9th International Workshop on Decentralized Domestic Wastewater Treatment in Asia
Organized by Ministry of the Environment, Government of Japan (Webinar)

Case-study on Changshu PPP-project for rural wastewater treatment andapplication of household Johkasou
Dr. Fan Bin, Professor
Research Center for Eco-Environmental Sciences, Chinese
Academy of Sciences
University of Chinese Academy of Sciences

Outline
1

Background of Changshu PPP Scheme for ruralwastewater treatment

2

Design and implementation of Changshu PPP-schemefor rural wastewater treatment

3Summary and Proposals

Demands and Challengesof Rural wastewater Treatment in China• A 500,000,000-rurual-population urgently needs modern
environmental sanitation services• Deficiencies of the State Management System• Responsibility Management: finance & organization• Industry Management: Master plans, Standards, supervises,supports……

• Deficiencies of the State Technology System (decentralizedwastewater treatment)• Manufacture• Installation• Running

CHANGSHU

Jiangsu Province, China•

Changshu a county-level city•

Annual disposable income of

the comprehensive demonstration
county-area for rural wastewater

Suzhou, Jiangsu• Located in the protected area ofTaihu Lake Basin• The first case of global-county
rural wastewater treatment in
China

RMB 57,831, developed area in
China• Resident population of 1,667,050

Changshu County, Suzhou

Taihu lake drainage basin

Practice before the Johkasou project
Period Ⅰ：2008-2010• Break the administrative division• Optimize the layout of centralized system• Invest >RMB 200 million to decentralizedsystem

Progress

Deficiency• The construction costs of pipeline in centralized
system are too high• For the decentralized system, completion rate <40%, normal running rate < 15%

Period Ⅱ：2011-2014• Establishing the first county-region unified
running system: completion rate raised to 95%,
normal running rate raised to 92%

Improved the quality of facilities
and equipment in 2012-2014• The quality of facilities not high, the average costof water treatment RMB 3.2 per ton (electricity
costs at 20%，maintenance costs at 60-70%）• Equipment quality not improved significantly

Construction cost increased
from 10k￥ to 25k￥

First engineering application of household Johkasou in China• 2013, RCEES cooperated with
Kubota to implement 102-family
Johkasou installation (54-sets)• Loweredthehousehold
construction cost 18.7 k alongwith the quality advanced toworld level
Dong qing Village

Johkasou distribution

Kubota Johkasou

Demonstration project• Based on the demonstration,
Changshu cooperated with theRCEES to introduce the Johkasou
technology• Carry out the PPP program ofdecentralized sewage treatment,
and introduce CRRC* as the socialcapital* China Railway Rolling stock Corporation Limited
A state-owned assets holding company in China

Changshu PPP scheme: the reasons and the process
 Ensure project quality and reduce supervision cost
 Promote application of innovative technologies
 Improve investment performance Set an example for the whole country“The first crab”

PPP scheme utilization

Outline
1

Background of Changshu PPP Scheme for ruralwastewater treatment

2

Design and implementation of Changshu PPP-projectof rural wastewater treatment

3

Summary and Proposals

Design of the PPP project-Overview
Fundamental core of theproject contract system

Changshu Water Investment
and Development Co., LtdCWID

Government
Enterprise

SPC

Signing the Franchise
Agreement

Paymentofsewage
service fees based on theperformance assessment

Special purpose company

CRRC• Design,financing,construction,procurement of the entire project.
•Operation and maintenance,renewal and transferandequipment

After the expiration of theagreement, transferring thefacility

Standard period of agreement : >10 years and<30 years
Overall consideration, 26 years for this agreement, 1-year construction period and25 -year commercial operation period.

Design of the PPP project-Investment and financing
Own: Registered capital of SPC

With stocks with rights
Government

Debt: Loans by the enterprise

35%
SPC

Enterprise

Funding

Registered capital25%(>20%) of65%

CRRC
Changshu Water Investment
and Development Co., LtdAuthorization
Changshu Municipal Government

Investment
75%

DifferenceEnterprise
Loan financing

Bank of China
Changshu Branch

Financing Institutions
Provide loans• 15-year long-term loans
pledged with the toll rights• Loan at the prime rate of 4.5%
• Repayment of equal principaland interest

Design of the PPP project-Performance assessment methods
IndustryDevelop
management
Testing methods and standards for rural
department
decentralized wastewater treatment technology
Purchasesupervision
services
Operation &managementof SPC

Facility O&M
Pipeline O&M Evaluation
results
Sample Testing
Users feedbackCSupervision andsampling results

DSample collection
and testing
Effect evaluationAB

Inf & Eff features

Basis for

Deduct the corresponding
percentage of sewage
treatment service fees

Penalties: If more than 3 consecutive or a total of 6 assessment periods get D,
department in charge will cancel the qualification of operation and not pay the service fees.

