PPPs in Waste Management Dr. Roland Ramusch, Sector specialist Solid - - PowerPoint PPT Presentation

PPPs in Waste Management

• Dr. Roland Ramusch, Sector specialist – Solid Waste

Workshop outline

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Sustainable Infrastructure Project and Policy Preparation - Policy paper

https://www.ebrd.com/documents/climate-finance/from- waste-to-resources-mobilising-the-private-sector-to-deliver- sustainable-waste-management.pdf?blobnocache=true

Workshop outline

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• Sett

etting ing th the sc scen ene

• Compl

plexity xity in in wast ste ma manag nagement ement

• Select

Selected ed is issues sues for

• r wast

aste manag management ement PPPs Ps

• Ex

Examples ples - Gr Group

• up work
• rk

Setting the scene

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• Many people have no

no acc access ess to to re reliab liable and and saf safe servi vice ces

− 1.2 billion people life without electricity − 2.8 billion people cook food using solid fuels − 60% of world’s population lack access internet − 750 million have no access to safe drinking water − 2 billion lion ha have no no acc ccess ess to to regula ular wast waste co collec lection ion servic vices es

• Worldwid
• rldwide we

we have more more mobile mobile phone hone sub subscript scriptions ions then then people le having access ss to to proper per sanit itation! ation!

Setting the scene

2/14/2019 5 Roland Ramusch Source: World bank

Setting the scene

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• Governments face capacit

pacity and financial nancial cons nstra traints ints;

• Under the ri

right ght cir circumstan cumstances, s, PPPs can facilitate economic growth thr through

• ugh infrastructure development

and improve basic services,

• PPPs can be a good business opportunity for the private

sector;

• BUT

UT: implementing a successful

successful PPP PPP is CHA

CHALLENGING LLENGING

and requires a long long-ter erm co commit mmitme ment nt from both the private and the public sector!

Setting the scene

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• PPPs need very careful

reful plann anning ing and prep eparation aration;

• PPPs are com

comple plex legal, legal, contr ntract actual ual and financial inancial arran range geme ments nts;

• Goals: introduction of pri

privat ate sect sector

• r exper

xpertis tise and contractually-defined performa

• rmance

nce requi uireme rements nts;

• Tran

ransfer of the majority of the ri risks sks and and re responsib sponsibilities ilities for project delivery from public authority to to a pri privat ate contractor;

• A pa

paym yment ent mec mechani hanism link linked ed to to per perform

• rmance

ance which is specified primarily in output terms.

Setting the scene

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GOOD GOVER ERNANC NANCE PRINCIPL INCIPLES ES:

• Put people

le first st and start with assessi sessing ng user needs ds;

• Involve ALL concerned stak

akeh eholder

• lders;
• Build admi

dministrativ nistrative ca capa pacities cities for effectively negotiating and managing long-term collaborations with private sector;

• Adequate legal

al frame mewor

• rks

ks / regulations;

• Ensure transparent

ansparent procure urement ment policies;

• Assess

Assess all all risks risks and allo allocat cate the them ap appr propriat

• priately

ely between partners;

• Mitigat

igate all environmen

• nmenta

tal risks sks.

Setting the scene

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Setting the scene

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• 1. Usually government sets the stage and drafts a first plan.
• 2. Launching of a com
• mpe

petit titiv ive ten ender der to identify the best offer from private partner to FINANCE – DESIGN - BUILD – OPERATE and MAINTAIN the project.

• 3. Private partner recovers initial investment by ser

servic vice fee ees paid paid by by public ic partner tner or by the users directly ectly.

Setting the scene

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Setting the scene

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Setting the scene

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• PPP approach lets you plan project over enti

entire re li lifecy ecycle cle and..

• …optim

imises ises us use of available vailable re resour urces ces.

• Private sector knows better how to first attract

and invest capital and how to avoid cost

• verruns and
• how best to operat

erate and inn nnovat ate.

Risk allocation

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PPP approach allocates specif specific ic risks risks to the partner that is in a be bett tter er position position to to ma manage age them.

Permi mits ts Lega gal l frame mewor

• rks

Change ges s in jurisdiction diction and d regulations lations Design ign Cost st effic icien ient t invest estme ment nt Opera rati tion

• n and

technol chnology

• gy

PUBLIC LIC ACTOR PRIVATE ACTOR Force ce majeu eure re Suf ufficient icient us user r dema emand nd

Waste management is complex – WHY?

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• Waste sector usually receives the lea

east st pol politic itical atten ention ion…

• …and fin

inanc ncia ial sup suppor port compared with other infrastructure sectors.

• Despite this sec

ector

• r is

is highly ighly visibl isible and po polit itical ically ly… sen ensit itiv ive.

Waste management is complex – WHY?

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Waste management is complex – WHY?

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Waste management is complex – WHY?

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Animal Animal feeding eeding Inf Infor

• rmal

mal pic picking king

Waste management is complex – WHY?

