5 MGD Desalination Project
Local Government & HTP Department – Government of Sindh
PROJECT BRIEF
Demand for both domestic and industrial water has increased in Karachi and it remains water starved owing to a multitude of reasons. The gap is currently filled by water tankers supplying water to residents the city. The KWSB intends to setup sea water desalination plant having 5 MGD capacity (under DBFOT Public-Private-Partnership mode) at Ibrahim Hyderi to supply potable grade water to the residents of Karachi (the Project).
PROJECT DESCRIPTION
PPP Policy Board in its 32nd meeting granted approval to engage consultants for 5 MGD Desalination Plant Project to carry out detailed technical, legal and financial study to ascertain the feasibility of developing such a plant in Karachi. Consortium of EY, Techno Consult, EMC Pakistan & FKM Law were engaged after competitive bidding process and a consultancy services agreement was signed into between the KW&SB & the consortium of consultants. Subsequently, the Consultants completed detailed financial, technical and legal feasibilities and submitted report to KWSB.
Expected Concession Period
Construction period is of 2 years whereas concession period shall be of 27 years (including construction period of 2 years and operation period of 25 years).
Key Features of the Project
The Project is envisaged to be procured under Design, Build, Finance, Operate and Transfer (DBFOT) mode. The Private Partner will finance the Project and shall be entitled to receive payment from GoS upon the Commercial Operation Date (COD) of the Project. Demand risk for potable water will be taken by the KWSB. The Private Partner shall receive payments on account of the following:
- Capacity Payments (which will cover the debt service costs, fixed operating and maintenance costs and return on equity) will be paid to the Private Partner to extent the desalination project is available, irrespective of how much potable water it has actually produced and delivered; and
- Production/Variable Payments (which will be based on the actual quantity of potable water produced and delivered) will paid to the Private Party for the variable operating and maintenance costs that it will incur on the production and delivery of the potable water.
Furthermore, private partner will also be allowed to setup a facility with higher capacity (up to 6.5 MGD). The surplus capacity can be utilized by the private partner to sell bottled water. By introducing bottled water into the sales mix will have significant impact in lowering the overall tariff and could exponentially improve the viability of the project.
Current Status
In 40th PPP Policy Board meeting, the Board approved the project structure for 5 MGD desalination project and approved initiation of investor solicitation / procurement process for selection of private party.