A successful pioneering PPP amidst difficult times. New Cairo WWTP Public-Private Partnership (Egypt) II International Conference. Governance among partners in Public Private Partnerships 17 de Noviembre, 2016. Barcelona @FCCAqualia
FCC. Citizen Services Leading company with a business model based on business lines with huge long-term growth potential Turnover of 6,334 billion and EBITDA of 814 million in 2015 3 main Business Areas Business portfolio of 32,500 billion 1 Spanish leader in Environmental Services and Construction Workforce of over 55,000 employees Operating in more than 25 countries (47% of revenue comes from international markets) 2
Aqualia today. Main magnitudes 13.5 M. INVOICES ISSUED END USER PER YEAR 2,570 DRINKING WATER TANKS 1,100 TOWNS 23,620,000 INHAB. POPULATION SERVED (GWI) 17 SPORT FACILITIES 618,463,970m 3 /year OF WATER SUPPLIED 70,577 km OF NETWORKS MANAGED 1.100,00 825,00 Turnover 712 790 845 872 868 845 901 946 954 1.033 246 WWTPs 445 DWTPs 33 SWDPs 550,00 275,00 269 298 349 384 426 461 570 5 ACCREDITED LABORATORIES ISO -17025 7,639 EMPLOYEES 92 106 0,00 3
Aqualia. Main Business Areas INTEGRAL MANAGEMENT OF PUBLIC SERVICES O&M SERVICES AND TECHNICAL SERVICE DESIGN, CONSTRUCTION AND FINANCE OF HYDRAULIC INFRASTRUCTURES 4
New Cairo Project Basic Data Basic Project Information Title DBOFT of New Cairo Wastewater Treatment Plant (250.000 m 3 /d) Location Cairo, Egypt Type PPP (Public-Private Partnership) Client Sponsors/Bidders New Urban Communities Authority, NUCA (Ministry of Housing, Utilities and Urban Development ) JV: (50% Aqualia New Europe 50% Orascom) Terms of Transaction 20 years (2 years Construction + 18 years Operation) Payment Guarantee Sovereign Guarantee by the government Payment Term Investment & Finance Take or Pay Fixed payment + Variable Payment $140 MM ($103MM Project Finance without recourse + $40 MM Equity) (Banks: NSCB, CIB, AAIB, AUB) Bid Submission March-2009 Successful Bidder May-2009 Contract Signature June-2009 Financial Closure February- 2010 Start of Operation October-2013 Contract Expiry June-2029 5
The Competition 6
The New Cairo PPP Scheme
The Main General Challenges 8
The Specific Project Risks Source: New Cairo WWTP (Egypt). Case Study (PPP for Cities) 9
The Specific Project Risks Land and space (Public): NUCA handled this process without significant problems. Design and Construction (Private): No major issues with deadlines or budget (turnkey). Risk transfer back-to-back by SPV to EPC Contractor. Financing (Orasqualia): $103 MM Project Finance closed in 7 months with 4 banks Inflation (Shared): Only Fixed & Variable Operating Charge annual indexation Interest rates (Orasqualia): Project debt indexed every three years to 3-year certificate of deposits by 3 banks and certificated by the Central Bank of Egypt. 10
The Specific Project Risks Forex (Orasqualia): NUCA handled this process without significant problems. 15-11-2016 (15,54 EGP/$) 2-11-2016 (ECB floats the pound) (8,87 EGP/$) Bid Submission (5,64 EGP/$) 3-14-2016 (ECB depreciates pound) (8,94 EGP/$) 11
The Specific Project Risks Creditworthiness (Public): MoF to pay in case of NUCA s default. O&M (Private): The SPV assumes the risk. Energy Cost (Public): Pass-through from SPV to NUCA. Demand (Public): Transferred to NUCA through fixed part of the tariff. Performance (Shared): NUCA designs the KPIs and the SPV has to deliver. 12
The Specific Project Risks Political (Public): Major events happened and NUCA respected the PPP Agreement at all times. January 25th, 2011 July 3rd, 2013 13
Direct Agreement Agreement between Lenders & NUCA & SPV & MoF: MoF to pay in case of NUCA s default: Compensation (Force Majeure, NUCA or SPV Default, NUCA s unilateral early termination : To be paid directly to the Security Agent (CIB) STC (> 30days): To be paid to the SPV Binding until full debt repayment NUCA to pay all the proceedings (including STC) into a pledged account 14
PPP Agreement Main Terms (I) Tariff:. Terms: STC = CC + FC +VC STC (EGP/quarter): Sewage Treatment Charge CC (EGP/waurter): Capacity Charge (CAPEX + Debt service + Insurances + ROE) FC (EGP/quarter): Fixed operating Charge (fixed O&M costs) VC (EGP/quarter): Variable operating Charge (variable O&M costs) (*) Energy Cost -> Pass-through. Indexation: 15
