PPP IN WATERAND SANITATION - Toyo University

PPP IN WATER AND SANITATION – THE ROLE OF PPPS IN SOCIETY AFTER THE CORONAVIRUS PANDEMIC TOYO UNIVERSITY, 1 NOVEMBER , 2020 | PG. 1

15TH ANNUALINTERNATIONAL

PPP FORUM

WISE PPPINTERNATIONAL

SPECIALIST CENTREOF EXCELLENCE ON

PPP IN WATERAND SANITATION

PPP IN WATER AND SANITATION

THE ROLES OF PPPS IN SOCIETY AFTER THE CORONAVIRUS PANDEMIC

15TH ANNUAL INTERNATIONAL PPP FORUM

TOYO UNIVERSITY, TOKYO

1 NOVEMBER, 2020 DIOGO FARIA DE OLIVEIRAFOUNDER & EXECUTIVE DIRECTOR - DEFINING FUTURE OPTIONS

PRESIDENT – WATER AND SANITATION NATIONAL STRATEGIC PLAN (PENSARR 2020, PORTUGAL) PRESIDENT – WISE PPP, INTERNATIONAL SPECIALIST CENTRE OF EXCELLENCE ON

PPP IN WATER AND SANITATION (UNECE)



PPP FORUM




WATER AND SANITATION INTERNATIONAL FRAMEWORK1

COVID 19 IMPACT ON WATER SECTOR3

PPPS AND THE PANDEMIC SITUATION4

THE INTERNATIONAL SPECIALIST CENTRE OFEXCELLENCE ON PPP IN WATER AND SANITATION

5

THE ROLE OF PPPS AS A TOOL FOR SOCIETY2

CONTENTS



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CONTENTS





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Drinking water is essential to life, but only 71 percent of people have water that is considered safely managed

EXPANDING ACCESS TO DRINKING WATER

“At least basic water” requires only an improved water source within a 30-minute roundtrip, but 42 percent of people in Sub-Saharan Africa lack even that.

People using at least basic water services, 2015 (% of population)

Source: World Bank Group, 2018



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Globally, 6 in 10 people use sanitation facilities that are not safely managed and may contribute to the spread of disease

EXPANDING ACCESS TO IMPROVED SANITATION FACILITIES

Handwashing makes an important contribution to hygiene, but many households, especially among the poor, lack basic facilities.

Access to sanitation at different categories, 2015 (% of global population)

Source: World Bank Group, 2018



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Annual cost of water and sanitation utilities is estimated in USD 679,8 billion

GLOBAL MARKET

Global Market: USD 679,8 billion

Source: Global Water Intelligence, 2017

Utility Expenditure, 2020

Global Water Market is growing and will continue growing due to:

Migration from rural to urban areas

Increasing in water consumption

Higher hydric stress

Greater water costs

Capital Expenditure

43%

Operating Expenditure

57%



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The World Bank estimates that the gap to meet the Sustainable Development Goal #6 is about USD 113 billion per year, until 2030

INVESTMENT GAP

Annual Investment Gap to meet SDG #6

Water Sanitation Annual Gap

Source: World Bank, 2018Unit: USD x 1000

16,00026,600 25,000

46,000

113,600

0

20,000

40,000

60,000

80,000

100,000

120,000

Rural Urban Rural Urban Total




Capital Expenditure

43%


57%



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The success of the SDG #6 means that the annual market value will be set at USD 944,5 billion

INVESTMENT GAP

Annual Investment Gap to meet SDG #6

Source: World Bank, 2018Analysis: WISE PPPUnit: USD x 1000

Water Sanitation Annual Gap

16,00026,600 25,000

46,000

113,600

0

20,000

40,000

60,000

80,000

100,000

120,000

Rural Urban Rural Urban Total




Capital Expenditure

43%


57%



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Private Sector Participation is growing steadily in the 21st Century. Private Sector’s market share in 2020 is estimated at 12,5% of the Global Market

PRIVATE SECTOR PARTICIPATION - POPULATION

335

10491220

1550

0

200

400

600

800

1000

1200

1400

1600

1800

2000 2013 2018E 2030F

Population (millions)

Population Served by Private SectorThe total number of people who have access to water or sanitation services from the private sector exceeded a billion for the first time in 2013

Given the limited financial resources of many governments, it is foreseen that Private Sector Participation will keep growing to bring additional resources to meet SDG #6

Source: David Lloyd Owen; GWI, WISE PPPE: EstimatedF: Forecasted



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OBJECTIVES





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THE ROLE OF PPP AS A TOOL FOR SOCIETY2

