Water tap

Piped Water Systems (PWS)

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Piped Water Systems (PWS)

Country
Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Infrastructure
Sub Sector
Most major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Utilities
Indicative Return
Describes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
15% - 20% (in IRR)
Investment Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Long Term (10+ years)
Market Size
Describes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
USD 100 million - USD 1 billion
Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.
Investment needs can vary from USD 500,000 to several millions depending on the size (capacity of the company) and growth stage of the water supply business.
Direct Impact
Describes the primary SDG(s) the IOA addresses.
Clean water and sanitation (SDG 6) Reduced Inequalities (SDG 10)
Indirect Impact
Describes the secondary SDG(s) the IOA addresses.
Good health and well-being (SDG 3) Industry, Innovation and Infrastructure (SDG 9) Climate Action (SDG 13)

Business Model Description

Invest in businesses engaged in supply and distribution of affordable and safe piped water to rural households through PWS, covering the entire end to end water utility services from source to consumer household. Business model can be under PPP arrangement with the Royal Government of Cambodia (RGC), or under a license.

TapEffect is a social enterprise that brings the technical know-how and financial capabilities to manage a portfolio of commercially viable PWS, providing safe & affordable water to underserved rural & semi-rural communities. It operates in a region near the Thai border, covering an area of ~2,300 households.(13)

In 2020, TapEffect received USD 220,000 as a loan from The Pioneer Facility for constructing and operating a new piped water station and pipeline in Banteay Meanchey province in rural Cambodia.(7)

Khmer Water Supply Holding (KWSH), seeded in 2013, by the project promoters, Obor Capital and an early stage investor, Insitor Seed Fund [majority owner (14)]. It operates a portfolio of small-scale piped water networks that distribute clean drinking water directly to households in rural Cambodia. (15)

Each rural water station is a subsidiary company with its own water license, operations team & water treatment / distribution facilities. Currently, KWSH manages 5 stations, for a total of over 40,000 households. KWSH has received a grant from a Development Finance Institution (DFI) and its program is designed to expand the delivery of key infrastructure services. (14)

Expected Impact

Expansion of PWS across rural and remote areas to reduce regional disparities in access to affordable and clean water.

How is this information gathered?

Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.

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Country & Regions

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Sector Classification

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Sector

Infrastructure

TCdata360 ranked quality of Cambodia’s infrastructure as 99/137 in 2017, indicating a lack of housing, waste management and water treatment to support its growing population and urbanization.(1) As a result, Cambodia’s performance score on SDG 6 (Clean Water and Sanitation) was ~60.(2) As of 2017, rural access to improved quality of water was 73%.(3)

The National Water Supply and Sanitation Sector Policy (2003)
sets the target of providing complete water coverage by 2025. (4) Ensuring all Cambodians have access to clean drinking water is a Cambodia Millennium Development Goal.

Poor infrastructure can exacerbate gender and regional disparities. In 2019, the gap between rural and urban coverage for clean water access was 15.2 points. The gap is even wider for access to piped water as it reaches 33.9 points. (5)

The burden of fetching water falls on women and children, especially girls, when water is not easily accessible in homes. As such, the opportunity cost of collecting water is high for women as it shortens their time available to spend on themselves, with families, on child-care, other household tasks, or even in leisure activities.

For both boys and girls, water collection can take time away from their education and sometimes even prevent them from attending school.

Moreover, when water is not available at home, and has to be transported and stored, the risk of contamination increase by the time it is consumed, thereby impacting the health of the whole family, particularly children. (6)

Ensuring availability and sustainable management of water and sanitation for all by 2030, as defined by SDG6, requires investing in adequate infrastructure.(7) China Development Bank invested >USD 5.7 bn from 2007 to 2019 in infrastructure development in Cambodia. Since 2020, European Development Bank (EIB) has invested USD 57 mn in rural infrastructure.(8)

Although, Piped Water System (PWS) is a preferred water supply option, barriers to connectivity include affordability of the initial connection fees, and to a lesser extent, the volumetric tariff.(9) Existing single PWS have been underperforming due to weak operations, significant leakage, and the inability to finance expansion of their networks.(10)

