.4 8 - )s (>0 (1 Z '- /// ilocument ot The World Bank FOR JFt ICIAI L'SE ONLVh Report No. 1 2357-AL STAFF APPRAISAL REPORT DEMOCRPTIC AN) POPULAR REPUBLIC OF ALGERIA WATER SUPPLY AND SEWERAGE REHABILITATION PROJECT MAY 5, 1994 Infrastructure Operations Division Maghreb and Iran Department Middle East and North Africa Regional Office This document has a restricted distribution and may be used by recipients orly in the performance of their official duties. Its contents may not otherwise be disclosed without A arld Bank authorization. EXCHANGE RATE Currency Unit: Algerian Dinar (DA) - 100 Centiies Eguivalency of 1 US5 in DA since 1985 1985 5.03 1986 4.70 1987 8 4.85 1988 5.92 1989 7.46 1-990 8. (10 1991 17.35 199? 22.49 1993 22.00 1994 (APRIL 12) 36.00 ABBREVIATIONS bbl/d : barrels per day mm : millimecer ha : hectare MM3 : million of cubic meters Km kilometer MMT : million of metric tons lcpd : liters per capita per day m3/ : cubic meters per second GLOSSARY OF ACRONYMS AGEP : Agence Nationale de 1'Eatt Potable et Industrielle et de 1'Assainissement AGID : Agence Nationale de Rdalisation et de Gestion des Infrastructures Hydrauliques pour Irrigation et le Drainage ANB : Agence Nationale des Barrages ANID : Agence Nationale d'Irrigation et de Drainage ANRH : Agence Nationale des Ressources Hydrauliques DGAIH : Direction des Grands Amenagements et Infrastructures Hydrauliques DHW : Direction de l'Hydraulique de la Wilaya DRFUE : Direction de la Reglementation, de la Protection et de l'Usage de 1'Eau EPA : Entreprise Publique Administrative EPDEMIA : Etablissement Public de Gestion e; de Distribution des Eaux Kdnageres et Industrielles et de l'Assainissement EPE : Entreprise de Production d'Eau EPEA : Entreprise de Production, de Gestion et de Distribution d'Eau d'Annaba EPEOR : Entreprise de Production, de Gestion et de Distribution d'Eau d'Oran EPIC : Entreprise Publique, Industrielle et Commerciale GOA : Government of Algeria MA : Ministere de l'Agriculture ME : Ministere de 1'Equipement SEDAL : Socift6 des Eaux de l'Agglomeration d'Alger WILAYA(TE) : Province(s) FOR OFFCIAL USE ONLY DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA VATER SUPPLY AND SEWERAGE REHABILITATION PROJECT Table of Contents LOAN AND PROJECT SUMARY . . . . . . . . . . . . . .. . . . . . . . I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . II. THE URBAN WATER SUPPLY AND SEWERAGE SECTOR. . . . . . . . . . . . 3 General Features . . . . . . . . . . . . . . . . . . . . . . 3 Population Distribution . . . . . 3 . . . . . . . . . . . , 3 Water Resources. . . . . . . . . . . . . . . . . 4 Service Levels. . . . . . . . . . . . . . . . . . . . . . 4 Institutional Arrangements . . . . . . . . . . . . . . . . 5 Investments in the Sector . . . . . . . . . . . . . . . . . . 6 Industrial Water Demand . . . . . . . . . . . . . . . . . . . 6 Finances . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Staffing and Management.8 The Bank Experience in the Sector . . . . . . . . . . . . . 8 Environmental Aspects . . . . . . . . . . . . . . . . 9 III. THE PROPOSED PROJECT. . . . . . . . . . . . . . . . . . . . . . . 9 Project Genesis and Concept . . . . . . . . . . . . . . . . . 9 Objectives of the Project . . . . . . . . . . . . . . . . . . 10 Project Description . . . . . . . . . . . . . . . . . . . . . 11 Institutional Reforms . . . . . . . . . . . . . . . . . . . . 12 Cost Estimates . . . . . . . . . . . . . . . . . . . . . . . 13 Project Execution . . . . . . . . . . . . . . . . . . . . . 14 Project Financing . . . . . . . . . . . . . . . . . . . . . . 15 Cost Recovery . . . . . . . . . . . . . . . . . . . . . . . . 15 Procurement . . . . . . . . . . . . . . . . . . . . . . . . . 15 Disbursement . . . . . . . . . . . . . . . . . . . . . . . . 17 IV. PROJECT IMPLEMENTATION AND OPERATION . . . . . . . . . . . . . . . . 18 Executing Agency . . . . . . . . . . . . . . . . . . . . . . 18 Operation and Maintenance . . . . . . . . . . . . . . . . . . 19 Technical Assistance . . . . . . . . . . . . . . . . . . . . 19 Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Project Accounts and Audit . . . . . . . . . . . . . . . . . 20 V. WATER SUPPLY MANAGEMENT . . . . . . . . . . . . . . . . . . . . . 20 Background . . . . . . . . . . . . . . . . . . . . . . . . . 20 Sector Structure . . . . . . . . . . . . . . . . . . . . . . 21 Concessionary Arrangements . . . . . . . . . . . . . . . . . 22 Organization and Management . . . . . . . . . . . . . . . . . 23 Staffing . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Commercial Operations .................... 23 Accotnting System . . . . . . . . . . . . . . . . . . . . . . 24 Other Management Procedures . . . . . . . . . . . . . . . . . 24 This report was prepared and written by Mr. Fritz Rodriguez (MNIIN); Mr. Charles Sterling (MNIIN); and Mr. Alain F. Thys (Consultant). This documt has a rstricted distrbution and may be used by cpient oy in *te pefrmm of their officil dutes Its contents may not otherwie be hdislosed wihout World D *n autoizaton Table of Contents (continued) VI. FINANCIAL ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . 24 Overview . . . . . . . . . . . . . . . . . . . . . . I . . . 24 Past and Present Financial Performsnce . . . . . . . . . . . 25 Revenues and Costs . . . . . . . . . . . . . . . . . . . . . 25 Financing Plan . . . . . . . . . . . . . . . . . . . . . . 27 Future Financial Performance . . . . . . . . . . . . . . . . 27 Monitoring System . . . . . . . . . . . . . . . . . . . . . . 28 VII. ECONOMIC JUSTIFICATION . . . . . . . . . . . . . . . . . . . . . . 28 Project Benefits . . . . . . . . . . . . . . . . . . . . . . 28 Least-Cost Alternative . . . . . . . . . . . . . . . . . . . 29 Economic Return . . . . . . . . . . . . . . . . . . . . . . . 29 Economic Efficiency . . . . . . . . . . . . . . . . . . . . . 29 Environmental Impact . . . . . . . . . . . . . . . . . . . . 30 Institution Building . . . . . . . . . . . . . . . . . . . . 30 Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 VIII. AGREEMENTS REACHED AND RECOMMENDATION . . . . . . . . . . . . . . 31 LIST OF ANNEXES 1. Land and Water Resources 2. Cost of Water Supply Services in 1992 3. Projected Cost of Water Supply Services in 1994 4. Contract Model for Optimizing Water Sttpply Operations 5. Selection Criteria for Sewage Plant Rehabilitation 6. List of Studies and Operational. Equipment to be Procured 7. Program for Upgrading Meteorological Recording Operations 8. Terms of Reference for Management Studies of Surface Water and Groundwater in Soummam Valley 9. Detailed Cost Estima.es 10. Price E&calation Calculation 11. Project Implementation Schedule 12. List of Contracts to be Placed for the Project 13. Estimated Schedule of Disbursements 14. AGEP's Organizational Chart - 1993 15. Terms of Reference for Technical Assistance to AGEP 16. Water S-pply Operations in the Project Area 17. Concesssionary Arrangements for Managing Urban Water Supply Services 18. Contract de Gestion pour l'Exploitation des Services Publics d'Alimentation en Eau Potable 19. Lettre Traitant des Politiques de D6veloppement du Secteur de l'Eau 20. EPEA's Organtzational Chart - 1992 21. EPEOR's Organizational Chart - 1992 22. Proposed Organizational Chart for Regional Water Utilities 23. Terms of Reference for Setting out Commercial Operations of Water Utilities 24. EPEA - Income, Balance Sheet, and Cash Flow Statements 25. EPEOR - Income, Balance Sheet, and Cash Flow Statements 26. Assumptions for Financial Projections 27. Monitoring Indicators 28. Assumptions for Economic Evaluation of the Project 29. Selected Documents and Data Available in the Project File Man- No. IBRD 25235 DEMOMRATIC AM POPUIAR REPUBLIC OF ALGERI WATE SUPPLY AND SW AG U ITATIOX PQJECT LOAN AND RJT S Y Borrowei: : Democratic and Popular Republic of Algeria Not applicable. hmwunit : US$110 million equivalent Zeama : Repayable in 17 years including 5 years of grace, at the standard variable interest rate. Poverty Cateorv: Not applicable. Proiect Descrltion : The project seeks to restructure the urben water supply sector by contracting out a number of its operations, such as leak detection and repair, optimization of meter reading and billing, and network recalibration and mapping, with private entrepreneurs. It advocates the creation of self-financing water utilities that would operate under concession agreements with the Government. To promote water conservation, the report recommends chrArging the true economic cost of the services to consumers. Until now, a national tariff structure has been applied for water services, with no provision for capital consumption and expansion. The project proposes changing this policy by levying regional tariffs that would cover both operating and maintenance costs, and the concession fees. The Government would use these fees to finance asset renewal and expansion. As large volumes of water produced are now unaccounted for, the project includes a network rehabilitation program aiming at reducing water losses. Most wastewater treatment plants in Algeria are currently inoperative. As a result, water pollution is spreading around the large urban agglomerations, damaging the natural environment. To mitigate these damages, the project proposes the rehabilitation of a number of existing wastewater treatment plants. Under the project, institutional development assistance would be provided to three specialized agencies of the Ministry of Equipment: AGEP, ANB, and ANRH. This assistance would aim at improving project evaluation procedures in these agencies. Project benefits would encompass the recovery of 32 Mm3 of annual water production that is now lost, and substantial improvement of water quality in the country. Project execution faces some risks relating to the Government not living up to its obligations under the concession agreements. Other - ii 1 risks r late to the extent and cost of the rehabilitation works, which cannot be determined accurately, and to possible slow pace of their execution. These risks are inherent to the nature of that type of works. To minimize the first risks, Bank review and approval of the concession agreements is proposed, to be followed by a mid-term review in the summer of 1997. To diminish the second ones, a number of seminars are - scheduled to take place at project inception, to discuss strategies for quick project implementation. Fstimated Cost C al Foreign Total -US$ Million- Water System Rehabilitation 24.5 46.0 70.5 Sewage Plant Rehabilitation -.5 7.8 ..L Subtotal 30.0 53.8 83.8 Physical Contingencies 3.0 5.4 8.4 Project Impiementation 1.8 3.2 5.0 Project Preparation 1.5 10.0 11.5 Operational Equipment 0.8 8.7 9.5 Institutional Development 9.O 112 Total Base Cost (Mid-1993 prices) 39.3 90.1 129.4 Price Escalation 2L2. 19.9 40.6 TOTAL PROJECT COST1 60. 11.0. Financimg Plan Concession Fees 54.1 -- 54.1 Government 5.9 . 5.9 IBRD - 110.0 Total Sources 60.0 110.0 170.0 Zstmated Disbsementg BkE* 1995 199£ 1222211222 2 21 Annual 7.3 15.4 19.2 18.9 17.6 15.6 11.3 4.7 Cumulative 7.3 22.7 41.9 60.8 78.4 94.0 105.3 110.0 Economic Rate of Return About 17 percent on the aggregate investments, excluding those for reaabilitating existing wastewater treatment plants, accounting for about 12 percent of the total project cost. Staff AnRraisal LenoOt : 12357-AL IBRD 25235 I/ Inoclud,, 55816.S mllion .quvalemt in taes mad dutlsa. DEMOCRATIC AnE POPULAR REPUBLIC OF ALGERI WATER SUPPLY AND SEWERAGE REHABILITATION PR.OJECT STAFF APPRAISAL REPQRT I. INTRODUCTION 1.01 This report appraises a work program for the rehabilitation of urban water supply and sewerage services in Algeria during the period 1994-2000. There are currently many flaws in the way these services are provided in this country. The supply is interLittent, with insufficient pressure. Almost 45 percent of the volumes of water producedl are unaccounted for, thus not available to meet consumers' demand. With respect to sewerage, most of the wastewater generftted in the urban areas is d.'scharged untreated in the river system and the Mediterranean Sea. A number of wastewater treatment plants have been built in the last twenty years, but most of them are currently inoperative. Other operational aspects in the sector are also in great need of reform. The existing water distributors are public enterprises legally defined as commercial and industrial entities (EPIC), and as such, under Algerian legislation, have possible access to Government subsidies for both capital investments and operations. In some cases, tariffs are insufficient to meet operational requirements, and inefficiency permeates the sector. 1.02 This poor performance, however, should not be attributed to Govern- ment's neglect of the sector. Between 1974 and 1989 the Government made a total investment of US$4.2 billion in the sector, increasing per capita investments from US$48.0 in 1974 to US$102.0 in 1989. A number of institutional reforms were also undertaken during the same period. From a centralized management at the beginning, regional organizations were subsequently set up to manage water supply and sewerage in the country. These reforms, however, were not accompanied by necessary financial measures. Until recently,water has not been considered an economic good, and the Government has not attempted to charge its real cost to consumers. This approach, however, is now being revised as the Government has taken a number of actions aiming at introditeing more efficiency in the sector management. These include a recent doubling of tariffs, a program for full metering of water consumption,and enforcement of regulations governing the management of water utilities in the country. 1.03 The Bank has been active in the sector since 1978, and so far has made five loans for urban water supply and sewerage works. Except for the last one, these loans financed projects in the taree largest cities in the country, Algiers, Oran, and Constantine. The fifth loan financed works in medium-size cities. Through these loans, an attempt was made to strengthen the sector institution. Though not always successful, it has nevertheless led to major improvement of water supply services in the large urban areas. It has advocated the application of more realistic user charges, the establishment of self- accounting entities to manage the services. A large tariff increase that took effect in early 1993, was in response to the Bank's advocacy for more efficiency in the sector. From a municipal department in 1978, the water service in Algiers has evolved to a semi-autonomous entity. Similar evolution has taken place in other cities involved in the Bank-financed projects. - 2 - 1.04 The previous projects, together with the structural reforms that they tried to achieve, were confined to specific areas. The proposed project is taking a bolder approach to institutional reforms in the sector. It advocates taking a first step in the path to privatization of the management of water services in Algeria. It calls for the establishment of self-accounting entities, for more efficiency in providing the services,and for developing national expertise in water resources management. The proposed project follows recommendations of a recently completed sector report on a strategy for the development and management of water resources in Algeria. For now, a large proportion of water produced is lost through leaks in the network. Because of low tariffs, consumers have not attempted to conserve water. Large volumes of water are wasted inside the dwellings through faulty plumbing systems.. If these wastes can be reduced, it is proiected that the available fresh water resources could meet water demand up to the year 2030. 1.05 With this objective in view, the project includes a rehabilitation program aiming at reducing water losses in the network. It advocates the adoption and applicatior of a more progressive tariff structure that would promote water conservatior. To enhance environmental conditions, the project contemplates the rehabilitation of wastewater treatment plants that are neces3ary to protect the w^ter resource base. Institutional development assistance would also be provided to operators in the sector, including training of their staff. Implementation of these components, however, is contingent upon the issuance by the Government of directives f5r- the establishment of self-financing water utilities, with a clear mandate and incentives for increasing performance and efficiency. 1.06 The estimated total cost of the project is US$170.0 million, with a foreign exchange component of US$110.0 million. A Bank loan is proposed to finance this component. The balance will be financed by cash generation in the sector, and Government funds. Detailed project design is under way and is expected to be finished by the time the Bank loan is ap1 roved, to allow immediate start of procurement. The project would be executed during the period 1994-2001. A mid-term review of progress in project execution and in compliance with loan covenants is scheduled to take place during the summer of 1997. 1.07 Project preparation was partially financed under Bank Loan 2821-AL, and carried out by the Kinistry of Equipment with the assistance of consultants. The Bank actively participated in project formulation and discussed it with lenders involved in the water sector in Algeria. A Bank mission composed of Messrs. Fritz Rodriguez and Charles Sterling (Bank staff) and Mr. Alain F. Thys (Consultant), appraised the project in June 1993. II. THE URBAN WATER SUPPLY AND SEWERAGE SECTOR General Features 2.01 With an area of about 2.4 million km2, Algeria is the largest country in North Africa. Most of this area, however, extends into the Sahara Desert, is unfit for agriculture, but rich in mineral resources. North of the Saharan Atlas is a semi-arid region encompassing a coastal strip along the Mediterranean, the interior plains, some highlands near the coast, and the high plateaux. More than 90 percent of the population livos in this region. The mean annual rainfall in this northern part of the country varies between 300 mm and 1,000 mm, exceeding 600 mm only in the central and eastern coastal plains where rich arable land is found. It is less than 100 mm south of the Atlas in the Sahara. 2.02 There are 17 major river basins in Algerie. Some of them are shared by other countries: the Medjerda with Tunisia; the Tafna, Guir, Dra and Daoura with Morocco. Based on rainfall and surface water regime, climate, and soil characteristics, 11 hydrographic regions have been identified in the country: Oranie, Chelf, Algeroise, Soummam, Constantinoise, Annaba, Medjerdah-Mellegue, Hodna-Zahres Sersou, Aures Nementchas, Chott Chergu' South Atlas, and Southern Algeria. This regional distribution is used in comparing water demand with the available supply in different parts of the country. 2.03 Administratively, Algeria ia divided into 48 provinces (wilayate), 567 counties (dairate), and 1540 communes. At the provincial level, the executive is headed by a Governor (Wali), and his cabinet includes representatives of each of the Central Government's ministries. PoMIlation Distribution 2.04 The 1987 census recorded a population of 23 million in Algeria, half living in urban areas. A previous census was carried out in 1977. Between these two censuses, the population kept growing at an average annual rate of 3.1 percent. The urbanization rate alst increased during that period from 39 percent in 1977 to 50 percent in 1987. The expectation is that the share of urban population will continue to increase, reaching 58 percent of the total population by the year 2000. The stationary population in Algeria is projected to be around 76 million. More than 90 percent of the population lives in the northern part of the country, accounting for only 12 percent of the land. As a result, the population density is relatively high in this part. It ranges from 50 persons per jn2 in the steppe to 220 perions per km2 in the coastal plains. In fact, almost 40 percent of the total population resides along the coast between Oran and Annaba in a strip accounting for less than 2 percent of the total area. Only 7 percent of the total population lives in the southern part of the country. 1/ In this report the teiz urban water refers to potable water used in households, pubLUc entities, and iustries in both urban end rural areas. -4- 2.05 Over 70 percent of the total population lives in fixed settlements that need to be provided with public water supply and sewerage services. The rest of the population is dispersed, necessitating at the most the provision of water points for its supply. About 44 percent of Algerians are under 15 years of age, 65 percent under 25 years of age. Although one-fifth of the urban population is concentrated ir. the capital city, Algiers, there exist in addition a number of -relatively large and medium-size cities distributed across the- northern part of the courntry, where puhlic services such as water supply and sewerage can be provided at a reasonable cost. This distribution saggests that a decentralized sector organization for urban water supply can be implemented in Algeria, provided the necessary staff can be feund to manage the resulting independent systems. at_er Resources 2.06 A detailed description of land and water resources in Algeria is given in Annex }. Total water resources are estimated at 19.1 billion m3 per year, comprising 12.4 billion m3 of surface water and 6.7 of groundwater. Surface waters are particularly abundant in the coastal plains (11.1 billion m3), but decrease rapidly in the steppe (0.7 billion m3) and in the Saharan Atlas (0.6 billion m3). Because of irregular flows and heterogeneoue distribution, the surface water resources cannot readily be exploited for irrigation and urban water supply. Most of the rivers are dry in the summer, and their quality deteriorates in the winter, as the rising flows carry high solid contents. Their regulation througih costly reservoirs is often required to obtain economically exploitable yields. It is estimated that, with full damming, about 5.7 billion m3 per year or 46 percent of the surface waters in northern Algeria could be mobilized for irrigation and urban water supply. Presently, an average of 2.2 billion m3 is exploited from a total of 45 impounding dams. Large investments remain to be made for full mobilization of the surface water resources. 2.07 As a result of high infiltration from storm runoff and surface water resources, and of the existence of large fossil water deposits, groundwater is available over much of the country. The average annual yield of groundwater is estimated at 6.7 billion m3, but more than two-thirds of these resources (4.9 billion m3) are located in the Sahara Desert. In Northern Algeria, more than 80 percent of groundwater is already under exploitation, particularly in the coastal plains. The balance of 0.3 billion m3 is essentially in the steppe in Zahrez, Chott Hodna, and Chott Chergui. Overall, the average yield of water resources, excluding groundwater in the Sahara, with full development of storage, is estimated at 7.4 billion m3/year. This should be sufficient to cover the water needs for urban, industrial and agricultural use until the early part of the next century. Beyond that, it will be necessary to reclaim wastewaters and to tap non-renewable groundwater in the northern part of the Sahara, and later on to demineralize brackish water to meet the demand. Service Levels 2.08 Government investments over the last decade or so have allowed to increase service levels in 1989 to about 81 percent of the total population with direct connections to the water network, from an estimated 50 percent in 1976. - 5 - Despite this achievement attained during a period of high urban population growth, much remains to be done in terms of improving the quality of the services. The average consumption in households, estimated at 100 lcd, is considered adequate. In some places where it is lower, it could be much improved if losses were reduced to more acceptable levels. About 87 percent of the urban population have direct access to public water supply through private service lines; it is about 75 percent in agglomerated rural areas. The rest of the population is served- by standposts and private wells. The water quality is considered safe, although cholera and other water-relateo diseases have been endemic in Algeria. 2.09 The service levels are somewhat lower in the sewerage subsector. About 70 percent of households in urban areas are connected to public sewer systems. In many instances, these systems are combined networks carrying botlh wastewater and stormwater runoff. Large volumes of wastewater are discharged untreated into the Mediterranean and the rivers. It is estimated that in 1992 only 17 percent of domestic and -ndustrial wastewaters received some form of treatment prior to their disposal. This threatened water quality and created environmental hazards in the country. By the end of 1990, the Government had provided grants for the construction of 77 wastewater treatment plants; but most of them are now inoperative. Access to sewerage services in rural areas is provided to about 20 percent of the population. Institutional Arra&Uements 2.10 The Ministry of Equipment (ME) is responsible for the development, management, and conservation of water resources in the country. Thtis Ministry plans and builds urban water supply, sewerage, and irrigation conveyance systems. These functions are decentralized in a number of departments (Directions). The Direction des Grands Amenagements et Infrastructures Hydrauliques (DGAIH), carries out the planning and design of water resources development schemes. Another department, La Direction de la Reglementation, de la Protection et de 1'Usage de l'Eau (DRPUE), regulates sector operations including the sharing of water resources among different uses, and the setting of tariffs. Two semi- autonomous agencies provide specific services in the sector: the Agence Nationale des Barrages (ANB) for the construction of dams, and the Agence Nationale des Ressources Hydraullques (ANRH) for the collection and interpretation of hydrologic data, and the monitoring of water quality. 2.11 The main regulatory agency of the urban water supply and sewerage sector is the Agence Nationale de 1'Eau Potable et Industrielle et de 1 'Assainissement (AGEP). When established in 1986, this agency was assigned the task of formulating detailed policies for the urban water supply and sewerage sector, and of monitoring the operations in the sector. Other specific assignments were the provision of technical assistance to the sector operators, and staff training. Unfortunately, AGEP has not fulfilled these assignments. Instead, it has spent its resources planning and supervising the construction of water projects. To a large extent, this has curtailed AGEP staff from their true mandate of improving sector operations. Their assistance in this area has been minimal. As part of a fourth Bank-financed water supply project (Loan 2821-AL), it was agreed to undertake management studies to determine what actions should - 6 - be taken to improve efficiency in the sector. These studies were completed recently. 2.12 Water supply services to consumers are now provided by nine regional enterprises and 26 wilaya agencies. They are responsible for both production and distribution of urban water, and for sewerage services. The reasons for having two kinds of organizations are not fully transparent. Except that in the case of a regional enterprise, it appears that its water production facilities are usually located in more than one wilaya, making it a natural regional organization. Economies of scale and cross-subsidization appear not to have been determinant factors in setting up the current organization. The enterprises are semi-autonomous entities, with industrial statute (EPIC) giving them possible access to government funds for operations and capital investments. Their operations are not guided by commercial objectives, or return on investments. The proposed project advocates radical changes in the status of the entirprises to transform them into truly commercial entities. It further proposes the use of economic criteria and competition to optimize the geographical division of services in the country. Investments in the Sector 2.13 Since 1974 the Government has made increasingly large investments in the sector. During the First Five-Year Plan (1980-1984), investments in the order of DA 6.0 billion (US$1.2 billion) or about DA 300 (US$60.0) per capita were made in the sector. This amount increased to DA 10.4 billion (US$2.2 billion) during the Second Five-Year Plan (1985-1989). Table 2.1 illustrates the increasing importance given to the sector over successive plan periods. Given the continuing need to make up for backlogs in water infrastructure provision, the Government is not considering curtailing investments in the sector in the coming years. Table 2.1: Sector Investment Plant (in current DA) Total Per Capita Investment Plan DA US$ DA US$ .... billion.. 1974-77 4.0 0 8 240 48 1980-84 6.0 1.2 300 60 1985-89 10.4 2.2 476 102 Source: MlJintry of EqUymnt. Industrial Water Demand 2.14 There are a limited number of industries that use large volumes of water in Algeria. Beside', except for the industrial complex in Arzew, the industries are dispersed over the territory, thus imposing no disproportionate load on the water system In particular areas. Also, some of the industries with heavy water use have their own water supply. This is the case of the industrial - 7 - complex in Arzew, a phosphate rock processing plane in Djebel Onk, the steel complexes, and the petrochemical industries. The fact is that, at present, industry is not a major water consumer in Algeria, as shown in Table 2.2 below. As is the case for most countries at Algeria's stage of development, the major consumer is the household sector. Table 2.2: Volume and Structure of Sales in 1987 Usage Volume (Mm3) Percent Domestic 520 67 Industrial* 119 16 Commercial 60 8 Public .70 9 TOTAL zu Q * Excluding the volumes of water produced by industries for their om u8o. 2.15 The industrial sector accounted for about 16 percent of total water used in 1987. To this amount should be added the volumes consumed by industries equipped with their own water supplies, estimated to amount to 40 Mm3. This gives a total industrial water use of 159 Nm3 in 1987, i.e., about 20 percent of the total use in that year. Given the current and expected macroeconomic situation in Algeria, it is not foreseen that the structure of water uses would markedly change in the coming years. Finances 2.16 Annex 2 provides the cost of urban water in different provinces of the country in 1992, while Annex 3 depicts the projected cost in 1994. The bulk of past investments in the sector were financed by government grants, and not surprisingly, the asset base of the regional water enterprises is very low. Very often, the Government-funded fixed assets have not been registered in the enterprises' books, and no depreciation allowance has been made for these assets. This practice distorts the financial situation in the sector, giving a blurry picture of the financial position of the enterprises. In general, the level of receivables is high, on average 10 months of sales. This is compounded by the presence of illegal or unregistered connections that provide no revenues to the enterprises. Most of the water enterprises posted operating losses at the end of 1991, though by allowing their accounts payable to increase, cash collection was sufficient to cover expenses in that year. 2.17 The current tariff structure for urban water supply was established by Decree No. 85-267 issued in October 1985. It is an increasing block rate structure encompassing four blocks in domestic consumption. The base price per =3 in the first block is currently DA 2.20, generating an average revenue of DA 6.30 (US$0.18) per,-. With some exceptions (Medea, Tiatat, Illizi, Tamaurasset, Tebessa), this amount is projected to be sufficient to meet operating costs of the 35 enterprises in 1994 as illustrated in Annex 3. In some cases, it will also be sufficient to cover capital investments. A more detailed discussion of the tariff structure is carried out in paras. 6.05-6.07. Staffina and Management 2.18 With an average ratio of 14 employees per 1,000 connections, the enterprises are considered overstaffed. At the same time, there is a shortage of qualified staff in the sector. Labor productivity is low. The work seems to be reduced to the minimum necessary to continue providing services, and no effort is made to Improve them. A case in point is the high volume of losses in the water network. No systematic approach to repairing the leaks has been taken, and the staff seems to be comfortable with the situation. Long delays are observed betweer, the time a customer requests a service line and the time the work is done. In some cases, receivables amount to more than a year of sales, but no action is taken, since cash collection can meet salaries and other operating expenses. There is a definite lack of dedication and involvement by the staff. 2.19 The salaries and employment conditions in the enterprises are lover than in the industry and energy sectors. Most of them, therefore, are experiencing difficulties in recruiting staff of high caliber in areas such as finance and accounting. These difficulties are accentuated in enterprises located in places relatively far away from large urban centers. This situation could be remedied through the implementation of a comprehensive staff training program. An additional remedial action would be regionalizaticn of the services. It would be a lesser burden for staff if they are stationed in large cities where the main offices of regional water companies are located. From there, they could provide operational assistance to small utilities in the region, and at the same time, enjoy the amenities of a large city. The Bank xperiLen_c in the Sector 2.20 The Bank became involved in the sector in 1978 when Loan 1545-AL of US$82.0 million was made for the Algiers Sewerage Project, to finance the construction of sewer interceptors and a sewerage treatment plant in Greater Algiers, and management and engineering studies in the cities of Algiers, Constantine, and Oran. One of the objectives of this project was to strengthen the sector organization in Greater Algiers through the creation of a regional water supply and sewerage authority (SEDAL). In spite of some delays in implementing agreed policies, the SEDAL experience was good and instrumental in the Government decision, in 1986, to set up similar authorities in the rest of the country. 2.21 To help improve water supply and sewerage services in the Algiers area, in 1980 the Bank made a US$5.0-million loan (S-17-AL) to finance a water resources study, the Water Master Plan for the Algiers/Sebaou Area. Upon the recommendations of this study, a water supply project, -overing the first construction stage of the Master Plan, was defined for Greater Algiers. In June 1984, the Bank zAade a US$290-million loan (2461-AL) to finance part of this construction. This loan also addressed the institutional development of the sector by partly financing the setting up of AGEP, the implementation of a sector survey, and organizational, managerial and financial studies for the Algiers water company. Implementation of the Algiers project was completed at the end of 1992. -9- 2.22 In 1985, the Bank made a US$262-million loan (2591-AL) to finance water supply and sewerage works in Oran and Constantine, and technical assistance for 13 regional water companies in the areas of organization, management, finance and staff training. A fifth loan of US$250 million (Loan 2821-AL) was made in 1987 to finance part of the investments in the sector during the period 1986- 1991. Implementation of these two projects is progressing reasonably well, with the first one expected to be completed by the end of 1994, and the second one in 1995. The latter was restructured in 1993 -to introduce more urgently needed works. 2.23 Since the beginning of its involvement in the sector, the Bank's lending strategy has been geared essentially toward the development of a strong institutional framework for the sector, that would result in sound investment programming, improved operational efficiency of the water utilities, and ultimately in improved and expanded services. To this end, the Bank has been actively assisting the Government in putting in place financially strong and viable organizations, and in expanding water supply and sewerage services in the large and intermediate cities, as outlined in the Second Five-Year Plan. Important institutional reforms have already been achieved under the four previous Bank-financed projects, but much remains to be done to establish a more cohesive approach to the use and management of the water resources. Environmental Asnects 2.24 Domestic and industrial wastewaters in Algeria are discharged virtually untreated into the Mediterranean and the river system. Only 17 percent of the wastes actually receive some form of treatment. Industrial pollution is particularly heavy near the large coastal cities of Algiers, Annaba, and Oran. Apart from the unpleasant sight of polluted waters in the Algiers Bay and El Harrach River near Algiers, there is serious risk of polluting the groundwater aquifer along the coast, a source of potable water for the large coastal urban communities. Because of water pollution in the Bay and the river system, recreational activities such as bathing, swimming, and sailing, have ceased in this area. 2.25 The first phase of a wastewater collection and treatment master plan for Greater Algiers is now operaLional. Wastewaters generated in the most industrialized part of this conurbation are now treated for their eventual reuse in agriculture. There are plans for completing the implementation of the master plan, and for implementing similar programs in the regions of Annaba and Oran. III. THE PROPOSED PROECT Proiect Genesis and Concept 3 01 In 1987 the Bank made a loan of US$250 million (2821-AL) to the Government of Algeria to finance a number of water supply and sewerage works in the country. The loan also covered studies in areas with deficient water supply to determine how services could be improved in these areas. At the beginning, - 10 - project implementation experienced some difficulties. The sector organization was changed with the creation of thirty-five water utilities replacing thirteen regional authorities with which the loan had been negotiated. Since reimbursement agreements were to be entered between the Government and the implementing agencies, additional negotiations took place between the Government and the Bank following loan signing. The project itself included some controversial works such as the construction of two dams along the Tunisian border. Recently, the project had been restructured, eliminating these works and introducing more needed subprojects. 3.02 Meanwhile, the studies included in the loan have been carried out successfully. They have defined a number of urgently needed works for which detailed design is currently under way. These studies have also showed that large volumes of water produced were unaccounted for, and that the systems were in great need of rehabilitation. This finding has led the way in conceiving the proposed project. On the institutional side, both the Government and the Bank have recognized the need to restructure the sector by introducing more efficiency in the provision of water supply and sewerage services in the country. An institutional study along with a sector survey were included in Loan 2821-AL. They were conducted by an Algerian/French consortium (CNAT/SAUR-Afrique), and completed recently. The study recommendations have been taken into account in forovulating the proposed project. Oblectives of the Prolect 3.03 The proposed project would seek to rationalize institutional arrangements in the urban water sector with a view to achieving full cost recovery by autonomous, self-financing utilities. As these institutional reforms are taking shape, the project will proceed with the rehabilitation of existing urban water supply and sewer systems. As highlighted in para. 1.01, large volumes of water production, around 45 percent, are now unaccounted for, due to leaks in the systems, metering defects, and illegal connections. Leakages are considered the cause for three quarters of water unaccounted for. The project would attempt to optimize water distribution in a number of cities with current water production considered relatively sufficient to fill water demand in these cities. They are the cities of Annaba, Ain Temouchent, Bejaia, Jijel, Mascara, Oran, Relizane, Sidi Bel Abes, Setif, and Tlemcen with a total population of 2.0 million. The rehabilitation program would cover leak detection and repair, the setting up of a reliable metering system, both bulk and individual, the establishment of efficient billing and collection procedures, and an updated census of water customers. 3.04 The difficult situation of sewerage operations in Algeria has already been highlighted in this report (paras. 1.01 and 2.09). The communes now operate the sewer systems, but have neither the technical capability nor the financial resources to perform this task. Beginning in 1993, the Government began collecting a 10-percent surcharge on water bills to cover sewerage expenses. This surcharge, however, was considered insufficient to ensure normal operation and maintenance of the sewerage installations. It was increased to 20 percent effective January 1st, 1994. But further increases are needed to meet operational requirements. The proposed project addresses this issue. It - 11 - Includes the rehabilltation of a number of sewage treatment plants. However, to ensure adequate operation and maintenance of the rehabilitated plants, during negotiations, agreement was reached with the Government that Bank loan proceeds for a sewerage rehabilitation subproject in a city would be disbursed only after the Bank has been satisfied that a sewerage organization has been tstablished in this city, and funds to cover sewerage operations have been identified. 3.05 As the water supply rehabilitation program is being implemented, it will be necessary to strengthen regulations in the sector. The Government has recently made a start in this direction. It has proposed that communes, as the owners of water distribution and sewage networks, give them in concession to water utilities. It has recently issued regulations governing the functioning and operations of water utilities. The Government has also regulated the relations between customers and water utilities. A large meter installation program is currently under implementation with the goal of full metering of all individual connections in urban areas by the end of 1994. 3.06 Some major issues, however, still remain to be tackled. They include tariff levels, asset renewal, increasing productivity and efficiency in the sector, and intersectoral coordination. The proposed project addresses these issues. Frolect Descrintion 3.07 The proposed project would include: (i) water supply system rehabilitation in ten cities, inclusive of leak detection and repairs, meter installation, and gauging; (ii) water distribution network relooping and balancing in the same ten cities; (iii) rehabilitation of about 24 sewage treatment plants located in different places in the country; (iv) consulting services to AGEP and ANB to carry out feasibility and detailed studies, and environmental impact assessments of projected water and sewerage works; (v) institutional development assistance to AGEP, ANB, ANRH, and the water utilities; and (vi) supply of operational equipment to AGEP, ANB, ANRH, and the water utilities. 3.08 For the rehabilitation program of water supply systems, it is proposed to contract out with private specialized companies following competitive tendering. The contracts would be based on target costs for water loss reduction. The contractors would get a bonus if actual costs are less than the target costs, and a penalty if they are more. The contracts would be executed in three phases. The first one would cover a quick study to determine whether a large proportion of water unaccounted for in a subproject is resulting from - 12 - leaks in the system. Depending uponI this finding, a decision would be made on whether or not the subproject should be undertaken. 3.09 In the second phase, the metering system would be rehabilitated, water leaks detected and repaired, and an evaluation of the water network operations carried out. In the third phase, the network would be recalibrated with a system and procedures set out to control loss in the network. In each city involved in the program, a unit would be detached from the water utility to work with the specialized company. It is expected that by the time the program is completed, the unit staff would be trained enough to take over leak detection and repairs in the city. The rehabilitation program in a city is expected to last about four years. A more detailed outline of the contract is provided in Annex 4. 3.10 Given the high level of water pollution in the country, as a result of the breakdown of most sewage treatment plants, it is proposed rehabilitating 24 of them. Selection criteria of these plants that were agreed upon during negotiations, are given in Annex 5. In rehabilitating the selected plants, particular attention would be paid to the disposal of liquid and solid wastes. Whenever reuse of the plants' effluent in agriculture is not contemplated, it should be disinfected prior to disposal. Dry beds are used to process the plants' sludge. Special equipment would be provided for safe transportation of dried sludge to farms where it would be used in agriculture. 3.11 As additi.onal components, the project includes consulting services to carry out detailed studies and environmental impact assessments of future water works, and the supply of operational equipment. A list of these studies and of operational equipment is shown in Annex 6. Special assistance would be given to ANRH in the form of consulting services and provision of hydrologic and operational equipment. ANRH is the national agency responsible for monitoring water resources in the country. An overview of this agency is outlined in Annex 7. Terms of reference for a particular study of water resources development management in Soummam Valley are outlined in Annex 8. For tendering purposes and to speed up their procurement, similar items of equipment will be packaged together. Institutional Reforms 3.12 A proposal has been made to the Government for restructuring the utilities to make them operate and maintain water systems under concessionary arrangements with the Government as owner of the water systems. most of these systems have been financed by Government grants and are not included in the asset base of the utilities. For now, no system is in place to generate funds for renewal and expansion of water works. Whenever this is required, the Government until now has provided the necessary funds. A systematic change of this practice is proposed, whereby the concession fees would be allocated for asset renewal and expansion. 3.13 It is proposed that at the beginning, these institutional reforms be carried out in only two utilities: one in the east (EPEA), and the other in the west (EPEOR). These two utilities are now the best run in the country. The - 13 - proposed reforms would be experimented during the next two and a half years. After evaluation, they would be standardized in the sector. At negotiations, the Government agreed to complete the execution of concession agreements with all utilities in the sector by January lst, 1997. Meanwhile, institutional development assistance would be provided to the utilities to make them better prepared for entering into the concession agreements with the Government. A discussion of these agreements is carried out in paras. 5.07-5.09. 3.14 A national tariff structure is now applied for vater services countrywide. This system, however, has created inefficiency in the provision of the services. In places where the cost is higher than the tariff, consumers have not made an efficient use of the supply. Meanwhile, in places where the cost could be lower, operative inefficiency has predominated through high expenses and waste. As shown in Annex 3, operating costs vary markedly from one region to another. To make consumption more responsive to prices of the services, it is proposed to apply regional tariffs. A detailed discussion of the tariff structure is carried out in paras. 5.04-5.06 and 6.05-6.07. As for the concession agreements, the Government has agreed to apply regional tariffs by January 1, 1997 at the latest. Cost Estimtes 3.15 The estimated total cost of the project is DA 5,801.3 JDillion (US$170.0 million), with a foreign exchange component of DA 4,481.3 million (US$110 million), i.e., 64.7 percent of the total cost. A summary of the cost estimates is given irt Table 4.1. Detailed estimates and price escalation calculation of project investments are provided in Annexes 9 and 10. 3.16 The cost estimates are based on an evaluation of the works that would be required to reduce unaccounted for water and rehabilitate the sewage treatment plants. It takes hold on previous experience in similar circumstances. The estimates include taxes and duties. A 10 percent allowance has been added for physical contingencies. Construction supervision is projected to account for about 6 percent of the base cost. During project execution, local expenditures are projected to increase by 20 percent in 1994, 18 percent in 1995, 16 percent in 1996, 14 percent in 1997, 12 percent in 1998, and 10 percent in 1999 and 2000. Foreign expenditures, meanwhile, are expected to increase by 3.4 percent in 1994, 2.9 percent in 1995, 3.0 percent in 1996, 2.7 percent in 1997, 2.7 in 1998, 2.5 in 1999, and 2.5 percent in 2000. Price escalation is forecast to amount to about 31 percent of the base cost. To convert DA amounts in US$, exchange rates of DA 36.0 for US$ 1.0 in 1994, DA 37.5 in 1995, DA 41.0 in 1996, DA 43.0 in 1997, DA 47.0 in 1998, DA 50.0 in 1999 and in 2000, are used. 3.17 The project provides for an estimated 1,100 person-months of consulting services for project preparation and implementation, and for institutional development assistance to AGEP, ANB, ANRH, and the utilities. - 14 - Table 3.1: Cost Estimates LOCAL FOREIGN TOTAL LOCAL FOREIGN TOTAL PERCENT ITEM OF TOTAL DA Million US$ Million Water systems rehabiliation 539.0 1,012.0 1,551.0 24.5 48.0 70.5 54.5 Sewerage rehabititation 121.0 171.6 292.6 5.5 7.8 13.3 10.3 Subtotal 660.0 1,183.6 1,843.6 30.0 53.8 83.8 64.8 Physical contingencies 66 9 118.4 184.4 3.0 5.4 8.4 6.5 Project implementation 39.6 71.0 110.6 1.8 3.2 5.0 3.8 Project preparation 33.0 220.0 253.0 1.5 10.0 11.5 8.9 Supply of operational equipment 17.6 191.4 2090 0.8 8.7 9.5 7.3 Institutional development 48.4 198.0 246.4 2.2 9.0 11.2 8.7 Total cost (Mid 1993 pnoes) 864.6 1,982.4 2,847.0 39.3 90.1 129.4 100.0 Price escalation 455.4 2,498.9 2,954.3 20.7 19.9 40.6 31.4 TOTAL PROJECT COST 1,320.0 4,481.3 6,813 60.0 110.0 170.0 131A (current prices) Prolect Executlon 3.18 A bar chart illustrating construction phases of the project components is shown in Annex 11. Project construction is expected to begin by mid-1994 and to be completed by the year 2000. Bids for the water supply rehabilitation program are scheduled to be called by mid-1994, so as to allow for a quick start-up of project- execution. The execution of the sewerage component is expected to begin in early 1995. 3.19 The Directions de 1'Hydraulique de Wilayate (DHW) would be responsible for the execution of the rehabilitation works. This responsibility would be carried out in concert with the water utilities coneerned, with the assistance of consultants acceptable to the Bank. For the purpose of Bank review of contracts and loan disbursement, the works of the DHWs would be coordinated by AGEP. Studies and environmental impact assessments included in the project would be undertaken by concerned agencies, also with the assistance of consultants acceptable to the Bank. All consultants under the project would be retained not later than March 31, 1996, in accordance the Bank Group Guidelines for the Use of Consultants, under terms and conditions satisfactory to the Bank. - 15 - Project Financing 3.20 A Bank loan of US$110 million is proposed to finance the foreign exchange cost of the project. The loan would be made to the Government, to be repaid over 17 years, including 5 years of grace, at the standard variable interest rate. Through the concession fees, the Government is expected to raise a minimum of DA 1,549.0 million (US$54.1 million equivalent). The balance of local cost would be financed by the Government who would keep ownership of the works. An outline of the financing plan for the project is given in para. 6.08. Cost Recoverv 3.21 Investments that the Government would make to rehabilitate the water supply systems would be recovered through the payment of concession fees by the utilities. As the systems are reshaped and produce more water for sale, the fees would increase to achieve full cost recovery of the investments. In addition, the Government would use part of the Bank loan to finance institutional development assistance, and the supply of operational equipment to water utilities in the country. This cost needs also to be recovered. To this effect, whenever such financing is provided to utilities, the concession agreements with these utilities would specify how repayment of expenses for technical assistance and operational equipment should be made to Government. Repayment terms and conditions might vary, depending upon the financial situation of a utility. These terms and conditions would be reviewed at the time the Bank approves the agreements. Procurement 3.22 Proposed procurement arrangements for the project are depicted in Table 3.2. A list of contracts to be placed for the project is given in Annex 12. The project elements have been distributed into contract packages that should ensure efficiency and economy in project implementation, and at the same time provide the opportunity for domestic contractors to participate in bidding. Supplies of pipes, valves, and fittings for the water supply rehabilitation component would be grouped into one contract. For efficiency and cost containment, single contracts covering both equipment supply and civil works would be laid for the rehabilitation of sewage treatment plants. These contracts would be for small amounts (less than US$800,000 each), dispersed, and of little interest to foreign bidders. Therefore, they would be procured by LCB acceptable to the Bank. 3.23 Except for those items, all other Bank-financed works and goods contracts would be procured through International Competitive Bidding (ICB), in accordance with the Bank Guidelines for Procurement- under IBRD Loans. To speed up the procurement process, agreement was reached during negotiations on standard sets of tender documents that would be used to procure civil works and equipment. In particular, a special contract type has been prepared for the water supply rehabilitation program. Since it will not be possible to determine in advance bills of quantities for these rehabilitation works, a target price contract would be used to implement this program. Contractors would be reimbursed against actual costs of works performed plus a fixed fee. To provide incentives for increasing performance, contractors would get a bonus if actual costs are less than the target costs, or a penalty if they are higher. An outline of this contract type is given in Annex 4. - 16 - ta2le 3.2: Sutmary of P-, uderocue,iienAtangruie (US$ Million Equivalent) PROJECT ELEMENT TOTAL IeB LCB OTHER Ui.B.F. COST 1. Works 1.1 Leak repairs - 70 7.0 12 Rehabilitation: Water systems 41.5 - - - 41.5 (24.9) - (24.9) Wastewater systems - 19.7 - - 19.7 (11.8) (11.8) 2. Goods 2.1 Equipment and machlnery: vehides, trucks daa procssIng 12.8 - - - 12.8 (10.0) (10.0) 2.2 Matelals. Pipes, fitings, valves 46.5 - - - 46.5 (x325.5) (32.5) 3 Srnice cofr 3.1 Unaounted for water reducwon 8.? _ _ _ 83 (5-8) (58 4. Consultances 4.1 Projet inpmentation - - 3.6 - 3.6 (2.5) (2.5) 42 Pro preparation - 15.50 _ 15.5 (12.0) (12.0) 4.3 Institutionsl deveopment - - 15.10 - 15.1 (10.5) (10.5) 109.1 19.7 34.2 7. 170.0 TOTAL (73.2) (11.8) (25.) (110.0) NOTE, FIgue In pae s are t respective amounts financed by the Bank loan. N.B.F.: Not Bank fnaeh a Finaed by the Algian Governmt; procured under LCB or by force account b. Needed for the Water Systems Rehabilitton Program. C. Prored In hcoordanie wth Worbd Bank's Gudelnes: Use of Consulknts by World Bank Borrows and by the Wodd Bank as Executng Agency, August 1981. - 17 - 3.24 With minor exceptions, local procurement regulations in Algeria have been found acceptable to the Bank. In this context, works contracts above a thresbold of US$2 million would be subject to the Bank's prior review procedures. The review process will cover about 89 percent of the total value of Bank- financed works contracts. Goods contracts above a threshold of US$300,000 would also be subject to prior review, covering about 91 percent of the total value of Bank-financed goods. In evaluating bids for the supply of equipment and materials, a 15 percent margin of preference or the actual customs duties, whichever is lower, would be allowed for goods manufactured in Algeria. Consulting services would be procured in accordance with the Bank's Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency. Disbursement 3.25 The Bank loan would be disbursed against: (i) 100 percent of foreign expenditures for imported equipment and materials; (ii) 80 percent of local expenditures for goods procured locally; (iii) 60 percent of total expenditures for civil works; (iv) 80 percent of total expenditures of consulting services for project preparation; and (v) 70 percent of total expenditures of consulting services for project implementation and institutional development assistance. Overall, the Bank loan would finance about 65 percent of the planned investments. 3.26 Estimated quarterly disbursements of the loan and Government funds have been derived from the Project Implementation Schedule (Annex 11), and are shown in Annex 13. The estimates match disbursement profiles of past water projects in Algeria with due consideration of the status of project preparation. Disbursement is projected to be somewhat slow during the first two years of project execution, but to pick up rapidly thereafter. 3.27 In order to make prompt payments to contractors and consultants, the Bank has agreed to advance regularly funds for the establishment of a Revolving Fund in Algeria to cover these payments. The Fund would be maintained at the Central Bank of Algeria for a maximum amount of US$7.0 million, which would cover the Bank's sl re of eligible expenditures on the project over a period of four months. r Fund would be maintained in US dollars and replenished by reimbursement applications from the Government in US dollars. Applications with appropriate supporting documentation, covering the use of the Fund, should be submitted when approximately half of the maximum allowed avount in the Fund has been spent. 3.28 The closing date of the loan would be December 31st, 2001, i.e. one year after the end of the provisional acceptance and uaintenance period of the works, which is the time needed to monitor their performance and to return retention money on civil works contracts. - 18 - IV. PROJECT -VJLEMENTATION AND OPERATION ExecyAting Aiencv 4.01 The project would be implemented by the Ministry of Equipment through the nat.onal water supply agency Agence Nationale de 1'Eau Potable et Industrielle et de 1 'Assainissement (AGEP), and its local representatives for the water sector in the wilayate (DHW). The water supply and sewerage rehabilitation works would be implemented by the DHWs, in cooperation with the utilities. Execution of the studies included in the project would be supervised by AGEP and the Agence Nationale des Barrages (ANB). To facilitate Bank supervision, and probably to speed up project implementation, all procurement activities under the project would be centralized in AGEP. 4.02 Annex 14 shoaws AGEP's current organization. 1.is agency was created in June 1985, but became operational only in 1987, with the mandate to provide technical assistance to water supply enterprises. Its responsibilities encompass technical support to water utilities, preparation of standards and norms, design of tariff structures, recording of assets, and implementation of regional projects. To execute these tasks, AGEP has established four departments: operations, works, studies and programming, and administration. There is agreement between the Bank and the Ministry of Equipment that AGE? so far has only fulfilled the last part of its mandate, i.e. project construction supervision. AGEP has been the implementing agency of three ongoing Bank- financed projects (Loan 2821-, 2591-, and 2461-AL) and has acquired experience in this area. 4.03 At the time of AGEP's creation, there was a void in technical capability for construction supervision, and quite naturally AGEP took over this task. But an important element of its mandate, the assistance to the water utilites, remains to be fulfilled, and an effort should be made to reach this objective. A number of weaknesses have been hindering AGEP's operations. One of them is an acute shortage of competent staff. As a ministry agency (EPA), its salary scale is not competitive with those of the private sector. Consequently, AGEP has been urable to recruit qualified staff. The staff includes only engineers, and no economists or financial analysts. It follows that its project analysis capability is rather weak, focussed essentially on engineering aspects. AGEP has also been suffering from excessive oversight by staff from the Ministry of Equipment. 4.04 Complete restructuring of AGEP is envisaged under the proposed project. Its present responsibility for construction supervision will be assigned to a new agency to be set up as an EPA. Meanwhile, the status of AGEP would be changed into EPIC to make it the main regulatory agency for the urban water supply sector. The restructured AGEP also will be the supervisory and enforcement agency of the Government in relation to the concession agreements with the water utilities. Under its new status, AGEP would be provided with administrative and financial autonomy. As a result, it will be able to establish a more competitive salary scale that would allow it to attract more qualified - 19 - professionals. Part of the concession funds would be used to cover AGEP's expenses. The proposed reforms would be carried out gradually, but should be completed by January 1, 1997. The decree transforming AGEP's status into EPIC, should be issued by July 1, 1996. During the transformation period, institutional development assistance would be provided to AGEP. A brief outline of this assistance is given in paras. 4.06 and 4.07. Detailed terms of reference for it are depicted in Annex 15. Operatimn and NaIntenance 4.05 The rehabilitated works would be operated and maintained by the utilities. Their staff would be involved in their execution, so as to familiarize themselve. with operating peculiarities of these installations. Norms to follow for operating and maintaining Government-owned facilities would be covenanted in the concession agreements. The staff are also expected to participate in a large staff training program, currently under implementation. Technical Assistance 4.06 As outlined in the project description, technical assistance would be provided to the new AGEP, ANB, and the Agence Nationale des Ressources Rydraul.lques (ANRH). The assistance to AGEP would include two parts. The first one would involve the participation of experts in project analysis and appraisal. It would cover the financial and economic tests that should be carried out for projects, to determine their viability. Most of AGEP's studies are now executed by consultants on the basis of terms of reference prepared by AGEP. The experts would assist AGEP's staff in drafting these terms of reference and in evaluating the consultants' reports. 4.07 The second part would address the technical assistance that the restructured AGEP would be mandated to provide to water utilities in the country. Experts would assist AGEP's staff in preparing operational procedures that C.e utilities should follow in managing their systems. These procedures would in particular cover commercial and financial activities. Together with the experts, AGEP's staff should organize regular visits of the utilities to review their operations and to collect operational data. The private sector in Algeria is capable of providing this assistance to AGEP, and should be encouraged to do so. Whenever it is necessary, foreign experts would be called upon and engaged by the local private firm in charge of the assistance to AGEP. 4.08 As for AGEP, the assistance to ANB would focus on drafting terms of reference for studies, and on reviewing studies and reports prepared by consultants. Special training would also be given to ANB's staff on assessing environmental impact of water resources development projects. The technical assistance to ANRH would consist of an evaluation of ANRH's existing equipment and current procedures to determine how they should be modernized and made more effective. - 20 - ReDortin= 4.09 In order to monitor progress in project implementation, it was agreed during negotiations that the Ministry of Equipment through AGEP woula submit, to the Bank, quarterly reports on project activities by AGEP, ANB, ANRH, and the concerned DHWs. These reports would in particular cover: (i) progress in procurement of equipment, materials, and civil works, including revised timing of procurement actions such as bidding and contract awards; (ii) progress in rehabilitation of water networks and sewage treatment plants; (iii) expenditures on the project and updated cost estimates of remaining works; and (iv) execution and evaluation of the technical assistance programs. 4.10 Assurances were also obtained that, within six months following the closing date of the loar., the Ministry of Equipment through AGEP would prepare and submit to the Bank - completion report on the execution and initial operation of the project, its costs and benefits derived or to be derived from it, the performance and fulfillment by the Government, the Ministry of Equipment and its agencies, and the Bank, of their respective obligations under the Loan Agreement, and the accomplishment of the objectives of the Bank loan. Prolect Accounts and Audit 4.11 t.GEP maintains separate accounts and records of its projects. A financial controller from the Ministry of Economy regularly controls these accounts. Nevertheless, they should be audited by independent auditors acceptable to the Bank. To this end, during negotiations agreement was reached on appointing the Inspection Gin6rale des Finances (IGF) as such auditors, to execute an annual audit of the project accounts, including the Revolving Fund account. Certified copies of the accounts as well as the auditors's reports sho-ld be submitted to the Bank not later than six months after the end of a fiscal year. V. WATER SUPPLY NANAGERNT Background 5.01 Water supply operations in Algeria are managed by regional and wilaya utilities. There are now, in total, thirty-five of them. The regional ones usually cover adjacent wilayate with common water production systems, such as in Setif, Oran, and Algiers. Other than this commonality, there seems to be no other rationale for the adopted geographical division. An impediment to a rational approach for the partition of regional companies is the current - 21 - application of national uniform tariffs, a situation that is expected to change under the proposed project (para. 6.06). 5.02 When regional tariffs are applied, it would become possible to use market forces to determine the size and limits of regional utilities. This approach is described thereinafter, Meanwhile, it is proposed to leave the sector organization unchanged. As previously mentioned (para. 3.13), the new institutional arrangements would be experimented with two regional utilities: the Entreprfse de Productlon de Gestion et de Distribution d 'Eau d'Annaba (EPEA), and the Ehtreprise de Production, de Gestion et de Distribution d 'Eau d 'Oran (EPEOR). A detailed description of their jurisdiction together with An evaluation of past operations of these utilities are given in Annex 16. Tney would operate the systems under concession agreements with the Government. A brief outline of these agreements is given in paras. 5.07 to 5.09. Meanwhile, more details are provided in Annex 17. A full French version of the concession agreements is given in Annex 18, 5.03 A timetable for standardizing the use of these agreements in the sector and for applying regional tariffs is depicted in a sector development policy letter dated March 19th, 1994 (Annex 19), that the Government has transmitted to the Bank. This letter also covers other policies, such as pricing of sewerage services, environmental management of land and water resources, and water usage regulations, that the Government is expected to implement in the water resour'-es sector during the period 1994-2000. Sector Structure 5.04 A national tariff structure is now applied for urban water services in Algeria. However, the cost of providing these services differs from one region to another. As a result, some utilities derive a rent, while others post a deficit. If this situation exists in a group of adjacent wilayate, it would be possible to agglomerate them into a regional. utility with its revenues and expen3ss in equilibrium, without changing the current average tariff. It would be more than a zero-sum-game operation, as Government subsidies now given to the non-profitable utilities would no longer be necessary. It is thus possible to come out from this regrouping with the ideal geographic division of the sector, resulting from a search for economies of scale, population distribution and densities, production costs, and operating efficiency of the utilities. 5.05 There are many ways to arrive at the ideal structure, and some constraints should be placed to limit the number of solutions. One of them is geographical boundaries. Obviously, a wilaya in the West should not be allowed to associate with a wilaya in the East. They must maintain contiguity within the same region. Another constraint should be the number of regional utilities. There are now nine of them in the northern part of Algeria. This number should be allowed to grow to no more than eleven, similar to the number of hydrographic regions in the country. In fact, the strategy outlined here is to put in place a system under which the existing regional utilities would take over the wilaya enterprises. In the process, some wilaya enterprises might instead decide to join together to form new regional utilities, or to stay independent. However, as national tariffs would no longer be applied, wilaya utilities will have to set - 22 - their own tariffs, which might be much higher than regional ones. This should, in principle, discourage wilayate from setting up thteir own utilities. But they can opt for this alternative, if consumers are willing to pay the higher prices, including concession fees to the Government. 5.06 Under the proposed system, managed competition would be used to set up the sector structure in Algeria. Regional utilities around a wilaya would be allowed to bid for taking over the water supply system in that wilaya. Normally, two to three regional utilities, at the most, would be in a position to submit concessionary bids. One should expect that the most efficiently run utility should win the bid. To ensure transparency in the process, a study should be carried out by the Government to determine what should be the cost of the services in the wilaya, so that the winning bid can be qualified. Following the bidding, the tariffs of the regional utility that has won the concession, would need to be adjusted to reflect the new cost of the services. The bidding process should be initiated and managed by the Government. The regional utilities might propose possible takeovers, but should not be allowed t3 start takeover discussions with wilaya enterprises without prior Government authorization. Concess ionarv Arrangements 5.07 Two central features have been at the root of slow progress in the sector development in Algeria. The first one relates to the Government's poor cost recovery scheme under which major investments have been financed by subsidies. The second one refers to the application of a national tariff structure, unrelated to the real cost of providing the services. The tariff has been assumed to cover only operating costs, and no allowance has been made for asset renewal and expansion. Under the proposed concessions, both features would disappear, as concession fees would be calculated on the basis of the capital required for asset renewal and expansion. 5.08 Tariffs to be levied in a region would be determined as the sum of efficient operating and maintenance costs in the region, and the concession fees. Both the tariffs and concession fees would be adjusted annually on the basis of an indexation formula covering all major components in the water supply industry, such as labor, electricity, and chemicals. Any operational profit would be retained by the utility management and shared among its staff as performance bonuses. This will provide an incentive for the utilities to compress operating expenses, expand operations and increase revenues, and consequently bonuses. Concurrently, the utilities would be under the obligation to provide an agreed upon level of service, including a rate of service expantsion. In this context, the concession agreements should specify the types of investment and equipment renewal to be made by the utilities, and those by the Government. 5.09 The concessions would have a duration of six years, but would spell out special circumstances for their cancellation. One of them could be unsatisfactory performance by a utility. They would also set out the tariffs that would be applied at inception of the concession period and circumstances and procedures for their indexation and possible revision. Under the new institutional arrangements, the tariffs would be integrated in the concession agreements and no longer be part of a national decision. Drafts of these - 23 - agreements for the two selected utilities, EPEA and EPEOR, were approved during negotiations. Their execution would be a condition of loan effectiveness. Any proposed modification of these concessions should be submitted for the Bank's prior approval. Their termination, without prior consultation with the Bank, should be cause for suspension of loan disbursements. Organixation sad Management 5.10 There would be some variations in the organization of the different regional utilities. But the organizational core essentially would remain the same. Since a utility covers various wilayate. a branch office would be established in each of them. The setup would be completed in a wilaya with the establishment of an administrative unit in each daira. This organization follows the country's administrative subdivision, and might not always be the most efficient one, as the work load might differ among the dairas. But for a start, it should be accepted until a cost accounting system is in place that would determine the resulting costs in the dairas and decide on the opportunity of equipping them with units. The head office would be locrted in the largest urban area. 5.11 Annex 22 shows a proposed organizational structure of the regional utilities. Four departments would be established at the head office: finance, commercial, administration/personnel, and engineering/operations. At a branch level, a similar organization would be set up. Meanwhile at a daira level, only two divisions would be put in place: commercial, and engineering/operations. Executive Boards, made up of representatives of the Government, the industrial sector, and consumers, would evaluate the utilities' policies and operations, and set out directions and priorities. In addition, Administrative Boards,composed of the utilities' managers, would evaluate results and discuss corrective measures. 5.12 Internal audit sections, reporting directly to the General Managers, would be set up in the utilities. Two other sections, dealing respectively with legal questions and public relations, would also be put in place. Staffing 5.13 For now, staff productivity in the regional utilities is considered low. The number of customers per employee vary from 63 in EPEA to 110 in EPEOR. Ratios twice higher have been observed in neighboring countries. Most of the excess staff, however, are in the low grade jobs such as guardians and messengers, and more professionals would need to be recruited. Until now, Government salary structures have been applied in the water industry. This situation is expected to change in the newly restructured utilities, as they would be free to set salary scales that would make them more attractive to qualified profeseionals. Commerelal OperAtlons 5.14 The commercial operations of EPEA and EPEOR are not now run efficiently. Long delays occur from the end of a billing period to the time 24 - bills are dispatched to consumers. Collection is neither efficient. To redress this situation, technical assistance would be provided to these utilities to design and put in ylace an effective commercial system. Terms of reference for this assistance are given in Annex 23. 5.15 EPEA and EPEOR currently bill household customers quarterly, while industries and other large consumers are billed monthly. This practice would continue Lo the future, except that household bills would be issued on a continuous cycle. lIt addition to consumption, the utilities levy fixed charges for connection maintenance and meter rental. At the end of 1993, arrears for water consumption averaged eight months of sales. Acc.ounting System 5.16 The utilities' accounts would be kept on an accrual basis and computerized. The computer equipment has been in service for some time, and the staff have been trained in this area. Payroll, budgets, and stock management would also be computerized. The utilities should quickly begin developing a cost accounting system. The limited assets whose renewal rests with the utilities would be re-evaluated annually on the basis of an index to be introduced in the concession agreements. As indicated in para. 4.02, AGEP will manage the Government-owned assets. Other llanagement Procedu-res 5.17 The utilities' annual accounts would be audited by external auditors acceptable to the Government and the Bank. The selection and appointment of such auditors would be recorded in the concession agreements. These auditors' annual reports should be submitted to the Government and the Bank not later than September 30th of each year. Assurances to this effect were given during negotiations. This requirement would be recorded in the concession agreements. Assurances were also obtained during negotiations that Bank staff would be given access to any other report they might need to evaluate progress in project implementation. 5.18 The utilities would also establish procedures for personnel management and staff training. An information system would be put in place to allow quick and full dissemination of management data in the utilities. VI. FINANCIAL ANALYSIS Overview 6.01 As mentioned earlier in this report, two regional utilities, EPEA and EPEOR, have been selected to experiment with the proposed concessionary arrangements in the water supply sector. After evaluation at the end of 1996, the experiment would be replicated along similar lines at other water supply utilities. The organization, staffing, and management procedures of EPEA and - 25 - EPEOR are discussed in paras. 5.10-5.18. This chapter deals with their financial performance, past and future. 6.02 At present, EPEA and EPOR provide service to about 70X of their jurisdictional areas. As they expand service to small agglomerations, the average unit cost of water produced will increase, although some of the 'ncrease may be compensated by overall efficiency gains. Tariff increases will be necessary in the future because of the expansion just mentioned and the ongoing inflation. A uniform national tariff schedule is currently applied for water services. The recommendation is made for introducing regional tariffs. Past and Present Financial Performance 6.03 The actual income statements, balance sheets, and sources and applications of funds statements of EPEA and EPEOR --e given in Annexes 24 and 25. Highlights of their 1993 financial performance -.;-pear in Table 6.1, Table 6.1: Financial Indicatorg in 1293 REGIONAL OPERATING COLLECTIOM PAYABLE CURRENT DEBT:EQUIVY UflLfIY RATIO PERIOD, MONTHS MONTHS RATIO RATIO EPEA 0.87 6 17 2.6 6:94 EPEOR 0.86 8 33 1.5 77:23 6.04 Although EPEA and EPEOR had fairly acute operating problems in the period 1991-1993, there is evidence that in 1993 the discipline associated with the project was already producing improvements. Both utilities had favorable operating ratios, and their outstanding receivables were lower. However, both utilities had unacceptably high payables. Further, EPEOR had a very unfavorable debt to equity ratio. The year 1993 was particularly difficult for EPEOR on account of a severe drought in the Oran region, which severely curtailed the amount of water available. As a result, the volume of water sold dropped from 91 million m3 in 1992 to 55 million m3 in 1993, and a rationing system was introduced to meet the demand. In the meantime, EPEOR was able to remain solvent by sharply increasing its volume of outside civil works. =yeniia and Costp 6.05 Water utilities in Algeria derive their revenues from water sales, meter rentals and repairs, and civil works. In 1993, EPEA's revenues from water sales accounted for about 84X of total revenues, EPEOR's only about 65X. In time, however, water sales at these utilities are expected to represent over 90X of their total revenues. It should be pointed out that, in the absence of cost accounting systems, costs are not systematically allocated to each of the major activities, all expenses being treated as period costs. An analysis shows that the 1993 average revenues and costs of water sold per m3 by EPEA were DA 3.96 and - 26 - DA 3.55, while the average cost of water produced was DA 2.51. The corresponding 1993 figures for EPEOR were DA 5.24, DA 4.89, and DA 3.13. Table-La: Watgr Tariff Structure EXISTING STRUCTURE ANNUAL WATER USAGE ALLOWANCE, M3 TARIFF DA/K3 WATER RATES IN 1994 Household 0 - 100 1.00 U' 2.20 100 - 220 2.50 U 5.50 221 - 330 4.25 U 9.35 > 330 5.00 U 11.00 Public Uniform 3.50 U 7.70 Commercial n 4.25 U 9.35 Industrial " 5.00 U 11.00 6.06 Under the proposed sector restructuring (para. 3.12), the utilities would be responsible for system operation and maintenance, and mechanical equipment renewal. The Government would be responsible for system expansion and renewal. The tariffs should be sufficient to satisfy both obligations. For the Government, an important source of financing would be the concession fees (para. 5.08). As costs differ from one region to another, regional r.triff structures should be applied. A simpler structure should also be adopted for different classes of consumption. The present national structure is made up of seven classes inclusive of four for households, and one each for public dwellings, commercial activities and industries. Effective January lst, 1994, the national water tariffs have been increased by 33X. The rates that are now in force are given in Table 6.2. 6.07 The new tariffs would allow EPEA and EPEOR to meet their operating expenses, service their debts, and begin to service their concession obligations. These tariffs have been specified in the agreements between the Government and the utilities. They would be indexed to inflation and cost increases, and adjusted annually. The execution of the concession agreements with EPEA and EPEOR is a condition of effectiveness. I/ 'U* is the unit charge levied for water use in the first block of domestic conimiptian. A multiplicator is applied for uses in other blocks. - 27 - Financinj Plan 6.08 The project's financing plan is set out in Table 6.3. Financing sources would be concession fees, Government funds, and the proposed Bank loan. Z l3: FinansgPlan (1994 - 2000) DA USS PERCEW lMillion Proposed Projed 5,801.3 170.0 83.9 Capitalized Interest 1.3322 &i ii Total Requirmento 730.7 10. Concession Fees 1,549.0 54.1 26.7 Govwrnmt Finandng 1.,102 i n Total Nalional Funding 2.2 4 57 Proeseds of Bank Loan 4,481.3 110.0 54.3 TOTAL SOURCES future Financial Perfgmnce 6.09 Forecasts of future financial performance by EPEA and EPEOR are outlined in Annexes 24 and 25. Assumptions made in preparing these forecasts are described in Annex 26. Assuming that greater staff productivity and cost containment would materialize as conceived in the forecasts, these utilities should be able to maintain a healthy financial situation during the projection period. The projections assume that collection periods would be reduced to four months by year 2000 from the present level of around 8 months. Meanwhile, payment periods would decrease from the present 17 and 33 months to about 4 and 10 months, respectively for EPEA and EPEOR. The operating ratio of both utilities would fluctuate around 0.9 during the projection period. Amounts equivalent to 20X of basic personnel costs have been provided for staff performance bonuses. This is expected to provide a strong incentive for staff to fulfill the objectives of the proposed project. The projected tariffs are estimated to be within the margin of consumers' affordability, and should not generate increased levels of receivables. - 28 - Nonitorina System 6.10 Annex 27 gives the technical and financial indicators that the Government should monitor to evaluate the utilities' performance. This Annex also shows values forecast for the indicators in the years 1994 through 2000. These forecasts should be covenanted in the concession agreements. During negotiations, it was agreed that the Government, as part of its progress reports to the Bank, would report on the evolution of the indicators to the Bank on a quarterly basis during the project execution. The Government hps also engaged itself to carry out any action suggested by the Bank, aiming at meeting targeted values of the indicators. VII. ECONO_IC JUSTIFICATION Project Benefits 7.01 Because of its different components, the project would give rise to a number of complementary benefits. First, through its main objective of reducing unaccounted for water, it would increase available production and consequently water sales in the project area. Total water production in the cities where the network rehabilitation program would be executed, is currently estimated at 128 Km3/year. Only 55 percent of this production, i.e. 70.4 Mm3/year, is now recorded as sales to consumers. It is expected that, by the end of the project execution, this percentage would increase to 80 through the recovery of 32 Nm3/year. 7.02 Other elements of this program include network recalibration and mapping. The first one is expected to bring better services to consumers through more adequate water pressure and less interruptions in the distribution. There are many public health benefits inherent in a continuous service, as the risks of pollution entering the water system are curtailed to a minimum. The availability of maps of the systems would help in increasing work productivity in the utilities. At present, there are no detailed maps of the distribution network. Before proceeding with repairs in the network, very often much time must be spent searching for the location of pipes and other buried equipment. Faster repairs should become possible with the availability of maps. 7.03 As a complementary approach to optimizing water production in the country, it is proposed to assist ANRH in monitoring water resources, and to finance a number of studies of water production systems. These studies are aimed at identifying the works to be built, in addition to further rehabilitation, to meet future water demand in the country. 7.04 The last project component deals with sewerage rehabilitation in the country. This component benefits would be translated in improved environment, better public health conditions, and enhanced welfare of the population. - 29 - Least-Cost Alternative 7.05 The proposed project is the least-cost way of improving water supply service in Algeria. While new investments could be made to increase production to meet expanded demand, this would lead to a larger percentage of unaccounted for water and faster depletion of the resources. In a water sector study carried out recently by the Bank, it has been estimated that, if unaccounted for water could be reduced to 20 percent from its present 45 percent, the available fresh water resources could meet the demand by an extended period of 10 years from 2020 to 2030. Whenever water losses are higher than the above percentage, rehabilitation works should be undertaken first, prior to production expansion. Economic Return 7.06 Annex 28 outlines the assumptions made in calculating the return on the proposed investments. The economic rate of return on the project, excluding the sewerage rehabilitation program, would be about 17 percent. Benefits from the water supply rehabilitation program are valued using the water production cost of DA 3.00/m3 in 1994, times the volumes of water recovered of S2 Mm3/year beginning in year 2000. 7.07 A number of benefits relating to the sewerage component have already been mentioned in para. 7.04. They are, however, difficult to quantify in monetary values. The most obvious benefits would result from savings that would incur in treating waters for urban supply downstream of the sewerage works. But most of the benefits would come from environmental improvements which are intangible in nature. 7.08 A sensitivity analysis has been carried out on changes in benefits and costs on the project. An increase of 20 percent in the cost stream would reduce the return to 15 percent. A reduction of 10 percent in the costs would increase the return to 20 percent. A decrease of 20 percent in the projected tariffs would reduce the return to 12 percent. This analysis shows that as long as no radical changes occur during project execution, the project would be worth undertaking from an economic viewpoint. Economic Efficiency 7.09 Annex 28 shows basic assumptions for calculating the long-run marginal costs (LRMC) in the regions of Annaba and Oran. At the expected 1994 price levels, it is estimated to be US$0.31/m3 (DA 11.16/m3) in Annaba and US$0.45/m3 (DA 16.20/m3) in Oran. These estimates corroborate the hydrologic situation in Algeria where much more water resources are avail ble in the east (Annaba) than in the west (Oran). The projected average revenues of DA 6.07/m3 in Annaba and DA 6.82/e3 in Oran in 1994 are below the respective LRMCs in these regions. For economic efficiency, the tariffs of large consumers would need to be raised in real terms over the coming years. 7.10 The current tariff structure calls for progressive rates for increasing consumption blocks. It provides for a first subsidized block of 100 m3 per family per year. As consumption increases, higher rates are levied. In - 30 - Annaba, apart from the first three domestic categories up to 330 M3 per year, consumers in the other categories and industries are charged tariffs close to the marginal cost. Thus, to some extent, economic efficiency ls being achieved in the Annaba region, while at the same time safeguarding social equity. To attain similar results in Oran, the tariffs of domestic customers consuming more than 330 m3 per year, and for other uses would have to increase annually by 7 percent in real terms to equal the LRMC in year 2000. Environmental Impact 7.11 The project will have a major positive impact on the environment. By stopping leakages in the water distribution network, it will improve sanitation in urban areas, through the elimination of water pools, a propitious environment for the development of germ carrier vectors. A rehabilttated water network would provide better assurances against infiltration of wastewater in the network, and possible contamination of the drinking water and spread of vector- borne diseases. The rehabilitation of sewage treatment plants would contribute to a major improvement of water quality in Algeria. Wastewaters, now generated in urban areas, are disposed of without treatment. As a result, the environment around these areas has been seriously affected. The project is expected to redress this situation in a number of them. 7.12 In rehabilitating the sewage treatment plants, necessary precautions would be taken to ensure that the plants' effluent and sludge are disposed of without damaging the environment. When it is not reused in irrigation, the effluent would be disinfected prior to disposal. As indicated in para. 3.10, the plants' sludge would be composted for use in farming. The plants' operations would be monitored to ensure the safe use of their effluent and sludge in agriculture. Appropriate safeguard instructions would be given to farmers. In this context, prior to undertaking the rehabilitation of a plant, the necessary investigation and analysis would be carried out to ensure that there is no industrial discharge that might affect the plant operation. 7.13 Because treatment plants and other project construction might have limited adverse environmental effects, the project has been rated "Category B". Necessary precautions will be taken to keep effects resulting from construction, such as noise, air pollution, and population influx, to a minimum. Institution Building 7.14 A major project objective remains the institutional reforms that are expected to be accomplished in the sector. These expectations include the establishment of financially viable utilities; the application of tariffs, promoters of water conservation; and effective cost recovery. To realize them, the project proposes a first start toward privatization of the sector through the introduction of concessions for the management of the systems. It further recommends contracting out: (i) leak detection and repair works; (ii) optimization of meter reading and billing; and (iii) customer survey and recording. The project covers about 20 percent of sector operations in Algeria. If successful, it will be replicated for the rest, to achieve a major sector reform in the country. - 31 - Riskgs 7.15 There are some risks associated with project execution. The major one relates to the Government not living up to its obligations under the proposed concession agreements with the utilities, particularly with regards to tariff adjustment and other support to the utilities, relating to the payment of water consumption by public entities. If this occurs, the utilities in return might not be able to meet their obligations, with the end result of project failure in terms of institutional reforms. As a first action toward minimizing this risk, the concession agreements with EPEA and EPEOR have been reviewed and approved by the Bank during negotiations. Their ratification is a condition of effectiveness. Further action would be a mid-torm review in the summer of 1997 to evaluate possible deviations from the loan agreement and necessary corrective measures. 7.16 Other risks may surface in the execution of the rehabilitation works. In general, these are slow, tedious, difficult undertakings. As it is not possible to identify them with exactness, the estimates are not utterly reliable. To manage these risks, it is proposed to hold two seminars at project inception, to discuss the leak detection program and procurement. The aim is to set out in advance, actions that would need to be taken to keep project execution and costs under control. VIII. AGREEMENTS REACHED AND RECOMNENDATION 8.01 Agreement having been reached on the issues outlined in Chapters III through VII, and subject to the condition of effectiveness set forth in paras. 5.09 and 7.15, the proposed project is suitable for a Bank loan of US$110 million to the Government of Algeria for a term of 17 years including 5 years of grace. Washington, D.C., U.S.A. May 5th, 1994 - 32 - AN=1 Page 1 of 4 DEORXI MM OPOPULAR REA .LIC OF ALERIA WATER SUPPLY AND SEWERAGE REHABILITATION PROJECT LAN AND_ VATER RESOURCS GeffiffralFere a 1. With an area of about 2.4 m'llion km2, Algeria is the largest country in North Africa. Host of this area, however, extends into the Sahara Desert, is unfit for agriculture, but rich in mineral resources. North of the Saharan Atlas is a semi-arid region encompassing a coastal strip along the Mediterranean, the interior plains, some highlands near the coast, and the high plateaux. More than 90 percent of the population lives in this region. The mean annual rainfall in this northern part of the country varies between 300 mm and 1,000 mm, exceeding 600 mm only in the central and eastern coastal plains where rich arable land is found. It is less than 100 mm south of the Atlas in the Sahara. 2. There are 17 major river basins in Algeria. Some of them are shared by other countries: the Medjerda with Tunisia; the Tafna, Guir, Dra and Daoura with Morocco; and the Niger by Mali and Niger. Based on rainfall and surface water regime, climate, and soil characteristics, 11 hydrographic regions have been identified in the country: Oranie, Cheliff, Algeroise, Soummam, Constantinoise, Annaba, Nedjerdah-Mellegue, Hodna-Zahres Sersou, Aures Nementchas, Chott Chergui South Atlas, and Southern Algeria. This regional distribution is used in comparing water demand with the available s-"ply in different parts of the country. 3. Administratively, Algeria is divided into 48 provinces (wilayate), 567 counties (dairate), and 1,540 communes. At the provincial lcvel, the executive is headed by a Governor (Wali), and his cabinet includes representatives of each of the Central Government's ministries. FoMUlation Distribution 4. The 1987 census recorded a population of 23 million in Algeria, half of it living in urban areas. A previous census was carried out in 1977. Between these two censuses, the population kept growing at an average annual rate of 3.1 percent. The urbanization rate also increased during that period from 39 percent in 1977 to 50 percent in 1987. The expectation is that the share of urban population will continue to increase, reaching 58 percent of the total population by the year 2000. The stationary population in Algeria is projected to be around 76 million. As previously mentioned, more than 90 percent of the population lives in the northern part of the country, accounting for only 12 percent of the land. As a result, the population density - relatively high in this part. It ranges from 50 persons per km2 in the st. ,pe to 220 persons per km2 in the coastal plains. In fact, almost 40 percent of- the total population resides along the coast between Oran and Annaba in a strip accounting for less than 2 percent of the total area. Only 7 percent of the total population lives in the southern part of the country. - 33 - ANN9X X Page 2 of 4 5. Over 70 percent of the total population lives in fixed settlements that need to be provided with public water supply and sewerage services. The rest of the population is dispersed, necessitating at the most the provision of water points for its supply. About 44 percent of 41gerians are under 15 years of age, 65 percent under 25 years of age. Although one-fourth of the urban population is concentrated in the capital city, Algiers, there exist in addition a number of relatively large and medium-size cities distributed across the northern part of the country, where public services such as water supply and sewerage can be provided at a reasonable cost. This distribution suggests that a decentralized sectoral organization for urban water supply can be implemented in Algeria, provided the necessary st&ff can be found to manage the resulting independent systems. Land Resources 6. Out of a total land area of 238 million ha, only 40 million ha are considered suitable for farming. Less than 10 percent of this arable land, however, is actually under cultivation, while another 10 percent is laying fallow. Some 31 million ha are used for pasture and grazing, and about 3.7 million ha in raising cereals such as corn and sorghum. Most of the Algerian territory consists of the Sahara Desert and is not usable for agriculture. Land evaluation is still in progress in Algeria. At the end of 1986, the evaluation was completed for a total area of 5.8 ha. 7. Overall, irrigated farming is practiced on about 320,000 ha, a very small percentage of the cultivable land. Government plans are to expand irrigated land by 20,000 ha yearly. So far, however, little progress has been made in this area. The best arable land, about 168,000 ha, is found in the western part of Algeria; but less than 10 percent of this land is presently under irrigation. The fact is that farming in Algeria heavily relies on rainfall. As a result of good rainfall in the last two years, the amount of fallow land has decreased, but erosion has accelerated with an estimated loss of 15,000 ha of steppe land eve'y year. This soil degradation has led to siltation problems in the reservoir system, with the resulting loss of capacity and deterioration of water quality for urban supply. Land management is 8 pressing issue that the Government should address forthrightly, if surface water quality is to be lmproved, and water structures such as impounding dams, transmission facilities and irrigation grids are to provide continuous benefits. 8. Algeria is endowed with 1.5 million ha of canopied forests. The dst,:estation rate during the first half of the 1980s, however, was 40,000 ha each year. About half million ha of land is classified as protected areas. Vater Resources 9. Total water resources in Algeria are estimated at 19.1 billion m3 per year, comprising 12.4 billion m3 of surface water and 6.7 of groundwater. Surface waters are particularly abundant in the coastal plains (11.1 billion m3), but decrease rapidly in the steppe (0.7 billion m3) and in the Saharan Atlas (0.6 billion n3) . Because of irregular flows and heterogeneous distribution, the surface water resources cannot readily be exploited for irrigation and urban - 34 - Page 3 of 4 water supply. Most of the rivers are dry in the summer, and their quality deteriorates in the winter, because the rising flows have high solid contents. Their regulation through costly reservoirs is often required to obtain economically exploitable yields. It is estimated that, with full damming, about 5.7 billion m3 per year or 46 percent of the surface waters in northern Algeria could be mobillzed for irrigation and urban water supply. Presently, an average of 2.2 billion m3 is exploited from a total of 45 impounding dams. Large investments remain to be made for full mobilization of the surface water resources. 10. As a result of high infiltration from storm runoff and surface water resources, and of the existence of large fossil water deposits, groundwater is available over much of the country. The average annual yield of groundwater is estimated at 6.7 billion m3, but more than two thirds of these resources (4.9 billion m3) are located in the Sahara Desert. Their evaluation was carried out in the course of oil exploration and drilling, and with the help of simulation models. These aquifers lie very deep under the ground surface, and their exploitation would ie costly. When economically feasible, their utilization should be essentially for local consumption. Any water transfer scheme appaars to be an expensive proposition that should not be included in a mid-term balance sheet of available water resources. 11. Of the 1.8 billion m3 of groundwater available in northern Algeria, 1.5 billion m3 are already in exploitation, particularly in the coastal plains. The unexploited balance of 0.3 billion m3 is essentially in tne steppe in Zahrez, Chott Hodna and Chott Chergui. Thus, the average yield of water resources, excluding groundwater in the Sahara, with full development of storage, is estimated at 7.4 billion m3/year. This should be sufficient to cover the water needs for urban, industrial and agricultural use until the early part of the next century. Beyond that, it will be necessary to reclaim wastewaters and to tap non-renewable groundwater in the northern part of the Sahara, and later on to demineralize brackish water to meet the demand. This situation already exists in some urban areas along the coast, such as in Oran, where the present demand exceeds the available supply in the river basin, and water must be transferred from the adjacent Chelif basin. Also, in other regions, it might be more economical to reclaim wastewater instead of tapping additional outside fresh water. 12. Most urban are&s are presently supplied with groundwater, also a main source of water for irrigated farming. While surface water is under-exploited, groundwater resources are already utilized to more than 80 percent of their full capacity. Domestic, public and industrial uses currently account for about 34 percent of water used. These needs, however, will expand rapidly with larger population and possibly higher per capita consumption associated with greater income. It is estimated that, presently, irrigation farming is in use in only 4 percent (320,000 ha) of the arable land. 13. The following table gives the volumes of water consumed in 1987 by different types of users. Serious water shortages, and potential conflicts of use, are likely to develop in the more densely populated watersheds, and along the coastal areas where the majority of the population is concentrated. In the - 35 - Page 4 of 4 long run, reclamation of wastewater and eventually desalination will become necessary to meet the demand. Water Use in 1987 (Million m3) By End-user Volume Percent Households 580 24 Industry 159 7 Public 70 3 Irrigation 1.584 66 TOTAL La. 910.0 ealautorl Framework 14. The institutional perspective of the water resources sector in Algeria is geared toward improving the nation's welfare. The Constitution states that water resources belong to the nation's people and should be used for their welfare and prosperity. Emphasis is also on protecting the environment. These objectives are spelled out in three legislative frameworks: the Water Code or Law No. 83-17 (1983); Law No. 83-03 (1983) relating to environmental protection; and Decree No. 85-266 (1985> regulating the provision of public water and Sanitation services. Under the Water Code, usage priority of the water resources is given first to drinking water, followed by agriculture use and industry. Decree No. 92-100 (1992) regulates the establishment and operation of water utilities in the country. The regulation and operation of large-scale irrigation areas are spelled out in Decrees No. 85-259 and 261 (1985). Meanwhile, the disposal and management of national lands are regulated by Law No. 84.16 of June 30, 1984. It should be noted that, while these regulations are full of good intent, their application is not always carried out to the letter of the law. This is particularly the case for environmental and pricing regulations. DEMOCRATIN JWD POUAREPUOLIC ALGERIA WATER 8UPPLY AND SEWERAE REILTATION COST OF WATER SUPPLY SERVIE IN 1982 POPULATION, 1000 TOTAL 9 SRSVB) NO. SERVICE WATER PERCAPITA OPERATI AVERAGE UNES SALES, 106 MS CON& LCD COSTS. 10 ODA COST (l) (2) (4)(L() ) A11110110 8,415 64 243,400 126. 119 W7.0 4.00 Annaba 841 78 60,000 55* 239 168.0 3.05 ChIet 1.416 20 D 8.20 15.6 161 35.5 2.14 C _saatanlln. 1.914 62 112.800 Sao0 8 18.7 4.41 m1m 1,7 45 79200 20.0 so 10.0 4 Oran 2.9 am 205.700 88.0 125 363.0 4.01 6619 1,4 46 s5.101 24.4 82 5.0 S.9O Xbd OSS 3S 28.700 7.9 42.8 6.42 Im,9 73 126 37.0 82 167.0 4.1 WYAIITS Ad 772 es el7 2.0 82 9.e 2.0 B Sy0 7 6O0 1" t10 75. 02 ea 20 so 18,200 12.9 18 3.7 2.79 SaWs 01 8 MM50 a.9 78 34*0 3* _a 41 431 .2a0 14.4 187 25.9 167 Dub 607 53 71M00 5. 47 11 2.23 0Ousd 44 27 1 0 4.0 1 102 El11h 72 0, f i 1.5 0 9.4 w*@ O_de 20 07 41.100 7 4.1 a Gushow 410 go 2.160 7 25.0 4* mmb S4 07 2.00 OA 88 41 7.75 ua 804 99 1260 6.2 175 38.9 .5 Lagho S 17,00 0.6 1S3 26.4 3.42 W166 311 57 16,800 4.7 107 20.8 4.4 Meotag... 500 56 1G,600 *.1 82 43.1 4A8 Nsa.. 60 60 11,000 30 so 12 7.4 4.88 0 . a am 6 78 24.00 0.3 139 23.3 5 Ouft* 810 el 29.400 19.6 17 02.4 4.20 Palmt. 627 37 21,700 6.2 73 14.0 2.5 asI Sl Ab ale 40 0.800 09. 129 15.4 1.02 Samd. 279 as 24.D0 8.5 131 14.4 1.00 Skda 712 51 26.00 15.9 120 48.6 3.05 Sm*-Ahra 106 70 9.900 4.6 171 27.7 5.10 TaMeWa 44 as 3.,00 0.6 48 3.0 0.00 Tabos Soo0 as 38,700 5.7 61 34.0 6.99 llnduf 20 74 l,60o 0.6 111 32 6.23 ALGMERIA MIS55- UL.4 _ - ~~~~~~~~_ _, NOTE: lalCok ^( gve. w pcea oodu lpopultion need by to te. In tal In 1692 Uty pmAlded ervls to 142...9000 poopl. L.. aboeaMof Otm total population. ibi Column (5) Ib ra to betwm cdumn (4) and coumn (1) tims column (2). Ija Column (7) laobtalwed by dhh cohmn (6) by comn (4). DUdOCAAWMADOFPlA aR fTW SUPPLY AND _W E E RABIhT& PRWWT 6R_ MOSrOFW ATf SUJPPLY S0VCEN 1N OPERATINdaCOSTS WATEt SALEM OffRCDOT CAPITAL ASSETS PROVISION ALLOWANME TOrALCOST CAPITAL tOOlA looms PERMS, DA IOODA FOR ASiEWAL PERM8 DA CARA CONS.A A USODA (1) ( (4) () (6) ) RE MA A*t* 71S.0 186. 581 12.175 243A 1.8 7.11 34 Annaba 810.0 01.0 5.18 2.000 40.o 0.06 6.84 19 C0J 60.8 18.0 2.7* 1.01 14.0 188 4.18 40 C _wWIn 224.i 88.0 5.78 5.087 100.7 2.69 8.7 4 Medea 182. 9 22 G8 S .013 50.8 2.70 0.6 se Oane $81n. O6.0 6.6e 9.160 68.0 1.18 6.2 20 Sawl 184.5 15.4 6.09 8,217 04.8 2.44 7.58 46 iawr 00. 9.6 7.18 1.392 27. 8.27 10.40 40 T-OUZa 2386. 40.0 &01 6,232 104.7 2.62 8.5 44 Abr 0.4 2.2 4.27 264 5.1 2.82 .59 64 SeIn 106.6 20.6 .12 2.130 42.0 2.06 7.17 40 lsOhaw 47.7 19.1 8.*4 747 14.9 1.14 4.70 S1 Bouk 46.6 .0e slo 1.307 20.1 2.72 7.7 64 own. 88.1 16.6 244 8s 17. 1.1 as. 47 Seb 16.7 6.7 2.08 1.320 26.4 4,.0 7.00 Ise ElOsd 14A 5.0 2.08 60 10.1 2.02 4.90 70 Eal B 13. S 1.0 8.81 2 6.3 3.31 11.08 40 Sbrdm 472 0.7 6.4 o6n 19.2 2.21 7.08 41 tu_m 85.4 6.0 6.90 0 18.2 3.20 .10 54 mlm 4.4 0.4 11.00 as 1.4 8.60 14.60 32 _ thancht 82.0 8.7 4.78 412 0.2 122 0.00 26 Lhaa 41.0 0.8 4.47 766 16.4 .e6 0.13 37 USa. 2M 6.1 6.78 a0 10.2 2.00 7.78 as stapn.m 0tO1.0 10.6 6.61 1.379 27.0 2.09 8.44 46 Na_ne 24.6 8.9 0.81 386 0.7 1.72 8.08 27 Out. a DmzoN 47.2 10.1 4.67 79N 10.0 1.69 6.26 34 OMwa 116.7 21.2 6.60 1,222 24.4 1.15 6.66 21 PAlzn* 20.7 8.7 8.09 006 19.7 2.04 6.03 Os SWkSol Abb.e 21.4 10.3 2.12 874 17.6 1.70 3.02 so a" 20.4 0.2 2.2 761 16.0 1.3 8.86 74 Sklda 66.7 17.2 SAM 1,640 30.8 1.78 6.78 46 Sauk-Ahm 86*2 4.9 8.00 as 0.1 t24 0.24 1s Tma_Ot 4.8 0. 8.60 123 2.5 6.00 13.60 se Tab.. 4.2 0.2 7.77 1,307 20.1 4.21 11.00 64 Tindout 4.6 0.7 0.43 64 1.3 1.0 620 20 14* 617S 6.14 6 7, 97 1.144M 6 0 w NOTE lei COdmn (8) bIt. rafio b*twe 0 u (1) and Pbi Cdumn(s) kdlutae anl _a" sosumpto atoace or c a 0- pedod. pcl Col. (6) b the rao b twen eum_e (5)nd (. Id) CIok (7) bI Omam of ockmmnmo anti p. (f Coa m8) is te rdlio ofcolumn(S) mr eonnn (8). - 38 - AEN= 4 Page 1 of 4 DEMOCRATIC AND POPULAR REPUBLIZ OF AMLERIA WATE R =SPL AND SEUMAG REHADILAT1ON MROUNT CONTRACT MODEL FOR OPTIMIZING WATER SUPPLY OPERATIONS Introduction 1. In theory, urban water supply production in some large Algerian cities is sufficient to meet demand. For example, in the city of Annaba, current water production reaches about 240 liters per capita per day. This means that, even if 50 percent of the production tiere unaccounted, the available supply would be 120 liters per capita per day, an allowance largely sufficient for a city of the size of Annaba. The reality, however, is very different. In spite of the relatively large production, water is rationed in the city of Annaba. Some areas receive water 12 hours a day, while others only 3 hours a day. Because of the unreliability of the services, consumers have accustomed to store water when it is supplied, and to discard the remaining stored water at the beginning of the next supply. As a result of such prar-tice, the percapita consumption has increased substantially. But even that increase should not have led to the current rationing in the city. The fact is that, even at peak hour demand, the available supply could fill the demand. 2. Two problems are associated with the inability of water utilities in Algeria to provide continuous water services. The first one is the large volume of water unaccounted for, resulting from leaks, illegal connections, and metering errors. The second one is the lack of capacity and pressure in distribution networks. Primary pipelines do not have the necessary capacity to convey peak hour demand. Because of the type of material used in connections, leakage occurs very often in service lines to consumers. To solve these problems, an action plan should cover the entire spectrum of water supply operations. Water leakage might be a faulty area with major impact on water availability. Faulty metering might be also a major culprit. Illegal connections may be another area responsible for the disparity between production and metered consumption. 3. The following outlines a type of contract to be used for optimizing urban water supply operations in Algeria. Reonired ServLces 4. The type of contract outlined here is intended to be more interventionist than a traditional consultancy approach for providing advice and training. It is a start toward privatization of leak detection and repair, and commercial activities of water utilities. In entering into a contract with a specialized company, a major objective for water utilities should be to increase metered consumption and consequently sales and revenues. To reach this goal the following services should be spelled out in the contract: - 39 - AN 4 Page 2 of 4 (a) diagnostic of the system operations inclusive of metering, leakage level, pipe capacity, and pressure availability; (b) repair of leaks and other defects; (c) replacement of defective equipment (district meters, valves, pressure reducers, overflows etc.); (d) consumer metering, meter reading, billing and revenue collection; (e) modelling of the distribution system; (f) mapping of the distribution network; and (g) master planning of distribution system. Contractina Appnroach 5. As the problem data such as volumes of water unaccounted for, the state of the metering system, and repair works to be done, are not actually known, a traditional contract with a bill of works cannot be used for optimizing urban water supply operations. Instead, a Target Cost Reimbursement Contract (TCRC) is used. It is based on direct reimbursement of works done by a contractor, but with incentives to speed up the works and to increase performance. This is achieved through a bonus or a penalty to the contractor for exceeding the target cost or failing to meet it. Essentially, the contractor will be asked to quote a target cost for increasing metered water consumption by implementing a work program. If the actual cost of this program is less than the target cost, the contractor will get a bonus. Otherwise, he will pay a penalty. 6. The following elements are included in the target cost: (a) the contractor's reimbursable costs in executing the works but excluding those carried out on behalf of the water utility; (b) abortive work requested by the contractor wherein no defect is found within the location indicated by the contractor; (c) attendance by the utility's staff at works being executed by the contractor at his request; and (d) the cost of water losses or the difference between water production and metered consumption times the marginal cost of producing one unit of water. - 40 - ANNEX 4 Page 3 of 4 7. Water losses as used in the target cost include all forms of losses such as leaks, metering defect, and illegal connections. The utility will provide the marginal cost of producing one unit of water. This rate may be increased by the utility from time to time. The cost of water losses will be the total volumes of water unaccounted for time the cost of unit of water. Contract Execution 8. The contract will be executed in three distinct phases: The first phase will include a quick study to corroborate the extent of water losses, whether they are resulting from leaks in the system, illegal connections, or metering defect. During this phase, the contractor will also determine the conditions of bulk meters, reservoir overflows, district valves, and other equipment on line in the system. This phase is expected to be executed quickly, in less than four months. After the study is completed, more accurate data will become available to allow a more precise evaluation of the parameters included in the target cost. At this stage, both the utility and the contractor will review the results of the study to agree on a set of updated parameters for the contract. 9. The second phase will include the execution of works aimed at increasing metered consumption, covering leak detection and repair, consumer survey, installation of meters,determination of pipeline characteristics, repair to pipes ,service lines, valves, etc. This phase is expected to last about three years. Like for the second phase, a third phase will be undertaken only after an evaluation of the systems set in place for controlling unaccounted for water has been carried out, proving the effectiveness of such systems. 10. The third phase will cover recalibration and modelling of the distribution system. During this phase a map of the system will be prepared together with a customer data base. A rehabilitation program will be proposed as the first construction stage of a master plan of the water supply system. Cometitive Tendering 11. Competitive pressure will come on the level of fixed fees that the contractor will charge to the utility. This level will depend on the size of the contract, data reliability, and bidder's perceptions of risk. Pressure on the contractor's efficiency will come from the target cost. For him to get a bonus, actual costs will have to be lower than the target cost. The final cost to the utility will also depend on the absolute amount of the target cost. In the utility's interest, it will be necessary to provide accurate data, leaving the possibility of revising them if necessary. Bid Evaluation 12. In carrying out bid evaluation, both the fixed fees and bonus amount should be taken into account. Bidders should be requested to quote a fixed price for the first phase (the study). They should also outline the methodologies and resources they will use to execute the two subsequent phases, including a target - 41 - Page 4 of 4 cost for the second phase. A fixed fee will be quoted for the third phase. The bonus amount is related to the target cost, making the utility and the contractor share the inevitable difference between the actual cost "A" and the target cost"T". IfMB' represent the bonus to the contractor, then the cost IC' to the utility will be: C A + B "BO is the difference between the actual and the target costs times a percentage S"s: B (T - A) S "S" being the share of saving/overrun going to the contractor. Thus, the following expression can be obtained: C A + (T -A) S 13. The cost of the work program will occur only once. Thus in introducing it in the target cost, only an annual payment should be considered. If "Fcr' is the capital recovery factor, then the payment amount will be AFcr. On this basis the finel cost to the utility will depend upon the contractor's fees and the bonus amount. The function for bid evaluation then will be: F + Sx Tx Fcr IF" being the fixed fees quoted by bidders. The values of 'S" and "Fcr", as well as the evaluat on formula should be provided in the tender documents. In addition, a detailed description of the works should be given in the documents. Other elements will be detailed schedules of cost parameters, rates and charges, terms of payment, times and stages of completion, takeover procedures, and performance procedures. - 42 - ANNEX Page 1 of 3 DEMOCRATIC AOR POPULAR REPUBLIC OF AMGERIA WATER SUPPLY AND SEWERAGE REHABILITATION PROJECT SELECTION CRITERIA FOR SEWAGE PLANT REHABILITATION 1. This Annex outlines the criteria that would be used to select sewage treatment plants that would be rehabilitated under the project. This selection should be first approved by the Bank, before loan funds can be disbursed for a subproject. To speed up procurement for this project component, a group of plants should be selected at project inception. Equipment and materials for this group should be packaged and procured together. It is estimated that some 25 plants would be rehabilitated under the project. The Government should make an effort to select them by the end of 1994, the first year of project implementation. A list of plants in need of rehabilitation is given in Table 7.1 Table 7.1: List of Sewage Treatment Plnt 4nNeed of Rehabilitation CAPACITY COMPLETION POPULATION ID NO. WILAYA LOCATION YEAR EQ X3/DAY 01 Algiers Baraki 1989 750,000 150,000 02 El Alia -- -- 3,000 03 " Bologhine -- 2,000 04 Bab-Ezzouar 1976 -- 20,000 05 Annaba Annaba *1984 500,000 67,000 06 a Serraidi -- 24,000 -- 07 a Berrahal -- 6,000 -- 08 a Drean -- 6,000 -- 09 0 Chettaibi -- 6,000 -- 10 n 0. El Anes -- 12,000 -- 11 Bouira S. El Bhouzlane 1972 25,000 2,850 12 Blida Blida 1988 350,000 -- 13 Bejaia Bejaia 1986 80,000 13,000 14 Aokas 1985 4,500 450 1S Tichy 1986 1,200 100 16 Djelfa Djelfa 1986 88,000 14,000 17 Ouargla Ouargla 1974 87,000 21,600 18 Touggourt 1989 62,500 -- 19 H. Hessaoud 1979 5,000 20 H. Messaoud 1960 2,000 -- 21 Saida Saida 1978 78,000 7,600 22 Ghardia Bounoura 1987 60,000 15,600 23 T. Ouzou T. Ouzou E. 1973 28,000 4,080 24 a T. Ouzou W. 1984 25,000 4,320 25 a D.B. Xhedda 1973 14,500 1,770 26 a Tadmait 1984 13,000 2,420 27 a Boghni 1984 13,000 2,100 -43- ANNX 5 Page 2 of 3 CAPACITY COMPLETION POPULATION ID O0. WILAYA LOCATION YEAR EQ H3/DAY 28 Boumerdes Baghlia 1984 7,000 -- 29 n Corso 1962 1,500 -- 30 Tipaza Tipaza -- 3,500 -^ 31 S. Ferruch 1992 '5,000 - 32 n Kolea 1587 45,000 10,000 33 C des Pins 1992 5,000 -- 34 Azur Plage -- 2,000 - 35 Staqueli 1982 1,500 -- 36 Zeralda 1976 2,500 -- 37 El-Tarf El Kala 1985 25,000 3,750 38 Zerizer 1985 3,000 260 39 Asfour 1984 5,000 -- 40 Tiaret Tiaret 1985 60,000 9,000 41 A. Temouchent A. Temou 1962 20,000 -- 42 n El-Amria 1954 -- -- 43 Bechar Bechar 1971 30,000 9,000 44 S.S. Abbes Sfisef 1981 16,000 4,080 45 Telagh 1980 12,000 1,800 46 ' Tilmouni 1980 2,000 200 47 Ben-Badis 1980 8,000 950 48 Oran Es Senia 1975 15,000 1,500 49 n Bousfer 1990 10,000 -- 50 El-Karma* 1987 6,000 -- 51 Misserghin 1980 5,000 500 52 Mascara Tighennif 1984 16,000 2,600 b tIade up of lagoos. Ezeopt for these two plants, eal the others use activated sludge process. Priority Assignment 2. A number of considerations should be made in assigning priority to a plant for its rehabilitation. The first one should relate to the type of treatment process used in the plant. Priority should be given to those using simple processes such as lagoons, trickling filters. The least priority should go to sludge activated process. In this context, an investigation would be made to determine whether there is any industrial discharge which might affect the treatment process. In the affirmative, the concerned industry would be required to pretreat its wastes prior to their disposal in the sewer system. 3. The next consideration should deal with the function of the plant, whether or not it provides an environmental protection that could not otherwise be obtained through a natural process. This lead to the third consideration relating to the plant location. If a plant is situated at a short distance upstream of a water intake, with no possibility for natural recovery of water quality before it reaches the intake, priority should be given to such a plant. - 44- Page 3 of 3 4. On the contrary, if there is no close downstream use, or there in sufficient time and reach for quality recovery, no priority should be given to such a plant. Further consideration should be given to the use of the plant effluent. If it is used for irrigation, for instance, less treatment would be required. More would be needed when the effluent is discharged into a water body that is used for urban water supply. In any event, an economic analysis should be carried out to determine which alternative would be more economic, more sewage treatment and less water treatment, or the reverse. Aesthetic considerations should become a factor when treatment is necessary to preserve the natural beauty of the environment. Rehabilitation Program 5. Once a plant has been identified, consultants would be hired to evaluate its priority for rehabilitation on the basis of the foregoing criteria. The next step would be for them to carry out rehabilitation studies, followed by the preparation of a work program. Both the capital and operating costs of the program would be calculated by the consultants. They should also carry out an institutional review to determine the organization to put in place to operate and maintain the plant. Finally, they should prepare operational procedures for the plant. In general, consulting services would be required to inspect regularly plant operations, and when necessary, to assist in resolving particular operational problems. U,bnole0Ct ApMrOl 6. On the basis of the consultants' report on the opportunity of rehabilitating a sewage treatment plant, the implementing agency would submit a request for financing the rehabilitation program. The request would indicate the dispositions that the Government is taking to ensure normal operation and maintenance of the plant. Indications should also be given on financial sources to cover such operation. The Bank will promptly advise the agency of its decision concerning the plant financing. No loan amount would be disbursed on a subproject that has not been approved by the Bank. - 45 - Page 1 of 1 DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA WATER SUPPLY AND M SEWEAE REH&EILITATION PROJBCT LMST OF STUDIES AND OPRAIONAL ROUIPMEN TO I& PROCURE UNDER TE PROJECT FESIp.TYSTUDIES AND IAs - Barika impounding dam in Ksila Wilaya - El Beida impounding dam in Khenchela Wilaya - Sidi Akacha impounding dam in Chelf - Akbou impounding dam in Bejaia - Ait Zaouia impounding dam in Setif DETAILED STUDIES AND _IAs - Water supply for Sidi Bel Abbes - Water supply for Bejaia - Sewerage in Oran - Neskiana impounding dam in Tebessa Wilaya - Tabellout impounding dam in Jijel Wilaya - Boussiaba a La - Porte de Fer impounding dam in Bordj Bou. Wilaya - Boulatane impounding dam in El Taref Wilaya - Djidiouia ' Relizane Wilays - Taourira " Tipaza Wilaya For EPEs: tractors, cranes, trench diggers, trucks, pipe layers, bulldozers, pumps, air compressors, sludge haulers. For EPEs, ANB, AGEP, ANRH: Sedan vehicles, four-wheel drive vehicles, topographic instruments, drawing instruments, computers, photocopy machines. - 46 - MM 7 Page 1 of 2 DEMOCTIC AM POPL REULIC OZ AGEIA MMfl "UML amD SEWEAGE RflILITAMION PROJO PRgRm 101 UPGRAIN NTItQIQIDXCAL RU!CORDING Ot -tx 1. Hydrology is the science which analyses the occurrence, position, and movement of water on earth. Such analysis is essential for conceiving, operating hydraulic structures. In Algeria, it is the responsibility of the Agence Natlonale des Ressources HydraulIques (ANRH) to record and analyze hydrological data. This agency was set up i.. 1942, and over the years has provided distinguished assistance to the hydraulic sector. Its equipment and materials are now becoming obsolete, and it is looking for ways to modernize them. The proposed project includes financing for this modernization. NZandate 2. ANRH is responsible for maintaining an inventory of water and land resources in Algeria. In carrying out this responsibility, ANRH observes and measures hydro-climatological phenomena in the country. ANRH disposes of 200 flow measurement stations, 1500 rainfall gages, and 250 recording rainfall gages to record rainfall in the country. In addition, it has 60 weather stations recording temperatures, wind movements, humidity, and evaporation data. ANRH also maintains an inventory of 70,000 wells to control groundwater exploitation, recharge and movement in the country. 3. So far, ANRH has surveyed se-ven million ha of land, recording and classifying their possible use in agriculture. One of the determinants in this classification is water requirement for different types of culture. Other determinants refer to the chemical characteristics of the soils. 4. On request, ANRH carries out special studies related to groundwater yield, flow regime and forecast, recurrent floods in dam design, and soil suitability. An important function of ANRH is data dissemination as an essential ingredient in project concept and design. =BaRIzation 5. To execute the above mandate, ANRH disposes of six departments at the head office, three branch offices one respectively in the center, east and west, and 25 units. The six departments include hydrology, hydrogeology, pedology, chemistry, progranming and information, and administration. ANRH has a total staff of 3,200, is well structured, and provides valuable services to the water sector. - 47 - Page 2 of 2 4ve a emet Progra 6. A major objective of ANRH is to modernize its recording equipment and materials. For now the data are recorded, later on read, and then transmitted to the central office. This process takes time, and the data are not always faithfully reported. ANRH is proposing to equip its stations with the necessary systems that would allow simultaneous recording and transmission of data, Some of the stations would be equipped with radio systems, and others with satellite communication. As necessary complementary materials, computer and other operational equipment would be provided to ANRH. 7. On the software side, assistance would be given to ANRH to valorize its data bank. Between the time data are now recorded and then published, a substantial period of time elapses. Until now, the 1990 weather data have not yet been published. This long delay diminishes the usefulness of the data. Such publications should take place not later than four months after the end of a calendar year. The proposed modernization of recording equipment should help to investigate and transmit information for its immediate dissemination. 8. Additional assistance would be provided to ANRH in firming up their knowledge of the meteorological causes in floods and droughts, and their management of water resources. Support would also be given to them to set up an information system in the agency. At project inception, consultants would be employed to specify the modernization program of equipment, and the technical assistance. 9. The estimated total cost of the development program is US$4.0 million, covering the following items: US$ Mtil}ion (i) Network Development-and Modernization 1.0 (ii) Groundwater Investigation 0.4 (iii) Soil Investigation 0.4 (iv) Setting up of Information System 0.6 (v) Equipment for Water Quality Monitoring 1.0 (vi) Investigation of Groundwater in Sahara 0.5 (vii) Research Program on Drought and Groundwater Q1 TOTAL COST 10. The program would be executed during the period 1994-1996. Depending upon its success, the possibility of providing additional assistance to ANRH beyond 1996 would be Investigated as part of future operations in the water sector. - 48 - Page I of 2 DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA WATER SUPLY AND BEVERAGEM E AILITATION PROJECT TERMS OF REFEENC FOR MANAGMEENT STUDIES OF SURFACE WATER AM GROUNIDWATER IN SOUNNA VALLEY Backgound 1. Oued Summam starts at the iunction of two tributaries: Oued Sahel and Oued Bou Sellam. From there it runs for about 90 kms. to the city of Bejaia where it discharges into the Mediterranean. The Soummam Valley has an average width of 2 kms, which in many reaches extends to 5 kms. The river basin has a total area of 8,800 km2. The average rainfall in the valley is about 600 mm per year, but reaches 1,000 mm in the mountains. The valley has experienced some major floodings. A flood of 5,200 m3 per second was observed in 1957. The 10- year predicted flood has been calculated to be 3,000 m3 per second; but the average flow of the river is only 25 ms per second (788 Mm3 per year). 2. Besides a number of settlements in the valley, some major infrastructures have been built along the river. They include a national road linking the east of the country to the capital city of Algiers, a railway, a major oil pipeline, and a gas pipeline. Floods have occasioned major damages to these infrastructures, and some large dams are planned or under construction on Oued Sahel and Oued Bou Sellam to control floods in the valley. A geological barrier at Sidi Aich City divides the valley into two parts: the higher Soummam with an area of 40 km2 and the lower Soummam with 75 km2. 3. Alluvial deposits form a continuous strip along the river, with large groundwater reserves. As a result, groundwater is used for both urban water su-yly and irrigation. A large number of wells are in operation in the valley. It is estimated that about 5,500 m3 per day are pumped in the upper valley, and 7,800 m3 per day in the lower valley. Irrigated agriculture is practiced in some 4,280 Ha. There are some 2,000 springs in the Wilaya of Bejaia, and most of them are used for water supply. Total population in this wilaya was estimated at 700,000 in 1987. Objectives of the Studies 4. A dam at Tichi Af on Oued Bou Sellam, wust above the confluent of this ousd with Oued Sahel, is currently under construction. This dam was originally conceived to protect the valley from floods, and would regulate 150 Nm3 per year. The Government is now considerlng transferring this regulated water to Bejaia for urban supply, and to the Sahel for irrigation. Hydrological studies that were undertaken by ANRH in the 1970s, indicated that recharge of groundwater in the lower valley would not be affected by this transfer. The general conclusion of this study was that the hydrological cycle in the valley would not be unduly disturbed by major transfers of water. - 49 - Page 2 of 2 5. An environmental impact assessment (EIA), however, was not carried out by ANRH. Such a study should be completed before a final decision is made on the proposed transfer. These terms of reference briefly cover this study. G=2=nts f the Studio-& 6. The EIA studies should cover an analysis of the environment in the valley dealing with inter alia the natural resources, fauna and flora, agricultural uses, forestry, and groundwater and surface water uses. The analysis should be supported by a hydrological model simulating the different uses of water in the valley. The impact of the dam on the existing environment should be evaluated in terms of its adverse effects on agriculture, the fauna and flora. 7. Particular attention should be paid to actions that would modify significantly the present ecological systems. The study should also highlight measures to be taken by the Government to mitigate possible adverse effects of the proposed water transfer. It should further indicate how the economy in the Soummam Valley might be affected by this transfer, and whether benefits of transferring water outside the valley are commensurate with losses in the valley. The study should ascertain whether it would be possible to recharge groundwater in the lower valley through discharges from the Tichi Af dam. It should also review the possibility of e,=eanding irrigated agriculture in the valley. Regacmmedatlons 8. The study should recommend the most appropriate modus operandi for storing and releasing water of Oued Bou Sellam, with a view to maintaining the ecological balance and enhancing agricultural development in the valley, while allowing, if possible, some water transfer to the Sahel and to Bejaia. - so - Page 1 of 1 DiMOCRATIC AND POPULAR REPUBUC OF ALGERIA WATER SUPPLY AND SEWERAGE REHABILITATION PROJECT DETAILED COST ESTIMATES DA MIlilon US$ IVlIIon rTEM Local Foreign Total Local Foreign Total Percent 1. Water SUDDIV Rehabilitation Annaba 74.8 138.6 213.4 3.4 6.3 9.? Ain Temouchent 15.4 28.6 44.0 0.7 1.3 2.0 Bejaia City 37.4 72.6 110.0 1.7 3.3 5.0 Jijel Supply 24.2 41.8 66.0 1.1 1.9 3.0 Mascara City 22.0 44.0 66.0 1.0 2.0 3.0 Oran City 193.6 360.8 554.4 8.6 16.4 25.2 Relizans System 26.4 50.6 77.0 1.2 2.3 3.5 Sidi Bel Abbes 50.6 94.6 145.2 2.3 4.3 6.6 Setif City 59.4 114.4 173.8 2.7 5.2 7.9 Tlemcen 3562 6.0 101.2 1-6 3.0 4.6 Subtatal (I) EnD 1.012.0 1.551.0 24.5 46.0 7QM 11. Seweaae Rehabilitation Sewerage treament plants 17.6 37.4 55.0 0.8 1.7 2.5 Pumping stations 17.6 44.0 61.6 0.8 2.0 2.8 Sewer network 9 0 2 176.0 39 4.1 8£ Sub Total (III 121.0 171.6 MA 5 7.8 13.3 i0. lL Sub Total Rehablftation 6§.0 11836 1,843. 30.0 53.8 a I and 11 Physical contingencies 66.0 118.4 184.4 3.0 5.4 8.4 6.5 Project implementation 39.6 71.0 110.6 1.8 3.2 5.0 3.9 Studies, ElAs by ANB 22.0 143.0 165.0 1.0 6.5 7.5 5.8 Studies, ElAs by AGEP 11.0 77.0 88.0 0.5 3.5 4.0 3&1 Supply of operationat equipment to ANRH 8.8 79.2 88.0 0.4 3.6 4.0 3.1 * * ANB 2.2 13.2 15.4 0.1 0.6 0.7 0.5 * a EPEs 6,6 99.0 105.6 0.3 4.5 4.8 3.7 Training and technical assistance to ANRH 6.6 24.2 30.8 0.3 1.1 1.4 1.1 ANB 132 50.6 63.8 0.6 2.3 2.9 2.2 * * AGEP 11.0 46.2 57.2 0.5 2.1 2.6 2.0 * * EPEs 17.6 77.0 94.6 0.8 3.5 4.3 _ IV. Total Base Cost (July 1993) 8 1.982.4 2.847.0 393 90.t 129.4 10 V. Price Escalation 455.4 2,498.9 2,954.3 20.7 19.9 40.6 31A VI. TOTAL PROJECT COST (curent prices) I32a 4.481.3 5 81.3 UNA VII. Percent 22.8 77.2 100.0 35.3 64.7 100.0 DEMOCRATIC AND LAR REPUBLIC OF ALGERIA WATER SUPPLY AND SEWERAGE REHASBILTATION PROJECT PRKCE E8CALATION AlfCULATION (USS NI) FlM PART low less s8 197 iees I9N TOTAL ITEw LOCAL FOREIGN LOCAL FOREIGN LOCAL FOREIGN LOCAL FOREIGN LOCAL FOREIGN LOCAL FOREIGN LOCAL FOREIGN LOCAL FORE3GN 1. Water Oupply Rehsb. 4.9 9.2 0.2 0.6 3.4 .4 3.7 6.9 4.1 11.6 3.7 0.8 2.6 4.6 24.6 40.0 11. Sew Reshab. 1.1 1.6 - - 0.4 0.0 0.4 0.6 o.a 1.2 1.4 1.0 1.4 1.9 6.6 7.8 111. Subtotal Conruction 9.0 10.8 0J.2 0.6 3.8 7.0 4.1 7.6 6.9 12.7 S.1 8.8 3.9 6.6 30.0 63.8 Physloal Conlngenolo 0.6 1.1 - - 0.4 0.7 0.4 0.8 0.7 1.3 0.6 o.e 0.4 0.8 3.0 5.4 Projsct Implementation 0. 0.7 - - 0.2 0.4 0.3 0.4 0.4 0.8 0 3 0.6 0.2 0.4 1.8 3.2 ANW'Studba and EAs 0.1 1.3 - - 0.1 1.0 02 1.0 0.2 1.0 0.2 1.1 0.2 1.1 1.0 6.5 AGEPes tdle.and ElAn 0.1 0.4 - - - - 0.1 0.7 0.1 0.8 0.1 0.8 0.1 0.8 0.6 3.6 Supply atOp.. EquIpment 0.1 1.7 -- - 0.1 1.4 0.1 1.4 0.1 1.A 0.2 1.4 0.2 1.4 0.8 8.7 Inst Develop. Assidanc to ANFH. ANB. AGEP & EPE - - - - 0.4 1.0 0.4 2.0 0.4 2.0 0.5 2.0 0.6 2.0 2.2 9.0 IV. TotalBaseCoot(JuiyISM3) 7.3 10.0 0.2 0.8 6.0 11.5 5.6 13.8 8.8 20.0 a.9 16.6 6.6 12.8 39.3 W0.1 V. Prbe Escaaon - - - - 1.6 2.3 2.6 3.2 6.7 6.3 6.6 4.7 6.4 4.4 20.7 19.9 VI. Total Proect Cost 7.3 16,0 0.2 0.6 6.6 13.8 8.2 17.0 14.6 26.3 12.4 202 ¶0e 17.2 60.0 110,0 VIl. CostInDAmIlIlon 10.6e 3s2.0 4.4 17.6 143.0 617.6 180.4 97.0 319.0 1087.9 272S 949.4 239.8 eeo.o 1320.0 4481.3 VIL. Exchane Rates 22.0 36.0 37.5 41.0 43.0 47.0 50.0 0 ALGERIA WATER SUPPLY AND SEWERAGE REHABILITATION PROJECT IMPLEMENTATION SCHEDULE Estimated Annual Contractual and Other Payments (US$ Million Equivalent) "ect F....ent Proj_c_ Y__ __m P Total ._.__.. fProject Ulement 1994 1995 1 . 1997 19 2000 PaYmOnt R 1. WORKS . . . . * 1.4. * .*1.4. . 1.4- 1.. 1.4, 7.0 GovtFin. 1.1 LeakRepairs a 3 D ' 1.2 Rehabilitation . .8.3' 8.3' 8.3' '8.3' 8.3 41.5 LCB Water Systems Rehabiafion * c b a b M m b : I * , . ' .(4.9). * (. 5.0) (5-0)' 250), 4.9) a 3.9 :3.9 :3.9: :4.0: :4.0: 19.7 LCB Wastewater Systeffr,RehabiNtation t a a i aeam m mm mu gm I Mm, =13 on 0 E!l f J ,(2.4) !(2.4): k2.4): :(2.3): (2.3) (11.8) 2. GOODS 2.1 Equipment and Machinery , , , . , , . , , , * '~~~~1.3-. '2.6' '3.2' '3.2' '2.5' 12.8 ICB Vehicles. Trucks, Oata Processing a . ( ln * , ,(1.0), .(2.O). ~~~~~~(2.5): (2.5): (2.0). (10.0) 2.2 Materlals .4 6 o6: :8.A: 8.4_ 8.5: 46.5 ICB Pie.Vles, Fiftros :8.4, NMm.6.8:aa , am Mla '(5.9)' (4.8)' (4.1)' '(5.8) (5.9) (6.0) (32.5) 3 SERVICE CONTRACT 0.6 I.I 1.8 1.6 ,1.7 '1.7 8.3 ICB 3.1 Unaccounted for Water Reduction , ' , mm m '(0.4) '(0.8), '(1.1) (1 .1) '(1.2) ' (I - ' (5.8) 4. COISULTANCIES Q0.1; 0.5' :0.6, :0.6: :0.6: :0.6: S.6 3.6 4.1 Project Implementation gm I= NM = a . Man m , 2 Short List . .4)' (0.4) (0.4)' (0.4) '(0.4)' ' (2'5) ,4.4' ' . '7.6' '2.6' '0.6' '0.3' 15.5 Short Ust 4.2 Project Preparation no a m o =ol 1= a on mm In !l , f V 4,2 Projt P i43.4) (5.9). , (2.0) .(0.5) :(02), (12.0) .4.6 .72. .2.5. 0.6. 0.2 15.1 ShortList 4.3 Institutional Development o is on Z I m m m M 1 , (3.3): : , l5-0)' :. ' 7): '(0.4): :(,(Qi (10.5) TOTALS 0.7 20.3 25.2 39.8 32.6 28.1 23.3 170.0 (Bank-Financed) (0.5) (14.8) (15.6) (26.4) (21.0) (17.7) (14.0) (1100.0) iXer ~~~~~~~~~~~~~~~~~~~~~~~~~~~~z Cl D af i Document Preparatn B Bidding Period 1 ConsructionStudy Penod S_ 3A03W54834E - 53 - A\NNEX t2 Page 1 of 1 DEMOCRATIC AND POPULAR REPUBUC OF ALGERIA WATER SUPPLY AND SEWERAGE REHABILITATION PROJECT UST OF CQNTRACTS TO BE PLACED FOR THE PROJECT TOTAL PROJECT COMPONENT PROCUREMENT fTEMS CONTRACT NO. PAYMENT US$ Million I. Water SuoRlv Rehab. Unaccounted fbr water reduction WSSR-U1 to 10 8.3 Leak repairs WSSR-L-01 to 10 7.0 Supply of pipes and fitings WSSR-(;01 46.5 Pipe network recalibration WSSR-N-01 to 10 41.5 SUBTOTAL 103.3 II. Sewerage rehabilition Equipment supply and works WSSR-8-01 to 25 19.7 Ill. Operational eouipm Supply of equipment for transportation, construction and data processing WSSR-D-01 to 03 12.8 IV. Studies. enineerino Feasibility, detailed studies and ElAs WSSR-E-01 to 10 15.5 V. Instutional Development Training and consultants' assistance WSSR-F.01 to 04 15.1 VI. Proiect Imnlsmentation Design and supervision WSSR-H-01 to 10 _ TOTAL 170.0 - 54 - - 54 - ~~~~~~~ANbLEX 13 DEMOCRATIC MOD POPULAR REPU8UC Of ALGERIA WATER SUPLY ANMD SEWERAGE REHABILITATION PROJECT OESTMATED SCHEDULE OF DISBURDSEMENTg (USS Million) Bank Loan Ceovemment Funds Bank FY' and Quarter In Quarer Cumulalvo' In Quarter Cumulative3 First 02 0.2 0.1 0.1 Second 0.3 0.5 0.1 0.2 Third 3.3 3.8 1.6 1.8 Fourth 3.5 7.3 1.6 3.4 1S« First 3.5 10.8 1.6 5.0 Second 3.5 14.3 1.7 6.7 Third 4.1 18.4 2.0 8.7 Fourth 4.3 22.7 2.0 10.7 t997 First 4.3 27.0 2.1 12.8 Second 4.3 31.3 2.1 14.9 Third 5.3 36.6 2.6 17.5 FouRt 5.3 41.9 2.6 20.1 Fist 5.4 47.3 2.6 22.7 Second 5.3 52.6 2.7 25.4 Third 4.1 5:6.7 2.6 28.0 Fourth 4.1 60.8 2.6 30.6 First 4.9 65.7 2.6 33.2 Second 4.1 69.6 2.6 35.8 Third 4.3 74.1 2.7 38.5 Fourth 4.3 78.4 2.7 41.2 ;{QQQ First 4.3 82.7 2.7 43.9 Second 4.3 87.0 2.3 46.2 Third 4.0 91.0 1.8 48.0 Fouth 3.0 94.0 1.8 49.8 2QQj First 3.0 97.0 1.8 51.6 Second 3,0 100.0 1.9 53.5 Thid 2.7 102.7 1.7 55.2 Fourth 2.6 105.3 1.6 56.8 iCQQ2 First 2.4 107.7 1.6 58.4 Second 2.3 110.0 1.6 60.0 3,1 l b_ b)n sId1 O tefo Pcf you to me 30t o Nt urm yaw. a, g uainuW dbNaMe as wA aft ih ooWuqot qetau. ALGERIA WATER SUPPLY AND SEWERAGE REHABILITATION PROJECT AGENCE NATIONALE DE l:EAU POTABLE ET INDUSTRIELLE ET DE L'AS$AINISSEMENT AGEP Organizational Chart - 1993 ORIENTATION BOARD I GENERAL MANAGER DEPUTY DEPUTY MANAGER MANAGER ADMINISTRATION SRTUDAEMST_ RKS OPERATIONS _ PERSONNEL l _SDiESEAND TECHNICAL REERCH _ BUDGET lG_ PROGRAMS PROJECTS REGULTiONS SYSTEM ORGANIZATION INSPECTION j SADStW54834D z - 56 - Page 1 of 3 DEXORAIIC AND POPUALARRPUBLI-C OF ALGERIA. DATM SUPPLYAWD SEERAG LOHAMILTA ION OEC TERIf OF UEFERENC O TECHNICAL ASSISTANCE TO AGEP 1. ~~The Agerzce Nationale de 1'Eau Potable et de l'Assalinssement (AGEP) was set up itt June 1987 to provide technical assistance to the water supply and sewerage sector. The original intent was to make it a national agency that would oversee the operations of water and sewerage utilities in the country. Some key tasks outlined in the bylaws creating AGEP were standardization of operational norms in the sector, dissemination of knowledge, experiments and practices, and staff training. As a side task, AGEP was mandated to supervise construction implementation of regional works financed by Goverrnment funds. For now, AGEP is an administrative agency directly attached to the Ministry of Equipment. It is devoid of admi~nistrative, technical, and financial autonomy. 2. At the time of its creation, most of the personnel who joined AGEP came from operational units in the Ministry of Equipment in charge of project construction implementation. Most if not all of them were engineers. The first General Manager himself was an engineer. As a result, since its inception AGE? has devoted most of its time and resources to construction supervision. So far, AGEP has not been staffed with economists, system analysts, financial analysts, and has paid little attention to these aspects of institutional management. A consequence of this neglect has been the low rate of sectoral development recorded in the last six years. 3. One of the problems that AGE? has been confronting is the lack of autonomy and c-ompetitiveness that would have allowed it to attract high caliber staff for implementing an effective assistance progr.am to the utilities. The decision has now been made by the Government to transform AGEP into an autonomous, commerciaLl and industrial agency. This transformation would allow it to set out more attractive pay scales and benefits. At the same time, as the Government is changing institutional arrangements in the sector, a national agency should be in place to monitor these changes. The Government is proposing to mandate a restructured AGEP with this task. rnstituional Set-Mgi 4. The new operational mode in the water supply and sewerage sector in Algeria would consist of independent utilities operating the systems under concession agreements with the Government as the owner of the systems. For these arrangements to be successful, a number of performances must be achieved in the sector. First, the systems must be able to perform well, so that the utilities can operate efficiently. Second, the Government must have the capacity to forecast future needs in the sector, and to make the necessary investments in time, so as to maintain the operational conditions of the systems. And thirdly, an organization -should be in place to control the utilities' operations, ensure - 57 - Page 2 of 3 that concession fees are paid on time, and decide on the use of these fees. The proposed restructuring of AGEP aims at making this agency fulfill these functions. Reauirsd Assistance 5. These terms of reference describe the assistance that AGEP would need to set up the organization necessary to carry out the foregoing functions. As this organization is being put in place, further assistance would be given to AGEP' staff in performing these functions. Under this assistance, each function would be described in detail and codified in procedures that would be followed in performing this function. An organizational structure would be prepared for AGEP, showing the different levels of organization in the agency and the interconnections between them. A job description would be prepared for each staff position, describing the precise role that this staff would play in the organization. 6. Under the proposed assistance, operational manuals would be prepared and codified for all operating aspects of AGEP. An important area for codification would be the relations between AGEP and the utilities and other governmental agencies. As AGEP would become an investment agency handling large Government funds, a system should be in place to control its management and operations. Additional assistance would cover the setting of an information system, computerization of its operations, and equipment specifications. All operational procedures would be codified, including technical assistance aspects, investment decisions, construction supervision, fund management and investment, billing and collection, monitoring of covenants under concession agreements with the utilities. Areas to be Covered 7. The new AGEP is scheduled to perform three main functions: portfolio management overseeing the quality of management of installations owned by the Government, their refurbishment and expansion; adherence to covenants in concession agreements; billing and collection of fees; - technical assistance to utilities with the objective of strengthening and standardizing procedures of the water and sewerage utilities; and - planning and implementation of investments for rehabilitating and expanding water supply and sewerage installations. 8. To cover these areas, it is proposed to establish seven departments in AGEP. They would be: - Rlanning, to look at supply and demand of water in the country, collect data, forecast future water use, and estimate investment requirements to meet future demand; - 58 - Page 3 of 3 studies, to commission and follow up the preparation of rehabilitation and expansion plans of water and sewage systems, bidding and selection of contractors to execute these plans; new _w2&s. to supervise construction of regional water projects; thnical ssixstalce , to guide utilities in the implementation of technical, commercial, and financial procedures, and organize staff training; V nortfolio management, to manage funds stemming from the concessions, monitor the life and conditions of assets owned by the Government, supervise the execution of concession agreements, and bill and collect concession fees from water utilities. - findnce, to establish the origin and disposition of funds in the agency, secure financing for the sector when necessary, and formulate financial strategies for the agency and the sector; and - «dDEnista*.tion,, to manage human resources in the agency and provide administrative support dealing with procurement, stock, communications and transportation. Ezecution of the Assistance 9. The requested assistance should be executed in three phases. The first one should cover the design of the organizational structure, specifications and procedures of AGEP's administrative departments and divisions. Job descriptions should be prepared for the main functions performed in the agency. This phase is expected to last six months. The second phase should include the implementation of recommendations made under the initial phase. This phase is also expected to have a duration of six months. The last phase would cover support to AGEP in getting acquainted with and executing the functions and procedures prescribed under the requested assistance. This phase is expected to last a year. - 59 - Page 1 of 6 DEMOCRATIC AND POPULAR REPUBLIC OF ALGERI KATME SUPPLY AND StEW G REHABILITATION PROJECT TR SUPPL OPtTIONS IN T PROJE A 1. The proposed new inst-itutional arrangements would be experiment with two existing regional utilities: the Entreprise de Production, de Gestion et de Dlstribution d'Eau d'Annaba (EPEA) and the Entreprise de Production, de Gestion- et de Distribution d'Eau d'Oran (EPEOR). They are considered the best run in the sector. The first one is located in the east, and the other in the west. Together they cover six wilayate with a total population of 3.7 million. As the experiment is being carried out at these two utilities, institutional development assistance would be provided to the others. By mid 1996, the new institutional arrangements would be in place for all the utilities, which would manage water supply systems under concession agreements with the Government. 2. At this stage it is not proposed to change the legal status of the utilities. However, necessary provisions would be introduced in the concession agreements that would provide full institutional autonomy to the utilities. Drafts of the agreements with EPEA and EPEOR have been approved during negotiations. Background of the establishment of these two utilities and appraisal of their past operations are discussed below. A. TRRISE DE PRODUCTION. DE GESTION ET D DISTRIBION D'RAU D2ANNAA-EPEA Baucround 3. The Entreprise de Production, de Gestion et de Distributlon d'Eau d'Annaba, EPEA, was set up in May 1983 to provide water supply services in the wilayate of Annaba and El Tarf. For now, EPEA serves 73 percent of the agglomerated population in Annaba and El Tarf. In the service area, EPEA has 66,400 customers, with the possibility of increasing this number, as it takes over the remaining systems during the next five years. At its creation, EPEA took over centers that were served by the Eastern Regional Office of SONADE. Nokmt ea 4. The total population in the area served by EPEA is currently estimated to be 0.8 million. About 73 percent of this population is already served by EPEA. It thus needs to extend services to an additional 226,000 people. In 1992 water production reached 83.9 Mm3, but only 41.9 Mm3 was billed to customers; 50 percent of this production was unaccounted for. In that year there were 66,400 customers for an average of 9.3 persons per connection. The consolidated average percapita consumption was 187 liters per day. This - 60 - Page 2 of 6 allowance appears high, but is misleading, given that almost 40 percent of the production was delivered to industries. If this allocation is excluded, domestic per capita consumption would be about 112 lpcd, judged appropriate for the type of climate in EPEA's jurisdiction area. The current water production is considered sufficient to meet present demand, but as service expansion is taking place, production will have to be increased. Works, partly financed under Loan 2821-AL, are currently under way to expand water production in this region. a SLanMnihgnt 5. At present, EPEA is serving two wilayate, namely Annaba and El Tarf. Accordingly, two branches have been established one in each wilaya. In addition, a head office has been set up in Annaba, the largest , most important city in the region. In the wilayate, an administrative unit has been put in place in each daira. This organization, which follows the country's administrative subdivision, might not always be the most productive, efficient setup, as the work load might be different from one daira to another. But for a start, it should be considered appropriate until a cost accounting system is in place that would allow to calculate the resulting costs in the dairas. The units' works in a wilaya are supervised by the wilaya branch office. In turn, the branch offices' works are controlled by the head office. 6. Annex 20 shows EPEA's interim organizational structure. Three departments are now established at the head office: finance/commercial, technical, and personnel. At the branch level, a similar organization is in place. Meanwhile, at the daira level, only two divisions, commercial and engineering/operations, have been set up. Although Law No. 90-11 of April 21st, 1990, set out the establishment and functioning of Governing Boards to oversee the utilities' operations, those boards have never met. Under the new institutional arrangements, Executive Boards would be formed to supervise the utilities' works. These boards would be made of representatives of the Government, the industrial/commercial sector, anid consumers. In addition, Administrative Boards, composed of the utilities' managers, would be set up to evaluate the utilities' policies and operations. The Executive Boards are expected to meet regularly on a monthly schedule, while the administrative Boards would meet weekly. 7. Annex 22 shows a proposed organizational structure for the utilities. Basically, four departments would be set up: finance, commercial, administration/personnel, and engineering/operations. An internal audit section would be set up in all of them, reporting directly to the General Manager. Two other sections, one dealing with legal questions and another with public relations, would also be in place. Most of EPEA's operations are now computerized. This prac.ice is expected to expand gradually to cover all operations by mid 1995. staffing 8. At the beginning of 1993, there were a total number of 1,047 staff in EPUA. This represents a ratio of one employee for 61 customers. It is extremely low, as ratios four times higher have been observed in neighboring - 61 - ANEX-16 Page 3 of 6 Morocco and Tunisia. As EPEA takes over new systems in its jurisdiction, this number is expected to increase, as obligation would be made to EPEA to take all employees of the joining communes. However, EPEA should make an effort to reduce the number of staff through attrition and other means. A performance indicator dealing with staff numbers would be set out in contract plans between the Government, the Communes and EPA. 9. Government salary structures are applied for employees in the water utility industry. However, provisions should be made in the concession agreements for specific fringe benefits to employees. With the addition of these benefits, current salaries should become competitive with those in the industry and energy sectors. Consequently, EPEA should not experience difficulties in recruiting qualified staff. In addition, a training program is planned for the personnsl of the water utilities. Billing aod Collection 10. EPEA bills household customers quarterly, while industries and other large consumers are billed monthly. This practice is in variance in some places such as in the dairas of Sidi Ammar and El Hadjar. EPEA is, however, expected to follow this practice in all the dairas. In 1994 EPEA is expected to generate an average revenue of DA 6.07/m3 as the result of applying a unit base of DA 2.20/m3. In addition, EPEA would levy fixed charges for connection maintenance and meter rental. All connections are expected to be equipped with meters by the end of 1994. Customers will have a 15-day period to pay their bills. Beyond that a 5 percent penalty would be applied. All billing and collection operations would be computerized. Arrears for water sales now average almost a year of sales. EPEA should make an effort to reduce those receivables. A&counting Sv ten 11. EPEA's accounts have been kept on an accrual basis and computerized. Customers billing and collection, and payroll, are also computerized. EPEA is planning to computerize budget and stock management, and to develop a cost accounting system. EPEA revaluates its assets annually. On the other hand, other accounting procedures have been sketchy. There is not a written information system in place. All that is expected to change under the technical assistance program included in the proposed project. Other ManaMement Procedures 12. EPEA's accounts have been audited regularly, though with some delays. Under its contract plans with the Government and the Communes, EPEA would be required to appoint external auditors, acceptable to the Government, for an swnual audit of its financial accounts. These auditors' annual report should be submitted to the Government for its review and approval not later than September 30th of each year. EPEA should be allowed to hire either State-owned or private auditing offices. The best qualified firm should be retained, as EPEA's staff, during the formative years of the company, would benefit from regular exchanges of views with auditors who have broad experience in public utilities practices. The requirement for submission by the regional utilities - 62 - A= 16 Page 4 of 6 of audit reports to the Bank has been recorded in the draft loan agreement between the Government and the Bank. Bank staff will be given access to the utilities' accounts and records, and non compliance with this requirement should be grounds for loan suspension. 13. EPFA has established procedures for staff recruitment, and has institutionalized staff training. There are, hewever, no procedures for exchanging information within the company. Those will be formalized under the proposed technical assistance to EPEA. An internal auditor provides support to the General Manager for the control and application of existing procedures. Finance 14. The financial situation of EPEA has been relatively stable in the last five years. Its operating ratio in 1992 was slightly higher than one, but on a cash basis the company was able to covpr its operations. The situation should substantially improve and stabilize, as a result of the 33-percent tariff increase in 1994. B. RNTREpRIE DE PREDUCTION. DE GESTIQN ET DE DISTRIBUION DRIAUJ D'ORAN-EPEO 15. EPEOR provides services in the wilayate of Oran, Tlemcen, Ain Temouchent, and Mascara. In terms of population covered, it is the second largest regional utility after the one in Algiers. EPEOR was set up in may 1983 to replace the Western Regional Office of SONADE, making it responsible for both water and sewerage services in the western part of the country. The population in this region is growing at an annual rate of 3.1 percent. In 1992 it was estimated at 2.8 million inhabitants distributed in some 441,000 households. As of now, only 68 percent of the population is served by EPEOR. Its services have been extended particularly in the wilaya of Oran where 92 percent of households are connected to the water network. In the other wilayte, the service levels have reached 53 percent in Mascara to 62 percent in Ain Temouchent. A large percentage of the total population lives in small villages supplied by individual wells and standpipes. EPEOR is not expected to extend services to these communities. Narketi= 16. The Oran region has recently experienced a series of droughts, and as a result, the water resources have been insufficient to meet the demand. Water supply in the region is now rationed, and In Oran, water in most areas is available only every other day. Production is generally metered, but distribution is not. Volumes of water billed are only estimated, as a large number of connections are not equipped with meters. For instance, in Ain Temouchent, the volumes billed have been found to be higher than the amounts produced. In general, however, the statistical data are considered sufficiently - 63 - ANNEX 16 Page 5 of 6 good to make reliable extrapolations and projections. They must, however, be taken with caution. 17. The 1992 production was 145 Nm3 of which 91 Mm3 were sold through 211,000 service lines. Current losses are estimated at 37 percent. However, overall, the volume distributed per service line is quite high and should have been sufficient to satisfy the demand, if other conditions were satisfied. Estimated water production and consumption per service line in cubic meters per year in 1992 are given below: 9Xlaya prQduCtjn aCognsumDtion Ain Temounchent 328 292 Oran 700 422 Mascara 371 237 Tlemcen 800 700 18. Preslmably, unaccounted for water must be higher than 40 percent and not the 28 percent quoted in reports. Apparently production data are more accurate than volumes sold or consumption. Percapita domestic consumption has been calculated to be 94 lpcd in Oran, but 229 lped in Tlemcen. In 1992 total production grew to 145 Nm3 and sales to 91 Wm3. Because of the current drought, sales dropped to 55 Mm3 in 1993. Naniaement and 0rganization 19. EPEOR covers four wilayate and is organized accordingly. Its head office is located in Oran, and In each wilaya there is a departmental branch. At the head office there are five administrative departments: commercial, operations, finance, administration/personnel, and stores. They regularly provide management with reports on their activities. These reports are generally complete, giving statistics on production, distribution, receivables, works undsrtaken, finances, and procurement. However, some Important ratios helpful in determining the company's position and planning corrective measures, are missing in these reports. These aspects have been discussed with EPEOR's management, and as a result of these discussions, the content of the reports is expected to be modified to make them more useful to management. At present, the company does have the data processing capacity it needs to computerize its activities. In addition, under the proposed loan, assistance would be provided to EPEOR for acquiring operational equipment. 20. At the end of 1992, EPEOR's staff numbered 1,837 of which management represented about 7 percent, technlcal 15 percent, and operational 78 percent. The ratio of connections per staff is 115, which is considered low. The proportion of qualified staff is also low, as seems to be the case for most of the utilities. On the other hand , the number of unskilled staff is high and includes a large number of security guards and messengers. Like for EPEA, EPEOR is committed to increasing this ratio by gradually reducing its staff through attrition. - 64 - Page 6 of 6 BiLLInaI #ad Collecto 21. Billing is processed monthly for large consumers, and quarterly for the rest. When there is no meter or it is broken, billing is made on the basis of a fixed estimated volume of consumption. Presently, about 20 percent of the service lines are not metered. But all connections are scheduled to be equipped with aeters by the end of 1994. Meter readings are processed at the head office, and collection at local levels. This information is processed at the central level about a month later. Updating of customers' records as regards unpaid bills is made in an adhoc manner, and does not allow close supervision. AccountIna and Audit 22. Separate accounts are kept in each branch and processed manually. They are consolidated and computerized at the head office every quarter. There is no cost accounting and no internal auditing. This is an area for which assistance would be provided under the proposed loan. A Government agency, SNC, has in the past carried out the external auditing of EPEOR's accounts. In the future, the company would look for the assistance of private auditors to carry out this work. 23. An analysis of EPEOR's past financial results shows that payables have increased in proportion to increases in accounts receivables. Purchases as well as customs duties and taxes have remained unpaid in 1992. However, based on the following ratios in 1993, the consolidated company appears to be financially profitable: Personnel cost: total revenues 0.50 Total revenues: total costs 1.16 Personnel cost: total costs 0.57 - 65 - AKNNF 17 Page 1 of 4 DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIh WATER SUPPLY AND SEERARGE REHABILJTATION PROJECT CONCESSONA AANGUEMEWNTS FOR XMNAGING URBAN WATER SUPPLY SERVICES 1. This Annex outlines what should be the contents of concession agreements between the Government and utilities for managing urban water supply services in Algeria. The long-term objective for the sector is to privatize the management of these services, or to contract out with specialized companies that would take over the existing parastatals. The Government, however, will continue to own the installations. In the path to this limited divestiture, there are a number of issues that need to be resolved before this objective can be achieved. Resolving these issues would also lead to improved quality of the services, and to enhanced management capability in the sector. As this is being achieved, private entrepreneurship will develop in the sector, with the possibility for national enterprises to compete for the proposed management contracts. Their participation will make it more acceptable for the Government to allow the intervention of foreign companies in the management of urban water supply services in the country. 2. Five issues need to be addressed in promoting institutional reforms in the water supply sector in Algeria. The first one relates to the Government's control of operations all over the country. For wilayate or communes to enter into management contracts with private enterprises, it would be necessary for them to have full control of operations in their jurisdiction, including the setting of tariff levels. This means that full decentralization of the decision making process should be achieved in the sector. The second issue concerns ownership of water distribution networks in the communes. For economies of scale, it will be necessary to set up regional water companies covering a large number of communes. The issue is how to encourage the communes to join the regional companies, so as to achieve those economies. The best alternative might be to provide financial incentives to them by undertaking works for improving services in a commune, once it has decided to join a regional enterprise. 3. The third issue refers to the current application of a national uniform tariff structure in the country. Tariffs are expected to be different in the various regions, and should be decided on the basis of the cost of providing the services. The fourth one relates to the lack of expertise in the sector. For a privatization program to be successful, both capital and technical expertise must be available in the country, so that national enterprises are able to participate in this program. This participation would help to turn down feelings against privatization. The fifth and final issue concerns the status of the existing enterprises, as they are now functioning as industrial and commercial outfits devoid of financial autonomy. If progress is to be made in resolving the first four issues, more institutional and financial autonomy should be given to the enterprises. This should be the first step to take in the path toward divestiture in the sector. - 66 - ANNEX 17l Page 2 of 4 Preamble 4. Before a concession agreement can be drafted, the jurisdiction of the regional enterprise concerned must be defined by the Government. Since such a concession will cover a number of communes in different wilayate, the parties to the concession should be the Government and the enterprise. The next step would be to determine the costs to the enterprise to provide the required services in its jurisdiction. The purpose of this study would be to determine the value of the installations, and consequently, of the concession fees that should be charged to the enterprise. From there, the tariff levels would be set out, giving the enterprise a margin for making profits through increased productivity and efficiency. 5. In compensation for the use of the State-owned assets, the enterprises would pay concession fees to the Government. These payments should be made quarterly, at the latest, 30 days after the end of a quarter. The concession fees would be adjusted annually on the basis of an indexation formula that covers major inputs in the water supply industry. The enterprises should engage themselves to carry out effective operation and maintenance of the conceded assets. The Knteririses Obligations 6. The enterprises should be required to provide the services in accordance with norms specified in the contracts. These should include quantity, quality and pressure. The norms of quantity and quality can be exceeded, but any reduction would need to be approved by the Government. In addition zo these technical specifications, an expansion rate of the services should be spelled out in the contracts. The enterprises should be under the obligation to implement a permanent program for effective reduction of water unaccounted for. Their objective should be to minimize the difference between water produced and consumed. A time bound schedule for progressive reduction of water unaccounted for should be specified in the contracts. 7. The contracts should also contain a schedule of works and equipment renewal to be executed by the enterprises. This schedule, in general, should include pipeline extension for new customers, renewal of pumps, electrical motors, transformers and lines. Major expansion works would be executed by the Government. As additional duties, the enterprises would keep up customer data bases as well as updated maps of the networks. 8. The enterprises should collect revenues for water consumption, and any other taxes or uses, such as for sewerage, that the Government might ask them to undertake. Amounts collected on behalf of the Government should be returned to it without delay. The State's Obliuations 9. The contracts should set out the water tariff structure and levels that the enterprises will be authorized to apply during the concession period. - 67 - ANNEA 17 Page 3 of 4 Like the concession fees, these levels will be adjusted annually on the basis of an agreed indexation formula. Based on the studies that were carried out prior to the signing of a contract, the cost of providing the services should be known to both parties. The Government should allow the enterprises to retain any income surplus after concession and income tax payment. It should also take all necessary measures to pay its water bills within a reasonable period of time. Other than the tariff allowance, no subsidies or other form of financial assistance should be given to the enterprises. 10. The contracts should contain specific arrangements for payment by Government, wilaya, and municipal dwellings of their water consumption. A system of advance billing might be established by which a down payment is made by these dwellings at the beginning of a fiscal year. Any balance should be paid at the end of the fiscal year. The Government should guarantee these payments. The enterprises should be authorized to deduct any unpaid amount from concession fees. 11. The Government should also be responsible for financing and executing expansion and renewal works. Among them should be the rehabilitation program included in the proposed project. The enterprises should be allowed to participate in the planning, conceptualization, and design of the works. As operators of the installations, their suggestions and proposals should be given due consideration in planning system expansion. Performce Bonuses 12. The enterprises should be allowed to retain any income surplus resulting from operations, after payment of all obligations including the concession fees. The surplus should be shared among staff in an enterprise. In addition, the enterprises should keep their depreciation allowance to service their debt and to finance their own work program. The concept of profit should build up incentives for increased performance in the enterprises. OOvernment'a Control 13. The type and extent of Government's control of the enterprises' operations should be indicated in the concession agreements. As owner of the installations, the Government should be represented on the enterprises' administrative boards. Besides, it may have permanent technical and financial auditors in place in the enterprises. These auditors should carry out post control of the operations. To facilitate the Government's control, the enterprises should be required to submit a number of reports dealing with the financial and technical operations of the systems. A detailed outline of these reports should be provided in the agreements. Obligation should also be made to the enterprises to submit audits of their financial accounts within nine months after the closing of a fiscal year. These audits should be carried out by external auditors acceptable to the Government and the Bank. - 68 - Page 4 of 4 14. Specific provisions should be made in an agreement for its cancellation, and removal of an enterprise's management. These should include cases for not meeting performance specifications, late submission of reports, and non payment of concession fees. Coe-ssin= Dation 15. A concession agreement should be signed for a period of six years. Expected performances at different time intervals during the agreement duration should be spelled out in the agreement. - 69 - Page 1 of 8 REPUBLIG ALGIENE =OCRATIQUE E1 PQEO AIRE NINISTERE DE L'EOUIVPEX Contrat de Gestion pour 1 'Exploitation des Services Publics d'Alimentation en Eau Potable - 70 - AMNEX 18 Page 2 of 8 Entre les soussign6s: L'Etat, repr6sent6 par le Ministre de 1'Equipement, d6sign6 dans le texte qui suit par "l'Etat', d'une part, et L'Etablissement de Production, de Gestion et de Distribution d'Eau de ______________________ Etablissement Public A caractere industriel et commercial (EPIC), reprdsent6 par son Directeur G6n6ral, Monsieur , lequel est dfment habilit6 A la signature des presentes et d6sign4 dans le texte qui suit par 11'Etablissement". d'autre part IL A ETE CONVENU CE QUI SUIT - 71 - Page 3 of 8 ARTICLE 1 - OBJET PM CONTRAT Par lea prdsentes, l'Etat consent A dormer en ges-tion les installations publiques de production, de transport, at de distribution de l'eau potable situ6es dans le p6rim6tre de concession d6fini A l'Article 2 suivant, A l'Etablissement Public de Production et de Distribution d'Eau de _ L'Etablissement slengage A exploiter et A entretenir les installations qui lui ont 6te confides selon les termes du pr6sent Contrat et du Cahier des Charges d'exploitation qui y est annexe, et a payer une redevance & l'Etat. ARTICLE 2 - PERIMETRE GEOGRAPHIQUE - AGGLOMERATIONS CONCERNEES L'Etablissement exerce son activitd sur un territoire g6ographique dont les limites sont dfinies comme suit: * Wilaya de : totalit4 du territoire de la Wilaya * Wilaya de : totalit6 du territoire de la Wilaya Wilaya de : Communes de I I_, , et Dans le cadre g6ographique tel que dofini ci-dessus, 1'Etablissement exerce son activit6 our la totalit6 de la partie agglom6r4e des Communes de type urbaines et semi-urba'-nes, la definition prise en compte pour ces derniares communes 6tant celle du Ministere de l'Interieur. La gestion des services d'eau des Communes rurales et do l'habitat dispers6 eat exclue du champ du pr4sent contrat, sauf exception(s) dCiment mentionn6e(s) dans un document figurant en annexe du present contrat. ARTICLE 3 - EXCLUSIVITE DU SERVICE Pendant sa dur6e, le contrat de gestion confere A l'Etablissement le droit exclusif d'exploiter au profit des abonnds les installations de distribution d'eau potable qui lui ont ete donnees en gestion. ARICLE 4 - -REALISATION DES TRAVAUX Les travaux de premi6re installation ou les travaux de renouvellement dont la Mattrise d'ouvrage est assuree par l'Etat sont execut6s selon lea modalitds des Articles 17 et 21 du Cahier des Charges pour 1'Exploitation du Service Public d'Alimentation en Eau Potable. Cependant, et par derogation au paragraphe precedent du pr6sent Article, lea 'Travaux lids A l'Exploitation" tels que definis A l'Article 34 du Cahier des Charges sont attribues A titre exclusif et ex6cut6s par l'Etablissement ou par un sous-traitant qu'il aura ddsign6. - 72 - ANNEX 1 Page 4 of 8 ARTICLE 5 - TARIF DE L-EAU Le tarif de base de 1'eau vendue aux abonnes est unique et identique pour l'ensemble des Abonnes dont la gestion du service de l'eau est assur6e par lEtablissement. Le prix de l'eau doit permettre de couvrir: c les charges d'exploitation et d'entretien des installations confiees A 1'Etablissement, appelees A: o is redevance de gestion de l'Etablissement, appele, B; et a les imp6ts et taxes y aff4rent reprdsentant un pourcentage de A + B. Le tarif de base T, est egal & la somme de A + B, avec A repr6sentant pour cent de T, et B - pour cent de T. Ce tarif de base est fixe a la date de la signature du contrat A dinars. 11 est r6visd annuellement selon les dispositions de l'Article 7 de ce contrat, et ajust6 au 1e janvier de chaque annee. Durant la duree du contrat de gestion, l'Etablissement est autoris6 a appliquer le bar&me des tarifs suivants CATEGORIU D'USAGER TRANCIE DE CONSOWKATION TARIF/M3 _3/AN 0-100 Menages 101-220 221-330 >330 Administration Tranche unique Artisan et service Tranche unique Industrie/Tourisme Tranche unique UAIICLE 6 - REDEVANCE DE GESTION L'Etablissement s'engage a payer une redevance annuelle A I'Etat. Cette retevance est vers6e A l'Etat en deux tranches, chacune dans les 90 jours k la fin de chaque sumestre calendaire. Le montant initial de la redevance pour l'annee est fix4e a El. le oast revise arnnuellement selon la formula de revision definie en l'Article 7 du pr6sent contrat et ajust6e au 11 janvier de cheque annee. - 73 - Page 5 of 8 ARTICLE 7 - REVISION DU TARIF DE L'EAU ET DE LA REDEVANCE DE CESTION Afin de tenir compte de l'4volution des conditions dconomiques et techniques par rapport a celles existant a la date de signature du present contrat, les 6lements A et B du tarif T sont ajust6s au l janvier de chaque annde par application de coefficients de rdvision calcul6s comme ci-dessous. La composante A du tarif est revisee somme suit: A - Ao(0.10 + 0.50 S + 0.20 E + 0.10 PC + 0.05 a + 0.05 C) So Eo PCo Plo Co La composante B du tarif est revisee comme suit: B - Bo(O.10 + 0.33 S + 0.52 PI + 0.05 C) So PIo Co La date de prise en consid6ration des indices "o' dans lea formules ci-dessus correspondent aux valeurs applicables au 30 septembre 1993. Dans ces formules: A represente la part du prix de base sp6cifiee A l'Article 5 du present contrat; B est la part du prix de base initial du premier M3 d'eau vendue aux abonnes et specifiee a l'Article 5 de ce contrat; S represente l'indice officiel des salaires dans les industries du Bftiment et des Travaux Publics au 30 septembre de llaxnne en eours; So est la valeur de cet indice au 30 septambre 1993; E repr6sente la moyenne pond6rde des tarifs de nuit et de jour du KWh moyenne tension au 30 septembre de l'annee en cours; Eo est la valeur de l'indice au 30 septembre 1993; PC represente le coat moyen des produits chimiques rapport6 au m3 d'eau traitee au 30 septembre de l1'ann6e d'application; PCo est la valeur de l'indice au 30 septembre 1993; C represente le prix du litre de carburant au 30 septembre de l'ann6e d'application; Co eat le prix du litre de carburant au 30 septembre 1993; PI repr6sente l'indice officiel des Produits Industriels et Biens Intermtdiaires au 30 septembre de l'annee d'application; at - 74 - ANNEX 1 Page 6 of 8 Plo est la valeur de l'indice au 30 septembre 1993. Le nouveau montant de la redevance est calcul6 en multipliant le montant courant de la redevance par la relation B sur Bo. Les nouveaux tarifs et redevance sont appliquds A partir du 11 janvier de chaque ann6e d'application. AQTICLE 8 - EVOLUTION DU TARIF Pour tenir compte de l'evolution des conditions techniques et dconomiques suite a la prise en charge de nouvelles communes par l'Etablissement, le tarif est soumis A reexamen A la demande de l'une ou l'autre des parties. Le tarif rdvisd tient compte des coats additionnels d'exploitation et d'entretien des nouvelles installations prises en charge par l'Etablissement et de la redevance rdvis6e, laquelle tient compte de l'amortissement des nouvelles installations donn4es en gestion A l'Etablissament. Le tarif y compris la redevance sont dgalement r6vis6s chaque fois que l'Etat confie de nouvelles installations en gestion A 1'Etablissement. ARTIC 92 - 1¶ISE A JOUR DES FORMULES DE REVISION Pour s'assurer que les formulas de revision sont representatives des coats rdels, la composition de ces formules, y compris la partie fixe, est soumise & r6examen A la demande de l'une ou Ilautre des parties dans les cas suivants: 9.1 Apres six ans. 9.2 En cas de variation de plus de 20X (en plus ou en moins) du volume global vendu par rapport aux previsions annexees au present contrat; ces previsions tiennent compte de la prise en charge dlinstallations et de branchements nouveaux pendant la periode de six ans du contrat de gestion, telle que prevue au programme d'investissament de 1'Etat. 9.3 En cas de variation du tarif de plus de 50X (en plus ou en moins) par simple application des formules de r4vision depuis la derniere negociation des tarifs. 9.4 En cas de modification des imp6ts, taxes et redevances mises A la charge de l'Etablissement. L'Etablissement doit produire A cette fin tous les justificatifs et les documents necessaires ou demandos par 1'Etat, dont notamment, ses comptes d'exploitation. ARTICLE 10 - ENTREE EN VIGUEU - DMREE - DATE DE PRISE EN CHARGE DU SERVICE Le prdsent contrat entre en vigueur A la date de sa signature par leas deux parties. 11 proud effet des la prise en charge par l'Etablissement du ! rvice d'alimentation en eau des Collectivitds d6finies A l'Article 2 du present contrat, - 75 - ANNEX -18 Page 7 of 8 m6me si, par mesure transitoire, le service des eaux de la totalit4 des communes n'est pas effectivement pris en ciharge. Dans ce dernier cas, un calendrier est elabord et annexe au present contrat, determinant la date de prise en charge effective des services d'eau de ces communes. Le Contrat est conclu pour une dur6e de six (6) ans. Les parties conviennent que le contrat de gestion sera tacitement reconduit par p6riodes suppl6mentaires d'une dur6e de six (6) ans, sauf d6nonciation dOment notifi6e par l'une des parties au moins six mois avant 1'expiration de la periode en cours. ARTICLE 11 - CONTINUITE DU CONTRAT EN CAS DE CHANGEHENT DE STATUT DE L'ETABLISSEMENT Tout changement juridique de l'Etablissement, dans la mesure oit ce changement ne remet pas en cause les termes du present contrat, ni ceux du Cahier des Charges d'Exploitation du service de 1'Eau potable, ne met pas fin au pr6sent contrat. Les modifications necessaires a apporter aux clauses du present contrat ainsi qu'& celles du Cahier des Charges d'Exploitation du Service de 1'Eau Potable, devront Atre effectuees par voie d'avenant, de sorte A assurer la continuit4 et la coherence des textes par rapport & la situation reelle des partenaires. ARTICLE 12 - PRMIS EN CHARGE DES INSTALLATIONS La prise en charge des installations s'effectue dans les conditions et selon les modalites prevues au Cahier des Charges d'Exploitation du Service de l'EaW Potable. La p6riode dite "d'exploitation" commence l.e jour de la prise en charge du service. Pour ce qui concerne les Communes dont les services d'eau sont pris en charge apr&s un certain delai, dans le respect du planning mentionne a l'Article 10 ci- dessus, la p6riode d'exploitation court selon les echeances de la premiere prise en charge, sans que l'Etablissement puisse se pr4valoir d'une date plus tardive pour demander une prolongation de la dur6e du prdsent contrat. ARTICLE 13 - CONTROLE DES COMPTES L'Etablissement a' engage a tenir ses comptes sur la base du Plan Comptable national. A la fin de chaque exercice, il soumet ses comptes et etats financiers A des controles par des experts comptables externes. Danz lea neuf (9) mois suivant la fin de l'exercice, les experts comptables fournissent un rapport sur la gestion de l'Rtablissement y compris des 6tats financiers certifi6s dont un Bilan, un dtat des comptes de resultats, et un 6tat des Emplois et des Ressources. ARTICLE_ U - RELENENT DS LITItES Tout litige n6, de l'application du prfsent contrat, est r6gle conform6aent aux dispositions de l'Article 46 du Cahier de Charges pour l'Exploitation des Services Publics d'Alimentation en Eau Potable. - 76 - ANNEX_18 Page 8 of 8 ARIILE 15 - NOIFICATIO Toute notification adressee en application du pr6sent contrat est soit ddlivrde en main propre contre dtcharge dCkment sign6e, soit adress.e par lettre recommandoe avec accus6 de reception. Toute notification donnee par 1'Etat A 1'Etablissement devra 6tre adressee A ltadresse du Sibge Social de cette derniere et mentionn6e A l'Article 16 ci-aprbs. Touts notification donn6e par l'Etablissement A 1'Etat en execution du pr4sent contrat doit 6tre adressee soit directement A l'adresse du Ministere charge de 1'Hydraulique soit au siege de tout Organisme ou structure que ce dernier aurait d6signd comme valablement apte A la recevoir. ARICLE 16 - DOCILIATION L'Etat fait acte de domiciliation, pour la signature des presentes, a ladresse du Ninistere charg4 de 1'Hydraulique ou au Si&ge social de tout Organisme ou Structure que ce dernier aura ddsign6 comme valablement apte A le representer. L'Etablissement fait acte de domiciliation & son Sibge Focial qui, au moment de la signature des pr6sentes, est 6tabli & Fait & _A_ , le en exemplaires originaux Pour l'gtat, et par d6l6gation, Pour l'Etablissement R6gional, le Directeur, - 77 Page 1 of 6 Le 19 mars 1994 Monsieur Lewis Preston President Banque Internationale pour la Reconstruction et le DUveloppement 1818 H Street N.W. Washington, D.C. 20433 Etats-Unis d'Amdrique Monsieur le President, A l'occasion du nouveau pret que la Banque accorde au secteur de 1'AEP et de l'Assainissement en Algerie, je souhaite vous dire tout d'abord toute ma satisfaction de voir un pr6t de votre institution enti&rement consacre a la rehabilitation des systemes existants d'AEP et d'assainissement. I1 s'agit la, J'en suis convaincu, de ia meilleure preuve quo le secteur de 1'Equipement, qui a jusque lA axe ses efforts sur le developpement d'infrastructures nouvelles, a identifie de nouvelles prioritds, toutes consacrees a une meilleure gestion du patrimoine. Je soubaite vivement que le programme de travail mis au point par les experts de nos deux instituions pour le developpoment d'infrastructures nouvelles et la r6habilitation d'infrastructures existantes, soit mend A terms dans leas ddlais prdvus, et je suis persuade que vous ne mdnagerez aucun effort pour l'aboutissement de cette ddmarche. Je profite de cette occasion pour remercier la Banque de laide technique et financi6re qu'elle a apportde jusqu'a prdsent au secteur de l'hydraulique et pour exposer A votre institution les grandes lignes de la politique que nous appliquons actuellement dans le secteur de lleau potable et de l'assainissement, ainsi que celle qua nous avons l' intention de mettre en place progressivement. Les projets que la Banque a acceptd de financer en partie ces dix dernieres anndes ont permis une nette amdlioration des services d'alimentation en eau et d'assainissement dans nos grands centres urbains et en particulier dans la capitale, concernde par le Pret 2461-AL qui vient de se clBturer & la satisfaction g6n6rale. Dans le cadre des proj ets finances par la Banque, plusieurs tentatives de restructuration du secteur de l'eau potable et de l'assainissement ont etd effectudes avec a chaque fois l'objectif d'en amdliorer lVefficacitt. Cos tentatives n'ont pas toujours donne les rdsultats escompt6s, peut 6tre parce qua nous nous sommes A chaque fois limit6s A la seule architecture institutionnelle. C'est pour cette raison quo nous avons convenu avec la Banque de rdaliser des 6tudes d'organisatLon et de gestion du secteur dans le cadre du 2' Projet National d'Approvisionnement en Eau et d'Assainissement (Pret 2821- AL). Ces dtudes sont bien avancedes et nous avons pu identifier un certain nombre de recomnandations quo nous avons commencd A mettre en oeuvre avec le concours technique apprdcid de la Banque. - 78 - ANNEX 19 Page 2 of 6 Monsieur Lewis Preston Le 19 mars 1994 Au cours de L'annee ecoulee, nous avons euitrepris un certain nombre d'actions visant a introduire plus d'efficacit6 dans le secteur de l'eau potable et de I'assainissement. Apres un doublement des tarifs en debut 1993, nous venons de decider une augmentation substantielle de 33 pour cent du prix de l'eau potable a compter du 1' janvier 1994. Pour la premiere fois en 1993 une taxe d'assainissement representant 10 pour cent de la facture d'eau a ete instituee en faveur des communes. Depuis le 10 janvier 1994 cette taxe a et6 portee a 20 pour cent de la facture et a dt6 transformde en redevance d'assainissement. Elle est destinee aux entreprises de gestion d'eau qui prendront en charge progressivement les reseaux d'assainissement. Dans ce cadre, la Banque pourrait apporter son concours pour assurer une meilleure prise en charge de cette activit6 par les etablissements de 1'eau. Parallelement a ces actions sur le tarif, le Ministere a engagd un programme d'actions en direction des entreprises de distribution d'eau qui a consistd: 1. a clarifier la relation entre l'Etat et les entreprises d'une part et les entreprises et les utilisateurs d'autre part, en publiant le cahier des charges-type relatif a l'exploitation des services d'eau potable et d'assainissement et le r6glement general de l'abonne; 2. A renforcer leL iiff6rentes fonctions de gestion dans l'entreprise par la mise en oeuvre de procedures efficaces; 3. A clarifier les comptes de I'ensemble des entreprises par l'ex4cution de missions d'audit; 4. A gdndraliser le comptage et donc A instituer une plus grande transparence par l'installation de plusieurs centaines de milliers de compteurs; 5. A ameliorer le recouvrement des erdances par l'institution systdmatique de mesures coercitives en direction des mauvais payeurs, en particulier les administrations et lea services publics; et 6. & assainir le portefeuille de dettes par leur r6glement ou par la mise au point d'dchdanciers de paiement avec les grands cr6anciers du secteur (Fiscalite, Securit4 Sociale, SONELGAZ). Ces actions ont dejA produit des resultats tout A fait satisfaisants et la majoritd des-35 6rablissements de 1'eau, dont une bonne partie sont deji sortis de leurs decouverts bancaires, devraient etre au rendez vous du redressement financier attendu A la fin du lr trimestre 1994. Les r6formes ci-dessus seront approfondies et poursuivies dans le cadre du nouveau prft. Le secteur de la distribution d'eau est compose de 35 6tablissements de 1'eau dont 9 etablissements r6gionaux correspondant grossierement aux grandes rdgions hydrographiques du pays et 26 6tablissements de wilays. - 79 - ANNEX 19 Page 3 of 6 Monsieur Lewis Preston Le 19 mars 1994 Nous avons d6jA engage l'unification de la tutelle sur l'ensemble des 35 etablissements d'eau et il a t d6cide par consequent de transfArer les 26 etablissements de wilaya sous lfautorit6 du Minist6re de l'Equipement a compter de janvier 1994. L'efficacit4 et la productivit6 du personnel dans le secteur de l'approvisionnement en eau et de I'assainissement, qui restent une preoccupation majeure de mon Minist6re, ont 6td considerablement ameliorees durant l'annde 1993 et sont appel6es a etre poursuivies cette annee. En depit de son caractere de service public essentiel quo nous pensons consolider, nous sommes convaincus qulil faut donner encore plus d'autonomie A la gestion de ce secteur pour amnliorer son efficacite par le renforcemaent et la modernisation de ses moyens. Nous avons decide de contractualiser la relation entre l'Etat et les Collectivites Locales, propri6taires des infrastr-uctures d'alimentation en eau potable et d'assainissement, d'une part, et les entreprises charg6es de la gestion de celles-ci, d'autre part. La signature en 1992 de l'arrWt6 interministdriel portant approbation du cahier des charges-type pour l'exploitation des services publics d'AEP a etd un premier pas vers cette contractualisation. L'enrichissement de ces cahiers des charges par l'introduction des recommandatiuns de la Banque, formuldes dans le nouveau pret, permettra, des 1994, d'instituer une redevance que l'entreprise paiera au bailleur. Cette redevance couvrira progressivement le coat de renouvellement et de rdhabilitation des infrastructures hydrauliques. La mise en place de ces relations contractuelles avec les entreprises sera inaugurde avec les entreprises EPEOR et EPEA dans le courant de lVann6e 1994, apres enrichissement avec le concours technique de la Banque, du cahier des charges de concession du service public de l'eau. Cette ddmarche sera dtendue progressivement A 1'ensemble des entreprises de gestion de l'eau par sa gdndralisation A partir du 10 janvier 1997. L'Agence Nationale de l'Eau Potable et de l'Assainissement (AGEP), qui connaitra d'ici fin 1995 une reorganisation complete, est A notre point de vue l'institution qui se pr6te le mieux pour contr6ler la mise en application des contrats de gestion. Nous comptons proc4der au rdamdnagement de son organisation et de son statut pour la rendre plus A meme d'assurer ses missions tout en lui confdrant le maximum d'autonomie. L'6conomie de l'eau et sa prdservation doivent 6tre des objectifs essentiels du secteur de l1dquipement durant les prochaines anndes. Le secteur de l'eau potable consomme environ un tiers des ressources en eaux mobiliades. L'irrigation consomme les autres deux tiers. Nous considdrons toutefois qu'une partie trop importante estimde A 40 pour cent de l'eau livr6e A 1'AEP et A prbs de la moitid de 1'eau d'irrigation sont perdues A cause de fuites dues A 1'etat ddfectueux des rdseaux, alors que les fuites ne reprdsentent en Europe occidentale que 15 a 20 pour cent pour l'eau potable. Nous pensons qu'il faille r6habiliter d'urgence nos rdseeux. Cela permettra de differer, probablement, d'importants investissements en leur substituant une meilleure valorisation de la ressource en eau de plus en plus rare dans nos contrees arides. - 80 - ANEX 19 Page 4 of 6 Monsieur Lewis Preston Le 19 mars 1994 Par ailleurs, il faut souligner que malgre tous ces efforts, certaines r6gions telles que l'Oranie, caracterisees par un deficit pluviomdtrique important depuis plusieurs ann6es, connaissent des contraintes d'approvisionnement en eau par les ressources classiques, et qui devront n6cessiter par consequent, le recours aux techniques de dessalement d'eau de mer ou de d4uindralisatiori d'eaux saumAtres. La Banque mondiale pourrait apporter son concours au d6veloppement de ces projets A l'avenir. Si l'on souhaite que le tarif de 1'eau encourage la preservation des ressources, il est ndcessaire que l'utilisateur paie & terme le vrai prix de cette ressource. Nous sommes persuades que des tarifs r6gionaux refleteront mieux la verite des coats qui varient assez largement d'une r6gion A une autre; mais nous sommes aussi convaincus que dans ce domaine il faille agir avec precaution. Aussi avons nous decid6: 1. Dans un premier temps d'augmenter progressivement le tarif de l'eau en incluant au fur et A mesure: (a) la totalitd des frais de gestioa des installations. Cette mesure a 6te atteinte pour la quasi-totalite des dtablissements avec l'augmentation r6cente du tarif; (b) une part de plus en plus importante du cout de l'assainissement jusqu'a la prise en compte de 1'ensemble des charges d'assainissement par le tarif d'ici l'an 2000; (c) les charges de grosses reparations sur les r4seaux d'AEP; et (d) les charges de renouvellement et d'extension des reseaux d'AEP. 2. Dans un deuxieme temps et ce A partir du 10 janvier 1997, nous comptons instituer des tarifs rdgionaux qui refletent la realite des cofits dans chaque region. A cette phase, nous aurons par ailleurs, grace & l'amelioration et A la modernisation de la gestion des dtablissements de l'eau, optimis6 les cotts d'intervention de ces dtablissements; ce qui nous permettra d'allier la verite des prix A la verit6 des coCits de gestion. De plus, dans cette tarification rdgionale et avec l'objectif de conserver les ressources en eau, nous sommes de l'avis que les abonnds domestiques consommant plus de 200 m3 par an, ainsi que le abonn6s publics, commerciaux et industriels, devraient payer un tarif au moins egal au coait economique a long terme de l'eau potable. Au moment de signer tout contrat de gestion, il faudra nous assurer, quand c'est necessaire, que les augmentations de tarif sotent programm6es de telle sorte que le tarif pr6citd atteigne le coat 6conomique en Van 2000. Ce sera le cas pour le contrat de gestion avec EPEOR. Il faut toutefois noter que les disparit6s de coit sont telles (2,50 DA/m3 A Biskra et 20,57 DA/m3 A Tamanrasset) qu'il faudra probablement mettre en place, pour les zones qui accusent des coats trop dloign4s de la moyenne, un systeme de pdr6quation permettant de surcharger les tarifs pour lea regions ou les coiLts *ont bas et de les rdduire pour les rdgions dont les co*ts seraient excessifs. - 811 Page 5 of 6 Monsieur Lewis Preston Le 19 mars 1994 Outre La rehabilitation des reseaux et un tarif de l'eau dissuasif qui penalise les gros consommateurs et lutte contre le gaspillage de leau, nous pensons mettre au point, avec le concours de la Banque et d'autres institutions, une reglementation et un programme educationnel qui encourage l'conomie et la preservation de 1'eau. Nous avons entam6 en 1993, en relation 6troite avec plusieurs Ministeres dont notamment ceux de l'Industrie et de 1'Intdrieur et des Collectivitea Locales, un vaste programme tendant A 1'economie de I'eau dans les unit4s industrielles et & la lutte contre la pollution des eaux par les rejets industriels. Nous souhaitons vivement la contribution de la Banque aux plans technique et financier, pour la mise en oeuvre de ce programme. Comme vous le savez, quatre ministeres sont essentiellement impliquds dans le developpement et la gestion des ressources en eau en Algerie: Le MinistAre de l'Equipement, celui de l'Agriculture, celui de l'Int6rieur et des Collectivit6s Locales, et celui charge de l'environnement. Cette division des responsabilites requiert que ces quatre minist6res coordonnent leurs travaux de planification et de pr6servation des ressources en eau pour I'avenir. Nous wommes convaincus qu'une meilleure coordination des politiques de ces ministeres, A laquelle nous nous attachons actuellement, amxliorera l'efficacite de nos investissements, particulierement en matiere de prdservation et d'utilisation rationnelle de la ressource en eau. Une des taches majeures de mon Ministere est de preserver les dcosyst6mes aquatiques dans le pays, Nous avons enregistre une augmentation de la pollution des eaux souterraines et de surface, qui est due A plusieurs raisons. Avec le concours du Ministere de l'agriculture et grace a une meilleure information des agriculteurs, il sera possible de limiter la pollution due A l'utilisation abusive d'engrais et de pesticides. Nous pensons touterois que la pollution qu'il convient de combattre le plus rapidement est celle qui est due A la d6fectuosite des reseaux d'assainissement, A l'insuffisance de stations d'epuration, A l'absence de maitrise des stations d'epuration existantes, et A l'absence de traitement des rejets industriels et de leur recyclage. Outre le programme de remise en dtat des stations d'epuration sur le territoire national, le Ministere de l'Equipement espere renforcer sur les plans materiel et technique, les entreprises de gestion de l'eau afin d'ameliorer le service d'assainissement. I1 pense egalement multiplier le nombre de stations sur le territoire national, et souhaite vivement int6resser les bailleurs de fonds A son ambitieux programme d'6puration d'eaux us6es, qui a ete entame depuis 1992 et qui porte sur 200 stations d'1puration. Nous esperons vivement que les comp6tences techniques de la Banque soient interessees A notre programme, de m8ime que nous sommes persuad4s que votre institution pourra se faire notre interpr6te aupres d'autres bailleurs de fonds pour soutenir notre effort de realisation de plusieurs dizaines de stations sur le territoire national. Comma vous pouvez le constater, d'importants efforts sont n6cessaires pour initLer et developper les politiquee esquissees ci-dessus. II nous semble qu'il sera possible de mettre au point avec la Banque un - 82 - ANNEX 19 Page 6 of 6 Nonsieur Lewis Preston Le 19 mars 1994 planning dtexdcution de ces mesures. Ce planning devra tenir compte des d6lais de maturation n6cessaires, ainsi que de la progressivitd des mesures que nos devrons mettre en place durant ;'execution du projet. Nous souhaltons vivement qua les experts de la Banque qui seront charg6s d'6laborer les futurs projets d'A.E.P. et d'assainissement, se chargent d'arr6ter un dcheancier rigoureux des mesures & initier et A mettre en place pour lib4rer ddfinitivement le secteur de I'AEP et de l'assainissement des entraves et lourdeurs qui g6nent son developpement, Comme il nous parait indispensable que la Banque nous assiste pour 6valuer pdriodiquement les progr6s r6alises dans ±a mise en place de ces politiques. Nous esperons vivement recevoir le soutien entier de votre institution dans 1'execution de nos politiques et programmes et vous prions de croire, Monsieur le PrAsident, en 1'expression de notre haute consideration. Mokdad Sifi Ministre de 1'Equipement ALGERIA WATER SUPPLY AND SEWERAGE REHABILITATION PROJECT ENTREPRISE DE PRODUCTION, DE GESTION ET DE DISTRIBUTION D'EAU Q'ANNABA EPEA Organizational Chart - 1992 GENERAL MANAGER | DATA INTE.R.N _L _ TECHNICAL. _FINANCE PERSONNEL ANNABA EtTARF OPERATIONS/ ACCOUNlINO NEW WORKS SRIE { MAINTENANCE l _ COMMERCIAL _ SADS\W54834C WATER SUPPLY AND SEWERAGE REHABILITATION PROJECT ENTREPRISE DE PRODUCTION, DE GESTION ET DE DISTRIBUTION D'EAU D'ORAN EPEOR Organizational Chart - 1992 GENERAL MANAGER DATA PROCESSING OPE.ATIONS LOGISTICS F _DMIRNSTRATION PRODUCTION AND MECHANICAL DGET PERSONNEL DISTRIBUTION MAINTENANCE L- BuDGET PLANNING/ PROCUREMENT! ACCOUNTING/ GENERAL STUDIES S AUDiT ADMINISTRATION NEW WORKS 1 SEWERAG LABORATORY I ORAN | | AIN TEMOUCHENT | | MASCARA L TLENCEN BRANCHBt L 8RANCH JBRANC____ BRANCH SADS\W54834B ALGERIA WATER SUPPLY AND SEWERAGE REHABILITATION PROJECT Proposed Organizational Chart for Regional Water Utilities I EXECUTIVE BOARD | GENERAL g { ADMINISTRATIVE MANAGE BOARD PUBLIC __ INTERNAL RELATIONS _ -AUDIT ENGINEERING/ ADMINISTRATION/ COMMERCAL _ OPERATIONS _ PERSONE NE_ CMECA _ STUDIES _ PERSONNEL ACCOUNTING BILLINGICOLLECTION PROCUREMENT/ GENERAL CST CUSTOMERS _ NEW WORKS _ SERVICES ACCOUNTING SERVICES WATER PRODUCTION TRAINING TREASURY J J STATISTICS 0 ERGE 0 0 WS | 0 BUDGET l-LDATA PROCESSING WLAYA BRANCH WILAYA BRANCH WILAYA BRANCH --- WLA BRANCH SADS\W54834A 1' - 86 - ANNEX 23 Page 1 of 8 REPUBLIOUE ALGERIENNE DRERMOGAIQUE ET, POPULARE PROJET DE REHABILITATION DES SYSTENES D'APPIQYI$IONNEMENT EN EAU T D'ASSAINISSENENT TU=ES DP REFERENCE POUR LA KISE EN PLACE DS OUTILS DE GESTION CONMERCIALE DgS ENTEPISES DE DISTRIBUTION D'RFAU Avat-102o011 1. Le Gouvernement Algerien procAde actuellement A la restructuration des entreprises de production ot de distribution d'eau potable dans le but de les rendre plus efficaces et performantes. L'objectif est qu'elles arrivent A gen6rer les fonds necessaires pour couvrir l'exploitation, la maintenance et le renouvellement des systemes de production et de distribution d'eau. En meme temps, il est propose de mettre en place des dispositifs institutionnels pour inciter le personnel des entreprises A devenir plus productif et performant. 2. Pour l instant il existe 9 entreprises r4gionales et 26 entreprises de wilayate. L'objectif final est d'6tablir, tout au moins dans le nord du pays, does entreprises r4gionales pour la desserte des services d'eau. Ce regroupement s'efffectuerait A travers l'absorption des entreprises de wilayate par les r6gionales, et vraisemblablement par la crdation de nouvelles rdgionales. Toutefois, le nombre total d'entreprises r4gionales dans le nord n'espAre pas d6passer la douzaine. Ces changements dans l'organisation du secteur sont programmes pour les deux prochaines anndes, et lVobjectif est qu'k la mi-97, seulement des entre?rises r6gionales seront en place dans le nord du pays. 3. En attendant, le Gouvernement se propose d'entreprendre la restructuration de deux entreprises regionales: 1'Entreprise de production, de gestion et de distribution dteau d'Annaba-EPEA, et l'Entreprise de production, de gestion et de distribution d'eau d'Oran-EPEOR. Comme dojA indiqu6. les juridictions territoriales de ces entreprises peuvent changer durant les deux prochaines annees. En cons4quence, toute recommandation concernant Ilorganisation, les systAmes et procedures de ces entreprises, devrait Atre flexible, permettant son adaptation A toute nouvelle forme, structure et etendue que pourraient prendre ces entrepreises A l'avenir. 4. La Banque mondiale se propose d'accorder un prdt au Gouvernement Alg6rien pour financer la resructuration d'EPEA et d'EPEOR. Les services requis sous les pr6sents termes de r6f6rence seront partiellement financds par les fonds de ce pret. gervices Reguis 5. L'expertise d'un consultant, ou d'un bureau d'6tudes ou d'un exploitant de services de distribution d'eau potable, est requise pour concevoir, mettre en place, et faire fonctionner les outils de gestion commerciale d'EPEA et d'EPEOR. Par gestion commerciale, il faut entendre toute lea operations se rapportant aux ventes d'eau potable aux abonnzs d'EPEA et d'EPEOR, et & l'encaissement de ces ventes. Elles concernent aussi les procedures A suivre pour raccorder les consommateurs aux r6seaux de distribution d'eau, ainsi quo toutes lea statistiques relatives & la consommation, le nombre d'abonn6s, la distribution de la consommation entre cat6gories d'abonn6s, et la r6partition des ventes d'eau & travers le temps. - 8A -NEX2 Page 2 of 8 6. L'expertise sera men6e s6parl .ent pour EPEA et EPEOR. En cons6quence, l'Administration alg6rienne chargee de cette op6ration, peut choisir un seul expert pour les deux entreprises, ou deux diff6rents experts, un pour chaque entreprise. Pour lui permettre ce choix, les consultants s6lectionnds pour pr6senter des offres pour cette expertise devront soumettre deux offres s6par4es, une pour EPEA, et une autre pour EPEOR. CoMoitnSeS Territor.Ale d''ZEA et dtlPEO 7. EPEA eat chargee de l'alimentation en eau potable dans lea wilayate d'Annaba et El Tarf. La population totale dans ces deux wilayate est estim6e aujourd'hui A 850.000 habitants. Environ 86 pour cent de cette population, i.e., 735.000 habitants sont desservis par EPEA. Sur un total de 12 communes dans la wilaya d'Annaba, EPEA A pr6sent gere 5; dans la wilaya d'El Tarf, elle g6re 18 sur un total de 24. EPEA esp6re prendre toutes les communes en charge vers la mi-95. 8. Au 30 juin 1993, EPEA comptait 67.000 abonn6s dont A peu pr&s la moiti4 sans compteur. L'objectif est d'avoir tous les branchements munis de compteurs a la fin de 1994. Durant llannee 93, EPEA a facture un volume total de 53 Mma d'eau A ses abonnms. EPEA compte un nombre important d'abonnds industriels qui contribuent un fort pourcentage de son chiffre d'affaires. 9. Pour fournir les services d'eau a ses abonn6s, EPEA dispose de quatre unit6s: l'unite siege, lunit6 Annaba, Ilunite El Tarf, et l'unite de la villa d'Annaba. Lea unit6s operationnelles sont elles-m6mes subdivisees en secteurs en ce qui a trait & I'exploitation et la facturation des abonnes. 10. Quant a EPEOR, elle a 18 responsabilite de la production et de la distribution d'eau potable dans quatre wilayate: Oran, Ain Temouchent, Mascara, et Tlemcen. La population totale actuelle dans ces wilayate est estim6 A 2,9 milion habitants. A present, EPEOR assure la desserte d'environ 70 pour cent de cette population, i.e., environ 2 million habitants. EPEOR espere desservir la totalit6 de la population vers la fin de 1995. 11. En 1993 EPEOR projete un chiffre d'affaires de 288 million de dinars pour une vente d'eau de 55 Mm3. Pres de 70 pour cent des revenus d'EPEOR proviennent d'Oran, 26 pour cent de Mascara et Tlemcen, et 4 pour cent d'Ain Temouchent. A la fin de 1993, EPEOR avait un total de 215.000 abonnFs. Comme pour EPEA, environ la moiti6 de ces branchements n'6taient pas munis de compteurs. L'objectif est d'achever d'equiper la totalit6 des branchements de compteurs A la fin de 1994. 12. L'EPEOR east organis6e en quatre unit6s op6rationnelles, une dana chacuns des quatre wilayate d6saervies par l'entreprise, et une unite de siag. Leo unit6s op6rationnelles sont decoup6es en secteurs pour les operatious d'exploitation et de facturation. Dans la assure du possible et toute les fois quo les critAres economiques le justifient, les outils de j,ostion commerciale devraient suivre le d6coupage administratif des entreprises. 13. Avant de soumettre leurs propositions, les consultants prdqualifids devraient contacter lea Directions Generales d'EPEA et EPEOR pour plus d'informations our l'organisation et le fonctionnement de ces entreprises. Ils devraient on particulier se renseigner our des changements organisationnels quo lea entreprises couptent *ettre en place dana un proche avenir. - 88-NEX Page 3 of 8 Gestion Commerciale 14. La gestion commerciale d'une entreprise de distribution d'eau touche toutes les activitds se rapportant au raccordement d'un immeuble par nature au reseau d'eau potable, le releve et la facturation de sa consommation d'eau, L'encaissement de sa facture, le suivi de sa consommation A travers le temps, L'entretien de son branchement et de son compteur, et quant c'est requis, son d6branchement du rAseau. Cette gestion est effectuee en coordination avec d'autres services de 1'entreprise, particulierement les services techniques et financiers. Les services techniques procedent A 1'execution des branchements, leur entretien et d6branchement, Les services financiers contr6lent les recettes des ventes d'eau. 15. Pour les besoins de 1'expertise demand6e, la gestion commerciale comprendrait deux parties: - la premire couvrant les activites prdc6dant l'abonnement d'un immeuble oar nature, et son d6branchement suite A sa cessation en tant qu'abonne de l'entreprise; et - la deuxieme se rapportant aux activites de son abonnement, c'est-k-dire le relevd r6gulier de sa consommation, sa facturation, et le paiement de sa consommation. 16. Les deux parties sont interconnect6es et les activites de la deuxieme partie sont complementaires A celles de la premiere. De la demande d'abonnement, jusqu's sa resiliation possible, le dossier d'un abonnd devrait etre catalogue, suivi, et si n.cessaire, reconstruit A tout moment. L'expert est requis de formuler toutes les procedures A suivre pour maintenir cette interconnexion et reconistruction. II est propose que toutes les activitds soient informatisdes. Au pr6able, l'expert devrait etablir la conformitd et suite logiques des activit6s. De plus, le programme informatique devrait pouvoir produire toutes les statistiques concernant les volumes d'eau facturds et revenus par categorie de consommateurs, par diametre de branchements, et pour differentes p6riodes d'une annee. Le programme devrait aussi pouvoir prevoir des consommations et recettes futures sur la base des donnees enregistrees dans le pass6. Gestion de I'Abonnement 17. L'expert retenu pr6parera toutes les procedures, formes, et fichiers necessaires pour l'enregistrement, la localisation, et description des abonn6s aux services. 11 sp6cifiera leas liaisons A maintenir entre les services de gestion commerciale, technique, et financi6re, durant la conduite de ces procedures. I1 indiquera en particulier les temps limites pour l'ex6cution de chaque etape des procedures sp6cifi6es. Les procedures, formes, et fichiers devront traiter des demarches suivantes: la demande d'abonnement par le propridtaire d'un immeuble par nature; l'inspection des lieux, la localisation de l'immeuble sur le cadastre; la preparation d'un devis de branchement; - 8EX 23 Page 4 of 8 le paiement du devis et de la caution d'abonnement; l'ex6cution du branchement, sa localisation et lenregistrement du compteur, de la niche du compteur, et autres materiels installes sur le branchement; inscription de l'abonn6 au fichier des abonn6s; resiliation de l'abonnement pour faute de paiement, ou sur demande de l'abonne; coupure des services ec enlevement du branchement; demande de reconnexion, paiement d'arridr6s d'abonnement et du devis de reconnexion; et - execution de la reconnexion et remise de Ilabonnement au fichier des abonn6s. 18. L'expert preparera des livrets de procedure pour toutes les activit4s decrites plus haut. De plus, il d6crira ces activit6s sous une forme schematique, montrant les diff6rentes dtapes de 1'6volution d'une demande d'abonnement, et les actions & r6aliser durant chaque 6tape. Gestion des Abonn6s 19. Comme pour la premiere partie couvrant la demande d'abonnement ju3squ'& sa resiliation et sa reconnexion possibles, l'expert pr4parera toutes les procedures, formes, et fichiers n6cessaires pour la facturation et le paiement des consommations d'eau des abonnes. Les damarches suivantes devront 6tre traitees: le releve des consommations, y compris le decoupage de la juridiction geographique des entreprises en secteurs, et les tournees des relev6s. L'expert fera des recommandations quant a la p6riodicit6 des relevds. Le choix d'une pdriodicite devra etre base sur des criteres economiques. I1 est souhaitable qu' travers cette periodicite le releve soit continu. Dans ce cas, l'expert devra sp6cifier les tourn6es de releve durant chaque jour ouvrable de la periodicite. L'expert indiquera sous quelle forme les coordonnees de l'abonnement seront fournies aux releveurs, et les dispositifs A prendre pour emp6cher toute erreur ou fraude dans les releves; la transmission et saisie des relev6s par l'ordinateur pour le calcul des factures. La programzation informatique devrait permettre la d6tection d'anomalies dans les factures et leur signalisation automatique; distribution et mode d'envoi des factures aux abonnds par vote postale ou par releveurs. La facture devrait signaler uu temps limite pour son palement, au-delA duquel des int6r6ts seront ajoutes & la facture originale. Ce paiement accru devrait aussi etre indiqu6 sur la facture; - 90 - ANNFA LI Page 5 of 8 paiement de 7.a facture par vote postale, ou directement A une banque ou aux releveurs; - enregistrement du paiement et conciliation entre la facture et le paiement, contrble de la caisse des paiements; - listing des impaycs et mesures de relance aux abonnes en retard de palement. Ce listing devrait indiquer le montant at 1'age des arri4rds; - application de mesures coercitives comme la coupure du service, l'enl6vement du branchement; - la suppression temporaire de l'abonn6 du cardex des abonnrs dans lordinateur, suite ' la coupure du service. Un dispositif de s4curitd devrait 6tre mis en place pour emp4cher un tel enlevement sans motif valable; et - lla pr6paration de statistiques relatives aux consommations et revenus par categorie d'abonnds, diamttre de compteur, periode de l'ann6e. Le programme d'ordinateur devrait aussi pouvoir fournir les statistiques se rapportant A la distribution de la frequence entre le nombre d'abonnes et le cumul de leurs consommations. SXst4me Informat igue 20. Le systbme informatique comme decrit ici propose la centralisation des activitds de facturation A l'unite de sULge. Cependant, les activit6s concernant la gesti-n de l'abonnement devraient 6tre d6centralisdes au niveau de chaque unit6. A ce niveau et probablement A celui de chaque secteur, des terminaux devraient 6tre installes pour acceder aux informations d'abonnement maintenues au niveau de l'unite de siege. A la demande d'abonnes, les unites et secteurs operationnels devraient avoir la possibilite d'emettre des exemplaires de factures deja 6mises. Mais toutes les operations d'enregistrement et de saisie de paiement, et de passation d'ecritures comptables concernant la facturation, devr^ient etre centralis6es au niveau de l'unit6 de siege. 21. L'expert devra indiquer les modes de transmission et de saisie des releves et paiements d'abonnement A l'unitd de siege. Si jug6 adequat, les unit6s operationnelles devraient pouvoir 4mettre directement les factures d'abormement. L'expert devrait indiquer tous les dispositifs A mettre en place pour le contr6le des paiements et de la caisse. 22. Le syst&me informatique propose ici est optionnel. L'expert est invite A proposer des changements qui, de son avis, rendraient le systeme plus sOr et efficace. L'une des investigations A mener est la possibilite d'avoir des connexions t4ldphoniques pour le systeme informatique entre les unit6s at secteurs. D&roulement de g'Exoertise 23. L'Administration alg6rienne envisage le deroulement de l'expertise en quatre phases: - 91 - AUNNE 23 ±'age 6 of 8 Phase 1: Ia compilation et confirmation de l'inventaire des branchements dans chaque unIt-; 1'6tablissement de. tournees de relev6 et fichiers d'abonnement dans chaque unite; une 6valuation du nombre futur de branchements, et des besoins en matdriel informatique; 1' investigation des liaisons t16ephoniques; la confirmation des specifications du matdriel informatique (hardware et software) recommand6 dans l'offre de l'expert. La dur6e de cette phase est estimn6 A 3 mois; Fhase_2: la pr6paration, discussion et approb&tion des proct:dures, formes et fichiers requis pour la gestion de l'abonnement et celle des abonnXs; organisation du departement responsable de la gestion cc'Bmerciale; parallelement A ces activit6s, la coumande et livraison du mat6riel informatique. Cette phase devrait -'..chever dans 6 mois au maximum; Bhase__: mise en place et d6marrage du syst6me informatique; creation du fichier informatis6 d'abonn6s; misa en oeuvre des procedures de gestion; formation du personnel destine A travailler sur le mat6riel informatique et logiciel. Durant cette periode, la facturation continuera A 6tre effectu6e A travers les systimes existants. Le transfert des dossiers se fera progressivement pour s'achever enti6rement dans une pdriode de 6 mois au maximum; et Phase 4: suivi des op6rations et formation continue du personnel durant une periode de 9 mois. 24. La dur6e totale de 1Vexpertise est estim6e A 24 mois. Durant l'ex6cution de toutes les phases de l'expertise, l'expert devrait discuter et associer le personnel du D6partement commercial des entreprises A ses activit6s. Chaque entreprise d6signera un interlocuteur pour discuter avec leexpert de la bonne marche et la coordination de lIexpertise avec le personnel de l'Entreprise. L'expert devrait garantir la bonne marche et les resultats du systbme informatique et des procedures mis en place. Proc6dures de S4lection 25. L'Administration alg6rienne a choisi et pr6qualif i6 cinq experts (bureaux d'etudes, ingenieurs-conseils, exploitants), pour soumettre des offres pour l'expertise demand6e. Ces experts ont le choix de soumettre pour les deux entreprises, ou pour une seule. De toutes facons, l'Administration algerienne se reserve le droit de s6lectionner un seul expert pour les deux entreprises, ou deux experts, un par entreprise. De plus, l'Administration algerienne se reserve le droit de ne pas donner suite A cette consultation. Les depenses encourues par les experts pour la preparation de leurs offres restent A leur charge. Ils ne peuvent en aucun cas et sous aucune circonstance et sous aucun pretexte, reclamer le remboursement de ces d6penses. 26. L'Administration algdrienne basera sa s6lection sur IIexp4rience, la muthodologie, le personnel, et l'offre financiere de l'expert, dans la forme definie ci-apres. Une fois s6lectionne, l'Administration conclura un march6 avoc - 92 - Page 7 of 8 l'expert d"finissant le d6roulement de l'expertise, les garanties A donner, les modes de paisment, la reception des services, et les obligations respectives de l'Administration alg6rienne et de 1'expert. Pr6Daration de 1'Off# 27. LIoffre devrait comprendre une part tachnique et une part financiere. La part technique comprendra un expose de l'experience et des qualifications de l'expert dans la conception et la mise en oeuvre d'outils de gestion commerciale d'entreprises de distribution d'eau potable. Elle incluira de plus une 6tude critique des presents termes de reference, suivie de la methodologie que l'expert se propose de mettre en oeuvre pour lVex6cution de L'expertise. Enfin, elle indiquera le personnel que l'expert compte utiliser pour executer les services requis. Les c.v. de ce personnel seront soumis avec l'offre. 28. La part financiere comprendra le prix de l'offre et tous les details ndecessaires pour determiner le coat d3s composantes financieres. Les coots de chaque phase devront etre indiques separement. Le coQt en personnel de l'offre sera exprime sdpar6ment avec indication du coefficient de maj oration de l'expert. Les depenses de transport, d'administration, et pour l'achat d'equipement et de materiels, devront 6tre ind'qu6es aussi separement. Les perts des ddpenses en devises et en dinars k1lg6riens devront Atre exprimees pour chaque item. 29. L'offre financi6re devrait comprendre le montant destin6 A l'achat du materiel informatique et de logiciels. Toutefois, l'Administration algerienne peut opter pour l'achat direct de ce materiel et des logiciels par ses propres services. 30. L'offre devrait etre presentee en frangais, et toutes les relations de l'expert avec les entreprises doivent se faire en frangais. I1 est vivement recommand6 aux experts pr6qualifi6s de visiter EPEA et EPEOR pour recueillir les informations necessaires A la preparation des offres. Ces entreprises mettront toutes ces informations gratuitement A la disposition des experts. Remise des offres 31, Les experts prequalifies auront un delai de 60 jours A partir de la date d'invitation de l'Administration algerienne pour remettre leurs offres. Cette date limite de remise des offres sera indiqude dans la lettre d'invitation. Jusement des Offres 32. L'Administration algdrienne utilisera un systeme de points pour juger les offres des experts. La part technique recevra 60 points, et la part financibre 40 points, pour urn total de 100. Les 60 points de la part technique seront subdivis6s commae suit: - 15 points pour l1exp6rience et les qualifications de l'expert; - 25 points pour la m6thodologie de l'execution de lexpertise; et 20 points pour les qualifications et l'exp6rience du personnel propose pour l'expertise. - 93 - Page 8 of 8 33. L'expertise sera confi6e A l'expert ou aUX deux experts qui auront accumult le plus grand nombre de points. L'Administration alg6rienne fora connaitre son choix dans un d6lai maximum de 90 jours apr6s la reception des offres. L'Administration alg4rienne informera tous les experts prequalifies des resultats de la consultation. Les experts retenus devront se pr6senter A l'Administration algerienne qul a lance cette invitation, dans un ddlai de 7 jours pour formaliser un marche pour i'execution de l'expertise. - 94 - ANNEX 24 Page 1 of 3 DEMOCRATIO AND POPULAR REPUIUC OF ALGERIA WATER SUPPLY AND SEWERAGE REHABILITATION PROJECT EPEA (DAMIlIon) ACTUAL PROJECTED 1091 1992 199 1994 199 1986 1997 1908 1909 200 InflatIon Rate- Loca 20% 191 18% 14i% 12% 10% 10% - Foreign 3.40% 2.8% 3.0% 2.7% 2.7% 2.5% 2.6% Populatlonsidd(000) 400 689 735 878 96 1t,082 1,115 1,171 1,230 1,291 Number ofCConectlons(000) 61 64 70 73 80 88 93 97 102 107 Numberotftaff 861 1.047 1.130 1,124 1.090 1,058 1.026 99N 986 936 Numberfof StIf.OoooConneoono 11 1e 1e 15 14 12 11 10 8 0 AveragCostltaff(DA ON) 83 87 112 135 159 185 211 230 260 285 Water Pwduoed (000 m3) 68 73 76 88 a8 88 88 8S 80 88 Water Sold (000 m3) 60 51 63 1 64 e6 67 6s 71 73 Unacounted-for Water(%) 12% 30%A 29% 29% 27% 26% 23% 21% 10% 17% Aweage Revenue (DAhmS) t 43 2.72 3.08 6.07 8.07 6.87 6.87 7.87 7.67 8.44 Taiff increase 53% 0% 10% 0% 15% 0% 10% OPERAMTINQ REVUE Wat Sales 110 139 210 370 388 438 460 531 545 014 WO*s a 26 38 31 37 41 43 46 47 49 Mewr Rntal Vnd Repalr 1 1 1 16 19 25 30 36 40 47 LeSW ad DeboProdon (19) (10) (22) (23) (27) (27) (31) TOWal R9avee 120 68a 248 US6 425 482 50 5164 605 679 OPERATNIG EXPENSES Pereonnel 54 91 130 176 174 196 218 235 250 267 Porkmane Bonuses - - - 28 26 29 32 36 38 40 Sub-Total 54 91 130 201 200 226 249 270 288 307 Energy 5 1e 22 28 33 38 44 40 64 Se ChemIcls 5 8 5 13 15 18 20 23 26 27 Other Suppie & Mateials 6 12 21 42 50 57 6e 73 81 88 Sevlore 7 8 8 11 13 15 17 10 21 23 BuaendsJTaxee 7 9 11 21 22 26 26 31 32 36 Concession Fee - - - 20 33 51 58 96 72 79 Saub-Total 64 141 186 336 366 430 480 530 672 621 Deprecitin 21 26 22 4 8 0 tO 11 12 14 Tota OperatIng EBpelmes 106 187 217 340 374 439 490 541 585 C3C NetOperalngneme 15 (2) 32 57 51 43 10 43 20 45 Lowe Interedt 5 8 8 3 3 3 2 3 3 3 Les. Non-OrtIg AdJamnte 1 - - - Net Incoen3 a (10) 23 54 48 41 a 40 17 41 Operatng Ratio 87* 101% 87% 86% 89% 91% 98% a9q 976* g3 e 95 - ANNEX 24 Page 2 of 3 DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA WATER SUPPLY AND SEWERAGE REHABILITATION PROJECT EPEA (DA Million) ACTUAL PROJECTED 1891 1Q92 18943 1 1905 198 19 e97 18 1099 2000 ASSErS rixedAaeets 498 511 515 72 80 8s 9g 110 123 137 Leos: Accumulated Depreciation (168) (195) (217) 430) (38) (47) ,?7) (68) (80) (94) N ixed Acse 329 318 298 42 41 42 42 42 43 43 Ltzrent 1A4s: Gasth and Equivalent 3 12 1 16 52 80 18 1B 12 18 AcountoRso lvae e8 108 116 126 142 161 167 196 202 228 Prepald Expensss a 7 9 11 12 13 13 to 18 is Other Reevables 52 63 49 48 58 67 78 86 94 104 Inventory 25 47 41 48 43 50 57 e0 8 73 Tol Cufrfeit Awssft 159 224 215 248 308 341 331 372 390 438 TOTAL ASSETS 485 840 513 289 348 382 373 416 432 478 EQUITY & LUBIIMES Equity 400 384 407 177 225 286 273 314 331 372 MAedium- and Long-Term Debt 36 33 24 32 20 26 21 26 28 32 Ourrent Uabllltee: Accounte Payable 28 84 76 71 83 78 73 as 86 6s Current LT Debt Maturtie 6 4 6 0 11 12 5 7 7 a Overdraft 17 35 0 0 0 0 0 0 0 0 Totl Currer Uabilo 50 123 82 80 84 02 78 76 73 74 TOTAL EQUITY & UABIUTIES 486 640 613 289 348 382 373 416 432 478 FINANCIAL INDICATORS Current Rato 3.12 1.82 2.82 3.10 3.23e 72 4.22 4.91 5.30 5.87 OperainUg Ratio 87% 101% 87% 88% 88%6 91OA 98% 93% 97% 93% OoIctionPerlod (months) 7 8 6 4 4 4 4 4 4 4 Panmnt Prbod (monthe) 15 24 17 8 9 7 8 6 4 4 Inwentory(montth 30 28 10 10 8 8 8 a 7 8 Peronnel C Rewnues 46% 55% 62% 61%A 47% 47%A 50% 46% 48% 46% Average Revenue per m3 sold 1.83 2.72 3.80 8.07 6.07 8.67 6.67 7.67 7.67 844 Operating Cost per n 3 produced 1.54 2.28 2.89 3.87 4.26 4.98 5.67 6.16 8.65 7.21 Personnel Costs per mS produced 0.80 1.24 1.73 2.29 2.27 2.55 2.82 3.07 38.27 3.48 Coat of Enrgy per m3 produced 0.06 0.22 0.29 0.32 0.38 0.44 0.50 0.5 O.e1 0.07 CotofChemicalopermsproduced 0.07 0.11 0.07 0.16 0.17 0.20 0.26 Ole 0.28 0.31 - 96 - ANNEX 24 Page 3 of 3 DEMOCRATIC AND POPULAR REPUBL OF ALGERIA WATER SUPPlY MAR SEWERAE EHALITTION PROJ EPEA (DA Milon) ACTUAL PROJECTED 1991 1982 193 194 1099 16 1897 198 9 2000 USES OF FUNDS Capital lnvmente 30 13 4 18 A 8 10 11 13 14 Inreaae/(Decrea) In Working Capilt 1a (5) 32 48 45 37 4 44 20 46 Debt Serie Interet Chlgd to Operaione 6 8 3 3 3 2 3 3 3 Amoaulotlz of Loane 5 8 a 6 a 11 12 5 7 7 OldDebt 5 6 6 6 6 6 6 0 0 0 New Deot 1 3 6 8 6 7 7 Toe Io 8b s Gwe 10 1a 17 9 12 13 14 8 10 10 TotmIUwe ofFuNdo 56 21 53 75 as so 28 93 42 40 SOURCES Opertng Incom before Depreeon 36 18 63 61 58 62 20 64 32 56 BorrowAng, 23 3 0 14 8 7 a a 10 11 TotalSouroe 59 21 53 75 aS a9 28 as 42 69 - 97 - ANNEX 25 Page I of 3 DEMOCRATIC AND POPULAR REPUBLIC OF ALGERIA WATER SUPPLY AND SEWERAGE REHABILITATION PROJECT EPEOR (DA Millioh) ACTUAL PROJECTED 1991 192 S993 1984 109S 183 1897 19NS 189 2000 Inflation Rate - Local 20% 18% 18% 14% 12% 10% 10% - oreign 3.40% 2.89% 3.0% 2.7q1 2.7% 2.5% 2.6g PopulatnI 8ervsd (000) 2,880 2,846 2,87 3200 3,275 3.350 3.504 3,863 3.804 38.8 Number of Connections (000) 199 211 21S 232 245 280 272 284 295 308 Number of Staff 1.81S 1.837 1.856 1.858 1,800 1,746 1.94 1,843 1,684 1.C46 Number of Staffl,000 ConineDtione a a a 8 7 7 a 8 6 6 AverageCoet/Staff(DA000) 78 a9 118 124 133 155 170 107 217 239 Water Produoed (000 m3) 144 146 88 86 120 140 160 180 200 200 Water8 d (000m) 86 el 56 50 78 07 114 132 15O 154 Unaccounted-for Water (%) 41% 374% 38% 35% 33% 31% 29% 27% 25% 23% Avejage Rewnue (IA)m3) 210 2.42 6.24 6.82 6.82 7.50 7.60 8.26 8.25 8.25 Tariff inorease 30% 0% 10% 0% 10% 0%6 0% OPERATING REVENUES Water Sals 185 221 288 382 532 728 864 1,086 1.240 1,273 Works 54 100 112 90 50 50 60 50 50 s0 Meter Rental ano Repalre 24 35 41 54 82 71 s0 88 es 105 Leos: Bad Deb Provision (19) (27) (38) (43) (54) (62) (64) Toal Revenuse 283 356 441 497 et8 811 941 1.170 1,324 1,384 OPERATING EXPENS£S Personnel 143 180 219 230 240 270 209 324 34 398 Performance onuses - - - 34 38 41 45 48 52 56 Sub-Total 14 180 218 264 278 311 343 373 388 426 Energy 39 40 14 44 72 e8 128 181 197 216 Chomieas 12 16 14 15 25 33 44 56 87 74 O#w 8upplies&Materials 28 48 53 38 54 74 so 121 148 183 Se8vIae 11 9 14 15 18 21 23 26 29 32 Buinses Taxes 7 0 0 27 34 44 61 64 72 74 Concesslon Fee 63 102 158 180 202 222 244 Sub-Totdl 240 D91 3S0 4e8 581 738 885 1,001 1,132 1,7 Depredaton 32 27 31 14 15 17 18 20 22 24 ToWlOporeaingEXpenM 271 328 381 480 a6S 756 884 1,022 1.166 1,262 NetOperating Incone (8) 28 eo 17 22 58 67 148 170 112 Less: lntereet 18 39 21 10 15 10 23 15 33 21 Leos: Non-OperatIng Adjustments 22 (0) 10 - - - - - - Net Income (46) (2) 29 7 6 48 34 134 137 01 Operating ratio 103% 92%A 88% 97% 97% 9394 94g 87% 87% 92% - 98 - ANNEX 2S Peg 2 013 DE}ilOCRATIC AND POPULfR REPUBUC OF ALGERIA WATER SUPPLY AND SEWERAG=E REABIUATION PWJECT EPEOR (DA Million) ACTUAL PROJECTED 18891 182 1883 1884 185YS 1838 1c87 138t 1838 200 ASSETS Fixed Ases O8m 701 711 314 A48 383 421 468 613 682 Lose: Accumulated Depreciation (292) (318) (350) (1865 (170) (186) (205) (22) (247) (272) Net Fixed Assets 374 382 381 159 178 18 217 241 265 2£0 Current Asste: Cash and Equlvalent 16 18 28 48 80 1 7i 63 84 77 Accounts Receivabte 183 284 298 240 237 237 274 341 38 388 Prpaid Expenses F8 01 57 68 78 108 126 189 182 187 OtherReceivables 87 89 87 100 104 107 110 113 116 117 Inventory 161 140 92 80 118 152 161 148 143 168 Toal Curro Aseet 4e4 673 56 547 627 012 733 818 010 we TOTAL ASSETS sos 865 8ze 707 80S 808 e0 1,064 1,176 1.228 EQUITY & LUABILMES Equity ot 989 128 136 141 187 222 a56 402 684 Medium-and Long-Term Debt 438 448 418 208 210 210 206 202 187 11t Current Uabillies: Acounts Payable 176 303 345 340 423 376 484 484 440 404 Current LT Debt MaturItes 27 27 38 24 29 36 38 43 46 47 Overdraft 120 75 0 0 ' 0 0 0 0 0 Toal Current UabIlitle 331 410 383 3S4 463 411 523 4e8 486 451 TOTAL EQU.TY& UABSIUTIES 888 866 920 707 803 808 860 1.054 1,176 1.2 FINANCIAL INDICATORS Current Raio 1.48 1.40 1.48 1.60 1.30 1.48 1.40 1.64 1.87 2.08 Opeing Rato 103% 92% 86% 87% 078% 346 04% 87% 87%6 a2m Cclecton Period (months) 8 8 8 e 6 4 4 4 4 4 Psymont Pelod (months) 23 30 33 30 30 20 20 16 12 10 Inwntory(months) 45 27 16 20 18 17 13 10 8 a Personnel CostslRevenues 64% 61% 5k60% 53% 45% 38% 37% 32% 30%A 31% Average Revenue per m3 cod 2.19 2.42 5.24 0.82 6.82 7.60 7.50 8.26 8.2S .26 Operating Costs per m3 produced 1.80 2.26 4.43 6.68 4.97 6.38 5.62 5.88 5.77 f.20 Personnel Costs per m3 produoed 0.89 1.24 2.66 3.07 2.30 2.22 2.16 2.07 1.8e 2.12 Cost of Energy per m3 produced 0.27 0.34 0.61 0.51 0.60 0.70 0.80 0.8 0.08 1.08 CostofChe4mcelefperm3produced 0.08 0.11 0.16 0.17 0.21 024 0.27 0O30 0.34 0.37 - 99 ANNEX26 Page of 3 DEMOCRATIC AND POPUe A REPUBUC OF ALGERiA WATER SUPPLY AND SEWERAGE REHABIUTATION EPEO0 (DA Milon) ACTUAL PRJECTED 191t 1992 1993 1994 1886 198 1997 10W 1999 2000 USE OF FUNDS Capitalinvestment 117 36 10 21 32 37 39 44 47 49 Increa*A(Decreass) In Worlding Capital (421 0 23 (21) (9) 26 10 107 108 61 Debt sern4 Interest Charged to operalono I 39 2z 10 15 10 23 1s 33 21 Amodluon of Loans 27 27 38 38 24 20 36 38 4S 48 Old Debt 27 27 36 36 18 to tP 18 18 18 New Debt 2 6 11 17 21 26 27 TOW Debt Serice 43 88 S9 48 3g 30 " " 78 90 TOWal Us"otUdf d 119 101 91 47 62 102 108 20 229 1 SOURCES Operating Income before Depreciaton 2 63 81 30 37 73 76 169 192 137 Borroiwngs 117 38 10 17 26 29 31 39 37 39 Toal Source 119 101 81 47 62 102 108 204 229 176 - 100 - AMU 26 page 1 of 4 DE4CRATIC AND POPULAR REPUBLIP O)F' LE UATERSUPLY AND SEWERAGE REHABILITAION PROJEC ASSUNPTIONS FOR FXNANCIAL- PROJECTIOS 1. About 50% of i%ater produced in Algerija is pres-ently unaccounted for. Under the proposed project, a progressiv, narrowinig of the gap is foreseen between the amount produced in m3 and the amount contsumed and billed to customers. This gap presenitly reflects not only water losses from a deterioratiug, poorly maintained infrastructure, but also from inLadequate leak detection, metering, and billing procedures. It is assumed that over the project period, all aspects cE unr,ccounted-for water will be addressed through project- supported rehabilitation wo.rhz and a new incentive- scheme leading to improved leak detection and repair, and commercial management. On that basis, it is envisaged that unaccounted-for water will be reduceed from about 29% in 1994 to 17% in 2000 in EPEA's operating area. and from 35% to 23% in EPEOR's. O2er8ting Revenues 2. (a) Pro1LWaonof ate Saes At EPEA, water production capacity will be fully utilized in 1994. Thereafter, the volume of water sold will increase only with the gradual reduction of unaccounted-for water. It is assumed that, with the continuing increase in the population served and the number of connections, plauned rationing will have to be introduced, if production is not increased. At EPEOR, a severe drought has reduced water availability by about 40% in 1993 in the Oran region, and severe rationing is in effect. As of early 1994, the drought had not ended, and thus water sales have been projected to start increasing only in 1995, and to reach the full potential of the system by 1999. M4eanwhile, the amount of water sold would increas A more rapidly than water availability .'ae to projected reduction in unaccounted-for water. (b) Revenues from Water Saleg In 1994, a country-wide tariff increase of 33% was introduced. At EPEA, the resulting value of water sold is expected to increase from 3.96 DA/M3 in 1993 to 6.07 DA/M3 in 1994 due to EPFA's taking over responsibility for water distribution in Annaba. Average revenues per in3 are also expected to go up some 10% in 1996, 15% in 1998 and 10% in 2000. On this basis, sales will increase from about DA 370 million in 1994 to DA 614 million ini 2000. At EPEOR, avierage revenues will grow 10% in 1996, 15% in 1998, and 5% in 2000. Sales are expected to grow from about DA 382 million in 1994 to 1,273 million in 2000. - 101 - ANNUlM 26 page 2 of 4 (c) Qther Revenues At both EPEA and EPEOR, these represent civil works contracts. The pace of this activity rose sharply at EPEOR in 1993 in an effort to compensate for the severe drop in revenues resulting from water shortages. In subsequent years, civil works contracts are not expected to increase, due to an anticipated short supply of pipes in the country. (d) Meter Rental And ReRair With the takeover of the retail distribution in Annaba, EPEA is expected to increase revenues for meter rentals and repairs. At both EPEA and EPEOR, tlhese revenues reflect projected volumes of activity and local inflation. (e) Provision for Bad Debts Provision for bad debts has been calculated at 5% of total sales. g0eratin Exoenses 3. (a) Personnel and Productivity Incentives In 1993, EPEA and EPEOR were over-staffed with about 16 and 9 employees per 1,000 connections, respectively. Productivity gains should be achieved as a result of performance bonuses, for which the equivalent of about 20% of the base cost of personnel has been added to operating costs. In the year 2000, staff ratios are expected to be reduced to about 9 and 5 employees per 1,000 connections, respectively. The basis for awarding the performance bonuses will include, inter-alia, the reduction of unaccounted-for water. (b) Energy and Chemicals At both utilities, these are a factor of the volumes of water produced at 1993 prices, increased throughout the projection period for inflation. (c) Materials. Supplies. Services and Taxes These are proportionate to water production and distribution, as well as the volume of civil works and associated taxes, adjusted for inflation. (d) Concession Fee This charge represents the rent for the facilities placed at the disposal of the utilities by Government. It has been estimated on the basis of the current value of the facilities such as dams, pipelines and treatment plants required to provide water to the population served in each of EPEA and EPEOR in 1993. The average life of such assets has been estimated at 50 years. The current - 102 - page 3 of 4 value has been increased each year for inflation. Firally, since the concession fee was introduced after the implementation of the 1994 tariff increase, the fee has been reduced in the first three years, and will become due in its entirety only beginning in l997, when regional tariffs are introduced. (e) DepiSation Depreciation covers the annual charge for the utilities-owned assets. Other Expenses 4. (a) Interest Interest has been calculated on medium- and long-term debt at the rate of 10% per annum. Assets 5. (a) Fixed Assets Beginning in 1994, the utilities only retain the fixed assets necessary to operate and maintain the systems. Other facilities, including dams, pipelines, and treatment plants continue to be owned by the Government. (b) Accounts Receivable Pursuant to the terms of the concession agreements, receivables are expected to come down to the equivalent of 4 months of sales. (c) Preoaid ExRenses and Other Receivables These are a factor of the volume of business adjusted annually for inflation. (d) Inventory Inventory levels at each of the utilities have been projected to reflect the level and nature of their business, covering chemicals and other supplies and materials requirements. They are expected to go down from the equivalent of 19 months in 1993 to 8 months in the year 2000 at EPEA, and from 20 months to 8 months at EPEOR. LiabLlit1es 6. (a) Equitv and Long-term Debt The transfer of fixed assets from the utilities to the Government in 1994 results in a reduction of EPEA's equity, and a reduction of EPEOR's long-term debt. Afterwards, the equity of each utility - 103 - page 4 of 4 increases with each year's net income, while its long-term debt increases with the development ot the assets necessary to operate and maintain Its systems. (b) Accounts Pavable Accounts payable have bPoen unduly high at both companies, particularly at EP1lOR. This is expected to change with the implementation of the concession Agreements. EPEA's payables are projected to drop from the equivalent of 19 months of the cost of materials and supplies in 1995 to 8 months ln the year 2000, and EPEOR's from 33 months to 10 months. - 104 - ANNX 27 Page 1 of 2 DEMOCRATIC AND POPULAR REPUBLIP OF ALaERA WATER SUPPLY AND S AIGE R ILITATION ROJECT NONITORIMG INDICATORR FgR EPE INDICATORS 1994 1995 199 1997 1998 1999 2000 I. MIEM5 QEERTI2N$ Water produced, Mm3/yr 88 as 88 88 88 88 88 Water sold, Mm3/yr 61 64 66 67 69 71 73 Unacoourted for waer, % 29 27 25 23 21 19 17 Numberofoonneions, 1000 73 80 88 93 97 102 107 IL. STAFFIN Number of da 1,124 1,090 1,058 1,02%6 99 g85 93 Stff per 1,0Q0conne dom 15 14 12 11 10 9 9 PayoU as % of pses e0 55 52 52 51 50 50 IU. EINANC Operatingratio, % 86 88 91 98 93 97 93 Current ratlob 3.1 3.3 3.7 4.2 4.9 5.3 5.9 Ludck r atio 2.5 2.8 3.2 3.5 4.1 4.4 4.9 Colaconpw-paiod,mot 4 4 4 4 4 4 4 Ptent pedlod, month 9 9 7 6 5 4 4 Profit margin on payroll, %d 26.7 23.9 18.0 3.3 15.0 6.0 13.5 Profi mawgin on sa % 14.5 12.3 9.2 1.8 7.6 32 6.7 af total operating spene dided by tot revenues X 100. Q/ Oret asse, - invenor current lablies Net com XIOO p- am ANNE& 27 Page 2 of 2 DEMOCRATIC ANM POPULAR REPUBLIC OF ALGERI WATE RSU A SEG REHBLTATION PRONJECT ONIO-TORINGIDCAOSFO PO INDICATORS le" 199 19 1997 198 1999 2000 I. M=M§ OPEATIONS Water produced, Mrn3/yT 8a 120 140 160 18O 200 200 Water sold, Mm3/yr 56 78 97 114 132 150 154 Unaccounted for water, % 35 33 31 29 27 25 23 Number of oonne*ion8, 1000 232 245 260 272 284 295 30S IL. TAINGE Number of 8s 1,856 1,800 1,746 1,694 1,643 1,594 1,546 taffpsr 1,000 oonnecrs 8 7 7 6 6 5 5 Payrol as % ofexp nss 57 48 42 40 37 35 35 -11I. EANbg OperSatg ratio, 97 97 93 94 87 87 92 Current raiod 1.5 1.4 1.5 1:4 1.6 1.9 2.1 Quick raios 1.3 1.1 1.1 1.1 1.3 1.6 1.7 Colletfion. piod, mont 6 5 4 4 4 4 4 Payment period, monxt 38 30 20 20 15 12 10 Profit margin on paWoM, %h 2.57 2.28 14.80 10.04 35.86 34.43 21.51 Profi margin on sales, % 1.8 1.2 6.3 4.0 12.3 1 1.1 7.2 a/ Tolal operat expene divkid by tota rvenues X 100. g,/ Cuffent ass-. - hvo cureret ab8e W/ Net inoome X100 P ca - 106 - Page 1 of 4 DEMOCRATC AND POPUIAR REPUBLIC OF ALGERI WATER SUP?LY AKD SEWERAGE R[Ai9LITATION PROJECT ASSUMPTIQNS FOR ECONOMIC EVALUAION OF THE PROECT 1. The project comprises the rehabilitation of water supply systems, and of wastewater treatment plants. The first component would generate additional water sales and other benefits relating to public health improvements. The latter are difficult to express in monetary terms, and are not included in the stream of project benefits. Only the water sales are considered in evaluating the water supply component benefits. Works included in this component are to recover water production which is now being lost in the distribution network. Consequently, the marginal production cost has been used to express this recovery in monetary valueb. 2. The stream of costs includes both the initial capital investments and future expenditures required for equipment renewal. All costs are taken net of taxes and duties. These are estimated to amount to about 10 percent of the total project cost. Only the incremental operating costs are included in this stream. All values in the cost and benefit streams are expressed in terms of the 1993 price levels. Additional sales are valued at the 1993 average tariff of DA 5.5/m3. 3. Table 29-1 gives the data used to calculate the return on the investments for the water supply rehabilitation program. Based on an average life of 25 years of the installations, the rate of return for this program is estimated to be about 17 percent. Table 29.1: Cash Flow 8o 1S.R.. o Water Reailitation PrarM Incremental Capital Operational Total Sales Costs Expenses Cost Year -----------------------DA Killion------------------------ 1994 -- 20.0 -- 20.0 1995 25.0 80.0 4.5 84.5 1996 45.0 105.0 5.5 110.5 1997 60.0 105.5 d.0 113.5 1998 75.0 76.5 10.6 87.1 1999 86.0 76.4 15.0 91.4 2000 96.0 - 18.0 18.0 -- 96.0 18.0 18.0 -- 96.0 18.0 18.0 2020 96.0 18.0 18.0 - 107 - ASE.X 2a Page 2 of 4 Table 29.2: ..Aveae Incremental Cost of Urban Uater in.. A.na. INCREMENTAL CAPITAL OPERATING EQUIPMENT TOTAL YEAR SALES lMb COSTS EXPENSES RENEVAL COST --_ _____ -------------US$ Million---------_-__-_ 1994 -- 5.0 5.0 1995 -- 10.0 10.0 1996 -- 15.0 -* 15.0 1997 -- 10.0 10.0 1998 6.6 10.0 0.3 10.3 1999 10.7 6.0 0.5 6.5 2000 15.0 12.0 0.8 12.8 2001 19.7 10.0 1.0 11.0 2002 24.5 10.0 1.3 -1.3 2003 29.5 5.0 1.5 6.5 2004 34.9 -- 1.6 1.6 2005 40.6 -- 1.8 1.8 2006 46.5 -- 2.0 2.0 2007 52.6 -- 2.1 2.1 2008 59.2 -- 2.3 2.3 2009 60.0 -- 2.5 2.5 2010 60.0 -- 2.8 2.8 2011 60.0 -- 2.8 2.8 2012 60.0 -- 2.8 -- 2.8 2013 60.0 -- 2.8 3.0 5.8 2014 60.0 -- 2.8 2.0 4.8 2015 60.0 -- 2.8 -- 2.8 I~~~_. _ ---- 2035 -- -- _ _ 1994-2035 224.7 69.9 AVERAGE INCREMENTAL COST: US$0.31/m3 WTZ: AU values la the cast ad reveue strem are aupreased in toM of tho 1994 prices. - 108 - 6MEL_2a Page 3 of 4 Table 29.3: Averaae Incremental Cost of Uzban Water in Oran INCREMENTAL CAPITAL OPERATING EQUIPMENT TOTAL YEAR SALES, Mm5 COSTS EXPENSES RENEVAL COSTS -- US$ Killion---------- 1994 -- 5.0 -- - 5.0 1995 -- 10.0 -- -- 1010 1996 - 12.0 - - -- 12.0 1997 -- 15.0 - 15.0 1998 -- 20.0 - -- 20.0 1999 -- 15.0 -- -- 15.0 2000 20.4 8.0 1.3 9.3 2001 22.8 10.0 1.4 -- 11.4 2002 25.1 10.0 1.5 -- 11.5 2003 27.4 15.0 1.7 -- 16.7 2004 30.0 20.0 1.8 - 21.8 2005 32.3 25.0 2.0 -- 27.0 2006 35.0 20.0 2.2 -- 22.2 2007 37.7 15.0 2.4 -- 17.4 2008 40.3 10.0 2.6 -- 12.6 2009 43.1 -- 2.7 -- 2.7 2010 45.7 -- 2.7 -- 2.7 2011 48.4 2.8 -- 2.8 2012 51.2 -- 2.9 -- 2.9 2013 53.9 -- 3.0 4.0 3.0 2014 56.8 -- 3.1 4.5 3.1 2015 59.6 -- 3.1 -- 7.1 2016 62.6 -- 3.2 -- 7.7 2017 65.7 -- 3.3 -- 3.3 2018 68.9 -3.4. 3.4 2019 72.0 -- 3.5 -- 3.5 2020 75.2 -- 3.6 -- 3.6 2021 78.1 -- 3.7 -- 3.7 2022 81.2 -- 3.8 -- 3.8 2023 84.3 -- 3.9 4.0 3.9 2024 87.6 -- 4.0 4.5 4.0 2025 91.1 -- 4.2 4.1 8.2 2026 94.5 -- 4.3 -- 8.8 2027 98.3 -- 4.4 -- 8.5 2028 102.1 -- 4.5 -- 4.5 2029 106.1 -- 4.6 -- 4.6 2030 110.2 -- 4.8 -- 4.8 2031 114.5 -- 4.9 -- 4.9 2032 119.0 -- 5.1 -- 5.1 2033 123.6 -- 5.2 -- 5.2 2034 128.4 -- 5.3 -- 5.3 2035 133.4 -- 5.5 -- 5.5 2036 138.6 -- 5.6 -- 5.6 2037 144.1 -- 5.8 -- 5.8 2038 149.7 -- 6.0 -- 6.0 2039 155.5 -- 6.1 -- 6.1 2040 161.6 -- 6.3 -- 6.3 1994-ZU40 TW.O -- -- -- 113.7 AVERACE INCREMENTAL COST: US$0.45/H3 N: AU wvuinet Lu the cost ad xweuu. *t.m are alPresed Xn te of the 194 prices. - 109 - H2: 28 Page 4 of 4 4. As regional tariffs would be applied beginning in 1997, the calculation has been made to determine what would be the long-run marginal costs (LRMC) of water supply services in the regions served by EPEA and EPEOR. Data used in this calculation are provided in Tables 29.2 and 29.3. The LRMC in EPEA is based on investments for the Mexenna Reservoir whose production would be sufficient to meet demands up to the year 2010. In EPEOR, two production systems would be required: the Gargar-Oran transmission facilities, and the Sidi Hadjel Reservoir. These systems would be able to fill the demand up to the year 2040. 5. The LRMC in the EPEA region is estimated to be DA 11.16 per X3 in 1994 prices, compared to an expected average revenue of DA 6.07 per m3 in that year. In EPEOR it is about DA 16.20 per m3 compared to an expected revenue of DA 6.82 per m3. This means that, for both utilities, tariffs for -onsumption of more than 220 m3 per year would need to increase annually by about 4 percent in real terms, in order to reach the 1UMCs in these regions by year 2000. - 110 - ANNEX-29 Page 1 of 2 DE!OCRATIC. AND POPULAR 1'MPUBLIC OF AlGERIA WaTER SUPPLY AND SEWERAGE IERABILITATION PROjECT SELECTED DOCUENTS AND DATA AAIlALE I _E OJECT FILE 1. Etude Organisationnelle et de Gestioi du Sous-Secteur de l'Eau Potable et de l'Assainissement Diagnostic de i'Entreprise d'Alger - EPEAL d'Aauaba - EPEA d'Adrar - EPDEMIA Adrar de Batna - EPDEMIA Batna de Bechar - EPDEMIA Bechar de Bejaia - EPDEMIA Bejaia de Biskra - EPDEMIA Biskra de Constantine - EPECO de Chelf - EPEC de Djelfa - EPDEM1A Djelfa d'El Bayad - EPDEMIA El Bayad 2 ri nd'El Oued - EPDEKIA El Oued Q " t de Ghardaia - EPDEMIA Ghardaia q tl n de Guelma - EPDEMIA Guelma n n " =^d'Illizi - EPDEMIA Illizi a n n de Khenchela - EPDEMIA Khenchela a t " de Laghouat - EPDEKIA Laghouat n n n de Medea - EPEM de Mostaganem - EPDEMIA Mostaganem n n " de M'Sila - EPDENIA M'Sila de Naama - EPDEMIA Naama d'Oum El Bouaghi EPDEMIA Oum El Bouaghi d'Ouargla - EPDEMIA d'Ouargla d'Oran - EPEOR de Relizane - EPDEMIA Relizane de Saida - EPDENIA Saida w a a de Setif - EPES H a n de S. gel Abbes- EPDEMIA S. Bel Abbes f a a de Souk-Ahras - EPDEMIA Souk-Ahras de Skikda - EPDEIIA Skikda aCn a de Tamanrasset - EPDEMIA Tamanrasset de Tebessa ' EPDEMIA Tebessa de Tiaret - EPET de Tindouf - EPDEMIA Tindouf de Tizi Ouzou ^ EPETI 2. Les Outils de Gestion - Commerciale U " " " - Analytique-principes Gdn6raux Ressources Humaines Plan Comptable Adapts Manuel d'Explication - lLl - ANNEX.29 Page 2 of 2 3. Previsions et Gontr6le Budg6taires - Principes G6n6raux 4. Scbdma Directeur Informatique 5. Syst&me d'Organisation Comptable - Proc6dures de Gestion 6. Contexte G6ndral - Mission Ao 7. Rapport de Synthese des Diagnostics 8. Plan de Recommandations 9. Etude de Tarification 10. Aspects Juridiques 11. Contrat d'Exploitation du Service d'Eau Potable 12. Plan de Formation des Entreprises 13. Plan d'Action - Missions A12 A A22 14. Description des Principales Fonctions 15. Maintenance - Definition et Organisation 16. D6limitation Territoriale des Etablissements R6gionaux 17. Diagnostic A.G.E.P. 18. Plan de Recommandations i9. Service de l'Assainissement - Structures et Organisation All above prepared by Groupement CNAT/SAUR Afrique, 1993. 20. Diagnostic de la STEP de la Ville de Ben Badis Diagnostic de la STEP de la Ville de Sfisef Diagnostic de la STEP de la Ville de Telagh Diagnostic de la STEP de la Ville de Tilmouni Prepared by Hydro-Traitement, March 1993. 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