Water Resources Management (2021) 35:3497–3511

https://doi.org/10.1007/s11269-021-02900-9

Public–Private Partnerships in the Water Sector: The Case

of Desalination

Robert A. Greer1 · Kyungsun Lee1 · Amanda Fencl1 · Gretchen Sneegas1

Received: 25 November 2020 / Accepted: 29 June 2021 / Published online: 13 August 2021
© The Author(s), under exclusive licence to Springer Nature B.V. 2021

Abstract
Public–private partnerships (PPPs) have grown in popularity as a method to leverage pri-
vate sector actors in the production of government services. With the global challenge of
water insecurity, PPPs are becoming more common for large scale water infrastructure pro-
jects. One prominent example is the water desalination industry. Global desalination capac-
ity has grown in recent decades driven by demand for alternative water sources. However,
desalination facilities remain complex and expensive operations. In this paper, we exam-
ine the role of private actors working in partnership with public entities in the delivery of
drinking water using the case of desalination. We examine global trends in PPPs and dis-
cuss implications for the desalination industry as well as water infrastructure more broadly.
Additionally, detailed data on desalination facilities were collected in Israel, Australia, and
the United States including key stakeholder interviews. Results demonstrate an increase
in PPP use in the water sector over time along with significant regional variation. We also
find that the public sector partners often rely on private sector partners in the design, build,
and operation stages of the project regardless of the amount of public financing.

Keywords Public–private partnership · Desalination · Infrastructure · Finance

1 Introduction

The global water sector has increasingly recognized the challenges of meeting the grow-
ing demand for water infrastructure. A key challenge is meeting the financial requirements
for building, upgrading, and maintaining aging water systems in an operating environment
of water scarcity, regulatory hurdles, climate change, and competition for financial capital

* Robert A. Greer
rgreer1@tamu.edu
Kyungsun Lee
kylee@tamu.edu
Amanda Fencl
alfencl@tamu.edu
Gretchen Sneegas
gsneegas@tamu.edu
1
Texas A&M University, College Station, Texas, USA

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Vol.:(0123456789)
3498 R. A. Greer et al.

(Cashman and Ashley 2008). One estimate by the Organization for Economic Coopera-
tion and Development (OECD) is that the required global infrastructure investment will
reach US$71 trillion by 2030 (Abadie 2008). While there are efforts to reduce per capita
consumption of water in many parts of the world, a long term strategy for financing water
infrastructure will be needed to provide clean drinking water and wastewater infrastructure.
To address the significant financial demands related to infrastructure, many govern-
ment organizations have sought out innovative financing tools. Traditionally, govern-
ments finance capital costs with debt and then repay that debt using tariffs and water fees
(Greer 2020). This debt financing approach spreads out the costs of the project to match
the useful life of the asset, which can often be twenty to thirty years (or longer). However,
given the rising cost of construction and a competitive fiscal environment for governments,
many governments have turned to non-traditional financial innovations.
One of the most popular financing alternatives has been public–private partnerships
(PPPs). While they only account for between one and three percent of total infrastructure
projects (Congressional Budget Office 2019), PPPs have grown in popularity over the last
twenty years. PPPs have been used most extensively in the transportation and housing
sectors, where they have been studied more broadly. PPPs have been used in water
megaproject (e.g. Novaro and Bercelli 2017; Suárez-Varela et al. 2017; Ma et al. 2020), but
they have also gained traction in other areas of the water sector where our understanding of
their forms, functions, costs, and benefits are more limited.
One prominent area of the water sector that has made use of PPPs is the desalination
industry. The process is expensive, typically energy-intensive, and requires substantial
technical expertise which has promoted many public entities to turn to the private sector
to help navigate the implementation of desalination technology. Desalination provides a
useful lens through which we can observe trends in the use of PPPs in the water sector.
In particular, we can explore variation over time, geography, and partnership formation.
Using a global database of desalination facilities we describe the use of PPPs across these
dimensions and then examine their applications more in-depth with case studies in Israel,
the United States and Australia.
This study builds on the growing body of PPP literature to advance our understanding of
how partnerships are used in the desalination industry, which may reflect growing trends in
the larger water sector. Furthermore, it identifies the varying forms of PPP arrangements,
how they shift costs and risks between public and private partners, and the extent to which
they are favored in different governance arrangements. PPPs are not a “one size fits all”
solution and the decision to use one depends on specific goals, operating environment, and
risk preferences. This study analyzes a global data set and provides in-depth case studies
in three different governance contexts to develop a better understanding of the institutional
arrangements that support PPPs.

