Wastech International Summit & Expo
‘4 R’s – A Way to Sustainability’
PPP Experience in Waste and Wastewater Management
in Developing Countries
Sumeet Shukla
PPP Transaction Advisory Services – South Asia
November 22, 2014
Contents
• Who we are
• Sector Perspective
� MSW management
� Water and waste water
WHO WE ARE
3
International Bank for Reconstruction and Development
1945
Lends to governments of middle income developing countries.
International Finance Corporation 1956
Provides loans, equity and technical assistance to stimulate private sector investment in developing countries.
International Development Association
1960 Provides concessional loans to governments of the poorest countries.
Multilateral Investment Guarantee Agency
1988
Provides guarantees to foreign investors against non-commercial risk
International Centre for Settlement of Investment Disputes
1966
Settles investment disputes between foreign investors and host countries.
WORLD BANK GROUP
IFC is the private sector arm of the World Bank Group, with a mission to reduce poverty by promoting private sector investment in developing countries
5
IFC also provides technical assistance and advice to governments and businesses
Investments Advisory
IFC is the world’s largest multilateral provider of financing for private enterprises with over US$26 billion in outstanding investment commitments
Loans
Equity
Guarantees
Environment & Social
Sustainability
Access to Finance
Business Environment
PPP Transaction Advisory
Enterprise Assistance
IFC’s Main Business Lines
6
• Specializes in advising public sector on private sector participation in the
delivery of infrastructure services .
� Structuring Public-Private Partnerships (e.g. concessions, BOO, BOT)
� Restructuring and disposal of publicly owned assets
� Upstream advisory work (regulatory, legal framework)
� We help businesses access capital markets
� We provide technical assistance
• Sectors: roads, rail, power, airports, ports, water, waste, mining, education and
health.
• Advised on 165 projects in over 60 countries, mobilizing over $8 billion of private
sector investments.
• Organized regionally with HQ in Washington, USA: Latin America & Caribbean,
East Asia, East Asia and Pacific, Middle East and Northern Africa, Africa and
Europe & Central Asia.
IFC PPP Transaction Advisory
7
IFC’s Two Phased Implementation Approach
DIAGNOSTIC PHASE
Technical Review
Financial/ Operational
Review
Legal Review
Preliminary Memo/ Research
Determine Restructuring
Needs
Deliver TSR to Client
Phase 1: Diagnostic and Strategic Review (DSR)
(Legal Consultant)
(Technical Consultant)
Strategic Decisions on
Transaction Structure
IMPLEMENTATION PHASE
Marketing/ Road show
Bidder Prequalification
Valuation Report
Restructuring
Bidders’ Due Diligence
Bid, Evaluation & Closing
Negotiate Bid Documents
Phase 2: Restructuring and Implementation
3-6 months 9-14 months
PPP Transaction Advisory does not only produce reports, our role does not finish
until a suitable private investor has committed to execute a project
Waste Management
Project Description IFC Involvement Year
Modern Asia
(Thailand/Indonesia)
Waste Collection / Transport / Recycle /
Treat / Dispose
USD 15 million Corporate
Finance 2004
Ramky
(India)
Municipal Solid Waste / Hazardous
Industrial / Bio-medical Waste Treatment
USD 15 million Corporate
Finance 2005
Petstar
(Mexico) Plastic Recycling
USD 24.5 million Corporate
Finance 2007
Estre Ambiental
(Brazil) Sanitary Landfills / Waste Treatment
Approx. USD 24.5 million
Corporate Finance 2009
Vietnam Battery
Recycling
Recycle Car Batteries – Establish
Regulations & Run Recycle Pilot Program Advisory Service 2010
Maldives SWM Waste Collection / Transport / Recycle /
Treat / Dispose
PPP Advisory Service for a 20
Year BOT 2011
Behrampur SWM SWM Processing
PPP Advisory Service for a 20
Year BOT + 15 Year post
closure maintenance
2013
West Bank SWM Transport / Landifll / Recycling PPP Advisory Service for a 5
Year O & M contract 2013
Kampala SWM Waste Collection / Transport / Treat /
Dispose Ongoing PPP Advisory Services 2013
Puri SWM Separation & Processing Ongoing PPP Advisory Services 2013
IFC Experience in Waste Projects
Project Background & Description
1
Kampala Solid Waste Management PPP Project
11
Need for Project
• Population of 2 million with 60% in informal
settlements
� Urban poor communities
� Poorly planned infrastructure
� Inadequate access to water supply and
sanitation
• Sanitation coverage less than 50% in informal
settlements
• Waste generation – 1000 TPD
• Waste is disposed at Kiteezi landfill
� Capacity almost exhausted – would suffice
requirements for a year
� Characterized by poor operational practices
0.6
0.70
0.85
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
