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

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.

I. Overview of Project Target Area (Baguio City) Fig. 1 Location of 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 Baguio City census), an area of approx. 57.5 km2, and is catagorized as a Highly Urbanized City (HUC) geographically situated in the Manila 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 Source: Prepared by Study Team 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

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”)

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

400,000 345,366 350,000 318,676 301,926 300,000 252,386 250,000 226,883

200,000 183,142

150,000 119,009

100,000

50,000

0 1980 1985 1990 1995 2000 2005 2010 2015 Source: Baguio City

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

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

(㎥/year)

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. 9 Water Supply Population Forecast

Supply to entire population in 2020

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

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

■Current Situation ■Goals Short-term Mid-term Long-term

Sewerage service is provided in 65 /128 Sewerage barangays either fully or partially. The connection rate 25% in 2020 50% in 2025 total number of registered users is 9,820 100 % in 2035 15 % (15 per cent of the population).

The average daily inflow of sewage to the Treatment BSTP in 2010 was 12,434 m3/day . This is 32,000m3/day capacity of BSTP 15,000m3/day 39,000m3/day well beyond the 8,000 m3/day which is + DEWATS 8,600m3/day the treatment capacity of the BSTP.

Total length of sewer line leading to the Total length of BTSP. Due to the BSTP’s limited capacity, 67 km sewer line 117km 257km the number of new connections is around + 15km 57 km replacement 200 connections per year.

*BSTP: The Baguio Sewage Treatment Plant 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 Source: Prepared by Study Team based on the Pre-F/S

Table 13 Main Projects in Sewerage Upgrade Program (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) 798 Medium-Term (5 – 10 years) Development of New Treatment Facility (7,000 m3/day) 1,806 Rebuilding of Current Treatment Facility (→ 25,000 m3/day) 840 Development of New Small-Scale Treatment Facilities (multiple locations) 578 New Sewer Pipe (Approx. 10 km) 1,554 Note: Converted at 1 Peso = 2.1 Yen Source: Prepared by Study Team based on the Pre-F/S

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)

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.

(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

Step 2: Step 3: Step 4: Step 1: Step 5: Basic Design of Studies on Project Studies on Benefits Review of Exiting Studies on Way of Water Treatment Schemes and for Baguio City and Pre F/S Financing System Feasibility the Philippines

• Review of preF/S • Basic design of • Feasibility studies • Preliminary • Examination of way • Onsite survey water treatment based on assumed calculation of of financing for system which cost and revenue benefits for Baguio private entities for utilizes Japanese • Sounding toward City and the PPP project part companies’ know- local enterprises in Philippines by • Setting of a timeline how under the order to formulate implementing the and actions conditions of project schemes project • Holding a debriefing Baguio City session • Preliminary calculation of cost

Source: Prepared by Study Team

Fig. 15 Key Points for This Feasibility Study

Securing a Competitive • Necessity of indicating technical capabilities and cost competitive edge (LCC) so that Japanese Edge for Japanese corporation is selected. Corporations • Necessity of creating horizontal development business scheme that utilizes above competitive edge.

Compliance with • Necessity of complying with effluent standards which are becoming stricter. Environmental Standards • Necessity of increasing treatment capacity of existing sewage treatment facility where Overcoming Various there is no additional space. Restrictions • Necessity of building additional treatment facilities while maintaining current treatment capacity. Economic Effect on • Necessity of adopting local materials, equipment and manpower as much as possible the Locale • Necessity of attempting to maximize beneficial effect on agriculture and tourism industry.

Source: Prepared by Study Team

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

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

+ 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 20C), 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

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).

Fig. 17 Project Implementation Scheme and Feasibility Review Process

Setting of Infrastructure Setting of Project Development/Maintena Calculation of VfM, Discussions with Patterns (2 – 3 nce Scope by Japanese Review of Feasibility Related Organizations Corporations patterns)

• The scope of the • Setting of self- • The VfM for Baguio City • Confirmation concerning infrastructure supporting type, as a result of project costs to be borne by developed/maintained by availability payment implementation will be Baguio City Japanese Corporations type, etc. calculated. The feasibility • Discussion with DPWH will be set by taking into of the operator will be (confirmation of the • consideration the Project term, various considered at this time. possibility of providing specifications of the guarantees and other • Interviews of local NSSMP subsidy, project infrastructure developed details will be companies and other scale, etc.). and local circumstances stipulated, taking into organizations will be • Discussions with local (review of related consideration local implemented to facilitate companies on potential of infrastructures based on circumstances. formulation of the project cooperation. the results for treatment scheme. facility).

