Country: West Bank and Gaza |
Sector: Solid Waste Management |
Name of Project: Palestine Solid Waste Management Project |
Contracting agency: The Joint Services Council for Hebron and Bethlehem |
Agency type: Sub-national |
Type of PPP: Operation and maintenance contract |
Contract term: A total of 7 years, with an initial 5 year contract with a provision for extension of another 2 years |
Construction period: The landfill site improvement was funded prior to the PPP project structuring by the World Bank through the Gaza Southern West Bank Solid Waste Management Project of 2009, which is scheduled to close in 2014 |
Bid Parameter: Technical evaluation and the lowest level of tariff per ton |
Total cost of project: - |
Total Population served: Approximately 1 million |
Per unit cost: - |
Basic specifications: Output based performance indicators and targets under the contract |
Stage of project: The project is operational. The agreement was signed in September 2013 |
Time taken for processing project from concept to contract execution: -- |
Local or foreign investor: Greek investor, W.A.T.T.S.A.-MESOGEOS S.A. and EPEMS.A, which has also invested in the waste business in other countries |
Applicable legislation: |
Approving authority: The Joint Services Council for Hebron and Bethlehem |
Is the approval process the same as for other projects: This is the first PPP project in the area |
Role of Private Party: Operation and maintenance of the landfill at Al-Minya and two transfer stations at Hebron and Tarqoumiya as well as transportation of waste form the transfer stations to the landfill, financing of operational costs |
Role of Public Authority: Setting standards and specifications, monitoring and verification of performance and contract management |
Financing: World Bank financing to construct the project, private financing for operation and maintenance |
Payment Mechanism: Payment made by the public entity on per ton basis (output based) |
Tariff: Set through bid, paid by government |
Comparison to existing rates: NA |
Government Support: Construction of landfill site and transfer stations through a specific investment loan of the World Bank, GPOBA grant funding support of $8.25 million over four years upon fulfillment of pre-defined OBA targets by participating municipalities and village councils |
Other advantages : Reduction of GHG emissions by 13400 tons during contract period |
Contingent liabilities created: Fiscal commitments are created but overall there are net benefits as compared to the situation prior to the project in terms of savings in emissions and better maintenance of landfill |
Risks: Demand risk, performance risk, political risk |
Level of risk: Moderate |
Key risk mitigating features: • A minimum guarantee was provided by the JSC for supply of 500 tons of waste every day taking care of demand risk; also historical user fee collection data was provided to lend comfort to the private party. • A contract cancellation payment of $500,000 is to be made by the authority taking care of termination risk; private party may demand payment for the minimum amount of waste guaranteed, in addition providing further protection. • JSC-H&B is required to pay an extra per kilometer charge for waste delivered in the event that Israeli roadblocks elongate the route protecting against political risk/ force majeure risk. |
Factors affecting decisions on the size of project or population serviced by the project: A number of municipalities and villages were brought together to make the cost of service sufficiently affordable and the project feasible. |
Lessons learned: • It is important to bring in key changes in the sector before initiating a PPP project. There was a long period of about 4-5 years preceding the PPP where the World Bank through a specific investment loan worked on bringing in a change process in the way waste was being perceived and disposed. The objective of the World Bank project was to improve solid waste disposal services for the communities and businesses of Palestinian municipalities and joint services councils in the Bethlehem and Hebron governorates through provision of an efficient socially acceptable and environmentally friendly mechanism, including (i) strengthening the joint services council administrative and technical capabilities for a cost-effective management of waste disposal services; (ii) improving the waste disposal services through provision of a sanitary landfill facility and related infrastructure; and (iii) carrying out a public awareness campaign for promoting waste minimization, resource recovery and cost recovery for financial viability. • The JSC was established with security deposit from municipalities to counter their default risks • The Joint Services Council did not have the financial capacity to undertake the improvement and had to rely on multilateral and bilateral partners such as the World Bank, IFC, GPOBA and others to find a solution to the problem of waste. • The Joint Services Council also did not have the knowledge or the capacity to handle the PPP process and the project became possible only due to the intervention and long period of work by international organizations • The project targets were set based on discussions and consultations with the participating municipalities and villages to ensure achievability, which is important when new projects are taken up at local level and the services are of an essentially new nature • There were no local investors and all the investors who participated in the bid were from other countries; i.e., Spain, Greece and Egypt. • An important lesson is that if the project is appropriately structured and government support is forthcoming, international firms are willing to work in less politically secure/ stable regions • Political risks were borne by JSC-H&B. • Smaller municipalities can be brought together as in this case through the joint services council to form a service area that is large enough and feasible for cost effective waste management and also attractive enough for larger investors to come in • Partnership between the Bank, IFC and GPOBA enabled the provision of the full range of technical assistance in this case, including subsidy support, and enabled policy and project development and implementation from upstream to downstream |