Per Capita Waste Generation
Source: United Nations Statistics Division
Current Waste Collection
12
Private & Informal
Collectors
Fee
Waste
Waste
KCCA
Middle income & Commercial/Government areas
Lower Income areas
Waste
Informal Collectors
Single point collection / Bring to Truck services
Door to door collection
The Implementation Structure
Collection & Transport Concession
– Up to 7 concessions of 4 years to be
awarded for collection exclusivity
– Collect from both premium customers and informal sector
– Charge customers in addition to offering
free communal service to those that can’t
afford
– Keep the zone clean and transport all waste
to the landfill
– Pay a gate fee at the landfill
– Bid parameter: Concession fee received/paid
Landfill Concession
– One concession of up to 20 years for the
landfill
– Collect gate fee and return a % of it back to
KCCA
– Complete discretion on third party revenue
but share a % with KCCA
– Bid parameter: Availability payment received
Collection & Transport Operator
– The more customers you can convert from the free service, the better your
bottom line (revenue from KCCA is
fixed!)
Landfill Operator
– Any third party revenue is your upside
KCCA
– The better your enforcement to ensure
that all waste arrives at the landfill,
the more revenue earned from gate fees.
Obligations Incentives for upside
Annual Collection Costs & Revenues
Total Collection Costs
Item Cost (UGX mil) Cost (USD mil)
Casual staff 2115
Management 442
Fuel/Lubricants 4316
PPE/Bags 7625
Maintenance 911
Depreciation 1822
Sub Total 17231
Profit@10% 1723.1
Interest@24% 4374
Total 23328.1 8.64
Gate fee paid at landfill @$12*
Waste delivered
341,640
Gate Fee paid 4.10
Total Collection Cost (+ Gatefee) 12.74
Revenue from Customers
UGX mil USD mil
Households in Kampala 363,000
Premium customers @33% 119,790
Total Revenue @30,000/month 43,124 15.97
Sensitivities on paying households
UGX mil USD mil
Households in Kampala 363,000
Premium customers @33% 119,790 43,124 15.97
Premium customers @30% 108,900 39,204 14.52
Premium customers @25% 90,750 32,670 12.10
Premium customers @20% 72,600 26,136 9.68
Premium customers @15% 54,450 19,602 7.26
� If 25% or more of all households pay UGX 30,000/ month for collection, collectors will not require any subsidy and may offer a concession fee if expected revenues are higher
� Any marginal increase in revenue from the informal sector will be an upside.
15
Maldives Solid Waste
Management PPP Project
The real paradise at Maldives is under threat
… from waste related problems Open burning of waste at Thilafushi …
Construction waste - no place to dispose Pile of bottles left behind …
Project Overview • Project
� Integrated Waste Management project for 4 islands in
the capital region generating nearly 400 TPD of waste.
• Context & Background
• Collection done by informal sector – Inconsistent; user
charges
• Municipality does transportation and disposal
• 17 years of environmental abuse at Thilafushi island
• Operations funded by Government budget
• Government Objectives
• Manage waste in an environmentally friendly and
sustainable manner
• Improve waste management collection services
• Introduce efficient waste treatment & disposal systems
that limit damage to the surrounding marine
environment
Contractual Structure – 20 year BOT
Residences Commercial Resorts
Special Purpose Vehicle
USERS
Male’ City Council Ministry of Finance
TRIPARTITE AGREEMENT
Provides MSWM Services
Pays Tipping Fees Lease land for
transfer station
Raises Invoice
Pay SWM Charges Collect User Fees
Thilafushi Corporation
Lease land for landfill
Power Utility
PPA for waste to energy
GUARANTOR
Key Features of the Agreement
• Integrated responsibility of private sector measured against performance standards
• Tripartite agreement between bidder, municipality and Government to minimize
municipal credit risk
• Government has guaranteed waste quantity of 200TPD
• Government assumed the responsibility of setting of tariffs and collection
• Invoicing by operator in USD -> protects against currency devaluation risks
• Bid Variable – Two fold
� Tipping Fee (USD per ton) for waste treatment & disposal
� Transportation Fee (USD per ton kilometer) for waste collection & transportation
• Technical Proposal Evaluation included a detailed scoring matrix; minimum 70 marks
were required to pass technical proposal evaluation
• Winning Bidder was selected on L1 basis provided firm scored minimum technical score
• Winning Bidder -> Indo-German consortium named Tatva Global Energy Limited
21
West Bank & Gaza: Solid
Waste Management
Project Description
22
• Provision of standard municipal public services, especially solid waste management, of
particular concern, given political and economic instability in West Bank and Gaza.
