Singapore - Sewerage Project

RESTRICTED Report No. TO-644a This report was prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for its accuracy or completeness. The report may not be published nor may it be quoted as representing their views. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION APPRAISAL OF THE SINGAPORE SEWERAGE PROJECT SINGAPORE June 12, 1968 Projects Department  CURRENCY EQUIVALENTS Currency Unit = Singapore Dollar (S$'); US$1.00' = S$53.00 S$1.00 - US$O.33. S$1,000,000 =- US$333,,333 WEIGHTS AND MEASURES gallon = imperial gallon 1.2 U.S. gallons 4 4.54 liters million gallons= 4546 cubic meters ABBREVIATIONS IMg = million imperial gallons IMgd = million imperial gallons per day gpcd =- gallons per capita per day FISCAL YEAR January I throu-gh December 31  APPRAISAL OF THE SINGAPORE SZUEERAGE PROJECT SINGAPORE TABLE OF CONTENTS Page No. SUMMARY i 1. INTRODUCTION 1 2. BACKGROUND A. Sewerage Development in Singapore 2 B. The Present Sewerage System 3 3. THE PROJECT A. Main Technical Features 6 B. Estimated Costs 7 C. Procurement and Disbursement 8 D. Planning, Engineering and Construction 8 4. JUSTIFICATION OF THE PROJECT 10 5. THE SEWERAGE BRANCH A. Nature of the Entity 12 B. Organization, Administration and Activities 12 C. Accounting and Auditing 14 D. Operating Costs 15 E. Sewer Service Charges and Sources of Funds 16 6. FINANCING PLAN AND FUTURE FINANCIAL POSITION A. Financing Plan 20 B. Future Financial Position 21 7. CONCLUSIONS AND CONDITIONS OF LENDING 22 This Report is based on the findings of missions in July and November 1967 to Singapore composed of Messrs. P. Callejas and P. F. Lu.  -2- ANNEXES 1 Population Trends 2 Trend of Sewage Flows and Treatment Capacity 3 Summary of Project 4 Cost Estimates and Yearly Disbursement Program 5 Public Works Department Organization Chart 6 Sewerage Branch Organization Chart 7 Summary of Sewer Service Charges and Fees 8 Income Statements; 1962-1967 9 Cash Flow Statements; 1962-1967 10 Proforma Income Statements; 1968-1976 11 Proforma Cash Flow Statements; 1968-1976 12 Proforma Balance Sheets; 1967-1976 13 Proposed Rate Increases and Expected Results 14 Financial Assumptions MAPS 1 Existing Sewerage System 2 Proposed Sewerage Project  -1- APPRAISAL OF THE SINGAPORE SEWERAGE PROJECT SUIYARY The Government of the Republic of Singapore has requested a Bank loan to assist in financing a sewerage project comprising about 95% of Singapore's sewerage extension and improvement program for the period 1968 through June 1972. The project includes the ccnstruction of sewers and pumping stations in nine areas, modification and expansion of three existing treatment plants and miscellaneous improvements and extensions to existing pumping stations and sewers. ii. The total cost of the proposed project is estimated at S$67.2 million (equivalent to US$22.4 million) including interest during con- struction. The proposed loan of US$6.0 million would be used to meet about 77% of the foreign exchange costs. The balance of the project expenditures would be covered by appropriations from the government's development funds. iii. The borrower would be the Government of Singapore and the project would be carried out by the Sewerage Branch, a division of the government's Public Works Department. iv. The sewerage project is an important element in Singapore's overall development plan. It is essential to the housing, urban renewal and industrial estate sectors on which the government is concentrating wvith success in the present five-year plan (1966-1970). The project is technically sound, the estimated costs and time schedule are reasonable and the proposed arrangements for design, procurement and construction are satisfactory. The Sewerage Branch is qualified to carry out the project and operate it efficiently. v. The financing plan is appropriate. Direct user charges for sewer service would be raised in steps to yield revenues sufficient to cover operating expenditures, including depreciation, and eventually to bring an appropriate financial return on Singapore's sewerage investments. vi. With the assurances obtained from the government during negotiations (paragraph 7.03), this project is suitable for a Bank loan of US$6.0 million for a period of 20 years including five years grace.  APPRAISAL OF THE SINGAPORE SEWERAGE PROJECT 1. INTRODUCTION 1.01 The Government of the Republic of Singapore has applied for a loan from the International Bank for Reconstruction and Development to help finance a sewerage project. This report covers the appraisal of the proposed project. 1.02 The project would comprise about 95% of Singapore's sewerage program during the period 1968 through June 1972. It would include expansion and improvement of existing sewage treatment and sludge disposal plants, the installation of sewers and the erection of pumping stations in nine separate areas and miscellaneous extensions and improvements to existing sewers and pumping facilities. 1.03 The estimated total project cost is S$67.2 million (equivalent to US$22.4 million) including interest and commitment charges of about US$1.3 million on the proposed Bank loan during construction. Foreign exchange costs excluding the interest during construction would be equi- valent to about US$6.5 million and the proposed loan of US$6.0 million would cover about 92a of these costs. The balance of the project costs uould be met by appropriations from the Govrerrmert of Singapore' s development funds. 1.04 The borrower would be the Government of Singapore. The executing agency would be the Sewerage Branch - a division of the government's Public Works Department - which has the responsibility for all sewage disposal facilities in Singapore. 1.05 This appraisal is based on the findings of Bank missions to Singapore in July and November 1967, consisting of Messrs. P. Callejas and P. F. Lu, on information submitted to the Bank by the Government of Singapore and its consultants during 1967 and 1968, and on the work of the Bank's economic mission to Singapore in February/March 1968. A number of factors contributed to the time required to complete this appraisal, aside from the fact that the project is a new type for Bank consideration. There were difficulties in compiling satisfactory financial data and projections from the available accounting information. Engineering studies by consultants, engaged by Singapore after the initial appraisal mission, were necessary to properly identify and confirm the estimated cost of key project components; and finally there were difficulties in determining revenue requirements for sewer service in Singapore.  -2- 2. BACKGROUND A. Sewerage Development in Singapore 2.01 The City of Singapore started constructing its main sewerage system in 1912 when the island had a population of about 325,000. The initial system served three areas in the heart of the city, each with facilities to pump sewage to a central treatment plant at Alexandra Road. The expansion of Singapore's sewerage system since its start is indicated by the table below and is plotted in Annex 1 (trend of total and sewered populations) and in Annex 2 (trend of sewage flows and installed treat- ment capacity). Estimated Population Annual 1/ Served by Main Increase in Average- Total Sewerage System Population Dry Weather Singapore (Percent Served Sewage Flows Year (thousands) (thousands) of Total) (Percent) (IMgd) 1917 325 25 8 1.0 7.2 19Lt9 1,050 230 22 8.0 9.1 1959 1,610 550 3h 20.5 7.2 1966 1)930 900 h7 35.3 2.02 For the years 1960 through 1966 the average annual increase in population served was about 50,000; the apparent increase in 1966 alone was about 72,000 (8.7%). About one-third of the sewers and pumping mains in use at the end of 1966 were constructed after 1959, and the pace has been increasing steadily; sewer construction averaged about 25 miles per year during 1964, 1965 and 1966. 2.03 In 1961, the City Council of Singapore was integrated into the Government of Singapore and its various functions were assigned to other departments or agencies of the Central Government. The responsibility for sewerage and sanitary installations in the City of Singapore was transferred fram the City Engineer's Department to the Sewerage Branch, P.W.D. (Public Works Department). Responsibility for storm water drainage was assigned to the P.W.D.'s Drainage and Marine Branch. 1/ A convention for expressing sewage flows based on measurements taken during periods when flows are not distorted by storm water.  -3- B. The Present Sewerage System 2.04 At the beginning of 1967 the estimated population served by the main sewerage system was about 900,000 or about 847p of Singapore's 1.9 million people. An additional 130,000 to 150,000 people were served by secondary sewerage systems (paragraph 2.08). The balance of about 850,000 people was served by the conservancy system (house-to-house collection of night soil buckets by Department of Public liealth). 2.05 The averap dry weather sewage flows in the main system during 1966 were 35.3 IMgd- , equivalent to about 40 gpcd (gallons per capita per day) for the population served. Short term peak dry weather flow rates ranged from 1.75 to 2.5 times the average in the various parts of the system. These flows are consistent with water use and other data available for Singapore. However, during wet weather, flows of up to 4.0 times the average occur for a few hours at a time in the older areas, indicating the amount of storm water which enters the system, most apparently from courtyard drains. This condition leads to installation of larger sewerage elements than would otherwise be necessary, with corresponding capital and operating cost increases, to prevent objectionable sewage overflows. However, there is little that can be done except to look forward to elimination of the drains in the city's extensive urban renewal program (paragraphs 4.01 and 4.02). 2.06 The principal elements of the existing sewerage system are shown on Map 1. In 1967 there were about 400 miles of sewers and pumping mains ranging from 6 to 72 inches in diameter which served about 150,000 housing units and other premises through about 100,000 connections. The sewers and pumping mains averaged only about 2.5 linear feet of pipe per capita served, emphasizing the high population density in the sewered areas and the compactness of the system. Due to the nature of Singapore's terrain, most of the sewage must be pumped to the treatment plants - about 30% is pumped twice - and there are 23 pumping stations. 2.07 Sewage is treated at two plantq, Ulu Pandan and Kim Chuan,-/ employing the activated sludge process... The Ulu Pandan plant, located on the southwest side of the island, was built with a rated dry weather capacity of 24 IMgd to serve 400,000 people, although sludge treatment capacity was provided for 300,000 only. The effluent is discharged to 1/ About 4570 of the total water sales of 78.5 IJgd during 1966. 2/ The original, centrally located Alexandra Treatment Plant w7as taken out of service and the land appropriated for development purposes when Ulu Pandan Plant was completed in 1961. 3/ A widely used biological process for removal or stabilization of up to 95% of the putrescible organic matter in sewage by contact with media of living organisms (activated sludge) mixed with the sewage and maintained in suspension with diffused air which also provides the dissolved oxygen required for the process.  the Jurong River and some is being used after furthor treatment, as a source of industrial water for the Jurong Industrial Estate. The Kim Chuan plant is located in the northeast part of the island; the effluent is discharged to the Serangoon River. WThen a large expansion project is completed in 1968, it wqill be rated at 30 Dtgd. The combined capacity of Ulu Pandan and Kim Chuan is then expected to be adequate for about 1,150,000 people. The Serangoon Sludge Disposal Plant, about two miles from Kim Chuan, is intended to achieve secondary digestion and disposal of the primary digested sludge from Kim Chuan because of the lack of space at Kim Chuan. All three of these plants utilize gas generated from sludge digestion as the major source of energy for the treatment processes. 2.08 Aside from the main sewerage system, there were about 1,400 small secondary systems which had been constructed (under Sewerage Branch super- vision) by other government agencies or private developers to serve areas where the main system is inaccessible. Altogether these serve about 18,000 properties and utilize septic tanks or other minor treatment and disposal facilities. As the main system is extended, the secondary treatment facilities are abandoned and the tributary sewers are connected to the main system. 2.09 Wiith some exceptions, the existing sewerage system is well planned and maintenance is very good. The most notable deficiency in the system is at the Kim Chuan Treatment Plant where a so-called "partial activated sludge" process was a technical mistake and the plant, completed in 1940 and later expanded on the same basis, has been very unsatisfactory. Major changes and additions now under construction should correct this problem when they go into operation during 1968. The Serangoon Sludge Disposal Plant is affected by the poor Kim Chuan operations but also suffers from under- capacity and poor design of its own facilities. Sludge treatment facilities at Ulu Pandan also are inadequate to serve the tributary population. As a whole the system is deficient in flow measuring devices at pumping stations and treatment plants. 2.10 For the most part, in operating the sewerage system, the Sewerage Branch- appears to be doing fairly well in making the best of the system deficiencies mentioned above. However, in the course of preparing this project for Bank consideration, the Sewerage Branch has discovered a number of necessary or possible operating improvements of which it probably hadbeen aware but which had not received sufficient attention. In recent years the system has growJn rapidly more complex. Operation of the many pumping installations and the sophisticated treatment processes requires a constant program for analyzing operations, experimentation and adjustment. But the Sewerage Branch had not managed to establish operating records suitable for the system or effective programs for data collection and investigative work; 1/ Section 5 includes further discussion of the Sewerage Branch.  nor had it sought necessary outside engineering advice on how to adjust operations to make the best possible use of some of its plant. As a result, operating practices have been adhered to with little awareness that they had become outmoded and unsuitable for existing circumstances and conditions. The Sewerage Branch has now moved these operational shortcomings to the forefront of its current concerns. It has engaged engineering consultants (J.D.