Document of The World Bank Report No. 15433-MOR STAFF APPRAISAL REPORT KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT MARCH 29, 1996 Private Sector Development Finance and Infrastructure Division Maghreb and Iran Department CURRENCY EQUIVALENT (as of January 1996) Currency Unit Moroccan Dirham (DH) - 100 centimes US$1.00 - DH 9.0 DH1.00 - US$0.1111 DHI,000,000 - US$111,111 MEASURES AND EQUIVALENTS I millimeter (mm) - 0.04 inches I meter (m) - 3.28 feet I kilometer (km) - 0.62 miles I square meter (m2) - 10.8 square feet I hectare (ha) - 2.47 acres I square kilometer (km2) - 0.368 square miles I liter (1) - 0.264 US gallons I cubic meter (m3) - 264 US gallons I cubic meter per second (m3/s) - 35.4 cubic feet per second I liter per capita per day (lcd) - 0.264 US gallons per capita per day I liter per second (I/s) - 0.035 cubic feet per second PRINCIPAL ABBREVIATIONS AND ACRONYMS USED ADB - African Development Bank AH - Administration de l'Hydraulique CFD - Caisse Francaise de Developpement CIRF - Centre Inter-Regies de Fornation CLs - Collectivites Locales CSE - Conseil Superieur de l'Eau et du Climat DEPP - Direction des Entreprises Publiques et Participations DGCL - Direction Generale des Collectivites Locales DRSC - Direction des Regies et Services Concedes EIB - European Investment Bank EU - European Union KfW - Kreditanstalt fur Wiederaufbau lcd - Liters per capita per day MARA - Ministere de ['Agriculture et de la Reforme Agraire ME - Ministry of Environment MOF - Ministry of Finance MOI - Ministry of Interior MOPW - Ministry of Public Works MOPH - Ministry of Public Health O&M - Operation and Maintenance ONEP - Office National de l'Eau Potable RAD - Regie Autonome Intercommunale de Distribution d'Eau et d'Electricite de Casablanca RADEEF - Regie Autonome Intercommunale de Distribution d'Eau et d'Electricite de Fes RADEEMA - Regie Autonome Intercommunale de Distribution d'Eau et d'Electricite de Marrakech RAMSA - Regie Autonome Multiservices d'Agadir TA - Technical Assistance USAID - United States Agency for International Development FISCAL YEAR January 1 - December 31 KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT STAFF APPRAISAL REPORT Table of Contents LOAN AND PROJECT SUM4MARY .......................... i I THE WATER SUPPLY AND SANITATION SUB-SECTOR .... ........ 1 A. Country Background, Water Resources and Sub-sector Organization .. ..1 B. Drinking Water Supply and Sewerage Sub-sector Strategy .... ....... 1 C. Rationale for Bank Involvement ........................... 1 D. Sewerage Sub-sector Issues and Proposed Actions ............... 1 II. THE PROJECT .3.................................... 3 A. The Nation-Wide Sewerage Investment Program. 3 B. Eligibility Criteria. 4 C. Project Description. 5 D. Status of Project Preparation - Follow-up Project. 5 E. Cost Estimates. 5 F. Project Financing Plan. 6 G. The Borrowers and the Implementing Agencies. 6 H. Procurement. 7 I. Reporting and Monitoring. 8 J. Disbursements. 8 K. Project Risk. 9 L. Environmental Aspects. 9 II. FINANCIAL ANALYSIS ..10 A. Past and Current Financial Performance of Regies .10 B. Regies Future Financial Performance - The Arrears Issue ......... 11 C. Audit and Insurance .12 IV. ECONOMIC JUSTIFICATION AND RISKS .13 V. AGREEMENTS AND RECOMMENDATION . .16 A. Agreements .16 B. Conditions of Board Presentation .18 C. Recommendation .18 This report, prepared by Messrs. Sergio Culegari, Sr. Sanitary Engineer, Task Manager, Fathi Ben Slimane, Sr. Financial Analyst; Piotr Wilczynsli, Sr. Environmental Specialist and Mrs. Laura Raimondo, Economist, is based on the findings of the pre-appraisal and appraisal missions which took place respectively in November-December 1994 and in May 1995. The responsible Division Cbief is Mr. Amir Al-Khafaji; the Director is Mr. Daniel Ritchie; and the Regional Vice President is Mr. Kemal Dervis. KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT STAFF APPRAISAL REPORT L1Sr OF ANNEXES Annex 1-1 Country and Sub-sector Background, Water Resources and Current Sector Organization Annex 1-2 Drinking Water Supply and Sewerage Sub-sector Strategy Annex 1-3 Bank's Involvement and Lessons Learned in the Water Supply and Sewerage Sub-sector Annex 1-4 Sewerage Sub-Sector Policy Letter Annex 1-5 Addendum No. 1 to the "Protocole d'Accord" made between the Government and RADEEF Annex 1-6 Bank Note on Privatization of Urban Water Distribution and Sewerage Services Annex 2-1 Forecast of Population, Water Consumption and Water Demand Annex 2-2 1995 Statistical Data Annex 2-3 Project Description Annex 2-4 RAD-Casablanca Sewerage Works Annex 2-5 RADEEF-Fes Sewerage Works Annex 2-6 RADEEMA-Marrakech Sewerage Works Annex 2-7 Status of Sewerage Feasibility Studies and Master Plans in 137 ONEP Centers Annex 2-8 Cost Estimates Annex 2-9 Project Financing Plan Annex 2-10 Implementation Schedule Annex 2-11 Current Organization of ONEP and the Regies Annex 2-12 Organization Chart of a Typical Regie Annex 2-13 Monitoring Performance Indicators Annex 2-14 Estimated Semi-Annual Disbursement Schedule Annex 2-15 Limitation of Project Risks-Elaboration of the Environmental Analysis Annex 3-1 Financial Projections: Tables 3-1 to 3-12 Annex 3-2 Assumptions for Financial Projections Annex 3-3 Sensitivity Analysis Annex 3-4 RADEEF Arrears Settlement Plan - Global Arrears Matrix as of March 1, 1995 Annex 3-5 Bank's letter of March 1,1995 to the Minister of Interior, concerning sub-sector arrears Annex 3-6 Letter of the Minister of Interior dated December 7, 1994 to the R6gies ordering the Regies to curtail service to Collectivites Locales accumulating arrears Annex 3-7 Letter of the Minister of Interior to the Wali and Governors ordering them to assist the Regies in recovering their arrears. Annex 4 Economic Analysis (including Tables 1 to 5) Selected Documents in Project File Map IBRD No. 26877 - Regies. KINGDOM OF MOROCCO SECOND iEWERGE AND WATER 1UaE rIROJECT STAFF APPRAISAL REPORT Llff OF ANNEXES Annex 1-1 Country and Sub-sector Background, Water Resources and Current Sector Organization Annex 1-2 Drinking Water Supply and Sewerage Sub-sector Strategy Annex 1-3 Bank's Involvement and Lessons Learned in the Water Supply and Sewerage Sub-sector Annex 1-4 Sewerage Sub-Sector Policy Letter Annex 1-5 Addendum No. 1 to the "Protocole d'Accord" made between the Government and RADEEF Annex 1-6 Bank Note on Privatization of Urban Water Distribution and Sewerage Services Annex 2-1 Forecast of Population, Water Consumption and Water Demand Annex 2-2 1995 Statistical Data Annex 2-3 Project Description Annex 2-4 RAD-Casablanca Sewerage Works Annex 2-5 RADEEF-Fes Sewerage Works Annex 2-6 RADEEMA-Marrakech Sewerage Works Annex 2-7 Status of Sewerage Feasibility Studies and Master Plans in 137 ONEP Centers Annex 2-8 Cost Estimates Annex 2-9 Project Financing Plan Annex 2-10 Implementation Schedule Annex 2-11 Current Organization of ONEP and the Regies Annex 2-12 Organization Chart of a Typical Regie Annex 2-13 Monitoring Performance Indicators Annex 2-14 Estimated Semi-Annual Disbursement Schedule Annex 2-15 Limitation of Project Risks-Elaboration of the Environmental Analysis Annex 3-1 Financial Projections: Tables 3-1 to 3-12 Annex 3-2 Assumptions for Financial Projections Annex 3-3 Sensitivity Analysis Annex 3-4 RADEEF Arrears Settlement Plan - Global Arrears Matrix as of March 1, 1995 Annex 3-5 Bank's letter of March 1,1995 to the Minister of Interior, concerning sub-sector arrears Annex 3-6 Letter of the Minister of Interior dated December 7, 1994 to the Regies ordering the Regies to curtail service to Collectivites Locales accumulating arrears Annex 3-7 Letter of the Minister of Interior to the Wali and Governors ordering them to assist the Regies in recovering their arrears. Annex 4 Economic Analysis (including Tables 1 to 5) Selected Documents in Project File Map IBRD No. 26877 - Regies. -i- dependent on already constrained public budget financing, and waterborne diseases and infant mortality would be significantly reduced. The project would benefit the whole population of Fes through the rehabilitation of existing interceptors and the construction of wastewater treatment plants and, would benefit the poor, in particular, since social sewerage house connections would be located in low income neighborhoods. The total additional population serviced through the proposed project is estimated at 300,000 people to which about 200,000 equivalent inhabitants are to be added, representing the equivalent increase in industrial pollution. Risks: The project would not pose specific technical risks. Execution of physical components would be straightforward. The risks mostly involve the Government's willingness to enforce the stipulations of the "Protocole d'Accord" and in particular i) adaptation of the legal framework to enhance RADEEF's managerial and financial autonomy; ii) needed sewerage charge adjustments; iii) settlement of arrears; and iv) reinstatement of RADEEF's autonomy. The tariff structure and the industries contribution level will be based on a tariff study which is a component of the proposed project. The 1994 and 1995 significant tariff increases (40% for water and 48% for sewerage), the 1993 settlement of 33% of the "Collectivit6s Locales" (CLs) arrears, the 1994 settlement of Government arrears, shifting from a priori to a gosteriori control, prove that the Government is committed to the Regies' sustainability. Technical assistance and training under the project would reinforce the Government's and RADEEF's commitment to the needed reforms by identifying and enforcing the implementation of procedures necessary for sound financial management and sustainable autonomy. Sustainability would be enhanced through possible privatization of water and sewerage services, following the current review by the Government of private firms' proposals. A Bank note of December 1994 was distributed to the Government, reminding it, inter alia, of the basic principles of sound privatization: competition and transparency. Technical assistance in implementing, operating, and maintaining project works would also minimize any technical risks. Estimated Costs: UsS Million Total LoW Foreism h of Total R6gie: RADEEF Sewerage works, equipment, consulting services TA and training 81.6 32.4 49.2 84 Taxes and duties 13.1 13.1 - 14 Interest during construction 2.3 - 2.3 2 TOTAL 97.0 45.5 51.5 100 Financing Plan: uS$ MiIin Total LocalPri % of Total Proposed IBRD loan 40.0 7.6 32.4 41 Co-financier (CFD) 23.6 4.5 19.1 24 RADEEP 18.8 18.8 - 20 Home owners 14.6 14.6 - 15 TOTAL 97.0 45.5 51.5 100 Estimated Disbursement: US S MIILLION FY 1997 1998 19 2000 N 2001 2002 2003 Annual 1.2 2.8 8.0 10.0 8.0 6.0 4.0 Cumulative 1.2 4.0 12.0 22.0 30.0 36.0 40.0 Economic Rate of Return: 11.5% using tariffs as a proxy for benefits evaluation. President Report No. P-6846-MOR Mapi IBRD No. 26877 MNIPI, March 1996 KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT STAFF APPRAISAL REPORT I. THE WATER SUPPLY AND SANlTATION SUB-SECTOR A. Country Background. Water Resources and Sub-Sector Organization 1.01 The country and sector background, water resources and current sector organization are described in Annex 1-1. B. Drinking Water Supply and Sewerage Sub-Sector Strategy 1.02 The proposed project fits into the Bank's current CAS of November 1993 supporting Government efforts to deepen adjustment and reform, alleviate poverty, strengthen public sector and natural resource management, and encourage private sector development. Details of this Strategy are given in Annex 1-2. The proposed project is also consistent with the World Bank strategy for water resources management' and MENA strategy for managing water2, in that it is an outcome of an analysis taking into account social, environmental and economic objectives; it supports more efficient sewage collection, treatment and disposal in an environmentally sustainable and economically viable manner, and promotes decentralized management as well as a system of water charges to endow municipal water utilities, R6gies, with operational and financial autonomy. C. Rationale for Bank Involvement 1.03 The Government recognizes that the establishment of efficient and cost-effective sewerage and pollution control management systems, as well as institutional management, are critical to the country's overall development. Based on long-standing relationships in the sector, the Government has requested continued Bank participation as a development catalyst, both at the micro-level of sanitation and at the macro-level to assist in addressing intra-sectorial issues. Details concerning Bank-funded projects including lessons learned from previous Bank operations are given in Annex 1-3. The proposed project would lead to improved operational efficiency of sector agencies, particularly the Regies, and to expanded sewerage service levels benefitting low income consumers. Focussing on social sector development through comprehensive action plans in the water and sewerage sector would be part of the overall post-adjustment strategy. It would follow on the successes and avoid the shortcomings of the ongoing Greater Casablanca Sewerage Project in addressing sector-wide institutional and financial issues through the establishment of global eligibility criteria (see para. 2.02). The proposed project would directly benefit the Regie of Fes, while supporting ongoing policy changes affecting all Regies and adopting the Government's social sewerage connection program. 1 water Resources Managemnt The World Bank, 1993 2. A strategy for managing water in the Middle East and North Africa The World Bank, 1994. - 2 - D. Sewerage Sub-Sector Issues and Proposed Actions Institutional Aspects 1.04 Currently sewerage systems are not operated satisfactorily by the Municipalities, essentially because their revenues (municipal taxes) are insufficient, and there are no allocations made for a specific service like sewerage. To overcome these shortcomings, the Government intends to adopt a basic institutional scheme in line with the "charte communale" of 1976 entrusting responsibility for sewerage services to the "Collectivites Locales" - CLs (Municipalities), as per its Sub-Sector Policy Letter (see Annex 1-4). Cost Recory 1.05 The Government agrees that full cost recovery through sewerage user charges to approximate the long-term marginal cost (LRMC) of sewerage works is the optimal solution to be pursued (see Sub-Sector Policy Letter in Annex 1-4). This is in line with the Government economic strategy of discontinuing its involvement in services to be provided in local communities (CLs) and also in line with the Bank policy. However, the implementation of this solution can sometimes face serious socio-economic constraints, as sewerage charges cannot exceed the affordability level. 1.06 During appraisal, the Bank has carried out financial projections for the sewerage activity of three Regies: RAD of Casablanca, RADEEF of Fes and RADEEMA of Marrakech. Furthermore, during pre-appraisal the Bank has carried out preliminary financial projections for the sewerage activity of four additional Regies: RADEEC of Settat, RADEEN of Nador, RAID of Tangiers and RDE of Tetouan and five ONEP centers, to determine the order of magnitude of sewerage charges needed to reach financial viability (applying the above-mentioned cost recovery assumption). The financial projections take into account house owners' contributions which consist of a 'Participation au Premier Etablissement -PPE" paid by new house owners and developers, proportional to the surface area of premises to be connected to the sewerage network. In addition, a 20% surcharge is added to the cost of house connections for construction cost and 10% for work supervision on the cost of the tertiary network. These contributions and the methodology are defined in the Regies By-laws. The financial projections show that funding sewerage investments at IBPD loan terms is appropriate for the cities of Casablanca, Fes and Marrakech, for which the resulting user service charges are acceptable. Similarly, funding sewerage investments at EEB loan terms is appropriate for the cities of Nador, Tangiers, Tetouan and Settat, where the resulting user service charges are also acceptable. For the five ONEP centers, the application of IBRD terms would result in sewerage charges far too high relative to users' ability to pay, and if costs were to be recovered through user charges only. Therefore, additional financial projections were carried out under the assumption that funding would be provided through donor grants. 