Tunisia - First and Second Water Supply Projects

Document of The World Bank FOR OFFICIAL USE ONLY Rr""TSK Report No. 1902 ONE PROJECT PERFORMANCE AUDIT REPORT TUNISIA: FIRST AND SECOND WATER SUPPLY PROJECTS (Loan 581-TUN and Credit 209-TUN) February 13, 1978 Operations Evaluation Department This document has a restrictid distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  PROJECT PERFORMANCE AUDIT REPORT FOR OFFICIAL USE ONLY TUNISIA: FIRST AND SECOND WATER SUPPLY PROJECTS (Loan 581-TUN and Credit 209-TUN) Table of Contents Page No. Preface Project Performance Audit Basic Data Sheet Project Performance Audit Memorandum (Highlights) 1 - 2 Attachment: Project Completion Report I. Introduction Al II. Project Content, Execution and Operation A2 III. Financial Performance A7 IV. Institutional Performance A10 V. Justification A13 VI. Conclusions A14 Annexes I. Detailed Project Descriptions II. Comparison of Appraisal Forecast and Actual Schedule of Disbursement III. Comparison of Appraisal Forecast and Actual Disbursement by Category IV. Comparison of Major Indicators, Appraisal Forecast and Actual V. Comparison of Appraisal Forecast and Actual Income Statements Comparison of Appraisal Forecast and Actual Cash Flow Comparison of Appraisal Forecast and Actual Balance Sheet Comparison of Appraisal Forecast and Actual Financing Plan VI. Table of Actual Incremental Benefits and Costs Map This document has a restriicted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  PROJECT PERFORMANCE AUDIT REPORT TUNISIA: FIRST AND SECOND WATER SUPPLY PROJECTS (Loan 581-TUN and Credit 209-TUN) Preface This report presents a performance audit of the Tunisia First and Second Water Supply Projects for which Loan 581-TUN of US$15 million and Credit 209-TUN of US$10.5 million were both closed in December 1976. It con- sists of a memorandum (Highlights), prepared by the Operations Evaluation Department (OED), and a Project Completion Report (PCR), prepared by the Bank's EMENA Regional Office. OED has reviewed the PCR against the Appraisal and President's Reports and has found that it seems to cover reasonably well the issues rele- vant to the implementation of the components as well as to the economic justi- fication of the projects and to be internally consistent. On the basis of this limited review process, OED has accepted the analysis and conclusions of the PCR and has summarized its main findings in the memorandum (Highlights).  TUNISIA: FIRST AND SECOND WATER SUPPLY PROJECTS (Loan 581-TUN and Credit 209-TUN) COMPLETION REPORT BASIC DATA Key Project Data loan 581-TUN Credit 209-TUN Original Actual or Original Actual or Item Plan Current Estimate Plan Current Estimate Total Project Cost (US$ million) 32.8 42.8 19.2 25.2 Overrun (%) - 30.5 - 31.2 Loan/Credit Amount (US$ million) 15.0 15.0 10.5 10.5 Disbursed ) - 15.0 - 10.5 Repaid ) June 30, 1977 1.455 - Outbtanding ) - 13.545 - 10.5 Date Physical Components Completed 2/73 12/76 2/73 12/76 Proportion Completed by Above Date () 60 100 60 100 Proportion of Time Overrun (M) - 61.2 - 44.4 (Incremental) Internal Rate of Return (%) 11 10 11 10 Financial Performance Better Better Institutional Performance Better Better Other Project Data loan 581-TUN Credit 209-TUN Original Actual or Original Actual or Item Plan Revisions Est. Actual Plan Revisions Est. Actual First Mention in Files or Timetablas - - 3/15/66 - - 4/17/68 Covernment's Application - - 3/15/66 - -- Negotiations 8/19/68 - 8/19/68 5/19/70 - 5/19/70 Board Approval 12/03/68 - 12/03/68 6/23/70 - 6/23/70 Loan/Credit Agreement 1/16/69 - 1/16/69 6/30/70 - 6/30/70 Effectiveness 5/15/69 7/15/69 6/09/69 10/01/70 11/15/70 11/12/70 Closing Date 12/31/73 12/31/74/5/6 12/31/76 12/31/74 12/31/75/6 12/31/76 Borrower - Societe Nationale d'Exploitation et de Distribution - Republic of Tunisia des Eaui: (SONEDE) Executing Agency - SONEDE - SONEDE Fiscal Year of Borrower - January 1 - December 31 - January 1 - December 31 Follow-on Project Name - Second hater Supply - Third Water Supply Loan/Credit Number - Credit ;09-TUN - loan 989-TUN Amount - US$ 10.. million - US$ 23.0 million loan/Credit Agreement - Credit Agreement - Loan Agreement Mission Data Item Month/Year No. of Weeks No. of Persons Manweeks Date of Report Loan 581-TUN Identification 9/66 6 2 12 11/09/66 Preappraisal 6/67 2 1 2 9/20/67 Appraisal I 11/67 5 3 15 Appraisal II 3/68 2 3 6 4/17/68 Credit 209-TUN - Project was identified during appraisal of first project (loan 581-TUN) Appraisal 11/69 4 3 12 1/07/70 loan 581-TUN Supervision I 5/69 4 3 12 6/27/69 Supervision II 11/69 4 3 12 1/07/70 Loan 581-TUN and Credit 209-TUN Special Mission 4/70 1 2 2 4/22/70 Supervision III 3/71 2 3 6 4/22/71 Supervision IV 8/71 2 4 8 10/01/71 Supervision V 9/73 1 3 3 10/05/73 Supervision VI 5/74 2 2 4 6/17/74 Supervision VII/l 5/75 2 2 4 6/25/75 Supervision VIII 5/76 1-1/2 1 1-1/2 6/22/76 Completion 5/77 2 2 4 6/22/77 Country Exchange Rates Name of Ctrrency (Abbreviation) - Diner (Din) Appraisal Year Average - US$ 1 - Din 0.5208 Interveni.g Years Average - U0$ 1 = Din 0.4642 1968 - 1970 - US$ 1 = Din 0.5208 1971 - US$ 1 - Din 0.4807 1972 - US$ 1 - Din 0.4840 1973 - US$ 1 = Din 0.4451 1974 - US$ 1 - Din 0.4065 1975 - US$ 1 - Din 0.4253 1976 - US$ 1 = Din 0.4305 Completion Year - US$ I = Din 0.4320 L During subsequent supervision missions, the Third Water Supply Project (Loan 989-TON) was also supervised  PROJECT PERFORMANCE AUDIT MEMORANDUM (HIGHLIGHTS) TUNISIA: FIRST AND SECOND WATER SUPPLY PROJECTS (Loan 581-TUN and Credit 209-TUN) 1. Loan 581-TUN of US$15 million, to Societg Nationale d'Exploitation et de Distribution des Eaux (SONEDE), was approved in December 1968 and was to help finance a US$32.8 million water supply project. The project con- sisted of expansion and improvements of the water supply and distribution systems of Tunis region (74% of project cost), the Sahel region (22%) and the cities of Hammamet and Nabeul (4%). Credit 209-TUN of US$10.5 million, to the Government of Tunisia and re-lent to SONEDE, was approved in June 1970 and was to finance the second water supply project, estimated to cost US$19.2 million. This project consisted of expansion and improvements of the supply and distribution systems of several regions (76% of project cost), and cities (20%), and engineering and supervision services (4%). The two projects con- stituted the major part of the National Water Supply Program for the 1968-73 period. Since these two projects, the Bank has made three other loans in the water supply and sewerage sector of Tunisia as outlined in the PCR (paras. 1.03 and 1.04). 2. The projects were implemented as planned but with a cost overrun of about 31% in US$ equivalent, and a delay of almost four years.11 The original estimates of the construction time for some of the project components appear to have been unrealistic. However, initial start up problems, and problems with the performance of local contractors further extended the construction schedule (PCR paras. 2.04-2.06). About 80% of the cost 'overrun was due to changes in currency values, and the remaining 20% was caused by general price rises during the period of implementation. 3. The water systems under the two projects have been operating satis- factorily since their completion and the quality of water has been good. The level of water supply service has improved substantially under these two projects, from 43% urban coverage in 1968 to 62% in 1975 - a remarkable achievement of SONEDE which was only established in 1968 (PCR paras. 1.01-1.02). However, unaccounted for water during the 1969-76 period caused some concern, averaging about 33% during this period compared to the original estimate of about 20% (PCR para. 2.11). SONEDE is trying to reduce the losses by installing new meters and checking the accuracy of others. Actual sales of water increased on the average by 6.2% compared to the forecast 7.4%, resulting in water sales being two years behind the original schedule. The incremental rate of return on the two projects is now estimated at about 10% compared to 11% at appraisal mainly because of the slower growth in sales of water than originally envisaged (PCR para. 5.03). 4. At appraisal, it was assumed that the average consumption of water per connection would be stable during the 1969-76 period, and that tariff increases would have no significant effect on consumption. As it turned out, 1/ Some components of the projects were completed and in operation after a delay of about two years. - 2 - actual number of connections far exceeded the number estimated (276,000 at the end of 1976 compared to the estimate of 170,000). On the other hand, average consumption of water per connection steadily decreased throughout the period. Factors influencing the lower than expected consumption of water per connection appears to have been the rapid extension of the distribution system into lower per capita income areas, and by increases in the water tariff (PCR para. 2.12). 5. SONEDE has developed into an efficient and well-managed institution (PCR paras. 