Source: Prepared by Study Team 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

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.

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 2018 2019 # Item Jul. Aug. Sep. Oct. Nov. Dec. Jan. Feb. 1 Reexamination of Existing Pre-F/S 2 Basic Design of Water Treatment System Review of Project Implementation Scheme 3 and Project Feasibility 4 Review of Benefits to Baguio/Philippines 5 Review of Financing 6 Review of Future Strategy Field Survey ★ ★ ★ ★ Source: Prepared by Study Team

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

Source: Study Team

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

Source: Study Team

(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* Process where Process that does Process where Process where water is treated not have primary water is treated water is treated in with following sedimentation with single a biological flow: primary tank, and uses reaction tank. reactor filled with sedimentation tank endless channel to carriers. ⇒biological perform biological reactor⇒final reaction. sedimentation tank.

Overview of Inflowing sewage Inflowing sewage Inflowing sewage Inflowing sewage Treatment ↓ ↓ ↓ ↓ Process Primary Biological reactor Biological reactor Biological reactor sedimentation tank (Endless channel) ↓ (filled with carriers ) ↓ ↓ Treated water ↓ Biological reactor Final Final ↓ sedimentation tank sedimentation tank Final ↓ ↓ sedimentation tank Treated water Treated water ↓ Treated water

Rough development cost for 5,000 m3/day 3.11 3.29 2.88 2.23 treatment plant (M USD) Rough annual O&M cost 0.337 0.362 0.314 0.258 (M USD) 25 year project 1.18 1.01 1.28 0.95

5 Water Quality Guidelines and General Effluent Standards of 2016

cost (1 m3)(PHP) Adopted in Metro Adopted in Adopted by Not adopted in the Manila. Baguio City and private sector Philippines, but other areas in the development in may be chance to Track Record Philippines. the Philippines, consider due to but mainly less track record in than 5,000 Europe. m3/day.  Low risk since  Low technical  Technically  No track record technology is risk since adopted advanced and in the Philippines. established and at existing facility complicated, risk  Due to features has track record in in Baguio. that treatment not of biotreatment, the Philippines.  Impossible to successful risk that expected  Weak with expand functions (technical/cost). effect not obtained respect to load with existing  Need adjustment (commercial risk). Main Risks fluctuation. facility due to site tank before  Not suited to limitations. reaction tank to removal of  Flocculants need level sewage. nitrogen / to be added to  Possibility that phosphorous remove effluent standard phosphorous. may not be satisfied. 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

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 A C C (1990) Water Quality Item 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 MPN/100mL 3,000 (4) 10,000(400) ━ (Fecal Coliform) 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.

Table 23 Predicted Future Residential Population (Unit: Persons, %) Year Actual Predicted Area Annual Annual 2010 2015 2025 2035 Growth 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 Population Primary Unit Future Sewage Vol.* Area (Persons) (L/person/day) (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 Source: Prepared by Study Team

(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.

Fig. 25 Overview of Treatment Processes Treatment Name Treatment Process Reaction Reaction Tank Effluent Tank

Final Treated Water Advanced Sedimentation Tank treatment OD Excess Sludge process Returned Influent Sludge Advanced treatment that provides anaerobic zones and aerobic zones in the appropriate ratio in an OD process biological reactor (without endless channel).

Inflow Discharged Reaction Sedimentation Effluent Sludge

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

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.

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

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

Table 26 Aeration Methods (a) Fine Bubble Injection (b) Aeration Device + (c) Mechanical Agitation by Agitator Submersible Mixer

Blower Blower Cylinder Agitator Diffuser Blower

Overall Configuration Circulating Pump Mechanical Submersible Air Overall Configuration Mixer Overall Configuration Schematic Flexible Tube Diagram Air Aerator

Liquid Gas Nozzle

Liquid Nozzle

Detailed Sectional View Agitator Detailed Sectional View of Aeration Parts

The batch tank liquid Oxygen is supplied by an Agitation of the batch tank mixture is circulated with a aeration tube (flexible tube), liquid mixture is carried out pump, and by finely and for anaerobic operation mechanically, and at the dividing the air with the agitation is carried out using same time the injected air is energy, the oxygen transfer a separate submersible broken down to increase the efficiency is increased. agitator. oxygen transfer efficiency During mixing and injection Note that slits are provided and power transmission and during transfer within in the flexible tube, so with efficiency.

