PPP Project Profile Presentation:

Operation and Service Management PPP for the

Distribution of 41MLD Bulk Water Supply in Bandar
Lampung City
BKPM Auditorium, Jakarta
Tuesday, 21 May 2013

Agenda
1.
2.
3.
4.
5.
6.
7.

Introduction
Project Background
Project Scope
Proposed Commercial Structure
Procurement Process and Timeline
Pre-Qualification Bid Assessment
Q&A

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Section 1: Introduction

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Introduction
Tender Committee - PDAM Way Rilau, Municipal
Government of Bandar Lampung ("MGBL")
Indonesia Infrastructure Guarantee Fund ("IIGF")
Hogan Lovells Lee & Lee (International Legal Counsel)
Castalia (Financial / Technical Adviser)

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Section 2: Project Background

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Project Background

Municipality of Bandar Lampung

Objectives of the Project
Overall Lampung Project Structure (PPP1 and PPP2)
Illustration of Project Scheme
Interaction between PPP1 and PPP2
Importance of the Project

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Municipality of Bandar Lampung

Municipality of Bandar Lampung, the capital of

Lampung Province, is located in a strategic territory at
the entrance to the island of Sumatra and is a 45minute flight away from Jakarta.
With a total area of 200 km2, Bandar Lampung is
administratively divided into 20 Districts and 126 SubDistricts.
Municipality of Bandar Lampung has a population of
over 1 million and an average population growth rate
of approximately 1.6 % per year.
Residential and commercial areas are growing rapidly
and reflects a need for critical infrastructure.
Main economic activities include trade, construction,
retail, manufacturing and provision of public services.
Development of critical infrastructure, such as water supply facilities, will be
crucial to Bandar Lampungs socio-economic development.

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Objectives of the Project

Support the city's economic growth especially in the provision of
clean water to the public.
Increasing the capacity of drinking water services in the
Municipality of Bandar Lampung.
Ensuring an experienced operator can be incentivised to
appropriately assess demand for water distribution and to operate
and maintain a newly constructed distribution network utilising
best practices.

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Overall Lampung Project Structure (PPP1 and

PPP2)

PPP1
PPP1 comprises two main components:

1. Design, Build Finance and Operation

of a 41 MLD bulk water supply
system ("BWSS"); and

2. Build and Finance of a secondary

and tertiary water distribution pipe
network ("Distribution System")
Two Project Phases:

Phase 1 to be operational 2 years from

cooperation agreement financial close
with a required net output capacity of
20.5MLD
Phase 2 to be operational 5 years (or
earlier) from cooperation agreement
financial close with a total net output
capacity of 41MLD

PPP2
PPP2 is a project for the management,
operation and maintenance of the
Distribution System constructed under
PPP1.
Three phases:

Pre-Operation Period demand /

design input
First Phase Operation Period for
20.5MLD output
Second Phase Operation Period for full 41MLD output

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Illustration of Project Scheme - Construction

LEGEND
PPP1

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Main
Transmission
Pipeline

Secondary &
Tertiary
Distribution
Pipeline

Last Mile
Connection to End
Users

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Illustration of Project Scheme - Operation

LEGEND
PPP1

PPP2

Main
Transmission
Pipeline

Secondary &
Tertiary
Distribution
Pipeline

Last Mile
Connection to End
Users

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Illustration of Project Scheme - Geographical

PPP1
Intake for 500
LPS from
River Way
Sekampung
Bulk Supply /
Transmission
Pipeline
Reservoir

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PPP2
Operation of
Distribution
Network to
Consumers

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Illustration of Zones that Distribution System will

Supply

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PPP1 and PPP2 Key Information

Capacity delivered to the Bulk
Water Meter

41MLD

Estimated length of the

Bulk Supply /
Transmission Pipeline

28 km

Water quality

Potable to
specified
standard

Estimated length of the

secondary mains

40 kms

Estimated operations
commencement

2015/2016

Estimated length of the

tertiary mains

340 kms

Number of existing
connections (2010)

7,000

Duration of PPP1

27 years

Estimated number of peak

connections (4 years after
COD)

44,000

Duration of PPP2

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Pre-COD: 2 years
Post-COD: 8 - 10
years

