The County Government of Nakuru

REPUBLIC OF KENYA

THE COUNTY GOVERNMENT OF NAKURU

TERMS OF REFERENCE FOR THE FEASIBILITY STUDY FOR THE PROPOSED INTEGRATED SOLID WASTE MANAGEMENT PPP PROJECT IN NAKURU COUNTY

1. INTRODUCTION Vision 2030, Kenya’s national long-term development strategy covering the period 2008 to 2030, places great emphasis on rebuilding and creating a productive infrastructure in the country’s journey towards poverty reduction as well as social, political and economic transformation. However, in a time of constrained public budgets with competing development pressures especially in the social sectors (particularly health and education), high sovereign debt, and rising public expenditure demands from the current and new devolved structures, the Government of Kenya (GOK) is facing great challenges. In particular, Kenya’s infrastructure funding gap is estimated at approx. $2.1Bn p.a. Responding to this challenge, the GOK, through the National Treasury, has made infrastructure development and public service provision through Public Private Partnerships (PPP) a priority mechanism that can help it address this major infrastructure funding gap and achieve the benefits of successful PPP investments including: substantial private investment; transfer of significant risk to the private sector; improving access to infrastructure; creating higher quality assets with better operation and maintenance; and helping achieve better value for money. With a growing number of project proposals approved by the PPP Committee, currently standing at seventy-one (71) across various sectors and county governments, the PPP programme in Kenya is gathering pace and can be considered to be taking shape. As of today there is a substantial pipeline of projects just entering the feasibility stage, and in accordance with section 36(2) of the PPP Act, the PPP Unit encourages the appointment of Transaction Advisors (TA) with the qualifications and experience necessary to assist contracting authorities with the preparation of Feasibility Studies and the procurement of PPP transactions. In this regard, the County Government of Nakuru seeks to engage requisite expertise to assist in the procurement of one or multiple private sector partners for designing, constructing, operating and maintaining the Integrated Municipal Solid Waste management project (the “Project”) in the County through a PPP arrangement.

2. BACKGROUND OF PPP IN KENYA Established initially under the Public Procurement and Disposal (Public Private Partnership) Regulations, 2009, the Kenyan government has in the recent past been committed to improving and strengthening the PPP framework for private sector participation in the country. Several accomplishments are notable: a) the adoption of a PPP Policy in 2011 to articulate the government's commitment to PPPs and to provide a basis for the enactment of a PPP Law; b) the enactment of the PPP Act on 8th February 2013; c) the gazettement of the National PPP Regulations on 19th December 2014; d) the development of draft PPP Regulations for the County Governments; and e) the development of a PPP Manual is at an advanced stage To support the delivery of the country’s PPP agenda, a number of institutions have been created under the PPP Act of 2013. They include: i. PPP Committee; ii. PPP Petition Committee; iii. PPP Unit; and iv. PPP Nodes within the Ministries, Government Agencies and County Governments.

2.1. PPP Committee The PPP Committee, assisted by its Secretariat (PPPU) has the responsibility to: . Develop and implement PPP policy initiatives; . Champion the PPP Agenda; . Ensure compliance with the PPP Act 2013; . Approve/recommend PPP projects to the Cabinet; . Ensure efficient execution of the PPP Agreements; . Ensure PPPs are consistent with national priorities; . Authorize allocations of the Project Facilitation Fund; and . Issue PPP standards, guidelines & procedures, & bid documents.

2.2. PPP Petition Committee The PPP Petition Committee, established under section 67 of the PPP Act 2013, is set up as a tribunal to adjudicate on all petitions and complaints submitted by a private party during the process of tendering and entering into a PPP project agreement.

To effectively discharge its mandate to function as a dispute settlement body, the day to day administrative aspects of the Petition are administrated through a Secretariat.

2.3. PPP Unit The PPP Unit, as the resource center for best practice and guardian of the integrity of the PPP process, has a large role to play in identifying problems, and making recommendations to the PPP Committee regarding potential solutions.

In addition, it is the specific responsibility of the PPP Unit to assist each Contracting Authority to identify, select, appraise, approve, negotiate and monitor PPP projects throughout their life cycle. Moreover, the PPP Unit is also tasked to improve capacity and skills in the public sector and to manage PPP projects more effectively.

2.4. Contracting Authorities The PPP Act of 2013 recognizes Contracting Authorities (CA) as Ministries/Government Departments, County Governments and Statutory Corporations. Their main responsibilities with respect to PPP are to identify, develop, implement and monitor projects. To discharge their responsibilities, procuring entities are required to conduct feasibility studies, prepare bidding documents and seek necessary approvals. Each CA undertaking a PPP project is required to establish a PPP Node, staffed with officers with the ability to carry out day-to-day management of a PPP project (section 16 and 17 of the PPP Act, 2013). Given that Contracting Authorities do not have in-house expertise on PPP, they may have to appoint Transaction Advisors (TA) to assist them in the development of projects.

2.5. Scope and Application of the PPP Program The scope of the Government’s PPP program is the creation of new infrastructure, and the expansion & refurbishment of existing assets such as: . roads and bridges; . ports; . airports; . railways; . power generation plants and transmission/distribution networks; . oil and gas i.e. petroleum infrastructure, such as storage depots and distribution pipelines etc.; . inland container depots and logistics hubs; . municipal services; . mining; . water supply, treatment and distribution systems; . solid waste management; . social infrastructure for health care, prisons, education; . telecoms/ICT

3. DESCRIPTION AND SCOPE OF THE PROJECT 3.1. Background Situated at an altitude of 1,859m above the sea level, Nakuru County is approximately 160Kms North West of Nairobi and is within the greater region of the Rift Valley. Covering an area of 7,496.5 Km², the County has a population of 1,603,325 and 409,836 households (2009 census) with a population density is 213.9 per Km2. Constituting of 11 constituencies (Naivasha, Nakuru Town West, Nakuru Town East, Kuresoi South, Kuresoi North, Molo, Rongai, Subukia, Njoro, Gilgil, Bahati), Nakuru is the fourth largest County in Kenya after Nairobi, Kakamega and Kiambu in terms of population.

