Turkey - Istanbul Water Supply Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4853 PROJECT PERFORMANCE AUDIT REPORT TURKEY: ISTANBUL WATER SUPPLY PROT'CT (LOAN 844-TU) December 27, 1983 Operations Evaluation Department This document has a restricted distribution and may be used b:, recipients only in the performance of their official duties. Its contents may not otherwise be discloseJ without World Bank authorization. FOR OFFICIAL USE ONLY PROJECT PERFORMANCE AUDIT REPORT TURKEY: ISTANBUL WATER SUPPLY PROJECT (LOAN 844-TU) TABLE OF CONTENTS Page No. Preface .................................................... i Basic Data Sheet .......... .. ........... ........ ... . .... 11 Highlights .............. . . . . . . . . . . . . . . . . . . . . . iv PROJECT PERFORMANCE AUDIT MEMORANDUM I. PROJECT BACKGROUND ................................... 1 II. PROJECT IMPLEMENTATION ...* ........................ 2 III. PERFORMANCE ..-..... ...................... 6 IV. MAJOR ISSUES ..................................... 8 V. CONCLUSIONS ..................... . ... ... ... .. *... 13 APPENDIX A: Comments by the Treasury ............................... 15 APPENDIX B: Comments by the Kuwait Fund ........................... 16 PROJECT COMPLETION REPORT I. Introduction ************.... ........... 17 II. Project Preparation and Appraisal *********************... 18 III. Project Implementation, Cost and Operation ............... 23 IV. Operating Performance .....*.*. *............ 29 V. Financial Performance ............................... 30 VI. Institutional Performance ............................... 32 VII. Project Justification .............. 34 VIII. Conclusions ..**.*.. ............. ........ 36 Annexes: 1. Estimated and Actual Project Costs in TL Million ........ 38 2. Estimated and Actual Project Costs in US$ Million ....... 39 3. Actual Annual Local Project Investments .........40 4. Actual Annual Foreign Project Investmentts ....... 41 5. Estimated and Actual Operational Data *......42 6. Actual and Expected Technical Specifications ...*..... 43 7. Comparison of Appraisal and Actual Income Statements ...45 8. Comparison of Appraisal and Actual Balance Sheets ...... 46 9. Comparison of Appraisal and Actual Cash Flow Statements . 47 10. Com~parison of Appraisal and Actual Financing Plans ...... 48 11. Re-Calculation of the Internal Rate of Return ......... 49 maps IThis document has a restricted distribution and may be used by recipients only inthe performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization, PROJECT PERFORMANCE AUDIT REPORT TURKEY: ISTANBUL WATER SUPPLY PROJECT (LOAN 844-TU) PREFACE This report presents the results o2 a performance audit of the Istanbul Water Supply Project, for which Loan 844-TU of US$37.0 million was made in June 1972 to the Government of Turkey to be relent through a subsidiary loan agreement to the Istanbul Water Administration (ISI). The loan agreement was signed in June 30, 1972 and became effective in January 4, 1973. The original closing date was June 30, 1977 but it was extended to June 30, 1981 and the loan was not fully disbursed until April 1, 1982. A project agreement was also signed between the Bank, ISI and the State Hydraulic Works (DSI), a national agency responsible for construction of the major works. The Project Performance Audit Report (PPAR) consists of a Project Performance Audit Memorandum (PPAM) prepared by the Operations Evaluation Department (OE)) and a Project Completion Report (PCR) prepared by the Water Supply and Sewerage Division of the Europe, Middle East and North Africa Regional Office. Regional divisional staff undertook a project completion mission in December 1981 to gather information for the PCR. OED reviewed the PCR, the Appraisal and the Loan documents, the President's Report and other information in Bank Group files. OED visited Turkey in March 1983 to discuss the project with project staff and government officials. OED also inter- viewed Bank staff familiar with the project. Another PPAR to be issued separately will cover the Istanbul Urban Development Project (Credit 324-TU). The PCR fairly describes the preparation and appraisal of the project and its implementation, costs and operation. The financial records and reports were kept in local currency, which underwent such marked inflation during the later years of the project implementation period that the financial results are not comparable. The PPA.H comments on the issues of unaccounted for water, institutional development, and financial viability. Following standard OED procedures, copies of the PPAR were sent on August 23, 1983 to the Government, the executing agencies (ISI and DSI) and the Kuwait Fund for Arab Economic Development for comments. Comments were received from the Treasury and The Kuwait Fund. These have been taken into account in preparing the final report and they are attached as appendices to the report. - il - PROJECT PERFORMANCE AUDIT BASIC DATA SMSET TURKEY: ISTANBUL WATER SUPPLY PROJECT (LOAN 844-TU) KEY PROJECT DATA Appraisal Ac,ual or Item Expectation Cirrent Estimate Total Project Cost (US$ million) 85.1 159.5/a Overrun (%) -87.4 Loan Amount (US$ million) 37.0 37.0 Disbursed 37.0 37.0 .Date ior Completion of Physical Components 12/31/76 12/82/b Proportion Completed by Target Date (%) 40 Time Overrun (%) 125 Economic Rate of Return () 10.6 8.6 Financial Performance Rate of return on Operating losses assets of at least 1974 through 1976 7% from 1974 through and an estimated 1976 and 8% there- rate of return on after. assets of 2% in 1980 and 1981. Institutional Performance Good Unsatisfactory Cumulative EstImated and Actual Disbursements (US$ millions) PY: 73 74 75 76 77 78 79 80 81 82 (i) Appraisal Estimate 2.7 9.6 20.5 30.7 37.0 - - - - - (ii) Actual 0.2 1.3 5.9 7.4 15.3 25.7 27.3 27.6 27.9 37.0 (iii) as % of (L) 7 14 29 24 41 70 74 75 75 100 OTHER PROJECT DATA Item Original Revisions Actual First Mention in Files or Timetable -- 08/20/69 Government Application -- 10/14/71 Negotiations -- 05/10/72 Board Approval Datae - 06/27/72 Loan Agreement Date - - 06/30/7 2 Effectiveness Date 10/05/72 01/05/73 01/04/73 Closing Date 06/30/ 77 06/30/79 06/30/80 06/30/81 06/30/8 1/c Borrower Republic of Turkey Executing Agencey Istanbul Water Administration (1SI) and State Hydraulic Works (DSI) Follow-on Project Name Istanbul Sewerage Project Loan Number 21159-TU Amount (UJS$ million) 88.1 Loan Agreement Date 051/28/82 /a Not including the installation costs of distribution mains not completed under the project. Ib Except distribution mains hich had not been completed as of March 1983. Cac Final disbursement was on April 1, 1983. BESTI COPY AVAILABLE - iii - MISSION DATA Month/ No. of No. of Man- Date of Item Year Weeks Persons weeks Report Reconnaissance 11/69 8 2 16 12/08/69 Preparation 06/70 10 2 20 07/13/70 Preparation 04/71 9 4 36 07/21/71 Preparation 07/71 10 1 10 07/28/71 Preparation 09/71 5 1 5 10/14/71 Appraisal 11/71 21 4 65 12/06/71 Post-Appraisal 03/72 20 2 40 04/05/72 Supervision I 06/73 2 1 2 07/18/72 Supervision II 07/72 9 1 9 08/14/72 Supervision III 10/72 10 1 10 11/15/72 Supervision IV 04/73 14 2 18 05/14/73 Supervision V 02/74 6 1 6 03/11/74 Supervision VI 02/74 5 1 5 03/22/74 Supervision VII 09/74 6 2 12 10/10/74 Supervision VIII 01/75 10 1 10 02/10/75 Supervision IX 06/75 9 1 9 07/09/75 Supervision X 10/75 8 1 8 10/17/75 Supervision XI 05/76 11 2 22 06/18/76 Supervision XII 11/76 3 2 6 01/07/77 Supervision XIII 07/77 10 1 10 08/04/77 Supervision XIV 10/77 10 1 6 11/11/77 Supervision XV 01/78 9 1 9 05/18/78 Supervision XVI 03/79 10 2 14 04/10/79 Supervision XVII 08/79 8 2 16 09/12/79 Supervision XVIII 02/80 7 2 14 02/25/80 Supervision XIX 01/81 8 2 8 02/17/81 Supervision XX 09/81 8 2 16 10/26/81 Completion 12/81 10 2 20 06/18/82 Total 252 422 COUNTRY EXCHANGE RATES Name of Currency (Abbreviation) Turkish Lira (TL) Appraisal Year Average (1971) US$1.00 - TL 14.0 Completion Year (1981) US$1.00 = TL 111.2 - iv - ELDJECT PEREORMANCE AUDIT REPORT TURKEY: ISTANBUL WATER SUPPLY PROJECT (LOAN 844-TU) HI6HLIGHTb The Project was successful to the extent that it assisted in providing adequate water to the Istanbul Metropolitan area (PPAM, para. 4; PCR, paras. 4.01, 4.07, 7.01 and 8.01). It did not succeed in strengthening the ISI and its financial viability (PPAM, paras 15-19 and 35-44; PCR, paras. 5.01-5.03, 6.03 and 7.01); it may have encouraged the establishment of a regional water supply authority, although that took place only in 1981 (PPAM, paras. 35-36; PCR, paras. 3.21, 6.02, 6.05 and 7.02). Effectiveness of the loan was delayed because of the reluctance of DSI to employ consultants (PPAM, para. 11; PCR, paras. 3.01-3.03) and the overall implementation of the project began much later and took more than twice as long to implement as had been anticipated (PPAM, para. 13; PCR, paras. 3.04-3.06). Distribution system improvements by ISI were very limited compared to the project objectives (PPAM, paras. 7 and 16; PCR, paras. 4.02 and 4.03). Physical execution of the major project works by DSI was satisfactory, if drawn out. There were also substantial cost overruns caused primarily by unanticipated inflation and, to a smaller extent, by design changes and original cost underestimates (PFAM, paras. 13 and 20; PCR, paras. 3.11-3.14 and 3.18). In addition to the above mentioned issues, which are properly set out in the PCR, the audit notes the following points of interest: (1) the issue of unaccounted-for water which was a matter )f some concern to the Bank during project implementation, is even now difficult to properly assess in the absence of reliable water production figures (PPAM paras. 16 and 26-29; PCR, paras. 4.05-4.06 and 7.06); (ii) the inability to develop ISI as a more effective operational entity (PPAM, paras. 15-19 and 30-36); and (iii) inadequate financial viability due to a decreasing water tariff in real terms and escalating operating costs during the implementation period, such that the rate of return was not met and operations required cash contributions instead of providing funds for con- struction (PPAM, paras. 17-19 and 37-44; PCR, paras. 5.01-5.03 and 7.01). The appraisal was well and thoughtfully done. The unusual inflation could not have been fully foreseen, nor the political problems which were to occur and render tariff tncreases difficult to obtain (PPAM, para. 15; PCR, para. 3.14, 5.01, 5.09 and 8.01). Some lessons may be drawn from the experience, however. More attention should be addressed to water production in order to assess the true extent of unaccounted-for water (PPAM, paras. 28-29; PCR, paras. 4.05-4.06 and 7.06). A more realistic assessment of likely implementation progress is necessary to properly fix project institutional and physical goals (PPAM, para. 23; PCR, paras. 2.15, 7.07 and 8.03). Revenue covenants should be designed with due consideration for the type and caliber of accounting system likely to exist during the project period (PPAM, paras. 16 and 19; PCR, paras. 2.06 and 5.05-5.08); in this case an operating ratio or a cash contribution test may have been more suitable than the rate of return, which could have been left for a future project (PPAM, para. 42). - 1 - PROJECT PERFORMANCE AUDIT MEHORANDUM TURKEY: ISTANBUL WATER SUPPLY PROJECT (LOAN 844-TU) PROJECT BACKGROUVD 1. The Istanbul Water Supply Project was a major part of the initial implementation of a regional water supply plan prepared by a consortium of consultants from 1966 to 1971 as a UNDP/WHQ Project. The consultants had studied the Istanbul metropolitan area as a region, rather than a collection of separate municipal systems. They had prepared the preliminary engineering for the improvements necessary to meet the projected demand to 1985 and this preliminary engineering was the basis of the project (PCR, paras. 1.03 and 2.01). 2. There were two agencies involved in the project. ISI, the former Istanbul Water Administration, was responsible for water treatment and distribution to consumers throughout the Istanbul municipal area and for sale of water at wholesale to neighboring municipalities. It was established in 1933 when it took over the assets of a private water company serving European Istanbul. In 1937 IST took over another company serving Asian Istanbul. ISI was a semi-autonomous agency of Istanbul municipality and was absorbed into a metropolitan water supply and sewerage agency in 1981 (PCR, paras. 1.03- 1.05). 3. DSI, the General Directorate of State Hydraulic Works, was established in 1953 to coordinate the exploitation of water resources in Turkey and to design and construct works for flood control, irrigation, drainage, hydroelectric power, and, since 1968, urban water supply for municipalities with populations above 100,000. It is a large, experienced and well-regarded organization with 1,200 engineers. DSI builds water supply facilities and hands them over to the municipalities for operation and maintenance. The municipalities are indebted to DSI for the costs incurred. (PCR, para. 1.05). 4. At the time of project appraisal, available water supply for Istanbul was about 60% of the estimated demand. The supply of water to consumers trebled during the project period, although much of this was due to major works which had been started by DSI in 1966 with local funds. The current water supply situation in the Istanbul metropolitan area is now one of sufficiency, but additional works must be started at once if a new shortage is not to develop in the near future (PCR, paras. 4.01, 4.07, 7.01 and 8.01). 5. The project was appraised in November/December 1971, together with the Urban Development Project (Credit 324-rU), and the loan was signed on - 2 - June 30, 1972. The Bank loan of US$37 million was intended to cover the foreign exchange costs of a total project cost estimated at US$85 million. It became effective with a three-month delay on January 4, 1973 and was closed with four years of extension on June 30, 19811/ (PCR, paras. 1.05, 2.04, 3.03 and 3.16). The project was to be processed jointly with an electric power distribution project and an urban development project as .n integrated Bank Group approach to Istanbul urban development. The Urban Development Project (Credit 344-TU) was appraised at the same time as the water supply project. The loan and the credit were signed on the same date and there were cross effectiveness clauses (PCR, para. 2.05). The power distribution appraisal took place in June-July 1972 and a loan (892-T11) was signed on May 25, 1973. In practice the three projects proceeded independently and there was little integration. 6. The Government of Turkey was the Borrower and relent the proceeds to ISI. There was a Project Agreement between the Bank, ISI and DSI. As noted in the PCR, there were four areas of contention at loan negotiations (PCR, paras. 2.05-2.06). The first was a Bank requirement for 20% increase in water rates as a condition of effectiveness, which the Bank yielded. The other three issues were: the Bank's requirements for linkage between the water supply project loan agreement and the urban development project credit agreement; inclusion of all assets in use in the IST rate base; and automatic revaluation of the assets. The cross effectiveness linkage resulted in holding up the effectiveness of the urban development credit because of -elays ay DSI in employing consultants as required under the water supply *greeaent. Although agreed by the Borrower, the calculation for computing rate of return on revalued assets was not used in practice (PCR, paras. 2.06 and 5.07). II. PROJECT IMPLEMENTATION 7. ISI was responsible for providing the overall project aanager and for construction of the distribution components (PCR, paras. 2.16, 3.10 and 6.04).2/ The Appraisal Report anticipated that IS1 would lay 210 kms of primary distribution pipe and 545 kms of secondary distribution pipe in the project period of 1972-76. Construction progress was very poor; ISI only installed 165 kms of primary distribution in the 1972-80 period and 101 kms of secondary distribution (PCR, paras. 3.05-3.06). The Appraisal Report cost 1/ However, at the formal closing date, approximately US$9 million remained undisbursed. The Bank agreed to allow disbursements to continue for five months until November 30, 1981. This was interpreted to mean the date of receipt of withdrawal applications, and the last disbursement was made April 1, 1982 (file search). 