73210 PPI data update note 76 September 2012 Private investment in water and sewerage recovers in 2011, mostly due to activity in China Overview In 2011, 31 new water and sewerage projects reached financial or contractual closure in six lower- and upper- middle income countries: Algeria (1), Brazil (2), China (26), Jordan (1), Mexico (1) and Peru (1).1 Total investment commitments (hereafter, investment) in water projects reached US$2.6.2 billion, of which over US$1 billion included investments in existing projects and US$1.5 billion included investments in new projects. Compared to 2010, private activity by number of projects increased by 24%, while by total investment it increased by 8.3% Figure 1: Water projects with private Figure 2: Investment commitments in participation, by regions, 1990-2011 water projects in developing countries, 90 16 by region, 1990-2011 Projects 2011 US$ 80 14 billions 70 12 60 10 50 8 40 30 6 * Adjusted by 4 US CPI. 20 10 2 0 0 1990 1995 2000 2005 2010 2011 1990 1995 2000 2005 2010 2011 EAP ECA LAC MENA SA AFR EAP ECA LAC MENA SA AFR Source: World Bank and PPIAF, PPI Project Database. Source: World Bank and PPIAF, PPI Project Database. Regional focus By number of projects, private activity in the water sector was concentrated in East Asia and Pacific (EAP), specifically in China, where 25 new projects closed in 2011. Following EAP was Latin America and the Caribbean (LAC) where four projects closed in 2011. Middle East and North Africa (MENA) ranked third since only two projects closed in 2011. There was one management contract in Jordan (Yarmouk Water Management Contract) and a second management contact in Algeria for Societe des Eaux d’Assainissement d’Alger. There hasn’t been any activity in Europe and Central Asia (ECA), or Africa (AFR) since 2008, and since 2010 in South Asia (SA). This note was written by Andreea Militaru, Consultant, Finance Economics and Urban Development Department, Sustainable Development Network, World Bank 1 Data on water projects with private participation include primarily medium-size and large projects in low and middle income countries as reported by the media and other public sources. Small-scale projects are generally not included because of lack of public information. More information is available at http://ppi.worldbank.org/. 1 Investment, however, was concentrated in LAC with US$2 billion, followed by EAP with US$586 million. The second phase divestiture of the Aguas Andinas, where the Chilean government sold 30% of its shares to institutional investors (private pension fund managers (AFPs) - 86% and 14% to the retail sector) for US$986 million, is one of the reasons why investment levels are significantly higher in LAC. The remaining investment in LAC was split between six utility and water treatment projects. Subsector focus Figure 3: Water projects with private participation, by subsector, 1990-2011 90 Projects In 2011, water treatment plants accounted for 25 new 80 projects (80% of the total number of new projects) and 70 total investments amounting to US$684.84 million 60 (26% of total investments in 2011) while water utilities accounted for six new projects (20% of the total 50 number of new projects) and total investments 40 amounting to US$1.936 billion (74% of total 30 investments). This breakdown is in line with water activity in the past eight years. Water treatment 20 projects were concentrated in China (23) followed by 10 one in Mexico and one in Peru. Water utility projects 0 were equally represented across three regions- two 1990 1995 2000 2005 2010 2011 projects each in EAP (China), in LAC (Brazil) and MENA (Jordan and Algeria). 2 Treatment plant Utility Water Transfer System Source: World Bank and PPIAF, PPI Project Database. Contract type focus Figure 4: Water projects with private Figure 5: Investment commitments in participation, by PPI type, 1990-2011 16 water projects by PPI type, 1990-2011 90 Projects 14 80 2011 US$ billions 70 12 60 10 50 8 40 6 30 * Adjusted by 4 US CPI. 20 10 2 0 0 1990 1995 2000 2005 2010 2011 1990 1995 2000 2005 2010 2011 Management and lease contract Management and lease contract Greenfield project Greenfield project Divestiture Divestiture Concession Concession Source: World Bank and PPIAF, PPI Project Database. Source: World Bank and PPIAF, PPI Project Database. By contract type, management and lease contracts were predominant (11 out of 31). They were followed by ten concession contracts (eight in China and two in Brazil), greenfield BOTs (seven in China, one in Peru and one 2 Water utility projects include all facilities necessary for storing and delivering potable water to users, including pipes and devices for measuring consumption, for transfer of potable water to individual users. 