A Comparison of Turnkey and Co-Management Performance- Based Non-Revenue Water Reduction Contracts. Paul Fanner

Transcription

1 A Comparison of Turnkey and Co-Management Performance- Based Non-Revenue Water Reduction Contracts Paul Fanner

2 Introduction Performance-Based Contracts (PBCs) increasingly promoted to achieve rapid Non-Revenue Water (NRW) reductions Key funding agency concerns Sustainability utility capacity building in NRW management Value for money Effectiveness Comparison of 2 very different types of PBC for NRW reduction New Providence Full turnkey project Kingston & St. Andrews Co-management project

3 Jamaica Bahamas

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5 Project Overview 10 years project Reduce NRW to 2.5 MIGD (11.36 Mld) by end of year 5 Increase average system pressures to 25 psi (1.72 bar) Reduce NRW to 2 MIGD (9.09 Mld) by end of year 7 Maintain at 2 MIGD (9.09 Mld) until the end of the project Large component of Performance Based compensation The project is designed to repay itself within its lifespan, with an expected double digit project IRR for WSC Over 10 Billion imperial gallons (45.46 billion Ml) of water will be saved Project size: USD83 Million (USD51M financed by the IDB) Detailed training / shadowing during final 2 years of project

6 Situation in New Providence up to 2012: Over 90% of the water came from expensive desalination and once it got into the water supply system - 58% was getting lost (6.87 MIGD, 31Mld) Average price to consumers in New Providence: $12.1 per 1,000 gallons ($2.7 per m 3 )! (compared to $1.5 per 1,000 gallons ($0.3 per m 3 ) in the U.S) For almost three decades WSC was coping with increasing levels of water losses WSC realized that a long term comprehensive approach should be taken

7 Project outline Baseline Survey Data gathering, economical analysis, testing and surveys Water Balance & NRW reduction Strategy Plan Strategy and action plan with respect to: Leak detection and repair DMA & Pressure Management Infrastructure replacement Commercial losses (Illegal connections, Meters) NRW management software (NETBASE)

8 Baseline Water Balance Study Phase 2012 NRW 6.87 MIGD - Significantly higher than the 5 MIGD of the RFP average system pressure also higher 25.1 psi N 1 (pressure/leakage exponent) 0.9 NRW Reduction Strategy Development Least cost NRW reduction strategy developed to meet targets Primary focus real loss reduction (92% of NRW!) Apparent losses also addressed

9 MIGD 13 New Providence NRW Reduction Project Annual Average Target Updated targets agreed with WSC Water Supplied Revenue Water NRW

10 IDB Report (January 2018) Technical Note No. IDB-TN Case Study of Project The NRW reduction in the period from mid 2013 to mid 2015 was so large as to be off the charts Operating Cost Recovery rose substantially and the EBITDA loss was cut by more than 50%, as was the Government Operating Subsidy These are massive improvements in a short period of time, and can be attributed to the strong skills and previous Bahamas experience of the Miya field team, their good collaboration with WSC and the persistent efforts of the WSC General Manager, who has championed NRW reduction for many years A detailed financial analysis, presented here, shows the project will pay for itself within the time frame of the PBC. The same analysis shows that the significant financial and operation benefits of rapid NRW reduction pay for themselves, when compared with a conventional NRW project even at lower overall cost

11 USD thousand WSC expected financial benefit analysis 15,000 End of rehabilitation period Graph End of maintenance period 10,000 5, Total incremental income Total incremental expense

12 Project is Delivering! Exceeding performance targets Recovered from dangerous situation due to intermittent supply operation 2013 Pressure management savings reduced WSC pleased with progress Now have few breaks to repair! Remote control of pressures Improved customer service Improved infrastructure WSC now using the improved materials SCADA / Netbase

13 Project Area Kingston and St. Andrew

14 Primary Objective Project Objectives To establish within the National Water Commission (NWC) Jamaica a sustainable non-revenue water management capability to deliver the long-term NRW targets and objectives of the NWC. Secondary Objectives a) Reduce NRW within the KSA from the start date of the contract to 30% by the end of year 5. b) Maximize the income collected by the NWC, and to which it is entitled. c) Prepare and implement Strategies and Actions Plans that will ensure the improved performance and efficiency of the NWC.

15 Contract Covers all of Kingston and St. Andrew parishes Includes Socially Challenging Areas ( Red Areas ) Term 5 years, with gradual transfer of management from the Consultant to the Utility staff over the 5 years. But Consultant remains fully responsible for achievement of performance targets. Value - $42.5m (funding by the Inter American Development Bank) Co-management team Miya 28 staff NWC 148 staff

16 Characteristics of Project Area Area 155 km 2 Elevations from sea level to 525 m above sea level High pressures over 140 m head in certain parts, low in other parts - 5 M Population 588,300 11,790 households in Socially Challenging Areas Plus informal settlements 107,000 active accounts Sources 2 surface water, 9 wellfields, plus 1 import 25 inputs metered, 40 unmetered - produce around 200 Mld Network 1,584 km 44 storage tanks, 27 pumping stations

17 Why Co-management? History of failure to maintain NRW after contractor leaves Inadequate involvement of NWC staff Inadequate capacity building with past approaches Better knowledge transfer Take advantage of contractor s experience on wider spectrum of water issues Non Obligation of contractors (generally) going forward after contract period ends Possible replication to other parishes Easier sell to external Stakeholders 17

18 Challenges of Co-Management - Utility Staff Public sector job for life mentality No incentive to work efficiently Incentive schemes problematic Impossible to fire, complicated to remove from project or discipline Not used to supervision and quality control Strong job demarcation supported by strong unions Very little control makes planning problematic Average team availability only 70%

19 Challenges of Co-Management - Materials, Vehicles, Plant, Equipment Very slow, bureaucratic procurement processes Vehicles Past end of life Frequent breakdowns / Non-availability No spare vehicles Plant availability Equipment / tools availability / reliability High failure rate due to poor care, operation and maintenance of equipment / tools by operatives Productivity much lower than private sector repairs a day v 4-5 in private sector

20 Co-Management Knowledge Transfer Even though utility staff are working in project team Knowledge transfer is not automatic Still require Extensive training Key role shadowing Development of detailed Standard Operating Procedures (SOPs) Very similar to the training components of a turnkey project

21 Challenging Project KSA Project Summary Fixed NRW reduction targets, tight timescale, (very) limited budget Many difficulties: In addition to the co-management challenges Very poor GIS and lack of network knowledge Very poor customer cadastral Socially Challenging Areas A lot of effort needed to achieve less in longer time Better sustainability questionable

22 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 NRW liter per connection per day per meter pressure (w.s.p.) NRW liter per cconnection per day (w.s.p.) 45 NRW Performance Indicators (12-month rolling average) 1, , , , NRW Target l/conn./d (w.s.p.) NRW l/conn./d (w.s.p.) per m pressure NRW l/conn./d (w.s.p.)

23 Conclusions Turn-key NRW PBC much more efficient, easier to implement rapidly and likely to be more effective Sustainability is problematic for both contract types Co-management PBC can be cheaper if water utility has a lot of excess staff which can be seconded to the project, but project likely to be less effective Experienced NRW reduction contractor essential for either type of contract to be successful Good co-operation and support from utility senior management also essential for either type of contract

24 Questions?