FY 2018 Study on Business Opportunity of High-quality ...

FY 2018 Study on Business Opportunity of High-quality

Infrastructure to Overseas

(Feasibility Study for the Sewerage System Development Project in

the Philippines)

Final Report

February 2019

Ministy of Economy, Trade and Industry

Outsourcing Contractors:

Deloitte Tohmatsu Financial Advisory LLC

General Incorporated Association,

Global Water Recycling and Reuse System Association, Japan

Original Engineering Consultants Co., Ltd.

Table of Contents

Introduction .............................................................................................................................. 6

(1) Background and Objective of Study ................................................................................... 6

(2) Outline of the Study ....................................................................................................... 16

1. Reexamination of Existing Pre-F/S ....................................................................................... 22

(1) Overview of Existing Pre- F/S ......................................................................................... 24

(2) Results of Existing Pre-F/S ............................................................................................. 25

(3) Results of Reexamination of Existing Pre-F/S .................................................................. 25

(4) Countermeasures ............................................................................................................ 27

(5) Other Issues ................................................................................................................... 28

2．Basic Design of Water Treatment System ............................................................................ 30

(1) Review of Water Treatment Processes .............................................................................. 30

(2) Facility Capacity to Ensure A-SRT .................................................................................. 37

(3) Facility Capacity of Final Sedimentation Tank .................................................................. 38

(4) Flocculent Equipment (for phosphorus removal) ............................................................... 39

(5) Filtration Process............................................................................................................ 41

(6) Sludge Treatment Facility ............................................................................................... 42

(7) Effective Use of Filtered Water ........................................................................................ 43

(8) Water Treatment Facility ................................................................................................. 44

(9) Dealing with Effluents Containing Heavy Metals .............................................................. 54

3．Review of Project Implementation Scheme and Project Feasibility ........................................ 57

(1) PPP Application Status in Water Supply/Sanitation Sector in the Philippines ....................... 57

(2) Feasibility When Implemented as a Public Utility ............................................................. 58

(3) Review of Project Schemes ............................................................................................. 60

(4) VfM When Project Implemented as PPP .......................................................................... 62

(5) Feasibility Evaluation When Implemented as PPP Project ................................................. 65

(6) Feasibility Evaluation When Implemented as JV with Baguio City Water District ............... 66

(7) Sharing of Feasibility Review Results with Related Organizations ..................................... 68

4．Review of Benefits to Baguio City and the Philippines ......................................................... 69

(1) Review of Benefits to Baguio City ................................................................................... 69

(2) Expected Benefits to the Philippines as a Whole ............................................................... 72

5．Review of Financing .......................................................................................................... 75

(1) Overview of NSSMP ...................................................................................................... 75

(2) Expected Fund Sources for This Project ........................................................................... 77

(3) Interview Survey of Domestic and Overseas Financial Institutions ..................................... 81

(4) Review of Financing ....................................................................................................... 83

6. Review of Future Policy ....................................................................................................... 84

(1) Sharing Results of This Feasibility Study with Local Public Institutions (Baguio City, DPWH,

PPP Center)......................................................................................................................... 84

(2) Steps After This Study .................................................................................................... 85

(3) Challenges Towards Project Achievement ........................................................................ 86

(4) Future Schedule ............................................................................................................. 88

Abbreviation Table

Symbol English Term

A-SRT Aerobic Solids Retention Time

BDO Banco Deoro

BOD Biochemical Oxygen Demand

BOT Build Operate Transfer

BPI Bank of the Philippine Islands

CAS Conventional Activated Sludge

CBD Central Business District

CDIA Cities Development Initiative for Asia

CEPMO City Environment and Parks Management Office

CLUP 2013-2023 Comprehensive Land Use Plan of Baguio City

COD Chemical Oxygen Demand

CODCr Chemical Oxygen Demand by potassium dichromate

DBP Development Bank of the Philippines

DENR Department of Environment and Natural Resource

DOF Department of Finance

DPS Department of Public Services

DPWH Department of Public Works and Highways

EIRR Economic Internal Rate of Return

E/S Engineering Services

FIRR Financial Internal Rate of Return

NPV Net Present Value

HUC Highly Urbanized Cities

IRA Internal Revenue Allotment

JICA Japan International Cooperation Agency

JV Joint Venture

Kj-N Kjeldahl Nitrogen

LCC Life Cycle Cost

LGU Local Government Unit

LOI Letter of Intent

MBBR Moving Bed Bio-film Reactor

MLSS Mixed Liquor Suspended Solids

NCR National Capital Region

NEDA The National Economic and Development Authority

NO3-N Nitrate Nitrogen

NSSMP National Sewerage and Septage Management Program

OD Oxidation Ditch

PAC PolyAluminum Chloride

PDMF Project Development and Monitoring Facility

PO4-P Phosphate Phosphorus

PPP Public-Private Partnership

PWRF Philippine Water Revolving Fund

SBR Sequence Batch Reactor

SS Suspended Solid

T-N Total Nitrogen

T-P Total Phosphorus

UN United Nations

UPS Uninterruptible Power Supply

USAID United States Agency for International Development

VfM Value for Money

WD Water District

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Introduction

(1) Background and Objective of Study

The National Sewerage and Septage Management Program (NSSMP) in the Philippines was was

approved by the Administrative Board of the National Economic and Development Authority

(NEDA) in 2012. It sought to promote and develop sewerage infrastructure in urban areas beyond

Metro Manilla. Under this program, the central government introduced an implementation support

system where 40% of total development costs for sewerage infrastructure of local government units

(LGUs) would be subsidized by the national government, subject to standard appraisal procedures

headed by the Department of Public Works and Highways (DPWH). The said 40% subsidy cover

was eventually increased to 50% with the intent to attract more interested LGUs to apply for the

support facility.. However, as of February 2019, only one local government unit has officially

applied for the NSSMP support facility (Zamboanga City. In order to remedy this situation, the

DPWH established a policy of striving to increase the application of this system through the

expansion of local governments receiving the subsidy by means of infrastructure development.

Instead of restricting the subsidy facility only to highly urbanized cities (HUCs), the facility was

also made available to component cities (cities not regarded as highly urbanized) as well as first

class municipalities.

One of the reasons that sewerage infrastructure development has not progressed at the same pace

as what the Philippines requires is due to the limited basic infrastructure in urban localities outside

Metro Manila. However, the government of the Philippines is aware that delays in the provision of

sewerage services would not only lead to environmental degradation, but also have an adverse

impact on the tourism industry as well as agriculture, forestry, fisheries and other such industries.

Improving sewerage and septage conditions in the Philippines was manifested in the much

publicized closure of the popular resort island of Boracay in April 2018 by no less than President

Rodrigo Duterte at a cabinet meeting. The president at that time decided to close down the island

due to utter failures in sewerage management in the locality and due to sewerage management

violations of several establishments in the island. Furthermore, announcements that effluent

standards were not being upheld in 82 of 351 resort hotels in Bohol (another similar holiday

destination) also made news Therefore, it is expected that development of sewerage infrastructure

facilities will be strongly promoted in the future.

Another known tourist destination – Baguio City is proposed as the target location for this project.

It is one of a very few local governments in the Philippines which themselves provide public

sewerage services. This essentially indicates that the infrastructure for project implementation is set

in place. It is envisaged that formulating and implementing sewerage projects as a Public-Private

Partnership (PPP) will enable promotion as a business development model that can be utilized

various other cities in the Philippines.

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I. Overview of Project Target Area (Baguio City)

Baguio City in the center of the Luzon Island is located

approximately 250km north of the Metropolitan Manila Area

(Metro Manila). It has a population of about 350,000 (2015

census), an area of approx. 57.5 km2, and is catagorized as a

Highly Urbanized City (HUC) geographically situated in the

Province of Benguet, one of the provinces within the Cordillera

Administrative Region (CAR).

Due to its location at an altitude of about 1,500 meters, the

climate is cooler compared to other areas in the Philippines,

making it a popular summer destination especially for local

tourists. In 2017, Baguio City was visited by an estimated 1.5

million tourists – an increase of about 17.5% compared to the

previous year. The breakdown is as follows: 90% Philippine

nationals, with foreign tourists mainly consisting of Americans,

Koreans and Japanese. Furthermore, there are approximately 150 lodging and accommodations

facilities in the city, making tourism one of the key industries in the city.

On the other hand, since Baguio City is located in a steep mountainous area, there is a limit to

the amount of land that can be utilized for sewerage and septage facility use. According to the

Baguio City Comprehensive Land Use Plan 2013-2023 (CLUP), approximately 56% of the land in

Baguio City is designated as residential zones, and approximately 5% is designated as commercial

zones, implying that the development area has already reached the limit in terms of expansion,

making the land issue a bottleneck when attempting to implement projects with sizeable land area

in this city.

Fig. 2 Current Status of Land Usage in Baguio City

Source: Prepared by Study Team based on the Baguio City Comprehensive Land Use Plan 2013-

2023

There has been a report that Baguio City will be the next location to be designated as an

Ecotourism Zone by the Department of Environment and Natural Resources (DENR) after Boracay,

Palawan and Bohol due to the necessity to facilitate rebuilding from a massive earthquake that

occurred in the 1990s as well as the concentration of air pollution in the central part of the city as a

Fig. 1 Location of Baguio City

Source: Prepared by Study Team

Baguio City

Manila

8

result of the cone shaped topography1. According to this report, the importance of the role that the

environment plays in the tourism industry in Baguio City is positioned at the same level as the

international tourist destinations such as Boracay and Palawan, although no mention was made

regarding measures to deal with the decline in water quality.

Fig. 3 Scenes of Baguio City

Source: Baguio City

In addition, there is a robust agricultural industry in the region, and Baguio City is a center point

for highland crops harvested in and around the city. According to the Philippine Statistics Authority,

the gross domestic product growth rate in the Cordillera Administrative Region (a region with a

population of 1.72 million) was pegged at 12.1% in 2017 compared to the previous year, far

surpassing the national average growth rate of 6.7%, one of the highest growth rates in the entire

nation. The main industries consist of manufacturing at 52.1%, followed by the service sector

(39.6%) and agriculture, forestry and fisheries (8.3%). The main industry of Benguet province (a

province with approximately 446,000 inhabitants and where Baguio City is geographically situated)

is in mining gold, copper, and coal among others. However, agriculture has been strategically

positioned as a key industry from a long time ago. Due to its elevation and viability for growing

high value crops, an assortment of vegetables are produced in this area – giving the area the moniker

“The Salad Bowl of the Philippines”. In addition, it has also been called “Strawberry Country” in

recent years. Relevant persons in Baguio City are aware that improvement of the environment

through development of the sewerage system will make a substantial contribution to further

invigorating agriculture as another key industry in this city.

II. Overview of Water Supply in Project Target Region (Baguio City)

A) Overview of Sewerage System

The sewerage system infrastructure in Baguio City was developed through grant aids from

Japan between 1980 and 1990. The planned treatment capacity of the sewage treatment plant

that was developed in Baguio City in 1986 was 8,600 m3/day, with a service provision area

that consisted of the city center (with an approximate 10,000 households / business

establishments). In addition, the total length of sewer pipes is spanned approximately 57 km,

developed also through Japanese grant aid. Operations of the sewerage treatment facilities was

directly undertaken by the City Government of Baguio through a specialized office under the

City Environment and Parks Management Office (CEPMO).

1 GMA News Online (Dec. 9, 2018 “Baguio next ecotourism zone to be rehabilitated – DENR”)

9

Fig. 4 Current Status of Sewage Treatment in Baguio City (Pink portion is sewerage service

area)

Source: Baguio City CEPMO (City Environment and Parks Management)

Through time, , measures need to be taken to deal with the aging sewerage infrastructure in

Baguio City and the increase in treatment demand brought about by the continuous population

and economic growth of the locality. While the population of the city was somewhere between

100 and 200 thousand in the mid-1980s when operation of the sewage treatment facility began,

the population has grown to 350 thousand by 2015.

By 2010, the treatment facility On the other hand, approximately 12,000 m3/day of sewage

was being treated by year 2010, a figure roughly 30% more than the designed capacity of the

the existing sewerage treatment facility. This figure however dropped to 8,000 m3/day in 2013

due to the aging sewerage system of Baguio City.

Fig. 5 Population Growth in Baguio City

Source: Baguio City

119,009

183,142

226,883

252,386

301,926 318,676

345,366

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

1980 1985 1990 1995 2000 2005 2010 2015

10

Fig. 6 Transition in Sewage Treatment Volume in Baguio City

Source: CDIA Pre-F/S

Furthermore, it has been recommended in the NSSMP that while the local government is

charged with developing the sewerage system, maintenance of the facilities would be better

off transferred to the Water District (WD) which also provides water supply services in the

particular franchise area. Thus, the Study Team also looked into formulating a project scheme

that takes into consideration the possibility of transfer of sewerage system operation to the WD.

Baguio City will be collecting two usage fees/charges related to the sewerage system. The

first is a sewerage charge that entities using sewerage service are due to pay, consisting of 30%

of the basic charge for water supply collected. The second charge is an Environmental Charge,

with 20% of the basic charge for water supply collected from all parties who have water supply

connections, regardless of whether or not sewerage services are being provided.

B) Overview of Water Supply

The Baguio City Water District has jurisdiction of water supply in Baguio City. The WD

was established in 1975 and took over the task of water supply operations from the Department

of Public Services (DPS).

As of 2012, the Baguio City Water District supplies 8.61 million m3/year, covering nearly

the entire city. Water is supplied 24 hours/day in the Central Business District (CBD), and 6

hours/day in other areas2. Water consumption by households is the highest at 71%, followed

by commercial facilities which comprise 22% of total water consumption. Government

agencies (both national and city) consume 5% of total water consumption in Baguio City.

2 From CDIA Pre-F/S

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Source: Prepared by Study Team from CDIA Pre-F/S

Fig. 8 Baguio City Water District Supply Area (Yellow is 100% supply area)

Source: Pre-F/S

The future water supply plan calls for water supply to the entire population to be achieved

by 2020, with the supply volume increasing to 50,000 m3/day in 2022, approximately 1.2 times

the volume in 2013.

Fig. 7 Transition in Water Consumption and Customer Breakdown (For 2012)

(㎥/year)

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Fig. 9 Water Supply Population Forecast

Source: Prepared by Study Team based on the materials from Baguio City Water District

The Non-Revenue Water (NRW) rate as of 2013 was 31.4%. This figure has however

decreased to 24.8% in 2017. Plans call for the NRW rate to be further reduced to 20% by the

year 20203.

Fig. 10 Transition in Non Revenue Water (NRW) Rate

Source: Prepared by Study Team based on the materials from Baguio City Water District

III. Actions to Upgrade/Develop Baguio City Sewerage Infrastructure

Baguio City implemented a Pre-Feasibility Study (Pre-F/S) between 2015 and 2016 in

cooperation with the Cities Development Initiative for Asia (CDIA) based on the idea of utilizing

the above NSSMP subsidy. Short-, medium- and long term sewerage related infrastructure

development goals were set and planned thought his Pre F/S. The short-term (within 5 years) and

3 From Pre-F/S

Supply to entire population in 2020

13

medium-term (5 – 10 years) infrastructure development policy goals for this pre-F/S are described

below. These include updating/expansion of the current sewage treatment facilities,

updating/extension of sewer lines and other related works (Total short-term project cost: 2.9 billion

yen, medium-term: 5 billion yen).

Fig. 11 Baguio City Sewerage Services Goals in Pre-F/S

Source: Prepared by Study Team based on the Pre-F/S

Table 12 Approximate Sewerage Related Infrastructure Development Budget in Pre-F/S (2015

prices)

Note: Converted at 1 Peso = 2.1 Yen


■Current Situation

Treatment capacity of BSTP

8,600m3/day

The average daily inflow of sewage to the BSTP in 2010 was 12,434 m3/day . This is well beyond the 8,000 m3/day which is the treatment capacity of the BSTP.

Total length of sewer line

57 km

Total length of sewer line leading to the BTSP. Due to the BSTP’s limited capacity, the number of new connections is around 200 connections per year.

Sewerage connection rate

15 %

Sewerage service is provided in 65 /128 barangays either fully or partially. The total number of registered users is 9,820 (15 per cent of the population).

25% in 2020 100 % in 203550% in 2025

15,000m3/day32,000m3/day

+ DEWATS39,000m3/day

67 km

+ 15km replacement

117km 257km

Short-term Mid-term Long-term

*BSTP: The Baguio Sewage Treatment Plant

■Goals

14

Table 13 Main Projects in Sewerage Upgrade Program

Note: Converted at 1 Peso = 2.1 Yen


Initially, Baguio City envisaged that the project could be implemented by tapping into the NSSMP

subsidy (previously set at up to 40% of total project costs) based on the results of the CDIA Pre-

F/S, but an application for a subsidy was not made because it was difficult to raise capital to finance

the project from other sources to counterpart for the NSSMP subsidy. This led Baguio City LGU

to explore ways to compensate for counterpart funds, including venturing into Public-Private

Partnerships (PPPs).

