some reasons to use a ppp lessons learned from wastewater...
TRANSCRIPT
www.pppcities.org
Some reasons to use a PPPLessons learned from Wastewater Treatment Plant. New Cairo. Egypt.Barcelona, November, 16th 2016
www.pppcities.org
Specialist Centre on PPPs in Smart and Sustainable Cities (PPP for Cities) is a research, innovation and advisory center that aims to provide public administrations throughout the world with support in the development of projects involving collaboration between the public and private sectors
PPP for Cities task is to help cities around the world transform themselves into Smart and Sustainable Cities (SSC) by embracing the Sustainable Development Goals (SDG) of the United Nations (UN)The center is led by IESE Business School and is part of the United Nations’ International Centre of Excellence on PPPs program. It has the support and sponsorship of Barcelona City Hall and other public administrations and private companies.
WHO WE ARE?
www.pppcities.org
WHY PPP FOR CITIES?
60-80% OF ENERGY CONSUMPTION
ONLY 2% OF OUR WORLD’S SURFACE.
TODAY, 50% OF THE WORLD LIVE IN CITIES…
75% OF THE POPULATION IN 2050
75% OF CO2EMISSIONS
Some challenges are new…migration, economic crisis,
Others don’t…environment, poverty, climate change
21st century will be the century of Cities
Smart City is the one that has a strategy to face these challenges ICT as a main driver to improve this
strategy
Someone has study and find good practices…..
www.pppcities.org
WHAT DO WE DO?
Case Studies of PPP projects & Designing guides to PPP good practices in urban development and Smart Cities
Independent consultancy services for public administrations seeking to develop their capabilities and PPP markets
Creating working groups to share good practices and communities of innovation
Promoting partnerships among cities, bringing together the public and private sectors
Creating standards for PPP projects in specific areas through multidisciplinary, multicultural working groups
Hosting technicalworkshops and training
Holding seminars on different aspects of PPP with the participation of both the public and private sectors
Researchthanks to allthe informationwe collect fromthe Case Studies, theWorkingGroups
Developing a database of practical case studies and a network of specialized experts
Holding periodic international conferences on the development and transformation of cities through public-private partnerships
www.pppcities.org
International, multidisciplinary, with extensive experience in public-private partnerships, design strategies for cities, smart cities and sustainable developme
OUR TEAM
Joan Enric Ricart –Academic DirectorDoctor of Philosophy
Northwestern University. Doctor Industrial Engineer and PhD in Economics and Business Strategy Director Department at IESE and
holder Carl Schroeder Chair
Miquel Rodríguez -Manager
Management Development Program (PDD), IESE Business
School. B.A. in Economics, Universitat
Autònoma de Barcelona.
Pascual BerroneAssociate Professor of
Strategic Management. Schneider Electric Chair of Sustainability and Business Strategy. Ph.D. in Business
Administration and Quantitative Methods,
Universidad Carlos III de Madrid
Francesc TrillasAssociate Professor of Applied Economics at
UAB. PhD in Economics, European
University Institute (EUI), Florence, Italy.
Jordi Salvador -Researcher
Master in International Trade & Finance,
Barcelona GSE. B.A. in Economics & B.A. in
Political Science, UAB
Josep Navarro -Research Assistant
Master in Economics and Finance Barcelona GSE,
Master in Economics University of Valencia, B.A. in Economics in
University of Valencia
Esther Garcia -Technical Support
B.A. in Political Science in Universitat Pompeu
Fabra
Carlota Monner -Technical Support
Master in Protocol, Organization & Executive
Management of events and congresses. B.A. in Market Research and Techniques,
UOC. B.A. in Business Administration, UAB
www.pppcities.org
Some reasons to use a PPP Lessons learned from Wastewater Treatment Plant. New Cairo. Egypt.
www.pppcities.org
NEW CAIRO Wastewater NeedsNew Cairo City, a city created at the southeastern part of Cairo in 2000 in a former desert area, needed a Wastewater treatment plant to ease problems derived of an overcrowded capital.
One of the main challenges faced by the city was the shortage of drinking water due to the harsh environmental conditions.
Two were the main consequences of the New Cairo WWTP operation:
An increase in the drinking water availability (since treated water would be used for irrigation purposes instead of fresh water)
Limit the environmental impact of the wastewater discharge into the river Nile (with a direct positive impact on human health and river ecology)
www.pppcities.org
NEW CAIRO WastewaterTreatment PlantProject type: Urban water treatment plan. Average daily flow 250.000 m³/day
Goal: Reuse urban wastewater for agricultural and urban green areas irrigation instead of fresh water
Delivery Mode: BDFOT. 20 years (construction 2 years & operation 18 years)
Private investment: 140 million USD
PPP contract value: 482 million USD
Contracting Authority: New Urban Communities Authority (NUCA)
SPV: Orasqualia (Aqualia (50%) & Orascom Industries (50%))
Payment method: Sewage Treatment Charge (STC) including a fixed payment coverage (investment, debt, RoE and fixed operating cost) plus variable operating charge based on volume of treated sewage (m³)
www.pppcities.org
NEW CAIRO WastewaterTreatment Plant. PPP characteristics
www.pppcities.org
Why a PPP?