PPPs should not be seen as an “end”, but a “mean” to achieve certain objectives

PPP GOALS

PPP Goals

Expanding network coverage

Increasing operational efficiencyIncreasing

quality of service

Reducing cost of service

Assuring sustainability

In Water and Sanitation Sector, PPPs are a “tool” of the public sector to achieve certain goals, namely:



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Different management models should be used to achieve different objectives

DIFFERENT NEEDS, DIFFERENT CONTRACTS

Less commitment of Public Grantor with Private OperatorLess responsibility delegated on Private OperatorLower contract periodPublic finance

More commitment of Public GrantorMore responsibility delegated

Higher contractual length / relationshipPrivate finance

Service Contracts

ManagementContracts

Lease/AffermageContracts

BOT and variant

Contracts

Concession Contracts

Joint Ownership

Outright Sale Divestiture

New trends, hybrid contracts and new forms of financing keep appearing

PPPs, as any other management model, have advantages and disadvantages, successes and failures

Each project has its own needs – it is the project that requires a certain management model, and not the other way around.



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It is the prime responsibility of the public sector to ensure Value for People and value for money;

There are several techniques and considerations for determining and assessing value;

Value for money assessment techniques are complicated and require quality data and should be used after careful reflection;

However value for money must be a primary objective in maintaining the public interest.

Value for People, on the other hand, must evaluate social, environmental and local economy criteria.

Source: Guidelines for successful public – private partnerships, EU; UNECE ICoE Programme


PPPs should be used only if they provide better Value for People and Value for Money than traditional public methods

FEASIBILITY OF PPPS



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Water and sanitation Utilities faced great difficulties while assuring continuity of service and social concerns

MAIN CONCERNS

Workforce and 24/7 service

Changes in consumption and effects on P&L

Affordability

• Risk of staff contamination

• Assure shifts and minimum

staff to operate assets

• Assure continuity of supplies

(chemicals & spare parts)

• Health and safety measures

• Contingency plans

• Increased domestic

consumption due to

confinement

• Decreased tourism, commerce

and industry consumption due

to lower activity

• Less revenues (domestic tariffs

are often lower than non-

domestic tariffs)

Source: Defining Future Options; WISE PPP

• Unemployment | Lay-off

• Preclusion of “cutting off” tap

water service for non-

payments

• Wither spectrum of “social

tariffs”

• Less revenues (social concerns

lead to lower revenues)



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Global Water Intelligence (GWI) predict a 2% fall in global utility capex (2019-2020), down from 6% growth expected pre-COVID, before a 5% bounce-back in 2021

REGION ANALYSIS IN EMERGING MARKETS

Source: GWI

The pandemic has proven the water sector's resilience to economic downturns, particularly in Europe and US

Pandemic Policy measures Utility Financial Impact Utility Social measures

• Argentina, Chile, Columbia and Peru, with strict lockdowns;

• Mexico and Brazil with less stringent lockdowns

• Reduced revenues• Procurement delays

• Suspension of cutting off supply;

• Supply households without connections

Latin America

13% capital expenditure decrease


• Indonesia, Philippines, Vietnam, Thailand, Malaysia and Singapore with stimulus to economy including PPPs

• Reduced revenues• Procurement delays• Supply chain interruptions

• N.A.

Southeast Asia

12% capex construction delays


• Utilities are highly dependent on subsidies from governments

• Sometimes governments faced difficulties in financing utilities

• Reduced 60-70% revenues

• Procurement delays• Supply chain interruptions

• Free water during lockdown

• Suspension of cutting off supply;

Africa

12% capital expenditure decrease



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Contractual impact is yet unknown – results and consequences will only start appearing in mid-2021

ARRANGEMENTS AND GOVERNANCE

Some contracts predict this sort of event in its “Force Majeure” articles

But some contracts do not!

Force Majeure “exempt” private operators from certain obligations

Force Majeure requires an agreement on clearance of direct and indirect costs of the pandemic

FORCE MAJEURE?

Some contracts have insurances for “lost profits”

In these cases, the private operator may be protected

INSURANCES?

Some private operators may request compensations and/or tariff increases

This will lead to: Friendly agreement Dispute resolution mechanisms Litigation

COMPENSATIONS & TARIFF INCREASES

In this pandemic situation there are no winners

The public party (Grantor) must understand that the private operators cannot bear the costs alone

And the private operators cannot assume that the Grantor will bear all the costs

Common sense is necessary

NO ONE WINS!



