Note 88 September 2013 Infrastructure Policy Unit 2012 PPI Data Update: Water & Sewerage Sector Private activity in Brazil spurs investments by 50 percent in 2012 Overview In 2012, 32 new water and sewerage projects reached financial or contractual closure in nine lower- and upper- middle income countries1, the same number as the previous year. There were eleven projects in Brazil, fourteen projects in China, and one project each in Ghana, India, Indonesia, Jordan, Peru, the Russian Federation, and Serbia.2 Four projects that closed before 2012 received additional investments in 2012. They were in Armenia, Indonesia, the Philippines, and Vietnam. Total investment commitments (hereafter, investment, all in US$ unless otherwise indicated) in water and sewerage projects amounted to $4 billion this year, up 50 percent from 2011. Of this amount, $3.9 billion was invested in new projects, while projects that closed before 2012 received additional investments worth $178 million. Three large Brazilian concessions (two sewerage collection and treatment plants, one water utility with sewerage) attracted nearly $2.5 billion, which accounted for most of the increase in investments in 2012. The compound annual growth rate in the water and sewerage sector was seven percent, in the period 2002-2012. 2012 US$ billions* Figure 1: Private investment in water & sewerage, by region 16 100 14 80 12 10 60 8 6 40 4 20 2 0 0 1990 1995 2000 2005 2010 2012 AFR EAP ECA LAC MNA SA # of projects Source: World Bank and PPIAF, PPI Project Database. * Adjusted by US CPI This note was written by Robbert van Eerd, consultant to the Infrastructure Policy Unit (TWISI), Transport, Water and ICT Department, Sustainable Development Network, World Bank. 1 This note uses the World Bank country classification released in July 2012. St. Kitts and Nevis graduated to high-income status in July 2012 and is thus no longer included in the update. Investment data are in real 2012 US dollar (nominal values were adjusted using US CPI). 2 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. Additional investment in some projects may have been omitted for the same reason. For more information: http://ppi.worldbank.org/ Regional Overview East Asia and the Pacific (EAP) saw 15 projects reach financial closure, the highest number of any region but significantly lower than the 2007 peak of 62 projects. The projects attracted investments of $118 million. All but one project are located in China, the exception being the Bekasi potable water treatment plant in West Java, Indonesia. The second largest region by number of projects was Latin America and the Caribbean (LAC), where twelve projects closed. Because of three large projects in Brazil, the total amount invested in LAC in 2012 was a whopping $3,113 million. There was one greenfield wastewater treatment plant in La Chira, Peru, while the other eleven projects were all 30-year concessions located in Brazil (split between water utilities with sewerage and sewerage collection and treatment plants, mostly contracted at the municipal level). Europe and Central Asia (ECA) had not seen new private activity in the water and sewerage sector since 2008, but in 2012 there was one project each in the Russian Federation and Serbia, which brought $133 of investments to the region. The Russian project was a build-rehabilitate-operate-transfer water utility with sewerage in Voronezh, the Serbian project a potable water treatment plant in Zrenjanin, Vojvodina. There was only one project in each of the Sub-Saharan Africa (AFR), Middle East and North Africa (MNA), and South Asia (SAR) regions. The projects were located in Ghana ($126 million), Jordan ($192 million), and India ($116 million) respectively. The Ghanaian project was a greenfield potable water treatment plant in Accra. The project in India was a rehabilitate-operate-and-transfer water utility without sewerage in Nagpur, Maharashtra; the project in Jordan was a sewerage treatment plant concession in the country’s Zarqa Governate. Subsector Focus Almost 60 percent of all projects were treatment plants, while the remaining 40 percent were utilities (see figure 2 below). Treatment plans were the only subtype in China, while utilities were the only subtype in Brazil, the two countries with the largest amount of projects this year. Total investments in treatment plants were $0.63 billion in 2012, down from $0.70 billion in 2011 (see figure 3 below). This corresponded with a 10 percent drop in treatment plant investments. The total amount for utilities was $3.40 billion, compared