CWA's private partner will pocket part of the revenues

7 years ago - September 16, 2016
CWA partner will receive the revenues
Rather than privatisation, the Central Water Authority (CWA) is moving towards a leasing arrangement. This type of private-public partnership consists of delegating the management and operation of the system to the private operator, while the public party remains the owner

This is the formula recommended by the World Bank to the Ministry of Public Utilities for consideration and decision. Among the World Bank's suggestions is that the private partner should receive a percentage of the CWA's revenues, as well as a project management fee.

"The private partner will not participate in the capital of the CWA. The entire network remains the property of the CWA, while the private operator will be responsible for installing the computer system," explains a source close to the matter. The distribution service and the collection of payments will be the responsibility of this private partner. The CWA will continue its pipe replacement programme by drawing from the Build Mauritius Fund, as it is currently doing.

A private operator means higher tariffs. And this will be inevitable, according to our source. "The tariffs will increase, it is not sustainable on the current model. The private partner will receive a percentage of the revenues," she adds. Under the leasing agreements usually negotiated by the World Bank, the private partner receives 80% of the revenues. However, this distribution can be negotiated.

Project Management Fee

"The proposed formula stipulates that the percentage will not be applied to future mark-ups," says our source. This means that if at the time of signing the contract with the private partner, the latter pockets Rs 8 out of every Rs 10 charged to the consumer, it will continue to receive the same rate in the event of a tariff increase. The difference will go into the CWA's coffers.

In addition to this percentage on the tariffs, which is yet to be determined, the World Bank also recommends the payment of a Project Management Fee to the operator. The exact formula has yet to be found, but the amount should depend on the number of kilometres of pipe that the CWA should replace.

It will, however, be possible to impose a 'cap' on this fee. "Everyone has a tap and a tank. The ability to raise revenue is limited. Other incentives must be found," concludes our source.

Steps to be taken

The installation of DMAs is part of the second phase of the project. Before this can happen, the CWA must first make a decision on the World Bank's proposals. "Then the formula has to be presented to the Cabinet so that the international tender can be launched to find the partner," says our interlocutor. The CWA is still working on this.

At the World Bank level, there is a willingness to accompany the government in the second stage and to negotiate with the private operator on behalf of the government.

The question of revenue distribution remains one of the sensitive points to which the World Bank experts are paying the most attention. However, the final decision will rest with the government.

The sharing of responsibilities

Maintenance of the network for the CWA and modernisation for the private operator. This is how one could summarise the operational modalities of this leasing arrangement recommended by the World Bank. "In which region should the pipes be replaced first? Where is it most critical to invest? These are questions that will directly affect revenues and the private sector will therefore have a say in these matters," explains our interlocutor.

Communication between the private partner and the CWA will have to be permanent. One of the priorities of the future CWA partner will be the installation of District Metering Areas (DMAs), which are described as "central taps for the regions" (see off-text above).

These will provide real-time data on the flow of water being delivered. While there are a few of these, without remote reading capability, the plan is to install them across the country. "With DMAs, the operator will know the volume of water injected into a region and the rates collected in return. This will give a clear map of the losses in each region," says our source.

Text by Faits sur Maurice

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