Turkey - Antalya Water Supply and Sanitation Project

Document of- The World Bank Report No.13516-TU STAFF APPRAISAL REPORT REPUBLIC OF TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT APRIL 26, 1995 Infrastructure Division Country Department I Europe and Central Asia Region  CURRENCY EQUIVALENTS Currency Unit - Turkish Lira (TL) December 1993 - TL 14,458 = US$1.00 June 1994 - TL 31,162 = US$1.00 December 1994 - TL 37,372 = US$1.00 ABBREVIATIONS AND ACRONYMS AMM Antalya Metropolitan Municipality ASAT Antalya Water Supply and Sewerage Authority ASO Antalya Water Supply and Bus Department DM District Municipality DSI State Hydraulic Works EIB European Investment Bank GDRS General Directorate of Rural Services IB Iller Bank (Local Authorities Bank) Sirket Management company for water supply, sewerage and solid waste incorporated under the Turkish Trade Law SPO State Planning Organization WEIGHTS AND MEASURES ha = hectare (2.47 acres) km = kilometer (.621 mile) 1 = liter (0.264 US gallon) lcd = liters per capita per day m 3 = cubic meter (264 US gallons) Mm3 = million cubic meters mm/y = millimeters per year m3/d = cubic meters per day m3/s = cubic meters per second m3/c = cubic meters per capita t = metric ton BOD = Biological Oxygen Demand ppm = parts per million PE = population equivalent FISCAL YEAR January 1 - December 31  REPUBLIC OF TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT STAFF APPRAISAL REPORT Table of Contents LOAN AND PROJECT SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . .i I. SECTORAL CONTEXT AND ISSUES . . . . . . . . . . . . . . . . . . . . . .1 Population . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Water Resources . . . . . . . . . . . . . . . . . . . . . . . . . . .1 Service Coverage . . . . . . . . . . . . . . . . . . . . . . . . . .1 Sector Institutions in the Central Government . . . . . . . . . . . .1 Sector Operating Agencies ..................... . 2 Sector Investment . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Sector Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Private Sector Involvement . . . . . . . . . . . . . . . . . . . . . 4 Sector Objectives . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Environmental Issues ....................... . 4 Previous World Bank Involvement in the Sector . . . . . . . . . . . . 5 Bank's Strategy in the Sector . . . . . . . . . . . . . . . . . . . . 6 II. PROJECT AREA SECTOR SERVICES AND DEMAND . . . . . . . . . . . . . . . 7 Project Area . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Water Supply - Existing Facilities, Level of Services and Demand ........... 8 Sewerage - Existing Facilities, Level of Services and Demand. . . . . 9 Stormwater Drainage - Existing Facilities, Level of Services and Demand . . . . . . . . . . . . . . . . . 11 III. THE PROJECT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Background ........... 11 Project Objectives . . . . . . . . . . . . . . . . . . . . . . . . . 11 Approach to Project Preparation .12 Institutional Arrangements ..................... . 12 Project Description . . . . . . . . . . . . . . . . . . . . . . . . . 14 Project Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Project Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Project Implementation . . . . . . . . . . . . . . . . . . . . . . . 18 Land Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Procurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Disbursements .22 Accounts, Audit and Reporting . . . . . . . . . . . . . . . . . . . . 23 Supervision .24 Annual Project Review . . . . . . . . . . .24 IV. FINANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Past Financial Performance and Current Financial Position . . . . . . 24  Project Financial Approach . . . . . . . . . . . . . . . . . . . . . 25 Future Finances and Project Financing Plan . . . . . . . . . . . . . 26 V. ECONOMIC EVALUATION AND RISKS ... . . . . . . . . . . . . . . . . . . 27 Project Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Least Cost Solution . . . . . . . . . . . . . . . . . . . . . . . . . 28 Rate of Return . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Affordability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Poverty and Gender Impact . . . . . . . . . . . . . . . . . . . . . . 29 Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Environmental Considerations . . . . . . . . . . . . . . . . . . . . 30 VI. AGREEMENTS REACHED AND RECOMMENDATION . . . . . . . . . . . . . . . . . 31 Agreements Reached at Negotiations ... . . . . . . . . . . . . . . 31 Conditions of Loan Effectiveness . . . . . . . . . . . . . . . . . . 32 Recommendation . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 LIST OF ANNEXES I. SECTORAL CONTEXT AND ISSUES 1.1 Municipal Water and Sewerage Service Indicators . . .33 1.2 Water Supply and Sewerage Sector Total Central Government Investments . . . . . . . . . . . . 34 1.3 Previous Bank Experience in the Sector . . . . . . . . . . . . 35 II. PROJECT AREA, SECTOR SERVICES AND DEMAND 2.1 Projected Population in Antalya . . . . . . . . . . . . . . . . 36 2.2 Monthly Household Income by Quintiles in Antalya . . . . . . . 37 2.3 Projected Water Demand--Proposed Use of Water Sources . . . . . 38 2.4 DSI Investment . . . . . . . . . . . . . . . . . . . . . . . . 40 2.5 Sewerage Existing Facilities . . . . . . . . . . . . . . . . . 41 2.6 Iller Bank Sewerage Work Program . . . . . . . . . . . . . . . 43 2.7 Sewage Treatment Capacity--Estimated Sewage Load . . . . . . . 44 III. PROJECT IMPLEMENTATION ARRANGEMENTS 3.1 Antalya Metropolitan Municipality . . . . . . . . . . . . . . . 45 3.2 Proposed Institutional Arrangement . . . . . . . . . . . . . . 47 3.3 ASAT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48 3.4 Sirket . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 3.5 Project Description . . . . . . . . . . . . . . . . . . . . . . 51 3.6 Cost Estimates . . . I . . . . . . . . . . . . . . . . . . . . 56 3.7 Implementation Plan . . . . . . . . . . . . . . . . . . . . . . 58 3.8 Allocation of Loan Proceeds . . . . . . . . . . . . . . . . . . 63 3.9 Disbursement Schedule of the Loan . . . . . . . . . . . . . . . 64 IV. FINANCES 4.1 ASAT--Income Statement . . . . . . . . . . . . . . . . . . . . 65 ASAT--Balance Sheet ...... . .. .. .. . .. .. .. . . 66 ASAT--Cash Flow Statement ..... . . . . .. . . . . .. . . 67 ASAT--Financial Indicators .... . . .. . . . . . . . . . . 68 ASAT--Water and Sewerage Monitoring Indicators . . . . . . . . 69  V. ECONOMIC EVALUATION AND RISKS 5.1 Rate of Return . . . . . . . . . . . . . . . . . . . . . . . . 70 5.2 Environmental Assessment and Mitigation Plan . . . . . . . . . 71 6.0 List of documents in Project Files . . . . . . . . . . . . . . 77 MAPS: IBRD No. 26274 Sewerage Component No. 26275 Water Supply Component This report is based on an Appraisal Mission which visited Turkey in July 1994, consisting of Paul Andre Blanchet (Task Manager and Senior Municipal Engineer), Henry Boldrick (Senior Financial Analyst), Vincent Lacour (Senior Urban Planner) and Sunja Kim (Financial Analyst). Snezana Mitrovic (Consultant EClIN) and Ahmet Gokce (Engineer EClTU) also participated in the preparation of the project. The peer reviewers were Anthony Pellegrini (Director, TWUDR) and Sergio Calegari (Principal Sanitary Engineer, MNIIN). Supervising managers are Ricardo Halpeiin, Chief EClIN, and Rachel Lomax, Director EC1. The financial assistance of the Government of Japan, which provided a grant to help prepare the project, is gratefully acknowledged.  I  REPUBLIC OF TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT LOAN AND PROJECT SUMMARY Borrower: Antalya Water Supply and Sewerage Authority (ASAT) Guarantor: Republic of Turkey Poverty: Not applicable Loan Amount: US$100.0 million equivalent Terms: Seventeen years, including five-years grace period, at the Bank's standard variable interest rate. Project Objectives: The objectives of the proposed project are to: (a) meet at least cost the demand for water supply, sewerage and stormwater drainage; (b) develop new institutional arrangements for management of municipal water supply, sewerage and stormwater drainage, and to introduce private sector participation in the operation of the services; (c) implement appropriate cost recovery policies; (d) postpone the need to develop costly new water resources by improving the efficiency of utilization of existing sources and of water usage by reducing the volume of non-revenue water which is presently too high (46 percent); (e) improve and sustain environmental conditions and reduce health hazards that threaten the local population and the tourism industry by: (i) eliminating deficiencies in the collection and disposal of municipal sewage; and (ii) improving stormwater drainage in areas suffering seasonal flooding. Project Description: The Project comprises water supply, sewerage and stormwater components. While leaving the legal authority with the borrower (ASAT), the administrative and financial management of the services will be consolidated within a company (Sirket) owned by ASAT, AMM and the District Municipalities (DMs) and incorporated under Turkish trade law. The Sirket will also oversee the operation of the services by a private operator under lease and management contracts. The project represents the first phase, to be implemented from 1995 through 2002, of a program designed to continue to the year 2020. The project will: (a) renovate, rehabilitate and extend the existing water supply network; (b) provide a new sewerage network and a preliminary wastewater treatment plant on the western part of the Municipality; (c) improve operation of septic tanks in the eastern part of the city; (d) upgrade the stormwater drainage system in flood areas and elaborate a comprehensive master plan; and (e) provide technical  ii assistance for project implementation (engineering services and project management) and institutional development (particularly training of Sirket personnel, and preparation of the lease and management arrangements). Benefits and Risks: The Project approach supports the Government's decentralization objective in shifting investment responsibility from the government budget to the Municipality, which will recover costs through user charges. In addition, it will: (a) promote managerial efficiency and improve service quality through new institutional arrangements that will introduce private sector participation through lease and management contracts in the operation of the water supply and sewerage services; (b) reduce health hazards to the local and tourist population; and (c) improve environmental conditions. Project risks relate to: (a) the challenge of setting up, for the first time in Turkey, lease and management arrangements for the operation of public utilities; (b) the Sirket's institutional and financial capacity to carry out a large investment program in view of potential political interference; (c) the sustained willingness of municipal authorities to maintain cost recovery measures necessary to assure affordability and self-financing; (d) the ability of Iller Bank and DSI to complete their investments within the expected time; and (e) the time required to complete all land acquisition. Project preparation and design have aimed to minimize all these risks.  iii Estimated Project Cost: US$ million Local Foreign Total Water Supply Works 36.1 43.0 79.1 Stormwater Drainage Works 0.3 0.3 0.6 Sewerage Works 44.7 26.1 70.8 Preliminary Sewage Treatment Plant 6.6 10.0 16.6 Water Supply & Sewerage Equipment 1.9 6.2 8.1 Consultant Services and Engineering 2.9 20.9 23.8 Land Acquisition 1.4 0.0 1.4 Total Base Costs (June 1994) 93.9 106.5 200.4 Contingencies 20.8 23.4 44.2 TOTAL PROJECT COST 114.7 129.9 244.6 Financing Plan: US$ million Total of Total World Bank 100.0 40.9 EIB 46.0 18.8 Iller Bank and DSI 35.0 14.3 Internal Cash Generation 63.6 26.0 TOTAL 244.6 100.0 Estimated Bank Disbursements: US$ million World Bank Fiscal Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 Annual 0.0 10.0 10.0 11.5 12.4 18.3 16.1 13.0 8.7 Cumulative 0.0 10.0 20.0 31.5 43.9 62.2 78.3 91.3 100.0 Internal Rate of Return: 9 percent (using tariffs and earmarked taxes as a proxy for benefits, and excluding taxes and duties from project costs) Maps: IBRD Nos. 26274, 26275   REPUBLIC OF TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT STAFF APPRAISAL REPORT I. SECTORAL CONTEXT AND ISSUES Population 1.01 The population of Turkey in 1993 was estimated at 60.0 million, with 60 percent living in urban areas. Population growth averaged 2.3 percent per year during the last decade. The overall growth rate is expected to average 2.0 percent during the 1990s and to reach 72 million by the year 2002. Rural migration to urban areas is expected to continue and to constitute a major cause of growing demand for developed land and for water, sewerage and solid waste services in urban areas. Water Resources 1.02 Turkey enjoys abundant aggregate water resources, but there are some regions where water shortages are prevalent throughout the year, and others where seasonal shortages occur. Water resources are estimated at about 200 billion m3/year, including surface water that flows out of the country. At present, withdrawals from surface water resources are estimated at about 15.6 billion m3/year, with about 60 percent used for irrigation and the rest for municipal and industrial use. Water abstraction from aquifers is regulated through drilling licenses, but surface water intakes are not licensed. There are no fees for underground or surface water. Service Coverage 1.03 Service coverage levels for municipal water in Turkey, as indicated in Annex 1.1, appear high (971 and 85% of urban and rural populations served with public water), but the quality of the services received by the population is often poor. Water pressure drops and cutoffs of service are frequent because of source and distribution limitations. Average water consumption (77 lcd) is low compared to developing countries in Europe (about 200 lcd). The number of employees per thousand connections (4.3) is high compared to developing countries in Europe (3.2), but low compared to most developing countries (5 to 6). Sector Institutions in the Central Government 1.04 In the Central Government, the responsibility for water, wastewater and solid waste is shared by six different organizations: * the State Planning Organization (SPO) is responsible for reviewing and approving investment plans in the sector; * the State Hydraulic Works Department (DSI), under the Ministry of Public Works and Settlements, is responsible for national water resources management, development and operation of major water sources, and provision  2 of water supply to cities with a population greater than 100,000, except for some of the largest municipalities (para. 1.06); * the Iller Bank (Bank of the Provinces, IB), also under the Ministry of Public Works and Settlements, is responsible for water supply and sewerage development for small cities and construction of solid waste disposal sites in all urban areas, except for some major cities; * the General Directorate of Rural Services (GDRS), under the Ministry of Agriculture, Forestry and Village Affairs, is responsible for rural water supply and sanitation programs; * the Ministry of Health is responsible for the control of quality of the water sources and supply to consumers; and * the Ministry of Environment is responsible for controlling the implementation of environmental legislation. Sector Operating Agencies 1.05 There are at present two types of entities providing water supply and sewerage services. In most of the municipalities, the services are generally provided by departments within the municipal administration. In metropolitan areas, however, the services are provided by autonomous, municipally-owned water and sewerage authorities. 1.06 The municipal water and sewerage authorities have a short history. The first was the Istanbul Water Supply and Sewerage Authority (ISKI), created in 1981 as an autonomous entity responsible for the planning, design, construction, and operation and maintenance of all water supply and sewerage facilities in Greater Istanbul. Creation of an autonomous utility reflected recognition of the complex problems faced in large urban areas and was intended to enable an increasing share of sector investment to be financed with internally generated funds. Of particular significance, ISKI's enabling law gave the Municipal Council the right to set water tariffs and sewerage charges without prior approval by the Central Government, as had been required before. Also, 1981 legislation defining metropolitan municipalities enabled entities such as ISKI to take over the water supply and sewerage services of smaller municipalities near the metropolitan area. Initially, ISKI was relatively successful and this approach became compulsory for all metropolitan municipalities. By 1993, there were 15 metropolitan municipalities, including Antalya, which contained about 18 million peoples, or over 30 percent of the population. 1.07 The autonomous water authorities have not only substantially increased the internal generation of funds in the sector, but they have also obtained long-term credits for sector development. Ankara, Istanbul and Izmir water authorities, for example, have financed with internally generated funds a substantial percentage of their investment in recent years. Istanbul, Ankara, Izmir and Bursa water authorities have r-ceived Bank loans and bilateral credits from several countries, including France, Germany and Kuwait. In contrast, the services provided directly by the municipal departments generally cover no more  3 than the operating expenses, and long-term capital is unavailable from sources other than DSI and Iller Bank. 1.08 Although the institutional framework for water and sanitation services provided by the 1981 legislation represents a substantial improvement over the traditional municipal department, it is not fully adequate to meet the challenge faced by sector authorities in the 1990s. Municipal political influence still plays an important role, not only in major policy decisions, but also in the entities' day-to-day operations. In addition, the water authorities' staffing plans and remuneration levels have to be approved by the Central Government (Ministry of Interior), which results in delays in decisions, insufficient consideration for the particular needs of the specific authority and lack of accountability. The commercial orientation of the utilities is often constrained by political considerations. Future institutional arrangements should take into account the lessons learned from the experiences of existing authorities (paras. 