2/ The concept was that since all works would become the property of 1SI, which would assume responsibility for repayment of costs, it should have the senior role in project administration. estimate of ISI project components (US$33.7 million) and actual expenditures (US$57.2 million) have little comparability because of inflation, currency revaluations and the inclusion in expenditures of the large quantities of pipe which have not been installed (PCR, para. 3.14). 8. ISI also was required to employ engineering consultants to assist in the preparation of a water distribution network analysis and the develop- ment and improvement of distribution systems. The consultants were appointed in October 1974, two years later than had been anticipated (PCR, paras. 2.16, 3.05 and 3.20), and they were released before the final expiration of their contract. This early release was due in part because ISI felt it could complete the detailed mapping of the distribution system which was well advanced under the consultants and because ISI did not feel that the distribution system design undertaken by the consultants would be of any use. ISI did complete the mapping, using two of the draftsmen who had been with the consultants. In the case of distribution system design, the project manager did his own design based on the earlier report by the consulting consortium (PPAM, para. 1) and his intuition. As the project neared an end, the Bank agreed that funds would be used to purchase pipe based on the project manager's list of requirements (PPAM, para. 5). 9. The consultants were also expected to investigate the leakage of the distribution system and prepare recommendations. This was done to a limited degree, but was severely handicapped by ignorance of pipe and valve locations, difficulties in closing off portions of the system in the face of public complaints, and power interruptions, all of which probably contributed to the lack of conviction on the pa-t of the IST management that it was a useful program (PCR, paras. 2.16 and 4.06). 10. ISI was also required to engage management and accounting consul- tants to assist in improving its organization and management and accounting procedures. The original date for appointment was October 31, 1972 and 1SI was to submit proposals for implementation of the improvement of its organization by December 31, i972. The management and accounting assignments were combined into a single consultancy agreement which was finalized with a group from a local university early in 1974. The recommendations produced by the local consultants were deemed unsatisfactory by ISr and were not implemented (PPAM, paras. 31-33; PCR, paras. 2.16, 6.01 and 6.03). 11. DSI was responsible for constructing US$50 million of works of the US$85 million project. These included pumping stations, treatment plants, reservoirs, major pipelines, a telemetering system and a pipeline under the Bosphorus (PCR, paras. 1.05 and 2.16). As a condition of effectiveness, DSI was to employ engineering consultants to assist: (a) in the design and construction supervision of (i) the Bosphorus underwater pipeline and (ii) the transmissions mains; and (b) in the tendering and construction supervision of the treatment plants. Delays in meeting these requirements forced extension of the proposed effective date from October 5, 1972 to January 5, 1973. Then, when consultants had not been employed by the latter date, the loan was made effective on the basis of an undertaking by the Ministry of Finance that DSI had: (L) asked a consultant to sign a contract for the Bosphorus pipeline; (ii) agreed to engage one of two short-listed consultants for the transmission mains; and (iii) agreed to sign the consulting contract for construction supervision of the treatment plants by May 31, 1973 (PPAM, para. 6; PCR, paras. 3.01-3.03). 12. DSI had two reservations about the use of consultants. Were they necessary, and if so, would they have to be foreign firms? DSI decided that a foreign firm was necessary for the Bosphorus pipeline because in Turkey there was no experience with such construction; the consulting agreement was signed on January 8, 1973. DSI did not believe that consultants were neces- sary for supervision of construction of treatment plants, and the delay in selecting them was based on this view. Eventually, however, because the Bank insisted that the treatment plant construction contract should not be signed before engagement of a consultant firm, the consulting agreement was signed on June 21, 1974. The firm was foreign because no local firm with appro- priate experience expressed interest. DSI's position on consultants for the transmission mains is not clear. Howetver, the firm employed for the treat- ment plants was eventually (1976) given responsibility for the transmission works, although it was not one of the short-listed firms (PCR, paras. 3.03 and 3.20). 13. Construction of the DSI components was delayed on average two years. The treatment plants were begun in 1975, instead of 1973, and con- struction of the Bosphorus pipeline, which was to have been completed by 1975, only began in that year and was completed in 1978 (and put into use only at the end of 1982 due to difficulties encountered by ISI in obtaining approval to install connecting pipes through a military installation). Costs of the DSI components (US$101 million equivalent) substantially exceeded estimates (by US$47.4 million equivalent). However, it is difficult to separate out the effects of the severe inflation which took place during the project implementation period from changes in design and original underestimations of costs. Nevertheless, it appears that the additional costs occurred primarily because of underestimatioa of the degree of inflation which was to take place (PCR, para. 3.14) and because project execution took about twice as long as expected. Consequently, the price contingency provision of 19% of estimated costs plus physical contingencies proved to be much too low (PCR, paras. 3.04, 3.06-3.10 and 3.14). 14. The financial plan of the project is summarized in the following table. This is a very approximate statement in current US dollars of information contained in the PCR. It illustrates the additional funds which had to be provided by government loans and a Kuwait Fund loan3/ to cover cost overruns and the failure to generate cash internally (PCR, paras. 3.13 and 5.04). 3/ See Appendix B for description of Kuwait Fund loan. -5- Appraisal Results US$ million Capitel Sources Bank Loan 37.0 37.0 Government Loan 56.2 110.2 Kuwait Fund /a 12.0 Total Borrowing 93.2 159.2 Capital Contributions 3.5 33.2 Internal Cash Generation 20.3 (12.2) Total Source 117.0 180.2 Capital Requirements ISI Capital Works -Project 35.1 ) 57.2 -Other 1.4 ) DSI Capital Works -Project 50.0 ) 96.5/b Other 15.2 ) Total Program 101.7 153.7 Debt Service 3.3 Capitalized Interest 5.0 Adjustment to Balance 27.1 Addition to Net Working Capital 10.3 (3.9) Total Requirements 117.0 180.2 /a See Appendix B for description of Kuwait Fund loan. /b Includes US$1.3 million design and construction supervision. N.B. Not included are: (i) US$5.84 million of project capital works executed by DSI in 1982; (ii) debt service on the Bank loan through 1982, amounting to something like US$2.5 million annually and serviced by Government; and (iii) cost of installing distribution pipe purchased by ISI but not completed. - 6 - III. PERFORMANCE ISI - The Beneficiary 15. In evaluating the performan,e of ISI, it should be noted that the implementation period of this project paralleled a difficult economic and political period. While ISI was unsuccessful in meeting most of the institu- tional and financial objectives set out at project appraisal, the reasons for its failures were not entirely withiL itn control. Turkey suffered from unprecedented inflation, high unemployment, severe economic contraction in real terms and major uncertainties in its political and civic institutions. Under these circumstances, decisions bringing about substantial institutional and financial changes were difficult to obtain. It is in this context that ISI's performance should be assessed (PCR, paras. 3.14, 5.01, 5.09, 7.05 and 8.01). 16. ISI failed to complete the distribution works outlined in the Appraisal. These had been projected at about twice the level achieved by ISI in previous years - a reasonable goal. In fact, ISI installed less pipeline during the project implementation period than it had in the preceding decade. The operating performance of ISI also deteriorated during the project period. Although the actual increase in production closely paralleled Appraisal Report estimates, the amount of water sold was substan- tially less and the amount of unaccounted-for water was more (PCR, paras. 4.02-4.06). 17. ISI's financial performance was very poor; instead of the projected 7% rate of return, ISI started incurring losses in 1973. Losses exceeded the depreciation provision so that instead of generating cash for the project, operations drained away about US$12 million equivalent from 1972 through 1981. Accounts receivable increased from US$9.5 million equivalent in 1972 to US$43.8 million equivalent in 1981. This was essentially matched by an increase in accounts payable from US$3.9 million equivalent to US$40.2 million equivalent. The collection of water bills continues to be poor; as of December 30, 1982, collections were less than half of 1981 and 1982 billings (PCR, paras. 5.01-5.03 and 5.08-5.10). 18. In spite of continued urging by the Bank, ISI did not institute a training program, nor make significant changes in its management or accounting structures. It did not use consultants well and resisted attempt to address identified problems. Its management of project implementation was deficient to a large measure. There were problems of inadequate staff. They were exacerbated by language constraints which prevented Bank staff from fully understanding the institutional difficulties and ISI staff from profiting from the available learning opportunities. - 7 - 19. ISI failed to comply with the rate of return requirement, largely because it could not get tariff approvals, and could not arrange wholesale water agreements, asset reevaluation procedures, timely and acceptable audits, and implementation of managerial and accounting recommendations. On some of these (audit and reevaluation) the Bank Group4/ gave up; on others (managerial and accounting reforms), it kept pressing but to no avail (PPAM, paras. 6 and 15; PCR, paras. 5.01-5.02, 5.05-5.08 and 8.01). DS I 20. DSI took much longer than scheduled to construct its works, completing the transmission mains only in 1982, and at a cost well over the * cost- estimates. Although the higher costs were principally due to unanti- cipated inflation (PPAM, para. 13), some of the additional costs were the result of design changes (e.g., the Bosphorus pipeline), delays in starting works because of DSI reluctance to hire consultants (treatment plants), and difficulties in procurement which led to rebidding (Bosphorus pipeline and transmission lines). DSI also refused to follow international competitive bidding for some civil works contracts which, in the end, were not financed from the Bank loan (current Bank practice would result in cancellation of the loan funds provided for such contracts). DSI is very competent tech- nically; it can and does plan, design and execute construction programs well. In spite of the long construction period and cost overruns, DSI's performance was good (?PAM, paras. 11 and 13; PCR, paras. 3.01-3.10). 21. DSI did not fully observe the international bidding requirements (PPAM, para. 20 and PCR, para. 3.09) and reluctantly engaged consultants for the treatment plant construction as a condition of effectiveness (PPAM, paras. 11 and 12; PCR, paras. 3.03 and 3.20), but otherwise complied satis- factorily with its loan covenants. Consultants 22. DSI had employed a firm of consultants to prepare the tender docu- nents for treatment plants and to assist in the evaluation of bids. These consultants, who had been appointed before appraisal, were not financed by Bank funds. Their performance was judged by DSI as unsatisfactory, prin- cipally because the tender and contract conditions as drafted gave rise to substantial supplier claims at a later date. DSI said that the consulting firm for the Bosphorus pipeline and the firm responsible for the supervision of the treatment plants and transmission mains performed in a satisfactory manner and DSI was satisfied with their participations, including the treatment plant supervision DSI had objected to earlier (PPAM, para. 12). The consultants hired by IST to assist in the distribution system performed 4/ Both of these matters were raised by the Bank Group with Turkish authorities as multi-project problems. - 8 - adequately (PPAM, paras. 8 and 9; PCR, para. 3.20). According to former IST staff, the management and accounting consultants were unsatisfactory (PPAM, para. 10). Bank 23. The Bank was over-optimistic in its assessment of ISI's ability to implement the project and to meet the institutional and physical (e.g., construction and operation) goals which were never remotely reached within the anticipated time period. This optimism was apparent in the requirement for appointment of management and accounting consultants by October 21, 1972 (accomplished by June 3, 1974) and submission by ISI by December 31, 1972 of its proposals for implementating the improvement of its organization (essen- tially done in early 1979).(PPAM, para. 10; PCR, paras. 2.15, 7.07 and 8.03). 24. The Bank did push constantly for a training program and leak detec- tion but without success in the face of ISI's lack of interest (PPAM, paras. 9 and 18). Supervision missions provided welcome technical assistance and a useful stimulus to project implementation which otherwise would have been delayed more than it was. Also the Bank supported ISI in its tariff applica- tions. On the other hand, the Bank soon decided it could not obtain a proper audit report (a problem common to all Turkish projects), and only diffidently pursued the revaluation of assets (PPAM, para. 19; PCR, paras. 7.04-7.08; file search). 25. The Loan Agreement required an ISI Project Manager (PPAM, para. 7 and PCR, paras. 2.16, 3.10 and 6.04), through whom all correspondence was to pass, including procurement documentation. This was intended to give ISI some status and force it to develop an ability to manage. It failed because ISI was unable to rise to the challenge and because DSI, a well established and competent organization, did not want to be rut into a subordinate position to another organization. In retrospect, a me unnecessary friction would have been avoided if the Bank had arranged, as it eventually did, to deal separately with each of the two organizations on its portion of the project. IV. MAJOR ISSUES Unaccounted-for Water 26. The Appraisal Report noted that unaccounted-for water had decreased from 45% ten years previously to an estimated 34% in 1971. The report then projected a further gradual decline to 26% in 1980. The project included funds for water meters for individual connections and for production meters and appeared to have anticipated that meter installation plus the replacement of some distribution pipes (as part of the general expansion of the distribu- tion system) would result in the projected decline. Reported unaccounted-for water increased, however, to 44% in 1980 (PCR, paras. 