• 500 TPD of waste generated illegally burned or dumped outdoors
• Insufficient investment by the municipalities
• Funding for a new sanitary landfill, transfer stations, and access roads at Al-Minya
provided by the World Bank and other donors
• Local capacity to manage it was still insufficient.
• Holistic assistance provided by the World Bank Group which included IFC structuring a PPP
transaction for the project.
• PPP project structured - operation and management of Al-Minya landfill and two transfer
stations at Tarqoumiya and Hebron, including the long-haul transfer of waste to from the
transfer stations to the landfill.
• Primary waste collection excluded from the private sector’s responsibilities
• Payment mechanism – Tipping fee per ton of waste managed.
• Flexible concession term adopted whereby the term increases in case of balance volume of
the landfill cells
Indian Context PPP Trends & Prevalent Models
23
SWM Activities covered in PPP Types of PPP Average Tenure of the Project
Integrated Municipal Solid Waste Management BOOT , DBOOT, BOT 20- 30 years (Some of the project tenures
linked to the asset life)
Collection, Transportation & Disposal BOOT 3 years
Transportation, Processing and Disposal BOOT 20 years
Treatment & Disposal DBOOT, BOT 20 / 25 years
Treatment BOO 20 -35 years
Disposal DBOOT, BOOT 3- 20 years
Road Sweeping, C&T with local
contractor participation
First few failed attempts with big
private firms
Initiatives of waste processing with
private firms Mostly compost tried
and tested
PIL for inadequate MSW practices
MSW Rules issued in September 2000
by MoEF
Growing trend in waste processing,
scientific landfill, and closure of existing
landfill Successful projects
implemented
Large projects in integrated MSWM and development
of scientific landfill awarded &
implemented NOW
Thrust on WTE
Need for proven
technologies for waste
management
1996-97 Late 1990s 2000 2003-07 2007-13
Key Structuring Issues
24
• Waste Quality & Quantity
• Minimum Waste Volume Guarantee
• E&S Issues • User Fee and
Collection • Waste to Energy?
Sector Related
• Technology Neutral Bid?
• Financial Bid • Credibility of
private partner
Bid Process Related
• Government affordability
• Payment Security
Government Sector Related
Key Lessons
Quality Baseline Factor adequate time for project preparation
Information,
Communication and
Education
Involve the community of informal workers, residents and
internal stakeholders like sanitary workers and employees
for garnering public support
Post contract support Capacity building for ULBs for monitoring performance,
ULBs to facilitate smooth transition, support
communication with stakeholders/agencies
Land acquisition Critical to project delivery; ULBs to facilitate
Affordability Government support
Investor Interaction Address bankability and key risks of private sector
Political Will Championing to co-ordinate different stakeholders
Waste-water Management
27
New Cairo Wastewater
Treatment Plant
The Need… � New Cairo is one of the new centers being promoted to help alleviate the problems
of urban overcrowding in Greater Cairo;
� Water sanitation and supply were identified as priority sectors by the GoE as the infrastructure had inadequate capacity and could be improvised.
New Cairo City (35.2 ha)
Population (moderate
growth)
2010 2020 2030
690,000 2.0 M 3.2 M
WWTP
12.1 ha
11.0 ha
12.1 ha
Transaction Structure
• Service Provider
� Financing, design, construction, start-up, operation, maintenance, repair and
renewal of 250 MLD WWTP;
� O&M, repair, replacement and renewal of the WWTP to meet Performance Criteria
and Good Industry Practice for a period of 20 years;
� Accept influent water, meeting pre-defined specifications, at the facility;
� Meet performance criteria for effluent water;
� Treat and dispose of sludge in compliance with environmental norms
� Handover of facility upon termination
• Grantor
� Ensure influent water meets specifications;
� Operate and maintain influent water pipeline system so to not “Materially and
Adversely” affect the WWTP;
� Keep SP informed of proposed physical alterations to the pipeline system
� Implement, monitor and enforce a pre-treatment program for industrial wastewater.
