Region: South Asia
Country: Global / Non-Specific
Sectors: Water and Sanitation
Keywords: Contractual Provisions, Water supply and sewerage system
Document(s):
Nagpur Water PPP Agreement - Draft from RFP558.68 KB
Document Summary:
Document: Nagpur Water PPP Agreement - Draft from RFP
Tracking Ref: India_Nagpur Water PPP Agreement - Draft from RFP_EN.pdf
The draft agreement was issued with the RFP for the project to be between the NMC, the Commissioner of Nagpur, Nagpur Environmental Services (NESL) and the Operator. It is understood that the final version contained a number of amendments
Background - NMC is required to provide water (no reference to sewerage services) to Nagpur city under City of Nagpur Corporation Act 1948 (the Act). NESL (wholly owned subsidiary incorporated under the Companies Act 1956) was appointed agent of NMC under section 58B of Act and NESL (under a Relationship Agreement to be entered into) has been granted exclusive right of operating the water supply services in city of Nagpur and use of Facilities. NMC assigned to NESL management of future investment projects initiated by NMC for development and rehabilitation of municipal infrastructure for water supply. NESL is to appoint a private operator to carry out some of its functions and obligations under Relationship Agreement. Bidding process is international competitive bidding, initiated by NMC.
Duration - PPP Agreement for 25 years (subject to extension on agreement of parties up to length of initial term (ie 25 years). Transition Period of 60 months.
Operator as agent for NESL provides and manages the Services, operates system, bills and collects payments for all Services (5.2) in accordance with Contract and all Applicable Laws. Operator to undertake as contractor the Rehab Works for the Initial Performance Improvement Project in order to achieve 24x7 uninterrupted water supply services in Service Perimeter (5.3) – operator to submit recommendations and proposed adjustments to program for this within 180 days of Commencement Date and NESL to make best efforts to procure additional funding that such amendments would require. NESL to finance 70% estimated cost – 30% to be financed and recovered by Operator under Operator’s Remuneration. Operator provides the treated water to Government Parties on behalf of NESL such that all Consumers have equal access and treatment in conformity with the Contract (11.1). Operator top operate, maintain and renew Facilities.
NESL to procure and provide raw water to Operator in quantities as required by Operator to provide treated water to Government Parties to enable them to sell the same to Consumers in Service Area and to Communities located outside Service Area in accordance with the contract (6.5). NESL gives Operator exclusive right to use Existing Facilities and assigned rights of NESL regarding New Facilities. NESL responsible for changes in composition of raw water that result in Operator incurring extra cost – required to cause construction of New Facilities. NESL retains a number of functions under contract (9.2) including monitoring and administering of NESL loans, developing, financing and supervising investment program for extension of water supply facilities.
Following end of Transition Period, Operator to provide 24x7 water to all connected Consumers within Service Perimeter which shall comply with drinking water quality standards as declared from time to time by Central Public Health & Environmental Organization, Ministry of Urban Development, Govt of India and performance parameters in schedule 10. Operator also to supply bulk supply of water to Communities outside Service Area at request of NESL, subject to Government Parties entering into agreement with Communities, subject to prejudice of service obligations for service within Service Area.
Operator to set up collection centres where potential customers can go and make application for water connection + obligations to make connections if the applicant is eligible subject to payment by applicant of applicable costs charged in accordance with Schedule 21.
Government Parties (NMC + Commissioner) undertakes to take all actions (whether under Relationship Agreement or as shareholder of NESL) as required to enable NESL to comply with its obligations under the Contract. NMC to continue to approve Master Plan for water supply, monitoring and administering NMC loans, establishing changes to tariff rates, establishing sector policies (10). NMC to provide such funding to NESL from time to time to maintain solvency of NESL and to enable NESL to comply with its obligations under Contract and NESL entitled to request grant from NMC to enable it to discharge its obligations (16.6).
Remuneration – Operator to bill consumers at Water Rates specified in Bye-Laws on basis of volume. Operator to collect payments on behalf of NMC/ NESL which shall be deposited in Sewage and Water Fund (16). Operator to be paid Operator Rate under schedule 5. From 5th anniversary Operator’s remuneration shall be determined on basis of audited billing records and subject to performance standards. Operator’s Rate shall be subject to automatic adjustment for variation in electricity rates or raw water rates. Operator can also request revision to adjustment method for calculation of Standard Operator’s Rate Adjustment for each Rebasing Period. There are a few listed events that trigger an extraordinary rate adjustment (17) such as change of law or circumstances, change in services, reduction in financing costs etc.
Environmental Liability etc – NESL liable for environmental and other liabilities (including contingent liabilities) related to Facilities and operation thereof arising from operation of Facilities prior to Commencement Date. Operator not liable for (and NESL to indemnify and hold harmless for) raw water failing to meet quality standards, technical characteristics of Existing Facilities which result in Operator not being able to meet prescribed water quality standards until Renewal Works or Rehabilitation Works are carried out (12).
