6 th of October Wastewater Treatment Plant Project memo.pdf · to as the Service Provider ) to design, build, finance and operate ( DBFO ) a new Wastewater Treatment Plant ( WWTP

The Arab Republic of Egypt

Public-Private Partnership Program

6th

of October Wastewater

Treatment Plant Project

Information Memorandum November 2009

6th of October Wastewater Treatment Plant

November 2009

Page 2 of 45

Important Notice

This Information Memorandum (“Memorandum”) is provided as part of the evaluation materials to the recipient solely for informational purposes in order to assist the recipient and its advisors in assessing whether they wish to consider participating in the competitive tender for a Public-Private Partnership (“PPP) tender involving the design, financing, construction, operation and maintenance of a new domestic wastewater treatment plant ("WWTP") in 6

th of October Governorate with a planned capacity of

150,000m³/day, as well as the operation and maintenance of a 100,000m³/day capacity plant which will be adjacent to the new WWTP, and which is currently under construction (the "Project").

The Memorandum is being issued jointly by the Ministry of Housing, Utilities and Urban Development (“MHUUD”) represented by the Construction Authority for Potable Water and Wastewater (“CAPW” or the Tendering Authority) and the PPP Central Unit at the Ministry of Finance (“MoF”) solely for use by prospective service provider (“Prospective Service Provider”) and their advisors in considering the Project. The Memorandum has been prepared with the assistance of Ernst & Young (“EY”) as lead transaction advisor. Ernst & Young are assisted by DHV International/ Chemonics Egypt as technical consultants and Trowers & Hamlins as the legal advisor.

The Memorandum does not contain or purport to contain all the information that a prospective investor may desire. In all cases, interested parties should conduct their own investigation and analysis of the Project and of the data set forth in this Memorandum. Neither the MHUUD, CAPW, MoF, EY, nor any of their consultants, other representatives or agents make any representation (expressed or implied) or warranties as to the accuracy or completeness of this Memorandum and shall have no liability for this Memorandum or for any other written or oral communication transmitted to the recipient in the course of the recipient’s evaluation of the Project. Neither the MHUUD, CAPW, MoF, EY, nor any of their consultants will be liable to reimburse or compensate the recipient for any costs or expenses incurred by the recipient in evaluating or acting upon this Memorandum or otherwise in connection with competitive tender for the Project as contemplated herein.

The Memorandum contains certain interpretations, explanations and/or summaries of the Arab Republic of Egypt’s laws, decrees, ordinances, regulations, licenses and other governmental authorizations which were prepared solely to acquaint the recipient with the matters described in a general manner only and are not intended to constitute legal opinions, memoranda or interpretations or to disclose or discuss any aspects of such laws, decrees, ordinances, regulations, licenses or other governmental authorizations that may be important to a recipient, and interested parties and their advisors (including legal counsels) must rely solely on their own due diligence review and findings in connection with the same.

The Tendering Authority and MoF reserve the right: (i) to modify any of the rules or procedures set forth herein or any other rules or procedures without giving prior notice or assigning any reason therefore and/or (ii) to take any action which they deem necessary or prudent in their sole discretion in connection with the Project (including canceling the Project and/or the bidding process).

The Tendering Authority and MoF may amend, supplement, or replace any information contained in this Memorandum at any time, without giving prior notice or providing any reason.

The Memorandum does not constitute a solicitation to invest, or otherwise participate, in the Project.


Confidential Information Memorandum

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Abbreviations

BOD Biochemical Oxygen Demand

CAGR Compounded Annual Growth Rate

CAOA Central Agency for Organizational Administration

CAPMAS Central Agency of Public Mobilization and Statistics

CAPW The Construction Authority for Potable Water & Wastewater

CBE Central Bank of Egypt

COMESA Common Market for Eastern and Southern Africa

CPI Consumer Price Index

DBFO Design, Build, Finance and Operate

EGP Egyptian Pounds

EGX Egyptian Stock Exchange

EIU The Economist Intelligence Unit

EU

European Union

EWRA Egyptian Water and Wastewater Regulatory Agency

EY Ernst & Young

FDI Foreign Direct Investment

GAFI General Authority for Investment and Free Zones

GDP Gross Domestic Product

GoE Government of Egypt

GoPP The General Organization for Physical Planning

IMF International Monetary Fund


November 2009

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LOS Level of Service

MHUUD Ministry of Housing, Utilities and Urban Development

MoF Ministry of Finance

MPC Monetary Policy Committee

NDP National Democratic Party

NOPWASD National Organization for Potable Water and Sanitary Drainage

NUCA New Urban Communities Authority

OPEC Organization of Petroleum Exporting Countries

PAFTA Pan Arab Free Trade Area

PPP Public Private Partnership

PPPCU Public Private Partnership Central Unit at Ministry of Finance

STC Sewage Treatment Charge

TIFA Trade and Investment Framework Agreement

TKN Total Kjeldahl Nitrogen

TRP Technical Review Panel

TSS Total Suspended Solids

UK United Kingdom

UN United Nations

US Untied States of America

USD United States Dollars

WTO World Trade Organization

WWTP Wastewater Treatment Plant



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Contents

Important Notice....................................................................................................................2

Abbreviations ........................................................................................................................3

Contents................................................................................................................................5

1. Introduction ..................................................................................................................6

1.1 Background of the Project ........................................................................................... 6

2. The Egyptian Economy...................................................................................................7

2.1 Overview of Egypt ....................................................................................................... 7

2.2 Political Structure......................................................................................................... 8

2.3 Demographic Profile .................................................................................................... 9

2.4 Economic Performance ............................................................................................. 11

2.5 Fiscal Sector.............................................................................................................. 13

2.6 Financial and Monetary Sector .................................................................................. 13

2.7 Inflation ...................................................................................................................... 13

2.8 Foreign Exchange ..................................................................................................... 14

2.9 Bank Credit and Interest Rates.................................................................................. 15

2.10 External Sector .......................................................................................................... 15

2.11 Investment Environment ............................................................................................ 16

2.12 Taxation..................................................................................................................... 17

3. The PPP Program .........................................................................................................18

3.1 Overview and Objectives of the PPP Program .......................................................... 18

3.2 PPPCU Support Structure ......................................................................................... 19

3.3 Key Elements of the PPP Projects ............................................................................ 19

3.4 Achievements to-date................................................................................................ 20

3.5 Legal and Regulatory Framework.............................................................................. 20

4. The Water and Wastewater Sector ................................................................................22

4.1 Historical Background and Sector Reforms............................................................... 22

4.2 Achievements of the wastewater Sector at the National Level .................................. 23

4.3 Water and Wastewater Institutions ............................................................................ 24

5. The Project ..................................................................................................................26

5.1 Project Overview ....................................................................................................... 26

5.2 Project Site and Scope of Services ........................................................................... 26

5.3 Capacity Requirements ............................................................................................. 28

5.4 Design parameters .................................................................................................... 28

5.5 PPP Contract............................................................................................................. 29

6. Tender Process & Indicative Timetable .........................................................................32

6.1 Tender Process ......................................................................................................... 32

6.2 Indicative Timetable................................................................................................... 33

7. Contact Information.....................................................................................................34

Appendix A : Project Specifications ......................................................................................35

1.


November 2009

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INTRODUCTION

1.1 BACKGROUND OF THE PROJECT

The Government of Egypt has embarked on a major program to expand and improve public infrastructure through Public Private Partnership (“PPP”) projects. As a part of this program, the Ministry of Housing, Utilities, and Urban Development ("MHUUD") represented by the Construction Authority for Potable Water and Wastewater (“CAPW” or the "Tendering Authority") with the technical assistance of the PPP Central Unit (“PPPCU”) of the Ministry of Finance of the Arab Republic of Egypt, wishes to attract a private sector Service Provider (hereafter referred to as the “Service Provider”) to design, build, finance and operate (“DBFO”) a new Wastewater Treatment Plant (“WWTP”) in 6th of October Governorate with a capacity of 150,000m

3/day; and

to operate and maintain an adjacent 100,000m³/day capacity plant that is currently under construction (the "Project").

The 6th of October Governorate is growing rapidly and has a current population of about 500,000. Over the next 30 years to 2039, the population of the Governorate and its surrounding area is expected to increase to between 3.7 million to 5.0 million people. This growth in population will require an expansion of the existing wastewater treatment capacity.

The PPP Central Unit (“PPPCU”) has appointed Ernst & Young (“EY”) as its lead transaction advisor for the procurement of the Project. EY is assisted by DHV International / Chemonics Egypt as technical consultants. Trowers & Hamlins have been appointed as the legal advisor.



Page 7 of 45

2. THE EGYPTIAN ECONOMY

2.1 OVERVIEW OF EGYPT

Geographically, politically and economically, Egypt sits at the pivotal crossroads linking Europe, the Middle East and Africa. Egypt is the Arab world's largest country in terms of population, and the fourth largest in terms of size of the economy.

The country is located in the north-eastern part of the African continent, bordering the Mediterranean Sea between Libya and the Gaza Strip, and the Red Sea north of Sudan, including the Asian Sinai Peninsula. The country is divided into four main geographical regions that include:

� Nile valley and delta;

� Eastern desert;

� Western desert; and

� Sinai Peninsula

Egypt recognizes the increasing interdependence of the world community and is concerned with international issues including economic cooperation, disarmament, accessible global markets, human rights and refugee issues. These concerns are reflected in Egypt’s foreign policy. In recent years, Egypt has led mediation efforts in several Middle East disputes to maintain regional stability. Egypt

is a founder and active member of the United Nations (UN).

Egypt has served on the UN Security Council and has participated in drug control, peacekeeping, disarmament and human-rights initiatives. Egypt is also a member of several other international organizations, including the World Bank, the International Monetary Fund (IMF), the Arab League and the World Trade Organization (WTO). In 2007 Egypt became the first Arab and first African country to sign the OECD Declaration on International Investment and Multinational Enterprises.

Egypt is a major trading partner in the Middle East. In light of its increasing exports and trading balance with the other nations of the world, Egypt has entered into several industrial and trade agreements with different geographical areas, such as the COMESA Agreement, the Egypt - EU Partnership Agreement, the Qualified Industrial Zone (QIZ), the Free Trade Agreement between Egypt and Turkey, the Pan Arab Free Trade Area (PAFTA), and the Agreement on Establishment of a Free Trade Area between the Arab Mediterranean Countries (AGADIR Agreement). Moreover, Egypt has signed the Free and Preferential Trade Agreements between Egypt and the Arab Countries, as well as the Egypt -US Trade and Investment Framework Agreement (TIFA) and other international agreements.

Exhibit 1 Map of Egypt

Source: World Fact Book


November 2009

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Egypt has been a member of the WTO since 30 June 1995. Since then, Egypt has taken major steps towards compliance with the WTO rules, whether in amending existent regulations or implementing new regulations.

2.2 POLITICAL STRUCTURE

Egypt is an Arab republic, headed by President Mohamed Hosni Mubarak, who was elected to his fifth term in the country’s first multi – candidate elections in September 2005. The Government is led by the Prime Minister, Ahmed Nazif, who was appointed by the President in July 2004. Mr. Nazif has reshuffled the cabinet to bring economic liberals to the fore.

As a republic, Egypt’s legislative power is vested in the People’s Assembly, who are re-elected every five years. Executive power is vested in the president, who is appointed by the assembly with the confirmation of a public referendum.

Exhibit 2 Summary of Roles for Judicial, Executive and Legislative Authorities in Egypt

Source: GAFI

Judicial Authority Executive Authority Legislative Authority

� The President of Egypt undertakes the executive authority in his capacity as the person ensuring the sovereignty of the Egyptian people, respect for the law and Constitution as well as the protection of national unity. The presidential term lasts for six years starting from the date of announcing the referendum results. The President may be re-elected for other terms. The public-policy making process is being undertaken and its implementation supervised by the President cooperatively with the Cabinet of Ministers. The President is also the Supreme Commander of the Armed Forces and Head of both the Supreme Police Council and the National Defense Council.

� The Government, represented by Cabinet of Ministers, is the highest administrative and executive body managing the State's affairs including:

� Directing, coordinating and monitoring the performance of ministries and public authorities

� Drafting public budget and state plan. Concluding and granting loans based on the presidential laws and decrees. The government, in conjunction with the President, lays down the State's public policy and supervises its implementation.

� The government also works on the implementation of laws, maintaining national security and protecting citizens' rights and interests.

� The Cabinet consists of 31 Minister, and is headed by the Prime Minister. The Central Authority for Public Mobilization and Statistics and the Central Authority for Organization and Administration are bodies assisting the government.

� The Egyptian constitution stipulates that the judiciary is an independent body through which courts perform their legal role; and judges, who are also independent, issue verdicts based on the law. No authority, whatsoever, is allowed to interfere in judicial affairs.

� The judicial authority is composed of a diversity of courts (partial, primary, courts of appeal and cassation), administrative judiciary (state-council) and the Supreme Constitutional Court, the highest judicial body of the judicial authority.

� The Egyptian judiciary plays a key role in monitoring the constitutionality of laws and interpreting their provisions. Moreover, it also effectively helps enforce democracy in Egypt through having an important role in forming political parties, protecting rights, freedom and values of the Egyptian society and people.

� The People's Assembly (The Parliament) exercises the legislative power and approves the State’s general policy. The assembly’s current term involves 454 members, 10 of whom are appointed by the Egyptian President. The elected members to The People’s Assembly must be at least 350 members. The duration of the People’s Assembly term is five years starting from the date of its first meeting.

� During the latest parliamentary elections in October/November 2004, Egypt has applied judicial supervision on all polling stations throughout the three stages of the elections.

� The People’s Assembly carries out its legislative and supervisory missions through 18 committees which are: Constitutional and Legislative, Planning and Budgeting, Economic Affairs, Foreign Affairs, Arab Affairs, Defense and National Security, Suggestions and Complaint, Industry and Energy, Agriculture and Irrigation, Education and Scientific Research, Media and Tourism, Health and Environment Affairs, Transport and Communication, Housing, Public Utilities and Construction, Local Government and Public Organization.

� The Shura Council (Consultative Assembly) is entitled to study and propose whatever it sees can maintain the national unity and social peace and protect basic constituents of the community.

� The current Shura Council is composed of 264 members. The term of membership is six years. 50% of the members are to be re-elected or re-appointed after 3 years.



Page 9 of 45

The president serves for a six year term and may be re-elected. The president appoints all members of the Council of Ministers (the cabinet). The Shura Council (the senate) advises the Government on national issues. Judicial power is exercised by an independent and established system, which includes ordinary police courts and the court of constitution.

As of June 1977 when the law on the establishment and organization of political parties in Egypt was issued, the number of Egyptian political parties increased from five parties in 1977 to 24 parties, currently exercising their political rights freely and within a comprehensive legal and political framework. The most prominent parties are: the National Democratic Party (the “NDP” is the ruling party), the New Wafd Party, the National Progressive Unionist Party (Al-Tagamoa).

The country is divided into 29 governorates. Each governorate is headed by a Governor appointed directly by the president. Each Governorate, in turn, consists of Districts or Markaz headed by a district head appointed by the Prime Minister.

2.3 DEMOGRAPHIC PROFILE

Currently Egypt is the most populous country in the Middle East and North Africa with a population of approximately 75 million. It is the second largest country in Africa in terms of size of population following Nigeria. The capital, Cairo, is the most populous city with some 18 million living in Cairo and the neighbouring governorates followed by Alexandria and the Nile Delta. These main areas are among the most densely populated in the world. Additionally, the Sinai Peninsula and Western Desert is home to a minority of Bedouins and Arabs.

Based on statistics from the Central Agency of Public Mobilization and Statistics ("CAPMAS"), Egypt’s population has been growing constantly since 2000 where the average annual growth rate has been approximately 2% per annum between 2000 and 2009. The chart below depicts the size of the population and its annual growth rate.

Exhibit 3 Historical Growth in Egypt’s Population

Source: CAPMAS

Over the 1996 to 2006 period, size of the households has dropped from 4.65 people per household, to 4.18 people per household. The size reduction has been caused by the drop in the overall population growth rate particularly in the urban areas.

39383737363534343332

37363635343433323231

2.0%2.1%

2.2%

1.9%2.0%2.0%2.0%2.1%2.1%2.1%

2009200820072006200520042003200220012000

Male population (million) Female population (million) Year-on-y ear grow th (%)


November 2009

Page 10 of 45

Size of Population ('000)

77,369

78,839

80,337

81,863

83,418

85,003

2010F

2011F

2012F

2013F

2014F

2015F

1,443

1,470

1,498

1,526

1,555

1,585

Annual Demand Increase for

Residential Units ('000)

345

352

358

365

372

379

2010F

2011F

2012F

2013F

2014F

2015F

4.18

4.18

4.18

4.18

4.18

4.18

Annual Population

Increas

('000)

Avg. Size of

Household

(people/ household)

Currently, 32% of the population is in the 0 – 14 years age group while 63.5% is between 15 years old and 64 years old. The median age for the total Egyptian population is 24.5 years, where it is 24.1 years for males and 24.9 years for females.

It is forecasted that the population growth rate will continue to increase throughout most of the

twenty-first century and is not expected to stabilize until 2065. The first-bar-chart of 0indicates the projected population growth based on projections of the Economist Intelligence Unit (the EIU), the subsequent figures indicate the addition in total population base and the average assumed size of household in Egypt, while the last bar-chart indicates the estimated demand for residential units.

Exhibit 4 Projected Population Base & Estimated Demand for New Residential Units

Source: CAPMAS

The substantial increase is driven by the relatively high fertility rates. The birth rate in Egypt is estimated to be 22.12 births per every 1000 population.

2.3.1 Labour Market

Egyptians define the labour force to include all individuals with ages ranging from 14 (the minimum age of employment according to the Egyptian labour law) to 65 years old (the retirement age) whether they are actually taking part by their physical or mental efforts in an activity related to the production of commodities and services (employees) or are capable and willing to perform such activity and searching for work but cannot find it (the unemployed).



Page 11 of 45

Exhibit 5 Unemployment Rate

Source: CAPMAS

The total labour force in Egypt during 2008 was estimated to be 24.7 million according to CAPMAS.

Approximately 47% of Egypt’s social and economic enterprises are located in the Greater Cairo and Alexandria governorates, which employ approximately 25% of the total labour force. Approximately one-third of the Egyptian workforce is employed in the agriculture sector.

2.4 ECONOMIC PERFORMANCE

Egypt’s Gross Domestic Product (GDP) in 2008 is estimated at EGP 896.5 billion1

(approximately USD 160 billion), of which 49% was contributed by the services sector, including public administration, tourism and revenue from the Suez Canal. The latter has performed well in recent years as high fuel prices encouraged the use of shorter shipment routes connecting Asia, Africa and Europe. Although agriculture's economic contribution is gradually diminishing, it remains an important and sizable sector accounting for 13% of GDP in 2008.

1 Preliminary figures as obtained from the Ministry of Economic Development, indicate that GDP (at

market prices) for 2008/09 is projected to reach EGP 1,040 billion.

18,901 19,340 19,877 20,360 20,871 21,792 22,878 23,859 24,651

9.0% 9.2%

10.2%11.0%

10.3%

11.2%

8.9% 8.7%

10.6%

2000 2001 2002 2003 2004 2005 2006 2007 2008

Size of labour force ('000) Unemploy ment Rate (% of labour force)


November 2009

Page 12 of 45

4.1%4.5%

6.8% 7.1% 7.2% 6.9%6.9%

5.8%

4.1% 4.3%

2003/04 2004/05 2005/06 2006/07 2007/08 Jan - Mar 2008 Jul - Sep 2008 Oct - Dec 2008 Jan - Mar 2009

Annual profile Quarterly profile

Exhibit 6 GDP Breakdown by Major Sector

Source: CAPMAS, *The figures for 2008 are from Indexmundi.com,

The Egyptian economy has witnessed impressive economic growth recently which has been driven by economic reforms and a subsequent influx of Foreign Direct Investments (FDI). The reform initiatives range from streamlining investment procedures, privatization of key state-owned enterprises and simplification and reduction in tax rates have encouraged investment in major sectors including tourism, media, agriculture, telecommunications, retail, food and beverages, and construction. Major national and international projects in the real estate sector, industrial and oil and gas have contributed heavily in providing jobs for young Egyptians.

Estimated GDP per capita has also increased in 2008 compared to 2007 from USD 1,687.60 to USD 2,009.70. There have been major initiatives by the Government to narrow the gap between the rich and poor. However, despite a moderate success, the gap still remains. An increasing population, supplemented by a high birth rate in addition to relatively high illiteracy rates have all added to Government challenges to improve income per capita and in providing urgently needed jobs.

Exhibit 7 Real GDP Growth (in percentage)

Source: Ministry of Finance, June 2009

48% 48% 49% 48% 48% 48%

36% 37% 36% 38% 38% 39%

16% 15% 15% 14% 14% 13%

2003 2004 2005 2006 2007 2008*

Serv ices Industry Agriculture



Page 13 of 45

2.5 FISCAL SECTOR

The Government of Egypt has launched a fiscal reform program including the automation of the budget process, streamlining tax collection procedures and the introduction of a new personal and corporate tax code in July 2005.

These reforms have resulted in the reduction of the overall fiscal deficit as a percentage of the GDP from 10.2% in 2001/2002 to 8.2% in 2005/2006 and further reduced to 6.8% in 2007/08 and 6.2% in the July to May period of the 2008/09 fiscal year.

Over the long-term, the GoE aims to reduce the budget deficit by 1% of GDP annually.

2.6 FINANCIAL AND MONETARY SECTOR

Egypt is adopting a reform program that targets the modernization of monetary policy formulation and operations. Key components of reform include strengthening the regulatory capacity and supervisory apparatuses of the Central Bank of Egypt (the “CBE”), establishment of the Monetary Policy Committee (the “MPC”) to decide on appropriate actions regarding key policy rates. The MPC also monitors all inflation related local and international developments and is moving towards an inflation-targeting regime instead of an exchange rate focused policy.

2.7 INFLATION

The CBE has begun to move towards making inflation targeting its main policy goal to counteract rising inflation. Driven by rising food and energy prices, the annual increase in Consumer Price Index (the “CPI”) rose to an average of 10.9% in fiscal year 2006/2007 from 4.2% in fiscal year 2005/2006. In 2008, further global price increases in food prices pushed the inflation rate in Egypt to 18.3%.

Going forward, the EIU predicts that as global commodity prices inflation ease, inflation is projected to fall to 8.1% in 2008/09 and further down to 6.5% in 2010.

Exhibit 8 Fiscal Deficit as Percentage of

GDP

9.6%

8.2%7.3%

6.8%6.2%

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

2004/05 2005/06 2006/07 2007/08 Jul- May

2008/09

Fiscal deficit

(% of GDP)



November 2009

Page 14 of 45

Exhibit 9 Inflation Rate (Annual Percentage Increase in CPI)


2.8 FOREIGN EXCHANGE

Egypt’s foreign exchange rate policy was revised in January 2003 whereby the adjustable peg has been replaced with a floating exchange rate regime. Moreover, an inter-bank system for foreign exchange trading was launched in December 2004, which has led to the convergence of the official and unofficial parallel market rates, bringing discipline to the market. Since the inception of the reform program, exchange rates have remained stable at around EGP 5.6/USD and EGP 7.7 /EUR.

Exhibit 10 Foreign Exchange Rates


10.3%

11.4%

4.2%

10.9%

18.3%

8.1%

6.5%6.9%

5.5% 5.4%

2003/04 2004/05 2005/06 2006/07 2007/08E 2008/09F 2009/10F 2010/11F 2011/12F 2012/13F

4.1

4.6

5.96.2

5.8 5.7 5.65.4 5.6

3.6

4.4

6.7

7.77.2 7.2

7.88.1

7.5

5.9

7.0

9.6

11.3

10.6 10.6

11.4

10.2

8.3

2001 2002 2003 2004 2005 2006 2007 2008 2009

EGP/ USD EGP/ EUR EGP/ GBP



Page 15 of 45

2.9 BANK CREDIT AND INTEREST RATES

Credit provided by commercial banks has increased by about 8% since 2004, with lending to private sector accounting for more than 93% of total credit as of April 2009.

Of total lending to the private sector, foreign currency loans accounted for 30% of the total as of April 2009.

Domestic interest rates have remained relatively stable over the past 5 years. The CBE discount rate averaged 10% in 2008, and observed short-term lending and deposit rates were in the range of 12.2% and 6.1% respectively in 2008.

Observed domestic lending rates now are at an all time low level, with major lending spread reaching LIBOR +2% for

blue-chip private sector companies. Grace periods ranged from 2 to 5 years and loan term can extend up to 15 to 20 years for project financing deals.

Exhibit 12 Observed Lending and Borrowing Rates in Egypt


2.10 EXTERNAL SECTOR

Egypt’s external position has also been improving. The overall balance of payments has moved from recording a deficit of USD 871 million in FY 2000/2001 to a surplus of USD 3.3 billion in FY 2005/2006, and further improved to USD 5.5 billion in 2007/08.

Egypt’s current account has also performed well recording a surplus reaching USD 888 million in 2007/08. In the meantime, the capital and financial account has recorded a surplus of USD 7.1 billion in FY 2007/08 compared to a deficit of USD 963.8 million in FY 2001/2002.

Exhibit 11 Mortgage Lending in Egypt

281 285 298 322367

400

15 20 2127

31

32

0

100

200

300

400

500

2004 2005 2006 2007 2008 2009

Loan from Banks (EGP billion)

Priv ate Gov ernment


12.0

11.0 11.0

10.0 10.0 10.0

9.0 9.0

10.0 10.3

9.3 9.5 9.6

8.78.0 7.7

6.56.0 6.1

7.2

13.2 13.4 13.4 13.7 13.4 13.412.7 12.6

12.2 12.5

2000 2001 2002 2003 2004 2005 2006 2007 2008 Average

2009

CBE Discount Rate CBE Discount Rate Lending rate (short term)


November 2009

Page 16 of 45

2.11 INVESTMENT ENVIRONMENT

2.11.1 Overview of Reform Initiatives & Foreign Direct Investment

Over the past few years, Egypt has carried out far-reaching economic reforms and a liberalization program, designed to both open up its economy and strengthen its unique position as an international business hub.

According to the World Bank's annual report "Doing Business" 2008, Egypt reported the greatest improvement of any country in the overall global rankings for the ease of doing business. This improvement was the result of its comprehensive reforms in such activities as starting a business, property registration, trading across borders, dealing with licenses and getting credit.

Key features of the structural economic and legal reforms implemented by the Government over the last four years are summarized below:

� Streamlining investment procedures by the establishment of a new Ministry of Investment and the reorganization of the General Authority for Investment and Free Zones (GAFI).

� Law 19 of 2007 was issued to allow the establishment of the new Investment Zones in order to streamline and speed up the process of licensing by reducing the number of administrative procedures and entities involved in the process, thereby reducing overall time and cost.

� Tax rates have been significantly reduced. A tax bill that halved the highest rate bands of income and corporation taxes was passed by the Parliament and has been applied since June 2005. The bill introduced sales tax rebates and improved payment procedures. The highest income tax rate has been reduced to 20%, and the qualifying income level for each tax band has been raised. The corporate tax rate has also been reduced and unified at a single rate of 20%.

� Import tariff rates have been reduced and the largest cuts took place in primary industrial materials, fuel and crude oil, and spare parts and parts of transportation facilities. Consequently, the weighted average for tariff rates decreased from 14.6% to 6.9% in February 2007.

� Establishment of a new non-banking, financial services sector regulator, the Egyptian Financial Supervisory Authority (“EFSA”), with responsibility for capital markets, commodities contracts exchange (derivative exchange), activities elated to insurance services, mortgage finance, financial leasing, factoring and securitization.

� Tax and customs procedures have been modernized, a Model Customs and Tax Centre was established as a modern tax administration centre that consolidates the activities of three departments (Customs, Sales and Income). This simplifies rules and makes the tax payment system more transparent.

Consequently, FDI levels surged significantly, from USD 407 million in the 2003/04 fiscal period to top USD 13.2 billion in the 2007/2008 period. Although the slow down in world economic condition has impacted the flow of FDI to the country in the 2008/09 fiscal period, the Government is pressing ahead with its economic reform programme. The regime is seeking to foster sustainable economic growth to improve living standards and create jobs.



Page 17 of 45

Exhibit 13 Foreign Direct Investment in Egypt (USD million)

Source: Ministry of Finance, June 2009, GAFI, 2009,

2.12 TAXATION

2.12.1 Corporate Tax

Egyptian corporations are subject to corporate profits tax on their profits derived from Egypt, as well as on profits derived from abroad, unless the foreign activities are performed through a permanent establishment located abroad. Foreign companies are subject to tax only on their profits derived from Egypt.

2.12.2 Rates for Corporate Tax

The standard rate of corporate profits tax is 20%. However, exceptions to this rate exist. A 40% tax is imposed on the Central Bank of Egypt. Petroleum prospecting and production companies are subject to tax on their profits at a rate of 40.55%.

Dividends distributed by an Egyptian company are not subject to withholding tax. Dividends received by residents from foreign sources are considered taxable income and are subject to a 20% tax rate. Interest on bonds listed on the Egyptian stock exchange is exempted from tax, if certain conditions are satisfied.

2.12.3 Capital Gains and Losses

Capital gains are taxed at the ordinary corporate tax rates, in the same manner as ordinary business profits. Gains from shares listed on the Egyptian Exchange are exempt from tax. Taxes on capital gains are not calculated separately. Trading and capital losses realized on sales of other assets are deductible against taxable capital gains.

407

3,902

6,111

11,053

13,237

8,100

2003/04 2004/05 2005/06 2006/07 2007/08 2008/09

CAGR: 82%


November 2009

Page 18 of 45

3. THE PPP PROGRAM

3.1 OVERVIEW AND OBJECTIVES OF THE PPP PROGRAM

Since 2004, key structural reforms have been implemented by the GoE and are delivering results. To sustain Egypt’s real GDP growth prospects of around 7 – 8% in the future, Egypt needs more infrastructure investments. It is estimated that Egypt should allocate from 5.5% to 7% of its annual GDP to cover its new and maintenance infrastructure needs representing annual spending of USD 13 billion. The GoE estimates it can realistically mobilize 10% to 15% of infrastructure spending through PPPs.

In line with its economic reform agenda and strategy to increase private sector involvement and spending in public social infrastructure services, the GoE has launched a PPP program with the principal objective to:

� significantly expand public infrastructure (water, sanitation, transport, schools, hospitals, etc) to meet growing demand for public services;

� improve the quality of public infrastructure and services;

� introduce private sector efficiency and cost effectiveness in all phases of public infrastructure and services, including financing, design, construction and operation;

� change the focus of public procurement from inputs to outputs/services;

� facilitate innovation in design, construction and delivery;

� promote greater business opportunities for Egyptian contractors, service providers, and funding institutions; and

� progressively transform the Government from a direct financier and provider to a policymaker, purchaser and regulator.

The PPP policy and program will be managed through the establishment of the Public Private Partnership Central Unit (PPPCU) within the Ministry of Finance. The PPPCU was established as an expertise focal point aimed at providing overall program direction, legislative and operational framework for implementation coordination and supervision to line ministries for the successful implementation of PPPs. The PPPCU’s mission is to:

� generally promote the national PPP initiative to key stakeholders (within the Government, to private sectors, to public consumers, etc);

� identify and facilitate solutions to formal legal and institutional obstacles to the overall PPP project cycle;

� develop PPP best practices, models and standards for Egypt;

� validate and develop PPP project proposals;

� shepherd pilot procurements of PPPs;

� build capacity in the Public sector to identify, analyze, prepare, tender, contract and monitor successful PPP transactions;

� alert and stimulate private contractors and lenders to enter the new PPP market;

� assist public infrastructure authorities in the selection of experienced and quality PPP transaction advisors;



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� work together with the public infrastructure authorities and the advisors to ensure quality and consistency in procedures;

� ensure that set PPP principles, rules and Standard Operation Procedures (SOPs) are followed;

� assist awarding authorities in the transparent and competitive selection of private sector partners; and

� report to the Ministerial PPP Committee on the progress of the PPP projects

3.2 PPPCU SUPPORT STRUCTURE

The PPPCU will also be supported by:

� establishment of a project promotion PPP Unit at the Ministry of Investment;

� receipt of technical assistance from experienced UK consultants in the design, policies and procedures of the PPP program, drawing on the successful experience of the UK and other OECD countries in utilizing PPP’s to expand and improve public infrastructure and services;

� issuance by the MoF of guidelines for the PPP program, titled “Public-Private Partnership: A Guide to Making PPP’s Work Successfully in Egypt”;

� international and overseas PPP training of Government officials on PPP design and implementation details; and

� drafting of PPP standard contracts, in cooperation with international law firms with extensive legal expertise in PPP contracts, as well as starting on the drafting of a legal framework for implementing PPPs in Egypt.

3.3 KEY ELEMENTS OF THE PPP PROJECTS

The PPP program will set out a series of parameters for the development of PPP projects, including:

� the Government will contract with private sector companies to finance, design, build, and operate public infrastructure for public services or for its own use. At the end of the contract, the infrastructure will be transferred to the Government;

� the contracts will be long-term, up to 30 years depending on the project;

� unlike conventional public civil works procurement which is based on input specification, PPP procurement is based on output specifications. The Government client defines the services that are required in output or functional terms, while providing greater flexibility to the private Service Provider in design, construction and delivery;

� all PPP contracts will be awarded through a public tender procedure, which will involve: (a) broad dissemination of the opportunities to potential Service Providers and investors in Egypt and abroad; (b) high quality project preparation with the assistance of external transaction advisors, lawyers and technical consultants; and (c) fair and transparent procedures for prequalification, investor due diligence and tender award;

� under the PPP contract, the Service Provider will receive periodic availability payments tied to delivery and performance; and

� each PPP contract will include procedures to ensure regular performance reporting and monitoring.


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3.4 ACHIEVEMENTS TO-DATE

The program has achieved a number of successes , including:

� A new PPP law has been drafted to strengthen and clarify the legislative framework of PPPs and to establish the institutional guidance for implementation required and will be presented to the Parliament to be approved;

� Significant training and capacity building activities has been undertaken for government officers to increase PPP awareness;

� PPPCU won “PPP 2008 Award” among the Euro-Mediterranean Countries at “The Second International Conference for Public-Private Partnership” that was held in Paris, France in October 29-30, 2008 for its PPP program;

� A bilingual website to promote the sector has been established: www.pppcentralunit.mof.gov.eg.

Exhibit 14 Pipeline projects

Project Capacity

Abo Rawash Wastewater plant Upgrading level of treatment from primary to secondary for capacity 1,200,000 m

3/d

Helwan Wastewater plant 500,000 m3/d

Alexandria West Wastewater plant 200,000 m3/d

Source: PPP Central Unit

3.5 LEGAL AND REGULATORY FRAMEWORK

3.5.1 Legal Basis

Following the evolution of PPP in the UK and other European countries, the Egyptian Government expects to benefit from the private sector’s knowledge, experience and resources to facilitate the timely and cost effective procurement of works and services. Further, the Government seeks to ensure better contract management through the fair incentivisation of the developers; avoid short term significant capital expenditure and therefore procure a larger number of projects, limit the Government’s debt; and pass a substantial part of project risk to the private sector. Its main objectives are to create a market-friendly regulatory environment, establish the administrative basis necessary to coordinate this development and clarify the procurement process for PPP's.

A PPP law has been drafted and is under consideration by the Cabinet. It will be considered and presented to the Parliament in the near future. The PPP Law will provide a framework for the efficient implementation of PPPs in accordance with best international practice with provisions that will cover among other areas: list of sectors to be included by the Law; identification of the



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granting authorities; creation of clear tender rules for PPPs based on international best practice; rules on the form and content of the PPP Contract and dispute resolution mechanisms including arbitration. A summary of the draft law is available on the PPPCU website: www.pppcentralunit.mof.gov.eg.

However, pending the issuance of the PPP law or any sector specific legislation, PPP projects are being procured through a competitive tender process under the Egyptian Procurement Law 89 of 1998.

3.5.2 Tendering Process

As per the Egyptian Procurement Law 89 of 1998, the procurement process will be based on the following principles:

� All tenders will be subject to principles of publicity, equal chances and freedom of competition;

� Technical and financial proposals will be submitted and opened separately;

� The technical proposals will be reviewed on a pass/fail basis

� Only if the technical proposal meets required criteria the financial proposal will be opened;

� The bid validity period may be extended under certain circumstances.


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4. THE WATER AND WASTEWATER SECTOR

4.1 HISTORICAL BACKGROUND AND SECTOR REFORMS

Egyptian water utilities have gone through a number of organizational reforms. The transition has seen water utilities evolving from being government departments, to economic authorities and finally public sector companies.

The earliest utilities were formed in Alexandria and Cairo. In 1879 a limited liability English company, the Alexandria Water Company was formed. The company operated within that structure until 1958 when it was transformed into an Egyptian joint stock company. The Cairo water utility began as a French company and in 1958 was also transformed into an Egyptian joint stock company. In 1961 both companies were taken over by the GoE under Law 117 of 1961.

Both utilities were transformed into general organizations in 1968 and economic authorities in 1979. In 1971, a Presidential Decree transferred responsibility for supervision of the utilities from the Minister of Housing and Utilities to the respective Governor.

The wastewater utilities for Cairo and Alexandria were created in 1981 and 1979 by Presidential Decrees 133 of 1981 and 363 of 1979. The Beheira, Damietta and Kafr El Sheikh Water companies were formed by decree of the respective Governors in 1981, 1983 and 1984, respectively. The Cairo and Alexandria wastewater authorities were transformed into economic authorities in 1994 and the Minya, Beni Suef, Fayoum, Aswan, Sharqeya, Gharbeya and Dakahleya utilities were made public economic authorities in 1995.

The conversion of these utilities into public companies and economic authorities was an attempt by the GoE to make these utilities responsible for balancing costs and revenues; this objective however was not met. The utilities continued to serve as a means for meeting social employment objectives and as a result were all overstaffed. In addition, the legislation forming the economic authorities did not allow autonomy in the area of tariff setting. The central Government still maintained authority over the setting of tariffs.

Because the economic authorities were not able to operate on an economic basis, the Ministry of Finance became responsible for providing subsidies needed to meet operation and management costs. By the end of FY 2003 the total accumulated deficit of the eleven economic authorities and three companies had reached EGP 7.6 billion.

This financial crisis triggered the April 2004 reform of the sector, which resulted in the formation of a water sector holding company and the transformation of the fourteen largest utilities in the country into subsidiaries of that company. The Holding Company for Water and Wastewater was formed under Egyptian Law 203 of 1991 regarding public sector companies and each of the fourteen subsidiaries was transformed into a Law 203 subsidiary of the Holding Company. This decree resulted in a number of improvements:

� Increased autonomy: Utility managers no longer had to secure authorization for organizational and staffing changes from the Central Agency for Organizational Administration (CAOA). Nor were they required to abide by Egyptian Procurement Law 89 of 1998.

� Better supervision: Previously, governors managed the utilities by exception; becoming involved only when problems surfaced. The management of the utilities lacked performance improvement programs, clearly defined objectives, and evaluation of performance against benchmarks / standards.



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� Improved financial management: Under the old system, the governor was not held responsible if the utility did not cover operating costs. The burden usually fell on the Ministry of Finance who had no active participation in the utilities management or in the setting of tariffs. Now, the Holding Company is held responsible and its management tracks the financial status of each of the utilities. Tariff increases have been considered again, as illustrated by the September 2004 tariff increase in Cairo.

The April 2004 reform also formed a regulatory Agency – EWRA – which, based on the enabling Presidential Decree 136 of 2004, was to receive and analyze tariff adjustment requests from water and wastewater utilities. However, to date EWRA has not been given power to actually adjust rates; that power was left with the Cabinet which would receive recommendations from the regulator. In 2006 a Prime Ministerial decree mandated the corporatization of the water departments in all governorates not then managed by the Holding Company and transformation of those companies into subsidiaries of the Holding Company. In addition, the MHUUD mandated that all new community water departments be transferred to the control of the Holding Company. Once implementation is completed, the Holding Company will have responsibility for the operations and maintenance of the entire Egyptian water and wastewater sector.

In April 2006, additional responsibilities were given to the Holding Company to:

� take over the water and wastewater operations in the New Communities; and,

� corporatize the water and wastewater service facilities in governorates not already served by subsidiary companies.

4.2 ACHIEVEMENTS OF THE WASTEWATER SECTOR AT THE NATIONAL LEVEL

In line with its objective to develop infrastructure, the GoE is giving special attention to the wastewater sector. Providing wastewater services has become one of the basic and vital objectives, a measure of the country’s economic level, and a necessity for comprehensive development of communities.

� Thus, the MHUUD and its agencies have turned wastewater projects from mere plans and figures to thousands of facilities and equipment and hundreds of kilometers of wastewater networks all over Egypt. The exhibit below presents the production capacity and investment in wastewater projects over the period of time and as expected until year 2012.

Exhibit 15 Development of Wastewater Capacities and Investments at the National Level

Item

Production capacity

(1,000,000 m

3/d)

Average per capita share

(l/d)

Investment implemented (LE Billion)

Period

To 1982 1.1 25 0.8

To 2007 11 150 40

To 2012 28 230 54

Source: CH2M Hill


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In addition to the above, the figures below explain the wastewater coverage in Egypt:

During the current five year development plan (ending 2012), the GoE will invest around EGP 35 billion (USD 6.2 billion) in potable water and wastewater projects. This represents a 180% increase when compared to the previous five year development plan.

4.3 WATER AND WASTEWATER INSTITUTIONS

Currently, under the MHUUD, the following principal agencies are involved in water and wastewater planning, infrastructure development and operations.

� The Egyptian Water and Wastewater Regulatory Agency (EWRA) was established by Presidential Decree 136 of 2004. It has been established to regulate the water and wastewater sector in Egypt. EWRA has not actually started to provide regulatory services. Its Board of Directors was appointed in May of 2005 and, as of September 2007 more than sixty staff members have been appointed to the Authority. It is intended to take an active role upon the implementation of a new water sector law.

� The Holding Company for Water & Wastewater was established by the Presidential Decree No. 135 of 2004 according to which it has a juridical personality. As per Article 3 of the aforementioned Presidential Decree, a number of economic general authorities and public sector companies determined in the same Article were converted into subsidiary companies to the Holding Company.

The purpose of the Holding company is to purify, desalinate, transfer, distribute and sell potable water, collection, treatment and safe disposal of wastewater whether by itself or through any of its subsidiaries as well as formation and management of a securities portfolio which may include shares, bonds and any other financial tools.

� The National Organization for Potable Water and Sanitary Drainage (NOPWASD) was established by Presidential Decree 197 for 1981. It is responsible for setting national policies and plans with regard to potable water and wastewater as well as executing large



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national projects that are outside the capabilities and scope of municipalities or that serve more than one governorate.

� The Construction Authority for Potable Water and Wastewater (CAPW) was established by the Ministerial Decree No. 497 of 1981 to implement the wastewater project in Greater Cairo which has since been expanded to include Alexandria, Giza and Qaliuybia. The agency is responsible for proposing and drawing policies, plans, technical and financial program for the projects relating to the potable water and wastewater under its jurisdiction. It also is responsible for the implementation of these projects and coordination of these plans and programs with the various agencies involved in the agency projects. CAPW will be the Tendering Authority for the proposed Project.


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5. THE PROJECT

5.1 PROJECT OVERVIEW

The Project involves the design, financing, construction, operation and maintenance of a new domestic wastewater treatment plant ("WWTP") with a capacity of 150,000m³/day, as well as the operation and maintenance of a 100,000m³/day capacity plant which will be adjacent to the new WWTP, and which is currently under construction. All assets shall be transferred back to the Government at the end of the contract duration. Further technical details regarding the WWTP will be stated in the Tender Documents of the Project.

5.2 PROJECT SITE AND SCOPE OF SERVICES

The Project is located in the 6th of October Governorate which is growing rapidly and has a current population of about 500,000. Over the next 30 years to 2039, the population of the Governorate and its surrounding area is expected to increase to between 3.7 million to 5.0 million people. This growth in population will require an expansion of the existing wastewater treatment capacity.

Exhibit 17 Location of 6th of October City

The location of this new 6th

of October WWTP is in the southern catchment area, at a relatively high point along the eastern flank of the Gebel Qatrani range that divides the new Governorate in two. The location of the projected WWTP is indicated in Exhibits 18 and 19 below.



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Exhibit 18 Location of WWTP in the Southern Zone

Exhibit 19 New site for the WWTP

Scale 500mrailway

+235

+220

+255

+235

Water shed

Cemetry

New site

Existing

ponds


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5.3 CAPACITY REQUIREMENTS

The table below summarizes wastewater projections for the medium growth scenario. This projection is proposed as base scenario.

Exhibit 20 Wastewater projections Southern Zone – medium growth scenario

2006 2010 2020 2030 2040

Population 50,000 500,000 750,000 1,035,808 1,543,445

Parameters

Domestic l/cd 300 300 300 300 300

Other % dom. 15% 15% 15% 15% 15%

Water demands

Domestic m3/day 15,000 150,000 225,000 310,750 463,000

Other m3/day 2250 22,500 33,750 46,650 69,500

Net demand: m3/day 17,250 172,500 260,000 357,400 532,500

Wastewater generation rate % 75% 75% 75% 75% 75%

Wastewater flow

Average day m3/day 13,000 130,000 195,000 268,050 399,375

The successful bidder will be required to operate and maintain a total capacity of 250,000 m

3/day. This is the aggregate of :

� A 150,000 m3/day plant that the bidder shall finance, design and construct; and

� An adjacent 100,000 m3/day plant currently under construction.

5.4 DESIGN PARAMETERS



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"The environmental standards for the treated effluent quality should comply with advanced treatment Grade A of the Egyptian Code, issued in 2005. This takes account of Decree 44/2000. The only exception to complying with these environmental standards is for the BOD and TSS requirements, which are fixed at a maximum of 10 mg/l for this project, instead of the 20 mg/l as stated in the Egyptian Code."

The following table summarises the influent and effluent specifications for key design parameters.

Exhibit 21 WWTP Performance Requirements

Parameter Raw Sewage Effluent Specifications

BOD5 400 mg/l 10 mg/l

Suspended Solids 400 mg/l 10 mg/l

There will be appropriate penalties for failure to meet discharge specifications. An independent laboratory will be contracted to carry out regular sampling and analysis of both influent to the WWTP and effluent from the WWTP.

Further details regarding the raw sewage characteristics and the performance specifications to comply with will be stated in the tender documents of the Project

The Service Provider will be responsible for the treatment and disposal of sludge. Sludge will be digested dried, and stored on-site until it is tested and passes field trials for agricultural application. If no long-term use of the sludge is approved before storage is exhausted, it will be hauled to a landfill.

5.5 PPP CONTRACT

The Project documentation will take the form of a DBFO contract using the experience of international best practice. The documentation will set out, inter alia, the rights and obligations of the parties, service and performance standards, monitoring and reporting procedures, dispute resolution procedures, penalties and termination procedures. A draft of the PPP Contract will be issued to pre-qualified bidders for review and comment.

At this stage, it is expected that the main parameters of the PPP Contract will entail:

� Scope: The Service Provider will be required to:

� Enter into a DBFO contract with the Tendering Authority.

� Incorporate a Special Purpose Vehicle (“SPV”) prior to tender submission which must be a joint stock company incorporated under the laws of Egypt.

� Design, build, operate and maintain a new wastewater treatment plant in 6th of October Governorate, with an anticipated capacity of 150,000m

3/day. The capital cost of this

plant is estimated to be between US$150 million and US$200 million.


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� Finance the construction of the plant though a combination of senior debt, subordinated debt and equity.

� Operate and maintain a 100,000m3/day wastewater treatment plant which is under

construction.

� Execute all adjustments (process and/or equipment and structures) needed to comply with the ‘new’ effluent requirements.

� Term: the Term of the transaction has not yet been set by the Tendering Authority and is expected to be approximately 20 years;

� Site: The Tendering Authority will provide a site for the facility as well as all necessary authorizations and approvals for site use. All assets will be transferred back to the Government at the end of the concession. The site for the plant will remain in the ownership of the Government throughout the duration of the contract.

� Capacity & phasing: the combined facility will be of a capacity of 250,000 m3/day. This is

an aggregate of:

� The 100,000m3/day plant currently being constructed by ORASCOM Construction

Industries Company and due for completion by Q2 2011.

� The 150,000m3/day plant to be constructed by the Service Provider, due for completion

in Q1 2013.

� Offtake: All treated effluent will be subject to offtake by the New Urban Communities Authority and the service provider is expected to discharge all treated effluent to the existing, adjacent waste stabilization pond. All sludge residues from the plants will be managed by the Service Provider.

� Service Provider Operating Obligations: the operating obligations of the Service Provider will include:

� operation and maintenance of both wastewater treatment plants to meet contractual performance criteria and good industry practice;

� meeting performance criteria for effluent water provided influent water is within specification; and

� treatment and disposal of sludge in compliance with environmental standards.

� Operating Obligations: the operating obligations of the Tendering Authority will include:

� ensuring that influent water meets contractual specifications;

� operation and maintenance of the influent water pipeline system and the outlet pipeline; and

� keeping the Service Provider informed of proposed physical alterations to the influent water pipeline system and outlet pipeline if susceptible of materially and adversely affecting the wastewater treatment plants.

� Monitoring: monitoring and reporting procedures will be defined to ensure full compliance with performance obligations and corrective actions, to be taken when appropriate during all phases of the Project (design, construction, operation and maintenance);

� Sewage Treatment Charge: the Service Provider will receive from the Tendering Authority a periodic Sewage Treatment Charge (“STC”) in Egyptian pounds based on availability of the facility, volume of wastewater treated and performance of the facility (as further specified in the PPP Contract). A portion of the STC will be indexed to national



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inflation to reflect increases in operating costs. The STC will also be subject to variation in accordance with the terms and conditions of the Project Agreement;

� Contract re-equilibrium: the Service Provider may request the Tendering Authority to re-examine the Sewage Treatment Charge and/or seek compensation if one of a list of pre-defined events has caused or results in a substantial increase in costs or a reduction in revenue;

� Force Majeure, Change in Law: compensation in case of force majeure or a direct change in law will be provided in the contract;

� Step-in Rights and Direct Agreement: lenders to the Project Company will have step-in rights in case of early termination by the Tendering Authority for Service Provider default under the PPP Contract pursuant to a direct agreement to be signed between the Tendering Authority and the lenders. The MoF is expected to provide undertakings to pay the STC in the event of a default by the Tendering Authority;

� Termination Clauses: customary termination mechanisms and compensation for the Service Provider will be provided in the PPP Contract;

� Settlement of Disputes: in case of disputes between the parties, the parties may refer the dispute to a “Performance Monitoring Committee” (PMC) comprised of three members: one chosen by the Service Provider, another by the Tendering Authority and an independent expert selected by common agreement. In case the parties disagree with the recommendations of the PMC or in case of certain specified disputes, they can submit the matter to a Partnership Committee ("PC") comprised of senior representatives from the Tendering Authority, Service Provider and other stakeholders. In the event that a dispute is not resolved amicably, the matter shall be referred to arbitration under the UNCITRAL rules (to take place in Cairo, Egypt);

� Governing Law: The PPP Contract will be governed by Egyptian law and will include standard internationally accepted provisions pertaining to, inter alia, rights and obligations of the parties, representation and warranties, land issues, price adjustment, payment, performance targets and monitoring, penalties and termination, compensation, and other general provisions including environmental undertakings, insurance, force majeure, and a dispute resolution mechanism.


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6. TENDER PROCESS & INDICATIVE TIMETABLE

6.1 TENDER PROCESS

The main steps of the tender process are as follows:

� Invitation for Prequalification. The invitation for prequalification will be published in the last quarter of 2009.

� Prequalification. Bidders having expressed interest will automatically receive a prequalification invitation setting out a description of the proposed tender process and technical and financial criteria. Each prospective bidder will be required to submit a qualification proposal. Qualification proposals will be evaluated on a pass/fail basis.

� Prequalification results. Bidders qualified will be announced.

� Invitation to Bid. An invitation to bid, subject to amendments, will be sent to the qualified bidders.

� Bidders’ Due Diligence. Qualified Bidders will be given access to a data room with technical and legal documentation relating to the Project as well as access to WWTP site. Bidders will have the ability to submit questions in writing and during bidders’ meetings organized by the MHUUD and the PPP Central Unit at the MoF. Both will address questions in writing.

� Question & Answers by Bidders. The queries from the qualified bidders will be addressed.

� One to One meetings. One to one meetings with the qualified bidders will be held.

� Final Invitation to Bid.

� Tender. Bidders will be invited to submit one technical proposal and one financial proposal. The technical and financial bid will be evaluated by two committees formed by the MHUUD. Technical proposals will first be evaluated on a pass/fail basis on defined criteria. Only the Bidders whose technical proposal meets minimum technical criteria will have their financial proposals evaluated.

� Evaluation.

� Contract Award. The contract will be awarded to the selected bidder.



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6.2 INDICATIVE TIMETABLE

An indicative timetable for the Project is provided below. Please note that this timetable is only provided as a reference and is subject to change based on the progress of the transaction.

The criteria for prequalification and evaluation of technical and financial bids will be set out in the prequalification and tender documents respectively.

Bidders should note that the Tendering Authority is coordinating the development of the timetable for this 6th of October WWTP project with the Abo Rawash WWTP project, so that any bidders interested in responding to both projects will have adequate time to properly develop their responses.

Exhibit 22 Indicative Timetable

Activity

Target Date

Issue Invitation for Prequalification Early November 2009

Deadline for Prequalification Application submission December, 30th

2009

Announcement of Qualified Bidders January 2010

Issue Invitation to Bid (draft documents) and Issuing of the Data Room

February 2010

Deadline for Bidders Q&A’s April 2010

One to one Bidder meetings May 2010

Issuance of final Amended Bidding Documents (if any) June 2010

Deadline for submission of bids (technical and financial) September 2010

Evaluation of technical bids September 2010

Notification of technical bids results September 2010

Opening of financial bids October 2010

Letter of contract award October 2010

Financial closing March 2011

WWTP completed and operational Q1 2013

* The timetable is presented for indicative purposes only

Source: PPP Central Unit


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7. CONTACT INFORMATION

Contact details for the key organizations involved in this procurement are listed below.

Any queries should be directed to Ernst & Young in the first instance.

Exhibit 23 List of Contacts

Ministry of Housing, Utilities and Urban Development

Name: Mohamed Al Alfy Position: Assistant Minister for international Cooperation Phone: +202-7924-9988E-mail: [email protected]

PPP Central Unit

Name: Rania Zayed Position: Advisor to the Minister – Director, PPP Central Unit Phone: +202-2342-1283 / 84 E-mail: [email protected]

Name: Mohamed Tarek Position: Utilities Sector Officer - PPPCU Phone: +202-2342-1283 / 84 E-mail: [email protected]

Construction Authority for Potable Water & Wastewater (CAPW)

Name: Zaineb Monir Phone : +201-219-7544 E-mail : [email protected]

Ernst & Young

Name : Stephen Smith Position : Director Phone : +44 (0) 117 981 2254 Fax : +44 (0) 117 981 2051 E-mail : [email protected]

Name : Stuart Campbell Position : Assistant Director Phone : +44-(0)-20-7951-6973 Fax : +44-(0)-20-7951-3167 E-mail : [email protected]



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Appendix A : Project Specifications

Influent Quality

A wastewater characterization study will be undertaken. Results of the characterization will be issued in the performance specification of the Concession Contract. The effluent from 6

th of

October WWTP is anticipated to be a typical medium strength domestic wastewater.

Relevant Effluent Discharge Specifications

IMPORTANT NOTE TO BIDDERS: The GoE reserves the right to refine effluent discharge specifications and sludge quality requirements. Final specifications will be included in the legal documentation for the concession and may differ from the requirements set forth below.

It is anticipated that the majority of effluent from the WWTP will eventually be reused in agriculture, however initially effluent will be discharged to infiltration/evaporation zones .The adopted effluent quality requirements are shown below. These figures should all be adopted as 90th percentile limits except where noted. These requirements meet the requirements of Egyptian Law 48/1982 and related decrees set out below and also meet WHO requirements.

Nutrient removal will initially not be applicable when discharging to the desert; however options should be able to meet future effluent requirements through modifications to the WWTP.

Exhibit 24 Effluent Quality Requirements

Parameter Units Recommended Effluent Quality

Faecal Coliforms cfu/100mL 100 (1)

Enteric Nematoda qty/L 1

BOD mg/L 10

Suspended solids mg/L 10

Oil and Grease mg/L 5

pH pH 6.0– 9.0

Iron mg/L 5.0

Chlorine residual (3)

mg/L 0.5 (2)

Total Nitrogen (3)

mg/L 15


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Ammonia Nitrogen mg/L 2.5

Total Phosphorus (3)

mg/L 2

(1) Limits are median values determined from the bacteriological results of the last 7 days for which analyses have been completed. The number of faecal coliforms should not exceed 800/100 ml in any sample.

(2) If required for end use. After 30 minute detention time. Dechlorination required before disposal/irrigation.

(3)

Design and layout of the WWTP shall allow for future retrofit so those parameters can be achieved. Initially these will not be required.

Exhibit 25 LAW 48/1982 AND MINISTERIAL DECREES (Effluent discharges to Irrigation

Canals & Aquifers) Actual effluent specification for the 6th of October WWTP Project will be

issued in the Performance Specification of the PPP Contract.

Parameter

Units

Law 48/1982

and Ministerial Decrees (1)

Faecal Coliform cfu/100ml unless otherwise noted

2500 MPN/100 mL

Number of Enteric Nematoda (Cells or Eggs)

Qty/l

Not Specified

BOD mg/l 20

Turbidity NTU Not Specified

COD mg/l 30

Suspended solids mg/l 30

Oil and Grease mg/l 5

pH pH 6.0– 9.0



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TDS mg/l 800

Sodium absorption ratio percent Not Specified

Chlorine residual mg/l 1.0

Chlorides mg/l Not Specified

Boron mg/l Not Specified

Cadmium mg/l 0.01

Lead mg/l 0.05

Copper mg/l 1

Nickel mg/l 0.1

Zinc mg/l 1

Arsenic mg/l 0.05

Chromium mg/l 0.05

Molybdenum mg/l Not Specified

Manganese mg/l 0.5

Iron mg/l 1

Cobalt mg/l Not Specified

Total Nitrogen(2) mg/l Not Specified

Total Phosphorus(2) mg/l Not Specified

(1) Recommended effluent specification for discharge to Irrigation Canals & Aquifers

(2) To be applied when Agricultural Reuse is implemented

Effluent Metal Concentrations

The Heavy metal content in the effluent as per US EPA guidelines shall apply to the effluent used for irrigation. It is noted that generally the Contractor/Operator of a WWTP has no control over the heavy metals content as it depends on the quality of the incoming sewage. The enforcement of the metal concentration limits on the incoming sewage at the source will depend


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upon the government authorities. If the metal content exceeds the US EPA guideline, the effluent should not be used for irrigation.

Exhibit 26 Effluent Metal Concentrations

Constituent

Long-Term Use (mg/l)

Short-Term Use (mg/l)

Remarks

Aluminium 5.0 20 Can cause reduced productiveness in acid soils, but soils at pH 5.5 to 8.0 will precipitate the ion and eliminate toxicity.

Arsenic 0.10 2.0 Toxicity to plants varies widely, ranging from 12 mg/L for Sudan grass to less than 0.05 mg/L for rice.

Beryllium 0.10 0.5 Toxicity to plants varies widely, ranging from 5 mg/L for kale to 0.5 mg/L for bush beans.

Boron 0.75 2.0

Essential to plant growth, with optimum yields for many obtained at a few-tenths mg/L in nutrient solutions. Toxic to many sensitive plants (e.g., citrus) at 1 mg/L. Usually sufficient quantities in reclaimed water to correct soil deficiencies. Most grasses are relatively tolerant at 2.0 to 10 mg/L.

Cadmium 0.01 0.05 Toxic to beans, beets, and turnips at concentrations as low as 0.1 mg/L in nutrient solution. Conservative limits recommended.

Chromium 0.1 1.0 Not generally recognized as an essential growth element. Conservative limits recommended due to lack of knowledge on toxicity to plants.

Cobalt 0.05 5.0 Toxic to tomato plants at 0.1 mg/L in nutrient solution. Tends to be inactivated by neutral and alkaline soils.

Copper 0.2 5.0 Toxic to a number of plants at 0.1 to 1.0 mg/L in nutrient solution.

Fluoride 1.0 15.0 Inactivated by neutral and alkaline soils.

Iron 5.0 20.0 Not toxic to plants in aerated soils, but can contribute to soil acidification and loss of essential phosphorus and molybdenum.



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Lead 5.0 10.0 Can inhibit plant cell growth at very high concentrations.

Lithium 2.5 2.5 Tolerated by most crops at concentrations up to 5 mg/L; mobile in soil. Toxic to citrus at low doses - recommended limit is 0.075 mg/L.

Manganese 0.2 10.0 Toxic to a number of crops at a few-tenths to a few mg/L in acidic soils.

Molybdenum 0.01 0.05

Non-toxic to plants at normal concentrations in soil and water. Can be toxic to livestock if forage is grown in soils with high levels of available molybdenum.

Nickel 0.2 2.0 Toxic to a number of plants at 0.5 to 1.0 mg/L; reduced toxicity at neutral or alkaline pH.

Selenium 0.02 0.02 Toxic to plants at low concentrations and to livestock if forage is grown in soils with low levels of selenium.

Tin, Tungsten, & Titanium

- - Effectively excluded by plants; specific tolerance levels unknown

Vanadium 0.1 1.0 Toxic to many plants at relatively low concentrations.

Zinc 2.0 10.0 Toxic to many plants at widely varying concentrations; reduced toxicity at increased pH (6 or above) and in fine-textured or organic soils.

pH 6.0 Most effects of pH on plant growth are indirect (e.g., pH effects on heavy metals’ toxicity described above).

TDS 500 - 2,000 mg/l

Below 500 mg/L, no detrimental effects are usually noticed. Between 500 and 1,000 mg/L, TDS in irrigation water can affect sensitive plants. At 1,000 to 2,000 mg/L, TDS levels can affect many crops and careful management practices should be followed. Above 2,000 mg/L, water can be used regularly only for tolerant plants on permeable soils.

Free Chlorine Residual

<1 mg/l Concentrations greater than 5 mg/l causes severe damage to most plants. Some sensitive plants may be damaged at levels as low as 0.05 mg/l.


November 2009

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Sludge Quality Requirements

NOTE TO BIDDERS: The actual effluent and sludge specifications for the 6

th of October WWTP

Project will be issued in the Performance Specification of the Concession Contract.

For the purposes of this study, Australian Guidelines for sludge treatment and use, which are very similar to the US guidelines, have been adopted due to their simplicity to apply to any situation.

Australian guidelines are more stringent than the United States with regard to heavy metal concentrations and also the inclusion of limits on organic substances, such as pesticides, that are not included in the US guidelines.

Like US guidelines, classification of biosolids is based on two independent factors, namely the contaminant concentrations in the biosolids and the microbiological quality post treatment. Contaminant concentration limits are set out in the table below, while microbiological and vector reduction requirements are specified in the tables on the next page.

There are three Treatment Grades T1, T2 and T3 and two Contamination Grades C1 and C2. Sludge which exceeds Contamination Grade C2 concentrations and/or does not meet Treatment Grade T3 requirements should not be reused.

Note that for comparison purposes Treatment Grade T2 is roughly equivalent to USEPA Class A biosolids while Treatment Grade T3 is equivalent to USEPA Class B biosolids. Treatment Grade T1 has no equivalent in the USEPA guidelines.

The adopted sludge quality requirements are Treatment Grade T3 with potential to upgrade to T2 and Contamination Grade C1. It is noted that generally the Contractor/Operator of a WWTP has no control over the heavy metals content as it depends on the quality of the incoming sewage.



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Exhibit

27

Biosolids Microbiological Requirements

Treatment Grade

Treatment process

T1

Verification (of prescribed processes listed below) < 1 Salmonella/50g (dw), <100 E.coli MPN/g (dw) and ≤1 enteric virus PFU/100g. Verification of inhibition of pathogen regrowth is also required.

Routine monitoring (of prescribed processes listed below) is based on <100 E.coli MPN/g (dw).

Alternative process microbiological verification described on case-by-case basis Vector attraction reduction controls also required.

T2 Routine monitoring (of prescribed processes listed below) <10 Salmonella/ 50g dw, <1000 E.coli MPN/g dw.

Alternative process Based on achieving Salmonella and E.coli criteria as above and demonstration of 2 log Taenia saginata and enteric virus removal or batch testing to demonstrate < 1 Taenia ova per 10g and < 2 enteric virus PFU per 10g. Vector attraction reduction controls also required.

T3 Routine monitoring (of prescribed processes listed below) <2,000,000 E.coli MPN/g (dw).

Alternative process Based on E.coli criteria as above and 1 log reductions in Salmonella and enteric viruses. Vector attraction reduction controls also required


November 2009

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Exhibit 28 Biosolids VAR Requirements

Suggested Vector Attraction Reduction (VAR) requirements

Most Suitable Biosolid Types

Biosolids treatment process reduces volatile solids by ≥ 38%

all biological anaerobic or aerobic processes

Biosolids containing specialize solids only, dried to ≥ 75% solids content

Fully specialize by anaerobic or aerobic process

Biosolids containing unstabilised solids, dried to ≥ 90% solids content

Heat dried biosolids

Aerobic treatment for ≥ 14 days at minimum 40°C and average > 45°C

Composted

Biosolids pH raised to ≥ 12, and without addition of further alkali pH maintained at ≥ 12 for 2 hours and then at pH ≥ 11.5 for an additional 22 hours

PH (alkali/lime addition) and temperature

Injection or incorporation of biosolids into soil within 6 hours of surface application

Partially specialize or unstabilised biosolids, liquid sludges.

T1 Prescribed processes include:

� Composting processes that simultaneously heat all material (eg, in-vessel) Temperature of all compost material to be maintained at ≥ 55°C for ≥ 3 continuous days with process control

� Composting windrow method Temperature of compost material maintained at ≥ 55°C for ≥ 15 days, including 5 turnings of the windrow.

� High pH and high temperatures Biosolids pH raised to ≥ 12 for ≥ 72 continuous hours and during this period, maintained at ≥ 52°C for ≥ 12 continuous hours. Final biosolids product to be air-dried to a solids content of ≥ 50%.

� Heating and drying Biosolids dried by heating particles to ≥ 80°C to a final solids content of ≥ 90%.

� Long-term storage Sludge is digested, dewatered to > 10% w/w solids and stored for > 3 years.


� Composting method. The temperature of all compost material to be ≥ 53°C for ≥ 5 continuous days or ≥ 55°C for ≥ 3 continuous days. (NB. Although this criterion is



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comparable to T1, it is also included as a T2 process in reflection that achieving the stringent T1 E.coli limits may require specialized techniques).

� Heating and drying Biosolids are heated to ≥ 70°C and dried to a solids content of at least 75% w/w.

� Aerobic thermophilic digestion Aerobic conditions at 55-60°C for ≥ 10 continuous days. Final product dried to ≥ 50% solids. (NB. Could also achieve T1 process).


� Anaerobic digestion ≥ 15 days at ≥ 35°C or ≥ 60 days at ≥ 15°C.

� Aerobic digestion ≥ 40 days at ≥ 20°C or ≥ 60 days at ≥ 15°C.

� Composting Aerobic conditions maintained ≥ 5 days at ≥ 40°C including ≥ 4 hours at ≥ 55°C.


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Exhibit 29 Biosolids Contaminant Concentration limits

Contaminant Grade C1 (1) Grade C2

Arsenic 20 60

Cadmium 1 10

Chromium (2) 400 3000

Copper 100 (3) 2000

Lead 300 500

Mercury 1 5

Nickel 60 270

Selenium 3 50

Zinc 200 (4) 2500

DDT & derivatives 0.5 1

Organochlorine pesticides (5) 0.05 0.5

PCBs 0.2 1

1. Receiving soil contaminant limits. Application of biosolids must not cause chemical contamination of receiving soils. This guideline describes default contaminant limits for receiving soils that are identical to the limits for Contaminant Grade 1. These may be altered according to site specific requirements

2. Chromium (III) limit due to expectation that this will be the dominant form.

3. 150 mg/kg copper limit for biosolids products composted to AS 4454.

4. 300 mg/kg zinc limit for biosolids products composted to AS 4454.

5. Organochlorine pesticide limit applies individually to: dieldrin, aldrin, chlordane, heptachlor (and the epoxide), hexachlorobenzene and lindane.

Based on the above contamination and microbiological classes different biosolids classes can be used for different uses as outlined in Exhibit 26.

Exhibit 30 Biosolids Contaminant Concentration limits

Agricultural Use Non-Agricultural Use

Treat-ment Grade

Contam-ination Grade

Unrestricted Use

Human food crops consumed raw in direct contact with biosolids

(2)

Dairy and cattle grazing/fodder, human food crops consumed raw but not in direct contact (3)

Processed food crops

(4)

Sheep grazing and fodder (also horses, goats), on food crops, woodlots

(5)

Landscaping (unrestricted public access) (6)

Landscaping, (restricted public access), forestry, land rehabilitation (7)

T1 C1

� � � � � � �

T2 C1 � � � � � � �

T3 C1 � � � � � � �

T1 C2 � � � � � � �

T2 C2 � � � � � � �

T3 C2 � � � � � � �

1. Unrestricted uses - biosolids are suitable for distribution, marketing and appropriate use with only minimal controls (e.g. recommended handling/safety directions). Includes sale as a bagged product for residential use. 2. Human food crops potentially consumed raw and in direct contact with biosolids include lettuces, strawberries and carrots. 3. Human food crops potentially consumed raw but not in direct contact with biosolids include those grown on trees for example fruit. 4. Processed food crops refer to crops that are either cooked at greater than 70°C for two minutes or processed (such as cereals, wheat and grapes for wine production) prior to sale to the domestic market. 5. Non-human food crops include turf, woodlots, flowers and ornamental plants (that is, not for human consumption). 6. Landscaping with unrestricted public access - includes public parks and sports grounds, with controls on access during soil renovation and until fully revegetated. 7. Landscaping with restricted public access, land restoration - includes non-recreational land, road development, rehabilitation of quarries, mines and landfills, sewage treatment plants and other landscaping where there is controlled or limited public and stock access. Forestry also involves restricted public and stock access.