Water Management Financing in the Caribbean - Part 4

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Part 4 of the presentation entitled "Water Management Financing in the Caribbean."

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Water Management Financing in the Caribbean - Part 4

  1. 1. <ul><li>MINERAL HEIGHTS </li></ul><ul><li>SHREWSBURY </li></ul><ul><li>LONGVILLE </li></ul><ul><li>BAY FARM VILLA </li></ul><ul><li>DE LA VEGA CITY </li></ul>CReW PROGRAMME - WASTEWATER TREATMENT PLANTS <ul><li>LLANDILO </li></ul><ul><li>ELLESTON FLATS </li></ul><ul><li>HUGHENDEN </li></ul><ul><li>ARCADIA </li></ul><ul><ul><li>HUGHENDEN </li></ul></ul><ul><li>GREATER PORTMORE </li></ul><ul><li>BLACKWOOD GARDENS </li></ul><ul><li>BOSCOBEL </li></ul><ul><li>SPRINGFIELD/ RED HILLS PEN </li></ul>PHASE No.1 - Fourteen Pilot WWTPs Fourteen (14) WWTP
  2. 2. FINANCE STRUCTURE <ul><li>GEF/CReW make available Grant of US$3.0M. </li></ul><ul><li>NWC secures US$10.0M Loan from Commercial Bank </li></ul><ul><li>NWC pledges portion of projected revenue stream (K- Factor) </li></ul><ul><li>CReW offer US$3.0M ‘Grant’ as a Guarantee to banks to offset any shortfall in revenue stream. </li></ul><ul><li>Projected annual revenue stream greater than Debt Service obligation. </li></ul><ul><li>K - Factor will service Debt /Loan Repayment </li></ul>
  3. 3. FINANCE STRUCTURE <ul><li>CReW </li></ul><ul><li>Facility </li></ul><ul><li>US$3.0M </li></ul>LENDER Local Finance Institution- LFI NWC Water/Wastewater Service Provider/ Borrower Sewerage Collection/ Treatment Loan US$10.0M Debt Service with K- Factor Guarantee Lender Borrower Project /Users IADB /GEF Inter American Development Bank
  4. 4. Chester Engineers/NWC: T.A. Project Agreement - signed May 2011. Report being reviewed by NWC - Report Completed CReW / NWC - IMPLEMENTATION SCHEDULE IDB/NWC Grant Agreement: signed July 26, 2011- Completed USTDA/NWC Grant Agreement Aug.2010- Completed Invitation of RFPs - Capital Financing - October 2011 Invitation - RFPs Design/Build WWTP 14 WWTPs - Oct 2011 Rehabilitation of 14 No. WWTPs - 2012 - 2014 Engagement of Consulting Engineer : Baseline Study
  5. 5. <ul><li>K- FACTOR PRGRAMME </li></ul>
  6. 6. ‘ K- FACTOR’ - FINANCE MODEL <ul><li>2008 April - OUR Determination Notice </li></ul><ul><li>- Tariff Regime in place for 5 Years (2013) </li></ul><ul><li>- To increase certainty in loan financing </li></ul><ul><li>negotiation </li></ul><ul><li>Tariff - Special Provision deemed K- Factor </li></ul><ul><li>- K- Factor schedule : 2008 - 2021 </li></ul><ul><li>- 44 No. WWTP Rehabilitation (Immediate) </li></ul><ul><li>- Extension of sewerage network in KSA. </li></ul><ul><li>- NRW Works - Mains Replacement etc. </li></ul><ul><li>K- Factor is calculated on all Customer bills - (Loan from Customer) </li></ul>
  7. 7. ‘ K- FACTOR’ - FINANCE MODEL <ul><li>X- Factor deducted from Bill after application of normal rates. (Repayment/Credit Customer A/C) </li></ul><ul><li>K - Factor & X - Factor will continue across tariff regimes to ensure fund availability to service loans </li></ul><ul><li>K-Factor </li></ul><ul><li>- ‘ Not for Additional Revenue/Benefit’ to NWC </li></ul><ul><li>- To improve the financial position of the NWC </li></ul><ul><li>via ‘EFFICINCY GAINS’ which will be accrued </li></ul><ul><li>via the financing of the selected works </li></ul>
  8. 8. Caribbean Regional Fund for Wastewater Management - CReW <ul><li>K- Factor & X-Factor Schedule </li></ul>Year Ending March 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 K - Factor (%) 5 14 20 23 25 27 27 27 26 26 24 24 23 X-Factor (%) - 5 10 10 12 12 13 15 18 22 22 23 23
