Colombia - Palmira Water Supply and Sewerage Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 4589 PROJECT COMPLETION REPORT COLOMBIA PALMIRA WATER SUPPLY AND SEWERAGE PROJECT (Loan 738-CO) June 28, 1983 Projects Department Latin America and the Caribbean Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  UNITS AND MfEAStTRFS 1 mm = millimeter = 0.04 inches 1 cm = centimeter = 0.39 inches 1 m = meter = 3.28 feet 1 k.m = kilometer = 0.62 miles 1 1 = liter = 0.26 US gallons 1 m3 = cubic meter = 264 IuS gallons 1 m3/sec = cubic meter = 22.8 Mgd = million US gallons per second per day FISCAL YEAR January 1 to December 31 ABBREVIATIONS AND ACRONYMIS FPHP - Palmira Mfunicipal Public Authority (Erpresas Publicas Municipales de Palmira) INSFOPAI, - National Institute for Municipal Development (Instituto de Fomento Municipal) USAID - United States Agency for International Development  COLOMBIA FOR OFFICIAL USE ONLY LOAN 738-CO PALMIRA WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REPORT Table of Contents Page No. Preface ......................................................... Basic Data Sheet .ii Highlights .iv I. Introduction ....11 ................... Sector and Project Area . ...... . ........ 1 Organization of the Borrower 1........................... 1 II. Project Preparation and Appraisal.. ...... . 2 Origin, Preparation and Appraisal .. 2 Negotiation and Approval .... . ... ...... . 2 Project Role in Long-Term Plan. . . 3 Project Description . .... ...... . 3 Loan Covenants ............. ........... 3 III. Project Implementation, Operation and Cost ................ 4 Effectiveness and Start-Up... 4 Implementation Schedule . ............. . ... .. 4 Disbursement of Loan Funds ..... .. .... 5 Procurement ....... .................6 Revisions .....I................ ....6 Project Costs.... 7 Financing Plan ....... ....... . 7 Reporting ........... ..... ..... .. 08 IV. Operating Performance .8..... .. .................. ... 8 Project Design and Construction ........8 Operating Covenants .. ........ . ............ . ............ . 8 V. Financial Performance ...... .......................... .......... 9 General ....... .................... .......... ........... 9 Consolidated Results .............. .. ......... ............ 9 Water Production and Sales .................. ................ 10 Water and Sewerage T'ariffs .... .. .... .............. . . 11 Unaccounted-For Water ............... . ...........12 Water Supply and Sewerage .... . .................. . ... 13 Other Services . . .13 Financial Covenants ...... .. . .. 14 Future Finances . .. ..... .. ........ 14 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  Table of Contents (Continued) Page No. VI. Institutional Performance and Development ........ ......... 14 VII. Economic Re-evaluation . ........... . ...................... 15 VIII. Project Justification ................. . . . . ............... . ....... 15 IX. Bank Performance ....... ........... ....... ... .... ........ . 16 Appraisal Issues .. ................. ........................ 16 Loan Supervision ............................................. ......... 16 Borrower's Opinion ............................. ....... ... 17 X. Conclusions and Lessons Learned ......................... 17 General . . . . . . . . . . . . . . . . . . . . . . . . ..17 Technical . . . . . . . . . . . . . . . * . * .. . . . ..17 Financial .18 Bank Management of the Project ............................ 19 ANNEXES 1. Construction Schedule ...................................... 20 2. Disbursement of Loan Funds ................................. 21 3. Comparison of Completed Works with Appraised Project ....... 22 4. Allocation of Proceeds of Loan ............................. 23 5. Project Costs and Expenditures of Bank Loan .... ............ 24 6. Financial Statements 1972-1979 ............................. 25 7. Population and Water Consumption 1970-1980 .... ............. 35 8. Internal Financial Rate of Return .......................... 37 9. Summary of Mission Findings ................................ 40 10. Statement of the General Manager of EPMP .... ............... 44 11. Comments from Government ................................... 47  PROJECT COMPLETION REPORT COLOMBIA: PALMIRA WATER SUPPLY AND SEWERAGE PROJECT (Loan 738-CO) PREFACE This is the Completion Report for the Water Supply and Sew- erage Project for which Loan 738-CO was approved in May 1971 in the sum of US$2.0 million. The Loan was closed in June 1980. There were no cancellations. The project completion report of April 27, 1981 was prepared by the Latin American Caribbean Projects Department on the basis of the findings of an October 1980 mission, documents contained in regional files and information provided by various Bank staff members involved with the project during its execution. Copies of the draft report were sent to the borrower, the Empresas Publicas Municipales de Palmira (EPMP), and to the Government. While no comments were received from EPMP, the opinion of EPMP, obtained during the October 1980 mission, is included in Annex 10. The comments received from the Ministry of Finance, ex- pressing concurrence with the findings of the Completion Report are attached as Annex 11. The project has not been subjected to an audit by the Operations Evaluation Department (OED). The assistance provided by the staff of EPMP during the October mission to gather information for the preparation of this report is gratefully acknowledged.   - ii - PROJECT PERFORMANCE AUDIT BASIC DATA SHEET COLOMBIA: PALMIRA WATER SUPPLY AND SEWERAGE PROJECT (LOAN 738-CO) KEY PROJECT DATA Appraisal Item Estimate Actual Total Project Cost (US$ million) 3.78 3.15 Underrun (%) -- 17.00 Loan Amount (US$ million) 2.00 2.00 Disbursed 2.00 2.00 Cancelled -- 0 Repaid to Outstanding to Date Physical Components Completed 06/30/74 06/05/80 Proportion Completed by Appraisal TargetDate (%) 100 30 ProDortion of Time Overrun (x) -- 300a/ Internal Financial Rate of Return (%) 9.8 0.4 Financial Performance Good Poor Institutional Performance Good Good Cumulative Estimated and Actual Disbursements (US$ millions) FY 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 (i) Appraisal Estimate 0.4 1.7 2.0 2.0 2.0 2.0 2.0 2.0 2.0 2.0 (ii) Actual 0 0.1 0.5 0.8 1.4 1.6 1.7 1.7 1.8 2.0 (iii) (ii) as of % of (i) 0 5.9 25.0 40.0 70.0 80.0 85.0 85.0 90.0 100.0 OTHER PROJECT DATA Actual or Item Original Revisions Est. Actual First Mention in Files or Timetable -- -- 10/ /65 Government Application -- -- 10/ /68 Negotiations 04/02/70 04/05/71 04/05/71 Board Approval 05/17/71 05/17/71 Loan Agreement Date 05/25/71 05/25/71 Effectiveness Date 08/02/71 09/30/71 12/31/71 10/30/71 11/30/71 12/30/71 Closing Date 03/01/75 03/01/76 06/06/80 03/01/77 12/31/79 06/30/80 Borrower Empresas Publicas Mu- nicipales de Palmira Executing hgencv Empresas P5blicas Mu- nicipales de Falmira Fiscal Year = calendar year   - iii - MISSION DATA Month! No. of No. of Date of Year Weeks Persons Manweeks Report Economic 10/65 n.a. 1 n.a. n.a. Identification 04/66 n.a. 2 n.a. 05/23/66 Preappraisal 02/69 0.4 1 0.4 04/11/69 Preparation 05/69 0.2 2 0.4 05/13/69 Appraisal 08/69 1.4 2 2.8 10/02/69 Prenegotiation 03/70 0.2 1 0.2 03/20/69 Postappraisal 1 07/70 1.0 2 2.0 08/01/70 Postappraisal II 10/70 0.2 1 0.2 10/28/70 Postappraisal III 11/70 0.4 2 0.8 12/02/70 Supervision I 04/71 0.2 1 0.2 05/06/71 Supervision I 04/71 0.1 2 0.2 05/06/71 Supervision II 08/71 0.2 1 0.2 08/23/71 Supervision III 08/71 0.2 2 0.4 09/15/71 Supervision IV 10/71 0.2 2 0.4 11/29/71 Supervision V 04/72 1.4 2 2.8 05/18/72 Supervision VI 06/72 0.4 1 0.4 o7/06/72 Supervision VII 08/72 0.2 1 0.2 09/26/72 Supervision VIII 11/72 0.4 1 0.4 12/01/72 Supervision IX 02/73 0.1 2 0.2 03/02/73 Supervision X 03/73 1.2 3 3.6 04/30/73 Supervision XI 09/73 0.2 1 0.2 none Supervision XII 03/74 0.4 1 0.4 04/22/74 Supervision XIII 11/74 0.2 3 0.6 12/09/74 Supervision XIV 07/75 0.4 1 0.4 07/18/75 Supervision XV 09/75 0.6 3 1.8 10/06/75 Supervision XVI 05/76 0.2 2 0.4 none Supervision XVII 03/77 0.2 2 0.4 04/15/77 Supervision XVIII 04/79 0.2 2 0.4 05/21/79 Supervision XIX 07/79 2.6 1 2.6 n.a. Supervision XX 10/79 0.2 3 0.6 01/04/80 Supervision XXI 04/80 0.2 2 0.4 06/12/80 Supervision XXII 10/80 0.6 1 0.6 11/10/80 Total Staffweeks: 24.6 COUNTRY EXCHANGE RATE Name of Currency (Abbreviat:ion) Pesos (Col$) Appraisal Year Average (1969) US$1 = Coi$ 19.000 Intervening Years Average (1970-1980) US$1 = Col$ 31.505 Completion Year Average (1980) US$1 = Col$ 48.920 a/ Final project completion including additional work added after completion of original program. Original program time overrun was 216%.   - iv - PROJECT COMPLETION REPORT COLOMBIA: PALMIRA WATER SUPPLY AND SEWERAGE PROJECT (Loan 738-CO) HIGHLIGHTS The project was the third Bank operation in the water sector in Colombia. Its princip:Le objective was to increase the capacity of the water supply system for Palmira, Colombia's twelfth largest city, in order to meet the projected 1978 water demand (para. 2.05). The project also in- cluded sewage collection, drainage and technical assistance in management. Project execution experienced considerable delays. Work on the various project elements began 12 to 48 months later than scheduled, and final completion of the project was six years later than projected (para. 3.02). Half this time resulted from Bank agreement to postpone the Loan closing date to permit undisbursed Loan funds to be used for construction of additional works. No one cause stands out as bearing major responsibil- ity for the delays (para. 3.04). The conclusion is that the project sched- ule was unrealistic. The impact of the delays on construction costs due to inflation was substantial (para. 3.11). As a result, the scope of some of the project components had to be reduced. Treatment capacity was sized to meet the 1978 demand. However, because of lower than projected population growth and lower than projected consumption per connection, installed capacity will now be adequate until 1991 (para. 4.02). The project was successful in meeting its objective of increasing water supply capacity (para. 8.01). In 1980, 98% of the population had a piped water supply with continuous service. However, tariffs remained low and at the end of the project in 1980, and the borrower was in a difficult financial position (para. 5.08 and 5.17). Low tariffs and a lower than an- ticipated demand adversely affected the internal financial rate of return (IFR). The actual IFR is 0.4% versus an appraisal value of 9.8% (recalcu- lated) (para. 7.01).   COLOMBIA LOAN 738-CO PALMIRA WATER SUPPLY AND SEWERAGE PROJECT PROJECT COMPLETION REPORT I. Introduction Sector and Project Area 1.01 At the time of project appraisal in 1969 the Government of Colombia had an urban development policy of preserving a reasonable balance and pro- portion in the rate of growth of its various cities. To achieve this goal, the cities were divided into categories, each of which was intended to have a specific role in a balanced development. In order to reduce demographic and social pressures in the capital city of Bogota, it was proposed to pro- mote growth in the next ranking cities, i.e. Medellin, Cali and Barranquilla, offering alternative centers to attract economic activity and internal migra- tion. While these cities provided the most immediate alternative growth centers, the Government had taken the longer-term view to direct future econo- mic growth and migration toward the next level, the intermediate cities, with populations of 30,000 to 200,000. This was to be achieved through the establish- ment of labor-intensive industry, the integration of agriculture with industry, the provision of necessary public services, and the preparation of urban development plans. Palmira with a then estimated population of 160,000 in 1971 was one of these intermediate cities. 1.02 The rapid growth of Colombian cities had resulted in inadequate urban services. This has been especially evident in the supply of potable water and removal of liquid wastes, primarily due to the inability of the municipalities to provide the capital required and of the traditionally low tariffs charged for the services. 1.03 In 1969, Palmira was the twelfth largest city of Colombia and the second largest city in the Cauca Valley after Cali. With an international airport close to Palmira, urban industrial development was expected to grow between Cali and Palmira. The result of censuses in Palmira (1970) showed a population growth of about 6% p.a. during the prior decade. It was expected that the growth rate would continue and bring the 1971 population of 160,000 to a population of 241,000 by 1978. In 1971 the appraisal report indicated that 87% of the city's population was served with water through house connections. Organization of the Borrower 1.04 Responsibility for the provision of water supply and sewerage services in Palmira rests with the Empresas Publicas Municipales de Palmira (EPMP). This organization is an autonomous municipal entity which not only supplies water and sewerage services but also provides telephone services and operates a slaughterhouse and two public markets in Palmira. EPMP was created in 1961 by municipal decree. The Board of the EPMP is composed of 6 members all appointed by the Htunicipal Council for a two-year term. The Board has the power to fix tariffs within the limitations approved by the National Tariff Board, approve contracts in accordance with Colombian laws and statutes of the EPMP, and borrow up to Col$150 million. A general manager is nominated by the Board for a two-year term.  - 2 - 1.05 EPMP is organized into four operating departments, an administra- tion department and two staff units. The Water Supply and Sewerage Department is the most important in terms of revenues. In 1970, water supply and sewerage accounted for 40% of total revenues, telephone services for 31%, and the slaughterhouse and public markets for 29%. 1.06 At the time of appraisal, EPMP had a history of very low tariffs in both water supply and sewerage and telephone services. Water supply and sewerage tariffs remained constant from 1962 to late 1968 at which time they were increased from Col$0.35/m3 to Col$0.38/m3, and then to Col$0.50/m3 in late 1969. Following the Bank appraisal, the EPMP increased tariffs in February 1970 at the Bank's request to Col$0.70/m3. The appraisal mission recommended an initial rate increase to Col$1.00/m3 as a condition of effectiven3 ss of the proposed loan, to be followed in 1971 by an increase to Col$1.40/mi. II. Project Preparation and Appraisal Origin, Preparation and Appraisal 2.01 In April 1966, a Bank project identification mission identified the Palmira Water Supply and Sewerage Project. In 1968, a United States Agency for International Development (USAID) financed feasibility study of the project was completed by a consortium of two Colombian firms and a U.S. firm. The project was subsequently appraised by the Bank in February 1969. In May 1969, the Bank reviewed a groundwater study and public accounting audit study, also prepared by consultants. Negotiation and Approval 2.02 A draft appraisal report was prepared in February 1970 in which it was stated that "adequate progress in the implementation of water supply tariff increases in the sector as a whole should be a condition for presenta- tion of this loan". During negotiations in April 1970 for the proposed loan of US$2.0 million, an impasse was reached on the question of tariffs. EPMP did not agree to implement the tariff increases recommended by the appraisal mission. In addition, it was discovered that EPMP was in default on existing debt service obligations with Siemens, a manufacturer of telephone equipment. A decision was taken to suspend negotiations until such time as EPMP could satisfactorily rectify these principal problems. During 1970, three post- appraisal missions visited Palmira to assist the EPMP in meeting the Bank's requirements to reopen negotiations. 