the tank, shear forces are this structure blockage does The two functions of Process and produced at gas‐liquid not occur even with ON-OFF agitation and aeration are Principle interfaces by the flow rate operation. concentrically integrated in of the gas and liquid and by the submersible friction, so the oxygen is aerator/mixer, which is transferred and the gas- installed on the bottom of the liquid are renewed, and in batch tank. addition the surrounding liquid is drawn in and agitated. 1. Blower 1. Blower 1. Blower Equipment 2. Circulation pump 2. Aeration device 2. Submersible mixer Configuration 3. Fine bubble injection 3. Agitator device

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

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

■ Nitrification Control 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) A) Details of Review 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.

Table 27 Aeration Methods in the OD Process (a) Vertical Shaft Type (b) Propeller Type (+ aerator) (c) Axial Flow Pump Type

Draft Tube Aerator Blower Blower

Schematic Water Water Buffle Current Diagram Current Aerator Wall

Vertical Shaft Teype Aerator

Water Current

This is a method in which This is a method in which the This is a method in which the rotational power of the mixing and agitation and the the mixing and agitation and drive unit is transferred to an air supply for aeration within the air supply for aeration impeller on the reaction tank the ditch can be separately within the ditch can be water surface, to carry out controlled. separately controlled. surface aeration. Agitation is supplied by Agitation is provided by Water flow is generated by generating a water current by generating a water current by the pumping action of the the rotation of a submersible the rotation of the impeller Method aerator, and as a result of a propeller, and the air for directly connected to a drive and dividing wall to one side of aeration is supplied by a unit, and air for aeration is Principle the aerator, in one area the blower to an aerator. supplied by a blower to an water is pumped up and in The oxygen transfer aeration pipe directly below the other area it is driven into efficiency can be increased by an impeller. the water channel. adopting membrane rubber for The air injected from the The flow has a spiral the aerator. aeration pipe is sheared by the shaped turbulent flow water flow forming fine pattern, flowing while bubbles, so a high oxygen constantly combing up the transfer efficiency can be bottom surface. obtained. 1. Vertical shaft aerator 1. Submersible propeller 1. Draft tube aerator agitator 2. Blower 2. Aerator Equipment 3. Blower Configuration 4. Submersible propeller agitator lifting device 5. Aerator lifting device Source: Prepared by Study Team

■ 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 OD process. In addition, introduction of nitrification control by installation of instruments for performing nitrification

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.

B) Results of Review ■ 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

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)

Source: Prepared by Study Team

■ 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.

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

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 I. Details of Review 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) Case II: Advanced Treatment OD Process (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.

II. Results of Review The specifications of the final sedimentation tank for each case, are as shown in the following table.

Table 30 Specifications of Final Sedimentation Tank in Each Case Item Case I Case II Final SBR process: Not set New construction (9,000 m3/day): Sedimentation Advanced treatment OD process: Tank φ13 m ×3 Tank Shape and Tank φ18 m ×2 Expansion or upgrading (12,000 Quantities m3/day): Tank φ18 m ×2 Surface Loading New construction: 23.6 Capacity 23.6 Expansion or upgrading: 22.6 (m3/m2.day) Source: Prepared by Study Team

(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 A) Details of Review 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

■ 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

B) Results of Review 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 Aluminum Polyaluminum Ferric Chloride Ferric Polysulfate Type Sulfate Chloride Phosphorus ○ ◎ ○ ◎ removal performance Agglomerating ◎ ◎ ○ ○ property Corrosiveness △ ○ ○ ◎ Ease of handling △ ○ ○ ◎ (safety) Procurement Liquid Liquid Solid Solid packing pH 1.5～ 2.0～ 3.0～4.0 3.5～5.0 Quantity of Large Large Small Small sludge generated

Price ◎ ◎ ○ ○ Source: Prepared by Study Team

(5) Filtration Process I. Details of Review 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.