Figure 1: Map of Nakuru County

In accordance with the 4th Schedule of the 2010 Kenya Constitution (functions of the national and the county governments), Solid Waste Management (SWM) is a legal mandate placed to the County Governments. In this regard, the County Government of Nakuru has embarked on a strategic initiative to develop an integrated solid waste management project within its jurisdiction. The Ministry of Environment, Natural Resources, Energy and Water briefly initialized as ENREW, of the County Government of Nakuru, implements the county legislation, national legislation within

the county, and manages and coordinate the functions of the ministry of Environmental, Natural Resources, Energy and Water. The ministry has two technical departments namely: (i) Department of water and sanitation; and, (ii) Department of Environment, Natural Resources and Energy. The Department of Environment, Natural Resources and Energy has two technical sections namely, Environmental planning and management section and natural resources management section. Solid Waste Management falls under the aegis of the Environmental planning and Management Section of the Department of Environment, Natural Resources and Energy.

3.2. The Proposed PPP Project In its 3rd meeting of 31st March 2014, the PPP Committee, acting under section 7(d) and in accordance with section 31(3) of the PPP Act 2013, approved the proposal to implement an integrated1 solid waste management project under the PPP structure, including collection, transportation, treatment and disposal of solid waste generated in the urban cities of Nakuru County Government (see Appendix 1 for a copy of the approved project proposal). Currently, the performance of the County in managing solid waste is below average. The absence of effective solid waste management practices has made Nakuru lose its erstwhile accolade of the ‘cleanest town’ in East Africa. As per estimates, 800 tonnes of solid waste is generated daily in the County (based on the HDI estimate of 0.5kgs of waste/per person) with the highest amount of waste being generated in Nakuru and Naivasha towns. Only about 45% of this waste is officially collected and disposed at the designated dumpsites while the rest is either recycled/left unattended. In the more affluent communities, private companies, which are licensed by the county government, collect domestic waste weekly and are paid by individual residents. In the less affluent areas, youth groups are organized to collect from individual houses and brought to small transfer sites, or intermediate collection points (TPS) from where county waste trucks collect and transport to the dumpsite. These TPS basically consist of open dump areas usually by the roadside. The County has a few ageing refuse waste trucks that collect and dispose of solid waste daily from the central business district (CBD), industries, county’s own institutions and schools. Further details on: (i) the current functional solid waste management model and operating arrangements; and (ii) waste characterisation in the county is provided in Appendix 2 (i.e. Scoping Report), and Appendix 3 (i.e. Waste Characterization Report of 2010 by Antea (France) and Engin-consult, Kenya) respectively. The County has one open dumpsite that sits on approx. 29 acres of land located in the Kiamunyi area. Waste is emptied at the dumpsite (a former quarry pit) without compaction. The site emits landfill gases and obnoxious odours which burns during the dry season, and the smoke is injurious to the health of the residents living in the immediate vicinity. Exposure of wastes at the site encourages foraging by domestic animals and waste picking of recyclables by unemployed local residents and children. In this regard, the overall focus of the County Government is to minimize

1 “Integrated” in this context does not presume a particular structure for the waste management industry in the county, merely a desire to improve the service throughout the entire value chain 5

the adverse environmental effects caused by the inefficient and inappropriate solid waste management practices. Figure 2: Kiamunyi Open Dumpsite

Accordingly, the County Government of Nakuru, under provisions of the PPP Act of 2013, defined as the Contracting Authority, has expressed its desire to implement an Integrated Solid Waste Management (ISWM) plan by enhancing the solid waste Re-use, Recycle and Reduction (3Rs) principles in the urban areas of the County. However, due to the significant capital investment and technical and managerial expertise required to meet the above needs, the County Government of Nakuru has considered it necessary to partner with a strategic private party towards the implementation of the Project with a focus on protecting public health and the environment in the face of the growing volume of waste.

4. OBJECTIVE OF THE ASSIGNMENT On behalf of the County Government, the PPP Unit seeks the assistance of a consortium of International/Local consultants (i.e. technical/sector, financial, Legal and social and environment) to gauge the potential for PPPs in SWM in Nakuru County environs. The consultants to be engaged will prepare a feasibility study consistent with the PPP Act, 2013 to a standard that will enable the County Government of Nakuru to establish the technical configuration, commercial attractiveness and bankability of the Project(s). In the process, the assignment is to recommend the best PPP model for the procurement of the Project based on an analysis of several

alternative technical and PPP models, and advise the County on the optimum risk allocation and the resultant contract structure, including requisite statutory approvals.

5. ROLE OF THE CONSULTANTS As a minimum, the team will include the following experts: 1. Financial Expert(s)/Team Leader; 2. Technical Expert(s) 3. Legal Expert(s); and 4. Environmental & Social Impact Assessment Expert(s). The overall objective of the assignment is to assist the County Government of Nakuru to develop a bankable structure for one or more PPP projects covering the entire solid waste management value chain from collection through transportation, treatment and disposal, based on a full-scale feasibility process which would allow it to tender the project(s) in a subsequent bidding phase. The assignment is to be provided by a firm or consortium of firms, collectively covering the range of financial, technical, legal, social & environment, and other requisite expertise.

6. SCOPE OF THE ASSIGNMENT The consultants will provide all needed support, inputs, documentation, services and content for the Project. This section describes the minimum required tasks to be performed by the consultants, without in any way limiting the scope of activities that they may need to fulfill the County’s objectives, including the following key stages: a) Project Feasibility: This initial assessment is in describing the problem(s) that the proposed project(s) is trying to solve, supported by a situational analysis of the current SWM practices in the County. The expected outcome is the development of an optimal “industry” structure that caters to various options of vertical and horizontal integration or separation, e.g.: do we separate or bundle collection, transportation, treatment and disposal; do we aggregate or disaggregate across urban/ centres/ regions? If so for which activities – will be different answers for different activities; and also what form of disposal – landfill, recycling, waste to energy etc. The objective is to conclude with a recommended industry structure whose feasibility and the feasibility of implementing it (they) as a PPP will be assessed in the next phase. b) PPP Feasibility: Completion of the feasibility study to a standard to comply with the requirements of the PPP Act, including assessing PPP options, technical due diligence, demand/market projections, social safeguards considerations including environmental concerns, financial and economic analysis and modeling, value for money and public sector comparator analysis, affordability and fiscal impact assessment and overall transaction structuring.

