Insight – David Lloyd Owen

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The numbers game.

The GWI conference in Barcelona this month may just go down as a marker for a new climate in the financing of water and wastewater projects worldwide. Too many events over the past decade have seen delegates in danger of being outnumbered by speakers and chairs. A couple of hundred present at a plenary session and well-filled side rooms during the graveyard slots suggest an upsurge of interest in the practicalities of water management and finance.

The hard-bitten habitué would add ‘belated’ at this point, but belated also applies to funding. The need for funding has been compounded by a reluctance amongst politicians to commit funds to ageing and over-burdened water and sewerage infrastructure. The tone of many of the presentations suggested that planners are increasingly willing to look beyond political largesse when it comes to mobilising funding.

Three presentations from Spain, Saudi Arabia and Libya highlighted $114 billion in capital and operating costs for projects in arid countries, each with distinctive water management issues.

Some $25 billion will be spent on wastewater projects in Spain between 2007 and 2013, in order to fully comply with the EU’s urban wastewater treatment directive and the initial impact of the water framework directive. Saudi Arabia is seeking to emphasise water conservation, leakage management and wastewater recovery, budgeting $37 billion to extend sewerage and wastewater treatment facilities over the next 18 years, and $18 billion to operate these systems. On its completion, Libya’s Great Man-Made River project will have cost $34 billion ($20 billion in capex and $14 billion in opex) as the country mobilises a sweet water sea 1,200-1,500km from its arid cities.

In each case, cost recovery was discussed, where it has traditionally been a taboo subject. On a grand scale, we were told that the Great Man-Made River will pay for itself over 50 years at a tariff of $0.28/m3. This was a bit of a teaser, as a tariff like this being charged, especially for agricultural users, is something of a moot point. To allude to cost recovery, however, was refreshingly new.

In Spain’s case, it has to wean itself off a diet of EU subsidies as Brussels’ largesse moves eastwards. In 2005, the year when the UWWTD was meant to be met, 23% of urban discharges were still below the expected standard. Given that the failure rate was 59% in 1995, progress has been made, but the small wastewater treatment works, especially those near to EU designated sensitive waters, are appreciably more expensive to deal with than major cities on a per capita basis. Indeed, €19 billion for some 7.5 million people works out at €2,500 per person. While €5 billion in Government and EU funding will be mobilised for those affected by the sensitive areas standards, the other €14 billion will need to come from cost recovery (via an 11% tariff increase) and private sector funding. Such a degree of private funding suggests that wastewater treatment concessions are about to become appreciably more popular.

Saudi Arabia, meanwhile, seeks “to build a world-class water utility” which, considering that in Riyadh average water supply is seven hours a day, suggests a sea change, and one that extends well beyond desalination. The use of phased targets and a gradual approach towards private sector participation (medium-term O&M contracts leading to full concessions) suggests that they have had plenty of advice.

By cutting out 1.1 million m3 of water leaking away from Riyadh each year through cutting distribution losses from 31% to 5% by 2025, the need for nine new desalination plants disappears. That is a robust target. The shift towards comprehensive wastewater treatment by 2025 also suggests that the debate over the acceptability of water recovery has been won in Saudi.

In case people start feeling too optimistic, it is clear that the mood in the US remains pretty grim. In these examples, however, it appears that pragmatism is gaining the upper hand.