UNECE Public-Private Partnerships (PPP) Initiative Public Private Partnerships in water – models...

UNECE Public-Private Partnerships (PPP) Initiative

Public Private Partnerships in water – models for low and middle income

countries?

Geoffrey Hamilton

Chief, Cooperation and Partnerships SectionUNECE

Geneva, May 5, 2011


• Private sector can bring considerable benefits to the management of water

• Benefits depend on improving the capability of governments to undertake PPPs( more the case because at municipal levels the capacity is even weaker)

• Not all types of PPPs are applicable for low income countries

( better start with the easier PPP models

• UNECE initiative in PPP: UNECE International PPP Centre of Excellence / Saudi Arabia Water Centre of Excellence

Overview


• PPPs are: Partnerships between the public and private sector aimed at financing, designing, operating public sector facilities and services ( energy, transport, water and waste and health and education and IT )

• consisting of two core elements: project finance ; long term contracts.

• By ‘water’ we refer to water supply and waste water

Definition of terms


The case against PPP in water (taken from the Documentary Flow)

• “At present , several multinationals – Nestle, Thames, Vivendi, Suez, Coca Cola and Pepsi – own and control most of the earth’s fresh water. ”

• The companies charge higher prices for water which are ‘out of the reach’ for poor people who are forced to look for (less safe) alternatives, e.g. rivers

• Water (that should be ‘free’) is turned into a commodity

http://www.documentary-film.net/search/watch.php?&ref=212


But the case against water PPP is a flawed one…

• Water is not owned by water multinationals, as they do not own and control water;they only ‘own’ to the extent that the governments allow it;

• Perception is that the private operators are mainly large European multinationals but, in fact, there is increasing participation of operators from developing countries;

• Private sector advantages: efficiency, management and finance can improve quality and distribution of water, even for the poor.


Successful water PPPs are numerous…Bucharest: Water and Sanitation Overview: Veolia of France won the bid to operate and maintain the water and sanitation system for 25 years.

Outcome:– appr. €70 million investment into modernizing water and

sanitation services between 2002 and 2006;– built a new water treatment plant; – reduced water losses (the loss was reduced by 44.4%); – introduced a new metering system and reduced leakages,

leading to a drop in total water demand from 497.8 cubic millimeters in 2002 to 304.1 cubic millimeters in 2006;


Successful Water PPPs are numerous… (cont.)

Manila Water Overview: Manila Water, a profitable listed company with 45% of its shares in public hands, has received numerous global awards for operating efficiently and bringing water to the urban poor. Outcome:

– non-revenue water was reduced from 63% in 1997 to just 12.5% at present;

– without taxpayer money being spent for new water sources, the amount of delivered water to customers grew threefold from 440 million liters per day to 1,140 million;

– served customs from 3 million to 6 million, who get 24-hour service, from just 30% before privatization;

– the cost of piped water from P 150-200 per cubic meter to P75 per month.


In summary

• PPP does not mean higher prices for water. (PPIAF/World Bank study of 2009 of 1,200 facilites in 71 countries

• Bucarest had some of the worst quality water , now uninterrupted high quality ,exceeding EU water quality standards : rising customer satisfaction

• ‘Water for the poor’ campaign in Manila allowed poor people to pay less for water

• Not a scintilla of truth in FLOW !


In summary contd…

• But could these improvements have been achieved without the private operator ?

• To some extent yes but evidence also shows that private sector operators out-perform public sector counterparts


Challenge is to develop the capability of governments to get it right

• Lack the skills of making viable projects and of designing contracts

• Private sector ‘takes over’ and the problems begin. ( many governments actually renege on contracts)

• Answer is to create a strong capacity building programme to ensure that the public, municipal authorities protect their interests.


11

Duration

Ownership of assets

Source of capital investment

Private sector responsibility

Operation Risk

Revenue

Infrastructure development

ManagementContract

3-5 years 3-7 years 20-30 years Indefinite

Public Private

PrivatePublic

Tariffs based on full cost recoveryO&M costs + rental feeO&M costsMgt. fee

PrivatePublic

EverythingMgt. + O&M + Some investment + Investment

PrivatePublic

PrivatisationLease ContractO&MContract

BOT/BOO/ BOOT

Concession

Select the ‘right’ PPP Model

5-15 years


Management Contracts vs. BOTs

• Probably better to start with ‘management contracts’ than expensive concession/BOTs. (getting water from its source into the network/pipes requires large investments);

• Private sector needs to recover the costs and investments through charges to users, this may not be sustainable for low income countries;

• Management contracts introduces modern management practices, increases commercial efficiency and introduces business approach;

• Excellent initial stage in PPPs.


UNECE PPP Centre of Excellence (final stage):

• PPP Specialist Centre for Water : Kingdom of Saudi Arabia • PPP Specialist Centre for Health : The Philippines• PPP Specialist Centre * : Russian Federation• PPP Specialist Centre for Sustainability : Malaysia

UNECE PPP Centre of Excellence (expression of interest):

• PPP specialist centre education : Germany • PPP Specialist Centre for Food security : Qatar • PPP Specialist Centre Water Management : The Kingdom of the Netherlands• PPP Specialist Centre for Roads : India• PPP Specialist Centre for Power : South Korea • PPP Specialist Centre for Prisons : Romania• PPP Specialist Centre for Seaports : Greece• PPP Specialist Centre for Airports : Turkey

Current development of the UNECE PPP Initiative

UNECE PPP InitiativePPP Specialist centers to come:


The need for the Specialist PPP Centre in Water• The world needs to find ways of getting water and managing

existing water supplies and using it efficiently.

• Presently, there is an international shortage of water. This is a major issue. But there is no reliable data on water projects, and many water projects must be undertaken.

• What is needed: An international intergrated response in creating a Centre that will advise countries about water projects.

• The world needs a reliable resource and access it easily.• Unbiased advice, that can be accessed easily and is user

friendly.

UNECE Public-Private Partnerships (PPP) InitiativeAssist

foreign countries in PPP

Support the UNECE PPP capability development in other countries

Define best practice

Specific advice on sector. The center will have experts who can be invited in to help them on water projects.

Countries will have access to best practice in water on a world wide basis. Guides provide:

1. Strategic advice

2. Detailed operational guidance on projects.

Water PPP Specialist Center


Innovation

Identify innovative PPP strategies and methodologies and diffuse them

Develop innovative PPP strategies and methodologies

CountriesUniversitiesInstitutionsPrivate sector

- Research and R&D.

- Establish a research network linking international water bodies.

- Training people in water PPP.

The Specialist Centres continually research and update best practice

Innovation


Thank you for your attention!

Geoffrey [email protected]

UNECE Public-Private Partnerships (PPP) Initiative Public Private Partnerships in water – models...

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