4.01-4.13) and its financial performance during the 1969-76 period was satisfactory. Most financial ratios were better than forecast, and the covenanted rate of return on assets was generally adhered to (PCR paras. 3.01-3.08). 6. The objectives of the two projects have been met. The PCR gives a clear account of the implementation and operation of the project, the institu- tional and financial performance of the company, and draws conclusions arising out of the project experience. The following points may be of particular interest: - requirement of prequalification of local contractors (PCR paras. 2.05 and 2.06); - effect of rate increases on sales of water and need for price elasticity study (PCR para. 2.12); and - factors influencing SONEDE's development (PCR paras. 4.13-4.15). Attachment TUNIESIA:FIRST AND SECOND WATER SUPPLY PROJECTS (Loan 581-TUN and Credit 209-TUN) COMPLETION REPORT I. INTRODUCTION 1.01 The Tunisian Government has always attached high priority to public water supply. In 1968, 2.3 million out of a total of 2.4 million urban dwellers already had access to a public water supply. Of these, 43% had house connections and the remaining 57% used municipal public taps. However, the demand for water was growing at a high rate because of a number of factors including rural-urban migration, improved housing and the expansion of tourism. The Government as part of its social poli- cies encouraged improved access to public water supplies and from 1961 established a policy that interest-free credits repayable over 10 years be provided for the costs of new domestic connections. 1.02 Until 1968, responsibility for all potable water supplies lay with the R6gie des Eaux (RDE), a section of the Ministry of Agriculture, which did not have adequate financial resources and independence nor suf- ficient qualified staff on the supervisory and professional level and whose status as a minor government department did not permit satisfactory planning, accounting nor management. To overcome these problems and as part of the conditions for Loan 581-TUN, the Government established in July 1968 the autonomous national water authority, Socigt6 Nationale d'Exploitation et de Distribution des Eaux (SONEDE). SONEDE's achieve- ments in the sector are remarkable; the percentage of the urban population connected has increased from 43% in 1968 to 62% in 1975 and the number of house connections almost tripled in the same time. During this period, SONEDE expanded its technical capability and maintained an overall very satisfactory financ[al record. In addition to discussing other project related matters, the present report examines possible reasons for SONEDE's success as well as those areas in which its improvement may still be expected. 1.03 The Bank's involvement in the water supply and sewerage sector has continued since it was first invited by the Government in 1966 to participate with the Swedish International Development Authority (SIDA) in the financing of various water supply works. Since this request was made, the Bank has contributed the following financing for water supply: (i) Loan 581-TUN; January 1969; US$ 15.0 million for water supply works in the regions of Tunis and Sousse (SIDA joint financing of an additional US$ 5.0 million). (ii)- Credit 209-TUN; June 1970; US$ 10.5 million for water supply works in eight areas of the country (SIDA joint financing of an additional US$ 3.5 million). (iii) Loan 858-TUN and Credit 329-TUN; February 1972; which include US$ 8.2 million for water supply under Tourism Infrastructure Project. A2 (iv) Loan 989-TUN; May 1974; US$ 23.0 million for water supply systems in Sfax and a number of rural centers. (v) Loan 1445-TUN; June 1977; US$ 21.0 million for water supply (additional financing of US$ 23.4 million for associated distribution in the Greater Tunis Area by Kuwait Fund for Arab Economic Development). 1.04 The development of sewerage, as in most countries, lags behind public water supply. Nevertheless, the Bank is involved in the sector. The Tourism Infrastructure Project (para 1.02) included US$ 16.6 million for sewerage. In February 1975, a Loan (1088-TUN) of US$ 28.0 million was made to finance the first stage of sewerage for Greater Tunis District and a small part of the program of urgently needed sewer system renewals. The national sewerage program is being implemented by "Office National de l'Assainissement" (ONAS) which was created for this purpose in August 1974 precedent to Loan 1088-TUN. 1.05 The First and Second Water Supply Projects (Loan 581-TUN and Credit 209-TUN) are complementary and are part of the then existing na- tional water supply program. During appraisal of the first project, it was recognized that a second project would have to incorporate those elements whose preparation was not sufficiently advanced to permit their evaluation. The projects were executed concurrently by SONEDE. It is therefore fitting that a single completion report evaluate performance of the two projects. II. PROJECT CONTENT, EXECUTION AND OPERATION A. The Project 2.01 The projects taken together represented the National Water Supply Program for 1968-1973. They are described in detail in Annex 1 and shown on Map 2883. The works carried out under the first project (Loan 581-TUN) were those foreseen under the Loan Agreement and include: (i) engineering and construction of sub-projects for the expansion and improvement of the supply and distribu- tion systems of the Tunis region, the Sahel (Sousse) region, and the cities of Hammamet and Nabeul; and (ii) improvement of SONEDE's organization and operations. Works carried out under the second project (Credit 209-TUN) were those des- cribed in the Joint Financing Agreement and consist of expansions and im- provements of the water supply and distribution systems of the regions of Bizerte, Cap Bon, Sahel, and South Tunisia, the cities of Beja and Gab6s (including neighboring areas), the city and tourist resorts of Kelibia and A3 the Sfax Metropolitan area. The project also provided services of manage- ment and engineering consultants and advisors for implementation and super- vision of the National Water Supply Program and for the engineering of future water supply projects in Tunisia. 2.02 Changes in the projects during implementation were minimal and resulted from refinement of demand forecasts and more complete knowledge of the topography. At the request of SONEDE the Bank agreed that technical studies related to the second water supply project be added to the Project Description as laid down in Schedule 3 of Loan Agreement 581-TUN. In the amendment, which became effective in April 1970, US$ 240,000 were reallo- cated from category "unallocated" to category "Engineering and Supervision." As it turned out this transfer of allocated funds was not necessary. B. Loan Effectiveness 2.03 The Kingdom of Sweden provided joint co-financing for both projects. Loan 581-TUN and Credit 209-TUN, therefore, contained a cross effective clause. Furthermore, in casE of Loan 581-TUN, employment of engineering and manage- ment consultants was a condition of effectiveness as was also approval by the Bank of the "Accord Relatif A l'Apport du Gouvernement de la R6publique Tunisienne au Capital de la Soci6tg Nationale d'Exploitation et de Distribu- tion des Eaux." (Agreement under which Government furnished 10.5 million Dinars equity to SONEDE on basis of quarterly forecast of needs during pro- ject period) Concluding a satisfactory agreement between SONEDE and the Socift6 Tunisienne d'Electricitg et de Gaz for settling outstanding pay- ments between the tuo companies was a further condition of effectiveness of Credit 209-TUN. Scheduled effectiveness of Loan 581-TUN was postponed from May 15, 1969 to July 15, 1969 and of Credit 209-TUN from October 1, 1970 to November 15, 1970. Loan 581-TUN became effective on June 9, 1969 and Credit 209-TUN on November 12, 1970. The delays were not caused by unduly stringent effectiveness conditions but were the result of time re- quired to obtain necessary legal opinions. The minor delay in effective- ness did not cause time losses in project start-up or implementation. C. Implementation Schedule Loan 581-TUN 2.04 It was forecast at the time of appraisal that work would have commenced on all sub-projects by June 1969. Work on the various sub-projects actually started at various dates between July 1970 and August 1971. Initial delays which arose partly from start-up problems in SONEDE's engineering and new works division as a result of staff constraints and unfamiliarity with procedures were added to by time lost in supervising repairs to exten- sive damage to existing works caused by severe floods in 1969. Delays also occurred because consultants refused to start work on the basis of a letter of intent. Price negotiations and fulfilment of conditions of the Central Bank regarding foreign exchange transactions took another six months. Con- tractors in general maintained their schedules fairly well once work was started although there were delays arising from failure of local pipe manu- facturers to meet delivery schedules, poor quality of pipe furnished, short- ages of cement, minor unforeseen obstacles and inclement weather. Quality of A4 work was generally good and the number of leaks and/or breaks in new pipe- lines laid has been minimal. 