IV. Actions by Baguio City Towards Sewerage Infrastructure Updating/Development

The significance of Japanese corporations participating in the Baguio City Sewerage Project is

organized in this section.

A) Baguio City – A Showcase for Public Sewerage Projects in the Philippines

As stated earlier, although the central government in the Philippines has ventured into promoting

the development of sewerage infrastructure beyond Metro Manila, At present, still many HUCs have

had limited to virtually non-existent sewerage infrastructure. Local governments around the country

have been kown to have low level of planning / implementation capabilities in the sewerage field.

In light of this, , if sewerage infrastructure updating / expansion succeeds in Baguio City, the city

will become a project model that can be used as an example to be spread throughout the country.

There are 334 cities with a population of 300 thousand or more that are of the same size or larger

than Baguio City outside Metro Manila (as of 2015). This means that the success of this project will

serve as a large opportunity for further business development. Although the project that is being

examined in this study is relatively small in scale since it involves the rehabilitation and expansion

of existing facilities, if sewerage projects are newly implemented in other HUCs, it would amount

to a market scale of approximately 100 billion yen for development of the sewage treatment

4 Excluding National Capital Region (NCR)

(Unit: Million Yen)

Phase Project Overview Approximate Project Cost Short-Term (within 5 years) Treatment Capacity Expansion of Current Treatment Facility (→ 15,000 m3/day) 616

Development of New Small-Scale Treatment Facility (3,000 m3/day) 287

Development of Sludge Treatment Facility 25

Replacement of Sewer Pipe (Approx. 15 km in central area) 1,195

New Sewer Pipe (Approx. 10 km) 798Medium-Term (5 – 10 years) Development of New Treatment Facility (7,000 m3/day) 1,806

Rebuilding of Current Treatment Facility (→ 25,000 m3/day) 840Development of New Small-Scale Treatment Facilities (multiple locations) 578

New Sewer Pipe (Approx. 10 km) 1,554

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facilities alone.

In addition, according to the United Nations (UN), urbanization in the Philippines amounted to

44.3% in 2015, but it is estimated that the urban population in the Philippines will exceed the rural

population by the year 2040. It is therefore expectd that the need for sewerage services and

infrastructure will continue to increase with the sustained progression towards urbanization in the

country.

It is also expected that the market scale will expand further with the the necessity of providing

sewerage services in tourist destinations aside from HUCs.

B) Environment That Can Utilize Advanced Technology/Knowhow of Japanese

Corporations

As Baguio City is situated in a mountainous region with an altitude of 1,500 meters, the

topography makes it difficult to secure a large site. This means that there is very limited land sizeable

enough for updating or expanding the existing sewerage facilities. A very viable option is to expand

the capacity of the current site through the use of advanced technologies. Baguio City has received

unsolicited proposals a number of times for sewerage projects, but has not adopted any of these as

proposed undertakings required that the sewerage services currently being provided would be

interrupted. The utilization of technology from Japan should the expansion of facilities possible,

while to provide the existing services.

C) Importance of Preparations for Reorganization of Sewerage Services in the Future

As stated earlier, the NSSMP guidelines indicate that the viability of WDs being responsible for

maintenance of sewerage facilities in the future. With Metro Manila concessionaires Manila Water

Company, Inc. and Maynilad Water Services Inc. providing both water distribution and sewerage

and septage services, there is a high level of possibility that the WD in Baguio City can become an

entity in charge of sewerage service in the future. Water charges in the Philippines are high

compared to the income level (Per capita GDP of approximately US$3,000) (Reference: Basic

charge for households classified as Residential A in Baguio City [up to 10 m3] is approximately

¥780 [12A] – up to approximately ¥56,000 [18A]), the above water supply business concessionaires

in Metro Manila are able to earn a profit every fiscal year. Even if there is not a high level of

feasibility of the sewerage service as a stand-alone business, early participation in both the water

supply and sewerage service businesses in anticipation of integration of the two service operations

will enable the businesses to absorb future demand, which will contribute to further business

development.

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(2) Outline of the Study

The outline of this feasibility study is described as follows.

This feasibility study will be implemented in the following five steps: “Reexamination of Existing

Pre-F/S”, “Basic Design of Water Treatment System”, “and Review of Project Implementation

Scheme and Project Feasibility”, “Study of Benefits to Baguio City and the Philippines” and “Study

of Financing”. When the study is conducted, recommendations will be made on the adoption of the

appropriate infrastructure, facilities and operation methods from the perspectives of “Securing a

Competitive Edge for Japanese Corporations”, “Compliance with Environmental Standards”,

“Overcoming Various Restrictions” and “Economic Effect on the Locale”.

Fig. 14 Work Flow of This Feasibility Study


Fig. 15 Key Points for This Feasibility Study


Furthermore, during this feasibility study, the possibility of participation in activities that have

Step 1:Review of Exiting Pre F/S

Step 2:Basic Design of Water Treatment System

Step 3:Studies on Project Schemes and Feasibility

Step 4:Studies on Benefits for Baguio City and the Philippines

Step 5:Studies on Way of Financing

• Review of preF/S• Onsite survey

• Basic design of water treatment system which utilizes Japanese companies’ know-how under the conditions of Baguio City

• Preliminary calculation of cost

• Feasibility studies based on assumed cost and revenue

• Sounding toward local enterprises in order to formulate project schemes

• Preliminary calculation of benefits for Baguio City and the Philippines by implementing the project

• Examination of way of financing for private entities for PPP project part

• Setting of a timeline and actions

• Holding a debriefing session

• Necessity of increasing treatment capacity of existing sewage treatment facility where there is no additional space.

• Necessity of building additional treatment facilities while maintaining current treatment capacity.

• Necessity of indicating technical capabilities and cost competitive edge (LCC) so that Japanese corporation is selected.

• Necessity of creating horizontal development business scheme that utilizes above competitive edge.

• Necessity of complying with effluent standards which are becoming stricter.

• Necessity of adopting local materials, equipment and manpower as much as possible

• Necessity of attempting to maximize beneficial effect on agriculture and tourism industry.

Securing a Competitive Edge for Japanese

Corporations

Compliance with Environmental

Standards

Overcoming Various Restrictions

Economic Effect on the Locale

17

been proposed in the Pre-F/S including expansion of the existing sewage treatment facility (short-

term project) and upgrading / rehabilitation (medium-term project) + facility maintenance will be

verified.

Fig. 16 Existing Sewage Treatment Facility Expansion/Upgrading/Rehabilitation Plan

(Short-term Case in the Pre-F/S)

Source: Prepared by Study Team from CEPMO and based on the materials from Baguio City

I. Reexamination of Existing Pre- F/S

As stated in “III. Actions to Upgrade/Development Baguio City Sewerage Infrastructure in (1)

Background and Objective of Study in the Introduction”, the current status of sewage treatment in

Baguio City, sewerage infrastructure development plans and approximate cost for infrastructure

development were determined and calculated in the Pre-F/S. The Pre-F/S stipulates that the

treatment capacity of the current treatment facility will have to be expanded from 8,600 m3/day to

15,000 m3/day in the short-term plan (within 5 years). Therefore, the facility capacity needs to be

expanded by at least 6,400 m3/day. In addition, in order to satisfy the current treatment capacity of

8,600 m3/day, the existing 8,600 m3/day facilities need to be rehabilitated for one line (2,150 m3/day)

or two lines (4,300 m3/day) after the expansion is completed. At this time, the operation capacity of

the sewage treatment facility will have the capacity described below, enabling to satisfying the

current capacity of 8,600 m3/day.

A) New facility treatment capacity + Existing 3 lines operated (each line repaired) = 6,400 m3/day

+ 6,450 m3/day = 12,850 m3/day > 8,600 m3/day OK

B) New facility treatment capacity + Existing 2 lines operated (two lines repaired) = 6,400 m3/day

18

+ 4,300 m3/day = 10,700 m3/day > 8,600 m3/day OK

Furthermore, the medium-term plan (5 – 10 years) stipulates that the current treatment facility

will have to be rebuilt (increasing capacity from 15,000 m3/day to 25,000 m3/day). This indicates

that improvement and rehabilitation of the existing facility will be completed during the short-term

plan, that rebuilding during the implementation of the medium-term plan is illogical, and that

expansion of capacity by 10,000 m3/day or new facilities need to be considered for the medium-

term plan.

Therefore, during this feasibility study, the relevance of the items described in the Pre-F/S will

be analyzed by means of the field survey and other work, and the work methods, cost unit price and

other details to be adopted will be reviewed.

II. Basic Design of Water Treatment System

The following review will be conducted in order to implement the Basic Design of Water

Treatment System. During this review process, in addition to the treatment capacity, the ripple

effects on Baguio City (e.g. whether or not procurement can be performed in the city will also be

considered), initial investment, maintainability, operating costs, maintenance costs, energy saving

effect, LCC and other details will be taken into consideration.

A) Review of Water Treatment System

The ease of operation, maintainability, energy saving effect and other details will be reviewed for

the following content.

(a) Sequence Batch Reactor (SBR) Process: Inflow method, aeration method (oxygen supply

method) and nitrification control

(b) Advanced Treatment OD Process: Aeration method (oxygen supply method) and nitrification

control

B) Reconsideration of Facility Capacity to Secure A-SRT

Since a certain level of A-SRT is required in order to remove the nitrogen (A-SRT > 5.4d with a

design water temperature of 20C), the capacity of the OD tank at the existing facility (8,600

m3/day) will be reviewed.

C) Reconsideration of Final Sedimentation Tank Capacity

The relevance of the capacity of the existing Final Sedimentation Tank (retention time) and the

surface loading capacity will be reviewed.

D) Flocculation Facility (For phosphorous removal)

The ease of procurement, price and other details for the type of flocculants (polymer type, ferrous

type, aluminum type) will be reviewed.

E) Filtration Process

When flocculants are used to remove phosphorous, the Suspended Solids (SS) generally need to

be reduced since the sewage to be treated contains 3 – 4% of phosphorous. The following filtration

19

processes will be considered as the process used to reduce the level of SS.

(a) Filtration Processes: Sand filtration, fiber filtration, membrane filtration

F) Sludge Treatment Facility

The increase in the volume of water treated will require additional dehydrators. The number of

dehydrators required will be reviewed, taking into consideration 24 hour operation and other factors.

In addition, since the excess sludge from the final sedimentation tank can be directly dehydrated, it

may be possible to eliminate the sludge concentration tank, so this matter will also be taken into

consideration.

G) Effective Usage of Filtered Water

Introduction of a filtration process to remove phosphorous is being under consideration, which

will allow to maintainance of water quality suitable for reuse. Therefore, effective usage for other

locations in addition to within this facility will be considered.

H) Water Treatment Facility

The results of the field survey and items A) to G) will be used to set the preconditions for basic

design and estimate the capacity of the water treatment facility.

I) Handling of Waste Water Containing Heavy Metals

It was clarified in the field survey that the inflowing sewage contains heavy metals, and these

heavy metals need to be separately treated, but this will be excluded from the sewage treatment

facility plans that are being made this time. However, proposals will be made on examples of how

to deal with waste water that contains heavy metals.

III. Review of Project Implementation Scheme and Project Feasibility

Based on the specification settings for the infrastructure facility and the approximate cost

stipulated from the results of section I. and II., a review will be conducted on what type of

infrastructure can be developed and maintained by a consortium of Japanese corporations. As stated

in section “(2) Outline of the Study in the Introduction”, it is expected that the core projects will be

the expansion of the existing sewage treatment facility (short-term project) and upgrading /

rehabilitation (medium-term project).

20

Fig. 17 Project Implementation Scheme and Feasibility Review Process


After the above work is performed, several project implementation schemes that are feasible will

be set. Furthermore, as it is presumed that the costs related to infrastructure development cannot be

adequately recovered with sewerage related charges alone, it will be difficult for a private sector

company to cover the demand risk. Therefore, although adoption of the PPP availability payment

type will be kept in mind for this feasibility study, the self-supporting type will be also considered

to provide comparison materials in order to review how the development of the related infrastructure

and maintenance can be performed over a certain period of time. Moreover, the Generic Preferred

Risks Allocation Matrix (GPRAM) utilized by the Philippine PPP Center will be used as the base

for the method to allocate the risk when implementing a PPP project in the Philippines, and the

adoption of GPRAM will adequately be reviewed, taking into consideration the characteristics of

sewerage services and the fact that there is a tendency to transfer too much of the risk and obligations

to the private sector.

In addition, as stated in “IV. Actions by Baguio City Towards Sewerage Infrastructure

Updating/Development under (1) Background and Objective of Study in the Introduction”, although

sewerage services are currently being directly operated by the city, it is quite possible that the Water

District will be placed in charge of this role in the future from the perspective that this is the policy

of the central government. This may lead to enhanced operational efficiency. Consequently, when

the review of the project scheme is performed, the possibility that the Water District to serve as a

business partner from a long-term perspective will be kept in mind when considering short/medium-

term contract policy.

Furthermore, when the PPP scheme is formulated, the various laws and regulations related to PPP

(revised BOT law, JV guidelines, foreign investment regulations, etc.) will be taken into

consideration during the review process. In particular, for projects that are implemented under the

revised IRR of the BOT law, a Philippine capital ratio of 60% or more needs to be secured. Therefore,

during this feasibility study, cooperation candidates will be narrowed down while conducting an

opinion exchange with local influential firms. After this is performed, a review will be conducted

to determine whether or not VfM can be achieved based on the premise that the private business

will need to secure a certain level of profit in order to select the most effective method while having

discussions with the local cooperation candidates. Subsequently, discussions will be held with

Setting of Infrastructure Development/Maintenance Scope by Japanese Corporations

• The scope of the infrastructure developed/maintained by Japanese Corporations will be set by taking into consideration the specifications of the infrastructure developed and local circumstances (review of related infrastructures based on the results for treatment facility).

Setting of Project Patterns (2 – 3 patterns)

• Setting of self-supporting type, availability payment type, etc.

• Project term, various guarantees and other details will be stipulated, taking into consideration local circumstances.

Calculation of VfM, Review of Feasibility

• The VfM for Baguio City as a result of project implementation will be calculated. The feasibility of the operator will be considered at this time.

• Interviews of local companies and other organizations will be implemented to facilitate formulation of the project scheme.

Discussions with Related Organizations

• Confirmation concerning costs to be borne by Baguio City

• Discussion with DPWH (confirmation of the possibility of providing NSSMP subsidy, project scale, etc.).

• Discussions with local companies on potential of cooperation.

21

Baguio City, DPWH and other related parties, and the feasibility for project implementation and

challenges will be summarized.

IV. Review of Benefits to Baguio City and the Philippines

The benefits provided to Baguio City and the Philippines as a result of implementation of this

project will be reviewed. Since it was calculated that the Economic Internal Rate of Return (EIRR)

when this entire project is implemented as stipulated in the Pre-F/S would exceed 30%, it has

already been recognized that this project will have a large impact on Baguio City. Therefore,

although it is probably not necessary to recalculate the EIRR, the effect of this project on agriculture

and tourism will be reviewed in this study since these industries are considered to be key industries

in Baguio City.

V. Review of Financing

When the NSSMP subsidy (up to 50% of development cost) is applied to the infrastructure project

that is being reviewed with this feasibility study, the private business will need to procure 50% of

the funds to pay for infrastructure development (please pay attention to the fact that in the revised

BOT law, burden of the development costs on the public agency side is limited to less than 50% of

the entire infrastructure development costs.). Therefore, fund procurement methods for the above

50% will be reviewed.

Specifically, it is expected that funds can be procured from commercial banks, loans made by

public institutions and other funds, and that investments will be made by private businesses, which

will be reviewed along with the project scheme. During this review, interview surveys will be

conducted with a focus on local and other financial institutions in the Philippines based on the

overview of the project scheme results, and information on the amount of funds to be procured,

financing conditions and other details will be collected and organized.

VI. Review of Future Strategy

Based on the results of I. – V., the project scheme proposal will be compiled, and a report meeting

will be implemented for Baguio City and the DPWH.

22

1. Reexamination of Existing Pre-F/S

In this chapter, the relevance of the items described in the Pre-F/S will be analyzed by means of the

field survey and other information, and the results of the review of the methods, cost unit price and

other conditions to be adopted will be described. The field surveys were conducted with the schedule

described below.