2 Desalination

Desalination refers to a set of technologies that remove dissolved salts and other minerals
from seawater and brackish water. Due to increased water demands in areas with limited
surface and groundwater resources, the use of unconventional water resources like seawater
and brackish water desalination have expanded (Swyngedouw 2013; McEvoy 2014;
March 2015). The global desalination industry has rapidly grown in the last 20 years. In
1966, the total installed capacity of desalination facilities globally comprised 92 plants

13
Public–Private Partnerships in the Water Sector: The Case of… 3499

with around 90,000 m ­ 3/d (Balaban 2017). In the last decade, the installed capacity of
global desalination plants increased on average 6.8% since 2010 (Eke et al. 2020). As
of February 2020, 20,971 facilities produced around 97.2 million m ­ 3/day of desalinated
water (Eke et al. 2020). Not only the number but also the size of the desalination facilities
have expanded. The number of extra-large facilities producing 50,000 m ­ 3/day or more of
desalinated water continues to increase, especially in developed and emerging countries
(Feitelson and Jones 2014; Eke et al. 2020).
The growth of the desalination industry has been based on technological development
and efficiency improvement (Feitelson and Jones 2014; Gude 2016; Williams and
Swyngedouw 2018). Because of high energy demand and costs, desalination facilities were
predominantly located in water-scarce and energy-rich regions like the Middle East before
the 2000s (Williams and Swyngedouw 2018; Shomar et al. 2014). These facilities mainly
used thermal technology such as Multistage-flash (MSF) and multi-effect distillations
(MED) (Elimelech and Philip 2011; Mezher et al. 2011). However, the development of
Reverse Osmosis (RO) technology, which has lower energy requirements and simplicity, has
made RO the most commonly used commercial desalination technology since the 1990s
(Mezher et al. 2011; Gude 2017). The research on desalination has been growing rapidly
since the 1980s, but the majority of publications focus on technological development (Jones
et al. 2019). Other aspects of this research include economics, energy, and environmental
impacts while research examining the socio-political issues of desalination remains
relatively scarce (Jones et al. 2019; Ibrahim et al. 2021; Lee and Jepson 2021).

3 Public–Private Partnerships and Risk

Traditional procurement methods for large infrastructure projects involve contracting out
single functions of a project to a private company. This is often done as a competitive bid-
ding process and can be done for each stage of a project. A public–private partnership,
however, is a joint arrangement between the public and private sectors to work towards a
certain goal or objective, and in doing that share risks, resources, responsibilities, liabilities
and/or authority (Kwak et al. 2009). The pooling of resources across sectors is advanta-
geous because aspects of a project such as expertise, money, information, personnel, and
management can be handled by the partner with the comparative advantage as compared
to a situation where only an individual agency is involved (Osborne 2000). The nature of
a PPP is thus built around cooperation, collaboration, and interaction of these sectors for
mutual benefit (van Ham and Koppenjan 2001).
For the public sector, one of the significant advantages of PPP arrangements is
that they face a reduced financial burden especially in the design and construction
stage of a project. This may reduce public sector debt by involving private financiers
(Kwak et al. 2009). Collaboration with private sector partnerships also allows access
to experience and technologies that the public sector agencies are lacking (van Ham
and Koppenjan 2001). In return, the private sector partner is allowed to generate
profits in markets and investment opportunities that may be otherwise unavailable. For
example, in the case of water provision, a municipality may have monopoly power but
through a partnership, the private actor may collect, and profit from, the water fees.
Simultaneously, PPPs can benefit the general public by expanding and improving its
core infrastructure. PPP contracts are mechanisms to transfer risks from public agencies
to private firms as an attempt to improve operations and reduce operating costs. The

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3500 R. A. Greer et al.

