BBWSP).

The Metropolitan Waterworks and Sewerage System (MWSS) submitted an application seeking

PDMF funding for the engagement of the transaction advisor for the pre-investment studies and

PPP structuring of the BBWSP.

A key objective of the PPP Center is to facilitate an increase in the level of private sector

participation in infrastructure development and service delivery which has the potential to:

increase private sector competition that drives innovation in infrastructure delivery and services while driving down the whole-of-life costs;

access private sector capital in a manner that facilitates cost efficient risk transfer away from the Government of Philippines; and

access the best of private and public sector know-how across all project elements to increase the quality of infrastructure stock across existing and new infrastructure in the Philippines.

The PPP Center is committed to identifying opportunities from the project pipeline that will

benefit from private sector involvement. The BBWSP has been identified as one such potential

opportunity.

With IMC’s assistance, MWSS has undertaken a feasibility assessment of the Project, including

private sector participation options to determine its viability and mode of delivery. As an integral

part of the Project assessment process and prior to any tendering process that may be

contemplated for the Project for private sector participation, MWSS has invited identified private

sector parties (project sponsors / investors, debt financiers, contractors / operators) to participate

in a market sounding process.

Market Sounding:



2 PROJECT BACKGROUND

Since the 1920s, after the establishment of Angat Water Supply System, Bulacan has been the

backbone of Metro Manila’s water supply. Bulacan, however, has not benefited from the Angat

water system and continues to abstract water from depleting aquifers to the detriment of the

environment. A long term, sustainable alternative for water supply does not currently exist in the

province.

Efforts were made to solve Bulacan’s water deficit following the Privatization of MWSS in 1997,

through a scheme that aimed to supply Bulacan with bulk water through a Common Purpose

Facility and later under the completion of the Umiray Angat Transbasin (UATP) project in

2001.Since the implementation of UATP there have been several initiatives to develop Bulacan’s raw

water allocation from the Angat Dam as unsolicited proposals via Build-Operate-Transfer (BOT)

schemes. They have been unsuccessful due to the size of investment, complexity of technical

requirements and limitations of the implementation framework. The complexity of the project has

posed a challenge to identifying the optimal efficiency and technical soundness that is financially

viable in terms of an acceptable tariff to the proponent, Water Districts (WDs) and end users.

In addition, the WDs in the province face a number of obstacles that impinge on their ability to

fully serve the service area. The following are the major deficiencies of many of the WDs in

Bulacan:

1. Inadequate supply

2. Low water pressure due to the undersized distribution system and inadequate supply.

3. Saline water intrusion

4. Aging distribution pipelines

5. Inadequate storage volume.

6. High Non-Revenue Water. The average NRW in the area is 30%

A reliable supply of treated bulk water is urgently needed by most of these Water Districts in the

short term and by all of them in the medium to long term. The bulk water must be supplied in a

manner that will reduce regional reliance on unsustainable sources such as saline-intruded ground

water, illegal abstraction and time consuming journeys to fetch water in far off locations. Neither

MWSS nor any of the WDs has the financial capacity to fund the construction and operation of the

infrastructure and equipment necessary to provide the quantities of bulk water that these Water

Districts need individually and collectively. Therefore, private sector capital investment will be

required to meet the demand.

The proposed project aims to address the need for bulk water supply through the construction of

infrastructure and utilities for the abstraction, treatment and conveyance of the treated water

supply to the intended connectors of the Water Districts. The sequence of implementation of the

proposed project will be by Water Districts that have been divided into two geographical areas,

grouped into three phases of development. The grouping of Water Districts for implementation has

been prioritised by need first and then geographic location. The project will cover 24 Water

Districts in total, spanning the whole area of the Bulacan Province.

Market Sounding:



3 PROJECT DESCRIPTION AND SCOPE

The BBWSP will provide treated bulk water to the province of Bulacan under an appropriate PPP

scheme. The Project will be implemented in three phases that, when completed, will supply treated

water to 24 municipalities of Bulacan. Phase 1 will provide bulk water supply services to six of these

municipalities within 18 months of the start of construction.

