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Introducción a Finanzas para Empresas de Servicios Públicos de Agua Potable y Saneamiento Sesión 1

Contents

1

• Necesidades de inversión en el sector

• Vision General SENAGUA

• La sostenibilidad financier de ls EPS y la

• Course Objectives and Structure

Why is Finance Important to Achieve WASH Targets?

Tariffs, Taxes and Transfers are Not Enough to Cover Investment Requirements for EPS

• Achieving the WASH targets will require substantial capital investments

• Tariffs, Taxes and Transfers will not be enough to meet

• Utilities must access commercial financing and increase cash generated from operations to achieve objectives

3

FundingGap

Cash Requirements

Sources of Funding

Tariffs

Transfers (from donors)

Taxes (Govt. grants)

Operating Cost

Maintenance Cost

Capital Investments

(Rehabilitation and new)

EjemploPlan Nacional de Saneamiento 2006-2015

4

76%24%

2005

Cobertura de agua Potable

Objetivo2015

83%17%

Cobertura de Alcantarillado

2005Objetivo

2015

41%59% 23%77%

Cobertura de Tratamiento de Aguas Residuales

Objetivo2015

2005

78% 22% 100%

Financiamiento Requerido para el Sector Agus Agua2006-2015Requerido Anticipado

US $4,042 millones

US $2,772 millones

US $1,270 millones

Bre

cha

de fin

ancia

mie

nto

Fuente: Plan Nacional De Saneamiento 2006- 2015

Coberaturas Actuales

5

93%

7%

100%

Objetivo2021

2013

Cobertura de Agua Potable Urbana

84%,

16%

2013

Cobertura de Saneamiento Urbano

Tratamiento de Aguas Residuales

, 30%

70%

2013

Fuente: Plan Nacional De Inversiones del Sector de Saneamiento 2014-2021

What are the Sources of Commercial Financing

6

Equity

Debt

Types of Financing Available

Tariffs

Transfers (from donors)

Taxes (Govt. grants)

Financing Need

Source of Commercial Financing

Concessional Loans

Commercial bank Loans

Bonds issued in financial markets

Asset based finance (Project Finance)

Corporate Equity (issuing shares, privatization)

Public water utilities use mostly debt for financing

Algunas de las EPS en Perú no pueden acceder a financiamiento comercial

• Las EPS tienen carencia de recursos para financiar las inversiones necesarias para ampliar el acceso y mejorar la calidad de los servicios.

• Muchas empresas presentan una pérdida operativa

• Pero , las EPS no cuentan con capacidad de endeudamiento, debido a su precario estado financiero.

7

PerdidasOperativas

Falta de Capacidad de

Endeudamiento

Carencia de Recursos porparte de las

EPS

Achieving Targets Requires Access to Commercial Financing

8

Concessional Financing

WASH investment

Requirements

Commercial Financing

The funding available to water utilities without access to commercial financing is well below what is required

Cobertura de Agua Potable y Saneamiento(2009)

9

Agua Potable Saneamiento

El desempeño de las EPS y su relación con la sostenibilidad financiera

Virtuous Circle of Performance

11

Financial performance and operating efficiency linked:1) O&M costs controlled2) Make operational

improvements

3) Generate cash or access finance to pay for network expansion, bulk water supply, etc.

4) Revenues increase

Financial performance and service to poor linked:

Operating efficiency

Financial performance

Access and service for the

poor

Finance

12

3

4

Interacción del Bajo Desempeño Operacional y Financiero

12

Total subsidies available for utility

Operating Losses

Increase in Non-Revenue Water

Operating subsidies

IncreaseIncreases

reliance on Requires more of

Reduces availability of capital subsidies

Higher Cost of Water Produced

Tariffs below cost

Insufficient capital expenditures

Leads to

System deteriorates leading to

Increases

Operating cost recovery deteriorated from 71% to 62% between 2000 and 2008

Operating losses grew from $12.1 to 23.6 million between 2000 and 2008

Capital subsidies shrank from 72% to 49% of total subsidies between 2000 and 2008

Operating subsidies grew from $5.4 to 19.8 million between 2000 and 2008

Total subsidies grew from $17.5 to 19.8 million

between 2000 and 2008

Non-Revenue Water increased from 49% to 54% between 2000 and 2008

utility invested only $96 million between 2000 and 2008 in comparison with estimated current requirements of over $300 million

To Access Commercial Financing Utilities Must Move Towards Financial Sustainability

