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Sectorul de Apa Popa
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Specialist Group on Economics meeting
2O February 2015, Poiana Brasov
The Romanian Water Sector
Teodor Popa
Romanian Water Association
Content
Romanian water sector
key figures
Institutional arrangements
Finance
tariff policy
MRD mechanism
Specialist Group on Economics meeting 2O February 2015, Poiana Brasov
The Romanian Water Sector
Teodor Popa
Experience in the water sector since 1991
Involved in intl financed programs since 1994
Financial Manager since 2001
Member of the Romanian Water Association
Member of the Strategic Council of IWA
Romania water key figures
(2013)
Total population: approx. 21 mil. (3- 4 mil. abroad)
Service coverage:
62% water (29% in 95)
83% in urban area
46,8 % sewerage
95% treated at least in one stage
Romania water key figures
(2013)
Number of employees: 30,000
Invoiced water quantity: 542 million m3
Operating revenues: 700 million Euro
EBITDA: 160 million Euro
Indebtedness of the sector: 700 million Euro
Specific consumption (l/cap/day)
100
200
RegulatorIDA
Operator
Water sector institutional key players
Gov
IFI
EU
Local Authority 2Local
Authority
Local Authorit
y 1
(ROC)
LOCAL COUNCILS
IntercomunalDevelopmentAssociation
(IDA)
Regional Operating Company
Delegation(Concession)
Contract
CUSTOMERS
Performances monitoringWater Services
Mandate
Statutory Companys Act
SHAREHOLDERS
100% public (PPP possible
later)
Regionalization process
Tariff policy
Operators= Final Beneficiaries
Co-financing
approx. 10% of total value (SOP)
Loan from IFI (EBRD, EIB) without guarantee
Loan from commercial banks
Tariff policy
Volume based/ Fixed part possible/ Polluters pay principle
Strategies were related to the investment projects
considering the affordability criteria:
- 2000: 4.0% for the average household
- 2003-2004: 3.5%
- 2007-2011: 2.0-2.5% max. 4% for the lowest decile
Maintenance & repair expenses
Executed by themselves/ third parties
emergency repairsroutine maintenancepreventive maintenance
Profit
A
F
F
O
R
D
A
B
IL
IT
Y
Tariff structure- Romanian Water Act
I
N
V
E
S
T
M
E
N
T
SRoyalty
Financial expenses:
Interest and commission, exchange rate loss
Environmental expenses:
INFLATION
REAL TERM
FORMULA
FINANCING/
LOAN
AGREEMENT
Development fund
ASSETS COST ELEMENTS ADJUSTMENT
Operating expenses:
Raw water, energy, fuel, staff
Company assets depreciationWater Co. Fixed assets:
buildings, equipment etc.
City Fixed assets: w&
ww. networks etc.
(Delegation contract)
Public assets depreciation: zero !
Tariff approval process
Water Co.
propose
Regulator
check
Local Auth.
approve
Shareholders= Local Auth.
Government
CUSTOMERS
Water ActDelegation Contract
Loan/ Financing Agreement
Support Agreement
13
Water consumption per capitaCompania Apa Brasov, Romania
14
1,75%1,74%
3,47%
3,26%
3,34%
2,79%
3,23%
2,53%
2,03%
1,73%
1,36%
1,06%
1,12%
1,10%
1,58%
1,86%
1,31%
2,49%2,39%
0,0%
0,5%
1,0%
1,5%
2,0%
2,5%
3,0%
3,5%
4,0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
%Affordability Compania Apa Brasov
15
AffordabilityBenchmarking in Romania
0,00 200,00 400,00 600,00 800,00 1000,00 1200,00
Denmark
Netherlands
Canada
Finland
England & Wales
Switzerland
Sweden
Belgium
Austria
Cyprus
Norway
France
Mexico
United States of America
Spain
Portugal
Hungary
Poland
Israel
Romania
Japan
Bulgaria
Italy
Chinese Taiwan
China
South Korea
Hong Kong, China
Macao, China
Iran
Fixed charge Variable charge Other charges drinking water Sewerage and waste water charge Other charges VAT
Average annual water cycle charges in 2013 for a consumption of 100 m*in US$/100 m
Affordability index
7
11
14
16
18
51
56
61
63
72
93
100
128
129
129
130
134
139
139
142
144
149
159
161
169
173
221
267
312
0 50 100 150 200 250 300 350
Macao, China
Hong Kong, China
Iran
Chinese Taiwan
South Korea
Italy
Japan
United States of America
China
Israel
Norway
Spain
Switzerland
Austria
Portugal
Bulgaria
Poland
France
Sweden
Canada
Hungary
Belgium
Romania
England & Wales
Finland
Netherlands
Cyprus
Denmark
Mexico
Water cycle charge for 100 cm x 10 000/GDP
27%25%25%25%
24%24%
20%17%
11%10%10%
6%6%6%
5%5%
3%3%
2%2%
0%0%0%0%0%0%0%0%0%
0% 5% 10% 15% 20% 25% 30%
Hungary
Norway
Denmark
Sweden
Finland
Romania
Bulgaria
Israel
Spain
Italy
Austria
France
Iran
Belgium
Japan
Portugal
Chinese Taiwan
Switzerland
Netherlands
Cyprus
Canada
England & Wales
Mexico
United States of America
Poland
China
South Korea
Hong Kong, China
Macao, China
VAT on total charge 100 m
Earn Before Income Taxation and Depreciation
Maintenance Reserve
for Development
Royalty for the public
patrimony
Tax Dividends
Long term debts
City w& ww system
(delegation
contract)
Gross profit
Cash inflow
Cash outflow
Maintenance Reserve for Development mechanism
Conclusions
Refine the institutional role
Up date financial strategy/ tariff policy
Gradually include depreciation
Gradually reduced VAT
Yes, we can!
Thank you !
Multumesc !
20th February 2015, Poiana Brasov
Teodor Popa
Financial Manager
Compania Apa Brasov