Waste to Energy Project (WtE)
Ministry of Municipalities & Agriculture

The Problem

The Kingdom of Bahrain generates about 1.2 million of waste per year. Currently, all this waste is disposed off at the Asker Municipal landfill sit (approximately 35 kilometers from Manama) The waste arrives at the disposal site unsorted and co mingled. It is estimated that about 20 million cu meters of land fill space is left. At the present rate of 1.7 m cu m of space per ton of waste and assuming a growth rate of 5% per year, the Askar Landfill site will have been exhausted within a decade.

The disposal without processing method is harmful to the environment.

Solution and Key Benefits

 What is the initiative about? (the solution)
The solution was to establish Energy to Waste Plant to reduce waste to landfill. That is, the waste generated will not be sent to the land fill, but will be processed, generating power in the process, and the stabilized fly Ash Collected at the plant deposed of in a landfill meeting European Union Standards

The Environment Directorate approved the project subject to environmental assessment.

The Ministry of Municipalities & Agriculture invited tenders as it decided to take the private sector approach through a Build Own Operate [BOO] plant. Through an international tender which attracted 13 bids a fresh consortium was selected as a preferred bidder to undertake the work. Though there were considerable delays in finalization of the agreements, it has now been agreed that the plant be set up in an area south of Asker.

The agreement is for a period of 25 years, with provision for extension if both sides agree.
The project as currently agreed is for the establishment of a plant for the Municipality to supply an agreed 390,000 tons of solid waste from the municipality, to be processed and a 25 MW p.a of electricity to be produced which will be fed to national grid. The Electricity & Water authority (EWA) has agreed to purchase the full production of electricity over the period of the agreement. The price is also agreed but has an escalation clause over the full 23 years.

The solution was thus found through a public private partnership, with the parameters of the project agreed, which included mandatory provisions on technical, and performance criteria. This included penalties for nonperformance on both sides. It had also had performance KPIs, linked to penalty clauses.

The toxic ash the final waste after the process is 19,000 tons per year which will be enclosed in reinforced concrete structures. It will conform to European Landfill Directive. Each year’s toxic waste will similarly be enclosed and provision has been made cater to the full 23 years of and more.
Incineration will not endanger the environment, as the agreement specifies that it should meet minimum EU standards.

This plant is the first of its kind in the Kingdom to process waste through an incineration process which meets the EU standard. We are assured the plant will emit at pollution level less than the pollution levels in the surrounding area.

The power supply will add to the electricity supply especially during the peak summer season, when electrify supply is very tight.

Actors and Stakeholders

 Who proposed the solution, who implemented it and who were the stakeholders?
The proposal came from MMAA, who are responsible for keeping the city clean, and had to find new refuse dumps if no solution was found. The Developer and EPC contractor is a well-known French company CNIM, who has built many plants in Europe including England, conforming to the strict environmental conditions of EU.
They would operate the plant under an agreement which specifies the details of the process, environment standards, the level of production etc. overt the full 25 years.
CNIM has also agreed to implement the project under an open book scheme, which mandates the sharing of information on the cost of the plant etc. in addition to meeting the specifications to provide in the minimum functional specifications [MFS]
The Municipality will have to supply waste which complies with the definitions set in the agreement. The effect of this is that if the waste supplied is different the electricity generated will be affected , and any shortfall will have to be paid for by the Government.

(a) Strategies

 Describe how and when the initiative was implemented by answering these questions
 a.      What were the strategies used to implement the initiative? In no more than 500 words, provide a summary of the main objectives and strategies of the initiative, how they were established and by whom.
The physical implementation of the project has just commenced, but the steps that were taken to reach this point has provided major learning experience to the Government, Ministry of Finance MOF, Ministry of municipalities and Agriculture [MMAA], Electricity & Water Authority [ EWA], particularly on details negotiation techniques, Selection of Technologies, pricing, Environmental policies
The strategy adopted was to obtain the best technology, at the lowest price. Hence different plant options were considered, the pricing was difficult as the Engineering Procurement and Construction (EPC) price of the plant was an important input. Hence through negotiation, an open book approach was adopted. This mandates the details of the plant as well as its cost will to be approved.
The strategy was to involve the best available consultants, who are knowledgeable in the field. Thus Mott McDonald environmental team was involved in the technical aspect of the project, including power connection to the national grid.
Mott McDonald provided the detailed technical specification though “Minimum Technical Specifications for the Developer to follow.. The specifications is gave in very great detail the technical features of the plant and its operation as well as the environmental standards to be followed. FreshFelds provided the legal input which needed agreement covering the full 25 years of operations. Financial input was also sought from Mott McDonalds to determine the unit price to be paid. Further consultants will follow, for the escalations clauses in the contract where the price that is escalated in accordance with the cost of living index in the kingdom
The inter ministerial team were deeply involved in the detailed formulation and evaluation, as well as reviewing agreements which anticipated events over a 25 year period. The team obtained a very thorough knowledge of the privatization model based on Public private partnership, and the technical input necessary for projects which are over a long period.
This project has deadlines, and performance standards for both sides, which are time bound and which are protected through of penalties. These are new levels of performance standards for the government, benchmarked against international standards.
It had transformed the entire administration. Tight productivity targets, performance measurements, and environmental standards equaling the western standards.
An environmental impact assessment was conducted, by consultants specialized in environment studies. The project will secure carbon credits, and studies have been conducted on the way it should be presented to international authorities.