Sub Sector

Utilities

~29% of Cambodian population [73% of rural households (3)] lacks access to an improved water source, making them vulnerable to contracting waterborne diseases. The use of untreated water puts families at risk of contracting dangerous waterborne diseases, including diarrhoea, dysentery, typhoid, cholera, hepatitis, parasites, arsenic poisoning, and malnutrition.(10)

National Strategic Plan for Rural Water Supply, Sanitation and Hygiene (RWSSH) 2014-2025 (11)

Sustainable and reliable water supply remains scarce in Cambodia’s rural areas, where about 77% of the total population (16.4 mn) resides. In 2017, while 73% of rural households had access to improved water supply, only 11% of those had piped water supply. (3)

The existing market of scattered individual piped water operators throughout Cambodia is failing to adequately provide clean water needed, especially in rural areas. (10)

Rural population is vulnerable to climate change impacts, and excluded from protective measures due to the logistical, financial and technological constraints that isolation poses. Thus, it is imperative to provide safe and affordable water to underserved, rural and semi-rural communities through a unique management approach for PWS. (12)

In 2019, ~27% of rural households purchased water from a service provider, 16% from PWS, 9% from a vendor, and 2% from a bottled water distributor (compared to ~11% in 2009). This is a result of the country’s economic growth, increased disposable income, and the emergence, strengthening, and expansion of both centralized and decentralized water supply services. (9)

Although impact investors, donors, and development agencies have strong interest in supporting the piped water sector, single operators struggle to attract adequate funding needed to improve their operations, due to small individual size, inadequate capitalization, and lack of proper governance. (10)

Industry

Water Utilities and Services

Pipeline Opportunity

Discover the investment opportunity and its corresponding business model.
Investment Opportunity Area

Piped Water Systems (PWS)

For Peri-Urban and Rural Areas in Cambodia
Business Model

Invest in businesses engaged in supply and distribution of affordable and safe piped water to rural households through PWS, covering the entire end to end water utility services from source to consumer household. Business model can be under PPP arrangement with the Royal Government of Cambodia (RGC), or under a license.

TapEffect is a social enterprise that brings the technical know-how and financial capabilities to manage a portfolio of commercially viable PWS, providing safe & affordable water to underserved rural & semi-rural communities. It operates in a region near the Thai border, covering an area of ~2,300 households.(13)

In 2020, TapEffect received USD 220,000 as a loan from The Pioneer Facility for constructing and operating a new piped water station and pipeline in Banteay Meanchey province in rural Cambodia.(7)

Khmer Water Supply Holding (KWSH), seeded in 2013, by the project promoters, Obor Capital and an early stage investor, Insitor Seed Fund [majority owner (14)]. It operates a portfolio of small-scale piped water networks that distribute clean drinking water directly to households in rural Cambodia. (15)

Each rural water station is a subsidiary company with its own water license, operations team & water treatment / distribution facilities. Currently, KWSH manages 5 stations, for a total of over 40,000 households. KWSH has received a grant from a Development Finance Institution (DFI) and its program is designed to expand the delivery of key infrastructure services. (14)

Business Case

Learn about the investment opportunity’s business metrics and market risks.

Market Size and Environment

Market Size (USD)
Describes the value in USD of a potential addressable market of the IOA.

USD 100 million - USD 1 billion

CAGR
Describes the historical or expected annual growth of revenues in the IOA market.

Demand for water is so high; Consumers pay USD50-100 per year for contaminated/low quality water(16)

Critical IOA Unit
Describes a complementary market sizing measure exemplifying the opportunities with the IOA.