1.07 The first phase investment program which includes the proposed project (Fes), as well as Casablanca and Marrakech, would not need any Govemment subsidy for funding the required investments. The resulting average sewerage user charges range between 1.5 and 3.5 DH/m3 (17 to 31 US cents per m3) during the implementation period, same order of magnitude as the long-term marginal cost of sewerage works, which compares with current water tariffs ranging between 3.5 and 6.5 DH/m3 (or 31 - 57 US cents per m3). For the city of FRs, a study of the tariff structure will be carried out, to identify for each beneficiary the sustainable level of - 3 - sewerage charges and, if a contribution from the central or local budget is set, design the sewerage charge structure in such a way that lower income beneficiaries would benefit most from of the contnbution. The European Investment Bank would provide external funding through loans at concessional terms for the sewerage systems of Marrakech, Nador, Settat, Tangiers and Tetouan without any need of Government subsidy. Similarly, no Government subsidy would be needed for the sewerage systems of Erfoud, Errachidia, Goulmima, Ouarzazate and Rich, if external funding is provided by a donor grant - eventually the European Union (EU) or the Kreditanstalt fur Wiederaufbau (KfW). The results of preliminary financial projections show, in fact, that sewerage user charges remain at a tolerable level for small-size communities only if investments are funded through grants or subsidies. This means that, due to the limitation of donor grant amounts, most of the sewerage systems needed in the 235 small-and middle-size towns can be implemented only if funding is provided by massive Government subsidies. Under this assumption, Bank funding would still be feasible, provided that debt service is assumed by the Govemment which would yield the assets to the communities as equity contribution. Conditionalities 1.08 The above-mentioned institutional set-up and cost recovery plan would be implemented through conditionalities agreed with by the Govemment, RADEEF and donors (CFD, EIB, EU, KiW, USAID). Two conditionalities were complied with prior to appraisal:: (i) availability of an adequate environmental impact analysis (EIA) of the proposed sewerage works; and (ii) availability of 1993 and 1994 audit reports; Three conditionalities were complied with prior to negotiations: (i) transfer of sewerage responsibility to the autonomous water, electricity and sewerage utility RADEEF of FRs; (ii) availability of a draft addendum to the RADEEF "Protocole d'Accord", covering the improvement of its managerial autonomy and financial and operating performance for the sewerage activity; and (iii) carrying out by RADEEF a vigorous sanitary education campaign, to inform the population of Fes about appropriate use of sewerage facilities. The agreed addendum No. 1 to the RADEEF "Protocole d'Accord" is shown in Annex 1-5. Agreements were reached during negotiations that, prior to Board presentation, the following conditionalities would be complied with: (i) signature of the above-mentioned addendum to the "Protocole d'Accord" satisfactory to the Bank; and (ii) reception by the Bank of the Government Sewerage Sub-sector Policy Letter satisfactory to the Bank including, inter aia, the eligibility criteria (complied with on March 15, 1996). II. THE PROJECT A. The Nation-Wide Sewerage Investment Program 2.01 Currently in Morocco the urban population (about 14 million inhabitants) lives in 260 Municipalities (communes urbaines), 20 of which have a population ranging from 100,000 to 3 million people. The rural population (about 12 million inhabitants) lives in 1,290 rural communities (communes rurales) grouping 31,000 douars (villages). The progressive migration of rural population to urban areas makes the sewerage issue even more urgent in those areas. Sewerage feasibility studies and master plans are partly finalized and partly under way in - 4 - 13 cities (by the Regies and Municipalities) and 137 towns (by ONEP), with the assistance of consultants, through funds provided by the Bank and other co-financiers. These studies would identify for each city or town a justified phased investment program. Based on data gathered from these studies, the estimated per capita investment needed to cover sewerage needs in the year 2000 is ranging between $60 to $180 for large cities and small towns respectively, which translates into a global estimated investment of $1.4 billion. The coverage of sewerage needs beyond the year 2000 will require additional investments on the same order of magnitude. B. Eligibility Criteria 2.02 During appraisal, the Government has agreed that each city and town need to comply with the following eligibility criteria, to be included in the nation-wide sewerage investment program, irrespective of the fund source; confirmation of this agreement was reached during negotiations as per Sewerage Sub-Sector Policy Letter (see Annex 1-4 and para. 1.08). They consist of: (a) availability of a thorough sewerage feasibility study and master plan giving full justification (technical, economic, financial) for the recommended investment; (b) availability of an adequate environmental impact analysis (EIA) of the proposed sewerage works; (c) transfer of the sewerage responsibility from Municipalities to autonomous utilities; and (d) availability of audit report(s) of said utilities. EMect Appo:ach and Objectives 2.03 The implementation of the above-mentioned investment program depends on the timely availability of adequate funds at appropriate terms. The pre-appraisal mission has identified a first phase sewerage investment program concerning twelve cities and towns for which thorough sewerage feasibility studies and master plans satisfactory to the Bank, were available: Casablanca, FRs, Marrakech, Nador, Settat, Tangiers, Tetouan, Erfoud, Errachidia, Goulmima, Ouarzazate, and Rich. The Govemment wishes to first use grants and funds at concessional terms which would be made available for small cities and towns. The Bank intervention would concern the city of FRs where sanitation issues are most acute; this would constitute the proposed Bank project. The Bank was instrumental in mobilizing funds at concessional terms: (i) from CFD to secure parallel financing to complete the external funding of the Fes sewerage system; (ii) from EIB to secure external parallel funding needed to finance the sewerage systems of Marrakech, Nador, Settat, Tangiers and Tetouan; and also in interesting the EU and KfW to provide parallel grant funds for the sewerage systems of Erfoud, Errachidia, Goulmima, Ouarzazate and Rich. The project would develop the Govemment sector strategy by improving the operational and financial perfommance of sector institutions, extending ongoing rehabilitation and expansion programs, expanding sewerage services to the poor and mobilizing adequate financial resources to fund delayed infrastructure investments. The Govemment is currently reviewing a privatization proposal from a French company for water, electricity and sewerage services for Casablanca. Privatization would improve the efficiency of sewerage services, and bring in funds which would reduce the Govemment contribution to project funding. A Bank note of December 1994 (see Annex 1-6! was distributed to the Government, reminding, inter aia, the basic principles of a sound privatization: competition and transparency. Assurances were reached during negotiations that the Government would mention the privatization option in the sewerage sub-sector policy letter (see Annex 1-4 . The project would establish a consistent framework within which it would replicate any further project in the sewerage sector, to all cities complying with eligibility criteria mentioned above. The role of the Bank would essentially consist in assessing compliance with eligibility criteria, in lieu of the classic project cycle (preparation, prappraisal and appnaisal). The project's major objecdve is to achieve satisfctory public health condidons by transporting and adequatdy ftraing and disposing effluents far from the populated areas; this would drasically reduce the waterbome diseases which are the major cause of morbidity. C. r 2.04 The project area is the entire country in so far as it supports institutional and financial reforms of water distribution and sewerage utilities (R6gies) and ONEP which operate all over the country (IBRD Map No. 25095). Forecasts and statistical data concerning sewerage facilities of the three major cities of Casablanca, Fes and Marrakech are given in Annexes 2-1and2-2. Sewerage works were identified and justified on the basis of priorities set forth in the feasibility studies and master plans, as mentioned in para 2.03 above. The proposed project would focus on the city of Fes and include sewage collection system, pollution control works, equipment, consulting services, technical assistance and taining. A detailed description of sewelage works is given in Anexc 2-3. Sewerage works are shown in Anes 2-(L4fl, 2-s l3E and 2-6 (ItADEEMA). D. Status of tPre aon - FoloW-U Proect 2.05 Project preparation is well advanced. Sewerage feaibility studies and master plans satisfactory to the Bank are available. The first phase sewerage works of the twelve cities and towns considered during pre-appraisal are identified and justified. Part of final design and bidding documents is also completed. The completion of final design and bidding documents of sewerage works of the city of FPs is scheduled for mid 1997. Terms of reference for consulting savices, TA and traing are available. Due to the different progress of project preparation - sewerage master plans have been finalized for 12 cities and towns, and some are just staring or are underway (Agadir, Melnes, Kenitra, Rabat-Sai, Safi, Oujda, and 137 ONEP centers) - (see Anne 2-7), it is likely that the proposed project would be followed by a further project at a two to three years interval. The preparation of the proposed project would be closely coordinated with the ongoing activities in the water and sewerage sector. E. Cost Ffl 2.06 The estimated costs for the sewerage worls of the project city of Pes (icluding taxes, duties and interest during constucton) are detailed in Annex 2-8 and summarized in Table 2-1 (see next page). Annex 2-8 also provides detailed cost estimates of sewerage works for the cities of Casablanca and Marrakech considered dunng appraisal, as well as Nador, Settat, Tangiers, Tetouan, Errachidia, Erfoud, Goulmima, Ouarzazate and Rich considered during pre-appraisal. 2.07 The project cost is estimated at US$97.0 million equivalent, with a foreign exchange component of US$51.5 million (53%). Taxes and duti estimated at about US$13.1 million equivalent would be funded entirely by the Pes water and sewerage utility and by the house owners. The base cost estimates are expssed in January 1996 prices. Cost estimates are based on data provided by the feasibility studies, master plans, and final deign. Unit costs are based on recently awarded contracts. Physical contingencies of 10% have been added to the costs of all components and price contingencis toalling 15% of the base costs and physical contingencies are based on the following inflation rates: -6 - 1997 1998 1999 2000 2001 2002 2003 Porcgn E=xhange 1.6 2.1 2.4 2.2 2.5 2.3 2.2 Loal Curency 4.3 4.3 4.3 4.2 4.2 4.2 4.2 Table 2-1 SuMmary Of Estimated ProieCt Costs (ZConSKg Baxe: January 1MU3 mmo 1d Pemba Taol LoaM F Rdgio: RADEEF - Sewers and Civil Works 415.2 166.1 249.1 46.2 18.5 27.7 - Treatment Plants 121.5 60.7 60.8 13.5 6.7 6.8 - Equipment 21.0 - 21.0 2.3 - 2.3 - Consulting Services 18.0 2.7 15.3 2.0 0.3 1.7 - T.A and Traning 4.8 0.7 4.1 0.5 0.1 0.4 A. Base Cost 580.5 230.2 350.3 64.5 25.6 38.9 B. Physical Contingencies 58.1 23.0 35.1 6.5 2.6 3.9 C. Price Contingencies 95.8 38.0 57.8 10.6 4.2 6.4 D. Total Cost (net of taxes and duties) 734.4 291.2 443.2 81.6 32.4 49.2 E. Taxes and duties 117.5 117.5 - 13.1 13.1 - F. Interest during consruction-IDC 21.1 - 21.1 2.3 -- 2.3 G. Total Cost (including taxes, duties & IDC) 873.0 408.7 464.3 97.0 45.5 51.5 The project provides for: (a) an estimated 180 man-months of consulting services and 20 man- months of TA, and (b) an estimated 12 man-months for training. F. ae ct Plan 2.08 The Project financing plan would be as follows: Table 2-2: Poect pancing Plan US Millin LOW Lo Fon % of Toal Prpood 3RD loan 40.0 7.6 32.4 41 Stadard IRD Co.-fincier (CFD) 23.6 4.5 19.1 24 Standard CFD RADEEF 1I.8 18.8 - 20 Own contribution Rome ownen 14.6 14.6 - 15 Own contribution TOTAL 97.0 45. 51.5 100 The detailed project financing plan is shown in Annex 2-9. G. Ihe Borrowers and tmetng A 3 Exchange rate = US$1 = DH 9.0 - 7 - 2.09 The proposed IBRD contrbution of US$40.0 million would finance 63% of the project foreign exchange and 23% of local currency costs through a loan agreement to be made with RADEEF. Thirty-seven percent of the project foreign exchange and 14% of local currency costs would be funded by CFD. Home owners and RADEEF would fund 73 % of the local currency costs plus taxes and duties or 35 % of the investment program. The whole amount of the loan would be guaranteed by the Government. The foreign exchange risk on the loan would be borne by RADEEF. 2.10 All project components are designed to allow for an implementation period of about seven years, i.e., from mid 1996 to 2003 (Aamc 2-10). The implementing agency would be the Rdgie RADEEF. Consulting services would be provided to support RADEEF in bidding document preparation, procurement, and works supervision. TA would be provided to RADEEF for the organization of its sewerage department and training for wastewater treatment facilities and equipment use. The operation and maintenance of all facilities would be carried out by RADEEF. The organization of the Regies is described in Annex 2-11. The organizational chart of a typical R6gie is shown in Annex 2-12. R. Procurement 2.11 Civil works, sewers and equipment would be procured in accordance with the Bank's Guidelines. Eligible domestic manufacturers of pipes and equipment bidding under International Competitive Bidding (ICB) procedures would be awarded a 15% preference on the CIF price or the prevailing custom duty applicable to non-exempt importers, whichever is less, provided the local value added to the product is not less than 20% of the ex-factory bid price. The supply and installation of pipes and equipment will be tendered as single packages and grouped in such a way as to maximize competition. Local Competitive Bidding (LCB) procedures, acceptable to the Bank and in which foreign bidders would have an opportunity to participate would be used for the following: contracts for equipment and vehicles estimated to cost less than US$75,000 each, up to a total amount of US$400,000; and contracts for civil works estimated to cost less than US$2,500,000 each, up to a total amount of US$10,000,000. Contracts below US$50,000 for equipment and vehicles, up to a total amount of US$250,000 would be awarded under Local Shopping (LS) procedures in accordance with the Bank's Guidelines. Consultants would be recruited in accordance with Bank Guidelines. Terms of reference for the various asignments were reviewed by the Bank. Due to the urgency of rehabilitation works, some project activities (procured in accordance with Bank Guidelines) would be carried out prior to loan signing. Consequently a small amount of retroactive financing (less than US$0.7 million) would be provided under the proposed Bank loan. 2.12 All contracts awarded through ICB and LCB, as well as all consultant appointments above US$100,000 for firns and US$50,000 for individuals, will be subject to prior Bank review. This will result in prior review of about 90% of total procurement. All other contracts will be subject to selective a posteriori review by the Bank. 2.13 Procurement arrangements are summarized in Table 2-3 where the figures in parenthes represent amounts financed by the Bank and the others are the total amounts of the project