2.05 There were exceptional delays relative to two local contractors. The contractor for the Tunis distribution works, although a competent builder, had no experience in laying watermains and had not recruited experienced personnel. To make matters worse, he began work in winter in an area where the water table was only fifteen inches below the surface. SONEDE eventually had parts of his contract carried out by other firms but the time required to complete the original one-year contract finally exceeded three years. A second firm awarded the contract for the Sousse (Sahel) distribution works took nearly 4-1/2 years to complete a two-year contract. While some delay resulted from high water tables, traffic con- gestion in the urban areas and even long forgotten buried Roman cisterns, the principal problem was the lack of planning and qualified personnel. This deficiency became more serious when the contractor was awarded ex- tensions to his original contract and later was awarded large contracts for which he was low bidder for works under Credit 209-TUN. This con- tractor was particularly deficient in finishing his works (cleaning, testing, painting, minor repairs) and even at the date of loan closing some of these items remained unfinished. SONEDE now requires prequalifi- cation of local contractors and is paying greater attention to the evalua- tion of the capacity and experience of contractors when making contract awards. Under the First Urban Sewerage Project (Loan 1088-TUN) the Bank is financing part of the cost of studies and technical assistance for the strengthening of the local construction industry. Credit 209-TUN 2.06 The appraisal report forecast that work on all sub-projects would begin by September 1971. In fact, the works began at various dates between February and December 1972. This was an improvement over the start-up delays on the first project and reflected improvement in SONEDE's project implementation capacity (para 4.06). Part of this delay was due to the fact that an average of one year elapsed between tender advertise- ment and contract award; six months was provided for this sequence in the project timetable. Minor delays in construction occurred for the same reasons as under Loan 581-TUN (para 2.03). SONEDE's engineers now feel that the construction periods foreseen during appraisal may have been somewhat short for two sub-projects, namely Bizerte and Cap Bon. Neverthe- less, these construction periods were those adopted by SONEDE for the contracts. The greatest delay was occasioned by the same contractor who built the Sousse distribution works under Loan 581-TUN (para 2.05). This contractor took nearly five years to complete the Cap Bon sub-project for which 18 months were foreseen in his contract and the project timetable. Unit prices paid under the contract, normally subject to revision to account for inflation, were frozen at the end of the agreed period for carrying out the works. A5 D. Costs, Procurement and Disbursement 2.07 Total prolect costs are summarized below: Dinars (millions) US$ millions Local Foreign Total Local Foreign Total Loan 581-TUN Appraisal estimate 8.4 8.7 17.1 16.1 16.7 32.8 1/ Actual 10.6 7 .6 18 .2 24.9 17.9 42.8 2/ Credit 209-TUN Appraisal estimate 4.1 5.9 10.0 7.9 11.3 19.2 1/ Actual 7.9 2.8 10.7 18.6 6 .6 25.2 2/ Project costs measured in Dinars are very close to estimated costs. Actual foreign exchange costs would be slightly higher since those given above do not include depreciation on locally owned imported construction equipment nor the foreign exchange cost of cement. (Tunisia was a net importer of cement through most of the project period.) It is therefore unlikely that any local costs were financed. Nevertheless, there was a significant dif- ference between the estimated and actual proportion of foreign exchange costs in both projects. For Loan 581-TUN, this difference is explained by the fact that as a result of most pipe supply contracts being won by local bidders, only 19% of the cost of materials was foreign, compared with 42% estimated at the time of appraisal. The same factor influenced the actual foreign exchange component under Credit 209-TUN and it was further reduced by the fact that only 30% of the cost of civil works and pipelaying was foreign compared with 47% under the first project. This re- flected a higher percentage of contract awards under the second project to local civil works contractors. Procurement under both projects was well carried out and was probably substantially aided by a comprehensive set of procurement regulations prepared by SONEDE for its own use. 2.08 Disbursement of the proceeds of Loan 581-TUN and Credit 209-TUN (shown in detail in Annex 2) was considerably slower than anticipated. Disbursement for Loan 581-TUN started one year late and the proceeds were fully disbursed only in early 1977, three years later than anticipated. At the time when the loan had been forecast to be fully disbursed, 59% was actually disbursed. Likewise, disbursements were slow for Credit 209-TUN. Disbursement started one year later than assumed, in 1972, and was completed in early 1977, two years behind schedule. Disbursements were slow in earlier years, and at the time when the Credit had been forecast to be fully disbursed only 46% had actually been disbursed. Factors responsible for the discrepancy between the forecast and actual 1/ At exchange rate DT 1 = US$ 1.92. 2/ At exchange rate DT 1 = US$ 2.35. A6 disbursements were the late start of works, delays in the completion of project components, and some bureaucratic delays in submission of requests for disbursement. Major deviations in the disbursement categories for Loan 581-TUN occurred in two categories: "supply of equipment" and "in- stallation of pipes and related works", to which most of the allowance for "unallocated" was allocated (para 2.07). The proceeds of Credit 209- TUN were reallocated in February 1974 to allow for considerably greater disbursements for locally manufactured equipment. Details of disburse- ment by category are shown in Annex 3. E. Consultants 2.09 Consulting engineers for the works under both projects were Socift6 G6ngrale des Techniques Hydro-Agricoles (SOGEThA, France) who during the course of the project became associated with Socift6 Grenobloise d'Etudes et d'Applications Hydrauliques (SOGREAH, France). SOGETHA and SOGREAH prepared detailed designs and specifications for all project elements, collaborated with SONEDE in the preparation of feasi- bility studies, aided in the drafting of general contract conditions and undertook various other assignments at the specific request of SONEDE. The personnel of SONEDE who worked with the consultants found them satis- factory, with a significant improvement in performance taking place fol- lowing SOGETHA's association with SOGREAH. Nevertheless, they felt some improvement in SOGREAH's performance was possible, referring among others to the following weaknesses: (i) failure to respect agreed timetables for delivery of reports and tender documents; (ii) inadequate attention to Bills of Materials in contracts, particularly for supply; (iii) overdesign of structural elements-reinforcing steel sometimes so dense it impeded placing of concrete; and (iv) unnecessarily complicated structures. F. Operations 2.10 Forecast and actual water production figures match very well over the years from 1969 to 1976 Annex 4). Volume of water sold was over- estimated sales of 114 million m were forecast for 1976 but only 99.1 million m were actually sold. This represents an annual increase in sales of 6.2% instead of the forecast 7.4%. The increase in the volume of water sold varied for each consumer category. The annual average increase of 6.2% was exceeded by domestic connections, industry and government agencies, where the respective increases were 6.6%, 7.4% and 9.1%. Lower than average in- crease was registered in the water consumption of tourist installations with 4.8% and by the municipalities with 4.6%. The volume of water distributed through standpipes, however, increaed to a maximum of 6.4 million m3 in 1972 and then decreased to 4.9 million m by 1976, about 400,000 m lower than the volume distributed in 1968. This decrease is the result of SONEDE's A7 program to increase the number of private house connections which was in- tensified from 1973 largely through the influence of the project. 