Sofia 2014 national conference

1. Teodor Popa and Cristina Nedelcu
Romanian Water Association
25 November, Sofia, Bulgaria
National Conference "Challenges in the Execution of Projects within the Operational Programme Environment 2007 - 2013" and "Rural Development Programme"
The Romanian Experience in Execution of Environmental Projects with European Funding
THIRD PANEL: Challenges in Designing and Supervision

2. Content
introduction
how the EU programme is going
what are the challenges faced by WSS operators and what are the benefits
how the operators covers the co-financing part
do private operators have access to the program
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia

3. Teodor Popa
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia
Experience in the water sector since 1991
Involved in int’l financed programs since 1994
Financial Manager since 2001
Involved in Romanian Water Association
Member of Strategic Council of IWA

4. Romania water key figures
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia
Population: approx. 21 mil.
Service coverage: 57% water, 44% sewerage
Invoiced water quantity: 542 million m3
Number of employees: 30,000
Operating revenues: 700 million Euro
EBITDA: 160 million Euro
Indebtedness of the sector: 700 million Euro

5. Specific consumption (l/cap/day)
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia
100
200

6. Regulator
IDA
Operator
Water sector institutional key players
Gov
IFI
EU
Local Authority 2
Local Authority …
Local Authority 1

7. (ROC)
LOCAL COUNCILS
Intercomunal
Development
Association
(IDA)
Regional Operating Company
Delegation (Concession) Contract
CUSTOMERS
Performances monitoring
Water Services
Mandate
Statutory Company’s Act
SHAREHOLDERS
100% public (PPP possible later)
Regionalization process

8. Content
introduction
how the EU programme is going
what are the challenges faced by WSS operators and what are the benefits
how the operators covers the co-financing part
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia

9. EU contribution 2007- 2014
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia
18 074
21 231
24 808
24 092
24 060
23 939
8 364
16 027
18 564
20 365
21 569
21 788
1 368
2 328
3 571
6 250
7 039
8 193
0
5 000
10 000
15 000
20 000
25 000
30 000
2007-2010
2011
2012
2013
31.05.2014
15.10.2014
MILIOANE LEI
SOP Environment
proiectelor depuse
proiectelor contractate
plăţilor efectuate către beneficiari
DIRECŢIA AUTORIZARE ŞI PLĂŢI Ministerul Mediului şi Schimbărilor Climatice Autoritatea de Management pentru Programul Operaţional Sectorial “Mediu”

10. Payments done against financing contract
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
Axa prioritară 1
Axa prioritară 1A
Axa prioritară 2
Axa prioritară 3
Axa prioritară 4
Axa prioritară 5
Axa prioritară 6
14 222
157
4 097
762
773
1 404
374
5 130
0
1 081
306
278
201
43
5 974
1
1 236
330
320
261
72
Valoare contract de finanţare
Plăţi 31.05.14
(prefinanţare+rambursare)
Plăţi 15.10.14
(prefinanţare+rambursare)
DIRECŢIA AUTORIZARE ŞI PLĂŢI
Ministerul Mediului şi Schimbărilor Climatice
Autoritatea de Management pentru
Programul Operaţional Sectorial “Mediu”

11. EU Funds Absorption
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia
0,27%
1,08%
1,93%
10,53%
23,84%
40,19%
0,00%
5,00%
10,00%
15,00%
20,00%
25,00%
30,00%
35,00%
40,00%
45,00%
2008
2009
2010
2011
2012
2013
2014
2015
2009
12
2010
48
2011
85
2012
465
2013
1,052
2014 (octombrie)
1,773
SOP Environment payments (mil Euro)
DIRECŢIA AUTORIZARE ŞI PLĂŢI
Ministerul Mediului şi Schimbărilor Climatice
Autoritatea de Management pentru
Programul Operaţional Sectorial “Mediu”

12. Risks
Out of 46 projects Axis 1 Water:
20 risk of non-completion in 2015: 460 mil. ROL should be financed by Water Companies (Finance Contract)
11 major risk of non-completion: 1 bil. ROL moved in 2014- 2020
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia
At the end of 2015  81% (estimate)

13. Content
introduction
how the EU programme is going
what are the challenges faced by WSS operators and what are the benefits
how the operators covers the co-financing part
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia

14. Challenges in preparation
Slow preparation:
Institutional: corporatization, Intercommunal Development Association, Delegation Contract
Low quality technical documentation: insufficient data from geo and topo studies.
Slow (bureaucratic) procurement process (6- 18 months): complex and unclear legislation, lower price criteria, low qualification requirements criteria, (too) many of complains and weak co- ordination between the procurement bodies
Results: financial correction 5- 25%
Solutions
Standard legal documents prepared by the Government and RWA
Standard tender documents
Legislation adjustment (not complete yet)
The Court
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia

15. Challenges in implementation
Difficulties in obtaining and maintaining the (costly) construction permits
Relocations of works and private lands
Inability to adjust the project and to manage Variation Orders: procurement legislation barrier, blocking the 10% of contingencies
Low rate of connection to the new networks
Solutions
Legal initiatives concerning: taxes for water infrastructure, private land, about using contingencies and contracting the supplementary works
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia

16. Challenges in implementation
Weak contractors: no sufficient technical and financial capacity, insolvency and bankruptcy
Low guaranties/ insurance
Some financing and fiscal difficulties
Excessive and multiple control (with divergent opinions)
Low quality project management
Avoiding (fear) of taking decision
Solutions
Legal initiatives concerning the qualifications criteria
Legal changes of the VAT regime
COURAGE and PROFESSIONALISM
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia

17. Eppur si muove Gallileo Galilei

18. Benefits
Consolidation
Regionalization (when is smart done): using better the infrastructure and companies’ resources, defeating the water consumption/ revenue decreasing
Corporatization: introducing business management techniques by: utilities’ bylaws, Delegation contract, Project Support Agreement, Loan Agreement, Financing Contract
Financial soundness: clear tariffs policy and using MRD Reserve/ Fund
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia

19. Content
introduction
how the EU programme is going
what are the challenges faced by WSS operators and what are the benefits
how the operators covers the co-financing part
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia

20. Co-financing
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia
Operators= Final Beneficiaries
Co-financing
approx. 10% of total value
Loan from IFI (EBRD, EIB) without guarantee
Loan from commercial banks

21. Tariff policy
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia
Strategies were related to the investment projects
Tariff increases in real terms considering the affordability criteria:
-2000: 4.0% for the average household
-2003-2004: 3.5% for the average household
-2007-2011: 2.0-2.5% for the average household (4% for the lowest decile)

22. Tariff approval process
Water Co. propose
Regulator
check
Local Auth.
approve
Shareholders= Local Auth.
Government
CUSTOMERS
Water Act
Delegation Contract
Loan/ Financing Agreement
Support Agreement

23. Tariffs
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia
0,00
200,00
400,00
600,00
800,00
1000,00
1200,00
1400,00
1600,00
Denmark
Belgium
England & Wales
Finland
Switzerland
Austria
France
Mexico
Norway
Netherlands
Canada
Cyprus
Sweden
Poland
Israel
Hungary
Portugal
Spain
United States of America
Romania
Japan
Bulgaria
Italy
Hong Kong, China
South Korea
Mauritius
Macao, China
Chinese Taiwan
Iran
Average annual water cycle charges in 2013 for a consumption of 200 m³*
in US$/200 m³
Fixed charge
Variable charge
Other charges drinking water
Sewerage and waste water charge
Other charges
VAT

24. The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Hungary
Norway
Denmark
Sweden
Finland
Romania
Bulgaria
Israel
Spain
Italy
Austria
France
Iran
Belgium
Japan
Portugal
Chinese Taiwan
Switzerland
Netherlands
Cyprus
Canada
England & Wales
Mexico
United States of America
Poland
China
South Korea
Hong Kong, China
Macao, China
VAT percentage on the total charge for 100 m³
VAT
Total Charge 100 m³

25. Earn Before Income Taxation and Depreciation
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia

26. Maintenance Reserve
for Development
Royalty for the public
patrimony
Tax Dividends
Long term debts
City w& ww system
(delegation
contract)
Gross profit
Cash inflow
Cash outflow
Maintenance Reserve for Development mechanism

27. Conclusions/ Needs
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia
Leadership: less bureaucracy and courage to take decisions
Tackle the challenges as soon as they appear
Harmonize the legislation
Co-ordinate actions and the investments (do not promote projects in an unfair competition)
More management, less (hyper)controlling
Correctness
Never give up

28. Thank you ! Благодарᴙ за вниманиеᴛo!
The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia
Teodor Popa
Financial Manager
Compania Apa Brasov
DoruPopa@apabrasov.ro
Cristina Nedelcu
Head of Int’l Investment Department
Compania de Apa Buzau
Cristina.Nedelcu@cabuzau.ro