First Field Survey: July 30 – August 3, 2018 (5 days)

Second Field Survey: September 25 – 29, 2018 (5 days)

Third Field Survey: October 21 – 25, 2018 (5 days)

Fourth Field Survey: January 28 – February 2, 2019 (6 days)

Table 18 Survey Schedule

# Item 2018 2019

Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb.

1 Reexamination of Existing Pre-F/S

2 Basic Design of Water Treatment System

3 Review of Project Implementation Scheme

and Project Feasibility

4 Review of Benefits to Baguio/Philippines

5 Review of Financing

6 Review of Future Strategy

Field Survey


★ ★ ★ ★

23

Fig. 19 Photos of Field Survey (Survey of Existing Facilities in Baguio City)

Source: Study Team

Source: Study Team

Fig. 20 Photos of Field Survey (Meeting with the Mayor of Baguio)

24

(1) Overview of Existing Pre- F/S

As stated in “III. Review of Project Implementation Scheme and Project Feasibility under (2)

Outline of the Study in the Introduction”, a Pre-F/S was implemented between 2015 and 2016 for

sewerage management in Baguio City with the cooperation of CDIA by means of the ADB fund.

An overview of the treatment process reviewed in the Pre-F/S is shown in the table below.

However, as effluent water standards of the Philippine government became stricter after the Pre-F/S

was conducted5, it is currently necessary to remove phosphorous / nitrogen and other such pollutants

which was not foreseen initially in the Pre F/S.

Table 21 Overview of Existing Pre-F/S Treatment Process Review

CAS* OD Process SBR MBBR*

Overview of

Treatment

Process

Process where

water is treated

with following

flow: primary

sedimentation tank

⇒biological

reactor⇒final

sedimentation

tank.

Inflowing sewage

↓

Primary

sedimentation tank

↓

Biological reactor

↓

Final

sedimentation tank

↓

Treated water

Process that does

not have primary

sedimentation

tank, and uses

endless channel to

perform biological

reaction.

Inflowing sewage

↓

Biological reactor

(Endless channel)

↓

Final

sedimentation tank

↓

Treated water

Process where

water is treated

with single

reaction tank.

Inflowing sewage

↓

Biological reactor

↓

Treated water

Process where

water is treated in

a biological

reactor filled with

carriers.

Inflowing sewage

↓

Biological reactor

(filled with carriers )

↓

Final

sedimentation tank

↓

Treated water

Rough

development cost

for 5,000 m3/day

treatment plant (M

USD)

3.11 3.29 2.88 2.23

Rough annual

O&M cost

(M USD)

0.337 0.362 0.314 0.258

25 year project 1.18 1.01 1.28 0.95

5 Water Quality Guidelines and General Effluent Standards of 2016

25

cost (1 m3)(PHP)

Track Record

Adopted in Metro

Manila.

Adopted in

Baguio City and

other areas in the

Philippines.

Adopted by

private sector

development in

the Philippines,

but mainly less

than 5,000

m3/day.

Not adopted in the

Philippines, but

may be chance to

consider due to

track record in

Europe.

Main Risks

Low risk since

technology is

established and

has track record in

the Philippines.

Weak with

respect to load

fluctuation.

Low technical

risk since adopted

at existing facility

in Baguio.

Impossible to

expand functions

with existing

facility due to site

limitations.

Flocculants need

to be added to

remove

phosphorous.

Technically

advanced and

complicated, risk

that treatment not

successful

(technical/cost).

Need adjustment

tank before

reaction tank to

level sewage.

Possibility that

effluent standard

may not be

satisfied.

No track record

in the Philippines.

Due to features

of biotreatment,

risk that expected

effect not obtained

(commercial risk).

Not suited to

removal of

nitrogen /

phosphorous

Source: CDIA Pre-F/S

Note: CAS: Conventional Activated Sludge, MBBR: Moving Bed Bio-film Reactor

(2) Results of Existing Pre-F/S

In the existing Pre-F/S, short-term / medium-term / long-term goals were set for development of

sewerage related infrastructure, and a short-term plan (within 5 years) was formulated to expand

treatment capacity of the existing facility from 8,600 m3/day to 15,000 m3/day. In addition, as the

removal of phosphorous / nitrogen needs to be taken into consideration, MBBR was identified as

the optimum process.

(3) Results of Reexamination of Existing Pre-F/S

In the existing Pre-F/S, the conclusion was made that an SBR or MBBR for which the installed

area is small was appropriate as the treatment process for the expanded facility as nitrogen or

phosphorous limits in the final effluent of sewage treatment plant were out of scope.

However, during this reexamination, the removal of nitrogen and phosphorous had to be

considered when selecting the appropriate treatment process. Therefore, an advanced treatment OD

process that is an oxidation ditch process enabling removal of nitrogen and a sequence batch reactor

(SBR) process that can remove both nitrogen and phosphorous by using a specific

operation/management method have been deemed viable candidates.

Regarding the existing facility, it would be appropriate to modify the OD process currently being

26

used into an advanced treatment OD process considering the maintainability and construction costs,

and as for the facility newly constructed or upgraded, it would be appropriate to improve treatment

performance by using the SBR or the advanced treatment OD process.

The settings for the treatment facility scale and treatment process review content are described

below.

I. Change in Environmental Standards

Due to the fact that the Balili River into which treated water discharges from the existing

treatment plant is upstream from the point where water for the city water supply is taken, the Class

A Water Quality Guidelines and General Effluent Standards of the Philippine government are

applied. The water quality guidelines are described below.

Table 22 Effluent Water Quality Standards

CLASS

Water Quality Item A C C (1990)

BOD mg/L 20 50 50

COD* mg /L 60 100 100

Nitrate-Nitrogen mg /L 14 14 ━

Phosphorous mg /L 1 1 ━

Coliform Count

(Fecal Coliform) MPN/100mL 3,000 (4) 10,000(400) ━

Source: Water Quality Guidelines and General Effluent Standards of 2016 (DENR)

* COD: Chemical Oxygen Demand

II. Residential Population

The growth of resident population is expected to slow down in the future. However, it is predicted

that improvement of the living environment brought about by development of the sewerage system

will result in a continuing increase in the population. In the previous Pre-F/S, it was predicted that

while the population would increase, there would be a slowdown in the population growth rate, and

since this is deemed in line with actual conditions, the actually planned design values were adopted.

The actual and predicted resident population are described in the table below.

27

Table 23 Predicted Future Residential Population

(Unit: Persons, %)

Year

Area

Actual Predicted

2010 2015 Annual

Growth 2025 2035

Annual

Growth

Ambalanga 19,640 24,000 4.50 33,000 44,000 3.00

Balili 13,116 138,000 1.00 152,000 168,000 1.00

Bued 79,150 94,000 3.50 115,000 140,000 2.00

Galiano 84,050 91,000 1.60 101,000 111,000 1.00

Total 195,956 347,000 2.04 401,000 463,000 1.45

Source: Pre-F/S

III. Sewage Volume Primary Unit

The actual water supply volume is adopted as the sewage volume primary unit, which is 120

L/person/day.

IV. Future Sewage Volume

The sewage volume primary unit is multiplied by the projected future population in order to

predict the sewage volume in the future described in the table below.

Table 24 Predicted Future Sewage Volume (2035)

Year

Area Population

(Persons)

Primary Unit

(L/person/day)

Future Sewage Vol.*

(m3/day)

Ambalanga 44,000 120 5,500

Balili 168,000 120 21,000

Bued 140,000 120 17,000

Galiano 111,000 120 14,000

* Future sewage volume is rounded up to 500 or 1,000


(4) Countermeasures

I. Treatment Processes That Can Handle Demand

In consideration of compliance with effluent standards, the available space at the treatment plant

and maintainability, the following two treatment processes were selected as the candidates to

upgrade the functions of the facility.

28

Fig. 25 Overview of Treatment Processes

Treatment Name Treatment Process

Advanced

treatment OD

process

Advanced treatment that provides anaerobic zones and aerobic zones in the

appropriate ratio in an OD process biological reactor (without endless channel).

SBR process

Anaerobic – aerobic condition is created during the treatment process in order

to achieve advanced treatment effect.

II. Facility Introduction Method

The current sewage inflow volume is approximately 8,000 m3/day, so it is not possible to stop the

existing OD process (8,600 m3/day). Therefore, the new advanced treatment OD process or SBR

process facility will be installed on the site currently being used within the existing treatment plant

as a sludge sun-drying facility, but since the current sludge treatment cannot be stopped, the

judgment has been made that treatment capacity needs to be upgraded with the following procedure.

A) Secure another site as a temporary sludge treatment facility.

B) Build new treatment facility on current sludge drying facility site.

C) Modify existing OD process. (When existing facility is used, its service life will need to be

reconsidered.)

(5) Other Issues

This feasibility study revealed that there are the following problems that need to be addressed in

addition to upgrading of the functions of the treatment plant at the sewage treatment facility in Baguio

City.

I. Sewer Culverts

The sewage inflow volume has decreased in recent years, and it was clarified that collected

sewage is being directly discharged into the public water area due to damage to the sewer culverts.

Therefore, the judgment was made that the sewer culverts needs to be rehabilitated or repaired, but

there is not a local contractor with the technology to rehabilitate or repair the sewer culverts.

Consequently, the judgment can be made that sewer culverts should be rebuilt, rehabilitated or

Reaction Sedimentation Effluent Discharged

Sludge

Inflow

Reaction Tank

Final Sedimentation

Tank

Excess Sludge

Treated Water

Reaction Tank Effluent

Returned

Sludge Influent

29

repaired with a method that minimizes the Life Cycle Cost (LCC), keeping in mind the possibility

of needed replacement of some sewer culverts.

II. Handling of Breakdowns (Pumping Station)

The pumping station at the treatment plant had broken down, and it was confirmed that it has

been out of service for six months since the necessary parts were not available. Therefore, a system

and a supply chain need to be urgently established to provide repair services for the machinery that

has broken down.

III. Handling of Poor Quality Sewage

Heavy metals are mixed in with the inflowing sewage, and the Biochemical Oxygen Demand

(BOD) load was higher than the design value. This leads to the judgment that guidance needs to be

provided from administrative agencies since it is caused by poor quality wastewater from factories,

hospitals and restaurants. In addition, it would be appropriate as a countermeasure that a facility

that has functions to reduce BOD load be installed at the sewage treatment plant.

IV. Septic Tank Sludge

It was found that sludge recovered from septic tanks were being directly disposed into the sewage

treatment plant. A septic tank sludge treatment facility is currently being constructed, but such

methods of disposal needs to be immediately improved.

30

2．Basic Design of Water Treatment System

This section describes the basic design of water treatment system. During the review process, in

addition to the treatment performance, the ripple effects on Baguio City, initial investment,

maintainability, operating costs, maintenance costs, energy saving effect, LCC and other

considerations. Also, regarding the water treatment processes, as a result of re-examination of the

existing pre-F/S in the previous section, the study was carried out for the following two cases.

Case Ⅰ: Sequence Batch Reactor (SBR) Process (new construction: 9,000 m3/day) + Advanced

Treatment OD Process (expansion or upgrading: 12,000 m3/day)

Case II: Advanced Treatment OD Process (new construction: 9,000 m3/day) + Advanced


In addition, heavy metals are contained in the sludge of the existing treatment plant, so for the sludge

treatment facility, dehydrators shall be out of scope and concentration and storage were reviewed.

(1) Review of Water Treatment Processes

I. SBR

A) Details of Review

The SBR process is a sewage treatment approach in which a single reaction tank has the functions

of oth breaction tank and final sedimentation tank, and the activated sludge reaction and liquid

mixture deposition, discharge of supernatant water, and the process of removal of the deposited

sludge are carried out repeatedly. Compared with other treatment processes, this treatment process

is easily affected by fluctuations in quantities of water inflowed, so a flow equalization tank is

needed to levelize the quantity of inflow to the reaction tank.

In this section, the results of the study to determine whether it is possible to install the facility

required to extend the capacity up to 9000 m³ per day by SBR are discussed.

■ Continuous Inflow Type and Intermittent Inflow Type

The potential for introduction of the continuous inflow type SBR in which the sewage

continuously flows into the reaction tank, and the intermittent inflow type SBR in which the sewage

flows into the reaction tank only during the reaction process (mainly aeration) were reviewed.

■ Aeration Method

31

Table 26 Aeration Methods

(a) Fine Bubble Injection (b) Aeration Device +

Agitator

(c) Mechanical Agitation by

Submersible Mixer

Schematic

Diagram

Process and

Principle

The batch tank liquid

mixture is circulated with a

pump, and by finely

dividing the air with the

energy, the oxygen transfer

efficiency is increased.

During mixing and injection

and during transfer within

the tank, shear forces are

produced at gas‐liquid

interfaces by the flow rate

of the gas and liquid and by

friction, so the oxygen is

transferred and the gas-

liquid are renewed, and in

addition the surrounding

liquid is drawn in and

agitated.

Oxygen is supplied by an

aeration tube (flexible tube),

and for anaerobic operation

agitation is carried out using

a separate submersible

agitator.

Note that slits are provided

in the flexible tube, so with

this structure blockage does

not occur even with ON-OFF

operation.

Agitation of the batch tank

liquid mixture is carried out

mechanically, and at the

same time the injected air is

broken down to increase the

oxygen transfer efficiency

and power transmission

efficiency.

The two functions of

agitation and aeration are

concentrically integrated in

the submersible

aerator/mixer, which is

installed on the bottom of the

batch tank.

Equipment

Configuration

1. Blower

2. Circulation pump

3. Fine bubble injection

device

1. Blower

2. Aeration device

3. Agitator

1. Blower

2. Submersible mixer

Blower

Circulating Pump

Overall Configuration


Blower

Agitator Detailed Sectional View Detailed Sectional View

of Aeration Parts

Air

Air


Liquid Gas

Nozzle

Liquid Nozzle

Aerator

Blower

Mechanical Submersible

Mixer

Agitator

Cylinder

Diffuser

Flexible Tube

32

Source: Guidelines and Commentary on Planning and Design of Sewage Treatment Facilities – Sequel

2009 Edition

■ Nitrification Control

A review was carried out into the stable operation of the advanced treatment facility and the

energy saving by the application of nitrification control to the SBR process.

B) Results of Review

■ Continuous Inflow Type and Intermittent Inflow Type

In order to deal with advanced treatment of sewage (removal of nitrogen), the intermittent flow

type SBR is adopted to enable nitrogen removal, with inflow of sewage only during the reaction

process, by setting the anaerobic- aerobic state.

■ Aeration Method

(a) Fine Bubble Injection

The equipment configuration is simple. The water energy is produced by circulation using a

submersible pump, for which maintenance is simple, and pumps are general-purpose items

which has the advantage of ease of procurement of consumable parts.. Nitrogen can be

removed by stopping the blower and carrying out agitation using the circulation pump only.

(b) Aeration Device + Agitator

The equipment configuration is simple. The water energy is produced by a submersible

mixer only, making maintenance easy. The submersible mixer is a general-purpose item which

has the advantage of ease of procurement of consumable parts. Nitrogen can be removed by

stopping the blower and carrying out agitation using the mixer only.

The service life of the aeration device is about 5 years, so replacement is necessary.

(c) Mechanical Agitation by Submersible Mixer

The two functions of agitation and aeration are done and concentrically integrated in the

submersible aerator/mixer. This type of equipment is considered uncommon. During inspection

of the submersible mixer, it is necessary to raise this heavy equipment out of the water, so it is

necessary to consider maintainability. Nitrogen can be removed by stopping the blower and

carrying out agitation by the mixer only.

It is necessary to send the submersible mixer back to the factory for overhaul.

The aeration method has a simple configuration of equipment and maintenance is easy. Also it

33

is judged that it is advantageous in terms of maintenance cost, so it is desirable to adopt the fine

bubble injection method.


Nitrification control is carried out to control ammonia concentration in the sewage. This is

measured at the point of inflow and at intermediate points, and appropriate suppression is applied

to the quantity of air in accordance with the concentration of ammonia at the outlet of the reaction

tank in accordance with the target. (Energy efficient control is achieved by reducing the excess

air of the blower as much as possible). This nitrification control can be applied to a plug flow

type (extruder) reactor, in which there are inflow and intermediate points. With the SBR process,

operation is single tank intermittent operation and not plug flow, so it is envisaged that the

ammonia concentration will be the same value at the inflow point and at intermediate points, so

it is judged that it is not possible to apply to the nitrification control.

II. Review of Advanced Treatment OD Process (including control of ammonia)


The OD process is a sewage treatment process in which no primary sedimentation tank is

provided, and an endless channel having a mechanical type aeration device is used as a reaction

tank in order to carry out the activated sludge treatment at low load. Solid-liquid separation is carried

out in the final sedimentation tank. On the other hand, the site area for an oxidation ditch tank of

this facility is too narrow, so it is necessary that the water depth be 3 m deeper than normal which

is the same as the existing facility. In addition, it is necessary to form appropriate anaerobic and

aerobic zones within the tank for advanced treatment.