2.11 Differences between the forecast and actual unaccounted-for water explain the discrepancy between the quantities of water produced and sold. Unaccounted-for water was assumed to drop from 23% in 1969 to 20% by 1976; however, in spite of installation of meters and launching a leak detection campaign as part of the project, unaccounted-for water was recorded over the years at about 33%. It is believed that the re- corded figures at the time of appraisal were erroneous and thus hide a reduction in losses that actually took place. SONEDE is now intensifying its efforts to determine the true value of unaccounted-for water and to reduce it to acceptable levels e.g. by installing meters where there are none and checking the accuracy of others. An acceptable detailed program to reduce losses has recently been submitted to the Bank for comment. 2.12 Various factors are responsible for the lower volume of water sold. The appraisal report had anticipated an increase in the consumed water per capita per day over the years, with a more or less stable aver- age consumption of water per connection. However, the recorded average consumption per connection dropped from 570 m3 in 1969 to 360 m3 in 1976, as a result of diminishing per capita consumption of new customers asso- ciated with the rapid extension of the distribution system, particularly in areas with a lower per capita income. The lower consumption per con- nection was also influenced by two increases in the water tariff, in 1969 and 1974, and in particular by introducing a sewerage surcharge in 1975 which is assessed only on quarterly consumption exceeding 40 m3. (As agreed during preparations for the Tunis Urban Sewerage Project, 1088-TUN, sewerage surcharges are billed and collected by SONEDE on behalf of ONAS.) The extent of the reduction in the water sales caused by the tariff in- creases and the sewerage surcharge is presently not known. A special study with Bank support is being considered to quantify the price elasticity of water consumption in Tunisia, as SONEDE has the necessary data available. 2.13 SONEDE performed very well in meeting the demand for installing house connections. At the time of appraisal, it had been estimated that the total number of connections would increase from 97,000 at the end of 1969 to 170,000 at the end of 1976. This figure was well exceeded as 276,000 house connections were in service at the end of 1976. III. FINANCIAL PERFORMANCE A. General 3.01 Included as Annex 5 are the appraisal forecast and actual Income Statements, Balance Sheets and Sources and Applications of Funds for SONEDE from July 2, 1968 to end 1976. Annex 4 provides a comparison of key indi- cators of these Statements. It should be noted that in all comparisons forecast values used are those determined by the appraisal mission for the Second Project since data gathered at that time were considered to be more reliable. A8 B. Income Statements 3.02 Over the years from 1969 to 1976, revenues increased annually by 13% instead of the forecast 8%, mainly due to a considerable increase in connection charges. Although water demand rose more slowly than anti- cipated, revenue from water sales was close to the estimate due to a higher average tariff. As the tariff was modified in 1969 and 1974, aver- age water rates in 1969, 1975 and 1976 were higher than the forecast. At end 1976, the average tariff was 18% higher than forecast. The higher revenues were offset by higher operating expenses, primarily payroll and materials, which rose at an annual average rate of 10.3% instead of the forecast 5.1%. Due to infrequent tariff changes, the rate of return from 1972 to 1974 was lower than forecast, even though part of the projects investments was transferred to plant in operation at least one year later than originally envisaged. The financial rate of return averaged 4.9% ranging from a high of 7.7% in 1975 to a low of 3.4% in 1973. C. Financing Plan 3.03 SONEDE's overall financing plan projected by the appraisal re- port for the Second Water Supply Project as compared with the actual from July 2, 1968 to December 31, 1976 is shown in Annex 5, Table 4. Total requirements approximately doubled mostly due to a considerable increase in the works carried out, although higher than expected inflation also contributed to this increase in the later years. The higher investment requirements were met by a substantial increase of the internally generated cash, customers contributions and Government equity contribution which together provided more funds than originally foreseen in both absolute and relative terms. In particular, customers contributions rose from a fore- cast 3.3% of total requirements to an actual 11.8%. Although the amount of borrowings increased by 15%, their relative share in financing reduced from 45.7% to 27.1%. This is also reflected in the debt/equity ratio, which never exceeded 32:68 instead of a forecast maximum of 44:56. This low debt/equity ratio together with a debt service coverage which from 1971 on- wards has consistently been higher than 2.4 times (1.5 times was required by covenants) should allow SONEDE to finance a larger proportion of its investments through borrowings in the future. D. Accounts Receivable 3.04 Collection of accounts receivable from private customers did not present a problem. However, those of government agencies and municipalities which together account for about 20% of sales exceeded one year's sales in the early years of operation. Modifications in the budgetary allocation system and a special law to settle arrears prior to 1972 resulted in a considerable reduction of the arrears of the government agencies, which are now at an acceptable level. Introduction of the same system of budgetary appropriations for the municipalities from 1978 onward, agreed upon during negotiations of the Fourth Water Supply Project (Loan 1445-TUN), should reduce the accounts receivable due from the municipalities to acceptable levels in the future. A9 E. Covenants 3.05 Covenants related to limiting additional borrowing were met without difficulty. The requirement to achieve an average tariff of 60 millimes over the years till 1972 was also met. The rate of return covenant which was modified in Credit 209-TUN by requiring a 5% rate of return on net fixed assets in operations over the years from 1973 to 1975 and 6% thereafter although not met in 1973 was met from 1974 following introduc- tion of a new tariff. This tariff which increased the average rate charged for water by 38% was based on a thorough tariff study by SONEDE's staff and was established along the principle that the price charged for water should reflect the cost of supply to each category of consumer, except that a con- cessionary price was set for a fixed volume per domestic connection required to meet the basic human requirements. 3.06 The covenant relating to the arrears of the government agencies and municipalities as laid down in the Guarantee Agreement (Loan 581-TUN) and the Joint Financing Agreement (Credit 209-TUN), required the Government to take all steps to enable SONEDE to receive full payment within 120 days of billing for all water charges incurred by all public authorities or agencies, whether national, regional or municipal. In a side letter to Loan 581-TUN, the Government had agreed that budgetary advances of 80% of the forecast annual water consumption of the government agencies would be made available to SONEDE during the fiscal year with the balance to be agreed upon at the end of the fiscal year and to be settled thereafter. For the municipalities, however, the 120 day limit of settling all water bills was maintained. Whereas the system adopted for the government agencies proved to be successful (and was feasible because of the ac- curacy of their water consumption), arrears of the municipalities increased well beyond the 120 day limit. As noted in para 3.04, this covenant has now been modified to incorporate the same system of payment for the water con- sumption of the municipalities as for the government agencies. 3.07 The covenants relating to the financial operations of SONEDE were in general met. Temporary instances of non-compliance (para 3.05) were be- yond SONEDE's control and did not significantly affect SONEDE's financial position. SONEDE's overall financial performance has been remarkably good over a period of high inflation. Most financial ratios, some of them laid down in covenants, were better when compared to the forecast values. Con- tributing factors were a higher government equity contribution and timely and sufficient tariff increases. 