Algeria - Water Supply and Sewerage Rehabilitation Project

.4 8 - )s (>0 (1 Z '- /// ilocument ot The World Bank FOR JFt ICIAI L'SE ONLVh Report No. 1 2357-AL STAFF APPRAISAL REPORT DEMOCRPTIC AN) POPULAR REPUBLIC OF ALGERIA WATER SUPPLY AND SEWERAGE REHABILITATION PROJECT MAY 5, 1994 Infrastructure Operations Division Maghreb and Iran Department Middle East and North Africa Regional Office This document has a restricted distribution and may be used by recipients orly in the performance of their official duties. Its contents may not otherwise be disclosed without A arld Bank authorization.  EXCHANGE RATE Currency Unit: Algerian Dinar (DA) - 100 Centiies Eguivalency of 1 US5 in DA since 1985 1985 5.03 1986 4.70 1987 8 4.85 1988 5.92 1989 7.46 1-990 8. (10 1991 17.35 199? 22.49 1993 22.00 1994 (APRIL 12) 36.00 ABBREVIATIONS bbl/d : barrels per day mm : millimecer ha : hectare MM3 : million of cubic meters Km kilometer MMT : million of metric tons lcpd : liters per capita per day m3/ : cubic meters per second GLOSSARY OF ACRONYMS AGEP : Agence Nationale de 1'Eatt Potable et Industrielle et de 1'Assainissement AGID : Agence Nationale de Rdalisation et de Gestion des Infrastructures Hydrauliques pour Irrigation et le Drainage ANB : Agence Nationale des Barrages ANID : Agence Nationale d'Irrigation et de Drainage ANRH : Agence Nationale des Ressources Hydrauliques DGAIH : Direction des Grands Amenagements et Infrastructures Hydrauliques DHW : Direction de l'Hydraulique de la Wilaya DRFUE : Direction de la Reglementation, de la Protection et de l'Usage de 1'Eau EPA : Entreprise Publique Administrative EPDEMIA : Etablissement Public de Gestion e; de Distribution des Eaux Kdnageres et Industrielles et de l'Assainissement EPE : Entreprise de Production d'Eau EPEA : Entreprise de Production, de Gestion et de Distribution d'Eau d'Annaba EPEOR : Entreprise de Production, de Gestion et de Distribution d'Eau d'Oran EPIC : Entreprise Publique, Industrielle et Commerciale GOA : Government of Algeria MA : Ministere de l'Agriculture ME : Ministere de 1'Equipement SEDAL : Socift6 des Eaux de l'Agglomeration d'Alger WILAYA(TE) : Province(s)  FOR OFFCIAL USE ONLY DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA VATER SUPPLY AND SEWERAGE REHABILITATION PROJECT Table of Contents LOAN AND PROJECT SUMARY . . . . . . . . . . . . . .. . . . . . . . I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . II. THE URBAN WATER SUPPLY AND SEWERAGE SECTOR. . . . . . . . . . . . 3 General Features . . . . . . . . . . . . . . . . . . . . . . 3 Population Distribution . . . . . 3 . . . . . . . . . . . , 3 Water Resources. . . . . . . . . . . . . . . . . 4 Service Levels. . . . . . . . . . . . . . . . . . . . . . 4 Institutional Arrangements . . . . . . . . . . . . . . . . 5 Investments in the Sector . . . . . . . . . . . . . . . . . . 6 Industrial Water Demand . . . . . . . . . . . . . . . . . . . 6 Finances . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Staffing and Management.8 The Bank Experience in the Sector . . . . . . . . . . . . . 8 Environmental Aspects . . . . . . . . . . . . . . . . 9 III. THE PROPOSED PROJECT. . . . . . . . . . . . . . . . . . . . . . . 9 Project Genesis and Concept . . . . . . . . . . . . . . . . . 9 Objectives of the Project . . . . . . . . . . . . . . . . . . 10 Project Description . . . . . . . . . . . . . . . . . . . . . 11 Institutional Reforms . . . . . . . . . . . . . . . . . . . . 12 Cost Estimates . . . . . . . . . . . . . . . . . . . . . . . 13 Project Execution . . . . . . . . . . . . . . . . . . . . . 14 Project Financing . . . . . . . . . . . . . . . . . . . . . . 15 Cost Recovery . . . . . . . . . . . . . . . . . . . . . . . . 