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Public-Private Partnership (William Costin)

Public-Private Partnership (William Costin)

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Convention on Water and Wastewater in South East Asia (Public-Private Partnership)
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Convention on Water and Wastewater in South East Asia (Public-Private Partnership)
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Published by: adbwaterforall on Jul 05, 2011
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02/10/2014

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ADB’s Experience on Private Sector Participation in the Water Sector

Presented by
William Costin, Head, Infrastructure, Urban Development and Social Sectors ADB Viet Nam Resident Mission 7 June 2005

Outline
Promises of PSP The Asian Experience The ADB Experience • BOT • Concession Lessons Learned

Stark Realities
• Asia has 700 million people without safe water and 2 billion without adequate sanitation • MDG Target 10 reduce by half the number of people without water and sanitation

Who will pay for the needed infrastructure and services?

Why Private Sector Participation?

• New funds • Management efficiency • Performance efficiency • Better technologies • Autonomy in operations

PSP in Asia
Examples of positive and negative developments

Male’– despite high tariffs, PSP still resulted in greater customers and higher water consumption

Jakarta – two concessionaires grappled with Asian financial crisis, low tariffs, public hounding

PSP in Asia
Examples of positive and negative developments Macau– regarded as best private water supply operations

Ho Chi Minh –mismatched demand and supply and “take or pay” BOT deal led to financial problems for operators

ADB pursues water service efficiencies, and sees PSP as a possible means of attaining it

ADB’s Water Policy
Promotes the creation of PSP enabling environment for the water sector thru
• • • • Promotion of BOT and BOO projects Assistance to DMCs in indentifying suitable projects for PSP Promotion of contracting out specific operations to maximize efficiency Development of PPP modalities

ADB PSP Modalities
• Equity investments • Direct loans to project company • Guarantees– partial risk and political risk • Complementary financing schemes

BOT: Chengdu Water Supply
• Goal: provide reliable supply of treated water to 3 million residents of Chengdu • 18 year concession involves construction of modern water supply plant with 400,000 m3/day capacity • Plant will be transferred to Municipal Government after 18 years • Operation started in 2002

BOT: Chengdu Water Supply
ADB Roles
• Provided technical assistance in BOT process • Created innovative financing structure for the project

BOT: Chengdu Water Supply
1st urban water supply project awarded under an open bidding system within BOT scheme 1st official BOT water project in PRC to reach financial closure 1st major BOT water project where sponsors and lenders took municipal risk 1st PRC project financing where EIB has extended one of its credit schemes

Concession: Metropolitan Waterworks and Sewerage system
• Largest water supply “privatization” in the world • Prompted by need for improvement and expansion of water and sanitation services • Concession contracts awarded in 1997 to Maynilad Water Services Inc and Manila Water Company Inc

Concession: Metropolitan Waterworks and Sewerage system
• Improvements took place but both concessions were generally under target • Maynilad fared worse than Manila Water • US$45 M ADB loan for Maynilad approved in 1999 but Maynilad withdrew

Concession: Metropolitan Waterworks and Sewerage system
• Lack of government policy • Lack of credible regulatory body • Tariffs and tariff structure • Lack of penalties for nonperformance and incentives for good performance

Some Lessons
• Transparent government policies and legal instruments, coupled with standards, are key to PSP • Credible regulatory bodies are critical for improving water services • Recovery-based tariffs are critical to operating and maintaining the systems, and generating capital investments

http://adb.org/water

Thank you

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