Fig. 1  Public private partnership forms and revenue risk transfers

tradeoff is that there needs to exist a profit motive for the private firm to assume
those risks; therefore, the type of risk and the extent to which it is shared is a critical
component of PPPs that needs to be understood by policymakers and public managers.
Financial risk is a core risk feature of PPP arrangements. All infrastructure projects
can identify common risk categories such as construction-related risk, usage or demand
risks, payment risks, maintenance, etc. What distinguishes water infrastructure from the
more commonly studied transportation sector is demand risk of water and the political
nature of water rates used as the main source of revenue for most utilities. For exam-
ple, it is revenue risk that will determine the remuneration model and whether the pay-
ments will be user-fee based or budget-based (Weber and Alfen 2010; Roumboutsos and
Pantelias 2015). There are a wide range of risks that exist in any given project and a
substantial literature on risk management that spans multiple disciplines (Bullock et al.
2019); however, it is often revenue and demand risk that is most heavily weighted in
PPP arrangement decisions.
Despite including the term ‘partnership,’ it is important to keep in mind that
public–private partnerships are in fact strict contractual agreements with legal bearing and
financial consequences. The reason for the legalistic approach is protection against risk
(Roumboutsos and Pantelias 2015). To account for the various risks that are shifted to the
private sector through PPPs, various contractual forms have been created with a variety
of acronyms used to reflect the key attributes of the transactions such as BOTs (Build-
Operate-Transfer), BOOTs (Build-Own-Operate-Transfer), BOOs (Build-Own-Operate),
DBFOs (Design-Build-Finance-Build-Operate), and many others. Each of these contract
forms represents a different version of risk transfer between public and private entities.
Figure 1 outlines some of the popular forms in water infrastructure projects with their
description and level of risk transfer.

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Public–Private Partnerships in the Water Sector: The Case of… 3501

The stages that are shifted from public sector authority to private sector authority define
the PPP arrangement type (as indicated in Fig. 1). Therefore, each arrangement type car-
ries varying degrees of project risk depending on the arrangement. One relatively new PPP
type that has grown in popularity is the Build-Operate-Transfer (BOT) arrangement and
its myriad variations. The BOT arrangement involves private entities assuming risks in
design, finance, construct, operation, and maintenance phases of a project for public use for
a specific term during which they are able to collect revenue from the facility. Then when
the contract term ends, the title and ownership reverts to the government. The private entity
expects to have collected enough revenue to repay its initial investment and make a profit
through the collection of user fees (Levy 1996). A similar arrangement is the Build-Own-
Operate-Transfer (BOOT) arrangement where the private entity also owns the asset prior
to transferring it to the public entity. Yet another permutation is the Design-Build-Own-
Operate-Transfer (DBOOT) where the same private entity is responsible for designing the
facility in addition to the other functions.
In a different approach, the Design-Build-Operate (DBO) arrangement is structured
so that the public entity owns and finances the construction; however, the private entity
designs, builds, and operates the asset to an agreed-upon level of output. These are similar
to another PPP type sometimes referred to as a Build-Transfer-Operate (BTO). DBOs are
typically a simpler contract relative to a BOT or concession as there are not the financial
documentation and disclosure requirements (World Bank 2018). The private entity, which
is also the operator, takes minimal financing risk and is paid a fixed amount for the design
and construction at set time periods or milestones. The private operator does have operation
and maintenance responsibility so they would be responsible for replacing parts and equip-
ment. This may be significant in the context of desalination where the filtration membranes
are an important factor in facility operating costs. Even though these arrangements present
opportunities for capital investment that would otherwise be unavailable, political barriers
and resistance to change might result in these PPPs not being utilized (Yescombe 2007).
A PPP arrangement that comes closest to actual contracting-out of the public service is
the Build-Own-Operate (BOO) arrangement. In this model, a government entity sells the
rights to build a project to a private firm with the requirement that design specifications
are met. The firms are then allowed to control operations for the remainder of the project.
In the realm of water supply management, an example can be found in the operation of
water treatment plants. The public entity contracts with a private firm to build a desired
water treatment plant, which is then owned and operated by the private firm perpetually.
This model allows for the recoupment of investment costs by local governments in a timely
manner but has the particular disadvantage of difficulties arising in administrative power
over the constructed facility (Algarni et al. 2007). The disadvantage of this approach to
the government is that the private sponsor owns the public facility to operate forever. Also,
the government may have political difficulty in exercising administrative power to assist a
private entity in owning a public facility even if the intention is to promote public welfare.
An alternative form of PPP is what’s known as Alliance Contracting. This project struc-
ture typically exists through the creation of an entirely separate “Alliance” entity typi-
cally formed via the future asset’s owner and private firm(s), wherein the Alliance mem-
ber entities and their team commit to work together in good faith through a “no fault,
no blame, no dispute culture, a risk/reward scheme, unanimous decision making, direct
cost reimbursement on 100% open book basis, principle based decision making” (Water
Corporation 2010, p. 5). Many countries rely on Alliance Contracting, but they appear to
be notably present in Australia, New Zealand, the UK, and some Scandinavian countries.
Alliance models are characterized by collective risk sharing and are “widely employed by

