Opportunities and challenges from the emergence of new ... · new private operators in developing...
Transcript of Opportunities and challenges from the emergence of new ... · new private operators in developing...
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Opportunities and challenges from the emergence of new private operators in developing countries
Philippe MarinSenior Water & Sanitation Specialist
Energy and Water Department, The World Bank
OECD Global Forum on Sustainable DevelopmentParis - November 29-30, 2006
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The growing presence of “new” operators: examples of recent/current transactions
Some recently short-listed tenders:
West Manila concession: ∼ Manila Water, plus 3 others Filipinos teaming
with Hong Kong, Malaysian, Singapore
Argentina - Catamarca concession (renewal):
∼ Spanish FCC
∼ LatinAguas (Salta, Rioja, Corrientes), Roggio(Córdoba), Sielecki (Formosa),
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The growing presence of “new” operators: examples of recent/current transactions (2)
In Sub-Saharan Africa:∼ Cameroon: Veolia, SAUR & ONEP (Morocco)∼ Ghana: won by consortia Vitens (NL) + Rand
Water (South Africa)
Algeria (management contracts, 3 cities)∼ Veolia, Saur, Suez∼ Acea & Amga (Italy), Gelsenwasser (Germany)
Peru: Tumbes concession won by LatinAguas
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Water PPPs: the end of the Oligopoly
During 1990-97, five operators concentrated 53% of projects awarded ∼ Suez, Veolia, Thames, Agbar, Saur
2002-2005: their share dropped to 23% of projects awarded
New players come from two origins:
∼ Other water utilities from Western Europe
∼ New entrants from developing countries
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Water PPPs:the new Supply Side of the business
Large international
operators
New foreign operators
small/informal local operators
New national operators
New entrants
Session 3
New countries New line
of business
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New players from developed countries
Already established water utilities from W. Europe, private or publicly owned:∼ Germany (e.g. Gelsenwasser), Italy (e.g. Acea,
Amga), Netherland (e.g Vitens), Portugal (Aguas de Portugal), Sweden (e.g. Stockholm)
Typically little interest in private investment
Issue: which contracts/countries do they target?
Management Contracts, leases/affermages, or new innovative approaches (twinning)?
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New operators from developing countries: coming from a wide diversity of backgrounds
Diversification of industrial conglomerates: access to finance, credibility and political connections
Vertical integration by companies involved in water sector through construction (can be large firms), manufacturing or consulting/engineering
Takeover from foreign operators (Latin America)
Well performing public utilities going regional: ONEP, Rand Water, Singapore, now São Paulo…
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Number of water PPP project: the growing share of developing countries sponsors
Water projects with private participation in developing countries by main sponsor type
0
5
10
15
20
25
30
35
40
45
1990 1995 2000 2001 2002 2003 2004
Developed country sponsor Developing country sponsor
Projects
Source: The World Bank and PPIAF, PPI Project database.
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Water utilities: developing countries sponsors are the driving force since 2002
Water utilities with private participation in developing countries by main sponsor type
0
5
10
15
20
25
30
35
1990 1995 2000 2001 2002 2003 2004 2005
Developed country sponsors Developing country sponsors
Source: The World Bank and PPIAF, PPI Project database.
Projects
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Present mainly in 3 regions: Latin America, East Asia and Eastern Europe
2001-05
0%
10%
20%
30%
40%
50%
60%
70%
East Asia andPacific
Europe and CentralAsia
Latin America andthe Caribbean
2001-05
Share of developing countries sponsors in number or projects, by regions
44%
28 %
66 %
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Rate of non-active projects by sponsor’s origin: developing vs. developed country
Share in water utilities with private participation in developing countries by sponsor type and project status, 1990-2005*
No active projects by 2005 (5%)
Active projects by 2005 (38%)
Active projects by 2005 (45%)
No active projects by 2005 (12%)
Main sponsor from a high income country
Main sponsor from a low or middle income country
Total = 222 projectsSource: The World Bank and PPIAF, PPI Project database.
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Comparing the rate of non-active projects: the gap increases with age of projects
Water utilities with private participation in developing countries by sponsor type, status, and period of financial closure
0
10
20
30
40
50
60
70
1990-95 1996-2000 2001-2003 2004-05 1990-95 1996-2000 2001-2003 2004-05
Active projects by 2005 No active by 2005 (a)
Projects with developing country firm as main sponsor
Projects with developed country firm as main sponsor
Projects
23%
17%
8%36%
25%
10%
0% 0%
Source: The World Bank and PPIAF, PPI Project database.
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What do these new national operators bring?
Their experience of doing business in the country∼ Knowledge of political environment (volatile)
∼ Adapting to customers needs & social conditions
… and potentially: money for investment ! ∼ Cash and access to local financial market∼ Interest in local currency exposure∼ Long term view (portfolio approach)
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What about previous sector expertise?...
Some had experience in running other utility services (Russia)
Many are coming already from the water sector:
∼ Civil works and engineering
But they typically started with no previous experience in operating water systems!
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What are the minimum requirements to become a water utility operator?
The “dogma”: you need to be already an operator
Why? “An essential service, public health…”∼ Same excuse used by many countries to deny
entry to foreign operators…!
What happens in other sectors?∼ E.g. food industry (highly regulated)
We already have a monopoly in the market, we do not need on top of that an oligopoly for the market…
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How the new entrants acquired expertise?
By doing… and often through partnerships with international operators
∼ Argentina (exit of foreign partner)∼ Joint ventures: China, Philippines, Malaysia
By buying existing companies (Chile)
Hiring water experts: ∼ Colombia ∼ (…what international operators typically do…)
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How do they actually perform?
Rate of non-active project less than half the one for foreign operators (5% vs.12%)
Philippines: Manila water∼ Major success in coverage expansion for the
poor (more than double number of connections)Argentina: ∼ Weathering the economic crisis
Colombia, China, Malaysia…
Evidence so far is hardly unfavorable…
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Opportunities from these new entrants:they are many and obvious…
Limited “supply side” has been a major bottleneck so far for water PPPs in developing countries
More competition is great news:∼ More pressure on cost efficiency∼ Working in difficult countries (Africa)
Large potential with new national/local operators:∼ Private financing in local currency∼ Sustainability over long term
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Challenges for Governments and IFIs: adjusting to a new “supply side” paradigm
Project design: understand these new players
∼ Risks & responsibilities they are willing to take
∼ Contract types and targets countries
How to support the growth of national operators?∼ Pre-qualification criteria (Colombia)
∼ Foster partnerships with foreign operators Session 4
next
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We need to listen and learn from these new players
5 short presentations by:∼ Ranhill (Malaysia)∼ Manila Water (Philippines)∼ ONEP (Morocco)∼ Eurasian Water Partnership EWP (Russia)∼ Beijing Capital (China)
What they currently do, what kind of deals they are looking for, how they learned the business
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Thank you !