elements. - 8 - Table 2-3: Amounts and Methods of Prcurment (US $ million) PsoictA L3aOt B : dwhr k4 x TOtal REamQ (a) Sewen & Civil Works 58.8 10.0 - 20.9 39.7 (31.0) (5.0) - (36.0) (b) Supply and installation of equipment 1.7 0.4 0.3' 1.5 3.9 (1.4) (0.3) (0.2) (1-9) (c) Consultunts, TA & tiuinzg - - 2.2 1.2 3.4 (2.1) (2.1) TOTAL 60.5 10.4 2.5 23.6 97.0 Bank loan (32.4) (5.3) (2.3) - (40.0) RADEEP 16.9 1.6 0.3 - 1.1 House ownen 13.2 1.2 0.2 - 14.6 Co-finncier (CFD) - - - 23.6 23.6 I. Reporting and Monitoring 2.14 RADEEF would report twice a year on the progress of project implementation and the achievements of the project would be monitored. RADEEF would also prepare an Implementation Completion Report (ICR). These reporting requirements were agreed upon during negotiations. Key indicators for RADEEF are mentioned in Annex 2-13. Agremnt was reached during negotiations that during project implementation: (a) a yearly review would be conducted by the Bank to verify the compliance by RADEEF on the actions stipulated in the performance agreement (Protocole d'Accord and its addendum), including: implementation measures, water tariff and sewerage charge adjustments, self-financing of no less than 25% on average of the investment program, account receivables no more than three months of water billing by 1998, and debt service no more than 1.2.; (b) an annual report covering all the indicators to be submitted by RADEEF no later than September 30 of each year of project implementation, and identifying appropriate remedial measures if indicators stipulated in the agreements are not realized; (c) a mid-term review to be carried out jointly with the Bank no later than October 31, 1999, to verify the implementation of the -Protocole d'Accord' and its addendum and identify appropriate remedial measures to complete the project as scheduled, and to achieve all the project objectives; and (d) annual audit reports on the accounts of the previous year, project accounts and special accounts (to be prepared by independent audit firms acceptable to the Bank) based on terms of reference to be agreed on by the Government and the Bank, no later than June 30 of the foLlowing year. J. Disbursent 2.15 Loan proceeds would be disbursed as shown in Table 2-4 on the basis of full documentation, except for eligible expenditures with a value below US$100,000. These would be covered by statements of expenditure. This documentation would be made available for review at the project audit offices of the implementing agencies. The loan would be disbursed against foreign exchange expenditures and part of local expenditures over seven years, this 4 NBF: Not Bank Finnced 5 Loca Shopping - 9 - period being based on experience gained from the implementation of similar projects with ONEEP and the R6gies. The Bank loan includes US$0.7 million of retroactive financing for urgent works carried out after March 1, 1996. In order to expedite disbursements, agm=nL was reached durin" negotiations that the Government will establish a Special Account for RADEEF at the National Treasury in the amount of five percent of the loan amount. This account will be used to prefinance eligible expenditures under the Bank loan and will be replenished on the basis of standard Bank procedures. Applications for replenishment of the Special Account will be submitted to the Bank on dates to be specified by the Bank. The project disbursement schedule, in line with the standard disbursement profile for water supply and sewerage projects including preparation of bidding documents and work construction, is shown in Annex 2-14. 2.16 The risk of delaying project implementation and having to finance a higher proportion of project costs would be borne by RADEEF. Assuming implementation begins in mid 1996, loan proceeds would be fully disbursed by June 30, 2003. The closing date would be December 31, 2003. Table 2-4: Bank Loan Disbursemnt Categof (in US$ million) Catesory Estimated Esfimated cost of Allocated PcrOentagCes of Total Cost Components Funded by Amounts of Expenditur Bank (net of taxes and Bank Loan Financed by ank duties) Loa 1. Civil Works and Sewers 89.7 68.8 29.8 75% 11. Supply and installation of 3.9 2.4 1.2 100% of FE equipment and vehicles 80% of LE m. Consuling Services and 3.4 2.2 2.0 100% traning _ _ _ _ _ _ _ _ _ _ _ _ _ _ IV. Unallocated - 7.0 Total 97.0 73.4 40.0 FE: foreign expenses; LE: 100% of local expenses (ex-factory cost) and 80% of local expenditures for other items procured locally. K. Poect Risks 2.17 The project would not pose specific technical risks. The risks mostly involve the Govemment's willingness to enforce the stipulations of the "Protocole d'Accord' made, and its addendum to be made, with RADEEF and, in particular, agree on the needed user sewerage charge adjustments. Annex 2-15 explains how the project risks will be kept within tolerable limits. L. Environmental Aspects 2.18 This project is a first major effort of the Government and the Bank to address a backlog of water pollution issues in accordance with the country's environmental priorities and the MEENA Environmental Strategy. Minimizing existing environmental health problems related to poor water quality observed for some time, has been the decisive factor in determining priorities for site selection for the project. This has been especially an issue of concern in the Fes Valley. The project will reduce the flow of raw sewage and industrial effluent into surface waters of highly urbanized areas in which agricultural production takes place. Upgrading of the municipal infrastructure in the municipality of FRs will have a significant impact on environmental health - 10- of communities located along the rivers downstream of Fes. At the same time, it will improve the living conditions of people in the municipalities by controlling flooding of raw sewage in the old city of Fes. 2.19 Environmental benefits of this project will also include improvement in the quality of the wastewater used for irrigation by bringing it to levels recommended by the Bank. This will improve the quality of foodstuffs produced by private farmers. The institutional aspect of the project allows for expanding the scope of work of water utilities to also cover wastewater treatment. Effluent monitoring will be conducted by the utility. Quality monitoring will also be carried out by the responsible agencies: ONEP, the Administration de l'Hydraulique (AH) and the Ministry of Environment (ME). An environmental impact analysis has been carried out by ME, ONEP and consultants for the twelve cities and towns considered during pre-appraisal and appraisal, in accordance with Bank requirements, and mitigation measures have been incorporated into the project design. These include sludge handling in such a way as to allow for separation of heavy metals from industrial wastewater before it is mixed with municipal wastewater. Sludge will be used in agriculture. For each wastewater treatment plant, effluent standards were set to allow for wastewater to be used in the farming of products to be cooked. For the purpose of environmental rating this project has been rated as " B " in accordance with O.D. 4.01. m. FINANCUL ANALYSIS 3.01 RADEEF generates its revenues from consumers' charges and contributions. Water and electricity revenues are based on consumptions metered and billed to users. During the 1990- 1994 period, RADEEF electricity revenues covered its operating expenses including depreciation costs and met its financial requirements under Loan No. 2910-MOR, while water revenues do not. Water activities generated operating deficit due to the preponderance of operating expenses over total revenues. The shortage to cover operating expenses as well as investments is made up by customers' contributions and subsidies from electricity. In 1994, the FRs Municipality entrusted the sewerage activity to the "Regie Autonome Intercommunale de Distribution d'Eau et d'Electricite de FRs" (RADEEF). To date, no financial statements are available regarding the sewerage activity. The financial analysis covers the three activities: water, electricity and sewerage. A. Pad and Current Performance of 3.02 RADEEF's past and present performance is shown in its financial statements for fiscal years 1990 through 1994, summarized in Annex 3-1 (Tables 3-1, 3-2, 3-3, 3-4, 3-5, 3-6). During this period, RADEEF performed satisfactorily and met its financial requirements for the electricity activity. However, the financial statements of its water supply activity show that the financial equilibrium and operating efficiency are low and show deficits due to the preponderance of operating expenses and interest over total revenues, and deferral of tariff adjustments. However, working ratio improved slightly from 109% in 1990 to 92% in 1994 and its operating ratios improved from 133% in 1990 to 108% in 1994. As a consequence, the net operating deficit and net deficit after taxes decreased, respectively, from DH22.0 million to DH11.0 million and from DH26.0 million to DH20.0 million. The consolidated financial statements showed an overall satisfactory performance in 1994. - 11 - 3.03 RADEEF's low profitability in water supply activity is mainly compounded by (a) the inadequacy of tariff to keep up with escalating operating costs, and (b) the low water distribution network efficiency, due to insufficient maintenance and rehabilitation as well as lack of resources. In addition, according to the Moroccan fiscal code, net income before taxes is subject to a 36% (40% up to 1992) corporate income tax, but in case of net losses, a 2.5% tax is levied on actual turnover. 3.04 This lack of performance in its water supply activities is being addressed to some extent, by the 1993, 1994 and 1995 average tariff increases of more than 25% each year, and through appropriate measures covenanted in the Fifth Water Supply Project and related "Protocole d'Accord" (Loan 3364-MOR) i.e. annual tariff adjustment, settlement of arrears, implementation of new tariff structure and improvement of network efficiency from 64% in 1994 to 80% in 2000. 3.05 Tables 3-2, 3-3, 3-5 and 3-6 of Annex 3-1 show how RADEEP's water supply equity has eroded: cumulated retained losses reaching about 35 % of equity in 1994. Furthermore, balance sheets have increasingly expanded from the large accumulation of unpaid bills owed to RADEEF (account receivable representing about 33 % of total assets) and by RADEEF (account payable representing about 15 % of total equity and liabilities). Throughout the period, RADEEF's debt to equity and current ratio were satisfactory, and its cash generation reached the required level. Trhe RADEEF financial performance for both water supply and electricity activities is expected to improve drastically in 1995 and thereafter, due to settlement of all arrears owed by the Government and CLs as of December 1992, and annual water tariffs adjustments in 1994, 1995 and 1996 of about 25% each year, implementation of new tariff structure for electricity in 1996, as well as Government's and RADEEF's commitment to meet financial and operating requirement stated in Loan Agreement 3664-MOR and "Protocole d'Accord" signed between the Government and RADEEF on December 6, 1993. B. RADEEF's Future Fnancial Performance 3.06 Financial projections for water supply and power activities, as well as the consolidated financial projections suggest that under the assumptions outlined in Annex 3-2 and the agreements reached under the 5th Water Supply Projects, RADEEF would perform satisfactorily and meet all financial and operational requirements in terms of efficiency (80%), debt service coverage (1.2) and cash generations (25%) (Anne= 2-13) provided that the adequate tariff structure will be implemented in 1996 and tariffs level adjusted as described in Annex 3-2. The RADEEF's forecast financial statements are presented in Annex 3-1 (Tables 3-7 through 3-15). 3.07 The financial analysis for the proposed project suggests that the average sewerage user charges of RADEEF should be at DHL.0 in 1996 and would increase to reach DH3.09 in 2002 and 3.61 in 2004. The first increase in the average sewerage charge of about 25% should be in effect in January 1997. Thereafter, sewerage charges are assumed to increase by 17% each year in average as foreseen in Annex 3-2. On this basis, projections indicate that these tariffs would allow RADEEF's to achieve satisfactory operating efficiency and financial performance throughout 1996-2002 period. They would allow RADEEF to adequately cover operating expenses and other recurrent charges, including debt service and produce acceptable overaU net cash generation over the implementation period. It would keep its operating ratio at a satisfactory level (average operating ratios will be 82% decreasing from 909% in 1996 to 73% in 2002), and - 12 - generate a net internal cash, including customer contributions for new connections, to service the debt (1.6), and cover a substantial portion of its investment program (33%). The RADEEF's debt-to-equity ratio would be satisfactory, it would be kept at less than 50% as would be its debt service coverage. Under the above assumptions, the average debt-to-equity ratio would be about 46%. The Loan Agreement would contain a debt limitation covenant, whereby no new debt would be incurred without consulting with the Bank unless future internal cash generation were at least 1.2 times future debt service, including that on the proposed borrowing, and the self- financing ratio were no less than 25%. 3.08 The Government and the RADEEF cost recovery policy aims at preserving the short-and long-term financial viability of the three sub-sectors. At the same time, it aims at ensuring that low-income water supply users are serviced by the sewerage systems, and to creating appropriate incentives for decreasing the quantity of domestic and industrial effluents and discharge of wastewater through adequate tariff levels and structure. The current structure approved in 1994 that became effective in 1995 for RAD and RADEEF is still low compared to the potable water tariffs and the expected level of services to be delivered. Agreement was reached during negotiations that, the "Protocole d'Accord" signed on December 16, 1993 between the Government and RADEEF will be completed with an addendum providing appropriate user charges and structures (including identification of charges by category of consumer and tranches of water consumption). It will include a provision for the annual revision of user charges on the basis of updated financial projections acceptable to the Bank, and in the light of the Regie' medium-term cash flow needs (para. 3.07). The Arrears Issue 3.09 As has been the case for the Fifth Water Supply Project (Loans 3664-MOR and 3665- MOR), the settlement of mutual debts is a national issue and does not only apply to public utilities. Annex 3-4 is a matrix showing the arrears due to the Regies ONE and ONEP by the Government and the Collectivites Locales (CLs) as of March 1, 1995. The arrears owed by CLs is the major issue regarding Regies' own current liabilities. The national budget allocations for 1993, 94 and 95 to the Regies have not been sufficient to meet the costs of providing electricity and water to the Administration as well as the local communities (CLs). Consequently, arrears are building up. The Government is taking action to address the arrears issue through (a) settlement of arrears of CLs and the Administration (see the Bank's letter to the Minister of Interior of March 1,1995 given as Annex 3-5; (b) two vigorous incitations of the Minister of Interior to the R6gies to curtail water and electricity to CLs which have been accumulating arrears (Annexes 3-6 and 5-7) and (c) debt rescheduling which is currently being discussed. During negotiations, the situation of the RADEEF arrears was examined and the apropriate measures to be taken were identified and agreed upon (Annex 3-4). 3.10 Annexes 3-6 and 3-7 specify the RADEEF's legal right to discontinue service to customers whose payments are in arrears. Agreement was reached during negotiations that RADEEF would reduce private and parastatal receivables to under three months of billing by 1998, by strengthening its commercial department, and implementing new and appropriate billing and collection procedures, including disconnection campaigns. 