&D.M. WJatson of England) and has recently received preliminary advice from them on these matters. During negotiations assurances were obtained that the Sewerage Branch would establish and maintain a continuous program of data collection, analyses and investigation, including the installation of dependable flows measurement devices at appropriate locations in the system. This program should provide adequate information on populations served, sewage flow patterns and trends, sewage characteristics and treatment effectiveness which will be used as the basis for operating improvements and the detailed design of future system extensions.  -6- 3. THE PROJECT A. Main Technical Features 3.01 The proposed project would include 95% of the capital investment program for sewerage in Singapore during the period 1968 through June 1972. The project is described in Annex 3 and the locations of the principal elements are shown on Map 2. 3.02 Nine area sewerage programs provide for construction of main sewers and pumping stations to serve new housing developments of the Housing and Development Board, the Jurong Industrial Estate and adjacent residential sections, the South and North Urban Renewal Areas and the Kallang Basin Redevelopment Area. The project also would include mis- cellaneous improvements to existing pumping stations and extensions to the system of main and minor sewers throughout the city. 3.03 The average dry weather flow capacity of the Ulu Pandan Sewage Treatment Plant would be increased from 24 to about 36 IMgd, which should be adequate to serve more than 600,000 people. Sludge treatment and disposal facilities at Ulu Pandan would also be expanded, some as much as 100O and a variety of modifications and improvements would be made at the plant based on recommendations made by the consulting engineers (paragraph 2.10) after a review of operating experience. 3.04 The sludge treatment and disposal facilities at the Kim Chuan Treatment Plant and its attendant facility, the Serangoon Sludge Disposal Plant, would be modified to improve their effectiveness and some elements would be expanded by as much as 400%. When completed these facilities should be adequate for a tributary population of about 750,000 people, matching the sewage treatment capacity at Kim Chuan. 3.05 Capital expenditures of S$3.2 million (US$1.1 million equivalent) for sewerage facilities to be completed during the project period have not been considered as part of the project. Contracts for these facilities were awarded in 1967 or earlier and the remaining expenditures consist mainly of final payments to contractors and suppliers. Minor sewers required to complete many of the area sewerage programs are not included in the project because they are to be provided by the real estate developing agencies as part of their development costs.  -7- B. Estimated Costs 3.06 The total cost of the project is estimated to be S$67.2 million (equivalent to US$22.4 million) including interest during construction. The estimates are summarized below and given in detail in Annex 4. In Singapore $ In US$ Local Foreign Total Local Foreign Total ------------------millions------------------- Treatment Plant Expansions and Improvements 7.76 3.94 11.70 2.59 1.31 3.90 Area Sewerage Programs 20.34 8.90 29.24 6.78 2.97 9.75 Miscellaneous Improvements and Extensions 8.20 2.83 11.03 2.73 0.95 3.68 Contingencies 7.27 3.13 10.40 2.h4 1.04 3.45 Total Construction Costs h3.57 18.80 62.37 1.52 6.27 20.79 Consulting Services 0.20 0.80 1.00 0.07 0.27 0.34 Interest and Other Financing Charges During Construction 0.00 3.79 3.79 0.00 1,26 1.26 Total 43,77 23.39 67.16 1h.59 7.80 22.39 3.07 The cost estimates are reasonable. They were prepared by the Sewerage Branch and the engineering consultants, based on some final but mainly preliminary designs for the various project elements. The major part of the basic cost data comes from actual experience on similar recent sewerage work in Singapore. The individual items in the estimate include appropriate provisions for freight and insurance. The allowance for escalation and contingencies amounts to about 20% of both the estimated local currency and foreign exchange construction cost components. This comparatively high allowance is suitable in this case due to the long construction period, the preliminary status of much of the design and the uncertain nature of much of the work involving deep excavation in con- gested areas. The consulting costs include additional technical studies relating to the exparsion programs for the Ulu Pandan, Kim Chuan and Serangoon Plants (paragraphs 2.10, 3.03 and 3.04) plus detailed engineering design of the new treatment facilities. A small amount is included in the local currency component of the consulting item to cover management advice (paragraph 5.07). The estimated costs do not include expenditures on existing contracts for programs nearing completion (paragraph 3.05), but these costs are shoin in the total capital investment by the Sewerage Branch during the project construction period (paragraph 6.01 and Annex 4).  