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MediterraneanRegionalTechnicalMeeting

Dealingwithwaterscarcitythroughdesalination,non-revenuewater

reductionandPPPs

SummaryReport

CenterforMediterraneanIntegration,VillaValmer,Marseille,December12-142016

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Agendaataglance

Monday,December12

9:00-11:00 Welcomeandregistration

11:00-12:00 Settingthestage–dealingwithwaterscarcityintheMediterranean

12:00–13:00 Lunch

13:00–17:45 Thematicpresentations:DealingwithwaterscarcitythroughPPPsfordesalinationandnon-revenuewaterreduction

Tuesday,December13

9:00–11:00 CaseStudies:DealingwithwaterscarcityinMediterraneanIslands

11:00–12:00 CaseStudies:TheIntegratedUrbanWaterManagementApproach

12:00–13:00 CaseStudies:Involvingtheprivatesectortoreduceunaccountedforwater

13:00–14:00 Lunch

14:00–17:30 CaseStudies:Desalinationatscale

19h30 Receptiondinner

Wednesday,December14

9:00-12:45 Roundtablewithgovernments’delegationsfromMediterraneanandMENA

12:45–13:00 Lunch

14:00–15:30 Theprivatesectorperspectiveondesalination:Roundtablewithdesalinationcontractorsanddevelopers

16:00-17:00 RoundtablewiththedonorscommunityandNGOs

Downloadpresentations

Youcandownloadallpresentationsfromtheworkshophere:http://cmimarseille.org/highlights/regional-mediterranean-workshop-desalination-non-revenue-water-reduction-and-public

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Openingsession:Settingthestage–dealingwithwaterscarcityintheMediterranean

Day1:Monday,December12201611:00-12:00

Steven Schonberger from theWorld Bank kickedoff theworkshopby askingwhy theMediterranean-givenitslongexperienceinmanagingwaterscarcity-isnotcurrentlythegloballeaderinwatersecurity,eventhoughhalfoftheworld'sdesalinationistakingplacein theMiddle East andNorth Africa. For this to happen, theremust be a combination ofpolicy, technology andmanagement systems, andmost importantly thedevelopment of a"madeintheMediterranean"expertise.Bill Kingdom from the World Bank brought some insights from a 2006 report, whichdefined the main characteristics of a well-performing WSS service provider, and askedwhetherwecouldstartseeingashifttowardsthisintheMediterranean.Thisincluded:

• Goodgovernanceandimprovedaccountabilitytocustomers• Autonomytomakedecisionsandnotbeinfluencedbypolitics• Incentivestodelivergoodandefficientservices• Customer-oriented• Finance-throughimprovedefficiencyandpredictabletransfersfromgovernment• Mobilizingfinance• Asoundpolicyenvironmenttomakealloftheabovework.

Emilio Gabrielli from the International Desalination and Reuse Association (IDA)highlightedthevalueofthisworkshopinbringingdesalination,reuseandNRW-topicsthatareoftenaddressedseparately - together. Ina fewdecades, the costofdesalinatedwaterhad decreasedmore than tenfold,making it now amore affordable option at times thantreatingorpumpingwaterfromafarforsomecities.Stephane Dahan from the World Bank showed that most of the Mediterraneanpopulation(60%)livesinareasofhighorveryhighwaterstress,andarguedthatmanagersneed to look at the entireurbanwater cycle bydeveloping anddiversifying conventionalandnon-conventional resources, aswell as on the demand-side by reducing urbanwaterneeds, and look at potential trade-offs by cooperatingwith other users in or beyond thebasin. The World Bank's Water Scarce Cities initiative (which is being launched at thisworkshop) aims to contribute to this paradigm shift by providing technical support andfacilitatepeer-to-peerexchangesbetweeninterestedcities.DuringtheQ&Aparticipantspointedouttheneedtobeinclusiveofothersectorsineffortsto integrate urban water management, in particular the energy sector; and on the hugeimprovementsneededintermsofefficiencyforregionalservicesproviders.

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Thematicpresentations:DealingwithwaterscarcitythroughPPPs

fordesalinationandnon-revenuewaterreductionDay1:Monday,December122016

14:00-18:00

Thierry Davy from the World Bank and Marta Moren-Abat from the EnvironmentDirectorateGeneralof theEuropeanCommission (EC)presentedtheEC'smandateonwater, which focuses on water quality but not water quantity (which is the purview ofmemberstates).100millionpeopleintheEUsufferedfromthe2003drought,withatotalcostof8.7billioneuro.Toaddressthis,theECstartedbylookingforadefinitionofdroughtandwater scarcitywhich could be applied from Finland to Spain. This led to 2 concreteoutputs:the2007EUcommunicationandthe2012BlueprinttosafeguardEurope'swaterresources.AproposalforEClegislationofwaterreusestandardsisexpectedbymid-2017.Thisapproachwashighlightedbytwocasestudies:Spain, inwhichdroughtmanagementplans are embedded in river basin management plans, and include emergency plans forurbanareas;andFrance, inwhichdroughtmanagement is thepurviewof theriverbasinagencies,andwhichhaspioneeredaninter-sectoraltradingmechanisminwhichthestatecompensateshydroelectricityproducerswhenmorewaterisneededintimesofdroughtforwaterandagriculturalusers.Thefollowingdiscussionhighlightedtheneedtothinkmoreofan insurance scheme for this type of scenario, which is very costly for the state. Themanagementofaquifersisseenasinsuranceforfarmers.ThepricingofwaterforfarmersintheEUiscomplex:thereareanumberofcountrieswheretheydonotpayforwater,butthisis the mandate of member countries: EC directives only ask for transparency on waterpricing,andtoaccountforenvironmentalandresourcecosts.