c) PPP Transaction Plan: Design of a detailed PPP Transaction Plan, based on the findings of the feasibility analysis, outlining the recommended PPP structure for an integrated SW management in Nakuru County, the roles and responsibilities of all parties involved, the allocation of project risks to the parties, as well as roadmap of further implementation stages until financial closure. Throughout the assignment, the consultants will support, as appropriate, in securing the necessary approvals for the Project. As an integral part of the scope of works, the consultants will advise on the institutional and organizational framework and capacity building requirements to ensure knowledge transfer to the CA team. 6.1. Feasibility Study and Project Implementation Schedule The PPP Feasibility Study is intended to examine both the Project’s feasibility and the feasibility of implementing the Project as a PPP. The Study is intended to answer the following key questions: 1. Needs Analysis and Project Objectives: What need is the project trying to address, what demand is it trying to satisfy, what problems is it trying to solve, what are the project’s objectives, etc.? 2. What is the preferred (based on financial, economic, technical, environmental etc. evaluation) technical and commercial solution to achieving the Project’s objectives vs. other options which will need to be considered? 3. Is the project viable – from a technical, economic, social, environmental and financial perspective? This should include an assessment of affordability – for the end user and the public sector, including an assessment of the fiscal impact and contingent liability, value for money and risk transfer. 4. What is the best way to procure the project – through traditional public sector procurement, for example a Build or Design and Build contract, or through some form of PPP? 5. If PPP, then what is the most appropriate form of PPP for the project as defined by the proposed responsibilities of the private sector and the key risk allocation. A template for the Feasibility Study Report is attached as Appendix 4 to these ToR.

Task 1: Project Feasibility Assessment Task 1.1: Technical and Commercial Options Analysis The Technical Due Diligence analyses the alternative technical configurations, projected market demand and other parameters influencing the financial and operational viability of the PPP transaction with a view to achieving an optimized approach to operational efficiency for the development, operation and maintenance of an Integrated Solid Waste Management project. In detail, the Technical Due Diligence will undertake, but shall not be limited to, the following:

. Conduct a situational analysis of the principal actors and resources available in refuse collection and disposal within the county i.e. county government, private sector entrepreneurs, community-based organizations (CBOs), youth groups, informal sector influence, recycling industry, and any other player, if any, and the effect of the Project on the current institutional setting. . Carry out a detailed assessment of the existing solid waste management system/practice (i.e. collection, transport and disposal), including the regulatory framework and the financial situation of the County, to identify any shortfalls, bottlenecks, and/or permits for out- sourcing development, operations and maintenance of the service to the private sector. . Conduct a Waste Characterization Survey to gain better knowledge of the composition of the waste currently collected in the County and entering the dumpsite and therefore to better determine the measures to be taken upon restoration/rehabilitation of the existing dumpsite or if applicable, the treatment facilities that are needed at a new landfill. . Review existing and emerging technologies for waste disposal (e.g. waste incineration), waste handling, and waste conversion/recycling or reuse, and propose the most viable alternative. . Conduct a Demand Analysis, based on household and other generator/producer volume forecasts and projections for the County’s proposed project. Emphasis is to be given to elasticity studies (scenario analysis) that consider the sensitivity of the service demand to the user fees/charges imposed. . Assess opportunities for restoration/rehabilitation of the existing open disposal site and provide preliminary engineering designs for various improvements to the current solid waste management infrastructure to minimize the environmental impact and provide a long term disposal solution for the wastes from the Nakuru County communities. . Identify and evaluate the options for various engineering configurations to be considered during the evaluation of alternative methods including the development of a new sanitary landfill while identifying specific locations and any associated land acquisition requirements and difficulties, etc. . Carry out preliminary engineering designs and costing of the recommended technical configuration of the Project including, potential refuse collection zones, solid waste collection (including pre-collection, recycling and transfer) and disposal (including any composting, incineration, recycling and other means of treatment/resource recovery), transfer stations, infrastructure improvement i.e. access roads, fencing, construction of weighbridge and measurement of solid waste delivered, etc. and any other required, to be laid out in Design Criteria and Performance Specifications. . Survey various users of the solid waste system regarding their service preferences and their ability and willingness to pay for various solid waste management services (i.e., various types of users include residential dwellings, commercial establishments, tourist establishments, hospitals, and industries; and various solid waste management services include pre-collection, collection, recycling, transfer, disposal, composting).

. Based on a preferred tariff/fee structure and the service characteristics offered by the scenarios, recommend a tariff policy. Various cost recovery schemes may be proposed together with the corresponding rate structures for user charges, tipping fees and solid waste fees to be collected from residents, commercial and industrial establishments. . Assess various methods of invoicing and payment collection and propose potential revenue collection systems and tariff structure to accommodate the capital, operating and maintenance costs of the Project as a cost recovery mechanism that is likely to increase revenues and has minimal potential for leakage. Mechanisms for the collection of fees with other services (i.e. water & sewerage, and power distribution & generation) shall be explored. . Assess whether the solid waste system should be managed as a whole or in parts by the incoming private sector consortium. . Provide technical inputs and data, as required, to a stakeholder and public awareness campaign on the introduction of private sector waste collection fee systems, in liaison with County Government, PPP Unit and specialized communications consultants assigned to develop and implement the awareness campaign. . Identify ancillary revenues or commercial development potential of the Project, if any, e.g. tapping carbon finance, waste recycling, sale of compost or RDF or electricity from the treatment facility etc. . Prepare a Development, Operation and Maintenance Plan for reference and costing purposes.

Task 1.2: Project Due Diligence The Project Due Diligence will evaluate the feasibility of the Project, based on the preferred Technical and Commercial configuration determined above. This due diligence will cover: . Economic and Social Cost Benefit Analysis . Financial Viability . Legal due diligence . Site due diligence . Environmental and Disaster Risk Assessment

Task 1.2.1 Economic and Social Cost Benefit Analysis (ECSBA) The ECSBA will comprise both a qualitative and quantitative assessment of the economic and social costs and benefits of the proposed Project, including a determination of the Economic Internal Rate of Return (EIRR) and the Benefit-Cost Ratio (BCR) for the project.