1.21 through 1.23). Sector Investment 1.09 Turkey invested substantial amounts in water supply and sewerage during the 1980s. Total water and sewerage investments (Central Government and water authorities) from 1980 to 1989 are estimated at over US$4 billion (at 1990 prices). Sector investments in the last four years of the decade represented about 0.7 percent of the country's GNP, which is high by international standards (0.5 percent). This relatively high level of investment is consistent with the improvements in service coverage (para. 1.03), but some investments were relatively inefficient as a result of inadequate project selection and execution (para. 1.12) and, subsequently, of poor operation and maintenance. 1.10 The bulk (80-90 percent) of the sector investments were carried out by the Central Government through Iller Bank, DSI and GDRS. The other 10-20 percent were undertaken by the respective municipal entities responsible for water and sewerage. The breakdown, by executing agency, of Central Government investments in the water and sewerage sector is shown in Annex 1.2. Sector Financinq 1.11 Sector investment financing policy has been changing in a positive direction since the early 1980s. Until that time, it was Central Government policy to finance virtually all investments through Iller Bank, DSI and GDRS. In recent years, however, the Government has reduced its investments in metropolitan areas (paras. 1.06 and 1.07) and thus has encouraged the mobilization of local financial resources. This was a much needed change in sector policy because the Government-financed investments represented a heavy fiscal burden (between 1.8 percent and 4.1 percent of annual Government expenditures between 1980 to 1989, or between 7.5 percent and 22.8 percent of annual investments during the same time). 1.12 The Government policies undeL which Iller Bank, DSI and GDRS operate contribute to allocative and technical inefficiencies. First, the financing provided is heavily subsidized as the interest rates charged to the municipalities are highly negative in real terms. Second, large investment  4 programs, involving over-contracting works in response to political pressures, result in slowdown, and sometimes even in interruption, of work because of insufficient funds. Third, water supply and sewerage networks are frequently over-designed, assuming population increases, per capita consumption and periods of time that are excessive. Private Sector Involvement 1.13 Private sector involvement in the provision of services has been limited. One municipal water authority (BUSKI) has recently contracted out the reading of water meters and billing of service charges. To date, no management contract, lease, concession or other form of contracting has been implemented for water or sewerage system operation by the private sector. Sector Objectives 1.14 The objectives of the central sector authorities are to ensure prompt provision of: (a) safe water and sewerage to the population that is not currently covered, and (b) sewage treatment facilities to most of the population. Due to population growth, it is also necessary to serve an estimated 16 million additional inhabitants by the year 2002. Simultaneously, the quality of the services will have to be improved significantly. To address the above-mentioned objectives, the ten-year total investment needs for new and upgraded urban water supply and sewerage facilities during the 1990s are estimated to be approximately US$10 billion equivalent (at 1990 prices), with half concentrated in the metropolitan centers. Environmental Issues 1.15 Water pollution is an acute problem in urban and industrial zones around Istanbul and in the major metropolitan centers like Izmit, Izmir, Ankara and Bursa; it also extends to the tourist areas of the southern Turkish Mediterranean coast where Antalya is located. There is a growing concern not only to better protect surface water resources because a major part of the groundwater reserves has already been exploited, but also to protect natural tourist attractions. Water supply, especially for major cities, will increasingly have to come from surface water. Few systems have adequate interception of sewage or any treatment. Domestic and industrial pollution is also of concern, especially when liquid effluent is discharged in environmentally sensitive areas such as coastlines. 1.16 In response to all these problems, both the Government and the municipalities are beginning to take a much more aggressive stance toward environmental protection. The General Directorate of the Environment (GDE) was established in 1984 to oversee implementation of the Environmental Law and its regulations and to manage the National Pollution Prevention Fund (NPPF). Another indication of the Government's growing commitment to environmental protection was the decision in 1991 to upgrade the GDE to the ministry level. I 1.17 The Environmental Law (No. 2872 of 1983) -- which seeks to protect and optimize land and natural resources usage, to prevent air, water and land degradation, and to protect health, bio-diversity and cultural property --  5 provided the first general framework for environmental protection. Subsequently, regulations governing air quality and noise (1986), marine pollution (1987) and water pollution (1988) were promulgated. The Environmental Law stipulates that polluters must cover costs associated with pollution abatement and prevention and bear responsibility for all damages. Under the Turkish water pollution regulations, national water quality objectives for inland waters were defined in 1991, specifying four classes of water quality: class I for high-quality water suitable for water supply, recreation and fisheries; class II for fairly polluted water suitable for irrigation and other uses after appropriate treatment; class III for polluted water suitable for industries other than food and textiles; and class IV for highly polluted water having no beneficial end use. 1.18 The enforcement of the regulations designed to protect the environment is generally the responsibility of the municipalities and provincial governments. The municipalities' capacity to implement the regulations effectively has still to be developed. The most important role in enforcing regulations regarding the protection of water resources in metropolitan areas has been given to the municipal water and sewerage authorities (para. 3.04). Municipalities and water authorities, which have made progress in evaluating the quality of industrial effluent, are now requiring polluting industries to invest in on-site treatment. Metropolitan municipalities, including Antalya, have ambitious programs to improve sewage collection, treatment and disposal. Effluent monitoring capacity and enforcement of regulations through inspection by the water authorities remain to be improved. Previous World Bank Involvement in the Sector 1.19 The Bank initiated water sector operations in Turkey over 20 years ago (1972) with a US$37 million loan for the Istanbul Water Supply Project. It has continued its operations through seven more loans to Istanbul, Ankara, Izmir and Bursa water authorities, and to small municipalities in the Cukurova Region. Five of the projects are still under implementation. To date, the loans provided to the sector amount to US$946.3 million (Annex 1.3). 1.20 The Bank's participation in the water and sanitation sector has been an important factor in encouraging the Government to establish municipal water authorities. The Bank has also played an important role in assisting these authorities during their early operation. The Bank-financed projects have been generally successful in meeting their physical targets, and in encouraging much needed investment in sewerage services. The concept of full cost recovery for the services has contributed to progressively improved efficiency in the management and operation of these public companies. Lessons learned from the previous projects have indicated, however, a need to improve efficiency. At the same time, the constraints to efficiency faced by public sector entities have become increasingly evident and there is a growing consensus that private sector participation would improve project management and financial discipline. On the technical side, past projections of water sales and implementation schedules were proved to be too optimistic. For timely and successful project implementation, detailed designs should be prepared in the early stages of the project. It is equally important to obtain a clear political commitment to cost recovery and improvement of the water authorities' finances, accounting and audits. The proposed project takes the above lessons into account and goes a step further  6 than previous projects by promoting important institutional changes to enable significant private sector involvement. This concept responds to changes in the Government's evolving vision of the respective roles of the public and private sectors and it is fully supported by Antalya municipal authorities. Bank's Strategy in the Sector 1.21 The Bank's strategy towards Turkey is outlined in the Country Assistance Strategy (CAS) submitted to the Board on March 11, 1993. Within the overall objectives of the CAS, the Bank had agreed with the Government to support projects which improve the environment, promote sustainable use of natural resources, and strengthen local institutions' capacity to achieve these objectives. Recently, the Bank prepared a review of sector issues (Urban Water and Sanitation Sector Review, March 26, 1993) which was discussed at a workshop held in Antalya in October 1993. This workshop was designed to promote discussions of institutional changes that may be required so as to remove the central Government from its present close involvement (through Iller Bank and DSI--paras. 1.10 thru 1.12) in the planning and funding of most water supply and sanitation investments, and to promote decentralization of investment responsibilities and service delivery provision to local utilities, which should be financially autonomous and managed free from bureaucratic constraints, thereby encouraging privatization wherever possible. 1.22 The Bank's strategy in assisting the Government has two objectives. The first is to continue supporting the development of the newly-created water authorities in the larger municipalities so as to enable them to provide adequate services at affordable prices. The satisfactory development of these authorities in areas of rapid population growth should have significant direct benefits for about 30 percent of the country's population (para. 1.06). To provide this, the Bank is now seeking to promote revised institutional arrangements and operational practices which involve the private sector. The second objective is to help address the needs of smaller municipalities. Given the severe budgetary constraints of the Central Government, it is evident that the infrastructure demands of these municipalities cannot be met without significant local resource mobilization. In addition, the capacity for project implementation and operation and maintenance of infrastructure must be developed. However, this capacity is constrained by a wide range of problems, including: (a) lack of transparency of the role of Iller Bank and DSI, and of their performance and financial arrangements; (b) lack of flexibility in the legislation for setting up municipal administrative structures; (c) lack of adequate municipal legislation to promote local resource mobilization; (d) constraints stemming from the present legislation on the sector's ability to set competitive salaries, thus limiting the possibilities to promote development of the managerial and technical capacity of municipal personnel; and (e) lack of a legal framework to promote the involvement of the private sector. Correction of these problems is a massive agenda that can only be carried out in stages. Accordingly, the Bank is now working, for the Southwest Coast area, to establish a realistic basis for priority investments and an appropriate institutional framework, including financial intermediation arrangements, to reach smaller municipalities. 1.23 The proposed project would be an important step in the implementation of the Bank's strategy in the sector. In particular, the institutional  7 development component of the project, which involves private sector participation, takes into account the experience of previous projects and has a significant potential for replication. The proposed project was prepared and negotiated simultaneously with a solid waste management project for Antalya (para. 3.01). The proposed solid waste management project would also be an important element of the Bank support to the Government in its efforts to improve environmental conditions and to strengthen local institutions capacity. The solid waste management project would aim at: (a) improving solid waste collection; (b) developing a new sanitary landfill; (c) improving land management and pollution monitoring; and (d) contracting out with the private sector solid waste operations and street sweeping. The solid waste management project is expected to be submitted for Board consideration shortly, after Antalya Metropolitan Municipality completes all the necessary requirements for acquiring the land for the landfill. II. PROJECT AREA. SECTOR SERVICES AND DEMAND Project Area 2.01 The project area, which embraces the Antalya Metropolitan Municipality (AMM) and surrounding districts, lies in the Antalya Province of Turkey. Situated on a large fertile plain, the region is bound on three sides by mountains rising to over 3,000 meters above sea level. The topography is unusual in that the coastline in the central part of the Municipality is located on an ancient travertine terrace which rises about 30 m vertically from the sea in rugged cliffs and thence in successive terraces to the foot of the Taurus Mountains about 40 kms to the north. The terraces are formed of a highly fractured and porous karstic travertine several hundred meters thick. On the east and west sides of the Municipality, the perimeter of the travertine formation has eroded over the years and the flat valleys are covered with alluvial deposits that vary from cobbles to stiff clay. Antalya is flanked by extensive beaches (Lara Beach to the east and Konyaalti Beach to the west) and is bounded by the Bogacay River on the west (800 km2 drainage basin) and the Aksu Cayi River (6,472 km2 basin, average annual flow of 1,300 million m3/y) on the east, which are continuous streams discharging into the Mediterranean Sea. There are two dams on the Aksu Cayi River, Karacaoren I and II, each with a hydropower plant. Of less importance are the streams of Sarisu (0.5 to 0.6 m3/s), Arapsuyu (0.5 to 1.3 m3/s), and Duden (16.6 to 41.5 m3/s), which are fed by emerging springs that eventually discharge, through spectacular waterfalls, into the sea. The area enjoys a typical Mediterranean climate of hot, dry summers and refreshing winters. Virtually all the annual rainfall occurs between November and March. The average temperature varies from 10.20C in January to 28.10C in July, and the average rainfall is 1,065 mm/y. 2.02 One of the ten most populous cities in Turkey, Antalya's estimated 1994 population of 491,000 has been growing at an average annual rate of 7 percent, the highest in the country. The high growth rate is due primarily to migration from the rural areas and to the choice of Antalya as a retirement home by large numbers of middle- and high-income pensioners from all over the country, attracted by the natural beauty and favorable weather conditions. Future growth  8 is expected to result in the following population levels: 1995--530,000, 2000-- 709,000, 2005--905,000, with estimated growth rates of seven percent in 1990 to five percent in 2005 (Annex 2.1). The population in AMM is divided among the three district municipalities (DMs) of Konyaalti (three percent), Muratpasa (62 percent) and Kepez (35 percent). 2.03 Presently, the Municipality encompasses 9,610 ha and has almost extended to its natural boundaries. Land development has radiated inland from the commercial and administrative center, which includes the historical Old City (mostly a conservation area), and along the shore line. The current tendency is to transfer industry outside the municipal boundaries to an industrial park of 197 ha (estimated 140 industrial plants for about 6,000 workers) located 26 km north of the Municipality, along the Antalya-Burdur highway. The bell-shape macro-form of the city is characterized by a densely populated center (500 to 600 inhabitants per hectare) and attenuating densities toward outer zones. 2.04 Some 80 percent of the region's population derives its income from agriculture. A significant center for commerce and tourism, Antalya provides services for the whole of Antalya Province. It is also the site of significant industrial development, especially in agro-based industries. Total hotel bed capacity reached 14,000 in 1989 and 28,000 in 1992. A comparison of national and Antalya income by quintile distribution shows that average income in Antalya is slightly lower and that the distribution is roughly similar to the country as a whole (Annex 2.2). Water Supply - Existing Facilities, Level of Services and Demand 2.05 Antalya's present water supply is from springs (about 17 percent) and wells (83 percent). The estimated water produced over the last three years is: 1990--83,500 m3, 1991--87,300 m3 and 1992--100,500 m3. After chlorination, clear and clean water from springs and wells is pumped either to reservoirs at a high elevation or directly into the distribution network. Magara, Meydan and Topcular sources, which show traces, sometimes above allowable limits, of ammonia nitrogen, orthophosphate, lead and zinc, will have to be abandoned soon. There are 20 licensed wells producing some 11,600 m3/d and about 100 private wells at various locations in the Municipality, especially to the east in the Dudenbasi and Lara districts. Together they produce some 12,100 m3/d, of which 75 percent is used for irrigation. Sources and pumping facilities are sufficient to meet the Municipality's demand, but the water network does not have enough capacity (Annex 2.3). 2.06 In 1975, Iller Bank designed and installed 155 km of PVC and asbestos cement pipe, the first major extension of a diameter of 100 mm or less to the existing cast iron pipe network. The network was divided into four pressure zones. In 1987, DSI design proposed the same pressure zones as those recommended in the 1975 Iller Bank study and added two more for the higher zones. After 1985, the Antalya Water Supply and Bus Department (ASO) laid more than 300 km of pipeline (asbestos, steel, PVC pipes of diameter 100 mm or less), which were not in compliance with the DSI design. As a result, the built network is undersized and lacks reservoir capacity (presently there are seven reservoirs with a  9 capacity of 27,150 m3); the Duraliler sources cannot be used to their full capacity, and polluted Magara, Meydan and Topcular sources have not been taken out of service (para. 2.05). In addition, the system is poorly equipped with air relief valves, becomes air-locked after each failure of the power supply, and three of the pressure zones are interconnected at different locations to provide water to customers. DSI initiated a construction program in 1992 including construction of water mains, pumping stations and reservoirs (Annex 2.4). 