THE COUNTY GOVERNMENT OF MURANG A

Transcription

1 REPUBLIC OF KENYA THE COUNTY GOVERNMENT OF MURANG A TERMS OF REFERENCE FOR THE FEASIBILITY STUDY FOR THE PROPOSED MURANG A TOWN/ MUKUYU WATER SUPPLY PPP PROJECT IN MURANG A COUNTY INTRODUCTION 1. Vision 2030, Kenya s national long-term development strategy covering the period 2008 to 2030, places great emphasis on rebuilding and creating a productive infrastructure in the country s journey towards poverty reduction as well as social, political and economic transformation. However, in a time of constrained public budgets with competing development pressures especially in the social sectors (particularly health and education), high sovereign debt, and rising public expenditure demands from the current and new devolved structures, the Government of Kenya (GOK) is facing great challenges. In particular, Kenya s infrastructure funding gap is estimated at approx. $2.1Bn p.a. 2. Responding to this challenge, the GOK, through the National Treasury, has made infrastructure development and public service provision through Public Private Partnerships (PPP) a priority mechanism that can help it address this major infrastructure funding gap and achieve the benefits of successful PPP investments including: substantial private investment; transfer of significant risk to the private sector; improving access to infrastructure; creating higher quality assets with better operation and maintenance; and helping achieve better value for money. Further background information on Kenya s PPP Program is provided in Annex With a growing number of project proposals approved by the PPP Committee, across various sectors and county governments, Kenya s PPP programme is gathering pace and can be considered to be taking shape. As of today there is a substantial pipeline of projects entering the feasibility stage, and in accordance with section 36(2) of the PPP Act, the PPP Unit encourages the appointment of Transaction Advisors (TA) with the qualifications and experience necessary to assist contracting authorities with the preparation of Feasibility Studies and the procurement of PPP transactions. 4. As part of its overall PPP Program, GOK has identified the Water Sector as one of the priority infrastructure sectors for PPP investment for which a number of prospective projects have been identified and considered pilot candidates. In particular, the County Government of Murang a 1

2 seeks to engage requisite expertise to assist in the procurement of a private sector partner to rehabilitate and extend the water distribution network in Murang a Town/Mukuyu in Murang a County (the Project ) through a PPP arrangement. Additional details on the water sector is provided in Annex 2. DESCRIPTION AND SCOPE OF THE PROJECT 5. In its 9 th special meeting of 29 th May 2015, the PPP Committee, acting under section 7(d) and in accordance with section 31(3) of the PPP Act 2013, approved the proposal to rehabilitate and extend the water distribution network in Murang a Town/Mukuyu via a PPP framework in an effort to facilitate the supply of clean, quality and affordable water to its residents, while benefiting from the operational efficiencies of the private sector (see Annex 3 for a copy of the approved PPP project proposal). 6. The water distribution system for Murang a Town was constructed over 40 years ago and designed to serve a population of approx. 20,000 and a water demand of 3,000m 3 /day. Presently, the distribution network is old and dilapidated resulting to a much-reduced level of service for the continuously increasing population, now at 70,000 people and a current water demand of 7,500m 3 /day. The proposal, prepared and submitted in cooperation with MUWASCO, is balanced and has a component of: - Improving Performance and Efficiency, mainly expressed in terms of Non-Revenue Water (NRW), Energy Efficiency (EE), revenue generation; - Improving Quality of Service, mainly expressed in terms of Continuity of Service (24/7/365); and, - Augmenting Capacity, mainly investments in dams, treatment plant, storage and pipes. 7. While the initial project scope involves the rehabilitation of the existing water system and the laying of a new 15km water system within Murang a CBD and Mukuyu market, to support the expanding commercial and residential establishments within the County and its environs, and to also attract a wider private sector market, these Terms of Reference include the need to assess the following related scope expansion, to lower transaction costs and reach economies of scale: - To include the Maragua and Kenol areas of Murang a County; and, - To explore clustering of the neighboring proposed regional projects i.e. Kahurura and Thika Dam Water Supply proposals. OBJECTIVE OF THE ASSIGNMENT 8. On behalf of the County Government and WSP, the PPP Unit seeks the assistance of a consortium of eligible consulting firms (i.e. technical/sector, financial, legal, and social and environment) to gauge the potential for PPPs in water supply provision in Murang a County environs. 9. The consultants to be engaged will prepare a feasibility study consistent with the PPP Act, 2013 to a standard that will enable the County Government of Murang a to establish the technical configuration, commercial attractiveness and bankability of the Project. In the process, the 2

