Specialist Group on Economics meeting

The Romanian Water Sector

Teodor Popa
Romanian Water Association

2O February 2015, Poiana Brasov

The Romanian Water Sector

Content

Romanian water sector

key figures

Institutional arrangements

Finance

tariff policy

MRD mechanism

Specialist Group on Economics meeting

2O February 2015, Poiana Brasov

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)

200

100

Water sector institutional key players

EU

IFI

Gov

Operator

IDA

Local
Authorit
y1

Local
Authority

Local
Authority 2

Regulator

LOCAL COUNCILS

SHAREHOLDERS
Mandate

100% public
(PPP possible
later)

Statutory Companys Act

Regional
Operating
Company
(ROC)

Delegation
(Concession)
Contract

Water Services

CUSTOMERS

Intercomunal
Development
Association

Regionalization
process

(IDA)

Performances monitoring

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

Tariff structure- Romanian Water Act

ASSETS

COST ELEMENTS

ADJUSTMENT

Operating expenses:

I
N
V
E
S
T
M
E
N
T
S

Raw water, energy, fuel, staff

INFLATION

Maintenance & repair expenses

REAL TERM

Executed by themselves/ third parties

emergency repairs
routine maintenance
preventive maintenance

Environmental expenses:
Financial expenses:
Interest and commission, exchange rate loss

Water Co. Fixed assets:

buildings, equipment etc.

Company assets depreciation

City Fixed assets: w&

ww. networks etc.
(Delegation contract)

Public assets depreciation: zero !

Royalty
Development fund
Profit

FORMULA
FINANCING/
LOAN
AGREEMENT

A
F
F
O
R
D
A
B
IL
IT
Y

Tariff approval process

CUSTOMERS
Shareholders=
Local Auth.

Government

Water Co.
propose

Regulator
check

Water Act

Delegation
Contract

Local Auth.
approve

Loan/ Financing
Agreement

Support
Agreement

Water consumption per capita

Compania Apa Brasov, Romania

13

Affordability
Compania Apa Brasov
4,0%
3,47%

3,5%

3,34%

3,23%

3,26%
3,0%
2,79%

2,53%

2,5%

2,49%
2,39%
2,03%

2,0%
1,75%

1,86%

1,73%

1,74%

1,5%

1,58%

1,36%

1,31%

1,12%
1,0%

1,06%

1,10%

0,5%

0,0%
1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

14

Affordability
Benchmarking in Romania

15

Average annual water cycle charges in 2013 for a consumption of 100 m*

in US$/100 m
Iran
Macao, China
Hong Kong, China
South Korea
China
Chinese Taiwan
Italy
Bulgaria
Japan
Romania
Israel
Poland
Hungary
Portugal
Spain
United States of America
Mexico
France
Norway
Cyprus
Austria
Belgium
Sweden
Switzerland
England & Wales
Finland
Canada
Netherlands
Denmark
0,00

200,00
Fixed charge

Variable charge

400,00
Other charges drinking water

600,00

800,00

Sewerage and waste water charge

1000,00
Other charges

VAT

1200,00

Affordability index
Water cycle charge for 100 cm x 10 000/GDP
Mexico

312

Denmark

267

Cyprus

221

Netherlands

173

Finland

169

England & Wales

161

Romania

159

Belgium

149

Hungary

144

Canada

142

Sweden

139

France

139

Poland

134

Bulgaria

130

Portugal

129

Austria

129

Switzerland

128

Spain

100

Norway

93

Israel

72

China

63

United States of America

61

Japan

56

Italy

51

South Korea

18

Chinese Taiwan

16

Iran

14

Hong Kong, China

11

Macao, China

7
0

50

100

150

200

250

300

350

VAT on total charge 100 m

0%
0%
South Korea0%
China0%
Poland0%
United States of America0%
Mexico0%
England & Wales0%
Canada0%
Macao, China

Hong Kong, China

Cyprus
Netherlands
Switzerland
Chinese Taiwan
Portugal
Japan
Belgium
Iran
France
Austria
Italy
Spain

2%
2%
3%
3%
5%
5%
6%
6%
6%

10%
10%
11%

Israel
Bulgaria

17%

20%

Romania
Finland
Sweden

Denmark
Norway
Hungary
0%

5%

10%

24%
24%
25%
25%
25%
27%
15%

20%

25%

30%

Earn Before Income Taxation and Depreciation

Maintenance Reserve for Development mechanism

Long term debts

City w& ww system

Royalty for the public
patrimony
(delegation
contract)

Gross profit

Cash inflow
Cash outflow

Tax

Dividends

Maintenance Reserve
for Development

Conclusions

Refine the institutional role

Up date financial strategy/ tariff policy

Gradually include depreciation

Gradually reduced VAT

Yes, we can!

Thank you !
Multumesc !

Teodor Popa
Financial Manager
Compania Apa Brasov
DoruPopa@apabrasov.ro

20th February 2015, Poiana Brasov