3.11 Fixed assets: Long-term debt. The addendum to the RADEEF's "Protocole d'Accord" would provide, as outlined in the Fifth Water Supply Project, that sewerage assets will be - 13 - inventoried and revalued, and that the Treasury and the RADEEF would evaluate undisbursed loans onlent to RADEEF. Fixed assets have been brought into account based on their historical cost. The capital expenditure is assumed to be incorporated into the balance sheet at its actual cost. The inflated balances of accounts payable and receivable are assumed to be reduced sharply, under the proposed settlement arrangement (paras. 3.07 to 3.10), and then to taper off slowly, to a more reasonable level. C. Audit and Iluac 3.12 The existing project agreement between the Regies and the Bank (under Loan 3664-MOR) provides for an audit of the Regie by independent auditors. Agreement was reached du=i negotiations that audited financial statements, project accounts, and special accounts be prepared by independent audit firms acceptable to the Bank, in accordance with terms of reference to be agreed on by the Bank, RADEEF, and the Government, and that the audit reports should include auditor opinion on the commitment of RADEEF on arrears setdement, and submitted to the Bank within six months after the closing of the fiscal year. The quality of the audits performed to-date by independent auditors has been improved. Until 1994, RADEEF accounts were not certified due to discrepancies in its accounting procedures and weak internal control. These discrepancies are being addressed through studies financed under Loan 2825-MOR which recommendations would be implemented in 1996 and 1997. 3.13 On the tariff assumption and arrears (paras. 3.08 to 3.10) and those of fixed assets and working capital (para. 3.11), RADEEF would be able to perform its new responsibilities and reach operational and financial targets outlined in paragraph 3.07. However, a sensitivity analysis shows that cash flow ratio, and operating efficiency are particularly sensitive to revenues, investment fluctuation and interest charges (Anne 3-3!. Therefore, the financial situation will be closely monitored during project implementation. 3.14 Under the project, RADEEF will further develop the skills of the departments in charge of intemal audit and organization, in line with the recommendations of the Regie restructuring study (Anne& 4 and the ongoing study for implementing accounting and management systems. IV. ECONOMC JUSTlCATION AND RISKS l?oject benefits 4.01 The project would have major benefits stemming from: (a) reduction in the health hazards to the local population through better sewerage infrastructure, increased connections and treatment of wastewaters; (b) improvement of environmental conditions through treatment of wastewater, separation of heavy metals from industrial wastewaters and rehabilitation of the existing infrastructure; (c) promotion of local resource mobilization and cost recovery; and (d) improved operational efficiency of RADEEF. 4.02 By the year 2004, year of expected completion of investment works, approximately 1 million people will live in the targeted project area. Currently, 480,000 million people are served by sewerage infrastructure, and this number should reach 880,000 million in 2004 when all the additional benefits of the project will materialize. The project would benefit the population of Fes through the rehabilitation of existing interceptors and the construction of - 14 - wastewater treatment plants and would benefit the poor, in particular, since most sewerage system extensions would be located in low income neighborhoods. The total additional population serviced through the proposed project is estimated at 300,000 people to which about 200,000 million equivalent inhabitants are to be added, representing the equivalent increase in industrial pollution. The project would provide a total of 21,000 social sewerage house connections, and the level of sewerage service should increase from 65 percent in 1994 to 84 percent in 2004 for the project area. It is estimated that the implementation of the proposed investments, excluding consulting services and technical assistance, will have a positive impact on local unemployment rates by employing 22,000 person/year of skilled and unskilled local labor. For the first time, sewvage would be collected in Fes and Marrakech (in this latter city external funds would be provided by EIB), while in Casablanca additional sewage is currently captured and channelled to an ocean outfall of 3.6 Km made operational in January 1995. This is expected to greatly improve the sanitary situation of the area and reduce the diffusion of waterborne diseases whose incidence in Morocco and in the project areas is still high. 4.03 Impact on health. More than 900,000 cases (3 out of 100 people) of diarrhea and 2000 of cholera were registered in 1993. Children between 0 and 11 years old are the most affected group with 405,000 cases of diarrhea, and 33 percent of total cholera cases. The project area of FRs, is among the provinces where the incidence of waterborne diseases is the highest. According to the analysis carried out by Esrey (1991) on over 144 studies, sanitation facilities would decrease diarrhea morbidity by 26 percent, and improved water supply and sanitation would decrease child mortality by 55 percent. Since it is the first time that wastewater will be treated in FRs and Marrakech and a large number of people will be newly serviced by the system, the project is expected to have significant health benefits. 4.04 In order to evaluate the whole set of positive externalities and benefits stemming from the project, a comparison of land values of sample areas in Morocco, before and after sewerage infrastructure implementation , has been carried out. The appreciation attributable to the expected benefits of the provision of sewerage infrastructure has been estimated at 4 billion DH for Casablanca for 4500 ha of newly equipped areas and 570 million DH for Marrakech for 2,850 ha of newly equipped areas. For the city of FRs, data were not available. However, given the scarcity of land, netland appreciation for new development, the value for the newly equipped areas is expected to be at least higher than the one surveyed in Marrakch where land is abundant. Some of these benefits are partially captured by the participation in project financing of house owners' contributions. 4.05 Water re-use. In the inland cities of Fes and Marrakech, raw sewage is currently used for irrigation under extremely bad hygienic conditions. The proposed project would make available wastewater treated according to effluent standards allowing for wastewater to be used in farming products to be cooked. The treated water flow will dominate the irrigation perimeters by gravity down the slope from the treatment plants (2,000 ha and 200 ha for Marrakcch and Fes respectively) - see Annex 4. The proposed project does not include the construction of the irrigation perimeters which is currently undertaken by peasants. For the moment, no water reuse for agriculture is foreseen in Casablanca where the treatment of sewage and the pumping of treated water to agricultural areas, would impose an additional cost of around 4DH/m3. Even if this cost is likely lower than the opportunity cost of water, this investment would not be viable for RAD since the level of water tariffs for irrigation in agriculture is so low that it restrains any development of a market for treated wastewater. - 15 - 4.06 Impod mobilization of local resources and affordabil. The introduction of full cost recovery of the proposed investments and management of the sewerage infrastructure by qualified technical institutions in Fes and Marrakech, will overcome the chronic problem of insufficient municipal resources for the provision of sanitation services. The project was conceived in such a way as to limit the investment costs of this first tranche of investments as much as possible and allow for tariffs that will be increased slowly over a seven-year period and reach an average value of around 3.34DH/m3. It was estimated that, in FRs, yearly payments for the consumption of 100 liters per capita per day (ld) in an average family of six people would represent about 2.5% of the expenditure distribution average projected for year 2001, at 3 percent yearly increases in real terms during the 1991-2001 period and measured at 1994 prices. The yearly payments would represent 4 percent of the average expenditure for consumption estimated for the cumulative distribution of 44 percent of population. Assuming that the consumption of low income customers is likely to be lower than 100 lcd, i.e. 60 lcd, the budget share of the urban poor would be 2.6 due to the tariff structure that benefits low consumption customers. Table 5 in Annex 4 shows the budget shares for different expenditure groups calculated at 1988 tariffs and 2001 tariffs. These values are within the range of acceptability by Bank standards. Least-cost solution 4.07 The project's physical components represent the first phase investments identified in the sewerage feasibility study and master plans of the project cities. The most economic alternative (sewerage systems working by gravity) was selected to meet the demand for improved sanitation services and the expected quality objectives for the discharged effluents. For sewage treatment, a phase approach has been adopted and different process alternatives have been studied and compared by analyzing discounted capital and operating costs. In FRs and Marraketch, given the cost of land and its availability, the lagoon anaerobic system has proven to be the most economical. Capability of progressive expansion to meet higher effluent standards in the future was also taken into consideration. Economic rate of return and sensitivity analysis 4.08 Project economic evaluation for rehabilitation, and new investment components comprise separate assessments for RADEEF and for the Regies considered during appraisal. The average selling price for the sewerage service which will apply in 1999, year in which part of the project is expected to start operations, has been considered in order to calculate revenues. The use of the expected price charged for delivering the service as a proxy for benefits is extremely conservative since most of the benefits deriving from the existence of a performing sewerage infrastructure are not quantified and hardly quantifiable. The costs and benefits streams presented in Tables 1. 2. 3 Annex 4, include the net additional cost of meeting the sewerage service demand up to 2004. The expected ERR is estimated at 11.5 percent for RADEEF. Given the nature of the project and the wide positive externalities that it would produce, the expected ERR can be considered satisfactory. The ERR of the project is slightly lower. 4.09 The sensitivity analysis indicates that the switching values for tariff levels in 1999 is around 1.60 DH/m3 at 1995 prices for RADEEF (see Table 4, Annex 4!. This condition represents approximately the project tariff level estimated for year 1999. Therefore, compliance with the proposed financial projections will be a determinant of the financial viability of the - 16 - project. A 20 percent increase in the costs and 20 percent decrease in the benefits will make the project non-viable. This indicates that the project will have to be implemented on schedule and according to the technical specifications agreed to avoid cost overruns. The benefits are in fact less manageable since the amount of wastewater collected and treated depends on the level of water consumption which is affected mainly by other variables than sewerage tariffs. However, if the projected financial tariff increases are implemented in a timely fashion, the ERR for the project will substantially improve even if there were a reduction of 20 percent in benefits. 4.10 According to a 1994 poverty assessment, about 18% of those whose incomes are below the poverty threshold and 20% with incomes only just above, are concentrated in urban areas. Basic services such as sewerage infrastructure have direct and indirect benefits for the well-being of the population and its productivity. 50 % of the urban poor are served by a sewerage system, 25 % by individual systems and 25 % are unserved. The proposed project will extend sewerage infrastructure to newly reclaimed areas, medinas, areas where social housing projects have been carried out during recent years and where a high percentage of poor live. These areas represent 35% of the area that will be newly equipped. In these areas, the project would provide for a total of 21,000 social sewerage house connections. Most of the existing bidonvilles will not, however, be served by sewerage, but sanitary campaigns will be provided to improve the current situation. Risks 4.11 The project would not pose specific technical risks. The risks mostly involve the Government's willingness to enforce the stipulations of the RADEEF's "Protocole d'Accord" and in particular i) adaptation of the legal framework to enhance RADEEF's manageral and financial autonomy; ii) needed sewerage charge adjustments; iii) settlement of arrears; and iv) reinstatement of RADEEF's autonomy. However, the significant water tariff increases of 1992, 1993 and 1994, reinforcement of the Regies autonomy, efforts to reach a solution for the arrears and positive Government attitude towards privatization, prove the Government's commitment to the sustainability of water and sewerage operations. Technical assistance and training under the project would reinforce the Government's and the sewerage operators' commitment to the needed reforms, by identifying and enforcing the implementation of procedures necessary for sound financial management and genuine autonomy. The appointment of financially autonomous sewerage departments for the implementation, operation and maintenance of sewerage works, would also minimize technical risks. V. AGREEMENTS AND RECOMMEDIATION A. Agreements 5.01 During negotiations, agreement was obtained on the following: (a) the Govern t will: (i) honor all commitments undertaken in the current "Protocole d'Accord" made between the Government and RADEEF, and in the addendum to the "Protocole d'accord" to be made between Government and RADEEF covering the managerial and financial autonomy and the sewerage activity of RADEEF, concerning, in particular: a posteriori - 17 - control, procurement, human resources management, implementation of the recommendation of the management and accounting system study, arrears settlement, and annual water tariff and sewerage charge adjustments, (paras. 1.08 and 3.08 to 3.10); (ii) during project implementation: (a) give the Bank the opportunity to carry out a comprehensive yearly review to verify the implementation by RADEEF of actions and assess performance according to specific indicators stipulated in the "Protocole d'Accord" entered into with RADEEF and its addendum to be entered into with RADEEF, and (b) take the Bank review into account when finally agreeing on indicators (para. 2.14); (iii) carry out a joint mid-term review of project implementation with the Bank and RADEEF no later than October 31, 1999, to identify and enforce remedial measures needed so that al objectives fixed by the "Protocole d'Accord" entered into between Government and RADEEF and its addendum to be entered into with RADEEF may be fully achieved (para. 2.14); (iv) open a Special Account at the National Treasury to prefinance eligible expenditures of RADEEF (para. 2.15); and (v) confirm the eligibility criteria for a city or town to be included in the Nation-Wide Sewerage Investment Program, irrespective of the financing source (para. 2.02); (b) RADEEF will: (i) honor aU commitments undertaken in the "Protocole d'Accord" entered into between the Government and RADEEF and its addendum to be entered into with the Government (para. 1.08); (ii) during project implementation give the Bank the opportunity to carry out a comprehensive yearly review of RADEEF expenditure program, to verify RADEEF implementation of measures contemplated in the "Protocole d'Accord" and in its addendum to be entered into between the Government and RADEEF and, in particular, assess its performance according to the level of monitoring indicators mentioned in para 2.14; (iii) carry out a joint mid-term review of project implementation with the Bank and Government no later than October 31, 1999, to identify and enforce remedial measures needed so that all objectives fixed by the "Protocole d'Accord" entered and to be entered (addendum covering the sewerage activity) into between the Government and RADEEF may be fully achieved (para. 2.14); (iv) reach on average a cash generation ratio no less than 25% on average of the investment program (para 2.14); (v) prepare an annual report on all the indicators no later than September 30, take the Bank review into account when agreeing on the indicators, and promptly take all necessary measures to comply with the agreed values of the above-mentioned indicators - 18 - (para. 2.14). This annual report should forecast the cost of operation for the next fiscal year and, on the basis thereof, recommend tariff and sewerage charge adjustments in line with the covenanted cash generation, to be submitted to the Government and to be forwarded to the Bank for its review and comments (para 2.14); (vi) take all necessary actions to ensure that its accounts receivables from sewerage charges be kept under three months of billing (paras. 