Morocco - Greater Casablanca Sewerage Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. P-4553-MOR MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN IN AN AMOUNT EQUIVALENT TO US$ 60.0 MILLION TO THE KINGDOM OF MOROCCO FOR A GREATER CASABLANCA SEWERAGE PROJECT May 6, 1987 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS lUs$ Dollar ($) - 8.40 Moroccan Dirham (DH) IDH = US$0.119 FISCAL YEAR January 1 - December 31 PRINCIPAL ABBREVIATIONS AWD ACRONYMS USED LCB - Local Competitive Bidding ICB - International Competitive Bidding FA - Force Account FEC - Fonds d'Equipement Communal RAD - R6gie Autonome Intercommunale de Distribution d'Eau et d'Electricite de Casablanca RAMSA - R6gie Autonome Multiservices d'Agadir RADEEF - Regie Autonome de Distribution d'Eau et d'Electricite de Fes RADEEMA - Regie Autonome de Distribution d'Eau et d'Electricit6 de Marrakech RADEEM - Regie Autonome de Distribution d'Eau et d'Electricit6 de Meknes RADEEN - Regie Autonome de Distribution d'Eau et d'Electricit6 de Nador RED - R6gie Autonome de Distribution d'Eau et d'Electricite de Rabat RADEEC - R6gie Autonome de Distribution d'Eau et d'Electricite de la Chaouia (Settat) RAID - R6gie Autonome de Distribution d'Eau et d'Electricite de Tangier ONEP - Office National de l'Eau Potable  FOR OMCIAL USE ONLY KWGDOM OF MOROCCO GREATER CASABLANCA SEWERAGE PROJECT LOAN AND PROJECT SUMMARY Borrower: Kingdom of Morocco Beneficiaries: The water distribution companies (Rigies) of Agadir (RAMSA), Casablanca (RAD), Fes (RADEEF), Marrakech (RADEEMA), Meknes (RADEEM), Nador (RADEEN), Rabat (RED), Settat (RADEEC) and Tangier (RAID). Amount: US$60 million equivalent. Terms: Twenty years, including 6 years of grace, at standard variable interest rate. Onlending Terms: Same as lending terms, the R6gies assuming foreign exchange and interest risks. The Bank Loan would be onlent to the Regies as follows: RAMSA: US$ 1.2 million; RAD: US$ 49.5 million; RADEEF: US$ 1.7 million; RADEEMA: US$ 1.0 million; RADEEM: US$ 1.0 million; RADEEN: US$ 0.6 million; RED: US$ 3.1 million; RADEEC: US$ 0.6 million; and RAID: US$ 1.3 million. Financing Plan: IBRD $60.00 million Equipment Communal Fund (FEC) $ 2.00 million Net Internal Cash Generation $54.91 million TOTAL $116.91 million Economic Rate of Return: Not applicable. Staff Appraisal Report: Report No. 6472-MOR This document has a restricted distribution and may be used by recipients only in the perfo4mance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  MEMORANDUM AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ON A PROPOSED LOAN TO THE KINGDOM OF MOROCCO FOR A GREATER CASABLANCA SEWERAGE PROJECT * 1. The following report on a proposed loan to Morocco for the equivalent of US$60.0 million is submitted for approval. The proposed loan would have a term of 20 years, including 6 years of grace, at the standard IBRD variable interest rate. It would support a sewerage project in the Greater Casablanca area and sewerage master plans and feasibility studies in eight major urban areas. 2. Background. Water is scarce in Morocco. Existing groundwater sources are becoming exhausted or are deteriorating in quality as a result of over-exploitation. Tre'ated surface water is therefore brought from greater distances to supply the larger cities. Although about 80% of the urban population receives piped water and about 302 of the rural areas has access to piped water, most of the water supply systems insta'lled during the first half of tlhc century need ugcnt repairs and rehabilitation to reduce water losses and improve the service. These issues as well as institutional, financial and administrative limitations pertaining to the water supply sector are addressed in a recent National Water Supply Rehabilitation Project. 