13

Fully Creditworthy

Unviable Loss MakingUtilities

Pay-As-You-Go Recovery of Cash Outlays

Operating Cost Recovery

Financially Sustainable

Becoming Creditworthy

Financial sustainable + Country Conditions and

Developed Financial Markets

Capital & OperationalSubsidies to keep utility afloat

Capital subsidies essential to keep utility afloat

Profitable in Any Given YearBut Not Sustainable in Long Term

Revenue + other Reliable Resources Cover full Cost of Service Providing and

Sustaining Service

Financial Sustainable + Credit History

Government Grants

(possibly borrowed

from donors)

Commercial Finance

Concessional Finance

Do

no

r/P

ub

lic

Cre

dit

E

nh

an

ce

me

nts

Transitioning to financial sustainability requires changes to: Utility operations and the operating environment

14

Change to Utility Operations (Internal)

Change the Operating Environment (External)

Minimize Cost of Service

For the costs of

service to be

reasonable, the utility

must operate

efficiently

• Improve management of the utility• Implement a business plan that

focuses on the drivers of a utility’s performance

• Carry out an integrated operational and financial assessment

• Reduce political interference thatcauses inefficiencies in operations

• Reduce political interference thatresults in investments that are not commercially viable

• Improve utility governance• Improve project selection

Achieve revenue ≥ Cost of Service

Recovering costs will

often required

collaboration with the

Government

• Innovate in:• Tariff structure• Increasing sales to

commercial customers• Financing connections• Making case for cost-

reflective tariffs• Making case for grants for

equity + public goods/externalities

• Secure multi-year funding mechanism (taxes + transfers)

• Secure apolitical tariff setting + indexation

• Crowd-in commercial finance

Change Utility Operations: Improve Management of the Utility

Key:

Looking after customers and getting money

Spending money to provide services

Strategic Planning

1 2

3 4

5

6

Change Utility Operations: Carry out an Integrated Operational and Financial Assessment

16

Change Utility Operations: Implement a Business Plan that Focuses on the Drivers of a Utility’s Performance (1/2)

17

Area Key DriverAspect of Performance

Affected

Operational Performance

� NRW

� Staff productivity

� Electricity usage per TIG

� Operating expenses

� CAPEX required

Financial Performance

� Average Tariff

� Demand

� Collection rate

� Operating revenue

� Operating Cost Recovery

� EBITDA Margin

Coverage � Investment in new systems and networks

� Water coverage

� Wastewater coverage

Quality of Service

� Repairs and maintenance

� Investment in capital works(new assets and rehabilitation)

� Pressure

� Continuity of Service

� Water Quality

� Response Time to CustomerComplaints

Change Utility Operations: Implement a Business Plan that Focuses on the Drivers of a Utility’s Performance (2/2)

18

Area Key DriverAspect of Performance

Affected

Operational Performance

� NRW

� Staff productivity

� Electricity usage perTIG

� Operating expenses

Financial Performance

� Average Tariff

� Demand

� Collection rate

� Operating revenue

� Operating CostRecovery

� EBITDA Margin

Coverage � Investment in new systems and networks

� Water coverage

� Wastewater coverage

Quality of Service

� Repairs andmaintenance

� Investment in capitalworks (new assetsand rehabilitation)

� Pressure

� Continuity of Service

� Water Quality

� Response Time toCustomer Complaints

For example: Reducing NRW

TargetsWhat is the cost of NRW?What is the appropriate level of NRW for the utility?Are there certain areas that are targeted?What is the targeted reduction?

MechanismPerformance-based NRW reduction contract?NRW reduction contract?Internally led efforts with technical assistance?

Change the Operating Environment: The Vicious Cycle of Poor Quality

19

Source: Office of Evaluation and Oversight, Inter-American Development Bank, Evaluation

of Public Utilities Policy (PU Policy, OP-708) for Potable Water and Sanitation Services, 2002.

Poor financial performance can lead to Government justifying and increasing political interference due to:• The utility’s reliance on

subsidies • The utility’s performance

Change the Operating Environment: The Virtuous Circle of Better Quality

Source: Office of Evaluation and Oversight, Inter-American Development Bank, Evaluation of

Public Utilities Policy (PU Policy, OP-708) for Potable Water and Sanitation Services, 2002.

Well-performing utilities are provided more autonomy.

Keys to an operating environment that leads to well-performing utilities:• Tariffs are adjusted to

allow for self-sufficiency (excluding targeted subsidies)

• Utility is provided protection from political interference

• The mandate and targets for the utility are clearly established

Course Objectives and Structure

Course Structure

22

8. Completing Economic and

Financial Analysis of Water Projects

11 Measuring Creditworthiness of

Water Utilities

12 Bringing it all together:

Getting Utilities to Access Commercial Finance

5. Finance Concepts for

Investment and Financing Decisions

6. Reaching Financial

Sustainability

9. Using Blended Finance to Access

Commercial Finance

10 Financial Modeling of Water Utilities and

Projects

2 Distinctive Aspects of Water

Utilities

3 Understanding Financial

Statements of Water Utilities

4. Measuring Performance of Water Utilities

I. FundamentalsTo understand

utility performance

Course Sessions

1. Introduction

Conclusion

II. Applied Financial Concepts

To understand how can water utilities become users

of private financing

III. Utility Finance in PracticeTo understand how to help utilities to

achieve financial sustainability

7. Tariff Setting

Terms and Key Definitions for the Course

• In your course materials you have a document with the Terms and Key Definitions that we will use thought the course