3.09 and 3.10); (vii) not incur any additional debt without prior agreement with the Bank, unless its net revenues are at least 1.2 times its debt service requirements (para. 3.07); (viii) cause its accounts (including, arrears settlement, project and special accounts) to be audited by auditors acceptable to the Bank and that the audited accounts, together with the auditors' report, be made available to the Bank no later than six months after the end of each fiscal year (para. 3.12); and (ix) carry out, no later than December 31, 1998 a detailed tariff structure study (para. 10 of Annex 4). B. Conditions of Board Presentation 5.02 Conditions of Board Presentation will be: (i) signature of the addendum to the 'Protocole d'Accord" by Government and by RADEEF, stipulating their respective commitments and obligations (para. 1.08); and xii) reception by the Bank of the Government Sewerage Sub-sector Policy Letter satisfactory to the Bank. C. Recommendation 5.03 Subject to the above conditions, the proposed project is suitable for a Bank loan in the amount of US$40.0 million at the standard variable interest rate with 20 years maturity, including five years of grace. MN1PI, March 1996 - 19 - ANNEX l-l Page I of 5 KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT Country and Sector Background, Water Resources And Current Sec(or Organization Country Background 1. Morocco is situated in tihe northwestern comner of Africa. The Mediterranean Sea forms its boundary to the north, the Atlantic ocean to the east, and the narrow fertile strip of Algeria to the nortlheast. Elsewhere the country is bordered by the Sahara. The country's four climatic zones reflect this setting: the coastal areas, the interior plains, the mountains, and the desert. The inlteior plains and the coastal zone enjoy a mediterranean climate with the interior having greater seasonal and diumnal temperature variations. Summers are hot and dry, whiile spring and fall rains are generally light and irregular with the main precipitation concentrated in the few winter months. Hence either natural or artificial water storage is required to compensate for the seasonal and irregular rainfalls. 2. According to the last 1994 census, 12.7 million persons, or almost 49% of the total population of 26.1 million, were urbanized with urban growth rates averaging 3.5% over the preceding decade. Natural growth accounted for about 60% of the increase, immigration from rural areas for the remainder. In spite of the preeminence of Casablanca (3,531,000 inhiabitanits) and the capital area, Rabat-Sal6 (1,433,000 inhiabitants), Morocco has a well- balanced network of small and medium-sized cities. About two-thirds of GDP is generated in urban areas, and urban incomes are at least 30% higher than, and (have been increasing twice as fast as) those in rural areas. The urban population is expected to reach 16 million, or 54% of the projected national total of 29.6 million by the end of the century. 3. - In spite of a slow down in urban population growth in the last few years, additional urban growth and rural-to-urban migration can be expected given the country's present state of economic development. Socioeconomic conditions are expected to give rise to more urban growth and rural-to-urban migration averaging 3.4% p.a. thlrough the end of the century, exacerbating deficiencies in the urban infrastructure. Since the Government decision, in 1989, to donate land to slum dwellers, most slums are now being replaced by permanent dwellings, thus paving the way for the supply of basic services such as water, sanitation, and power. The result is a substantial improvement in urban development througliout the country. - 20 - ANNEX 1-1 Page 2 of 5 Sector Backgrotind 4. Since the 1980's, the Government has sought to improve the provision of sewerage services, in particular in urban areas, first through an Engineering Loan in 1977 (IBRD Loan No. S-7-MOR) and, in 1988, througli the Greater Casablanca Sewerage Project (IBRD Loan No. 2826-MOR) that includes priority sewerage works in Casablanca and Mohammedia and nine sewerage master plans for Agadir, Casablanca, Fes, Marrakech, Meknes, Nador, Rabat-Sal6, Settat and Tangiers. Simultaneously, other sewerage master plans have been undertaken for Tetouan through funds provided by USAID and the Tetouan Municipality, for Kenitra through funds provided by the Kenitra Municipality, and for 137 ONEP centers, tirough funds provided by the KfW, CFD, ADB3 and ONEP, within the 5ti Water Supply Project. Financing for urgent sewerage and depollution works were provided by KfW and EIB, mainily for ONEP centers. 5. In the 1990's, additional funds have been provided by CFD, GtZ and OECF for testling innovative sewage treatmenit techinologies. Despite these efforts, the sewerage sub- sector is grossly underdevelopcd: several densely populated urban areas are not provided with any sewerage systems, existing sewerage systems are under-sized and deteriorated and domestic and industrial liquid wastes are often discharged near residential areas without any prior treatment. The environmental conditions resulting from this situation are unsatisfactory: public hcalth is seriously affected, water resources as well as the coastal sea waters are polluted. Responsibility for sewerage services is vested in the Municipalities (Collectivitds Locales) which generally do not possess adequate know-how and financial resources to operate and maintain their sewerage systems and to plan and implement the needed rehabilitation, reinforcement and extensions. This unsatisfactory situation is further aggravated by a shortfall in finaicial resources in tlle 1980's wlhich led to the postponemeint of several investmilcints, with particularly negative impacts on service levels for low-incomiec consumers. 6. The proposed project would address the sub-sector's most pressing needs arising froml tie inadequacy of tie current institutional set-up and financial resources, inadequate sewerage infrastructure works, physical deterioration and limited service to the poor. Water Resources 7. Water is scarce in Morocco. The annual rainfall averages 30 billion m3, of which 22.5 billion m3 are drained by the rivers and 7.5 billion m3 infiltrate and recharge aquifers. TIhe overall national water balance is relatively well known and with the completion of the water resources master plans for the major river basins financed under the Second and Third Water Supply Projects (Loan 1724-MOR and 2006-MOR), almost all potential water resources will have been surveyed. The water resource potential has been estimated at 21.0 - 21 - ANNEX 1-1 Page 3 of 5 billion m3, of whiicih 16.0 billion m3, or 52% of the potential, are being exploited. Agricultural use was about 92% with the remaining 8% for urban (5%) and industrial (3%) uses. It is estimated that the regularized volumes could reach 14.0 to 14.6 billion mn3 (or two thirds of tie potential) by the year 2000, of which 12.0 billion m3 (90%) would be consumed by agriculture and 1.15 billion m3 (10%) by potable and industrial users. Although it is estimated that by the year 2000, supply and demand of water will be in balance in the aggregate, the growth of demand, at about 3 to 4% p.a., is expected to produce water shortages in tlie medium term. 8. Most of the potable water supplied to populated areas up to 500,000 inhabitants is groundwater from nearby aquifers. However, due to yield limitations, surface water resources are increasingly exploited, requiring dams, conveyance over greater distances, and tihe provision of pumping stations, treatment plants, and large transmission pipelines. The physical, chemical, and bacteriological quality of drinking water supplied to most of Morocco's urban areas is acceptable. However, this is not the case in most rural areas where groundwater is often contaminated by unsanitary domestic waste disposal. Sector Organization 9. Study and development of water resources for all users is the responsibility of the "Adminiistration de l'Hydraulique" (AH) within the Ministry of Public Works (MOPW). This administration is also responsible for the operation, maintenance, and control of all major dams. Management responsibilities of other water resources are vested witI thle Ministry of Agriculture and Rural Administration (Ministere de l'Agriculture et de la Reforme Agraire - MARA), National Water Production Agency (Office Natiolial de l'Eau Potable - ONEP), Local communities (Collectivites Locales - CLs) and their public utility enterprises (Regics) an(d otlier agencics. The executive power of tie coordinating body, thc Higher Water and Climate Council (Conseil Superieur de l'Eau et du Cliniat - CSE) is linited. Allocation of water resources among various consueinrs is at present dcletriliicd by a special commission within tie Prime Minister's OfFice. 10. - Production of potable water and conveyance to the larger agglomerations is ensured by ONEP under the supervision of the MOPW. The Regies are in charge of watcr distribution in the 16 largest urban agglomerations. Ten of these Regies are also responsible for electricity distribution; three for water, electricity, and sewerage; and one for water and sewerage. The Rdgies are under die administrative tutelage of die Ministry of Interior (MOI) thiroughi its Public Utilities Directorate (Direction des Regies et Services Concedes - DRSC). Since January 13, 1993, DRSC has had the role of the Regies' a posteriori control (inspection). The finanicial tutelage of the Regies is the responsibility of the Directorate of Public Utilities and Participations (DEPP: Direction des Etablissements Publics et des Participations). The R6gies performance, although limited, is gradually improving throughi - 22 - ANNEX 1-1 Page 4 of 5 restructurinlg, concerning in particular the six Regies participating in the ongoing Fiftlh Water Supply Project (Loan no. 3664-MOR). While some Regies still exploit their owI1 groundwater resources, die quantities produced are small and are increasingly being supplemented by ONEP's water. ONEP is also operating the water supply systems of 200 small-and-mediuin-sized agglomerations on behalf of the respective municipalities. In the past, some ONEP centers developed to such an extent as to justify the creation of new independent R6gies, while some others have been incorporated into existing ones. This process is likely to continiuLe albeit to a limited extent. ONEP is a well managed autonomous and sustainable institution. 11. The construction and, to some extent, the maintenance of water supply systems in rural areas has traditionally been MARA's responsibility with the rural communities ensuring day-to-day operationis. However, with the implementation of the communal reforn datling back to 1976, MOI now plays an active role in planning, implementing, and operating basic infrastructure in the rural communes such as water supply systems througl its Water and Sanitation Directorate -WSD (Direction de l'Eau et de l'Assainissenient) - DEA within the Local Communities General Directorate (Direction Generale des Collectivit6s Locales-DGCL) - CLs. WVater Supply 12. Relatively higih per-capita investment costs in rural areas and budgetary constraints hiave tius so far directed most of the investments to the densely populated urban areas where limited financial resources can yield maximum benefits. In 1990, 90% of the urban population had access to piped water with about 76% served by house conntectiolns and 14 % by public stanidpipes. Operation and maintenance of the water supply systemiis is adequate and the quality of water is acceptable. The water service is generally continuous. However, in the rare cases of initermiittenit service, there is the potential risk of contamination from sewage penetrating tlhrougih leaking water pipes. In rural areas, about 14% of tile total population has access to safe drinking water: 2% throughi house connectionis, 6% through public standpipes, and 6% throtigh public wells. Countrywide improvements in service levels are being achieved throughi the responsible agencies, namely ONEP and the Regies in urban areas, and MARA and MOI in rural areas. Government policy for urban areas is to make potable water available through house connections to 90% and 98% of the population respectively in 2000 and 2020. The remaining 10% and 2% of the urban population would be supplied through public standpipes. Government policy for rural areas is to make potable water accessible to 80% of the population by the year 2010: 10% tirouglh house connections, 40% through public standpipes, and 30% through public wells. This policy is consistenit with the Moroccan stabilization program and institutional reforms envisaged for the sector. One of the main objectives of the post-adjustment strategy is poverty alleviation. Therefore emphasis will be given to increasing infrastructure services - 23 - ANNEX 1-1 Page 5 of 5 to rural areas whlich would increase service levels. 