A bankable, non-revenue water project using technology

While reducing non-revenue water (NRW) is a high priority for most municipalities, the capital requirement to address this problem typically exceeds the available municipal budget. With this in mind, the Development Bank of Southern Africa (DBSA) assisted the City of Tshwane in preparing an NRW project from the concept phase to bankability.

Leaking pipe at Moreleta Reservoir Konstant Bruinette, senior deal originator at the Development Bank of Southern Africa

Lesego Lekubu, programme manager: WC/WDM Programme, City of Tshwane

Municipalities often have to prepare an NRW programme and go to market for funding. However, financiers look for a holistic solution when tackling NRW, and municipalities usually focus on a single element like replacing meters or pipes,” says Konstant Bruinette, senior deal originator at the DBSA.

City of Tshwane

With a 700 km pipeline and water infrastructure valued at R22 billion, the City of Tshwane loses millions of rand annually due to water losses in the transmission and distribution network, and has poor cost recovery (86%). Estimates of physical losses (leaks) in the municipality’s network range between 25% and 40%. The metro consumes approximately 1 000 Mℓ/day of water.

The impact of deteriorating water distribution and transmission infrastructure was not limited to physical losses only. In an environment of limited maintenance, water meters were typically the type of device where maintenance falls short or is neglected completely. As a result, the proportion of non-functional water meters had grown rapidly. This had a direct impact on billing and cost recovery. “We were fortunate to receive project preparation assistance from the DBSA. A lot of time and effort was directed towards identifying potential interventions to address water losses holistically with the NRW project,” explains Lesego Lekubu, programme manager: WC/WDM Programme, City of Tshwane.

Funding

The City of Tshwane’s NRW project is designed to allow for phased financing and implementation. It is a hybrid between conventional balance sheet finance and project finance. The intention is to strengthen the financial position of the metro by increasing cash flows stemming from the interventions that are implemented on a sub-project level. Funding for future sub-projects will be progressively advanced to the municipality in tranches by the participating financiers against strict criteria for the achievement and maintenance of key performance indicators of the sub-projects already implemented.

As the programme is rolled out, less debt will be required to finance the new subprojects, because the municipality will be able to fund a larger portion through its own funds generated from the savings and improved revenues stemming from already implemented interventions.

“We received grant funding (R34 million) from the Investment Infrastructure Programme for South Africa (IIPSA) in 2019 to start a feasibility study for a water conservation and water demand management (WC/WDM) programme. Additional funding of R6 million

Construction of new bunkers Fixing PRVs

KEY PERFORMANCE INDICATORS IDENTIFIED IN THE PROGRAMME PREPARATION PROCESS

• System input volume (SIV) • Minimal night flows (MNF) • Pressure management: PRVs/Critical point/

Average pressures • SIV (integrated with Zednet/Ibis) • Authorised AADD (billed, unbilled) • Water loss (volume, %) • SIV saving (kℓ/day, ZAR/a) • Total billed amount (ZAR/a) • Customers with 60 days+ debt (%) • Total collected revenue (ZAR/a)

TECHNICAL INTERVENTIONS IDENTIFIED FROM THE FEASIBILITY STUDY

KEY FEATURES OF A BANKABLE NRW PROGRAMME

was received for programme management and R20 million for meter installations. A pilot project is being implemented in the Cullinan, Rayton and Refilwe region,” says Lekubu.

Programme preparation and implementation

The programme is designed to consider: • climate adaptation initiatives, improving the

City’s resilience • job creation and local economic development • enhanced service delivery • deferment of capital investment for new bulk infrastructure • affordable tariffs. According to Bruinette, the programme is implemented in phases, based on prioritised demand management zones (DMZs). “The performance of these zones will be continuously monitored and assessed for improvement. These prioritised zones will be financed through separate loan tranches. All funding is preceded by the confirmation of the financial model and agreed-upon performance indicators that are focused on the reduction of real loses within the network and the improvement of revenue collection.”

The detailed feasibility study was completed a year ago; it took a programmatic approach that evaluated water resources, infrastructure and tariff modelling. It addressed all financial, social, institutional and legal issues. From there, a financial model was developed to determine if the WC/WDM project is bankable and feasible.

“This is a basket of WC/WDM interventions. These interventions differ in all DMZs,” states Lekubu.

Zednet

The City of Tshwane was already using an existing web-based system (Zednet) to monitor parameters such as meter readings, flow, pressure and reservoir levels. Data storage is cloud based and backed up to the City of Tshwane’s server. Data is displayed in a graph or table format that is easily understandable.

There was a further investigation to evaluate the possibility of using Zednet to measure the objectives set out by this project. These objectives include: • monitoring various parameters (flow, meter readings, pressure) • prioritising leakage repair activities by evaluating the minimum night flows • receiving alarm notifications (high/ low alarms) • integrating with other information systems used in the City of Tshwane, such as IMQS and Scada. Bruinette states that it is important that multiple users have access to Zednet on multiple devices. “For example, consumers can log in to view their monthly volume of water consumed and financiers can log in to view the performance of DMZs that have received funding. Furthermore, there is a functionality where all information gets timestamped and one can plot trends over time. From a financier’s point of view, this is great. If something starts to go wrong, one can focus in on the problem and make appropriate changes.

“The idea was to help the City of Tshwane move away from a reactive to a more proactive response when addressing NRW, where we could prioritise the deployment of infrastructure and monitor the impact of waterloss initiatives. This is key for financiers who want to quantify the benefit of their funding,” notes Lekubu.

The smart technology used in the programme is an enabler that reduced project risk and unlocked a larger NRW programme. “With this project, we did not reinvent the wheel, but used existing technology that the municipality already had in place. We merely added some functionality and integrated all systems.

Conclusion

“With the assistance received from IIPSA and the DBSA, we managed to create a clearly defined, bankable WC/WDM project that showed anticipated returns and benefits. This generated support from all stakeholders from the City’s Water and Sanitation Department, the City’s Finance Department, Revenue Collection Department, as well as from the Executive Mayor. IIPSA funding has built capacity within our municipality where training has been provided on the management and maintenance of pressure-reducing valves,” adds Lekubu.

This WC/WDM project is ongoing; it has been implemented in 240 district metering areas. In terms of bulk metering, mechanical meters are being replaced by electromagnetic flow meters. These will help to accurately determine the metro’s water balance and quantify water losses.

• Reduction of recoverable real losses (RRL) • Improvement of the infrastructure leakage index (ILI) • Reduction of over-consumption • Improved cost recovery • Strong support by politicians and management • Phased funding and implementation approach • Ability to monitor and verify benefits • Sectored demand management zone approach