Practical Indonesian PPP

1

Western Jakarta water servicesApril 2010

PALYJA Shareholding

SUEZ Environnement CITIGROUPASTRATEL

30% 51% 19%

2

PALYJAPALYJA

30% 51% 19%

• MIDR 200,630 Capital (paid in 1997 and 1998)• Effective July 2006 Astratel and Citigroup become new Shareholders. • Astratel is fully owned by PT Astra International Tbk, a well-known company and a business leader in Indonesia

Jakarta Water Service

UPP

Pusat

Wilayah Usaha

2

UPP

UPP Barat

Wilayah Usaha

3

3

PAM Jaya delegated its water services on February 1st, 1998 to :

• PALYJA : Western part of Jakarta

• AETRA : Eastern part of Jakarta (originally Thames Water)

through a 25 years Concession type of contract

UPP

Selatan

Wilayah

Usaha

6

Ciliwung River

Institutional Stakeholders Mapping

DKI Jakarta

Administration

DPRD

City Council

4

PAM JAYA

Customers

Regulatory

Body

PALYJAPALYJA

Cooperation Agreement

PALYJA scope

5

Drinking Water only

• Production

• Distribution

• Customer service (metering – billing – collection)

• Maintenance & Repair

• Investment

Contract performances measured in terms of “Level of Service”

Scope of services

DesignSystem

General

BuildSystem

New works

OperateSystem

Operation

Maintenance

Human resources

FinanceBusiness

New works

financing

ManageBusiness

Overall

management

CAPEX &

OPEX

Customer Care

Billing

Cash

6

General

design

Detail

design

Construct

Refurbish

Supplies

Human resources

Technical control

Quality control

Training

financing

Debt service

Asset

management

OPEX

management

Master plan

Public

relations

Standards

compliance

Cash

collection

Front office

Back office

Call centres

Contractual Performance Objectives

Technical Targets

• Volume of water billed

• Water production

Service Standards

• Quality of water supplied to the customers

7

• Water production

• Non Revenue Water

• Number of connections

• Service coverage ratio

the customers

• Pressure at customers connection level

• Customers care

• Routine interruption in distribution network

• Response time for new connections

• Population : 4.5 millions

• Connections : 412,000

• 5,258 km of pipes

• Volume distributed : 138 M m3/y

PALYJA SnapshotWestern Jakarta

UPP

Wilayah Usaha

2

UPP Barat

Wilayah Usaha

3

8

• Number of employees: 1,376

• Revenues 2009 : ≈ 100 M US$

• Investments : ≈ 140 M US$

UPP

Pusat

2

UPP

Selatan

Wilayah

Usaha

6

Ciliwung River

Cikokol90 L/sec

62%

1%

PALYJA main Water Resources

9

62%

32% 5%

Financing Schemes

• 1998 – capital contribution : 200 B IDR

• July 2005 - issuance of local currency bonds 650 B IDR for re-financing the USD 55 million debt

PALYJA rated A- Stable Outlook

10

• 2007 – World Bank grant of 2,5 M USD under GPOBA (Global Partnership for Output Based Aid) program

�to provide access to water to some 7 000 customers in deprived area.

• Year 2007/ Early 2008 – secure a 455 B IDR long-term non recourse loan with Asian

Development Bank

�CAPEX funding for the next 5 years

�Cash flow facility helping bonds & dividends payment in the future

Volume Sold

137.73

11

129.34

130.04

130.26

134.51

137.73

2005 2006 2007 2008 2009

Volume Sold

NRW(6 Monthly Mobile Average)

50.6%

48.0%

46.6%48%

50%

52%

12

43.9%

46.6%

45.3%

40%

42%

44%

46%

2005 2006 2007 2008 2009

NRW

Service Coverage Ratio

49.9%52.2%

53.7% 54.6%55.5%

59.0%

61.8%

63.9%

55%

60%

65%

70%

13

35.2%

37.8%

42.3%

48.3%49.9%

52.2%

33.8%

30%

35%

40%

45%

50%

55%

Feb

9819

9819

99

200020

01

2002

200320

04

200520

06

200720

08

2009

Improvement of Supply Conditions

20091998

14

Continuous Supply Intermittent Supply No Water

Over 11 years, about 1,700 km1,700 km of pipe have been laid for rehabilitating or extending the network