Bill Kingdom from the World Bank highlighted that one of themost efficientways toimprovethefinancialsustainabilityofaWSserviceproviderwastofixNRW.However,staffcapacityandincentivesinpublicserviceprovisionareoftennotalignedwiththisobjective.HowcanpublicWSprovidersfixhighcommercialand/orphysicallosses?Oneoptionistouse Performance-Based Contracts, which can help utilities address (i) a backlog of fixingleaks,whichhastranslatedintohighleakageor(ii)routinemaintenancetoensureleakageremainslow.Contractingcanbebundledordonewithvariousdegreesofunbundlingandisusually for4-5yearsminimum,keeping inmindthatrisksandresponsibilitiesneedtobesharedappropriatelytoavoidinter-partydisputesorhighprices;keepinginmindthatthespeed of implementation, not just the price, should guide the decision to work with theprivatesector.Thishasbeendone,forinstance,inHoChiMinhCityforphysicallosses(seeBox1below)andintheBahamasbothforphysicalandcommerciallosses. Oneissuethatoftencomesupisthelackofareliablebaselineatthestartofthecontract,whichcanbeariskfortheprivatesector-inwhichcase,itisrecommendednottohavearigidbaselinesetinthecontractbuttoestablishthebaselineandendlineonceDMAshavebeensetup.

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Ø For more information and resources on Performance-Based Contracts forNRWreduction,pleaseseehere.

Box 1: the Ho Chi Mink city experience: reducing NRW with a performance-basedcontractAs part of the World Bank's Vietnam Water Supply Development Project and with thesupport of PPIAF, the Saigon Water Corporation launched a competitive tender for aperformance-based contract for NRW reduction for one of its zones. The overall projectdesignwastocontractoutallNRWreductionworks(asperformance-basedcontracts)forone of SAWACO’s service areas (Zone 1) to the private sector while undertaking atraditionalcontractingforanotherarea(Zone2).Asaresultoftheactivity,afive-yearperformance-basedNRWcontract(4yearsforleakagereduction and 1 year for maintenance) was awarded in July 2008 to Philippine-basedManilaWater Company, Inc. (MWCI),which teamed upwith Vietnam-based ConstructionTechnologyDevelopment JSCo towin the contract to increase theefficiencyof thewatersystemandestablisharound100districtmonitoringareas(DMAs)tomanageleakageandsystem expansion works in Ho Chi Minh City. Establishing the DMAs took time due totransport congestion inHoChiMinhCity, but the resultswere impressive: the volumeofleakage was halved in Zone 1 – equivalent to 100,000m3/day (enough water to serve500,000people)withlessthan1%ofthedistributionsystemreplaced.

Source:B.Kingdom(blog);PPIAF(2012)

EmilioGabbriellifromIDAgaveahistoricaloverviewofthedevelopmentofdesalination,ofwhichrecordsexistsinceRomantimesbutwhichtookoffasan industry in thesecondhalfofthe20thcentury.Developmentsinenergyrecoverymechanismsledtoadecreaseinpriceandaboomofdesalinationsincethestartofthe21stcentury:currently300millionpeopleworldwiderelyondesalinatedwater.EvenLondonreliesfor25%ofitsfreshwatersupplies on desalinated water. Looking to the future, Emilio expects development ofdesalinationcapacitytoincreaseattwicethespeedparticularly inChina,IndiaandBrazil,where the next World Desalination Congress will take place. In terms of technology, heexpects that Reverse Osmosis will continue to dominate themarket, and that the use ofsolarenergy(throughConcentratedSolarPower(CSP))willbecome increasinglyrelevantparticularlyintheMediterraneanregion.CarlosCosin(independentconsultant)gaveanoverviewofcapitalandoperationalcostsforReverseOsmosis(47%installedcapacityinMENA)andthermal(53%installedcapacityin MENA) desalination technologies. Around half of desalination projects worldwide areunderaPPParrangement;themaindriversofpricefortheprivatesectorare(i)plantsizeandmaturity; (ii) the region and area, in particular the regulatory environment (iii) thechoice of technology (RO/thermal) and (iv)water quality (in particular Total SuspendedSolids(TSS))andtemperature.ReturnratesfortheprivatesectorintheMediterraneanaregenerally better than other regions outside MENA due to maturity of market andregulations. Looking to the future, Carlos also expects more use of RO; efficiency

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improvements; and energy savings; but the price of desalinatedwaterwill likely plateauaround 0.3-0.5 USD/m3. Innovationswill likely come in the form of hybrid desalinationplants (RO/ thermal) and the increased use of solar power, though it may be moreappropriate inland than in coastal areas due to its large land footprint. The discussionhighlighted that staff training forO&Mof desalination plantwas difficult due to the everchangingtechnologyandyetcrucial:forexample,inAlgeria:22plantsof1000m3/dweresuppliedandoneyearlaternotoneplantwasinoperationasstaffhadnotbeentrainedonhowtomaintainthemembranes.