13. The number of households served by house connections in the urban areas increased by about 4% P.A. During the same period, tde service level for the population with housc connections increased from 48% to 76%. The introduction, in 1980, of credit facilities for low-income customers for financing the cost of individual house connections has contributed more than 20% of the improvement in the service level. A recent assessment of the investments needed to meet future water supply demand showed that this would require, depending on the desired service level, between 0.6% and 0.3% of GNP, or between 7% and 3 % of gross fixed investmenits. For the Five Year Plan 1988-92, sector investments totalled US$694 million. Sewerage 14. Sewerage has not developed commensurately with water supply. Although sewagc collection systemns exist in most medium-sized and large cities, they have not been extended to cope with the rapid growth of the population and industry. In most cases, they are insufficienlt and poorly maintained. Communities in the hinterland discharge untreated sewage into rivers, whichi are usually not perennial, whereas communities along the coast disclharge effluent at the shoreline. This practice seriously pollutes the environment and creates a major healtlh hazard. So far sewerage has been the responsibility of the CLs, which face financial constraints and have limited know-how. Consequently, they have been unable to ensure the proper functioninlg of their sewerage systems which are generally in a serious state of disrepair. Maintenianlce often entails repairs after breakdowns. Lack of personnel with adequate technical skills is common and compounds maintenance deficiencies. The Govemrnment, with the Bank's assistance, has been examining ways to improve the management of the sewerage sub-sector. In 1985, as a pilot operation, the Governmcnt transferred the sewerage responsibility in the Greater Casablanca area from thie municipal autlhorities to the water and electricity distribution Regie (RAD). In 1991 and 1994, this experience was replicated in Agadir and Fes respectively where the CLs entrusted the water distribution R6gie RANMSA and the Water and Electricity Distribution Regie RADEEF withl responsibility for sewerage. A substantial improvement of sewerage services is expected dtrough tde proposed project. - 24 - ANNEX 1-2 Page I of 2 KINGDONI OF MOROCCO SECOND SEWERAGE AND WASTE WATER REUSE PROIECT Drinkiti2 Water SUDily and Sewerage Sector Strategv 1. The Bank strategy for the sewerage subsector is developed in a policy paper on water resources management issued in 1993 and in the MENA strategy for managing water of 1994. At the country level, the Bank strategy for the sewerage subsector is highlighted in a Watcr Sector Review issued in December 1994, and in an Environmental Strategy Note issued in March 1994. The Government strategy for the drinking water supply and sewerage sector was elaborated in a sector strategy letter under the Fifth Water Supply Project approved by the Board in November 1993. The proposed project would focus mainly on the urban population which is most affected by sanitation problems and for which the sector strategy, as defined in the above mentioned letter, is as follows: (a) For the year 2000: provide adequate water service to 90% of the inhabitants through house connections and to 10% of the inhabitants through public standpipes, and adequate sanitation to 90% of the inhabitants through sewerage and individual sanitation systems; and (b) For the year 2020: provide adequate water service to 98% of the inhabitants through house connections and to 2% of the inhabitants through public standpipes, and adequate sanitation to all inhabitants through sewerage and individual sanitation systems. The current situation is that water service is provided to 76% of the inhabitants through house connections and 14% through public standpipes, and 80% of the inhabitants are provided with sanitation through sewerage and individual sanitation systems. Government Sector strategy for the rural population is to make: (c) potable water accessible to 80% of the population by the year 2010: 10% through house connections, 40% through public standpipes and 30% through public wells. Currently, 14% of the rural population has access to potable water: 2% through house connections, 6% through public standpipes and 6% through public wells. 2. In the sewerage subsector, the Bank strategy is to assist the Government in the creation of competent and sustainable institutions capable of: (a) implementing sound operations, maintenance, and cost recovery policies; (b) efficiently managing sewerage works; (c) - 25 - ANNEX 1-2 Page 2 of 2 safeguarding the environment from pollution and health hazards through the application of appropriate technologies for sewage collection, treatment and disposal; and (d) planning and implementing adequate expansion programs. The present strategy hinges on the: (a) a pilot effort in which sewerage assets were transferred by the Municipality of Casablanca to RAD, the country's largest Regie; (b) development of sewerage master plans for 13 other cities served by water and electricity distribution Regies; and (c) rehabilitation and expansion of sewerage works, to include the construction of required sewage treatment plants, culminating in the appropriate re-use of wastewater. Currently, RAD, RAMSA and RADEEF are entrusted with tile responsibility for sewerage services in Casablanca, Agadir and Fes, respectively, through each of their sewerage departments. Technical assistance (TA) and training are being provided to RAD through Loan 2826-MOR, the sewerage department of which is satisfactorily run and organized. The sewerage department of RAMSA, although weak, is improving its performance through training and the purchase of maintenance equipment. The Caisse Francaise de Developpement (CFD) is ready to fund TA and equipment for RAMSA to further develop the capability of its sewerage department. Prior to shifting sewerage responsibilities from the local communities (CLs) to other R6gies, competent and sustainable sewerage departments are to be created within each R6gie. These departments are supported by adequate TA, training and equipment and provided with adequate financial resources through user charges. 3. The above development program and strategy are consistent with the Government's objectives for rationalizing public enterprises, as supported by the Public Enterprise Rationalization Project (PERL 1). They are being implemented through the ongoing National Water Supply Rehabilitation Project (Ln. 2825-MOR), the Greater Casablanca Sewerage Project (Ln. 2826-MOR), the Fifth Water Supply Project (Loans 3664-MOR and 3665-MOR) and the proposed Second Scwerage and Water Re-Use Project. - 26 - ANNEX 1-3 Page I of 3 KINGDOM OF MOROCCO SECOND SEWERAGE AND WASTE WATER RE-USE PROJECT Bank's Involvemenit and Lessons Learned in the Water SuDPlY and Sewerage Sector Bank Involvement 1. The First Water Supply Project (Loan 850-MOR of US$48 million, dated July, 1972), completed in 1980, supported the establishment of ONEP and financed the construction of water production facilities for the coastal zone from Kenitra to Casablanca. This project also helped the newly created ONEP strengthen its institutional capacity by financing the construction of training facilities and consultant services for management development, in-service training, and a tariff study. The project's main physical objective was to ensure safe and reliable water supply to the coastal area of Morocco extending from Kenitra to Casablanca, through the expansion of an existing water treatment plant, and construction of a dam, pumping station, and transmission facilities. The Project Performance Audit Report (No. 3721, dated December 16, 1981) concluded that the project had achieved its physical objectives and was instrumental in helping ONEP develop into a competent water production authority. 2. The Second Water Supply Project (Loan 1724-MOR of US$49.0 million, dated June 1979 and completed in 1987) continued the strengthening of ONEP's managerial and financial capacities, contributed to tie financing of the expansion of water production facilities for the coaslal zone from Kenitra to Casablanca and Greater Agadir, and provided, on a pilot basis, tile means for low-income customers to finance the cost of individual house connections through a revolving fund. The Project Performance Audit Report, (No. 8725, June 8, 1990) concluded that the project had achieved its primary objective and that the project benefits appeared to be sustainable. 3. The Third Water Supply Project (Loan 2006-MOR of US$87 million, dated September 1981 and completed in 1989), financed the construction of regional water supply systems, water supply systems in medium-sized towns in the country's hinterland, and a substantial expansion of credit facilities to finance house connections for ONEP's and three Regies' low-income customers. The social connections programs were satisfactorily implemented withi the installation of 130,000 house connections since 1980. This was the first time in Morocco, that the Bank (a) helped finance improvements to water distribution systems, (b) addressed the issue of water resources planning, development, and management, and (c) became involved in the rural sector by helping finance the Errachidia-Erfoud-Rissani Regional Water Supply Project and a study on water supply systems in rural areas. This operation also defined and implemented adequate arrangements to ensure proper operation and maintenance of rural water supply systems oll a pilot basis. The Project Completion Report for Loan 2006-MOR was issued to the Board - 27 - ANNEX 1-3 Page 2 of 3 of Directors on the end of June 1993. An audit of the project by OED is currently underway. 4. The National Water Supply Rehabilitation Project, or Fourth Water Supply Project, (Loan 2825-MOR of US$60.0 million, dated July 1987), which became effective in April 1988, supports the Government's broad-based effort to rationalize sector development. This ongoing project provides for a development program that includes the rehabilitation of some ONEP facilities, the partial rehabilitation of water distribution facilities of 11 Regies, water resource master plans for AH, and updating of water supply master plans of the same Regies. It was launched concomitantly with the Public Enterprise Restructuring Loan (PERL I - Loan 2820- MOR) under which the Government and ONEP signed a performance contract specifying their respective obligations in terms of tariff levels, operating ratios, Ministry of Finance control over investments, and the Government's contribution to ONEP's investment program. Disbursemcnts of Loan 2825-MOR are progressing satisfactorily. 5. The first Bank loan to the sewerage sector was an Engineering Loan (S-7-MOR of August 1977), which assisted in the financing of a sewerage study for the Greater Casablanca area. The Project Completion Report of June 14, 1984 concluded that the project-financed studies had been successfully completed and had assisted the Government in addressing the major aspects of the sewerage sector in general. A follow-on project, the ongoing Greater Casablanca Sewerage Project (Loan 2826-MOR of US$60.0 million, dated July 1987), which became effective in October 1988, has been assisting the Government in carrying out sewerage master plans of nine major cities as well as rehabilitation works in the sewerage system of Casablanca. Most of the sewerage master plans are progressing satisfactorily, and the disbursement rate for the RAD (Casablanca) sewerage rehabilitation works is improving due to the current strengthening of the sewerage department. 6. The Fifth Water Supply Project (Loan 3664-MOR of US$128.0 million and 3665-MOR of US$32.0 million, dated December 1993), which became effective in September 1994, stipports the Government policy towards the sustainability of the water, sewerage and electricity distribution Regies and of ONEP. This ongoing project provides a development program including rehabilitation, expansion and reinforcement of the water distribution facilities and reinforcement of operational and managerial capabilities of six Regies (RAD-Casablanca, RADEEF-Fs, RADEM-Meknds, RADEEMA-Marrakech, RAK-Kenitra and RED-Rabat-Sale) and ONEP, including consulting services, technical assistance and training. Disbursements of loan proceeds are just starting. 7. In addition, seven Bank-financed irrigation and rural development projects include water supply components providing for potable water at public standpipes in villages within the relevant project areas. Two urban development projects provide for infrastructure, including water distribution and sewers in the project areas. The Pilot Project for the Communal Infrastructure Fund (FEC), financed under Loan 2272-MOR, and the First Municipal Finance Project (Loan 3616/17-MOR) are geared towards improving the financing of municipal infrastructure investments, including water and sewerage. These projects also aim to strengthen - 28 - ANNEX 1-3 Page 3 of 3 FEC's organization and staffing, improve its loan preparation, appraisal of sub-projects, project pipeline development, programming of operations, and financial planning. Lessons Leamed 8. The following main lesson learned from previous Bank operations was taken into accountl in the preparation of the proposed project: with the main constraint for access of the poor to sewerage service being the cost of sewerage house connections and the payment procedure, the proposed project would provide for 32,500 social house connections, to be paid for in 60 equal monthly installments. The proposed project would provide for sensitization and education of the population to use sewerage systems in an appropriate way, and in particular to discontinue the current practice of disposing solid wastes into the sewers. 9. ONEP was the main beneficiary of the First, Second and Third Water Supply Projects. The PCRs of the 1st, 2nd and 3rd Project and the SAR for all projects highlighted the need to strengthen institutional capacity and operational efficiency, and to maintain full financial sustainability through adequate cost recovery. The two 'contrat-programmes" between ONEP and Govemment and the six "protocoles d'accord" made between the Regies RAD, RADEEF, RADEEM, RADEEMA, RAK and RED and the Government under the Fifth Water Supply Project, would enable both ONEP and the Regies to achieve financial sustainability. Actually, "protocoles d'accord" or "contrat-programmes" are lease contracts and can evolve towvards "contrat d'affermage" or concessions and thus be an appropriate vehicle towards privatization of water and sewerage services. The proposed project would apply the above-mentioned sound principles to the Regies restructuring and strengthening through increased efficiency and adequate cost recovery, in the framework of addenda to the existing "protocoles d'accord", to cover the sewerage activity. - 29 - ROYAUME DU MAROC Rabat, ie . I 'i uIAIg I9s,6 MINISTERE DE L'INTERIEUR CABINET ANNEX 1-4 N0 . .... /CAB. Page 1 of 4 LE MINISTRE DE L'INTERIEUR A MONSIEUR JAMES D. WOLFENSON PRESIDENT DE LA BANQUE INTERNATIONALE POUR LA RECONSTRUCTION ET LE DEVELOPPEMENT 1818 H. STREET N.W. WASHINGTON DC. 20.433 U.S.A. OBJET Strategie du Royaume du Maroc en matiere d'assainissement liquide. Monsieur le President, Dans le cadre de l'accord de pret relatif au deuxieme projet d'assainissement, j'ai l'honneur de vous confirmer les termes de la lettre n° 211/DCL du 17 Decembre 1986 constituant la declaration de politique generale du Royaume du Maroc en matiere d'assainissement liquide et visant l'amelioration des conditions de vie des populations, la protection de l'environnement, de la sante publique et des ressources hydrauliques ainsi que le developpement des capacites locales de gestion des equipements urbains. Les Collectivites Locales ont ete appelees a developper leurs services d'assainissement par le recours a des organismes publics ou prives, autonomes et specialises et par la recherche de nouvelles ressources financieres permettant le recouvrement de coats des equipements. C'est dans ce cadre que s'inscrit le premier projet d'assainissement en cours d'achevement, qui a permis la restructuration, la rehabilitation et l'extension des reseaux d'assainissement du Grand Casablanca. Ce projet a egalement permis aux principales agglomerations -30 - AEX 1-4 Page 2 of 4 du Royaume de disposer de plans directeurs d'assainissement definissant les dispositions d'ordre technique, operationnel, institutionnel et financier permettant d'apporter la meilleure solution possible a moindre coit aux problemes d'assainissement. Concernant le deuxieme projet d'assainissement, je tiens a vous confirmer la poursuite de la strategie du Royaume du Maroc basee sur les trois principes suivants: 1°) - Au Plan Institutionnel: La Charte Communale de 1976 reste le document de base de notre politique en matiere de decentralisation. Elle offre une souplesse et une variete de formules en ce qui concerne la gestion autonome des services d'assainissement, notamment la regie directe avec budget annexe, la regie autonome existante ou a creer, les societes d'economie mixte et la concession ou l'affermage a des entitees speialiskes publiques ou privees. Dans les grandes agglomerations, le transfert de la gestion des services d'assainissement aux Regies intercommunales chargees de la distribution d'eau potable, en tant que demembrement des Collectivites Locales, est preconise dans la mesure ou ces R6gies prennent les dispositions necessaires pour rationaliser leur gestion et optimiser leurs moyens humains et financiers dans un souci de rentabilite reelle du secteur de l'eau et de I'assainissement. D'une facon generale, les Collectivites Locales, sont appelees a user des prerogatives et possibilites que leur offre la Charte Communale pour developper l'organisation de leurs services d'assainissement. ll s'agit d'une strategie contractuelle basee sur la responsabilite communale, utilisant des acteurs potentiels publics ou prives. au niveau de leurs capacites specifiques. En creant en 1991 au niveau national, une Direction speialiske de l'Eau et de I'Assainissement au sein de la Direction Generale des Collectivites Locales, le Ministere de l'Interieur a contribue a la promotion du secteur de l'assainissement et a permis la coordination des actions dans ce secteur, notamment les etudes des sch6mas et plans directeurs engages avec l'aide de la Banque Mondiale et des autres organismes de cooperation. 