1. Financing Public WSS Infrastructure: Reflections on competing investment drivers and other factors to be considered
3 Challenges & 3 Recommendations from the Bulgarian experience (recent EU member perspective)
May 2017
Rado Russev

2. Brief Overview of Bulgarian WSS Sector
km of water mains ( of these are transmission mains)
km of sewer networks
2.2 million connections
98.6% of population is supplied from a centralized network
60% NRW
40% of water comes from surface sources, 60% is pumped
550 GWh annual electricity consumption

3. Challenge 1: Historic Under-investment vs. Compliance CAPEX
“COMPLIANCE” = Compliance with UWWTD 91/271/EC which for Bulgaria means:
- Sewerage + WWTPs for agglomerations > p.e. by (120 places)
- Sewerage + WWTPs for agglomerations > p.e. by (300 places)
Networks (& transmission mains) have an estimated life of years, i.e. 1% to 2% of pipes shall be replaced/rehabilitated annually
Bulgarian water regulator has adopted a long-term annual target of 1.25%
Currently this level is significantly lower and for most operators varies in the range 0.3 – 0.7%

4. Challenge 2: New Assets Bring New OPEX
WWTP Size & Type
Electricity Costs (EUR/year)
Chemicals (EUR/year)
Labour (EUR/year)
Maintenance costs (EUR/year)
Urban WWTP: p.e.
(N&P not removed)
28 000
5 000
60 000
6 000
(N&P removed)
35 000
7 500
Urban WWTP: p.e.
25 000
75 000
22 000
38 000

5. Challenge 3: The Curse of Low Tariffs(1/4)
Source: State of The Sector Report (Danubis)
Domestic tariff in Austria is more than three times higher than the one in Bulgaria

6. Challenge 3: The Curse of Low Tariffs (2/4)
Electricity is typically the second and sometimes the first biggest cost element in the P&L of water operators (from below 10% to above 50% in cost structures)

7. Challenge 3: The Curse of Low Tariffs (3/4)
Electricity is typically the second and sometimes the first biggest cost element in the P&L of water operators (from below 10% to above 50% in cost structures)

8. Challenge 3: The Curse of Low Tariffs (4/4)
Historic trend of billed volumes at Dobrich Water Company, Bulgaria. Key reasons for decline: industry decline, demographic trends and general reduction of per capita consumption.

9. Recommendations 1: Size Matters – Economies of Scale
WWTP Size & Type
CAPEX: EUR per p.e. for construction of a WWTP (N & P not removed)
Urban WWTP: p.e.
EUR 300 / p.e.
EUR 270 / p.e.
Urban WWTP: p.e.
EUR 150 / p.e.
EUR 135 / p.e.

10. Recommendations 1: Size Matters – Economies of Scale & Concentration
An example for a useful graphical representation of the case of “individual solutions vs. centralized sanitation”: Developed by World bank team in support to the Bulgarian Water Sector Reform (OPE-funded project)

11. Recommendations 1: Size Matters – Define Your Agglomerations (size but also concentration)

12. Recommendations 2: Intelligent Cross Subsidies Are Not Forbidden
Indicative figures:
- Water into supply source): m3 per year
- m3/year Abstraction fee per m3: 0.01 Euro/m3
- Total annual income (to Ministry of Environment): Euro
- Doubling of the fee creates a pool of 20 million euro which is almost 150 million for a 7-year framework period
Suggestions:
- The pool to be used only for water projects
- Focus on critical assets (potable water facilities, wells, strategic pumping stations and transmission mains)
- All water at source should be correctly measured to optimize revenue generation
- ONLY disadvantaged operators (low population per km of network; high energy intensity, etc.) should qualify for the fund
- Higher abstraction fee would encourage operators to focus on NRW
- Similar mechanism could be applied for discharge fees

13. Recommendations 3: Mix WWTP Investments with Efficiency CAPEX
Transmission mains (including adjacent pumping stations, wells, etc.) are a good example for assets (and processes) with potential for investments of short pay- back period. This is combined with risk management, focus on strategic assets, business continuity, etc. Water operators should stress on that during feasibility studies.
The specific case of Dobrich Water Company: based on field studies

14. Final Thought: Aligning the Perspectives
Policy Making
………………………….
Line ministries (infrastructure, environment, regional development, etc)
Regulation
………………………….
Regulators
Delivery
………………………….
Operators/Utilities
Michael Rouse: Institutional Governance and Regulation of Water Services – The Essential Elements, 2013

15. Thank You RADOSLAV RUSSEV rrussev@hydrolia.bg radorussev@gmail.com