Design of the PPP project-Risk allocation③⑤④

Government risk
Enterprise risk②①

③ Basic requirement• Land acquisition• Project approval• Policy arrangement④Business• Project construction• Project maintenance• Getting insurance① Law② Policy③ Basic requirement④ Business⑤ Natural disasterImplementation of the PPP project-Procurement flow
Public tender
Procurement manner

Invitation to tender
Competitive consultation

Approval

Superior financedepartment

The Interim Measures for the Administration of Competitive Consultation in Government
Procurement issued by the Ministry of Finance stipulates the following circumstances ：(1) Confidential engineering√ (2) Engineering with very high professional requirements(3) Additional works that are linked to the large works that have been awarded(4) Urgent works that cannot allow bidders to prepare quotations√ (5) Open bidding or invitation to tender will not achieve the desired results of the projectNot set the procedures of bid opening and evaluation.
Consultation between bidding and tendering unitImplementation of the PPP project-Procurement flow
Procurement Flow
Purchaser
Review experts

Recommendation

3 qualified
suppliers

Consultation
group

Review

Two rounds ofconsultation

Pick out
Highest scoring
candidate

For this emerging project, consultation is critical(1) Clarify the needs of both parties(2) Allow the government to procure quality services at a reasonable price(3) More complete to examine the comprehensive strength of the tenderImplementation of the PPP project-Benefit for the SPC
The finance bureau pays the annual service fee per household tothe SPC according to the results of performance assessment.
Pricing basis• The reasonable IRR is 8%-12%. IRR of this project was tentatively set at 7% due to thehigh competitiveness and importance.
• After consultation, the fee for sewage treatment service was RMB 1,935 /household/year (PPP project Phase I, 2015).
• Annual payment contains: the average annual construction cost borne by the enterprise(discounted present value of each year), annual operating costs, financial costs, andreasonable profit.
Favorable condition
From 1st to 3rd year, no enterprise income tax. From 4th to 6th, the income tax is reducedby half, i.e. 12.5% of the profit, and after 6th year, 25% of the profit

Implementation of the PPP project-Benefit for the SPC
Pricing adjustment
The mechanisms of pricing adjustment:• The service fee can be adjusted once every two years.
• If the audit amount of average household construction investment is lower than the consultation
quotation, the government will have the right to reduce service fee.
• If the investor may obtain more similar service projects within Changshu in the future, the service
fee can be reduced accordingly.
• If the Change in national or local wastewater discharge standards causes the capital expenditures
or operating costs variation, the SPC can consult with the government for fee adjustment.
• The Government has the right to redeem the amount of transfer guarantee to carry out overhaul
if the SPC fails to do that as required.

Implementation of the PPP project-Phase Ⅰ to Ⅳ
During 2015-2022, Changshu City, a total of four county rural wastewater
management PPP projects all enter the commercial operation period in turn.

Implementation of the PPP project-Phase Ⅰ to Ⅳ
Changes• Number of social capital• Rate of service fee• Effluent water quality standard settings

Implementation of the PPP project-Phase Ⅰ to Ⅳ
Changes• Social capital
Change: Compared with other phases, Phase Ⅱ introduced two social capitals
and set up an additional 600-household incentive program (mid-term evaluation
based on the construction, with the winner receiving additional concessionagreements).
Purpose: Introduce incentive mechanism to guarantee the quality of project
implementation.
Result: Due to the long cycle of the PPP project and the slow recovery of funds,
which brought great risks to the enterprise. Coupling with the newly introducedsocial capital whose technology had the problem of unsatisfactory treatment effect,
the PPP project in the later phase returned to one social capital, CRRC.

Implementation of the PPP project-Phase Ⅰ to Ⅳ
Phase Ⅰ to Ⅱ

Changes• Annual payment

No significant change in the average household input, and thetechnical mode is still dominated by household Johkasou

Phase Ⅱ to Ⅲ

38% ↑• The principle of centralized collection, laying
pipe networks and increasing pumping stations• A septic tank in front of the inlet of theJohkasou• Clear requirements for sludge treatment anddisposal, and for improving effluent quality• Rising raw materials, rising labor costs andnormal annual inflation

Phase Ⅲ to Ⅳ

Annual payment

4% ↓• Decrease in the proportion of centralized
wastewater treatment• Full market competition for social capitals

Implementation of the PPP project-Phase Ⅰ to Ⅳ
Challenge!!!
How to set the standard of effluent water quality?
Phase ⅠThe main water quality indexes referred to the class I B standard <GB 189182002>: COD 60mg/L, TN 20mg/L, SS 20mg/L or COD removal rate ≥80% .

Phase Ⅱ

The effluent standards are discussed in categories
For example: when the influent COD concentration is greater than 350 mg/L, theremoval rate of each index should be met at not less than 60%, etc.

Phase Ⅲ

Except involved in the assessment section and protection zone of Taihu Lake (greaterthan 5 m3/d), which need to implement special emission limits (approximating GB1B), the rest implement the target of local 1B standard.
For household treatment facilities, does not assess TN and TP

Outline
1Background of Changshu PPP Scheme for ruralwastewater treatment

2

Design and implementation of Changshu PPP-projectof rural wastewater treatment

3

Summary and proposals

Project summary and conclusive proposal

Good experiences of Changshu:
1. Household wastewater treatment may remarkably ease the finance burden of ruralwastewater treatment, but the application of reliable technology such as Johkasou
equipment is also critical.
2. PPP model is a nice tool to ensure the project quality and is conducive to the applicationof innovative technologies. Whether it is necessary to finance from the society needs toconsider the cost of financing.

Appropriate
standard

Lesson：reasonable effluent
quality standards isimportant!!!
Affordable cost

AvailableTech.

3A-Priciples

Thanks for your attention, welcome to discuss and guide

中国科学院生态环境研究中心

Rural Environmental 范彬 博士 研究员/教授/博士生导师
电话：010-62849142，13501003728
Sanitation Team
Email：fanbin@rcees.ac.cn