Public Private Partnerships (PPP)

Julio Kosaka Viceminister of Construction and Sanitation

September 2020 Diagnosis of Sanitation Services in Peru

With a population of more 3 Million (9%) of Peruvians without access to water than 31 million inhabitants, 5 through the public network. Peru is the 4th most populous country in South America. 7.4 Million (23%) of people do not have access to 6 sewers or sanitary disposal of excreta. 77% of the population live in urban areas, while 23% live in 5 19 Only 44 % of the wastewater captured by the Sanitation rural areas. Service Providers (EPS) enters the WWTP and has adequate treatment (*).

ACCESS TO WATER 1/ ACCESS TO SANITATION 2/ 29.4 M 25 M

3 M 7.4 M

90.8 74.5 76.8 77.2 89.4 90.7 Rural 73.7 The services are 89.2 Rural Urbano 88.3 88.9 90.2 90.4 Urbano not sustainable. 94.5 94.4 95.3 94.9 Nacional Perú 75.6 24.6 24.3 29.0 28.3 71.2 72.2 74.4 2016 2017 2018 2019 2016 2017 2018 2019 2/ Includes the connection of the toilet to the public network inside the 1/ Includes water supply by public network inside the home, public network home, public network outside the home but within the building and outside the home but inside the building and a basin for public use. latrine (by direct observation).

Source: INEI National Survey of Budget Programs ENAPRES 2019, ENDES 2019. * DGPRCS 2020. Sanitation Investment Gap Sanitation Investment per Government level Sanitation Service Providers (EPS) (Million of Soles) % 50000.00 INVESTMENT AREA TOTAL S/. PARCIAL TOTAL 40000.00 Extension of coverages 39,717,172,819 80.1% 30000.00 Potable water 5,815,631,950 14.6% 20000.00 Sewarage 26,145,111,816 65.8% 10000.00 TAR 7,756,429,053 19.5% Rehabilitation and 0.00 8,004,673,970 16.2% 2009 2011 2013 2015 2017 2019 2020 Improvement

Total Inversión Nacional 2/ Inversión en Saneamiento Potable water 4,176,609,563 52.2% Sewarage 3,828,064,407 47.8% Business Strengthening 1,431,655,404 2.9% TOTAL REGIONAL LOCAL DOMESTIC INVESTMENT IN NATIONAL Micro measurement 390,326,139 0.8% YEAR GOVERNMENT GOVERNMENT INVESTMENT SANITATION GOVERNMENT 1/ 1/ TOTAL 49,543,828,332 100% 2/ 2009 18,908 2,099 121 420 1,559 2010 22,991 3,046 139 653 1,767 2011 21,743 3,490 160 891 1,906 There is a significant infrastructure gap. 2012 26,162 3,832 94 759 2,485 To achieve universal water and 2013 30,126 4,244 181 638 2,599 S/49.5 sanitation coverage, a total investment 2014 31,490 4,656 151 411 3,037 2015 30,482 3,369 165 286 2,300 Billion of S/ 49.5 billion is required. 2016 26,955 3,506 160 347 2,556 2017 28,311 4,965 577 249 3,469 2018 32,285 4,459 775 296 2,752 Source: The National Sanitation Plan 2017-2021 (MVCS) 2019 31,945 4,006 834 232 2,696 2020 46,947 5,179 1,258 337 3,583 TOTAL 348,345 46,850 4,616 5,520 30,708 Source: OGEI-OGPP -MVCS Diagnosis of Wastewater Treatment in Peru

Sanitation Service Providers (EPS)

EPS Management Total

Municipalities (No RAT) 26 OTASS (RAT) 19 * In the process of entering the RAT 3

FONAFE (Sedapal) 1 Creditor committee – Bankruptcy 1 Regime (Grau) Total 50

Wastewater discharges

Discharge Discharge with without treatment 44% treatment 56% 28 28 22 22

22 EPS without wastewater treatment. -19 EPS do not have a Wastewater Treatment Plant. 5 Departments with 4 or 5 EPS 6 Departments with 2 or 3 EPS 13 Departments with 1 EPS. -03 EPS do not treat wastewater Strategies for Closing Sanitation Gaps The MVCS implements a series of financing and execution strategies to close gaps in sanitation services.