2.07 In 1994, the number of connections was estimated at 143,000. The distribution within consumption groups is as follows: (a) domestic 88 percent; (b) commercial 10 percent; (c) construction 1.2 percent; (d) institutional <1 percent; and (e) industrial <1 percent. An estimated 95 percent of the population is served. The non-revenue water was estimated at about 46 percent of total production; physical losses 41 percent (38 percent due to leakages and three percent due to the estimated 10,000 malfunctioning and under-reading meters) and commercial losses five percent. Commercial losses are estimated at 4,230 m3/d: about 3,960 m3/d for public fountains, parks, mosques, fire fighting and street cleaning, and 270 m3/d for illegal connections. Total water billed per capita served is in line with urban areas in Turkey (100 to 120 lcd) and in other middle-income countries, but it is low compared to developed countries in Europe (about 200 lcd). 2.08 It is expected that water leakages could be reduced from 41 percent in 1992 to 30 percent in 2005 with the replacement of part of the network and the project's proposed program for reduction of unaccounted-for-water, which would be included in the leasing arrangement for the operation and maintenance of the network (paras. 3.08 and 3.10). Domestic water sold is conservatively projected to increase from 94 lcd in 1992 to 98 lcd in 1998 and to 128 lcd in 2005. This estimates take into account the projected tariff increases (para. 4.06) which are expected to result in increased conservation efforts. Future gross demand also reflects population growth, an increase service coverage (from 95 percent of population served today to 98 percent by 2005), and increases in institutional, commercial and industrial water demand in proportion to land development (1992-- 92,846 m3/d, 1998--165,911 m3/d, 2005--252,530 m3/d, 2020--391,712 m3/d -- see Annex 2.3). The resulting demand forecast has been used in determining the technical criteria for the water supply and sewerage components of the proposed project. 2.09 The future gross water demand is expected to be met mainly through renovation of the existing Duraliler and Bogacay well fields and development of Distas well fields, which postpones until after 2020 more costly alternatives. Proposed use of water sources to satisfy the future demand and a chart of source capacity compared to water net and gross demands are shown in Annex 2.3. To meet the increased demand up to 2005, the required investment in water production facilities is small, but the required investment in water distribution is substantial. Sewerage - Existing Facilities, Level of Services and Demand 2.10 There is no municipal sewerage in Antalya, except in small isolated areas such as the industrial areas, the duty-free zone, the Old City (partly), the university, and some blocks of apartment buildings where operation and  10 maintenance are the responsibility of users. Traditionally, because of the unusual characteristics of the underlying karstic base-rock, effluent from septic tanks or cesspits from each house infiltrates directly into the underlying travertine formation (Annex 2.5). Some of the soaking pits (zerzemins) are connected to faults, cracks or caverns in the rock, so effluent is indirectly discharged into the sea. 2.11 Septic tanks are emptied by the Environmental Health Department of the Municipality and three private contractors. Septage collected from septic tanks is discharged into a 2,000 m3 pit, dug in highly permeable ground, in the controlled solid waste dump site located upstream of the main potable water source, Duraliler (para. 2.06). This poses a major health risk which will be addressed under the project by disposing of the septage in the sewerage under construction. 2.12 Inadequate wastewater disposal methods and harmful agriculture practices have polluted the underlying karstic base-rock. This has forced the authority to abandon some older potable water sources (yacht harbor and old city), and it will soon have to abandon others as well (paras. 2.05 and 2.06). 2.13 The 1992 sewerage master plan has been designed and partly tendered by Iller Bank. The proposed system is divided into two separate networks to collect the sewage flow from the western and eastern parts of the Municipality with wastewater treatment plants and sea outfalls. The construction of a portion of the western network was started in 1992; it was limited to collectors larger than 400mm and two of the 15 proposed pumping stations. Subsequently, in June 1993, complementary funds for constructing the missing secondary networks and house connections to this proposed initial primary network were added (Annex 2.6). This Iller Bank network will cover 2,426 ha and cost US$32 million (1993 prices). According to the Iller Bank program, work will be completed in 2002. 2.14 An extension to the Iller Bank western network covering an additional 1,656 ha is part of the proposed project. This extension includes a preliminary wastewater treatment plant with a long sea outfall south of the new harbor. It will assure partial protection of at least three water supply sources and obviate the difficulties of building individual systems in the saturated land of the western part of the Municipality. Once construction is completed, the population connected to the west side network in 2002 is estimated at about 400,000 or about 50 percent of the total population. Estimated wastewater treatment capacity and population equivalent (PE) including BOD, COD and Suspended Solid for the years 1998, 2002, 2005 and 2020, are indicated in Annex 2.7. As at present, the remaining part of the west side and all of the east side would continue to be served by individual disposal systems. 2.15 According to the hydrogeol-'g4cal study, a groundwater flow of about five m3/s discharges into the sea from the travertine along the coast. Surveys have indicated that pollution is insignificant when this flow is diluted with sea water, except in the old port, where sea water pollution is higher but still rated as class I (para. 1.17). During preparation of the project, an oceanographic investigation, including analysis of the assimilative capacity of the sea using the Tgo die-away and dye-tracking method, was performed. Results have indicated that the dilution factor is high, hence its assimilative capacity.  11 This first investigation has resulted in a preliminary design of the necessary outfall and diffusor to the proposed preliminary wastewater treatment plant. Further oceanographic investigations are planned during the final design phase. Since only part of the population will be connected to the network, the dilution factor with the sea water should be sufficient to maintain, at any time, a pollution level of class I. Sea water quality will be monitored regularly, particularly at the outfall location, and an activated sludge treatment plant will be added when necessary. This solution is flexible and allows an affordable, staged investment. Stormwater Drainage - Existing Facilities. Level of Services and Demand 2.16 Natural drainage systems are abundant in the Antalya region. Six rivers, a canal and several deep creeks cross the Municipality and discharge directly into the sea (para. 2.01). In spite of the fact that there is very little formal storm drainage (except in the central part of the Municipality), few flooding problems occur. This is because of the unusual characteristics of the underlying travertine, which readily allows percolation of surface water. However, runoff will increase due to urbanization. Curbs are unusually high and the streets act as stormwater conduits. The risks of property damage and traffic disruption will likely increase in the center of the city and in the western, low-lying areas. Immediate corrective civil works have been identified, but a comprehensive study will be carried out during the implementation of the project to elaborate a stormwater drainage master plan. III. THE PROJECT Background 3.01 Following a request from the Government of Turkey in March 1992, the World Bank secured a Japanese grant of JY310.5 million for the preparation of the Antalya Water Supply and Sanitation Project and of a solid waste management project (para. 1.23). In November 1992, the contract for the feasibility study was signed with a consortium of foreign and Turkish firms. The consultant's report was issued in April 1994, and a World Bank mission visited Antalya in July 1994 to appraise the water and sanitation and the solid waste management projects. Loan negotiations for both projects took place from March 20-23, 1995. Project Objectives 3.02 The main objectives of the proposed project are: (a) to meet, at least cost, the demand for water supply, sewerage and stormwater drainage; (b) to develop new institutional arrangements for the management of municipal water supply, sewerage and stormwater drainage, and to introduce private sector participation in the operation of the services;  12 (c) to implement appropriate cost recovery policies to enhance self- financing of water and sewerage services; (d) to postpone the need to develop costly new water resources by improving the efficiency of utilization of existing sources and by reducing the volume of non-revenue water which is presently too high (46 percent); and (e) to improve and sustain environmental conditions and reduce health hazards that threaten the local population and the tourism industry by: (i) eliminating deficiencies in the collection and disposal of municipal sewage; and (ii) improving stormwater drainage in areas suffering seasonal flooding. Approach to Project Preparation 3.03 The following principles guided the preparation of the proposed project. First, to ensure sustainability, it was considered necessary to define an institutional arrangement that would enjoy full support from the national and municipal governments. Such arrangement should provide the necessary managerial, technical and financial capabilities to achieve the required level of service with full cost recovery at affordable prices. Second, the proposed institutional arrangement should be replicable and serve as an example of self-financing in the delivery of public services. Third, the Project should protect the environment, promote sustainable use of natural resources, and strengthen the capacity of local institutions to achieve these objectives. Fourth, the national water quality objectives should be progressively reached within the framework of the National Water Pollution Regulations (para. 1.17). Institutional Arrangements 3.04 The September 1993 designation of Antalya as a metropolitan municipality (Antalya Metropolitan Municipality - AMM) under Law No. 3030 had important implications for the project. First, Law No. 3030 requires the application of Law No. 2560 (the ISKI Law) for: (a) the development and operation of public water supply, sewerage and stormwater drainage services, and (b) the monitoring and control of liquid waste discharges and enforcing of water pollution control regulation. Law No. 2560 requires the creation of an autonomous water and sewerage authority under AMM (Annex 3.1). This entity (Antalya Water Supply and Sewerage Authority - ASAT) was created in February 1995 by Decree 94/6516. And, second, under the Environmental Law 2872, AMM is responsible for monitoring the quality of water supply, wastewater, sea and air pollution in Antalya. 3.05 Project institutional arrangements (see organization chart in Annex 3.2) take into account the above laws. In addition, drawing on the lessons of Bank experience cited above (paras. 1.19 and 1.20), they would limit the direct involvement of AMM (and the DMs) in the day-to-day decision-making of service provision, limit the size and role of ASAT in the project (para. 3.07), give management responsibility to a commercially-oriented Sirket (para. 3.08) and give operational responsibility to private operators under lease and management contracts (para. 3.10). This would be a major step forward for the sector, as  13 high expectations are placed on private involvement as an instrument to improve efficiency. The proposed institutional arrangement was the subject of a seminar organized by AMM in Antalya, with the participation of the Bank, in May 1994. This seminar was followed by a visit of representatives of AMM, DMs, Ministry of Interior (MOI) and Treasury to privately-operated water and sanitation facilities in France and the UK from May 29 to June 4, 1994. 3.06 ASAT. The Antalya Water Supply and Bus Department (ASO) has been dismantled and its assets and personnel have been transferred to ASAT and AMM/DMs, respectively. Contrary to similar institutions created in other Metropolitan Municipalities, ASAT would remain very small. The number of authorized positions is 19 but AMM will not fill all the authorized positions and will limit the number of ASAT staff to a general manager, a deputy general manager and three others required to complete the Board of Directors. This arrangement provides the legal umbrella for the water supply, sewerage and stormwater services. While retaining its legal responsibility for service provision, ASAT will delegate management of water supply, sewerage and stormwater services to a Sirket (company incorporated under the commercial code). ASAT would be a joint owner of the Sirket with AMM and the DMs. Further details on the organization and structure of ASAT are found in Annex 3.3. 3.07 Sirket. AMM, the DMs and ASAT will establish this commercial enterprise as a means for consolidating administrative and financial management of water supply, sewerage, stormwater and solid waste services and ensuring the necessary commercially-oriented approach to service provision. Creation of the Sirket will allow greater autonomy to sector management and will help to achieve economies of scale. While the presence of ASAT and the proposed Sirket provide a seemingly heavy structure, it is necessary under the law to have both entities. As indicated above (para. 3.06), the heaviness of the structure will be alleviated by keeping ASAT very small and by passing all administrative responsibilities to the Sirket. To help ensure this efficient orientation, the Board of Directors of the Sirket will include representatives of other important agencies (e.g., DSI, Iller Bank) and of the private sector. The Sirket, with a staff of ten professionals will manage, on behalf of AMM, the DMs and ASAT, the bidding of civil works and equipment financed under the Project and will assure supervision of such contracts. This ceiling of ten professionals has been agreed at negotiations (para. 6.01 [a]). The Sirket will also provide billing, accounting, contractor payment, preparation of withdrawal applications, reporting and other administrative services to AMM, the DMs and ASAT. 3.08 The Sirket will engage the private operator for the water and sewerage services. Bidding documents and draft contracts for the private operator under lease and management contracts, will be prepared by a specialized consultant (para. 3.10). The Sirket is expected to be assisted in its assignment by a firm specialized in the management of water, sewerage and solid waste services (preferably a twinning arrangement). This approach would maximize the sense of responsibility and ownership as well as the self-financing effort of AMM, the DMs and ASAT. It is expected also to result in a reduction of dependency on Central government agencies, such as Iller Bank and DSI. It would also minimize the bureaucratic and political constraints to which sector institutions are typically exposed. The Sirket should be established before loan effectiveness (para. 6.02 [a]). and its key staff be appointed not later than  14 November 30. 1995 (para. 6.01 [c]). The technical assistance for the Sirket would be contracted not later than April 30. 1996 (para. 6.01 [d]). At negotiations, it was agreed that invitation for bids by private operator would take place no later than October 31. 1995 on the basis of documentation satisfactory to the Bank and that the private operator would be hired not later than May 31, 1996 (para. 6.01 [b]). Further details on the structure and operations of the Sirket are found in Annex 3.4. 3.09 Pro-ect Management Unit (PMU). The PMU, which is already in place reporting to the AMM Mayor, will assist AMM, the DMs and ASAT, as well as the Sirket, in implementing the project for about one year (or less if appropriate) after the signing of the contract with the private operator for the operation of water supply and sewerage services. The PMU will assist AMM, the DMs and ASAT in: (i) setting up the Sirket, including selection of its personnel and technical assistance (twinning arrangement - para. 3.08); and (ii) supervising the preparation of the bidding documents for the selection of the private operator. Until the Sirket is fully operational, the PMU will advise and assist ASAT in the implementation of the project and recommend any actions to achieve the project objectives, including the preparation of loan withdrawal applications and reports on operational and financial progress. PMU will be assisted by a high-level expert experienced in project management and familiar with the Bank's procurement and disbursement procedures and guidelines. The recruitment of this expert is a condition of loan effectiveness (para. 6.02, [b]). 