Public Private Partnerships in Waste Management: the first Greek Experience

First the facts: the first application for Public – Private Partnership (PPP) in the field of Waste Management (WM) has already been approved by the Special Secretariat for PPPs and the Interministerial PPP Committee.

The project of “Integrated Waste Management in Western Macedonia” includes design, construction and operation of a modern waste treatment facility and the relevant landfill for residues, as well as the operation of 9 transfer stations that have been already constructed, for 25 years. Detailed profile of the project can be found at http://www.sdit.mnec.gr/en/projects/projects/project0020.html. The budget is around 120 million Euros and up to 50% of this will be covered by the Greek Government, through PPP law regulations, while the rest will be the contribution of the local municipalities, through their Waste Management Authority (WMA) DIADYMA.

The project is already in the pipeline and it is expected to start operations at early 2010. During the preparation of the project, which has not yet been completed, there were several interesting issues that need to be discussed in a public discussion. The more important of them are addressed below.

1. Drivers for PPP in WM
The Greek WM market is in transition. A lot of landfills do exist and operate and some more will be constructed during next years, but the challenge of waste treatment has not yet been faced. Although there is a national strategy regarding directive EC 99/31 that puts strict targets for biodegradable waste and their diversion from landfills, the steps already implemented are poor.

Two Mechanical Biological Treatment (MBT) facilities are under operation, but their environmental results are at least questionable. In any case, the operation of these facilities cannot satisfy the requirements set up by directive 99/31.

At the same time, in a lot of the big landfills there is a gradually harder pressure due to lack of space, with the case of Athens to be a symbol of the failure of the actual WM policy to meet EU targets.

Greek WM market and WMAs have understood the necessity for waste treatment, but until now there is no certain indication that EU or national funds will be used for that way. So the combination of treatment necessity and lack of financial resources is a big driver for PPP in WM.

The response of the Ministry of Finance to this situation is a hopeful signal for the market and we do hope that this is just the first of the required steps.

Additionally, the very short time period left to achieve the targets for biodegradable waste provides a great advantage to PPP procedures. Although preparation of a PPP contract is neither an easy nor a rapid task, there is much more flexibility and the PPP law provides certain tools that can significantly reduce the preparation period.

One more important driver is the experiences from the poor operation of the actual WM facilities. We all now understand that there is no mean to spend decades millions Euros to develop waste treatment facilities if we are not ready to ensure their effective operation. And the truth is that effective operation can be achieved if the contractor is responsible for that, which can only be achieved through PPP contracts.

2. Barriers for PPP in WM
Despite of the real strong drivers that do exist, the application of PPP in WM in Greece is really a difficult issue due to specific characteristics of the solid waste management systems.

First, the status and the human resources of the most WMAs are not capable to prepare and implement PPP contracts. Of course it is not by chance that the first effort started form DIADYMA SA, a Managing Authority with remarkable status in terms of human resources and a certain record of successes in EU funding and project implementation. But there are very few similar cases.

Second the cost barrier. In almost all the country, Greek citizens are used to pay negligible money for waste management and even so it is not always sure that the citizens achieve value for money. The great landfill dependence of the country is also a measure for that. There is a need for brave political decisions in order to have a gradual but steady increase of the WM expenses, if we want to have successful implementation of recovery and recycling targets.

One of the reasons that drove DIADYMA to a successful preparation was that the local authorities were persuaded that they have to increase the WM spending in order to achieve great environmental results. And the generous contribution of the Ministry of Finance to their willingness to pay is a good example that will certainly affect the political decisions required.

Last but not least barrier are the negative experiences of some PPP efforts that have been done previously. Of course it has to be explained that these efforts were out of the new framework. In general terms these failures were characterized by:
Poor or no preparation
Lack of performance standards
Lack of risk distribution
Lack of reliable commitment between the PPP contractor and the municipalities.

Thus, it is better that those efforts have totally failed.
3. A new view should be considered about project preparation
The Greek WMAs, the consultants involved to WM as well as the government and the contractors need to make a shift regarding project preparation. The application of PPPs to WM projects:
Should be combined with certain changes to project design. The overall feasibility of the project must be carefully documented, since PPPs are long-term relationships, which are based, in the financial contribution of the citizens and municipalities and not just t EU funds. Local affordability levels must be determined and tested before the contracts.
Must drove to a project preparation with emphasis on specific, desirable and quantified results instead of the usual more or less detailed design of the facilities that dominates the Greek market
Needs a careful and justified distribution of the potential risks of the project. This is something that is not yet understood by public decision makers which are used to ignore long term risks, but we all know that a PPP contract without efficient risk allocation will be a certain disaster.

4. The need for combination with EU funds
One of the more important lessons provided by the DIADYMA experience is the modern WM gate fees are too high for Greece, even in the case of one of the more efficient and expensive WM systems in Greece, that of Western Macedonia.

The Ministry of Finance put a great contribution of funds in order to cover the existing gap between gate fees for modern WM treatment and social capability to pay, affordability level in other terms.

But if a big part of the construction cost was covered by EU funds, the gap will be much more small and the implementation of similar projects will be affordable in much more cases.

The new government should consider this as the last opportunity for Greece to develop modern WM infrastructure utilizing EU funds that do exist. If these funds will be consumed once again just for landfills and transfer stations, this opportunity will be lost. Then, the future of WM in Greece will be much more expensive and undoubtedly difficult to consider it as “appropriate”.

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