PPP Agreement Main Terms (II) Construction Approvals: Orasqualia s responsibility. SPV Shareholders Stability: Shares tranfer lock-up period for 6 months. After that, prior approval from NUCA required. Site: Handled over by NUCA. After PPP Agreeement signing, no responsibility. EPC and O&M: Turnkey + Inflation/Debt Interest rate indexed tariff Insurance and Performance Securities: Insurance (EPC): Third parties risk (amount TBD by SPV) and Civil Liability Insurance (O&M): To cover partial or total destruction or damages (amount reviewed by Independent Financial Expert) and Third parties & Civil liability (amount TBD by SPV) Performance Security (EPC): 5% x CC (18 years) Performance Security (O&M): 5% x (FC + VC 250.000 m3/d ) 5 years 16
PPP Agreement Main Terms (III) Water and Sludge Quality: Established Influent and Effluent characteristics (KPIs) Default: Standard Provisions (non-payments by NUCA, non performing WWTP,.). Change in law: Compensation for Losses (determined by Partnership Comittee). Force Majeure: Standard provision (< 180 days -> 100% CC payment). Contract Re-equilibrium: Based on ROE Bid. Partnership Committee to resolve disputes. It can be requested by both Parties: SPV: Inffluent Quality&Volume, Change in Law, Int l STDs Change -> MAC (NUCA to approve) NUCA: Change in Law or Int l STDs Change resulting in ROE Real > ROE Bid Dispute settlement: Partnership Committee -> Chairmen -> Arbitration (Cairo / UNCITRAL). 3 arbitrators (NUCA + SPV + Joint Decision/ GM Cairo Regional Centre for International Commercial Arbitration) Independent Experts: See below. Others: Step in, Changes, Ammendments, 17
(Usual) Project Finance Pros & Cons Pros Non-recourse finance Longer debt maturities Lower interest rates than corporate debt Shareholders equity structure optimization (Frequently) For lenders, interesting lower risk projects (infrastructure projects) Cons High structuring costs Complex, long and expensive Due Dilligence process Complex financing strucure 18
Governance NUCA: Part of the Ministry of Housing, Utilities and Urban Development SPV (Orasqualia): ANE (50%) Orascom (50%). ANE (Aqualia 50% & EBRD 50%) PPP Central Unit: Without executive powers. Part of the MoF. Policy communication, delivery of initial projects, practice developing. Committees: Partnership Committee: 10 members (5 Different Public Authority Representatives+ 5 Orasqualia) Performance Monitoring Committee: 3 members (1 NUCA + 1 Orasqualia + 1 Expert) 19
Contribution to Sustainable Developement Goals Source: New Cairo WWTP (Egypt). Case Study (PPP for Cities) 20
Project Impacts Administration: People: Institutional strenghtening (PPPs) Risk transfer Public budget pressure reduction Know-how transfer (management, technology, design, operations, etc) Foreign direct investment promotion Additional services without additional tax pressure Increased availability of fresh water Positive health impact Employment: 1.500 direct jobs & 150 indirect local jobs (2-year Construction period) + 58 local jobs (O&M period) Environment: Reduction of pollutants discharged into the Nile river(-94 tons BOD 5 /day, - 105 tons TSS/day, - 135 tons COD 5 /day) Fresh water consumption reduction 21
Awards and Others Water Deal of the Year : Global Water Intelligence (2010) First PPP successful transaction in Egypt, opening a new source of long term finance of infrastructure projects, including local lenders. The sponsors overcome the lack of local PPP references and established a solid precedent for the local and international participation in future projects in Egypt. With a PPP Law stillto be approved, the lenders gave a vote of confidence to the Egypt Government and its infrastructure strategy PPP African Deal of the Year: Euromoney (2010) Emerging Partnerships Bronze Award (Middle East &North Africa): IFC(2013) Case Study: PPP for Cities. November 2016. 22
Rafael Pérez Feito International Operations Director Aqualia Email: rperezf@fcc.es November 17 th, 2016. Barcelona