2 - 31 - ANNEX 1-4 Page 3 of 4 Dans ce cadre, ce departement a lance l'etude d'un schema directeur national d'assainissemnent liquide dont l'achevement est prevu pour le mois de Deembre 1996. Cette etude doit constituer un outil de reference pour un developpement et une organisation colherente et efficace du secteur de l'assainissement liquide. En vue de donner une nouvelle dynamique a ce secteur, et de fournir un meilleur service d'assistance et de conseil aux Collectivites Locales dans leurs efforts de developpement et d'innovation des services d'assainissement, un projet de loi portant creation d'une Agence Nationale d'Assainissement est en cours d'etude. Cette agence serait chargee dans les domaines de l'assainissement liquide des eaux usees, des eaux pluviales et des dechets solides, de l'evaluation des besoins, de la definition des priorites et leur planification, de l'elaboration des etudes, de l'examen des sch6mas et plans directeurs, de l'elaboration et de la diffusion de la r6glementation techinique, de l'assistance et du conseil sous toutes ses formes aux Collectivites Locales et de la recherche des financements ainsi que de toutes mnissions que les Collectivites Locales decident de lui confier. 20) - Au plan finiancier: Les Regies assurant la gestion des services d'assainissement doivent faire face aux nouvelles clharges decoulant de cette mission et assurer A terme un autofinancement ad6quat des investissements qu'elles devront realiser. A cet effet, elles sont autorisees, dans le cadre de la reglementation en vigueur sur les prix, a recouvrer aupres des usagers des redevances pour services rendus et a appliquer des dispositions tarifaires appropriees au titre de la participation aux depenses de premier etablissemenet. Selon les premieres estimations issues des etudes des plans directeurs d'assainissement, les besoins en investissement dans ce domaine sont considerables plus particulierement en matiere de grands travaux d'infrastructure et d'epuration. Ces investissements necessiteront pour les prochaines annees un plus grand concours des pouvoirs publics. En vue de limiter les redevances d'assainissement a un niveau tarifaire raisonnable tenant compte des capacites contributives des differentes couches sociales des usagers, la consistance du deuxieme projet d'assainissement a et limitee en matiere d'epuration, a un premier niveau de traiternent des eaux usees. 3 - 32 - . ANNEX 1-4 Page 4 of 4 La strategie nationale en matiere d'assainissement liquide tient compte au niveau de l'ligibilite des projets des criteres ci-apres: - disponibilite d'etudes completes de factibilite et de plans directeurs d'assainissement; - disponibiite d'une analyse adequate d'impact sur l'environnement des ouvrages d'assainissement proposes; - transfert des services d'assainissement a des entites autonornes, publiques ou privet; - disponibilite des rapports d'audit des institutions sollicitees pour g&er les services d'assainissement. Pour le cas particulier de la vile de Fes le projet d'assainissement retenu a fait l'objet d'une analyse environnementale qui confirme ses avantages substantiels tout en indiquant les mesures correctives permettant de reduire les impacts negatifs qui en resultent et qui seront natureUement ndses en application. Enfin, je souhaiterais attirer votre attention sur l'importance que nous accordons a ce futur accord de pret, et vous assurer que la mise en oeuvre des principes de notre strategie dans le domaine de l'assainissement, sera poursuivie. Elle s'inscrit dans une demarche globale visant la mise en place d'un plan national d'assainissement, associant l'Etat, les Collectivites Locales, les Etablissements Publics concernms et le secteur prive, et que nous souhaitons concretiser avec le soutien technique et financier de la Banque Mondiale et celui des autres organismes d'aide et de cooperation. Veuillez agreer, Monsieur le President, I'assurance de ma tres haute consideration./. ., 1 11 uIit.rictur 4 - 33 - ANNEX 1-5 Page 1 of 18 KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT Addendum To The "Protocole D'Accord" Made Bctweeii The Government And RADEEF ANNEX 1-5 Page 2 of 18 PROTOCOLE D'ACCORD PASSE LE 16 DECEMBRE 1993 ENTRE L'ETAT ET LA RADEEF ADDENDUM N. I Prdambule Le present addendum N°1 complete le protocole d'accord signe le 16 decembre 1993 entre l'Etat represente par le Ministre d'Etat a l'lnterieur et par le Ministre des Finances et des Investissements Exterieurs d'une part et la Regie Autonome Intercommunale de la Wilaya de Fes (RADEEF) d'autre part definissant les obligations et les engagements de l'Etat et de la Regie dans le cadre du 5-eme projet d'alimentation en eau. L'addendum N' I definit les obligations et les engagements complementaires des parties en mati&re de performance et d'autonomie de gestion de la Regie. ARTICLE 1: ETUDE DES MESURES SUSCEPTIBLES D'AMELIORER LE FONCTIONNEMENT DE LA RADEEF Compte tenu de l'activite nouvelle d'assainissement confiee a la RADEEF, une etude des mesures notamment reglementaires susceptibles d'ameliorer le fonctionnement de cette R6gie sera men6e pour lui permettre d'exercer dans les meilleurs conditions d'autonomie financiere et de gestion ses activit6s en matiere de distribution d'eau, d'electricite et d'assainissement. L'Etat et la RADEEF dlaboreront, a l'aide d'un cabinet specialise, si necessaire, une etude qui aboutira a la definition d'un plan d'action. Cette etude sera lanc&e au plus tard le I juin 1997 et sera achevee au plus tard le 31 decembre 1998. ARTICLE 2: ETUDE DE LA STRUCTURE TARIFAIRE DE LA REDEVANCE "ASSAINISSEMENT" La RADEEF s'engage a lancer une etude complementaire a l'etude en cours concernant la structure tarifaire et la redevance d'assainissement au plus tard le 30 octobre 1997 et a I'achever au plus tard le 31 decembre 1998. ARTICLE 3: PROCEDURE DE GESTION COMMERCIALE DES ABONNENIENTS DE L'ADMINISTRATION ET DES COLLECTIVITES LOCALES La RADEEF s'engage a perfectionner les procedures de gestion commerciale des abonnements de l'Administration et des Collectivites Locales, suivant l'Annexe 4. Dans ce cadre la RADEEF et les Collectivites Locales du Grand Fes elaboreront, au plus tard le 30 novembre de chaque annee, une prevision realiste des consommations d'eau et d'electricite qui leur permettra de cemer la quantit6 de vignettes necessaires au paiement des factures. Cette prevision prendra en compte aussi les ecarts entre consommations prevues et rdelles de l'exercice precedent et les arrieres, le cas echeant. ARTICLE 4: REDEVANCE D'ASSAINISSEMENT Pour permettre a la RADEEF d'atteindre ses objectifs physiques et financiers, la redevance AL0 - 35 - Page 3 of1 d'assainissement sera basee sur les projections financieres de l'activitd 'assainissement' etablies par la RADEEF, a mettre A jour A la fin de chaque exercice fiscal a l'initiative de la RADEEF. Elle est decidee et approuvee selon la reglementation en vigueur. A titre indicatif I'Annexe 2 mentionne les redevances moyennes prevues sur la periode 1996-2001 qui ressortent des projections financi6res annexees A cet addendum. ARTICLE 5: APUREMENT DES ARRIERES La RADEEF veillera a ce que les Administration et les Collectivites Locales et tout autre organisme public prennent les dispositions necessaires pour l'apurement de leurs arrieres certifids respectifs afferents aux consommations d'eau et d'electricite (voir Annexe 3). conformement I 1'echeancier quadriennal 1996-1999 (25% chaque annee) pour les Collectivites Locales, et a I'dch6ancier quadriennal 1997-2000 pour les Administrations. A cet effet et en cas de besoin, la RADEEF fera appel a l'aide de 1'Etat. ARTICLE 6: SUIVI ET EVALUATION DE L'ADDENDUM Le contr6le d'accompagnement de la gestion et le suivi du protocole d'accord seront exerces par le Controleur Financier de la RADEEF. ARTICLE 7: MODALITE D'EXECUTION ET DE REVISION DE L'ADDENDUM Le present Addendum, dont les annexes constituent une partie intdgrante, prend effet a compter de sa signature. A la fin de chaque ann6e, il pourra etre procede d'un commun accord entre les parties a la revision de cet Addendum. LE MINISTRE D'ET T L'INTERIEUR LEMI STREDESFINANCESET \ U ne'DES INVESTISSEMENTS Le tit,-Isilre ~~RIEURS wJ~~~~~~~~~L t - :;. ctnz Sigz16 :j Mo.c.n.d i^BBAJ LE DIRECTEUR DE LA RADEEF LsDlre ct0.E1 9LF Ad 6-d :') - 36 - ANNEX 1-5 Page4 of 18 Annexe 1 Assainissement de Fes - RADEEF Programme d'investissement Annexe 2 Projections financieres de l'activite "assainissement' de la RADEEF. Annexe 3 Plan d'apurement des arrieres de l'Administration et des Collectivites Locales Annexe 4 Procedure de gestion commerciale des abonnements de I'Administration et des Collectivites Locales. ANNEX 1-5 - 37 - Page 5of 18 Annexe I ROYAUME DU MAROC DEUXIEME PROJET D'ASSAINISSEMENT ET REUTILISATION DE L'EAU RADEEF PROGRAMME D'INVESTISSEMENT A.TRAVAUX I. INTERCEPTEUR Wature untit& Nahtant I.T. Cvolr: ip"de) mliti ens D*N) - intercepteur gqneral + liaisons NCP 7880 ml 28,0 - amenagement DO dans l'oued Boukhareb OPL 1 u 0,7 - remise en 6tat des ovoides RRM 1600 ml 0,1 - liaison ovoides-ONE Zenijfour NCP 1 u 1,4 - relevage ONE aval vers canal d'amen6e aux lagunes EEM 1 u 6,0 - canal d'amenee aux lagunes NCP 2210 ml 6,9 - franchissement SEBOU NCP 600 ml 8,1 Sous-total 51,2 II. BASSIN D'APPORT No. 1 FERME EXPERIMENTALE - collecteur ferme experimentale NCP 2400 ml 2,0 - franchissement oued Fes amont NCP 1 u 0,1 - thalwegs a amenager OPL 2300 ml 0,2 - dalot eaux pluviales OPL 350 ml 1,8 - amenagement nouveaux quartiers ANQ 301 ha 22,6 Sous-total 26,7 III. BASSIN D'APPORT No. 2 OUARTIERS NORD-FES JDID - r6habilitation collecteur My. Abdallah RVN 1 u 1,6 - soulagement collecteur My. Abdallah par cr6ation OPL 1 u 0,6 - amenagement nouveaux quartiers ANQ 47 ha 6,8 - nouveaux collecteurs secondaires Fes Jdid NCH 500 ml 1,2 - am6lioration evacuation du pluvial Palais Royal OPL 300 u -- - collecteurs concernes par le projet AEP Lot 2 RRM 6750 ml 13,1 - r6habilitation des r6seaux de Fes Jdid RRM 1300 ml 1,7 Sous-total 25,0 ANNEX 1-5 Page 6 of 18 - 38 - IV. BASSIN D'APPORT No. 3 BAB SIFFER - reamenagement des abords du collecteur Bab Siffer RVN 165 ml 1,4 - amenagement nouveaux quartiers ANQ 2 ha 0,3 Sous-total 1,7 V. BASSIN D'APPORT No. 4 MEDINA - amennagement des oueds egouts du BV Zihoun ROE 2810 ml 13,9 - renforcement des collecteurs des bassins exterieurs NCP 1170 ml 2,6 - r6habilitation des r6seux du BV Zihoun RRM 4090 ml 6,6 - nouveaux collecteurs dans le BV Zihoun NCM 590 ml 1,1 - amenagement oued Fejjaline ROP 630 ml 7,3 - amenagement et couverture de l'oued Zihoun ROE 350 ml 4,4 - amenagement oueds propres du Boukhareb ROP 585 ml 3,6 - nouveaux collecteurs secondaires RG Boukhareb NCM 2220 ml 4,8 - rehabilitation reseaux RG Boukhareb RRM 2560 ml 4,4 - rehabilitation reseaux RD Boukhareb RRM 3850 ml 6,1 - amenagement des oueds egouts RD Boukhareb ROE 520 ml 2,6 - nouveaux collecteurs secondaires RD Boukhareb NCM 400 ml 1,2 - collecteur Jnan Boutaa NCP 410 ml 0,8 - collecteurs concernees par le projet AEP Lot 3 RRM 4110 ml 7,1 - collecteurs concern6es par le projet AEP Lot 4 a RRM 2390 ml 4,9 - amenagement nouveaux quartiers ANQ 2 ha 0,3 Sous-total 71,7 VI. BASSIN D'APPORT No. 5 SARHIJ GNAOUA - JNANATES - remplacement du collecteur Bab Khokha NCP 650 ml 1,8 - prolongement collecteur Guerrouaoua NCP 319 ml 0,3 - amenagement nouveaux quartiers ANQ 71 ha 7,7 - collecteurs concernees par le projet AEP Lot 4 b RRM 1110 ml 1,6 Sous-total 11,4 VII. BASSIN D'APPORT No. 6 BEN SOUDA ET OUEST - collecteur Massira - Dokkarat NCP 8318 m 13,1 - bassin de retenue carriere Massira et foss6 OPL 5,5 ha 0,6 - reprise fosse pluvial Ain Sned OPL 2000 ml 0,2 - fosse pluvial voie ferree OPL 900 ml 0,1 ANNEX 1-S Page 7 of 18 - 39 - - bassin de retenue Merja OPL 1,4 ha 0,9 - recalibrage oued Ain Smen aval OPL 4400 ml 2,1 - am6nagement nouveaux quartiers ANQ 274 ha 12,1 Sous-total 29,1 VIII. BASSIN D'APPORT No. 7 OUED HIMMER - collecteurs Himmer I et II NCP 2793 ml 2,9 - DO sur collecteur Wifak OPL 1 u 0,2 - bassin de retenue route Ain Chkef OPL 1,5 ha 0,9 - bassin de retenue Rocade OPL 1,0 ha 1,0 - bassin de retenue Dokharat OPL 0,7 ha 1,3 - recalibrage de l'oued Himmer OPL 5200 ml 2,3 - amenagement des fosses amont OPL 3800 ml 0,2 - amenagement nouveaux quartiers ANQ 282 ha 6,9 Sous-total 15,7 BASSIN D'APPORT No. 8 COLLECTEURS OUEST - r6habilitation collecteur ouest RVN 300 ml 0,5 - soulagement du collecteur ouest OPL l u 0,4 - amenagement nouveaux quartiers ANQ 62 ha 8,8 Sous-total 9,7 BASSIN D'APPORT No. 9 COLLECTEUR HIPPODROME - r6habilitation collecteur Hippodrome RVN 200 ml 0,1 - reprise d'ossature collecteur Hippodrome NCP 550 ml 1,2 - amenagement nouveaux quartiers ANQ 42 ha 6,1 Sous-total 7,4 BASSIN D'APPORT No. 10 COLLECTEUR SUD - rehabilitation collecteur Sud RVN 1860 ml 4,1 --- reprise de deux DO OPL 2 u 0,1 - am6nagement nouveaux quartiers ANQ 43 ha 3,7 Sous-total 7,9 BASSIN D'APPORT No. 11 OUED MAHRAZ - collecteur Hay Benabdellah / route de Sefrou NCP 900 ml 0,6 - prolongement collecteur Sidi Brahim NCP 730 ml 1,9 - r6habilitation collecteur Villas RVN 300 ml 0,2 - rehabilitation collecteur Sidi Brahim RVN 150 ml 0,2 - resorption du point noir de route de Sefrou RVN 1 u 0,7 - reprise de deux DO OPL 2 u 0,1 - recalibrage oued Mahraz OPL 2900 ml 3,8 - reprise de la digue Dar Mahraz OPL 1 u 2,0 ANNEX 1-5 Page 8 of 18 - 40 - - fosses pluviaux OPL 4500 ml 0,2 - amenagement nouveaux quartiers ANQ 199 ha 9,1 Sous-total 18,8 BASSIN D'APPORT No. 12 OUED BOUFEKRANE - prolongement du coll. Boufekrane sur ovoide RD NCP 387 ml 0,4 - collecteur Hay Benabdellah / Oued Boufekrane NCP 2100 ml 1,5 - amelioration du systgme Aouinat El Hajjaj RVN 1 u 0,1 - fosses pluviaux OPL 2300 ml 0,1 - amenagement nouveaux quartiers ANQ 87 ha 3,9 Sous-total 6,0 BASSIN D'APPORT No. 13 AIN SMEN AMONT - collecteur Ain Smen NCP 900 ml 0,6 - r6calibrage oued Ain Smen OPL 3600 ml 0,9 - foss6 pluvial OPL 1400 ml 0,1 - am6nagement nouveaux quartiers ANQ 157 ha 10,8 Sous-total 12,4 BASSIN D'APPORT No. 14 OUED AIN CHKEF - collecteur Ain Chkef NCP 2280 ml 2,3 - bassin de retenue voie ferree OPL 1,4 ha 1,0 - recalibrage oued Ain Chkef OPL 3200 ml 1,1 - foss6s pluviaux OPL 1700 ml 0,1 - am6nagement nouveaux quartiers ANQ 218 ha 16,7 Sous-total 21,2 BASSIN D'APPORT No. 15 OUED MIYITT - collecteurs Miyitt amont NCP 3720 ml 2,9 - r6amenagement oued Miyitt canalis6 RVN 1900 ml 0,5 - bassin de retenue OPL 0,5 ha 0,7 - r6am6nagement oued Miyitt amont OPL 2300 ml 0,5 - am6nagement nouveaux quartiers ANQ 113 ha 7,6 Sous-total 12,2 ENSEMBLE DE LA VILLE - resorption des points noirs de premiere urgence DIV forfait 3,0 - lib6ration d'emprises le long des oueds FON 5 ha 1,2 - r6habilitation des reseaux secondaires en VN RVN 153 km 56,9 ANNEX l-S Page 9 of 18 - 41 - - curage des r6seaux secondaires en VN RVN 160 km 11,9 Sous-total 73,0 PROTECTION CONTRE LES CRUES - amglioration de l'oued Boukhareb OPL forfait 1,5 Sous-total 1,5 UNITES DE DEPOLLUTION INDUSTRIELLE - unite de traitement des margines 2-eme tranche OEP 1 u 8,5 - unite de traitement des effluents charges en metaux lourds OEP 1 u 27,5 Sous-total 36,0 EPURATION - r6habilitation pr6traitement station ONE OEP 1 u 4,5 - premiere serie de lagunes OEP 20 ha 58,3 - r6seau hydraulique tranche 1 OEP forfait 14,0 - gquipement et amenagements tranche 1 OEP forfait 8,7 Sous-total 85,5 Sous-total A (Travaux) 524,1 B. 21.000 branchements sociaux assainissement 12,6 C. Equipement de laboratoire pour analyse effluent 1,0 D. Moyens d'exploitation 20,0 E. D.A.O et surveillance travaux 18,0 --F. Assistance technique-Formation 4,8 TOTAL 580,5 millions DH HT ANNEX 1-S Page 10 of 18 LEGENDE RVN r6habilitation en ville nouvelle. RRM rehabilitation des reseaux en Medina. ROE rehabilitation oueds - egouts. ROP rehabilitation oueds propres: designe les travaux de reprise specifiques aux oueds de la Medina qui devront etre totalement assainis. NCP nouveaux collecteurs primaires et structurants. NCM nouveaux collecteurs en Medina. ANQ amenagement de nouveaux quartiers: designe a l'ha le coOt de reseaux unitaires ou separatifs necessaires pour equiper les nouveaux quartiers. OPL : ouvrages de transit ou stockage de pluvial a l'amont, comme en ville. OEP ouvrages d'6puration. EEM 6quipement 6lectromecaniques. DIV divers. Le devis estimatif comprenant divers, imprdvus, hausse des prix, taxes, droits de douane et interets pendant la construction figure au tableau de la page suivante ROYALIE DU KAROC Mars 1996 DEUXIEWE PROJET b'ASSAIUISSEMEMT ET RE-UTILISATION DE LEAU ASSAINISSENENT 1-ERE PHASE DE FES (RADEEF) DEVIS ESTIMATIF PRIX UNITAIRES JAVVIER 1996 DH (MILLIONS) US$ (MILLIONS) Total Momaie Devises Total nomaie Devises Locale Locale - Coliecteurs-g6nie civil 415.2 166.1 249.1 46.2 18.5 27.7 - Stations d'epuration 121.5 60.7 60.8 13.5 6.7 6.8 1 - Equipement 21.0 --- 21.0 2.3 --- 2.3 - Prestations de service 18.0 2.7 15.3 2.0 0.3 1.7 w - A.T. ex formation 4.8 0.7 4.1 0.5 0.1 0.4 A. Cocit de Base 580.5 230.2 350.3 64.5 25.6 38.9 B. Di_ ent i,s* 58.1 23.0 35.1 6.5 2.6 3.9 C. Sous-Totat A+B 638.6 253.2 3a5.4 71.0 2B.2 42.8 0. Hausse des prix 95.8 38.0 57.8 10.6 4.2 6.4 E. CoCut total (hors taxes et droits de oouane) 734.4 291.2 U 3.2 81.6 3Z.4 49.2 F. Taxes et droits de douane 117.5 117.5 --- 13.1 13.1 --- G. Cort total (y comoris taxes et droits de douane) 851.9 408.7 U 3.2 94.7 45.5 49.2 H. Interets pendant construction (IPC) 21.1 --- 21.1 2.3 ... 