3.10 Private Operator. A single private operator is expected to be engaged under a single contract comprising a lease of the water supply system and a management arrangement for the operation of the sewerage system. This operator is expected to be a joint venture of an experienced international company and a Turkish company. The operator will, under the lease and management contract: (a) manage, operate and maintain all the water and sewerage facilities; (b) bill and collect water and sewerage tariffs on behalf of ASAT/Sirket, retaining its contractual share of revenues and remitting the balance to ASAT/Sirket; (c) maintain detailed operating records and accounts and have the latter audited annually by private auditors; and (d) provide water supply quality and sewage treatment plant effluent test results. The private operator will not be responsible for investments, either in terms of financing or construction. ASAT/Sirket will be responsible for financing new investments and will engage contractors and consultants to undertake the necessary civil works and supervision. At negotiations it was agreed that as a condition of loan effectiveness ASAT will hire the consultants to assist in the preparation of bidding documents. bid evaluation, and conduct negotiations for the Private operator (para. 6.02 [c]). Proiect Description 3.11 The Project comprises water supply, sewerage and stormwater components, with ASAT as borrower. The Project represents the first phase, to be implemented from 1995 through 2002, of the water supply and sewerage investment program designed to continue to the year 2020. Future Bank lending for the program may be considered, subject to satisfactory achievement of the policy and institutional objectives proposed under this project.  15 3.12 The project is described in Annex 3.5 and shown in IBRD Maps Nos. 26274 and 26275. This project includes the following components: (a) water supply works and equipment needed to: (i) urgently rehabilitate existing distribution networks by replacing unsatisfactory sections of about 24 km, including repair of some electrical installations, pumping stations and reservoirs; (ii) increase the production at three well fields by about 56 Mm3/y through construction of about 24 new wells and replacement of eight pumps at pumping stations; (iii) construct about 40,000 m3 capacity of distribution reservoirs (three) to provide the storage capacity required for increased water demand; and (iv) replace and extend existing distribution networks (about 500 km) to supply consumers, including construction of two new pumping stations (eight pumps), replacement of four pumps in one existing pumping station (four pumps) and replacement of all water meters; (b) sewerage works and equipment needed to: Ci) urgently construct a collection network of about ten km including a small temporary wastewater treatment plant for the historically important Old City and rehabilitate the existing network and septic tank at Sanayi industrial area; (ii) extend the collection networks by constructing new collectors and collection networks of about 380 km to serve 1,660 ha in the western part of the city to complement the Iller Bank program presently under construction; (iii) dispose of sewage collected by the sewerage networks through construction, in phases, of a preliminary wastewater treatment plant with a capacity of 90,000 m3/d, located at the west end of the City, including a sea outfall of 2,500 m with a diffusor of 400 m and a capacity of four m3/s; (c) stormwater drainage works to: (i) correct deficiencies of the existing networks by constructing missing sections on the networks such as culverts, curbs and channels and removing debris from existing rivers, channels and ditches; (d) consulting services for: (i) technical assistance in proiect implementation for: (1) detailed design and construction supervision for the above- mentioned water supply, sewerage and stormwater drainage works;  16 (2) hydrogeological survey development of groundwater facilities; (3) site survey and investigations for mapping of the water supply systems; and (4) preparation of a comprehensive stormwater master plan; (ii) technical assistance in institutional development, including: (1) staffing of the Project Management Unit to assist AMM, DMs, ASAT and subsequently the Sirket in initiating, coordinating and supervising project activities and in preparing periodic reports required by the Bank; (2) assistance to the Sirket in the preparation of bidding documents, bid evaluation and contract negotiations for private operation of water supply, sewerage and stormwater systems; and (3) assistance to the Sirket through a twinning arrangement or contract with a reputable water supply and sewerage operator for the management of services, planning and administration of contracts and in the implementation of a training program for Sirket managers and staff. Project Costs 3.13 The total project cost is estimated at US$244.6 million equivalent (Table 3.1). Civil works costs represent about 83 percent of base cost, equipment about 4 percent, and services (including technical assistance) about 12 percent. Land acquisition costs account for the balance of project base cost. Detailed project cost estimates are given in Annex 3.6, and summarized in Table 3.2. Table 3.1: Summary of Project Costs (US$ million) Water Supply 102.4 Sewerage & Stormwater Drainage 98.0 Total Base Cost 200.4 Physical Contingencies 21.0 Price Contingencies 23.2 Total Project Cost 244.6 3.14 Base costs are as of June 1994 and are based on recent bids for similar projects. Local costs include about nine percent of taxes and duties. Physical contingencies of 12 percent, cc-rering unforeseeable increases in quantities, have been added to base costs (sea outfall: 15 percent), except for  17 land. Because of high and volatile inflation in the Turkish economy and rapidly changing exchange rates, base costs in Turkish lira have been converted into US dollars. Price contingencies based on World Bank guidelines for international price increases have been applied over the eight-year period of the project. The escalation factors used are based on the latest Bank estimates (BP 6.50 of October 1994). Table 3.2: Project Cost Estimate --TL billion-- -- US$ million-- Local Foreign Total Local Foreign Total Foreign CIVIL WORKS Water Supply 1125.7 1340.6 2466.3 36.1 43.0 79.1 54 Stonnwater Drainage 7.8 10.3 18.1 0.3 0.3 0.6 50 Sewerage 1396.2 813.1 2209.3 44.7 26.1 70.8 37 Preliminary Sewage Treatment Plant 204.1 312.0 516.1 6.6 10.0 16.6 60 Total Civil Works 2733.8 2476.0 5209.8 87.7 79.4 167.1 48 EOUIPMENT Water Supply & Sewerage Equipment 60.9 193.2 254.1 1.9 6.2 8.1 77 Total Equipment 60.9 193.2 254.1 1.9 6.2 8.1 77 CONSULTANT SERVICES & ENGINEERING Project Implementation 77.0 514.9 591.9 2.5 16.5 19.0 87 Institutional Development 13.3 134.1 147.4 0.4 4.4 4.8 92 Total Consultant Services & Engineering 90.3 649.0 739.3 2.9 20.9 23.8 88 LAND ACQUISITION 44.3 0.0 44.3 1.4 0.0 1.4 0 Total Base Costs (June 1994) 2929.3 3318.2 6247.5 93.9 106.5 200.4 53 Contingencies 646.5 729.0 1375.5 20.8 23.4 44.2 53 Grand Total 3575.8 4047.2 7623.0 114.7 129.9 244.6 53 Prolect Financing 3.15 The approach to project financing is to make the activities self- supporting with no contribution to investment costs from AMM or the DMs. ASAT will fund the local counterpart to the Project from net revenues raised from operations. To ensure that resources and effort would be focused on the proiect, no investment over US$200.000 ecauivalent in cost would be undertaken by ASAT without the prior concurrence by the Bank (para. 6.01 [el). 3.16 Based on the above financing approach and project characteristics, the financing plan would be as shown in Table 3.3:  18 Table 3.3: Project Financing Plan (US$ million) Total of Total World Bank 100.0 40.9 EIB 46.0 18.8 Iller Bank and DSI 35.0 14.3 Internal Cash Generation 63.6 26.0 TOTAL 244.6 100.0 3.17 As shown in Table 3.3 above, World Bank financing of US$100.0 million will amount to about 41 percent of total project cost. The standard World Bank loan terms for Turkey would apply: 17 years repayment, including five-years grace period, at the standard variable interest rate. The Bank would finance incremental recurring expenditures for the Sirket and the PMU (US$200,000 each) for a limited period (until the end of August and November 1996, respectively). The financing of the Sirket is required to cover its operating costs from the initiation of operations until the flow of tariff-based income from the private operator of the water and sewerage system becomes effective. The financing of the PMU is required to substitute for the Japanese Grant until the Sirket is fully operational. Retroactive financing in an amount of US$600,000 would be provided to cover PMU expenditures after March 31, 1995. 3.18 The table above also shows the financing already approved by the European Investment Bank (EIB). EIB loan will finance about 19 percent of the project, covering approximately half the total cost of the wastewater treatment plant and the entire cost of the sea outfall, as well as some sections of the sewerage network. The EIB loan was approved in November 1994. The borrower is the Government which will onlent to ASAT. The terms involve 20 years repayment, including a five-year grace period, and a variable interest rate, currently four percent. Aqreement was reached at neqotiations that ASAT should confirm to the Bank not later than December 1. 1995 that the EIB loan has become effective or, if not, that other funds are available for the project to the borrower (para. 6.01 [f]). Project Implementation 3.19 The Project will be managed by the Sirket with assistance from the PMU (paras. 3.06 through 3.09). Preparation of the bidding documents for the civil works and supply of equipment is in progress under the Japanese grant (para. 3.01), and bidding documents for selection of the private operator will be issued by October 31, 1995 (para. 3.08). The lease and management contract for water supply and sewerage is expected to be signed by May 1996 in order to allow the future operator a say on project implementation. To formalize these arrangements it was agreed at negotiations that ASAT will enter into a subsidiary agreement with the Sirket on terms and conditions satisfactory to the Bank not later than November 30, 1995 (para. 6.01 [g]). Tendering, bid evaluation and award of contracts, including loan withdrawal applications, would be carried out  19 by the Sirket with the assistance and supervision of PMU, and reviewed by the Bank. Contracts for the first civil works would be signed in the first few months of project implementation. 3.20 The Project will be implemented from 1995 through 2002. The details of the project implementation plan and programs of expenditures are in Annex 3.7. The projected investment program takes into account Bank experience in the sector in Turkey. The project completion date is December 31, 2002. Land Acauisition 3.21 The site recommended by the consultants for the sewage treatment plant would cover 25 ha of uninhabited agricultural land currently owned by many private owners. The process for acquiring the land is well advanced. The land- use implementation plan has been approved by Konaalti District Municipality and the thirty-day public notice expired. There are no disputes pending regarding the use of the land. Prior to loan effectiveness, ASAT should demonstrate that all legal requirements for the acquisition of the land have been fulfilled and there is no obstacle to the completion of the sewage treatment plant (para. 6.02 [d]). Procurement 3.22 Procurement arrangements for the Bank financed project elements, their estimated costs and proposed methods of procurement are summarized in Table 3.4 below and in Annex 3.7. All goods and works to be financed from the Bank loan proceeds would be procured in accordance with the Bank's Guidelines for Procurement (January 1995), including amendments as of the loan signing date, using the Country Standard Bidding Documents for Turkey. Consulting services will be procured in accordance with the Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency (August 1981), including amendments as of the loan signing date.  20 Table 3.4: Proposed Procurement Arrangementsl/ (US$ million) Procurement Method ICB NCB Other NBF Total Cost 1.0 Works2' Water Supply. Sewerage and 119.2 6.9 76.7 202.8 Stormwater Drainage (65.2) (3.8) (69.0) 2.0 Goods Water Supply and Sewerage 8.9 0.11' 1.3 10.3 (5.0) (0.05) (0.55) (5.6) 3.0 Consultant Services Project Implementation 19.4 4.7 24.1 (19.4) (19.4) Institutional Development 6.0 6.0 (6.0) (6.0) 4.0 Miscellaneous Land Acquisition 1.4 1.4 TOTAL 128.1 7.0 26.7 82.8 244.6 (70.2) (3.85) (25.95) (100.0) NOTE: " Figures in parentheses are the amounts financed by the Bank loans. Works includes supply and installation of equipment for pumping stations. 3/ Furniture Other: Includes intemational/local shopping (US$1.3 million) and selection of consultants according to Bank Guidelines. NBF: Not Bank Financed. Includes amounts financed by EIB (US$46.0 million), Iler Bank (US$31.5 million), DSI (US$3.5 million), and internal cash generation (US$1.8 million) 3 .23 Civil Works/Supply and Installation. An estimated US$119.2 million equivalent of civil works, including supply and installation of water and sewer pipes, will be procured through international competitive bidding (ICB) . An estimated US$6.9 million equivalent of small civil works contracts are not considered to be of interest to foreign bidders. The estimated value of these contracts would range from US$660,000 to US$3 million and their aggregated amount would be less than US$7 million; they would be procured through local competitive bidding (NCB) procedures acceptable to the Bank. For procurement under NCB, foreign bidders from the Bank's eligible countries would be allowed to participate. For contracts procured through ICB, bidding documents following the Bank's Standard Bidding Documents for Small Works (SBDSW) will be used. For the contracts to be procured through NCB, the Standard Bidding Documents for National Competitive Bidding will be used. For the supply and installation of equipment for pumping stations (US$1 million), the Bank's Standard Bidding Documents for the Supply and Installation of Plant and Equipment will be used. Prequalification of contractors would be used for large or complex civil works contracts procured through ICB according to the World Bank's Guidelines for Procurement Under IBRD loans and IDA Credits (January 1995, paras. 2.9 and 2.10). To ensure the selection and hiring of qualified contractors under NCB, project  21 supervision missions would agree with the Borrower on satisfactory and clearly defined postqualification criteria. 3.24 Goods. Goods and equipment (US$11.3 million) to be financed from the Bank loan proceeds would consist of water meters, vehicles, computer systems, and office equipment. As far as practicable, these will be packaged in such a manner that all packages are large enough to attract international competition and at the same time will contain packages suitable for attracting small manufacturers. An estimated US$8.9 million equivalent of goods and equipment (estimated average contract value US$250,000 equivalent) will be procured through ICB. Turkish manufacturers competing for the contracts for the supply of goods procured under ICB procedures will receive a preference in bid evaluation of 15 percent of the CIF price or the prevailing custom duty applicable to non-exempt importers, whichever is less, provided they can prove to the satisfaction of the Borrower and the Bank that the manufacturing cost of such goods includes more than 30% of locally procured labour, raw materials and components. Furniture estimated to cost the equivalent of US$125,000 or less per contract, up to an aggregate amount equivalent to US$125,000 will be procured through NCB using the Standard Bidding Documents for Procurement of Goods through NCB. International Shopping (IS), based on comparison of price quotations obtained from at least three suppliers from three eligible countries, will be used for procurement of some water meters and computer software estimated to cost less than US$250,000, with an aggregate limit of US$1.0 million. National Shopping (NS), based on comparison of price quotations obtained from at least three suppliers, will be used for procurement of computer accessories estimated to cost less than US$50,000, with an aggregate limit of US$300,000. Table 3.5 gives for each project component the number of contracts to be procured through ICB and NCB and the range of contract value. Table 3.5: Number of Contracts and Value RanQe ICB NCB Project Total No. of ICB Value Range NCB Value Range Component Contracts No (US$ mi.) No (US$ mi.) Works Water Supply 11 8 2.2-15.0 3 0.7-3.0 Stormwater 1 1 0.7 Sewerage 2 2 3-16.8 Sewage Treatment I 1 9.5 Equipment Water and Sewerage 10 5 1-2.7 1" 0.1 "Funuture 3.25 Consultant services. An estimated US$28.8 million equivalent of consultant services (up to 8 contracts) for civil works design and supervision  22 for water supply and sewerage; stormwater drainage design and master planning; base mapping for water supply; hydrogeological studies; preparation of bidding documents for private operator; technical assistance for the Sirket would be awarded on a competitive basis according to World Bank Guidelines. The remaining consultant services, totalling about US$1.3 million, will involve the award of contracts to individual consultants (for technical assistance for the PMU) and ranging from several weeks to 13 months in duration. Details of the nature and cost of the consultant services are found in paras. 3.08 and 3.09 and in Annexes 3.5 and 3.6. 3.26 Country Procurement Assessment. A Country Procurement Assessment Report (CPAR) which was completed in 1985 is presently being updated. Laws and regulations regarding local procurement procedures and practices in Turkey are being reviewed by the Bank in order to reach judgement as to whether local procedures are acceptable for Bank-financed contracts. The findings of that review will be discussed with Turkish authorities and agreement will be reached regarding any changes needed to make procedures acceptable to the Bank. Furthermore, ASAT will use the Standard Bidding Documents for the procurement through NCB. 3.27 All contracts awarded through NCB in excess of US$1 million, all contracts awarded through ICB, and contracts for technical assistance and consultancy services valued in excess of US$100,000 for firms and US$50,000 for individuals will be subject to prior Bank review. This limit will result in prior review of about 95 percent of total procurement. Contracts for lesser amounts will be subject to ex-post review. Also, terms of reference for all technical assistance and consultancy contracts will be reviewed in advance by the Bank. ASAT will promptly inform Bank staff regarding procurement plans, solicitations, proposed contract awards and progress in the implementation of its procurement activities. Contracting and purchase actions will also be summarized in periodic submissions of operations reports prepared for the Bank by ASAT (initially prepared by PMU and later by Sirket). Disbursements 3.28 The proposed allocation of the proceeds from the loan is shown in Annex 3.08. The Bank loan will finance: (a) civil works: 54 percent of expenditures; (b) goods: 55 percent of expenditures; (c) consultants' services: 100 percent of expenditures; and (d) incremental recurrent costs: 100 percent of expenditures for the Sirket through August 31, 1996; 100 percent of expenditures for the PMU through November 30, 1996. 