Pioneering Funding Initiatives in Water Sector
By VA Tech WABAG Limited
With a rise in funding options globally, improving outcomes, existing potential as well as reducing costs with the advent in relevant technologies, there is every reason to win the confidence of investors, funding agencies, and proven technology players.
Today, more than 2 billion people lack access to safe drinking water. Demand for water is expected to increase by nearly one-third by 2050 in view of the burgeoning global population. This results in accelerated consumption followed by increasing environmental degradation due to the low percentage of sewage treated and the all-round impact of climate change. In order to manage the challenging demand for our extremely valuable freshwater resources, setting up of sustainable water and wastewater infrastructure coupled with capacity building to manage such infrastructure effectively emerges as a priority in the list of requisites.
Imagine this scenario: A comprehensive water transmission, treatment, distribution model followed by complete wastewater treatment incorporating efficient and modern technologies, resilient green infrastructure, and complete resource recovery with minimum footprint and conformance to global environmental standards. Couple this solution with low life-cycle cost, extremely good cost recovery and returns with maximum project life. Sounds too good to be true? Maybe it isn’t. In fact, the doubt that this may be an overly optimistic context does keep people away from taking advantage of excellent opportunities especially considering the current scenario of the global water industry.
Private financing (through infrastructure bonds) can aid in bridging the demand-supply gap by supporting sustainable infrastructure with long project life. The state of infrastructure in most of the emerging markets globally has been improved with such funding mechanisms. The challenge faced by utilities in terms of operational and financial sustainability can be largely alleviated by the involvement of the private sector. However, financing in the water sector has been hampered by a couple of reasons. First, water as a sector may not be as prominent as the other infrastructure sectors in terms of size and volume. Second, the sector is undergoing a maturity curve to ensure bankable projects with timely execution, sustained performance and good returns backed by guarantees and clear contractual terms for payment and performance. Driven by such concerns of the perceived high risk of long gestation periods and poor cost recovery in water sector; due diligence and subsequent commitment to disbursement is a long drawn process. Water resource management and desired return on investment in the sector stand out as one of the major challenges in the water sector today. The situation is further aggravated by inefficient usage at the consumer end which in turn increases the cost defeating the objective to bridge demand-supply gap. To sum up, the current scenario combines weak performance incentives, low-cost recovery and inadequate funding coupled with lack of capability for proper maintenance, ultimately leading to poor performance of assets and a wastage of financial resources. Water tariffs need to be rationalized and water purchase agreements need to incorporate a take-or-pay clause to ensure that the utilities as well as the investors are protected commercially, be it an annuity model or a revenue generation model.
In order to progress towards the ambitious target of Sustainable Development Goal-6 of United Nations – Clean Water and Sanitation by 2030, we must focus on a comprehensive framework taking into account different stakeholders: For investors, one which comprises an innovative and guaranteed financing model, for utilities, one which augments their vision for sustainable infrastructure and capacity building, for contractors, one which provides weightage for technical expertise, not just commercial competitiveness and enhances their accountability and performance.
One such financing model to benefit the water sector would be funding through the Buyer’s credit mechanism. WABAG pioneered this initiative and availed Buyer’s credit (Commercial Credit) of EXIM Bank of India for a Drinking Water Project in Sri Lanka of value 78 million USD. This project is an ideal combination of competitive financing for an emerging market in need of developing sustainable water infrastructure by partnering with a company with proven technological expertise which helped secure access to safe drinking water for over 5 lakh people in Sri Lanka.
Moving over to the western hemisphere, WABAG also executed a drinking water project in Upper Ruvvu, Tanzania under the line-of-credit from EXIM India. This project has ensured access to drinking water for over 7 lakh people in Tanzania.
In addition to government-funded projects, WABAG has also been championing in projects funded by multilateral and bilateral institutions like World Bank, Asian Development Bank, Japan International Cooperation Agency, and European Union, etc.
• World Bank funded the 60,000 m3/day STP in Valenzuela, Philippines and 100,000 m3/day STP in Illugin, Philippines
• JICA funded 140,000 m3/day STP in Varanasi, India under Ganga Action Plan and 90,000 m3/day STP in Bengaluru, India
• Asian Development Bank (ADB) funded 32,400 m3/day WWTP in Guheswori, Nepal (EUR 20 Million)
• 19,200 m3/day WWTP in Polatli, Turkey funded by European Union
With a rise in funding options globally, improving outcomes, existing potential as well as reducing costs with advent in relevant technologies, there is every reason to win the confidence of investors, funding agencies and proven technology players who want to expand in global emerging markets with a vision to be partners in setting up sustainable infrastructure. As thought leaders, it is incumbent on us to initiate discussions and drive actions at all relevant levels to move towards a more sustainable management of water resources. It is this collective effort from all stakeholders that alone can help realize the 2030 vision of achieving universal and equitable access to safe and affordable drinking water for all coupled with comprehensive wastewater treatment.