(b) Implementation

 b.      What were the key development and implementation steps and the chronology? No more than 500 words
The key developments were:
2006: The feasibility study.
2008: Benchmarking by World Bank
2006: Terms of reference
2006: Evaluation of bids, Technical, Financial and legal
2011Agreements: Power Purchase Agreement
2011 WDC Developer
2011 Owner [Shareholders Undertaking Agreement]
Provision of guarantees
2011 Land lease
2011 Electricity power purchase agreement
Take or pay (guarantees by the EWA to purchase power and Pay for availability) Electricity Power purchase Agreement.
The project implementation has commenced, and MMAA is the supervisory institution following up on the implementation. Land lease has been signed, and the design work has progressed smoothly.
The plant will commence operation in 2014.

(c) Overcoming Obstacles

 c.      What were the main obstacles encountered? How were they overcome? No more than 500 words
There were obstacles on the way. The negotiations on price were long, which included scenarios building based on different output levels, and different input levels. The technical discussion on various productivity levels were also long, since it needed guarantees on the type of waste to be provided by MMAA (as this affects output). The fact that the waste is not sorted in the kingdom at the collection level was one particular difficulty. It is hoped that sorting in the future will help secure a guaranteed level of output. This is necessary since the output is guaranteed (termed Availability). If the waste is different and leads to lower output, government will have to pay the developer on availability of the plant, and not the actual output (if this is different due to the quality of waste)

These discussions led to new territory for the government team.

(d) Use of Resources

 d.      What resources were used for the initiative and what were its key benefits? In no more than 500 words, specify what were the financial, technical and human resources’ costs associated with this initiative. Describe how resources were mobilized
The resources used were the project team from both Ministry of Finance, Ministry of Municipalities, and the Electricity & Water Authority. The team was assisted by reputed consultants: Mott McDonalds [Technical]; Mott McDonalds [ Financial], and Freshfeilds. [ legal]
There were weekly, and fortnightly meetings for discussions an review. Special meetings were held for negotiations with CNIM.
The team reviewed detailed cash flow of the project

Sustainability and Transferability

  Is the initiative sustainable and transferable?
The initiative is sustainable, as the Agreement is for 25 years, and could be extended. This changed the way the government work. The operation of the plant is taken over by the developer, while strategic decisions remain with the government. Further the government becomes the regulator for the project. Further the agreement has sections which impose traffic studies, Environmental impact studies etc. which have all been carried out and have been reviewed by the government.

There are KPI for the full term of the agreement, so the follow up mechanism is with the government.

In addition the penalties are built in which would be imposed on both the government and the operator if specific conditions are not met during the 25 year period of the agreement. The government will thus have to perform well to avoid claims on the government, for “Buyer failure” events, which will be very costly to the government.

The terms are very rigorous, and based on private sector output terms. The government employees will have there to be working within strict guidelines to adhere to the timetable and performance. Currently during the early stages, Mott McDonald is assisting EWA to meet the guidelines, and are assisting in job training to perform according to the schedules.

This is also transferable, as new similar projects are set up, there will be similar provisions. The lessons learned could be implemented; as well there will be in the government public servants who are well versed in the modern management techniques, including concern for environment and other similar initiative.

Lessons Learned

 What are the impact of your initiative and the lessons learned?
The impact of the initiative is that the government can move rapidly to embrace modern techniques within the framework of Public private partnership projects, which are either BOO, or BOT etc. The work of the consultants have provided significant knowledge transfers, regarding, long term agreements, encompassing technical, financial, and legal aspects. It has also provided a much needed focus on KPIs and its implementation albeit with penalty provisions. These projects which have fully defined time frames, as well as output targets, have transformed the way government thinks and works.
This project should inspire other both in the public and private sector to take initiatives with the consideration to the environment. As carbon credits would also be available for projects such as these, there will be added incentive to take care of the environment.
This project is a follow up on the Private Public Partnership (PPP) projects which could accelerate development when more similar projects are set up, and its benefits become better known.
It has also the benefit that projects would not be abandoned, and strict adherence to the agreement is mandatory.
This is also projects which encourages risk taking by those who avoid them, as the government takes some of the main risks of the project.
The penalty regime, also imposes strict adherence to the time line of the project. This is a very important aspect of project development as there is s tendency to abandon projects, it there are no strict guidelines.
The Employees working in the project also has to be productively employed, as the strict time lines imposes rigid work schedules. In a sense there is the introduction of private sector concern for productivity, and return.
This type of projects also introduces deal making for economic development. Each deal will cover a package of thisns that are doen for the economy. Several of these could have a economy wide coverage, which will encourage increasing fgoutpu in general.

Contact Information

Institution Name:   Ministry of Municipalities & Agriculture
Institution Type:   Government Agency  
Contact Person:   Hassan Jabal
Title:   Director - Economic Studies and Research Directora  
Telephone/ Fax:   17575756
Institution's / Project's Website:   www.mof.gov.bh
E-mail:   anizami@ega.gov.bh  
Address:   P.O Box 333
Postal Code:  
City:   Manama
Country:   Bahrain

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