Kigali Water PPP Project – SDG GOAL 6

November 14, 2020
Blog

Kigali Water PPP Project – SDG GOAL 6    

By  Wilson Akhator-Eneka (Email:wilson.ae@igwehi.uk )     


The Rwanda Water PPP Project in Kigali as celebrated in sub-Saharan Africa as a successful PPP project. In this paper; I outlined the critical success factors; which includes the project vision, the problem, the solution, the financing mechanism, the Implementation and the benefits to the stakeholders.

a) The Project vision

b) The Problem 

c) The Solution

d) The Financing Mechanism

e) The Implementation

f)  The Benefits

The Rwanda government aims to provide 100% of reliable access to clean and safe water to her citizens. Currently, 86% of urban and 72% of the rural population have access to improved sources of drinking water. Against this background, it commenced a PPP Water project with the following measurable metrics according to the report.

The Project Vision:  Rwanda Government is committed to providing safe, clean water and worked to create a regulatory environment conducive to private sector investment. If we are to achieve Sustainable Development Goal 6, universal access to safe drinking water, we need to see many more similar projects come to fruition across low-income countries in sub-Saharan Africa and Asia (The World Bank, 2018).

The Problem: Kigali population is proliferating, placing strain on the city's water infrastructure. Water rationing is prevalent as a result of limited production capacity, which has affected the wellbeing and welfare of the citizens. To solve this problem, the government embarked on policy reforms and took a pragmatic solution.

The Solution: Rwanda’s government engaged the International Finance Corporations (IFC) as PPP Advisor, which boosted the private sector’s confidence in the project. And, with funding support from The Infrastructure Development Collaboration Partnership Fund (DevCo), and Technical Assistant Facility (TAF) to develop a PPP transaction, enthroned the framework for success. In a competitive tendering process, Metito won a 27-year license to Build, Operate and Transfer (BOT) the 40,000m³ per day Kigali Bulk Water scheme. Under the PPP contract, Metito designs, build, maintain and operate the treatment plant and sells portable water to Water & Sanitation Corporation of Rwanda (WASAC).

The Financing Mechanism: To gain private sector confidence, Rwanda appointed IFC to act as PPP Advisor. According to Cattaneo (2018), it involved three Project Infrastructure Development Group of the World Bank: The Emerging Africa Infrastructure Fund (EAIF), the Technical Assistance Facility (TAF), and the Infrastructure Development Collaboration Partnership Fund DevCo assisted the project funding at different stages. EAIF acted as the lead arranger of financing of the USD$61 million plan. It used a blended financing structure to execute the project. EAIF provided an 18-year-long term of US$40 million jointly with the African Development Bank, DevCo provided funding to help structure the transaction and its competitive tendering process. TAF granted US$6.5 million for Viability Gap Funding (VGF), which reduced up-front costs and allowed the government to expand the water supply to more users in the first phase.

The Implementation: According to PIDG and other partners to the project; Metito Utilities Limited, a Dubai-based intelligent water management solutions with over 60 years of experience became the preferred bidder in October 2014. Considering the strategic importance of the project for the Rwandan government, Metito put together a highly competitive financial and technical package to win the bid. Rwanda carried out reforms which led to the formation of WASAC. With support from RDB, DevCo and IFC; Metito set up Kigali Water Limited (KWL). KWL operates the project and sells potable water to WASAC under a 27-year PPP agreement, with a 24-month construction period clause. Rwanda government guarantees the project. WASAC will pay a regulated tariff in consideration for the water supplied by KWL (guaranteed cash inflows). The Water Project included development, financing, construction and operation of a bulk water production facility.

Under the contract implementation, EAIF worked with Metito to refine the financing model, and identified subsidy needs to make the project viable for all parties - EAIF, AfDB, Metito as an equity investor, and the off-taker with its tariff affordability objectives. As a result, the Technical Assistance Facility (TAF) provided a grant as viability gap funding. During the project structuring phase, DevCo provided support in the form of government advisory services.

The project timetable estimated a concession agreement as at the end of 2014, a fully operational plant. Additional time was required to complete the first time project. It finalised the concession agreement in March 2015. In 2016 the plan was revised as a result of scope and cost changes and the project reached financial closure in November 2017. The project construction began in 2018, and it will become operational in 2020.

The Benefits and Lessons: Cattaneo (2018), posited that there are four key lessons to learn from Kigali Water project which included; 

(i)         Coordinated blended finance: The financing structure of a PPP project is key to its  survival.

(ii)        Focused on Impact: Managing project scope, and making changes in a timely and efficient manner affect project impacts on communities, as well as effective  delivery.

(iii)       Communication is essential to project success. Inclusive communication among stakeholders helps to steer the project in the right direction.

(iv)       Confidence building: Using multilateral finance institutions boost private sector  involvement in projects.


 

Additional benefits of the project include: 

a)        Improved Rwanda health outcomes, including lower rates of water-borne diseases, higher productivity, and lower health-care costs; 

b)        Time and cost savings for households in parts of Kigali that are currently underserved; 

c)        Economic growth and job creation in businesses that are dependent on reliable water supply;

d)        The project will also employ 100 people during construction.

 

In conclusion, the author posits that a PPP project conceived and implemented as summarised in this case has a high chance of success. 


Author

Wilson Akhator-Eneka (FMVA, MBA, MSc, FCA)

Alumni of Oxford University, England, UK

Executive Director – IGWEHI Transatlantic UK Ltd

Email:wilson.ae@igwehi.uk