II. Results of Review 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.

Table 32 Overview of Filtration Processes Item Rapid Filtration Process Moving Bed Filtration High-Speed Fiber Process Filtration Process

Schematic Diagram

Filtration Rate 300 m/day 300 m/day 1,500 m/day About 1.5 m About 1.0 m About 1.0 m Filter Layer (gravel, sand filter, (sand filter) (fiber filter) Thickness anthracite) Filter Water Head About 3 m About 1 m About 1 m Loss Cleaning 1-2 times/day Continuous 1-2 times/day Frequency Cleaning About 3% of the daily About 6% of the daily About 2% of the daily Wastewater maximum water maximum water maximum water Quantity filtration quantity filtration quantity filtration quantity Filter Area 80 m2 or less per tank 6 m2 or less per tank 30 m2 or less per tank SS Removal 60～80％ 50～70％ 50～80％ Percentage Site Area (for 16 m×20.6 m 16 m×18.2 m 12 m×13.2 m 30,000 m3/day) (329.6 m2) (291.2 m2) (158.4 m2) Source: Prepared by Study Team

(6) Sludge Treatment Facility I. Details of Review 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 Treatment OD Process (expansion or upgrading: 12,000 m3/day) Case II: Advanced Treatment OD Process (new construction: 9,000 m3/day) + Advanced Treatment OD Process (expansion or upgrading: 12,000 m3/day)

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

II. Results of Review 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- 3,680 3,658 ds/day) Quantity of Sludge Generated 588 431 (m3/day) Concentration Shape and φ9.8 m ×H4 m (effective φ8.6 m×H4 m (effective Tank Quantities water depth) ×2 tanks water depth) ×2 tanks SS Loading 24.4 29.7 (kg-ds/m2.day) Sludge Shape and W6 m×L14.3 m×H3 m W6 m×L13.1 m×H3 m Storage Tank Quantities (effective water depth) ×2 (effective water depth) ×2 tanks tanks Number of 2.1 2.1 retention days Source: Prepared by Study Team

(7) Effective Use of Filtered Water I. Details of Review 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

II. Results of Review 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

(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 Treated Water Notes Water *1 BOD (mg/L) 200 20 Reduce down to 200 mg/L by introduction of pretreatment facility. SS (mg/L) 200 70 as TSS Treated water: Philippine water quality guidelines and effluent standards Class A CODCr*2 (mg/L) 60 Treated water: Philippine water quality － guidelines and effluent standards Class A Untreated water: Water quality data is T-N (mg/L) 40 － unclear from 2014/1/8 to 2018/7/11, assumed to be 40 mg/L 0.5 as NH4-N Treated water: Philippine water quality Kj-N*3 (mg/L) （40） guidelines and effluent standards Class A NO3-N*4 (mg/L) 14 Treated water: Philippine water quality （0） guidelines and effluent standards Class A Untreated water: Average value from 2014/1/8 to 2018/7/11 T-P*5 (mg/L) 14 1 Treated water: Philippine water quality guidelines and effluent standards Class A *6 *7 PO4-P (mg/L) （7） No. groups of Treated water: Philippine water quality coliform bacteria － 3,000 guidelines and effluent standards Class A (MPN/100mL) Fecal coliform Treated water: Philippine water quality bacteria － 4 guidelines and effluent standards Class A (MPN/100mL) 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

effluent standards Class A. Source: Prepared by Study Team 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 BOD‐SS loading (kg-BOD/kg-SS) 0.055 0.055 OD Tank BOD volumetric loading (kg-BOD/m3.day) 0.186 0.2 Final Sedimentation Surface loading (m3/m2.day) 24.1 24.1 Tank Sludge SS loading (kg/m2.day) 28.9 29.7 Concentration 25.9 Retention time (h) 27.0 Tank SBR Number of cycles (times/day) － 3 Drawdown rate － 1/3 Aeration time (h/day) － 12 Source: Prepared by Study Team II. Case I Facility Overview A) Overall Layout The overall layout is shown in the following figure.

Fig. 36 Overall Layout of Case I

Source: Prepared by Study Team

B) Treatment Flow The treatment flow is shown in the following figure.

Fig. 37 Treatment Flow for Case I

Source: Prepared by Study Team

C) Construction Sequence The construction sequence is shown in the following table.