2.03 In August 1970, at the suggestion of the Bank, EPMP engaged a new consortium of engineers to review the original USAID-financed feasibility study of 1968, upon which the appraisal was based, and to prepare designs and bid documents. The objective of the review was to reduce the scope of the project to keep it within the financial resources of EPMP by staging water treatment expansion and distribution extensions and by postponing some of the lower priority sewerage and drainage works.  - 3 - 2.04 By March 1971, increases in tariff rates to Col$0.80 had been approved and a debt rescheduling agreement between EPMP and Siemens had been reached. In March 1971, the Government, EPMP and the Bank jointly agreed on an investment program based on the consultants' work. Accordingly, loan negotia- tions were resumed on April 5, 1971, and completed on April 9, 1971. The loan was approved on May 25, 1.971. In view of the tariff increase implemented by EPMP and the rescheduling of EPMP's debt to Siemens, the delay in completing loan negotiations was justified. Project Role in Long-Term Plan 2.05 The aim of the project was to provide a nominal water treatment capacity of 1,500 1/sec by increasing the capacity of the existing water treatment plant from 290 1/sec to 600 1/sec and the addition of a new water treatment plant of 900 l/sec. The project included sufficient transmission, storage and distribution networks to meet the estimated growth in water demand in Palmira through 1978 at service levels of almost 100%. It also included sewage collection and drainage facilities. Project Description 2.06 The project works as described in the appraisal report included: (i) Nima River intake, with a holding dam if subsequently required; (ii) raw water main and water treatment plant capacity of 900 1/sec; (iii) renovation of the existing 290 1/sec plant to expand capacity to 600 I/sec; (iv) two treated water storage tanks, each with a capacity of 12,000 m3; (v) treated water main (27") from the treatment plant to Palmira; (vi) extension of the water distribution system, including house connections; (vii) sewerage and (drainage works; and (viii) consulting services for engineering and management. 2.07 It appears that: between the time of the preparation of the original draft appraisal report and loan negotiations, the capacity of the water treat- ment plant was reduced. The Loan Agreement, Schedule 3, indicates an expanded capacity of 500 1/sec for the existing plant and a capacity of 400 1/sec for the new plant for a total capacity of 900 1/sec. As noted in the previous paragraph, the project description in the appraisal report indicated a capacity of 1,500 1/sec. Loan Covenants 2.08 The Loan Agreernent contained these principal covenants of which the first two were special conditions of loan effectiveness:  -4- (i) EPMP to increase water tariffs to yield an average of Col$1.25/m3 of water sold; (ii) arrangements and terms for providing government funds to be made and agreed to by the Bank; (iii) maintain separate accounts and financial statements for each service; (iv) have accounts and financial statements audited once each year by independent auditors acceptable to the Bank and submit the audited statements to the Bank along with the auditors' report; (v) maintain debt service ratio of not less than 1.5; (vi) funds generated from water supply and sewerage services shall not be transferred to any of the EPMP's other services; (vii) maintain tariffs for water supply and sewerage services suf- ficient to earn a rate of return on revalued assets of 4% for the years 1971-73; 6% for 1974; 7% for 1975; 8 1/2% for 1976 and 9% for 1977 and subsequent years; (viii) maintain tariffs for telecommunication services sufficient to earn a rate of return of 10% for the years 1971 and 1972 and 12% for subsequent years; and (ix) maintain tariffs for markets and slaughterhouses sufficient to provide an annual operating ratio of not more than 85%. III. Project Implementa;tion, Operation and Cost Effectiveness and Start-up 3.01 The terminal date for effectiveness of the loan was extended four times from August 2, 1971 to December 31, 1971. The main reasons for 3the extensions were failure of EPMP to increase tariffs to Col$1.25 per m ; and failure of EPMP to obtain a Col$28.0 million government loan to help finance local project expenditures. EPMP and the Government eventually complied with all the Bank's conditions and the loan was declared effective on December 29, 1971. Implementation Schedule 3.02 The project works were expected to commence with original Loan effectiveness on August 2, 1971, and were to terminate by June 30, 1974. The closing date for the loan was March 1, 1975. The main elements of the project were completed in March 1977, almost three years later than originally scheduled. At that time, there were US$348,500 in undisbursed funds and in February 1978 the Bank approved additional items for inclusion in the project. The revised project was completed in June 1980. The closing date was extended from March 1, 1975, successively to March 1, 1976, March 1, 1977, December 31, 1979, and finally to June 6, 1980.  - 5 - 3.03 The appraisal report contains a bar chart which compares actual construction time with appraisal estimates for the project's major components (Annex 1). Project execution of the original program was estimated at 36 months but required 66 months, or 83% longer than estimated. However, the water treatment plant and transmission mains were completed to the extent that they could be put into service within 45 months, thus mini- mizing the effect of delays on EPMP's finances and on the economic viability of the project. 3.04 The delays in the completion of the project works were due to the following causes, as identified during the Bank's supervision missions and as stated by the Borrower: (i) delay in the start of construction of the water treatment plant due to a dispute over the contract award; (ii) delay in the selection of a consultant for the supervision of construction, as a dispute arose among the three member firms of the consultant consortium; (iii) bad weather in 1973; (iv) Government red tape in obtaining import licenses; (v) Bank's suggested revision of the program in 1973 and the Borrower's declination of such revisions; (vi) shortage of cement and other basic construction materials on the local market; (vii) a six-month delay in construction of the water treatment plant due to late delivery of equipment; (viii) delays in securing counterpart funds from the Government; and (ix) internal slowness in processing and awarding bids. Since the bidding documents were ready when the loan was signed, EPMP could have saved some time by initiating the bidding then, instead of waiting until loan effectiveness. Disbursement of Loan Funds 3.05 A comparison of actual with projected disbursements is presented in Annex 2. On December 31, 1973 when the loan was expected to be fully disbursed, actual disbursements were 25.6% of the total loan. Disbursements after com- pletion of the original project scope in March 1977 were equivalent to 83% of the total loan, and the final disbursement was in July 1980, 5 years and 3 months after the originally expected date. Loan disbursements equal to 38% (US$1,210,558) of the total cost of the project were utilized for local currency requirements, versus 36% defined in the Loan Agreement.  -6- Procurement 3.06 All goods and services (other than the services of the consultants) required for the project were procured on the basis of international competitive bidding in accordance with the Guidelines for Procurement under World Bank Loans and IDA Credits, published by the Bank in August 1969 and in accordance with the provisions set forth in Schedule 4 of the Loan Agreement (Procurement). The Borrower found no difficulty in complying with these guidelines and procurement was accomplished in a satisfactory manner. In general, EPMP obtained much lower bids than their consultants' estimate. With the exception of contracts for locally manufactured cement and asbestos cement pipe, all the equipment and material contracts went to foreign manufacturers. All the civil works contracts were awarded to local contractors. Revisions 3.07 In May 1973 it became apparent that EPMP's financial resources would be inadequate to cover the originally estimated project cost of Col$77.8 million (US$3.78 million). The Bank then recommended that the scope of the project be reduced to be consistent with available resources. This reduction was to be accomplished by postponing the construction of storage tanks and distribution mains larger than 8-inch to a second stage project. All secondary distribution network improvements (pipes up to 8 inches in diameter) remained in the project. Furthermore, the construction period for the project was to be extended by one year to 1975. These measures were to reduce the cost of the project by Col$15.0 million. EPMP's response to the Bank's recommendation for reduction in project scope was that they were opposed to any postponement and did not understand why works should be postponed since financing was readily available from the National Institute for Municipal Development (INSFOPAL). However, EPMP agreed to eliminate the storage tanks from the project and to reduce the length of the distribution main to be constructed. The financial position of EPMP improved by April 1974 as a result of higher tariffs, improved cost control, and of INSFOPAL increasing its disbursements from 36% to 64% of project expenses. As the Bank continued to disburse 36% of project costs, debt financing was meeting 100% of direct project investments including interest during construction. 3.08 The distribution mains and storage tanks had been designed to build more reliability into the system and to provide distribution capacity to meet future demands. The deletions were made in 1973 with the knowledge that they would be needed in the future to prevent shortages during peak usage hours and to make the system more reliable. Any reduction in the size of the treatment and transmission facilities would have been disruptive to project implementa- tion and would have saved little. Under the circumstances the postponement of the deleted components was the best choice available at the time. However, this action assumed that by project completion, EPMP's financial position would have improved sufficiently to permit construction of the deleted facilities to begin. Unfortunately this is not the case (para. 5.17). 3.09 In March 1977, all works programmed in the appraisal report as modified in 1973 were completed. Of the US$2.0 million under the Loan Agreement, US$1.642 million was disbursed. EPMP requested the Bank to finance additional  - 7 - sewerage works from the undisbursed loan balance and this was approved by the Bank in October 1977. Funds available were not sufficient to undertake the water distribution mains and storage tanks deleted from the project in 1973. In February 1978, the Loan Agreement was revised to increase the scope in Part C, to finance construction of two sewerage interceptors (Rio Palmira, North and South), construction of a sewer collector, and purchase of water meters and maintenance equipment. The project as constructed is compared with the appraised project in Annex 3. A comparison with the Loan Agreement and actual allocation of proceeds of the loan is shown in Annex 4. Project Costs 3.10 A comparison of the original cost estimate for the project with the actual costs of the project is presented in Annex 5 and summarized in the table below: Actual Cost Appraisal 1970 Current Estimate Prices Prices -----------Col$ Millions---------- Base Cost 69.0 40.7 99.2 Escalation 8.8 - - Total 77.8 40.7 99.2 3.11 In current Colombian pesos, the project had a cost overrun of 28% which was remarkable considering the exceptionally high rates of inflation which prevailed during the extended period of construction. A comparison of the costs of the original project scope (para. 3.08) indicates an estimated current cost of Col$66.2 million, which represents a current cost underrun of 15%. In real terms (1970 Colombian pesos) the project cost underrun was 41%. The actual cost figures suggest that the original cost estimates were overstated. This is impossible to confirm as a result of the difficulty of comparing the project as built with the original project scope. With respect to the treatment plant, it is probable that the appraised cost estimate was for greater capacity expansion than was actually built (para. 2.07). If this is the case, and given the fact that the cost of the treatment plant in real terms was about equal to the estimated base cost, there may have been a real cost overrun of about 25%. The real cost of the water transmission and distribution component was lower than estimated because of overstated appraisal cost estimates and a reduction in the length of distribution mains installed (para. 3.07). Financing Plan 3.12 The original financing plan for the project indicated that total requirements of Col$100.7 million would be met by the Bank loan (41%), Government loans (28%) and by internally generated cash (31%). Actual total requirements are est:imated to be Col$120 million which were  - 8 - financed by the Bank loan (Col$61 million, 51%), a Government loan through INSFOPAL (Col$36 million, 30%) and Federal Government contributions (Col$23 million, 19%). Internal cash generation in aggregate during the period of project construction was not sufficient to meet debt service requirements and did not contribute to project financing. Reporting 3.13 The Loan Agreement did not contain specific reporting require- ments. However, reporting requirements were set forth in a letter to EPMP dated August 11, 1971, which contained rather detailed forms covering the status of project implementation and EPMP operating and financial performance which were to be submitted quarterly. EPMP never initiated the preparation of this report and information was only obtained following specific Bank requests or during supervision missions. Financial reports of the Empresas Publicas Municipales de Palmira as prepared by Touche, Ross, y Asociados Ltda. were received by the Bank for all years (1971 through 1979). No reports from the consulting engineers as to progress or