28/06/20111 Meeting with DEVCO, Brussels, June 2011 EIBs STRATEGY IN THE MAURITIAN WATER SECTOR, A CASE STUDY Marco Beros EUROPEAN INVESTMENT BANK

28/06/20112 Meeting with DEVCO, Brussels, June 2011 CONTENTS 1.EIB Activity in the Water Sector 2.EIB in the Water Sector in Sub-Saharan Africa 3.EIB Strategy in the Water Sector in Mauritius 4.Outlook - Conclusion

28/06/20113 Meeting with DEVCO, Brussels, June EIB Activity in the Water Sector Delfland Waste Water Treatment Plant (NL) Water Treatment Plant in Krakov (Poland) St. Petersburg Flood Barrier

28/06/20114 Meeting with DEVCO, Brussels, June EIB Activity in the Water Sector 1.1 General Largest source of loan financing to the sector, Total loan amount of EUR 23bn over the past 10 years (financing 282 major projects), The water sector represents almost 5% of total loans signed in the last 10 years (EUR 511 bn) On average, EIB lending represents 30% of the total investment cost of water projects, 90% of the projects are located within the EU, EIB lends to public or private utility companies, national or local authorities or directly for project finance deals. EIB lending covers the whole water cycle (Water resources, water supply, sanitation, flood protection)

28/06/20115 Meeting with DEVCO, Brussels, June EIB Activity in the Water Sector 1.2 EIBs Water Sector Lending Policy River basin approach (IWRM) Sector development Adaptation to climate change Water efficiency Development of new water supply Wastewater and sanitation services Research and Innovation Maximise Added Value

28/06/20116 Meeting with DEVCO, Brussels, June EIB Activity in the Water Sector 1.3 Implementing the Policy: Key Actions (1/2) IWRM (Integrated Water Resources Management): Promote IWRM + water services provision in a project Support transboundary cooperation Consolidation of institutional framework: Support appropriate level of integration of utilities to improve efficiency and enhance borrowing capacity Enhance financial sustainability (sustainable cost recovery) Adaptation to climate change (CC): Adaptation part of new lending priority in EIB CC Strategy Promoters should consider adaptation in project design EIB supports technical assistance (TA) with grants Preparation, implementation of flood risk management projects

28/06/20117 Meeting with DEVCO, Brussels, June EIB Activity in the Water Sector 1.3 Implementing the Policy: Key Actions (2/2) Water efficiency: Support efficiency in: (i) use by consumers; (ii) allocation of resources; (iii) systems (losses); (iv) management of utilities Promote principle of cost recovery in line with WFD Support industries aiming at improving water footprint Development of new water supply: Demand side management and efficiency as 1 st priority Finance: (i) desalination with pre-requisites; (ii) dams, basin transfers and fossil water under strict conditions Wastewater and sanitation services: Always consider them when undertaking water supply projects Sustainable cost recovery (incl. subsidies) Sustainable financing (blend loans, grants)

28/06/20118 Meeting with DEVCO, Brussels, June EIB Activity in the Water Sector 1.4 Key Figures (1) : Signed Loans in the Water Sector Total amount ( ): EUR 23bn, i.e. average of EUR 2.3bn p.a. Note: EU as of 2007

28/06/20119 Meeting with DEVCO, Brussels, June EIB Activity in the Water Sector 1.4 Key Figures (2): Breakdown by Region ( ) Average loan amount: EU 27 EUR 113m, Partner countries EUR 43m Average loan amount: EU 27 EUR 113m, Partner countries EUR 43m Note: EU as of 2007

28/06/ Meeting with DEVCO, Brussels, June The EIB in the Water Sector in Sub-Saharan Africa (SSA) Berg Dam (Republic of South Africa) Water Works in Dar-es-Salam (Tanzania)

28/06/ Meeting with DEVCO, Brussels, June 2011 Active in the water sector in SSA since 1974 Two mandates: Cotonou Agreement (ACP) and Republic of South Africa Mandate Since 1974, signed loans amounted to 1.2 Bn EUR (for 64 projets) EIB projects cover the full water cycle and have a strong focus on extending services to the unserved, including in rural and peri-urban areas 2. EIB Activity in the Water Sector in SSA 2.1 General