Task 1.2.2 Financial Viability Assessment The Financial Due Diligence is required to analyze the market potential for private sector investors to implement the Project, compare alternative solid waste management structures and designs aimed

at optimising the transaction structure from the financial point of view, and assess the financial risks involved for both the public and the private parties. Based on the financial model, the Financial Due Diligence is required for the purpose of assessing the overall feasibility of the PPP project from the point of view of the public, as well as the private parties. The consultants will develop a Project Financial Model which will be used to evaluate: . The Financial Viability of the Project including determination of Project and Equity IRRs . Project Financing Needs – up front and recurring as driven by Capex requirements . Project Funding Needs – assessment of annual funding requirements (“tipping fee” or grants from the County Government of Nakuru) to cover O&M, debt service and other recurring costs (Different scenarios for different levels of end user charges), after accounting for likely revenue from recycling and treatment facility of the project . Value-for-Money (VfM) test through the comparative assessment of a risk-adjusted public sector comparator (PSC) model and the PPP reference model for the chosen or considered PPP structures . The Affordability of the Project for consumers and the public sector (i.e. County Government and/or the National Government) . The impact of various project inputs on the earnings and net cash flow potential i.e. ability to conduct sensitivity analysis for the purpose of quantifying the financial and economic impacts of different structuring options. Also, the Financial Due Diligence is expected to encompass and inform on the following aspects of the PPP transaction: . Technical definition of the Project and the distribution of Scope of Work among the parties involved; . Discussion on costs (direct and indirect) and assumptions made on cost estimates; . Discussion on revenue and assumptions made on revenue estimates; . Discussion on all model assumptions made in the construction of the model, including inflation rate, discount rate, depreciation and budgets; . Discussion on proposed PPP type; . Discussion on the approaches applied for enhancing the project’s attractiveness to both investors and their lenders/financing institutions . Proposed PPP project structure and sources of funding; and . Payment mechanism. Furthermore, the consultants will conduct a project risk analysis to determine, assess, allocate and manage risks (such as, but not limited to project, commercial/market risk, environmental, financial, political, economic, force majeure and legal risks) during all project stages. The risk analysis should cover valuation, allocation and mitigation measures.

Based on the risk analysis, and in accordance with GOK’s PPP Fiscal Commitment and Contingent Liability (FCCL) Management Framework, the consultants are to analyse the potential fiscal risk and contingent liabilities of the Project. The consultant will quantify the liabilities associated with the recommended project configuration, and propose how the same shall be managed and the funding requirements.

Task 1.2.3 Legal Due Diligence The Legal Due Diligence will examine the complete applicable legal, regulatory and institutional framework within which the Project will be implemented in order to identify any impediments to Project implementation and advise how any such impediments should be addressed. The legal due diligence will examine also the implications of alternative forms of procurement and alternative PPP structures which will be considered in the procurement phase and will identify a legally sound approach for the establishment of the preferred PPP approach. A general outline of parameters governing suitable PPP models shall be presented, based on international best practice and specific local circumstances. This will include and commence with a high level analysis of principles paramount to those PPP options from both the viewpoint of a potential investor as well as the public party, leading onto the local legal implications of the identified and preferred PPP models. Parallel to that, the existing regulatory and institutional framework will be assessed as to its actual effectiveness and as to its ability to accommodate the envisaged future PPP option, identifying any deficiencies and cornerstones of the current/future regulatory set up. The consultant will, inter alia, carry out the following tasks: . Assess current national and county laws, acts, regulations, administrative issuances, policies and institutional arrangements to ascertain first any constraints to Project implementation, and second the validity and viability of the alternative PPP structures for the project, including The County Government of Nakuru’s capacity to manage and monitor the implementation of the Project once operational, while identifying the gaps in the legal and regulatory framework as it applies to the management of the project, and recommend required changes to improve the governance, institutional or regulatory regime. . Formulate appropriate institutional arrangements for the Project taking into consideration the roles and responsibilities of The County Government of Nakuru, other Govt agencies & entities, private sector, and other stakeholders, including consumers and public at large. . Provide advice on appropriate institutional and organizational framework and capacity building needs for project procurement and contract management – including advice on: o public sector side procurement management and procurement steering arrangements o resourcing, training and capacity building needs for the public sector side o operational arrangements between public sector side and advisers during procurement

o contract management arrangements o resourcing, training and capacity building needs for contract management function o outline terms of reference for Independent Engineer/ Consultant . Determine the legal options and mechanisms for implementing and enforcing the proposed tariff policy. As needed, recommend changes in existing by-laws, requiring residents, visitors, and establishments to comply with the cost recovery mechanisms and private sector agents developed by government for improved solid waste management. This shall include the legal requirements that residents utilize the services of only licensed private agents or risk sanction. . Develop and provide detail to the legal architecture and design of the transaction, identifying, inter alia, the (i) type of PPP contract to be used; (ii) investment plan, how, where and when investments will be made; and (iii) type of public sector support required, if any, including terms and conditions. . Assist in resolving legal issues associated with the management of the social, economic and environmental impacts of the project in a manner consistent with the Constitution of Kenya (2010) and other relevant national and county legislation, taking into consideration international best practices.

Task 1.2.4 Site Due Diligence The consultants will carry out a due diligence on the Project site, including the areas of primary solid waste collection, current and potential transfer stations, the land-fill site and the potential site for the treatment plant (if not within the area of the land-fil site), with a view to identifying any impediments to Project implementation and advising on how such impediments should be addressed, covering, inter alia:  Land requirements and availability  Title, rights of way, easements, encumbrances  Access  Resettlement  Land acquisition process and costing  Utilities

Task 1.2.5 Environmental and Disaster Risk Assessment Environmental and Social Safeguards Sustainability The consultant’s team will encompass Environmental and Social Impact Experts which will identify, assess and quantify the specific environmental and social risks and impacts associated with integrated SWM project in Nakuru. It will ensure all environmental and social aspects of the Project comply with Kenyan laws and regulations as well as international development partner’s directives. Specific tasks entail, but are not limited to:

