P U B LI C -P RI VAT E INFR ASTR UCTUR E AD VISORY FACILITY 72065 January 2011 IMPACT STORIES PPIAF Supports Groundbreaking Public-Private Partnerships in the Wastewater Sector in Egypt PPIAF support to the Egyptian government has helped lay the groundwork for several public-private partnership (PPP) projects in a variety of sectors. Speci�cally, PPIAF provided support to two PPP transactions in the wastewater sector: the New Cairo Wastewater Treatment Plant, the �rst PPP in Egypt, and the 6th of October Wastewater Treatment Plant. In 2006 PPIAF assisted with the preparation of the conceptual framework and transaction model for the New Cairo plant. As part of broader capacity building support to Egypt’s PPP Unit in 2008, PPIAF also analyzed options for the 6th of October plant relating to capacity, location, and design. A 20-year concession contract for the New Cairo Wastewater Treatment Plant was awarded in June 2009, worth $482 million. The 6th of October Wastewater Treatment Plant is currently in the bidding stage. With several other wastewater treatment plant PPPs, as well as PPPs in other sectors, under consideration by the PPP Unit, the New Cairo and 6th of October plants offer a replicable model for future PPPs in Egypt and throughout the region. By 2006 Egypt’s water sector was characterized by limited service provision and faced several other signi�cant challenges. Consequently, the Egyptian government identi�ed water as a priority sector and began considering new approaches for �nancing and managing water supply and sanitation services that involve greater accountability for performance, improved operational ef�ciency, and reduced �scal burden faced by the government. In New Cairo City, a satellite town of Greater Cairo created to alleviate overcrowding, the population of 550,000 was expected to increase to approximately 4 million over the next 20 years. The existing infrastructure was insuf�cient and of poor quality, and rapid population growth placed increasing pressure on water supply and sanitation services. In the 6th of October Governorate, current wastewater infrastructure was also deemed inadequate, especially given population projections that would see the Governorate’s population rise from 150,000 in 2006 to 3 million in 2020. In both New Cairo and 6th of October, the government sought Public-Private Infrastructure Advisory Facility (PPIAF) support to consider the possibility of implementing a cost-effective, environmentally safe wastewater treatment facility that would mobilize private sector participation. PPIAF SUPPORT The Egyptian government requested $75,000 from PPIAF in 2006 to prepare a capacity assessment, conceptual framework, and transaction model for the proposed New Cairo Wastewater Treatment Plant. The �nal report was presented in January 2008 to the Egyptian government’s Ministry of Housing, Utili- ties, and Urban Development (MHUUD). The report recommended a PPP as the most suitable structure to create incentives to reduce the �scal cost of the water system to the government, and reviewed PPP options that could be implemented. An important consideration was to structure the project so that it was locally �nanced, yet still attractive to international investors. The New Cairo Wastewater Treatment Plant project was launched in 2007, amidst a dif�cult context for private investment in Egyptian infrastructure due to the country’s recent dif�cult experience with private participation in the electricity sector. In order to avoid past failures, the Egyptian government launched the project as part of a broader PPP program that aimed to develop innovative infrastructure projects www.ppiaf.org in various sectors. To ensure the success of this program, the government requested a further $450,000 in support DONOR COORDINATION from PPIAF in 2008 to de�ne the mandate and operating PPIAF, International Finance Corporation (IFC) Advisory, and environment of a PPP unit and provide on-the-job technical DevCo provided funding and advice to the Egyptian govern- assistance to review policy issues arising in the design of ment’s PPP program and the New Cairo plant, with PPIAF PPP projects. offering additional support to the 6th of October plant. Included within this second PPIAF grant was transaction support to another wastewater plant, the 6th of October IMPACTS Wastewater Treatment Plant, situated in the 6th of October Upon completion the New Cairo and 6th of October waste- Governorate. For this plant, PPIAF assistance consisted of a water treatment plants will bene�t over two million peo- capacity assessment, conceptual design of the plant, and ple. The treated contaminant-free effluent produced by the preparation of the project’s bidding documents. Follow- the plants will be environmentally safe and non-polluting. ing the �nalization of the PPIAF assistance, the government Although not suitable for drinking water, the wastewater then chose to move the proposed plant to the western part stream can be reused for irrigation purposes. The water re- of the city, which has delayed the award of the project. use is especially important given Egypt’s status as a water scarce country. OUTCOMES The New Cairo plant mobilized private investments total- Following PPIAF support, the government and PPP unit have ing $150–$200 million, and has opened up the market for decided to proceed to bid out both the New Cairo and 6th regional and international investors to work on other PPP of October wastewater treatment plants, with the MHUUD projects in Egypt, including the 6th of October plant. acting as the contracting authority on both projects. The New Cairo plant is best viewed as a replicable pilot for In June 2009 the contract for the New Cairo Wastewater further PPPs within Egypt and more broadly, the Middle Treatment Plant was awarded to Orasqualia, a 50/50 joint East and North Africa region as a whole. With a pipeline venture between Egypt’s Orascom Construction Industries of approximately $15 billion, it is to be hoped that Egypt’s and Aqualia, a division of Spanish construction �rm FCC, PPP unit will continue to learn from and build on its PPIAF- which reached �nancial close in February 2010. The 20- supported experience in the wastewater sector. year build, operate, transfer (BOT) concession contract, worth $482 million, covers engineering, procurement, and construction as well as operation and maintenance of the plant. Construction of the New Cairo plant began in February 2010. As of December 2010 Orasqualia had completed RELATED PPIAF ACTIVITIES nearly 40% of New Cairo Wastewater Treatment Plant and IN EGYPT expects construction to be completed in time for the plant to be delivered in March 2012. Once completed, the plant • 2004: PPP Models in Irrigation, $75,000 will have a capacity of up to 250,000 m3 per day—reaching • 2006: Development of Regulatory and Institutional 500,000 m3 per day by 2029—to treat wastewater. Arrangements for the West Delta Irrigation Project, $75,000 The 6th of October plant project is expected to be a design, • 2006: Options in PPPs in Operating and build, �nance, and operate contract over a 20-year period. Maintaining Irrigation and Drainage Infrastructure, A shift in the location and scope of the 6th of October plant $75,000 has slightly delayed the award of a concession contract. As • 2007: PPP Conceptual Framework for a Water a result, MHUUD has re-opened the prequali�cation stage, Treatment Plant in the New Cairo Area, $75,000 and the invitation to bid was opened on December 27, • 2008: Public-Private Partnership Unit Capacity 2010. Clari�cations from the bidders are currently being Building, $450,000 received. Once operational the plant is expected to have a capacity of up to 150,000 m3 per day.