Becoming Bankable:
Experiences and Challenges in Market-Based Finance in the Water Sector

Wednesday 20 August
Lunch Side Event

Convenors: UNEP Finance Initiative (UNEP-FI) and Water & Sanitation Program (WSP)

12:05-13:25           Room K12

Event Summary and Conclusions

•  There is growing consensus that private finance for water projects makes sense not only because of the increased availability of additional funds in a chronically under-funded sector, but because it forces water schemes to be financially efficient and therefore sustainable in the long term. The discussion is not about whether to privatize or not. The question is how the financial sector and capital markets can become the dynamic sources of sustainable funding for the water sector as they are for other sectors of the economy.

•  Water utilities must become bankable and this entails a fundamental shift in paradigms: utilities must plan projects in a way that private financiers and capital markets can understand and assess. Projects must include strategies that ensure their ability to meet debt service obligations (or dividend expectations). Concretely, financial viability will depend on the project’s expected ability to ensure (among others):

1. Billing efficiency
2. Public acceptance through demonstrable service improvements or/and network expansions
3. Tariff predictability and reliability
4. Transparency of financial flows
5. Water resource efficiency
6. If relevant, foreign exchange risk mitigation.

• The concept of corporatization can be promising in achieving management efficiency, accountability and independence of water utilities while at the same time avoiding the entire privatization of water supply and sanitation networks. It also enables public authorities to channel public funds where these are most needed, for instance, to finance output-based subsidies.

Chairperson: Mr. Paul Clements-Hunt, Head of UNEP FI

Presentation from the event

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