4.04-4.06). - 9 - 27. The Bank first noted the problem to ISI in November 1975 and con- tinually afterwards urged system surveys and a leak detection program and proposed a consultant be used to address the problem. ISI had leak detection crews but they were viewed by the Bank and the consultant working with ISI as ineffectual. ISI believed that the problem was principally one of old pipes which would require costly and disruptive replacement. There was substantial replacement of existing meters and installation of new ones with little appa- rent effect on unaccounted-for water. Moreover, the meter installation pro- gram was suddenly stopped in May 1977 when a five-day week was instituted (installations had been done on Saturday overtime by distribution system staff). The meter program was also handicapped by inadequate repair facili- ties and poorly trained staff. The Bank proposed that staff be sent to the Lisbon Public Water Enterprise, which had an efficient meter repair shop but this was not accepted; a major obstacle, and perhaps the principal reason the offer vasn't taken up, would have been language. ISI did send staff to meter manufacturers in Italy and Germany and later the manufacturers sent technic- ians to Istanbul to train ISI staff. 28. The key ingredient in assessing the true extent of the unaccounted- for water problem was (and is) production meters, which were lacking or were not functioning. An order for production meters was placed in August 1979, but installation is still not complete (1983), and the extent of the problem cannot still be reliably estimated. In the absence of production data, the wide range in unaccounted-for water estimates, 35 to 45%, is not surprising. 29. Unaccounted-for water can be due to a variety of factors in addi- tion to leakage, e.g., overestimated or underestimated production, illegal connections, meter under registration, underestimates of ideitified unmetered consumption, etc. At present, ISKI, the Istanbul Water Supply and Sewerage General Directorate and the successor to ISI, has 800,000 water connections in the metropolitan service area and estimates that there may be a further 200,000 illegal connections. In consideration of these factors, leakage may or may not be a significant problem, although it is liable to be in a distribution system as old as Istanbul's. In any event, early and specific detailed attention to measurement of production and evaluation of other factors could have been beneficial. Thiis would require larger amounts of technical and managerial input and capital funds than is usually applied to this aspect of water supply projects. Institutional Development 30. Effective diagnosis and remedy of internal managerial deficiencies require firsthand, intimate acquaintance with the practices of an organiza- tion. The language barrier in this case impeded access by Bank staff as only one or two Turkish individuals understood English well. Moreover, ISI's management was not enthusiastic about changes in its operations, particularly with the economic and political conditions which prevailed (PPAM, paras. 15 and 18). These two factors, language and reluctance, handicapped efforts to improve, or at least change, managerial practice within ISt. - 10 - 31. The Appraisal Report noted that management consultants were requir- ed to assist ISI to determine and implement appropriate organization changes, examine work methods, and provide training. It also found that the account- ing system was ineffective and that ISI had decided to employ accounting consultants to assist in the adoption and implementation of accounting changes and improvements by October 31, 1972. In the event, the two consul- tancies were combined in a single contract signed on June 3, 1974 with a local group allied with a local university. The consultants submitted reports in mid-1975 and the ISI management set up two committees to review the reports and prepare recommendations. Supervision missions pressed repea- tedly for comments and recommendations but assessed the response as "cool". The committees reported to the General Manager in March 1977. 32. The General Manager then formed another committee to review the two committees' reports. He held the view that the management study was too theoretical, did not take sufficient cognizance of procedures and realities in Turkey, and was unacceptable. It was also reported that he feared imple- mentation would result in appointment of new staff selected for political considerations and not abilities. A proposal for reorganization of the ISI management structure was submitted to ISI's board in early 1979, approved by the Municipal Council in November 1979 and sent to the Ministry of Internal Affairs, where no approval had been issued by November 20, 1981, when ISKI (PPAM, para. 29) was established. There is no evidence that this management study influenced the internal crganization of ISKI. 33. The accounting study fared little better. It was judged also to be too theoretical and impossible to apply, given the staffing available. In short, the effect of management and accounting studies was negligible. The OED mission learned that a new consultancy contract has been signed by ISKI. While this is with a different group from the same local university, the studies are expected to benefit from the mistakes of the earlier effort. 34. The project provided US$50,000 for staff training, this was par- tially used to send two engineers from DSI and one engineer from ISI to attend the year long sanitary engineering course at Delft in the Nether- lands. The three engineers trained are still employed by their respective institutions and this portion of the training was successful. However, training stopped there, in spite of repeated efforts by the Bank to have ISI institute a training program and appoint a Director of Training (PPAM, paras. 18 and 24; PCR, para. 6.08). 35. The Appraisal Report acknowledged the need to strengthen ISI. There is no evidence that progress was made during the implementation period. ISKI, (PPAM, paras. 29 and 32), the successor to ISI, now has the responsibility for water supply and sewerage throughout the metropolitan area and is composed of the staff of ISI (an estimated 60% of ISKI staff) plus the staff of the sewage department of the Istanbul Municipality and personnel from the water supply units taken over from neighboring municipalities. Optimism about its future performance rests largely on the hopes for the new dynamic general manager and for limited staff changes. - 11 - 36. A major goal of the project had been the creation of a regional water supply organization and the Government had agreed to furnish for Bank comments draft legislation for such an authority by the end of 1972, later amended to March 31, 1973. (This obligation was repeated in the Urban Development Project Credit Agreement). The Ministry of Reconstruction and Resettlement submitted draft proposals in April 1973 for a Municipal Union for Water Supply and Wastewater Disposal, but this appeared to have been largely an attempt to meet the letter of the requirements and disappeared quickly fiom serious consideration - reportedly due to unattrap.tive financial conditions for Istanbul Municipality. The Ministry of Reconstruction and Resettlement then draf'ed legislation to establish a regional authority, but no action was taken o it. The Bank would not appraise the waste water project,5/ prepared unaer the Urban Development Credit, until a regional authority was set up. This finally took place with the creation of ISKI in 1981. There is no evidence that the requirement of the water supply loan caused the action, or that it resulted from the prospect of a sewerage loan, although it is widely assumed that both did encourage regionalization. Like the creation of the Istanbul Metropolitan Authority, it was probably an idea whose time had come in an auspicious political environment. Financial Viability 37. The Loan Agreement required that IST should provide revenue suffic- ient to produce an annual return on revalued assets in service of at least 7% for the calendar years 1974 through 1976, and 8% thereafter, with assets revalued by a procedure to be proposed by the Borrower not later than December 31, 1974. The Appraisal Report projected that this would, together with depreciation, generate US$30.3 million equivalent, or 17% of total capital requirements (including capitalized interest) during the period 1972-76. The actual internal cash generated presented in the Cash Flow Statement in Annex 9 of the PCR is expressed in current Turkish lira. Expressing this in US dollars by applying the exchange rates contained in the Data Sheet, demonstrates that there was a cash drain of US$12.2 million equivalent expressed in current dollars; this was met by municipal tax transfers amounting to US$33.2 million equivalent, where a nominal amount had been anticipated (PPAM, paras. 14 and 17). 38. A serious deterioration in the financial operating results was noted in November 1973, when water sales were 70% of the budget and unaccounted-for water had increased to 46% of production. A tariff increase from TL 1.73/m3 to TL 2.7/m3 took effect from March 1, 1974. A September 5/ In 1982, Loan 2159-TU was made to ISKI for a sewerage project in Istanbul (Basic Data Sheet). However, the Sewerage Project Appraisal Report did not discuss the failings of ISI, because ISKI is legally a new agency. - 12 - 1974 supervision mission found that the operating results were no better and there appeared to have been some delays in billings as a result of the change in the water rate. It became increasingly apparent that [SI would be unable to generate funds tc help finance the construction program because, in addition to the low tariff, operating costs were increasing very rapidly and sales were substantially less and unaccounted-for water more than had been projected (PPAM, para. 19). 39. The Bank continued to urge both ISI and the Government to increase tariffs in order to meet the rate of return required (this discussion was carried out on the basis of historical asset costs rather than revalued asset costs). ISI did request additional tariff increases which the Bank continued to support. Bank missions reported that the Ministry of %nergy, which was responsible for approving tariff increases, was reluctant to do so, first because of its efforts to stabilize prices, and later because the Ministry was critical of ISI's failure to do something about unaccounted-for water and to implement reorganization recommendations. The Government did authorize further tariff increases in 1977 and 1979. Nevertheless, the tariffs in real terms, fell by a third during the period (from TL 3/n3 to TL 2/n3 in 1972 prices). 40. During negotiations, the Bank had initially proposed a 20% tariff increase as a condition of effectiveness of the loan (PPAM, para. 6; PCR, para. 2.06). This requirement was dropped in the face of Turkish protests. This failure to establish the importance of timely tariff action may have been taken as a signal that the water tariff was not that important. The continual reference to the rate of return requirement in Bank correspon- dence - a useful measure but not an end in itself - perhaps couLd have been more convincingly coupled with a discussion of the need for the generation internally of construction funds to reduce claims on other financial resources. Moreover, using marginal cost concepts, with ever more distant and expensive sources being developed, a strong econonic case could have been made for very much higher charges. 41. The PCR shows a 15% return on average net fixed assets on 1981. The average fixed assets are severely understated, however, by two factors: (i) the assets have not been revalued so that the replacement value could be, perhaps, ten times the historical value; and (ii) some project assets which were in use had not been put in the asset base. This would have the obvious effect of increasing the denominator proportionately as well as the deprecia- tion provision, the latter to a degree that would show significant Losses in current operating results. 42. In retrospect, an operating ratio or cash contribution to construc- tion cash flow tariff test would have been more appropriate to the capabili- ties of the accounting system. If fixed as a ratio or contribution before depreciation, they would have avoided the need to adjust assets for infla- tion. However, these would have been more difficult tests to forecast with confidence. A rate of return test could then be considered in a subsequent - 13 - project, when the accounting system was more sophisticated and the need for asset revaluation recognized, as is now the case with a new law dated January 21, 1983. 43. Government funds were provided to ISI free of interest. The Appraisal Report (PCR, pa;a 6.13) noted that a rational policy would call for reasonable interest rates, but also noted that the rate of return covenant would ensure that the uater rates would be adequate, and therefore the matter was dropped. The sewerage project (PPAM, para. 35) reformulated the tariff policy to require revenues sufficient to cover operating expenses and debt service.6/ Moreover, the interest free Government loan for the water supply project was written off when ISKI assumed IST obligations and Government contributions to the sewerage project are provided as equity. Therefore, only the foreign exchange loans for water supply and sewerage have to be serviced. 44. A debt coverage limitation of 1.5 times net revenue was required in the Loan Agreement. Althoufh there was no specific waiver when the Kuwait Fund financing was arranged_/, the Bank was fully aware ox it and agreed to it at least tacitly. In the case of the sewerage project, the tariff requirement is to recover operating costs and any debt service over deprecia- tion--essentially a debt service coverage of one. V. CONCLUSIONS 45. The project consisted of works which it was expected could be ini- tiated and completed by DSI and ISI in the period 1972-76. Major objectives were the rationalization of the Istanbul regional water supply sector and institutional improvements in ISI. 46. The works which were to be done by ISI were only partially imple- mented in 1972-81, with an expenditure 67% greater than had been projected. That part of the project which was the responsibility of DSI, was successful- ly completed - although in a ten-year period 1973-82 and at more than twice the estimated cost (in current US dollars). In the absence of the Bank project, the works would have been constructed - many of them were already in the DSI program - but perhaps at a higher cost and with an even longer construction period. The Bank did supply critical foreign exchange financing and supervision missions were helpful in technical and procurement matters. 6/ Although sewerage charge has been introduced for the first time in the country under the Istanbul Sewerage Project (Loan 2159-TU), ISKI's revenues from combined water and sewerage operations cannot meet the financing targets designed in 1972 for ISI. 7/ Appendix B. - 14 - 47. The rationalization of the sector in the Istanbul Metropolitan area occurred in 1981, but the extent to which this was influenced by the project cannot be assessed. Institutional and financial improvements in ISKI, the successor to ISI, have yet to be demonstrated. 48. The follow-on Sewerage Project requires ISKI to maintain tariffs for water and sewage services which cover operating expenses and debt service. As the government loan covering local currency costs for water supply was written off when ISKI was established, and local currency sewerage project costs are being met by government grants %equity), the only debt service is for foreign loans, principally IBRD and Kuwait Pund loans. Given the prevailing circumstances in the ciuntry when the loan for sewerage was made, it was thought that the sector in Istanbul must continue to call entirely on government and other non-internal resources for local funds. Thus, the financial objectives for water supply and sewerage operations in Istanbul hnve changed drastically since the water supply loan was made. 49. The water supply project was a necessary first step in addressing the Istanbul metropolitan water supply (and sewerage> needs, even though the institutional and financial results were substantially below expectations. However, it requires follow-up, with particular attention to institutional strengthening, training, and financial viability. The follow-on sewerage project benefited from some of the lessons which emerged from the water supply project experience in these respects. - 15 - APPENDIX A COmTS 7r TM TEASUM ZCZC DIST8202 WU17683 DIST WHEN REPLYING TO THIS MESSAGE REFER TO: TCP FCA OED DR 42689 ANK TR MR. SHIV S. KAPUR DIRECTOR OPERATIONS EVALUATION DEPARTMENT INTBAFRAD WASHINGTON, D.C. RE YOUR LETTER DATED AUGUST 23, 1983, CONCERNING ISTANBUL WATER SUPPLY PROJECT, LOAN NUMBER 844-TU. PLEASE BE INFORMED THAT WE AGREE WITH YOUR COMMENTS IN THE FINAL REPORT. REGARDS, TUNA ISKIR ASSISTANT DIRECTOR GENERAL OF THE TREASURY. 