problems (other than their request for assistance in obtaining their fees from the EPMP) are on file in the Bank. IV. Operating Performance Project Design and Construction 4.01 The project's principal objectives were to increase water sources, improve water quality, provide water and sewerage services to new clients and improve the disposal of sewage and surface water. The project was constructed as designed, exclusive of a water storage tank (para. 2.06), and construction was of good quality. There are no data with respect to acceptance of performance, quality or quantity, but EPMP has stated that the designs were appropriate and that the project facilities have achieved their objectives in all respects. It is clear that the 1980 demand is being satisfactorily met and that there exists reserve capacity. A comparison of treated water quality before and after the project indicates marked improve- ments. Physical inspection by Bank staff of the project facilities supports EPMP's contention that the project facilities have achieved their design objectives. Operating Covenants 4.02 There is some uncertainty in the appraisal report with respect to the year the water treatment facilities were to be fully utilized by demand. The project description in the appraisal report indicates annual treatment capacity of 47.3 million m3 (1.5 m3/sec) on completion of the project. Based on the 8.6% water demand growth rate projected at appraisal and an assumed unaccounted-for water level of 23%, this capacity would have met the 1985 average demand or the 1983 maximum day demand. Maximum day demand projections assume a maximum day to average day ratio of 1.2. As noted previously (para. 2.07), the project description in the Loan Agreement indicates a treatment plant capacity of 28.4 million m3 p.a. (0.9 m3/sec) on completion of the project which would meet average demand up to 1979 or the 1977 maximum day demand. The appraisal report, however, assumes both in its financial projections and in the calculation of the internal rate of return, that  - 9 - treatment facilities would be fully utilized in 1978 with production of 25.1 million m3 p.a. (0.8 m3/sec). On completion of the expansion, EPMP determined its treatment plant capacity to be 37.8 million m3 p.a. (1.2 m3/sec). Based on the latest demand projections, the plant has sufficient capacity to meet the average demand until 1995 and the maximum day demand until 1991. 4.03 There were no operating performance covenants, which was appropriate given the straightforward nature of the work and the capabilities of the Borrower and local contra,-tors. V. Financial Performanc, General 5.01 Summaries of the financial performance for EPMP consolidated and for each division are given in Annex 6, together with financial projections from the appraisal report. As a general statement, the financial performance was less satisfactory than forecasted and the covenanted rates of return or specified operating ratios were rarely achieved by any service throughout the period of project implementation. Consolidated Results 5.02 Selected financial data for EPMP overall for 1978 (the last year of the appraisal pro:jections) together with the appraisal projections for 1978 are given below: % Increase/ Appraisal Actual (Decrease) -----Col$ Millions a/--- Revenues 46.6 75.2 61 Operating Expenses 17.8 69.2 289 Depreciation 11.9 6.3 (47) Operating Income/(Loss) 16.9 (0.3) (102) Non-Operating Income 1.3 1.8 38 Financial Expense 5.4 26.5 391 Net Income/(Loss) 12.8 (25.0) (195) a/ In current Colombian pesos. 5.03 As can be seen, while revenues were 61% higher than forecast, operating expenses were higher by 289% and financial expenses by 391%. Despite a net income position forecast for 1978, EPMP in fact incurred a net loss  - 10 - equivalent to 33% of revenues. To eliminate the effects of inflation in the 1978 comparison, the following 1978 financial data have been stated in 1973 Colombian pesos to make them directly comparable with the appraisal projections: 1/ % Increase/ Appraisal Actual (Decrease) ----Col$ Millions a/--- Revenues 46.6 25.8 (45) Operating Expenses 17.8 23.7 33 Net Income 12.8 (8.6) (33) a/ In 1973 Colombian pesos. 5.04 The substantial revenue shortfall and operating cost increases versus appraisal projections are still evident in the 1973 Colombian pesos comparison and reflect principally the failure to adjust tariffs for all services in line with appraisal expectations or to procure other resources. Water Production and Sales 5.05 A major factor in the financial performance of EPMP's water and sewerage operations was the volume of water produced and sold which was below the appraisal estimate as indicated in the comparison below. Statistics for all years 1970-1980 are given in Annex 7. 1970 1978 % Increase/ Appraisal Actual Appraisal Actual (Decrease) Population 151,000 131,000 241,000 179,000 (26) Population Served 133,000 123,000 229,000 179,000 (22) Connections a/ 3 3 15,100 16,829 25,000 24,466 (2) Water Production im xlO ) 13,700 12,525 25,100 22,390 (11) Water Sold (m xlO ) 9,590 6,898 19,300 11,426 (41) Production per Connection (m /month) 75.6 62.0 83.7 76.3 (9) ConsumpSion per Connection (m /month) 52.9 34.2 64.3 38.9 (40) a/ Appraisal estimates assume 8.8 persons per connection and actual figures assume 7.3 persons per connection. 1/ The appraisal projections assumed zero inflation after 1973.  - 11 - 5.06 There are a number of reasons for the failure of water production and sales to reach appraisal projection estimates. First, as shown above the population estimate for 1970 was 15% higher than actual and the esti- mated population growth rate of 6.0% compared with an actual growth rate of 4.1%. As a result, the 1978 population was only 74% of the projected population. Second, estimated water sold in 1971 was 39% higher than actual and the number of connections was underestimated by about 10%. This resulted in consumption per connection for appraisal purposes of about 53 m3 per month versus 34.2 m3 actual. Third, it was assumed that consumption per connection would increase to 64.3 m3 per month in 1978 while the actual increase was much lower, to 38.9 m3. The appraisal report notes that per capita water demand projections were speculative, because of the poor data available on existing consumption. The result of the basic assumptions issued was an estimated growth in water sales of 9.1% p.a. on an overstated base, which compared with 6.5% p.a. actual, and in 1978 water sold was only 59% of the appraisal estimate. If the original 1970 water sold volume had been correct, the actual water sold in 1978 would have been 82% of the appraisal estimate. Because of exception- ally high unaccounted-for water in 1978, however, water produced was 89% of the appraisal estimate. 