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Australia’s public sector to handle high visibility, complex capital works projects” (Sakal
2005, p. 67). In an Alliance, all project risk management and outcomes are collectively
shared while financial risk or outcomes may not be equally shared; they may even be borne
exclusively by the major capital asset’s owner(s). The success of Alliance Contracting for
large, complex public infrastructure projects in multiple sectors in Australia (offshore oil
and gas, transportation, water) has led to the adoption of this model for projects in other
countries (Rahmani et al. 2017).

4 The Trends of Public–Private Partnerships in the Desalination Sector

To examine the role of PPPs in the water sector we use the case of desalination, which is
a growing sector that requires substantial financial investment, advanced technologies, and
several dimensions of risk. Data on desalination facilities around the world are collected
from Global Water Intelligence (GWI)’s DesalData database. The GWI DesalData pro-
vides information about desalination projects across the world such as location, capacity,
technology, stakeholders, award date, plant status, procurement model, project tracker, and
related news items. On February 6, 2020, information about 21,729 projects was down-
loaded from DesalData for this research.1 The data analysis is conducted by R. As of Feb-
ruary 2020, 2.66% (n = 578) of desalination projects around the world used a PPPs model.

4.1 The Trends of PPPs Over Time

The first awarded PPP project recorded in the DesalData dataset was a BOO project in
Oman in 1981. Since then, the PPPs project was getting popular in the desalination sec-
tor especially in the 2000s. The number of PPPs projects has been growing except in the
early 2000s and 2010s (Fig. 2). This trend was similar with the overall desalination mar-
ket trends (Fig. 2). The ratio of PPPs projects over all desalination projects was under 1%
except 2005 and 2019.

4.2 Procurement Models of PPP Projects

In the DesalData, six different procurement models were identified (BOO, BOT, BOOT,
DB, DBO, DBOOT) (see Fig. 1 for their definitions). In total, the most popular models
have been BOO and BOT. Compared with other procurement types, BOOT and DBOOT
have a lower number of projects. While there are no obvious trends in the time series anal-
ysis of different procurement models, there is geographic variation. While the countries in
the Middle East and North Africa preferred BOO and BOT, the countries in North Amer-
ica preferred DB, the countries in East Asia and the Pacific preferred DBO and BOT, and
the countries in the Western Europe preferred DBO. In the case of countries in East Asia
and the Pacific, the data shows that Pacific countries such as Australia prefer DBO while

1
The 21,729 projects are all projects identified in the DesalData as of February 6, 2020, regardless of their
plant status (planned, awarded, construction, online, presumed online, offline, presumed offline, on hold,
and canceled), technology type (RO, MSF, MED, etc.), feed water type (seawater, brackish water, wastewa-
ter, etc.) and customer type (industry, municipal, other) contracted from 1944 to February 2020.

13
Public–Private Partnerships in the Water Sector: The Case of… 3503

Fig. 2  The total number of all desalination projects (black line) and PPP projects (bar graph) per year
(1945—2019)

many East Asian countries adopted BOT. Our case study sites, the United States, Israel,
and Australia followed the same trend. DB (58.8%) and DBO (22.4%) in the United States,
BOT (64.3%) in Israel, and DBO (80%) in Australia were the major procurement types in
each country.