  9. 10. Facilities Completed & Work In Progress K-Factor Programe - Wastewater Facilities <ul><li>Cornwall Courts - St. James </li></ul><ul><li>Harbour View - KSA </li></ul><ul><li>Yallahs - St.Thomas </li></ul><ul><li>Negril - Westmoreland </li></ul><ul><li>Barbican Mews - KSA </li></ul><ul><li>Western - KSA </li></ul><ul><li>College Green - KSA </li></ul>St. James Wastewater to flow to Bogue WW TP KSA Wastewater to flow to Soapberry WW TP
  10. 11. ISSUES & LESSONS LEARNT
  11. 12. ISSUES & LESSONS LEARNT <ul><li>Reluctance of Commercial Banks/Bank Policies: </li></ul><ul><li>Restrict Loan Tenure of no more than 7 years, up </li></ul><ul><li>to max. 10 years depending on market conditions. </li></ul><ul><li>Bank Stringent Measures: Project’s Receivables are paid directly to Commercial Bank by the NWC </li></ul><ul><li>( Bank has first call on Contractors’ Receivable) </li></ul><ul><li>3. Commercial Loans – Expensive (Return Greater) </li></ul><ul><li>4. Risk Classification / Risk Profile of the Country </li></ul><ul><li>- MIGA & Co-Face = Insurer’s of the Bank’s Loan </li></ul><ul><li>5. Government relation with IMF & Multi-laterals </li></ul><ul><li>- Fiscal Space/Budgetary Provision has to created prior to accessing the loan for Project </li></ul><ul><li>- “Gateway Relation” impact on the ability of </li></ul><ul><li>GoJ/NWC to secure loan from other Multi-laterals. </li></ul>
  12. 13. <ul><li>6. Project Benefits are not realized immediately </li></ul><ul><li>(Repayment of Loan commences prior to project </li></ul><ul><li>benefits being realized) </li></ul><ul><li>7. Long Lead Time for Project Implementation : </li></ul><ul><li>- Pre-Feasibility , Feasibility ,Negotiation </li></ul><ul><li>- Design, Procurement and Implementation </li></ul><ul><li>8. Multi-Competitive Procurement &Agency Approvals: </li></ul><ul><li>- Pre-qualification & Tendering Process for </li></ul><ul><li>Contractors, Consultants, Supplies etc. </li></ul><ul><li>- Government Agency Approvals NEPA, NWA NLA </li></ul><ul><li>INFLEXIBLE PROJECT DEFINATION: Long time table and project scope and needs may change over the period </li></ul>ISSUES & LESSONS LEARNT
  13. 14. CONCLUSION <ul><li>NWC recognizes that : NO SINGLE or PRECISE or DEFINATIVE APPROACH’ to project financing/development. </li></ul><ul><li>Financing is dependent on the TIMELINESS OR ‘ URGENCY’ of the PROJECT’S BENEFITS/NEEDS and its ‘FINANCIAL’ and ‘ECONOMICAL FEASIBILITY. </li></ul><ul><li>Projects which are ‘deemed’ URGENT and FINANCIALLY FEASIBLE IN THE SHORT TERM ( PROVIDES EARLY REVENUE STREAM) provides prospects for financing via : </li></ul><ul><li>a. Commercial Financing </li></ul><ul><li>b. Partnership with Private Sector - PPP </li></ul><ul><li>(i.e. Commercial and Industrial Development) Spanish Hotel Construction North Coast - Tourism Sector </li></ul>
  14. 15. 2. Projects which are ECONOMICALLY FEASIBLE in the LONG TERM or have benefits accruing to more than direct users ( and are predictive/incremental growth) i.e. Sewage Projects : a. Bi-Lateral & Multi-lateral Funding are perused 3. Projects which are deemed ‘UNECONOMICAL ’ such as small remote, sparsely populated communities and rural districts : a. Grants and Subsidies (GoJ & Development Funding Agencies) b. Rural Water Supply ( RWL) etc. 4. Parish Plans – JM$100.0B / US$1.15B CONCLUSION
  15. 16. THANK YOU !

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