WASTE MANAGEMENT & WTE

BAPPENAS - SHARING SESSION

IMPLEMENTATION USING PPP SCHEME

Monday, February 18, 2019

WASTE VALUE CHAIN

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ENABLING FACTORS FOR PRIVATE SECTOR INVOLVEMENT
Structural
• Waste regulations and enforcement
• Municipalities willingness to pay tipping
fee​
• Creditworthy municipalities, utilities, end
users ​
 Ability to enter into long-term waste
agreements / PPAs​
• Reasonable electricity tariff available ​
• WtE classified as ”renewable” with
”must run” status​
• Strong legal framework
• Proven PPP framework
Technical
• Proven/experienced project sponsors,
proposing proven technology solutions ​
• Availability of land (rapidly urbanizing
cities with constrained land availability
& limited landfill space) ​
• Municipal capacity to collect & supply
waste as well as recover costs from
constituents​
• Waste quantity and quality​ (calorific
value)
• Good electricity grid access rules/costs​
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 OUTLINE OF PPP SCHEME AND ITS STAKEHOLDERS
Typical Structure of a WTE Project with PPP Scheme

Taxes Budget DINAS

HOUSEHOLDS CITY / MIGA / PRI
LINGKUNGAN
AND BUSINESS PROVINCE Guarantee
HIDUP

MoF Support
- PPP / Waste Supply Agreement (if needed)
Waste Collection & Transport
- Provision of land for the project
- Permits/ Licenses Viability Gap Fund (VGF)
(only for PPP Project)

Sponsors
Equity / Subdebt

PLN / PPA PROJECT

ELECTRICITY COMPANY /
OFF-TAKER SPV Non-recourse
IIGF Guarantee Project Financing
• Termination Lenders
• Tipping fee payments
Flow-down of key PPP Contract obligations

IIGF Guarantee

Project
EPC O&M
Management

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 PROJECT FINANCING STRUCTURE

CITY / MoF Support MIGA / PRI

PROVINCE (if needed) Guarantee

Viability Gap Fund (VGF)

(only for PPP Project)

Capital Grant (land etc)

Non Recourse Share Capital

Lenders
Senior Project Financing PROJECT (plus shareholder loans)
• DFI
COMPANY / Sponsors
• Commercial
Equity bridge financing SPV
Banks
From commercial banks

IIGF Guarantee
• Termination IIGF Guarantee
• Tipping fee payments

The Sponsors will provide equity financing to the SPV [25-30%] of total project costs to allow the SPV to
raise senior (non-recourse) debt for the remaining part [70-75%].

The sponsors can expect to partner with IFIs who have strong interest in providing and leading the senior
debt financing package.

The IFIs can work/engage commercial banks, insurance companies and concessional funding (for the first
few projects).
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Private
Risk
Partner
Delay in land acquisition
Planning Risk
Permitting Risk
Ground conditions Risk
Historic contamination
Credit Risk
Financing Risk
Construction Risk (on
time, within budget)
Completion Risk
Delivery of Waste Risk
Plant availability Risk
Plant Performance Risk
Change in Law Risk
Force Majeure Risk
Early Termination Risk
Electricity sale risks
KEY RISK ALLOCATIONS
Public
Shared Comments
Partner
X
X
X The City will use best efforts to facilitate the receipt of permits
X Risk is passed on the Private Partner, on the basis of detailed site surveys that
were prepared during project preparation
X
X The Private Partner will bear the credit risk of the City.
X Adjustment mechanism is used at financial close to reflect the final financing
construction
X
X Testing, commissioning according to design standards
X The City guarantees the delivery of waste to the plant (exclusivity).
X In case of unscheduled unavailability of the plant to accept the waste, the Public
Partner deducts penalties from the availability payment
X In case of poor performance (such as plant inefficiency, breach of diversion
targets, non-compliance with emission standards), the Public Partner deducts
financial penalties from the availability payment
X
X Uninsured FM events
X City default: Debt and Equity (incl. ROE) fully compensated by the City, net of
insurance proceeds
Private Partner Default: Debt fully compensated by the City, net of insurance
proceeds
Force Majeure: Debt and disbursed equity (excl. ROE) fully compensated by the
City, net of insurance proceeds
X PPA
 PROJECT PAYMENTS FLOW

Households/small Households/small Commercial Users City’s Budget

businesses (collection businesses
already covered by (collection not covered
Dinas) by Dinas currently)

Daily collection Daily collection Daily collection

Dinas/City Dinas/City Dinas/ City

Top-up if needed
Monthly transfer Monthly transfer Monthly transfer

City PLN
Segregated Project Account
PUBLIC

PRIVATE
Monthly Project Payment Electricity off-take
as per PPP contract payment as per PPA
contract

SPV
Project Account

Dividends Debt Service

Shareholders Lenders
THANK YOU