23

By the End of the Course, You Will Be Able to

24

Improve project

design and viability

Work towards Utility's

Financial sustainability

Understand how a Utility

Works

• Determine impact of investments and prioritize investments

• Understand how lenders and investors evaluate financing decisions for water utilities and projects

• Identify the key barriers water utilities face when accessing commercial finance

• Understand how tariffs are set, including the cost of service and the revenue requirement

• Diagnose a water utility’s performance by analyzing its financial statements and operational indicators

• Understand the key factors that impact water utility creditworthiness

Understand how to help utilities access commercial finance

www.wsp.org | www.worldbank.org/water | www.blogs.worldbank.org/water | @WorldBankWater

Thank you

Sector de Agua en Peru

26

Contexto del País y el Sector

• 88% de la población cuenta con acceso a agua potable.

• En Perú existen 51 Entidades Prestadoras de Servicios (EPS) que brindan el servicio de agua potable.

• El Plan Nacional de Acción Ambiental - Perú 2011-2021, considera como acciones estratégicas el asegurar la cobertura total del tratamiento y reúso de las aguas residuales en el ámbito urbano y ampliar su cobertura en el ámbito rural.

• El deterioro de la calidad de agua es uno de los problemas más graves del país. Existe una descarga anual de 960,5 millones de metros cúbicos de desagüe sobre el agua superficial, subterránea y marina de los cuales el 64% pertenece a desagües domésticos.

• Distribución asimétrica del agua. Perú cuenta con tres vertientes hidrográficas: vertiente del Atlántico (genera 98,2% de los recursos hídricos),vertiente del Pacífico (1,5% de los recursos hídricos) y vertiente del Titicaca (0,3%). La población está ubicada en su mayoría en la vertiente del Pacífico

Retos

• Falta de una política clara y viable de financiamiento.

• Necesidad de optimización de la gestión empresarial de la infraestructura existente

• Carencia de recursos para financiar las inversiones necesarias para ampliar el acceso y mejorar la calidad de los servicios. Además las EPS no cuentan con capacidad de endeudamiento, debido a su precario estado financiero.

• Muchas empresas presentan una pérdida operativa.

ACL1

Slide 27

ACL1 cua es la fuente de esto _?Anamaria Camacho Lopez, 11/1/2016

27

• La visión de los servicios de agua potable y saneamiento para los países de la región en los próximos 15 años (2030) se plantea en términos de lograr disminuir las inequidades y hacer desaparecer la consideración de ciudadanos de segundo nivel, en cuanto a la aplicación del derecho humano al agua. La visión por tanto se plantea en términos de “ofrecer a toda la población, servicios de agua potable y saneamiento en los domicilios de manera continua, siendo capaces de mantener la sostenibilidad y el equilibrio del entorno ecológico, paramejorar la calidad de vida de sus habitantes actuales y futuros”. (CAF)

• El 100% de la población urbana cuenta con acceso a agua potable.

• El 94% de la población urbana cuenta con un baño digno.

• Para las zonas rurales, los países realizan inversiones sostenidas para avanzar

• hacia la universalidad de los servicios de agua potable y saneamiento.

• Las áreas urbanas y las rurales reciben servicios óptimos de agua potable y saneamiento, en términos de cantidad, calidad, continuidad del servicio,

• confiabilidad, oportunidad y al costo adecuado.

• • Al menos el 60% de las aguas residuales son tratadas apropiadamente.

28

ACL5

Slide 29

ACL5 esto para que año es y cual es la fuente ?Anamaria Camacho Lopez, 11/1/2016

Tarifas Peru

29

Cobertura Nacional de Agua (PERU)

30

200 000

400 000

600 000

800 000

1 000 000

1 200 000

1 400 000

2004 2005 2006 2007 2008 2009 2010 2011 2012

mile

s d

e m

3

Producción de Agua Potable

- Nacional - Lima Metropolitana

70.0

75.0

80.0

85.0

90.0

95.0

100.0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Cobertura Nacional de Agua Potable (%)

- Nacional - Lima Metropolitana

Inversion Requerida

31

ACL4

Slide 32

ACL4 esto era para alcanzar 100% de saneamiento o para alcanzar cual meta ?Anamaria Camacho Lopez, 11/1/2016