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PPP1 - Timeline

Concess

Financial Close

Signing of
PPP1
Cooperation
Agreement

P
Com
Op

Phase 1
Commercial
Operation

2013

2014

2016

n of
d
of
GBL

2019

2041

LEGEND
Phase 1 Construction

Period to financial close

Phase 2 Construction

Operation Period

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PPP2 - Timeline
Optional
renewal period

CP Satisfaction
Date

Signing of the
Cooperation
Agreement

2013 2013/14

econd
ration
d

Ph
Com
Ope

Termination
of the
agreement

Phase 1
Commercial
Operation

2016

2019

2024-26

LEGEND
Period to CP Satisfaction
(short period anticipated)

Pre-Operation Period

Second Phase Operation Period

Renewal Term (if agreed)

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First Phase Operation Period

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Interaction between PPP1 and PPP2

Design input
(based on demand
analysis)

Design, Build and

Finance

Managing Network
Services
Design, Build and
Finance

Operation

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Interaction between PPP1 and PPP2 (contd)

Fee

Raw Water
Fee

Payment

Product Water

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Product Water

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Importance of the PPP2 Project

Small capex investment but important long term role in a growing

industry.
Foothold in Lampung (which also has an existing network) and potential
for expansion of role. This Project together with existing PDAM capacity
will supply 38% of the existing population.
May be a model replicated in other regions of Indonesia.
Opportunity to become a key player in Indonesia's growing water
distribution industry.
Involvement in Indonesia's first PPP in the water sector.
Pathfinder project representing a new approach to enhancing public
services.
Opportunity for Operator to demonstrate the benefit of private sector
involvement in the maintenance of the Indonesian water distribution
system.

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Section 3: PPP2 Project Scope

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PPP2 Project Scope

Design input
Assist and advise on the
Distribution System design
and location so as to
ensure appropriate
optimisation of the system
to predicted demand.
Measurement
Recording of customer
meters.
Read, maintain or replace
water meters.
Assisting PDAM on billing.

New Connections
Promote connection to the
Distribution System
Build and maintain a Customer
Database.
Sign up new Customers.
Despatch instructions
Assist in the authorisation of
despatch from the bulk treated
water reservoir.
Develop the systems and plan
to manage Distribution System
Build and maintain
Management Information
System
Prepare standard operating
procedures / manual
SCADA system

Operate and maintain the

Distribution System
Operating the water system
from (and including) the outlet
of the reservoir to the
customers' meter.
Ensure Customers receive
water meeting specified levels
of service (e.g. continuity,
pressure, quality and response
times).
Asset management
Set up and maintain an asset
database and produce rolling asset
management plans setting out how
the distribution system will be
expanded, operated and
maintained.

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Section 4: Proposed Commercial Structure

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Proposed Commercial Structure

Contract Structure
High Level Risk Allocation
Payment Mechanism
Escrow Arrangement

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Contract Structure
Project structure developed in conjunction with market
consultations. Project is being progressed as a PPP under
Indonesia's PPP Regulations in parallel with PPP1.
Private sector will enter into the Cooperation Agreement with
MGBL as the Government Contracting Agency.
Project commences on signing and will expire 8-10 years
from handover of Phase 1 Distribution System (subject to
MGBL's right to extend).
Cooperation Agreement will follow internationally accepted
water distribution O&M services agreements as well as
relevant Indonesian regulations.
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High Level Risk Allocation

Key Risks:

Allocated to:
Government

Land/ site access risk

Delay in construction of
Distribution System

PPP2 Co

Management of non-revenue
water

Physical water losses

Illegal connections

Network construction defects

Collection / revenue risk

Insufficient Product Water Supply

25
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High Level Risk Allocation (contd)

Key Risks:

Allocated to:
Government

PPP2 Co

Default by the PPP1 Contractor

Inadequate Product Water Quality

Force majeure risk

Change in law risk

Operating and lifecycle risk

Financing risk (if applicable)

Optimal Risk Allocation between Government and Private Sector

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Payment Mechanism
The Payment Mechanism is being developed by MGBL / PDAM.
The following is the indicative view for the payment terms:
Pre-Operation Period Fee
Fee to cover demand analysis, design input, marketing.

Fixed Fee
Fee to cover regular cost of operations.
Subject to meeting technical (NRW, water quality, pressure, etc.) and
commercial (e.g. number of connections, volume sold, etc.) targets.