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What are the more standar dardi dised ed par parts ts of a waste management system?

Source: https://www.bulkhandlingsystems.com Source: https://en.helector.gr

Waste management is complex – WHY?

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• Different waste types and composition
• Urban vs. rural areas (collection costs!)
• Costs of technologies / option
• Economies of scale
• Costs /revenues: recyclables, refuse derived fuels,

energy, electricity, disposal costs (hazardous waste!)

• Multitude of stakeholders with different values /

attitudes / beliefs

• Affordability / Tariffs / “Hidden services”

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Capital expenditures for sanitary landfill (EUR per tonne capacity)

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Capital expenditures for municipal solid waste incinerators (EUR per tonne capacity)

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Capital expenditures for municipal solid waste incinerators (EUR per tonne capacity)

Selected issues in waste mgmt. PPPs

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• PPPs commonly used for la

larger rger inf infrastructu rastructure re investm estments ents such as

• the de

development lopment and and operation

• peration of a ne

new sol solid id was aste tr treatment atment / dispos sposal al / reco cover ery fac acility lity.

• PSP / PPPs are NO

NOT forms of privatisation which involves the permanent transfer of publicly-owned assets to the private sector!

Selected issues - Drivers

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• Intr

Introd

• duc

ucing ng com compe peti titi tion, by reforming public procurement legislation and contracting procedures;

• De

Deli livering ering im impr provemen ements ts and inn nnovat ations

• ns

in waste infrastructure/ services more ra rapid pidly ly, com comprehen prehensi sively ely and /

• r on a larger

rger scale compared to public sector alone;

• Achieving signifi

significa cant nt cost cost sa saving vings and in incre creased ased value alue-for

• r-

money;

• Increasing the visi

visibilit bility and nd predi predictabilit ctability of the whole-life costs;

• Mobilising
• bilising privat

private capital to reduce pressures / demands on limited public budgetary resources;

• Better maint

ntenanc enance of the physical assets.

Selected issues – Common PSP types

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Selected issues – Common PSP types

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• Each PSP type implies var

arying ying le levels els of

• f re

respon ponsib sibility ility and risk risk to be assumed by the private sector operator, as well as dif differing ering de degree grees of

• f co

contractual ntractual co comple plexity xity and mana anagem gement nt burden en for the contr ntractin cting autho thori rity ty. QUESTIONS:

• Are procurement and contracting options legally

available to the contracting authority?

• Technical, legal, regulatory and institutional issues and

constraints?

• Commercial, financial and financing requirements and

constraints?

Selected issues – Common PSP types

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QUESTIONS:

• Interest of the market (local and international);
• Spec

pecial ial req equir irements ements based on the ch char aract acter erist istic ics

• f
• f th

the wast stes es gen gener erat ated ed, proposed system for managing wastes, topo pogra graph phy and demography of the project area, etc.;

• In the case of stra

trategic egically ally-es essent sentia ial asse assets, the need for the contracting authority to retain

• wnership / ultimate control of the assets.

Selected issues – Common PSP types

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CONSTRAINTS:

• Lo

Low-cos cost reco recover ery le level els due to politically- influenced or det eter ermined mined tari riff policies;

• La

Lack ck of

• f re

reliab liable le data about wastes generated / composition and / or technical performance of the existing services and facilities;

• Affordabil

dability ity of the measures proposed for improving the existing waste management services and facilities => => STE TEPWIS WISE APPR PROACH CH!

Selected issues – Common PSP types

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Case: Exten ende ded pr produ ducer cer res espo ponsib sibil ilit ity (EPR) schemes Environmental policy approach in which a producer’s responsibility for a product is extended to the post- consumer stage of a product’s life cycle. Characterised by:

• the shif

ifting ing of

• f respo

responsibil ibility ity (physically and/or economically; fully or partially) upstream toward the producer and away from municipalities; and

• the pr

provisio ision of

• f inc

incen entiv ives es to producers to take into account environmental considerations when designing their products.

Selected issues – Common PSP types

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Case: Ext Extended ended pr produc

• ducer

er re responsibi sponsibility lity (EPR) schemes

• Imply that producers take over the financial

and/or

• rganisational

responsibility for collecting collecting or

• r taking

taking back back use used goods goods, as well as sorti ting ng and nd tre reatment tment for thei eir re recy cyclin cling.

• Producers of products can fulfil the obligations
• f the extended producer responsibility scheme

individually or collectively.

Selected issues – Common PSP types

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Source: www.expra.eu

Selected issues – Payment mechanisms (PM)

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• PM defines ho

how th the priv privat ate par party is remunera remunerated ed (the heart of the contract);

• Is one of the main

main ways ys of

• f allocat

allocating ing ri risk sk effectively and ensuring that performance

• rmance requirem

quirements ents are met.