In this section, the method of aeration, ammonia control, facility capacity, etc., was reviewed

taking into consideration the functions and conditions as described previously.

■ Aeration Method

In addition to supplying the necessary oxygen for the process, the aeration device mixes and

agitates the activated sludge and the inflow water within the reaction tank, applies the flow rate

to the liquid mixture for circulation within the reaction tank, and ensures that the activated sludge

is not deposited. As stated previously, in this facility, it is necessary to have a water depth 3m

deeper than normal. It is also necessary to appropriately form anaerobic and aerobic zones within

the tank.

During this review, selection was carried out from among the three methods in the following

table, taking into consideration the above functions and conditions.

34

Table 27 Aeration Methods in the OD Process

(a) Vertical Shaft Type (b) Propeller Type (+ aerator) (c) Axial Flow Pump Type

Schematic

Diagram

Method

and

Principle

This is a method in which

the rotational power of the

drive unit is transferred to an

impeller on the reaction tank

water surface, to carry out

surface aeration.

Water flow is generated by

the pumping action of the

aerator, and as a result of a

dividing wall to one side of

the aerator, in one area the

water is pumped up and in

the other area it is driven into

the water channel.

The flow has a spiral

shaped turbulent flow

pattern, flowing while

constantly combing up the

bottom surface.

This is a method in which the

mixing and agitation and the

air supply for aeration within

the ditch can be separately

controlled.

Agitation is supplied by

generating a water current by

the rotation of a submersible

propeller, and the air for

aeration is supplied by a

blower to an aerator.

The oxygen transfer

efficiency can be increased by

adopting membrane rubber for

the aerator.

This is a method in which

the mixing and agitation and

the air supply for aeration

within the ditch can be

separately controlled.

Agitation is provided by

generating a water current by

the rotation of the impeller

directly connected to a drive

unit, and air for aeration is

supplied by a blower to an

aeration pipe directly below

an impeller.

The air injected from the

aeration pipe is sheared by the

water flow forming fine

bubbles, so a high oxygen

transfer efficiency can be

obtained.

Equipment

Configuration

1. Vertical shaft aerator

1. Submersible propeller

agitator

2. Aerator

3. Blower

4. Submersible propeller

agitator lifting device

5. Aerator lifting device

1. Draft tube aerator

2. Blower



A review was carried out into the stable operation of the advanced treatment facility and the

energy saving by the application of nitrification control to the OD process. In addition,

introduction of nitrification control by installation of instruments for performing nitrification

Vertical Shaft Teype Aerator

Draft Tube Aerator

Buffle Wall

Blower Blower

Aerator

Water Current

Water Current

Water Current

35

control at an appropriate location within the OD tank was reviewed.

Nitrification control is proposed with the objectives of stabilizing the treated water quality

(NH4-N concentration), reducing the electrical power consumption as a result of reduction in air

flow rate, and reducing the maintenance work. Specifically, a nitrification control flow rate

calculation is carried out using NH4-N sensors installed at two locations – on the upstream side

of the aeration tank and at an intermediate location. The concept of FF control in which the

required air flow rate is predicted from the upstream side NH4-N sensor measurement value, and

the concept of FB control in which the air flow rate is corrected based on the difference between

the predicted NH4-N concentration and the NH4-N sensor measurement value are used. Note that

with the nitrification control airflow rate only, there is a possibility that the upper limit value or

lower limit value of the DO concentration will be exceeded as a result of fluctuations in the inflow

NH4-N. Based on operational experience, etc., the upper side DO control air flow rate and the

lower side DO control air flow rate are simultaneously calculated with the DO concentration

upper limit value taken to be the upper side DO setting value and the lower limit value taken to

be the lower side DO setting value, and compared with the nitrification control air flow rate in

order to select the ideal air flow rate. In the “Breakthrough by Dynamic Approach in Sewage

High Technology (B-DASH) Project” led by the Ministry of Land, Infrastructure, Transport and

Tourism, verification of this nitrification control method was carried out in a sewage treatment

plant using the circulating denitrification. Compared with the target value of NH4-N in the treated

water of 1.0 mg-N/L, the measured value (average) was 0.33 mg-N/L, and the airflow rate

reduction effect was 16.9% compared with conventional DO constant control.


■ Aeration Method

For the following reasons, (c) the axial flow pump method will be adopted.

(a) Vertical Shaft Type

The water flow and oxygen can be supplied by vertical shaft rotor only, so this type is energy

efficient. The amount of oxygen can be controlled by the rate of rotation of the rotor, and the

water flow rate can also be adjusted simultaneously at this time. The surface aeration method,

however, cannot be applied to this scheme because of the large water depth.

(b) Propeller Type

The water depth can be increased, and anaerobic and aerobic zones can also be formed.

Adjustment of the oxygen quantity can be carried out by adjusting the blower air flow rate.

However, the equipment configuration consisting of the submersible propeller, aerator, and

36

blower is too complicated, so the maintenance cost is relatively large. Also the power required

to start a blower is increased due to the large water depth.

(c) Axial Flow Pump Type

The water depth can be increased, and anaerobic and aerobic zones can also be formed.

Adjustment of the oxygen quantity can be carried out by adjusting the blower air flow rate.

The water depth into which the air is blown is shallow, so the power required to start a blower

can be reduced.

Fig. 28 Schematic Diagram of the Axial Flow Pump Type (DTA: Draft Tube Aerator)


■ Review of Nitrification Control

With the advanced treatment OD process, the sewage is aerated with a blower and an aeration

zone is formed, by mock plug flow (extruder). It is considered that it is possible to promote

nitrification with the equipment, so by applying the above nitrification control, it will be possible

to reduce the air flow rate and the electrical power consumption, while controlling the NH4-N

concentration of the treated water to be less than the target value. However, the advanced

treatment OD process differs from the standard activated sludge process and other processes in

that the reaction tank structure, sewage flow rate, retention time, aeration method, water quality

within the reaction tank, etc. Therefore it is necessary to verify in advance its effectiveness with

the actual loading.

37

Fig. 29 Method of Nitrification Control in the OD Process

Source: Extracted from “Guidelines for Introduction of Efficient Nitrification Operation Control Technologies using

ICT (Draft)” (National Institute for Land and Infrastructure Management), and prepared by Study Team

(2) Facility Capacity to Ensure A-SRT

I. Details of Review

As a process of advanced treatment, a review was carried out into the OD aeration capacity for

38

biological nitrogen removal process under the following conditions.

(a) BOD-SS load: Inflow BOD load per unit of Mixed Liquor Suspended Solids (MLSS) within

the OD tank

(b) BOD capacity load: Inflow BOD load per unit volume within the OD tank

(c) Aerobic Solid Retention Time (A-SRT): The retention time required for

retaining the nitrifying bacteria within the system

II. Results of Review

In this process, the nitrogen removal method is biological (anaerobic, aerobic) in nature. The

inflow total nitrogen (T-N) is oxidized by the nitrifying bacteria in the aerobic zone of the OD tank,

and reduced by the denitrifying bacteria in the anaerobic zone and removed as nitrogen. The

nitrifying bacteria are aerobic bacteria, so it is necessary to reliably ensure the aerobic capacity. The

aerobic capacity is designed to enable each of the following conditions to be met.

(a) BOD-SS load: 0.06 kg-BOD/kg-SS or less

(b) BOD-capacity load: 0.2 kg-BOD/m3.day or less

(c) Aerobic solid retention time (A-SRT): 40.7ｅ(-0.101T) or more (T is the water temperature:

20℃)

(3) Facility Capacity of Final Sedimentation Tank


The final sedimentation tank capacity was reviewed assuming the following II as the water

treatment process.

Case I: SBR (new construction: 9,000 m3/day) + Advanced Treatment OD Process (expansion

or upgrading: 12,000 m3/day)



As preconditions for the review, water surface load of the final sedimentation tank should be the

same as the existing.


The specifications of the final sedimentation tank for each case, are as shown in the following

table.

39

Table 30 Specifications of Final Sedimentation Tank in Each Case

Item Case I Case II

Final

Sedimentation

Tank Shape and

Quantities

SBR process: Not set

Advanced treatment OD process:

Tank φ18 m ×2

New construction (9,000 m3/day):

Tank φ13 m ×3

Expansion or upgrading (12,000

m3/day):

Tank φ18 m ×2

Surface Loading

Capacity

(m3/m2.day)

23.6 New construction: 23.6

Expansion or upgrading: 22.6


(4) Flocculent Equipment (for phosphorus removal)

I. Review of Biological Phosphorus Removal and Results

This review will be carried out because removal of phosphorus (1.0 mg/L as PO4-P) is essential

for the effluent water standard DA2016-08 for freshwater areas (Class A), which is the regulatory

value for the treated water in this case.

(a) This is not possible to achieve with removal of biological phosphorus only (removal of about

50% of the inflow PO4-P).

(b) Due to site restrictions, it is difficult to construct the biological reaction tank necessary for

phosphorus removal.

(c) The sludge treatment facility shall be constructed outside of the premise, and the phosphorus

incorporated into the sludge due to the biological phosphorus removal will be re-released

during the sludge retention time before transport, so there is a possibility that it will flow back

into the water treatment system.

For the above reasons (a) to (c), phosphorus removal must be done by the flocculant addition

method.

II. Review of Phosphorus Removal Using Flocculants


The appropriate type of flocculants shall be selected by studying into the following items.

■ Type of Flocculants

(a) Ferric chloride

(b) Ferric polysulfate

(c) Aluminum sulfate

(d) Polyaluminum chloride

40

■ Comparison Review Items

(a) Phosphorus removal performance

(b) Agglomerating property

(c) Corrosiveness

(d) Ease of handling (safety)

(e) Procurement packing

(f) Chemical pH

(g) Quantity of sludge generated

(h) Price


The results of a comparative review of flocculants are shown in the following table.

As a result of the comparative review of flocculants for phosphorus removal, a review was

conducted about the candidate agents, and ferric polysulfate from among the ferrous types and

polyaluminum chloride from among the aluminum types were adopted because of their high

phosphorus removal performance and good agglomeration properties.

As polyaluminum chloride has the advantage of corrosiveness and ease of handling of the

chemical (safety due to high pH), and that the sludge treatment costs can be reduced due to the small

quantity of sludge generated, polyaluminum chloride shall be chosen even though it is expensive.

Table 31 Flocculant Comparison Table

Item Ferrous Types Aluminum Types

Flocculant

Type Ferric Chloride Ferric Polysulfate

Aluminum

Sulfate

Polyaluminum

Chloride

Phosphorus

removal

performance

○ ◎ ○ ◎

Agglomerating

property

◎ ◎ ○ ○

Corrosiveness △ ○ ○ ◎

Ease of

handling

(safety)

△ ○ ○ ◎

Procurement

packing

Liquid Liquid Solid Solid

pH 1.5～ 2.0～ 3.0～4.0 3.5～5.0

Quantity of

sludge

generated

Large Large Small Small

41

Price ◎ ◎ ○ ○


(5) Filtration Process


A) Preconditions

Inflow SS concentration: 20 mg/L

Treated water SS concentration: 10 mg/L or less

B) Treatment Process

(a) Rapid filtration process: This is a filtration process using sand filters. The filtration rate is

about 150 to 300 m/day. Periodic backwashing is required. The quantity of wastewater is

about 3%. There is also backwashing equipment so the facility area is large.

(b) Moving bed filtration process: This is a process of continuous filtration while cleaning the

sand filters. The filtration rate is about 200 to 300 m/day. The quantity of wastewater is

about 6 to 10%.

(c) High-speed fiber filtration process: This is a process that uses fiber filters with low

resistance to passage. The filtration rate is about 1000 m/day. Periodic backwashing is

required. The wastewater quantity is about 2%. Backwashing equipment is required, but

the facility area is small.


The results of the comparative review into the filtration processes are shown in the following

table.

For the filtration facility, since it is necessary to remove the SS in the secondary treated

wastewater as part of the process to remove phosphorous that originates in the SS, it must be

accommodated within the limited area of the site. For the following reasons, (c) high-speed fiber

filtration will be adopted.

(a) With the rapid filtration process, the filtration speed is low, and the required filter area is

large, the construction cost is, therefore, greatest.

(b) The moving bed filtration process does not require backwashing equipment, but the

quantity of wastewater is large compared with the other processes, the energy for transfer

of the wastewater will have to be larger.

(c) With the high-speed fiber filtration process, the filtration speed is high, and the facility

area is smallest. Since the quantity of wastewater associated with backwashing is small,

this process has advantages for transfer of wastewater.

42

Table 32 Overview of Filtration Processes

Item Rapid Filtration Process Moving Bed Filtration

Process

High-Speed Fiber

Filtration Process

Schematic

Diagram

Filtration Rate 300 m/day 300 m/day 1,500 m/day

Filter Layer

Thickness

About 1.5 m

(gravel, sand filter,

anthracite)

About 1.0 m

(sand filter)

About 1.0 m

(fiber filter)

Filter Water Head

Loss

About 3 m About 1 m About 1 m

Cleaning

Frequency

1-2 times/day Continuous 1-2 times/day

Cleaning

Wastewater

Quantity

About 3% of the daily

maximum water

filtration quantity


maximum water

filtration quantity


maximum water

filtration quantity

Filter Area 80 m2 or less per tank 6 m2 or less per tank 30 m2 or less per tank

SS Removal

Percentage

60～80％ 50～70％ 50～80％

Site Area (for

30,000 m3/day)

16 m×20.6 m

(329.6 m2)

16 m×18.2 m

(291.2 m2)

12 m×13.2 m

(158.4 m2)


(6) Sludge Treatment Facility


The capacity of the sludge treatment facility was reviewed using the quantity of sludge generated

by the following two water treatment processes. However, as stated, since the sludge of the existing

treatment plant contains heavy metals, the dehydrator is considered to be out of scope, and the

review was conducted only into concentration and storage.

Case I: Sequence Batch Reactor (SBR) Process (new construction: 9,000 m3/day) + Advanced




43

The preconditions for reviewing of basic design were as follows.

(a) Inflow SS loading in the concentration tank: 30 kg-ds/m2.day (design value of the existing

treatment plant) or less

(b) Number of retention days in the sludge storage tank: About 2 days


The concentration tank and sludge storage tank specifications in each case are shown in the

following table.

Table 33 Concentration Tank and Sludge Storage Tank Specifications in Each Case

Item Case I Case II

Quantity of SS Generated (kg-

ds/day)

3,680 3,658

Quantity of Sludge Generated

(m3/day)

588 431

Concentration

Tank

Shape and

Quantities

φ9.8 m ×H4 m (effective

water depth) ×2 tanks

φ8.6 m×H4 m (effective

water depth) ×2 tanks

SS Loading

(kg-ds/m2.day) 24.4 29.7

Sludge

Storage Tank

Shape and

Quantities

W6 m×L14.3 m×H3 m

(effective water depth) ×2

tanks

W6 m×L13.1 m×H3 m

(effective water depth) ×2

tanks

Number of

retention days

2.1 2.1


(7) Effective Use of Filtered Water


The following two methods were reviewed for the effective use of the filtered water.

(a) On site utilization (anti-foaming water, on-site sprinkling water, etc.)

(b) Utilization outside of the site


The filtered water can be obtained from the high-speed fiber filtration, but it is not sterilized, and

the influence of general bacteria and coliform bacteria should be taken into account when using

water at such state. In this study, the sterilization by ultraviolet (UV) light is being considered, but

UV light has no residual effect. When using the water outside the site, bacteria are highly likely to

survive and reproduce, so it is necessary consider such effect. Therefore, the use of filtered water

44

(assumed to be sterilized with UV light) on site is the most ideal.

(8) Water Treatment Facility

The preconditions for basic design were set from the results of the field survey and the results of

review into the basic design of the water treatment systems (1) to (7) above, and the capacity of the

water treatment facility was calculated. Results were as follows.

I. Preconditions for Basic Design

The preconditions for basic design are shown in Table 34 and Table 35.

Table 34 Quality of Untreated Water and Treated Water

Item Untreated

Water *1

Treated Water Notes

BOD (mg/L) 200 20 Reduce down to 200 mg/L by introduction

of pretreatment facility.