Connection Fee (to be determined)

Incentive Payment
Sharing of upside revenue.

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Payment Mechanism (contd)

Example: Commercial Target - Required
Connections
Operation Year

New
connections
per year

Number of
connection at
beginning year
of operation

7,000 *)

7,000

7,000

14,000

10,000

24,000

10,000

34,000

10,000

44,000

*) Conversion from existing connections to new ones

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Payment Mechanism (contd)

Example: Technical Target - NRW
Operation Year
Year 0
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Year 8
Year 9
Year 10

NRW Tolerance
5.0%
7.00%
9.00%
11.00%
13.00%
15.00%
15.25%
15.50%
15.75%
16.00%
16.25%

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Escrow Arrangement

All collections from End-Users to be paid into an Escrow Account.

Payment to the Operator to be made from the Escrow Account.
Escrow Agent to be a reputable Indonesian bank.
Mitigates credit and payment delay risk.

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Section 5: Procurement Process and Timeline

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Procurement Process 2 stage process

Objective of the pre-qualification

(PQ) stage is to establish and prequalify PQ Applicants who have
demonstrated, among other things,
the financial capability and technical
expertise to execute the Project.
PQ Applicants will be pre-qualified in
accordance with the criteria set out
in the pre-qualification document.
Applicants who have been selected
pursuant to the pre-qualification
process will be invited to participate
in the invitation to tender process.

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Draft invitation to tender (ITT)

documents will be issued to
shortlisted PQ Applicants for
comments and clarification.
Interactive clarification sessions will
be held to gather feedback from
shortlisted PQ Applicants on the
draft ITT documents.
Final ITT documents will be issued
to shortlisted PQ Applicants with
submissions to be evaluated based
on pre-determined set of criteria set
out in the ITT documents.

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Procurement Process Indicative Timeline

24 April
2013

21 May
2013

25 May
2013

PQ
PQ
documents
Conference
made
available for
collection by
interested
investors

Deadline for
submission
of questions
on PQD

July 2013

Aug 2013

4 June
2013

4 June 18
June 2013

PQ
Evaluation of
submission bidders

Sept 2013

18 June
2013

18 June
25 June
2013

Announcement
of PQ results

Objection
period

Bidders to be
shortlisted

Oct 2013

Nov 2013

Contd
Release of Consultation
Release of final ITT bid
Appointment
draft ITT
with shortlisted
ITT documents submission of preferred
documents to bidders on draft
to shortlisted
bidder
shortlisted
ITT documents
bidders
bidders

Nov/Dec 2013
Cooperation
Agreement
signed

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Section 6: Pre-Qualification Bid Assessment

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General Evaluation Criteria for PQ stage

1. Financial strength of the Applicant and if applicable, each
member of the JV / Consortium.
2. Technical track record / experience including:
General experience in water sector O&M;
Specific experience in contracts that are similar to the Services;
Specific experience in the following: implementation of marketing programs
and management of new connections; implementation of leakage
management programs; meter installation and tamper-proofing; network
planning and optimisation; and water distribution network maintenance.

3. Personnel including:
Resident project manager with at lease 3 years' experience working in
similar market conditions in such a position; and
Indonesian recruited management staff with at least 10 years experience in
water distribution network O&M.
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PQ Evaluation Assessment
The Tender Committee assisted by the PQ Working Group will evaluate
the PQ submissions.
Assessment method for all criteria will be on a "Pass / Fail" basis.
Criteria to be considered achievable for appropriately qualified
Indonesian and / or international entities and partnering is permitted.

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Pre-Qualification Document

Pre-Qualification Documents will be provided to interested parties upon:

o a written expression of interest to the Tender Committee; and
o payment of IDR 5,000,000 and proof of payment.
Payment details for the Pre-Qualification Documents will be provided
upon the receipt of a written expression of interest.
Expression of interest to be submitted by email or writing to the
following address:
Panitia Lelang KPS2
Jln. Pangeran Emir M. Noor No. 11A
Kota Bandar Lampung 35215, Indonesia
Contact Person : Ibu Gunarti Kumarasari, ST
Phone : +62721 483855 484611
Email : ppp2_committee@pdamwayrilau.com,
cc: PPP2_Lampung@iigf.co.id

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Questions and Answers

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