Julio Kosaka

Public Private Partnerships (PPP)

September 2020

Viceminister of Construction

and Sanitation

Diagnosis of Sanitation Services in Peru

ACCESS TO WATER 1/ ACCESS TO SANITATION 2/

1/ Includes water supply by public network inside the home, public network outside the home but inside the building and a basin for public use.

2/ Includes the connection of the toilet to the public network inside the home, public network outside the home but within the building and latrine (by direct observation).

29.4 M

3 M

25 M

7.4 M

71.2 72.2 74.4 75.6

94.5 94.4 95.3 94.9

89.289.4 90.7 90.8

2016 2017 2018 2019

Rural

Urbano

Nacional

24.6 24.3 29.0 28.3

88.3 88.9 90.2 90.4

73.774.5 76.8 77.2

2016 2017 2018 2019

Rural

Urbano

Perú

With a population of morethan 31 million inhabitants,Peru is the 4th most populouscountry in South America.

The services arenot sustainable.

3 Million (9%) of Peruvians without access to waterthrough the public network.

7.4 Million (23%) of people do not have access tosewers or sanitary disposal of excreta.

Only 44 % of the wastewater captured by the SanitationService Providers (EPS) enters the WWTP and hasadequate treatment (*).

Source: INEI National Survey of Budget Programs ENAPRES 2019, ENDES 2019.* DGPRCS 2020.

6

19

5

5

77% of the population live inurban areas, while 23% live inrural areas.

S/49.5Billion

There is a significant infrastructure gap. To achieve universal water and

sanitation coverage, a total investment of S/ 49.5 billion is required.

Source: The National Sanitation Plan 2017-2021 (MVCS)

Sanitation Investment Gap

INVESTMENT AREA TOTAL S/.%

PARCIAL TOTAL

Extension of coverages 39,717,172,819 80.1%

Potable water 5,815,631,950 14.6%

Sewarage 26,145,111,816 65.8%

TAR 7,756,429,053 19.5%

Rehabilitation and Improvement

8,004,673,970 16.2%

Potable water 4,176,609,563 52.2%

Sewarage 3,828,064,407 47.8%

Business Strengthening 1,431,655,404 2.9%

Micro measurement 390,326,139 0.8%

TOTAL 49,543,828,332 100%

Sanitation Investment per Government level (Million of Soles)

YEAR

TOTAL DOMESTIC

INVESTMENT 2/

INVESTMENT IN SANITATION

NATIONAL GOVERNMENT

REGIONAL GOVERNMENT

1/

LOCAL GOVERNMENT

1/

2009 18,908 2,099 121 420 1,5592010 22,991 3,046 139 653 1,767

2011 21,743 3,490 160 891 1,9062012 26,162 3,832 94 759 2,4852013 30,126 4,244 181 638 2,599

2014 31,490 4,656 151 411 3,0372015 30,482 3,369 165 286 2,3002016 26,955 3,506 160 347 2,556

2017 28,311 4,965 577 249 3,4692018 32,285 4,459 775 296 2,7522019 31,945 4,006 834 232 2,696

2020 46,947 5,179 1,258 337 3,583TOTAL 348,345 46,850 4,616 5,520 30,708

Source: OGEI-OGPP -MVCS

Sanitation Service Providers (EPS)

0.00

10000.00

20000.00

30000.00

40000.00

50000.00

2009 2011 2013 2015 2017 2019

Total Inversión Nacional 2/ Inversión en Saneamiento

2020

Diagnosis of Wastewater Treatment in Peru

Discharge with treatment

44%

Wastewater discharges

22 EPS without wastewater treatment.-19 EPS do not have a Wastewater Treatment Plant.-03 EPS do not treat wastewater

2228

Sanitation Service Providers (EPS)

EPS Management Total

Municipalities (No RAT) 26

OTASS (RAT) 19

* In the process of entering the RAT 3

FONAFE (Sedapal) 1

Creditor committee – BankruptcyRegime (Grau)

1

Total 50

5 Departments with 4 or 5 EPS 6 Departments with 2 or 3 EPS 13 Departments with 1 EPS.

2228

Discharge without treatment56%

Strategies for Closing Sanitation Gaps

Public Investment (Refundable and non-refundable transfers andinternational cooperation, executing units)

The MVCS implements a series of financing and execution strategies to close gaps in sanitation services.