3 reasons seenin this case
www.pppcities.org
Need for private investment capital: The PPP project provided private investment capital, reducing the Egyptian government’s pressure on public finances.
Source:IMF
Besides this need of capital (that will be recouped later on), there are other reasons.
www.pppcities.org
Finance and funding
In 2006, the government requested a fund of $75,000 to the Public-Private InfrastructureAdvisory Facility (PPIAF) to prepare an assessment for the plant.
The New Cairo plant mobilized private investments totaling 140 million USD.
The SPV was created on April 9th, 2009 for the PPP Agreement with a registered capital of 250.000 EGP (45,703.84 USD). The registered capital was increased to 5.250.000 EGP (952,813.07 USD) and 59.250.000 EGP (10,871,559.63USD) on September 17th, 2009 and December 3rd, 2009 respectively to satisfy equity / debt ratio required by banks as debt increased. On December 31st 2014 and 2015 the registered capital was 236,000,000 EGP (30,140,485.31 USD).
The debt, structured as a Project Finance without recourse, amounted to 566,000,000 EGP (103.47 million USD) in two tranches:
• 550 million EGP (100.55 million USD) in the form of a long term facility (15 years) to finance up to 70% of the Project´s Investment Cost (EPC cost) (estimated at 785,2 million EGP) (143.55 million USD). The other 30% in equity of the SPV.
• 16 million EGP (2.93 million USD) in the form of operation performance lettersof guarantee to be issued during the operation period
The banks acting as lenders were National Societe Generale Bank (NSGB) SAE (32.99%), Commercial International Bank (CIB) Egypt SAE (32.77%), Arab African International Bank SAE (17.12%)and Ahli United Bank Egypt SAE (17.12%).
The annual interest rate applicable to the first tranche of financing was the corridor rate for overnight deposits announced by the Central Bank of Egypt two business days before the start of each interest period plus 3% .
www.pppcities.org
Could the public authorities or the private firms manage the project alone?
Foto of Cairo city, February 2011
PPP are long term and consequentlyincomplete contracts. Good governancemechanism are necessary to deal withunexpected events
www.pppcities.org
An Independent Central Unit was created to overcome political instability.
A capacity to cooperate between authorities and private firms was crucial for the success of the project.
The PPP project established two governance committees to supervise the project functioningand deal with unexpected situations that may arise during the contract duration.
Partnership Committee: comprised of senior executives of NUCA & Orasqualia for amicabledispute resolution. Composed of ten members: five from NUCA side – NUCA, ConstructionAuthority for Potable Water and Wastewater, MHUUD, PPP Central Unit and Egyptian WaterRegulatory Agency (EWRA) - and five others from Orasqualia side.
Performance Monitoring Committee: to monitor the performance of the project. Composedof three members: one representative of NUCA, Orasqualia and one of the experts depending onthe case. Additional representatives of NUCA, Orasqualia and the PPP Central Unit orrepresentative of EWRA have the right to attend.
www.pppcities.org
Building Efficiency: Private firms that build andoperate the project (as in WWTP New Cairo PPP)have incentives to be efficient during the buildingprocess, so they will have lower operating cost.
(no significant economic deviations)
On time: Private firms that build an infrastructuresand operate it later, have incentives to finish thebuilding process in time, as they will be payed oncethe infrastructure will be operating.
(only 2 months of delay)
Specifically in this case…Importing knowledge and efficiency: The joint venture between anexperienced multinacional enterprise in alliance with a local operator hasbenefits in efficiency, but also in transfer of knowledge that will be use byprivate firms and public authorities in Egypt.
www.pppcities.org
But which is the best option? Public, Private or PPP
FINANCING GOVERNING EFFICIENCY
PREVIOUSEVALUATION
KPIs
GOODDESIGN
BUILDING &OPERATION
CONTROL
TRANSPA-RENCY
PARTICI-PATION
Some reasons to use a PPP
The focus should be on the purpose, not on the instrument.
Independently to the instrument, a Public project should also have:
More information….
[email protected]@iese.edu
Thanks for your attention
PPP for Cities, an ICoE at UNECE
&
an International platform of collaboration between públic and private sector in cities arena
Av. Pearson, 21Phone: +34 932 534 200
With the support from: