International practices innovative

water & climate adaptation finance

Ecorys research for the Netherlands Water Partnership and

Bangladesh Delta Plan

Rotterdam, 30 June 2016

Inventory of international cases

special reports for NWP and Bangladesh DeltaPlan 2100

• Around 40 interesting water funding & financing

cases were collected from more than 30 countries

• Different subsectors: flood protection, water

availability and drinking water & sanitation

• Per case information regarding:

–Title, introduction, stakeholders involved, financing

mechanisms, conditions for application and

successfactors

Typology of funding & financing mechanisms

I) Water funding needs

Recurrent annual costs(OPEX, O&M)

Investments (CAPEX)

III) Financing mechanismsC) Financial instruments

Revolving fundsMatch fundingViability gap fundingBlending (grants-loans..)Pooling funds

II) Funding arrangements(aimed at cost recovery)A) Market based pricing mechanisms

B) Institutional arrangements

Pricing mechanismsPayment & billing innovationsBenefit pricingPolluters pay & licensingInsurance mechanisms

Taxation & levy modelsDedicated fundsScope extensionScaling Private sector involvement (&PPP)Community models

4

INDEX

Flood protection & water

availability and navigation

Dedicated Funds

for investment &

related O&M

Example Delta Fund

Water safety

levy systems

Financial instruments:

Blending grants & loans, viability gap funding,

revolving funds

Private

engagement &

PPP - Availability payments and scope

extension to non water (roads, land

development)

- Private irrigation schemes

Water supply & sanitation

Improving Cost Recovery

- Service improvement

- Optimal tariff setting

- Smart metering and innovative

payment and billing systems

- Innovative leak detection to reduce

non revenue water

PPP and privatization

Viability Gap Funding

Small scale solutions

Community or private operation of

small drinking water solutions

Ongoing practices in Bangladesh

• PPPs industrial wastewater treatment in economic zones

• Private funding of tube wells in small scale irrigation projects

• Muhuri irrigation project

• PROOFS project (PROfitable Opportunities for Food Security)

• Inclusive finance in drinking water: DWASA Low-income Customer

Support Unit

International cases of innovative

water funding & finance

1. Flood Protection

1% additional sales tax - USA

• City of Tallahassee USA

• 1% additional sales tax is imposed to

ensure funding for storm drain

infrastructure projects (period 20yrs)

• The tax is managed a special purpose

intergovernmental agency, Blueprint

2000

• From earliest beginning local

stakeholders involved!

• Blueprint 2000 has received on

average $28.4 million per year

Delta Fund- the Netherlands

• The Delta Fund to ensure long-run

sufficient funds for flood protection and

freshwater supply

• Delta Fund: own budget which is an

independent part of the national budget

• Delta Fund is fed by contributions from

the Ministry of Infrastructure and

Environment and other national

budgets.

• Water Boards provide an annual

contribution to the Delta Fund.

PPP Lagos-Atlantic - Nigeria

• New city will rise from Atlantic Ocean in

Lagos Nigeria (ongoing) with a powerful

structure along coastline (Great Wall)

• Develop and financed entirely by private

sector (on PPP basis, with certificate of

occupancy for 78 years)

• Combination of flood protection together

with residential, commercial

developments

• The commercial developments (land

sales) will be used to cross subsidize the

flood protection

Philippines – Expressway Dike

• Laguna Lakeshore Expressway (to start

with implementation in early 2016)

• Combination of highway development,

land reclamation with flood protection

• PPP arrangement; strong say private

sector in development

• The revenues from reclaimed land and

toll income will be used to cross

subsidize the flood protection (FULLY

RECOVERY)

4. International cases of innovative water

funding & finance

2. Water availability & navigation

Muhiri Irrigation Project - Bangladesh

• Part of wider strategy to modernize large

scale agriculture in Bangladesh

• Integrated approach: – Repair 460km of canals, 23km coastal

embankments, Develop 17,000 ha modern and

highly efficient piped water distribution system

– Prepaid card meters water allocations on a

volumetric basis (full transparent payment)

– Electrification of pumping system (incl. Solar)

– Private sector involvement 5 year implementation

MOM contract, then a PPP for 15 year operations

IMOM contract (lease)

• 100% O&M cost recovery by 2019

Water pricing irrigation – Israel

• Three-tired tariff for the agricultural

sector

• Incentive for water use efficiency

• Maximum allocations (caps) issued to

farmers by the Water Authority.