28/06/ Meeting with DEVCO, Brussels, June 2011 Countries with at least 1 loan signed since 1974 New countries with ongoing project studies New project studies in country with at least one loan Countries with at least 1 loan signed since 1974 New countries with ongoing project studies New project studies in country with at least one loan 2. EIB Activity in the Water Sector in SSA 2.2 EIBs Geographical Presence in SSA

28/06/ Meeting with DEVCO, Brussels, June Key figures Over the last 10 years, the water sector in SSA received 737m EUR from the EIB, 11% of total lending to SSA 22 projects were financed, each receiving on average 34m EUR loan Mandate Signed Loans Water and Sanitation... Of which for water Share of total Number of projects Average loan per project Bn EURM EUR-- Cotonou Agreement (ACP) %2026 Total SSA + RSA … of which SSA - RSA %1926 Republic of South Africa %378 Total % EIB Activity in the Water Sector in SSA

28/06/ Meeting with DEVCO, Brussels, June EIB Activity in the Water Sector in Mauritius July 2012 (hopefully …) Sewer Works in MauritiusWater Works in Mauritius

28/06/ Meeting with DEVCO, Brussels, June EIB Activity in the Water Sector in Mauritius 3.1 EIB Key Figures EIB presence in Mauritius since 1975, total lending EUR 300m (to industry, agriculture, energy, etc.), First water project signed in Total lending EUR 83m (total project cost EUR 305m) of which two contracts active currently: ProjectProject Cost EIB Loan Dis- bursed GoMOthers m EUR CWA Reduction of NRW (signed 2002) Plaines Wilhems Sewerage (signed Dec. 2001) (EC) 12.5 (ADB) 17.1 (Kuwait) 17.6 (others)

28/06/ Meeting with DEVCO, Brussels, June EIB Activity in the Water Sector in Mauritius 3.2 EIBs two Promoters: CWA Created in 1971, serves almost 100% of population Decrease of financial and operations performance Last tariff increase in 2002 CWAs Profitability NRW ( ) 43% 50%

28/06/ Meeting with DEVCO, Brussels, June EIB Activity in the Water Sector in Mauritius 3.2 EIBs two Promoters: WMA Created in 2001 (10 years contract with GoM) Only 20% of population connected Decreasing financial performance (last tariff rise 2006) WMAs Profitability

28/06/ Meeting with DEVCO, Brussels, June EIB Activity in the Water Sector in Mauritius 3.3 Situation in 2010 : trapped in a vicious cycle - Low tariffs – reduced cashflows - Poor collection rate - Low creditworthiness - Limited access to finance - No investments - Deteriorating assets - O&M costs increasing - Irregular/ poor service - Poor quality water - Unsatisfied customers - Reduced willingness to pay

28/06/ Meeting with DEVCO, Brussels, June EIB Activity in the Water Sector in Mauritius 3.4 Situation in 2010 : EIBs reaction Finance and conduct a new tariff study for water and an update of that for waste water (initially financed by EU in 2006), Stop disbursements until tariff increase obtained, Coordinate approach with EU (budget support) RESULTS (as of June 2011): March 2011: Board decisions of WMA and CWA to increase tariffs, Resume disbursement to CWA, Not yet disbursed to WMA because contract with GoM ends August 2011 and extension not secured,

28/06/ Meeting with DEVCO, Brussels, June Outlook – Issues for discussion

28/06/ Meeting with DEVCO, Brussels, June Outlook – Issues for discussion How to react in a difficult environment? (donors position vs. IFIs position); Push for more private sector involvement? (currently one WWTP under private operation, process for water and sanitation management service contract started in 2009, then aborted) Affordability issues? How to tackle corruption? Enhanced co-operation between EIB and EC (and other donors, bilaterals and IFIs),

28/06/ Meeting with DEVCO, Brussels, June 2011 For more information please contact : Marco Beros Tel: (+352) EUROPEAN INVESTMENT BANK THANK YOU FOR YOUR ATTENTION!