Public Eye on Davos 2004
Speech by Andrej Delchev (25.02.04)
Sofia Water and Wastewater Concession Project
Speech by Andrej Delchev, Eurolex Bulgaria LTD
International conference "The Public Eye on Davos", 22 January 2004
The project:
Project awards:
Project Realization Structure
Project Development Phases
Why concession:
Tariffs:
Sofia Water Projects -Achievements:
Would the same advice be given again?
International conference "The Public Eye on Davos", 22 January 2004
The project:
 | Form of PSP: Full transfer of investment/Operational/ Customers to a Concession company, owned in 75% by private partner/ 25% Sofia Municipally |
| | Pillars of Concession Structure: Full responsibilities transfer to the Private operator based on fixed levels of services (increasing in time), mandatory to be achieved with penalty sanctioning; Tariffs are calculated based on offered tariffs through a fixed indexation formula, recognizing unforeseeable events; Indexation requires Grantor's approval for accuracy; |
| | Term: 25 Years concession project |
| | Funds for Investment: Fully Concessionaire's responsibility |
| | "Best International PPP Project" at the Public Private Finance Awards 2001 organized by PFI Report |
| | "Project of the Year Eastern Europe" (Privatisation International, Jan 2001) |
| | "Water Project of the Year Central and Eastern Europe" (Global Finance, Jan 2001) |
| | "Consultancy Firm of the Year", (British Board of Consultants, Nov. 2000) - joint award to advisory team |
| | EBRD Support - financing the advisor services; post award financing only if Concessionaire asks; |
| | International Advisor chosen through international tender; |
| | Eurolex - Project manager on behalf of the Municipality (interacting with the Consultant; controlling his activities for quality; participating in developing processing; presenting issues to the Grantor and advising on positions; making decision making on the municipality's side efficient and informed) |
| | Decision Making - Sofia Municipality; |
| | Option for PSP Studying and recommendations; |
| | Choice of PSP form by Grantor; |
| | Option realization - two round international tender; |
| | Award and Effectiveness; |
| | The only suitable legal/commercial form of solving the problems with the participation of the private sector; |
| | Large technical improvements need/ inability of the Municipality to finance such improvements; |
| | Proper allocation of roles of stakeholders - municipality monitoring; commercial entity operating; |
| | Define technical and customer oriented levels of services at the level where they need to be and monitor strictly meeting of such levels; |
| | Do not become involved in inputs (how targets are met) - as long as targets are met at the set price then your goal is achieved; |
| | Meeting targets at a set and controlled price - as good as it can get with regard to legally placing incentives on efficiency; |
| | Public interest is not "low tariffs" - it is "just" tariffs which pay for the right service; |
| | Social programs should be done by the public state and municipal officials addressing the needs of the public and not damaging the public provider; |
| | Monitoring and Control of tariff formulation mechanisms |
| | At concession award to Sofia prices were the third cheapest and are still the third cheapest; |
| | Contractual processes and mechanisms guarantee for predictability and transparency; |
| | The Big Issue - matching expectations with reality (in PSP the public always expects the magic stick; changes take time and effort) |
| | Objective review would show - new infrastructure has been built/ technologies have been massively improved/ response times to leaks and emergency works completion times improved/ customer centres - 3 before concession, 15 now; immensely more information on the system including hydraulic modelling; |
| | Tariffs - tariffs development exactly per contract; |
| | Are there problems - YES! Because of public attention problems are a lot more transparently discussed; |
| | The option of concession with a proper structure is the most appropriate legal and commercial structure for attracting private capital and operational skills in to Water and Wastewater Services; |
| | It is preferable to public sector operations; |
| | Detailed concession design is a prerequisite of a successful project emphasis to be put on monitoring concessionaire activities and improved communications with the public. |
