Financial Viability of Water and Wastewater Infrastructure: Using Public-Private Partnerships

摘要

To supplement current and future budget shortfalls for improvements to water and wastewater infrastructure, public-private partnerships (PPPs) are being advocated by the American Society of Civil Engineers (ASCE) and others as a practical mechanism to ensure financial sustainability. A PPP involves a partnership between a government entity and a concessionaire-consisting of one or more private companies acting as a single, private incorporation-who make an agreement on funding, building, and operating a traditionally government-provided service, such as water and wastewater infrastructure. This is different from a traditional contract between a government entity and a contractor because the concessionaire remains responsible for the operation of the project during the entire concession life. A financial model that can be used to input costs and activities for water and wastewater infrastructure projects is described. This model was developed as an adaptation of the financial model for PPP projects included in the Toolkit for PPP in Roads and Highways, developed by the World Bank Group (WBG). The proposed financial model can be used by practitioners, government agencies, and decision makers to estimate key financial indicators that are essential to assess the feasibility of private investors' involvement in a water and wastewater project. The input for the software consists of key parameters that can be easily changed (e.g., construction, operation, and maintenance costs, equity and subsidies, inflation and interest rates, tax rates, concession life, and estimated rate of water consumption and wastewater discharge). The output of the software is project financial indicators (e.g., project internal rate of return (IRR), return on equity (ROE), annual debt service cover ratio (ADSCR)) and the contribution amount from the public sector, if required to keep water consumption or wastewater discharge fees at affordable levels. A case study is presented to show under which conditions projects can be financially successful as a PPP. For example, increasing the public agency's investment subsidies enables the decrease of the wastewater discharge fee and the increase of ROE, making a PPP wastewater treatment project more attractive to consumers and private investors.