Water Management Financing in the Caribbean - Part 2

Finance Models/Source of Finance Finance Models/Source of Finance

Traditional Method via Multi/Bi-Lateral Traditional Method via Multi/Bi-Lateral Agencies Agencies Alternative Project Development Approach Alternative Project Development Approach (APDA(APDA) ) - Value Engineering Option- Value Engineering OptionGrant Financing Grant Financing Public Private Partnership (PPP)Public Private Partnership (PPP)Commercial Bank LoansCommercial Bank LoansTariff via K-Factor Programme Tariff via K-Factor Programme Credit Enhancement Fund - CReW Credit Enhancement Fund - CReW

Programme Programme

TRADITIONAL APPROACH TRADITIONAL APPROACH TO PROJECT FINANCINGTO PROJECT FINANCING

Construction & expansion of water & wastewater infrastructure usually requires

LARGE CAPITAL INPUT

LONG AMORTIZATION PERIOD

INTERNATIONAL FUNDING AGENCIES

CAPITAL MORATORIUM, LONG REPAYMENT TERM, LOW INTEREST RATES

Implementation of water supply and sewerage Implementation of water supply and sewerage projects have been undertaken projects have been undertaken

‘‘Traditionally via the Application of Standard Traditionally via the Application of Standard Project Management ProcessesProject Management Processes’’

Preliminary DesignPreliminary Design Finance Sought (Multi-lateral/Bi-lateral Agency)Finance Sought (Multi-lateral/Bi-lateral Agency) Detailed DesignDetailed Design

• Tendering & selection of Design consultantsTendering & selection of Design consultants• Design workDesign work

ConstructionConstruction• Tendering & selection of contractorTendering & selection of contractor• Implementation of the worksImplementation of the works

Delays due to issues relating to :Delays due to issues relating to :1.1. Procurement process - Multi Agencies & Multi Layer Procurement process - Multi Agencies & Multi Layer

Approval Processes Approval Processes 2.2. Terms of the financing - Level of inflexibility to respond Terms of the financing - Level of inflexibility to respond

to changes of situations to changes of situations

Traditional Finance MethodTraditional Finance Method No. Project / Sponsor Loan

Value

US$M

Project Initiated in Year

Project Status

Rate %

Moratorium Years

Tenure Years

Elapse Time

in Years (From Loan Approval –

Implementation )

1.0KMA Water Supply Improvement Project (JICA)

85.0M 1990’s 2010 Phase # 1 Completed.

2.50 4 25 10

2.0 Port Antonio Water Supply Improvement Project (EIB)

40.0M Mid 1990’s

Work delayed. No Fiscal Space.

3.00 5 1510

3.0 Kingston Water & Sanitation Project (IDB)

40.0M 1998 New loan being negotiated.Components being implemented.US$15.0M diverted Food Safety Program.

1.10 4 247

Loan Terms and Conditions are attractive & favourable. Challenge : Duration between Loan Approval & Completion of Project is long.Unsuitable for works with ‘Relatively Fast Commercial

Returns’

Alternative Project Development Alternative Project Development Approach (APDAApproach (APDA))

LONG LEAD TIMEFORTUNATELY SOME PROJECTS REPRESENT AN

OPPORTUNITY FOR RELATIVELY FAST COMMERCIAL RETURNS

SO THEY ALSO OFFER AN OPPORTUNITY FOR AN ALTERNATIVE IMPLEMENTATION & FINANCING APPROACH

• EARLY (and LARGE) REVENUE STREAM

•

• IMPACT CHARGES - CONNECTION FEES

Alternative Project Development ApproachAlternative Project Development Approach

DEVELOPING AND IMPLEMENTING PROJECTS DEVELOPING AND IMPLEMENTING PROJECTS USING THE TRADITIONAL APPROACH – USING THE TRADITIONAL APPROACH – WITH WITH FUNDING ASSISTANCE FROM INTERNATIONAL FUNDING ASSISTANCE FROM INTERNATIONAL AGENCIESAGENCIES - IS DIFFICULT - IS DIFFICULT

Alternative Project Development Approach (APDA)

Integrated Project Management Team Established with the

- NWC

- Independent Consultant

- Construction Company

BUILT ON MUTUAL RESPECT AND TRUST

An innovative approach to Project Development and Implementation has been developed

GENERAL PROCEDURE for APDA

1. NWC DEFINES PRIORITY OBJECTIVES

2. NATIONAL CONTRACTS COMMISSION (NCC) APPRAISED

3. INDEPENDENT CONSULTANT APPOINTED

4. CONSTRUCTION COMPANY SELECTED

6a. CONSULTANT’S COST ESTIMATE

6b. CONSTRUCTION COMPANY’S PROPOSAL FOR COST & FINANCING

7. NEGOTIATIONS

5. PROJECT TEAM, USING COLLECTIVE EXPERIENCE, DEFINES PROJECT IN DETAIL – TO OPTIMIZE NWC INVESTMENT

8. “VALUE-FOR-MONEY” SUBMISSION TO NCC FOR APPROVAL

10. IMPLEMENTATION

9. CABINET APPROVAL

NWC’S APDA EXPERIENCE- The US$39 M GREAT RIVER PROJECT

• 5 migd EXPANSION• GREAT RIVER

TREATMENT PLANT

• 20km, 500mm Ø

TRUNK MAIN to LUCEA

NWC’S APDA EXPERIENCE -TIMELINE

GREAT RIVER PROJECT AUGUST 2000 – M.O.U. for FRENCH GOVERNMENT FINANCED STUDY (5migd Treatment Plant & 20kms 500mm Ø