3 assignment is to recommend the preferred PPP model for the procurement of the Project based on an analysis of alternative technical and PPP options, and advise the County Government of Murang a on the optimum risk allocation and the resultant contract structure, including requisite statutory approvals. 10. The overall objective of the assignment is to assist the County Government of Murang a to develop a bankable structure for the rehabilitation and extension of the water distribution network in Murang a Town/Mukuyu (and its environs see paragraph 7) under a PPP scheme. SCOPE OF THE ASSIGNMENT 11. The main scope of work is to undertake the PPP Feasibility Study including proposing a Project Implementation Schedule. The PPP Feasibility Study is intended to examine both the Project s feasibility, and the feasibility of implementing the Project as a PPP. The Study is intended to answer the following four key questions: a) Is the project viable from a technical, economic, social, environmental and financial perspective? This should include an assessment of affordability for the end user and the public sector, including an assessment of the fiscal impact and contingent liability, value for money and risk transfer. b) What is the preferred technical solution to achieving the Project s objectives vs. other options, which will need to be considered? c) What is the best way to procure the project through traditional public sector procurement, for example a Build or Design and Build contract, or through some form of PPP? d) If PPP, then what is the most appropriate form of PPP for the project as defined by the proposed responsibilities of the private sector, and the key risk allocation. 12. The consultants will provide all needed support, inputs, documentation, services and content for the Project. This includes the design of a detailed PPP Transaction Plan, based on the findings of the feasibility analysis (Appendix 3 provides a template for the Feasibility Study Report) outlining the recommended PPP structure for an integrated water supply project in Murang a. 13. Throughout the assignment, the consultants will provide support, as appropriate, in securing the necessary approvals for the Project. As an integral part of the scope of works, the consultants will advise on the institutional and organizational framework and capacity building requirements to ensure knowledge transfer to the county and the WSP team. Task 1: Project Technical Feasibility Assessment 14. Conduct a situational analysis of the principal actors and resources available in water supply provision within and outside the county (i.e. MUWASCO, Laikipia County/NAWASCO, Kahurura Dam Water Supply project; and, Kiambu County/THIWASCO, Thika Dam Water Supply project) and the effect of the Project on the current institutional setting. The task will include a brief description of the following elements, but shall not be limited to: - A description of the service area, services provided, customer profile, and water demand forecast 3

4 - A brief history of the organization and current management; legal personality of the utility - The utility/government institutional relationship (County Government Water Services Board (WSB) Water Services Provider (WSP)) - Utility internal and external performance 1 - assessment of organizational performance - Capital improvement and expansion plans (current and planned); Investments projects under way and their financiers - Government financial support for operations; - The financial condition of the utility based on a review of the financial statements, with an emphasis on: o Outstanding debt structure. o Revenue sufficiency: operating results and debt service coverage. o Financial strength of utility, creditworthiness o Liabilities to other government entities. o Dependence on operating transfers from other government entities. o Tariff revenue history, rate setting and adjustment process, major users, and payment delinquencies. o Regulatory issues, and outstanding litigations 16. The Technical Feasibility will analyse the alternative technical configurations. In detail, the Technical Feasibility will undertake, but shall not be limited to: - Review project development objectives, and project rationale - Assess project context in strategic asset management/county Integrated Development Plan (CIDP) - Review existing studies and assessments (if any) - Evaluate the alternative technical configurations for the project and advise on the most suitable when evaluated against appropriate evaluation criteria - Evaluate and estimate ancillary infrastructure investments necessary for the Project - Estimate the full life cycle costs of the Project based on: o Preliminary outline engineering designs and estimated construction and supply costs o Proposed phasing of CAPEX o Maintenance, management and operating costs (OPEX) o Economic life of the facilities - Examine the tariff regime and evaluate whether it is capable of supporting investment in the project. - Ease of Implementation o Project readiness and preparation gaps 1 Water utility efficiency is defined in a comprehensive nature: Internal water utility efficiency is defined by all functions performed by a water utility (the means) and seeks to answer the question how efficient is the utility as an organization ; external water utility efficiency is defined by the water service provided (the ends); water utility operating environment is the operating environment within which a utility must act the legal, regulatory, political and environmental context (constraints, impediments, boundary conditions for opportunities) 4

5 o Possibility to fast track o Support of stakeholders o Capacity (technical and administrative) of implementing utility - Survey various users of the water supply system regarding their service preferences and their ability and willingness to pay for the services. 17. In particular, investments to refurbish/renew, to expand or to improve efficiency will be assessed. This would lead to a risk based priority investment plan, including: - Assessing the transmission mains and hydraulic capacity of existing supply zones to identify deficiencies in the system that may require rehabilitation. - Performing a system analysis to improve the quality of service, and specially continuity of service (24/7/365) - Auditing energy efficiency (EE), as needed - Preparing a NRW reduction investment strategy over the next 10 years. Such NRW strategy would need to include the following elements: (i) An estimate of realistic NRW performance targets over time, (ii) An assessment of the annual network rehabilitation investment needs to make this possible, including a sensitivity analysis, with the network renewal rate needed to maintain the targeted NRW performance (to sustain the gains in performance) (i.e. the inverse NRW Reduction Target Driven Approach). 18. The consultants will carry out a site due diligence on the project and related sites, with a view to identifying any impediments to project implementation and advising on how such impediments should be addressed, covering, inter alia: - Land requirements and availability - Title, rights of way, easements, encumbrances - Access - Resettlement - Land acquisition process and costing - Utilities 19. The consultants will conclude on the preferred structure of the Project from a Technical and Project Finance point of view. - This may include exploring the feasibility of clustering into regional projects to lower transaction costs and reach economies of scale. With regard to access to finance, donors, governments and private financiers may indeed be reluctant to provide funding for small entities. Clustering may make the transaction more attractive to (international) operators and investors. Clustering of e.g. well performing and less successful utilities will prevent cherry picking by private operators. - This may also include exploring the need for unbundling catchment & production from distribution (bulk supply from retail supply). The development of such schemes and the inter-connection of different supplies are recognized to offer greater resilience to climate variability. Inter-connection also helps to maintain supplies in the event of a breakdown of 5

