31/01/15Safe drinking Water 

Water PPPs show steady growth

More than 1 billion people, 1 in 7 of the world population, now benefit from water/wastewater services delivered by Private Water Operators

Regular growth of water PPPs
Public authorities and municipalities are continuously engaging private operators to help deliver sustainable water and wastewater services to their citizens. Private operators have been responding with innovative solutions and new service models. Looking back on the last 12 months, AquaFed observes a dynamic environment for private operators worldwide.
“Members tell me that their businesses are expanding to meet growing demand”
Mamadou Dia – President of AquaFed
 
Throughout 2014, and from all around the world, we received regular reports of positive contractual developments between public authorities and private operators. Private Water Operators are increasingly recognized as instruments to implement public water policies, to deliver drinking water and sanitation to meet local needs and to fulfill the human rights requirements. As a result the number of projects, the range of options they propose and the population they serve all continue to grow steadily.

AquaFed staff have witnessed this in field trips to all continents. In the wastewater and water services sectors, our members and colleagues continue to develop tailor-made solutions for their public authority clients. Our members report that confidence levels are up and as a result, in many countries, private operators are responding to increased demands, building upon their ability to develop tailor-made, flexible and time-bound solutions to a wide range of needs.
Since 2013, the number of people served by the private sector has passed the 1 Billion mark (David Lloyd Owen – GWI – “One Billion People Can’t Be Wrong, - url). In 2014, this number has continued to grow. 

The drivers of this growth
The explanations given by GWI are threefold: a) public budget constraints, requiring cost savings, alternative financing and risk management requirements; b) growing (urban) populations and increasing demand for more complex and sustainable water and sanitation services and c) the innovative technology and knowledge transfer (capacity building) on offer to clients during their contracts.
C. Gasson - GWI adds further explanations in his December 11, 2014 article (source): he identifies new possibilities in business models which deliver private sector expertise to the public sector, while taking account of political sensitivities. He also points to the private sector’s better track record in managing risks, avoiding cost over-runs and better procurement processes. He observes that management contracts and performance-related contracts are increasingly being used for the reduction of un-accounted-for water; energy consumption management and smart metering. The presence of a private operator leads to investment decisions being based on performance, rather than on political decisions. 
The Reason Foundation, a think tank in the USA, released two articles on the vibrant US market (url 1; url 2) highlighting a renewed appetite for PPPs in America.
Institutional recognition
In addition to these developments in the field, the institutional recognition of the value of PPPs has also grown. Work at the UN has qualified PPPs as “[…] a tool for achieving sustainable development. […] PPPs already are improving accessibility of essential services to the socially and economically vulnerable in society and the private sector, along with the public sector, has a strong social ethos to ensure that these projects are beneficial to citizens.” (url). 

In the framework of the development of the Sustainable Development Goals, PPPs are identified as valuable tools at the disposal of responsible public authorities, should they choose to use them. The Rio+20 conference of 2012 confirmed this principle and in the coming months, governments will negotiate and agree on a new post-2015 framework for Sustainable Development that includes a major role for the private sector as a solid partner for communities and governments.
Recent institutional reports and activities, including from the OECD, UNIDO, UNECE and the US House of Representatives, increasingly and underscore the beneficial contributions of PPP contracts to the development of sustainable water infrastructure, and thus the positive contribution to human well-being, poverty alleviation and the realization of the human right to water. 

A 2014 US Congress report Breaking Down Barriers to Consideration: states: “The federal government can do more to ensure that our Nation’s most pressing infrastructure needs are addressed through projects that expend taxpayer dollars more effectively. P3s, when carried out through well-designed contracts that ensure appropriate risk transfer and public benefit, may be an effective approach for certain types of projects. The Panel recommends several changes to federal programs to ensure fair consideration of P3 projects, where appropriate, and that the federal oversight processes take the realities of P3 procurements into account.”: The report finds that PPPs (for both Operation and Maintenance as well as capital planning) can accelerate project delivery; bring clarity in charging the costs leading to better (and more timely) maintenance; lead to more objectivity in the setting of water rates and address the issues of long-term financial stability and viability of these infrastructure investments by “de-politicizing” the decision-making process.

In October 2014, the United Nations Economic Commission for Europe (UNECE) together with the World Bank, the European Bank for Reconstruction and Development and the Islamic Development Bank, hosted an international conference on “Public–Private Partnerships in the water and sanitation sector: an exchange of experiences between Europe, Central Asia, the Middle East and North Africa”. An important conclusion of this meeting is: (url:) “In that respect, PPPs are a tool that can be used to reach the emerging Sustainable Development Goal on water and achieve the human right to water and sanitation.”
Another conclusion was the recommendation to launch an “International PPP Centre of Excellence on Water and Sanitation” (url): The UNECE will also continue to develop international standards for the development of PPPs, and start compiling verifiable information on PPPs. This shows that there is a clear appetite for PPPs and for understanding them in an unbiased way.

The importance of well-run public water and sanitation services is becoming better recognised. Exploring all available options, there is renewed interest in the many ways that private water operators can work with public authorities to provide, extend or improve these essential services, make them more efficient and responsive to users needs. The operators for their part are responding by developing new techniques and new models that are adapted to current situations.

 

Further Reading

  • US House of Representatives: Committee on Transportation and Infrastructure – Panel on Public-Private Partnerships – 2014 - Report on PPPs “Balancing the needs of the public and private sectors to finance the nation’s infrastructure" (url)
  • Global Water Intelligence - http://www.globalwaterintel.com/project-trackers/ 
  • Reason foundation’s report on the US market - (url 1; url 2
  • UNIDO review of PPPs (2014) - (pdf)
  • UNECE Water PPP Specialist Centre is being set up (url
  • PPIAF - (url
  • OECD Water Governance initiative: meeting report (pdf)
  • Global Water Intelligence: 2014-12-24 – “Private Sector Participation in Water: Opportunities for Investment and Expertise” (url
  • Waterlex: 2014-11: some advice on integrating the Right to Water into PPP agreements - (French pdf)

 

March 14th 2015

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    Attached Ressources

    Publications
    • 28/06/16 | Brochure on the Performance of Private Water Operators (EN)