Figure 1: Project Area

Overall, the intervention will require, among others, the following components:

Construction of interconnection structures; Development of new water source/s including raw water conveyance systems; Construction of water treatment plant/s (WTPs) and ancillary facilities; Construction of treated water reservoirs; Construction of pumping stations; Construction of treated water transmission mains, including line appurtenances; Installation of flow metering devices; and Installation of appropriate measurement and monitoring stations.

Market Sounding:



All client WSPs will have at least one interconnection point to the main conveyance facility passing

through their service area. Multiple interconnections will be permitted, provided that the cost of

additional interconnections will be shouldered by the Water Service Provider (WSP). In Phase 2

areas, wells drilled and equipped with necessary pumps and pump stations may be directly

connected to the WD main distribution lines or to the designated reservoir.

The BBWSP will be implemented in three Phases, namely Phase 1, Phase 2, and Phase 3. The

following table lists the components and areas to be served in every stage of implementation.

Market Sounding:



IMPLEMENTATION STAGES

Stage 1 Stage 2 Stage 3 a Stage 3 b Stage 3 c

SERVICE AREA Balagtas,

Bocaue,

Marilao,

Meycauayan,

Obando, San

Jose Del Monte

City

Bulakan, Calumpit,

Guiguinto, Hagonoy,

Sta. Maria, Malolos

City, Paombong,

Plaridel, Pulilan

Angat, Baliwag,

Bustos, Pandi,

Norzagaray, San

Miguel, Dona

Remedios

Trinidad, San

Ildefonso, San

Rafael,

All 14

towns

and cities

in Phase 1

and 2

area

All 10 towns

in Phase 2

area

INDICATIVE

PROJECT

COMPONENTS

Interconnection

of 6 WD’s

Interconnection of 8

WD’s

Interconnection

of 10 WD’s

- -

TARGET

IMPLEMENTATION/

COMPLETION

Y2014-Y2015 Y2015-Y2016 Y2018-Y2020 Mid of

Y2023-

Y2025

Mid of Y2028-

Y2030

TARGET

OPERATION

Q1-Y2016

Q1-Y2017 Q1-Y2021 Y2026 Y2031

The project is underpinned by a legal framework that has validated the project’s legal viability with

MWSS as the key regulator. The recommended legal option for the tended is that the project will

be tendered in its entirety as a Built-Operate-Transfer (BOT) agreement. The project will be

underpinned by contractual agreement through the concession/ BOT agreement between MWSS

and the Proponent; multiple Water Purchase Agreements (WPAs) between the Proponent and the

Water Districts; and a guarantee mechanism potentially between LGUGC and the Water Districts

in need of credit enhancement. The bid parameter for the tender will be the lowest bulk water

charge that can meet the output specifications.

Market Sounding:



4 MARKET SOUNDING

The Objective

The objectives of the market sounding are as follows:

Gauge the interest of the private sector to partner with MWSS for undertaking the BBWSP as

a PPP;

Determine market appetite and preferences for specific private sector participation models

for the BBWSP; and

Understand key considerations of the private sector regarding their potential involvement

with the Government of Philippines in the BBWSP.

The purpose of this market sounding exercise is to inform MWSS about possible impacts on the BBWSP Project from potential participants’ appetite, concerns, preferences and timing. Where relevant, these will be considered by MWSS during the assessment of the BBWSP and prior to bidding the Project for private sector participation. The outcomes of the market sounding process may also aid in evaluating the delivery options of similar projects and their procurement in future.

It should be noted that this market sounding exercise does not form part of the procurement process for the BBWSP Project or for the procurement of any other project being contemplated by MWSS.

The Process

MWSS, with support from its transaction advisors, will hold discussions with the private sector participants from 24October to 15 November 2013. This document has been prepared for distribution to the participants prior to discussions that will take place over an online platform. The discussions will include representatives of MWSS and PPP Center.

The discussions will focus on the market sounding questions in section 5 of this document. Written responses may be submitted. All questions shall be entertained during the time allocated for each participant. No subsequent queries through letters, e-mails, phone call shall be entertained.

Market sounding will take place from Monday, 24 October 2013 to Friday, 1st November 2013, and will be conducted virtually using an online platform.