• First 50% of the quota is supplied at a

given price!

• Increasing tariff structure based on the

percentage of allocation consumed

EL Guerdane irrigation PPP – Morocco

• Covering financing, design,

construction and management

(DBFMO) of irrigation infrastructure

(10 000 ha)

• Financing provided by the state (48%),

operator (44%) and farmers (8%)

• Clearly defined standards,

requirements and performance of

implementation by operator

• Farmers pay a single amount to be

connected to the irrigation system +

additionally a fixed price per cubic

meter of water used

Water licences and markets

(Australia Murray-Darling Basin)

• Water licencing system (introduced in

1970s) to decrease the overexploitation

of water resources

• Water market evolved that allowed (first

steps) in water trading (1980s;1990s)

• Water trading rules and market platform

(1994 and 2004)

• Requirements: sound metering

capabilities and allocation of water

quantity caps and regional caps

International cases of innovative water

funding & finance

Drinking water & sanitation

Small scale rural water operator: Haiti

• Local entrepreneurial water

operators selected by the community

• TA project trained operators,

promoted cost recovery, metering,

and the use of household

connections and water basins

• Grants/Loans in investments

financed by World Bank, IDB,

Spanish Fund, NGOs

• Operating costs are in most cases

covered given current tariff structure

Low-income Customer Support Unit (LICSU):

DWASA Bangladesh

• Inclusive finance: introducing

payment and billing innovations

• Customer associations/CBOs to

function as one legal customer

• Allows slum residents to obtain a

piped drinking water connection

without required land title and house

registration

• DWASA reduced the proportion of

non-revenue water to 22% compared

to 40% in 2008

FIPAG Financial performance improvement-

Mozambique

• Run by Vitens Evidens International (VEI)

and FIPAG

• Aims to improve non-revenue water,

water quality and services, billing and

collection efficiency and increase water

supply coverage up to 70%

• Project is financed by the Dutch Ministry

of Foreign Affairs (63%) and VEI (37%)

• Preliminary measures and results: – increased billing rates by 25%-point by monitoring

payments and closing of water connections,

– water loss reduced by 60%

– old water meters were replaced.

Manila Water PPP – the Philippines

• 1997: Manila Water Company (MWC) under a Concession Agreement (25 years)

• Viability gap funding grant by WB GPOBA

(2 mln $)

• Cost of providing access to clean water to over 20,000 poor households amounted at US$10.7

million, paid by MWC, GPOBA and the users

• The connection fee indexed on annual basis (in line with consumer price)

Harnaschpolder WWTP PPP – the Netherlands

• Wastewater treatment plant with capacity of 1.3 million pollution equivalents (p.e.)

• Consortium of Delfluent Services treats the wastewater from more than 1 million

inhabitants (30 years contract)

• PPP DBFO availability payments scheme

• Project resulted in a cost saving for the Delfland Water Board of 70 million Euros due

to the contract price & efficiency advantages of PPP

Maji Ni Maisha blending financial instrument – Kenya

• Maji Ni Maisha facilitates access to

finance for community-based water

providers by blending output-based

grants and commercial finance.

• The community provides equity (20%)

• Local bank, K-Rep, finances the

remaining 80 % (loan)

• Output based grants (released once a

subproject achieves the agreed number

of new connections and average monthly

revenues)

Lessons learned international practices

Market based and institutional arrangements

• Good governance, political commitment and leadership (champion),

• Registration systems and water metering essential elements;

• Sound monitoring of progress is key

• Active multi-stakeholder communication& engagement and real

participation

• Service level improvement & realistic path for increasing user charges

Financing instruments

• Sufficient level of private sector and financing expertise required

• Government or donor grants or guarantee mechanisms essential

components in order to attract private finance

25

Funding climate adaptation and water &

sanitation

Key recommendations

1. Public investment

management challenges

require coordinating

mechanisms with financial

cloud

Set up a dedicated Delta

Fund for adaptation

2. Improve general tax

revenue collection and

introduce specific water mgt

charges & levies

26

Funding climate adaptation and water & sanitation

Key recommendations

4. Scope extension

in flood protection

can generate

additional

revenues

Identify and

explore flood

protection projects

where additional

revenues streams

could be added

5. Community

adaptation and

small scale private

water supply is

promising

Develop incentive

schemes /

innovation fund for

initiatives

3. Improving cost

recovery of water

utilities is needed

Improve tariff

systems,

collection, billing,

leakages systems

with TA projects