:: February 2005 ::

:: presentation to ::

Global Water PPPs : Meeting the Challenge

Richard M. TempleHogan & HartsonOne Angel Court

London EC2R 7HJTel: +44 (0)20 7367 0200Fax: +44(0)20 7367 0220

Email: rtemple@hhlaw.com

The Challenge

By 2015 to

reduce by half the proportion of people without sustainable access to safe drinking water

reduce by half the proportion of people without access to basic sanitation

investment requirements of US$30bn a year to meet millennium development goals

Successful Water PPPs

A water and sewerage PPP lease contract in the Czech Republic

A water and sewerage PPP concession arrangement in Sofia, Bulgaria

A multi-site water and sewerage PPP concession throughout the UK

The World Bank Water and Sanitation Toolkit

Successful Water PPPs

What made these water deals successful?

How can they be replicated?

How best to meet the Challenge?

Water PPPs: special features

Politics

Revenue Risk

assets buried underground

sub-sovereign status

interconnected hydrological systems

complexity and unique risks

natural monopoly

limited number of developers

Successful Water Projects – Czech Republic

Private Sector International Operator

Municipalities Municipalities

Lease contract

Employees Voucher Holders Municipalities

Operating Company

Asset Holding Company

shareholder

shareholder shareholder

shareholder

250 members

Special Features

Number of Municipalities

No legal personality in Asset Holding Company

Shared Assets

Large number of shareholders in Operating Company

Lack of precedent

What made this water deal successful?

Municipalities retain ownership of assets

Clear division of tasks

Asset investment responsibility of the municipalities

Operating control to foreign investor

Mitigate environmental risk

Length of contract

Due diligence

Increasing number of lease arrangements

First step to greater PSP

Hybrid structures

Regulation by contract

Clear definition of roles and responsibilities

How can it be replicated?

Successful Water Projects – Sofia Water

Municipality of Sofia

Sofiska VodaIWL Winning Bidder

EBRDLenders

Concession contract(including right of use of water infrastructure assets)

VIK

Shareholder

In-kind contribution of operating assets for shares

Customers

Tariffs

Share-holder

Sofia Water: Special Features

First Project Financing in Bulgaria

First municipal utility concession in Bulgaria

No guarantees

ISPA funding

Scheduled Review

Eligible Events for tariff changes

What made this water deal successful?

One municipality

Integrity of the revenue stream

Multi-lateral involvement

Changes to legislation

Pliego tender approach

Output specifications

Appropriate risk allocation

Regulation by contract

Need customers able and willing to pay

Mix of public/private finance

Detailed contracts especially integration of future public finance

Clear and fair regulation

How can it be replicated?

Successful Water Projects – Project Aquatrine

Concession B550 sites

Concession C2,000 sites

Concession A1,100 sites

B

C

A

Bundling through multi-site concession (over 3000 sites)

Largest water PFI project in Great Britain

Three packages

Highly complex contractual agreements

Environmental liabilities

Extensive information preparation

Successful Water Projects: Project Aquatrine

Political Will

Public Sector revenue stream

Size

Bundling of Projects

Environmental liabilities and insurance

Transparent procurement process

Detailed contractual arrangements

What made this water deal successful?

Similar synergies apply internationally

Significant project preparation

Bundling of projects

Comprehensive contracts

Integrity of revenue stream

Cross sector application

How can it be replicated?

World Bank Water and Sanitation Toolkit

How to select an appropriate option for PSP?

How to design and implement an option for PSP?

What a PSP arrangement should cover?

A new World Bank Water and Sanitation Toolkit to be published in summer 2005

Mix of public and private finance

Robust legal and regulatory framework

Clear risk allocation

Investment requirement balanced with affordability

Local currency lending

Bundling of projects

Meeting the Challenge

Transparent tender process

Hybrid structures

Phased and pragmatic approach

Output Based Aid

Stakeholder consultation and communication

Meeting the Challenge

:: February 2005 ::

:: presentation to ::

Global Water PPPs : Meeting the Challenge