6 one element of a supply system. Finally, the bulk water tariff is a powerful instrument to reduce NRW in retail supply. Task 2: Environmental and Social Safeguards Sustainability & Disaster Risk Assessment 20. The consultants will identify, assess and quantify the specific environmental and social risks and impacts associated with the proposed Project in Murang a. It will ensure all environmental and social aspects of the Project comply with Kenyan laws and regulations as well as international development partner s directives. 21. Specific tasks entail, but are not limited to: - Prepare/review and/or update, as necessary, the Environmental and Social Risk Assessment and Analysis. The consultants will ensure that all aspects related to social safeguards have been considered, and necessary mitigation measures have been taken, adequate for purposes of securing approvals in accordance with the existing legislation. - Examine underlying geological features, particularly the permeability of soil, aesthetic appearance including topography and landscape - Conduct a climate and disaster risk vulnerability assessment, identifying potential threats and risks due to climate and geo-hazard situations/conditions in the covered/service areas. - As applicable, perform site selection and assessment, from a geological, ecological and population point of view, addressing all environmental issues associated with its construction. - Take into account any Resettlement actions and prepare a detailed Resettlement and Rehabilitation Action Plans for the proposed new site, if any. - Identify key risk areas and threats to the existing or new network; identify technical, administrative, institutional, infrastructure, and social/environmental mitigating measures and recommendations for integration into the over-all project design, financial and implementation proposal. - Conduct gender analysis and identification of gender issues and gender gaps that the project must address using available legislated guidelines. - Provide capacity building to County and WSP staff i.e. training workshops and seminars on water management, and collaboration workshops with other stakeholders in the sector. - Develop a Preliminary Environmental and Social Impact Assessment (PESIA) report, to be discussed in a stakeholder consultation process, and for purposes of assessing the social and environmental impact of the project. Task 3: PPP Options Analysis, Evaluation and Selection 22. Describe a range of credible alternative PPP options including justification for their selection. Options must include traditional public sector procurement. For each option will be set out: - The key roles and responsibilities of the private sector and of the public sector - The key risk allocation under each option - PPP options to be considered may include an energy performance (sub- or outsource-) contract for implementing energy saving investments 6

7 23. Explore and prepare the base PPP concept and scoping out its design, leading to shortlisting of a limited array of preferred and feasible PPP options. Depending on drivers, what type of PPP or what limited array or shortlist of PPP options can be considered? Roles, responsibilities and risks of public and private partner must be clearly assessed and allocated, and incentives and accountabilities must be internally consistent. Assess government/stakeholders willingness to accept the roles, duties and risks of PPP options under consideration. The consultants will make a recommendation which PPP option in his professional judgment is the most viable and bankable. 24. Risks should be allocated to the party that is most capable of managing such risks. Each PPP option considered will have a different risk profile that will impact its business case: the possibility exists that some higher-risk options may not find bidders, i.e. that they require investors to assume uncontrolled risks greater than the market is likely to bear; or that they may be viable only with socially unacceptable revenue increases. 25. The report shall include a Project Risk Matrix (PRM) 2 that quantifies the risks associated with the recommended PPP configuration, and proposes how the same shall be managed with the funding requirements. A lower risk perception will reduce the price of the project proposed by the private sector and good risk management contributes to making the project more bankable. 26. Two indicators are important in the process of risk assessment: (i) the Likelihood Index (or Probability Factor): the likelihood or probability of the risk occurring, and, (ii) The Severity Index (or Vulnerability Factor): Once the risk is identified, severity is defined as the impact of the risk. With these two indicators, project risks will be classified. The risk analysis should cover valuation (monetized), allocation and mitigation measures. In doing so, assessment and applicability of various risk mitigation mechanisms should be carried out, including review of the extent to which commercial insurance cover can underwrite the risks and the likely cost of such cover. Task 4: Market Sounding 27. To enable the preparation of a responsive Feasibility Study Report, the consultants shall undertake a Market Sounding exercise that shall include the following tasks: - Organize a meeting with The County Government of Murang a officials and other stakeholders to provide an overview of the approach to market sounding; - Prepare a Market Information Brief (Term Sheet) that will include project profile, context, objectives, requirements, preferred PPP option and outline risk allocation, as well as a summary of the key issues to be discussed with and questions to be asked of the market, i.e. equity investors, debt financiers, contractors and operators, the process of how the market sounding will be conducted, the proposed list of parties to be approached 2 Project Risk Matrix (PRM), in accordance with GOK s FCCL Framework for PPP projects 7