to $1.98 billion the year prior: a surge of 72 percent. Overall, 84 percent of all dollars invested went to utilities, the remainder to treatment plants. Since there were more treatment plants than utilities, this means that that average size of a treatment plant project was significantly smaller than the average size of a utility project. One large utility concession in Brazil worth $1.3 billion heavily skewed the numbers (see also ‘featured project’ at the end of this note). Figure 2: Water projects with private Figure 3: Private investment in water & participation, by subsector, 1990-2012 sewerage, by subsector 90 2012 US$ billions* 15 60 10 30 5 0 0 Water Transfer System Utility Treatment plant Treatment plant Utility Water Transfer System 2 In 2012, the average investment Figure 4: Average project investment in treatment plant projects was 2012 US$ millions* $33 million, which was somewhat 800 lower than the 20-year average of $56.5 million. 600 400 The average utility in 2012 200 attracted $262 million worth of investments, much more than the 0 20-year average of $156 million. 1990 1995 2000 2005 2010 2012 See also figure 4 to the right. Treatment Plant Utility Contract Type Overview Figure 5: Water projects with private Figure 6: Investment commitments in participation, by PPI type water projects by PPI type, 1990-2012 90 2012 US$ billions* 80 16 70 14 60 12 50 10 40 8 30 6 20 4 10 2 0 0 Brownfield concession Divestiture Brownfield concession Divestiture Greenfield Management and lease Greenfield Management and lease * Adjusted by US CPI In 2012, there were 21 brownfield concessions, including all 11 projects closed in Brazil (see figure 5). These 21 projects represented $3.64 billion of investments, the highest amount invested in concessions since 2004 (see figure 6). The remaining 11 greenfield projects raked in another $0.40 billion, the lowest amount since 2002. There were eight greenfield projects in China, and one in Peru, Jordan, and Serbia. In 2012, there were no divestitures or management and lease contract projects recorded. 3 Sponsors Overview Most projects in 2012 had a Brazilian sponsor (see Figure 7: Water projects with private figure 7 on the left). All eleven projects that closed participation, by sponsor countries, in in Brazil were done by at least one Brazilian sponsor. In total, there were 20 engagements by 2011 # of projects Brazilian sponsors in various projects. In 2012, fourteen projects closed in China. Twelve Other of those projects were sponsored by Chinese companies, the other two were sponsored by Europe BerlinWasser of Germany and MWH Global from the United States. Beijing Sound Environment China Industry Group of China was involved five projects. Brazil After Brazilian and Chinese companies, European companies were the most involved: seven projects 0 5 10 15 20 were sponsored by various companies from France, Source: World Bank and PPIAF, PPI Project Database. Spain, Austria, Germany and Portugal. Brazilian firms sponsored projects that represented the largest total investments (see figure 8 on the Figure 8: Investments in water projects, left; Brazilian companies’ investment exposure is off by top sponsor countries in 2011 the chart). Brazilian firms were involved in projects worth $9 billion (whereby each firm’s involvement in Project size (US$ millions) a project counts the full value of the project toward the exposure total). French sponsors were involved Other in projects worth $308 million, Spanish sponsors in projects representing $231 million of investments, China and Chinese sponsors for another $133 million. Spain France Only two projects received support from multilateral institutions: the Aguas do Mirante utility in Sao Brazil** Paolo, Brazil, received a $62 million loan from the International Finance Corporation (IFC), and the 0 200 400 600 9000** 800 Befesa desalination plant in Ghana received a $180 Source: World Bank and PPIAF, PPI Project Database. million guarantee from the Multilateral Investment * Adjusted by US CPI ** Not on scale Guarantee Agency (MIGA). 