70737/ 18.10.1983 42689 ANK TR 243826 1211 181083 01650057 1209 01890189 472 RFST COPy AVAILABLE - 16 - COMENTS BY THE KUWAIT FUND APPENDIX B ZCAC DIST8878 JW83914 DIST WHEN REPLYING TO THIS MESSAGE REFER TO: TCP FCA OEDDR REF: KF/GEN/1196 4.10,1983 FROM: KUWAIT FUND FOR ARAB ECONOMIC DEVELOPMENT, KUWAIT TO: THE WORLD BANK, WASHINGTON, DC. ATTN: MR. SHIV S. KAPUR, DIRECTOR, OPERATIONS EVALUATION DEPARTMENT SUBJECT: ISTANBUL WATER - TURKEY THANK YOU FOR YOUR LETTER OF 23RD AUGUST 1983 ENCLOSING A COPY OF YOUR DRAFT REPORT ON THE COMPLETION OF ISTANBUL WATER SUPPLY PROJECT. AS YOU ARE AWARE, KUWAIT FUND PARTICIPATED IN FINANCING THIS PROJECT WHEN IT REALIZED THAT THE CONSTRUCTION OF A MAJOR COMPONENT OF THE PROJECT, I.E.." THE MAIN TRANSMISSION PIPELINES" WAS ESSENTIAL FOR ACHIEVING THE MAIN OBJECTIVES OF THE PROJECT. THE FUND THEREFORE FINANCED THE FOREIGN CURRENCY COST OF THE CONSTRUCTION OF THE WATER PIPELINE MAINS FROM OMERLI TREATMENT PLANT TO MARMARA COAST ON THE ASIAN SIDE AND FROM BOSPHORUS CROSSING TO BAHCELIEVLER RESERVOIR ON THE EUROPEAN SIDE. THE FUND APPRAISED THE PROJECT IN 1979 AND THE AGREEMENT WAS SIGNED ON 21ST JANUARY 1980. THE FUND'S LOAN IS 3 MILLION K.D., FOR A PERIOD OF 20 YEARS INCLUDING 4 YEARS GRACE AND THE INTEREST RATE IS 4-1/2 PERCENT PER ANNUM. THE CONSTRUCTION SHOULD HAVE STARTED IN THE LAST QUARTER OF 1979 AND BEEN COMPLETED IN THE LAST QUARTER OF 1982. DSI, HOWEVER WAS UNABLE TO GIVE INSTRUCTIONS TO THE CONTRACTOR TO COMMENCE CONSTRUCTION UNTIL THE LOAN WAS DECLARED EFFECTIVE ON 31ST MARCH 1980. CONSULTANTS WERE APPOINTED FOR ADVISING DSI ON CONSTRUCTION PROCEDURE AND INSPECTION OF WORK AND FOR REPORTING ON THE PROGRESS OF WORK. THE CONSTRUCTION WORK AND THE SUPPLY OF MATERIALS PROCEEDED SATISFACTORILY. THE PIPELINES HAVE BEEN ALMOST COMPLETED. THE FOREIGN CURRENCY ESTIMATE WAS NOT EXCEEDED, BUT THE LOCAL CURRENCY ESTIMATE WAS EXCEEDED CONSIDERABLY DUE TO THE HIGH LOCAL INFLATION. DISBURSEMENT ON THE LOAN PROCEEDED SATISFACTORILY AND REPYAMENT OF THE LOAN STARTED AS SCHEDULED ON IST AUGUST 1983. WE HOPE THE AEOVE POINTS ARE OF SOME HELP IN FINALIZING YOUR REPORT WHICH WE FIND MOST USEFUL AND CONSTRUCTIVE. BEST REGARDS, KHALED AL-SHALFAN,. DEPUTY DIRECTOR-GENERAL (ADMINISTRATION) - 17 - TURKEY LOAN 844-TU - ISTANBUL WATER SUPPLY PROJECT PROJECT COMPLETION REPORT 1. INTRODUCTION 1.01 Since the early sixties international developing agencies have been * concerned with the water supply situation in Istanbul City. Located at the crossroads of Europe and Asia, Istanbul is one of the largest cities in Europe and the most important urban agglomeration of Turkey. It is also a major cultu- ral and historic center. However, in spite of its importance and strategic location in Europe, Istanbul has never been provided with adequate public utili- ties services, particularly with water supply and sewerage . Though in 1970 the water supply network had reached a reasonable percentage of the population (about 70%), water was available only a few hours a day and the per capita consumption (about 120 liters/day) was considered totally insufficient. In addition, many industries and public services had to build their own water supply installations as the water authority, the Istanbul Water Administration (ISI), was unable to meet their water requirements. 1.02 Meanwhile, the Istanbul population was growing at an annual rate of 5.5%, much faster than the rest of the country, as the city was a focus of urban and rural migration. Istanbul is an old city whose urban infrastructure was conceived to support a population of not more than half a million. But in 1965 the city's population had already reached 1.7 million and no program was under way to reshape the urban structure. And with the continuing influx of migrants, squatter settlements started to multiply all over the city. During those years the water supply and sewer systems became totally overloaded and environmental conditions started to deteriorate rapidly. 1.03 It was against this background that allocation was made in 1966 under the United Nations Development Program to finance the preparation of master plans for water supply, sewerage and storm drainage for the Istanbul metropo- litan area. These plans were prepared by a consortium of consulting engineers (the Consortium), under the supervision of the World Health Organization (WHO), and completed in 1971. At that time ISI was responsible for operating and main- taining water supply facilities, and building water networks in Istanbul City. ISI was a semi-autonomous agency of Istanbul Municipality. Outside Istanbul City water supply services were under the responsibility of the munici- palities. Sewerage services were managed and operated by offices of the differ- ent municipalities, including in Istanbul City. - 18 - 1.04 The sector organization was somewhat confused, as ISI's responsibility for water supply services were limited to Istanbul City, though its water production facilities were located in neighboring municipalities. ISI was also selling bulk water to these municipalities, but had no formal sales agreements with them. The need to set up a regional water authority which could plan and build regional water supply facilities for the whole metropolitan area, appeared evident and was proposed by the Consortium. 1.05 A national agency, the State Hydraulic Works (DSI), was under Law 1053 of 1968 responsible for the planning and construction of water production faci- lities for communities larger than 100,000 inhabitants. DSI was put in charge of the implementation of the master plans prepared by the Consortium which had defined a first phase of works covering the period 1972-76. The Government of Turkey in 1971 formally requested the Bank to help finance the work program in Istanbul. On June 27, 1972 the Board approved a loan of US37.0 million to the Government to finance these works (Loan 844-TU). In view of the need to start planning urban development in the Istanbul metropolitan area, the Board also approved on the same day an IDA credit of US42.3 million to Turkey to prepare an integrated urban program for Istanbul (Credit 324-TU) 1/. IT. PROJECT PREPARATION AND APPRAISAL Origin, Preparation and Appraisal 2.01 By mid-1969 the feasibility studies prepared by the Consortium were at an advanced stage of preparation and the Government requested the Bank's assist- ance in formulating a water supply and wastewater project for Istanbul. A reconnaissance mission visited Istanbul in December 1969 and discussed with DSI and ISI the project concept. Subsequent preparation missions in 1970 and 1971 continued to follow progress in the preparation of the master plans and to review the project formulation with the Government. These missions had identi- fied various difficulties that the Bank would confront in making its first lend- ing in the water supply sector. 2.02 A fundamental problem was the sector organization in the metropolitan area of Istanbul, under which DSI had the responsibility for planning and cons- tructing water production facilities and primary mains in the area. As reported by Bank staff, DST was not keen to see the Bank participate in the project. Legally, ISI's distribution area extended only to Istanbul Municipality, though the project was going to cover the Istanbul Region. The question was how ISI would be able to sell the water that would be produced under the project? Would ISI be able to control and promote the expansion rate of the distribution net- works in neighboring municipalities? 1/ OED Note: A separate Project Performance Audit Report will cover the Istanbul Urban Development Project. - 19 - 2.03 A third problem was related to Law 1053 regulating DSI's participation in the Istanbul. project. Under that law DSI's investment in the project was to be limited to TL 560 million (which was much lower than the projected expendi- tures) and all Government funds had to be provided interest free. In spite of the Bank insistence, the law was never amended. But each year a special author- ization had to be obtained to allow higher expenditures on the project. This contributed to the shortage of local funds for the project and the long delays in completing the works. 2.04 These problems and others concerning the relending of the Bank funds, the financing of DSI's work program and procurement procedures, remained un- solved until late 1971. By that time the Bank decide6 to appraise the project as this was the only way to bring these issues to a head. The project appraisal took place in November 1971. A post-appraisal mission visited Istanbul in March 1972 to discuss lending and repaymenc arrangements of the Bank loan. Negotiations and Approval 2.05 Negotiatiot.s were conducted with the Government in May 1972. During negotiations the Turkish delegation objected to four provisions of the loan documents: (i) a 20% immediate increase in ISI's water rates as a condition of effectiveness; (ii) the Bank's insistence in linking the default conditions of the agreement for the water supply project (Loan 844-TU) with those for the urban development project (Credit 324-TU); (iii) the Bank's calculation of ISI's assets base and the method for calculating the rate of return on the assets; and (iv) automatic revaluation of ISI's assets on the basis of the whole- sale price index in Turkey. 2.06 The Bank eventually waived the requirement for an immediate tariff increase, but proposed an average rate of return over the period 1972-73. The Turkish delegation in return agreed to the other provisions. It should be noted, however, that asset revaluation is not practiced in Turkey and conse- quently the revaluation of ISI's assets was never carried out during the project implementation (para. 5.07). The Water Supply Program 2.07 Under the UNDP/WHO project, the Consortium worked from 1966 to 1971 to prepare a master plan for water supply and sewerage in the Istanbul urban region, with DSI as the government counterpart organization. After estimating the long-term demand for water, the Consortium analyzed alternative sources of water and made recommendations for the most economic phased development of these sources. Plans were prepared for the associated pumping stations, treatment plants, transmission lines and distribution facilities. The planning was on a regional basis, ignoring administrative boundaries. The Consortium completed - 20 - preliminary engineering of improvements needed to meet the projected water demand in 1985. Meanwhile the construction of some of the production facili- ties, such as thea Aiibey Dam, had started since 1966 and was integrated in the master plan. 2.08 The objective )f the program was to more than triple the water avail- able for the Istanbul urban region. Two new sources were to be developed: Alibey reservoir in Europe and Omerli reservoir in Asia. A traditional major source for European Istanbul, Terkos Lake, was to be improved and its yield doubled by diverting water to Istanbul through the Alibey reservoir. The total program expenditures during the period 1966-1984, expressed in current prices, were expected to be of the order of TL 3,500 million (US$251.0 million), of which construction carried out from 1966 to 1971 had already accounted for about TL 440 million (US$31.0 million). During the project period (1972-76), expendi- tures on the program by DSI and ISI were expected to total TL 1,424 mil- lion (US$101.7 million). ISI'4 net fixed assets in 1977 were projected at nine times the 1971 value. 2.09 Water from the three sources (Alibey, Elmali and Omerli) must be pumped and treated before it can be distributed to consumers. Two new water plants had to be built to treat waters from the Alibey Reservoir and Terkos Lake, and the Omerli Reservoir. Major transmission pipelines had to be laid down to deliver treated water from the Kagithane and Omerli treatment plants to the population centers along the Bosphorus and the Marmara coasts. The European and Asian systems were to be linked by a pipeline underneath the Bosphorus, which would supply water to the Asian region until the Omerli source was completed in 1975. Thereafter, water from Omerli would flow in the reverse direction to supply the European region. 2.10 The program also included major extensions and improvements of the dis- tribution networks in the metropolitan area. Becauss of the rugged configura- tion of the region a fairly complex distribution system is required with many pumping stations and storage reservoirs to serve the different pressure zones. Project Description 2.11 The project was defined as those works in the program which could be initiated and substantially completed by DSI and ISI in the period 1972-76. It included: (i) the supply and installation of pumps for the Terkos- Kagithane raw water pumping station; (ii) doubling the capacity of the Kagithane treatment plant a"d addition of a treated water reservoir; (iii) the construction of transmission mains and two pumping stations in European Istanbul; (iv) the execution of the Omerli Scheme in Asian Istanbul, i.e., the construction of a raw water pumping station, a treatment plant, a clear water pumping station, and mains to Istanbul and the Marmara coast; - 21 - (v) the laying of a pipeline under the Bosphorus channel; (vi) expansion and improvement of the distribution system serving the Istanbul Region; and (vii) training of ISI and DSI staff. Items (i) through (v) had to be executed by DSI, and item (vi) by ISI. 2.12 The project component (para. 2.11, item vi) to be executed by ISI consisted mainly of installing distribution pipelines in Istanbul City. The amount of physical work which ISI was expected to complete through 1976 is shown below: Length of Pipelines to be Installed (km) Increase In Primary Secondary Number of Distribution Distribution Year Connections (300 mm & larger) (Less than 300 mm) Total 1972 23,000 35 70 105 1973 23,000 40 95 135 1974 21,000 45 120 165 1975 20,000 45 130 175 1976 18,000 45 130 175 Total 105,000 210 545 755 Loan Covenants 2.13 The loan was made to the Government which relent it to ISI under a sub- sidiary loan agreement whose terms and conditions had to be approved by the Bank. The relending terms were the same as those of the Bank loan. The Bank entered into a Loan Agreement with the Government and a Project Agreement with ISI and DSI. The effectiveness and implementation of the loan were linked to those of the development credit agreement for the Istanbul Urban Development Project (Credit 324-TU). 2.14 In view of the project complexity and the shortcomings of the sector organization in the Istanbul area, a series of covenants were introduced in the agreements. The Loan Agreement sets out that: (a) the Borrower shall not amend Law No. 2226, under which ISI was established, without the Bank's prior consent (Section 4.03); (b) the Borrower shall enable TSI to sell water on a wholesale basis to any municipality on terms and conditions satisfactory to !he Bank (Section 4.04); (c) prior to the project completion and following an exchange of views with the Bank, the Borrower shall initiate institutional, finan- cial and organizational arrangements to ensure coordination in the planning, implementation and operation of water supply and waste- water installations in the Istanbul metropolitan area. Specific proposals should have been submitted to the Bank by December 31, 1972 (Section 4.05). - 22 - 2.15 In addition to these main covenants, other obligations covering exchanges of views between the Borrower and the Bank, the regular inspection of the Alibey and Omerli Dams and the submission of the inspection reports to the Bank, were set out in the Loan Agreement. It should be noted that, though proposals concerning the reorganization of the sector in the Istanbul area were made in the studies prepared by the Consortium, the delay accorded to the Government for submission of specific proposals for the sector reorganization was too short (less than six months after the loan signing). In fact ISI had to complete a study of its own organization and the sector in the Istanbul area before it could recommend a new sector organization. 