C. Procurement and Disbursement 3.08 Supply and construction contracts for the project will be awarded on the basis of international competition. The procedure now followed by the P.W.D. in obtaining bids and awarding contracts can be used with a few minor changes, such as wider advertising and public opening of bids. Agreement on these procedures was reached during negotiations. Also during negotiations, the Bank agreed to allow a degree of preference for domestic over foreign suppliers when evaluating bids for supply contracts. The margin of preference would be limited to the amount of the relevant customs duties on the imported products which are low and are unlikely to increase significantly because of Singapore's declared policy for maintaining its position as a free trading nation. This agreement cannot be expected to have much of an effect on the bidding results or estimated foreign exchange costs because local products, such as pipe, which could be used on the project are competitively priced, usually win contracts without benefit of domestic preference, and the cost estimates have been made on this basis. The local construction contractors are competent and expected to win most of the contracts for buildings and pipelines. 3.09 The amount of Bank financing proposed for the sewerage project would be US$6.0 million (equivalent) to cover about 92% of the estimated foreign exchange costs excluding interest during construction. In the event that foreign exchange costs are less than estimated, the unused balance of the loan should be cancelled. Disbursements from the loan would be for the foreign exchange cost of goods and services required for the project and for which expenditures are made after the date of the loan. In the case of some locally procured goods and services, disbursements for the foreign exchange components would be made as a percentage of their total cost as agreed between the borrower and the Bank. Some project contracts have already been awarded, involving about l10$ of the total project costs, primarily for civil works. It is proposed to disburse about US$250,000 from the loan for payments made after the date of the loan under about six contracts awarded earlier this year, provided they conform to the Bank's procurement requirements1. D. Planning, Engineering and Construction 3.10 Planning, design and construction supervision of the area sewerage programs would be by the Sewerage Branch. The consulting engineers would be called upon to give advice on special technical problems which arise on the area programs. The requirements for sewers, the extent of the service to be provided and the timing of construction is largely dictated by the programs of the Housing and Development Board and the Economic Development Board. Close coordination is required between the two Boards and the Sewerage Branch to assure that the cost of sewerage and the lead time required for construction is fully considered in studying the economics and setting the location and timing for housing developments, urban renewal and industrial estates. During negotiations, satisfactory assurances to this effect were obtained from the government. 1/ The complete details on these contract awards are not yet available.  -9- 3.11 Preliminary techmical studies of expansions and improvements to the existing sewage treatment and sludge disposal facilities have been completed by the engineering consultants (paragraph 2.10) to the extent necessary for defining the project and estimating costs. The consultants would also make the detailed designs and prepare the bidding documents, construction drawings and specifications. Bidding, bid evaluation and construction supervision would be the responsibility of the Sewerage Branch, with assistance as necessary from the consultants. 3.12 The above arrangements for design and construction supervision are satisfactory provided that the PWD is successful in expanding and strengthening the Sewerage Branch engineering staff in order to meet its design schedule for the next four years. Otherwise, additional consulting assistance will be obtained - for some of the work, local structural consultants could be used. 3.13 The time schedule proposed for design, procurement and con- struction of the various project elements is realistic and takes due account of recent experience. Some decisions are still to be made on timing of a few of the area sewerage programs within the overall project construction period since these are dictated by the housing and urban renewal programs. The critical parts of the sewerage program are the works at the sewage treatment and sludge disposal plants. About 3