sofia 2014 national conference

Teodor Popa and Cristina Nedelcu

Romanian Water Association

25 November, Sofia, Bulgaria

National Conference "Challenges in the Execution of Projects within the

Operational Programme Environment 2007 - 2013" and "Rural

Development Programme"

The Romanian Experience in Execution of

Environmental Projects with European

Funding

THIRD PANEL: Challenges in Designing and Supervision

Content

introduction

how the EU programme is going

what are the challenges faced by WSS operators

and what are the benefits

how the operators covers the co-financing part

do private operators have access to the program

The Romanian Experience in Execution of Environmental Projects with European Funding 25 November 2014, Sofia

Teodor Popa


Experience in the water sector since 1991

Involved in int’l financed programs since 1994

Financial Manager since 2001

Involved in Romanian Water Association

Member of Strategic Council of IWA

Romania water key figures


Population: approx. 21 mil.

Service coverage: 57% water, 44% sewerage

Invoiced water quantity: 542 million m3

Number of employees: 30,000

Operating revenues: 700 million Euro

EBITDA: 160 million Euro

Indebtedness of the sector: 700 million Euro

Specific consumption (l/cap/day)


100

200

Regulator IDA

Operator

Water sector institutional key players

Gov

IFI

EU

Local Authority 2

Local Authority

…

Local Authorit

y 1

(ROC)

LOCAL COUNCILS

Intercomunal Development Association

(IDA)

Regional Operating Company

Delegation (Concession)

Contract

CUSTOMERS

Performances monitoring Water Services

Mandate

Statutory Company’s Act

SHAREHOLDERS

100% public (PPP possible

later)

Regionalization process

Content

introduction






EU contribution 2007- 2014


18 074

21 231

24 808 24 092 24 060 23 939

8 364

16 027

18 564

20 365 21 569 21 788

1 368 2 328

3 571

6 250 7 039

8 193

0

5 000

10 000

15 000

20 000

25 000

30 000

2007-2010 2011 2012 2013 31.05.2014 15.10.2014

M

I

L

I

O

A

N

E

L

E

I

SOP Environment proiectelor depuse proiectelor contractate plăţilor efectuate către beneficiari

DIRECŢIA AUTORIZARE ŞI PLĂŢI

Ministerul Mediului şi Schimbărilor Climatice

Autoritatea de Management pentru

Programul Operaţional Sectorial “Mediu”

Payments done against financing contract


0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

Axa prioritară 1 Axa prioritară 1A Axa prioritară 2 Axa prioritară 3 Axa prioritară 4 Axa prioritară 5 Axa prioritară 6

14 222

157

4 097

762 773 1 404

374

5 130

0

1 081

306 278 201 43

5 974

1

1 236

330 320 261 72

Valoare contract de finanţare Plăţi 31.05.14(prefinanţare+rambursare)

Plăţi 15.10.14(prefinanţare+rambursare)





EU Funds Absorption


0,27%

1,08% 1,93%

10,53%

23,84%

40,19%

0,00%

5,00%

10,00%

15,00%

20,00%

25,00%

30,00%

35,00%

40,00%

45,00%

2008 2009 2010 2011 2012 2013 2014 2015

2009 12

2010 48

2011 85

2012 465

2013 1,052

2014 (octombrie) 1,773

SOP Environment payments (mil Euro)





Risks

Out of 46 projects Axis 1 Water:

20 risk of non-completion in 2015: 460 mil. ROL should be financed by

Water Companies (Finance Contract)

11 major risk of non-completion: 1 bil. ROL moved in 2014- 2020


At the end of 2015 81% (estimate)

Content

introduction






Challenges in preparation

Slow preparation:

Institutional: corporatization, Intercommunal

Development Association, Delegation Contract

Low quality technical documentation:

insufficient data from geo and topo studies.