3.29 Retroactive financing in an amount of US$600,000 would be provided to cover PMU expenditures made after March 31, 1995. Loan withdrawal applications will be prepared by the PMU and the Sirket for ASAT. These will be fully documented, except for expenditures against contracts valued at less than: (i)  2 3 US$1,000,000 for goods and works; (ii) US$100,000 for consulting firms; and (iii) US$50,000 for individual consultation, which will be made on the basis of Statements of Expenditures detailing the individual transactions. Documentation supporting these expenditures will be retained by the implementing entity for at least the duration of the project. 3.30 To facilitate payments from the loan, ASAT will establish a Special Account in a commercial bank acceptable to the Bank or in the Central Bank. The account will have a maximum allocation of US$4 million, but until the pace of activity in the project justifies a balance of this size, defined as when the total of withdrawals from the loan account plus the value of any special commitments made against the loan are equal to US$10 million, the maximum balance in the Special Account shall be US$1 million. Documented applications for replenishment of the Special Account will be submitted every three months, or when two-thirds of the amount deposited has been withdrawn, whichever occurs earlier. Monthly bank statements of the Special Accounts, reconciled by the Sirket, will accompany all replenishment requests. 3.31 The estimated schedule of disbursements is given in Table 3.6 below. The project will be implemented over a seven-and-a-half-year period while disbursements will extend through eight years. The projected disbursement pattern differs from the standard disbursement profile for the sector in Turkey in duration (eight years instead of ten years) and in the amount of disbursement in the early years of the project (higher in the project schedule than in the profile). However, it differs only slightly from the Bank-wide sector profile in disbursements in the early years (ten percent in the first year compared to six percent in the Bank-wide profile) while being seven percent longer (six months) in duration. The loan closing date is June 30, 2003. The estimated schedule of disbursement is given in Annex 3.9. Table 3.6: Estimated Loan Disbursement (US$ million) World Bank Fiscal Year 1995 1996 1997 1998 1999 2000 2001 2002 2003 Annual 0.0 10.0 10.0 11.5 12.4 18.3 16.1 13.0 8.7 Cumulative 0.0 10.0 20.0 31.5 43.9 62.2 78.3 91.3 100.0 Accounts, Audit and Reporting 3.32 The Sirket will maintain project accounts to adequately reflect project expenditures. The project accounts and the Sirket operational accounts will be audited annually by independent private auditors, according to terms of reference acceptable to the Bank. The Special Account will be audited by Government auditors acceptable to the Bank. The audit reports will contain a separate opinion on the use of Statements of Expenditures. Audit reports in English will be forwarded to the Bank not later than six months after the end of each fiscal year. During negotiations, agreement was reached to have all these above-mentioned accounts audited by auditors acceptable to the Bank (para. 6.01 [hi).  24 3.33 The Sirket, under the guidance of the PMU and on behalf of ASAT, will provide quarterly reports to the Bank on progress of project implementation. These reports will include a summary of implementation status; the Sirket's financial statements including the Special Account; a description of progress on restructuring the water and sewerage services; and data on their performance indicators. Included in these reports will also be procurement information such as: (a) contract award information; (b) revised cost estimates for individual contracts and the total project cost; and (c) revised implementation schedule. The Sirket will prepare an Implementation Completion Report and submit it to the Bank six months after the closing date of the loan. Durinq neqotiations, agreement was reached on reporting recquirements (para. 6.01 [i]). Supervision 3.34 Intensive Bank supervision will be needed because the Project has significant policy and institutional requirements. Much of the day-to-day supervision will be carried out by the Sirket assisted by the PMU, but intensive Bank supervision of the Sirket will be required particularly in the early years, during which time the technical assistance will be made operational and most of the procurement contracts will have been awarded. Field supervision would take place at least three times each year. Supervision requirements would be 5 staff-weeks in 1995, 25 staff-weeks in 1996, and 15 each year during the period 1997 to 2003, for a total of 135 staff-weeks. A Project Launch Workshop will also be organized, along with a training seminar in procurement, disbursement and accounts/audits soon after loan signature. Supervision cost economies will be sought by relying as much as possible on the Bank Resident Mission for consultations. Costs for follow-on projects should decline as the Sirket gains experience in investment planning and implementation and Bank procedures. Each supervision mission should normally include a sanitary engineer and a financial analyst. Annual Project Review 3.35 An annual review, between the Bank, ASAT and the Sirket, to assess progress and problems towards achieving the objectives of the Project and to consider further actions needed for this purpose, will take place before September 30 of each year. Agreement on this review was reached at negotiations (para. 6.01 [j]). The review of financial aspects of the project should focus on the results of the previous four quarters of operation. The Bank financing for the water supply and sewerage investment program for the coming year will be adjusted to match the extent to which financial self-sufficiency (para. 4.06) is achieved or sustained. IV. FINANCE Past Financial Performance and Current Financial Position 4.01 The financial condition and performance of the Municipality's water operations cannot be determined with accuracy since ASO has been a municipal department with an accounting system which does not record asset values or  2 5 properly distinguish between water and transport revenues and expenditures. However, it has been possible to estimate the results of water operations, to extrapolate asset and liability values and to establish trends over the last several years, thereby permitting an assessment of the pre-project condition and performance of ASO. 4.02 At the end of 1993, ASO had a substantial asset base (estimated at about US$38 million) and a relatively small, TL-denominated debt with DSI and Iller Bank of about US$10 million equivalent. While debt has increased 3 times since 1991 (due to a Iller Bank-financed sewerage project), the debt/equity ratio at the beginning of 1994 was reasonable at 25 percent. 4.03 ASO's financial performance has been generally weak, with losses in each of the last three years resulting in a deterioration of cash flow that was worsened by the Municipality's practice of using ASO's cash for other purposes. A more detailed look at ASO's historical performance shows decreases in water sales revenue over the last three years while personnel expenditures increased. The latter averaged about 85 percent of water sales and about 68 percent of total operating costs, unacceptably high percentages that account for the very low levels of maintenance and repair expenditures that the Municipality was able to afford. Project Financial Approach 4.04 Water supply and wastewater services will be fully self-supporting, with cost-based tariffs chargeable to the users of these services. However, initially significant loan financing is necessary to supplement internally- generated funds as project investments are substantial. This financing scheme will require substantial tariff increases. There will be no direct recovery of stormwater costs which will be covered by sewerage tariffs. No AMM/DMs contributions will be required to support ASAT's project and operations. 4.05 The operator of the water supply, sewerage and stormwater systems should recover their costs from three different sources: (a) contractually- defined charges (which form part of the tariff) to cover recurrent costs arising from operating the systems and providing the services (personnel, energy, general maintenance, chemicals and other consumables); (b) contractually-defined assessments (participation fees) to direct beneficiaries of investments in the water and sewerage systems; and (c) contractually-defined connection fees, penalties and charges for repair and maintenance. The operator would be contractually recruired to periodically adjust water and sewerage charges and fees according to the Consumer Price Index or other index acceptable to the Bank to compensate for inflation. This was agreed at negotiations (para. 6.01 [k]). The operator's charges should form part of the tariff. Other elements of the tariff, to be set by ASAT, should comprise ASAT's own operating costs (which would be minor), Sirket costs, ASAT's debt service, and ASAT's contribution to investment. The tariff and other fees and charges will be billed and collected by the private operator. After retaining their contractual share of collected tariffs and other revenues, the private operator should remit to ASAT/Sirket the balance of revenues, including participation fees, which should cover ASAT and Sirket operating needs, debt service and investment obligations.  26 4.06 In January 1994, the average water tariff was equivalent to about US$0.44/m3 equivalent, with an increase to US$0.63/mr3 equivalent (June 1994 average exchange rate US$1 = TL 31,162) effective from July 1, 1994. The increase was approved by AMM Assembly in July 1994. The average tariffs, as envisioned in the feasibility study during the implementation of the project, are: 1995-US$0.53; 1996-US$0.67; 1997 to 2000-US$0.85; and 2001 to 2002-US$0.91. Agreement was reached at negotiations on the following criteria for tariff setting: ASAT would implement ciuarterlv tariff adjustments for its services to ensure that they are sufficient to cover (a) ASAT/Sirket operating costs; (b) the operating cost of the private operator as set in the lease and management contract; (c) a reasonable contribution to investment; and (d) debt service (para. 6.01 [1]). The required contribution to investment is to be agreed, at the annual review meeting (para. 3.35) so as to ensure that planned investments are fully funded, and consistent with the project implementation schedule. The operating cost of the private operator would vary according to inflation and other variables as determined by the operator's lease and management contracts. AMM Assembly has provided evidence of its agreement to the principles of autonomy and financial self-sufficiency of water supply and sewerage operations. 4.07 For the customers connected to the sewerage network, a tariff equal to 100 percent of the water tariff (the maximum sewerage charge permitted under Turkish law) will be charged, beginning in 1998 when the first parts of the sewerage system are commissioned. The calculation of the sewerage tariff should follow the same criteria for water supply as would the adjustment of the tariff. 4.08 By law, all property owners benefitting from extensions or improvements to the water network are required to "participate" in investment costs. The participation fees are set by the Municipality based on declared property values, as stipulated by the Municipal Revenues Law (No. 2464 of May 1981). Thus, under the Project, AMM would assess and collect participation fees from all connected properties (95 percent of the population is currently served by the water network) for the extension and rehabilitation of the water network. For sewerage, participation fees would be collected only from properties to be connected to the planned sewer network (about 50 percent of the population is to be served by the sewer network by the end of the Project). Participation fees have not been used in Antalya in recent years to help finance water network improvements. Such fees have been used in the case of road improvements, but generally have not been a significant source of financing as the fees have typically been low (due both to low fee rates set by the Municipality and to low declared property values) and have not been subject to adjustment for inflation or interest during the payment period. Future Finances and Project Financing Plan 4.09 ASAT/Sirket's financial requirements have been assessed taking into account projected investment over the seven-and-a-half-year period of the project (1995 to 2002). ASAT/Sirket is expected to adopt and implement sound operational and financial policies which should enable the utility to: (a) improve the quality of service and asset operation and maintenance practices; (b) internally generate funds to finance the local counterpart funds required for project investments; and (c) service local and foreign exchange-denominated debt (for the proposed Bank and EIB loans).  27 4.10 ASAT/Sirket's total operating revenues are expected to gradually increase from about US$7 million equivalent in 1993 to US$8 million in 1994, and US$10 million in 1995 and continue increasing during the project period to US$42 million in 2002. To generate the required revenues and to contain costs, the following assumptions have been used in the financial calculations: (a) total water sales will be increased from 17 million m3 in 1993 to 19 million m3 in 1995 and to 28 million m3 in 2002; (b) collection performance (collection ratio) will improve from an average of 80 percent (for 1991-93) to 82 percent in 1996 and will continue to improve by two percent annual increments to 90 percent in 2000 and by one percent increments to 92 percent in 2002; (c) labor productivity will improve from 3.5 employees/1,000 water connections in 1993 to 2.5 in 1995 and 1.8 thereafter; (d) average tariffs for water supply will increase from US$0.46/mr3 equivalent in 1993 to US$0.53/mr3 in 1995, US$0.67/m3 in 1996, US$0.85/m3 from 1997 to 2000, and US$0.91/m3 in 2001 and thereafter; (e) sewerage tariffs will be introduced in 1998 at levels equal to water tariffs, resulting in total water and sewerage average tariffs of US$1.70/m3 from 1998 to 2000 and US$1.82/mi3 in 2001 and thereafter. 4.11 The above operational improvements, resulting primarily from the actions of the private operator, will be reflected in ASAT's financial performance. Profitability (net income as a percentage of equity), which is expected to be negative three percent in 1994, would become positive in 1996 and would average about three percent in the second half of the implementation period. ASAT's contribution to investment (self-financing ratio) would improve from two percent in 1994 to 10 percent in 1996, 30 percent in 1998, and would average 15 percent over the implementation period. Indebtedness (debt/equity ratio) would increase, from 0.33 in 1994 to a high of 0.53 in 2000 and 2001 before declining to 0.51 in 2002. ASAT's performance in meeting these targets would be reviewed at the annual project review (para. 3.38). Past financial performance of ASO water operations and projected future performance of ASAT water and sewerage operations are detailed in Annex 4.1. V. ECONOMIC EVALUATION AND RISKS Proiect Benefits 5.01 The Project approach supports the Government's decentralization objective by shifting investment responsibility from the government budget to the Municipality, which in turn, will recover costs through user charges. In addition, the Project will: (a) promote managerial efficiency and improve service quality through new institutional arrangements that would introduce private sector participation in the operation of the water supply and sewerage; (b)  28 reduce health hazards to the local and tourist population; and (c) improve environmental conditions. 5.02 The water component will increase water supply to the growing population, which is already experiencing water shortages, and improve delivery by maintaining network pressure at all times. Water consumption is expected to increase from 22 million m3 in 1994 to 32 million m3 in 2002, and water sold is expected to increase from 18 million m3 in 1994 to 28 million m3 in 2002. Water connections will increase from about 143,000 in 1994 to about 212,000 in 2002, by which time service coverage will reach 96 percent. By the year 2002, sewerage would be available to about 400,000 households, or about 50 percent of the population. The network will be built mostly in the western part of the city, where the water table is high and construction of septic tanks is not feasible, and will extend to the north to protect the main water supply sources. Improvements in public health will occur through reduction of potential of drinking water contamination. Lack of reliable epidemiological studies makes it difficult to quantify this benefit. The construction of the drainage facilities will reduce the incidence of flooding in Antalya. 5.03 The proposed investments and technical assistance will strengthen efficiency, financial viability, service quality, capacity to plan and implement investments, and accountability to local consumers. Non-revenue water is expected to decrease from 46 percent in 1994 to 36 percent in 2002. Through the leasing arrangement, the number of employees is expected to be reduced significantly, from 3.5 employees/1,000 connections to 1.8 employees/1,000 connections. Least Cost Solution 5.04 The most economical alternative to meet the water demand has been selected. This involves rehabilitation and extension of existing facilities (well fields, pumping stations and network) and reduction of unaccounted-for- water. In addition, optimal use of groundwater would postpone the construction of the large-diameter water supply pipe from the Karacaoren Dam and water treatment plant proposed by DSI until after 2020. For the sewerage network, only the first phase which will serve about 50 percent of the population is financially feasible. For the sewage treatment plant, a phased approach has been adopted. Rate of Return 5.05 The Internal Rate of Return (IRR) of the project has been calculated using the incremental water and sewerage revenues as a proxy of the benefits attributable to the investments. The average selling price which would apply in 1998, the year major project-financed water and sewerage investments are expected to be operational (US$1.70/m3 at 1994 prices), has been taken in order to calculate the revenues. The use of actual price charged as a proxy for benefits is conservative since a high proportion of consumers would be willing to pay more than this for essential water supply. The cost and benefit streams used to calculate the IRR include the capital and operating costs, and benefits related to investments additional to the project in order to meet the water and sewerage demand up to 2020. All costs are at June 1994 market prices and exclude taxes.  