3.08 The covenants of Loan 581-TUN and Credit 209-TUN have been incor- porated or updated in the covenants for the Sfax Water Supply Project (989- TUN) and the Fourth Water Supply Project (1445-TUN). There is, therefore, no further need to monitor performance under the covenants of the legal documents for the first two projects. F. Audits 3.09 Audits were initially performed by Peat, Marwick and Mitchell. From 1972 onwards, they were performed by Cabinet Finor, a qualified Tunisian firm, correspondent of Peat, Marwick and Mitchell. The only A10 qualification remaining the auditors' report is in relation to establishing SONEDE's title to assets received from the Government at its creation, a time-consuming process expected to be completed in 1977. Audit reports were at times submitted to the Bank six months after the date fixed by the covenants but performance has recently improved and the deadline for submission of the latest report was met. IV. INSTITUTIONAL PERFORMANCE A. General 4.01 Since the beginning of its operations, SONEDE has developed into a relatively efficient and well-managed institution that has well surpassed the expectations of its future growth at the time of appraisal. External and internal factors contributed to this success, as well as the arrangements made prior to establishing SONEDE. B. Organization/Management 4.02 At the time of its creation, SONEDE was organized in three major departments: operations, administration and finance, and engineering and new work, headed by directors who reported to a general manager. Although routine management was entrusted to SONEDE's management in the earlier years, the Board took a rather active part in supervising SONEDE's activi- ties. This proved to be of great assistance as the expertise of the nine public officials representing various ministries and government agencies was readily available. 4.03 With SONEDE's growth existing activities were organized in sepa- rate divisions. First, two divisions were added: one for organization and internal audit, the other for public relations. Thereafter, the operational department was divided into two departments, and a department responsible for engineering and related studies was added. Finally, three divisions were added in charge of auditing and organization, operational control and general studies, to assist management in long range planning and establish- ing policies. The need for these changes was exposed over the years by the dialogue between managers and the organizational unit, whose creation was part of the consultants' recommendations for the setting up of SONEDE. 4.04 In view of SONEDE's activities, which cover all Tunisia, the greater decentralization introduced with the breaking up of the operational department into two departments will be adhered to in the future. This is in response to the need to be closer to the customer, whose services require different degrees of attention due to the structure of demand and the varying quality of the available water. 4.05 The growth of SONEDE's organization and the computerization of most of its financial operations have resulted in the accumulation of a wealth of information. However, the present information system and the form in which this information is presented do not necessarily highlight A 11 certain critical da:a, needed by management for taking appropriate deci- sions. For example, although data on water production and sales are reported on a monthly basis, management was unaware that in spite of its leak detection program, unaccounted-for water exceeded 50% of production in some centers. To overcome this difficulty and to allow for an adaptation of the information system to SONEDE's future growth, it was agreed during negotiations of the Fourth Water Supply Project (Loan 1445-TUN) that studies would be prepared with assistance from management consultants to develop information systems for SONEDE. This should ensure that the most important data will be prepared in a form which will highlight problems or developments and be channelled to the individual responsible for initiating necessary corrective action. C. Staff Recruitment, Growth 4.06 When SONEDE started its operations in 1968, it took over from the RDE not only the physical plant but also a well-trained staff at the professional, foreman and the workers level. Subsequent recruitment with the exception of specialized professionals did not create difficulties because of the improved national educational system and the high esteem in which SONEDE was held. A familiarization program of six months for each new employee ensures a smooth incorporation of new staff into SONEDE. The lack of recruitment of sufficient numbers of engineers, particularly site engineers, in the earlier years was a temporary problem which was overcome by organizing the engineering department as proposed by consultants. 4.07 SONEDE's staff increased from 1,804 employees in 1968 to 3,020 at the end of 1976 representing an average annual 6.6% growth. This growth was not uniform at the professional, foreman and workers level. Whilst the number of professional staff increased from 15 to 96 representing a growth of 26% on an annual average, those with special skills increased from 42 to 893 corresponding to an average annual growth of 46.5%. The number of workers increased from 1,747 to 2,031 translating to a 2% annual growth. The reason for this divergence is the overstaffing at the workers level and a severe shortage at the other levels at the time SONEDE took over from the RDE. In addition, the expansion and sophistication of SONEDE's operations required increased recruitment of staff with special skills and of professionals. 4.08 Some efficiency indicators show that the growth of SONEDE's person- nel was required by the extension of its services. The number of employees per 1 million m3 sold decreased from 29.5 in 1969 to 26.9 by 1973. Thereafter, the number increased gradually to 30.5 at the end of 1976 as a result of de- clining consumption per connection (para 2.12). The number of employees per 1000 connections decreased continuously from 16.9 at the end of 1969 to 10.9 at the end of 1976, corresponding to an average annual decrease of 6.4%. 4.09 Staff morale over the years has been very good due to an adequate salary scale, which was introduced in 1972, and the satisfaction derived from working in an expanding, well-managed enterprise which enjoys financial stability. Personnel turnover averaged at about 4% over 1971 to 1976 with a high of 5.8% in 1975 and a low of 2.4% in 1973. With few exceptions, this turnover was restrici:ed to lower level personnel. Al2 D. Training 4.10 The quality of SONEDE's staff has greatly improved by on-the-job training and the courses organized for its lower level personnel with the Office de 1'Emploi et de la Formation Professionelle. In addition, short term seminars are organized to cover specific aspects of SONEDE's operations. SONEDE has over the years arranged for overseas scholarships for its engi- neers to overcome the shortage of engineers specializing in sanitary engineer- ing and other areas related to water supply. Although SONEDE's management has been aware of the need for training, only recently has action been ini- tiated to introduce a systematic approach towards training and using it as a tool for manpower development. 4.11 Over the years, SONEDE's staff has developed recognized capabilities. A recent Bank appraisal mission employed a SONEDE engineer as a consultant on a water supply project in Syria. He was later invited back by the Syrians to provide technical assistance. Another SONEDE engineer spent time providing technical assistance in Abu Dhabi. There is every reason to envisage future opportunity for this form of technology transfer, particularly to water supply authorities in the Arab-speaking world. E. Consultants 4.12 The success of SONEDE is also attributable to the wise use and good performance of management consultants in setting up SONEDE. The consultants, SEMA 1/ of France, covered a wide scope in their studies: organization of SONEDE, working procedures, accounting system and tariff structure. The con- sultants' recommendations were adopted when SONEDE was established. SEMA rendered further assistance in implementing these recommendations. In addi- tion, under a technical assistance program, the Government requested Electri- citg de France to provide an adviser to the General Manager. This arrange- ment proved to be helpful in the initial years of SONEDE when a large number of problems had to be addressed to simultaneously execute a large project and establish a new organization. Consultants are still used by SONEDE for the design of large and/or complicated projects. F. Factors Influencing SONEDE's Development 4.13 In preparing the completion report, discussions were held with SONEDE's senior staff and government officials to determine their viewpoint on SONEDE's achievements. All those questioned agreed that SONEDE's perfor- mance has been excellent. SONEDE's senior staff felt that among the factors within SONEDE's control, those which contributed most to its development were: (a) commitment and dedication of management; (b) good working conditions and atmosphere; and (c) prior existence of RDE (which provided base staff). Officials outside SONEDE agreed on the importance of the first two points but felt that SONEDE's financial stability was at least equally as important as the prior existence of RDE. 1/ Soci6tg d'Economie et de Math9matiques Appliqu6es. A13 4.14 Both SONEDE's staff and outside officials agreed generally on the ranking of the external factors which contributed to SONEDE's develop- ment. The Government through its social programs, through setting invest- ment priorities in the water sector, and through its commitment towards SONEDE was noted as the outstanding external factor. Officials outside SONEDE stressed the favorable economic climate, noting