4.3 Characteristics of PPP Projects

To understand the characteristics of PPP Projects, we analyzed the data based on their
capacity,2 technology, feed water, and customer type. In terms of capacity, PPP projects
were more frequent among large projects. 73% of PPP projects were categorized into large
or extra-large capacity projects. Compared with all desalination projects, 29.5% of extra-
large and 11.4% of large capacity projects use PPP arrangements while only 1.79% of
medium and 0.197% of small projects choose the PPP. PPP projects are also commonly
used for seawater desalination. Among all PPP projects, 68% of projects used seawater as

2
In the DesalData, the capacity of project was categorized into small, medium, large, and extra-large based
on Million Imperial Gallons per Day(MIGD): Small size ≦ 0.22; 0.22 < Medium size ≦2.20; 2.20 < Large
size ≦ 11.00; 11.00 ≦ XL size.

13
3504 R. A. Greer et al.

feed water. These PPP arrangements were 5.69% of the all seawater desalination projects.
Other types of feed water are much less common.3 Brackish water was the second largest,
but only made up 1.08% of projects. The analysis also showed that RO (Reverse Osmo-
sis) is the dominant technology, used in 81.5% of all desalination projects and in 96.8%
of all PPP projects. Other major technologies such as MED (Multi-effect Distillation), ED
(Electrodialysis), MSF (Multi-stage Flash) occupied less than 1% of all PPP project, while
MED (6.32%), ED (5.62%), and MSF (3.91%) were major technologies in all desalination
projects. The main customers of PPP projects were municipalities (75.5%) and industry
(17.8%). This result is also different from all desalination projects where municipalities
occupied 29.2% and industry occupied 58.2% of all desalination projects.

5 PPPs in Context: The Cases of Israel, United States, and Australia

Examining the descriptive statistics of the different PPP arrangements and how they are
used in the desalination sector provides a useful overview of PPPs in the water sector. We
are able to examine trends over time, variation by region, and gain an understanding of
the frequency of PPP arrangements for desalination facilities. However, to provide a more
in-depth understanding on PPPs in the water sector through the lens of desalination, it is
helpful to examine case studies. We use three case studies: Israel; Perth, Western Australia;
and Carlsbad, California, USA. The case studies draw on document and literature review
as well as data from semi-structured interviews conducted in Israel and Australia in late
2019 to early 2020. These sites were selected for being industry leaders and early adopters
of large scale desalination and recycled water facilities in regions facing water scarcity due
to climate change, urbanization, and increasing populations. Together, they demonstrate
how context-specific considerations contribute towards using PPP arrangements for water
projects.

5.1 BOT Arrangements in the Israeli Water Sector4

A series of droughts in Israel beginning in the 1980s culminated with the severe 1998–2001
drought which prompted the government to consider large-scale seawater desalination. In
2004, Israel approved the first national water plan for seven seawater desalination sites; the
first desalination plant, Ashkelon, came online in 2005. In 2007, Israel created the Water
Authority to regulate the Israeli water sector (Feitelson and Rosenthal 2012). The Water
Authority published a new national water plan in 2008 with the goal to build five new
desalination plants by 2050 supplying 750 million ­m3/day. Currently, Israel has five operat-
ing seawater desalination plants (Ashkelon, Palmachim, Hadera, Soreq, Ashdod), with two
more under tender in 2020 (Soreq 2, Western Galilee). The overall percentage of potable
water sourced from seawater desalination has increased from 2% in 2005 to 39% in 2018.

3
Feedwater categorization is based on salinity thresholds: Brackish water or inland water pure water
or tap water (TDS (Total Dissolved Solids) ≦ 500 ppm), river water or low concentrated saline water
(500 ppm < TDS ≦ 3,000 ppm); (3,000 ppm < TDS ≦20,000 ppm); seawater (20,000 ppm < TDS
≦50,000 ppm); brine or concentrated seawater (50,000 ppm < TDS).
4
Data for the Israel case study is primarily drawn from informational and semi‑structured interviews con-
ducted between November 2019 and February 2020.