Treated water: Philippine water quality

guidelines and effluent standards Class A SS (mg/L) 200 70 as TSS

CODCr*2 (mg/L) －

60 Treated water: Philippine water quality

guidelines and effluent standards Class A

T-N (mg/L) 40 －

Untreated water: Water quality data is

unclear from 2014/1/8 to 2018/7/11,

assumed to be 40 mg/L

Kj-N*3 (mg/L) （40） 0.5 as NH4-N



NO3-N*4 (mg/L) （0）

14 Treated water: Philippine water quality


T-P*5 (mg/L) 14 1

Untreated water: Average value from

2014/1/8 to 2018/7/11



PO4-P*6 (mg/L) （7）*7

No. groups of

coliform bacteria

(MPN/100mL)

－ 3,000



Fecal coliform

bacteria

(MPN/100mL)

－ 4



Heavy metals

Assumed to be separately treated, the

heavy-metal concentration in the untreated

water is assumed to be less than the

Philippine water quality guidelines and

45

effluent standards Class A.


Notes

*1：Assumed to be the water quality flowed into OD tank.

*2：Chemical Oxygen Demand by potassium dichromate

*3：Kjeldahl Nitrogen

*4：Nitrate Nitrogen

*5：Total Phosphorus

*6：Phosphate Phosphorus

*7：The concentration of PO4-P is assumed to be 50% of T-P

Table 35 Design Parameters of Each Facility

Item Existing Value Present Set

Value

OD Tank BOD‐SS loading (kg-BOD/kg-SS) 0.055 0.055

BOD volumetric loading (kg-BOD/m3.day) 0.186 0.2

Final

Sedimentation

Tank

Surface loading (m3/m2.day) 24.1 24.1

Sludge

Concentration

Tank

SS loading (kg/m2.day) 28.9 29.7

Retention time (h) 27.0 25.9

SBR Number of cycles (times/day) － 3

Drawdown rate － 1/3

Aeration time (h/day) － 12


II. Case I Facility Overview

A) Overall Layout

The overall layout is shown in the following figure.

46

Fig. 36 Overall Layout of Case I


B) Treatment Flow

The treatment flow is shown in the following figure.

Fig. 37 Treatment Flow for Case I


C) Construction Sequence

The construction sequence is shown in the following table.

47

Table 38 Construction Sequence for Case I

Step Event Quantity of Water to be Treated in

the Plant, etc.

Step 0 1. Deal with heavy metals

2. Construction of sludge treatment facility

Specified separately


Step 1 1. New pretreatment facility (removal of oil)

(21,000 m3/day)

↓

2. Removal of existing facility

・Primary sedimentation tank

・Sludge drying bed

↓

3. Construction of new treatment facility

(9,000 m3/day)

・ Rehabilitation of main administrative

building (including electrical room)

・ SBR tank

・ Rehabilitation of chlorine mixing tank

(UV equipment)

(9,000 m3/day)

・ Electrical instrumentation equipment

Electrical substation: For 21,000 m3/day

Power equipment: For 9,000 m3/day

Instrumentation equipment: For 9,000

m3/day

In-house power generation: For 21,000

m3/day

Monitoring equipment: For 21,000

m3/day

8,600 m3/day (use of existing OD

tank, etc.)

8,600 m3/day (use of existing OD

tank, etc.) ・ Commence removal after installation of

the new pretreatment facility

・ Vacuum transport sludge from the existing

sludge storage tank to the sludge treatment

facility constructed in “Step 0”

After completion of new

construction, 8,600 m3/day →9,000

m3/day

Step 2 1. Remove the existing 8,600 m3/day

treatment facility

・OD tank

・Final sedimentation tank

・Sludge concentration tank

・Sludge storage tank

↓

2. New 12,000 m3/day treatment facility

・OD tank (12,000 m3/day)

・Final sedimentation tank (12,000 m3/day)

9,000 m3/day (to be treated in the

OD tank constructed in “Step 1”)

・The sludge is directly withdrawn

from the final sedimentation tank

constructed in “Step 1”, and

vacuum transported to the sludge

treatment facility constructed in

“Step 0”.

After completion of the new

construction, 9,000 m3/day

48

・Rapid filtration facility (21,000 m3/day)

・Polyaluminum chloride (PAC) injection

equipment (21,000 m3/day)

・Rehabilitation of chlorine mixing tank

(UV equipment)

(12,000 m3/day)

・Sludge concentration tank (21,000

m3/day)

・Sludge storage tank (21,000 m3/day)

・Expansion of electrical instrumentation

equipment

Expansion of power equipment:

Expansion for 12,000 m3/day

Instrumentation equipment: Expansion for

12,000 m3/day

Monitoring equipment: Incoming signals

for the above expansions

Ammonia control: For 12,000 m3/day

→21,000 m3/day

・After completion of the new

construction, vacuum transport

the sludge from the sludge

storage tank constructed in “Step

2” to the sludge treatment facility

constructed in “Step 0”


The electrical equipment in Table 38 above will be upgraded to the electrical substation that can

cover all the SBS + OD equipment, and an emergency generator will be installed as backup for all the

equipment in the case of a power outage, the same as for the existing facilities. Also, the monitoring

equipment will have to be capable of monitoring the status of operation, stoppage, breakdown of all

the equipment, and monitoring the displays of the instruments. Power supply to the monitoring

equipment and the instrumentation equipment will be from an uninterruptible power supply (UPS).

D) Overview of Main Facilities

The list of the main facilities is shown in the following table.

Table 39 List of the Main Facilities for Case I

Facility Name Shape Quantity Notes

1. SBR Facility (new construction: 9,000 m3/day)

Flow Equalization

Tank

W39.5 m×L6.5 m×H7.0 m (effective water

depth)

1

SBR Tank W17.0 m×L16.0 m×H6.0 m (effective water

depth)

6

2. Advanced Treatment OD Facility (expansion or upgrading 12,000 m3/day)

OD Tank W3 m×L33 m×H6.4 m (effective water depth) 4

49

3. Final Sedimentation Tank Facility (12,000 m3/day)

Final

Sedimentation

Tank

φ18 m 2

4. Rapid Filtration Facility

Untreated Water

Tank

W10.2m×L12.3 m×H2.0 m (effective water

depth)

1

Filtered Water

Tank


depth)

1

Backwashing

Wastewater Tank


depth)

1

5. Sterilization Facility

Sterilization Tank W3 m×L8 m×H2.0 m (effective water depth) 1 Reuse existing

6. Sludge Treatment Facility

Concentration

Tank

φ9.8 m×H4 m (effective water depth) 2

Sludge Storage

Tank

W6 m×L14.3 m×H3 m (effective water depth) 2


III. Overview of Case II Facilities

A) Overall Layout

The overall layout is as shown in the following figure.

50

Fig. 40 Overall Layout for Case II


B) Treatment Flow

The treatment flow is shown in the following figure.

Fig. 41 Treatment Flow for Case II


C) Construction Sequence

The construction sequence is shown in the table below.

51

Table 42 Construction Sequence for Case II

Step Event Treatment plant corresponding

water quantity, etc.

Step 0 1. Deal with heavy metals

2. Construction of the sludge treatment

facility



Step 1 1. New pretreatment facility (removal of oil)

(for 21,000 m3/day)

↓

2. Remove existing facility

・Primary sedimentation tank

・Sludge drying bed

↓

3. 9,000 m3/day new treatment facility

・ Rehabilitation of main administrative

building (including electrical room)

・ OD tank

・ Final sedimentation tank


(UV equipment)

(9,000 m3/day)

・Electrical instrumentation equipment

Electrical substation: For 21,000 m3/day

Power equipment: For 9,000 m3/day

Instrumentation equipment: For 9,000 m3/day

In-house power generator: For 21,000 m3/day

Monitoring equipment: For 21,000 m3/day


8,600 m3/day (use existing OD

tank, etc.)

8,600 m3/day (use existing OD

tank, etc.) ・ Commence removal after installation of

the new pretreatment facility

・ Vacuum transport sludge from the existing

sludge storage tank to the sludge treatment

facility constructed in “Step 0”


construction, 8,600 m3/day →9,000

m3/day

Step 2 1. Removal of existing 8,600 m3/day

treatment facility

・OD tank

・Final sedimentation tank

・Sludge concentration tank

・Sludge storage tank

↓

2. New 12,000 m3/day treatment facility

・ OD tank (12,000 m3/day)

・ Final sedimentation tank (12,000

m3/day)

9,000 m3/day (to be treated in the

OD tank constructed in “Step 1”)

・The sludge is directly withdrawn

from the final sedimentation tank

constructed in “Step 1”, and

vacuum transported to the sludge

treatment facility constructed in

“Step 0”.


construction, 9,000 m3/day

→21,000 m3/day

・After completion of the new

52

・ Rapid filtration facility (21,000 m3/day)

・ PAC injection equipment (21,000

m3/day)


(UV equipment)

(12,000 m3/day)

・ Sludge concentration tank (21,000

m3/day)

・ Sludge storage tank (21,000 m3/day)

・ Expansion of electrical instrumentation

equipment

Expansion of power equipment: Expansion for

12,000 m3/day

Instrumentation equipment: Expansion for 12,000

m3/day

Monitoring equipment: Incoming signals for the

above expansions


construction, vacuum transport

the sludge from the sludge

storage tank constructed in “Step

2” to the sludge treatment facility

constructed in “Step 0”


The electrical equipment in Table 42 above will be upgraded to the electrical substation that can

cover all the equipment for OD+OD, and an emergency generator will be installed as backup for all

the equipment in the case of a power outage, the same as for the existing facility. Also, the

monitoring equipment will have to be capable of monitoring the status of operation, stoppage,

breakdown of all the equipment, and monitoring the displays of the instruments. Power supply to

the monitoring equipment and the instrumentation equipment will be from an uninterruptible power

supply (UPS).

D) Overview of Main Facilities

The list of the main facilities is shown in the following table.

Table 43 List of the Main Facilities for Case II

Facility Name Shape Quantity Notes

1. Advanced Treatment OD Facility

OD Tank W2.5 m×L43 m×H6.4 m (effective water

depth)

3 For 9,000 m3/day

OD Tank W3.0 m× L 33 m× H 6.4 m (effective water

depth)

4 For 12,000 m3/day

2. Final Sedimentation Tank Facility

53

Final

Sedimentation

Tank

φ13 m 3 For 9,000 m3/day

Final

Sedimentation

Tank

φ18 m 2 For 12,000 m3/day

3. Rapid Filtration Facility

Untreated Water

Tank

W10.2 m× L 12.3 m× H 2.0 m (effective water

depth)

1

Filtered Water

Tank

W 5.0 m× L 4.9 m× H 6.1 m (effective water

depth)

1

Backwashing

Wastewater Tank

W 5.0 m× L 4.9 m× H 6.1 m (effective water

depth)

1

4. Sterilization Facility

Sterilization Tank W 3 m× L 8 m× H 2.0 m (effective water

depth)

1 Reuse existing

5. Sludge Treatment Facility

Concentration

Tank

φ8.6 m× H4 m (effective water depth) 2

Sludge Storage

Tank

W 6 m× L 13.1 m× H 3 m (effective water

depth)

2


IV. Superiority of Japanese Corporations (Japanese Products)

In both Case I and Case II, the use of the following Japanese products will not only satisfy the

Philippine water quality guidelines and effluent standards Class A (nitrogen and phosphorous), but

will also facilitate installation of a 21,000 m3/day treatment facility within the existing treatment

plant, reducing maintenance costs, support operation and management, substantial land acquisition

and other benefits. The superior points of the representative devices and controls are described

below.

A) SBR

■ Adoption of Intermittent Inflow SBR

Intermittent inflow SBR is adopted and generally used in Japan. This process enables anaerobic

/ aerobic conditions to be easily created inside reactors to remove nitrogen.

B) Advanced Treatment OD Process

■ Adoption of Axial Flow Pump Method

A deep-water depth is required due to the site area limitations, and the axial flow pump method

54

(Japanese product) facilitates a water depth of up to 6 meters. Furthermore, anaerobic / aerobic

zones can easily be created, and the amount of oxygen can be adjusted with the air volume

provided by the blower. Adoption of this method enables the air blow water depth to be made

shallower, minimizing blower power requirements (reducing electric power consumption).

In addition, the axial flow pump drive unit is located above the tank, providing superior ease

of maintenance since the OD tank does not need to be emptied.

■ Adoption of Nitrification Control System

A nitrification control system is being adopted that enables the concentration of NH4-N in the

treated water to be controlled at or below the target value (Philippine water quality guidelines

and effluent standards Class A for NH4-N: 0.5 mg/L or less), to reduce blower air blow volume

and decrease power consumption. In addition, an NH4-N concentration meter which is a Japanese

product is used for measurement of the NH4-N concentration in the advanced treatment OD tank.

This control system is a Japanese product.

C) Filtration Process

■ Adoption of High-Speed Fiber Filtration Process

In addition to needing to remove SS in the secondary treated water as part of the process of

phosphorus removal from the SS, the facility must be accommodated within the limited site area.

Therefore, a high-speed fiber filtration process is being adopted that operates at a high speed of

1,500 m/day and has a small quantity of wastewater (approximately 2% of filtered water)

associated with backwashing. This enables installation in the limited site area.

(9) Dealing with Effluents Containing Heavy Metals

The results of the inflowing sewage water quality analysis (data from 2014/1/8 – 2018/7/26)

detected there were 8 items and 7 types of metals (aluminum, zinc, nickel, copper, total manganese,

ferric, total iron and molybdenum). An opinion was raised an interview with representatives of

Baguio City concerning this issue that “The source of pollutants (heavy metals) was not factory

effluents, but rather from dental clinics”. However, from the fact that so many types of metals were

detected in the sewage, the study team presumes that there are other sources of pollutants aside from

those mentioned. However, in light of the fact that the source of pollutants has not been specifically

clarified at this point in time, it is expected that inflow of heavy metals will continue in the future,

and may increase. As stated in Table 34, it is assumed that heavy metals will be treated separately,

the same as in normal sewage treatment facilities, and the concentration of heavy metals in the

untreated water will be equal to or less than the Philippine water quality guidelines and effluent

standards Class A. Therefore, it is necessary that a study be carried out into the standards and

regulations regarding sewage effluents with respect to heavy metals, the methods to identify sources

55

of wastewater, joint wastewater treatment facilities for effluents containing heavy metals, etc., and

it is desirable that this be dealt with by Baguio city. The attached document shows the current status

of heavy metals contained in the untreated water.

On the other hand, there are cases in Japan where a heavy metal treatment facility is provided for

pretreatment within a sewage treatment plant, and, where seepage water containing heavy metals is

treated in landfill disposal sites. The study team possess heavy metal treatment technologies and

experience, and can make proposals by using these technologies after a review into heavy metal

treatment by Baguio City.

For reference, Fig. 44 shows an overview of coagulation/flocculation and sedimentation, and

removal of heavy metals by chelating resin, and Fig. 45 shows an overview of a treatment facility

for effluents containing heavy metals constructed in a public sewage treatment plant, as examples

of heavy metal removal equipment.

Fig. 44 Heavy Metal Removal Equipment (example)


Fig. 45 Example of Facility for Treating Effluents Containing Heavy Metals

56


57

3．Review of Project Implementation Scheme and Project Feasibility

In this chapter, the scheme when this project is implemented as a PPP was reviewed after

evaluating the feasibility of implementing this undertaking as a public utility based on the

specifications and approximate cost of the designated infrastructure facilities.

(1) PPP Application Status in Water Supply/Sanitation Sector in the Philippines

PPPs in the Philippines are carried out in accordance with Republic Act No. 7718 (revised BOT

Act) which was enacted in 2010. While adoption of a diverse range of methods, including BTO and

other such methods, have been approved, there is the regulation that government support shall be

kept within 50% of the total project cost. In addition, while the two-tiered system has been adopted

for large-scale government projects in recent years, the PPP scheme is being actively promoted at

the rural level and in areas beyond Metropoitan Manila. Water supply was the main type of project

in the water and sanitation sector up until now, but PPP projects in the “Water supply + Septage”

sector have been implemented in recent years, and there have also been projects using the JV scheme.

Fig. 46 PPP Status in Water Supply/Sanitation Sector in the Philippines

Source: Prepared by Study Team from PPP Center website

58

(2) Feasibility When Implemented as a Public Utility

I. Current Operation of Sewerage Services

Currently, CEPMO which is a department within the Baguio City government is operating and

maintaining their existing sewage treatment facility. Baguio City is collecting sewerage usage

charge from corporations registered in the city, but this income does not cover the O&M costs for

the sewerage services provided. Therefore, an Internal Revenue Allotment (IRA) and other local

government revenue sources is being used to make up for the loss incurred by the operation of

sewage treatment plants. The current project scheme is described in the diagram below.