Payment Structure
� GoE to pay quarterly Sewage Treatment Charges (STC), which comprises:
� Capital Charge: to compensate for the total costs of investments (including debt
service and return on equity);
� Fixed Operation charge: to compensate for fixed O&M costs, overhead, working
capital and provisions for replacement or renewal of plant and equipment;
� Variable Operation Charge: to compensate for variable unit O&M costs such as
chemicals and electricity consumption based on volume of wastewater treated.
• Fixed and Variable Operation Charge adjusted for inflation (basket of relevant indexes)
Provisions for Contract Re-equilibrium
• SP may request Grantor to re-examine the STC and other terms if one of the following
events has caused or results in an increase in costs or a reduction in revenue:
� Maximum volumes have been exceeded for 3 consecutive months;
� Influent Water does not meet Influent Water specifications and actual
operating costs exceed by more than 5% agreed operating costs;
� Grantor imposes new requirements in addition to those foreseen in contract.
Indian Scenario
• Historically, ULBs bid
out EPC contracts to
the private sector for
source development,
construction of
WTP/STPs, pipeline
laying, pumps etc to
different private
sector contractors.
• In the late ‘90s ULBs
in states like Tamil
Nadu, Karnataka and
Andhra Pradesh
started outsourcing
O&M of water and
sewerage systems to
local contractors in
order to overcome
hiring restrictions.
This trend has spread
to Gujarat and
Maharashtra as well.
• PPPs came on the
scene in the early
2000s with landmark
projects like Tirupur
Water & Sewerage
Project (IL&FS and
Mahindra Water
Utilities)and Alandur
Sewerage Project
(IVRCL).
• The progress has been slow with only a handful of UIDSSMT/JNNURM/Multi-lateral/State
Government supported projects being bid out on PPP basis.
Sector Overview
Parameter Description
ULBs with sewerage
facilities
• 6% of the ULBs have some form of system
Coverage in a ULB • Almost 50% of households in cities do not have sewerage
connections
Adequacy of sewage
treatment capacity
• Only 21% of the waste water generated is treated
• Capacity of the existing STPs developed - 31% of total
generation
Quality of sewage treatment • Treated water does not meet the norms and standards
Extent of cost recovery in
sewage management
• Minimal as marketability of treated water is poor
Source: HPEC Report
Financing of Projects • Most of the projects executed under EPC contracts with funds from budgetary
allocations / state government / Multi lateral agencies
o Operations and maintenance is carried out under service / management contracts
� Few PPP projects (BOT contracts with capital assistance) have been attempted in the
past but have met with limited success
� Currently, projects being developed with assistance from
� Government Schemes – JnNURM, UIDSSMT program launched by MoUD
� External aiding agencies
o World Bank support of USD 1 billion for National Ganga River Basin Authority
program
o Other multi lateral agencies
o Thrust by JnNURM
o Under JnNURM 116 projects have been sanctioned with an estimated investment
of INR 15000 Crores
o 16 projects with an estimated investment of INR 3000 Crores completed
Concerns of Stakeholders
34
Concerns
Government agencies
Civic Society Private
Developer
• Lack of reliable baseline
information
• Haste in bidding projects to
avail funds under schemes
• Inadequate technical studies
while preparing DPRs
• Had adverse impact on the
due diligence exercise prior to
bidding
• Business model?
• Payment guarantee?
• Government support and
Political Will
• Tariff implications
• Concern about loss of control
• Availability of funds to sustain
the projects on a long terms
• Condition of assets during
handback
Way Forward
35
• Need to develop a business case for treated waste water
• PPPs to be designed within the overall framework of financial sustainability
• Need for intensive project development activities
• Better leverage of technological skills of the private sector
• Objective should be to improve service delivery and not on asset creation
• Incentives for optimization of capital expenditure - Focus to shift from
underwriting the risk
• Frameworks for contract re-equilibrium
• Effective communication strategy
• Capacity building of ULBs critical
THANK YOU FOR YOUR
KIND ATTENTION
36