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Public–Private Partnerships in the Water Sector: The Case of… 3505

Seawater desalination is estimated to account for 45% of potable water by 2030, and 61%
by 2050 (WA employee, personal communication, November 11, 2019).
Israel views the BOT mechanism as an effective means of risk distribution among state
and private industry actors. The state ensures all water produced at the desalination facility
is purchased by a state-owned entity responsible for water distribution (called Mekorot),
which contracts to purchase a fixed amount from each facility even if that water is not
needed. Additional water goes towards groundwater recharge, with a new initiative to pipe
extra water from the planned Western Galilee facility into Lake Kinneret. No government
financiers, bonds, or guarantees are involved in the BOT process; all funding is provided
from the private sector. The private sector ensures that the facility is operational, taking
care of costs relating to operation and maintenance. Out of the money paid by the state,
the company pays the operator a fixed amount, pays the lender, pays a variable sum based
on energy used, and then distributes the remainder as dividend. Any day that a given facil-
ity is not running, the private industry groups running that facility are losing money (WA
employee, personal communication, February 11, 2020).
All desalination facilities in Israel but one (Palmachim) are funded through BOT mech-
anisms with 25 year concessions.5 After the 25 year concession ends, the facility trans-
fers back to WA before entering a new tender for operation. Ashkelon will be the first
plant to go into transfer in 2027 (WA employee, personal communication, November 11,
2019). Another plant, Ashdod, is the only plant owned and operated by Mekorot, but has
experienced many operation problems, despite only being in operation for six years; the
plant is currently under tender for renovation and operation by a private company until
the end of its concession (WA employee, personal communication, November 11, 2019;
DesalData 2020).

5.2 BOT in Carlsbad, CA: Claude “Bud” Lewis Desalination Plant

Situated on the Southern coast of California, the San Diego County Water Authority
(SDCWA) is an independent public agency created in 1944 to import water to the region.
As a wholesaler, it sells water to 24 retail water providers and their over 3.3 million
residents. In 2012, the SDWA Board of Directors approved a 30-year “take-if-delivered”
water purchase agreement of 59.2—69.1 million m ­ 3 per year from the Claude “Bud” Lewis
Desalination Plant in Carlsbad, CA, a Sea and Brackish Water Reverse Osmosis (SWRO)
facility (San Diego County Water Authority 2012a). The agreement was signed after
multiple years of contracting discussion and negotiation that focused on terms to “transfer
risk to the private sector” related to the DBO for both the plant and pipeline; ensuring that
SDCWA would have “no responsibility or liability for the design, permitting, financing,
construction and operation of the project” (San Diego County Water Authority 2012b).
The Plant was commissioned in 2015 with a capacity of 50 MGD (189,270 ­m3/d). The
desalinated water currently meets around 10% of the regional demand (Nikolewski 2019).
Various joint-ventures and private equity firms were involved in the plant’s development,
construction and current operation. Poseidon Resources Corporation, a private, investor-
owned firm which has pursued various PPP water projects since 1995. The Carlsbad
project was proposed unsolicited by Poseidon in 1998, who began acquiring the land and

5
Palmachim is instead funded through a BOO mechanism; with 138,190 million m3/day it is also the
smallest desalination plant currently operating in Israel (see Fig. 1).

13
3506 R. A. Greer et al.

beginning work on the Environmental Impact Report (EIR) by 2003 (DesalData 2004).
The plant was developed and (until recently) owned by Orion Water Partners LLC, a joint
venture of Poseidon Resources Corporation and Stonepeak Infrastructure Partners (a New
York-based private equity firm). Poseidon contracted IDE Technologies Ltd., an Israeli
desalination company, to design, supply and operate the plant (San Diego County Water
Authority 2010; DesalData 2019). The facility started construction upon approval of the
Water Purchase Agreement in 2012.
The initial estimate for construction was $250 million to build, however, by the time it
opened in December 2015, the final construction cost was $1 billion (Dayton 2016). Orion
Water Partners required more than $900 million in financing, 79% of which ($734 M)
was via tax-exempt private activity bonds from the California Pollution Control Financ-
ing Authority (DesalData 2018). Ultimately, the SDCWA passes the cost of their purchase
agreement for Carlsbad water onto “their member retail water providers through several
different charges: a variable supply rate, transportation rate and several fixed charges (Stor-
age, Customer Service, Capacity, and Infrastructure Access Charge) (Carollo Engineers,
May 2015) and accounts for an increasingly larger share of SDCWA costs to water systems
over time” (Pierce et al. 2019, p.25).