All queries regarding the market sounding meeting prior to its conduct should be directed by mail or email to:

Engr. Ramon Fabul, BBWSP Project Manager MWSS,4th Floor, Administration Building, MWSS Complex, 489 Katipunan Water Supply, Balara, Quezon City (+632) 922-2969 / (+632) 920-5521 local 103 [email protected] or [email protected] Mark Nimeno Project Manager Public Private Partnership Center NEDA sa QC, EDSA Diliman, Quezon City [email protected]

mailto:[email protected]



Market Sounding:



Conditions of Participation

By accepting an invitation to participate in the market sounding process being undertaken by MWSS, participants note and agree to the following conditions:

The market sounding meeting is being undertaken on a ‘no commitment’ basis and does not

form part of the formal procurement process for engaging private sector implementation

assistance. Participation in the market sounding process does not act to pre-qualify

participants for any future tender process.

Participation is voluntary and MWSS will not be responsible for any costs incurred by

organisations associated with either preparation or participation in the market sounding

process.

Only employees of invited private sector organisations will be able to attend the market

sounding meeting. Representatives of potential consortium member organisations or

potential sub-contractors are not eligible to attend.

MWSS will keep a record of the discussions at the market sounding meeting. However, these

records will be of a generic nature and will not identify any individual participant or

contributor.

MWSS reserves the right to use information gained from the meeting on a non-attributable

basis during the assessment of the BBWSP, including evaluation of the private sector

participation options and subsequent procurement of the Project.

Generic information generated as a result of the market sounding meeting may be used by MWSS to assist with the assessment and in evaluation of private sector participation options of the BBWSP which may be used in related documentation that may be released to third parties. A participant that attends a market sounding meeting does so, on the basis that he / she agrees that MWSS may include information or aspects of information provided by that participant in documentation.

Market Sounding:



5 QUESTIONS

In responding to the below questions, please take into consideration existing and proposed future growth of the Bulacan province, the water supply and sanitation sector in the region, the specific characteristics of the BBWSP and your company’s objectives.

The questions have been structured and arranged into sections based on the specific role a private sector participant may play in the BBWSP; namely, project sponsors, contractors/operators and financiers. If multiple roles are contemplated by a respondent, multiple sections may be applicable.

Project Sponsor The questions given below need to be answered by

participants who propose to play the role of project

sponsors and equity investors who will be taking

substantial equity risks on the BBWSP.

1. Do you own concessions for developing water supply infrastructure assets in the Philippines / other parts of the South East Asian Region / World? What is the primary role you have played in the development of the water supply infrastructure assets you own?

2. What is your company’s perspective with regard to developing water supply infrastructure assets in the Philippines, i.e., what are the key factors that need consideration by the government for the selection of the optimal procurement mechanism? What specific aspects would you focus on?

3. What is your company’s general interest / appetite for entering into concession contracts in the Philippines for the development of water supply infrastructure in the country? Why does your company believe that the Bulacan province offers a good opportunity for the development of the BBWSP?

4. If you own other water supply infrastructure concessions in the Philippines / elsewhere, what are the challenges you are facing with regard to their implementation /operation which you may want to consider in the context of the BBWSP? How does your company propose to overcome these for the BBWSP?

5. What are the financial criteria / threshold investment requirements that your company has for equity investment into water supply infrastructure projects?

6. To what extent is your company willing to consider involvement in the BBWSP? Is your company interested in investing into the concession and is it likely to take a lead equity role if the Project were to be bid out for private sector participation? What would be the financial structure that would make your level of participation feasible?

7. What do you consider to be the most suitable private sector participation option for the BBWSP and why?

8. What is your initial corporate position with regards to the development of the BBWSP as a PPP Project under

Market Sounding:



the BOT model? What does your company foresee as the appropriate PPP solution for the Project and why?

9. What would be the type of government support /concessions necessary from your company’s perspective to make the Project attractive for the private sector?

10. The government will make available the feasibility study undertaken on the Project and demand projections. Is there any other key information that would be required by your company as an equity investor to consider the opportunity from an investment perspective? Please specify.

11. What concerns as an equity investor would you have from a perspective of sharing risks with the government, i.e., what risks would you be open to taking, not taking and sharing on the Project.

12. Are there any concerns you have with regard to sourcing of debt funds on the Project including the cost of raising the debt which may impact the Project’s delivery /cost adversely?

13. Are there any contractual issues that would need to be addressed by the government at the bid document stage to enable timely financial closure? Please specify.

