Egypt’s first PPP venture: A $200 mln wastewater facility

By Mariya Petkova / Special to Daily News Egypt
First Published: February 8, 2010

CAIRO: The financial procedures for the first Public-Private Partnership in Egypt were completed late last week, announced the Ministry of Finance and the International Finance Corporation, the lead transaction advisor on the project.

The PPP venture will see the construction of a wastewater facility on the outskirts of Cairo with a total investment cost between $150-200 million.

In May 2009, the government closed the international bidding for the project and awarded it to Orasqualia, a consortium between Egypt’s Orascom Construction Industries and Spain’s Aqualia and Aqualia Infrastructure.

Orasqualia is expected to complete the construction of the project by 2012. The consortium will operate and maintain the facility for 20 years before it hands it over to the government.

With a capacity of 250,000 m3 the facility is expected to satisfy the sanitation needs of the growing settlements of New Cairo. The current population of New Cairo is 500,000 and is expected to increase to 3.8 million by 2029.

In the past few decades, PPP initiatives have been successfully used by Western governments to encourage private investment in large-scale infrastructure projects. With the implementation of this project, Egypt is likely to follow suit.

“We are actively working to collaborate with the private sector to meet the growing infrastructure demands in Egypt. This project is an important step towards setting the stage for future PPPs,” said Rania Zayed, head of the PPP Central Unit at Egypt’s Ministry of Finance.

The project was jointly funded by the Development Collaboration Partnership, a multi-donor facility set up by IFC, and the United Kingdom's Department for International Development to support IFC’s work on infrastructure projects.

“When we went to the market with this project, we were worried, but [in the end, it] got financed in the middle of the crisis,” said Muneer Feroize, head of the IFC team working on the project. He explained that despite the crisis, well-structured projects like Egypt’s first PPP are likely to get funding.

"This transaction has opened up the market for international investors who are now comfortable to work on PPP projects in Egypt, which will help the country address its growing infrastructure needs by harnessing the strength of the private sector," said Gulrez Hoda, IFC’s associate director for the Middle East and North Africa.

There have been concerns among private sector entities regarding the government’s commitment and the transparency of the process, explained Feroize. To guide future PPPs the government has drafted a law which awaits deliberation in the next parliamentary session.

Feroize expects the law to bring clarity to the PPP process, and along with the success of the current project, will boost the confidence of the private sector to engage in such ventures with the government.

In 2006, IFC signed a memorandum of understanding with the Egyptian Ministry of Finance to provide assistance in implementing PPPs. IFC is working on five projects in total within the sectors of water supply, transportation, health and education.

As a member of the World Bank Group, the corporation aims at encouraging sustainable economic development and poverty alleviation by stimulating the private sector in countries across the world. Its investments in 2009 reached $14.5 billion.