5.3 Alliance Arrangements and DBOs in Perth, Australia: Water Corporation

Perth is a city of nearly two million people on the Western coast of Australia where the
country’s first desalination plant was built in 2006 to provide water to its growing urban
population facing water shortages driven by marked reduction in rainfall over the last four
decades. The Water Corporation (Water Corp) is a not-for-profit entity owned by the West-
ern Australia Government, and accountable to the Minister for Water, its sole shareholder.
Water Corp is the main supplier of potable water, wastewater treatment, and drainage ser-
vices in the state. There are two major desalination plants in the Perth metro-region that
both produce water for municipal demand: Perth Seawater Desal Project at Kwinana (Desal
I) which is online as of 2006 and the Southern Seawater Desal Plant at Binningup (Desal
II), which has been operating since 2014. Together, the Perth Seawater and Southern Sea-
water Desalination Plants cost an estimated $427.8 million and both have a capacity of
around 140,000 ­m3/d (DesalData 2020).
Water Corporation does not issue bonds itself; it sources all financing through the West-
ern Australian Treasury Corporation (WATC) (Water Corporation Employee, personal
communication, Marc 11 2020). Both desalination plants were financed–in line with the
traditional model of debt financing– by public funds for public infrastructure from the
WATC. The WATC is Western Australia’s public sector financial services provider, whose
liabilities are guaranteed by the Treasurer on behalf of the State WATC 2020 is men-
tioned in the text but the complete bibliographic information is not provided in the Refer-
ence list. Please provide the missing bibliographic information. (WATC 1986). The West-
ern Australia State government also owns 100 percent of the Water Corp’s equity (Water
Corporation 2019).
Water Corp relies on an Alliance contracting model in its engagement with private sec-
tor facility designers, builders and operators. de Albornoz Portes’ (2017) case investiga-
tion of the Kwinana desal facility describes a process where a Multiplex-Degrémont joint
venture (Multiplex, Degrémont [Suez], Burns & Roe Worley), which was contracted to
build both the plant and the seawater intake and finalized its Alliance agreement over six-
months of working closely with Water Corporation in Perth (Verdict Media Limited 2006;

13
Public–Private Partnerships in the Water Sector: The Case of… 3507

de Albornoz Portes 2017). Suez (formerly Degrémont) now operates the plant with a
25 year contract (SUEZ n.d.). Similarly, in 2009 the Southern SeaWater Alliance (SSWA)
was awarded a DBO contract for the Southern Seawater Desalination Plant in Binningup.
SSWA. (Verdict Media Limited 2013; DesalData 2019). Water Corporation has been inves-
tigating a third desalination facility to serve the Perth-metro region but there are no imme-
diate plans to break ground.

