ProInversión rolls out international public tender for Puerto Maldonado WTP project concession

In Peru, 3.4 million people lack access to drinking water and 7.4 million go without sewerage services. Also, only 44% of the drainages connect to a wastewater treatment plant.

To cover this gap, the State needs to develop different solutions. Public investment mechanisms continue to be an alternative for public service utilities. Currently, however, the Ministry of Housing, Construction and Sanitation is focused on covering infrastructure gaps with the participation of the private sector through public-private partnerships (PPPs) that not only ensure construction of works but also their long-term sustainability.

The current ProInversión portfolio in the water and sanitation sector includes 14 projects with over US$2 billion in investments. One of the most advanced projects is the so-called "Improvement of the sewerage system and wastewater treatment of the city of Puerto Maldonado" (Puerto Maldonado wastewater treatment plant) that was convened on September 17 of this year.

The scope of the project is the design, financing, construction, rehabilitation, expansion, operation and maintenance of the collection, treatment and final disposal systems of municipal wastewater in the city of Puerto Maldonado, department of Madre de Dios.

The objective of the call is to promote the participation of potential national and international investors for the execution of this important project through the PPP model. The estimated investment in works, not including VAT, amounts to S/180 million (approximately US$50 million), and the concession term is 22 years and 6 months.

The remuneration to the Concessionaire will be made under the Pay Per Availability mechanism, subject to deductions for performance, where the State, through the Ministry of Housing, Construction and Sanitation, will assume 100% of the remuneration for the investment component. 

This implies that the State will recognize the investment made once the expected service begins. The model encourages the concessionaire to execute the works in a timely manner within the maximum terms established in the concession contract, and to provide the service under the expected quality conditions.

Currently the project has completed the first round of consultations to the Terms and Conditions and suggestions for the first version of the contract. At the request of the interested parties a second round has been opened through November 12, 2020, for those interested parties that acquire the right of participation.

The next important milestones in this process will be the prequalification stage, scheduled for the end of December 2020, while the presentation and evaluation of technical and economic offers, as well as the awarding, is scheduled for April 2021. It is expected that the signature of the contract will take place in July 2021.

The bidding rules and initial version of the contract are available at the following link. It details the procedure of the contest, the prequalification requirements, the guarantees to be presented, the selection criteria, as well as the schedule of activities of the promotion process. In addition, meetings can be requested with the technical team in charge of the project.

Upcoming projects and calls

• Main Works Project: Includes the design, financing, construction and operation of the infrastructure necessary for the collection, transfer, conduction, production and supply of drinking water for the city of Lima. We are currently in the process of adapting the scope of the project and updating its structure, for which we have the advice of the International Finance Corporation (IFC). Bidding for the concession is expected to be relaunched in the first quarter of 2021.
  
  
• Huancayo WTP Project: It was recently declared viable by the Ministry of Housing, Construction and Sanitation and commissioned by ProInversión for its development as a PPP. We are in the process of structuring and we expect to go to market with the declaration of interest in the third quarter of 2021.

Additionally, the package of 11 co-financed private initiative projects (9 WWTP, 1 desalination plant and an integrated rural sanitation project) that the Sector has been formulating to date. We hope that the technical studies will soon be completed to begin structuring this portfolio.

KEY POINTS OF PUERTO MALDONADO WTP: 

• The Pay Per Availability component, associated with operation and maintenance, comprises a fixed portion and a variable portion, depending on the amount of organic matter removed, to encourage the efficiency of the chosen treatment process and not just compliance with the contractual service levels.
  
  
• The execution of the Puerto Maldonado WTP project as a co-financed PPP is part of the Peruvian State's strategy to close coverage gaps in water and sanitation in the city of Puerto Maldonado.
  
  
• The project is expected to benefit 103,000 current inhabitants and a future population of 197,000 people by 2043. It is estimated that the impact of the rate is marginal due to the progressive income generated by the sales of new home connections.
  
  
• Under the PPP scheme, the approach goes beyond construction, as it ensures the project's long-term sustainability, thus allowing adequate operation and maintenance of the primary collection and wastewater treatment system, with high quality standards, avoiding the contamination of the Tambopata and Madre de Dios rivers.
  
  
• As part of the project's dissemination strategy, an informative webinar was held the day after the call was published. This event had more than 300 participants, of which 52% were representatives of international firms. At later dates, bilateral meetings have been held with foreign firms, some of which, to date, have acquired the right of participation, which shows us the interest that exists in the project.
  
  
• The successful bidder of the project will be the qualified bidder that submits the lowest economic bid.