2.16 The Project Agreement provided inter alia for: (i) ISI to appoint a Project Manager to control all aspects of planning, design and construction under the Project (Section 2.01(b)). (ii) ISI to employ engineering consultants acceptable to the Bank under terms and conditions satisfactory to the Bank to assist it in the preparation of a water distribution network analysis, the develep- ment and improvement of its distribution system (Section 2.02(a)). (iii) DSI to employ engineering consultants acceptable to the Bank under terms and conditions satisfactory to the Bank to assist it in the bidding and construction supervision of the treatment plants, the transmission mains and the Bosphorus underwater pipeline (Section 2.02(b)). Such employment was a condition of effectiveness of the loan. (iv) ISI to engage management and accounting consultants to assist it in improving its organization and management procedures (Section 4.03(a) and (b)). The original deadline for the appointment of these consultants was October 31, 1972 and ISI had to submit proposals for implementing the improvement of its organization by December 31, 1972. The tatget dates were unrealistic and ISI could not meet them. (v) ISI to establish and maintain water rates at levels sufficient to generate the revenues necessary to cover its operating expenses and to produce an annual rate of return on its assets of 7% in the years 1974 through 1976 and 8% thereafter. - 23 - III. PROJECT IKPLEMENTATION, COST AND OPERATION Loan Effectiveness and Project Start-up 3.01 There were two special conditions of effectiveness: (i) the Government and ISI had to enter into a subsidiary loan agreement with terms and conditions satisfatory to the Bank; and (ii) DSI had to appoint engineering consultants to assist it in the bidding and construction supervision of the treatment plants, the Bosphorus pipeline and the transmission mains. The first condition was ful- filled with relative ease, though the Bank had to insist on having the terms and conditions of the Government financing of the project clearly spelled out in the agreement. It was far more difficult for DSI to fulfil the second condition, which led to an extension of the originally proposed effective date of October 5, 1972 to January 5, 1973. 3.02 It seems that DSI's intent was to hire a different consulting firm for each of the project components. The Bank mission's back-to-office reports tend also to suggest that the Bank recommended to DSI to appoint different firms for the three project components under DSI's responsibility, namely the treatment plants, the Bosphorus pipeline and the transmission mains. The required engineering expertise was, however, not available in Turkey and there were great difficulties in securing the Government's approval of foreign consultants. Such approval had to be given by the Cabinet Council. 3.03 Under the Loan Agreement the Government had an obligation to give this approval. But in retrospect it seems that it would have been simpler and faster, had the approval been solicited for a single firm with the necessary expertise to supervise the whole project. DSI had hired consultants to prepare the bidding of the treatment plants and to help it in bid evaluation. DSI was not convinced, however, that it needed engineering consultants for construction supervision of the treatment plants. Also, DSI made the necessary arrangements to hire consultants for the Bosphorus pipeline, but did nothing for the trans- mission mains. As the deadline for the effective date was approaching, the Bank decided to waive the appointment by DSI of consultants as a condition of effectiveness and to set out March 31, 1973 as a new deadline for the engagement of consultants. The loan became effective on January 4, 1973. Implementation Schedule 3.04 Under the appraisal schedule the works were supposed to start in 1972. However, because of the delays in appointing consultants, the physical execution of the project only began in 1974. At appraisal the expectation was that the construction of the Bosphorus pipeline would have been completed by the end of 1973 to allow water transfer from the European side to the Asiav side. This construction started only in 1975. The works on the treatnent plants also started in 1975. To alleviate the water shortages on both the European and Asian sides, DSI made some provisional arrangements at the treatment sites, which resulted in increasing the water production for the city. - 24 - 3.05 Similar delays occurred in the execution of the ISI work program. A detailed schedule of the distribution pipes to be installed by ISI was not established during the project appraisal. It was expected that consultants would be appointed by October 31, 1972 to carry out an analysis of the network and propose changes and improvements in the systems. The consultants were finally appointed in October 1974. As a result, the execution of the ISI works began only in 1976. 3.06 The Loan Agreement provided that the project would be completed by the end of 1976. The original closing date of the loan was June 30, 1977. No pro- ject component was completed by that date. The construction of the Bosphorus pipeline was completed in 1978 or some five years behind the appraisal schedule. The treatment plants were put in operation, in 1978, but works on the transmission mains are still under way and are expected to be finished only by the end of 1982 by which time it would become possible to put the Bosphorus crossing in operation. The ISI works are still under way, but should be con- pleted at the end of 1983. Revision 3.07 The delayed execution of the Bosphorus crossing resulted in modifying its original design. During the project appraisal a Bank consultant visited Istanbul and suggested the laying of a single uncovered pipeline on the channel bottom. The original intent in building the Bosphorus pipeline was to increase the supply on the Asian side until the completion of the Omerli Treatment Plant. Meanwhile, some temporary installations had improved the supply on the Asian side. As construction of the Bosphorus crossing was going to be completed almost at the same time as the Omerli Treatment Plant and since the cost of water at this plant was lower than that of the production facilities on the European side, the design concept of the Bosphorus pipeline was changed to permit water transfer from the Asian side to the European side. 3.08 An economic study of water transfers and sales on both sides of the city showed that the ideal design would be to lay down two 0.9-meter pipes, and DSI decided to go ahead with the new proposal. The Bank approved the proposed design. A two-pipe system also had the advantage to give more operational flex- ibility than the originally proposed one. It was further decided to put a 2-meter backfill over the pipeline to prevent damages from boats. Procurement 3.09 The procurement process was slow and difficult and greatly contributed to the delays in the project execution; contracts for construction of the Bosphorus crossing and the transmission pipelines were bid twice. DSI and ISI refused to use ICB for most of the civil works contracts which in the end were not financed by the Bank loan. Only two DSI civil works contracts, the Bosphorus crossing and the installation of transmission pipelines, were financed by the Bank loan; no ISI civil works contract was financed under the loan. - 25 - 3.10 In addition, some procedural problems arose during che early stage of procurement. Under the loan agreement, a Project Manager, who was an ISI staff, had to approve all tender documents and contract awards. However, DSI objected to those procedures, arguing that they were against its governing law 2600 and that ISI had no authority to approve contract awards made by DSI. During the early stage of project execution, DSI kept sending procurement documents directly to the Bank. This impeded a smooth project execution as the Bank had to contact ISI and wait for their approval of DSI's procurement documents before any decision could be taken. Project Costs 3.11 A comparison of the estimated costs at appraisal with the actual expenditures for the project is shown below. A more detailed comparison is given in Annexes 1 and 2: Local Foreign Total Local Foreign Total TL Million ---- ---- US$ Million ---- Actual Expenditures 3,172.7 2,669.6 5,842.3 115.4 44.1 159.5 Appraisal Estimates 821.2 370.8 1,192.0 58.6 26.5 85.1 Increase/(Decrease) 2,351.5 2,298.8 4,650.3 56.8 17.6 74.4 Increase in % 286.3 620.0 390.1 96.9 66.4 87.4 3.12 Overall, the total project cost in US dollars increased by US74.4 million or 87.4% of the original estimate. The cost increase in Turkish Liras was much higher in view of the large fluctuations that occurred in the exchange rate. The appraisal assumed that the exchange rate of the US dollar to the Turkish lira would remain unchanged during the project imple- mentation (US$ 1 = TL 14.0). Actually the average annual exchange rate increased from 14.1 in 1972 to 111.2 in 1981 and an estimated 163.0 in 1982. The average annual rates that have been used to convert the expenditures in US dollars into Turkish Liras and vice-versa, are given in the Basic Data Sheet and Annexes 1 through 4. 3.13 The project foreign exchange cost increased by US117.6 million or 66.4% over the appraisal estimates. This increase was financed in part by a loan of KD 3 million 1/ (approximately US$12.0 million) from Kuwait Fund for Arab Economic Development. As in the case of the Bank loan, the Kuwait Fund loan was made to the Government which relent it to ISI. The loan covered foreign expenditures for the construction of the transmission pipelines. 3.14 In general, the project cost overruns can be attributed to price increases which took place during the project execution. However, the esti- mates of some of the project items, like the treatment plants, the pumping stations and the Bosphorus crossing, were not correctly arrived at during the project appraisal, when compared to the costs of similar works that were in execution at the time the project cost estimates were made (para. 3.18). The project was executed during a period of high inflation, both in Turkey and abroad, that was not anticipated at appraisal, as shown the following compa- rison between the estimated and actual annual inflation rates: 1/ KD = Kuwaiti Dinar OED Note: See Appendix B to Project Performance Memorandum for description of Kuwait Fund loan. - 26 - Annual Price Iricrease, % Price ---------------- Year-- Expenditures Increase, % 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 Foreign 1/ Appraisal 6.0 6.0 6.0 6.0 6.0 - - - - - Actual 9.9 19.3 23.7 14.6 L.8 8.5 18.4 11.8 10.1 (4.6) Local 2/ Appraisal 10.0 8.0 6.0 6.0 6.0 - - - - - Actual 18.0 13.0 34.9 25.2 17.4 36.2 39.9 35.2 113.8 45.0 3/ 3.15 The divergence between the actual and expected costs became larger as almost 60% of the investments were made after the forecast completion year (1976) as shown below: Project Annual Expenditures (US$ million) --- -----------------------------Yea---------------------------------- 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 Total The Project Appraisal 4.3 11.6 18.8 21.6 21.7 7.1 - - - - - 85.1 Actual 5.2 9.2 9.2 18.2 26.3 37.9 13.7 3.0 8.0 17.9 5.9 159.5 DSI Program Appraisal - 5.5 11.5 12.6 13.3 7.1 - - - - - 50.0 Actual 2.8 3.6 4.2 6.4 20.3 30.2 9.0 3.4 5.2 11.1 5.9 102.1 IST Program Appraisal 4.3 6.1 7.3 9.0 8.4 - - - - - - 35.1 Actual 2.4 5.6 5.1 11.7 6.0 7.7 4.7 4.6 2.8 6.8 - 57.4 1T Based on historical values of manufactured exports expressed in US dollar terms. 2/ Construction Index Cost - Official Journal. 3/ Estimat2C. - 27 - Loan Disbursements 3.16 A comparison of the actual with expected disbursements of the Bank loan is presented in the Basic Data Sheet. At the end of FY 1977 when the loan was expected to be fully disbursed, actual disbursements amounted to US$15.3 million or about 41% of the loan amount. The closing date of the loan was extended for two years and later on for an additional two-year period. The loan was closed on June 30, 1981. The borrower was, however, allowed to request additional dis- bursements until November 30, 1981, The loan was fully disbursed at the end of March 1982. 3.17 The schedule of allocation of the loan proceeds was amended various times during the project execution 1/, and ended up as follows: Amount of the Loan Allocated in US$ Category Appraisal Actual I. Pipes, Meters, Pumps and Other Equipment 10,000,000 13,293,822 II. Supply and Installation of Bosphorus Underwater Pipeli.ne 1,500,000 11,835,855 III. Supply and Erection of Treatment Plant Equipment 6,000,000 6,115,387 IV. Civil Works 8,100,000 2,509,827 V. Consultants' Services 350,000 797,967 VI Staff Training 50,000 22,929 VII. Interest and Other Charges accrued on the Loan before March 31, 1977 5,000,000 2,424,213 VIII. Unallocated 6,000,000 - TOTAL 37,000,000 37,000,000 3I1 Upon the Government's reauest the Bank had agreed in June 1976 to finance a study of solid waste collection and disposal in Greater Istanbul and to allocate US$ 500,000 of the loan for this study. This allocation was, however, never used as the Government obtained UNDP funds to finance the solid waste study. - 28 - 3.18 With the exception of the Bosphorus cros3ing (Category 1I), the civil works (Category IV) and the consultants' serviceu (Category V), the actual allocation followed closely the one expected at appraisal. The expenditures for the Bosphorus pipeline increased more than ten times. This increase did not, however, result entirely from the revised design of the underwater pipeline. The cost of the pipeline was underestimated at appraisal. The change in the civil works category came from the fact that more funds were allocated to cover foreign expenditures on the project, which were concentrated in Categories I, II, and III. The increase in expenses for consulting services stemmed from the longer construction period. 3.19 As of June 1, 1982 US$ 5,015,000 of the loan had been repaid. Performance of the Consultants and Contractors 3.20 Various consulting firms were engaged to prepare tender documents for the project works, and to evaluate bids and supervise construction. DSI hired three foreign consulting firms: one for the treatment plants, another for the Bosphorus crossing and a third one for the transmission pipelines. Meanwhile, ISI appointed a foreign engineering firm for the network analysis and a local management firm for the reorganization of ISI and the sector. It is the view of the staff of DSI and ISI that the consultants accomplished a satisfactory job. DSI and ISI were reluctant to hire consultants and at times there was some friction between the consultants and IST staff, because of the non-observance by the consultants of ISI working hours or the substitution of a member of the con- sulting team. But, all in all, ISI and the consultants maintained fair rela- tionships during the project implementation. 3.21 On the basis of the management studies mentioned in para. 2.16, as well as the discussions held during the preparation of the Istanbul Sewerage Project (Loan 2159-TU of Hay 28, 1982), ISI was merged into the newly created regional water supply and sewerage authority for Greater Istanbul, the Istanbul Water Supply and Sewerage General Directorate (ISKI) at the end of 1981. The setting up of this authority was one of the objectives of the project, which was to rationalize the sector organization in the Istanbul region. Another objective was to improve and expand sewerage services. This objective is also being met with the execution of the Istanbul Sewerage Project. 