• PM shall be sim

simpl ple and and li link nked ed directly to to measur easurable able proje

• ject

ct outputs puts / deliv iverables rables;

• Create a financi

ncial al incent ntiv ive to perform well;

• Be affor
• rdable

dable for

• r th

the contr contrac acting ting au auth thority

• rity, and

provide appr appropriat

• priate remedie

emedies in the event that the private party does not meet its obligations;

Selected issues – Payment mechanisms (PM)

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Key principle: pa payme yments ts should be made only if the as asse set / ser ervic ice is is avai ailabl able at the co contr ntractual actually ly-agree agreed qualit ity / pe performa

• rmance

nce levels;

• Not be based on the private contractor’s actual

costs;

• Not require the private contractor to bear excessiv

essive ris isk;

• Where

appropriate, include in indexat ation ion to compensate for cost increases due to inflation.

Selected issues – Payment mechanisms (PM)

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• Payme

ments nts receiv received ed by by pri privat ate cont

• ntract

ractor

• r directly from

user: Us User charg arges (e.g. waste disposal fees);

• Payme

ments nts fr from the contracting contracting aut authori

• rity to the private

contractor

• Usage based payments (according to how much the

infrastructure or service is used);

• Availability based payments – for making infra-

structure / services available for use at the contractually-agreed standard;

• Per

erforma

• rmanc

nce ba based sed pa payme ments nts – vary according to the quality of service provided;

Selected issues – Payment mechanisms (PM)

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• Bonu

Bonuses ses and deduc deduction tions / penalties penalties – if specified

• utputs and / or standards are met, or conversely not

met;

• Provisions for adjustment – to take account of

un unpredict predictable ble chan changes ges in service needs and / or

• perating conditions.

Selected issues – Defining and allocating risks and responsibilities

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RESPONS PONSIB IBILIT ILITY GROU OUPS PS 1.

• 1. As

Asse set de devel elopment pment, planning new in investme estments nts, demand foreca

• recast,

st, capac pacity ity pl plannin ing, preparing de desig ign, constructi struction

• n etc.

2.

• 2. Man

anag agemen ement: managing the delivery company, appointing staff, HR, establishing / improving businesses processes. 3.

• 3. Oper

perat ation ion & ma maint inten enance ance and fee ee bill illin ing and coll llec ecti tion

• n

Selected issues – Defining and allocating risks and responsibilities

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KE KEY RESPONS PONSIB IBILIT ILITIES IES – waste collecti lection

• n:
• Service delivery: types of waste / recyclables

collected / transported, acquisition of permits

• Procurement / supply of assets: supply of

containers/equipment, construction of container platforms etc., depot, maintenance, facilities etc.

• Insurance, cleaning, maintenance and replacing of

assets

Selected issues – Defining and allocating risks and responsibilities

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KE KEY RES RESPONS PONSIBIL BILIT ITIES IES – wast ste tre treatme tment nt and and di dispo posal al:

• Service delivery: types of waste received, treated,

recovered, disposed of;

• Facilities development, operation, closure and

aftercare: site provision/acquisition, permits/ licenses, facility design, construction, closure/restoration and aftercare, supply

• f

plant/equipment/consumables, training, monitoring and control etc.

Selected issues – Defining and allocating risks and responsibilities

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MAIN RISKS KS:

• Pl

Plan anni ning ng ris isks: permits are delayed / refused;

• Desi

esign gn risk isk: design solution fails to meet the contracting authority’s requirements;

• Co

Construct nstruction ion risk isk: delays due to adverse site, weather conditions;

• Oper

perat ating ing risk isk: operation costs higher than estimated or standards required are not met;

• Deman

emand ri risk sk: service usage varies from forecast, revenues are lower then expected;

Selected issues – Defining and allocating risks and responsibilities

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MAIN RISKS KS:

• Pa

Payme yment nt risks isks: some user fees are unpaid or delayed;

• Fi

Financ ncia ial risk isk: delays in securing project financing variation, interest or exchange rates;

• Pol
• lit

itica ical, l, leg egisl islat ativ ive risk isk: unforeseen changes in policies, legislation etc.;

Selected issues – Defining and allocating risks and responsibilities

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Source: Integrated Skills Limited

Cost-effective transfer of risk

EXAMPLES

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City A Rural municipalities

Case 1 Case 2 Case 3

City B

v

Recycling

EXAMPLES

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For each Case ask yourself:

• 1. Which part of the systems could be PUBLIC and

which part PRIVATE and WHY?

• 2. What are PAYMENT MECHANISMS / MONEY

FLOWS?

• 3. RISKS and OPPORTUNITIES for PUBLIC and

PRIVATE sector?

Contact

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Roland Ramusch Sector specialist – Solid waste Sustainable Infrastructure Policy and Project Preparation Tel: + 44 020 7338 7862 Email: ramuschr@ebrd.com EBRD, One Exchange Square London, EC2A 2JN United Kingdom www.ebrd.com Find us on social media