ZaelSanzandPhilippeMarinfromtheWorldBankhighlightedthefactorstotakeintoaccountwhenchoosingtherightcontractualarrangementforprivatesectorinvolvementindesalinationprojects.Howisdesalinationdifferentfromtheusualrisksthatcanaffectlargeinfrastructureprojects?Indesalination,itisoftenmoreadvantageoustotakeadvantageofthe contractor's expertise for the operation and maintenance of the plant: under DBOcontracts,afixedO&Mfeeismostcommonlyused.UnderaBOTapproach,theutilityentersinto water purchase agreement with the contractor; design and financial risks aretransferred to the contractor, but theutility needs to be flexiblewith the contractorwhomay have taken out loans in foreign currency and agree to share the currency risk byindexingthepriceoftheWPAtotheexchangerateofthecurrencyinwhichthedeveloperhas taken out loans. Raw water quality and quantity is partially transferred to thedeveloper: to get a lower price, the utility (or the contractor, depending on timing andcontractualarrangements)mayfindadvantageoustorunpilotsintheareainpreparationofthetender.EngineeringProcurementConstructionarrangementsmayleadtocostsoverrunandconstructiondelayrisks.

Thematicpresentations:DealingwithwaterscarcityinMediterraneanislands

Day2:Tuesday,December13201608:30-10:30

Nicholas Petroulias from the Hellenic Water Association presented the situation ofwaterservicesinGreece,whereallserviceprovidersarepubliclyownedandmanaged,withtheexceptionoftwosemi-publicserviceprovidersinAthensandThessaloniki.Greekwaterutilitiesarecharacterizedbylowefficiency(highphysicalandcommerciallosseswithNRWaveraging50-60%)andlowenergy-efficiency,withenergyaccountingforover50%ofthecostsofserviceprovisiononaverage.Theregulatoryframeworkforwaterabstractionwasonly recently modified to monitor groundwater abstraction, though enforcement andmonitoring are still lagging behind. The Hellenic Water Association tries to overcomethrough the dissemination of EU and IWAbest practice approaches.Water resources arecharacterized by overexploitation and saline intrusion.With regards to non-conventionalresources,therearecurrently157desalinationplantsinGreece,whichareusedparticularly

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to meet increased demand in the summer in municipalities, as well as high demand forirrigationwaterparticularlyinthecentreofthecountry.

Nikos Neocleous from the Water Development Department of the Ministry ofAgriculture, Rural Development and Environment of Cyprus and BambosCharalambous(independentconsultant)gaveanoverviewofwaterresourcesinCyprus,wheretotalwaterdemandhasbeenmetbyacombinationofavailableconventional(waterstorage development) and non-conventional resources (desalination (33Mm3/year) andreuse(8Mm3/year))inthepasttwodecades.Theefficiencyoflargewatersupplyserviceproviders is generally high (with rates ofNRWclose to20%), but the rates of losses candoubleortripleinsmallervillages.Cyprushasbeenhitbydroughtsinrecentyears;duringthelastdrought(2005-08),theauthoritiestankeredwaterfromGreecefordomesticwatersupplyduring8months.Thismeasurewascostlybothintheshort-term(withanaverageprice of tankered water of 6.5 Euros/m3) as well as in the medium-term: piped watersupply was provided intermittently during the drought, which resulted in higher waterlossesduetoanincreaseofbreaksinthemains.SimilarlytoGreece,groundwaterhasbeenhistorically over-abstracted and subject to saline intrusion, but abstraction anddrilling issubject to licensing, which is well enforced. Existing unlicensed boreholes owners weregivena1-year amnesty to request apermit to abstractwater - afterwhich they couldbetaken to court and their boreholes closed. Desalination is an integral part of the watersupplystrategy,butitsuseisrestrictedtoyearswithlowrainfallasthecostofdesalinatedwaterisnotentirelyrecoveredthroughtariffs,particularlyinyearswhenthepriceofoilishigh.Pricingofdesalinatedwaterpurchaseagreements includesaStandbyOperationandMaintenance fee - so thewater authorities compensate the desalination plan operator inyearsofgoodrainfall.

KonstantinaToli fromGWPMedpresentedsomeof theactivitiesof theawardwinningNon-Conventional Water Resources Programme in the Mediterranean, which aims atdemonstrating small-scale solutions for the development of non-conventional waterresources inCyprus,Greece, Italy andMalta (between2008-2018). The challenges therecenter around meeting seasonal water supply linked to tourism, as the population canincrease up to 30 times during the summer. The projectworks both on the supply angle(domestic and institutional rainwater harvesting in Athens and Malta, stormwaterharvesting inSyros islands inparks, greywater recyclingat thedomestic level)aswell asdemand(watersavingkits fordomesticwateruse).Theprojectalso installedsmallwaterdesalination kiosks in remote areas in Greek islands, which are managed by localauthorities.Theprojectalsoincludestrainingforengineersandarchitectsbyincludingnon-conventionalwater resources development andmanagement in education curriculae andsensitizingthegeneralpublicthroughsocialmediaoutreach.