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 Specified separately 2. Construction of sludge treatment facility Specified separately Step 1 1. New pretreatment facility (removal of oil) 8,600 m3/day (use of existing OD (21,000 m3/day) tank, etc.) ↓ 2. Removal of existing facility 8,600 m3/day (use of existing OD ・Primary sedimentation tank tank, etc.) ・Sludge drying bed ・ 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”

3. Construction of new treatment facility After completion of new (9,000 m3/day) construction, 8,600 m3/day →9,000 ・ Rehabilitation of main administrative m3/day 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 Step 2 1. Remove the existing 8,600 m3/day 9,000 m3/day (to be treated in the treatment facility OD tank constructed in “Step 1”) ・OD tank ・The sludge is directly withdrawn ・Final sedimentation tank from the final sedimentation tank ・Sludge concentration tank constructed in “Step 1”, and ・Sludge storage tank vacuum transported to the sludge treatment facility constructed in ↓ “Step 0”.

2. New 12,000 m3/day treatment facility ・OD tank (12,000 m3/day) After completion of the new ・Final sedimentation tank (12,000 m3/day) construction, 9,000 m3/day

・Rapid filtration facility (21,000 m3/day) →21,000 m3/day ・Polyaluminum chloride (PAC) injection ・After completion of the new equipment (21,000 m3/day) construction, vacuum transport ・Rehabilitation of chlorine mixing tank the sludge from the sludge (UV equipment) storage tank constructed in “Step (12,000 m3/day) 2” to the sludge treatment facility ・Sludge concentration tank (21,000 constructed in “Step 0” 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 Source: Prepared by Study Team

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 W39.5 m×L6.5 m×H7.0 m (effective water 1 Tank depth) SBR Tank W17.0 m×L16.0 m×H6.0 m (effective water 6 depth) 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

3. Final Sedimentation Tank Facility (12,000 m3/day) Final φ18 m 2 Sedimentation Tank 4. Rapid Filtration Facility Untreated Water W10.2m×L12.3 m×H2.0 m (effective water 1 Tank depth) Filtered Water W5.0 m×L4.9 m×H6.1 m (effective water 1 Tank depth) Backwashing W5.0 m×L4.9 m×H6.1 m (effective water 1 Wastewater Tank depth) 5. Sterilization Facility Sterilization Tank W3 m×L8 m×H2.0 m (effective water depth) 1 Reuse existing 6. Sludge Treatment Facility Concentration φ9.8 m×H4 m (effective water depth) 2 Tank Sludge Storage W6 m×L14.3 m×H3 m (effective water depth) 2 Tank Source: Prepared by Study Team

III. Overview of Case II Facilities A) Overall Layout The overall layout is as shown in the following figure.

Fig. 40 Overall Layout for Case II

Source: Prepared by Study Team

B) Treatment Flow The treatment flow is shown in the following figure.

Fig. 41 Treatment Flow for Case II

Source: Prepared by Study Team

C) Construction Sequence The construction sequence is shown in the table below.

Table 42 Construction Sequence for Case II Step Event Treatment plant corresponding water quantity, etc. Step 0 1. Deal with heavy metals Specified separately 2. Construction of the sludge treatment Specified separately facility Step 1 1. New pretreatment facility (removal of oil) 8,600 m3/day (use existing OD (for 21,000 m3/day) tank, etc.) ↓ 2. Remove existing facility 8,600 m3/day (use existing OD ・Primary sedimentation tank tank, etc.) ・Sludge drying bed ・ 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”

3. 9,000 m3/day new treatment facility After completion of new ・ Rehabilitation of main administrative construction, 8,600 m3/day →9,000 building (including electrical room) m3/day ・ OD tank ・ Final sedimentation 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 generator: For 21,000 m3/day Monitoring equipment: For 21,000 m3/day Ammonia control: For 9,000 m3/day Step 2 1. Removal of existing 8,600 m3/day 9,000 m3/day (to be treated in the treatment facility OD tank constructed in “Step 1”) ・OD tank ・The sludge is directly withdrawn ・Final sedimentation tank from the final sedimentation tank ・Sludge concentration tank constructed in “Step 1”, and ・Sludge storage tank vacuum transported to the sludge treatment facility constructed in ↓ “Step 0”.