5.07 It may be noted that the pattern of demand growth was irregular because of insufficient supply capacity prior to completion of the project water treatment facilities. Thus, between 1970 and 1975 there was no growth in consumption despite a 28% increase in the number of connections, and consumption per connection fell from 34.2 m3 to 25.2 m3. The degree of suppressed demand is indicated by the increase in consumption per connection to 35.7 m3 and an increase in water sales of 50% when the treatment plant capacity was expanded in 1976. Water and Sewerage Tariffs 5.08 Water and sewerage tariffs are progressive, allowing a minimum consumption of 25 m3 per month for the lowest category. In 1980 the average revenue per m3 was in Co'l$3.70. The minimum monthly charge per connection was Col$25.00 which allowed a consumption of 25 m3 per month. In comparison, Cali, a city with a popuLation of 1,000,000 just 30 km from Palmira, has an average tariff of Col$11.00 per m3. However, the same minimum monthly charge per connection is charged. In Palmira average tariffs were low during most of the project period. Annual average tariffs charged from 1970-79 are listed in the following table in both current prices and 1973 prices:  - 12 - Average Tariff, Col$/m3 Current 1973 Year Prices Prices 1970 0.50 0.78 1971 0.80 1.11 1972 1.40 1.71 1973 2.00 2.00 1974 2.00 1.60 1975 2.50 1.62 1976 2.50 1.35 1977 3.00 1.20 1978 3.00 1.03 1979 3.70 1.02 From the above figures, it can be seen that tariffs have not kept up with inflation and that in real terms, tariffs are lower than those assumed for the appraisal financial projections (Col$1.50 per m3 in 1973 prices). Unaccounted-for Water 5.09 At the time of appraisal unaccounted-for water was estimated to be 30% of water produced, and the expectation was that this would be reduced to 23% by 1978. Historical data which first came to the attention of the Bank during the March 1973 mission now indicate that the actual unaccounted-for water in 1970 was 45%. Between then and 1978 the percentage of unaccounted-for water ranged between 41% and 53%. It is probable that part of the apparent losses was an overestimate of water produced. Prior to the construction of the new water treatment plant, production metering was inadequate as evidenced by the relationship between production and consumption. For example, in 1974 water sold increased by almost 1.0 million m3 from the previous year, and water produced declined by 0.8 million m3. Reliability of production metering was improved with the project. Since 1975 production has been measured with a venturi meter with a recorder, a type of meter which is considered to be very reliable. 5.10 Increased consumer metering did not appear to be effective in reducing unaccounted-for water early in the project. In 1970 85% of connec- tions were metered (with many non-functioning) and by 1975 the system was 100% metered (most were functioning). During the period of new meter instal- lation and repair, between 1970 and 1975, the volume of water sold actually decreased while reported water produced remained constant, thereby resulting in a 49% level of unaccounted-for water in 1975 versus 45% in 1970. However, better results were obtained later in the project. Between 1975 and 1978 no new meters were installed and by 1978, the number of services with func- tioning meters had declined to 80%. By mid-1979 all broken meters had been repaired and meters had been placed on all connections installed since 1975 without meters, so that the metering level was again 100%. This effort was made possible by the use of loan funds to purchase spare parts and meters. Enough meters and parts were purchased this time to allow EPMP to maintain the level of metering close to 100%. As a result, in 1980 unaccounted-for water was only 29% of production.  - 13 - Water Supply and Sewerage 5.11 The financial results of the water supply and sewerage division for 1978 are compared with appraisal estimates in the following table: Actual % Increase/ (Decrease) vs. Appraisal Actual Appraisal --Col$ Million a/-- Operating Revenues 29.0 14.6 (50) Operating Expenses 7.8 11.2 44 Depreciation 9.2 1.7 (82) Operating Income 12.0 1.7 (86) Non-Operating Revenues 0.9 0.3 (67) Financial Expense 5.4 4.8 (11) Net Income/(Loss) 7.5 (2.8) (137) a/ 1973 Colombian pesos. 5.12 Operating revenues were at 50% of projected levels as a result of water sales being 41% below expectations (para. 5.05) and because of lower- than forecasted tariff levels. In 1973 Colombian pesos, 1978 average revenue per m3 of water sold was Col$1.28 versus the appraisal projection of Col$1.50. Conversely, operating expenses in 1973 Colombian pesos per m3 of water sold were Col$0.98 in 1978 compared with Col$0.40 forecasted at the time of appraisal. Other Services 5.13 A summary of 1973 financial results for EPMP's other services in comparison with appraisal expectations is presented below: Telephones Markets/Slaughterhouse % Increase/ % Increase/ Appraisal Actual (Decrease) Appraisal Actual (Decrease) --Col$ Million a/-- --Col$ Million a/-- Revenues 11.3 7.3 (35) 6.3 3.8 (40) Operating Expenses 4.7 5.1 9 5.3 7.4 40 Net Income 4.3 (2.2) (151) 1.0 (3.6) (460) a/ 1973 Colombian pesos. 5.14 For telephones, public markets and the slaughterhouse operations tariffs in real terms were below, and costs above expectations. The result was substantial losses in 1.978 for all services versus forecasted profitable operations.  - 14 - Financial Covenants 5.15 As a result of the above-mentioned factors, the borrowers' compliance with the financial covenants (para. 2.07) was poor. The situation in 1978, the last year of the appraisal projections, and in 1979 is summarized below: Actual Requirement 1978 1979 Water and Sewerage 9% Return 2.0% 0.0% Telephones 12% Return 6.0% 9.0% Markets 0.85 Operating Ratio 2.91 3.02 Slaughterhouses 0.85 Operating Ratio 1.50 1.60 5.16 Compliance with the financial covenants in each service would have resulted in much improved financial performance and reduced or eliminated the requirements for Government contributions to support operations. The reason why tariffs for all services failed to be increased on the surface appears to be political, but the Municipal Council's reluctance to raise charges commen- surately with costs reflects the perception that the low family incomes which prevail in Palmira are too low to permit full cost recovery. Whether or not incomes are really low compared to other areas in Colombia is not known since no statistics on income levels in Palmira are available. With respect to water supply, there are virtually no wealthy residential consumers or large commercial and industrial consumers which through progressive tariffs could subsidize the low income consumers. Telephone tariffs were satisfactory until 1978 when a large debt service burden commenced. In 1980 they were reinstated to appropriate levels. Market and slaughterhouse rates appear to be kept low as a way to subsidize food prices and small business in the case of markets. Future Finances 5.17 At the present time, EPMP remains in a difficult financial position even though tariff increases for all services have been or were expected to be made in 1980. After payment of a heavy debt service burden, the Borrower will have no funds to construct the distribution improvements which were deleted from the project in 1973 (para. 3.08) in order to solve the financial problems then facing EPMP. VI. Institutional Performance and Development 6.01 The appraisal report noted the adequacy of EPMP's organizational structure which basically remained unchanged throughout the period of project execution. The General Manager nominated for a two-year period in January 1971 was considered capable. It was recommended that management assistance be provided to correct deficiencies in accounting, billing and financial planning.  - 15 - 6.02 Since 1971, EPMP has had three new general managers of which only one, who held office in 1972-73, lacked adequate qualifications. The institu- tional technical assistance provided for in the project was implemented in 1972 by a team of PAHO consultants, and the report and recommendations provided the basis for a number of procedural changes in the financial and commercial operations of EPMP. The changes in the General Manager position were less frequent than is typical in Colombia, and it appears that the relative stability of management and its dedication to service have steadily improved the operations of EPMP. The incumbent General Manager has held his position since January 1977, and at. present EPMP is a capably managed public utility. Because of low pay scales and the small city environment, however, the turnover of qualified professional staff has been high. VII. Economic Re-evaluation 7.01 The internal financial rate of return on the project was calculated on an incremental basis which attributed all of EPMP's projected operating income before depreciation above the level which prevailed in 1970 to the project. The result was a. calculated internal financial rate of return on the project of 19.9% which is grossly overstated since only the incremental income should have been attributed to the project. To eliminate this overstatement, the internal financial rate of return has been recalculated using appraisal data but calculating benef'its by multiplying the incremental sales volume expected to be generated by the project times the projected operating income before depreciation per m3 sold. The recalculated rate of return on the project is 9.8% (Annex 8). The ex-post calculation of internal rate of return based on actual incremental sales volume and actual tariffs (all values stated in real terms) results in a return of 0.4%. The much lower return is explained both by lower incremental sales volume and lower real tariffs which in 1978 were 53% and 42% lower,respectively, than appraisal report projections. 7.02 Had the project been completed in accordance with the appraisal schedule, revenues would have been an estimated 13% higher in 1974 and 40% higher in 1975, producing an increase in net income equal to Col$6.0 million (current). This amount assumes no increase in tariffs. The earlier avail- ability of water may have had a greater impact by making it possible to raise tariffs as a result of the improved service. Whereas the additional revenue would have been helpful, it would not have compensated for inadequate tariffs which was and continues to be the cause of EPMP's financial problems. 7.03 The project's rate of return would have improved with an on-schedule completion, but not significantly. With a three year implementa- tion period, the rate of return would have been 0.5% instead of 0.4%. VIII. Project Justification 8.01 The project was originally designed in 1969 to produce potable water for Palmira's increasing population. It was successful in doing this as at present an estimated 98% of Palmira's population is served with  - 16 - water, compared with 94% in 1970. Water demand in 1978, which was the design year for the facilities, proved to be about 60% of that forecasted at the time of appraisal (para. 5.05). As a result of a reduction of unaccounted-for water from 49% in 1978 to about 30% currently, and a lower rate in demand growth than expected, supply and treatment facilities can now be expected to meet 100% of the demand through 1991. However, the distribution improvements deleted from the project may be required to adequately distribute the available supply prior to this date (para. 3.07). 8.02 A water supply project in Palmira was necessary, even at lower- than-predicted water consumption growth, as the existing treatment plant was inadequate (in terms of both quantity and quality), system water losses were high (45%), deliveries to about one-fourth of Palmira's customers were unmetered, the distribution system was in need of repairs, and pollution from sewage had to be reduced. The project represented a major step towards satisfying these needs. The project also was successful in improving EPMP's institutional performance (para. 9.02), but did not achieve the objectives of improving financial performance (para. 5.01) or the expected internal rate of return in the project (para. 7.01). IX. Bank Performance Appraisal Issues 9.01 There were no major issues raised during appraisal other than the tariff rates. EPMP was considered to be a fairly well managed utility which needed no more than the typical institutional covenants. The project was considered to be satisfactorily prepared by both the Bank and EPMP. Demand projections which were not an issue proved to be grossly overestimated because of an inadequate data base and the assumption of optimistic growth rate (para. 5.07). Also, more time should have been allowed for delays in the estimate of time required for project completion. Loan Supervision 9.02 Because of financial difficulties which became apparent in 1972, the project was regularly supervised. From the time of the loan effectiveness on December 29, 1971 to the completion of project in June 1980, there were a total of 22 supervision missions (Annex 9). It should be noted that visits to Palmira were typically of 1-2 days?duration which were made during longer missions for projects in Bogota and Cali. The visits were followed by mission reports highlighting deficiencies and by letters and discussions with EPMP's management and municipal and national government officials urging that correc- tive actions be initiated where required. Suggested actions covered all aspects of the project: management, personnel practices, construction, finances, procurement, engineering, tariffs and others. The advice and pressure was instrumental in improving operations, but was not successful in obtaining timely tariff increases which were needed to improve EPMP's financial situation. Atno time did the Bank considered suspension of disbursements or modifying the covenanted requirements.  - 17 - Borrower's Opinion 9.03 The Borrower is pleased with the results of the project and with the performance of the Bank during project supervision. A statement of the present General Manager regarding the project is given in Annex 10 and the comments with respect to the role of the Bank are presented below: "As a source of financing for the external component, the World Bank has had a positive impact on the meeting of the technical standards set for the project and also in the formulation of a set of recommendations for the Authority's administrative and financial management which created the essential groundwork for achievement of the proposed objec- tives. Disbursements were made on time and the information on account status and repayment mechanisms was very clear. Further, the comments on the financial statements influenced the decision taken by the Manage- ment and Board regarding expenditures and tariffs, while the procedures for contract award were such that the interests of the Authority and the return on available resources were protected. We also have to acknowledge the contribution of Bank officials who visited the Authority and who always showed a desire to help and to understand the technical financial, administrative and political difficulties with which we had to contend." X. Conclusions and Lessons Learned General 10.01 The project was successful in expanding EPMP's water production and treatment capacity and improving sanitary conditions in parts of the city. At the completion of the project, almost 100% of the population of Palmira was served with potable water. However, if the full benefits of the project are to be realized in the future, the distribution mains and storage tanks deleted from the project in 1973 must now be constructed. Unfortunately, EPMP's financial performance did not improve as a result of the project. Technical 10.02 Technical execution of the project fell short of expectations in that implementation took longer than estimated by the appraisal team (paras. 