. Prepare/review and/or update, as necessary, the Environmental and Social Risk Assessment and Analysis. The Experts(s) will ensure that all aspects related to social safeguards have been considered, and necessary mitigation measures have been taken, adequate for purposes of securing approvals in accordance with the existing legislation. . Examine underlying geological features, particularly the permeability of soil, aesthetic appearance including topography and landscape . Conduct a climate and disaster risk vulnerability assessment, identifying potential threats and risks due to climate and geo-hazard situations/conditions in the covered/service areas. . While recommending the option of treatment process, examine the possibility of penetration to check the quality of effluent water to the ground water. This effluent water may cause contamination to the surface water or ground water. . As applicable, perform site selection and assessment, from a geological, ecological and population point of view, addressing all environmental issues associated with its construction. . Take into account any Resettlement actions and prepare a detailed Resettlement and Rehabilitation Action Plans for the proposed new site, if any. . Identify key risk areas and threats to the existing or new facility; identify technical, administrative, institutional, infrastructure, and social/environmental mitigating measures and recommendations for integration into the over-all project design, financial and implementation proposal. . Conduct gender analysis and identification of gender issues and gender gaps that the project must address using available legislated guidelines. . Educate and mobilize residents on the key aspects of an integrated solid waste management including source separation, recycling and reuse. o Provide capacity building to County staff i.e. training workshops and seminars on solid waste management, and collaboration workshops with other stakeholders including informal waste pickers, NGO’s, institutions and private waste service providers. . Promote the benefits of handling waste effectively through door-to-door awareness raising and other educational efforts aimed at designing a waste management system that is inclusive, socially desirable, economically viable, and environmentally sound. . Develop a Preliminary Environmental and Social Impact Assessment (PESIA) report, to be discussed in a stakeholder consultation process, and for purposes of assessing the social and environmental impact of the project.

Task 2: Procurement Options and PPP Options and Structure Analysis Having established the Project Feasibility, the consultant will determine the optimum way of procuring the Project – through traditional procurement or through a PPP, and if a PPP, whether it would be one PPP contract for all elements of the project or multiple PPP contracts, which form of

PPP would be the most appropriate for each of these PPPs (if more than one), and which process of procurement would be best for each PPP. In their analysis the consultant must consider all infrastructures which need to be developed for the Project – including assets for primary collection, secondary collection, bulk transportation, SW treatment (including segregation unit) and sanitary land-fill site.

Task 2.1: Options Development, Evaluation and Selection The consultant will: . Describe a range of credible alternative procurement and PPP options including justification for their selection. Options must include traditional public sector procurement. For each option, the consultant will set out: o The key roles and responsibilities of the private sector and of the public sector o The key risk allocation under each option . Develop, describe and justify a set of evaluation criteria to be used in evaluating alternative procurement and PPP options to include, inter alia: o Value for Money assessment. The Value for Money assessment is expected to examine both the choice between traditional public sector and PPP procurement, as well as alternative risk allocations between the alternative PPP options. The report should present clearly how the Public Sector Comparator Model, the Risk Adjusted Public Sector Comparator Model, the PPP Reference Model and the Risk Adjusted PPP Reference Model have been developed and populated with data o Affordability for users and the public sector o Assessment of Fiscal Impact including any contingent liabilities for the public sector o Private sector feedback on attractiveness, bankability and risk allocation, based on a Preliminary Market Sounding amongst potential operators, developers, investors and financiers . Present the results of the Evaluation through a report and slides presentation, defining the different PPP options studied, presenting for each the structure of relationships, contractual undertakings, risk profile, and major pre-requisites. The consultant will make a recommendation which PPP option in his professional judgment is the most viable and bankable. . Provide a detailed description of the preferred Procurement Option and PPP Structure, including: o Key Risk Allocation o Outline Payment Mechanism/ Tariff arrangements

o Indicative Financing Structure and sources – private sector bank debt, multilateral debt, public sector debt, project bonds, grants (indicate source), developer equity, other (specify) o Key Heads of Terms for the proposed PPP Structure In support of the Options Analysis, the consultant will: . Develop a detailed and comprehensive Financial Model . Carry out Market Sounding of the Project and of alternative risk allocations/ PPP structures

Task 2.2: Financial Modeling The Feasibility Study is expected to be supported by detailed and comprehensive Financial Modeling. In particular financial modeling is expected to: . Support the Economic Viability Analysis of the Project and Alternative Technical Solutions (Task 1.2.1) . Support the Financial Viability Analysis, the determination of revenue requirements to meet Project Funding needs, the determination of necessary tariff levels, the evaluation of affordability for both user pays and public sector pays models including fiscal and public sector borrowing impact (Task 1.2.2) . Support in determining the Project’s Financing requirements and the evaluation of alternative financing structures and sources (Task 2.1) . Support in the evaluation of alternative procurement options and PPP options, including Value for Money analysis (Task 2.1) And in the implementation phase of the Project: . Support in the detailed design of the Payment Mechanism/ Tariff arrangements . Act as a shadow Bid Model and assist in evaluating bids and their robustness The Financial Model will be used to: (i) analyse the market potential for private sector investors and lenders, assess the financial risks involved for both the public and the private parties, (ii) assess the impact of various project inputs on the earnings and net cash flow potential and compute the refinancing mechanisms of capital expenditure costs; (iii) Compare alternative Project procurement and PPP options, aimed at optimising the transaction structure from the financial point of view by comparing the performances of various PPP models (with different risk allocation features). Further, the Financial Model should be designed to provide for analysis of project structuring options including quantifying the financial impacts of different structuring options In their proposals, Bidders should describe in detail the structure and functionality of the Financial Models they would develop and also the methodologies and tools they would employ in carrying out the necessary financial analysis.

Task 2.3: Market Sounding To enable the preparation of a responsive Feasibility Study Report, the TA shall undertake a Market Sounding exercise that shall include the following tasks: . Organize a meeting with The County Government of Nakuru officials to provide an overview of the approach to market sounding; . Prepare a Market Sounding document that will include a Project Profile (which will cover the objectives of The County Government of Nakuru, an overview of the Project, the process and timetable for procurement, outline Risk Allocation), as well as a summary of the key issues to be discussed with and questions to be asked of the market, i.e. equity investors, debt financiers, contractors and operators, the process of how the market sounding will be conducted, the proposed list of parties to be approached . Provide the Project Profile to the identified private parties and holding one-on-one discussions with them, either telephonically, or if practical and cost effective, face to face . Organize and participate in workshops with The County Government of Nakuru and other stakeholders to review findings of the market sounding and determine key areas that will need consideration in preparing the Feasibility Report; . Prepare a Market Sounding Report (which will form an appendix to the Feasibility Study) that will summarize the findings from the exercise and will consist of, but is not limited to, the following information: o Market sounding objective; o Key issues that needed to be considered; o List of companies consulted; o List of questions with answers from the one-on-one sessions; o Summary findings and matters considered in the Feasibility Report. In summary, the consultants will organize consultation discussions with potential market participants including, but not limited to, potential developers, operators, equity partners, investors, lenders and guarantors to fulfill the market sounding requirements. The conclusions drawn from these consultation meetings shall be taken into account in the preparation of the feasibility report and in designing the PPP transaction structure.