Thematicpresentations:CaseStudies:TheIntegratedUrbanWaterManagementApproach

Day2:Tuesday,December13201611:00-12:00

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Malika Belkouadssi from ONEE and Richard Abdulnour from the World BankpresentedthehistoryofwatersupplydevelopmentandmanagementinMarrakech,startingwith the traditional Khetarrat, which used to bring water from the Atlas mountains toMarrakech.Asthecitygrewinthe1960's,thissystemwassupplantedbyboreholesinthe1950's.In1972,ONEE-theNationalWaterandElectricityOffice-wascreatedandtaskedwithrawwaterresourcesdevelopmentandmanagement;waterservicesdistributionisthetaskofanautonomouspublicutility,RADEEMA, inMarrakech.AsMarrakechcontinuestoexpand,itseekswaterfurtherandfurther:inthe1980'sgroundwaterresourcesnolongersuffice, water is brought via the Canal Rocade from the Hassan 1 Dam, located 120 kmsawayfromthecityandsharedwithagriculturalwaterusers.Inthe1990sandearly2000s,Marrakechexperiencesarapidincreaseinwaterdemandduetotourism,withcloseto20golf resorts being given permission to develop in the city - which gave ONEE seriousconcernsaboutnotbeingabletomeettheseadditionaldemands.Atthetime,RADEMAalsohadhighlevelsofNRW,eventhoughthecitywasrunningoutofwater.Ameetingpresidedby the prime minister gave ONEE reason and mandated RADEEMA to supply the golfdeveloperswith treatedwastewater for irrigation, aswell asdecrease their rate ofNRW.RADEEMA managed to decrease its NRW by 20 points in 10 years, and the treatedwastewaterschemewascompletedforasmallernumberofgolfresortsin2012.Marrakechhas since had a couple of close callswith theirwater supply -most recently in 2012-13when therewas a droughtwhich left only a fewmonths'worth ofwater supplies in thereservoirs. This is where the World Bank is bringing in technical assistance to helpMarrakech diversity its water sources through improved groundwater management,reservoir management, and tertiary treatment and water reuse for irrigation. It is to benoted that in Morocco, tariffs are decided by an interministerial committee and rarelyraised,whichmakes thedevelopmentofcostlynon-conventionalwaterresourcesdifficulttorecoverforONEE-especiallysincesofar,thegovernmenthasrefusedtosubsidizethem.

BobYamada from the SanDiegoCountyWaterAuthoritypresentedthewatersupplystrategyoftheSDCWA,awholesalerofwaterinSouthCalifornia.Currently,theSDCWAgetsmostofitswaterfromtheColoradoRiver,aswellasfromatransferfromNorthCalifornia.Mostofitsownsupplies(whichcurrentlyonlyrepresent16%ofitstotalwaterallocation)comefromthedevelopmentofnon-conventionalresources, inparticulardesalination;butagencieshavealsoinvestedinwaterrecyclingandaremovingtowardpotablewaterreuse.The Claude “Bud” Lewis Carlsbad desalination plant is the largest inNorthAmerica on aBOTbasiswitha30-yearcontract.Thediversificationofwatersuppliesalsoincludeswatertransferagreementswithfarmers(payingfarmerstosupplyadditionalwatertoSDCWA)aswellasliningcanalstoprovideadditionalsupplies.ThecostsofdesalinatedwaterproducedareestimatedatUSD1.72/m3.Thereisscopeformanagingdemandas65%ofwateruseinSan Diego County is for residential purposes - this amounts to 330L/capita/day, half ofwhich is used for outdoor irrigation. The SDCWA engages with the public over droughtconditions (whenindrought.org andwaterwaste reporting app). During themost recentdrought,thestateimposedstatewidemandatoryrestrictions,butrecognizingtheprogressSDCWAhasalreadymade,hasgrantedyearlyself-certificationbasedonstresstest.

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Thematicpresentations:CaseStudies:Involvingtheprivatesectortoreduceunaccountedforwater

Day2:Tuesday,December13201612:00-13:00

FabienMainguyfromSuezpresentedthecaseofthePerformance-BasedManagementcontractinJeddah,SaudiArabia,whereSuezprovidedassistancetotherecently-createdNationalWaterCompany.AlmostallofthewatersuppliedinJeddahcomesfromdesalinationplants.ThescopeofthecontractincludedmanagementsupportandtrainingaswellasNRWreductionandimprovementofcontinuityofwatersupply,KeyfeaturesofthiscontractwasthepossibilityofredoingthebaselineforsomeoftheKPIsafterthestartofthecontract,inparticularNRWreduction,butthelimitedtransferofresponsibilitiestotheprivateoperatorwasamajorconstraintforachievingtangibleimprovements.Only20%ofthepopulationofJeddahhascontinuouswatersupply;thefrequencyofwatersupplyfortherestofthecityincreasedfromonceevery23daystoonceevery8days.