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Each Private Operator responded voluntarily and immediately with a wide spectrum of activities and donations

WATER AND SANITATIONS PPP RESPONSE IN PORTUGAL

Portugal

PPP response

Initiatives with

Employees

Initiativeswith

Customers

Initiatives with the Society

• Contingency plans• Remote work• Staggered working hours• Back-up operational teams• Protection personal equipment• Online meetings• E-learning• Social distancing• Limited number of customers• Payment with 6 months instalments• Suspension of water cut-offs• Entrance and exit corridors• Awareness campaigns• Disinfection of public space • New educational platform for children

and families • Donations



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Indaqua (Miya Group) with Social Responsibility policy towards Municipalities and citizens

WATER AND SANITATIONS PPP RESPONSE IN PORTUGAL – SOME EXAMPLES

Portugal

PPP response

• Provision of protective equipment to fire brigades and nursing homes

• Support to children in need: donation of 150 computers

• Donation to local Hospital Pedro Hispano towards the new unit for COVID-19 patients

• Acquisition of 44 medical beds for several nursing homes

• Loan scheme targeting disadvantaged employees and their children

Source: Indaqua



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Aquapor with innovative solutions to create an efficient working environment during confinement

Portugal

PPP response

• Centralized monitoring tool of staffing status

• Planning resources during the pandemic crisis

• Real time evaluation of working teams

• Assuring 24/7 supply service

Disaster Response Program


Source: Aquapor



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Plainwater concerned with Customer safety and comfort

Portugal

PPP response

• New ways to communicate with customers, reinforcing proximity rather than distance

• Awareness actions

• Site and social media activity

• Gamification as education


Source: Plainwater



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PPPs may face increasing activity after the coronavirus pandemic

PPPS AFTER THE PANDEMIC SITUATION

PPPs encourage construction, employment and local economy

PPPs can leverage the public capacity to invest

BOOST TO ECONOMY

Some countries already announced that new PPP programs will be launched to help recovering from the economic crisis

PPPs can be developed casuistically (by municipality) or centralized (by government programs)

ECONOMY RECOVER PLANS

Lessons from this pandemic will be helpful in drafting clearer arrangements

A new generation of PPP contracts will emerge with provisions to face world crisis

Operations will consider new health and safety measures

Partnerships will be stronger

MORE RESILIENT PPPS

PPPs are a tool to attract financing to the water sector

PPPs are an important part of “blended finance”, working side-by-side with IFIs

PPPs reinforce the public capacity to invest

PPPs can accelerate the SDGs

HELP CLOSING THEFINANCIAL GAP



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THE INTERNATIONAL SPECIALIST CENTRE OF EXCELLENCE ON PPP IN WATER AND SANITATION5 SUPPORTING THE SDGS

WISE PPPInternational Specialist Centre of Excellence

on PPP in Water and Sanitation



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THE INTERNATIONAL SPECIALIST CENTRE OF EXCELLENCE ON PPP IN WATER AND SANITATION5 MISSION

Defining Standards

Sharing Knowledge

Promoting Stakeholders Cooperation

Foster relationship and dialogue between governments, municipalities, private sector, IFI, regulators, workers, civil society and NGOs to drive successful PPP

Promote know-how exchange on PPP models between major players and stakeholders in order to facilitate development of sustainable infrastructure

Prepare, update and improve Standards in Water and Sanitation, and certify PPPs on request

The Centre of Excellence was established to collect information on successes and failures from the past and current PPP experiences and to distil from such an analysis the principles of best practice.



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THE INTERNATIONAL SPECIALIST CENTRE OF EXCELLENCE ON PPP IN WATER AND SANITATION5 ACTIVITIES

The Centre’s activities aim to deliver successful People First PPPs

Preparing Case-Studies &

Best Practices

Water Expert Council

[WeCon]

Shortlisting Experts

Monitoring & Updating standards

Managing Conciliation

Providing Institutional

Advisory

Issuing PPP Rating

Certification

PlannedActivities



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THE INTERNATIONAL SPECIALIST CENTRE OF EXCELLENCE ON PPP IN WATER AND SANITATION5 PARTNERS

We are gathering strategic partners to ensure the success of the Centre in supporting the SDGs

JoinUs!



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“It is critical for achieving the 2030 Agenda to mobilize new investments in high quality infrastructure projects, especially in low and middle-income countries.”

Ms Olga AlgayerovaUNECE Secretary-General

Date post:	02-Jan-2022
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