>5 mn people lack access to clean water; >11 mn (70% in rural areas) lack access to piped water (17)

Apart from 13 existing public urban water utilities, there are ~530 private PWS operators in urban and rural Cambodia that are known to the regulatory authority, Ministry of Industry and Handicrafts (MiH) and the Cambodia Water Supply Association (CWA). ~350 of these private operators are categorized as being Small Water Enterprises (SWEs), serving small towns and rural areas. (9)

The Asian Development Bank (ADB) issued USD 49 mn (USD 15 mn policy-based loan; USD 29.61 mn project loan; USD 4.39 mn grant from the Asian Development Fund) to help RGC achieve its 2025 goal of providing universal access to improved water supply and sanitation services in rural areas.(3) Since 2020, European Development Bank (EIB) has invested USD 57 mn in rural infrastructure.(8)

The Third Rural Water Supply and Sanitation Services Sector Development Program aims to benefit >400,000 people by constructing or rehabilitating 2,500 rural water facilities in at least 400 villages across 10 Cambodian provinces. (3)

Indicative Return

IRR
Describes an expected annual rate of growth of the IOA investment.

15% - 20%

One TapEffect water system can connect 1,000-10,000 households, with each household paying an initial USD 40-70 connection fee and an average annual water bill of USD 50 for safe, clean, and reliable water. (17)

With 8 mn Cambodians living in rural and semi-rural regions, and households covering their own connection cost and water bill, the TapEffect market based solution represents an annual revenue opportunity of USD 100 mn. (17)

For every dollar invested in water and sanitation, there is a USD 4.3 return in the form of reduced health care costs for individuals and society around the world. (18)

Investment Timeframe

Timeframe
Describes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.

Long Term (10+ years)

As for any utility, the returns from a PWS are affected by high initial investments and the need for low tariffs. Returns can realistically be expected within 12-15 years, license periods being over 20 years. (19)

TapEffect has developed a new piped water system, covering 19 villages (3,000+ households) in Banteay Meanchey, Cambodia. It has received a 20-year license to construct and operate a new Piped Water System. (17)

For TapEffect, equipment used is more durable, yet advanced, resulting in low start-up costs. Initial capital is needed to install the TapEffect systems in rural and semi-rural communities. This investment can cost as little as USD 540,000 to support a water system connecting 19 villages or 3,000 households. (17)

Ticket Size

Average Ticket Size (USD)
Describes the USD amount for a typical investment required in the IOA.

Investment needs can vary from USD 500,000 to several millions depending on the size (capacity of the company) and growth stage of the water supply business.

Market Risks & Scale Obstacles

Business - Supply Chain Constraints

The low willingness of households to connect to PWS can be a significant barrier to expansion of networks.

Capital - CapEx Intensive

Expansion of PWS to new regions requires significant investment flow. In addition, majority of rural population resides far from the networks, resulting in high transportation costs.

Market - Highly Regulated

Due to the social significance of water supply for achieving sustainable development across the country, businesses need to follow various compliances, and work closely with the regional municipalities. Thus, freedom of operations, and thereby the efficiency of systems may be impacted.

Impact Case

Read about impact metrics and social and environmental risks of the investment opportunity.

Sustainable Development Need

Development of water storage and delivery systems, along with capacity expansion can help resolve the issue of quality and stability of water supply in a timely manner in both wet and dry seasons.

For an effective Water, Sanitation and Hygiene (WASH), a concerted, holistic and systematic approach is required as making progress in each aspect depends on the presence of the other- without toilets, water sources become contaminated, and without clean water, basic hygiene is not possible. (20)

Technological advances in PWS allow for remote monitoring innovations, easy and accurate water payments and bill tracking, as well as sales support and marketing to expand to new communities. (16)

Gender & Marginalisation

Regional disparities in water supply can be resolved through an efficient PWS. With approximately 77% of Cambodians living in rural areas, poor access to safe water and sanitation disproportionately affects Cambodia's rural communities. (3)

Improvement in WASH is required to offer a safe a hygienic environment for underserved children and communities (poor, marginalized, and living in areas vulnerable to environmental risks). 7/10 pre-primary schools lack WASH facilities, and 1/2 rural healthcare facilities lack sufficient water. (20)

Inadequate water and sanitation facilities in schools is problematic for pubescent girls as they reach menarche, and must subsequently manage monthly menses while attending school. This may often lead to girls dropping out of schools. (21)