1 Public Investment (Refundable and non-refundable transfers and international cooperation, executing units)

For its financing Works for Taxes 3 Private Investment Co-financed Self-financed State Initiative State Initiative

Public Private origin Partnerships (PPP) its

For Co-financed Self-financed Unsolicited Unsolicited Proposal (CUP) Proposal (SUP)

2 Special Regime Water Supply Contract (Emergency Decree N° 011-2020) PPP in Execution

5 3 PROVISUR (Provision of sanitation 1 services in the southern districts of TABOADA WWTP Lima) • Term: 25 years • Term: 25 years • Investment: USD148 million (without VAT) • Flow: 0.18 m3/s wastewater • Average flow: 14 m3/s • Flow: 0.25 m3/s – 0.40m3/s wastewater. • Beneficiaries: 4.3 million inhabitants • Investment: USD 87 million (without VAT) • Status: In operation since December 2013 • Beneficiaries: 100 thousand inhabitants • Status: In execution 6 4 Lima TITICACA WWTP • Term: 30 years • Total average flow: 1.47 m3/s • Investment: USD 180.0 million (without 494 5 19 Puno VAT) 2 Million Dollars • Beneficiaries: 1.2 million inhabitants LA CHIRA WWTP (USD) • Status: In execution (Preparation of • Term: 25 years Technical File). • Investment: USD 79,0 million (without VAT) • Average flow : 6.3 m3/s • Beneficiaries: 2.6 million inhabitants The continuity of the investment is ensured • Type of treatment: advanced preliminary PPP CONTRIBUTION within the framework of the Budget Law 2021 • Status: In operation since june 2016 with PEN 1,061,430 from the Titicaca WWTP. Wastewater treatment: 21.96 • Addendum to the contract to extend the WWTP m3/s. • Average flow: 3.41 m3/s (does not include the expansion of the La Chira • Investment: USD 38 million approx. WWTP). CONCESSION CONTRACTS SIGNED TABOADA WWTP - NORTHERN LIMA LA CHIRA WWTP - SOUTHERN LIMA PROVISUR - SOUTHERN LIMA TITICACA – PUNO WWTP CHILLÓN WWTP – NORTHERN LIMA PPP contribution to closing gaps in sanitation services Lima- Callao

Wastewater Treatment (%) PPP contribution in wastewater treatment Sedapal S.A. 100.00 92.39 90.85 3.85 90.00 19% 79.72 92.2 90.37 75.95 80.00 LA CHIRA WWTP (Operation begins 12/16) 70.00 Total flow 71.71 treated average. 60.00 August 2020: 11.12 51.25 53% 50.00 TABOADA WWTP 20,85 m3/s (Operation begins 04/13) 5.88 40.00 28%

30.00 20.65 20.00 20.74 21.27 10.00 PTARTaboada Taboada WWTP PTARLa Chira La ChiraWWTP OtrasOther PTARs Sedapal SedapalWWTP 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 I Trim - 2020 Source: Source: http://www.sedapal.com.pe/tratamiento-de-aguas-residuales, Benchmarking SUNASS (2010-2018) August 2020 http://www.sedapal.com.pe/indicadores-de-calidad-del-servicio, March 2020. SEDAPAL PPP Project Portfolio The continuity of the investment is ensured within the framework of the 2021 Budget Law of Puerto Maldonado WWTP

Amount Type of N° Project Region Million (PEN Phase PPP with VAT) Loreto Native Communities 13 1 Main works Lima 2,720.0 Structuring IEA

16 Piura Desalination Plant 2 Puerto Maldonado WWTP Madre de Dios 212.55 Structuring IEC 17 Paita and Talara Lambayeque Cajamarca 3 Huancayo WWTP Junín ** Formulation 11 07 08 San Martín PTAR Chiclayo PTAR Cajamarca PTAR Tarapoto Projects Desaladora Lambayeque 17 4 Trujillo WWTP La Libertad 589.6 Formulation