Limitation of Liability – save in respect of fraud or willful misconduct, aggregate liability of Operator in any Accounting Year to NESL and Government Parties under contract not to exceed 5% annual revenue for that Accounting Year.
Audit – NESL has right to commission independent audit to assess accuracy and completeness of any Return Asset Condition Reports (12.3.2).
Disconnection – Operator has right to request disconnection by Delegates of consumer in accordance with By-Laws – delegates need to determine whether grounds provided by Operator for disconnection meet requirements of By-Laws – then required to take action in accordance with By-Laws (12.4).
Performance Bond – Operator to provide bond for each Rate Rebasing Period equal to 2.5% of average forecast turnover of Operator for each year of each Rate Rebasing Period (12.6).
Procurement – other than Existing Projects, Operator to realize works on basis of unit prices attached to Contract (adjusted in compliance with WPIs) or procure in accordance with Indian law and law of Maharastra State for procurement of public goods – public tenders required for any investment exceeding R1,000,000 (operator to determine specifications upon which contractors will bid and criteria including price and quality by which the winning bid is selected)(12.7).
Equity in Operator – until 1st Rate Rebasing Period Bidder/ constituents of Bidder shall collectively own at least 51% of issued share capital of Operator. After 1st Rate Rebasing Period this can be reduced to 25% (unless agreed further with NESL). Shareholders to infuse Equity not less than 50% of total Equity proposed in Bidder’s proposal on Commencement Date and balance to be infused as and when required to implement the Project. Operator may make a public offering of equity shares or equity lined convertible instruments (12.8).
Operator Debt – not to incur debt that would mature after 25th anniversary of Commencement Date (12.9).
Employees – employees of NESL (or deputed to NESL) to be deputed to Operator during Mobilization Period and Personnel Integration Period. Employer can make offers to Employees as it decides on on terms no less attractive than employees employed by NMC. Employees choose whether to continue in employment of NMC/ NESL or to join Operator. Those employees that opt to join Operator shall transfer. Other Employees remain deputed until end of Revocation Period or until replaced by Operator when they will be deployed elsewhere by NMC/ NESL. During deputation NMC/ NESL to ensure that Employees work properly and perform functions assigned to them – upon failure to do so NESL/ NMC shall take appropriate action against such employees, including initiating any disciplinary action (13).
Arbitration – in accordance with Arbitration and Conciliation Act 1996 – seat to be Nagpur only. Panel to be 3 members (unless sole arbitrator as mutually agreed).
Laws – law of India and in English.
Document Details:
Document: Nagpur Water PPP Agreement - Draft from RFP
The draft agreement was issued with the RFP for the project to be between the NMC, the Commissioner of Nagpur, Nagpur Environmental Services (NESL) and the Operator. It is understood that the final version contained a number of amendments
Background - NMC is required to provide water (no reference to sewerage services) to Nagpur city under City of Nagpur Corporation Act 1948 (the Act). NESL (wholly owned subsidiary incorporated under the Companies Act 1956) was appointed agent of NMC under section 58B of Act and NESL (under a Relationship Agreement to be entered into) has been granted exclusive right of operating the water supply services in city of Nagpur and use of Facilities. NMC assigned to NESL management of future investment projects initiated by NMC for development and rehabilitation of municipal infrastructure for water supply. NESL is to appoint a private operator to carry out some of its functions and obligations under Relationship Agreement. Bidding process is international competitive bidding, initiated by NMC.
Duration - PPP Agreement for 25 years (subject to extension on agreement of parties up to length of initial term (ie 25 years). Transition Period of 60 months.
Operator as agent for NESL provides and manages the Services, operates system, bills and collects payments for all Services (5.2) in accordance with Contract and all Applicable Laws. Operator to undertake as contractor the Rehab Works for the Initial Performance Improvement Project in order to achieve 24x7 uninterrupted water supply services in Service Perimeter (5.3) – operator to submit recommendations and proposed adjustments to program for this within 180 days of Commencement Date and NESL to make best efforts to procure additional funding that such amendments would require. NESL to finance 70% estimated cost – 30% to be financed and recovered by Operator under Operator’s Remuneration. Operator provides the treated water to Government Parties on behalf of NESL such that all Consumers have equal access and treatment in conformity with the Contract (11.1). Operator top operate, maintain and renew Facilities.
NESL to procure and provide raw water to Operator in quantities as required by Operator to provide treated water to Government Parties to enable them to sell the same to Consumers in Service Area and to Communities located outside Service Area in accordance with the contract (6.5). NESL gives Operator exclusive right to use Existing Facilities and assigned rights of NESL regarding New Facilities. NESL responsible for changes in composition of raw water that result in Operator incurring extra cost – required to cause construction of New Facilities. NESL retains a number of functions under contract (9.2) including monitoring and administering of NESL loans, developing, financing and supervising investment program for extension of water supply facilities.