3.03 and 3.04). Work on the various project components began 12 to 48 months after appraisal estimates. The problem was with initiation of the works. Once the work began, the various components were completed within appraisal estimates. While these delays had little effect on the project's internal financial rate of return, the impact they had on nominal construction costs was substantial. As a result the project scope had to be reduced (para. 3.07). Revenues were affected to a lesser extent. Had the project been completed on schedule, the cumulative additional net income realized from the project would have been only Col$6.0 million (current pesos).  - 18 - 10.03 The regularity with which delays occur in practically all Bank projects suggests that a more careful analysis of project execution time by Bank appraisal teams is required. Perhaps it is time that the Bank face up the fact that the projects in developing countries are going to take longer to implement than is the case in developed countries. In the past, appraisal implementation schedules have served more as targets, rather than realistic schedules. Bank appraisals should continue to estimate comple- tion times under realistic conditions. However, the appraisal could also determine the effect of delayed implementation on the following aspects of the project: (a) current project costs; (b) internal rate of return; and (c) revenues. A contingency plan could also be proposed for overcoming the adverse effects of delays, such as increasing the project cost contingencies or designating certain project components to be eliminated from the project, if not initiated by a certain date, so that costs do not escalate beyond the financial resources of the implementing agency. 10.04 The time required for the loan to become effective was also underestimated by the Bank. In retrospect, the 69 days allowed initially to put in place a tariff increase and obtain additional financing was too short. On the other hand, the 218 days it actually took was excessive. The period allowed or effectiveness should be based on a realistic assessment of the time required to meet the conditions. Also, as a way of saving time, the borrower should have been encouraged to proceed with bidding immediately after loan signing, indicating in the bidding documents that the contract award would be contingent on loan effectiveness. 10.05 The problem of overestimation of demand has plagued all of the Bank's water supply projects in Colombia during the past decade. The result has been that a number of projects have been oversized, thus making scarce resources unavailable to others who are in need and making it difficult for the owners of the oversized projects to pay for them. The Palmira project is a typical example. It is good banking practice to alert a borrower that he is overextending himself and even to decline lending beyond prudent limits of the Borrower's capacity. In the case of the development banks, this is more than a good practice. It should be a duty. The lesson learned from this project is that more care must be taken with the preparation of demand projections. Projections which simply extend past trends are not good enough. Social, economic and geographical factors must also be taken into account. Where the factors affecting future growth are not clear, the low and high estimates of demand should be prepared along with a sensitivity analysis of project cost to demand growth rate. Financial 10.06 EPMP's financial performance did not improve as a result of the project, even though there were clearly defined financial criteria for each service and constant pressure by the Bank to meet these criteria. As a consequence, EPMP does not now have the financial resources to under- take the works that were postponed which are now necessary to realize the full benefits of the project as originally conceived. EPMP's reluctance to raise tariffs seemed based on the fact previously noted that almost the entire population has low incomes and there are few industrial and  - 19 - commercial customers, whLch could facilitate any cross-subsidization between high-income and Low-income consumers. However, it is likely that the consumers in Palmira would have been willing to pay for high service standards if EPMP had pul: to them the alternative of lower service levels. Bank Management of t:he Project 10.07 Part of the responsibility for the failure of the project to meet its financial objectives was the Bank's leniency in dealing with EPMP's failure to comply with the loan covenants. The project files do not show any record that enforcement of Bank remedies or modification of the covenants were considered as possible avenues for bringing EPMP into compliance. In retrospect, the Bank should have been more forceful. Bank pressure can be a useful tool for the managers of water utilities to overcome low tariff policies forced on them politically.   LOAN 738-CO PROJECT COMPLETION PALMIRA WATER SUPPLY AND SEWERAGE PROJECT Construction Schedule 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 121314 23 1 2134 123 1124 1123 Intake and Raw Water Line m L L L Treatment Plant Transmission Line a Distribution trcs/ostutin System _ M ml ml me MO-so Sewerage Works U lst Phase Sewverage Works Revision Appraisal Treatment Plant Original Program Revised Additional Work Completon Date Start-up Date Completion Date Completion Date in Actual Contracts/Construction. WrdBn 22 m in=Appraisal Report Schedule. WrdBn 22  - 22 - ANNEX 2 LOAN 738-CO PALMIRA WATER SUPPLY AND SEWERAGE PROJECT Disbursement of Loan Funds (US$) Bank Fiscal Year Appraisal Actual 1971-72 436,000 - 1972-73 1,665,000 66,602 1973-74 2,000,000 512,911 1974-75 844,459 1975-76 1,446,537 1976-77 1,602,991 1977-78 1,651,471 1978-79 1,661,181 1979-80 1,802,835 1980-81 2,000,000  WAN 738-CO PALMIRA WATER SUPPLY AND SEWERAGE PROJECr EMPRESAS PUBLICAS MUNICIPALES DE PALMIRA Comparison of Completed Works with Appraisal Project Project Completed component as appraised Revised Added Deleted Remarks Nima river intake X Holding dam X Optional item identified during appraisal. 27" raw water main X Renovation and expansion of X Completed in accordance with appraisal report existing treatment plant to description. Actual capacity is 1.200 Ips. 1,500 lps Schedule I of the L.A. lists capacity as 900 lps. Reason for inconsistency between appraisal report and loan documents is unknown. Two treated water storage tanks of 12,000 m each X Deleted in 1973 to maintain project cost vithin EPMP's financial resources. 27" treated water main from the X treatment plant to Palmira Distribution system extensions: X 3" through 14" mains constructed as appraised. 3" - 2,155m; 16" and larger mains deleted in 1973 to maintain 6" - 10,690m; project cost within EPMP's financial resources. B. 2,970m; 10" - 8,905m; 12" - 2,520m; 14" - 1,990m; 16" - 1,020m; 20" - 4,196w; 24" - 1,175m; 27" - 700m; and 36" - 810n. [louse connections X Approximately 10,000 new connections added during the project. Repairs were made to 2,000 more. Sewerage and drainage - X S-LI; S-l; P-C8 Sewerage and drainage - X Identified during appraisal as standby projects, S-C2; Rio Palmira Canal; and added in 1978 to utilize US$348,000 in P-NI; and P-N2 undisbursed loan funds. Maintenance equipment - X Added in 1978 to utilize US$348,000 in undisbursed generator, vacuum sewer loan funds. cleaning truck, compressor Consulting serviceb X  - 24 - ANNEX 4 LOAN 738-CO PALMIRA WATER SUPPLY AND SEWERAGE PROJECT Allocation of Proceeds of Loan Loan Agreement Actual Category -----------US$ equivalent