Fig. 47 Current Operation Scheme


II. Feasibility of the Facility When Implemented as a Public Utility

The feasibility was confirmed when the required sewage treatment facility expansion or

rehabilitations are performed for sewerage services in the present status based on the current

operation form. The Financial Internal Rate of Return (FIRR) and Net Present Value (NPV) were

calculated and reviewed as indicators of the relevance of the project based on the public costs

expected for the project and the income.

The evaluation period used was a total of 36 years, including the operation period of 30 years

from the completion of renovation of the existing sewage treatment plant, taking into consideration

the economic useful life of the facilities, devices and equipment installed with the project and similar

project cases. The discount rate was set during the evaluation period taking 2019 as benchmark year.

Regarding the public utility development costs, a review was conducted based on the project costs

which consist of the initial investment costs calculated in the Pre-F/S and the O&M costs. A 5%

physical contingency was included in the total financial cost as well as a 1% price discretionary

reserve.

In this study, it was assumed that the NSSMP subsidy being implemented by the national

government for LGUs (Local Government Units) would be utilized based on the premise that it

would be difficult for Baguio City to cover all necessary development costs. This will reduce the

Baguio City

CEPMOWastewater Treatment, Conveyance Maintenance Operation

Users

Payments(Sewerage Tariff from commercial

and industrial institutions)

National Government(Internal Revenue Allotment)

Development Fund(Complement the shortage of

LGU’s budget)

Provide Service

Budget for Service

59

burden on LGUs for initial investment and fund procurement, increasing the profitability of the

project and possibly limiting the amount to be borne by the LGUs. The details of NSSMP are

described later in “5. Review of Financing”, but it is assumed that 50% of the initial investment

costs for sewerage development will be provided by support from NSSMP.

The assumed costs in the CDIA Pre-F/S are described in the table below.

The income is the amount that is currently collected from users in Baguio City, which consists of

a certain amount (30% of water supply basic charge) which is set and paid by businesses registered

in the city together with taxes. At the current stage, since it is unclear whether or not there will be

an increase or decrease in income as a result of a change in the set charges or other factor, it was

assumed that the sewerage usage income to be obtained during the evaluation period would be the

same, and the review was conducted based on the income as of 2017.

Table 48 Financial Income (2017)

(Unit: Thousand PHP)

Annual Charge

Sewerage Usage

Charge

17,646

Source: CEPMO

The FIRR and NPV were calculated based on the above data. This resulted in it being impossible

to calculate the FIRR due to a significant negative value. The NPV amounted to a value of

approximately minus 1,385 million PHP when it was assumed that the capital cost was the 7.5%

interest rate for 25 year Philippine government bonds. The NPV value further worsens when sewage

culverts are included, amounting to approximately minus 2,140 million PHP.

Table 49 Results of Feasibility Evaluation When Operated as Public Utility

Entity Evaluation Index Calculation Results

Sewage Treatment Facility

(Without Sewer Culverts)


(Including Sewer Culverts)

Public FIRR Cannot be Calculated Cannot be Calculated

NPV (Million PHP) -1,385 -2,140


III. Results of Feasibility Evaluation of Public Utility

Evaluation of the feasibility as a public utility resulted in the conclusion that charge income that

will enable project costs and O&M costs to be recovered cannot be expected, and will be

substantially below the 7.5% rate for 25 year Philippine government bonds. Therefore, this means

that it will be difficult for the public utility operator to ensure the management of sewerage services

in a self-sustaining manner. Reviews were conducted in the following sections due to the fact that

60

a different project scheme needs to be used in order to enable this project to succeed.

(3) Review of Project Schemes

During the review of project schemes, handling of the demand risk and handling of the fund

procurement risk were reviewed, and the options considered to be financially possible were

proposed as sewerage development projects for Baguio City. This review enabled us to conclude

the following two options which combine public and private sector participation for sewerage

infrastructure development and operation.

I. Service purchasing type PPP project in which profitability can be secured on private sector side

as a PPP project

II. Joint operation as JV with Baguio City Water District which is the water supply entity

I. Service Purchasing Type PPP Project

The Build Transfer Operate (BTO) method is one option as the PPP scheme for this feasibility

study due to the fact that the initial investment is large for projects such as sewerage services and

there is a high level of public need. For this project, a review was conducted into the BTO method

as shown in the diagram below as a scheme that is generally used.

Fig. 50 Exemplary PPP (BTO) Scheme


The required treatment volume for sewerage services is determined by the water supply volume

and the wastewater volume that is naturally produced due to rainfall. As the treatment volume

fluctuates due to the amount of rainfall, natural disasters such as floods and the environment, when

operated with the self-supporting method, the sewerage operation company needs to shoulder all

Japanese Firm

SPC

Baguio Water District/ Baguio City

BTO Contract

Users

ServiceProvision

FinancialInstitution

User Fee（Sewer Charge, Environmental Charge）

Availability Payment(computed by performance level)

LoanWastewater TreatmentConstructionOperation and

Maintenance

Fee Collection

Local Firm

Invest（60％～）

Invest（～40％）

61

demand risks, which is a large burden for the operation company. Therefore, the decision was made

to review the system where a certain amount is paid to the operator from the public utility (Baguio

City) as an availability payment for the PPP project in which compensation is paid according to

sewage treatment operation / management performance. Since availability payment provides

payment for the provision of services at a certain level according to the requirements of operation

and maintenance that are determined in advance, regardless of fluctuations in charge income from

the service recipients, the private sector company does not need to shoulder the demand risk. In

addition, since the fluctuation in the amount paid by the public sector is comparatively small, this

has the merit of making it easier to formulate long-term fiscal expenditure plans.

Furthermore, when the PPP scheme was reviewed during this study, it was assumed that an SPC

(Special Purpose Company) in which Japanese corporations participate will be the entity that

develops the facilities and becomes the operator. The scope of the infrastructure to be developed,

operated and maintained by the Japanese corporation was assumed to be expansion, upgrading,

operation and maintenance of the existing sewage treatment facility which is the core project.

Calculation of the development cost for sewer culverts was also performed, but due to the fact that

improvements in efficiency and effects cannot be expected by having this work implemented by a

Japanese company and that developing the sewer culverts would result in a large increase in the

cost, the judgment was made that there are no financial merits in having the sewer culverts

developed or operated by the SPC.

Table 51 Development Scope by Public and Private Sectors


(Without Sewer Culverts)


(Including Sewer Culverts)

Public Private Public Private

Expansion of Sewage Treatment

Facility

✔ ✔

Rehabilitation of Sewage

Treatment Facility

✔ ✔

Development of Sewer Culverts ✔ ✔


II. JV with Baguio City Water District

In the JV scheme for this feasibility study, it was assumed that the JV that is comprised of the

Baguio City Water District which operates the water supply services in Baguio City, Baguio City

and a joint Philippine-Japanese private sector entity will develop and operate the Baguio Sewage

Treatment Plant.

The Baguio City Water District is a public corporation which supplies water in Baguio City, and

has approximately 40,000 connections in Baguio City, including general households and businesses.

The total customer water consumption volume in the Baguio City Water District is 8.6 million

m3/day. The cash flow in the Baguio City Water District has already been stabilized by non-revenue

water reduction, increasing the number of connections, review of the O&M costs and other such

measures. The Water District recorded a net profit of 143 million PHP in fiscal 2017.

62

Table 52 Water Service Cash Flow in Baguio Water District (2017)

(Unit: Million PHP)

Item Amount

Sales 577

Operating Costs 424

Operating Profit 154

Other Profit (Costs) (11)

Net Profit 143


The Baguio City Water District was not providing sewerage services as of February 2019, but the

provision of integrated water supply and sewerage services by a JV that involves the Baguio City

Water District and other entities will enable an increase in operational efficiency to be achieved for

personnel and maintenance expenses, which can be expected to result in stimulation of investment

activities to improve services.

In the following section, (4) decribes VfM when the project is implemented as PPP, (5) describes

feasibility in PPP, and (6) describes the same in JV.

Fig. 53 JV Scheme


(4) VfM When Project Implemented as PPP

The life cycle costs when sewerage development / operation is implemented as a conventional

public utility and when it is implemented as a PPP (BTO) project were compared. The result of the

comparison is that VfM can be achieved through a PPP.

JapaneseFirm

JV Company

Baguio WaterDistrict

User

ServiceProvision

FinancialInstitution

User Fee（Water Supply Charge, Sewer Charge,

Environmental Charge）

LoanWastewater TreatmentConstructionOperation and Maintenance

Local Firm DPWHNSSMP

Baguio City

Drinking Water SupplyConstructionOperation and Maintenance

Invest Invest Invest Invest

63

I. Prerequisites

The evaluation period used was a total of 36 years, including the operation period of 30 years

from the completion of rehabilitation of the existing sewage treatment plant, taking into

consideration the economic useful life of the facilities, devices and equipment installed with the

project and similar project cases. The discount rate was set during the evaluation period taking 2019

as benchmark year.

The project financial costs consist mainly the initial investment costs and the O&M costs. A 5%

physical contingency was included in the total financial cost as well as a 1% price discretionary

reserve.

The costs assumed in this study are described in the table below. This review by the Study Team

resulted in the projection that the development costs could be substantially reduced compared to the

CDIA Pre-F/S if efficiency can be enhanced based on the assumption that integrated development

and operation will be implemented.

The income is the amount that is currently being collected from users in Baguio City, which

consists of a certain amount (30% of water supply basic charge). Such income is set and paid for by

businesses registered in the city together with taxes. At the current stage, since it is unclear whether

or not there will be an increase or decrease in income as a result of a change in the set charges or

other factor, it was assumed that the sewerage usage income to be obtained during the evaluation

period would be the same, and the review was conducted based on the income of Baguio Ciity as

of 2017.

Table 54 Financial Income (2017)

(Unit: Thousand PHP)

Annual Charge

Sewerage Usage Charge 17,646

Source: CEPMO

The income source for the private sector company when the project is implemented as a PPP will

be the availability payment amount set by the public authority. In this study, a target FIRR value of

10% was set as a criterion for a private sector company to participate in PPP projects in order to set

the availability payment amount.

II. Results of VfM Calculation

The VfM was calculated based on the above data. Due to the fact that the operation costs can be

minimized in addition to the development costs when this project is implemented through a PPP

scheme, the financial burden on the public utility side can be reduced. When sewer culverts are not

included, a VfM figure of 39% can be anticipated compared to a public utility which was planned

64

when the CDIA Pre-F/S was implemented. Therefore, the judgment can be made that

implementation as a PPP project will provide higher quality public services.

Fig. 55 VfM by PPP Project (Without Sewer Culverts)

(Unit: Million PHP)


There will still be a financial burden on Baguio City when the project is implemented as a PPP

project, but the financial burden can be reduced and equalized compared to when Baguio City

independently procures the funds and develops / operates the facility itself.

Furthermore, even when the sewer culverts are developed with a PPP project, the VfM value is

20%, verifying that the financial burden on the public sector can be reduced in this case also.

65

Fig. 56 VfM by PPP Project (Including Sewer Culverts)

(Unit: Million PHP)


(5) Feasibility Evaluation When Implemented as PPP Project

A feasibility evaluation was conducted when the project is implemented as a PPP project with the

above prerequisites. The private sector company can expect to make profits commensurate with the

capital invested when this project is implemented as a PPP project. In this study, an availability

payment was set based on the assumption that an FIRR value of 10% can be secured since

commercial banks have made the judgment that the sewage treatment business has a higher level of

profitability than loan interest. The NPV values based on this premise were 88 million PHP (without

sewer culverts) and 200 million PHP (including sewer culverts).

66

Fig. 57 Results of Feasibility Evaluation (Without Sewer Culverts)

(Unit: Million PHP)


Fig. 58 Results of Feasibility Evaluation (Including Sewer Culverts)

(Unit: Million PHP)


(6) Feasibility Evaluation When Implemented as JV with Baguio City Water District

In addition to the BTO method, a feasibility evaluation was conducted regarding providing

integrated water supply and sanitation services, taking into account a comparatively high level of

profitability of water supply services. Wages for engineers can be minimized through integrated

(500)

(400)

(300)

(200)

(100)

-

100

200

300

400

500

Revenue Investment O&M Tax Cash Flow

(500)

(400)

(300)

(200)

(100)

-

100

200

300

400

500


67

operation of water supply and sanitation services. On the other hand, since there is no reduction effect

from integrated operation for electric power and chemical costs, the required costs for water supply

and sewage treatment were totaled. In addition, the assumption was made that the water supply and

sanitation service income and the operation costs would be progressively increased in response of

inflation since 2017. The FIRR rate for water supply and sanitation services without sewer culverts

was 11.90%. When sewer culverts were included, the FIRR rate was 6.80%.

Fig. 59 Results of Feasibility Evaluation (JV without sewer culverts)

(Unit: Million PHP)


(1,700)

(1,500)

(1,300)

(1,100)

(900)

(700)

(500)

(300)

(100)

100

300

500

700

900

1,100

1,300

1,500

1,700


68

Fig. 60 Results of Feasibility Evaluation (JV including Sewer Culverts)

(Unit: Million PHP)


(7) Sharing of Feasibility Review Results with Related Organizations

When the feasibility review results were shared with related organizations (Baguio City Mayor,

Baguio City Budget Office, Baguio City Water District, DWPH, JICA Philippine Office, RCBC

(Rizal Commercial Banking Corporation), DBP(Development Bank of the Philippines), etc.), no

particularly significant concerns were raised.

(1,700)

(1,500)

(1,300)

(1,100)

(900)

(700)

(500)

(300)

(100)

100

300

500

700

900

1,100

1,300

1,500

1,700


69

4．Review of Benefits to Baguio City and the Philippines

This chapter reviews the benefits that the sewerage development project will provide to the

economy of Baguio City and the Philippines as a whole.

The review content for Baguio City and the Philippines as a whole is described in the table below.

Table 61 Framework for Benefit Review

Baguio City Philippines

Current Issues

• Deterioration of the existing

treatment plant has resulted in a

reduction in the treatment capacity,

as it cannot satisfy the need for the

population and the rising number of

tourists.

• Plans call for effluent standards to

be made stricter for Baguio City. It

is difficult to satisfy these standards

with the performance of the existing

treatment plant.

• Development of sewage treatment

facilities outside of Metro Manila is

extremely limited, and use of the

subsidy (NSSMP) for sewerage

infrastructure development is

limited.

• There have been cases of tourist

sites and other locations being

closed and inflow of tourists

restricted due to environmental

pollution or non-compliance

environmental laws and policies.

Benefit

Perspective

Verify contribution of sewerage

development project to CLUP which is

a master plan for development of

Baguio City while keeping solution of

the above issues in mind.

Verify whether solving the above

issues with a sewerage development

project in Baguio City can become a

model case and can be expected to

have ripple effects on other cities.


(1) Review of Benefits to Baguio City

I. Issues for Baguio City

As stated in “(1) Background and Objective of Study in the Introduction”, the population of

Baguio City has increased by approximately three-fold from the time the existing sewage treatment

plant was developed in the 1980s and the current point in time (as of 2015). In addition, many

tourists visit Baguio City as a summer holiday destination (three times the population), and the

population including tourists is rising. On the other hand, deterioration, aging of infrastructure and

other factors have resulted in the treatment capacity of the existing sewage treatment plant dropping

from approximately 12,000 m3/day in 2010 to approximately 8,000 m3/day in 2013.

Additionally, the water quality guidelines and effluent standards in the Philippines have been

revised and made stricter, and there are currently plans to raise the standards for Baguio City from

the current level of Class C to Class A. In light of these factors, there is the possibility that the

existing sewage treatment plant cannot provide the required level of sewage treatment service

volume/quality.

70

Fig. 62 Transition in Baguio City Population and Number of Tourists

Source: Prepared by Study Team based on the Materials from Philippine Statistics Authority

II. Contribution of Sewerage Development Project to CLUP

The goals related to the Baguio City sewage treatment project are included in the CLUP, which

is a 10-year development plan from 2013 to 2023. Note that in the CDIA Pre-F/S proposed technical

plan related to the rehabilitation and expansion of the sewage treatment plant and is considered an

official plan for Baguio City for sewerage.

Table 63 Positioning of Sewerage Development Project in CLUP

(Sewerage development project included in blue frame)

Chapter Title

I. Baguio City Overview

II. Integrated Land Usage Plan

A. Vision and Mission

B. Goals / Strategy / General Policy (* Stated below)

C. Space Plan

D. Land Usage Plan

E. Priority Sector Programs/Projects/Activities (PPAs)

1. Solid Waste Management

2. Sewage Management

a. Development of Sludge Facilities

b. Development of Small-Scale Treatment Facilities

c. Expansion/Rehabilitation of Sewage Treatment Facility Owned by City

d. Development of Community Sludge Tanks Outside Existing Treatment

Facility (BSTP) Target

e. Inventory Related to Current Status of City Wastewater Treatment such as

Sludge Tanks, Connections to Sewers, etc.