3. Sewerage services, which have not kept pace with the development of water supply, also need remedial attention. Although municipal sewage collection systems exist in most medium and large cities, they have not been extended to cope with the rapid growth of population and industries. The organizational, financial and technical capabilities of the municipalities which are responsible for sewerage services are limited. As a result, serious pollution and health hazards have been created. Since 1977, the Government has been examining ways to improve the sewerage sub-sector with assistance from the Bank and has issued a sewerage policy statement emphasizing its intentions to improve the environment by alleviating pollution and health risks, and to strengthen the financial and institutional arrangements within the sub-sector. The Bank's Sewerage Engineering Loan (Ln.S-7-MOR) financed Sewerage Master Plan studies for the Greater Casablanca area which were completed successfully in 1983. In 1984, the Government revised its financial policy relating to the sewerage sub-sector by adopting the concept of total self-financing of sewerage services. It also adopted a new sectoral policy which is to progressively transfer the municipal sewerage operations to the water supply R6gies ' throughout the country. The water supply R6gie of the R6gies are public enterprises which supply water throughout Morocco, and are expected to supply sewerage services eventually.  -2- Greater Casablanca area (RAD) assumed responsibility for the municipal sewerage services in iQ85 and is the main beneficiary of the proposed loan. 5. Lessons learned from the Greater Casablanca Sewerage studies have led the Government to entrust the R6gies with the responsibility for carrying out, on behalf of the municipalities they serve, technical, institutional and financial studies before taking over municipal sewerage services. The technical and administrative capabilities of the Regies and the level of pollution of the environment are key factors in identifying the urban areas where the transfer of responsibility from municipal services to the Regies is urgently required for the operation and maintenance of existing sewer systems. The Regies of Agadir (RAMSA), Fes (RADEEF), Marrakech (RADEEMA), Meknes (RADEEM), Nador (RADEEN), Rabat (RED), Settat (RADEEC) and Tangier (RAID) have been selected by the Government to carry out sewerage master plan and feasibility studies as the cities they serve are facing important issues related to sewerage system maintenance and to pollution of the environment. 6. Project Objectives. The proposed project is designed to: (i) promote the creation and development of appropriate institutional, financial, and technical structures to manage sewerage services in major urban centers; (ii) prevent further deterioration of the existing sewer systems in the Greater Casablanca area through an extensive rehabilitation program; (iii) keep abreast of the increasing domestic and industrial demand for sewerage and storm drainage by the construction of additional facilities; (iv) identify the least cost alternative for sewage treatment and disposal and possible reuse of sewage effluent, while minimizing the environmental impact of sewage effluent discharges; and (v) provide for effective operation and maintenance of sewerage facilities and standardization in the quality of design and implementation of sewerage extension works. 