Public PrivatePartnerships (PPP)

Private Investment

Works for Taxes

Special RegimeWater Supply Contract (Emergency Decree N° 011-2020)

1

2

3Co-financed

State Initiative

Self-financed State Initiative

Co-financedUnsolicited

Proposal (CUP)

Self-financedUnsolicited

Proposal (SUP)

For its financing

For

its

ori

gin

PPP in Execution

LA CHIRA WWTP• Term: 25 years• Investment: USD 79,0 million (without VAT)• Average flow : 6.3 m3/s• Beneficiaries: 2.6 million inhabitants• Type of treatment: advanced preliminary• Status: In operation since june 2016

• Addendum to the contract to extend theWWTP

• Average flow: 3.41 m3/s• Investment: USD 38 million approx. CONCESSION CONTRACTS SIGNED

TITICACA WWTP • Term: 30 years• Total average flow: 1.47 m3/s• Investment: USD 180.0 million (without

VAT)• Beneficiaries: 1.2 million inhabitants• Status: In execution (Preparation of

Technical File).

PROVISUR (Provision of sanitation services in the southern districts of

Lima) • Term: 25 years• Flow: 0.18 m3/s wastewater• Flow: 0.25 m3/s – 0.40m3/s wastewater.• Investment: USD 87 million (without VAT)• Beneficiaries: 100 thousand inhabitants• Status: In execution

6

19

5

5

Lima

Puno

TABOADA WWTP • Term: 25 years• Investment: USD148 million (without VAT)• Average flow: 14 m3/s• Beneficiaries: 4.3 million inhabitants• Status: In operation since December 2013

1

PPP CONTRIBUTIONWastewater treatment: 21.96

m3/s.(does not include the expansion of the La Chira

WWTP).

The continuity of the investment is ensured

within the framework of the Budget Law 2021

with PEN 1,061,430 from the Titicaca WWTP.

2

3

4

494Million Dollars

(USD)

TABOADA WWTP - NORTHERN LIMA

LA CHIRA WWTP - SOUTHERN LIMA

PROVISUR - SOUTHERN LIMA

TITICACA – PUNO WWTP

CHILLÓN WWTP – NORTHERN LIMA

PPP contribution to closing gaps in sanitation services Lima- Callao

Source:Benchmarking SUNASS (2010-2018)http://www.sedapal.com.pe/indicadores-de-calidad-del-servicio, March 2020.

Source:http://www.sedapal.com.pe/tratamiento-de-aguas-residuales, August 2020

20.74

20.65

21.27

51.25

71.71

75.9579.72

92.39

92.2

90.85

90.37

10.00

20.00

30.00

40.00

50.00

60.00

70.00

80.00

90.00

100.00

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 I Trim -2020

Wastewater Treatment (%)Sedapal S.A.

TABOADA WWTP(Operation begins 04/13)

LA CHIRA WWTP(Operation begins 12/16)

SEDAPAL

11.1253%

5.8828%

3.8519%

PPP contribution in wastewater treatment

PTAR Taboada PTAR La Chira Otras PTARs Sedapal

Total flow treated average.

August 2020:20,85 m3/s

Taboada WWTP La Chira WWTP Other Sedapal WWTP

INVESTMENT:

PEN 6,500 MillionApróx.

PPP Project Portfolio

Concession term: from 20 to 30 years

N° Project RegionAmount

Million (PEN with VAT)

