Workshop on PPP Amman, June 6 & 7, 2010 J. Ouechec SUEZ ENVIRONNEMENT GROUP WATER SECTOR: PPP references & lessons learnt in Near & Middle East region
Tripoli Lebanon Management Contract Case Funds: Agence Française du Développement (AFD) Value : 20 000 K Partners : CDR, EELN, MEE, Suez Environnement, Ondeo Liban Duration : 4 years (Feb 2003 - Feb 2007) Territory : Urban community of Tripoli ( 400 000 inhabitants, 7 municipalities) Scope of works : operations and maintenance, water production & network, distribution. Customers services. Installation of information systems (SIG, SIC, accounts) Leaks detection Water meters installation 6 June 2010 > SUEZ ENVIRONNEMENT - 2
Tripoli Lebanon Management Contract Case Achievements 1/2 Technical - rationning cancelation - leaks detection survey (150 kms) - leaks repairs for 15 000 m 3 /day - installation of production meters - renewal of 4000 meters & 400 connections - desinfection of all distributed water - miscellaneous studies & researches Customers services - customers reception & information systems - customers inventory (102 000) - tariff studies - human ressources management - 24/24 water delivery - 24/24 emergency interventions - complaints treated in less than 5 days 6 June 2010 > SUEZ ENVIRONNEMENT - 3
Tripoli Lebanon Management Contract Case Achievements 2/2 Capex -networks, repairs, assets, laboratory Financial - collection rates above 60% - payment of electricity invoices (2002,2003 and 2004) Procurement - Installation of accounts & stocks management, information system Hiring & training of personal Communication tools (internal/external) 6 June 2010 > SUEZ ENVIRONNEMENT - 4
Tripoli Lebanon Management Contract Case Some required improvements Contract performance was limited by regulations & heavy administrative rules Limited implication of the tutor (the Ministry) O E T debts Human Resources status Mandatory Public sector rules Supervision committee by OET managers 6 June 2010 > SUEZ ENVIRONNEMENT - 5
LEMA Amman Management Contract Case Kindly refer to distributed WATER STORIES brochure summarising: -The Contract -The Services -The Know-how transfer -The Customer Services -and The FUTURE 6 June 2010 > SUEZ ENVIRONNEMENT - 6
Suez Environnement Positionning in HKJ LEMA betwween 1999 and 2007 As-Samra WWTP BOT (CAPEX 2004 to 2008,OPEX for 22 years) Wadi Main Desalination Plant DBO (DB 2003 to 2007,OPEX 2y) DISI BOT Operation & Maintenance for 22 y EOI on the Jordan Red Sea Project Negociation in progress of 70% Extension of As-Samra Plant 6 June 2010 > SUEZ ENVIRONNEMENT - 7
Jordan s First BOT Experience in Constructing the Biggest Wastewater Treatment Plant > Jan 2010-8
Project Description 25 year Build, Operate and Transfer (BOT) contract for a Wastewater Treatment Plant to be built at As Samra Expand, Operate, Maintain and Transfer Pre-treatment Plant (Ain-Ghazal) Operate, Maintain and Transfer the Siphons from Ain Ghazal Pre-treatment Plant to the Plant, and pumping stations at Hashimiyya and West Zarqa. Treat Wastewater generated in Greater Amman area including Russeifa, Zarqa and Hashimiyya: population 2.3 million 6 June 2010 > SUEZ ENVIRONNEMENT - 9
6 June 2010 > SUEZ ENVIRONNEMENT - 10
Key Terms of the Project Agreement Executed with the Government of Jordan ( GOJ ) represented by the Ministry of Water & Irrigation ( MWI ) MWI Contribution (USAID grant) payable on Completion of Sections Treatment Charges payable when first (of four) Treatment Lines brought into Operation after 30 months Treatment Charges (Fixed and Variable) structured to match Project Company s Liabilities Payment Assurance Scheme to address any revenue shortfall 6 June 2010 > SUEZ ENVIRONNEMENT - 11
Financing Plan & Sponsors Undertakings Mixed Financing Financing Plan: MWI contribution 50% $ 92 M (GOJ $ 14 M + USAID $ 78 M) SPC : Minimum 20% of project costs in equity & 30% of project costs in commercial financing. Sponsors Undertaking Equity Investment ~11% Equity Guarantee $ 15.5 M ~ 9% Commercial Loan (11 Jordanian Banks & Financial Institutions $ (45 M+15.5M) Performance Guarantee $ 15 Million Post completion the Commercial loan guaranteed by the Gov. USAID Mother Companies Repayment Guarantee 6 June 2010 > SUEZ ENVIRONNEMENT - 12
Project Company Revenues Fixed Treatment Charge Payable monthly, made up of five parts to reflect: Repayment of Principal of Project Loan Interest on Project Term Loan Principal and Interest on Shareholder Loans, Dividends (linked to USD/JD exchange rate) Fixed Renewal cost (indexed) Fixed Operating Costs (indexed on local inflation) Variable Treatment Charge Payable monthly, and made up of two parts to reflect: Additional Volume of Influent (above 160,000 m 3 /day) Additional Pollution of Influent (for BOD 5 above 0.55kg/m 3 ) 6 June 2010 > SUEZ ENVIRONNEMENT - 13