8 - Provide private sector feedback on attractiveness, bankability and risk allocation, based on a preliminary market sounding amongst potential operators, developers, investors and financiers - Provide the proposed project profile to and hold one-on-one discussions with identified private parties, either telephonically, or if practical and cost effective, face to face; Assess and foster their interest in doing business in Kenya, and specifically for PPP forms that would involve substantial risk sharing and financial commitment by the private partner. 28. Prepare a Market Sounding Report (which will form an appendix to the Feasibility Study) that will summarize the findings from the exercise and will consist of, but is not limited to, the following information: - Market sounding objective; - Key issues that needed to be considered; - List of companies consulted; - List of questions with answers from the one-on-one sessions; - Summary findings and matters to be considered in the Feasibility Report. 29. Organize and participate in workshops with the County Government of Murang a and other stakeholders to review findings of the market sounding and determine key areas that will need consideration in preparing the Feasibility Report. The conclusions drawn from market sounding shall be taken into account in the preparation of the feasibility report and in designing the PPP transaction structure. Task 5: Financial Viability Assessment of Water Service Provider (WSP): the WSP Financial Model 30. In support to the Technical consultant s team, the task will include an assessment of the financial condition of the WSPs (MUWASCO, NAWASCO and THIWASCO) based on a review of the financial statements, with an emphasis on: - Outstanding debt structure - Revenue sufficiency: operating results and debt service coverage - Financial strength of utility, creditworthiness - Liabilities to other government entities - Dependence on operating transfers from other government entities. - Tariff revenue history, rate setting and adjustment process, major users, and payment delinquencies. - Regulatory issues, and outstanding litigations 31. A WSP financial model will be developed for purposes of (i) projecting financial and operational performance of WSPs (MUWASCO, NAWASCO and THIWASCO), (ii) using the model to develop the cost recovery strategy at WSP level (bulk and retail water tariff), (iii) estimating as precisely as possible the operational deficit to achieve cash flow equilibrium at a given target horizon, and (iv) providing an estimate of the Government financial needed support for operations and future CAPEX as simulated in the Project Financial Model. (Cf. Task 6) 8

9 32. The WSP Financial Model will provide an instrument for evaluating alternatives, including: (a) timing and financing capital investments proposed (through corporate finance or project finance); (b) tariff and connection policies, (c) service levels, and (e) time-bound target operational and commercial efficiency. The financial model will allow for factoring in inflation and currency fluctuations and assumptions should be clearly identified. Task 6: The Project Financial Model 33. A detailed and comprehensive Project Financial Model will be developed and used to compare alternative PPP options, and at optimising the transaction structure from the financial point of view by comparing the performances of various PPP models (with different risk allocation features). Estimating future cash flows of the PPP project company is of critical importance using a financial model as the key instrument; such financial projection will be specific to each PPP option considered, and is therefore meant as an input to the selection of the preferred viable PPP option. 34. The Project Financial Model should be designed to provide for analysis of appropriate project financing constraints including, but not limited to, debt service coverage ratio (DSCR) caps, which optimize scenarios for the disbursement of available projected cash flows to potential project creditors and other ratios. The Financial Model should allow the conduct of sensitivity analysis for the purpose of quantifying the financial impacts of different structuring options. 35. The Project Financial Model will be designed to review and discuss applicable approaches for enhancing the project s attractiveness to both investors and their lenders/financing institutions, such as Viability Gap Funding (VGF) and/or operational subsidies, payment mechanisms, performance guarantees, pre-conditions of a private operator for meeting service obligations, as well as specific default and risk clauses, and step-in rights of lenders and the CA. 36. The Project Financial Model in particular will support the financial due diligence and inform on the following aspects of the PPP transaction: - The financial and economic viability analysis of the project(s) including determination of project and equity IRRs - The determination of: o Project Financing Needs 3 up front and recurring as driven by CAPEX requirements, including a discussion of project costs (direct and indirect) o Project Funding Needs assessment of annual funding requirements to cover O&M, debt service and other recurring costs. 3 Although they are often treated as synonyms, infrastructure funding and infrastructure financing are in fact two separate components of the investment picture. Infrastructure funding refers, broadly, to revenue sources, often collected over a span of many years, which are used to pay the costs of providing infrastructure services. Infrastructure financing, by contrast, turns these revenue sources into capital that can be used today to build or make improvements in infrastructure. Only if a project can demonstrate reasonable predictability in funding sources for both capital expenditures and for operations and maintenance (O&M) can issues such as financing and delivery be tackled successfully. 9