PALYJA action in favor of low

income population

48,610

23,501

80,218

86,426

33,166

K4A

K4B

Feb 1998 : 201,668

2009 : 412,456

+ 41%

+ 78%

Domestic and in particular low income population benefited the most of Coverage extension and increase in connections

15

1,992

9,585

64,029

53,950

3,514

82,269

126,863

80,218

K1

K2

K3A

K3B

2009Feb-98

+ 758%

+ 98%

+ 49%

PALYJA action in favour of low

income population

Evolution of Low Income population connection 1998-2009

64,023

126,858

K3A 2A2

Dec-09

16

9,489

82,028

- 20,000 40,000 60,000 80,000 100,000 120,000 140,000

K2 2A1

Dec-09

Feb-98

Results of Customer Satisfaction

Survey

17

Level of current water tariff

• Current Tariff is Affordable, according to international standard, for low-income household, following an independent study performed

18

for low-income household, following an independent study performed in 2007/2008

• Jakarta water service based on full cost recovery scheme(not the case in other Asian capital cities and large cities even in Europe).

• Jakarta average domestic water tariff is lower than Beijing, Macao, Singapore, Hong Kong and Manila West tariffs

Price in Rupiah

6,300

9,076

Rice

Cooking Oil

Water is life and ……

it cost …nothing compared to

1 kg

1 Liter

19

100

525

2,067

4,500

5 PAM Water

SMS

Cigarette

Mineral Water

Petrol

1 Liter

1 Liter

1 cigarette

1 SMS

1 Liter

Domestic Water tariff in Asian cities2008-2010 figures

0.51

0.55

0.59

0.61

0.54

0.90

West Jakarta'09

Macao'08

Beijing'09

West Manila'09

Hongkong'09

Singapore'09

Jakarta water service on full cost

20

0.23

0.42

0.21

0.16

0.46

0.24

0.30

0.28

0.51

Surabaya'08

Kuala Lumpur'09

Delhi'09

Colombo'09

East Manila'10

Phnom Penh'08

Bangkok'09

Ho Chi Minh'08

West Jakarta'09

US$/m3

Jakarta water service on full cost

recovery scheme

A large number of Asian cities have their water services subsidised by

local or central government

Reminders on RCA benefits to

Jakarta population

At contract mid-term, PAM Jaya with its operator PALYJA significantly improved the water service to the population of Jakarta, bearing in mind that since Cooperation Agreement started in February 1998 the raw water resource remained unchanged in quantity :

� network length increased by an additional 1 228 km of pipe

� Network rehabilitation of 850 km of pipe

� Number of customers more than doubled to reach 412 456

� Population served increased by around 1 300 000 inhabitants

21

� Population served increased by around 1 300 000 inhabitants

� Water losses (NRW) has been reduced from almost 60% to less than 44%

thanks to 1 355 B IDR invested in the public service, and to the satisfaction of 73% of Western Jakarta customers.

On-going Challenges (contract term 2023)

• Capacity to secure cash for investments• Tariff adjustment (political decision) is essential to enable PALYJA to meet

the increasing demand and keep improving the level of service

• Coverage

22

• Large reserve of potential new customers within the low-income population and deep wells users conversion

• New water resource and transmission lines are necessary to ensure reliable water service together with alternative financing to reduce the pressure on tariff

• NRW reduction• Illegal connections and illegal use (depending on public authority support

and actions) are at stake to significantly improve NRW to reach less than 30% target

Balance of Stakeholder Interests

ConsumersConsumersMarketMarket SphereSphere

23

Public AuthorityPublic Authority OperatorOperator

RegulatoryRegulatoryBodyBody

Political SpherePolitical SphereCommercial SphereCommercial Sphere