Lynton presentation 14 june

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Lynton presentation 14 june

  1. 1. <ul><li>Bank Financing for PDAMs </li></ul>
  2. 2. <ul><li>Background </li></ul><ul><li>PDAMs have grown to more than 350 </li></ul><ul><li>1997 Asian financial crisis- conditions detiorated </li></ul><ul><li>By 2007 38% were rated less healthy and 37% unhealthy </li></ul><ul><li>Current PDAM expenditure levels insufficient to maintain existing infrastructure or increase distribution networks or improve water quality </li></ul><ul><li>Millenium Development Goal – 10 million new household connections by 2013 </li></ul>
  3. 3. <ul><li>Objectives </li></ul><ul><li>Develop full cost recovery tariff structures for participating PDAMs </li></ul><ul><li>Develop bankable 5 year Business Plans </li></ul><ul><li>Develop good corporate governance regimes in participating PDAMs </li></ul><ul><li>Assist participating PDAMs access commercial borrowings to accelerate infrastructure provision </li></ul><ul><li>Develop guidance materials to assist/facilitate PDAM commercial borrowings </li></ul>
  4. 4. <ul><li>PDAM selection </li></ul><ul><li>Local Government commitment to reform including full cost recovery tariff adoption </li></ul><ul><li>Surplus plant capacity </li></ul><ul><li>Access to raw water </li></ul><ul><li>No debt or membership of the debt-restructuring program </li></ul><ul><li>Rated unhealthy by DGCK </li></ul><ul><li>Approved by DGCK following presentation and interview </li></ul>
  5. 5. <ul><li>Perpres 29/2010 </li></ul><ul><li>Acknowledges water as a basic need and must be available in sufficient quantities, equitably and be of good quality </li></ul><ul><li>In order to achieve the Millenium Development Goals, new revenue streams need to be available to PDAMs through investment loans from national banks </li></ul><ul><li>Perpres 29/2009 provides: </li></ul><ul><ul><li>Loan guarantees 70% - 40% national, 30% local government </li></ul></ul><ul><ul><li>Banks provide up to 30% unsecured but cashflow control </li></ul></ul><ul><ul><li>Loan interest subsidy of up to 500 basis points for up to 20 years </li></ul></ul>
  6. 6. <ul><li>Perpres 29/2009 </li></ul><ul><li>To qualify PDAMs must have no outstanding debt to the Central Government or will obliged to enter the restruction program and obtain Minister of Finance approval </li></ul><ul><li>Open a bank account with an approved bank </li></ul><ul><li>Have proposed investment projects approved by the Minister fro Public Works </li></ul><ul><li>Be rated by BPKP as healthy and have higher than full cost recovery tariffs during the guarantee period </li></ul><ul><li>Be monitored by the Coordination Team – CMEA, MoF, MPW, MoHA, Bappenas and BPKP </li></ul>
  7. 7. <ul><li>Key problems/constraints </li></ul><ul><li>Tariffs not set by PDAMs but by local governments hence political constraints </li></ul><ul><li>Forced to deal with less healthy PDAMs which increased the scope and complexity of the task </li></ul><ul><li>Lack of consistent commitment by stakeholders </li></ul><ul><li>Poor socialisation of Perpres 29/2009 principles and procedures among national banks and PDAMs </li></ul><ul><li>Lack of capacity at many PDAMs to successfully undertake reform initiatives </li></ul>
  8. 8. <ul><li>Lessons learned and successes/failures </li></ul><ul><li>More care needs to be taken in PDAM selection </li></ul><ul><ul><li>Initial time was too short </li></ul></ul><ul><ul><li>Evaluations were too simple, some PDAMs not suitable </li></ul></ul><ul><li>Stakeholder support is critical to successful implementation </li></ul><ul><li>Beware the political pendulum – full recovery tariffs are not universally accepted </li></ul><ul><li>Coordination of stakeholders including national banks requires constant vigilance </li></ul><ul><li>MoF approval processes need to be reformed </li></ul>
  9. 9. <ul><li>Lessons learned and successes/failures </li></ul><ul><li>3 PDAMs completed which will result in 80,000 new household connections and improved PDAM cash flows </li></ul><ul><li>Another 5 to be completed by 30 June 2011 which will result in approximately 150,000 new household connections </li></ul><ul><li>National bank accepted business plan and good governance regime templates completed as well as “Best Practice” guidance manuals for PDAMs </li></ul><ul><li>Additional technical and environmental consulting assistance is required by many PDAMs </li></ul>
  10. 10. <ul><li>Key challenges/opportunities </li></ul><ul><li>The program needs to be able to re-focus on healthy PDAMs which will require less work to get them across the line and therefore increase new connections at a faster rate. </li></ul><ul><li>MoF approval processes need urgent review. </li></ul><ul><li>Need to improve national banks’ understanding of Perpres 29/2009 and the lending opportunities it presents </li></ul><ul><li>Templates and training materials need to be constantly updated to reflect current and best practice </li></ul>

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