28/06/20111 Meeting with DEVCO, Brussels, June 2011 EIBs STRATEGY IN THE MAURITIAN WATER SECTOR, A CASE STUDY Marco Beros EUROPEAN INVESTMENT BANK.

28/06/2011 1Meeting with DEVCO, Brussels, June 2011

EIB’s STRATEGY IN THE MAURITIAN WATER SECTOR, A CASE STUDY

Marco BerosEUROPEAN INVESTMENT BANK


CONTENTS

1. EIB Activity in the Water Sector

2. EIB in the Water Sector in Sub-Saharan Africa

3. EIB Strategy in the Water Sector in Mauritius

4. Outlook - Conclusion



Delfland Waste Water Treatment Plant (NL)Water Treatment Plant in Krakov (Poland)

St. Petersburg Flood Barrier



1.1 GeneralLargest source of loan financing to the sector,Total loan amount of EUR 23bn over the past 10 years (financing 282 major projects),The water sector represents almost 5% of total loans signed in the last 10 years (EUR 511 bn)On average, EIB lending represents 30% of the total investment cost of water projects,90% of the projects are located within the EU,EIB lends to public or private utility companies, national or local authorities or directly for project finance deals.EIB lending covers the whole water cycle (Water resources, water supply, sanitation, flood protection)



1.2 EIB’s Water Sector Lending Policy

River basin approach (IWRM)Sector development Adaptation to climate changeWater efficiency Development of new water supply Wastewater and sanitation servicesResearch and Innovation

Maximise Added Value


1. EIB Activity in the Water Sector1.3 Implementing the Policy: Key Actions (1/2)

IWRM (Integrated Water Resources Management):Promote IWRM + water services provision in a project

Support transboundary cooperation

Consolidation of institutional framework:Support appropriate level of integration of utilities to improve efficiency and enhance borrowing capacity

Enhance financial sustainability (sustainable cost recovery)

Adaptation to climate change (CC):Adaptation part of new lending priority in EIB CC Strategy

Promoters should consider adaptation in project design

EIB supports technical assistance (TA) with grants

Preparation, implementation of flood risk management projects



1.3 Implementing the Policy: Key Actions (2/2)Water efficiency:

Support efficiency in: (i) use by consumers; (ii) allocation of resources; (iii) systems (losses); (iv) management of utilities

Promote principle of cost recovery in line with WFD Support industries aiming at improving “water footprint”

Development of new water supply: Demand side management and efficiency as 1st priority Finance: (i) desalination with pre-requisites; (ii) dams, basin

transfers and fossil water under strict conditions

Wastewater and sanitation services: Always consider them when undertaking water supply

projects Sustainable cost recovery (incl. subsidies) Sustainable financing (blend loans, grants)


1. EIB Activity in the Water Sector1.4 Key Figures (1) : Signed Loans in the Water Sector

1.0

0.6

1.3

0.2

0.8

0.3 1.8

0.2

1.9

0.2

2.6

0.4

2

0.3

2.9

0.1

3.7

0.4

1.9

0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

EUR bn

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

EIB Lending to the Water Sector 2001 to 2010

Partner Countries

EU & EFTA

1.6 1.51.1

2.0 2.1

3.0 3.0

2.3

4.1

2.4

Total amount (2001-10): EUR 23bn, i.e. average of EUR 2.3bn p.a.

Note: EU as of 2007


1. EIB Activity in the Water Sector1.4 Key Figures (2): Breakdown by Region (2006-2010)

Amount of signed Projects in the Water Sector 2006 to 2010 (total EUR 14.8 bn), Breakdown by Region

ACP & South Africa3%

Mediterranean6%

Eastern Neighbours,

Caucasus, Central Asia1%

Candidates & Potential

Candidates2%

Asia & Latin America

1%

EU 2789%

Amount of signed Projects in the Water Sector 2006 to 2010 (total EUR 14.8 bn), Breakdown by Region

ACP & South Africa3%

Mediterranean6%

Eastern Neighbours,

Caucasus, Central Asia1%

Candidates & Potential

Candidates2%

Asia & Latin America

1%

EU 2789%

Average loan amount: EU 27 EUR 113m, Partner countries EUR 43m

Average loan amount: EU 27 EUR 113m, Partner countries EUR 43m

Note: EU as of 2007


2. The EIB in the Water Sectorin Sub-Saharan Africa (SSA)

Berg Dam (Republic of South Africa) Water Works in Dar-es-Salam (Tanzania)


