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The Ppp Transaction Structure/finance Option In Water Service Delivery In Developing Countries.

Congress: 2015
Author(s): Adedayo Mark-Adeyemi (Abakaliki, Nigeria)

Keyword(s): Sub-theme 5: Financing, investment and pricing schemes,
In developing nations, personal income is low, resulting to low GDP and taxes. Government revenue falls short of demand for infrastructure and transfers are dwindling. This leaves Tariffs. But low collection cannot sustain utilities. Repayable loans and PPP models are considered appropriate in this wise but the PPP operator need to be able to charge fair tariff. Water supply is not a straight process of transfer of risk to the private operator, revenue, demand and political issues, lead to cautious, risk shy private sector Nevertheless, the gap in water infrastructure finance makes the role of the private sector inevitable hence a hybrid transactions structures that delicately allocates risks and responsibilities, combines various financial options for specific projects and countries.Material and Methods

The Desk Study approach was adopted, websites were scanned, utility annual reports and old training materials perused and a comparative analysis was conducted. Old perception and willingness to pay studies were reviewed. The first hypothesis was to prove that there are gaps in finance. Secondly, that people are not paying for water as they are able and willing to do and as they pay for other utilities. Thirdly, that tariff will sustain the utilities under a hybrid PPP arrangement

Result and Discussion
Situation Analysis

Table 1.1 A Comparison between per capital investment in Water in Europe and Africa

Willingness and Ability to Pay

Comparison of expenditure on water with other utilities in Nigeria household expenditure on table water, telephone, alternative power supply, other avoidable indulgences.

Note: In Nigeria, school children own mobile phones, even blackberries, but they default to pay water bills in their home. Minimum charge against minimum pay. At N500/month with minimum pay at N15,000/month water bill is 3.5% of the monthly family minimum pay. *Nigerian Communication Commission says Average Revenue Per User is N1,011

The Public-Private Sector Partnership Imperative

PPP Structure and Risk AllocationThe principle is increasing risk transfer to the PPP as the year runs by. But at the initial stage revenue and demand risk should be shared between government and consumers by a balance of tariff and subsidies including length of concession. Government should bear all sovereign and currency risk, while operator should bear all project management related risk.

Funding gaps are apparent but recent investment by local investors in the energy sector and the estimated N1.6billion daily turnover on consumption of sachet water in Nigeria shows that the private capital to bridge funding gap is available locally. Study also shows willingness and ability to pay so tariff could sustain water supply. Wide stakeholder engagement is required, African countries have to confront this issue head-on. The political will is important. Government should provide the enabling environment and guarantees to give the private investor a soft landing. "Cherry picking" cities and communities with business case is also advised 1. Ability and willingness to pay studies Stoveland Study Lagos State Water and Sanitation Willingness to pay study
2. Divine Marketing Study Cross River State Water Board 2010
3. Lagos Water Corporation (2010), Annual Report 2010
4. National Water and Sewerage Company, Kampala, Uganda (2009): Annual Report 2008/2009
5. OBM Water Stakeholder Perception Study Lagos Water Corporation (2005)
6. Ogun State Water Corporation (2009) Annual Report 2009
7. SUWASA Ebonyi Stakeholder Perception Study on Water Supply in Abakaliki
8. Taijo Wonukabe Study Ogun State Water Corporation 2000
9. Thames Water (2010), UK Annual Report 2010
10 The Institute for Public-Private Partnerships, Inc. (IP3) Advance Project Finance and Tariff Rate Setting Course Material

2011 IWRA - International Water Resources Association - - Admin