Prospects in the Water Sector

Report
PPP’s IN NIGERIA:
Prospects in the Water Sector
PATRICIA SIMON-HART
INTRODUCTION
Water and Sanitation Services are different
from other infrastructure sectors!
Many Governments are trying to figure out how
to strike a balance between roles of the public
and private sector in water
• PPP approaches successful elsewhere (transport, power, etc) cannot be
replicated directly in the water sector
• Direct Private Investment should not be the focus in the Water Sector
• Combining efficient private operation with public/IDA financing is more
appropriate PPP approach
THE NIGERIAN WATER SECTOR
URBAN WATER SUPPLY
(20,000+)
SMALL TOWNS WATER SUPPLY (5,000 –
20,000)
RURAL WATER SUPPLY
(UNDER 5,000)
INSTITUTIONS IN THE NIGERIAN WATER
SECTOR
 THE FEDERAL MINISTRY OF WATER RESOURCES
 STATE MINISTRY OF WATER RESOURCES
 STATE URBAN WATER UTILITIES
 SMALL TOWN WATER SUPPLY AGENCIES
 RURAL WATER SUPPLY AGENCIES
 WATER SERVICE REGULATORY BODIES
PPP’s IN WATER
Promoting Public-Private Partnerships in the Water Sector requires striking the
right balance between capabilities that public and private entities bring to the
table.
1. Public Sector
Ability to provide commercial frameworks for infrastructure acquisition,
financing, licensing – as well as creating the enabling environment to assist
private firms operate and achieve full cost recovery.
2. Private Sector
Ability to invest and produce innovative, affordable products and reliable,
efficient services based on profit motives.
3. Partnership
Enabled through the Public Sectors Ability to regulate and facilitate
operations contracts to private firms while not burdening them.
WHY DO WE NEED PPP’s IN WATER
 TO MOBILIZE PRIVATE FINANCE
 TO INCREASE THE EFFICIENCY OF CAPITAL INVESTMENT
 RESTRUCTURE GOVERNMENT ESTABLISHMENTS
 TO REDUCE POLITICAL INTERFERENCE
 IMPROVE THE QUALITY OF SERVICE
 OPTIMIZE THE USE OF EXISTING INFRASTRUCTURE
 IMPROVE COMMERCIAL ORIENTATION
 INTRODUCE TECHNICAL EXPERTISE
 IMPROVE OVERALL OPERATIONAL EFFICENCY
 REDUCE OPERATING COST
 ELIMINATE GOVERNEMENT INTERVENTION FOR O&M
PROFITABILITY IS LINKED TO SERVICE DELIVERY!
THE ENABLING ENVIRONMENT FOR PPP’s in Water
WATER GOVERNANCE
REGULATION
FINANCE
EFFECTIE RISK
MANAGEMENT
• Political will for change
• Sector Reforms - Policy and New Legislation
• Performance based management
• Utility reforms – Financial and Operational autonomy, Capacity Development
• State Water and Sanitation Regulation
• Tariff policy and model
• Strong enforcement
• Clear Government Communications Strategy
• Access to affordable finance
• Government guarantees
• Government subsidies
• Favorable investment climate
• Detailed PPP transaction modeling
• Transparent Private sector engagement process
• Transparent private sector players
AREAS OF INTERVENTION IN THE VALUE CHAIN
WATER
PRODUCTION
oFresh/Ground
Water collection
o Fresh/Ground
Water Treatment
o Desalination Plants
DISTRIBUTION
& SUPPLY
SEWAGE
AND
SANITATION
oMunicipality/H
ousehold Supply
o Waste Water
Collection
o Supply to
Industries
o Supply to
Unplanned
Settlements
Unplanned
o Waste Water
Treatment &
disposal
OTHERS
o Irrigation
o Bottled
Water
PPP OPTIONS
SERVICE/MANA
GEMENT
CONTRACTS
LEASE/AFFERM
AGE
1-5
8-15
TERM (YEARS)
CONCESSION
20-30
BOT
FULL
DIVESTITURE
20-30
NA
ASSET
OWNERSHIP
Public
public
public
Private then
public
private
INVESTMENT
FINANCE
public
public
private
private
private
COMMERCIAL
RISK
public
shared
private
Public/shared
private
OPERATIONAL
RISKS
Public/shared
private
private
private
private
GOVERNMENT
REVENUES
Tariffs minus
service fees,
taxes
Tariff minus
affermage
operating price,
taxes
Concession fee,
taxes
Tariffs minus
offtake
Sales private,
taxes
PRIVATE
REVENUES
Service fees
Affermage
operating price
Tariffs minus
concession fee
Bulk water sales
tariffs
CURRENT TRENDS IN THE NIGERIAN WATER SECOTR
URBAN WATER SUPPLY
SMALL TOWN WATER SUPPLY
DBOO/ BOO
CONCESSION
LEASE/
AFFERMAGE
MANAGEMENT
CONTRACT
MANAGEMENT
CONTRACT
SERVICE
CONTRACT
SERVICE
CONTRACT
RURAL WATER SUPPLY
COMMUNITY
OWNERSHIP
ASSESSING YOUR RISK VS REWARDS
HIGH
Design-Build-Operate
(BOT)
Concession
REWARDS
Lease/
Operating
Contract
RETURN ON
INVESTMENT
Service
Contract
LOW
LOW
Management
Contract
RISK
REQUIRED INVESTMENTS
HIGH
Divestiture
(InvestorOwned
Utility)
TYPICAL PPP PROCESS
KEY CHALLENGES OF WATER PPP’s
 Access to Water is considered a Fundamental
Human right. People still reluctant to pay
 Absence of proper Preparation of suitable PPP
structure and viable Financial Models
 Governments need be willing to share the
associated risks
 The Political economy
 Lack of access to affordable finance
THE WAY FORWARD…
RECOMMENDATIONS AND CONCLUSION
 As the Nigerian Water Sector continues to implement reforms new prospects
and opportunities shall continue to emerge for Private Sector participation.
There has to be political will at State Level to reform and also to create the enabling
environment for Private Sector participation
Sector Regulation at State Level must be in place and enforcement evident
The must be detailed studies and financial modeling to determine Tariffs, Transfer and
subsidies
State Governments must still be willing to invest in Infrastructure costs as and when
required
The Private Sector should consider starting with Management contracts and gradually
move ultimately to concessions
Tariffs must be set for full recovery of O&M and any management fees
Utilities should design networks to offer bulk water services to an area that can operate
in isolation
Development funding should be structured to encourage the Private sector access at
affordable rates for investment in the water and sanitation sector
 In the water Sector one solution does not fit all. Understand your environment
and structure the PPP to the unique environment.
Thank you for listening.
WATER IS LIFE! SANITATION IS DIGNITY!!
LET’S BUILD PARTNERSHIPS!!!

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