10 o Revenue requirements assessment of revenue requirements to cover the Project s Funding Needs. o Indicative financing structure, combination of sources and their sequencing (commercial debt financing, IFIs concessional financing, bonds, grants, developer equity, blended or hybrid financing, other (specify)). o Revenue Requirements assessment of revenue requirements to cover the Project s funding needs necessary tariff levels required to support various levels of IRR, the potential need for public sector funding support for the Project quantum, form, timing, and delivery. (This financial analysis will contain a rough estimate of level of tariffs and payments from budget that can be obtained (i.e. financial implications for government (including assessment of fiscal impact and contingent liabilities) and a judgment about whether these will be feasible.) o Payment mechanisms o Discussion on all model assumptions made, including inflation rate, discount rate, depreciation o The Affordability of the Project for users and the public sector 37. Based on the risk analysis, and in accordance with GOK s PPP Fiscal Commitment and Contingent Liability (FCCL) Management Framework, the Financial/Economic consultant s will analyze the potential fiscal risk and contingent liabilities of the Project. He will quantify the liabilities associated with the recommended project configuration, and propose how the same shall be managed and the funding requirements. 38. The Financial Model will be used to support the analysis of market potential for private sector investors and lenders, assess the financial risks involved for both the public and the private parties, assess the impact of various project inputs on the earnings and net cash flow potential and compute the refinancing mechanisms of CAPEX. 39. In the implementation phase of the Project, the Financial Model will act as a shadow bid model and assist in evaluating bids and their robustness. Task 7: Economic and Social Cost Benefit Analysis (ECSBA) 40. The ECSBA will comprise both a qualitative and quantitative assessment of the economic and social costs and benefits of the proposed project(s), including a determination of the Economic Internal Rate of Return and the Benefit-Cost Ratio (BCR) for the project(s). Task 8: Value for Money Assessment 41. The Value for Money assessment is expected to examine both the choice between traditional public sector and PPP procurement, as well as alternative risk allocations between the alternative PPP options. 42. The report should present clearly how the Public Sector Comparator Model, the Risk Adjusted Public Sector Comparator Model, the PPP Reference Model and the Risk Adjusted PPP Reference Model have been developed and populated with data. (Templates will be provided) 10

11 Task 9: Legal Due Diligence 43. The Legal Due Diligence will examine the complete applicable legal, regulatory and institutional framework within which the Project will be implemented in order to identify any impediments to Project implementation and advise how any such impediments should be addressed. The legal due diligence will examine also the implications of alternative PPP options under consideration and will identify a legally sound approach for the establishment of the preferred PPP approach. The existing regulatory and institutional framework will be assessed as to its actual effectiveness and as to its ability to accommodate the envisaged PPP option, identifying any deficiencies and cornerstones of the current/future regulatory set up. 44. The consultants will assess current national and county laws, acts, regulations, administrative issuances, policies and institutional arrangements to ascertain first any constraints to Project implementation, and second the validity and viability of the alternative PPP structures for the project, including the County Government of Murang a and WSP s capacity to manage and monitor the implementation of the Project once operational, while identifying the gaps in the legal and regulatory framework as it applies to the management of the project, and recommend required changes to improve the governance, institutional or regulatory regime. 45. The consultants shall formulate appropriate institutional arrangements for the Project(s) taking into consideration the roles and responsibilities of the County, WSP, other Government agencies & entities, private sector, and other stakeholders, including users and public at large. 46. The consultants will assist in resolving legal issues associated with the management of the social, economic and environmental impacts of the project in a manner consistent with the Constitution of Kenya (2010) and other relevant national and county legislation, taking into consideration international best practices. Task 10: Capacity Building 47. The consultant s team shall provide advice on appropriate institutional and organizational framework and capacity building needs for PPP project procurement and contract management including advice on: - Public sector side procurement management and procurement steering arrangements - Resourcing, training and capacity building needs for the public sector side - Operational arrangements between public sector side and advisers during the bidding process - Contract management arrangements - Resourcing, training and capacity building needs for contract management function Task 11: Summary Recommendations, Project Implementation Plan and FS Report 48. The consultants, under leadership of the Lead consultant, will prepare a comprehensive Feasibility Study Report in accordance with the requirements of the PPP Act, and the template provided in Annex 4. This Report will present the analysis carried out, the conclusions reached and the recommendations made concerning the Project Feasibility and the preferred method of procurement including recommended PPP structure, as well as legal, regulatory, institutional, 11