that without higher income, less water would have been distributed and a lower number of house connections installed. G. Role of the Bank 4.15 The Bank was considered an important positive influence, not only as a lending institution which contributed to SONEDE's financial stability, but also because of its role, together with the management consultants, in the organizational development of SONEDE. Although the number and frequency of official supervision mission at first glance appears small, it must be remembered that two additional projects were prepared and appraised with SONEDE during the project period. Furthermore, SONEDE's excellent detailed quarterly progress reports greatly facilitated project supervision. Finally, there were field contacts with SONEDE to review outstanding problems by the appraisal and supervision missions of the Tunis Urban Sewerage Project. SONEDE's staff felt that the number of supervision missions was adequate without being imposing. SONEDE welcomes the continuing role of the Bank and future Bank guidance may be requested in developing more complete water supply programs for the rural areas and urban target groups. V. JUSTIFICATION A. General 5.01 The projects have fulfilled their basic objective of meeting the water demands of tourism and industry as well as the growth of urban water consumption stimulated by these developments. Although the volume of water sales is less than forecast during appraisal, the number of house connections has greatly exceeded the forecast so that the benefits are more widely dis- tributed to a lower-:Lncome population group. Moreover, in spite of lower sales, SONEDE has maintained its financial viability through increased tariffs which incorporate a cross-subsidy so that the volume of water required for basic domestic needs is available to each consumer at a price he can afford. During the detailed design stage, each sub-project was re- examinined to ensure that it still represented the least-cost solution. 5.02 The development of SONEDE as a national water supply and distri- bution agency fully capable of fulfilling its role must be viewed as a major benefit of the project. SONEDE's capability to provide technical assistance to other water authorities has resulted in a spillover of benefits even outside the country (para 4.11). Such technical assistance could in future be part of the Government's international resource utilization program. An unanticipated spin-off from the projects has been the development of local contractors and pipe manufacturers which occurred more quickly than anticipated A 14 (para 2.07). Although this rapid expansion of the local construction in- dustry resulted in some problems, mainly as a result of the shortage of skilled workers and experienced construction engineers, the overall ef- fect was to increase the local content of all SONEDE projects and thus reduce the demand for foreign exchange to carry out its program. B. Internal Economic Rate of Return 5.03 The appraisal report for Credit 209-TUN established that 83% of the incremental benefits over the base year were attributable to the First and Second Bank projects. The assessment performed in 1977 showed that be- ginning in 1974, when the major components were put into service, 86% of the incremental benefits accrued to the project due to proportionately higher water sales in the project area. The internal economic rate of return, re- calculated on the basis of actual costs and revenues through 1976 and pro- jected costs and revenues based on the present tariff would be 10%, compared with 11% rate of return forecast during appraisal (Annex 6). The lower value results from lower-than-expected water sales (para 2.10). The newly calculated rate of return is still acceptable since it does not include the unquantifiable benefits related to improved public health and fire protec- tion; moreover, it would be higher if the benefits were to be calculated using revenues from a higher tariff whose implementation is expected in the near future. VI. CONCLUSIONS 6.01 The water supply projects examined in this report were the back- bone of Tunisia's 1968-1973 National Water Supply Program, and by all normal standards of measurement and comparison can be judged to have been successful. It has been stated 1/ that creation of a successful water supply program requires: (1) Creation of a sector strategy. (2) Re-assessment of technical approaches. (3) Implementation of tariffs which ensure financial viability and encourage efficiency and equity. (4) Creation of stable and autonomous institutions with clear responsibilities and government support. (5) Development of manpower and ensuring that the sector offers a worthwhile career to qualified staff. 1/ Statement to the plenary session of the United Nations Conference Mar del Plata, Argentina (1977) by Mr. Yves Rovani, Director, Energy, Water and Telecommunications Department, World Bank. A15 The validity of this formula has been demonstrated in Tunisia, where all of these elements were present. In reviewing the projects, it is evident that if any of these elements had been missing, the chances of success of the project would have been greatly diminished. SONEDE is currently re- examining its manpower development program and management information systems with a view to strengthening these elements to ensure continuation of the high performance levels established in the past. It should be noted that both the senior sta:ff of SONEDE and Tunisian observers outside of SONEDB agree that the most important factors cotitributing to this excellent re- sult were the commitment of SONEDE's staff to the program's objectives and the Government's support of SONEDE.  A16 ANNEX I Page 1 of 3 TUNISIA SONEDE FIRST AND SECOND WATER SUPPLY PROJECTS (LOAN 581-TUN AND CREDIT 209-TUN) COMPLETION REPORT DETAILED PROJECT DESCRIPTIONS A. Loan 581-TUN The project included: I. Works in (a) Tunis sub-project - (i) the construction and installation of a large diameter pipeline and related facilities from Oued Kasseb Dam to Gdir El Goulla Reservoir in the outskirts of Tunis; (ii) the construction and installation of a large diameter feeder line from Gdir El Goulla Reservoir to Rastabia Reservoir in Tunis; (iii) the improvement of existing sources and develop- ment of additional ground water sources, includ- ing installation of tube wells and pumping stations ard the renovation of sections 6f the pipelines conveying water from the supply facilities south of Tunis; and (iv) the improvement and expansion of distribution systems, including major feeder mains and secondary distribution lines. (b) Sahel sub-project - (i) the improvement of existing sources and development of additional ground water sources, including installa- tion of tube wells, pumping stations and feeder mains; (ii) the construction of a section of about 40 km of the -Sahel pipeline known as phase B; (iii) the construction of sections of trunk pipelines supply- ing the north Sahel region and of additional storage facilities; and A17 ANNEX I Page 2 of 3 (iv) improvements and expansion to the distribution systems of Sousse, Msaken and Kalaa,Kebira, includ- ing storage reservoirs, distribution trunk lines and partial renovation of existing secondary mains. (c) Nabeul-Hammamet sub-project - (i) additional tube wells and pumping stations; (ii) construction of storage reservoirs; and (iii) interconnection of the distribution networks of the two cities. II. Consultants services to assist in improving SONEDE's management and operations. B. Credit 209-TUN The project included: I. Supply and installation of pipes, fittings and related equipment (and construction of related structures) for: (a) The Mateur-Bizerte transmission main and the related ground water collection systems. (b) The Hammam-Lif to Nabeul (Mamoura) transmission main and the distribution mains to tourist resorts of the Cap Bon area. (c) The Sahel groundwater collection pipelines, the Sahel's main transmission pipeline, the mains of the Sahel's north and central branch systems, the Kairouan branch main, and the distribution mains in the Central Sahel and Kairouan. (d) Sections of the South Tunisia pipeline and the distri- bution mains to the tourist resorts of Djerba and Zarzis. (e) The Beja (Tahouna) groundwater collection system and the main connecting Beja to the Oued El Lil pipeline. (f) The city of Gabes, the neighboring tourist resorts and oasis. (g) The town of Kelibia and the neighboring tourist resort. (h) The reinforcement of sections of the Sbeitla-Sfax trans- mission main and of the primary distribution main. A 18 ANNEX I Page 3 of 3 II. Construction and supply of related hydromechanical and electrical equipment for: (a) boreholes and related pumping stations in the areas of Mateur, the Sahel, Gabes, Kelibia and Sbeitla; (b) boosteir pumping stations and related structures in the areas of Jebel Tinja, Grombalia, Central Sahel, Kairouan, Beja, and Gabes; (c) storage tanks and related structures with a total storage capacity of about 35,000 m3 at (or near) Bizerte