FrancoisLacourfromVeoliapresentedtheco-managementOmanPAEWcontract-whichstartedinJanuary2011for5years,with10keystafffromVeoliadirectlyembeddedintheutility.ThecontractgovernanceincludedanexecutivemanagementcommitteewithmoreweightgiventoPAEWaswellasanindependentauditor.Thiscontractincludedarestructuringoftheutilityandsetting-upofqualitymanagementsystems,aswellasthedevelopmentofawatersectormasterplanandabusinessplanfortheutility(whichwasapprovedbytheministryofFinance).Savingsweremadebothoncapitalexpenditure(throughdesignandhydraulicmodelingreview)andoperationalexpenditure(throughre-workingofcontractors'scope).

OmanPAEWcovers47%ofresidentsbutitsperimeterincreasedby25%between2011-2014,whenithadtointegrate'privatenetworks'whichwereusuallyinpoorerconditionthantheutilitynetwork(therestofthecityissuppliedbytankers).80%ofthewatercomesfromdesalinationplants.Challengesincludedmanagingnewconnectionsandmaintainingthecontinuityofwatersupply,aswellasmanagingcontractorsinchargeofDMAset-up.NRWreductiontargetedinprioritycommerciallossesthroughtheinclusionoflargeconsumersinthebillingsystem,andfocusedonlyontheareasinwhichDMAsweresetup-themainchallengewastointegrateleakyprivatenetworksinthecontextofconflictingKPIswithchangingperimeters.

Thematicpresentations:CaseStudies:DesalinationatscaleDay2:Tuesday,December132016

14:00-16:00

SPAIN:FerminLopezUnzupresentedthestructureofAcuamed,aSpanishpublicagencytasked with implementing and operating 12 desalination plants and their distributionnetworks through a management agreement signed with the Ministry of Agriculture (as

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well as water reuse and water transfers projects). This includes the largest desalinationplant in Europe (Torrevieja). The plants run on average at 45% of capacity; 5 out of 12plants are used for irrigation (for high-value crops), with tariffs averaging 0.4-0.55Euros/m3. Energy for desalination plants is bought through the energy futures market;thereisstillsomeroomtoimproveenergyefficiency.

ALGERIA:KhaledGasmipresentedtheroleoftheAlgerianEnergyCompany(AEC)whichco-developsdesalinationplantsinAlgeriaalongwithforeigninvestors.Therearecurrently11 desalination plants in Algeria providing 1/5 of drinking water needs nationwide,through25-or30-yearDBOOschemesandcreationofJointVentureswithatleast49%ofthe sharesownedby theAlgerian state.TheAlgerianOilCompany typically guaranteedalarge portion of the commercial debt, allowing the private investors to access favorablerates.ThereisonlyoneMSFplant(Kahrama),whichwasfinancedbyAEC;theothersareallROplantsandwerefinancedeitherthroughlocalfinancingorbyOPIC.Waterispurchasedona'TakeorPay'basis,withpricesreviewedregularlytoaccountforinflation.ConflictsofinterestmayarisebetweenAECandtheforeigninvestorwhentheychoosetheconstructorandoperatoroftheplant.

ISRAEL:RonenWolfmanfromHutchisonwaterpresentedthelargestdesalinationplantin the world - the Sorek desalination plant, a BOT project in Israel, which currentlyproduces150Mm3peryearofdesalinatedwaterattheverycompetitivepriceof$0.53percubicmeter.Operationalusestartedin2013andtheplantrunsat100%capacity.Waterissold througha takeorpay scheme,witha fixed (indexed to currencybasket andCPI - tocovercapex,fixedenergyandO&Mcosts)andavariable(coveringincrementalcosts)tariff,which is linkedto themixofcurrencies inwhich theprivatesectoroperator tookout theloans.Keytoitssuccessinkeepingpriceslowis(i)theplanthavingitsownpowerstation,(ii) innovativeengineeringandmembranedesign toreduce theplant's land footprint (iii)proper risk allocation between the government and the private sector and (iv) flexiblefinancingwiththecurrencyexchangerisksbeingtakenonbythegovernment.

AUSTRALIA: Domingo Zarzo from Valoriza Agua and Miguel Angel Sanz from SuezpresentedsomeoftheinnovativeAustraliandesalinationplantstheirrespectivecompanieshavebeeninvolvedin.TheparticularityofAustraliandesalinationplants istheinnovativefinancingscheme:BOTsarestructuredundertheso-calledtheAllianceconcept(seeBox2).This ensures risks are kept shared equally between the private sector and the client andlimitedtothepotentialbenefitoftheprivatesector.Australiahasinnovatedbybuildingandoperatingsomeofthegreenestdesalinationplantsintheworld:inMelbourne,whereallofthe energy comes from renewables; and inPerth1,where the impact of backwashwaterdischargeontheenvironmentwasmonitoredandfoundtosupportmarinelife.