3.22 Except for the Omerli Treatment Plant, workmanship on the other project facilities was good. DSI and ISI exercised good control over the project imple- mentation. - 29 - IV. OPERATING PERFORMANCE Water Production 4.01 A major objective of the project was to increase water production to the level required to meet the 1985 demand in the Istanbul region. This objective was fully met. At the time of the project appraisal in 1971, ISI's annual water production was about 115 Mm3 1/. Its production in 1981 almost tripled to reach 315 Mm3 1/. A comparison between the actual and expected water production is shown in Annex 5. The actual volumes remained very close to the projected ones. The fulfillment of the appraisal expectations was possible because of the temporary works executed by DSI prior to the completion of the treatment plants (para. 3.04). During the period 1972-80 the available per capita water production increased by more than 40% from 141 to 203 liters/day. 4.02 Annex 6 shows a detailed comparison between the actual and expected technical specifications of the DSI and ISI programs. It can be seen that the DSI program was fully implemented, though with some delays. With some minor exceptions the water supply facilities were expanded as envisaged during the appraisal. But the same cannot be said for the ISI program. The actual expansion of the water network remained short of the appraisal goals. Though the ISI program was executed over a much longer period of time than expected at appraisal, the actual network expansion was much less than the appraisal expectations. Water Sales 4.03 The drawbacks in the execution of the ISI work program resulted in much lower water sales than expected at appraisal. ISI extended the water network at a much lower pace and thus reached fewer customers. The actual shortfall in water sales starced from the first year of project execution. They were projected to reach 83 Mm3 1/ in 1972; the actual sales in that year were only 74.2 Mm3 1/ or 10.6% lower. In 1976 the year that the project was supposed to be completed, they were projected to amount to 145.8 Mm3 1/; they reached only 117.6 Mm3 1/ or 19.3% less than the projections. By 1980 the shortfall in sales reached 58.3 Mm3 1/ or 25.2% lower than the projected amount. 4.04 Though the network coverage of the metropolitan area population did not grow as fast as expected during the appraisal, it nevertheless reached 90% in 1980 from about 72% in 1972. This was a significant achievement of the project. Unaccounted-for Water 4.05 One of the reasons for the reduced water sales was the high percentage of unaccounted-for water in the system, which increased to 46% in 1978 from 38% in 1972. The appraisal report assumed that the percentage of unaccounted-for 1/ Mm3 = million of cubic meters. - 30 - water would not exceed 29% in 1978. Actually almost half of the water product- ion in 1978 was not billed to customers. The unaccounted-for water was not necessarily lost through the system, though the water network in some areas of the city is quite old and might be subject to substantial leaks. Some of the unaccounted-for water was used for street cleaning, other public usage such as in public markets and gardens, and fire fighting, and was not recorded as sales by ISI. It should be said that water production was not precisely metered and the unaccounted-for water could have been over estimated. 4.06 The Bank unsuccessfully tried to convince ISI to implement an extensive leak detection and metering program that could have provided better operating data. The program was initiated in 1974, but stopped the following year as ISI staff were asked to devote their time to other operating functions and not spend overtime in the leak detection and metering program. This program continued in the subsequent years but on a small scale. Project's Role 4.07 The project played a major role in bringing about the substantial increase of water production which could have eliminated water shortages in Greaer Istanbul. Water production was increased by 220 Mm3, more than tripling the 1971 production. Unfortunately, because of the poor management of the system, the increase in production was not reflected in a similar improvement of the wacer sales. However, on the occasion of Loan 2159-TU (para. 3.21) ISKI has agreed to set up a comprehensive program to reduce unaccounted-for water, including leak detection. 1/ V. FINANCIAL PERFORMANCE Financial Results 5.01 The projected and actual income statements, balance sheets and cash flows of ISI in the years 1971 through 1981 are compared in Annexes 7 through 9. ISI's overall financial performance did not meet the appraisal expecta- tions. It should be said, however, that ISI's financial results were influenced by a number of factors that could not have been foreseen at the time of apprai- sal. A very high rate of inflation (see para. 3.14) coupled with the approval of high labor wages in Turkey during the period of the project execution, sub- stantially affected ISI's operating expenses and in particular its personnel and energy costs. In 1980 ISI's operating revenues were about five times higher than the appraisal estimate; but at the same time its operating expenses were nine times higher than the appraisal projection. 1/ In view of the age and complexity of the water network, un- accounted-for water which is currently about 43% might remain as high as 28% of the total production. - 31 - 5.02 In 1975 ISI registered an operating lose of TL 21.5 million (US$1.5 mil- lion), which continued to increase in the subsequent years and reached TL 204.8 million (US$8.4 million) in 1978. The tariffs were increased in 1974, 1977 and 1978; but the increases were not sufficient to offset the high operating expenses. In addition, as previously mentioned in para. 4.05, the percentage of unaccounted-for water remained high and the volume of water sold lower than the appraisal estimate. More recently, two successive sizeable tariff increases which were implemented in 1979 and 1980, have offset the increase in operating expenses and resulted in operating profits in 1980 and 1981. 5.03 As a result of the higher than forecast project cost (para. 3.12), ISI's net fixed assets in 1980 were 42% higher than the appraisal estimate. Meanwhile, with the operating losses registered during the period 1975-1978, ISI's equity kept decreasing and was not wiped out only because of Government contributions. The debt/equity ratio plunged to a low of 87:13 in 1978, as com- pared to 51:49 projected at appraisal. Financing Plan 5.04 The projected and actual financing plans of the project are compared in Annex 10. The total requirements nearly quadrupled due to the considerable increase of the project cost. The additional requirements were financed by the Kuwait Fund loan (para. 3.13) and an increase in the Government loan. This loan was originally scheduled to cover 47% of the requirements; the percentage increased to 60%. In addition, ISI received a large capital contribution from the Istanbul Municipality. This contribution financed about 20% of the total investments as compared to the 3% envisagnd during the project appraisal. Financial Covenants 5.05 The Project Agreement provided that ISI would have its accounts and annual financial statements audited by independent auditors acceptable to the Bank and that the auditors' reports would be submitted to the Bank not later than four months after the end of a fiscal year (Section 4.02 a). The audits were performed by inspectors of the Auditors' Council of the Ministry of Finance. The audit reports were mainly descriptive and not satisfactory; they did not offer any opinion on the processing and accuracy of ISI's accounts. In addition, the reports were submitted with substantial delays, though the time specified in the Project Agreement was not considered sufficient for the submis- sion to the Bank of the audit reports. 5.06 ISI's expected financial performance was set out in Section 4.04 of the Project Agreement, which specified that ISI should establish and maintain water tariffs that would generate revenues sufficient to cover its operating expenses and to produce an annual return on its assets of not less than 7% during the period 1974-1976 and 8% thereafter. Actually, ISI produced a return of 0.5% in 1972 and 4.0% in 1974. During the remaining years through 1979, ISI registered operating losses and as a result had a negative return in those years. The tariffs were increased by 59% in 1974, 30% in 1977 and 21% in 1978. However, these increases were not sufficient to offset the increased operating expenses during those years. - 32 - 5.07 Taking into account past inflation and ISI's weak financial position, the Government authorized ISI in 1979 and 1980 to substantially increase the tariffs. As a result of these increases ISI produced in 1980 a return of 19,8% on its unrevalued assets. It is not customary to revalue fixed assets in Turkey, and in spite of its efforts, IST was unable to came up with an accept- able method and its fixed assets were therefore never revalued. Until it was absorbed into the new regional water supply and sewerage authority - ISKI (para. 6.02) at the end of 1981, ISI had not met the rate of return covenant of 8%. 5.08 Under the terms of the Loan Agreement and the Subsidiary Loat, Agree- ment, ISI was required to start servicing the Bank loan by October 1977. In that year and the ensuing ones IST had, however, operating deficits before depreciation and the Government had to repay the loan. Accounts Receivable 5.09 ISI billed its customers on a quarterly basis. During the project execution the accounts receivable kept increasing from TL 134.31 million (US$9.53 million) in 1972 to TL 4,864.92 million (US$43.75 million) in 1981. About 66% of the arrears are due by private consumers while 18% are from the Government and 16% from the surrounding municipalities. As the private sector accounts for a major share of the arrears, ISI could have reduced the receiv- ables by pursuing more aggressive collection procedures. However, the political environment which prevailed in Turkey during the project execution, precluded the use of such procedures and IST had virtually no means to recover the arVears. It seems evident that new regulations concerning the use and payment of water supply and sewerage services in Turkey, such as the automatic attachment of a property lien for non-payment of these services, should be introduced in the Turkish legislation, so as to reduce the accounts receivable to more acceptable levels. 5.10 The Government has bailed out IST by means of loans (Law 1053) and con- tributions through the Istanbul Municipality. A more rational approach would have been for the Government to budget adequately for water supply services on its premises and pay its water bills in a timely manner. The surrounding muni- cipalities which were in charge of retail distribution also neglected to pay ISI for its bulk supply. The only alternative for ISI was to stop the supply. But this was not possible given the prevailing political climate during those years. VI. INSTITUTIONAL PERFORMANCE Organization and Management 6.01 A major objective of the project was the reorganization of the water supply and sewerage sector in Greater Istanbul. The Loan Agreement provided that the Government would propose to the Bank specific reforms of the sector arrangements not later than December 31, 1972 or less than six months after the signing of the Loan Agreement (Section 4.05). Though some recommendations for the sector reorganization were outlined in the Consortium studies, it is clear that the time accorded to the Government for the submission of the proposals was too short. In addition, ISI had to carry out management studies whose objective - 33 - was to improve ISI's organization and management procedures (Section 4.03(a) an6 (b)). It seems evident that the Government had to wait for tht. results of the management studies before it could formulate the sectoral reforms. 6.02 Consequently, the Government did not meet the deadline of December 31, 1972, but took much more time than expected, after completion of the ISI management studies in 1975, to submit the sector reorganization. On November 20, 1981 the Government issued Law 2650 creating the Istanbul Water Supply and Sewerage General Directorate (ISKI) which became responsible for the planning, design, construction and operation of water supply and sewerage faci- lities in Greater Istanbul. ISKI was set up by merging IST with the Sewerage Department of the Istanbul Municipality and the water supply and sewerage services of 24 surrounding municipalities. ISKI's General Council has broad authority including the setting of water and sewerage tarrifs. 6.03 As set out in Section 4.03 (a) and (b) of rhe Project Agreement, ISI appointed management consultants in March 1974 to asaist it in improving its organization and management procedures. The consultants submitted their reports and proposals for ISI reorganization in March 1976. These proposals were dis- cussed at length by ISI's Board of Directors and after some modifications approved by ISI's management in 1978 and by the Istanbul Municipality in November 1979. Finally, the proposals were submitted for the approval of the Ministry of Internal Affairs. This approval was never given and the consult- ants' recommendations were never implemented. With the creation of ISKI, the proposals should be modified to suit the new sector organization. The imple- mentation of modified organizational proposals should be pursued under the Istanbul Sewerage Project (Loan 2159-TU) now under execution. 6.04 The Project Agreement provided for the appointment by ISI of a Project Manager to control the project execution and coordinate the preparation of annual work programs to be executed by DSI and ISI (Section 2.01 (b)). The Project Manager was appointed within the time specified in the Project Agree- ment. ISI was also committed to appoint a Budget Director (Side Letter of June 30, 1972), a new post in ISI. This position was, however, never approved by the State Personnel Office (SPO). 6.05 All in all, most of the expected institution building objectives were met, though with considerable delays compared to the appraisal schedule. The most important institutional reform was the setting up of TSKI which is expected to provide better water supply and sewerage services in Greater Istanbul. Staff Recruitment and Development 6.06 When the project was appraised in 1971, ISI had a staff of 3,086 employees or about 13 staff per 1,000 customers. The staff continued to grow during the project execution and in 1980 numbered 4,122 or about 10 employees per 1,000 customers. 6.07 In 1970 the Government enacted a Personnel Law defining the employment benefits of Government staff and employees of state-owned organizations such as ISI. Under this law lower salary scales were established for engineers, and promotion opportunities were reduced. At the same ti=e, wages and fringe bene- fits of workers were substantially increased, in some casts doubled. As a result of the law, the technical staff of ISI had their salaries frozen during a period of rapid inflation, while non professional staff secured substantial salary increases. Consequently, the morale of the technical staff was affected - 34 - and engineers started to leave DSI and ISI to go to work in the private sector. The staff turnover in DfI and ISI, particularly among DSI's senior management averaged more than 20% during the project execution. Implementation of this Personnel Law had the effect of lowering the quality of the technical staff of both DSI and ISI. While this problem had been foreseen and discussed at project appraisal, the Government chose not to make an exception for DSI and ISI. The salaries of ISKI are also tied to the public service scale. ISKI management is very conscious of the problems inherent in an uncompetitive salary scale and intends to supplement the salaries of key personnel with other benefits such as housing. Staff Training 6.08 Dal and ISI spent about US$23,000 of the loan amount for staff train- ing. Two DSI engineers and one ISI engineer went abroad to follow post graduate sanitary engineering courses. A group of technical staff from DSI and ISI spent - about a month in Europe visiting water treatments plants. A group of techni- cians were also trained by the equipment supplier of the treatment plants and new operators were recuited and trained in the maintenance of water networks. Overall, it was a modest training program whose implementation was further hampered by the low morale of the technical staff. VII. PROJECT JUSTIFICATION Project Achievements 7.01 The project was primarily conceived to increase the supply of potable water to the growing population of Greater Istanbul and to pave the way to the reorganization of the water supply and sewerage sector in this metropolitan area. These major objectives were achieved. All the water production facili- ties envisaged at appraisal were built and the available annual production more than tripled from 110 Mm3 in 1971 to 348 Mm3 in 1980. The increased production should be sufficient to meet the 1985 water demand in Greater Istanbul. Such a significant achievement was, however, tarnished by the slippage in the extension program of the distribotion network and the high percentage of unaccounted-for water, which contributed to a shortfall in the expected water sales. This in turn worsened the financial situation of ISI which could not meet its financial obligations. 