29 Adjustment to border prices is not feasible for lack of data. The resultant rate of return is 9.3 percent (Annex 5.1) and would range from 5.2 percent to 14.0 percent if costs and benefits were to be increased or decreased by 20 percent. These rates of return, while lower than generally calculated for infrastructure projects, are not unusual for water supply and sewerage projects. In this sector, the actual returns to the economy, should also include those derived from improved health and environmental conditions, and hence would substantially exceed the returns derived from tariffs paid by the consumers. However, these health and environmental benefits are impossible to quantify based on the available data and are not included in the calculation of the rate of return. The risk of occurence of the lower range of rates of return from the sensitivity analysis is mitigated by contractual guarantees and loan conditionality which safeguard the revenues on which benefits are based from shortfalls and from cost increases through automatic tariff increases to reflect actual costs, operational experience and inflation. Affordability 5.06 Tariffs to residential customers will vary with consumption, and the lowest (subsidized) tariff would apply to customers consuming up to 10 m3/month. This low tariff level is intended to provide households with enough water to satisfy basic needs and maintain minimum health and sanitary conditions. The lowest tariff for water consumption in 1994 was US$0.32/m3 and in 2002 it is projected at about US$0.50/mr3. If the household is connected to the sewage network, the tariff doubles, representing an amount of about two percent of the monthly income of the households in the lowest income groups. This is well within the five percent range of acceptability, by Bank standards, for water and sanitation. Poverty and Gender Impact 5.07 In 2002, 96 percent of the population would be connected to the water network with about 60,000 new beneficiary households having been added, including about 12,000 additional low income residents. In addition, the quality of the water supply and distribution would be significantly improved. It has been documented worldwide that lack of access to water tends to pose a greater burden on women, so the gender impact of the project is also expected to be positive. All the population would indirectly benefit from the construction of the new sewerage network. Risks 5.08 Project risks relate to: (a) the challenge of setting up, for the first time in Turkey, lease and management arrangements for the operation of public utilities; (b) the Sirket's institutional and financial capacity to carry out a large investment program in view of potential political interference by AMM and the Ministry of Interior; (c) the willingness of municipal authorities to maintain cost recovery measures necessary to assure affordability and self- financing; (d) the ability of Iller Bank and DSI to complete their investments within the expected time; and (e) the time required to complete land acquisition. To mitigate these risks, substantial up-front actions have taken place: (i) a seminar was held in May 1994 to discuss private sector participation as an  30 instrument to improve efficiency in the operation of public services; and (ii) a visit of representatives of AMM, DMs, Ministry of Interior and Treasury was organized in May-June 1994 to privately-operated water and sanitation facilities in France and the UK. In addition the project includes: (i) substantial technical assistance; (ii) commitments from Iller Bank and DSI to the objectives of the project; and (iii) a commitment from AMM to complete land acquisition before loan effectiveness. Another risk relates to securing the full financing required; this would be contained by requiring ASAT to secure that EIB financing, which has already been approved, becomes effective by December 1, 1995, or to come up with alternative financing arrangements satisfactory to the Bank and by the proposed event of default (para. 3.18). Environmental Considerations 5.09 The Project has been reviewed and classified in Environmental Screening Category "B", consistent with the provisions of the Operational Directive 4.01, Annex E "Environmental Assessment". Preliminary environmental analysis of the components has been carried out to identify benefits, examine potential negative impacts and propose mitigation measures where needed (see Project File). Analyses consistent with the requirements for Category "B" projects were undertaken during the preparation of the Project and the feasibility study took into account the needed assessment and control of detrimental effects of the marine outfall for the treated effluent from the wastewater treatment plant. The Ministry of Environment has approved the environmental assessment as prepared in the feasibility study. Satisfactory designs would be submitted to the Ministry of Environment and the Bank for approval before tendering. Civil works contracts will include appropriate requirements to ensure that the works are carried out in such way as to minimize any negative environmental effects. There are no resettlement issues and no dam construction in the Project. 5.10 The Project strives to protect the unique environmental conditions of Antalya, benefitting the local population and the tourism industry by: (a) protecting and improving underground water quality through construction of sewerage; and (b) improving water distribution and easing pressure on the water sources by reducing water losses. 5.11 The sewage treatment plant Sjcations for the west and the east sides were identified and incorporated in the Antalya urban development master plan many years ago. The locations were confirmed by the feasibility studies undertaken by the consulting firm hired for the preparation of the project. The sites are not inhabited. The western location is used for mixed agriculture and grazing, and procedures for its acquisition by the Municipality are well advanced (para. 3.21). The site is large enough to protect the neighbors against the potential odor. The eastern location, which is not part of the Project, is owned by the Forestry Department, and the Municipality has already made a request for its acquisition. 5.12 The measures planned to mitigate the project environmental impacts are summarized in Annex 5.2.  31 VI. AGREEMENTS REACHED AND RECOMMENDATION Aqreements reached at Negotiations 6.01 During negotiations, agreement was reached on the following: (a) ASAT would limit Sirket professional staff to a maximum of 10 professional employees (para. 3.07); (b) ASAT would invite for bids by private operator not later than October 31, 1995, and would hire the private operator not later than May 31, 1996 (para. 3.08); (c) key staff of the Sirket would be appointed by November 30, 1995 (para. 3.08); (d) technical assistance for the Sirket would be contracted under terms and conditions satisfactory to the Bank not later than April 30, 1996 (para. 3.08); (e) ASAT agrees that no investment over US$200,000 equivalent in cost would be undertaken by ASAT without the prior concurrence of the Bank (para. 3.15); (f) ASAT agrees to come up with alternative financing arrangements satisfactory to the Bank if EIB financing is not effective by December 1, 1995 (para. 3.18); (g) subsidiary agreement, satisfactory to the Bank, would be signed by ASAT with the Sirket for contract management and other project- related administrative and financial services not later than November 30, 1995 (para. 3.19); (h) ASAT agrees to annual audits of project, ASAT and Sirket accounts and Special Account prepared by independent auditors (para. 3.32); (i) ASAT agrees to the preparation of quarterly reports and an Implementation Completion Report (para. 3.33); (j) ASAT agrees on an annual review to assess progress of the project (para. 3.35); (k) the water and sewerage operator should periodically adjust water and sewerage charges according to the Consumer Price Index or other index acceptable to the Bank to compensate for inflation (para. 4.05); and (1) ASAT agrees to implement tariff and other charges sufficient to ensure full coverage of (a) ASAT and Sirket operating costs; (b) the charges of the private operator as set in the lease and  32 management contract; (c) a reasonable contribution by ASAT to investment; and (d) debt service (para. 4.06). Conditions of Loan Effectiveness 6.02 Before effectiveness of the Project, the following conditions would be fulfilled: (a) the Sirket for the management of the water, sewerage and solid waste services would be created by AMM and ASAT under the Turkish Trade Law (para. 3.08); (b) technical assistance for the PMU would be engaged by ASAT under terms and conditions satisfactory to the Bank (para. 3.09); (c) a specialized consultant for the preparation of the bidding documents for the private operator would be contracted under terms and conditions satisfactory to the Bank (para. 3.10); and (d) the legal requirements for land acquisition will be completed and no obstacles remain for the completion of the sewage treatment plant (para. 3.21). Recommendation 6.03 With the above agreements and conditions, the proposed project constitutes a suitable basis for a Bank loan to ASAT in the amount of US$100 million. The loan would be for a period of 17 years, including a five-year grace period, at the standard variable interest rate.  33 Annex 1.1 TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT Turkey: Municipal Water and Sewerage Service Indicators (1989) Total population a/ 55,300,000 Urban population a/ 32,627,000 Rural population a/ 22,700,000 Population served with public water system 51,150,000 Urban population served with public water b/ 31,850,000 (97%) Rural population served with public water b/ 19,300,000 (85%) Population having sewer connections c/d/ 56% Population having septic tanks c/d/ 29% Water Production and Consumption Water produced e/ 3,067 Mm3 Water sold e/ 1,284 Mm3 Unaccounted-for-water 58% Number of water connections c/d/ 4,400,000 Number of water and sewerage employees e/ 19,300 Employees per thousand water connections 4.3 Water sold per connection 292 m3 Per capita water sales (lcd) (all sorts of consumption) 77.5 Sources: a) State Institute of Statistics, Statistical Indicators 1923-1990 b) Water Supply and Sanitation Country Report, June 1990 c) Social Indicators, September 1990 d) Figures refer to 1984 e) Gas and Water Statistics, 1989  34 Annex 1.2 TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT Water Supply and Sewerage Sector Total Central Government Investments 1980-89 (US$ million - 1990 prices) Year Water Supply Sewerage Total Total Investment Budget Budget 1980 170.4 35.8 206.2 2.5 10.0 1981 186.5 22.1 208.6 1.8 7.5 1982 172.5 53.5 226.0 2.2 8.9 1983 212.9 43.3 256.2 2.1 8.2 1984 294.2 67.5 361.7 3.0 12.8 1985 305.6 97.0 402.6 2.8 15.3 1986 434.2 137.3 571.5 4.1 22.8 1987 441.9 138.9 580.8 3.4 20.5 1988 384.1 121.0 505.1 2.4 14.2 1989 339.1 101.1 440.2 2.1 12.9 Total 2941.4 817.5 3758.9 Source: Turkey Water Supply and Sanitation Country Report Sub-Regional Consultation on Post-Water Decade Strategies Dubrovnik, Yugoslavia June 26-30, 1990. Prepared by a Committee under the coordination of State Planning Organization Water Supplv and Sewerage Sector Total Central Government Investments 1980-89 (US$ million - 1990 prices) Executing Agency Water Sewerage Total Iller Bank 1,245 814 2,059 DSI 1,088 -- 1,088 GDRS 608 4 612 Total 818  35 Annex 1.3 TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT Previous Bank Experience in the Sector Loan Year of Loan Title Amount Purpose Approval Status Comments 844-TU, 37.0 Expansion of water 1972 Completed in 1981. Performance Audit Report No. 4853, Istanbul suppLy system for issued in 1983, concluded that the main Water Supply Istanbul. project objectives were achieved. 2159-TU, 88.1 Expansion of 1982 Completed in 1990. Project Performance Audit Report No. Istanbul sewerage services, 10852 in August 1992 concluded that the Sewerage sewage treatment and project was well-implemented and disposal for demonstrated the high degree of sector Istanbul. self-financing capacity in Greater Istanbul. 2537-TU, 9.2 Preparation Studies 1985 Completed in 1988. Project design too complex. Cukurova for the Cukurova Project Coordination Unit not Region Urban Urban Development sufficiently accountable to project Engineering Project. entities. Project did not result in Project agreed reform program for Iller Bank. 2818-TU, 184.0 Water supply, 1987 Contracts awarded Project implementation has faced Izmir Water sewerage and sewage amount to significant managerial and financial SuppLy and treatment facilities approximately 65% problems and by now, it is clear that Sewerage for Izmir. of the estimated the project objectives will not be Project project cost. achieved. The project scope has been substantially reduced and part (US$68 million) of the loan has been cancelled at the borrower's request. 2819-TU, 120.0 Urban 1987 Project was scaled Overly ambitious project design and Cukurova infrastructure, down in 1991. complex implementation arrangements Urban improvement of Reduced project combined with lack of commitment of Development policies, will be completed Project Review, Implementation and Project. institutional and by June 1995. Monitoring unit brought the project to a financing virtual standstill and $91.5 million was arrangements for the cancelled in July 1991. Cukurova Region. 2888-TU, 218.0 Additional water 1987 Contracts awarded Progress was initially slowed down in Istenbul supply, sewerage and amount to 1989 by insufficient counterpart funds Water Supply sewage treatment approximately 67% and change of site locations for some and Sewerage facilities for of the estimated treatment plants now facing major Project Istanbul. project cost. financial problems. 3151-TU, 173.0 Sewerage and sewage 1989 Contract awarded Progress initially slowed down for lack Ankara treatment works for amount to approx. of detailed designs. As a result the Sewerage Ankara. 70% of the project project is behind schedule and facing Project cost. financial constraints. 3565-TU 117.0 Water supply, 1993 Tendering underway At the beginning of project Bursa Water sewerage including implementation. & Sanitation sewage treatment, solid waste disposal for Bursa  36 Annex 2.1 TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT Projected Population in AntalYa Year Population Annual Growth Rates 1950 31,090 5.16* 1955 39,996 7.17 1960 56,404 7.02 1965 79,195 5.73 1970 104,088 6.61 1975 144,088 5.75 1980 190,542 6.50 1985 261,114 7.65 1990 378,000 7.00 1995 530,000 6 .00 2000 709,000 5.00 2005 905,000 4.00 2010 1,106,000 2.40 2015 1,245,000 1.80 2020 1,361,000  37 Annex 2.2 TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT Distribution of Monthly Household Income by Ouintiles in Antalya Quintile URBAN - NATIONAL AVERAGE 1992 ANTALYA -- 1992 Avg. TL Avg. $ % income Avg. TL Avg. $ e income First 209 1,179,221 172 5.43 1,445,577 211 7.55 Second 20% 2,024,659 295 9.33 2,226,047 325 11.63 Third 20% 2,951,148 430 13.60 2,857,439 417 14.93 Fourth 20% 4,494,546 655 20.71 3,962,435 578 20.71 Fifth 20% 11,051,758 1612 50.93 8,642,697 1260 45.17 Total 100.00 100.00 Source: SIS update income Distribution of Antalya (1992), Table 4 Statistical Yearbook of Turkey (1991), page: 250 Average US$ in 1992 is 6,857 TL  38 Annex 2.3 Page 1 of 2 TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT Projected Water Demand Yrs Population Service Domestic Commercial Industrial Tourist Special Total Loss Total Ratio net gross demand demand (number) (%) m3/d m3/d m3/d m3/d m3/d Mm3/d (%) Mm3/d 1992 433,000 95 38,667 11,600 685 3,827 - 54,779 41 92,846 1998 631,000 95 64,741 19,422 685 14,076 5,600 104,524 37 165,911 2005 905,000 98 113,523 34,057 685 19,106 9,400 176,771 30 252,530 2020 1,361,000 98 213,405 64,021 685 23-858 11,400 313,369 !0 391,712 Proposed Use of Water Sources Name of Sources Existing Capacity Proposed Capacity Service Year I/s m"d I/s m31d Duraliler wells 1,04e 90,20C 2,600 174,00 existing--to be developed in 1998 Bogacay wells 42( 36,36? 524 45,00 existing--to be developed in 2000 Magara spring 35 30,20C to be abandoned--already polluted Meydan wells 35 to be abandoned--already polluted Altinova (Koyunlar) wells 71 6,50( to be abandoned Topcular wells 7 6,00( to be abandoned Gurkavak spring 6 5,20 ,300 sed as an alternative Ermenek well 2 5, to be abandoned Yesilkoy well 25 5,20 to be abandoned Cakirlar well 25 5,20C to be abandoned Kepezalti well 9 80C to be abandoned Hurma 25, 2006 Distas 70( 60,00C 2000 Cevre Yolu I -1,04 90, 2005 Universite 76 66, 2014 Karain 467 40, 2006 Total 2,453 212,00C  39 Annex 2.3 Page 2 of 2 TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT Demand Supply Capacity Curves 5eo.000 4970 450.000 400.000 392 350.000 3 3000 300.000 - 250.000 212000 2 000 200.000 1 5 0,000 0 191 1990 2000 2005 2020 -i--Total Ns DeMmni m 3Md Total GTmss Dem,a)d Supply CapadtyTm 3Md  40 Annex 2.4 TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT DSI Investment The work includes: Pumping station (270 l/s); water mains (0500 mm - 650 m; 600 mm - 6,850 m; 0700 mm - 1,900 m; 0800 mm - 7,145 m; 4900 mm - 5,008 m; 01,000 mm - 9,695 m; 01,100 mm - 2,280 m; 01400 mm - 3,255 m); and four elevated reservoirs (20,000 m3 and 10,000 m3 in zone III, and two 5,000 m3 in zone IV and V, respectively). The pumping station and the water mains are completed and the reservoirs are under construction according to the new proposed consultant TBS design. Full benefit from DSI investment would be achieved only if the distribution network is extended and partly replaced, which is the aim of the proposed project.  