Task 2.4: Summary Recommendations, Project Implementation Plan and Feasibility Study Report The consultants will prepare a comprehensive Feasibility Study Report in accordance with the requirements of the PPP Act, and the template provided at Appendix 4. This Report will present the analysis carried out, the conclusions reached and the recommendations made concerning the Project Feasibility and the preferred method of procurement including recommended PPP structure, as well as legal, regulatory, institutional, financial, economic, funding, tariff structure, environmental, social and risk allocation recommendations necessary for the successful implementation of the Project.

The Report will include a complete description of the Project as structured, based on the recommendations contained in the Report, covering: . A summary of how the proposed PPP project addresses the County Government of Nakuru’s strategic objectives and its consistency with the sector’s master plans . A summary of the output specifications for the Project . Other potential commercial activities that the PPP Company may undertake to augment revenues and lessen the fees charged to the off-taker . A list of significant Government assets which will be used for the Project (such as land and existing structures, access roads, etc.) . A summary of the fiscal implications and potential contingent liabilities for the public sector; . A detailed description of the type of PPP project proposed and its envisaged payment mechanism/ tariff regime . A detailed description of the proposed Key Risk Allocation . Draft Heads of Terms which will form the basis for the PPP agreements to be developed in the subsequent Phase i.e. Procurement The Report will also include a detailed Project Implementation Plan which will set out a clear timetable for the Project Implementation and will cover all the tasks required of all parties to procure the Project, identifying: (i) Tasks; (ii) Timing; (iii) Responsibilities for each task; and, (iv) Key approval/ decision points and milestones. Task 3: Support the County Government of Nakuru on Securing PPP Committee Approval and All Other Government Approvals The Feasibility Study Report will be submitted in the first instance to the County Government of Nakuru and the PPP Unit, and subsequently to the PPP Committee for approval. The consultants shall complete all required documents to be submitted to the PPP Unit and PPP Committee, and assist the County Government of Nakuru address all PPP Unit concerns until the approval is accorded by the PPP Committee and other concerned parties. These documents shall include the following: a) Six (6) electronic and hard copies, in MS Word format, of the Feasibility Report; b) Completed checklist for feasibility studies of PPP projects; c) Two (2) electronic copies, in MS Excel format of the financial analysis/financial model in traceable formula format; d) The Preliminary Environmental and Social Impact Assessment (PESIA) report in electronic & hard copies (Ms word file); e) Land acquisition plan and social strategy frameworks (i.e. resettlement and gender action plan); f) Location map (with electronic copy); and

g) Other documents that may be required by the PPP Unit. The consultants will also provide assistance in securing approval of the estimated Fiscal Commitments and Contingent Liability (FCCL) funding by the Public Debt Management Office (PDMO) including preparation of documentation required under the FCCL Framework for PPP projects in Kenya. And if necessary, they shall assist the County Government of Nakuru in obtaining PPP Committee approval for public sector support to the Project (financial, guarantee, legal etc.) as recommended by the Feasibility Study.

7. CONSULTANT SKILLS AND EXPERIENCE 7.1. Necessary consultant skills and experience The consultants will comprise a single organization or a consortium of firms, led by a single lead advisor. The members of the advisory team will have both the skills and experience necessary to undertake the range of tasks set out in these terms of reference. Each individual on the team must be personally available to do the work as and when required. The lead advisor will be held accountable, in terms of the consultancy contract, for ensuring project deliverables and for the professional conduct and integrity of the entire team. Team members may not be changed or removed without the prior written approval of The County Government of Nakuru and the PPP Unit, and replacement with someone at least as qualified and capable. The skills and experience required as a minimum of the consultancy team are as follows: . Financial advisory, analysis and modeling experience, with Integrated SWM PPP and project finance experience through to financial close . PPP procurement and structuring . Kenyan commercial and contract law . Relevant international and regional experience in the legal frameworks for PPP and in the drafting and negotiating of PPP agreements . Technical expertise in Integrated SWM project, including project configuration, planning, design, engineering, capital cost estimation, construction technologies, estimation of O&M costs and defining service standards/specifications of all aspects of Integrated SWM  Technical expertise in alternative solid waste treatment technologies and their evaluation, operations & maintenance of treatment facility and construction and operation of scientific land-fill site  Social and environment expertise and experience in Integrated SWM project

7.2. Key Personnel and Time Input Bidders are free to propose their own team structure and Key Personnel, however they are advised that The County Government of Nakuru expects, as a minimum, to see the following Specified Key Personnel in 7.3 below.

Bidders may propose the same individual and CV for more than one position if that individual is qualified for more than one position and that the individual will make the requisite time commitments for both the positions as required, but they must make it explicitly clear that this is what they are doing in order to ensure that the individual is evaluated against each position. Bidders may also propose two complementary (not alternative) CVs for one position if they do not have personnel with the full range of expertise required for such position. Again Bidders must indicate clearly that this is what they are doing. The Bidder’s proposed Specified Key Personnel will be evaluated against the Expertise Expectations set out in the table below. Bidder’s proposed Key Personnel outside of the below Specified Key Personnel will be evaluated on their individual merits, as will Bidder’s proposed non-key personnel. It is expected that a substantial majority of the proposed Specified Key Personnel will be full time employees of the Bidder, and credit will be given in the evaluation for this. Bidders are also required to state the proposed person month input of each member of their team (Key and non-Key personnel) in the form set out in Appendix 3. The amount of input stated for Specified Key Personnel both within and outside of Kenya will be evaluated as a part of the Technical Proposal evaluation.

7.3. Specified Key Personnel Expertise Expectations

Expertise Expectations Position A university degree in Business; Finance; Economics; Management; or any related filed, with a relevant post graduate qualification.

At least 15 years of professional experience in PPPs and project finance, with a proven track record in project structuring and Financial risk analysis, allocation and management, cost-benefit analysis, financial evaluation and financial modelling of PPP projects, Expert(s)/ particularly Integrated Solid Waste projects, including value for money, Public Sector Comparator analysis, affordability and Team Leader fiscal impact assessment.

Demonstrated experience in dealing with project finance structures with at least three (3) financially closed PPP projects. Relevant qualifications and experience in developing countries is an added advantage.