2 in Mexico) and one divestiture (Chile). Given the large amount of investment in the Chilean divestiture and the predominance of management contracts (which involve no investment commitments); total investment was concentrated in divestitures, followed by greenfields and concessions. Sponsor Focus Figure 6: Water projects with private Figure 7: Investments in water projects, participation, by sponsor countries, in by top sponsor countries in 2011 2011 Spain Mexico Hong Kong Malaysia France Hong Kong Singapore Project Investment Israel Israel Malaysia France Brazil Brazil China Singapore Spain China Mexico Projects 2011 US$ millions 0 5 10 15 20 0 100 200 300 Source: World Bank and PPIAF, PPI Project Database. Source: World Bank and PPIAF, PPI Project Database. Chinese private sponsors dominated the activity in 2011, in terms of number of projects (17), while Mexican and Spanish private sponsors dominated the activity in terms of total project investment (US$214 million, US$149.5 million respectively). Chinese sponsors invested in water projects in China while Mexican and Spanish sponsors invested across multiple countries in LAC. Featured project El Realito Aqueduct (Mexico) | Treatment Plant | Greenfield (BOT) | 25 years | PPP In July 2009, a consortium led by Conoisa and Aqualia was awarded a 25-year BOT contract to build, operate and maintain the El Realito Aqueduct water supply and purification system by the water commission of San Luis Potosi State in Mexico. The El Realito Aqueduct was to bring water to 132km from the El Realito dam on Rio Santa Maria to the city of San Luis Potosi and included a 1m3/second (86,400m3/day) water treatment plant, the 132km pipeline and three pumping stations. The associated dam and reservoir were part of a US$66.2 million public project built in conjunction with the El Realito PPP. Conoisa and Aqualia are subsidiaries of ICA [Mexico, 51%] and FCC [Spain, 49%], respectively. Aquos El Realito was formed as the project company. There were two other final bidders for the project: Abengoa [Spain] and IDEAL [Mexico]. Bidding was based on the lowest net present value (NPV) of payments. A fourth bidder, Makkro, was disqualified. The winning bid was 2.71 billion pesos although the original budget was 2.38 billion pesos. The total project cost was US$214.8 million. In July 2011, Banco Santander was the sole lead arranger of US$97.04 million peso denominated syndicated loan with banks Banobras, Banorte and Bajio. The project received a US$73.85 million capital grant from FONADIN backed by Banobras and US$43.9 million in equity from the sponsors. The ratio of debt to equity, not including the subsidy, was 69:31. 3 Table 1: Water projects with financial or contractual closure in 2011 Note: .. denotes missing data; N/A means not applicable. Region EAP Country Project Name Project Segment Type of PPI Subtype of Investment Capacity Capacity Sponsors Status PPI commitment Type (US$ millions) 1 China Fujian Anxi Construction Sewerage Greenfield Build, operate, .. Cubic meters 12.5 South Water Co., Ltd. Longmen Town treatment project and transfer per day (100% / China) Wastewater plant (thousands) Treatment Plant 2 China Wastewater Operational Sewerage Greenfield Build, operate, 42.03 Cubic meters 34.4 Beijing Sound Treatment Facility collection project and transfer per day Environment Industry Portfolio for 18 and (thousands) Group (100% / China) towns in treatment Changsha County 3 China Shaanxi Yang Construction Sewerage Greenfield Build, operate, 18.2 Cubic meters 40 Beijing Sound County Urban treatment project and transfer per day Environment Industry Wastewater plant (thousands) Group (100% / China) Treatment Plant 4 China Hebei Operational Sewerage Concession Rehabilitate, 41.26 Cubic meters 120 TAHAL Group (100% / Zhangjiakou City treatment operate, and per day Israel) Xuanhua District plant transfer (thousands) Yangfang Wastewater Treatment Plant 5 China Dihe Wastewater Operational Sewerage Management Management 0 Cubic meters 20 Shandong Hezheng Treatment Plant in treatment and lease contract per day Environment Lincheng County plant contract (thousands) Protection Engineering Co., Ltd. . (100% / China) 4 6 China Fenxi County Operational Sewerage Management Management 0 Cubic meters 10 Hebei Yongyi Wastewater treatment and lease contract per day Ecological and Treatment Plant plant contract (thousands) Environmental Engineering Co., Ltd. (100% / China) 7 China Guizhou Kaili City Operational Sewerage Concession Rehabilitate, 18.34 Cubic meters 80 Beijing Herocan Wastewater treatment operate, and per day Environmental Treatment Plant plant transfer (thousands) Engineering Tech Co. Ltd (100% / China) 8 China Xiong County Operational Sewerage Management Management 0 Cubic meters 20 Hebei Delong Wastewater treatment and lease contract per day Environmental Treatment Plant plant contract (thousands) Engineering Co., Management (100% / China) Agreement 9 China Jiangsu Jiangnan Operational Water utility Divestiture Partial 223.49 Cubic meters 930 Others (34% / ..) Water Co., Ltd. with per day sewerage (thousands) 10 China Two wastewater Construction Sewerage Greenfield Build, operate, 15 Cubic meters 55 TAHAL Group (100% / treatment plants in treatment project and transfer per day Israel) Zibo City plant (thousands) 11 China Rushan City Operational Sewerage Concession Rehabilitate, 19.57 Cubic meters 80 Chongqing Kangda Wastewater treatment operate, and per day Environmental Treatment Plant plant transfer (thousands) Protection