Following end of Transition Period, Operator to provide 24x7 water to all connected Consumers within Service Perimeter which shall comply with drinking water quality standards as declared from time to time by Central Public Health & Environmental Organization, Ministry of Urban Development, Govt of India and performance parameters in schedule 10. Operator also to supply bulk supply of water to Communities outside Service Area at request of NESL, subject to Government Parties entering into agreement with Communities, subject to prejudice of service obligations for service within Service Area.
Operator to set up collection centres where potential customers can go and make application for water connection + obligations to make connections if the applicant is eligible subject to payment by applicant of applicable costs charged in accordance with Schedule 21.
Government Parties (NMC + Commissioner) undertakes to take all actions (whether under Relationship Agreement or as shareholder of NESL) as required to enable NESL to comply with its obligations under the Contract. NMC to continue to approve Master Plan for water supply, monitoring and administering NMC loans, establishing changes to tariff rates, establishing sector policies (10). NMC to provide such funding to NESL from time to time to maintain solvency of NESL and to enable NESL to comply with its obligations under Contract and NESL entitled to request grant from NMC to enable it to discharge its obligations (16.6).
Remuneration – Operator to bill consumers at Water Rates specified in Bye-Laws on basis of volume. Operator to collect payments on behalf of NMC/ NESL which shall be deposited in Sewage and Water Fund (16). Operator to be paid Operator Rate under schedule 5. From 5th anniversary Operator’s remuneration shall be determined on basis of audited billing records and subject to performance standards. Operator’s Rate shall be subject to automatic adjustment for variation in electricity rates or raw water rates. Operator can also request revision to adjustment method for calculation of Standard Operator’s Rate Adjustment for each Rebasing Period. There are a few listed events that trigger an extraordinary rate adjustment (17) such as change of law or circumstances, change in services, reduction in financing costs etc.
Environmental Liability etc – NESL liable for environmental and other liabilities (including contingent liabilities) related to Facilities and operation thereof arising from operation of Facilities prior to Commencement Date. Operator not liable for (and NESL to indemnify and hold harmless for) raw water failing to meet quality standards, technical characteristics of Existing Facilities which result in Operator not being able to meet prescribed water quality standards until Renewal Works or Rehabilitation Works are carried out (12).
Limitation of Liability – save in respect of fraud or willful misconduct, aggregate liability of Operator in any Accounting Year to NESL and Government Parties under contract not to exceed 5% annual revenue for that Accounting Year.
Audit – NESL has right to commission independent audit to assess accuracy and completeness of any Return Asset Condition Reports (12.3.2).
Disconnection – Operator has right to request disconnection by Delegates of consumer in accordance with By-Laws – delegates need to determine whether grounds provided by Operator for disconnection meet requirements of By-Laws – then required to take action in accordance with By-Laws (12.4).
Performance Bond – Operator to provide bond for each Rate Rebasing Period equal to 2.5% of average forecast turnover of Operator for each year of each Rate Rebasing Period (12.6).
Procurement – other than Existing Projects, Operator to realize works on basis of unit prices attached to Contract (adjusted in compliance with WPIs) or procure in accordance with Indian law and law of Maharastra State for procurement of public goods – public tenders required for any investment exceeding R1,000,000 (operator to determine specifications upon which contractors will bid and criteria including price and quality by which the winning bid is selected)(12.7).
Equity in Operator – until 1st Rate Rebasing Period Bidder/ constituents of Bidder shall collectively own at least 51% of issued share capital of Operator. After 1st Rate Rebasing Period this can be reduced to 25% (unless agreed further with NESL). Shareholders to infuse Equity not less than 50% of total Equity proposed in Bidder’s proposal on Commencement Date and balance to be infused as and when required to implement the Project. Operator may make a public offering of equity shares or equity lined convertible instruments (12.8).
Operator Debt – not to incur debt that would mature after 25th anniversary of Commencement Date (12.9).
Employees – employees of NESL (or deputed to NESL) to be deputed to Operator during Mobilization Period and Personnel Integration Period. Employer can make offers to Employees as it decides on on terms no less attractive than employees employed by NMC. Employees choose whether to continue in employment of NMC/ NESL or to join Operator. Those employees that opt to join Operator shall transfer. Other Employees remain deputed until end of Revocation Period or until replaced by Operator when they will be deployed elsewhere by NMC/ NESL. During deputation NMC/ NESL to ensure that Employees work properly and perform functions assigned to them – upon failure to do so NESL/ NMC shall take appropriate action against such employees, including initiating any disciplinary action (13).
Arbitration – in accordance with Arbitration and Conciliation Act 1996 – seat to be Nagpur only. Panel to be 3 members (unless sole arbitrator as mutually agreed).
Laws – law of India and in English.
Tracking Number: India_Nagpur Water PPP Agreement - Draft from RFP_EN.pdf
Updated: January 28, 2022