Box2:theAllianceconceptinAustralia:aninnovativeformofPPPTheAllianceisaPPPbasedonthesharingofrisksandbenefitsbetweentheoperatorandthe client, which has been developed in Australia by the Federal government as aninnovativewayofpartneringwiththeprivatesector.Thepartnersmustworktogetheronabasis of trust, in a spirit of openness and ethics, and in a culture of performance andinnovationthankstoa tailor-made joint leadershipunit.TheAlliancecontract ismanagedthrough a governance structure called the "Alliance leadership team" and amanagement

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team. These two entities bring together representatives of each of the parties associatedwith the contract. In the case of the contract with the City of Adelaide, SUEZENVIRONNEMENThas a share in the partnership of 25%,with its subsidiaryDegrémonthaving 25%, andTransfield (anAustralian energy and transport services operator) 50%.Eachofthesecompaniesisentitledtorepresentationinthe"Allianceleadershipteam",withtwoexecutivesfromSUEZ,twofromDegrémontandthreefromTransfield.TheStatepublicwaterservicescompanySAWater,hastworepresentatives.InFebruary2012theAlliancewassigned,withgreater involvementbySAWater inoperations:assetmanagement,newconnections,SCADA(SupervisoryControlandDataAcquisition)andthemanagementofcallcentres.AnothermajoradvantageoftheAlliancecontract isthenatureoftherelationshipwith SA Water, namely complete collaboration between the two entities (operations,finance,etc.),whichenablesthepublicauthoritytotakebacktheoperationoftheplantsifitsowishes,butcanrelyonthetechnicalexpertiseofaprivatesectoroperator.

Source:http://www.suez-environnement.fr/wp-content/uploads/2012/12/DP_Australia_2012_VA1.pdf

Roundtablewithgovernment'sdelegationsfromMediterraneanandMENA

Day3:Wednesday,December1420169:00-12:45

MiguelGarciaHerraiz,DeputySecretaryGeneraloftheUnionfortheMediterranean(UfM) opened the day with a keynote speech, highlighting the role of UfM as a bridgebetween governments, the private sector and civil society in the Mediterranean. Heannounced that theUfM is currentlyworkingonanewministerialdeclarationwhichwillsetacommonagendaforwaterpolicyintheMediterranean.SelmaJaririfromONEE(Morocco)gaveanoverviewofwatermanagementinthecontextofscarcityinMorocco.Anationalstrategyforthedevelopmentofnon-conventionalwaterresourceswasapproved in2009.Desalination isbecoming increasingly relevant towatersupplyinMorocco,whichisdevelopingadozendesalinationplantsofacumulativecapacityof 260 000 m3 per day, and envisages to continue developing desalination plants for acumulative capacity of 400 million m3 per year by 2030. At the moment, all of thedesalinationplants inMoroccoarebasedonROtechnologyandweredevelopedbasedonEPC,asidefromtheflagshipBOTprojectofAgadir(thelargestinthecountry).Afeasibilitystudy iscurrentlybeingundertaken toassesshowtobestassociaterenewableenergy fordesalination.ONEEisnottheonlydeveloperofdesalinationplants-OCPandtheMinistryofAgriculturearecurrentlydevelopingdesalinationplantsforagriculturalandindustrialuserespectively. ONEE is currently confrontedwith a financial sustainability issue - as it hasbeen taskedwith financing thedevelopmentofnon-conventionalwaterresourcessuchasdesalinationwhich the statehas refused to subsidize in thepast, even though itprovides

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funding for the development of conventional resources. Finally, ONEE called upon theprivatesector toprovidemoreagilesolutions todesalination- for instance throughsmallmobiledesalinationplants(ofanaveragecapacityof10,000m3/day).BenAichMondherfromSONEDEoutlinedsomeoftheissuesTunisiafacesinurbanwatersupply,particularlyNRWreduction.SONEDEprovidescontinuouswatersupplyto90%ofthepopulationinTunisia,andcoverssmallsandlargetownsandurbanareas.Whereastheyieldofurbanwatersystemsaveraged86%in2000,itisnowdownto76%dueto(i)lowtariffs, (ii) lackofprecisionofmeteringandwatersupplyaccountingand(iii) thestateofdisrepairofthedistributionnetwork.Tunisiahassetitselfanobjectiveofimprovingwaterefficiencythrough(i)sensitizationand(ii)trainingofexternalauditors(trainedtocarryoutaudits for large water consumers every 5 years). There are no current PPP projects forwatersupply inTunisia(there isadesalinationproject indevelopment for industrialuse)but tworegional10-yearO&Mcontractsare inpreparationwithnationalsewerageutilityONAS.

SadiAli from thePalestinianWaterAuthorityoutlinedthesituationintheWestBank,wheredesalinationistheonlyoptionforwatersupplyasthecoastalaquiferiscompletelydepleted. Currently, there are close to 400 service providers in theWest Bank andGaza;institutional reform is taking place to improve efficiency. NRW is currently estimated at40% but there is no reliable data; there are plans to set up DMAs in some key areas toimprove efficiency. It is difficult to attract the private sector in theWest Bank and Gaza,even though there is a historyof private sectorparticipation (withWorldBank support).IFCiscurrentlyinvolvedinthesolarpowerprojectwiththeprivatesector,andtheWorldBank is providing support to assess whether a Performance-Based Contract for NRWreductionwouldbefeasibleinHebron.