Active in the water sector in SSA since 1974

Two mandates: Cotonou Agreement (ACP) and Republic of South Africa Mandate

Since 1974, signed loans amounted to 1.2 Bn EUR (for 64 projets)

EIB projects cover the full water cycle and have a strong focus on extending services to the unserved, including in rural and peri-urban areas

2. EIB Activity in the Water Sector in SSA2.1 General


Countries with at least 1 loan signed since 1974New countries with ongoing project studiesNew project studies in country with at least one loan

Countries with at least 1 loan signed since 1974New countries with ongoing project studiesNew project studies in country with at least one loan

2. EIB Activity in the Water Sector in SSA2.2 EIB’s Geographical Presence in SSA


2.3 Key figures 2001-2010Over the last 10 years, the water sector in SSA received 737m EUR from the EIB, 11% of total lending to SSA

22 projects were financed, each receiving on average 34m EUR loan

Mandate

Signed Loans

2001-2010

Water and Sanitation

... Of which for

water

Share of total

Number of

projects

Average loan per project

Bn EUR M EUR - - M EUR

Cotonou Agreement (ACP)

6.1 518 8 % 20 26

Total

SSA

+

RSA

… of which SSA - RSA

5.4 502 9 % 19 26

Republic of South Africa

1.4 235 16 % 3 78

Total 6.8 737 11 % 22 34

2. EIB Activity in the Water Sector in SSA


3. EIB Activity in the Water Sector in Mauritius

July 2012 (hopefully …)

Sewer Works in Mauritius Water Works in Mauritius



3.1 EIB Key Figures

EIB presence in Mauritius since 1975, total lending EUR 300m (to industry, agriculture, energy, etc.),

First water project signed in 1993. Total lending EUR 83m (total project cost EUR 305m) of which two contracts active currently:

Project Project Cost

EIB Loan

Dis-bursed

GoM Others

m EUR m EUR m EUR m EUR m EUR

CWA Reduction of NRW (signed 2002)

43.5 20 3.1 23.5 0

Plaines Wilhems Sewerage (signed Dec. 2001)

191.3 35 0.0 78.6 30.5 (EC)12.5 (ADB)17.1 (Kuwait)17.6 (others)



3.2 EIB’s two Promoters: CWA

Created in 1971, serves almost 100% of population

Decrease of financial and operations performance

Last tariff increase in 2002

CWA’s Profitability 2005-2009

NRW (2005-2010)

43%

50%


3. EIB Activity in the Water Sector in Mauritius3.2 EIB’s two Promoters: WMA

Created in 2001 (10 years contract with GoM)

Only 20% of population connected

Decreasing financial performance (last tariff rise 2006)

WMA’s Profitability 2004-2009



3.3 Situation in 2010 : trapped in a vicious cycle

- Low tariffs – reduced cashflows

- Poor collection rate

- Low creditworthiness

- Limited access to finance

- No investments

- Deteriorating assets

- O&M costs increasing

- Irregular/ poor service

- Poor quality water

- Unsatisfied customers

- Reduced willingness to pay



3.4 Situation in 2010 : EIB’s reaction

Finance and conduct a new tariff study for water and an update of that for waste water (initially financed by EU in 2006),

Stop disbursements until tariff increase obtained,

Coordinate approach with EU (budget support)

RESULTS (as of June 2011):

March 2011: Board decisions of WMA and CWA to increase tariffs,

Resume disbursement to CWA,

Not yet disbursed to WMA because contract with GoM ends August 2011 and extension not secured,


4. Outlook – Issues for discussion


4. Outlook – Issues for discussion

How to react in a difficult environment? (donor’s position vs. IFI’s position);

Push for more private sector involvement? (currently one WWTP under private operation, process for water and sanitation management service contract started in 2009, then aborted)

Affordability issues?

How to tackle corruption?

Enhanced co-operation between EIB and EC (and other donors, bilaterals and IFIs),


For more information please contact :

Marco Beros ([email protected] )

Tel: (+352) 43 79 827 48

EUROPEAN INVESTMENT BANK

http://www.eib.org/

THANK YOU FOR YOUR ATTENTION!

mailto:[email protected]

http://www.eib.org/

http://www.eib.org/

http://www.eib.org/

28/06/20111 Meeting with DEVCO, Brussels, June 2011 EIBs STRATEGY IN THE MAURITIAN WATER SECTOR, A CASE STUDY Marco Beros EUROPEAN INVESTMENT BANK.

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