Rhezala, Mateur, Nabeul, Kairouan, Beja, Gabes and Kelibia. III. Services of management and engineering consultants and advisors for the implementation and supervision of the National Water Supply Program and for the engineering of future water supply projects in Tunisia. A19 ANNEX II TUNISIA SONEDE FIRST AND SECOND WATER SUPPLY PROJECTS (LOAN 581-TUN AND CREDIT 209-TUN) COMPLETION REPORT COMPARISON OF APPRAISAL FORECAST AND ACTUAL SCHEDULE OF DISBURSEMENTS LOAN 581-TUN Calendar Appraisal Report Estimate Actual Year Annual Cumulative Annual Cumulative US$ Million % US$ Million % US$ Million % US$ Million % ----- ----------------------------------------------------------------------------- 1968 0.2 1.3 0.2 1.3 - - 1969 2.6 17.4 2.8 18.7 0.3 2.0 0.3 2.0 1970 4.7 31.3 7.5 50.0 0.4 2.7 0.7 4.7 1971 3.9 26.0 11.4 76.0 2.6 17.3 3.3 22.0 1972 2.5 16.7 13.9 92.7 3*1 20.7 6.4 42.7 1973 1.1 7.3 15.0 100.0 2.5 16.7 8.9 59.4 1974 - - 15.0 100.0 1.9 12.6 10.8 72.0 1975 - - 15.0 100.0 2.2 14.7 13.0 86.7 1976 - - 15.0 100.0 1.4 9.3 14.4 96.0 1977 - - 15.0 100.0 0.6 4.0 15.0 100.0 CREDIT 209-TUN 1971 1.4 13.3 1.4 13.3 - - - - 1972 5.5 52.4 6.9 65.7 0.2 1.9 0.2 1.9 1973 2.7 25.7 9.6 91.4 2.6 24.8 2.8 26.7 1974 0.9 8.6 10.5 100.0 2.1 20.0 4.9 46.7 1975 - - 10.5 100.0 3.2 30.5 8.1 77.2 1976 - - 10.5 100.0 2.0 19.0 10.1 96.2 1977 - - 10.5 100.0 0.4 3.8 10.5 100.0 TUNISIA SONEDE FIRST AND SECOND WATER SPTY vMQHr (IDAN 581-TUN AND CREDIT 209-TUN) COMPLETION REPORT 00MPARISON OF APPRAISAL FORECAST AND ACTUAL DISBURSEMENTS BY CATEGORY IDAN 581-TUN US Dollar Equivalent - Variations Between Revised Appraisal Agreed Eatimates & Actual Diabur ents Report Revised Amounts Cateaorv Description Estimate Estimates Disbursed In Dollars % 1 Supply of equipment $ 900,000.00 * 900,000.00 $ 1,570,302.66 _ 670,302.66 74.5 2 Cast iron or asbestos cement pipes and related fittings 750,000.00 750,000.00 925,431.50 175,431.50 23.4 3 Engineering and supervision 870,000.00 1,110,000.00 5 885,874.25 -224,125.75 -20.0 4 Prestressed concrete pipes 4,350,000.00 4,350,000.00 4,465,883.64 115,883.64 2.7 5 Installation of pipes and related works 2,550,000.00 2,550,000.00 4,031,354.75 1,481,354.75 58.1 6 Other civil works 810,000.00 810,000.00 871,153.20 61,153.20 7.5 7 fet and other charges on loan 2,250,000.00 2,250,000.00 2,250,000.00 - - 8 Unallocated 2.520.000.00 2,280,000.00 - -2,280,000.00 -100.00 Total $15,000,000.00 $15,000,000.00 $15,000,000.00 0 CREDIT 209-TUN US Dollar Equivalemt Variations Between Revised Appraisal Agreed Estimates & Actual Disbursements Report Revised Amounts Category Description Estimate Estimates Disbursed In Dollars % 1 C.I.F. cost of imported pipes, fittings and related equipment under Part I of the Project $ 4,800,000.00 $ 750,000.00 $ 942,389.29 192,389.29 25.7 2 C.I.F. cost of imported pumpe, and related mechanical and electrical equipment under Part II of the Project 240,000.00 450,000.00 547,034.26 97,034.26 21.6 3 Ex-factory price of goods listed under categories 1 and 2 of this schedule, in case they are pro- cured or produced in Tunisia 300,000.00 3,840,000.00 5,824,774.15 1,984,774.15 51.7 4 Civil works, related supplies 3,300,000.00 3,600,000.00 3,053,541.09 -546,458.91 -15.2 5 Consultant services under Part III of the Project 360,000.00 360,000,00 132,261.21 -227,738.79 -63.3 6 Unallocated 1,500,000.00 1,500,000.00 - -1.500MOO.00 -100.00 Total $10,500,000.00 $10,500,000.00 $10,500,000.00 Exchange adjusanent due to devalua- tions of the US dollar in May 1972 and February 1973 $39,626.89 TUNISIA SONEDE FIRST AND SECOND WATER SUPPLY PROJECTS (LOAN 581-TUN AND CREDIT 209-TUN) COMPLETION REPORT COMPARISON OF MAJOR INDICATORS APPRAISAL FORECAST (CREDIT 209-TUN) AND ACTUAL Appraisal Appraisal Rate of Growth Forecast Actual Forecast Actual Appraisal Actual 1969 1969 1976 1976 Forecast Water Produced (Million M ) 90.0 95.7 142.0 143.3 6.7 5.9 Water Sold (Million M3) 69.0 65.2 114.0 99.1 7.4 6.2 Unaccounted-for Water () 23.1 32 20 33 1/ 0.1 Connections at Year End ('000) 106 114 170 276 7.0 13.5 Average Rate (Millimes/M3) 60 63.4 70 82.3 2.2 3.8 Revenues (D Million) 4.50 5.18 8.70 12.24 9.9 13.1 Operating Expenses (D Million) 4.06 4.14 5.76 8.22 5.1 10.3 Net Operating Income (D Million) 0.44 1.04 2.94 4.02 31.2 21.3 Operating Ratio (%) 90 80 66 71 - - Return on Net Fixed Assets 1.7 4.1 6.0 6.4 - - Net Fixed Assets in Service (D Million) 24.90 25.25 50.31 58.57 10.5 12.8 Debt Service Coverage (Times) 4.3 2.4 2.9 3.2 - - Debt Equity Ratio 32:68 32:66 41:59 31:69 - - Internal Financing of Capital Investments (7) 372 55.) 92 36 Internal Financing as % of Net Fixed Assets Plus Work in Progress 2 (Annual Average) 0.72 3.7 6.0 15.2 1/ This figure believed to be erroneaously reported. 2/ 1970 instead of 1969 August 1977 FIRST AND SE®ND VATER SUPF.Y NROJECi (<AN 581-TUN AND CIT 20-TUl) 0~0LET10N REPORT 0M<PARIS 07 PTRA2SAL FORECAST CREDIT 209-TUN AND ACTUA4 IUM STATEMENI Fiscal Tear &d l 31 1b~ 3* 1969 1970 1971 1972 1972 1974 1973 1976 Apprasal Appralåal Appralsal Appralsal Appralsal Appralsal Appralsal Appraisal Appraisal Raport Actual Report Actual Report Actual Report Actual Report Actual Report Actual Report Actual Report Actual Report ACtUal sttmate Est Imte Eatime Etate Estifate Esttmate stinate Estimfte - Estimte etr Produced 0M111= 3) 47.5 47.8 90.0 95.7 99.0 103.1 105.0 111.1 111.0 118.6 118.0 120.6 126.0 128.2 134.0 137.3 142.0 143.3 ss: UDaccoutad-for Vato 28 25 23 32 22 32 21 33 20 35 20 33 20 33 20 33 20 33 Vatar Sold (i011m .3) 34.2 35.9 . 69.0 63.2 77.0 68.8 83.0 74.7 89.0 77.0 94.0 81.9 101.0 88.4 107.0 93.5 114.0 99.1 No. of Co-ettons at T&Kr hd (*000) 97 106 114 116 125 126 12 16 17 14, 176 154 206 162 242 170 276 31.8 36.7 60 63.4 60 60.6 60 60.9 60 60.9 70 62 70 65.6 70 84.5 70 82.3 OperatIn eveu*s --- - ----------- -------------------------------- llon ---- -------------------------------- Vater Sales 1.09 1.32 4.14 4.13 4.62 3.97 4.98 4.55 5.34 4.69 6.58 5.08 7.07 5.80 7.49 7.90 7.98 8.16 Nev Connaection Charga 0.08 0.42 0.50 0.33 0.58 0.36 0.61 0.36 0.57 0.33 0.73 0.30 1.59 0.30 2.28 0.30 2.50 Other Fata and Charga 0.17 0.09 0.36 0.40 0.37 0.43 0.41 0.62 0.44 0.64 0.46 0.74 0.50 0.85 0.52 0.97 0.55 0.96 Water Sales Tax 0.05 0.18 0.22 0.20 0.21 0.21 0.25 0.23 0.25 0.28 0.28 0.30 0.35 0.32 0.46 0.34 0.55 Other Incoec (&asse.) - 0.10 - 0.14 - - - - - (0.01) - 0.21 - 0.34 - 0.27 Les: Bad Deht Provisl 21 0.60 0.17 0.53 0.07 0.58 0.1 0.7 0.09 Q0.20 0.50 0.22 0.41 0 0.47 .20 Total Revenua. 1.13 1.54 4.50 5.18 4.99 5.26 5.38 5.90 5.60 6.06 7.14 6.62 7.67 8.38 8.22 11.86 8.70 12.24 Operattng Exr~nses Personnel 0.59 0.50 1.35 1.25 1.47 1.43 1.52 1.62 1.57 1.88 1.61 2.22 1.67 2.77 1.72 3.20 1.77 3.86 Emergy and Pual 0.15 0.18 0.38 0.34 0.40 0.36 0.43 0.39 0.46 0.40 0.49 0.42 0.53 0.55 0.57 0.64 0.62 0.68 henicala 0.05 0.06 0.14 0.16 0.15 0.17 0.15 0.20 0.16 0.24 0.17 0.28 0.18 0.47 0.19 0.44 0.19 0.45 Materiala 0.16 0.16 0.57 0.99 0.57 0.80 0.58 1.03 0.59 1.01 0.60 1.09 0.60 2.02 0.61 3.14 0.61 3.31 ¥ater Purcha*as - - - - - - - - - - 0.07 - 0.08 - 0.06 - 0.02 cereral and Ad isaltrattve E m 0.15 0.28 0.30 0.53 0.23 0.32 0.24 0.50 0.25 0.54 0.26 0.41 0.27 0.52 0.27 0.67 0.28 0.69 Vater Sales and Other T - 0.06 0.22 0.23 0.25 0.26 0.26 0.32 0.28 0.31 0.34 0.34 0.36 0.45 0.38 0.58 0.41 0.63 Special Rapair - Flood - - 0.06 - 0.23 - - - - - - - - - LUss: Capitaltad Esea -_ 005 0.10 0.45 0.10 0.61 0.10 0.65 0.10 071 0.10 0. 0.10 1.98 0.10 2.47 Q1 L9 Sub-Total 1.10 1.19 2.92 3.05 3.20 2.93 3.08 3.41 3.21 3.67 3.37 4.03 3.51 4.88 3.64 6.26 3.78 5.69 Depreciation gJ 0.35 1.14 1.0 1.17 1.22 1.20 .29 1.32 .21 1.40 1.54 1.82 1.95 1.90 2.24 ha 2.31 Total Operatinåg£~ 6 n 1. 40 4 a2 4-_ 4.28 4.70 4.9 4.9 ha 5.33 6.83 Lä 8.10 "7 "2 net OperatL-x Incan. (0.33) (0.20) 0.44 1.04 0.62 1.11 1.10 1.20 1.27 1.10 2.17 1.03 2.34 1.75 2.68 3.36 2.94 4.02 Interet 0.07 0.09 0.12 0.19 0.17 0.25 0.18 0.27 0.27 0.32 0.44 0.47 0.92 0.61 0.98 0.79 1.02 1.21 Net Inco (0.40) (0.29) 0.27 0.85 0.45 0.86 0.91 0.93 1.00 0.78 1.73 0.58 1.42 1.14 1.70 2.57 1.92 2.81 Operattng Ratio() - 113 90 80 87 79 80 80 78 82 70 84 69 79 67 72 66 71 Retur on Averaga Net Fixed Atsts - - 1.7 4.1 2.5 4.4 4.3 4.6 4.3 4.0 5.5 3.4 5.1 4.8 5.6 7.7 6.0 6.4 *July 2 thr.ugh Dcber 31. August 1977 TtUISIA SONEDE FIRST AND SE=MHD WATER SUPPLT PROJECTS (IA 581-TIU AND CR.Drr 209-TUN) COurteTON REPORT CMPARSON OF APPRAISAL FORECAST AND ACTUAL CASH FLOW Fiscal Tear Eding December 31 1968 1969 1970 1971 1972 1973 1974 1973 1976 - ---------D Mill-on----------------------.--- -..--....-..-----.---- -.---...Million.