Hamze Tuerkman from the General Directorate of State Hydraulic Works (DSI) ofTurkey highlighted the relatively high level of NRW in Turkey due to commercial andphysicallosses.DSIisafinanciallyautonomousentitywithasimilarroletothatofONEEinMorocco: it is a producer, transporter, andwholesale retailer ofwater and also providesservicesinsmalltowns.Watersupplycoverageiscloseto91%inTurkey,upfrom75%in2001. Turkey hasn't needed to invest in non-conventional resources so far and DSI haslimitedexperienceindesalination;duetopopulationgrowthandclimatechange,Istambulispilotinga feasibility study fordesalinationand therearepilotprojects forwater reuse.Iler bank has traditionally provided financing for infrastructure but is facingcreditworthinessissueswhichmayleadtomoreplansforPSP.

Jamal Krayem (Director of theNorth LebanonWater Establishment) and Joseph Nseir(DirectorGeneralofWaterAuthorityofBeirutandMountLebanon)fromLebanongaveanoverviewof thesituation inNorthLebanonand inBeirut respectively.Thechallengesaremultiple: Lebanon has taken on the highest proportion of refugees in the region (25%increase in residents in the past two years) and is currently in themiddle of a drought.Tripoli is the only citywith 24/7water supply in Lebanon; however, it has seen a hugeincrease in demand in the past few years due to the influx of refugees and has limitedpotential for further water resources development. NRW reduction and demandmanagement are the only options today for the utility as groundwater resources are

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depleted and in need to rehabilitation. In Beirut, a pilot scheme (see Box 3 below)successfully showcased that continuous water supply can be provided with the sameamountofwaterwithverylittlefunding.Thisapproachisbeingscaleduptootherareasofthecity.

Box3:TheBeyrouthpilotschemeforNRWreductionTheWorldBanksupportedatwinningpartnershipbetweentheMaltapublicwaterutilityWSCandtheBeirutMountLebanonWaterEstablishment(BMLWE),whichaimedatre-establishing24/7watersupplyinapilotareaofdowntownBeirutwithabout5,000residents.WiththehelpofMalteseexpertsonthegroud,thefollowingstepsweretaken:1.EstablishingthepilotzoneandsettingupaDMA2.Carryingoutleakdetectionbynightandrepairs3.Repairingtanksinthebuilding4.Reducingthewaterpressureto2bars5.Carryingoutleakevery2months.Thenetworkwasthensuccessfullyfedwithcontinuouswatersupply,withthesamequantityofwateraspreviouslywhenwaterwasonlyprovidedfor7hoursoutof48hrs(5000m3).Thisapproachwasthenspreadto6zonesbyBMLWEstaffwithverylittlefunding,andtheutilityisnowworkingwiththeWorldBanktograduallyscaleupthisapproachtoallmetropolitanBeirut.

MohammedAhmedandDekaKhairehAllalehfromONEAD(Djibouti)outlinedsomeofthe challenges facing Djibouti-ville, one of the most water-scarce cities in the world.Traditionally groundwater has provided most of the water supplies of the city but theaquifer isbecomingdepletedandsuffers fromseawater intrusion; furthermore theutilityonly meets about half of the estimated water demand in the city. Tariffs are below costrecovery levels (USD 0.45 for production costs averaging USD 1.70); and there is strongpoliticalpressurenottoincreasethem.

ONEADwascreatedin2006asamergerofwatersupplyandsanitationauthorities.Ithasawithacustomerbaseof39,000connectionsandmanages55boreholes(ofwhich13weredevelopedsince2013)andadesalinationplantforsalinegroundwater.AWWTPhasbeeninoperationsince2014.Severalprojectsarecurrentlybeingimplemented,aswellasanewstrategygearedtowardprivatesectorparticipationandsensitizationofthepopulation:

• ThetransboundarywaterprojectbetweenEthiopiaandDjibouti,whichiscurrently85%completedandwillprovide100,000m3ofgroundwaterfromEthiopiaperdaythroughconveyance from July2017onwards (this ismore than twice theamountcurrentlyprovidedbyONEAD).ThewaterresourcesarefreetobeusedbyDjiboutifor30yearsbutDjiboutineedstopayforthecostofextractionandconveyance.

• The PEPER project (DBOT - 5 years project) of which the first phase will becompletedin2017.

• Finally, the Arab Social Development Fund is providing funding for a networkrehabilitation project, with the first phase focused on the mains and the secondphaseonthedistributionnetwork.

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ONEAD is looking for technical assistance for rainwater management as well asgroundwater recharge. ONEE offered to provide its expertise through South-Southcooperation between Morocco and Djibouti. It also encouraged ONEAD to establish apartnership with OCP which is established in Djibouti and may be able to provide itsexpertise.