41 Annex 2.5 Page 1 of 2 TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT Sewerage--Existing Facilities Installations constructed prior to 1975 are mostly equipped with single- compartment pits dug in the travertine, with or without a zerzemin (soakage pit). Most of the buildings constructed after 1975 are equipped with concrete septic tanks, often of single-compartment type, although it was not an obligation at the time. During the last 10 years, in order to conform with a Ministry of Health and Social Works' regulation, septic tanks have had to be built to serve facilities within 1,000 m of potable water sources or 500 m of the sea. This regulation involves all buildings in Antalya since potable water is drawn up from the underlying travertine. Owners are required to improve their sanitation facilities whenever they ask for removal of septage. Since 1985, a total of about 7,200 modern septic tanks have been built. At present, about 70 percent of the population is served by some kind of concrete septic tank. The newly recommended concrete septic tank is multi-compartment (generally three to four compartments) and is combined with a traditional zerzemin of a small-diameter 20 m to 40 m deep-borehole for percolating the effluent. Design criteria of one m3/c for a maximum of 100 persons is appropriate, but not always applied during construction. Disposal facilities receive not only domestic wastewater but also some of the rainwater falling on the property, either directly into the septic tank or into the zerzemin. Because it often is not protected by a screening device, solids such as papers, plastics and other floating materials clog the zerzemin or the underground channels. Although such facilities should be desludged on a yearly basis (Iller Bank Regulation 1986), this in fact occurs only when odors indicate that the zerzemin is clogged and the septic tank overflows. The system is then cleaned with acid, which damages the travertine, or a new zerzernin is built. Institutional and educational buildings (four hospitals, 129 schools), except the university and the electricity company (TEK), have septic tanks, although their load exceeds the design capacity of 100 persons as mentioned above. Industrial activities have not developed, except for one ferro-chrome and one battery factory. The construction materials industry developed in the early eighties, in response to tourism development and the rapid population increase. Most of the industries are located along the important access roads from the north (Burdur-Ankara) and the east (Airport-Alanya) in four organized industrial zones of 370 ha, 120 ha, 32 ha, and 40 ha, respectively. The 370 ha and 120 ha industrial zones, including the sewerage system, are under construction. The 32 ha zone is served by a sewerage system draining the effluent into a large buried settling tank that allows infiltration into the ground through three boreholes. The 40 ha duty- free zone, near the port, is newly opened and is fully served by a sewerage system  42 Annex 2.5 Page 2 of 2 and a biological wastewater treatment plant (capacity about 3,000 P.E.). Except for nine factories that have some kind of a pre-treatment, almost all scattered industries merely have septic tanks with soaking pits or boreholes. Tourism activities are served by large hotels and "pensions" (31) and holiday camps (seven). Twenty-eight of these facilities are equipped with biological wastewater treatment and ten have only septic tanks.  43 Annex 2.6 TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT Iller Bank Sewerage Work Program up to 2002 Sewer diameter Original Contract Revision 1992 Adjustment in Agreement accordance with June 1993 (ni) the Agreement * (mm) (m) (m) (ni) 300( 555C C. 240( 198 220( 2741 _ 200( ( 1167, (80F 1086' 160( 243 4481 4484 140( 2521 89 0 892 120( 3094 398' (1778) 2205 -00 158S 962 (1758T 7868 80( 342q 14191 (8374) 5824 70( 259 ( 60( 2514 910 (5916 3188 50( 841 2 (10352 7270 40( 10181 36171 (19613 16565 1358' 13581 27721 41305* 20( 4400 MI 21789: 257892* - The negative figures represent sewers included in the original 1990 contract, but that are outside the area covered by the June 1993 agreement, and will not be constructed under the Iller Bank program - These are tertiary sewers and they include parcel connections - In addition, two pumping stations will be constructed: TM1 (4 pumps (3+1) with a head of 18 m and a Q=120 1/s/pump TM2 (4 pumps (3+1) with a head of 9 m and a Q=1751/s/pump  44 Annex 2.7 TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT Sewage Treatment Plant Capacity (lls) Description 1998 2002 2005 2020 Mean Waste Water Flow 405 958 1128 1979 Peak Flow 810 1916 2256 3958 Infiltration 71 83 83 84 ,Total 881 1998 2339 4042 Population Equivalent to be served by the western wastewater treatment plant and its estimated sewaqe load Year Domestic Tourist Industry Total BOD COD SS1 Iller Bank Project ton/day ton/day ton/day 1998 93,423 39,958 10,300 8,000 151,300 8.2 20.5 13.6 2002 223,616 188,302 13,600 32,000 457,600 24.7 61.8 41.2 2005 250,603 214,536 16,100 41,000 522,100 28.2 70.4 47.0 2020 _ 391,450 286,804 18,700 88,000 784,700 42.4 105.9 70.6 Note: Based on a pollution discharge of 54 gr/capita/day of Biological Oxygen Demand (BOD), plus an appropriate allowance for BOD discharge from industries, and 90 gr/capita/day of Suspended Solids (SS), the total BOD load and Suspended Solids would reach the loads indicated above. It has been assumed that the general mix of industries will remain approximately the same as at present.  45 Annex 3.1 Page 1 of 2 TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT ANTALYA METROPOLITAN MUNICIPALITY Municipal Structure The responsibilities are exercised through an institutional structure which consists of the Municipal Council, an Executive Committee of Members, and the Mayor as Head of the executive employees. In September 1993, the Municipality of Antalya was granted the status of Metropolitan Municipality under Law No. 3030. As a result, the Antalya Municipality receives a portion of the nine percent national tax revenues which are distributed on the pro rata of the population by Iller Bank. The elevation of the Antalya municipality to metropolitan status established three new district municipal authorities, each with a mayor, council and administration. These new district municipalities have responsibilities for solid waste collection and street cleaning. Law No. 2560 requires the creation of an autonomous and self-financing water and sewerage company under AMM. This entity was created in February 1995 by Decree 94/65/6 (Annex 3.3). Until the private operator is engaged, the personnel of ASO (former water department) and Environmental Health Department (former sewerage department) will remain as personnel of the Municipality. The Municipal Council/General Assemblv The Council consists of 38 elected members who serve for a five-year period. Its function is to determine policy for the provision of the various local services. The Executive Committee The Committee is chaired by the Mayor and is composed of members elected of the Municipal Council, together with the head of municipal departments. The Committee meets twice weekly to review the policy, monitor operational and financial performance and examine administrative matters. The Mayor The Mayor is the institutional head and chief executive of the Municipality. He is elected for a five-year period. He is required to ratified all decisions of the Municipal Council. As chief executive, the Mayor has the responsibility to implement the Council's policies. To manage the municipal departments, he appoints six non-elected Vice-Mayors who have few departments reporting to them.  46 Annex 3.1 Page 2 of 2 Personnel The Municipality has a staff of 2,400 employees on a permanent basis. About 380 are subject to Public Employee Law and have "civil service" terms and conditions; the remaining 2,020 are subject to Union Law and have "general worker" terms and conditions.  TUR_EY ANTALYA WATER AND SANITATION PROJECT PROIUOSED INSTITUTIONAL ARRANGEMENTS LEGAL ANTALYA AUTHORITY METROPOLITAN DISTRICT ASAT MUNICIPALITY MUNICIPALITIES (AMM) IDMMsl PMU MANAGEMENT SIRKET RESPONSIBILITY OPERATION PRIVATE RESPONSIBILITY OPERATOR Note: Contract for water supply and sewerage would be signed witli ASAT and the private operator  48 Annex 3.3 TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT Antalva Water Supply and Sanitation Authority (ASAT) Governing Entities According to Law No. 2560, ASAT would be governed by: o a General Assembly consisting of the Metropolitan Municipal Council; o a Board of Directors consisting of the Mayor, as the chairman of the Board, the General Director, as the vice-chairman of the Board, and three municipal appointees nominated on a part-time basis mainly to sit at Board meetings; and o a General Director, who is appointed by the Ministry of Interior upon nomination by the Mayor and, as the chief executive officer, is responsible for the day-to-day operations of ASAT. The General Assembly, which consists of 38 elected members who serve for a five-year term, will approve ASAT's investment plans, operating budgets, tariffs, borrowing and staffing prepared by the Sirket. The Board of Directors will approve matters proposed by the Sirket before being submitted to the General Assembly. The General Director will implement the decisions of the General Assembly and the Board of Directors and manage the day-to-day activities of ASAT. ASAT's staffing plan, remuneration levels and personnel regulations are approved by the Ministry of Interior. ASAT's accounts will be maintained by the Sirket and will be audited annually by independent accredited auditors approved by the Bank. Main Issues The autonomy of the Board has to be improved. Political influence still takes precedence in the determination of the financial and operational policies and the central government has control over manpower planning and levels of remuneration. Such issues have to be addressed if cost-effective services to customers are to be achieved.  49 Annex 3.4 Page 1 of 2 TURKEY ANTALYA METROPOLITAN MUNICIPALITY SIRKET Rationale for a Sirket The past performance of the Antalya municipal departments, together with the less than fully successful experience of the organizations created under the ISKI Law in other metropolitan municipalities, help explain the decision of AMM to contract out the operation of the water supply and sewerage services to the private sector under lease (affermage) and management arrangements. The proposed Sirket is needed to supervise the operation of the services under the private operator and to enforce the provisions of the lease contract, ensuring that the operator complies with all its commitments. The Sirket, incorporated under the Turkish Trade Law, is not subject to staff regulations of the Ministry of interior and the Law 657 on civil servants, but is regulated by the general Labor Law 1475 which applies to private enterprises. Management and remuneration of its personnel is only subject to the directives of the Board. Governing Entities The Sirket is expected to be incorporated as soon as possible following the creation of ASAT. The Sirket will be owned by AMM, the DMs and ASAT. The Board of Directors will comprise representatives of AMM (1), DMs (3), ASAT (1), Sirket's Director General (1), DSI (1), Iller Bank (1), local chamber of Commerce and Industries (1), local chamber of Artisans and Craftsman (1), and the Association of Tourism (1). Each representative will have an equal voting power. Boards members would not be appointed on a full time basis. Staffing The 565 employees of the municipal water supply and sewerage department (ASO), the 54 employees of the Environmental Health Department responsible for emptying the septic tanks, and the 314 employees of the municipal Cleaning Works Department responsible for solid waste collection and disposal and street cleaning, will remain with AMM, but only some of them will be transferred to the DMs. The services will continue to be managed by AMM. When the private operator is selected, the employees will have the choice to work with the private operator or remain with AMM or the DMs. The private operator is expected to absorb about 50 percent of the previously mentioned employees. Sirket staff should not exceed ten professional employees as agreed during negotiations. All professional positions will be advertised and a special committee will be responsible for the selection of the candidates. The operator under contract with the Sirket will confront the Sirket staff with enforcement and control issues for which there is no precedent in Turkey. Technical assistance from a single firm, specialized in  50 Annex 3.4 Page 2 of 2 the management of such services (twinning arrangement), is therefore essential and will be provided by the proposed project. Planning and Information Systems The Sirket would be an autonomous company. It will have the overall management responsibility for the development of the services, including physical and financial planning and construction, while the private operator will be responsible for the operation of the services, including maintenance and repair of the physical assets. The information systems for managing operational and commercial activities and reporting on overall financial results (accounting system) will be shared by the Sirket and the private operator. The Sirket and the private operator will agree on an accounting system generally accepted for commercial enterprises and compatible with the information normally required by the Municipality and the Ministry of Interior. The Sirket will request necessary financial statements, including operational and financial indicators to evaluate the performance of its operator. These indicators will be included in the lease and management contracts. The Project will provide technical assistance to establish the computerized accounting system and record keeping such as customer billings, accounts receivable and payable, payroll, inventories and control of budget execution. Accounts will be audited annually by independent accredited auditors approved by the Bank. In addition, the Project will provide training for the Sirket personnel to supplement on-the-job learning from the technical assistance.  51 Annex 3.5 Page 1 of 5 TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT Water Supply, Sewerace and Stormwater DescripDtion A. Water Supply 1. Immediate remedial work Construction of immediate remedial work includes: (i) laying of about 24,000 m of PVC pipes of 0 100mm to 300 mm; (ii) repair of electrical installations, pumps and leakages at five pumping stations; and (iii) repair of leaks and repair/replacement of non-operating valves at ten existing reservoirs. 2. Renovation of existing groundwater wells (a) Improvement and reinforcement of the Duraliler facilities (beginning 1996) to increase the water production from 1 to 2.6 m3/s, includes: (i) 11 new wells (80 m deep); (ii) connecting lines between wells (700 m 0 400 mm and 1000 m 0 800 mm); (iii) one transformer 630 KVA; (iv) 11 pumps and electrical equipment; (v) a transmission power line of 2.5 km; and (vi) a fence around the well field; and (b) rehabilitation of the Bogacay wells (beginning 1999) to increase the capacity from 420 l/s to 524 l/s, includes: (i) five wells (60 m deep); (ii) connecting lines between wells (805 m 0 400 mm); (iii) one transformer 1,000 KVA; (iv) five pumps and electrical equipment; (v) a transmission power line of three km; and (vi) a fence around the well field. 3. New groundwater wells Development of the new Distas wells (beginning 2000) to increase the total capacity of 700 l/s, includes: (i) nine wells (70 m deep); (ii) connecting lines between wells (230 m 0 400 mm, 345 m 0 500 mm, and 345 m 0 600 mm); (iii) one transformer 1,000 KVA; (iv) nine pumps and electrical equipment; (v) a transmission power line of four km; and (vi) a fence around the well field.  52 Annex 3.5 Page 2 of 5 4. EElevating pumping stations (a) Construction of two new pumping stations and a fence around the installations: (i) (beginning 1998), TM3 consisting of four units of 640 l/s with a head of 40m each; and (ii) (beginning 1999), TM6 consisting of four units of 250 l/s with a head of 4Om each; (b) replacement of pumping equipment in three existing pumping stations: (i) beginning 1995), TM4 consisting of four units of 190 l/s with a head of 45 m each; (ii) (beginning 1996), Duraliler consisting of four units of 900 ls with a head of 71 m each; and (iii) (beginning 1998), Bogacay consisting of four units of 175 l/s with a head of 45 m each. 5. Reservoirs Construction of three reservoirs and a fence around the installations: (i) (beginning 1996), DIA with a volume of 15,000 m3 in pressure zone I; (ii) (beginning 1996), DII-2 with a volume of 20,000 m3 in pressure zone II; and (iii) (beginning (2000), DVI with a volume of 5,000 m3 in pressure zone III. 6. Distribution network Supply and laying of: (a) 52,000 m of steel pipes: (i) 20,000 m of 0 700 mm; (ii) 18,000 m of 0 800 mm; (iii) 14,000 m of 0 1000 mm; and (iv) 1,000 m of 0 1000 mm; (b) 127,000 m of ductile iron pipes: (i) 14,000 m of 0 250 mm; (ii) 32,000 m of 0 300 mm; (iii) 4,000 m of 0 350 mm; (iv) 42,000 m of 0 400 mm; (v) 26,000 m of 0 500 mm; and (vi) 9,000 m of 0 600 mm; (c) 318,000 m of PVC pipes: (i) 233,000 m of 0 100 mm; (ii) 1,000 m of 0 125 mm; (iii) 27,000 m of 0 150 mm; and (iv) 57,000 m of 0 200mm; and (d) replacement of all the household water meters as well as repair/replacement of meters on the distributions lines and at the sources.  