14. What initiatives do you propose to undertake that can maximise value for money outcomes for the government from a whole-of-life cost perspective? Please specify.

15. Do you perceive any constraints / limitations for private sector participation in the BBWSP? Please specify.

16. Are there any specific condition precedents that will need to be fulfilled by MWSS prior to the project being tendered out?

17. Do you have any other comments or remarks which you feel may be of use to MWSS in this process?

Market Sounding:



Contractor / Operator The questions given below need to be answered by participants who propose to play the role of a contractor / operator involved during the construction / operation stage of the BBWSP.

1. What is your company’s experience with regard to constructing / operating water supply infrastructure assets in the Philippines / SEA region / world?

2. What key factors will drive your interest for constructing / operating water supply infrastructure projects in the Philippines?

3. What is your perspective on the implementation of the BBWSP during its construction / operation stage?

4. Are there any technical challenges you foresee during the construction / operations stage of the Project in the Bulacan Province? What could be the approach to overcome them?

5. What do you consider to be the most suitable private sector participation option for the BBWSP and why?

6. Are there any risks you believe will be high and will need consideration from a contractor / operator perspective that needs to be mitigated by the government prior to taking the Project into the market for private sector participation?

7. As a contractor / operator, do you perceive any major environmental/social concerns that will need mitigation and that may delay the Project?

8. What institutional mechanisms do you have that ensures innovation of project delivery during the construction / operation stage? Would you be using international know-how / resources for this purpose? Or do you have previous local experience that could be used to enhance innovative approaches to the Project?

9. The government will make available the feasibility study undertaken on the Project and demand study. Is there any other key information that would be required by your company from a contractor / operator perspective? Please specify.

10. Are there any specific risks that you will not assume? Specify why?

11. Are there any specific initiatives (ie. NRW reduction) you propose to undertake that can maximise value for money outcomes for the government from a whole-of-life cost perspective? Please specify.

12. Do you perceive any constraints / limitations for participation by contractors / operators in the BBWSP? Please specify.


Market Sounding:




Market Sounding:



Financier The questions given below need to be answered by participants who propose to play the role of senior lenders for the BBWSP.

1. What are the financial criteria / threshold disbursing requirements that your company has for extending senior debt assistance for water supply infrastructure projects?

2. Does your institution have any infrastructure / non- infrastructure investments in the Philippines? If so, what is your position with regards to investing into the water supply infrastructure sector in the Philippines and with regard to the Bulacan Province?

3. What key factors will drive your interest for extending funding assistance to the BBWSP?

4. Would your institution require a substantial retention of risk by the government (to overcome any inherent challenges of the Project) to consider extending funding assistance to the BBWSP?

5. From a debt financier perspective, what do you consider to be the most suitable private sector participation option for the BBWSP and why? Would your institution consider this option and the BBWSP for investment?

6. Are there any concerns from a debt financing perspective that will impact funding /funding costs during the construction / operations phase of the Project? How can they be overcome?

7. Would your institution be suggesting any innovative structuring options for the debt component that can drive down funding costs and provide a better value for money outcomes for the government from a whole-of-life costs perspective? Please specify.

8. Are there any considerations that the government needs to be aware of and that needs consideration in the bid documents (in terms of contracting issues) that may pose as a potential issue for financial close?

9. Does your institution see a need for tri-partite financial agreements (Government-Project Investor-Financier) to make the PPP structure stronger in the Philippines? Please specify.

10. The government will make available the feasibility study undertaken on the Project, demand projections, topographic and geological survey material. Is there any other key information that would be required by your institution from a financier perspective? Please specify.

11. Are there any specific risks that you will not assume as a debt financier for the PPP section of the Project? Why?

Market Sounding:



12. Do you perceive any constraints / limitations for participation by financiers in the BBWSP? Please specify.



.

Market Sounding:



IMC Worldwide Ltd

64-68 London Water supply

Redhill

Surrey

RH1 1LG

United Kingdom

Tel: +44 (0)1737 231400 Fax: +44 (0)1737 771107

www.imcworldwide.com

Date post:	17-Feb-2022
Category:	Documents
Upload:	others
View:	3 times
Download:	0 times

Market Sounding: The Bulacan Bulk Water Supply Project - MWSS

Documents