Theprivatesectorperspectiveondesalination:Roundtablewith

desalinationcontractorsanddevelopersDay3:Wednesday,December14,2016

14:00–15:30EmilioGhiazzafromFisiaItalipianticommentedthatwhileROprevailstoday,thereisroomforanincreaseofthermaldesalinationinthemarket.Hybridplantsarealsoverycompetitive(combiningROandthermal)-particularlyforlargeinstallation,astheyallowyoutomonitorwaterdemandandenergydemand.Hehighlightedthatthebestbasisforselectingatechnologyforaplantisnotnecessarilyaplantthat'scheaperbutthatgivesthecheapesttariffwhentakingintoaccountcapexandopex.MiguelSanzfromSuezpresentedsomeoftheinnovationsinthedesalinationmarketinrecentyears-includingenergy-efficientmembranesdevelopedinMasdar.Hehighlightedthatitisimportantthatbothclientsandtheprivatesectoragreeoninnovation.AlonsoZapatafromGSINIMApresentedanumberofPPPandBOTschemesindesalinationwithrenewableenergy,whichcouldbeinterestingforMoroccoandAlgeria.DomingoZarzafromValorizaAgualistedanumberofrecommendationsfromtheprivatesectorforsuccessfulPPPdesalinationprojects.HehighlightedthatEPCprojectsgenerallyhavelowerprofitabilityforthecontractor-BOT/BOOTcontractsaremoreconvenientforbothparties.HerecommendedtoincludesomeyearsofO&MinEPCcontracts.Hestressedthattightandrigidconstructiondeadlinescanbecostlyfortheclient-theyareoftentootightandpoliticallymotivated.Ifpossible,theclientshouldtrytobeflexibleonconstructiondeadlinesinordertodecreasetheriskofoverruns.Theprivatesectorisalsooftenaskedtoacquirepermitsbutoftendoesnotknowtheselocalprocedures,whichleadstodelays.Onewaytheclientcanhelpisbytakingonorsharingthistasktomitigatetheriskofdelays.Thehighesttechnicalriskscomefrommarineworksanddelayswithelectricitysupplyandconnection,aswellaswaterqualityforintake.Itisrecommendedtodopilotplantinstallationsbeforetheproject.RonenWolfmanfromHutchisonWaterconcurredwiththisobservationandaddedthatthegovernmentcouldusethetimebeforethetenderislaunchedtodoatestpilotonsomecriticalcriteria(e.g.waterquality;plantsiting)tohelpshortenthetimeofconstructionlateron.Itisalsohelpfulforthegovernmenttobeflexiblewithregardstotechnology,andtodefineindependentarbitrationincaseofdisputes.

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Theprivatesectorperspectiveondesalination:Roundtablewith

desalinationcontractorsanddevelopersDay3:Wednesday,December14,2016

16:00-17:00DonorsandcivilsocietyorganizationrepresentativesfromtheIslamicDevelopmentBank,MIGA,GWPMed,ACWUA,theInstitutMediterraneendel'Eau,theWorldWaterCouncilConseilMondialdel'EauandIFCtookpartinthefinalroundtableoftheworkshop.Theypresentedtheirrespectiveprojectsindesalination:

• TheIslamicDevelopmentBankhasalreadyfinancedadesalinationprojectinBahrain.

• MIGAhassupported2desalinationplantsinChinaandinGhana.

JulieCarlesfromIFCexplainedtheadvantagesofPPPs,whichreducesthepressureongovernmentbudgetsandtransferssomeoftheriskstotheprivatesector.IntheMENAregion,lowcostrecoverycanhinderprivatesectorparticipation.Whentariffislow,therearetwooptionsforprivatesectorparticipation:1.BringingconcessionalfundsblendwithIFCfinancing2.BringingWorldBankfinancingintotheprojectwhileensuringprogressivecostrecovery.YannBurtinfromMIGApresentedseveralMIGAproductsthatcanbeusedinthewatersector,includingPoliticalRiskInsuranceandCreditEnhancement.PoliticalRiskInsurancecancoversmallprojectsinconflict-affectedcountries(WestBankGazafor500,000USD)uptolargeprojectsandcanmobilizeforlongtenorsofupto15years.KonstantinaTolifromGWP-Medpresentedsomeoftheworkitisinvolvedinimprovingtransparencyandgovernanceinthewatersectorandimprovingaccountabilityandstakeholders'engagement,bothatthenationallevel(inAlbania,Lebanon,Tunisia...)aswellastheregionallevel-toexchangegoodpractices.HachmiKennoufromtheInstitutMediterraneendel'Eauisaprofessionalnetworkofpublicandprivatewaterservicesproviders.IthasrecentlysetupaplatformonwaterknowledgeintheMediterranean,andissettingupaEuropeanobservatoryonwaterwhichincludesathemeondesalination.DanielleGaillardfromtheWorldWaterCouncilgavesomeexamplesofitsactivitieswhichincludeadaptationtoclimatechangefromawaterperspective.KhashmanKhaldonfromACWUAhighlightedsomeofthechallengesuniquetoArabcountries,includingthehighlevelofwaterstress,thechallengeofmanagingwaterinthe

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contextofmigrationandrefugees,aswellastheneedtobuildcapacityandretainexpertiseinspiteofbraindrain.