La Libertad 04 5 Cusco- San Jerónimo WWTP Cusco 192.3 Formulation PTARs System - Trujillo INVESTMENT: 6 Chincha WWTP Ica 156.6 Formulation 09 Ancash PEN 6,500 PTAR Huaraz 7 Cajamarca WWTP Cajamarca 294.4 Formulation Lima 8 Tarapoto WWTP San Martín 123.1 Formulation 01 Main works PTAR Cañete 03 Junín Million 10 PTAR Huancayo 14 PTAR Barranca 9 Huaraz WWTP Ancash 120.4 Formulation Y Huacho 05 02 Madre de Dios BeneficiariesApróx.: Cusco PTAR Puerto PTAR Cusco - San Jerónimo Maldonado 10 Cañete WWTP Lima 157.3 Formulation 7.1 15 Million HVCA-APURIMAC 11 Chiclayo WWTP Lambayeque 489.6 Formulation PTAR Huancavelica- inhabitants 06 Andahuaylas 12 Desalination Plant Ilo Moquegua 120.0 Formulation Ica

approx. PTAR Chincha FINANCED PROPOSAL FINANCED UNSOLICITED Community Sanitation - 13 Loreto 150.0 Formulation Services - Loreto CO Concession term: from 20 to 30 years

Moquegua 12 14 Huacho and Barranca WWTP Lima 195.0 Desalination Plant - Ilo Huancavelica- Andahuaylas Huancavelica- PPPs are a financing modality in the Sanitation Sector that allows the State to close 15 115.0 the gaps and have sustainable projects. WWTP Apurímac Planning and Desalination Plant Paita and programming 16 Piura 576.0 Talara Desalination Plant The PPP project portfolio for the design, financing, construction, operation and 17 Lambayeque 230.0 maintenance of drinking water, sewerage and wastewater treatment will benefit more Lambayeque than 20% of the Peruvian population. (*) Investment amounts updated as a result of advances in formulation. (**) Confidential Conclusions PUBLIC PRIVATE PARTNERSHIPS

The provision of infrastructure is advanced Predictability: in future commitments and flows The project is fully or partially financed by the private sector instead of using public resources in year zero. • The private sector recovers its investment through user fees or deferred payments Strong by the public sector, based on the availability of infrastructure and services. commitments • The private sector has greater incentives to seek alternative sources of financing such as: ✓ Obligations to pay specific or ▪ quantifiable amounts Supplementary income Commitments ▪ Reduce collection losses ✓ Generated as compensation for the generated by provisions of the contract PPP

QUALITY

Traditional public the Contingent to to

work State commitments Costs DESIGN TENDER CONSTRUCTION COST MAINTENANCE t OVERRUN ✓ Potential payment obligations ✓ State QUALITY They are derived from one or more

the events corresponding to risks

PPP to inherent to the PPP project. Costs

DESIGN TENDER CONSTRUCTION MAINTENANCE t They are given through long-term contracts Optimal project risk allocation. Average term of awarded projects: 22 years ✓ Deadline of the PPP contracts: 60 years Contribution to closing the public infrastructure gap is allowed. ✓ Minimum term for IPC: 10 years Conclusions and Perspectives PUBLIC PRIVATE PARTNERSHIPS

The Ministry of Housing, Construction and Sanitation is promoting a portfolio of sanitation service projects (drinking Wastewater reuse and commercialization, sludge reuse, water, sewerage, and wastewater treatment) for more than S/ and biogas generation are significant aspects that will be 6,000 million investment and benefiting more than 30% of the included in the design of wastewater treatment projects Peruvian population, through PPPs, for design, financing, under PPPs. construction, operation, and maintenance.

In response to the water stress that Peru is facing, the MVCS is The private participation, through PPPs, is a promoting the development of projects under the new potable complementary mechanism to Public Works and Works water supply and wastewater treatment regime, through DU for Taxes, which will continue to be promoted by the 011-2020, which fosters private investment, as the provider of MVCS to close gaps in sanitation services. these services to the EPS sanitation service companies.