Wastewater project stalls as Cairo revises pricing model

03 October 2008
Government seeks to balance end user tariffs and operator incentives.

Talks on the New Cairo wastewater treatment project have stalled, with companies close to the project telling MEED that Cairo is having problems in finalising the pricing model under which the new plants will operate.

Companies selected to bid for the country’s first ever public private partnership (PPP) scheme in the wastewater sector have been told by the Housing, Utilities & Urban Development Ministry that the scheme is facing delays.

However, the ministry has not given a reason for the delays, nor has it given a date when the pro-cess will be resumed.

A request for proposals had been due to be issued this month, but developers say there is little chance of this happening .

Under the original timetable for the build-own-operate-transfer project, the contract was to be awarded in September 2009.

The 250,000 cubic-metre-a-day (cm/d) plant was scheduled to begin operations in December 2011.

Several companies prequalified for the scheme now say they do not expect to see any progress before 2009.

The potential bidders say that the delay is likely to be the result of ongoing discussions within the government about tariffs to be levied with the scheme.

The amount that consumers pay for their wastewater to be treated is far lower than the tariff likely to be paid by the ministry to the developer, meaning the government will need to find a way to cover the difference.

“The government needs funding to cover the gap between consumer tariffs and the payments to us,” says one potential bidder.

“The tariffs must be affordable for consumers,” he says. “The government also needs to make sure that there are incentives for the private operators,” says another project source.

There is speculation that the government could use the Finance Ministry to provide developers with a tariff guarantee.

Seven groups have prequalified for the project. They include Saudi Arabia’s Al-Rajhi Utilities Development Company with Germany’s Passavant-Roediger and Dubai-based Infrastructure Capital Group; the local Orascom Construction Industries with Spain’s Aqualia; and Kuwait’s Kharafi National.

A consortium of local Samcrete with Spain’s Befesa and Emasesa has also been prequalified.

The other shortlisted teams are: the local AAW Consulting Engineers with France’s Veolia Water and the local International Environmental Technology Company; UAE-based Metito Utilities with Japan’s Mitsui & Company, Australia’s Babcock & Brown, Germany’s Berlinwasser and the local Hassan Allam & Sons.

Also on the shortlist are Japan’s Marubeni Corporation with the UK’s Biwater and two local firms: Icat and Siac Industrial Construction & Engineering Company (MEED 1:4:08).

The government plans to develop five more wastewater treatment plants through public private partnerships.

They include the expansion of the Abo Rawash plant in the Giza governorate to 2 million cm/d, from 1.2 million cm/d.

Expansion of the Gabal Asfar wastewater treatment plant will increase its capacity by 500,000 cm/d to 3 million cm/d.

The capacity of the Helwan wastewater treatment plant will also be doubled to 1 million cm/d.

New wastewater plants will be built to serve the 6th of October governorate and Nahia.

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