12 financial, economic, funding, tariff structure, environmental, social and risk allocation recommendations necessary for the successful implementation of the Project. 49. The Report will include a complete description of the Project as structured, based on the recommendations contained in the Report, covering: - A summary of how the proposed PPP project addresses the County and WSP strategic objectives and its consistency with the sector s master plans - A summary of the output specifications for the Project - Other potential commercial activities that the PPP Company may undertake to augment revenues and lessen the fees charged to the WSP off-taker - A list of significant Government assets, which will be used for the Project (such as land and existing structures, access roads, etc.) - A summary of the fiscal implications and potential contingent liabilities for the public sector; - A detailed description of the type of PPP project proposed and its envisaged payment mechanism/ tariff regime the consultants will make a recommendation which PPP option in its professional judgment is most viable and bankable - A detailed description of the proposed key risk allocation and mitigation - Draft Heads of Terms which will form the basis for the PPP agreements to be developed in the subsequent Phase i.e. Procurement 50. The Report will also include a detailed Project Implementation Plan which will set out a clear timetable for the Project Implementation and will cover all the tasks required of all parties to procure the Project, identifying: (i) Tasks; (ii) Timing; (iii) Responsibilities for each task; and, (iv) Key approval/ decision points and milestones. Task 12: Support the County Government of Murang a on Securing PPP Committee Approval and All Other Government Approvals 51. The Feasibility Study Report will be submitted in the first instance to the County Government of Murang a and the PPP Unit, and subsequently to the PPP Committee for approval. The consultants shall complete all required documents to be submitted to the PPP Unit and PPP Committee, and assist the County Government of Murang a address all PPP Unit concerns until the approval is accorded by the PPP Committee and other concerned parties. 52. The consultants will also provide assistance in securing approval of the estimated Fiscal Commitments and Contingent Liability (FCCL) funding by the Public Debt Management Office (PDMO) including preparation of documentation required under the FCCL Framework for PPP projects in Kenya. And if necessary, they shall assist the County Government of Murang a in obtaining PPP Committee approval for public sector support to the Project (financial, guarantee, legal etc.) as recommended by the Feasibility Study. INSTITUTIONAL ARRANGEMENTS AND COUNTERPART ASSISTANCE 53. The advisory team shall work closely with the County Government of Murang a and the WSP team and other government agencies as may be required during the assignment. A 12

13 Project Appraisal Team (PAT), composed of representatives from the County Government, the WSP and the PPP Unit, will be established to review and assess the acceptability of Project deliverables. 54. The County shall: (i) provide the consultants with all available pertinent data and previous studies, if any, useful to the Project; and (ii) liaise with other agencies to ensure that the consultant has access to all information required as may be allowed under Kenyan laws. 55. The consultants will: (i) be responsible for providing all necessary facilities and logistical support for its staff, including office space, vehicles, miscellaneous transportation, office equipment (computers, printers, telephone, and internet services), survey and investigation equipment, communications, utilities, office supplies and other miscellaneous costs for carrying out the services as per the requirements of the TOR; and, (ii) provide all the administrative, technical professional, and support staff needed to carry out their services including market/demand survey teams, social surveys teams, etc. as deemed necessary. DURATION OF THE ASSIGNMENT 56. Considering that many activities will be undertaken concurrently, it is estimated that the above services would require a period of approx. 14 weeks from the date of commencement of the services until end of the assignment. 57. Bidders are expected to provide a comprehensive and detailed Project Implementation Plan, preferably using MS Project, or equivalent software, indicating all the key tasks, deliverables, milestones, responsibilities, timetables and critical path for successful project implementation, capturing as a bare minimum the following tasks. This detailed plan will be discussed and agreed with Murang a County, WSP and PPPU before market engagement. DELIVERABLES OF THE ASSIGNMENT 58. The general deliverables of the project are as represented in the table below. The consultants shall submit an Inception Report including an updated detailed work plan for project implementation, covering tasks and responsibilities of all parties involved not just the consultant s personnel. No. Deliverable 13 Due Date, to be completed by Bidders (After contract signing) 1. Inception Report 2 weeks 2. Feasibility Study Report including PPP Implementation Plan 13 weeks 3. FS Study findings approvals and close out Report 14 weeks 59. Every week thereafter, and as needed, the consultants will hold progress meetings with the County Government of Murang a, the WSP and PPP Unit to discuss any key constraints

14 encountered, work planned for the subsequent period, inputs and support needed from the County and other parties and will update the work plan accordingly. 60. The consultants, in close coordination with the County Government of Murang a and the WSP, shall conduct quality reviews to obtain feedback on all draft versions of deliverables as appropriate. The consultants shall make presentations to the Murang a County and PPP Unit on each deliverable, with the team s key experts present. 61. All reports shall be submitted to the County Government of Murang a, the WSP and the PPP Unit in electronic format as MS Word document (latest version) and printed in the relevant number of copies. Models and workflow, process and data diagrams shall be submitted electronically in their appropriate dynamic application files. 62. The deliverables shall include: - Six (6) electronic and hard copies, in MS Word format, of the Feasibility Report; - Two (2) electronic copies, in MS Excel format of the financial analysis/financial model in traceable formula format; - The Preliminary Environmental and Social Impact Assessment (PESIA) report in electronic & hard copies (Ms word file); - Location map (with electronic copy); - Other documents that may be required by the PPP Unit REMUNERATION SCHEDULE AND DISBURSEMENT ARRANGEMENTS 63. The Consultants will be paid on a lump sum basis in USD based on the below remuneration schedule. Bidders must keep these in mind in writing their proposals and submit in the formats prescribed in this RFP. 20% of the Amount upon delivery of the inception report; 60% of the Amount upon delivery of the draft feasibility study and presentation of the findings and recommendations to the County, the WSP and the PPP Unit; and 20% of the Amount upon acceptance of the final feasibility study by the County Government, the WSP and approval by the PPP Committee. EXPERT SKILLS AND EXPERIENCE 64. The skills and experience required for the Financial Expert as a minimum are as follows: - A university degree in Finance; Business; Economics; Management; or any related filed, with a relevant post graduate qualification. - A minimum of 15 years demonstrated professional experience in PPPs and project finance with a proven track record in financial evaluation and financial modelling of PPP projects including value for money, PSC analysis, affordability and fiscal impact assessment. - Demonstrated experience in dealing with project finance structures and products and experience in financially closing of PPP projects. 14

