[Almost not] Flushed with success

More than 10 years in the making, the project, which at one point was nearly abandoned, has now entered the final stretch, and the project company’s general manger Olivier Crasson, speaking at the recent Utilities Expansion and Investment Congress in Dubai, said he hoped lessons would be learnt from the Emirate’s experiences.

A growth story

Ajman’s population has undergone a dramatic explosion, rising from 80000 in 1992 to more than 250000 today. In light of the boom in residential developments, in 1995, the government recognised the need for a modern sewage collection system and decided to enlist the expertise of the private sector.

A lengthy tendering process followed at the end of which, in 2001, a concession agreement was signed with several private companies to build and operate the network.

“With this project we were to replace around 15 000 septic tanks and every property owner was going to be invited to be connected to our sewerage system,” Crasson told delegates.

The project was to be financed through government and shareholder equity, bank loans and, most crucially, through the payment in advance of connection fees by the owners of the properties that were to be hooked up to the wastewater collection system.

In 2002, a sewer law was passed to give the project a legal footing. The concession company was also incorporated and the engineering, procurement and construction (EPC) and operations and maintenance contracts were signed.

Then, in 2003, construction kicked off with completion pencilled in for two and a half years later.

Stumbling block

The next year, however, the project was suspended. There were insufficient funds to pay the contractor to continue the construction work and tools had to be downed. The reason: the property owners were refusing to pay the connection fees two years in advances of being plumbed in.

The planners went back to the drawing board and during 2005-2006 the project was restructured and resurrected with an amended sewer law, a new 25-year BOOT (build, own, operate, transfer) concession agreement, new shareholders and lenders.

“The project had a near death experience,” said Crasson. “It was stopped four years ago and it took a long time to restructure. But the shareholders, government and banks then agreed they would finish the construction phase.”

In 2006, the Ajman Sewerage Private Company was incorporated with Belgium’s Besix taking a 50% stake. Veolia Water and the Ajman government each own a 20% shareholding with the remainder belonging to Black & Veatch.

The EPC contract was awarded to Besix and Black & Veatch, while the operations and maintenance contract was split 67:33 between Veolia Water and Besix. ING and Ambac were brought in as the new joint financing partner.

Progress at last

With the project back on track progress has been swift. At the end of May, the network was around 75% complete with some 40000 customers already being serviced. The first flows were collected in September 2007.

The treatment works is 96% complete and is operating with almost 25% of the plant design flow. The larger pumping stations have been finished and there are just a few smaller ones still to complete.

“The next few months will be very important because we are going to switch from construction phase to steady state operations and I think by December we will be getting there,” Crasson predicted.

The sewerage system will comprise 240 km of gravity sewers that will collect wastewater from registered properties and convey it to collection points. Some 22 pumping stations will then send the wastewater from collection points to the treatment plant.

Ultimately, the network will serve 250000 Ajman residents in 75000 properties and apartments on 12500 plots of land. It will be able to handle 49000 m3 of effluent per day, with a peak load of 78000 m3.

The wastewater will undergo three-stage treatment to produce water suitable for irrigating parks and other open spaces. The total cost of building the sewerage system was AED 800 million (US $218 million).

Residents are still obliged to pay connection and service fees, and, as specified in the sewer law, their properties have to be linked to the system. The connection fees will account for 5% of Ajman Sewerage Private Company’s revenue during next 28 years, providing cash for construction, while the service charges will provide the other 95%.

Crasson admitted that convincing residents that a sewage collection system was necessary had been a tricky task: “We started from scratch in the desert where people were using septic tanks, most of which were leaking.

But they didn’t worry about what to do with their sewage. So we had to tell them you must pay your service charges, you are benefiting from a modern system.

But some of them were saying we don’t need it – some of them never even used tankers; it was not perceived as a need in the emirate by the residents. It is an unsubsidised utility charge which was difficult to communicate as well as.”

Penalties have had to be put in place to oblige residents to pay, for example trade licences cannot be renewed if fees are not paid. As sewerage connections cannot be disconnected, power supplies are cut off it bills go ignored.

Hard times ahead

But while the stuttering start caused huge problems for all involved in the project, in many respects the true challenges lie ahead. The network was designed using calculations that Ajman would have a population of 350000 in 2030, but estimates have since been revised to a staggering 2 million.

“It is just incredible the properties we are now registering and the population announced,” remarked Crasson. “Ten years ago Ajman was a village with a centre and it is a small city now and that city is expanding at an incredible pace.

The original network was covering all the parts of the emirate where people were living, but now we cannot keep pace with expansion. The double digit growth was not envisaged.”

The current accelerated rate of development makes it difficult to accommodate the changes as buildings go up faster than sewerage system extensions can be designed and built.

“It is not only the quantity, but also the change in population density, for example the high-rises on the corniche are causing headaches for our engineers,” Crasson commented.

New major developments have to be integrated into the system and the capacity of pumping stations and the treatment plant have to be increased accordingly. But expected flow and timing of occupancy also have to be factored into the equation.

He continued: “In the northern emirates, we have a big risk of limited power supply, which is a challenge because we are informed by our new customers that they want to build tower blocks but we know that they will not get power immediately.

This can cause some problems with the rate of occupancy and our revenues are dependent on the properties. We need people to live in the properties in order to generate a certain amount of revenue.

“So the timing of the occupancy, the timing of the development and the initial capital expenditure depends on the flow generated by the people living in these developments. Developers are creating supply and assuming demand will follow, but we cannot afford to over-invest.”

Another cause for concern is the fact that the tariff structure was intended to support the future growth of the network, but the fees were drawn up years ago based on a certain pattern and certain mix of properties with specific completion dates and levels of occupancy, which are no longer valid.

And on a more practical note, the lack of a postal service has hampered monthly fee collection. With up to 4 000 bills to deliver each day, the firm has had to hire staff to post them, at additional cost to the company.

But problems aside, the Ajman story is one of success. Setting up a European-styled sewerage utility and network in a desert from scratch was always going to be challenging. Yes, it was naïve to believe residents would pay for something they could not comprehend and they felt they did not need.

But thanks to persistence, the result is that Ajman now has a modern sanitation system, and the odour and pollution problems stemming from the old septage system have been eradicated, which for an emirate looking to expand and attract investors, not to mention residents, are important issues.

Add to this that Ajman now has a constant supply of irrigation water that can turn barren areas of desert into lush green zones without squandering precious water resources and all involved in the project can be proud of a job well done.

Nevertheless, Crasson is first to admit: “We all made a lot of mistakes with this project, certainly at the beginning, and I think everyone can take lessons from it.”