15 Procurement . . . . . . . . . . . . . . . . . . . . . . . . . 15 Disbursement . . . . . . . . . . . . . . . . . . . . . . . . 17 IV. PROJECT IMPLEMENTATION AND OPERATION . . . . . . . . . . . . . . . . 18 Executing Agency . . . . . . . . . . . . . . . . . . . . . . 18 Operation and Maintenance . . . . . . . . . . . . . . . . . . 19 Technical Assistance . . . . . . . . . . . . . . . . . . . . 19 Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Project Accounts and Audit . . . . . . . . . . . . . . . . . 20 V. WATER SUPPLY MANAGEMENT . . . . . . . . . . . . . . . . . . . . . 20 Background . . . . . . . . . . . . . . . . . . . . . . . . . 20 Sector Structure . . . . . . . . . . . . . . . . . . . . . . 21 Concessionary Arrangements . . . . . . . . . . . . . . . . . 22 Organization and Management . . . . . . . . . . . . . . . . . 23 Staffing . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Commercial Operations .................... 23 Accotnting System . . . . . . . . . . . . . . . . . . . . . . 24 Other Management Procedures . . . . . . . . . . . . . . . . . 24 This report was prepared and written by Mr. Fritz Rodriguez (MNIIN); Mr. Charles Sterling (MNIIN); and Mr. Alain F. Thys (Consultant). This documt has a rstricted distrbution and may be used by cpient oy in *te pefrmm of their officil dutes Its contents may not otherwie be hdislosed wihout World D *n autoizaton  Table of Contents (continued) VI. FINANCIAL ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . 24 Overview . . . . . . . . . . . . . . . . . . . . . . I . . . 24 Past and Present Financial Performsnce . . . . . . . . . . . 25 Revenues and Costs . . . . . . . . . . . . . . . . . . . . . 25 Financing Plan . . . . . . . . . . . . . . . . . . . . . . 27 Future Financial Performance . . . . . . . . . . . . . . . . 27 Monitoring System . . . . . . . . . . . . . . . . . . . . . . 28 VII. ECONOMIC JUSTIFICATION . . . . . . . . . . . . . . . . . . . . . . 28 Project Benefits . . . . . . . . . . . . . . . . . . . . . . 28 Least-Cost Alternative . . . . . . . . . . . . . . . . . . . 29 Economic Return . . . . . . . . . . . . . . . . . . . . . . . 29 Economic Efficiency . . . . . . . . . . . . . . . . . . . . . 29 Environmental Impact . . . . . . . . . . . . . . . . . . . . 30 Institution Building . . . . . . . . . . . . . . . . . . . . 30 Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 VIII. AGREEMENTS REACHED AND RECOMMENDATION . . . . . . . . . . . . . . 31  LIST OF ANNEXES 1. Land and Water Resources 2. Cost of Water Supply Services in 1992 3. Projected Cost of Water Supply Services in 1994 4. Contract Model for Optimizing Water Sttpply Operations 5. Selection Criteria for Sewage Plant Rehabilitation 6. List of Studies and Operational. Equipment to be Procured 7. Program for Upgrading Meteorological Recording Operations 8. Terms of Reference for Management Studies of Surface Water and Groundwater in Soummam Valley 9. Detailed Cost Estima.es 10. Price E&calation Calculation 11. Project Implementation Schedule 12. List of Contracts to be Placed for the Project 13. Estimated Schedule of Disbursements 14. AGEP's Organizational Chart - 1993 15. Terms of Reference for Technical Assistance to AGEP 16. Water S-pply Operations in the Project Area 17. Concesssionary Arrangements for Managing Urban Water Supply Services 18. Contract de Gestion pour l'Exploitation des Services Publics d'Alimentation en Eau Potable 19. Lettre Traitant des Politiques de D6veloppement du Secteur de l'Eau 20. EPEA's Organtzational Chart - 1992 21. EPEOR's Organizational Chart - 1992 22. Proposed Organizational Chart for Regional Water Utilities 23. Terms of Reference for