53 Annex 3.5 Page 3 of 5 7. Instrumentation Design and installation of a Supervisory Control and Data Acquisition system (SCADA). This includes: (i) instrumentation at critical locations; (ii) control panel with indicators for the parameters monitored; (iii) programmable logic controller in the pump stations control panels to provide local control; (iv) computer-based work station at each pump station; and (v) communication network for transferring information to a central location. B. Sewerage 1. Collection system (a) Immediate improvement measures: (i) construction of about 10 km sewage network (8,000 m of 0 200 mm, 1,000 m of 0 300 mm, and 1,000 m of 0 400mm) and a small wastewater treatment plant for the touristic Old City; and (ii) rehabilitation of the small existing sewerage network and septic tank of the Sanayi Sitesi industrial area; and (b) Construction of sewers to cover 1,656 ha and serve 190,000 inhabitants (in 2002) in the western part of the city to complement the Iller Bank program presently under construction, which covers 2,426 ha and serves 220,000 inhabitants (in 2002). The work includes: (i) 15 km of primary sewers, above 0 800 mm; (ii) 15 km of secondary sewers, from 0 400 mm to 0 800 mm; and (iii) 350 km of tertiary sewers, of 0 200 and 0 300 mm; 2. Disposal system (a) Construction of a wastewater treatment plant, of a modular concept, at the west end of the municipality, with pre- treatment facilities for a PE of 151,300 (40,000 m3/d, 8.2 t/d of BOD and 13.6 t/d of suspended solid) in 1998, and for a PE of 457,600 (90,000 m3/d, 24.7 t/d of BOD and 41.2 t/d of suspended solid) in 2002. Treatment will consist of: (i) coarse screening (40 mm); (ii) grit removal and floatables removal (including oil--vertical velocity not exceeding 10 m/h); (iii) fine screening (5-6 mm), including automatic cleaning and collection of solids; and (iv) effluent pumped through the outfall; and (b) construction of a sea outfall, based on oceanographic survey, for a designed flow of 4 m3/s; 2,500 m long and 0 1.2 m, including a diffusor of 400m.  54 Annex 3.5 Page 4 of 5 C. Stormwater Drainage 1. Immediate Remedial Work Construction of immediate remedial work includes: (i) a drain and a culvert under the Gazi and Dumlupinar Boulevard; (ii) a curb along the north side of the Yucunzu Blvd; (iii) 150 m of 0 600 mm pipe under the road lC; (iv) a 500 m channel to the Bukludere Creek to prevent the flooding of the Konuksever district; (v) six km of open channels in the western part of Antalya; (vi) a two km curb along Dumlupinar Boulevard; and (vii) clean debris from rivers and existing drainage channels and ditches. D. Technical Assistance 1. Technical assistance in prolect implementation for: (a) detailed design, including preparation of bidding documents, and construction supervision for the above-mentioned water supply, sewerage and stormwater drainage works; (b) hydrogeological survey needed to develop the groundwater facilities at Duraliler, Bogacay, Distas and Cevre Yolu well fields; (c) site survey and investigations to develop detailed mapping of the water supply systems including preparation and calibration of a reticulation model of the distribution network; and (d) preparation of a comprehensive stormwater master plan. 2. Technical assistance in institutional development: (a) staffing of a Project Management Unit to assist AMM, DMs, ASAT and particularly the Sirket in coordinating and supervising project activities and in preparing periodic reports required by the Bank. This activity will terminate one year after the signing of the contract with the private operator for water supply and sewerage; (b) consultant services to assist the Sirket in the preparation of bidding documents, bid evaluation and contract negotiations, for private operation of water supply, sewerage and stormwater systems in order to enhance competition, efficiency, accountability and commercial practices; and  55 Annex 3.5 Page 5 of S (c) consultant services or a twinning arrangement with a reputable water supply and sewerage operator to assist the Sirket: (i) in its role of services manager, planner and contracts administrator; and (ii) in implementing a training program for the new Sirket's managers and staff. This assistance will also include the establishment of a joint work program for the Sirket and the private operator consisting of: (a) designing and implementing an action plan to increase the volume of water billed as a proportion of water produced; (b) designing and implementing an Asset and Capital Investment Management System, which includes appropriate procedures for establishing investment priorities; making efficient use of existing assets; monitoring and controlling investment programs; and ensuring the renewal of assets; (c) designing and implementing a Management Information System, which provides adequate information on the services' operational and financial performance; and (d) designing and implementing a new water and sewerage tariff schedule aimed at promoting water conservation, controlling water pollution, and ensuring financial viability of the services.  56 Annex 3.6 Page 1 of 2 TURKEY AHTALYA WATER SUPPLY AND SANITATION PROJECT Water Supply Seurrvr and Stormwater Thminnge Total Base Cost & Contin- Procure-' % Financed TL million USt 1000 % gencies menl rinanced by Bank Local Foreign Total Local Foreign Total Foreign USS 1000 Melhod by Bank USS 1000 1I ClVI llORKS WATER SUPPIY Duraliler 107,821 142.971 250,792 3.460 4.588 8.048 57% 10212 ICB 54% 5.56B Bogacay 9.006 11.904 20.910 289 382 671 57% 851 ICB/LCB 54% 464 Distas 18,859 22,405 39.264 541 719 1260 57% 1.599 ICB 54% 871 T73 facilities 15.456 20.505 35.961 496 658 1.154 57% 1.464 ICB 54% 798 TU4 facilities 3.618 4.796 8.414 116 154 270 57% 343 ICB 54% 187 Tli6 facilities 4.300 5.671 9.972 138 182 320 57% 406 ICB 54% 221 Water reservoirs 38,759 24.508 61.284 1.180 786 1.966 40% 2.495 LCB 54% 1.360 Water reservoirs (DSI) 101.088 6.452 107,540 3.244 207 3.451 6% 3.451 Other (DSI) DisLribution network 782.500 1.037.267 1.819.767 25.111 33.286 58.397 57% 74.100 ICB 54% 40.384 Immediate measures 41.365 54,832 98.197 1.327 1.760 3.087 57% 3.917 ICB 54% 2.135 Administrative Building 8.988 9236 16.204 224 296 520 57% 660 LCB 54% 360 Tolal WaLer Supply 1.125.738 1.340.547 2.466,285 36,125 43.019 79.144 54% 99.498 54% 5Z345 SEBRACE Collection network (Iller Bank) 892.408 88.260 980.668 28,638 2.832 31.470 9% 31,470 Other (IB) Collection Network (EIB) 187.95 248.673 436.268 8.020 7.980 14.000 57% 17.765 Otber (EIB) Collection network 177.519 235.315 412.834 5,697 7.551 13.248 57% 16.810 IC8 54% 9.162 Preliminary lreatment (EIB) 112.090 161.837 273,727 3.597 5.187 9.060 57% 11.498 Other (EIB) Preliminary treatmenl 91.990 150.325 242.31B 2.952 4.824 7.500 65% 9.517 ICB 54% 5.187 Sea outfall (EIB) 107.431 199.515 306.946 3.448 6.403 9.850 57% 12.499 Olher (EIB) Immediate measures 31.221 41.386 72,607 1.002 1.328 2,330 57% 2.957 ICB 54% 1.611 Stormnwater drainage improvement 7.772 10.302 18,074 249 331 580 57% 736 LCB 54% 401 Tolal Sewerage 1.608.026 1.135.414 2.743.440 51.602 36,436 88.038 41% 103.249 54% 16.361 TOTAL CIVIL WORKS 2.733.784 2.475.961 5.209.725 87.728 79,455 167.182 48% 202.747 54% 68.70B 2LEQUIPMENT WATER SUPPLY later Meters 12.465 49.859 62.324 400 1.600 2.000 80% 2.538 ICB/IS 55% 1.408 Scada System 13.287 53.150 66.437 426 1.706 2.132 80% 2.705 IC8 55% 1.501 Computer and software 16.204 64.817 81.021 520 2.080 2.600 80% 3.299 ICD/IS/LS 55% 1.831 Furniture 1.246 1.870 3.116 40 60 100 60% 127 LCB 55% 70 Total laler Supply 43.203 169.696 212,899 1.386 5.446 6.832 80% 8.669 55% 4.810 SKFFRArE Vehicles 17.728 23.500 41.227 589 754 1.323 57% 1.879 ICD 55% 932 Tolal Sewerage 17.728 23.500 41227 589 754 1.323 57% 1,879 55% 932 55% TOTAL EQUIPMENT 60.931 193.195 254.126 1.955 6.200 8.155 76% 10.348 55% 5.742 TOTAL CIVIL WORKS AND EQUIPMENT 2.794.695 2.669.156 5,4B3,852 89.683 85.654 175.337 49% 213.095 55% 74.448  57 Annex 3.6 Page 2 of 2 TURKEY ANTALYA VATER SUPPLY AND SANITATION PROJECT Water Supply, Sewerage and Storrnuater Drainal Tolal Base Cosl & Contin- Procure- % Financed TL million us: 1000 % gencies ment Financed by Bank Local Foreign Total Local Foreign Totai Foreign USS 1000 Method by Bank USS 1000 3. CONSULTANT SERVICFS AND FNGINEFRING PROJECT IMPLEI4FNTATION Water supply - Design & supervision 38.675 258.824 297,499 1.241 8.306 9.547 87% 12.114 Shortlist 100% 12114 Sewerage - Design & supervision (EIB) 15.025 100.554 115.580 482 3.227 3.709 87% 4.706 Olher (EIB) Sewerage - Design & supervision 12.833 85.888 98.721 412 2,758 3.168 87% 4.020 Shortlist 100% 4.020 Stormwater drainage - Design & supervision 282 1.887 2.169 9 61 70 87% 88 Shortlist 100% 88 Water supply - Hydrogeological studies 2.026 13.555 15.581 65 435 500 87% 634 Shortlist 100% 634 Water supply - mapping 6,077 40,666 46.743 195 1.305 1.500 87% 1.903 Shortlist 100% 1.903 Stormrwater drainage - Master Plan 2.030 13,555 15.585 65 435 500 87% 634 Shorilist 100% 634 Total Project Implementation 76.947 514.930 591.878 2,469 16,524 18.993 87% 24.101 100% 19.394 INSTITUTIONAL STRENGTHENING Bidding doc. ror private operators 0 23.372 23.372 0 750 750 100% 952 Shortlist 100% 952 TA for PUU 3,116 12.465 15.581 100 400 500 80% 634 Other 100% 634 TA for Sirket 10.209 98.235 108.444 328 3.152 3.480 90% 4.416 Shortlist 100% 4,416 Total Inslitutional Strengthening 13.325 134,071 147.396 428 4,302 4.730 91% 6.002 100% 6.002 TOTAL CONSULTANT SERVICES AND ENGINEERING 90.272 649.002 739.274 2.897 20.827 23,723 88% 30.103 100% 25.396 4. IAND ACQUISITION Water supply 7.853 0 7.853 252 0 252 0% 252 Olher Sewerage 36,460 0 36.460 1.170 0 1.170 0% 1,170 Olher TOTAL LAND ACQUISITION 44.312 0 44,312 1,422 0 1.422 0% 1.422 TOTAL BASE COST (JUNE 1994) 2.929.280 3.318.158 8.247.438 94.002 106.481 200.482 53% 244.620 5. CONTINCENCIFS Physical 306.719 345,875 652.595 9.843 11,099 20.942 53% Prices 339.776 383,151 722.927 10.904 12.295 23,199 53% TOTAL CONTINGENCIES 646.495 729,027 1.375.522 20.746 23.395 44.141 53% GRAND TOTAL 3.575.775 4.047.185 7,622,960 114,748 129.876 244.623 53% 61% 99.844  58 Annex 3.7 Page 1 of 5 TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT Project Implementation Plan This annex contains the details, the timing of implementation of project components, schedules of contract and other payments as well as procurement information. Descriptive parts of the Implementation Plan have been incorporated into the text of the Staff Appraisal Report and do not appear in this annex. These and other elements of the Implementation Plan can be found as follows: Scope, objectives and description of the project Ch. III: paras. 3.01-3.02, 3.11-3.12; Ann. 3.5 Project costs and financing plan Ch. III: paras. 3.13-3.18; Ann. 3.6 Institutional structure and implementation responsibilities Ch. III: paras. 3.04-3.10, 3.19; Ann. 3.1-3.4 Detailed implementation and procurement arrangements Ch. III: paras. 3.22-3.27; Ann. 3.7, pp. 4-5 Role of Bank in implementation Ch. III: paras. 3.34-3.35 Disbursement details Ch. III: paras. 3.28-3.31; Ann. 3.8- 3.9 Environmental mitigation actions Annex 5.2 Accounting and auditing arrangements Ch. III: paras. 3.07, 3.30, 3.32-3.33 Monitoring indicators: Implementation progress Annex 3.7, page 2 Financial performance Annex 4. 1, page 4 Major loan covenants: Water/sewer tariff adjustment Loan Agreement, Section 5.03 Contracting of private operator Loan Agreement, Schedule 5, para. 2  ~~i ~~~ 0~ a U 4 a Un U * -04 * m t~~~~~~~~~~ g S[~EIJ iii si;IIIfJJit iii X * f x Li 69  60 Annex 3.7 Page 3 of 5 TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT Water Supply and Sewerage Estimated Annual Contractual and Other Payments Implementation Plan (US$ million equivalent) Total Procur. Project Element 1995 1996 1997 1998 1999 2000 2001 2002 Payment Method CIVIL WORKS Water Supply 3.6 9.0 11.4 13.0 14.7 15.9 13.0 9.3 89.9 ICB xxxx xxxx xxxx xxxx xxx xxxx xxxx xxxx 0.4 1.2 1.4 1.0 0.5 0.7 0.7 0.3 6.2 LCB xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx 3.5 3.5 NBF xxxx (DSI) Sewerage 0.5 0.9 0.7 2.3 5.0 6.2 6.2 7.5 29.3 ICB xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx 0.7 0.7 LCB xxxx 6.0 12.1 18.5 16.5 6.5 4.3 4.3 5.0 73.2 NBF xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx (EIB/IB) EQUIPMENT Water Supply 0.3 0.7 0.8 0.9 0.3 0.4 1.3 2.5 7.2 ICB xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx 0.1 0.1 LCB xxxx 0.4 0.6 0.1 0.1 0.1 1.3 IS/LS xxxx xxxx xxxx xxxx xxxx Sewerage 0.2 0.4 0.4 0.2 0.2 0.3 1.7 ICB xxxx xxxx xxxx xxxx xxxx xxxx CONSULTANT SERVICES & ENG. Project Implementation 0.9 2.2 2.4 2.5 2.8 3.5 2.8 2.3 19.4 Short- xxxx xxxx xxxx xxxx xxxx xxxx xxxx xxxx list 0.4 0.9 1.7 1.5 0.2 4.7 NBF xxxx xxxx xxxx xxxx xxxx (EIB) Inst. Strengthening 1.4 1.9 1.2 1.0 0.5 6.0 Short- xxxx xxxx xxxx xxxx xxxx list LAND ACQUISITION 0.6 0.7 0.0 0.1 1.4 NBF xxxx xxxx xxxx xxxx TOTAL 18.0 30.3 38.4 39.9 30.9 31.3 28.5 27.3 244.6  TURKEY STAFF APPRAISAL REPORT ANTALYA WATER SUPPLY AND SANITATION PROJECT PROCUREMENT IMPLEMENTATION PLAN Water Supply, Sewerage and Stormwater Drainage Components Project Elements Est. Cost No. of Procurement Bid Docs. Invitation Contract Contract US$ 1000 Contracts Method Preparation Award Completion 1. CIVIL WORKS WATER SUPPLY June 1995 Sept. 1995 June 1996 Duraliler wells 2002 Bogacay wells 12,662 2 ICB/LCB Distas wells Pump Station (TM3 facilities) Pump Station TM4facilities) 2,213 1 ICB 2002 Pump Station (TM4 facilities) 21 Pump Station (TM6 facilities)_______________ _______ Water reservoirs 2,495 1 LCB Distribution network 74,100 5 ICB Immediate measures 3,917 1 ICB Administrative Building 660 1 LCB SEWERAGE June 1995 Sept. 1995 Jan. 1996 2002 Collection network 16,810 I 1CB Preliminary treatment 9,517 1 ICB Immediate measures 3,957 1 ICB Stormwater drainage improvement 736 1 LCB (D~ p o x 0  TURKEY STAFF APPRAISAL REPORT ANTALYA WATER SUPPLY AND SANITATION PROJECT PROCUREMENT IMPLEMENTATION PLAN Water Supply, Sewerage and Stormwater Drainage Components Project Elements Est. Cost No. of Procurement Bid Docs. Invitation Contract Contract US$ 1000 Contracts Method Preparation Award Completion 2. EQUIPMENT WATER SUPPLY June 1995 Sept. 1995 Jan. 1996 Water Meters 2,538 3 ICB/IS Scada System 2,705 1 ICB Computers and Software 3,299 9 ICB/IS/LS Furniture 125 1 LCB SEWERAGE June 1995 Sept. 1995 Jan. 1996 Vehicles 1,679 1 ICB _ 3. CONSULTANT SERVICES PROJECT IMPLEMENTATION Water Supply - Design and Engineering 12,114 1 SHORTLIST Sewerage - Design and Engineering 4,020 1 SHORTLIST Stormwater drainage - Design and Engin. 88 1 SHORTLIST Water supply - Hydrogeological studies 634 1 SHORTLIST Water Supply Mapping 1,903 1 SHORTLIST Stormwater Drainage - Master Plan 634 1 SHORTLIST INSTITUTIONAL STRENGTHENING _ Bidd. Docs. for private operators 952 1 SHORT LIST Dec. 1994 Dec. 1994 May 1995 Id TA for PMU 634 1 Other Feb. 1995 D z TA (D TA for Sirket 4,416 1 SHORT LIST Oct. 1995 Dec. 1995 April 1996 0x  63 Annex 3.8 TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT Allocation of Loan Proceeds Amount of the Loan % of expenditures Category Allocated in US$ to be financed 1. Civil Works 57,800,000 54 2. Goods 4,700,000 55 3. Technical Assistance (a) Project Implementation 18,700,000 100 (b) Institutional Development 4,900,000 100 4. Incremental Recurrent Costs (a) for the Sirket 200,000 100% of expenditures through August 31, 1996 (b) for the PMU 200,000 100% of expenditures through November 30, 1996 5. Unallocated 13,500,000 TOTAL 100,000,000  64 Annex 3.9 TURKEY Antalya Water Supply and Sanitation Project Loan Disbursement Schedule (US$ million) Bank Fiscal Year and % of Total Semester Ending semester cumulative cumulative FY1995 June 30. 1995 0.0 0.0 0.0% FY1996 December 31. 1995 1.0 1.0 1.0% June 30. 1996 9.0 10.0 10.0% FY1997 December 31. 1996 2.0 12.0 12.0% June 30. 1997 8.0 20.0 20.0% FY1998 December 31. 1997 2.5 22.5 22.5% June 30. 1998 9.0 31.5 31.5% FY1 999 December 31. 1998 4.4 35.9 35.9% June 30. 1999 8.0 43.9 43.9% FY2000 December 31. 1999 8.3 52.2 52.2% June 30. 2000 10.0 62.2 62.2% FY2001 December 31. 2000 8.1 70.3 70.3% June 30. 2001 8.0 78.3 78.3% FY2002 December 31. 2001 7.7 86.0 86.0% June 30. 2002 5.3 91.3 91.3% FY2003 December 31. 2002 6.1 97.4 97.4% June 30, 2003 2.6 100.0 100.0%  TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT WATER SUPPLY AND SEWERAGE ASAT - INCOME STATEMENT (USS Thousands) Actual Projected 1.991 1.992 1.993 1.994 1.995 1.996 1.997 1.998 1.999 2.000 2,001 2.002 2.003 2,004 2.005 Water revenues 10,125 6.640 7.134 7,851 9.949 13,646 18.118 19.310 20,848 22,894 24.627 25,971 27.171 28.047 29.674 Sewerage revenues 83 79 108 190 200 211 4.575 12,414 11.338 13.075 14.736 18.431 20.294 21.112 21.971 TOTAL OPERATING REVENUES 10.208 6.719 7.242 8.041 10.149 13.857 22.693 31.724 32.186 35.969 39,363 42.402 47.465 49.159 51.645 Water operating costs 6.970 7.444 6.948 7.108 7.396 7.354 8.570 9.460 10.248 10.627 11.310 12.122 12.608 12.643 13.068 Sewerage oper. costs 83 79 108 192 346 365 3.221 4.542 5.107 6.101 6.718 7.885 8.952 9.574 10.244 ASAT oper. costs 0 0 0 0 507 701 929 949 970 992 1.013 1.036 1.059 1.082 1.106 TOTAL OPERATING COSTS 7.053 7.523 7.056 7.301 8.249 8.421 12.720 14.951 16,325 17.720 19.041 21.042 22.619 23.299 24.415 01 which: Personnel 4.609 5.055 4.717 4.772 5.424 5.393 5.838 5.684 6.076 6.324 6.709 7.253 7.514 7.704 7.930 Energy 1.975 2.004 2.004 1.828 1.730 1.726 2.991 4.101 4.390 5.097 5.339 6.126 6.435 6.621 6.815 Maintenance 250 259 160 407 682 869 3.041 4.210 4.782 5.094 5.658 6.194 0.957 7.162 7.755 U, Consumables 219 205 175 294 413 434 850 956 1.078 1.204 1.335 1.470 1.713 1.811 1.915 Operating income 3.155 (804) 186 741 1.900 5.436 9.974 16.773 15.861 18.249 20.322 21.360 24.846 25.861 27.230 Depreciation 660 772 905 1.195 937 2.610 4.544 6.469 7.863 9.308 10,573 11,780 11.980 12.480 13.480 Interest expenss (18) 0 0 0 0 283 681 1.417 2.231 3.243 4.269 4.985 5.327 5.226 4.728 4.137 Interest expenses (other) 0 183 338 448 837 1.267 1.940 2.124 1.914 1.725 1,550 1.389 1.238 1.095 959 NET INcoIIe 2.495 (1.759) (1.057) (902) (157) 878 2.072 5.949 2.821 2,947 3.213 2.84 6.402 7.557 8.854 oZ Qq (D x 0 -h, U, S-  TURKEY ANTALYA WATER SUPPLY AND SANITATION PROJECT WATER SUPPLY AND SEWERAGE ASAT - BALANCE SHEET (USS Thousands) Actual Projected 1.991 1.992 1.993 1.994 1,995 1.996 1.997 1.998 1.999 2.000 2.001 2.002 2,003 2.004 2.005 Fixed Assets 23.401 28.648 40.218 51.932 69.932 100.232 138.632 178.532 209.432 240,732 269.232 296.532 316.580 349.759 378,844 Accum. Depreciation 660 1.432 2.337 3.532 4.469 7.080 11.624 18.093 25.976 35.284 45.858 57.638 69.618 82.098 95.578 Net Fixed Assets 22,741 27,216 37.881 48.400 65.463 93.152 127.008 160.439 183.456 205.448 223,374 238.894 246.962 267.661 283.266 Accounts Receivable 1.266 830 892 981 1.494 1,956 2.962 4.091 4,148 4.621 4.92Z 5.300 5.933 6.145 6.456 Stocks 97 96 57 127 159 199 894 1.211 1.382 1.490 1,662 1.828 2.078 2.151 2.324 Cash in hand 0 0 0 592 616 614 983 1.166 1.280 1,377 1.487 1.754 1,885 1.942 2.035 Short-term Investment 2.663 2.227 1.891 1.301 3,998 2.615 8.537 8.811 10,092 10.243 7.540 2.605 87 3.197 2.265 Current Assets 4.025 3.153 2.840 3.002 6.267 5.384 13.376 15.278 16,903 17,731 15.611 11.486 9.982 13.435 13.079 TOTAL ASSETS 26,767 30.370 40.721 51.402 71,730 98.536 140.384 175.717 200.359 223,179 238.985 250.380 256.945 281.095 296.345 ) Capital 15.680 15.680 15.680 15.680 15.680 15.680 15.680 15.680 15.680 15.680 15,680 15.680 15,680 15.680 15.680 Accumulated Profit 2.495 736 (320) (1,223) (1.379) (501) 1.571 7,520 10.341 13,288 16,502 19.365 25.767 33.325 41.979 Grants(lB)&Revaluations 5.190 10.066 14.782 19.362 27.493 33.382 38.486 43.210 47.613 49.664 51,460 54.355 57.560 59.697 68.489 Participation Fee and Other 0 118 475 832 5.253 9.473 13.769 18.144 22.605 25.562 27.830 33.162 39.585 41.056 46.449 Equity 23.365 26.600 30.617 34.651 47.047 58.034 69.507 84.555 96.240 104.194 111.472 122.562 138.592 149.758 172.596 LT debt.end bal (other) 3.205 3.571 9.918 16.556 23.486 28.292 47.830 54.517 51.093 47.763 44.680 41.793 37.949 59.224 59.891 LT debt.end.bal (WB) 0 0 0 0 1,000 12.000 22.500 35.900 52.200 66.135 73.505 76.575 70,845 62.515 54.185 LT Debt. End. Balance 3.205 3.571 9.918 16.556 24.486 40.292 70.330 90.417 103.293 113.898 118.185 118.368 108.794 121.739 114.076 LT Debt. LT Portion 3.155 3.449 9.806 16.431 24.135 39.999 70.081 87,375 100.177 110.753 115.072 114,926 105.380 118.340 110.682 LT debt. curr (other) 50 121 112 125 351 293 249 3.042 3.116 3.146 3.113 3.443 3.414 3.399 3.394 LT debt. curr (WB) 0 0 0 0 0 0 0 0 0 4.165 8.330 8,330 8.330 8.330 8.330 o' Accounts Payable 197 199 186 195 197 210 547 745 827 922 999 1.120 1.229 1.269 1.342 rD S Current Liabilities 247 320 298 320 549 504 796 3.788 3.943 8.232 12.442 12.892 12,972 12.998 13.067