15 - Knowledge of the Kenyan water sector and experience in financial structuring of water projects in the country. - Good English communication and writing skills, especially in report writing, are essential. 65. The skills and experience required for the Technical/Sector Expert as a minimum are as follows: - A university degree in Engineering, Finance, Management, Economics, or any other relevant field. - A minimum of 10 years demonstrated experience in providing PPP transaction advisory services/development of infrastructure projects on PPP basis including extensive experience in project structuring and risk analysis, allocation and management; project agreements. - Relevant qualifications and experience in water infrastructure development, operation & maintenance projects in general, and in developing countries in particular. - Good English communication and writing skills, especially in report writing, are essential 66. The skills and experience required for the Legal Expert as a minimum are as follows: - A university degree in law. - A minimum of 10 years demonstrated international and regional experience in PPPs and related legal and contractual matters, and policy and institutional assessments. - Demonstrated professional experience and knowledge of the legal (commercial and contract law), regulatory and institutional framework for PPPs in Kenya. - Good English communication and writing skills, especially in report writing, are essential. 67. The skills and experience required for the Environmental/Social Expert as a minimum are as follows: - A university degree in social or environmental sciences, development studies or other related field. - A minimum of 10 years demonstrated experience in the assessment of social and environmental impact assessment and mitigation measures, and gender analysis in Kenya - Experience in the application of development partnerships in Environmental and Social Management Framework on Safeguards Policy Statement (involuntary resettlement safeguards, indigenous peoples safeguards, Physical Cultural Resources, etc.) in implementing PPP projects will be an additional merit. - Good English communication and writing skills, especially in report writing, are essential. 15

16 Annex 1: Background of PPPs in Kenya Established initially under the Public Procurement and Disposal (Public Private Partnership) Regulations, 2009, the Kenyan government has in the recent past been committed to improving and strengthening the PPP framework for private sector participation in the country. Several accomplishments are notable: a) The adoption of a PPP Policy in 2011 to articulate the government's commitment to PPPs and to provide a basis for the enactment of a PPP Law; b) The enactment of the PPP Act on 8 th February 2013; c) The gazettement of the National PPP Regulations on 19 th December 2014; d) The development of draft PPP Regulations for the County Governments; and e) The development of a PPP Manual is at an advanced stage To support the delivery of the country s PPP agenda, a number of institutions have been created under the PPP Act of They include: i. PPP Committee; ii. PPP Petition Committee; iii. PPP Unit; and iv. PPP Nodes within the Ministries, Government Agencies and County Governments PPP Committee The PPP Committee, assisted by its Secretariat (PPPU) has the responsibility to: Develop and implement PPP policy initiatives; Champion the PPP Agenda; Ensure compliance with the PPP Act 2013; Approve/recommend PPP projects to the Cabinet; Ensure efficient execution of the PPP Agreements; Ensure PPPs are consistent with national priorities; Authorize allocations of the Project Facilitation Fund; and Issue PPP standards, guidelines & procedures, & bid documents PPP Petition Committee The PPP Petition Committee, established under section 67 of the PPP Act 2013, is set up as a tribunal to adjudicate on all petitions and complaints submitted by a private party during the process of tendering and entering into a PPP project agreement. To effectively discharge its mandate to function as a dispute settlement body, the day-to-day administrative aspects of the Petition are administrated through a Secretariat PPP Unit The PPP Unit, as the resource center for best practice and guardian of the integrity of the PPP 16

17 process, has a large role to play in identifying problems, and making recommendations to the PPP Committee regarding potential solutions. In addition, it is the specific responsibility of the PPP Unit to assist each Contracting Authority to identify, select, appraise, approve, negotiate and monitor PPP projects throughout their life cycle. Moreover, the PPP Unit is also tasked to improve capacity and skills in the public sector and to manage PPP projects more effectively Contracting Authorities The PPP Act of 2013 recognizes Contracting Authorities (CA) as Ministries/Government Departments, County Governments and Statutory Corporations. Their main responsibilities with respect to PPP are to identify, develop, implement and monitor projects. To discharge their responsibilities, procuring entities are required to conduct feasibility studies, prepare bidding documents and seek necessary approvals. Each CA undertaking a PPP project is required to establish a PPP Node, staffed with officers with the ability to carry out day-to-day management of a PPP project (section 16 and 17 of the PPP Act, 2013). Given that Contracting Authorities do not have in-house expertise on PPP, they may have to appoint Transaction Advisors (TA) to assist them in the development of projects Scope and Application of the PPP Program The scope of the Government s PPP program is the creation of new infrastructure, and the expansion & refurbishment of existing assets such as: Roads and bridges; Ports; Airports; Railways; Power generation plants and transmission/distribution networks; Oil and gas i.e. petroleum infrastructure, such as storage depots and distribution pipelines etc.; Inland container depots and logistics hubs; Municipal services; Mining; Water supply, treatment and distribution systems; Solid waste management; Social infrastructure for health care, prisons, education; Telecoms/ICT 17