Sewage Treatment Plant (STP) Project in Valenzuela, Philippines
The contract value of the order was around EUR 25 million and World Bank funded this project. WABAG designed and built the 60,000 m3/d Valenzuela sewage treatment plant for Maynilad Water Services Inc. using the activated sludge process. The contract also included operation and maintenance of the plant as part of performance proving period of one year.
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Sewage Treatment Plant (STP) Project Under JICA Funded Ganga Action Plan in Varanasi, India
This order had the value of around EUR 30 million for design and construction of 140,000 m3/d Sewage Treatment Plant (STP) at Dinapur, Varanasi including operation and maintenance for 10 years. The scope for WABAG included design, engineering, supply, installation, testing and commissioning of the sewage treatment plant whereas the civil construction is to be carried out by its JV partner.
The order is part of JICA – Funded Ganga Action Plan Project and the implementing agency for this project is Ganga Pollution Prevention Unit of UP Jal Nigam, Varanasi.
WABAG is to employ the activated sludge process with biogas based Power Generation for this project. This process will help the plant to generate power from biogas and the plant would largely be self-sustainable using this “green energy”. This will not only help the project to reduce its operational costs but will also reduce the carbon emissions and thus will qualify for carbon credits.
Guheshwori WWTP Plant Project in Kathmandu, Nepal
This Wastewater Treatment Plant (WWTP) project in Kathmandu, Nepal had the value of Rs. 141 crores (>18 million Euro). The order was funded by the Asian Development Bank (ADB) and included operation & maintenance of the WWTP for a period of 10 years. This was the second order secured by the company from Nepal, the first one being the Melamchi Water Treatment Plant order which was funded by JICA.
The scope of the order included rehabilitation and expansion of wastewater treatment plant at Guheshwori in Nepal. WABAG carried out rehabilitation and expansion of the WWTP while the existing plant was kept operational. The salient feature of the plant included generation of power from biogas produced out of the sludge.
Municipal Wastewater Treatment Plant Project Near Ankara in Turkey
This project for the construction of Polatli Wastewater Treatment Plant and Wastewater Collection Network and Collectors”, had a total value of around EUR 13 million. The plant was co-financed by the European Union and the Republic of Turkey.
The project was related to the building of a new municipal wastewater treatment plant and sewerage network in Polatli, a city with a population of 120,000, which is located in central Anatolia in the vicinity of Ankara, the Turkish capital.
The wastewater treatment plant is equipped with conventional mechanical/biological treatment technology on the basis of the activated sludge process and also incorporated carbon and nitrogen removal. In addition, the plant is operated using aerobic sludge treatment, sludge dewatering, and a biological waste air filter. The facility corresponds with EU regulations regarding environment-friendly wastewater treatment and in particular with the Environmental Impact Assessment Report.
The treatment plant had a capacity of roughly 20,000 m3/d. However, overall plant design and parts of the buildings and electro-mechanical equipment was designed and installed to accommodate a planned subsequent extension to 27,800 m3/d.
WABAG partnered with an experienced, local specialist company ECETAS for the completion of the “collection network and collectors” section of the contract. An optimized process design, the high quality of the quotation and last, but not least, the competitive offer proved convincing for the customer. As a result, during an international tendering process, the WABAG and ECETAS consortium was able to beat off challenges from twelve competitors.
Turkey invested roughly EUR 13 million in the project of which WABAG’s share will amount to some EUR 6 million. The financing was provided by the national government and the EU within the framework of the IPA programme.
About the Contributor
Around the world, the WABAG name stands for innovative and successful solutions in the water engineering sector. As an internationally respected expert group, WABAG is a systems specialist and full service-provider with a focus on the planning, installation, and operation of drinking and wastewater plants for local government and industry in the growth markets of Asia, North Africa, Middle East, the Central and Eastern Europe. The WABAG Group represents a leading multinational player with a workforce of over 1,600 and has companies and offices in more than 20 countries. It disposes of unique technological know-how, based on innovative, patented technologies and long-term experience. Since 1995, WABAG has completed over 900 water and wastewater plants worldwide.