Slow (bureaucratic) procurement process (6- 18

months): complex and unclear legislation, lower

price criteria, low qualification requirements

criteria, (too) many of complains and weak co-

ordination between the procurement bodies

Results: financial correction 5- 25%

Solutions

Standard legal documents

prepared by the Government

and RWA

Standard tender documents

Legislation adjustment (not

complete yet)

The Court


Challenges in implementation

Difficulties in obtaining and maintaining the

(costly) construction permits

Relocations of works and private lands

Inability to adjust the project and to

manage Variation Orders: procurement

legislation barrier, blocking the 10% of

contingencies

Low rate of connection to the new networks

Solutions

Legal initiatives concerning:

taxes for water infrastructure,

private land, about using

contingencies and contracting

the supplementary works


Challenges in implementation

Weak contractors: no sufficient technical

and financial capacity, insolvency and

bankruptcy

Low guaranties/ insurance

Some financing and fiscal difficulties

Excessive and multiple control (with

divergent opinions)

Low quality project management

Avoiding (fear) of taking decision

Solutions

Legal initiatives concerning the

qualifications criteria

Legal changes of the VAT

regime

COURAGE and

PROFESSIONALISM


Eppur si muove Gallileo Galilei

Benefits

Consolidation

Regionalization (when is smart done): using better the infrastructure and

companies’ resources, defeating the water consumption/ revenue

decreasing

Corporatization: introducing business management techniques by:

utilities’ bylaws, Delegation contract, Project Support Agreement, Loan

Agreement, Financing Contract

Financial soundness: clear tariffs policy and using MRD Reserve/ Fund


Content

introduction






Co-financing


Operators= Final Beneficiaries

Co-financing

approx. 10% of total value

Loan from IFI (EBRD, EIB) without guarantee

Loan from commercial banks

Tariff policy


Strategies were related to the investment projects

Tariff increases in real terms considering the affordability

criteria:

- 2000: 4.0% for the average household

- 2003-2004: 3.5% for the average household

- 2007-2011: 2.0-2.5% for the average household (4% for the

lowest decile)

Tariff approval process

Water Co.

propose

Regulator

check

Local Auth.

approve

Shareholders= Local Auth.

Government

CUSTOMERS

Water Act Delegation Contract

Loan/ Financing Agreement

Support Agreement

Tariffs


0,00 200,00 400,00 600,00 800,00 1000,00 1200,00 1400,00 1600,00 1800,00 2000,00

Denmark

Belgium

England & Wales

Finland

Switzerland

Austria

France

Mexico

Norway

Netherlands

Canada

Cyprus

Sweden

Poland

Israel

Hungary

Portugal

Spain

United States of America

Romania

Japan

Bulgaria

Italy

Hong Kong, China

South Korea

Mauritius

Macao, China

Chinese Taiwan

Iran

Average annual water cycle charges in 2013 for a consumption of 200 m³* in US$/200 m³

Fixed charge Variable charge Other charges drinking water Sewerage and waste water charge Other charges VAT


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Hungary

Norway

Denmark

Sweden

Finland

Romania

Bulgaria

Israel

Spain

Italy

Austria

France

Iran

Belgium

Japan

Portugal

Chinese Taiwan

Switzerland

Netherlands

Cyprus

Canada

England & Wales

Mexico

United States of America

Poland

China

South Korea

Hong Kong, China

Macao, China

VAT percentage on the total charge for 100 m³

VAT Total Charge 100 m³

Earn Before Income Taxation and Depreciation


Maintenance Reserve

for Development

Royalty for the public

patrimony

Tax Dividends

Long term debts

City w& ww system

(delegation

contract) Gross profit

Cash inflow

Cash outflow

Maintenance Reserve for Development mechanism

Conclusions/ Needs


Leadership: less bureaucracy and courage to take decisions

Tackle the challenges as soon as they appear

Harmonize the legislation

Co-ordinate actions and the investments (do not promote projects in

an unfair competition)

More management, less (hyper)controlling

Correctness

Never give up

Thank you !

Благодарᴙ за вниманиеᴛo!


Teodor Popa

Financial Manager

Compania Apa Brasov

[email protected]

Cristina Nedelcu

Head of Int’l Investment Department

Compania de Apa Buzau

[email protected]

mailto:[email protected]

mailto:[email protected]

sofia 2014 national conference

Environment

execution of projects

programthe romanian

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wss operators

european fundingthird

eu programme

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