7. Project Description. The project, to be implemented over a nine year period, includes the following components: (i) the provision of management and technical assistance including training to RAD. This technical assistance would be provided through a twinning contract recently concluded between RAD and an international water supply and sewerage company; (ii) replacement of about 60 km of primary and secondary sewers and three pumping stations; (iii) inspection, mapping and cleaning of about 1,000 km of sewers, and rehabilitation of about 200 km of sewers; (iv) construction of about 410 km of new sewers and overflow structures for unserviced areas; (v) provision of operation and maintenance equipment, training equipment and vehicles for RAD's sewerage department; and (vi) sewerage feasibility studies to assess alternatives for the treatment and disposal of sewage in the Greater Casablanca area. In addition, sewerage master plans and feasibility studies including detailed design and bidding documents will be prepared for eight major regional cities, i.e. Agadir, Fes, Marrakesh, Meknes, Nador, Rabat, Settat and Tangiers. 8. The total project cost (net of taxes and duties) is estimated at US$95.2 million, with a foreign exchange component of US$33.4 million. A breakdown of costs and the financing plan are shown in Schedule A. Amounts and methods of procurement and disbursements, and the disbursement schedule are shown in Schedule B. A timetable of key project processing events and the status of Bank Group operations in Morocco are given in schedules C and D respectively. Two maps covering the project areas are attached. The Staff Appraisal Report, No. 6472-MOR dated May 6, 1987, is being distributed separately.  9. Rationale for Bank Involvement. The Bank's overall involvement in the water supply sector has been focussed on the strengthening of sector planning and execution capabilities, cost recovery principles, pursuit of sound financing mechanisms, and fostering the development of a strong institutional framework. In the sewerage sub-sector, the Bank's main objective, supported by this loan proposal, is to help the Government develop competent and finaneially viable institutions which would: (i) implement sound policies and efficiently manage the sub-sector; (ii) adopt appropriate financial policies and tariff structures; (iii) apply appropriate technologies for sewage collection, treatment and disposal; and (iv) plan and implement adequate expansion programs. 10. Agreed Actions. Agreement was reached on: (i) the immediate implementation of sewerage tariffs and fees to generate revenues sufficient to finance all operating and maintenance expenses, working capital requirements and debt service and at least 40% of capital expenditures, not prefinanced by consumers' and developers' contributions; (ii) technical assistance to RAD to carry out a training study and initiate implementation of a sewerage training program by July 1, 1988; (iii) budgetary allocations sufficient to avoid a build-up of future arrears from the public sector in the sewerage department of RAD; and (iv) the recruitment of qualified consultants, by November 1, 1987, to carry out sewerage studies for Agadir, Fes, Marrakech, Meknes, Nador, Rabat, Settat and Tangier. The consultants' recommendations will be submitted to the Bank for comments by June 30, 1990 and the implementation of such recommendations will be initiated by the Regies not later than January 1, 1990. During negotiations, the Communal Infrastructure Fund (FEC) confirmed that it will provide financial assistance in an amount equivalent to US$2.0 million to the Regies of Agadir, Fes, Marrakech, Meknes, Nador, Rabat, Settat and Tangier to finance their sewerage master plans and feasibility studies. Signing of a financing agreement between FEC and a Regie would be a condition of disbursement of the portion of the Bank loan related to that R6gie. Signing of an agreemen between a R6gie and the municipalities within which it operates to carry out on their behalf their sewerage master plans and feasibility studies would also be a condition of disbursement of the portion of the Bank loan related to that Regie. 