Expected Development Outcome

Provide clean drinking water directly to rural and semi-rural households in a scalable and efficient manner. For example, KWSH’s consolidated business model allows it to implement high operational standards across its PWS, leverage commercial debt, and scale each PWS to reach more households. (10)

Ensure that PWS service is offered at a lower cost to consumers, than alternative water sources, with significant convenience and improved status. (10)

Generate employment opportunities for local communities, thereby improving their income levels. For its new piped water station and pipeline project in Banteay Meanchey province, TapEffect aims to connect 2 communes (Kouk Ballangk and Sambour), creating 4 full-time jobs on site.(7)

Gender & Marginalisation

Increase access to safe water for informal settlements and rural areas by bringing piped water not only to households, but also to schools and rural health centers. (7)

Promote health and well-being of the population, especially the vulnerable population (children, women and people living near contaminated zones), with decreased rate of communicable water-borne diseases and infections.

Promote menstrual hygiene through progressive WASH behavior change communication, subsequently strengthening sexual and reproductive health of women.

Primary SDGs addressed

Clean water and sanitation (SDG 6)
6 - Clean water and sanitation

6.1.1 Proportion of population using safely managed drinking water services

Current Value

16% in 2016 (22)

Target Value

50% in 2030 (22)

Reduced Inequalities (SDG 10)
10 - Reduced Inequalities

10.1.1 Growth rates of household expenditure or income per capita among the bottom 40 per cent of the population and the total population

Current Value

5.2% in 2016 (22)

Target Value

19.2% in 2030 (22)

Secondary SDGs addressed

Good health and well-being (SDG 3)
3 - Good Health and Well-Being
Industry, Innovation and Infrastructure (SDG 9)
9 - Industry, Innovation and Infrastructure
Climate Action (SDG 13)
13 - Climate Action

Directly impacted stakeholders

People

Rural population benefits from reduced regional disparities in supply of clean and safe water.

Gender inequality and/or marginalization

Vulnerable communities benefit from low-cost supply of clean water which helps in ensuring their improved health and well-being. Women are benefited as the burden of acquiring water for the household from far off distances is reduced.

Planet

As water is supplied directly to households, schools and other remote regions, the level of commute required for accessing water sources reduces, thereby reducing the impact of transport pollution on the environment.

Corporates

Companies such as KWSH manage rural water stations and enable them to work effectively, expanding their coverage of households.

Public sector

Improvement in water supply through PWS contributes to several infrastructure and social development related commitments made by RGC.

Indirectly impacted stakeholders

People

Population benefits from increased employment opportunities, adolescent girls and women benefit from improved sanitation facilities, especially in rural areas.

Gender inequality and/or marginalization

Women benefit from improved and safe menstrual hygiene through the provision of WASH facilities.

Planet

Safe and hygienic surroundings through efficient WASH help in reducing land and air pollution, reduce contaminated zones that can lead to potential climate risks.

Public sector

Sustainable development across regions helps in improving Cambodia's score on human development index, with improvement in health indicators.

Outcome Risks

In the case of chemical water filtration method, improper treatment of wastewater can contaminate water resources and the environment.

Unless measures are taken to ensure end to end effectiveness of the PWS value chain, problems such as leakages in the PWS will lead to loss of precious water resource rendering the business model and expected impact thesis ineffective.

Many consumers assume water to be a free commodity, to be supplied by the government, and may not be willing to pay for installation of PWS.

Gender inequality and/or marginalization risk: If the price points for securing PWS systems are not suited to the needs and payment capacities of low income households, communities and regions where such services are required the most they may remain excluded.

Impact Risks

Due to lack of support infrastructure, many people may still be required to travel long-distances to access PWS.

Women and adolescent girls may not fully benefit from such business models if their needs are not accounted for in the design and implementation of PWS services.

Gender inequality and/or marginalization risk: Health issues of rural communities will persist if pipelines installed are not durable, or equipment for water treatment is not adequate.