7.02 The second objective of reorganizing the sector was met through the creation of ISKI which has been put in charge of the planning, design, cons- truction and operation of water supply and sewerage facilities in Greater Istanbul. Prior to that, the responsibility for water supply and sewerage services was divided between various authorities, DSI, ISI and the municipali- ties, and it was difficult to put in place an integrated water network in the Istanbul Region. Such integration can now be undertaken with ISKI which is currently implementing a sewerage project in Istanbul. This project is partly financed by a Bank loan of US$88.1 million (Loan 2159-TU). - 35 - Jrrernal Rate of Return 7.03 The project was the least cost solution for increasing the water supply in Greater Istanbul. The selected water sources and transmission facilities were the least cost alternative to meet the increasing water demand. In order to assess the economic value of the actual project, the internal rate of return on the investments was re-calculated. On the basis of the actual costs and revenues through 1981 and projected ones through 2011, the internal rate of return was found to be about 9%. The detailed calculation of the rate of return is given in Annex 11. The rate of return calculated at appraisal was about 12%. The decrease in the return can be attributed to the combined effects of the higher project cost and lower water sales. In spite of the reduced return, the project was justified that an improved water supply also provides unquanti- fiable benefits such as improved productivity and better health. Bank Performance 7.04 The project was the first Bank operatiou in the water supply sector and as such was expected to be difficult. Some of the difficulties were foreseen at appraisal and measures were taken, such the appointment of consultants and a Project Manager, the staff training and the monitoring of performance indica- tors, to reduce the project risks. Despite these actions, the project remained for quite a while a problem. The main objective was to provide additional water to Istanbul at the least cost. In this regard the Bank intervention was decisive in promoting economical implementation procedures for the project. The Bank also contributed heavily to the administrative reforms in the sector by insisting upon the creation of ISKI. The discussions with the Government regarding this creation lasted ten years. 7.05 There were also some shortfalls in the project execution, notably the reduced extension program of the water distribution network and ISI's poor financial performance. However, the political climate which prevailed during the project implementation and which could not have been foreseen at appraisal, contributed heavily to the deterioration of ISI's financial situation. The tariff increases implemented during the period 1972-1980, were not enough to offset ISI's large increases in operating costs. 7.06 On balance, ISI was not fully responsive to the needs for improvement of the water supply operations in Greater Istanbul. In spite of repeated Bank efforts to make IST undertake a leak detection and metering program, only token works were executed under the program. As a result, the high percentage of unaccounted-for water was never reduced. ISI's managemenL also delayed its decision on the management studies and in the end the consultants' proposals for reformulating ISI's administrative procedures were not implemented. Finally, ISI's management was not very persistent in requesting the Government's approval of tariff increases, the post for a Budget Director and the recomm,-nded adminis- trative reforms. 7.07 In retrospect it is clear that the time allowed for the fulfillment of some of the loan conditions, such as the appointment of consultants and the sub- mission by the Government of specific proposals for the sector reorganization in - 36 - Greater Istanbul (less than six months after the signing of the loan), were unrealistic. The requirement for the Turkish Cabinet to approve the hiring of foreign consultants was apparently not realized at appraisal. The Government needed more time to discuss the sector organization with all the parties involved (ISI, DSI, Iller Bankasi and 25 municipalities) and come up with a proposal for the Bank. 7.08 The project was regularly supervised, at least twice a year. In total twenty supervision missions were made between the loan signing in June 1972 and the completion of disbursement in March 1982. The visits were followed by mis- sion reports highlighting concerns about the project execution and by letters to the Government, DSI and ISI urging that corrective actions be taken where re- quired. The Bank's advice and persuasion were instrumental in convincing the Government to set up ISKI. The Goverment, DSI, ISI and the Istanbul Municipal authorities, are pleased with the results of the project and the Bank's perform- mance during its implementation. VIII. CONCLUSIONS 8.01 The project ir,-<mentation was difficult, but in the end successful. The two main objecti-,- ,r the project, which were to increase water production for Greater Ist"-' to set up a regional water supply and sewerage author- ity in this me. ,oian area, were fully attained. The project was executed during a period of high inflation, both in Turkey and abroad, and as a result, the actual project costs were much higher than the appraisal estimates and the expected financial goals could not be reached. However, the political climate that prevailed during the project execution and which could not be foreseen at appraisal, was not propitious for taking the actions which could have accele- rated the project execution and redress the financial situation of the imple- menting agencies. Long delays occurred in obtaining the Government's approval of tariff increases and funds for the investments, and of foreign consultants for construction supervision of the project. 8.02 The situation changed in 1980. Increased water tariffs were imple- mented and funds made available to complete the project. For the first time in 1980 ISI registered an operating profit and met its financial obligations. DSI and ISI did not always perform well during the project execution and in fact at times were unable to bring the difficulties in the project implementation to a head. For instance, the delays in the procurement process could have been avoided with better understanding between the two agencies; a more vigorous leak detection and metering program should have been undertaken by IST. 8.03 In retrospect some of the appraisal strategies appeared unnecessary. There was no need to hire three groups of consultants; a single engineering con- sulting firm, for which it would have been easier to obtain the Turkish Cabinet approval, could have been hired to supervise the whole project. The arrange- ments made between the two implementing agencies concerning the approval of pro- curement documents did not take sufficiently into account the procurement bylaws of the agencies. Finally, the time allowed in the Loan documents for the ful- fillment of some of the loan conditions were unrealistic. - 37 - 8.04 In short, the project was instrumental in increasing potable water production for Greater Istanbul and in promoting the reorganization of the water supply and sewerage sector in the Istanbul metropolitan area. The project paved the way for the improvement and rationalization of water supply and sewerage services in Turkey, which should continue during the implementation of the follow-up sewerage project (Loan 2159-TU). June 24, 1982 - 38 - ANNEX 1 TURKEY LOAN 844-TU - ISTANBUL WATER SUPPLY PROJECT PROJECT COMPLETION REPORT ESTIMATED AND ACTUAL PROJECT COSTS IN TL MILLION Ap%raisal Estimates 1/ Actual Costs Local Foreisn Total Local Poreiltn 21 Total PART A - DS1 COMPONENT Terkos Lake Pumping Stations 1.0 1.0 2.0 17.2 9.7 26.9 Treatment Plants 117.1 114.9 232.0 485,6 188.4 674.0. Kagithane Pumping Station 3.4 2.3 5.7 26.7 3.5 30.2 TasLitaria Pumping -tation L.6 1.3 2.9 21.6 4.8 26.4 OmerLi Pumping Stations 18.7 17.8 36.5 50.2 18.9 69.1 Camalica Reservoir L3.3 1.3 14.6 33.0 3.5 36.5 Gebze Pumping Station 1.5 0.9 2.4 21.1 18.2 39.3 Bosphorus Undervater Pipeline 11.9 16.8 28.7 84.7 232.5 317.2 Transmission Pipelines 222.3 91.9 314.2 1,328.8 1,426.3 2,755.1 Land 25.5 - 25.5 25.5 - 25.5 PART A - Sub-Total 416.3 248.2 664.5 2,094 1,905. 4000.2 PART B - 1S1 COMPONENT Distribution Pipelines 260.1 68.5 328.6 957.2 601.8 1,559.0 Distribution Reservoirs 13.7 L.4 15.1 32.0 - 32.0 Pumping and Pressure Stations 8.5 3.7 12.2 74.7 - 74.7 Water Meters and Connections 62.0 27.7 89.7 - 31.6 31.6 Terkos-Kagithane Conduit Renewal 3/ 13.7 8.0 21.7 -- - Operation and Maintenance Equipmenc 2.4 0.9 3.3 - 115.7 115.7 Management Consultants and Training 4/ 1.8 0.5 2.3 0.8 - 0.8 PART B - Sub-Total 362.2 110.7 472.9 L,064.7 749.1 L,813.8 Project Design and Supervision 42.7 11.9 54.6 13.6 14.7 28.3 TOTAL PROJECT COST 821.2 370.8 1,i92 3 6 5,842.3 1/ To allow for direct comparison between the estimated and actual costs of the project items, the physical and price contingencies forecast at appraisal were redistributed among the items to show their cost estioates in current prices. 2/ To convert the actual foreign costs in TL equivalent, the following exchange rates were used. Year 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982 Liras per US 14.1 14.1 13.9 14.4 16.1 18.0 24.3 31.1 76.0 111.2 163.0 3/ Improvement works on the Terkos-Kagithane Conduit were carried out by tS's own staff and were not recorded separately and capitalized. 4/ Foreign Expenditures for Training amounted to only US$ 22,929 equivalent. There were none for Management Consultants. May 25, 1982 BEST COPY AVAILABLE - 39 - ANBX 2 TURKEY LOAN 844-TU - ISTANBUL WATER SUPPLY PROJECT PROJECT COMPLETION REPORT ESTIMATED AND ACTUAL PROJECT COSTS IN US3 KILLION Appraisal Estimates 1/ Actual Costs Local Forei9hn Total Local 2/ Foreivn Total PsRY A - DSI COMPONENT Terkos Lake Pumping Stations - 0.1 0I. 1.0 0.5 1.5 Treatment Plants 8.4 8.2 16.6 28.1 6.2 34.3. Kagithane Pumping Station 0.L 0.3 0.4 1.9 0.3 2.2 Taslitaria Pumping Station 0.2 - 0.2 1.4 0.3 1.7 OmerLi Pumping Stations 1.3 1.3 2.6 2.9 1.2 4.1 CamLica Reservoir 0.9 0.1 1.0 0.6 0.1 0.7 Gebse Pumping Station 0.2 - 0.2 1.4 0.2 1.6 Bosphorus Underwater Pipeline 0.9 1.1 2.0 4.6 L1.8 16.4 Transmission Pipelines 15.9 6.6 22.5 24.7 12.0 36.7 Land 1.8 - 1.8 1.8 - 1.8 PART A - Sub-Total 29.7 17. 7 47.4 68.4 32.6 101.0 PART B - ISI COMPONENT Distribution Pipelines 18.6 4.9 23.5 40.2 9.3 49.5 Distribution Reservoirs 1.0 0.1 1.L 1.7 - 1.7 Pumping and Pressure Stations 0.6 0.3 0.9 4.6 - 4.6 Water Meters and Connections 4.3 2.0 6.3 - 0.4 0.4 Terkos-Kagithane Conduit Renewal 3/ 1.1 0.5 1.6 - - Operation and Maintenance Equipment 0.1 0.1 0.2 - 1.0 1.0 Management Consultants and Training 4/ 0.1 - 0.1 - - - PART B - Sub-Total 25.8 7.9 33.7 46.5 10.7 57.2 Project Design and Supervision 3.1 0.9 4.0 0.5 0.8 1.3 TOTAL PROJECT COST 58.6 26.5 85.1 115.4 44.1 159.5 1/ To allow for direct comparison between the estimated and actual costs of the project items, the physical and price contingencies forecast at appraisal were redistributed among the items to show their cost estitates in current prices. 2/ To convert the actual local costs in US dollars equivalent, the following exchange rates were used.* Year 1972 L973 1974 1975 L976 1977 1978 1979 1980 1981 1982 Liras per US$ 14.1 L4.L L3.9 14.4 16.1 18.0 24.3 31.1 76.0 111.2 L63.0 3/ Improvement works on the Terkos-Kagithane Conduit were carried out by ISI's own staff and were not recorded separately and capitalized. 4/ Foreign Expenditures for Training amounted to only US$ 22,929 equivalent. There were none for Management Consultants. May 24, 1982 BEST COPY AVAILABLE -All3F.X 3 iej l å - l s .i J I I : ~ ~ 1 1 a; a -i lI II A I; I1 1 Z . - J 3 I J J f l i J J ig M a äl 5 ;I . 1 1 9 å. i * I l .2 - .2 .2 - j~ i l 9 1ägJ IDU 844-TU ISTAI UATER SUpLy NJECT floJECT æ89L.TIOu 8E01T ACTUAL AIOIUL E1Gi 019JECT INVES11HEBTS <I nilli~o) 1972 1973 1974 1975 1974 1977 1978 1979 1980 1981 1982 1T.L _UST _ T. _E 1 TL U51 T 1it E US ii Us0 TL USt T tU IL s UL USt TE. U5d IL PABT A - 1S1 æoltouuET Ters tak Pumping S i- - -- - --. - 0.54 9.72 - - - - - - - - . 9.72 Trearmne 71.n - - - - - - 0.63 9.07 0.86 13.85 2.11 37.98 1.65 40.10 0.20 5.2 - - 0.73 81.18 - - 0.18 106.40 7 PgiLts.n Pin 0ca1ion - - 0.25 3.32 - - - - - - - - - - - - - - - - - - 0.25 3.52 Taslitaria Pu~ig Station - - - - - - 9.3 4.75 - - - - - - - - - - - - - 0.33 4.75 Ometli hpin Stations - - 0.47 6.63 0.11 3.06 0.03 0.43 - - 0.46 8.28 0.02 0.49 - - - - - - - - 1.20 18.69 Camlic" terir - - - - - 0.04 0.J2 - - 0.09 2.80 - - - - - - 0.13 3.52 Cåbe 9~pi6 S"o----- - - - - - - 0.24 18.24 - - - - 0.24 18.24 osphor. Underwter Pipelin- ··· - - - - - - - 8.73 157.14 3.10 75.33 - - - - - - - - 11.83 23.2.7 Trsision. Pipelin__ - - - - 1.54 193.04 5.96 662.75 3.50 570.50 1 100 L.426.29 PArr A - SUs-MTAL 0 72 10.15 C.22 3 0!99 14.25 0.86 13.85 il.88 213.84 4.77 115.92 0.29 9.02 2.7a 21.28 0.09 743.93 3.50 570.50 32.70 9 05.80 PART 8 - is1 i NDET Distribucca Pipene.- - - 4.29 61.78 0.15 2.42 0.03 0.54 - - - - - - 4.83 537.10 - - 9.30 601.84 8at. 8letes a.d Con.nctions - - - - -- - - - - 0.08 2.49 0.31 3.50 0.05 5.56 - - 0.44 31.o1 Ogeration aod målttenance Equipmat8t- - -- - - -- - - - - _ -- - _ .04 15.65 - - 1.04 LLS.I5 PART B - SUBU.-TAL 61.78 0.15 5.42 0.03 0.5. -- 0.0g 49 0.31 20.56 5.92 65831 - - L0.78 749.10 et Din and Speviion -042 0-0 -97 0.14 58 0. 52 0.12 216 0.18 4.37 0.0 1.24 .0 4 KaIe of Exchamge - US 1 i. T. 14.1 14.1 13.9 14.4 16.1 18.0 24.3 31.1 76.0 111.2 163.0 9ay 25. 1982 BEST COPY AVAILABLE TURKEY LOAN 844-TU - ISTANBUL WATER SUPPLY PROJECT PROJECT COWPLETION REPORT ESTIMATED AND ACTUAL OPERATIONAL DATA - TEAR -- ----------------- -------1/ DATA 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 Water Produced, Mm3: Appraisal 128.0 146.8 155.0 177.0 211.0 238.0 264.0 289.0 315.0 - Actual 120.6 136.3 151.8 183.6 209.7 233.5 273.0 28..5 307.3 315.0 Water Sold, Mu3: Appraisal 83.0 96.9 103.6 121.1 145.8 166.7 188.0 209.6 231.6 - Actual 74.2 78.2 85.1 102.3 117.6 131.8 147.0 167.7 173.3 180.6 Number of Connections, 1000: Appraisal 26S 288 309 329 347 364 382 400 419 - Actual 260 287 310 3317 345 363 377 392 408 418.0 Unaccounted-for Water, Z: Appraisal 35 34 33 32 31 30 29 27 26 - Actual 38 43 44 44 44 44 46 42 44 43.0 Total Populationr 1000: Appraisal 3,020 3,160 3,., 3,450 3,590 3,730 3,880 4,030 4,2oo - Actual 3,260 3,410 3,560 3,719 3,890 4,060 4.240 4,430 4,634 - Population Served. 