Moscow: keeping the taps flowing

Moscow: keeping the taps flowing (an interview with Denis Yanev) 

For Denis Yanev and his colleagues at MosVodoKanal (MVK), providing clean water and sanitation services to more than 13 million Moscow residents comes down to three main challenges: maintaining a secure supply of safe drinking water; enhancing the efficiency of the water system; and ensuring that services are affordable and accessible to all.

"We are constantly working to improve the quality of our services," said Yanev. "On the one hand, we need to meet and exceed the country's drinking water standards, but on the other hand our water resources are increasingly deteriorating.

Tapping into finance

MVK also faces significant financial pressures. For one, water tariffs in Moscow are lower than most Eastern European countries (and lower than many other Russian municipalities). The company acknowledges that, with a growing gap between rich and poor in the city, increasing the cost of basic services is not an option. The State Enterprise is also seeing reduced demand with water consumption falling across the city in recent years.

"High quality and reliable service is just not possible without financial sustainability," said Mr. Yanev. "That is why we are always exploring different financing sources such as direct budget investments, loans and - of course - Private Public Partnerships.

Realigning legacy systems

While the company owns dozens of pumping stations, treatment plants and distribution systems, they are also dealing with an inherited Soviet water distribution network that relied on huge centralized stations and facilities. As a result, MVK is actively working to develop local solutions that both reduce transportation costs and increase efficiency.

To help achieve this, the utility has entered into eight Public Private Partnerships over the past 15 years, with total investments of more than €550 million. Looking ahead, at least eight more projects are currently in the pipeline with an estimated value of €2 billion. "We think that more intensive use of PPPs could be a solution for many water utilities," noted Mr. Yanev. "Investors are always looking for conservative opportunities with minimal risk, and that's what the water sector provides: steady growth, long-term returns and low elasticity of demand."

Pointers on PPPs

The company has learned a lot of valuable lessons about PPPs over the past 15 years and stress five key points to developing a successful water sector PPPs:

  • the PPP process cannot be rushed and takes time to properly develop;
  • some PPPs require significant up front costs, but become much more attractive to investors if the right resources have been applied;
  • governments must play a role in monitoring and regulating the project;
  • PPP structures must be designed to include clear and formal methodologies for reviewing contracts over the term of the project (particularly those that last 10 to 30 years or more); and
  • a single-minded focus should be placed on developing transparent and competitive procurement procedures.

"We also ensure that our contracts call for state-of-the-art facilities and equipment to ensure we have a platform for further modernization," added Mr. Yanev. "In our perspective, that will enable Moscow to stay ahead of demand in the future."

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