4 Featured Project Western Zone of Rio de Janeiro Sewerage Services (Brazil) | Utility | Brownfield concession (BROT) The Brazilian company Foz Aguas 5, a partnership of Foz do Brasil and Saneamento Ambiental Aguas do Brasil (SAAB) or Aguas do Brasil group (itself a partnership of the Brazilian construction companies Developer, Queiroz Galvao, Trana Construcoes Ltda and Construtora Cowan S.A.), was awarded the 30-year concession contract to expand, rehabilitate and operate the sewerage facilities of the western zone of the city of Rio de Janeiro (Rio de Janeiro state) in November 2011. The contract was awarded by the municipality's central administration. The population of the concession area was estimated at 2.6 million. Foz Aguas 5 was awarded the contract by offering the highest payment for the concession rights (the offer was of $ 42.6 million or BRL 84.2 million, 8 percent above the floor established by the government). Only two other Brazilian companies took part in the contest: Construtora Delta and Equipav. The contract was signed in January 2012, and the private sponsor took over the operations of the sewerage services in May 2012. The private sponsor committed to invest $1,367 million (BRL 2,700 million) over the life of the project with the aim to treat 90 percent of the area’s sewerage and to construct 2,100 km of collection pipes. At the time the contract was awarded, only 4 percent of the sewerage in the area was treated. * By itself, this project represents 34 percent of the global total investments in the water and sewerage sector in 2012. 5 Table 1: Water & sewerage projects with financial or contractual closure in 2012 (total of 32 projects) East Asia and the Pacific Country Project Name Segment Type of PPI Subtype of Investment Capacity Capacity Sponsors PPI commitment Type (US$ millions) 1 Cubic meters Anhui Guozhen Funing County per day Environmental Wastewater Treatment Sewerage Rehabilitate, (thousands) Protection Science & Plant Concession treatment operate, and Technology Co. Ltd. China Agreement plant Concession transfer 2.06 10 (100% / China) 2 Cubic meters Xingyuan Kongjian Wuxue City Wastewater Sewerage per day Environmental Treatment Plant Phase treatment Greenfield Build, operate, (thousands) Technology Co., Ltd. China II plant project and transfer 4.75 20 (100% / China) 3 Cubic meters Xingyuan Kongjian Wuxue City Wastewater Sewerage Rehabilitate, per day Environmental Treatment Plant Phase I treatment operate, and (thousands) Technology Co., Ltd. China Concession Agreement plant Concession transfer 3.8 15 (100% / China) 4 Xian City Changan Cubic meters Beijing Sound District Wastewater Sewerage per day Environment Industry Treatment Plant Phase treatment Greenfield Build, operate, (thousands) Group (100% / China II plant project and transfer 9.29 50 China) 5 Emeishan City Cubic meters Wastewater Treatment Sewerage Rehabilitate, per day Plant Concession treatment operate, and (thousands) Haitian Group (100% China Agreement plant Concession transfer 13.31 50 / China) 6 Cubic meters Suizhou City Yulong Suizhou City Sewerage per day Water Supply Wastewater Treatment treatment Greenfield Build, operate, (thousands) Company Ltd (100% China Plant Phase II plant project and transfer 8.69 50 / China) 7 Cubic meters China Bozhou Wastewater Potable Concession Rehabilitate, 0 per day 80 Anhui Guozhen Treatment Plant water and operate, and Environmental 6 Concession Agreement sewerage transfer (thousands) Protection Science & treatment Technology Co. Ltd. plant (100% / China) 8 Sewerage Rehabilitate, Cubic meters Shifang Wastewater treatment operate, and per day MWH Global Inc China Treatment Plant plant Concession transfer 5.72 (thousands) 30 (60% / United States) 9 Cubic meters Beijing Sound Sewerage Rehabilitate, per day Environment Industry Hailun City Wastewater treatment operate, and (thousands) Group (100% / China Treatment Plant plant Concession transfer 4.75 20 China) 10 Dangtu County No. 2 Sewerage Cubic meters Wastewater Treatment treatment Greenfield Build, operate, per day Shuguang Group China Plant plant project and transfer 5.03 (thousands) 15 (100% / China) 11 Chuzhou City No. 2 Sewerage Cubic meters Wastewater Treatment treatment Greenfield Build, operate, per day BerlinWasser (100% China Plant plant project and transfer 23.77 (thousands) 50 / Germany) 12 Cubic meters Beijing Sound Anshan City Dagushan Sewerage per day Environment Industry Wastewater Treatment treatment Greenfield Build, operate, (thousands) Group (100% / China Plant plant project and transfer 14.9 30 China) 13 Cubic meters Beijing Sound Anshan City Ningyuan Sewerage per day Environment Industry Wastewater Treatment treatment Greenfield Build, operate, (thousands) Group (100% / China Plant plant project and transfer 30.11 80 China) 14 Cubic meters Beijing Sound Anshan City Dongtai Sewerage per day Environment Industry Wastewater Treatment treatment Greenfield Build, operate, (thousands) Group (100% / China Plant plant project and transfer 36 100 China) 15 Potable Build, Cubic meters water rehabilitate, per