Corporatization and Management Contract Approach
Northern Governorates Water Administration (NGWA)
Corporatization and Management Contract
Project Background and Scope:
Water Authority of Jordan (WAJ) analyzed and evaluated various options for the Northern Governorates Water Administration (NGWA) and finally, decided that NGWA has to undergo a process of commercialization that consists of two stages:
1- NGWA corporatization, through out the establishment of a limited liability company (Yarmouk Water Company YWC). So that it will be an independent legal entity with its own separated finances and management.
2- YWC to go for a full Performance Based Management Contract, (ie; Management Contractor).
The main objectives of the Management Contract:
A) To improve the water and wastewater services provided to the customers in the Northern Governorates
B) To improve the financial position of Al-Yarmouk Water Company through the achievement of cost efficiencies and improved revenue management.
C) To establish, for Al-Yarmouk Water Company (YWC), the foundation for sustainable operational and business effectiveness and efficiency; and
D) To reduce the amount of water lost or unaccounted for through, among other things, leakage and unauthorized connections to the water facilities.
The service area covers the four Governorates of Ajloun, Irbid, Mafraq and Jerash with a population of around 1.5 million people.
Type of Contract:
The contract is performance-based; the Management Contractor (MC) will receive a (fixed fee) plus an incentive. Year by year, the variable fee will increase.
YWC through partial subsidy from WAJ and a grant from the German Development Bank KFW will secure respectively the finance of the MC's total annual fee.WAJ is committed to subsidize the cash deficit of YWC throughout the duration of the management contract.
Project Current Status:
1- Corporatizing NGWA:
* NGWA has been corporatized through the establishment of a Limited Liability Company Al-Yarmouk Water Company (LLC). "YWC" was registered on 26 July 2010 in accordance with its Article of Association and Memorandum of Association (AOA and MOA).
* YWC is now the legal successor of NGWA. YWC is an independent legal entity with its own separate finances and management. Its Management Committee consists of seven members chaired by WAJ S.G, the committee members are from both public and private sectors.
* The duties and responsibilities of YWC are specified and defined in an "Assignment Agreement" with the Water Authority of Jordan. This Assignment Agreement governs the working relationship to be followed by the management contractor.
2- Yarmouk Management contract:
* PMU has tendered and signed an agreement with a Transaction Advisor on 20 June 2010 in order to do the due diligence, prepare the tender documents for the services of the Management Contractor for YWC, and assist PMU in the tendering process.
* PMU is now tendering the services of the Management Contractor on behalf of YWC; in addition PMU will eventually carry out all regulatory responsibilities relating to the management contract.
* PMU has announced on 27 July an international competitive bidding to procure an international experienced company or a consortium of companies to provide services of a Management Contractor for YWC. Offers were received by 18 October 2010, the management contractor is expected to commence on 1st April 2011.