Good English communication and writing skills, especially in report writing, are essential. A university degree in Engineering, preferably with a relevant post-graduate qualification in the Waste Management sector.

A minimum of 10 years’ demonstrated experience in providing PPP transaction advisory services in the assessment of Integrated Solid Waste management projects on a PPP basis, including: designing and evaluating primary collection, secondary collection, transfer stations and bulk transportation of SW in medium to large urban areas; construction and Technical operations and maintenance of treatment facilities and scientific landfill sites; and designing and evaluating alternative solid Expert(s) waste treatment technologies and plants. Relevant experience in extensive experience in project structuring and risk analysis, allocation and management; project agreements; bid process management including preparation of bidding process documentation and post-bid process monitoring.

Successful preparation of PPP projects with at least three financially closed projects. Regional working experience (SSA) will be an advantage.

Good English communication and writing skills, especially in report writing, are essential.

A university degree in Law.

A minimum of 10years’ demonstrated experience in drafting Project agreements comprising PPP Concession Agreement, Waste off-take agreement, share-holders agreement and other related documents/agreements; PPP procurement, managing bidding process, and resolving legal issues, policy and institutional assessment; and, successful preparation of PPP projects PPP Legal with at least two financially closed PPP projects. Expert Demonstrable knowledge and experience of the legal, regulatory and institutional framework for PPPs in Kenya and of the solid waste sector, relevant experience of public procurement/ transaction management will be an additional merit.

Experience in Integrated Solid Waste projects will be an additional merit.

Good English communication and writing skills, especially in report writing, are essential. A university degree in social sciences, development studies or other related field.

A minimum of 8 years’ demonstrated experience in the assessment of social impacts, gender analysis and mitigation measures for 3 investment projects (public and private funded) in Kenya. Experience of working with informal sector and designing at Social least 1 inclusive project in Kenya or East Africa.

Safeguards Thorough knowledge of Kenyan labour laws and other related laws/provisions. Experience in the application of Specialist development partnerships in Environmental and Social Management Framework on Safeguards Policy Statement (involuntary resettlement safeguards, indigenous peoples safeguards, Physical Cultural Resources, etc.) in implementing PPP projects will be an additional merit.

Good English communication and writing skills, especially in report writing, are essential.

A university degree in social or environmental sciences, development studies or other related field.

5 years’ demonstrated experience in environmental impact assessment and mitigation measures and experience of Environmental environmental impact and mitigation measures for at least 3 land-fill sites and solid waste treatment plants (public or private Specialist funded) in accordance with the specific environmental and safeguard requirements.

Good English communication and writing skills, especially in report writing, are essential

8. DURATION OF THE ASSIGNMENT Considering that many activities will be undertaken concurrently, it is estimated that the above services would require a period of approx. 14 weeks from the date of commencement of the services until end of the assignment. Bidders are expected to provide a comprehensive and detailed Project Implementation Plan, preferably using Microsoft Project, or equivalent software, indicating all the key tasks, deliverables, milestones, responsibilities, timetables and critical path for successful project implementation, capturing as a bare minimum the following tasks. This detailed plan will be discussed and agreed with the County Government of Nakuru and PPP Unit before market engagement.

9. DELIVERABLES OF THE ASSIGNMENT The general deliverables of the project are as represented in the table below. Bidders are expected to include, as a part of their proposal, anticipated dates of delivery. The consultants shall submit an Inception Report including an updated detailed work plan for project implementation, covering tasks and responsibilities of all parties involved not just the consultant’s personnel. Every week thereafter, and as needed, the consultant will hold progress meetings with the County Government of Nakuru and PPP Unit to discuss any key constraints encountered, work planned for the subsequent period, inputs and support needed from the County and other parties and will update the work plan accordingly.

Due Date, to be No. Deliverable completed by Bidders (After contract signing) 1. Inception Report 2 weeks Feasibility Study Report including PPP Implementation 2. 13 weeks Plan 3. FS Study findings approvals and close out Report 14 weeks

All reports shall be submitted to the County Government of Nakuru and the PPP Unit in electronic format as MS Word document (latest version) and printed in the relevant number of copies. Models and workflow, process and data diagrams shall be submitted electronically in their appropriate dynamic application files. The consultant, in close coordination with the County Government of Nakuru, shall conduct quality reviews to obtain feedback on all draft versions of deliverables as appropriate. The consultant shall make presentations to the County Government of Nakuru on each deliverable (e.g. draft Feasibility Study, Marketing Strategy, etc.), with the team’s key experts present.

10. REMUNERATION SCHEDULE AND DISBURSEMENT ARRANGEMENTS The Consultants will be paid on a lump sum basis in USD based on the below remuneration schedule. Bidders must keep these in mind in writing their proposals and submit in the formats prescribed in this RFP. . 20% of the Amount upon delivery of the inception report; . 60% of the Amount upon delivery of the draft feasibility study and presentation of the findings and recommendations to the County Government and the PPP Unit; and . 20% of the Amount upon acceptance of the final feasibility study by the County Government of Nakuru and approval by the PPP Committee.

11. INSTITUTIONAL ARRANGEMENTS AND COUNTERPART ASSISTANCE The advisory team shall work closely with the County Government of Nakuru team and other government agencies as may be required during the assignment. A Project Appraisal Team (PAT), composed of representatives from the County Government of Nakuru and the PPP Unit, will be established to review and assess the acceptability of Project deliverables. The County shall: (i) provide the consultants with all available pertinent data and previous studies, if any, useful to the Project; and (ii) liaise with other agencies to ensure that the consultant has access to all information required as may be allowed under Kenyan laws. The consultants will: (i) be responsible for providing all necessary facilities and logistical support for its staff, including office space, vehicles, miscellaneous transportation, office equipment (computers, printers, telephone, and internet services), survey and investigation equipment, communications, utilities, office supplies and other miscellaneous costs for carrying out the services as per the requirements of the TOR; and, (ii) provide all the administrative, technical professional, and support staff needed to carry out their services including market/demand survey teams, social surveys teams, etc. as deemed necessary.

12. PROJECT BASED LEARNING To ensure knowledge and skills transfer by the consultant to the County Government of Nakuru’s project implementation team, the consultant will be expected to incorporate a project based learning approach. All bidders are therefore expected to enumerate a clear and deliberate approach as to how knowledge and skills will be transferred to the Nakuru County’s project implementation team.