6 Discussion

The extent to which PPPs are a viable alternative for water utilities to use when taking
on large infrastructure projects depends on project specific goals, operating environment,
and risk levels. Context matters, which is why to understand the role that PPP plays in
the water sector it is helpful to consider both the global trends as well as the specifics of
each key case. We see that the BOT arrangement is particularly prominent in the Middle
East region, as exemplified by the many desalination facilities in Israel. We know from the
descriptive data that DB and DBO arrangements are more numerous in North America, but
when it comes to the largest seawater facility in the U.S. located in Southern California, the
BOT arrangement was still used. It is also interesting to note the role of key global partners
in the desalination industry such as IDE Technologies Ltd. that were involved in both the
Israel and California projects. The understanding of risk transfers, and familiarity with the
project-specific risks may help determine the contracting arrangements. On the financing
side, the role of the state government also seems to play an important role, but that can take
different forms such as guaranteed water purchase agreements or upfront capital costs for
construction.
As demonstrated in the Israel and Australian cases, the potential benefits of using PPPs
include access to technical innovations, private capital, managerial experience, and a risk
counterparty. However, the potential downside of a PPP arrangement relative to traditional
government procurement is the possibility of higher total cost, financial risks related to
debt and default, and political risks related to public perceptions and acceptance. To under-
stand how to best use PPPs as a tool in water infrastructure development these costs and
benefits have to be measured and weighed.
The first step in that process is to understand the water sector and current landscape
of PPP arrangements as they are being applied. Examining trends in the use of various
PPP arrangements for desalination facilities provides insight into the water sector. Using
the global desalination data we find that 2.66% of all desalination projects use some PPP
arrangement. There is significant growth in the use of PPPs since 2000 that tracks with
the overall trend of infrastructure projects exploring partnerships during that time. We do
find that the BOO and BOT are popular PPP arrangements in the desalination sector; how-
ever, there is geographic variation in those trends. There was also geographic variation in
the number and size of desalination facilities that use PPPs. While it is true that PPPs are
preferred for larger projects, we see that the United States has the largest number of total
projects whereas the total capacity of PPP projects in the Middle East and North Africa
are higher. We also find that PPPs are more often used for facilities using the older, more
established Reverse Osmosis technology as well as projects that have seawater sources
rather than brackish sources. Finally, we see that the government entity in a desalination
PPP is most likely to be a municipality.

13
3508 R. A. Greer et al.

The prevalence of BOT arrangements in the data along with the Israel and California
cases is an interesting departure from the PPP literature that focuses on the transportation
sector. In a survey of state and municipal agencies in the United States (focusing on trans-
portation), Algarni et al. (2007) found that BOTs, BOO, and BTOs were not widely used.
They found that survey participants cited availability of other methods as one of the key
reasons and specifically cited were variations of design-build or design-bid-build forms of
PPPs. Other reasons include political obstacles, which Algarni et al. (2007) note is not
surprising given the need for special legislation in some cases and the existing evidence
around the need to gain public support as a critical factor of PPP success (Frillet 1997;
Qiao et al. 2001, and Li et al. 2005). Bennett (1998) and Li et al. (2005) also find that an
enabling regulatory, legal, and political environment is the cornerstone of sustainable pri-
vate sector participation in urban infrastructure services. In most instances, the municipal
or state legislature has to discuss this issue at length before legislation is enacted that regu-
lates the use of BOT or variations.

7 Conclusions

A key factor in determining the appropriateness of PPPs for a given project is the extent
to which various financial risks are shifted from public organizations to private organi-
zations. Risk sharing is a core feature of PPPs, but as we discuss, there are many alter-
native versions of PPP that shift risks to different degrees. The appetite for financial risk
(by both public and private entities) may vary significantly depending on project specifics,
but understanding those tradeoffs is necessary for making informed decisions and achiev-
ing both efficient and equitable outcomes. In this paper, we argue that the different PPP
arrangements, and how they transfer risks, are understudied in the water sector. More
research in this area is needed given the importance of water provision on a global scale,
the high financial costs of water infrastructure, and the growing concerns about climate
change and water security.
The water desalination sector provides a lens through which we can examine the use
of PPPs in the water sector, but it is a small sector relative to global water infrastructure
demands. We present a starting point to understanding trends in the use of PPPs for water
infrastructure, but there is much more that should be done to fully understand the trade-
offs. For example, more research is needed to understand the appropriate scale of project
size for PPPs, to examine cases where PPPs have been successful and those that have not,
and to understand regional contexts in decision making. Our case studies represent regions
where water security concerns are high and the public may be more accepting of taking on
financial risks. Additional cases and contexts are needed to understand how governance
contexts, power structures, and public opinion may factor into the use of PPPs in the water
sector and beyond.

Authors’ Contributions All authors were involved in the production and writing of the manuscript. Concep-
tualization, R.A Greer and K. Lee; investigation, K. Lee, A. Fencl, and G. Sneegas; writing- review, and
editing, R.A. Greer, K. Lee, A. Fencl, and G. Sneegas. All authors have read and agreed to the published
version of the manuscript.

Funding Internal grant funding provided by Texas A&M University and the Office of the President’s Excel-
lence Grants.

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Public–Private Partnerships in the Water Sector: The Case of… 3509

Availability of Data and Material Available for purchase at desaldata.com.

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