PPP Best Practices
in Economic Infrastructure:
Transportation, Water, Waste
Management, Renewable Energy
UNECE
Team of Specialists
for PPPs
Presented by:
Art Smith
Chairman, UNECE TOS-PPP
asmith@mainet.com
October 10, 2012
2
Completed PPP Projects (U.S.)
Union Station, Washington, DC
JFK International Terminal 4, New York
Port of Galveston, Texas
Dulles Greenway, Virginia
3
Prioritizing and Balancing Objectives
• Some objectives may be competing or mutually-exclusive.
• For example, a government may wish to:
− Provide drinking water from the tap at the lowest possible cost to
consumers
− Extend water availability to remote areas which currently lack service
where the required investment may increase the cost to some or all
consumers
• For this reason, PPP objectives should be carefully
assessed, prioritized, and balanced.
4
Project Objectives and PPP Contract Model
Government
Objectives:
Solution:
Provide a new road from point a to
point b
Relieve congestion
Improve commuter access and
reduce travel time
Avoid government investment
PPP Toll Road
5
Project Objectives and PPP Contract Model
Government
Objectives:
Solution:
Provide a new road from point a to
point b
Relieve congestion
Improve commuter access and reduce
travel time
Avoid politically unpopular user fees
PFI-type, availability-based payments
6
Vancouver Cogeneration
Case Study
• The City of Vancouver, British Columbia owns and operates one
of the largest landfill sites in Canada. The site serves
approximately 900,000 residents and receives approximately
400,000 tons of solid waste annually.
• The site produces landfill gases as a byproduct of waste
decomposition, including methane, a greenhouse gas that
contributes to global climate change.
• Since 1991, the City collected and burned (flared) the landfill
gases to control odors and reduce the gases’ environmental
impact. This burning created significant heat energy. In 2000,
the City began to consider ways to make beneficial use of the
landfill gases and heat energy, and to further reduce greenhouse
gas emissions, in keeping with Canada’s commitment under the
Kyoto Protocol.
7
Vancouver Cogeneration
Case Study – cont.
 The City considered building a power plant itself to use the gas.
They decided to solicit private proposals in order to evaluate a
broader array of project concepts and maximize the economic,
environmental, and social benefits to the City.
 The City decided to implement a Public-Private Partnership-
based solution. It pursued a competitive tender process under
which potential partners could propose their own solutions for
the beneficial use of the landfill gas.
 A request for tender was released in January 2001, for a private
partner to finance, design, build, own, and operate a beneficial
use facility.
 Five varied proposals were received.
8
Vancouver Cogeneration
Case Study – cont.


Following a detailed and structured proposal evaluation and negotiation
process, a 20-year Public-Private Partnership contract, based on the most
highly-evaluated proposal, was approved by the City Council in February
2002.
Under the approved PPP structure, the City continues to operate the landfill,
and a 2.9 kilometer pipeline was constructed by the private partner to take the
gas from the landfill to a nearby agricultural complex, where they built the
cogeneration power plant.
9
Vancouver Cogeneration
Case Study – cont.
10
Vancouver Cogeneration
Case Study – cont.
 The private partner selected by the City designed, financed and
constructed the cogeneration plant, which uses the landfill gas
as fuel to generate enough electricity (7.4 MW per year) to
supply 4,000 to 5,000 local homes. The power is sold by the
private partner to a provincial utility, BC Hydro.
 Proceeds from the sales of power and thermal energy go to the private
partner, minus a 10 percent royalty paid to the City.
 Waste heat from the power generation process is recovered as
hot water, which is sold by the private partner to a large (32 acre)
tomato greenhouse complex adjacent to the plant, where the
water is used for heating purposes.
11
Vancouver Cogeneration
Case Study – cont.
• The City of Vancouver makes no payments to the private
partner, but guarantees provision of landfill gases for the
twenty-year duration of the PPP contract.
• The private partner’s investment was approximately $10
million.
• Construction of the power plant was completed in
September 2003, and it was operating at full capacity by
November of that year. (Initial capacity was 5.55 MW per
year, increasing to 7.4 MW per year with the installation of a
fourth engine in late 2004.)
• Together, the power plant and greenhouse complex employ
300 people.
12
Vancouver Cogeneration
Case Study – Outcomes
• Instead of paying to flare the gas, the City now receives net
revenues of $150,000 per year.
• Using the landfill gases in this manner, rather than burning
them, results in further reduction of greenhouse gases,
equating to the removal of 6,000 vehicles from Canada’s
roads.
• New jobs and more available power were created for the
greater Vancouver area.
13
Metropolitan Manila
• Capital of the Philippines, metro area consisting of 17
separate municipalities
• Population of over 14 million
• Intensely congested in parts – second most populous
country in S.E. Asia
14
Water and Wastewater Delivery
• In the mid-1990’s, water and wastewater services
in Manila were inadequately provided by the
public utility
• Less than two-thirds of the population had piped water.
• Water was available, on average, 16 hours per day.
• 63 percent of water was lost due to leaky pipes and
illegal connections.
• Only seven percent of the population connected to the
sewage system.
• More than 90 percent of sewage flowed untreated into
Manila Bay.
• Government utility hugely indebted: approximately $800
million.
15
Opportunity for a PPP?
• The Philippine Build-Operate-Transfer (BOT) Law
of 1993 enabled private sector participation in
public works activities.
• The Water Crisis Act of 1995 gave the President
authority to establish a water/wastewater
concession.
• In August 1996, the government was forced to
increase water rates by 38 percent in an attempt
to keep the government-owned water company
financially viable, but this was insufficient.
16
The Solution (?): A PPP
• In 1996, the Metropolitan Waterworks and Sewage
•
•
•
•
System (MWSS) began planning for a PPP.
The Manila metropolitan area was split into two zones,
east and west, to be run by two different concessionaires.
The concession duration would be 25 years.
After the concessions were awarded, MWSS would split
into two entities, one to manage the concession
agreements, and one to the be regulator.
The concession agreements were awarded in 1997.
17
Government Objectives for the PPP Contracts:
• Improvement in quality and efficiency of service.
• Expansion of service.
• Reduction in water tariff.
• End expensive government subsidies.
• Transfer debt to private partners.
18
East Zone Results
Reduction in Non-Revenue Water (NRW)
70
65
63
60
55.2
55
53
NRW(%)
51
52
54
50.7
50
43.4
45
40
35.5
35
30
30
25.2
25
20
1997
1998
1999
2000
2001
2002
2003
2004
Year
Source: Building Viable Water Utilities: The Manila Water Experience
Virgilio C. Rivera, Jr., Group Director, Regulation and Corporate Development
Manila Water Company, Inc.
2005
2006
Sep-07
19
East Zone Results
Water Coverage
2007
1997
3.1 million
(58% of population)
Customer Base
5.6 million
(99% of population)
Availability of Water
16
Hours per Day
24
20
East Zone Results
Manila Water Tariff Rates
25
Peso per cu. meter
20.48
20
2005
2006
13.88 14.02
15
9.37
10
5
18.55
19.72
4.02
4.37
4.55
4.77
1998
1999
2000
2001
0
2002
2003
2004
Year
Source: Building Viable Water Utilities: The Manila Water Experience
Virgilio C. Rivera, Jr., Group Director, Regulation and Corporate Development
Manila Water Company, Inc.
2007