Impact Classification

C—Contribute to Solutions

What

Installation of PWS to provide access to affordable water supply across regions, ensuring sustainable development in Cambodia

Who

Underserved; Rural and remote areas benefit with improved supply of safe and clean water directly to the place of consumption.

Risk

Inefficient maintenance of pipelines can lead to leakages and therefore loss of water resources with negative impact on the environment

Contribution

For every dollar invested in water and sanitation, there is a USD 4.3 return in the form of reduced health care costs for individuals and society around the world. (18)

How Much

>5 mn people lack access to clean water and >11 mn (70% in rural areas) lack access to piped water (17)

Impact Thesis

Expansion of PWS across rural and remote areas to reduce regional disparities in access to affordable and clean water.

Enabling Environment

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Policy Environment

National Strategic Plan for Rural Water Supply, Sanitation and Hygiene (RWSSH) 2014-2025 supports the RGC to achieve its vision that everyone in rural communities has sustained access to safe water supply and sanitation services, and lives in a hygienic environment by 2025. (11)

National Strategic Development Plan 2019-2023 presents the vision of development and objectives to reach by 2023 including for rural and urban water supply sector (23)

Financial Environment

Investment Law: Under article 24, green energy technology contributing to climate change adaptation and mitigation is entitled to investment incentives described under article 26 such as income tax exemption for 3 to 9 years, prepayment tax exemption and minimum tax exemption. (24)

Investment Law: Under article 27, besides the basic incentives above, Qualified Investment Project will receive additional incentives such as VAT exemption for the purchase of locally made inputs, deduction of 150 % from tax base for activities such as research development and innovation. (24)

Regulatory Environment

Since 2014, the government has taken progressive steps to strengthen the regulatory framework governing water supply, mainly through a Prakas addressing procedures relating to licensing (2014); and a series of Prakas (2015 – 17) on tariff setting principles. (24)

Water Supply and Sanitation Regulatory Law (draft) aims to encourage the participation and investment of the private sector, both domestic and foreign, in the provision of all Water Supply and/or Sewerage Services. (25)

Prakas on National Drinking Water Quality Standards, 2015 requires private water operators to comply with the water quality standards issued by MIH (26)

Prakas on Procedure for Water Tariff Setting permits the water supply operators to charge from their served customers (27)

Marketplace Participants

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Private Sector

Corporates: TapEffect, Khmer Water Supply Holding (KWSH) Investors: The Pioneer Facility, Obor Capital, Insitor Seed Fund, Asian Development Bank (ADB), European Development Bank (EIB), China Development Bank

Government

Ministry of Industry, Science, Technology and Innovation, Ministry of Rural Development, Ministry of Water Resources and Meteorology, Department of RWS within the Ministry of Rural Development, Department of Potable Water Supply within the Ministry of Industry and Handicrafts

Multilaterals

World Bank Group, Asian Development Bank, Cambodian Water Supply Association, United Nations International Children's Emergency Fund, Mekong River Commission

Non-Profit

Teuk Saat 1001, WaterAid, 3I (Invest in Infrastructure), GRET, Water for Cambodia, Aqua for All, Cambodian Water Supply Association

Public-Private Partnership

Phnom Penh Water Supply Authority, Sihanouk Water Supply Authority, Siem Reap Water Supply Authority, Battambang Water Supply Authority, Kampot Water Supply Authority

Target Locations

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Otdar Meanchey Province has the lowest percentage of people with access to safe drinking water, accounting for 1.4%, followed by Kampong Thom at 2% and Ratanakiri Province at 3%. (28)

Mondulkiri, Siem Reap, Pursat, Kompot and Preah Vihear are other provinces in Cambodia with low access to clean water, i.e. less than 10%. (28)

In 2020, The Pioneer Facility issued a loan of USD 220,000 to assist TapEffect in constructing and operating a PWS and pipeline in Banteay Meanchey province (an area of 14,000 people including 10 schools and 2 rural health centers), connecting two communes (Kouk Ballangk and Sambour). (7)

References

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