Setting out Commercial Operations of Water Utilities 24. EPEA - Income, Balance Sheet, and Cash Flow Statements 25. EPEOR - Income, Balance Sheet, and Cash Flow Statements 26. Assumptions for Financial Projections 27. Monitoring Indicators 28. Assumptions for Economic Evaluation of the Project 29. Selected Documents and Data Available in the Project File Man- No. IBRD 25235  DEMOMRATIC AM POPUIAR REPUBLIC OF ALGERI WATE SUPPLY AND SW AG U ITATIOX PQJECT LOAN AND RJT S Y Borrowei: : Democratic and Popular Republic of Algeria Not applicable. hmwunit : US$110 million equivalent Zeama : Repayable in 17 years including 5 years of grace, at the standard variable interest rate. Poverty Cateorv: Not applicable. Proiect Descrltion : The project seeks to restructure the urben water supply sector by contracting out a number of its operations, such as leak detection and repair, optimization of meter reading and billing, and network recalibration and mapping, with private entrepreneurs. It advocates the creation of self-financing water utilities that would operate under concession agreements with the Government. To promote water conservation, the report recommends chrArging the true economic cost of the services to consumers. Until now, a national tariff structure has been applied for water services, with no provision for capital consumption and expansion. The project proposes changing this policy by levying regional tariffs that would cover both operating and maintenance costs, and the concession fees. The Government would use these fees to finance asset renewal and expansion. As large volumes of water produced are now unaccounted for, the project includes a network rehabilitation program aiming at reducing water losses. Most wastewater treatment plants in Algeria are currently inoperative. As a result, water pollution is spreading around the large urban agglomerations, damaging the natural environment. To mitigate these damages, the project proposes the rehabilitation of a number of existing wastewater treatment plants. Under the project, institutional development assistance would be provided to three specialized agencies of the Ministry of Equipment: AGEP, ANB, and ANRH. This assistance would aim at improving project evaluation procedures in these agencies. Project benefits would encompass the recovery of 32 Mm3 of annual water production that is now lost, and substantial improvement of water quality in the country. Project execution faces some risks relating to the Government not living up to its obligations under the concession agreements. Other  - ii 1 risks r late to the extent and cost of the rehabilitation works, which cannot be determined accurately, and to possible slow pace of their execution. These risks are inherent to the nature of that type of works. To minimize the first risks, Bank review and approval of the concession agreements is proposed, to be followed by a mid-term review in the summer of 1997. To diminish the second ones, a number of seminars are - scheduled to take place at project inception, to discuss strategies for quick project implementation. Fstimated Cost C al Foreign Total -US$ Million- Water System Rehabilitation 24.5 46.0 70.5 Sewage Plant Rehabilitation -.5 7.8 ..L Subtotal 30.0 53.8 83.8 Physical Contingencies 3.0 5.4 8.4 Project Impiementation 1.8 3.2 5.0 Project Preparation 1.5 10.0 11.5 Operational Equipment 0.8 8.7 9.5 Institutional Development 9.O 112 Total Base Cost (Mid-1993 prices) 39.3 90.1 129.4 Price Escalation 2L2. 19.9 40.6 TOTAL PROJECT COST1 60. 11.0. Financimg Plan Concession Fees 54.1 -- 54.1 Government 5.9 . 5.9 IBRD - 110.0 Total Sources 60.0 110.0 170.0 Zstmated Disbsementg BkE* 1995 199