-----. Appraisal Appraisal Appraisal Appraisal Appraisal Appraisal Appraisal Appraisal Appraisal Report Actual Report Actual Report Actual Report Actual Report Actual Report Actual Report Actual Report Actual Report Actual Estimate Estimate Estimate Estimate Estimate Estimate Estimate Estimate Estimate Sources of Fonda Operating Income before Depreciation 0.08 0.35 1.56 2.13 1.79 2.33 2.30 2.49 2.60 2.39 3.77 2.59 4.17 3.70 4.58 5.60 4.92 6.55 Operational Requirements Increase in Working Capital other than Cash 0.91 0.64 1.73 1.35 (0.70) 0.22 0.15 (1.23) 0.13 (1.25) 0.41 (1.28) 0.15 0.07 0.15 0.88 0.11 (6.17) Interest Charged Opersttold IBRD/IDA - - - 0.02 - 0.09 0.01 0.11 0.11 0.17 0.28 0.24 0.74 0.37 0.76 0.64 0.75 1.07 S.edish Lending - - - * * - - 0.01 0.01 0.01 0.03 0.02 0.03 0.02 0.03 0.02 Other Loana 0.07 0.09 0.17 0.17 -0.17 0.16 0.17 0.16 0.16 0.15 0.15 0.22 0.15 - 0.22 0.19 0.13 0.25 0.12 Amortisation of loans: IBRD/IDA - - * * * * - * - . - - 0.18 0.17 0.16 0.19 0.31 0.42 Swedish Leanding * - - - - - - Other Loans 0.0 0.70 0.01 2 _4 1 g21 1_42 0.42 s I afL Total Debt Service 0.24 0.09 0.87 0.87 0.56 0.17 0.56 1.02 0.66 0.72 0.85 0.85 1.52 1.19 1.57 1.40 1.77 2.05 Total Operational Requirements 1.15 0.73 2.60 2.24 (0.14) 0.48 0.71 (0,23) 0.79 (0,53) 1.26 (0,42) 1.67 1.26 1.72 2.28 1.88 (4.12) Balance of Funds Available for Imest,ment (1.07) (0.38) (1.04) (0.11) 1.93 1.85 1.59 2.72 1.81 2.92 2.31 3.01 2.50 2.44 2.86 3.32 3.04 10.67 Capital Investments: lst Project 0.21 - 0.03 0.14 2.98 0.93 5.65 4.14 3.90 3.94 1.49 2.23 0.70 1.51 . 1.05 - 1.25 2nd Project - * * - - - 1.33 0.01 5.29 1.93 2.57 3.81 0.61 2.01 - 1.60 - 0.94 3rd Project - * - * - - * - - 0.19 - 0;51 - 6.49 Tourism Project * * - - - - - - - - - 2.90 Renevals and Other Projects 1-42 0.42 1 1.93 2.02 2.16 0.59 2.01 0.4 1.36 0 1.59 1.67 3.14 -1679 3.28 16.14. Sub-Total 1.63 0.42 1.37 2.07 5.00 3.09 7.57 6.16 9.64 7.23 4.75 7.65 3.18 6.85 3.30 9.95 3.28 27.72 Increase in Investment and longTaern Advances - 004 0.31 0.30 0.18 0.26 0.19 0.41 0.17 0.53 0.05 2.05 0.03 2.13 Total Capital Investment 1.63 0.46 1.68 2.37 5.18 3.35 7.76 6.57 9.81 7.76 4.86 8.85 3.24 8.20 3.35 12.00 3.31 29.85 Balance to be Financed 2.70 0.84 2.72 2.48 3.25 1.50 6.17 3.85 8.00 4.84 2.35 5.84 0.74 5.76 0.49 8.68 0.27 19.18 IBRD/3A 0.09 - 0.04 0.05 1.21 0.35 2.99 1.33 4.46 1.59 2.10 2.15 0.71 1.68 - 2.37 - 7.67 Swedish lending 0.21 - 0.01 0.01 0.40 0.12 1.00 0.44 1.49 0.53 0.70 0.72 0.23 0.54 - 0.69 - 1.09 Other Loans - . * .L 0.51 0.19 -. - - - - - 0.50 - 1.00 1.00 - Total Lending 0.30 * 0.05 0.06 2.12 0.66 3.99 1.77 5.95 2.12 2.80 2.87 1.44 2.22 1.00 3.06 1.00 8.76 Covernrent Contributions 2.55 0.92 3.09 2.57 0.35 0.70 1.93 2.26 1.87 2.01 - 2.29 - 2.50 - 2.92 - 6.38 Custoners Contributions - 0.07 0.21 0.25 0.17 0.42 018 0.56 0.18 0.83 0.17 0.7) 0.15 1.17 0.15 2.81 0.15 2.50 Total Funding 2.85 0.99 3.35 2.88 2.64 1.78 6.10 4.59 8.00 4.96 2.97 5.89 1.59 5.89 1.15 8.79 1.13 17.64 Cash Increase for Tear 0.15 0.15 0.63 0.40 (0.61) 0.28 (0.07) 0.74 - 0.12 0.62 0.05 0.85 0.13 0.66 0.11 0.88 (1.54) Cash at Beginning of Tear - - 0.15 0.14 0.78 0.54 0.17 0.82 0.10 1.56 0.10 1.68 0.72 1.73 1.57 1.86 2.23 1.97 Cash at End of Year 0.15 0.15 0.78 0.54 0.17 0.82 0.10 1.56 0.10 1.68 0.72 1.73 1.57 1.86 2.23 1.97 3.11 0.43 Debt Service Coverage (Times) - 4.3 4.3 2.4 1.8 0.9 3.2 2.4 4.1 3.3 4.0 2.9 4.4 3.0 2.7 4.0 2.9 3.2 Internal Financine of Capital InvestmentC%) * - - - 37 55 21 41 19 38 52 34 77 30 85 28 92 36 ---do--- as 7. of Net Fixed Assets Plu. Work in Progress (Annual Average) * - . 0.7 3.7 4.8 4.8 4.5 4.6 5.5 7.1 5.2 5.1 5.8 6.2 6.0 15.2 *July 2 through December 31 August 1977 TUNISIA SONEDE FIRST AND SECOND VATER SUPPLY PROJECTS (LDAN 581-TUN AND CRDIT 209-TUN) COMPLETION REPORT COMPARISON OF APPRAISAL FORECAST AND ACTUAL BAIANCE SHEET Fiscal Year Ending December 31 1968* 1969 1970 1971 1972 1973 1974 1975 1976 - - DMillion---------------------------------- Appraisal Appraisal Appraisal Appraisal Appraisal Appraisal Appraisal Appraisal Appraisal Report Actual Rept t Actual Report Actual Report Actual Report Actual Report Actual Report Actual Report Actual Report Actual Estimate Estimate Estimate Estimate Estimate Estimate Estimate Estimate Estimate Assets Fixed Assets 36.51 45.56 46.41 45.99 48.22 47.27 49.72 49.68 59.23 2.2; 2.36 58.86 76.06 67.89 78.73 76.66 83.03 90.86 Less Depreciation 11.29 20.36 21.51 7Z 21.o 23.92 23.07 25.27 24.27 26.90 25.68 28.76 27.52 30.69 29.6 32.72 32.29 Her Vized Assets 25.22 25.20 24.90 25.25 25.52 25.39 25.80 26.61 32.96 28.02 45.46 33.18 47.30 40.37 48.04 46.90 50.31 58.57 Vork in Progress 2.3 0.37 0.90 1.21 4.10 2.93 10.17 6.53 11.30 11.03 1.92 11.99 1,40 9.70 2.02 10.88 1.00 24.0 Total Fixed Assets 27.4! 25.57 25.80 26.46 29.62 28.32 35.97 33.14 44.26 39.05 47.38 45.17 48.70 50.07 50.06 57.78 51.31 82.97 Accounts Receivables - Ing-Tem and Investments 0.58 0.69 0.99 0.99 1.18 1.25 1 1.66 1.53 21 1.65 3.66 1.71 5.01 1.75 7.06 1.78 9.19 Sub-Total 28.03 26.26 26.79 27.45 30.80 29.57 37.34 34.80 45.79 41.24 49.03 48.83 50.41 55.08 51.81 64.84 53.09 92.16 Stocks 0.38 0.79 0.71 0.80 0.63 1.10 0.66 0.90 0.69 0.87 0.72 1.02 0.75 1.39 0.78 1.71 0.77 3.42 Accounts Receivable - 1.24 2.90 3.88 1.63 4.19 1.75 3.48 1.87 3.72 2.27 3.19 2.42 3.49 2.57 4.76 2.72 4.62 Cash and Equivalent 0.10 0.15 0.78 0.54 0.17 0.82 0.10 1.56 0.10 1.68 0.72 1.73 1.56 1.86 2.22 1.97 3.11 0.43 Total Current Assets Za& 3 . 2.43 6.11 2.51 5.94 2.66 6.27 3-71 5.94 4.73 6.74 5.57 8.44 6.60 8.47 Total Assats 29.51 2 31.18 32.67 33.23 35.68 29.81 40.74 48.4$ 47.51 52.74 54.77 5.14 61.82 57.38 73.28 59.69 100.63 Equity and Liabilities Government Contributions 17.72 16.60 19.68 19.00 20.03 19.70 21.97 21.96 23.83 23.97 23.83 26.26 23.83 28.76 23.83 31.68 23.83 38.06 Customers Contributions - 0.26 0.46 0.51 0.61 0.92 0.77 1.44 0.92 2.24 1.06 2.97 1.18 4 14 1.30 6.95 1.41 9.45 Earned Surplus (0.40) (0.29) (0.02) 0.56 0.43 1.41 1.34 2.34 2.35 3.12 4.08 3.70 5.50 4.84 7.20 7.41 9.11 10.2 Total Equity 17.32 16.57 20.12 20.07 21.07 22.03 24.08 25.74 27.10 29.33 28.97 32.93 30.51 37.74 32.33 46.04 34.35 57.73 Long-Term Debt: IBRD/IDA Lending 0.09 - 0.04 0.04 1.25 0.40 4.24 1.72 8.70 3.31 10.62 5.29 11.16 6.77 10.85 8.72 10.53 15.95 Swedish Credits 0.21 - 0.01 0.01 0.41 0.13 1.41 0.57 2.90 1.10 3.60 1.82 3.83 2.36 3.83 3.05 3.83 4.14 Other 10.16 9 76 9.37 9.37 9.50 9.17 9.11 8,79 8.70 8.39 798 8.35 7.57 8.91 7.15 9.44 6.73 Total Iong-Teru Debt 10.46 9.76 9.42 9.42 11.16 9.70 14.76 11.08 20.30 12.80 22.50 15.09 23.34 16.70 23.59 18.92 23.80 26.82 Customer Deposits - - - 0.08 - 0.10 - 0.17 - 0.48 - 0.57 - 0.73 - 0.87 - 1.04 Accounts Payable 0.23 1.41 1.26 2.72 0.62 3.09 0.62 3.36 0.64 4.51 0.67 5.60 0.70 6.04 0.72 6.61 0.7A 14.18 Current Maturities of Long-Term Debt 2 0.70 0.38 0.3 0.3i 0.7 0.39 g.19 i.Ai 2.9 20.0 0.5 0.59 0.61 0.74 0.84 O.90 - 0.86 Total Currt Liabilities 0.73 2.11 1.64 3.18 1.DO 3.95 1.01 3-92 1.05 8 1.27 6.75 1.29 7.38 1.46 8.32 1.54 16.05 Total Equity and Liabilities 28.51 28.4 31.18 32.67 33.23 35-68 39.85 40.74 48,45 47.51 52.74 54.77 55.14 61.82 57.38 73.28 59.69 100.63 Debt Equity Ratio 38:62 37:63 32:68 32:68 35:65 31:69 38:62 30:70 43:57 30:70 44:56 31:69 43:57 31:69 42:58 29:71 41:59 31:69 * July 2 through December 31. August 1977 A25 ANNEX V TABLE 4 TUNISIA SONEDE FIRST AND SECOND WATER SUPPLY PROJECTS (LOAN 581-TUN AND CREDIT 209-TUN) COMPLETION REPORT COMPARISON OF APPRAISAL FORECAST AND ACTUAL FINANCING PLAN 1968* - 1976 Appraisal Forecast Actual Variation (Credit 209-TUN) % of D Million % D Million % D Million Appraisa' Requirements Project Expenditures: First Project 14.97 36.7 15.21 19.2 0.24 1.6 Second Project 10.00 24.5 10.30 13.0 0.30 3.0 Third Project - - 7.19 9.0) Renewals and Other Projects 14.75 36.1 38.44 48.4) 30.88 209.4 Investment and Long-Term Advances 1.10 2.7 8.27 10.4 7.17 651.8 Total Requirements 40.82 100.0 79.41 100.0 38.59 94.5 Sources: Internal Cash Generation 25.77 28.12 2.35 Less: Debt Service 8.60 8.48 (0.12) Increase in Cash Balance 3.11 0.43 (2.68) Increase in Other Working Capital 3.04 (6.79) (9.83) Net Internal.Cash Generation 11.02 27.0 26.00 32.7 14.98 135.9 Borrowings: IBRD Loan 581, IDA Credit 209 11.60 28.4 12.13 15.3 0.53 4.5 Swedish Lending 4.04 9.9 4.14 5.2 0.10 2.5 IBRD Loan 989 - - 5.06 6.4) Other Loans 3.01 7.4 0.19 0.2) 2.24 74.4 Total Borrowing 18.65 45.7 21.52 27.1 2.87 15.4 Government Equity 9.79 24.0 22.55 28.4 12.76 130.5 Customers Contributions 1.36 3.3 9.34 11.8 7.98 586.8 Total Sources 40.82 100.0 79.41 100.0 38.59 94.5 * July 2 through December 31 August 1977 A26 ANNEX VI TUNISIA SONEDE FIRST AND SECOND WATER SUPPLY PROJECTS (LOAN 581-TUN AND CREDIT 209-TUN) COMPLETION REPORT TABLE OF ACTUAL INCREMENTAL BENEFITS AND COSTS Cost Incremental Benefits -----------Million Dinars---------- 1969 0.30 - 1970 2.02 - 1971 2.56 - 1972 3.96 - 1973 3.02 0.28 1974 3.55 0.69 1975 1.97 1.47 1976 0.52 1.86 1977 - 1.97 1978 2.09 1979 through 2008 2.22 Internal economic rate of return = 10.0% Benefits and costs have been adjusted for indirect taxes and customs duties. Base Year 1973.  "ERRAANEAN SEA 3R0,000 + + 1 OURIST RESORTS Mofeur UI 70,000 BENMETIR KAS5EB La Mooi La Goulette ©r libi. - BE ---2Meze DJENDOUBA mumoura 2 55 ,0 0 0 r N B E U L 3 24 ,0 0 0 Hamm.et TOURIST RESOF 311,000 .<Hn,oe ORS 3 00 Hergla KG-W Le3 2 Soers, TOURIST RESORI SOUSSE 521,000 Skanes Monajlir I 1Ordenine - okninHarkougssi @KASSERINIE 212,000 SFAX0 ý Kerkennah Islands Mao ores GAFSA 321,000 .u/f af G ø b e s TOURIST RESORTS Melita Houmt Souk TUNISIA GABES TOURIS DJERB3A 204,000 Island Adjim A F F l C A + TIM TUNISIA, . zoZris