day Moya Holding treatment operate, and (thousands) Company (95% / Indonesia Bekasi Water Project plant Concession transfer 15 19 Bahrain) 7 Europe and Central Asia Country Project Segment Type of PPI Subtype of Investment Capacity Type Capacity Sponsors Name PPI commitment (US$ millions) 1 Anhui Guozhen Build, Environmental Voronezh Water utility rehabilitate, Cubic meters Protection Science & Russian Water with operate, and per day Technology Co. Ltd. Federation Utility sewerage Concession transfer 100 (thousands) 477 (100% / China) 2 Potable Xingyuan Kongjian EVN water Number of Environmental Zrenjanin treatment Greenfield Build, operate, connections Technology Co., Ltd. Serbia Water Plant plant project and transfer 33.3 (thousands) 86 (100% / China) 8 Latin America and the Caribbean Country Project Name Segment Type of Subtype of Investment Capacity Capacity Sponsors PPI PPI commitment Type (US$ millions) 1 Build, Water utility rehabilitate, Aguas de Porto with operate, and Population Grupo Equipav (100% / Brazil Espiridiao sewerage Concession transfer 1.5 (thousands) 11 Brazil) 2 Sewerage Build, collection rehabilitate, and operate, and Population Construtora Queiroz Brazil CAB Atibaia treatment Concession transfer 50.2 (thousands) 125 Galvao (100% / Brazil) 3 Aracatuba Build, Water and Water utility rehabilitate, Sewerage with operate, and Population Construtora OAS (100% / Brazil Services sewerage Concession transfer 365.8 (thousands) 180 Brazil) 4 Water utility Rehabilitate, Aguas de with operate, and Population Grupo Equipav (100% / Brazil Jauru sewerage Concession transfer 0 (thousands) 11 Brazil) 5 Odebrecht SA (50% / Brazil), Construtora Cowan LTDA (13% / Brazil), Construtora Queiroz Galvao (13% / Western Zone Brazil), Trana Construcoes of Rio de Sewerage Build, Ltda (13% / Brazil), Janeiro collection rehabilitate, Carioca Christiani-Nielsen Sewerage and operate, and Population Engenharia S.A. (13% / Brazil Services treatment Concession transfer 1409.6 (thousands) 2600 Brazil) 6 Construtora Cowan LTDA (15% / Brazil), Trana Sewerage Build, Construcoes Ltda (15% / collection rehabilitate, Brazil), Construtora Aguas de and operate, and Population Queiroz Galvao (15% / Brazil Votorantim treatment Concession transfer 47.1 (thousands) 108.8 Brazil), Carioca Christiani- Nielsen Engenharia S.A. 9 (15% / Brazil), Grupo Somague (40% / Portugal) 7 Build, Water utility rehabilitate, Cab Ambiental (..% / Tubarao with operate, and Population Brazil), Enops Engenharia Brazil Saneamento sewerage Concession transfer 121.5 (thousands) 100 Ltda (..% / Brazil) 8 Build, Water utility rehabilitate, Vega Engenharia Sao Gabriel with operate, and Population Ambiental (50% / Brazil), Brazil Saneamento sewerage Concession transfer 55.7 (thousands) 60 Grupo Solvi (50% / Brazil) 9 Sewerage Build, collection rehabilitate, Aguas do and operate, and Population Grupo Equipav (100% / Brazil Mirante treatment Concession transfer 151.9 (thousands) 367.3 Brazil) 10 Sewerage Build, collection rehabilitate, and operate, and Population Cab Ambiental (100% / Brazil CAB Cuiaba treatment Concession transfer 717 (thousands) 553 Brazil) 11 Sewerage Build, collection rehabilitate, Aguas do and operate, and Population Cab Ambiental (100% / Brazil Agreste treatment Concession transfer 88.6 (thousands) 220 Brazil) 12 La Chira Waste Water Sewerage Build, Cubic meters Grana y Montero SA (50% Treatment treatment Greenfield operate, and per day / Peru), Acciona (50% / Peru Plant plant project transfer 104.5 (thousands) 544 Spain) 10 Middle East and North Africa Country Project Name Segment Type of Subtype of PPI Investment Capacity Type Capacity Sponsors PPI commitment (US$ millions) 1 As-Samra Build, Wastewater Sewerage rehabilitate, Cubic meters SUEZ Treatment Plant treatment operate, and per day (100% / Jordan Phase II plant Concession transfer 192 (thousands) 98 France) South Asia Country Project Segment Type of Subtype of PPI Investment Capacity Type Capacity Sponsors Name PPI commitment (US$ millions) 1 Nagpur, 24x7 Water Water utility Rehabilitate, Number of Veolia Supply without operate, and connections Environnement India Project sewerage Concession transfer 115.6 (thousands) 450 (50% / France) Sub-Saharan Africa Country Project Name Segment Type of Subtype of Investment Capacity Type Capacity Sponsors PPI PPI commitment (US$ millions) 1 Potable Abengoa (50% / Befesa water Build, own, Cubic meters Spain), Sojitz Desalination treatment Greenfield and per day Corporation (44% / Ghana Plant plant project operate 126 (thousands) 60 Japan) 11