2: Actual 72 72 72 77 76 81 8 87 90 - Per Capita Consumption. liters/day: Actual 141 153 163 176 194 194 210 204 203 - 11 Preliminary results. B S iXAoB BEST COP-Y AVAL.AI.E - 43 - ANNEX 6 Page 1 of 2 TURKEY LOAN 844-TU - ISTANBUL WATER SUPPLY PROJECT PROJECT COMPLETION REPORT ACTUAL AND EXPECTED TECHNICAL SPECIFICATIONS DSI PROGRAM Item Appraisal Actual TERKOS LAKE PUMPING STATION Number of Additional Pumps 3 3 Pump Characteristics: a) Kagithane Pipeline :Number of Units 2 2 : Capacity per Unit, m3/sec 0.5 0.5 : Design Read, meters 162 162 b) Kagithane Gallery : Number of Units 1 1 : Capacity per Unit, m3/sec 0.7 0.7 : Design Read, meters 127 127 TREATMENT PLANTS Design Capacity 1/, m3/day 300,000 300,000 KAGITHANE PUMPING STATION Number of pumps 4 4 Capacity per Unit, n3/sec 0.765 0.833 Design Head, meters 56 56 SILAHTAR PUMPING STATION Number of Pumps 6 6 Capacity per Unit, m3/sec 0.260 3 at 0.275 Design Head, meters 89 3 at 0.320 100 - 65 GEBZE PUMPING STATION Number of Pumps 3 3 Capacity per Unit, 3/sec 0.135 0.135 Design Head, meters 1/ The Kagithane Treatment Plant is presently functioning at a capacity of 250,000 m3/day and the Omerli Plant at 190,000 m3/day. - 44 ANNEX 6 Page 2 of 2 Item Appraisal Actual OMERLI RAW WATER PUMPING STATION Number of Pumps 6 6 First Group : Number of Units 3 3 : Capacity per Unit, m3/sec 2.00 2.26 : Design Head, meters 88.9 86.0 Second Group; Number of Units 3 3 : Capacity per Unit, m3/sec 2.00 1.04 : Design Head, meters 88.9 86.0 OMERLI TREATED WATFR PUMPING STATION Initial Number of Pumps 4 4 Capacity per Unit, m3/sec 1.50 1.74 Design Head, meters 16 16 BOSPRORUS SUBMARINE PIPELINE Number of Pipes 1 2 Length of Pipeline, meters 1,800 1,800 Pipe Diameter, meter 1.0 0.9 ISI PROGRAM PRIMARY DISTRIBUTION Length of Pipelines in Km. Executed in 1972-76 210 51 Length of Pipelines in Km. Executed in 1977-80 - 114 Total 210 165 SECONDARY DISTRIBUTION Length of Pipelines in Km. Executed in 1972-76 545 79 Length of Pipelines in Km. Executed in 1977-80 - 22 Total 545 101 HOUSE CONNECTIONS Number of Units installed in 1972-76 105,000 102,765 Number of Units installed in 1977-80 - 47,000 Total 105,000 149,765 June 7, 1982 TUME 18130BU. 04TER 00UffLY 1C0IECT? (10A5 866-TU) Po nCo~pl-ion Reprt C.opison of Appraisal and Atoml oStAet. (1971 - 1981) L971 1917 1973 1924 1975 1976 1911 1918 1919 1980 19&l AP.. Zrp. Apr. s"p. A . ep. Ap.. "P. Apr. ~ep. Ap. Ue. 0pr. Sg. 0pr. s7. -pr-v- s- 'e- Estinate ActUal Estiuate ctul EtimAe Actual Eutimate uctnal Estinste Actual Estimate Attual sati=ate _4l1 -1ti~ae 1Actual Esti~ate Actal Est0at 8ctua 1/ *eet«! 2 VåM ra~0C <.3 illi..) 104.9 104.8 128.0 120.6 146.8 136.4 155.0 151.8 177.0 1e3.6 211.0 209.1 238.00 233.50 266.00 213.00 289.00 287.30 315.00 307.30 35.00 etail vater Sold < mil110n) 08.9 69.1 a3.0 74.2 91.9 78.3 94.6 85.1 104.3 97.3 118.1 101.3 133.20 111.40 148.00 127.50 161.90 142.63 177.30 147.30 11.0 OOolesale uner 0old (m3 0illion) - - - ' - 3.0 - 9.2 - 16.8 5.0 27.7 15. 33.50 20.40 40.00 19.50 47.70 25.17 54.30 26.00 29.00 To-ai water sold (m3 "Id illi) 68.9 69.2 a3.0 74.2 96.9 78.3 103.6 05.1 121.1 102.3 145.8 116.7 166.70 131.80 188.00 147.22 209.60 167.80 23.60 173.30 180.00 z uoaccocnted-10r Wate9 34.0 33.8 35.0 38.0 34.0 42.62 33.0 43.5 312.0 4.9 31.0 64.4 30.00 42.50 29.00 46.00 22.00 42.00 26.00 44.00 43.00 ib. of Co~nections (thb-sands) 242.0 242.2 265.0 260.0 26h 0 286.0 309.0 310.0 329.0 337.0 347.0 345.0 364.00 363.00 382.00 377.00 400.00 392.00 419.00 403.00 418.00 eil te per a (TL) t 1.73 L.7 1.73 1.T1 1.73 1.11 2.25 2.6 2.34 2.6 2.3 2.31 2.68 .01 2.94 4.19 3.03 6.2n 3.03 17.43 19.00 .le1 e te1 r3 (yi - - - - 0.80 - 1.04 - 1.08 1.64 1.08 1.64 1.24 1.10 1.36 1.02 1.40 2.92 2A0 13.03 14.30 - T L N I L L 1 0 1 tail vater Sles [z 120.3 118.7 140.7 126.3 164.3 133.26 210.5 218.42 241.6 257.33 275.0 260.09 353.30 33.76 430.60 547.32 471.00 887.91 515.80 2568.57 2865.05 M~o1es2. --.r s2.;. 12 - - - - 3.9 - 9.4 - 17.7 8.2 29.3 25.23 40.70 22.44 53.30 39.90 03.60 7249 72.40 35%.35 3Q0.00 Neter Rent 1.1 1.0 1.6 1.3 2.1 1.92 2.5 3.16 2.9 2.5 3.3 2.76 3.60 6.20 4.00 7.73 640 8.72 4.0 107.10 114.41 ic- .- 7.20 7.7 6.2 10.28 6.4 9.52 7.2 9.8 7.9 9.91 0.6 9.44 9.30 16.33 9.90 18.70 10.0 12.40 12.40 8M.30 27.30 To.al 128.6 127.4 148.5 137.8U 176.9 144.7 229.6 231.38 270.1 27.94 316.2 297.48 .06.90 380.73 497.6 593.65 549.60 901.52 600.40 3115.61 3370.70 opERA~N CO=T r..ges ~n s"Iie 8.9 60.9 65.4 68.38 74.6 81.6 03.2 118.6 91.7 167.5 99.9 221.69 109.40 311.10 120.10 529.49 32.00 65.81 145.00 2211.32 2377.4U 7oel and Pooe~ 23.9 25.5 36.9 36.61 53.8 44.82 57.6 57.1 72.5 75.63 78.2 83.30 88.00 93.20 96.00 156.m 105.50 236.30 113.30 540.00 So.00 MC-eri.ls and che.m.i . 8.0 8.6 12.5 12.40 16.1 13.6 18.5 15.2 22.4 26.5 21.1 27.10 23.90 46.10 28.30 45.00 32.10 40.21 37.00 120.50 15s.0 Eilce11.-- Expensee 10.0 9.2 7.5 10.20 8.8 11.3 10.6 16.13 12.1 17.0 13.7 20.40 15.70 23.40 17.90 48.20 20.10 78.3.0 16.00 0.00 70.50 T.-1 100.8 104.2 122.3 127.59 153.3 151.32 169.9 207.03 19.7 286.63 212.9 352.49 237.00 473.20 2-3.10 778.89 26>.70 1013.62 311.30 2935.2 3158.5 luoe litlt. Dereciation 27.8 23.2 26.2 10.29 23.6 (6.62) 59.7 24.15 71.4 (8.69) 103.3 (55.01) 169.90 (93.07) 234.14 t185.24) 259.90 (32.10) 24-10 102.79 12.2o Deprec"ation 8.3 8.2 11.9 4.98 16.6 10.00 21.2 11.06 25.0 12.77 33.4 135.25 24.80 18.00 62.30 19.5 72.50 24.20 84.70 20.10 ..42 8t1 Operacig4 lacome 19.5 15.0 14.3 1.31 7.0 (17.50) 38.5 12.49 46.4 (21.46) 69.9 (0.26) 115.10 (111.07) 172.40 (204.B2) 187.40 (56.30) 209.40 154.03 1750. lugt.est - - - - - - - - - - - - 18.80 - 17.10 - 36.00 - 36.10 - Uet Ijoloss 19.5 15.0 14.3 1.31 1.0 (17.50 38.5 12.69 46.4 (21.6 69.9 70.26 96.30 (111.07) 135.40 1204.823 151.40 (Sb.30) 174.30 154.0 l;,. C.pital Contribution 2.0 - 2.0 58.65 2.0 2' 03 2.0 4.00 2.0 6.00 2.0 4.07 2.00 40.75 2.00 220A1 2.c0 219.3. z.00 10-.4 382.02 Retaluation0of Assta - - - - - - - - - - - - - "2t Addition Co Equity 21.50 15.0 16.30 59.96 9.0 6.33 40.5 16.49 40.4 (15.44) 7.9 (26.19) 98.30 (70.32) 137.40 (15.9) 153.40 163.06 170.3 I01..3 1.. Ret 7iAr4 AOSets 9.3 6.7 6.0 0.5 2.0 .a 7.3 4.0 7.1 . 8.1 /. 00.00 /. 8.90 W7. 8.60 n. a.40 19.80 15.30 flPreliainary reslca. g0.gTCOPY AVARABLE (Lo 844-10 Projet co-pletion uepott copariso of ap aal and Actut alace Sheet. (1971-1981) 1971 1972 1973 19 76 1975 1976 1977 197ø 1979 190 1941 Apr. Rp. Apr. 8ep. Apr. .p. P.- . Apr. Ikp. AF-. Rep. fip. R-9. Apr. &.p. &?r. Rep. pt. &ep- Esmat Acual Ettna'e Atua Esimae atua Esimae Atu L Etiaate A~ta EP-i-ae Actul- Etimat Act"lt £~1.at Actu Esti--t Ac-a Esli-.t act~l I smi2 L N8 L 1 3 ri~ed Asses in operation 299.1 306.1 334.1 333.01 555.7 394.55 733.5 4,'.63 860.7 414.23 1204.å 583.30 2097.9 486.62 2244.5 766.17 2499.8 935.3 2820.1 1054.9 22.~ L."' åcu.ted Deprecaton 81.2 81.1 93.1 1.00 109.7 200.96 130.9 112.42 155.9 125.8 189.3 140.62 244.1 158.66 321.0 17i.26 41.4 201.4 523. 23.5 2".92 To.tal ii. A.0se ln operation 213.9 223.0 261.0 242.93 446.0 293.59 602.6 323.81 706.8 308.82 1015.1 463.88 1853.* 525.96 1923.5 587.93 208.4 732.9 2296. 824.4 134.1 io.k in Progre-s 36.2 3(.2 43.3 51.10 39.4 78.17 36.2 109.20 58.6 102.25 63.0 121.69 62.0 210.20 57.0 450.2 55.0 4~6.- . 572.3 A237.0 Ad-aace8Rymens to 3S - - 1.A 39.49 49.0 90.23 *W8.0 146.80 179.3 387.25 186.7 719.99 - 1250.52 - 144.21 1568.80 - 196183 3193.73 Totai ~et FLxed A-sese 254.1 259.2 305.7 340.10 534.4 461.99 746.8 579.81 962.7 838.32 1264.8 1275.76 1915.8 1986.68 1980.5 2M92.34 2141.4 2786.53 235b.6 335a. 3,9.4~ Carreat usset* 1oveatories 25.5 25.5 32.0 38.53 38.0 47.24 40.0 65.77 44.0 62.91 48.0 69.13 50.0 76.59 34.0 l55.2 80.0 186.9 65.0 249.8 517.5 Acco-nt1 86ceivable 109.5 99.4 12.0 134.31 150.0 163.13 157.0 226.52 160.0 375.57 190.0 423.06 230.0 481.57 290.0 ~0s..s 30.0 u.2 318.6 3047.t 4 .92 cash 42.8 47.6 46.4 44.69 45.3 27.61 60.8 3.68 66.1 7.S2 85.9 1s.25 50.7 45.1 50.0 18.68 56.3 28.0 91.9 6.s 6o.25 Total Cbr~n As0eta 177.8 172.5 198.4 217.53 233.3 237.98 237.8 295.97 270.1 446.00 323.9 509.42 330.7 603.6 384.0 782.36 416.5 367.10 474.9 3353.4 34232 T~TrL *8**8 433.9 a31.7 504.1 557.63 767.7 699.97 1004.6 875.78 1212.8 1286.32 1588.7 1785.18 2246.5 2590.335 236. 328.70 2557.9 413343 2a31.50 4711.90 M617.96 EQUIt! ApD LIAILITES Equity gq.iy 218.3 1G8.3 220.3 226.95 222.3 250.98 224.3 254.98 226.3 260.98 228.3 305.05 230.3 345.0 232.3 s66.21 236.3 85.57 230.3 692.>1 U>J.35 Accumigted 9seoes 35.1 38.2 35.1 38.20 35.1 38.20 15.1 38.20 35.1 38.20 35.1 38.20 33.1 8.2 35.1 38.2 35.1 38.2 33.1 32 JS.x Acc1••6- Esrui.ge 101.5 97.0 115.8 98.31 122.8 80.81 161.3 93.30 207.7 71.8 2172.6 1.58 333.9 (109.493 509.3 (314.3U) 60.7 (370..13 835.0 (215.92 440.c i Total Ikc EqLity 354.9 303.5 311.2 X3.46 380.2 369.99 629.7 386A4 469.1 371.02 541.0 344.83 639.3 274.51 776.7 2~0-10 930.1 453.16 110.4 l14.79 1351..7 1ong-rerm Dett 8ank loan - - 2.8 1.41 77.0 10.57 214.2 50.18 359.8 104.80 501.2 142.80 512.3 371.3 500.3 495.80 482.3 S12.22 4734 5369 ;43."o r4¥*»~ oan 21.5 21.5 70.5 80.9 247.3 137.0 30.4 239.17 312.4 582.51 472.9 955.47 1016.3 130.71 1003.8 1594.40 1051.7 1698.99 1151.7 2091.99 2761.7 ~a 8~ L- -44.2 - - - - .- - - - - 2.87 - 2.90 4.78 10wait6~ - - - - - - -- - To-11 1an t-. Db. 21.3 63.7 73.3 126.60 324.5 211.77 516.6 333.55 672.2 690.22 974.1 1998.21 1528.6 1752.26 1504.1 2090.20 1539.0 2214.08 1631.1 2h33.48 4.75.os C=tret Liabilities, DpS0.i9 . 13.2 11.8 14.6 12.21 16.0 25.15 07.3 26.00 18.5 46.20 19.6 60.01 20.6 91.50 21.7 93.9 22.8 150.7 24.0 3~0.0 320.8s Account" f7ysble 42.3 50.7 45.0 55.36 47.0 103.06 50.0 129.75 53.0 176.80 54.0 282.01 S8.0 472.10 62.0 810.2 66.0 1315.69 10.0 3003.63 670.63 'total Correat Liabilitie* 55.5 62.5 59.6 61.57 63.0 118.21 67.3 155.73 71.5 223.80 73,6 342.08 78.6 563.6 83.7 9u4.60 88.8 166.39 94.0 3363.63 4991.6 20AL LIAILITIES 431.9 431.7 506.1 557.63 367.; 699.97 1004.6 875.78 1212.8 1286.32 1588.7 1785.18 2246.5 2390.35 2364.5 324-70 2557.9 4633.3 2031.50 611.0 1o617.38 D.b b. 9ity a-i4 0694 28:82 16:44 26:74 4654 36:64 55:45 4654 5941 6535 86:3b 26:24 71:29 86:14 66:34 87:13 62:38 83:17 to:40 Z8:22 11:23 1. Ko ettimte* m wade for 1981 at the ti= *t a9nais*1. 2f rIn ~erresult. BEST COPY AVAILABLE 15TASBU. VATER WUPPLY PROJ.CT (12At 844-TD) Project Co-plecion Raport Comparison of Appraiaal and MCcusi cASh fl1m state~enta (1971 - 19a11 1 971 19 7 2 1 9 7 3 1 9 7 4 2 9 75 1 9 7 6 1 9 7 7 19 1989 15 Apr. Rep. Apr. Up. Apr. Rp. Apr. R-p. Apr. R.p. Ap. tep. Apr. Bp. Apr. ap. 0pr. R67 - 4 p..9 Esti- a ~k au lLwcit&s Actual E4tL,nc* Actuel Esti"t Acua Eti~ate icczai Esci"4Ct AtuaL Esti=te cal Eime Acul stmt atul siu cta Atu 2 L082 »9 t LL 10 I 88t 1ncome (bfor. ierest) 19.5 15.5 16.3 1.3i 7.0 (17.50) 38.5 12.49 46,4 (21.44) 69.9 <7.26) 115.1 (111.07) 172.4 (2O4.2) 187.4 t5t3) 209. 1 3.80 l7 Depzeciaton 0.3 8.2 11.9 .8.98 16.6 W.88 1.2 12. 6 25,0 12.T. 33.4 15.15 54.8 18.0 62.3 19.58 72.5 24.2 84. 28.1 55.2 2--rI.1 Ca~h Ce-.rated 27.8 23.2 26.2 10.29 23.6 (6.62) 59.7 24.25 71.4 (8. ") 103.3 (55.01) 169.9 (93.07) 234.7 O85.24) 25.9 (3.1) 294-1 162.79 212-b ca-i.er . co ~aec,ion caerte7 - - 5.0 - 6.8 - 7.8 - 9.3 . 9.8 - 10.4 - 11.0 - 11.5 - 12.1 - t6".(cIa 2as (Cotributio4) 2.0 - 2.i 58.65 2.0 24.03 2.0 4.00 2.0 6.00 ?.q ".07 2.0 40.75 2.0 220.41 2.0 219.3% 2.0 106.94 t0.8b TotaL C.pit.i c.trib.ti..8 2.0 - 7.0 58.5 8.8 24.03 9.8 4.00 Å1.3 b.m0 11.8 4.07 12.4 40.735 13.0 220.41 13.5 219.36 14.1 l06.94 6h0.64 3.02 6oan - - 2.8 1.41 74.2 9.16 137.2 39.61 145.6 54.62 141.4 18.00 16.8 228.73 - 124.27 - 16.4 - 26.15 204.85 Grwt~nt l4a. 11.8 21.5 49.0 59.49 65.4 76.02 9. 82.17 - 346.25 - 37z.6 - 425.24 39.5 213.69 - 107Ao 411.93 091.08 7E-bier,, d - - - - - - - - - - - . - - - - - - - - 85.2 Toal 17.6 21.5 51.8 40.9 139.6 85.17 146.9 121.78 145.6 5.1. 7 141.4 410.96 16.8 65397 39.5 337.86 - 123.as - 's-o 8 .» 10T~. c0y0CL 0F ~09D8 47.6 4.1 85.0 129.84 t12.0 102.59 216.4 150.1" 228.3 398.18 274.5 400.02 199.I 001.5 287.2 3733 2"3.4 311.L4 308.2 726.03 251.~i arrsi72zo og1880o s C.pital 7qasaditure ?.oject E~geodtwze - - 60.5 34.66 85.7 79.75 102.1 71.02 126.1 171.69 11.8 01.1 - 142.4 - 120-56 - 14AS - 22.52 '79.3 Ad-ance Pap)888a 02 8s1 - - 1.4 39.49 47.6 50.74 84.0 56.57 15.6 90.45 57.4 323.74 - 539.53 - 213.69 - 10.59 - 393.00 1235.93 0ther hosø EUgediture 39.6 33.1 6.8 15.3 3.0 Z.26 3.1 2.09 3.1 &.M7 3.0 21.83 - - Erga d f.- 1977 - - - - - - - - - - - 130.00 67.03 138.0 20.01 1251.0 59.11 654.0 9-45 >1.82 Tical c"pita1 E~pe-d.itur 39.6 33.7 48.5 9.00 136.3 132.17 189.2 129.68 206.8 271.07 176.2 452.68 130.00 728.96 138.0 535.24 145.o 30a.35 15.0 -.92 2007.3. D.bs servi.. A~tisation - sa o.- - - - - - - - - - 5.5 - 12.22 13.0 - 13-9 - coverc~uat - - - - - - - - 44.20 - 2.91 26.0 - 52.0 - 52.0 - 52.0 - - t al 8rtiio - - - - - - -t - 244.0 - .- 31. - 64.0 - t5.0 - 4..9 ·· 1nterest-8ans0os: - - - - 4.2 - 7.0 - 15.4 - 26.6 - 35.6 - 37.0 - 36.0 - 35.1 - T062t 0ebt Serice - - - - 4.2 - 7.0 - 5.4 44.20 »6.4 2.91 67.3 - 101.0 i-. 101.1 - - L-ce8.. (~cre.se) i- Vorking C.Pital (exel.diaB Cash) 14.0 153.0 12.9 42.87 32.6 (13.22> 4.7 44.38 2.8 78.99 31.9 (63.31) 37.0 (157.53) 48.9 1135.28) 20.9 16.57) 17.8 80.5 -57.52 ~0rAL APPLICkTnow 07 t~oDs 53.6 48.7 S1.4 132.75 173.1 119.64 200.9 174.06 223.0 394.13 236.7 392.28 234.3 571.43 287.9 399.% 266.9 1".66 272.5 69.53 2524.90 C-ft surpz.u <Paric (8.) (4.0) 3.6 <2.91) (1.1) (17.08) 15.3 (23.93 5.3 3.54 19.8 7.73 (35.2) 30.26 (0.7) (2.83 6.5 9.32 35-4 8.70 10.» Ca~b Ual~ce &C d of 7r 4Z.8 47.6 46.4 44.49 45.3 27.61 60.8 3.68 66.1 7.52 65.9 15.25 50.7 45.51 50.0 18.8 56.5 26.0 31.9 5. 46.2> D.bt servic c1eag - - - - 5.6 8.5 - 4.6 - 3.9 - 2.5 - 2.3 - 2-. - 2.9 - 11 o estimates vere vad for 1981 at the ti=. of appreita1 2~ 9e1iminacy results. BEST CY AVAILABLE - 48- ANNEX 10 TURKEY ISTANBUL WATER SUPPLY PROJECT (LOAN 844-TU) PROJECT COMPLETION REPORT Comparison of Appraisal (1972-1976) and Actual (1972-1981) Financing Plan Fund Requirements and Sources Appraisal Actual Capital Sources TL Million % TL Million % Bank Loan 501.2 32.0 743.26 13.0 Government Loan 733.9 47.0 2786.77 49.0 Kuwait Fund - - 945.20 17.0 Total Borrowings 1235.1 79.0 4475.23 79.0 Capital Contributions 48.7 3.0 1185.05 20.0 Internal Cash Generation 284.2 18.0 48.96 1.0 Total Sources 1568.0 100.0 5709.24 100.0 Capital Requirements ISI Capital Works-Project 492.0 31.0 1842.08 32.0 Capital Works-Other 19.0 .1.0 295.15 5.0 DSI Capital Works-Project 700.0 45.0 3047.73 53.0 Capital Works-Other 213.0 14.0 150.00 3.0 Total 1424.0 91.0 5334.96 93.0 Debt Service - - 47.11 1.0 Addition to Net Working Capital 144.0 9.0 327.17 6.0 Total Requirements 1568.0 100.0 5709.24 100.0 June 9, 1982 - qt9 - ANNEX TURKEY LOAN 844-TU - ISTANBUL WATER SUPPLY PROJECT PROJECT COMPLETION REPORT RE-CALCULATION OF THE INTERNAL RATE OF RETURN 1/ Gross Capital 0 & M Total Water Sales Incremental Revenue Cost Total Net Year Costs Coats Costs Na3 Sale 2/ Ma3 From Sales Savings 3/ Revenues Revenues 1967 22 - 22 - - - - - (22) 1968 1L2 3 115 58.7 2.5 4.3 - 4 (111) 1969 139 8 147 62.5 6.3 10.8 - 11 (136) 1970 110 11 121 64.7 8.5 14.5 - 14 (107) 1971 155 20 175 69.2 13.0 22.2 - 22 (153) 1972 64 27 91 74.2 18.0 30.8 - 31 (60) 1973 98 33 131 78.3 22.1 37.8 - 38 (93) 1974 74 34 108 85.1 28.9 49.4 - 49 (59) 1975 126 46 172 102.3 46.1 78.8 8 87 (85) 1976 185 52 237 116.7 60.5 103.5 11 114 (123) 1977 242 53 295 131.8 75.6 129.3 14 143 (152) 1978 91 74 165 147.0 90.8 155.3 17 172 7 1979 54 68 122 167.8 111.6 190.8 41 232 110 1980 80 121 201 173.3 117.1 200.2 59 259 58 1981 200 130 330 180.6 124.4 212.7 77 290 (40) 1982 82 135 217 188.2 132.0 225.7 91 317 100 1983 92 136 228 196.1 139.9 239.2 104 343 115 1984 86 140 226 204.3 148.1 253.3 107 360 134 1985-2011 - 145 145 210.2 154.0 263.3 111 374 229 INTERNAL RATE OF RETURN: 8.6X l/ All values in the cost and revenue streams are expressed in terms of the 1971 price levels in TL million. Actual expenditures prior to 1971 were inflated to the 1971 levels while those after 1971 were deflated. 2/ Based on an average tariff of TL 1.71/m3. 3/ As per appraisal assumptions. The savings have been however postponed to reflect the delays in the project completion. June 9, 1982 ae BsTf COPY AVAILABLE 긔 MAP 291 . v ,4 MY Sile q., rlyer Haclos n N enlkd e 1- Elmoll 01 Existing Kukäkk ;Yýp Wells "Elmalityeservoif$ Inu J"OMPRP Gangö,e.. 01 F,okby 1\ r- -)Urnrofflye IST NBUL Zeyilnburnu Bakirkäy Yo gilkcy Kugulcyal K Kinall Ado Mal Y.kocik \ Burgaz 7" l Prince S, Heybett A Pe ndIR is] nd\ý Båy k Ada d.f ÅdW 0 Tufla G bre Izvnit Darica Kdramåsel Yolovo ginorcik K 0 A F- L 5 T A N a u L B u R A C,ha.9.21 Gemlik lake ånik It n,k 8-1 -d 1 82 p 3 E 2 SP 引 MAP 2 Al 8 1 A c K - s E A IN.U SS R ýlonbuj Ankaro T u y Kilyos 0 R A 0 5 Y R l A an S.O B A N 0 -Komurc5 Dam Volidé 0,7fn yeni Dam a hcekoy ,,hýekóý 8u.yuk Dom sarlyer Dorn Kemer ýru 19 ý.. Hociosmon Tor obya Beykoz Yenikdy 0 KO4ithane 0 event Røserroirs enkoy e*iklas óMerli Wells Ornøl' 'gom consfru471Jan) Umr oniye camlic Il TANBUL ,67ierl! Roset vo"r Zeylinburnu "Kuýýkyol. Maltepe Kinali Ada PRINCE5' GI ON Bur go z A do 1SLANDSý',..J(ortc311 Heybell Ada R OJ EG T Pendik \-f PROJECT 4 Buyuk Ada Sedef Adc4 0 Gebze '.ýt 0 10 K 1 (0 M E I R E 5 i BRC> 38 26R