18 Annex 2: Background Murang a County Murang a County is located in the Central Region of Kenya and constitutes 7 constituencies (Kangemi, Mathioya, Kiharu, Kigumo, Maragwa, Kandara and Gatanga). Situated at an altitude of 914m above sea level in the East and 3,353m above sea level along the slopes of the Aberdare Mountains in the West, Murang a County is approximately 85kms North East of Nairobi. Covering a total area of 2,558.8 Km², the County has a population of 936,228 persons consisting of 451,751 males and 484,477 females (2009 Population and Housing Census). This population is projected to rise to 947,530 in 2012; 958,969 in 2015 and 966,672 persons in Figure 1: Map of Murang a County Before 1974, water was managed by the Department of Water Development (DWD) which was housed in various ministries including Public Works, Natural Resources and Agriculture. In 1974 the Government upgraded the DWD in Ministry of Agriculture s into a full Ministry of Water. The Ministry developed a National Water Policy, which was adopted by Parliament as Sessional Paper No 1 of 1999 in April, The National Water Policy on Water Resources Management and Development provides the policy direction. The Policy moved the Ministry away from direct service provision to regulatory and coordination functions. To implement the Policy, Water Act, Cap 372 was repealed and the Water Act, 2002 was enacted. 18

19 During 2004 to 2005, new institutions were established and given legal mandates according to the Act (see figure 2). These institutions include the: Sector regulator WASREB; Eight (8) Water Services Boards (WSBs); Water Services Trust Fund (WSTF); Water Resources Management Authority (WRMA); and the Water Service Providers (WSPs). The Water Act, 2002 defines Water Service Providers (WSPs) to include companies, NGOs, community groups and person(s) who must be formally registered under the Societies Act. WSPs act as agents of Water Service Boards (WSBs). The main role of WSPs is to: provide water and sanitation services; billing and revenue collection; and develop, rehabilitate and maintain water and sanitation facilities of the WSB in their area of jurisdiction. The Murang a Water and Sanitation Company Ltd (MUWASCO) is a Water Service Provider (WSP) within Murang a County. Figure 2: Institutional Framework under Water Act, 2002 Article 43 of the Constitution of Kenya, 2010 entrenches water as a constitutional right by establishing a right to reasonable standards of sanitation and clean and safe water in adequate quantities. Further, the 4 th Schedule of the Constitution (functions of the national and the county governments) devolves water and sanitation services to the County Governments. In 2012, the Ministry of Environment, Water and Natural Resources prepared the draft Water Bill 2012 to be in line with Constitution of Kenya, The draft Bill seeks to provide for water management and development for water and sewerage services and repeal of the Water Act Currently, the Bill is under debate in parliament. 19

20 Annex 3: PPP Project Proposal 20

21 Annex 4: Feasibility Report Template Minimum Parameters to be covered in the Feasibility Study Report The Advisory team shall ensure that the Feasibility Study Report shall, as a minimum, conform to the following outline: INTRODUCTION Project Background: Rationale and Genesis Project Objectives Approach and Methodology of the Feasibility Study NEEDS ANALYSIS Project s Conformance to Sector Diagnostics and Master Plans Demand Forecasting and User Projections Institutional Settings Scope of the Project TECHNICAL AND COMMERCIAL SOLUTION OPTIONS ANALYSIS This section needs to describe: Alternative Technical Solutions, which have been considered to achieve the Project Objectives. Alternative Technical Solutions may be alternative engineering options The evaluation of the Alternative Technical Solutions. This section needs to describe the technical, economic, financial, legal, social, environmental and other criteria, which have been used to evaluate the alternative options, and to present the results of the evaluation, including an Economic Cost-Benefit Analysis. It is expected that the evaluation be carried out on the basis of high level capex and operating cost estimates Recommended Technical Solution. The Recommended Technical Solution should be described in more detail and an Outline Design provided. The description should include: o Proposed Output Specifications o Estimated CAPEX and OPEX Costs PROJECT DUE DILIGENCE The Study is expected to include a detailed Project Due Diligence on the basis of the Recommended Technical Solution covering the following: Legal Aspects o Use and User Rights o Relevant Financial Laws and Regulations o Relevant Environmental and Heritage Laws, if applicable 21