2. New 12,000 m3/day treatment facility After completion of new ・ OD tank (12,000 m3/day) construction, 9,000 m3/day ・ Final sedimentation tank (12,000 →21,000 m3/day m3/day) ・After completion of the new

・ Rapid filtration facility (21,000 m3/day) construction, vacuum transport ・ PAC injection equipment (21,000 the sludge from the sludge m3/day) storage tank constructed in “Step ・ Rehabilitation of chlorine mixing tank 2” to the sludge treatment facility (UV equipment) constructed in “Step 0” (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 Source: Prepared by Study Team

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 3 For 9,000 m3/day depth) OD Tank W3.0 m× L 33 m× H 6.4 m (effective water 4 For 12,000 m3/day depth) 2. Final Sedimentation Tank Facility

Final φ13 m 3 For 9,000 m3/day Sedimentation Tank Final φ18 m 2 For 12,000 m3/day Sedimentation Tank 3. Rapid Filtration Facility Untreated Water W10.2 m× L 12.3 m× H 2.0 m (effective water 1 Tank depth) Filtered Water W 5.0 m× L 4.9 m× H 6.1 m (effective water 1 Tank depth) Backwashing W 5.0 m× L 4.9 m× H 6.1 m (effective water 1 Wastewater Tank depth) 4. Sterilization Facility Sterilization Tank W 3 m× L 8 m× H 2.0 m (effective water 1 Reuse existing depth) 5. Sludge Treatment Facility Concentration φ8.6 m× H4 m (effective water depth) 2 Tank Sludge Storage W 6 m× L 13.1 m× H 3 m (effective water 2 Tank depth) Source: Prepared by Study Team

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

(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

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)

Source: Prepared by Study Team

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

Source: Prepared by Study Team

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

(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 Development Fund (Complement the shortage of LGU’s budget) National Government Baguio City (Internal Revenue Allotment) Budget for Service

CEPMO Wastewater Treatment, Conveyance  Maintenance  Operation

Payments (Sewerage Tariff from commercial Provide Service and industrial institutions) Users

Source: Prepared by Study Team

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

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 17,646 Charge 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 Sewage Treatment Facility (Without Sewer Culverts) (Including Sewer Culverts) Public FIRR Cannot be Calculated Cannot be Calculated NPV (Million PHP) -1,385 -2,140 Source: Prepared by Study Team

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

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

Fee Collection Baguio Water District/ Baguio City

Availability Payment BTO Contract Invest (computed by performance level) Local Firm （60％～） SPC Wastewater Treatment Loan Construction Financial Operation and Institution Japanese Firm Maintenance Invest （～40％） Service Provision Users User Fee （Sewer Charge, Environmental Charge）

Source: Prepared by Study Team

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

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 Sewage Treatment Facility Sewage Treatment Facility (Without Sewer Culverts) (Including Sewer Culverts) Public Private Public Private Expansion of Sewage Treatment ✔ ✔ Facility Rehabilitation of Sewage ✔ ✔ Treatment Facility Development of Sewer Culverts ✔ ✔ Source: Prepared by Study Team

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.

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 Source: Prepared by Study Team

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

NSSMP Japanese Baguio Water Local Firm Baguio City DPWH Firm District

Invest Invest Invest Invest

JV Company

Wastewater Treatment Drinking Water Supply Loan Financial Construction Construction Institution Operation and Maintenance Operation and Maintenance

User Fee （Water Supply Charge, Sewer Charge, Service Provision Environmental Charge）

User

Source: Prepared by Study Team

(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.

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

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)

Source: Prepared by Study Team

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.

Fig. 56 VfM by PPP Project (Including Sewer Culverts) (Unit: Million PHP)

Source: Prepared by Study Team

(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).

Fig. 57 Results of Feasibility Evaluation (Without Sewer Culverts) (Unit: Million PHP)

500 400 300 200 100 - (100) (200) (300) (400) (500)

Revenue Investment O&M Tax Cash Flow

Source: Prepared by Study Team

Fig. 58 Results of Feasibility Evaluation (Including Sewer Culverts) (Unit: Million PHP)

500 400 300 200 100 - (100) (200) (300) (400) (500)

Revenue Investment O&M Tax Cash Flow

Source: Prepared by Study Team

(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

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)

Revenue Investment O&M Tax Cash Flow

Source: Prepared by Study Team

Fig. 60 Results of Feasibility Evaluation (JV including 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)

Revenue Investment O&M Tax Cash Flow

Source: Prepared by Study Team

(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.