PhaseType of

PPP

1 Main works Lima 2,720.0 Structuring IEA

2 Puerto Maldonado WWTP Madre de Dios 212.55 Structuring IEC

3 Huancayo WWTP Junín ** Formulation

4 Trujillo WWTP La Libertad 589.6 Formulation

5 Cusco- San Jerónimo WWTP Cusco 192.3 Formulation

6 Chincha WWTP Ica 156.6 Formulation

7 Cajamarca WWTP Cajamarca 294.4 Formulation

8 Tarapoto WWTP San Martín 123.1 Formulation

9 Huaraz WWTP Ancash 120.4 Formulation

10 Cañete WWTP Lima 157.3 Formulation

11 Chiclayo WWTP Lambayeque 489.6 Formulation

12 Desalination Plant Ilo Moquegua 120.0 Formulation

13Community Sanitation

Services - LoretoLoreto 150.0 Formulation

14 Huacho and Barranca WWTP Lima 195.0

Planning and programming

15Huancavelica- Andahuaylas

WWTPHuancavelica-

Apurímac115.0

16Desalination Plant Paita and

TalaraPiura 576.0

17Desalination Plant

LambayequeLambayeque 230.0

AncashPTAR Huaraz

CajamarcaPTAR Cajamarca

CuscoPTAR Cusco - San Jerónimo

San MartínPTAR Tarapoto

La LibertadPTARs System - Trujillo

IcaPTAR Chincha

LimaMain worksPTAR CañetePTAR BarrancaY Huacho

LambayequePTAR Chiclayo

Desaladora Lambayeque

04

08

09

06

0711

05

01

02 Madre de Dios PTAR Puerto Maldonado

Junín PTAR Huancayo

0310

LoretoNative Communities13

14

15

HVCA-APURIMACPTAR Huancavelica-

Andahuaylas

12MoqueguaDesalination Plant - Ilo

PiuraDesalination PlantPaita and Talara

16

17

(*) Investment amounts updated as a result of advances in formulation.(**) Confidential

17Projects

7.1Million

inhabitantsapprox.

PPPs are a financing modality in the Sanitation Sector that allows the State to closethe gaps and have sustainable projects.

The PPP project portfolio for the design, financing, construction, operation andmaintenance of drinking water, sewerage and wastewater treatment will benefit morethan 20% of the Peruvian population.

The continuity of the investment is ensured within the framework of

the 2021 Budget Law of Puerto Maldonado WWTP

Beneficiaries:

CO

-FIN

AN

CED

U

NSO

LIC

ITED

PR

OP

OSA

L

Conclusions

The provision of infrastructure is advancedThe project is fully or partially financed by the private sector instead of using public resources in year zero.• The private sector recovers its investment through user fees or deferred payments

by the public sector, based on the availability of infrastructure and services.• The private sector has greater incentives to seek alternative sources of financing

such as:▪ Supplementary income▪ Reduce collection losses

tDESIGN TENDER CONSTRUCTION COST OVERRUN

MAINTENANCE

QUALITYTraditional publicwork

Co

sts

to t

he

Stat

e

tDESIGN TENDER CONSTRUCTION MAINTENANCE

QUALITY

PPP

Co

sts

to th

eS

tate

Optimal project risk allocation.

Contribution to closing the public infrastructure gap is allowed.

Predictability: in future commitments and flows

Commitmentsgenerated by

PPP

✓ Obligations to pay specific or quantifiable amounts

✓ Generated as compensation for the provisions of the contract

Strongcommitments

Contingentcommitments

✓ Potential payment obligations

✓ They are derived from one or moreevents corresponding to risksinherent to the PPP project.

They are given through long-term contracts

Average term of awarded projects: 22 years

✓ Deadline of the PPP contracts: 60 years✓ Minimum term for IPC: 10 years

PUBLIC PRIVATE PARTNERSHIPS

Conclusions and Perspectives

In response to the water stress that Peru is facing, the MVCS ispromoting the development of projects under the new potablewater supply and wastewater treatment regime, through DU011-2020, which fosters private investment, as the provider ofthese services to the EPS sanitation service companies.

Wastewater reuse and commercialization, sludge reuse, and biogas generation are significant aspects that will be included in the design of wastewater treatment projects under PPPs.

PUBLIC PRIVATE PARTNERSHIPS

The Ministry of Housing, Construction and Sanitation ispromoting a portfolio of sanitation service projects (drinkingwater, sewerage, and wastewater treatment) for more than S/6,000 million investment and benefiting more than 30% of thePeruvian population, through PPPs, for design, financing,construction, operation, and maintenance.

The private participation, through PPPs, is acomplementary mechanism to Public Works and Worksfor Taxes, which will continue to be promoted by theMVCS to close gaps in sanitation services.