637,298

1,115,264

301,926 318,676 345,366

-

200,000

400,000

600,000

800,000

1,000,000

1,200,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Tourists Population

71

f. Development of Small-Scale Sewage Treatment Facilities Outside BSTP

Target Area

g. Large Increase in Sewer Connections to Treatment Plant

h. Strengthen IEC 6 Activities Related to the Environment (Impact of

Climate Change)

3. Forest / Water Resource Management

4. Park Management

5. Air Quality Management

6. Water Resource Development/Water Quality Management

7. Land Management

8. Housing

9. Economic and Entrepreneur Development

10. Human Resource Development Program

11. Transportation

12. Communication Development Program

13. Water Quality Enhancement Project

14. Electric Power / Electrification

15. Public Building Development

16. Public Safety Program

III. Execution Plan

Source: Prepared by Study Team from CLUP

The content of CLUP II-B. (development goals/strategy) and contribution to achievement of the

said goals by the sewerage development project are organized below.

Table 64 Development Goals in CLUP and Strategy to which Baguio City Sewerage

Development Project is Expected to Contribute

Goal Main Strategy to which Baguio City Sewerage Development

Project is Expected to Contribute

Balanced Ecology Strengthen Enforcement of Environment Related Laws

Strictly enforce laws and regulations on anti-pollution,

littering, illegal tree cutting and other related laws.

Properly and strictly enforce national and local laws and

regulations on natural resources, physical and land uses

and the environment.

Faster Economic Growth Promote Tourism by Protecting/Improving Environment

Promote the city as prime tourist destination by preserving

and enhancing its natural environment.

Higher Levels and Culturally

Enriched Social Development N/A

6 Abbreviation of Information, Education, and Communication, surmise this refers to educational activity.

72

Efficient and Effective

Development Administration

and Management

Secure Administrative Responsibility/Accountability

Promote the elements of good governance in all

transactions or activities of the city such as, accountability,

transparency, competency, responsibility, predictability,

efficiency and effectiveness.

Cooperation Between National Government and Local

Government for Project Planning/Implementation

Pursue coordinated planning and implementation of

programs and projects of national government agencies

and LGUs.

Cooperation with Private Sector for City Investment Projects

Promote tripartite partnership between private investors,

labor, and public to gain support to the City’s Investment

Portfolio.

Increase Financial Revenue

Intensify revenue sourcing through increased tax

collection, identification of new sources of revenue,

implementation of fiscal laws and policies with the aim of

increasing income to improve quality services of the city.

Decrease Financial Expenditures

Reduce cost of local government services without

sacrificing its quality to increase fiscal capacity.

Boost Technical Level of City Government and Staff

Continue enhancing organizational and technical

competency of officials and staff.

Fund Procurement for Development of Large-Scale Projects

such as BOT

Explore alternatives to funding critical big development

projects such as BOT, bond flotation, grants, etc.

Efficient and Effective

Infrastructure Support

Facilities and Utilities

Provide Equal City and Public Services Throughout City

Provision of equitable distribution and allocation of urban

services, facilities and utilities in all areas following their

functional roles to the overall city development.

Source: Prepared by Study Team from CLUP

(2) Expected Benefits to the Philippines as a Whole

I. Issue 1 for The Philippines as a Whole and Each City: Delay in Sewerage Development in

areas beyond Metro Manila

Sewerage system development has proceeded in Metro Manila in the Philippines, but

development is extremely limited beyond it. The penetration rate of sewage treatment facilities is

above 10% in Metro Manila, but is only three to five percent outside of Metro Manila.

73

Table 65 Sewerage Infrastructure Development Status Inside/Outside Metro Manila

Inside Metro Manila Outside Metro Manila

Development

Scope

West District: Maynilad

East District: Manila Water

Only several cities

(Baguio, Vigan, Zamboanga7, etc.)

Penetration

Rate

West District: 11%

East District: 12%

(As of 2013)

3-5%

(As of 2013)

Source: Prepared by Study Team based on MWSS, 2014, “Water Supply and Wastewater Programs”, ADB, 2013,

“Water Supply and Sanitation Sector Assessment, Strategy, and Road Map”

As stated in “(1) Background and Objective of Study in the Introduction”, the government of the

Philippines created a subsidy system (NSSMP) in 2013 which makes up about 40-50%8 of total

development costs for sewerage infrastructure outside of Metro Manila. However it took five years

for the first project to be supported by the NSSMP subsidy to be carried out for in Zamboanga in

20189 . Furthermore, the project in Zamboanga was carried out through a conventional public

procurement process10.

II. Issue 2 for the Philippines as a Whole/Each City: Closure of Tourist/Other Locations Due

to Environmental Degradation

The increase in the number of tourists and other visitors to locations that do not have sewage and

other such facilities has resulted in the serious problem of environmental degradation in various

areas in the Philippines. President Duterte has issued orders to prohibit the entrance of tourists into

tourist destinations. Closure and penalty orders have been issued to tourist facilities and ordered

implementation of environmental rehabilitation programs in tourism regions, which have resulted

in stagnation of the tourism industry in regions which was considered a big blow to the local

economy.

Table 66 Current Status/Impact of Environmental Pollution in Tourist/Other Locations

Region Background/Status Impact

Boracay Island Visiting by tourists prohibited for six months

due to environmental pollution on the island

caused by increase in number of tourists.

Limits on number of visitors implemented

after island was reopened to tourists.

NEDA announced that it will

invest 25.27 billion Pesos

(Approx. 52.4 billion Yen)

for environmental

rehabilitation (15.89 billion

7 The sewerage infrastructures in Baguio, Vigan, and Zamboanga Cities have been developed in the 1920s and 1930s

by USA. 8 Response to interview that subsidy rate had been revised to 50% as of Aug. 2018 9 Confirmed in interview in November 2018 that budget was implemented in 2018 10 From response to interview in July 2018

74

Wastewater treatment facilities were

developed and illegally constructed

structures were removed.

Pesos to be procured from

private sector companies).

El Nido,

Palawan

Closure order issued for tourist facilities that

violate environmental related laws and codes

(environmental improvements implemented

when facilities not closed).

N/A Panglao Island,

Bohol

Manila Bay Water quality deteriorated due to household

sewage, industrial wastewater containing

harmful substances, percolating water from

garbage dumps and other wastewater inflow

(Number of bacteria coliform 3 times or

more allowable value).

Operation suspension order issued for

facilities in areas that do not have wastewater

treatment facilities, and declared that max.

Penalty of 200,000 Pesos per day (Approx.

416,000 Yen) would be imposed.

Rehabilitation program to commence in

2019 (minimum of 4 years).

Total cost of environmental

improvements projected to be

132 billion Pesos (Approx.

274.5 billion Yen).

Source: Prepared by Study Team using news report from NNA news, etc.

III. Benefits of Baguio City Sewerage Development Project on The Philippines as a Whole

The sewerage development project in Baguio City can be judged to be significant to the

Philippines as a whole from the following perspectives.

This development project is being implemented outside Metro Manila where the penetration

rate of sewage treatment facilities is substantially low.

Utilization of NSSMP is being reviewed for fund procurement.

A PPP scheme including private sector participation is being reviewed as an option.

Sewerage infrastructure development project includes environmental management in tourist

sites.

From the above points, the sewerage development project in Baguio City is envisaged as a

showcase for infrastructure development by LGUs through long term partnerships with the private

sector. It is anticipated that it will result in ripple effects on other LGUs and contribute to

environmental preservation and sustainable development of a balanced economy.

75

5．Review of Financing

In this chapter, based on the premise that an NSSMP subsidy (up to 50% of total development costs)

will be applied for a sewerage infrastructure development project, a review was conducted into the

fund procurement methods used by the private sector company which needs to cover the the remaining

50%. In addition, a description of the interview survey that was conducted with domestic and overseas

financial institutions as part of this review is also provided.

(1) Overview of NSSMP

The NSSMP was established through the Philippine Clean Water Act of 2004. It is a system that

provides a 50% subsidy by the central government to LGUs for sewerage infrastructure

development projects. The NSSMP has a goal of improving water quality in urban areas outside

Metro Manila and protecting public health in the Philippines by the year 2020, and HUCs including

Baguio City have been strongly urged to develop sewage treatment systems by this year (refer to

diagram below).

The DPWH has jurisdiction over the NSSMP, and the Environmental and Social Safeguards

Division (ESSD) is a unit in this department tasked to promote the NSSMP, functioning as the focal

point with related departments and divisions as well as serves as the supervising agency for NSSMP

as a whole (refer to diagram below).

Fig. 67 Goal/Objectives/Targets/Strategy of NSSMP

Source: Prepared by Study Team based on NSSMP Program Operations Manual (hereinafter referred to as “POM”)

1. By 2020, all LGUs have developed septage management systems and the 17 highly urbanized cities (HUCs) have developed sewerage systems.

2. By 2020, approximately 43.6 million people have access to septage treatment facilities and about 3.2 million will have access to sewage treatment facilities.

3. By 2020, PhP 26.3 billion has been invested in sanitation improvement projects.4. By 2020, about 346 million kilograms of BOD is diverted from the environment per year

as a result of the sewerage and septage management projects.

Goal

Objectives

Targets

To improve water quality and protect pubic health in urban areas of the Philippines by 2020.

1. To enhance the ability of local implementers to build and operate wastewater treatment systems for urban centers.

2. To promote the behavior change and supporting environment needed for systems to be effective and sustainable.

StrategyTo facilitate a bottom-up, demand-driven project development process by providing national government support and incentives.

76

Fig. 68 Implementation Organizations of NSSMP

Source: Prepared by Study Team based on NSSMP POM

Before an application is made to the NSSMP, it is necessary to formulate a plan for sewage

treatment and other details, followed by technical design and implementation of an F/S.

Subsequently, the LGU submits application documents to the DPWH for the NSSMP subsidy based

on the results of the F/S that was performed. Afterwards, when the application documents have been

positively appraised in the screening process done at the DPWH, the process proceeds to

implementation of actual project construction, operation, maintenance, evaluation and monitoring

following the procurement procedure. As stated in “(1) Background and Objective of Study in the

Introduction”, only Zamboanga City has made a successful application for NSSMP support as of

February11. The DPWH observed that one of the reasons for the lack of NSSMP applications and

adoptions is that there is no budget to implement the F/S required for NSSMP application, and it

has created a system that subsidizes the costs for the said F/S.

11 Budget implemented in 2018.

Policy

NSSMP Implementation Focal Point

Project Implementers

Project Facilitators

NEDA INFRACOMSub-committee on Water

Resources

NSSMP Committee

NSSMP Office(DPWH – ESSD)

Water Districts LGUs

Private Companies

DENR(WQMAs)

Industry Asscrr’s &

DonorsMWSS LWUA DOH DILG

77

Fig. 69 NSSMP Process

Source: Prepared by Study Team based on NSSMP POM

(2) Expected Fund Sources for This Project

In this project which will implement upgrade and expansion of a sewage treatment facility in the

Philippines, it is expected that the fund sources for the 50% portion of the development costs that

will not be covered by the NSSMP subsidy will be as shown in the diagram below. The fund sources

are roughly divided into public funds and private sector funds. It is expected that the public funds

for Baguio City which is an LGU will consist of city government finances and donor funds.

Furthermore, it is also expected that loans will be made with concessional conditions, which include

project loans and two-step loans.

Fig. 70 Expected Fund Sources for This Project


First, regarding the financial situation of LGUs, the annual revenue and expenditures of Baguio

City (Fiscal 2016) both amounted to approximately 1.6 billion Pesos (approximately 3.4 billion

Yen)12. It shows that it would be difficult for Baguio City to independently cover the costs of this

project for the initial few years when this project is implemented.

12 OANDA rate as of Jan. 22, 2019 (1 Peso = 2.08 Yen)

Sanitation Planning

Sewerage / Septage System

Design

Project Feasibility

Application and Selection

Procurement

Construction

Operation and Maintenance

Monitoring and Evaluation

78

Next, there is the possibility that donor funds may be provided by means of loans. These loans

consist of development funds that are made to developing countries with favorable conditions such

as low interest and a long concession term in order to support efforts to facilitate the development

of developing countries. Normally, the conditions under which loans are extended are determined

by considering the income level and other conditions in the target country13. Furthermore, loans are

classified into project type loans and non-project type loans. Project type loans consist of (1) Project

loans, (2) Loans for Engineering Services (E/S), (3) Development financing loans (two-step loans)

and (4) Sector loans. Non-project type loans consist of (1) Development policy loans, (2) Product

loans and (3) Sector program loans. It is thought that the loans that can be applied to this project

consist of (1) Project loans and (2) Development financing loans (two-step loans), which are project

type loans.

In addition, when considering the private sector funds that may not be independently invested in

this project, it is expected that the PPP scheme will be used, with funds provided by public and

private financial institutions. The banking sector in the Philippines is dominated to a large extent in

terms of the scale of total assets by the private banks centered around conglomerates and

government based banks. Specifically, the top five banks in the Philippines in the diagram below

which include Banco Deoro (BDO) (Sy Conglomerate), Metropolitan Bank and Trust Company (Ty

Conglomerate) and Bank of the Philippine Islands (BPI), account for the majority of assets in the

Philippines.

Many PPP projects obtain funds by means of fund transfer within corporate groups beneath

conglomerates, or by procuring funds by appropriating corporate financing by private sector

constituent companies. When there are projects that require large-scale fund procurement, banks

procure funds by forming syndicates.

However, when funds are procured by transferring funds within a corporate group beneath one

of the above conglomerates or by other such means, there are rules on DOSRI (Directors, Officers,

Stockholders, and Related Interests of the bank) for the financial activity within the group set forth

by the Bangko Sentral ng Pilipina (BSP) (Central Bank of the Philippines). Consequently, there are

transactions between conglomerates because of the lending restrictions within groups.

13 The Philippines is classified as a low/middle income country.

79

Fig. 71 Total Asset Share by Top 10 Banks and Other Banks (As of March 2018)

Source: BSP

As stated in “3. Review of Project Implementation Scheme and Project Feasibility”, it would be

difficult to recover the investment for this project with income for sewerage related charges alone,

and due to the fact that there are risks posed by the difficulty with service charge collection itself, it

was assumed that an availability payment type of PPP project would be adopted. The judgment was

made that Baguio City could shoulder the financial burden for this type of PPP project in view of

the financial situation of the city. The financial situation of Baguio City was briefly described above.

The city revenue of approximately 1.6 billion Pesos consists of approximately 700 million Pesos

(approximately 1.4 billion Yen) from taxes and other internal revenue (independent revenue

source)14, and approximately 900 million Pesos (approximately 1.8 billion Yen) from IRA (Internal

Revenue Allotment) and other external revenue15. Furthermore, IRA comprised approximately 600

million Pesos (approximately 1.3 billion Yen) of the external revenue16. In the Local Government

Code of the Philippines, since it is stipulated that each LGU should use 20% or more of the IRA for

local development projects, Baguio City must spend approximately 120 million Pesos

(approximately 260 million Yen)17 or more on development projects18. The sources of tax revenue

in the Philippines are described in the table below. Baguio City is allowed to collect more types of

14 OANDA rate as of Jan. 22, 2019 (1 Peso = 2.08 Yen) 15 Subsidy from the government; 23% of the total budget for IRA is allocated to “Cities” which Baguio City is

classified as. Out of the allocated portion of IRA, half of the budget is then allocated to each LGU (Province, City,

Town, Barangay) according to the population ratio, 25% according to the land area ratio, and the remaining 25% is

equally allocated to all LGUs. 16 Same as the above 17 Same as the above 18 Confirmed by interview of Baguio City Budget Office in Jan. 2019.

80

taxes compared to other general LGUs by virtue of it being an HUC. In addition, the tax rate upper

limit is set at a higher level than for provinces and towns. From this perspective, it is thought that

Baguio City has more internal revenue compared to other LGUs. Baguio City is considerably less

dependent on Internal Revenue Allotments (IRA) (percentage of IRA share in the annual revenue

of the city is low) in spite of the fact that the IRA calculation method is beneficial for Baguio City

(since the allotment amount is determined based on the population and land area ratios). The

dependence rate of Baguio City on IRA was around 40% for the 5 years between 2012 and 2016 as

shown in the table below, which is a lower value compared to the average value for cities of 66%

and the average value for provinces and towns of 84%.