Pipeline) MARCH 2001 STUDY COMMENCED

AUGUST 2001 STUDY COMPLETED

NOVEMBER 2002 INDEPENDENT CONSULTANT APPOINTED

DECEMBER 2002 SOGEA – SATOM’S PROPOSAL

DECEMBER 2002 to JULY 2002 - NEGOTIATIONS, FINANCE PACKAGING & APPROVAL JULY 2002 – CONTRACTS SIGNED

DECEMBER 2002 – FINANCIAL CLOSURE

MARCH 2003 – ORDER TO COMMENCE

OCTOBER 2004 – PROJECT COMPLETED ON BUDGET

ELAPSED TIME – 4 YEARS

FINANCINGThe GREAT RIVER PROJECT

ARRANGED BY CONTRACTOR:

COMMERCIAL LOAN 6 Million EURO - 4 years - 7.5%

FRENCH BUYER CREDIT 9 Million EURO - 7 years - 3.6%

ARRANGED BY NWC:

COMMERCIAL LOAN 3.8 Million EURO - 8 years - 9.25%

3 Million US$ - 4 years - 7.5%

46% of PROJECT COST

54% of PROJECT COST

17.2 Million US$ - 5 years - 9.25%

JAMAICA WATER SUPPLY JAMAICA WATER SUPPLY IMPROVEMENT PROJECTIMPROVEMENT PROJECT

Alternative Project Development Alternative Project Development ApproacApproach h - APDA- APDA


In 2006 NWC received an unsolicited proposal to In 2006 NWC received an unsolicited proposal to

address the water supply shortfall in KSA address the water supply shortfall in KSA – – ‘The ‘The

Kingston Improvement Project ‘Kingston Improvement Project ‘

The proposal was considered and the The proposal was considered and the Alternative Alternative

Project Development Approach appliedProject Development Approach applied

Independent Consultant was appointed in 2007Independent Consultant was appointed in 2007

Over time the project evolved into the Over time the project evolved into the Jamaica Jamaica

Water Supply Improvement Project (JWSIP)Water Supply Improvement Project (JWSIP) to to

include projects in rural areas of the island.include projects in rural areas of the island.


The Project consists of (2) Segments The Project consists of (2) Segments

CATEGORY A - BNP Paribas / VINCI Grand ProjectCATEGORY A - BNP Paribas / VINCI Grand Project Rehabilition - 20MGD Constant Spring & Seaview WTP Rehabilition - 20MGD Constant Spring & Seaview WTP New wells (Halls Green) – 1 mgdNew wells (Halls Green) – 1 mgd Replacement of asbestos cement Rio Cobre Pipeline (Bog Walk to Replacement of asbestos cement Rio Cobre Pipeline (Bog Walk to

Dam Head) Dam Head) Consumer Metering – 70,000 metersConsumer Metering – 70,000 meters

CATEGORY BCATEGORY B - Bank of Nova Scotia (BNS) - Bank of Nova Scotia (BNS) New 15 mgd WTPNew 15 mgd WTP Replacement of asbestos cement Rio Cobre Pipeline (Dam Head Replacement of asbestos cement Rio Cobre Pipeline (Dam Head

to Ferry)to Ferry) Network improvements (F/Hills & Stony Hill)Network improvements (F/Hills & Stony Hill) Connecting Pipeline to F/HillsConnecting Pipeline to F/Hills Rural WS ProjectsRural WS Projects

Replacement of Rio Cobre

PipelinePart 1 & 2

Construction of Rio Cobre WTP 15 MGD Construction

of Ferry to Red Hills relift scheme

Refurbishment of Constant Spring WTP

Refurbishment of Seaview

WTP

Halls Green Wells and Reservoir

Forest Hills / Red Hills Network Improvement

Stony Hill Network

Improvement

Category ACategory A - - Commenced - March 2010 Commenced - March 2010 Scheduled Completion - April 2012 Scheduled Completion - April 2012

JWSIP JWSIP Project Benefits include :Project Benefits include :

A.A. Addressing the Addressing the Water Supply Shortfall/Deficit Water Supply Shortfall/Deficit in in the Kingston Metropolitan Area – KMA via :the Kingston Metropolitan Area – KMA via :• New sources ( New Treatment Plants 15MGD /Well)New sources ( New Treatment Plants 15MGD /Well)• reduction of water lossesreduction of water losses

B.B. Improve ReliabilityImprove Reliability• Rehabilitation of two major WTPs in the KSARehabilitation of two major WTPs in the KSA• Network improvement - Stony Hill Network improvement - Stony Hill

C.C. Improvement in the Improvement in the efficiencyefficiency of the operations of the operations ELAPSE TIME : 2006 TO 2012ELAPSE TIME : 2006 TO 2012


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Water Management Financing in the Caribbean - Part 2