Why are Private Initiative and Capital Importantêêêê1 Strategies for Attracting Private.pdf

Tapping the Private Sector: Approaches to Managing Risk in Water and Sanitation David Haarmeyer and Ashoka Mody Contents Foreword iv Preface v Why are Private Initiative and Capital Important? 1 Strategies for Attracting Private Initiative and Capital 4 Management and Lease Contracts 4 Build-Operate-Own (BOO) and Build-Operate-Transfer (BOT) Projects 5 Full Utility Concessions 6 Privatization of Assets 6 Managing Risks through Project Finance—and Beyond 7 The Fundamentals of Project Finance for Water and Sanitation Projects 8 Risk Management 8 Elements of Financing: Structure, Maturity, and Sources 12 Beyond Project Finance 15 Corporate Finance 15 Overcoming the Disadvantage of Small Size: The Role of the Public Sector 16 Conclusions 18 Commitment and Strategy 18 Financing Responsibilities 18 Contracting and Regulation 18 Notes 19 References 20 Boxes Box 1 The legacy of public sector management 2 Box 2 How is the water and sanitation sector different from other infrastructure sectors? 2 Box 3 Successful contract transformation in Côte d’Ivoire 5 Box 4 Mitigating the risk of nonpayment through credit enhancement in Mexico 10 Box 5 Easing the policy transition with partial risk guarantees 14 Tables Table 1 Access to safe water and sanitation in developing countries, 1993 1 Table 2 Allocation of risks and responsibilities in alternative contractual arrangements 4 Table 3 Risk and cash flow profiles of alternative privatization mechanisms 8 Table 4 Types of risks and mitigation mechanisms 9 Table 5 Mechanisms used to mitigate market risk 9 Table 6 Mitigating regulatory and political risks 12 Table 7 Summary of project financing 13 Foreword The economic and enviro