Engage with local governments and utilities to develop scalable water infrastructure projects on a Public-Private-Partnership basis. Leverage our strong business development skills and extensive experience to work directly with government officials, utilities, law firms, financial institutions, and contractors to execute these projects.
The Public-Private-Partnership structure ensures that the project will be maintained over the life of the concession. Bigger projects achieve economies of scale which enable the sourcing of water from a sustainable resource.
Work with strategic partners to raise money and apply this capital as equity in Public-Private-Partnerships using a “Capital Light” funding structure that raises debt at attractive rates from Development Finance Institutions and Export Credit Agencies. Water consumers then pay an affordable price for the clean water we provide to repay the debt over the life of the concession.
Large-scale water infrastructure projects not only meet the needs of more people, but they also allow for additional villages and water treatment plants to be added to the network of pipes as funding permits.
THE CAPITAL LIGHT STRUCTURE
Operation Water will employ an innovative funding structure that was successfully implemented in Khartoum, Sudan for a 200mld bulk water treatment plant, which won Euromoney’s Trade Finance Deal of the Year award in 2008. This financing structure was developed by Operation Water Founder, Johan Oelfose, and termed “Capital Light Finance” by The Netherlands Development Finance Company (FMO), which provided subordinated debt as a multilateral lender to the project.
Export Credit Agencies (ECA) worldwide require a capital structure with at least a 15% contribution by the project promoter or government. Operation Water will provide the 15% required by the ECAs and invest it as equity, while taking at least a 51% share in the PPP or Special Purpose Vehicle (SPV). The SPV will run a competitive tender process to engage suitable Engineering, Procurement, and Construction (EPC) contractors; the right to design and build the facility will be subsequently awarded to the most desirable bidder. The local government and the Operating and Management (O&M) company will hold the balance of the shares. The SPV receives revenue income from a take or pay Water Purchase Agreement (WPA) to be entered into with the local water utility. The income will be used to cover all operating and management costs of the facility, and repay the lenders. The government’s Ministry of Finance (MOF) will provide guarantees to the SPV on all utility obligations under the WPA.
Key features of the Capital Light approach include:
- More efficient to implement than government funded or typical multilateral approach.
- Focus on Public-Private Partnerships.
- Robust operation & management contracts for the project assets.
- Provide water at affordable prices.
- Economically viable corporate venture.
- Governments incur less sovereign debt.