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 • Deterioration of the existing • Development of sewage treatment treatment plant has resulted in a facilities outside of Metro Manila is reduction in the treatment capacity, extremely limited, and use of the as it cannot satisfy the need for the subsidy (NSSMP) for sewerage population and the rising number of infrastructure development is tourists. limited. Current Issues • Plans call for effluent standards to • There have been cases of tourist be made stricter for Baguio City. It sites and other locations being is difficult to satisfy these standards closed and inflow of tourists with the performance of the existing restricted due to environmental treatment plant. pollution or non-compliance environmental laws and policies. Verify contribution of sewerage Verify whether solving the above development project to CLUP which is issues with a sewerage development Benefit a master plan for development of project in Baguio City can become a Perspective Baguio City while keeping solution of model case and can be expected to the above issues in mind. have ripple effects on other cities. Source: Prepared by Study Team

(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.

Fig. 62 Transition in Baguio City Population and Number of Tourists

1,200,000 1,115,264

1,000,000

800,000 637,298 600,000

345,366 400,000 301,926 318,676

200,000

- 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Tourists Population

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.

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 Main Strategy to which Baguio City Sewerage Development Goal 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 N/A Enriched Social Development

6 Abbreviation of Information, Education, and Communication, surmise this refers to educational activity.

Efficient and Effective  Secure Administrative Responsibility/Accountability Development Administration  Promote the elements of good governance in all and Management 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  Provide Equal City and Public Services Throughout City Infrastructure Support  Provision of equitable distribution and allocation of urban Facilities and Utilities 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.

Table 65 Sewerage Infrastructure Development Status Inside/Outside Metro Manila Inside Metro Manila Outside Metro Manila Development West District: Maynilad Only several cities Scope East District: Manila Water (Baguio, Vigan, Zamboanga7, etc.) West District: 11% Penetration 3-5% East District: 12% Rate (As of 2013) (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 NEDA announced that it will due to environmental pollution on the island invest 25.27 billion Pesos caused by increase in number of tourists. (Approx. 52.4 billion Yen)  Limits on number of visitors implemented for environmental after island was reopened to tourists. 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

 Wastewater treatment facilities were Pesos to be procured from developed and illegally constructed private sector companies). structures were removed. El Nido,  Closure order issued for tourist facilities that Palawan violate environmental related laws and codes N/A Panglao Island, (environmental improvements implemented Bohol when facilities not closed). Manila Bay  Water quality deteriorated due to household Total cost of environmental sewage, industrial wastewater containing improvements projected to be harmful substances, percolating water from 132 billion Pesos (Approx. garbage dumps and other wastewater inflow 274.5 billion Yen). (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). 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.

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

Goal 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. Objectives 2. To promote the behavior change and supporting environment needed for systems to be effective and sustainable.

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 Targets 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.

To facilitate a bottom-up, demand-driven project development process by providing national Strategy government support and incentives.

Source: Prepared by Study Team based on NSSMP Program Operations Manual (hereinafter referred to as “POM”)

Fig. 68 Implementation Organizations of NSSMP Policy NEDA INFRACOM Sub-committee on Water Resources

NSSMP Committee NSSMP NSSMP Office Implementation (DPWH – ESSD) Focal Point Project Implementers Water Private Districts LGUs Companies

Industry Project DENR MWSS LWUA DOH DILG Asscrr’s & Facilitators (WQMAs) Donors

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.

Fig. 69 NSSMP Process

Sanitation Planning Sewerage / Monitoring and Septage System Evaluation Design

Operation and Project Feasibility Maintenance

Application and Construction Selection

Procurement

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

Source: Prepared by Study Team

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)

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.

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.

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.

(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 Private Finance Institutions LGU Guarantee DOF (PFIs) Corporation Domestic Banks Credit Risk (LGUGC) Guarantee Sovereign Standby Debt Co-Guarantee Guarantee Credit Line Service

JICA DBP USAID Concessional Funds PWRF Commercial Loans

Debt Loans Repayment

Water Service Providers (LGUs and WDs)

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

Table 75 Loan Amounts and Conditions for “Environmental Development Projects” Interest (%/Year) Repayment Period/ Amount Procurement Grace Period (Million Yen) Main Activities Consulting Services Conditions (Years) 0.65* 0.01 40/10 24,846 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.

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.

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.

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.

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.

(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.

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.

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.

Table 77 List of Cities in the Philippines with Population of 200,000 or More

Population F/S subsidy from # City Province Region HUC (2015) 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 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.