Co. Ltd. (100% / China) 12 China Shandong Junan Operational Sewerage Concession Rehabilitate, 20.93 Cubic meters 90 Beijing Sound Wastewater treatment operate, and per day Environment Industry Treatment Plant plant transfer (thousands) Group (100% / China) 13 China Zhoukou Shabei Construction Sewerage Greenfield Build, operate, 24.81 Cubic meters 50 Asia Environment Wastewater treatment project and transfer per day Holdings Ltd (100% / Treatment Plant plant (thousands) Singapore) 5 14 China Yinchuan Operational Sewerage Concession Rehabilitate, 123.79 Cubic meters 500 Taliworks Corp. Bhd. Wastewater treatment operate, and per day (100% / Malaysia) Treatment Plant plant transfer (thousands) Concession Project 15 China Hengshui City Operational Sewerage Management Management 0 Cubic meters 15 CSD (Beijing) Raoyang treatment and lease contract per day Environmental Wastewater plant contract (thousands) Protection Co., Ltd. Treatment Plant (100% / China) Management Contract 16 China Xinhe County Operational Sewerage Management Management 0 Cubic meters 20 Hebei Yongyi Yushu treatment and lease contract per day Ecological and Wastewater plant contract (thousands) Environmental Treatment Plant Engineering Co., Ltd. Management (100% / China) Contract 17 China Wei County Operational Sewerage Management Management 0 Cubic meters 20 Hebei Yongyi Qingyuan treatment and lease contract per day Ecological and Wastewater plant contract (thousands) Environmental Treatment Plant Engineering Co., Ltd. Management (100% / China) Contract 18 China Zhongxiang City Operational Sewerage Concession Rehabilitate, 9.99 Cubic meters 50 Anneng Group (100% Wastewater treatment operate, and per day / China) Treatment Plant plant transfer (thousands) Concession Project 19 China Dongying Western Construction Sewerage Greenfield Build, operate, 3.82 Cubic meters 10 Sinomem Technology Suburban Area treatment project and transfer per day Ltd. (100% / Wastewater plant (thousands) Singapore) Treatment Plant 6 20 China The No. 2 Construction Sewerage Greenfield Build, operate, 8.88 Cubic meters 10 Sinomem Technology Wastewater treatment project and transfer per day Ltd. (100% / Treatment Plant of plant (thousands) Singapore) Hua’an County 21 China Zhuzhou County Operational Sewerage Management Management 15.95 Cubic meters 20 Anhui Guozhen Wastewater treatment and lease contract per day Environmental Treatment Plant plant contract (thousands) Protection Science & Technology Co. Ltd. (100% / China) 22 China Huaning County Operational Sewerage Concession Rehabilitate, .. Cubic meters 10 Jieyun International Wastewater treatment operate, and per day Construction & Treatment Plant plant transfer (thousands) Investment Holdings Concession (Hong Kong) Project Company Limited (100% / Hong Kong, China) 23 China Fengxiang County Operational Sewerage Concession Rehabilitate, .. Cubic meters 15 Jiangsu Ruisheng Wastewater treatment operate, and per day Water Treatment Co., Treatment Plant plant transfer (thousands) Ltd (100% / China) Project 24 China Jinde County Operational Sewerage Management Management 0 Cubic meters 7.5 Anhui Asia-Pacific Wastewater treatment and lease contract per day Environmental Treatment Plant plant contract (thousands) Engineering Tech Co, Ltd. (100% / China) 25 China Quanlu County Operational Sewerage Management Management 0 Cubic meters 6 Anhui Guozhen Wastewater treatment and lease contract per day Environmental Treatment Plant plant contract (thousands) Protection Science & Management Technology Co. Ltd. Contract (100% / China) 7 Region LAC Country Project Name Project Segment Type of PPI Subtype of Investment Capacity Capacity Sponsors Status PPI commitment Type (US$ millions) 1 Brazil Porto Ferreira Operational Water utility Concession Build, 23.3 Population 54 Odebrecht SA (100% / Water and with rehabilitate, (thousands) Brazil) Sewerage sewerage operate, and Services transfer 2 Brazil Uruguaiana Operational Water utility Concession Build, 104.2 Population 140 Odebrecht SA (100% / Water and with rehabilitate, (thousands) Brazil) Sewerage sewerage operate, and Services transfer 3 Mexico El Realito Construction Potable Greenfield Build, operate, 214.8 Cubic meters 86.4 ICA SA de CV (51% / Aqueduct water project and transfer per day Mexico), Fomento de treatment (thousands) Construcciones y plant Contratas SA (FCC) (49% / Spain) 4 Peru Taboada Construction Sewerage Greenfield Build, operate, 149.5 Cubic meters 1210 ACS Group (Actividades Wastewater treatment project and transfer per day de Construccion y Treatment Plant plant (thousands) Servicios) (100% / Spain) Region MENA Country Project Name Project Segment Type of PPI Subtype of Investment Capacity Capacity Sponsors Status PPI commitment Type (US$ millions) Societe des Eaux d’Assainissement d’Alger Water utility Management (SEAAL) second with and lease Management SUEZ (100% / 1 Algeria management contract Operational sewerage contract contract 0 525 2011 France) Water utility Management Veolia Yarmouk Water Company with and lease Management Environnement 2 Jordan Management Contract Operational sewerage contract contract 0 250 2011 (100% / France) 8 9