Table 72 Types of Tax Revenue Sources for LGUs

Type of Tax Province City Town Barangay19

Business Tax X O O X

Real Estate Tax O O Share Share

Idle Land Tax O O X X

Real Estate Transfer Tax O O X X

Printing/Publishing Tax O O X X

Crushed Stone Resource Tax O O Share Share

Delivery Vehicle Tax O O X X

Recreational Facility Tax O O Share X

Influential Individual Tax O O X X

City/Town Tax X O O Share

Patent Tax O O X X

Source: Local Government Code of the Philippines, materials from Philippine Department of Finance

Note: “Share” indicates that a certain amount is allocated from local government that is allowed to collect the

tax.

Table 73 Dependence Rate of Baguio City and Other LGUs on IRA

2012 2013 2014 2015 2016

Baguio City 38% 35% 37% 40% 42%

Average (Province) 84% 83% 85% 84% 84%

Average (City) 66% 66% 66% 67% 66%

Average (Town) 81% 83% 86% 86% 85%

Source: Prepared by Study Team from Philippine Department of Finance website

19 Barangays are smallest local government unit in the Philippines that comprise cities and town, and implement

administrative services.

81

(3) Interview Survey of Domestic and Overseas Financial Institutions

I. JICA

Interviews with the representatives of the JICA Headquarters and JICA Philippine Office

confirmed the possibility of providing funds by means of a two-step loan in case this project is

actually implemented. Two-step loans comprise a portion of project type loans as stated above, but

in general the required funds are provided in order to implement a certain policy such as promotion

of a specific sector or development of the local infrastructure for the poor through the development

bank or other financial institution in the country borrowing the funds20. A Japanese ODA Loan

Agreement for two-step loans was concluded with the DBP in the Philippines for “Environmental

Development Projects” in 2008. Medium and long-term loans were granted in this project in order

to facilitate fund-raising required for four target sectors through the DBP with the objective of

protecting the environment in the Philippines: a. Water supply/water quality preservation

(development of water supply / sanitation facilities), b. Renewable energy, c. Prevention of

industrial pollution and d. Disposal of solid, medical, and harmful waste. The Philippine Water

Revolving Fund (PWRF) was established in cooperation with the DBP in order to facilitate loans to

the a. Water supply/water quality preservation sector, under which funds reimbursed from projects

are saved, and this fund is used to make loans to new projects as the means to provide funds on a

continuing basis. The PWRF scheme is shown in the diagram below.

Fig. 74 PWRF Scheme

Source: Prepared by Study Team based on materials from the World Bank

The main conditions for this project are described below.

20 JICA website: https://www.jica.go.jp/activities/schemes/finance_co/about/kind.html

DOF

JICA USAIDDBP

Private Finance Institutions (PFIs)

Domestic Banks

LGU Guarantee Corporation

(LGUGC)

Water Service Providers(LGUs and WDs)

PWRF

Sovereign Guarantee

StandbyCredit Line

DebtService

Credit Risk Guarantee

Co-Guarantee

Concessional Funds

Debt Repayment

Commercial Loans

Loans

https://www.jica.go.jp/activities/schemes/finance_co/about/kind.html

82

Table 75 Loan Amounts and Conditions for “Environmental Development Projects”

Amount

(Million Yen)

Interest (%/Year) Repayment Period/

Grace Period

(Years)

Procurement

Conditions Main Activities Consulting Services

24,846 0.65* 0.01 40/10

General Untied 1.4 - 30/30

* Favorable conditions are applied to portion that contributes to global environment (water supply that contributes to

poverty reduction, renewable energy, sewerage services, prevention of industrial pollution, waste disposal)

Source: Prepared by Study Team from JICA website

Loans were granted for over 70 projects in the above 4 sectors between 2008 and 2018 to LGUs,

private sector companies and public corporations. Two case samples of these projects are provided

below.

The present project is a small-scale project compared to normal loan projects, but the judgment

was made that fund procurement could be facilitated by utilizing a two-step loan that indirectly

targets multiple projects, including small-scale projects like the above cases.

Case 1. Bulk Water Supply Project

Target Sector: Water supply/water quality preservation (development of water supply /

sanitation facilities)

Target Area: Metro Cebu

Sublessor: JV with Cebu Manila Water Development, Inc. and Cebu province government

Loan Amount: Approx. 800 million Pesos

Project Content: Development of water supply sourced from Luyang River. The Metro Cebu

Water District (MCWD) which supplies 56% of the water needed in Metro Cebu depended on

saline groundwater at the time. This project aimed to obtain an alternative source of water and to

newly connect approximately 230,000 household to the water supply system by 2027.

Case 2. Paranaque City Sewage Treatment Plant Development Project

Target Sector: Disposal of solid / medical / harmful waste

Target Area: Paranaque City

Sublessor: Maynilad Water Services, Inc. (Maynilad)

Loan Amount: Approx. 17 billion Pesos

Project Content: Development of sewage treatment plant. Facility with capacity of 76,000

m3/day will be developed to treat sewage from 500,000 households in 9 Barangays in Paranaque

City. JFE Engineering received contract for facility design, construction and commissioning.

83

II. DBP

The DBP is a state-run financial institution in the Philippines which serves as the intermediary

financial institution for the above two-step loan. It was confirmed by means of interviews that the

Baguio City Water District has taken out loans from DBP before, and even though no loans have

been made to Baguio City itself, Baguio City is recognized as a safe borrower. In addition, the lack

of investment funds for the sewerage service sector in the Philippines is viewed as a problem, hence

DBP has an intention of actively making loans to this sector. It will be also possible to consider a

loan for this project, both in PPP and JV schemes.

III. RCBC

Rizal Commercial Banking Corporation (RCBC) is a large commercial bank in the Philippines,

established in August 1960 as a member of the Yuchengco Group, a Filipino-Chinese conglomerate.

Since it was confirmed by means of interviews that loans can be considered for this project, it will

be necessary to continue to share information.

(4) Review of Financing

When the financing environment in the Philippines, interview surveys of domestic and overseas

financial institutions and the financial situation of Baguio City are factored in, the judgment can be

made that the JICA two-step loan scheme or the PPP or JV scheme can be utilized as the financing

method for the portion that is not covered by the subsidy from the NSSMP.

84

6. Review of Future Policy

A proposed project scheme was compiled based on the above results, opportunities to share

information with related institutions were created, the issues that need to be addressed to achieve the

project were organized and the future policy was examined.

(1) Sharing Results of This Feasibility Study with Local Public Institutions (Baguio City, DPWH,

PPP Center)

I. Baguio City

When the results of this feasibility study were shared with Baguio City, the city stated that it

considers implementation of this project to be an urgent issue, that it wantsed to file an application

with the NSSMP, and that it wanted the Study Team to update the NSSMP application with the

technical and financial analysis content that was implemented as a main part of this feasibility

study since the existing NSSMP application draft that was prepared in the Pre-F/S did not include

these aspects.

In addition, it was confirmed from Baguio City Water District that it wished to integrate water

supply and sanitation services in the future. Therefore, although there is not a concrete plan at

present, it is thought that it is possible for the NSSMP application to first be made by Baguio City,

with operation to be subsequently transferred to the Baguio City Water District, with water supply

and sanitation service operation to be implemented as a JV.

II. DPWH

When the results of this feasibility study were shared with the DPWH, it was confirmed that

Baguio City is a priority LGU for sewerage system development, and that preparations have been

made for the implementation of an evaluation if an application is made to the NSSMP. A Letter of

Intent (LOI) of NSSMP was submitted several years ago by Baguio City to the DPWH, but an actual

application to the NSSMP has not been made, and it was confirmed as a result of this feasibility

study that the DPWH wanted an application to be submitted by Baguio City to the NSSMP if this

is possible. In addition, it was confirmed that an application can be made for subsidy for the cost of

an F/S under a system that was newly created by the DPWH to support LGUs in filing an NSSMP

application in the event the survey content of this feasibility study is insufficient.

III. PPP Center

When the results of this feasibility study were shared with the PPP Center, it was confirmed that

the PPP Center is prepared to conduct a review for this project if an application is made. In addition,

if it is judged that the judgment is made that the information from the existing Pre-F/S is still valid

at this point in time, there would be no problem for the PPP Center with utilizing such information

to make an application for a PPP project after being updated taking into consideration the review

results of this feasibility study. Furthermore, it was confirmed that the Project Development and

Monitoring Facility (PDMF) can be utilized, which is a revolving fund at the PPP Center that

subsidizes the costs to facilitate F/S implementation and transaction advisory for projects that are

feasible under a PPP scheme.

85

(2) Steps After This Study

I. NSSMP Application

The first step required after this study is an application for the NSSMP subsidy, regardless of the

procurement method. Baguio City prepared an NSSMP application proposal when the existing Pre-

F/S was implemented, but these materials need to be updated, including addition and updating

information derived from this feasibility study. Therefore, the study team for this feasibility study

should update the NSSMP application with the technical and financial analysis results from this

survey project, explain the content to the new mayor21 after the incumbent mayor’s current term is

concluded, and submit the entire application for NSSMP support to the DPWH. In parallel with this

work, the continued sharing of information by the Study Team with the DPWH will help facilitate

smooth approval of the application.

In addition, in the event the PPP scheme is used as the fund procurement method, a separate PPP

application will be required for appraisal purposes, which will be made after approval of the NSSMP

application. It was confirmed in a meeting at the PPP Center that the NSSMP application must first

be made since a PPP project cannot be approved unless the fund source has been verified. The flow

of the NSSMP application and PPP application process is described in the diagram below.

Fig. 76 Flow of NSSMP Application and PPP Application Process

Source: Prepared by Study Team based on the NSSMP POM, revised BOT law and other materials

21 Will be described later, but the current mayor of Baguio City is serving third term (final term), and there will be a

mayoral election in May 2019, after which the current mayor will be replaced.

86

II. Bid Tendering

Since the LGU must be the entity to tender an application for NSSMP support, when this project

actually begins to take shape and is approved for subsidy, it will proceed to the bidding process.

For example, the World Bank has specified four types of sewage treatment technology candidates

for sewerage development projects in the Philippines (Examples: Conventional Activated Sludge,

Membrane Bioreactor, Moving Bed Bio-film Reactor and Sequence Batch Reactor), with the

selection of the method used left up to the proposal made by the bidder.

Based on this case, the following quality items should be looked at during the evaluation process

in order to disseminate high quality Japanese infrastructure technology overseas.

● Economic efficiency of LCC concept

● Stability of 24-hour facility operation capability

● Ability to restore operation in the event of a disaster

● Environmental considerations

● Ease of maintenance

(3) Challenges Towards Project Achievement

The challenges that need to be addressed to facilitate achievement of this project consist of

securing 50% of the funds required to pay for development costs, review and finalization of

agreement between Baguio City government and Baguio City Water District on the division of work

(or period / method used when work is to be transferred), competition with other private sector

proposals, the inevitable change of the local chief executive of Baguio City and other such issues.

In order to facilitate implementation of this project, 50% of the development costs which will not

be covered by the NSSMP subsidy need to be covered from other fund sources. However, since

those fund sources differ depending upon the project scheme, it will be necessary to continue to

review multiple possibilities, including financial institutions with which opinions are currently

being exchanged. This is to be done in parallel with the review of the project scheme,

Regarding the division of work between the Baguio City government and Baguio City Water

District, as stipulated in the Philippine Clean Water Act of 2004, the Water District should be in

charge of sewage treatment, and although the Baguio City government and Baguio City Water

District recognize this, concrete plans for the transferring of this work have not been made.

Therefore, it will be necessary to clarify these plans when implementing this project, and perform

implementation of operation / maintenance for this project according to these plans.

Furthermore, in preparation for implementation of this project, it will be necessary to confirm

how the local government would regard unsolicited proposals that were made for the sewage

treatment plant in Baguio City.. As of February 2019, it has been confirmed that a private sector

proposal was made by Metro Pacific Investments Corp. (the largest investor of Maynilad the water

supply sanitation service concessionaire in the West District of Metro Manila), but according to an

interview with Baguio City, an examination by the PPP Selection Committee22 is not in progress

due to the fact that the information required in the Baguio City Public-Private Partnership for the

People Initiative Code is lacking. It will be necessary to continue to share information with Baguio

City and the PPP Center for this project and pay close attention to any ensuing developments in

22 Committee in LGU that implements examination and other work for PPP projects.

87

relation to this.

Finally, regarding conclusion of the term of of the incumbent mayor of Baguio City, regulations

in the Philippines limit mayors to three consecutive 3-year terms. As of February 2019, Mr.

Mauricio Domogan, the current mayor of Baguio City, is serving his third and final consecutive

term as mayor, which started in June 2010, and a mayoral election will be held in May 2019, after

which the current mayor will have a successor. Therefore, the various plans that have been worked

on with the current mayor of Baguio City will not necessarily continue, and it will be necessary to

explain and convince the new mayor based on the merits of this project. On the other hand, since

this project qualifies as an issue that should be urgently solved by Baguio City, at the same time that

mainly the technical issues are discussed and determined with CEPMO, it will be necessary to

continue to share information with the Budget Office. Furthermore, as the approval by the city

council is required for Baguio City to implement this project, it would be useful to make requests

that members of the incoming city council to examine the result of this study.

In addition, after this project is implemented in Baguio City, it is expected that other markets in

the Philippines can be developed by consortiums of Japanese corporations. In this case, narrowing

down of the target potential markets should be considered based on: (1) Cities with a population of

200,000 or more (from the perspective that “certain level of market scale can be expected”), (2)

HUCs that have been requested to develop water supply/sanitation services by the Philippine Clean

Water Act of 2004 (from the perspective that “this is important politically and there is urgency”),

and (3) City that has applied for F/S cost subsidy by DPWH and received the subsidy (from the

perspective that city “Has intention to proceed with sewerage development as an LGU”) (list of

cities is provided in table below).

In the event this project is implemented, it will be necessary to use know-how acquired through

this project by holding seminars and other events for these cities in order to share, advertise and

otherwise disseminate information on this project in Baguio City.

88

Table 77 List of Cities in the Philippines with Population of 200,000 or More

Source: Prepared by Study Team using Philippine Statistics Authority website, Philippine Department of Home

Affairs website, interview with DPWH and other materials

(4) Future Schedule

The study team for this feasibility study will first update the NSSMP application, make a report

on this survey project to the new mayor after he/she is inaugurated in June, update the NSSMP

content as necessary in July, and file the application.

In parallel with this work, discussions and other interactions with local partners will proceed.

# CityPopulation

(2015)Province Region HUC

F/S subsidy from

DPWH

1 Cagayan de Oro 675,950 Misamis Oriental X ✔ ✔

2 General Santos 594,446 South Cotabato XII ✔ ✔

3 Bacolod 561,875 Negros Occidental VI ✔ ✔

4 Iloilo City 447,992 Iloilo VI ✔ ✔

5 Angeles 411,634 Pampanga III ✔ ✔

6 Butuan 337,063 Agusan del Norte XIII ✔ ✔

7 Puerto Princesa 255,116 Palawan IV‑B ✔ ✔

8 Davao City 1,632,991 Davao del Sur XI ✔

9 Cebu City 922,611 Cebu VII ✔

10 Zamboanga City 861,799 Zamboanga del Sur IX ✔

11 Lapu‑Lapu 408,112 Cebu VII ✔

12 Mandaue 362,654 Cebu VII ✔

13 Baguio 345,366 Benguet CAR ✔

14 Iligan 342,618 Lanao del Norte X ✔

15 Lucena 266,248 Quezon IV-A ✔

16 Tacloban 242,089 Leyte VIII ✔

17 Olongapo 233,040 Zambales III ✔

18 Antipolo 776,386 Rizal IV-A

19 Dasmariñas 659,019 Cavite IV-A

20 Bacoor 600,609 Cavite IV-A

21 San Jose del Monte 574,089 Bulacan III

22 Calamba 454,486 Laguna IV-A

23 Imus 403,785 Cavite IV-A

24 Santa Rosa 353,767 Laguna IV-A

25 Tarlac City 342,493 Tarlac III

26 Biñan 333,028 Laguna IV-A

27 Lipa 332,386 Batangas IV-A

28 Batangas City 329,874 Batangas IV-A

29 San Pedro 325,809 Laguna IV-A

30 General Trias 314,303 Cavite IV-A

31 Cabuyao 308,745 Laguna IV-A

32 San Fernando 306,659 Pampanga III

33 Cabanatuan 302,231 Nueva Ecija III

34 Cotabato City 299,438 Maguindanao XII

35 San Pablo 266,068 Laguna IV-A

36 Tagum 259,444 Davao del Norte XI

37 Malolos 252,074 Bulacan III

38 Mabalacat 250,799 Pampanga III

39 Talisay 227,645 Cebu VII

40 Ormoc 215,031 Leyte VIII

41 Meycauayan 209,083 Bulacan III

42 Marawi 201,785 Lanao del Sur ARMM

FY 2018 Study on Business Opportunity of High-quality ...

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