Treatment Charges: Structure Fixed Part = Fix (Cap) +I I. Fix I (Cap)+ I C. Fix F (Cap)+ I L. Fix (Op) +I R.I C Fix R (Op) Fix (Cap) : Repayment of Senior Debt I I. Fix I (Cap) : Payment of Senior Debt Interests I C. Fix F (Cap) : Remuneration of Sponsors Investment I R. Fix R (Op) : Payment of Fixed Renewal Expenditures I L. Fix (Op) : Payment of Fixed Operation Expenditures Variable Part = I L.{(A.(Vp-160))+B[( Xp.(Vp-160))+160.( Xp-0.55)]} I L.A.(Vp-160) I L.B.( Xp.(Vp-160)+160.( Xp-0.55)) : Payment of Variable OPEX (Flow) : Payment of Variable OPEX (Load) I I= Interest rate index I C= Currency Exchange rate index JD/USD I R= Renewal Index Construction & Machinery index I L= (50% X A Lm /A 0 ) + (40% X B Lm /B 0 ) + (10% X C Lm / C 0 ) A- Labour Index B- Producer price index C- Electricity Index 6 June 2010 > SUEZ ENVIRONNEMENT - 14
Base Case Operating Cash-flow 16 14 12 Flow - JOD millions - Nominal 10 8 6 4 2 0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Periods: Annual from January 2006 O&M fee Project Management Costs Principal Tranche Debt Service Project Sponsor Loan Tax Dividends Revenues 6 June 2010 > SUEZ ENVIRONNEMENT - 15
Simplified Contractual Framework Sweco In./Engicon Supervision Agreement Sida grant + Swed. Bank Loan USAID MWI Contribution (USAID) GOJ/MOF Payment Assurance Scheme Project Sponsors Sponsors GOJ/MWI Lenders Agreement Project Agreement Project Company 20% Suez Environment 30% Infilco Degremont Inc 50% Morganti Group Direct Agreement Loan Agreement Fixed Price EPC Contract EPC Contractor 50% Infilco Degrémont Inc 50% Morganti, CCC O&M Contractor 51% Degremont Inc 49% CCC Group 6 June 2010 > SUEZ ENVIRONNEMENT - 16
Payment Assurance Scheme- Reserve Account Agreement MWI 5) Notification of payment 1) Default in paying TC 2) Notification Project Company Reserve Account JD 4 million (Real Value) (Jordan Kuwait Bank) Reserve account agreement 3) Instruction to pay (5BD after Notification to MWI) 4) Payment of Treatment Charge within 2BD 6 June 2010 > SUEZ ENVIRONNEMENT - 17
Payment Assurance Scheme- Ministry of Finance Guarantee Agreement MWI Reserve Account 1) Failure to pay TC or TP 2) Notification 4) Credit or cause CBJ to credit Payable Treatment Charge (at least the Fixed Charge within 5BD) Project Company 3) Written Demand (5BD after notification to MWI) Ministry of Finance (Guarantee Agreement) 5) Pay or cause CBJ to pay Payable Termination Payment (at least the Outstanding Debt) within 5BD) In case of termination 6 June 2010 > SUEZ ENVIRONNEMENT - 18
Risk Sharing/Project Company s Exposure 1. During Construction. Equity Investments up to JD 22 Millions No profit for acceleration of Works Liquidated damages for completion delay Mother Companies guarantee for MWI contribution Performance guarantee Insurance ~ value of MWI Properties 2. During Operation Insurance ~ value of MWI Properties Performance Guarantee Liquidated damages for violating standards & no payment for treatment 6 June 2010 > SUEZ ENVIRONNEMENT - 19
Valuable Rules/Lessons Learnt Make sure that: Government/Owner is fully committed to project. No changes in policy or personnel involved in the project Enabling Legislation is in place (WAJ Law, Investment Promotion Law) Well prepared documentation Feasibility Study and EIA Pre-qualification Invitation to Tender Draft Agreements with sensible risk allocation Transparent and comprehensible evaluation procedure Limited number of strong consortia be prequalified (5 max.) Timetable is realistic and deadlines are achieved 6 June 2010 > SUEZ ENVIRONNEMENT - 20
Valuable Rules/Lessons Learnt Make sure that: Momentum is maintained, support at high levels, quick decision making and flexibility Government is perceived to be able to meet its long term commitments by providing securities For maximum leverage Government should contribute as little as necessary say 20-50% of total Project Costs (subject to a minimum of say $20 million) 1. to make the project affordable to both Government and other stakeholders 2. enough to attract bidders, 6 June 2010 > SUEZ ENVIRONNEMENT - 21
Project that Makes Many Firsts The first BOT Project in Jordan The first electricity Self-sufficient Wastewater treatment plant The first mix financed project (Government, Donors USAID, Sponsors and Lenders) First Project under private involvement financed by Jordanian Banks First Comprehensive environmental project (full cycle) conveyance, treatment and reuse of by products (water, sludge, hydropower and gas) 6 June 2010 > SUEZ ENVIRONNEMENT - 22
Illustration of treatment stages, electricity generation, fodder and fertilizers production at the plant 6 June 2010 > SUEZ ENVIRONNEMENT - 23
Effluent quality Parameter Quality BOD5 6mg/l Total Suspended Solids 10mg/l Total Nitrogen 15mg/l Nematode Eggs <1 egg/l Faecal Coliforms < 40 MPN/100ml DO > 1 mg/l ph 7-9 Fat, Oil,Grease <8mg/l Odours: (H2S, NH3, Mercaptans e.tc) - < standard 6 June 2010 > SUEZ ENVIRONNEMENT - 24