Appendix 1: PPP Project Proposal

Appendix 2: Scoping Report – Nakuru County SWM

Appendix 3: Nakuru County Waste Characterization Report, 2010

By Antea (France) and Engin-consult (Kenya)

Appendix 4: Feasibility Report Template

Minimum Parameters to be covered in the Feasibility Study Report The Advisory team shall ensure that the Feasibility Study Report shall, as a minimum, conform to the following outline:

INTRODUCTION  Project Background: Rationale and Genesis  Project Objectives  Approach and Methodology of the Feasibility Study NEEDS ANALYSIS

 Project’s Conformance to Sector Diagnostics and Master Plans  Demand Forecasting and User Projections  Institutional Settings  Scope of the Project TECHNICAL AND COMMERCIAL SOLUTION OPTIONS ANALYSIS This section needs to describe:  Alternative Technical Solutions which have been considered to achieve the Project Objectives. Alternative Technical Solutions may be alternative engineering options  The evaluation of the Alternative Technical Solutions. This section needs to describe the technical, economic, financial, legal, social, environmental and other criteria which have been used to evaluate the alternative options, and to present the results of the evaluation, including an Economic Cost-Benefit Analysis. It is expected that the evaluation be carried out on the basis of high level capex and operating cost estimates  Recommended Technical Solution. The Recommended Technical Solution should be described in more detail and an Outline Design provided. The description should include: o Proposed Output Specifications o Estimated CAPEX and OPEX Costs PROJECT DUE DILIGENCE The Study is expected to include a detailed Project Due Diligence on the basis of the Recommended Technical Solution covering the following:  Legal Aspects o Use and User Rights o Relevant Financial Laws and Regulations o Relevant Environmental and Heritage Laws, if applicable

o Tax Legislations o Labour Legislations o Foreign Exchange Legislations o Competition Legislation o Building and Fire Codes, as applicable o Zoning Rights and Land Use Regulations o List of likely Project Agreements o Dispute settlement mechanism and legal jurisdiction  Site Enablement o Land Requirements o Land Valuation o Land Availability and Title Deed Endorsements o Resettlement Needs, if applicable o Relocation of Utilities  Economic and Social Cost Benefit Analysis (ESCBA) o Identified Economic Benefits o Identified Economic Costs o Economic Evaluation and Sensitivity Analysis o Assessment of Social Benefits and Costs o Gender, Youth and other Social Concerns  Identified Environmental and Disaster Risk Concerns o Environmental Impact Assessment (EIA) and Social Risk Assessment o Climate and Disaster Risk Vulnerability Assessment o Preliminary Environmental & Social Impact Assessment (PESIA) report  Financing, Funding and Revenue Implications o Project Financing Needs – up front and recurring as driven by Capex requirements o Project Financing Sources – indication of Financing Sources (private sector bank debt, multilateral debt, public sector debt, project bonds, grants (indicate source), developer equity, other (specify)) o Project Funding Needs – assessment of annual funding requirements to cover O&M, debt service and other recurring costs o Revenue requirements – assessment of revenue requirements to cover the Project’s Funding Needs o Revenue Sources – identified revenue sources – users, public sector service payments, combination, other o Affordability Analysis: . For public sector service payments compare against budget allocation and evaluate availability. Determine need for Viability Gap Funding and quantify. For user pays evaluate ability and willingness to pay of users

PROCUREMENT OPTIONS AND PPP STRUCTURE ANALYSIS This section should present an evaluation of the alternative options for procuring the project, including the preferred PPP option. The section should cover:  Description of alternative procurement and PPP options considered and justification therefor. Options must include traditional public sector procurement. For each option set out: o The anticipated key roles and responsibilities of the private sector o The key risk allocation under each option  Description of and justification for the evaluation criteria used in evaluating alternative procurement options to include, inter alia: o Value for Money assessment. The Value for Money assessment is expected to examine both the choice between traditional public sector and PPP procurement, as well as alternative risk allocations between the alternative PPP options. The report should present clearly how the Public Sector Comparator Model, the Risk Adjusted Public Sector Comparator Model, the PPP Reference Model and the Risk Adjusted PPP Reference Model have been developed and populated with data o Affordability o Assessment of Fiscal Impact o Assessment of impact on Public Sector Borrowing including any contingent liabilities o Private sector feedback based on a Preliminary Market Sounding amongst potential operators, developers and financiers  Presentation of the results of the Evaluation  Detailed description of the preferred Procurement Option and PPP Structure, including: o Key Risk Allocation o Outline Payment Mechanism o Indicative Financing Structure FINANCIAL MODELING The Feasibility Study is expected to be supported by detailed and comprehensive Financial Modeling. In particular, the financial model is expected to:  Support the Economic Cost Benefit Analysis of the Project and Alternative Technical Solutions  Support the determination of revenue requirements to meet Project Funding needs  Support the determination of necessary tariff levels for user pays projects  Support the evaluation of affordability for both user pays and public sector pays models including fiscal and public sector borrowing impact  Support in determining the Project’s Financing requirements and the evaluation of alternative financing structures and sources

 Support in the evaluation of alternative procurement options and PPP options, including Value for Money analysis And in the implementation phase of the Project:  Support in the detailed design of the Payment Mechanism  Act as a shadow Bid Model and assist in evaluating bids and their robustness The Report should include a description of the Financial Model and key outputs in support of the various analyses and conclusions throughout the Report. PROJECT RISK MATRIX The report shall include a Project Risk Matrix (PRM) that quantifies the liabilities associated with the recommended project configuration, and proposes how the same shall be managed and the funding requirements. This information shall be of interest to the DMO in their review of the FCCL assumed in the proposed project structure. On a minimum, the PRM shall contain the following information: . Risk and its description . Expert’s estimate of the probability that the risk will be realized, together with the rationale/assumption . Expert’s estimate of the impact of the risk as a percentage of the base . The base or amount . Most likely timing of the risk event . Cost of the risk in NPV terms . Risk distribution between public and private parties in terms of percentage of costs borne . Distribution of cost of the risk between parties in terms of NPV amount . Mitigation of risk

PPP PROJET AGREEMENTS TERMS SHEETS Include here the Key Heads of Terms which will form the basis for a PPP contractual structure in due course. PROJECT IMPLEMENTATION SCHEDULE