11. Justification. The project would decrease the exposure of the population of Greater Casablanca to health risks from sewage ponding and flooding. Extension of sewer networks would also contribute to the promotion of housing development. In the longer term, the eventual installation of sewage treatment and disposal facilities, which will be possible based on the work completed under this loan, will alleviate pollution of the coastal waters and beaches of Casablanca. Results from this project are expected to provide the basis for replicating sewerage rehabilitation efforts in Morocco's major cities.  - 4 - 12. Risks. The only risks are those associated with the establishment of effective institutional management. However, these risks are minor, particularly since a management and technical assistance contract between RAD and an international water supply and sewerage company will supplement RAD's technical and financial staff, and there is also provision for technical assistance to the other eight Regies under the project. 13. Recommendation. I am satisfied that the proposed loan would comply with the Articles of Agreement of the Bank and recommend that the Executive Directors approve this loan. Barber B. Conable President Attachments Washington, D.C. May 6, 1987  SCHEDULE A Estimated Project Cost P': Component Local Foreigr Total - US$ Million Replacement of Sewers & Pumping Stations (RAD) 4.27 1.31 5.58 Rehabilitation of Sewers (WAD) 6.76 2.62 9.38 Construction of Sewer Networks (RAD) 33.58 9.01 42.59 Supply of Equipment (RAD) 3.17 3.10 6.27 RAD's Consulting Services Including Training 4.86 4.79 9.65 Regies' Sewerage Feasibility Studies 4.30 6.14 10.44 Base Cost (January 1987) 56.94 26.97 83.91 Physical Contingencies 9.53 4.26 13.79 Price Contingencies 17.04 2.17 19.21 Total Project Cost 3kSl 31.1f a' Includes taxes and duties of US$21.7 million. Fnening Plan: Sources: Local Foreign Total - US$ Million IBRD 26.60 33.40 60.00 Communal Infrastructure Fund (FEC) 2.00 - 2.00 Net Internal Cash Generation (RAD) 54.91 - 54.91 Total 834  SCHEDULE B PROCUREMET METHOD (Total costs of proposed project compoets including cotingencies) Project Elements ICB LCB OTHER FA TOTAL (US$ Million) A. Replacement of Sewers 7.40 7.40 & Pumping Stations (4.44) (4.44) B. Rehabilitation of Sewers 6.19 4.73 2.60 13.52 (3.70) (2.84) (1.57) (8.11) C. Construction of Sewer Networks 1. Civil Works and 41.85 41.85 Pipe Laying (14.76) (14.76) 2. Supply of Pipes 21.00 21.00 (10.20) (10.20) D. Supply of Equipment 8.45 8.45 (4.07) (4.07) E. Studies, TA & Training 1. Consultant Services & 12.18 12.18 Training (RAD) (7.92) (7.92) 2. Regies' Sewerage 12.51 12.51 Feasibility Studies (10.50) (10.50) TOTAL 43.04 46.58 24.69 Z.60 116.91 Bank Financing (22.41) (17.60) (18.42) (1.57) (60.00) Note: Figures in parentheses are the respective amounts financed by the proposed Bank Loan. DISBURSEbMENTS Category Amount X of Expenditure to (US$ Million) be financed Replacement & Rehabilitation of Sewers and Pumping Stations 12.55 60b of total expend. Civil Works and Pipelaying 14.76 35S of total expend. Supply of Pipes & Equipment 14.27 1002 of foreign expend. & 35S of local expend. Consultant Services (RAD) 7.92 65% of total expend. Regies' Sewerage Feasibility Studies 10.50 1002 of total expend. TOTAL 60.00 Estimated IBRD Disbursements (in US$ Million) IBRD Fiscal Year 1988A11989 1990 1991 1992 1993 1994 1995 1996 Annual 6.23 6.36 9.25 9.83 8.68 7.50 5.77 4.63 1.75 Cumulative 6.23 12.59 21.84 31.67 40.35 47.85 53.62 58.25 60.00 *' Includes initial deposit of US$2.5 million in a special account.  - 7 - SCHEDULE C KINGDOM OF MOROCCO GREATER CASA'LANCA SEWERAGE PROJECT Timetable of Key Proleat Processg Events . (a) Time taken to prepare project: Four years (b) Prepared by: Government with Bank assistance (c) First Bank mission: June, 1982 (d) Appraisal Mission Departure: June, 1986 (e) Negotiations: April 20-23, 1987 (f) Planned date of effectiveness: October 1, 1987 (h) List of Relevant PCRs: Casablanca Sewerage Engineering Loan (PCR No. 5131 dated 6/14/84)  -8- SCHEDULE STATUS OF SANK OpERATIONS IN THE KINGggA F IDfI] A. STATEMENI OF QK LOANS AMD IDA CgEDTS (As of March 31, 1987) Loan or Amount (less cancellations) Credit USS Hil-ion Number Year Borrower Purpose Ok IDfA Undisburgg Thirty nine Loans fully disbursed 1452.05 Five Credits fully disbursed 45.16 1416 1977 Kingdom of Morocco Agriculture 38.0 0.33 1602 1978 Kingdom of Morocco Agriculture 50.0 27.64 1681 1979 Kingdom of Morocco Education 88.0 31.98 1724 1979 Kingdom of Morocco Water Supply 49.0 3.93 1757 1980 Kingdom of Morocco Agriculture 44.0 7.39 1848 1980 Kingdom of Morocco Agriculture 24.0 14.15 1943 1981 CIH Tourism 100.0 15.71 1944 1981 Kingdom of Horocco Urban Development 20.0 11.83 2006 1982 Kingdom of Morocco Water Supply 87.0 S3.51 2037 1982 SNOE DFC 70.0 18.20 2038 1982 Kingdom of Morocco OFC (SSI) 30.0 22.66 2082 1982 Kingdom of Morocco Agriculture 24.0 20.15 2109 1982 Kingdom of Morocco Mining 9.5 6.12 2110 1982 Kingdom of Morocco Forestry 20.5 15.53 2114 1982 ONAREP Oil Shale 8.2 0.82 2149 1982 Kingdom of Morocco Education 38.0 20.75 2217 1983 Kingdom of Morocco Agriculture 30.0 27.00 2245 1983 CIH Housing Devt. 60.0 38.24 2253 1983 Kingdom of Morocco Agriculture 42.0 40.19 2254 1983 Kingdom of Morocco Highways 76.6 54.81 2271 1983 ONAREP Oil Exploration 65.2 12.59 2272 1983 Kingdom of Morocco Village Infrastr. 16.0 9.77 2479 1985 Kingdom of Morocco Voc.Training 27.1 16.94 2487 1985 Kingdom of Morocco Elec.& Mec.Ind. 25.1 20.61 2508 1985 Kingdom of Morocco Jerada Coal Min. 27.0 24.02 2572 1985 Kingdom of Morocco Health 28.4 28.40 2590 1986 Kingdom of Morocco Agr.Sec.Adj. 100.0 9.75 2656 1986 Kingdom of Morocco Agriculture 46.0 46.0 2657 1986 Port Authority Port of Casa. 22.0 22.0 2664 1986 Kingdom of Morocco Education SO.0 99.96 2731 1986 CNCA Agric. Credit 120.0 97.56 2779 1987 Kingdom of Morocco Voc. Training' 22.3 22.30 Total 3009.95 45.16 of which has been repaid S84.67 3.4C Total now outstanding 2425.28 41.76 Amount Sold 20.11 of which has been repaid 20.11 0.0 0.0 Total now held by Bank and IDA 2405.17 41.76 Total undisbursed 840.23 S. STATEMENT OF IFC INVESTMENTS (As of March 31. 1987) US$ Million Fiscal Year Lan Euit Tntal 1985 Frumat Food & Food Processing 6 3 6.3 1963/1978/1984 SHOE Development Bank 54.3 1.5 55.8 1976 Marrakech Cement Cement Factory - 1.2 1.2 1977/1980 Temara Cement Cement Factory 2.0 3.4 5.4 1980 SOMIFER Copper Mining 4.3 2.3 6.6 1981/1983 Casablanca Cement Cement Factory I2. .2.0 JM.9 Total coomitments now held by IFC 79.8 10.4 90.2 Total Undisbursed 1.5 Not yet effective. 04798  MOROCCO GREATER CASABLANCA LOCATION OF PROJECT AREAS > PROJECT AREAS SEWERAGE MASTER PLAN STUDIES ROE REGIES ) HEADQUARTERS OF REGIES o PROVINCE CENTERS SERVED BY REGIES MOUNAINS -SOHYET RIVERS AND WADIS FES PROVINCE CAPITALS' RABAT NATIONAL CAPITAL - - PROVINCE BOUNDARIES* Azemnmour j -a- INTERNATIONAL BOUNDARY EL JADIDA(t I *-X INTERNATIONAL BOUNDARY (APPROXIMATE) ( SETTATC 'Nonv of pmince is the so-v as Ouolidio *eniss nome of povince copstal Sidi O OEI .Bennoutr 324 ~(SAFI |RADES I Ygs\*i OSebt Gzouf i /E oChomo 0 E *,,._; DES SR Tomanor o ) ESSAOUIRA ( ' . ~ s - \ . . .. + ~~*\ < l 190 , 2090 0AGADIR onezne KItOMETERS Ait gMelloul TIZNIT . oTATA 1,2' -  IBRD 19884R 4