The virtual workshop “Solid Waste sector and opportunities for Public Private Partnership” has taken place

Published on: 10.02.2022
Category: PPP News

On the 9th of February, 2022, a virtual workshop “Solid Waste sector and opportunities for Public Private Partnership” took place. It was organised by the PPP Agency,  together with the Ministry of Economy of Ukraine, with the support of the International Finance Corporation (IFC) and the Public-Private Infrastructure Advisory Facility (PPIAF) to facilitate the development of the PPP mechanism in the solid waste sector and to increase the institutional capacity of PPP project initiators from the public sector.

The workshop was opened by Oleksandr Hryban, Deputy Minister of Economy of Ukraine and Bernard Atlan, Principal Investment Officer of the International Finance Corporation (IFC).

Deputy Minister has noted that

The issue of waste management, including recycling and waste-to-energy transformation, is critical for Ukraine. Our country has embarked on its way to building a comprehensive waste management system. We must concentrate on implementing a strategic approach to planning projects on recycling, composting and transforming waste into energy. 
Considering that the only proven alternative to burying non-recycling materials in a landfill is transforming waste into energy, waste disposal should become a part of measures that promote circular economy. This concept is based on repurposing and reusing materials, creating new cycles which ensure sustainable development.
I am certain that practical examples to be presented by the IFC experts during this workshop will facilitate the commencement of new PPP projects in Ukraine that will be a part of the comprehensive waste management strategy

The first part of the workshop was devoted to developing and financing waste management systems in Ukraine. The key speaker was Pierre Casabonnet, Senior Operations Officer of the International Finance Corporation (IFC).

Pierre Casabonnet has noted that the rate of waste generation is growing along with the rate of urbanization, which, in turn, is affected by the growth of GDP in a country. Share of organics, however, typically decreases and disposal becomes more complex as waste starts to include electronics, plastics, heavy metals/chemicals and more packaging materials.

The expert of the International Finance Corporation has explained the results of the analysis of the current and projected situations in Ukraine. Thus, even though the population is expected to decline, the level of urbanization is projected to increase from 70% to 73% by 2050. Currently, approximately 10 million TPA of MSW is generated each year, a number that will rise to 13.5 million by 2030. In Ukraine, only 31 waste sorting lines (in the city of Kyiv and 14 regions) operate. And only 6% of waste is recycled and diverted from landfills. Out of exciting 5,500 landfills, 30% do not meet environmental safety standards and 99% do not comply with European standards. Also, according to some estimates, there are around 27,000 unofficial dumpsites. 

Pierre Casabonnet has drawn the attention of the audience to the key milestones of Ukrainian legislation development in the solid waste management sector:

This information was further specified by Olena Koltyk, Director of the Department for Waste Management and Environmental Safety of the Ministry of Ecology and Natural Resources of Ukraine. She told the participants that the draft Law of Ukraine “On Waste Management” #2207-1-d is currently being prepared for the second reading. It is expected to open borders for investors and enable the development of regional waste management plans.

Pierre Casabonnet has summarized that Ukraine’s goals in this sector by 2030 include the reduction of reliance on landfill disposal; improvement of the processes of reusing, recycling and recovery of recyclables; becoming EU-compliant and the creation of integrated municipal SWM system with private sector participation.

Main challenges for the MSW sector in Ukraine include:

  • Gaps in legislation, implementation, and enforcement;
  • Inefficient economic instruments: low tariffs and no incentives for effective waste management;
  • The lack of planned and integrated, regional solid waste management approach, compliant with the waste hierarchy;
  • The lack of an EPR system, impeding the promotion of waste recycling and circular economy;
  • A large number of landfills/dumpsites that don’t meet the standards.

The expert has also illuminated the peculiarities of different options/solutions for solid waste management in the value chain in the solid waste management sector:

He emphasized that the International Finance Corporation (IFC) is flexible and very interested in collaborating with cities and companies to explore potential opportunities through the entire value chain in the solid waste management sector in developing countries. IFC experience covers solid waste management planning, collection and transport solutions, separation and processing (recycling/composting), waste-to-energy solutions, landfill placement solutions, sale/disposal of recyclables, composting, refuse-derived fuels (RDF), Waste-to-Energy (WTE) bottom ash.  

Demonstrated technologies include landfills, Materials Recovery Facilities (MRFs), thermal processing (Waste-to-Energy (WTE) combustion/incineration), biological treatment (anaerobic digestion, composting, Mechanical Biological Treatment (MBT)) and Refuse Derived Fuel (RDF). Emerging technologies include pyrolysis, gasification, plasma gasification, chemical and fermentation conversion, and chemical plastic recycling. The expert has noted that preference should be given to demonstrated technologies. 

