Wastewater Treatment: Case Study of Public-Private Partnerships (PPPs) in Shanghai

Publication | November 2010

The People's Republic of China began to deregulate the water sector in the 1990s, permitting private and foreign investment in water supply and sewage treatment infrastructure.

This case study narrates how the success of public-private partnerships (PPPs) in Shanghai has generated savings for the country. Once such project is the Shanghai Zhuyuan Youlian No. 1 wastewater treatment project (ZY1WWTP). It is the first mega-ton wastewater treatment plant in Shanghai, with advanced primary treatment capacity of 1.7 million cubic meters (m3)/day. The plant serves 23.5 million residents over an area of 107 square kilometers at a relatively low service fee of CNY0.22 per cubic meter of treated wastewater and a minimum treatment level of 1.4 million m3/day.

The savings generated through the PPP arrangement are reflected in the service fee, which was about 40% below the government’s own projected cost of CNY0.38 per cubic meter. The indirect subsidies through fixed investments and the provision of land from the government help explain how the consortium was able to offer a relatively low service fee. By aligning the service fee to performance and investments made by the consortium, the government was also able to transfer the financial risks of the project from the public to the private sector.