He also emphasised that a specific and detailed technological solution for a PPP project should be suggested by a private partner (investor), as experienced investors are interested in the commercial viability of the proposed business model, taking into account the specifics of a particular market and cost optimization during the project life cycle.

The Internation Finance Corporation project selection criteria include:

❖ Proven Technology (the technology for the waste project should be operational somewhere in the world at a commercial scale);

❖ Experienced Sponsors (even if the sponsor is entering a new geographical market, they should have adequate direct experience in the sector elsewhere);

❖ Revenue Model (there should be clarity on the business revenue model, and how the revenues would cover all expected costs over the project lifetime);

❖ Waste Source (minimum waste supply should be contractually agreed upon and there should be certainty on the source);

❖ Bank-able Structure (the project structure should address the fact that loans might be outstanding for a long time and allocate the risk to the most appropriate party (with appropriate guarantees), therefore reducing the risk to lenders); 

❖ Regulation (there should be adequate regulation that supports the business model).

Pierre Casabonnet added that the International Finance Corporation (IFC) supports Ukrainian cities by providing financing and specific advisory services to facilitate the implementation of scalable models of urban infrastructure development, by promoting the optimal use of technology, cost reduction and measures that improve financial stability and involve private sector participation. 

The second part of the event was focused on the international experience. Nikola Mihajlovic, Investment Officer of Europe and Central Asia (ECA) Infrastructure of the International Finance Corporation (IFC), has presented to the workshop participants a Waste-to-Energy PPP project, implemented in Belgrade (Serbia). 

The project was the result of multiple years of development work by the Advisory team on PPPs and sector reform of the International Finance Corporation of the World Bank Group. It is one of the first large-scale, bankable Waste-to-Energy (WTE) projects in emerging markets with private sector participation. 

The private partner was required to design, build, finance, operate for 25 years, and transfer to the City thereafter:

  1. a greenfield waste-to-energy facility producing district heat and electricity;
  2. new sanitary landfills for municipal waste and inerts;
  3. a construction and demolition waste recycling facility and storage area;
  4. a leachate treatment plant; and
  5. a ~3 MW landfill gas-fired power plant (including the closing and rehabilitation of the existing landfill).

The waste collection and separation remains the responsibility of the Public Utility Company of the city of Belgrade. 

The project preparation stage included:

 ? Strategic assessment

  ⫸ the City’s strategy for waste management (Waste Management Plan of the City) was assessed

  ⫸ high-level objectives (targets for landfill diversion, recovery and recycling) were identified

 ? Legal & Regulatory Analysis

  ⫸ applicable regulation for the purpose of identifying a regulatory framework for project implementation was reviewed

  ⫸ needs for change in the legislation were identified

 ? Technical and business analysis

  ⫸ waste flow projections (volumes and content) was prepared; investment needs in infrastructure were assessed

  ⫸ performance standards and estimate operating costs were established; revenue streams were identified and assessed

  ⫸ E&S risks were identified and mitigation measures prepared

  ⫸ the level of interest of potential investors was assessed

 ? Financial Analysis

  ⫸ a financial model using forecasted waste projections, costs and revenues was prepared

  ⫸ the impact of various structures and sources of funds was assessed

 ? PPP Project Structure

  ⫸ a bankable PSP project structure addressing legal, technical and financial parameters of the transaction, and meeting the City’s objectives and strategic priorities was recommended

  ⫸ a tender strategy and timeline developed under EU Directives and Serbia’s applicable laws was recommended

  ⫸ tender documentation was prepared

The time frame of the project:

– Project preparation phase (1st quarter of 2015 – 2nd half of 2015);

– Tender (competitive dialogue) (1st quarter of 2016 – September of 2019);

– Financial closure (September of 2019);

– Construction (October 2019 – 2nd quarter of 2023)

During the project preparation phase, the International Finance Corporation (IFC) provided skills, resources and access to the private sector market, including the development of high-quality legal documents, technical specifications and commercial structure to make the project viable, all while ensuring that strict E&S standards are applied.

During the private partner selection process, which was conducted in a form of a tender, the International Finance Corporation (IFC) was promoting the project and Serbia as a new promising market for viable PPP; created the process and the environment to attract competitive bids from top-class partners (11 qualification bids received).

Currently, the International Finance Corporation (IFC) is providing financing for the project and continues to consult the city on the peculiarities of a PPP construct management process. 

The workshop was concluded with a discussion on the new opportunities for public-private partnerships in the solid waste management sector in Ukraine; useful approaches to procure and finance PPP projects in this sector; experience of developing countries in comparison to developed EU countries; as well as the key challenges of the aforementioned project in Belgrade.