2.3 I. CoOt total (y coemris taxes, droits de douane et IPC) 873.0 408.7 464.3 97.0 45.5 51.5 Tao= de change: IS US = 9 DH (0 ANNEX 1-5 - 44 - Page 12 of 18 Annexe 2 RADEEF - ASSAINISSEMENT PROJECTIONS FINANCIERES AmNSYN 2 Page 1 ROYAUKE DU MAROC DEUXIMbE PRDSET D' ASSAINISSZMSNT ET REUTTLISATION DE L'EAU FES - RADESP F=S^S*UmanSUUflfl"s fl"" *--n ====.... Gee============ ,,,,=a n"S==e=r=="Z3 ................. Coaptes de Gention 1995 1996 1997 1996 1999 2000 2001 2002 2003 mu. msn..umn..am--- wrflsssin insflf flmnow=. ===. flu n.m....s:m...n infl=*flf unu=l*^ =S*f-lMSSSSS Total Produitz 49.19 51.28 65.77 83.22 104.74 117.89 143.77 175.54 195.09 Depenses d'exploitation 139.44 21-96 26.82 33.81 41.99 50.74 58.94 68.19 70.39 Dotations aux aaorts/provision 21.36 24-06 31.04 38.21 47.86 54.06 57.55 60.21 66.21 Resultat net dlexploit. 9.39 5.26 7.90 11.20 14.89 13.09 27.37 47.14 57.98 Charges financiero 0.77 0.99 3.22 9.61 16.97 30.61 36.80 41.95 41.17 Profits/perteo hors exploit. -0.75 -1.48 -2.28 -3.18 -4.17 -5.26 -6.46 -7.77 -9.20 Resultat net avant inmots S.37 5.76 6.97 4.77 2.09 -12.26 -2.97 12.96 26.00 9 Reoultat net apres impots 5.36 3.69 4.46 3.05 1.34 -15.20 -6.56 8.29 16.64 ratio d'explaitation kamortis 39.53t 42.82t 40.78f' 40.62t 40.091 43.04t 40.93% 38.851 36.34t ratio d'exploitation apres am 82.95t 89.74t 87.98t 86.541 85.78t 88.901 80.961 73 151 70.281 _ P4 AMIEXE 2 Page 2 ROYAUSE DU MAROC DEUXIEME PROJBT D'ASSAINISSEMENT ST RUTLISATION DE L' AU PES - RADEEF e==sen=sS=a---= C_wan e==-flin *UOw== atm==.c Min2=f--= ===M2== e==fl^e= W2=_fn flWW=f== 2. Bilan 1995 1996 1997 199B 1999 2000 2001 2002 Immobilisations n.ttea 275.42 338.23 438.57 608.38 767.60 904.43 951 49 923.34 ccmtea clients 44.27 43.05 30.57 23.73 27.51 30.49 37.18 45.40 Autres caznptes realis/dispo 4.85 17.64 37.29 34.26 21.76 12.22 1.4.11 15.55 Total Actif 324.54 398.92 S06.43 666.36 816.87 947.14 1002.78 984.29 =-:2==:= *.= fls* - c= = f== r== f n=a= f mu:*3n2-if=f Capitaux Propres 296.92 317.94 340.60 363.59 386.16 393.76 411.45 445.57 Dettes a Long Tezme 14.90 60.76 126.34 242.16 365.04 485.00 511.92 486.41 Fournimseurs 1.60 11.86 29.84 47.23 50.15 44.52 29.17 12.16 Autres Dettes a C.T 11.12 8.36 10.64 13.37 15.51 23.86 50.24 40-14 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - Totaj Psasif 324.S4 398.92 506.43 666.36 816.87 947.14 1002.7a 384.29 fl=S = fi* = - == fl=n= * =2=s 2 == 22 Sfi== - l2fS f flU==s = W=e ratio de liquidite 3.86 3.00 1.72 0.96 0.75 0.62 0.65 1.17 ratio d'endettement 4.78% 16.04% 27.061 39.98% 48.591 55.191 55.44V 52.19% o;_ 00t ANNSX 2 Page 3 ROYAOMS DU MARDC DEUXIEM PROJET D4ASSAINIBSBMNT ET RmUTIISA7TI10 DE LRAIU FES - RADEEF =inu==== =sfft.flvl.f *sS==^==nS flfls" =e=ass= ==n"c=z S a== *ufl===m um=l=g" ==_e-= 3. IRessources & EmplTois 1995 1996 1997 1998 L999 2000 2001 2002 Trisorerie brute 26.01 25.71 34.46 45.20 58.86 60.66 77.02 97.42 Moins:eervice de la dette 1.74 4.60 9.17 17.13 23.99 34.28 75.63 80.78 Variation du besoins de P.R. 39.86 -2.20 -35.20 -21.60 -8.73 8.30 31.76 22.02 Contributions des tiers 13.56 18.83 20.47 23.13 25.40 28.07 30.71 33.60 Trisorerie nette -2.02 42.13 80.97 72.79 69.01 46.15 0.33 28.21 Emprunts 15.87 46.83 66.56 116.79 123.85 120.93 65.76 13.32 1 _- - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - -- - - - - - - - - - - - - -_-- - - - - - -- Tota.l ressources dispon. 13.85 88.96 147.53 189.57 192.86 167.08 66.09 41.54 Investiseementa 17.31 75.47 119.42 L90.35 188.98 174.14 96.50 26.79 Autres emplois 17.18 19.85 33.12 32.53 32.38 13.88 0.00 Variation de tresorerie -3.46 -3.69 8.26 -33.90 -28.66 -39.44 -44.29 14.75 ratio de service de la dette -------- c------- <------- 1.65 <--------<-------- <-------- autofinancement -------- -------- ------- 33.27 c-------- c-------- <-------- LAz 0 N 8MM-3- 2 Page 4 ROYYAUMH DU MAROC DE-XSEME PROJST D'ASSAINISSSEhEbT ET RBUTILISATION DE L'ZEAU PES - RADREF -=-=S= S=-=S--=C=-e=Sfl =C-===S ^=ec= aai==cu e==e=== ==s==fl as_=nD =in.==c= D n =.s Indicateurs Financiers 1995 1996 1997 1998 1999 2000 2001 2002 - - ==sn ne s==flif ScanS=" ~f= _aW zel== ==e === _- *s =DS== e = ne=S c"ane=XS===-= = =afl - Rendement du reseau ( 671 69* 72% 76t 78t 79t 75% 75t - Ratio d'Exploitation 4 amor 40% 43% 41k 41% 40% 43% 41t 39t - Ratio d'exploitation (r) 83* 90% 8Bt* 87 96% 89t s1t 73% . Anir6s (en nbre de jours) . Particuliers 250.00 200.00 120-00 90.00 90.00 90.00 90.00 90.00 . Admistrationu 900.00 500.00 300.00 120.00 90.00 90.00 90.00 90.00 - Ratio du service de la dette<-------------------------------- 1.65 -----------------------> - Ratio d'endettement (t) 5t 16% 27t 401 49% S5t 55 52t 00 - Autofinrncement moyen (C) <--------------------------------- 331 --------- 2.58 3.09 - Redevance uoyenne DH/m3 1.00 1.00 1.25 1.56 1.95 2.15 Iir (ooor - L66 U! -T t m s:on9rXrUTqV( - z gi x Onb-P %9Z-(T666 - 961) t t :S;T--l STATi.TTOD - zNumn,v a iivx I J~~~~ s SS&9X A191&I aI 1sZa:, ss4 ZIZIL S 3 LA3S IZ as ILgaaaas IL I zzaa ast4 sIA Ia IA AZ s Lx s sl Sa sL tCIi i i i i i ~ ~ ~~~ ~~ ~~ ~ ~~~ ~~ ~ ~ ~~i i i i i i i iliw ui Df i i i i i i i i i I i i ii I i i -i i I - i i -i i~~~~~~~~~~~~~~r i i iii Tygii~~ MI i ii i ;r,o n r; i ;-1MU i~ ~ ~ ~ ~ ~ ~~~~ 3 iL 3 i5 I ,iiI I i iI 1 I j ; i i i i i i i i I i i ¶EL~~Ci i i i -- -- ; j j i I i nlEjO :"S:jls T i i S - UiE i - lslii 34 u ; ;r L.;wT,pi,i i E E E Y ! - 50 - ANNEX 1-5 Page 18 of 18 Annexe 4 PROCEDURE DE GESTION COMMERCIALE PAR LA RADEEF ABONNEMENTS DES COLLECTIVITES LOCALES (C.L) ET DES ADMINISTRATIONS La Regie prend acte de l'opportunit6 de la procedure telle qu'elle est definie ci-dessous: 1. Perfectionnement d'une procedure de gestion commerciale des abonnements des Collectivites Locales et des Administrations qui doit prendre en compte la creation de l'abonnement, la facturation des consommations et des travaux, le recouvrement et, le cas echeant, les r6siliations et les transferts d'abonnement. La procedure doit aussi porter sur le processus de budgetisation des previsions des consommations et des travaux qui devraient gtre definies sur la base des abonnements pris en charge par les C.L. et les Administrations, des consommations et les travaux realis6s anterieurement et des hypothAses de consommations A venir. 2. Justification des montants comptabilis6s par la RADEEF et contestes par les C.L. et les Administrations et recours en cas de besoin, A l'arbitrage de l'Etat. L'analyse doit se faire par anciennete de creance et doit d6finir les mesures A prendre A l'chelle des C.L./Administrations et Regies pour assainir la situation. Ces mesures peuvent inclure entre autre: 6cheancier (maximum sur quatre annees 1996-1999), budgetisation complementaire et annulation de cr6ances. 3. La decentralisation du traitement informatique et des procedures de releve, facturation, recouvrement et r6siliation, ainsi que le suivi des travaux abonnements et leur prise en charge dans le fichier facturation et le suivi des impayes devraient permettre de r6duire les d6lais de facturation, relance et recouvrement a des valeurs normales. 4. S'assurer que la programmation des paiements des montants echus, des conventions signes avec les C.L. ainsi que des impay6s sur les consommations de 1992 et 1993 des C.L. et des ecarts entre les montants factures et les montants des vignettes emises pour le paiement des consommations des Administrations, conformement A la circulaire du Premier Ministre NO 69 du 13 novembre 1992. - 51 - KINGDOMI OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT The wotld bduIk IIIEmAIloNAL SANk toR REOCMSIPUCI1ON AMO Ov*L4/II tSId 1 N.tI. t2021 ?TJ-1234 INIlERIAilo"Al otvftopv rkI AssociAtioN Udsiiioton. b.t.20431 trnble Aclireqs i 18ArNAD U. l A. C.bt Addregs ItDEvAS ANNEX 1-6 Page 1 of 2 tlote de ln nissiotn 1int s E id ptivotlgijotti do I disEtributlion de leau potab1o eL do tigddAlhiontisiht dOs ville. A. siltuation actusele I. arandes villes Dlans les gratides villes, la tietVice de dldttibUtioft dleau esL asstir6 par seize orgaii1smeos public mUhicIjpUk1 les n6gles4 onze dentire elles assureltL la oetvice da Ia dIdLtrlbtiUloi de Ilelectricith et trols asautettia 19 1 I I z"alilBfmeht. 1i& oil Il'assaiflissement ost dosUti lidl- ieU mUhicipailteIu (dd,is treize vt i les) , celles-ci sotit ell traln dia caoldAtht I 1poosibilltA de d6l6quer la responsabtll6 de 1 {""anIuoomot dux 11glos. it. villes do dille ntoye"td ot l Iioon Villou latis environ 200 villes de potAtI tallte et de tatile inoyetiiie, le service de lleaU egt aglU.e pt3 t IOfitoP et le service d'assaliiissemeriL esE assUre pdr Its muticipaIIL6g. Dans les adLres vilies, lea netvices de dEiA-tibutlon d'eau et 1I assainissemiiL sotit assUrts pdkt Ian mUtiIcItpdIItds. B. Recomnmafdatlonti dlordrto cig4ttdi Utne privaUisatLotl alnie et ttthspdtahtb des services de disributloti dleatu et d'asoeitil ifiseht devtoit Pe fIkAte sur la base des principes sulvatiLsi - 11ie participatHon stibstaitilolle dii uecttit ptive 4atocain d-alws le cadre d'uii parLenat-la dyve dod 9acletd§ 6Ltahg6rea teputeest - Adjudication de cotiLrats do cohcoeslol datftetmage oti nutres types de contraLs prlvds oulte h deg appels d'offres 1ntermintlonaux. Ces appeIs d1otlies ofat-iOht lances auprbs de socletes pt-d-quallfties srLIvahL Uihe VItocAdUtt fotmellt de prd- qualification. Lea documtiets diflhoI3u3 d1offtet nerdle"L prepards par des consultanLt inde ehddtits pddondaht Utie bolide ekp6rience dans le doMalte de lt diaetibuti,tt dg il'oU et de liassalniosemetiL ainsi qijlen matibte contLractutilel - la maolns-disance dd fti el do IoaU et de Ia tedevanice "assalillssement" devtalt etro Il pkdm6Lt-e-cle pout- l'adjudicatloil du contrat, parmrl les ofEteg etbiles dhans It pltil tespect des regles do dossier d'appel d'otftona La participaLton de ta hanqUet UA HddlOe daho le tinglicemelit d'unie op6ratlon de privailsailo0t pelUt do tltBo gdltUoihE 61 le coiitraL est adjutq a la sUlte dlutie comptilLIon Ihbatiatiobatet -52 - ANNEX;1-6 Page 2 of 2 La !3arque Mohdlale peUt aidet. ie AIUtEi14t Matocalhes a pteparer les documehts d'appel d'ofEteg, A 6VdiUet ibs ofttttg lnlh qu'en maEtlere cotitractUell. St I'Adtiinlstratlon decide; poUt deg thiohgts qUi Iul sotih ptopres, d'at~ttbutt UH cohttat do PVat1VAU§AOH pdt eltht§hEd ditectt avec tine socl6te pt-lvee, is hneoCidiotld deVtd1Oht dQtt lieu sur la base de tetmes de t6t6tetic d6Ldl4ied A ptePitet pnt UH cotisulatit 1nd6pendaht. It est tocomttdhd6 tlUe iAdntiH1tt6Uibth solt 8sgisite petindait 1e hecocilHoh8s pt- Uh bc"t1UlittiiL dydht Utle large experitence dciiis le domEltlhe de ia qtqtIbh de ia ditt-Ibutohn de l'eatu poEmble et de i'hsih1 emeIt nlhl tUIen tnatii:re cotitractUelle. Lers cl;uses coliLlractuelles sotit dlUhe i1pdttahCe cohttid6table pottr lerurs effeLs a mioyen et a lothg t£ttne, ptUique la dut6e mintilma.r d'lili coiitEt-n diaffetmage varie etti:tt iU tat 1i dtg et celle d'unie conicession, de 20 a1 25 alis. uJtn coliLtraE htlocl6 peUL aussl nboUEit i Uiti glUtion 61quitable, poijrvu que toUs les aspects -oheit oightmUh1tht to 1.qd1t6s datis la tratisparence la plus cotmplete. c. juieiIsg tince dobVent gLtd OkIVAU86691 La privalsatott des getviceg dt digtkibUtion d I eau et d'assalttssemetiL est Uhie soliUbhti 1et§le tititi tioUletneht: parcn qulelle petmet d'optimicet ia qUdilte dp§ iFvibee, mdie sUrtouti lrarce qultlle permnet de- moblillmo dog folidd 0JAVA§ poUt fth8hcer tim socLeur oU 8cLUellemhL, lo oh d'otigilie essentiiellemetntl 6LniqUe. L,es effeLs de la ptivaLiatlotl sttleht ltpottahtgs subttut au tilveau des RMles oU de cetta:i: "dT hCO9qUtl botit btt)itttUite5 alix problemes tels qUe! igesLIoti lhsit bfdil"dtiep tititg 1hndd&quats, manque de fotids pot- gietdte ae tehitftctta ied tUvteg dleau et d'assalnlissemeit, eLc. D. concluslonl Pour conclUte, In privatsatluoh dog tetVicet dI aU potable iet d'assalnllssomeht aU Mlatoc ddit A-ti- dtjtiVemehL poUtsUilVie. Elle necessite Uhe prepatatlon tolght tUdt l1ttibUtiot de tohttats a des compagtiles prIvees seta basee IUt UHt1 detltiltloh citite des devolrs e-t des tespongdbi1le Lit 80:69 btAip6titlo ttitte des soumissiotihatteg qU811tfies qLii opPe Ht de ptilf6ttatce, uneR patticipatioti substatitIelle di B§dtOU k IijVe Hitbcdli. Cette muuli:re de procedet, qtiolquei ioHgli. mati hi wwlt qLl pthtmettra de sclectlonner des soc6L6es qUi ptIlttquhht ehvets log Uragers ull prix juste. VdIL & ttAbdI Id io bAcembte g994 - 53 - ANNEX 2-1 KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT Table 1: Forecast or Pogulation. Water Consumption and Water Demand City Considered during appraisal Casablanica Fes Marrakech UTILITY RAD RADEEF RADEENIA Year 1995 2000 1 2000 1995 2000 - Population (thousands) 3,107 3,895 787 922 672 802.4 - Average consumption domestic (lcd) 70 70 87 87 78 78 - Industry and commerce (Icd) 18 20 8 8 11.5 12 - Goverunent institutions and local administrations (lcd) 20 20 54 53 22.5 22 - Total average consumption (lcd) 108 110 149 148 114 114 - Average system efficiency 0.70 0.75 0.67 0.75 0.65 0.72 - Total demand on production (thousand m3/d) 486 501 187 195 121 124 - Total average consumption (thousand m'ld) 340 376 126 146 78 89 - 54 - ANNEX 2-2 KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER REUSE PROJECT Table 2: 1995 Statistical Data City Considered During Appraisal Casablanca FRs Marrakechi R6gie RAD RADEEF RADEEMA Unit 1. Total population 1000 3,107 787 672 2. Population served by % 70 65 81 sewerage house connections 1000 2,175 512 544 3. Number of connections 1000 128 62 79 4. Number of technical(') U 6 1.2 1.9 personnel/1000 connections 5. Population served by % 2 2 3 individual sanitation 1000 70 16 17.6 6. Population non-served 5 28 33 16 by any sanitation system 1000 990 662 94 (most living in slums) " The ratios for RADEEF AND RADEEMA refer to 1996, first year of full operation of the sewerage departments. These ratios will increase according to the development of sewerage activities and the expected transfer of personnel from the municipalities. - 55 - ANNEX 2-3 Page 1 of 2 KINGDOMI OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT Project Description The proposed project would focus on the city of Fes. As the cities of Casablanca and Marrakech were also appraised, the following description includes the sewerage components of the three cities: (a) rehabilitation, reinforcement and expansion of sewerage facilities consisting of supply and laying of interceptors, sewers, sewerage house connections and lining of existing sewers requiring rehabilitation and ancillary works (manholes for inspection and maintenance, etc). The materials would be reinforced concrete and PVC which are manufactured in Morocco. No pumping equipment is required, as both the existing and future sewerage combined systems (transporting organic and industrial sewage as well as drainage water) would operate by gravity. In the Fes Medina, the laying of sewers will be closely coordinated with the laying of water pipelines in the framework of the ongoing Fifth Water Supply Project (Loan 3664-MOR); (b) waste water treatment works consisting of lagoon anaerobic systems in Fes and Marrakech, including floatable removal, making treated waste water available for re-use, in line with recommendations made in the 8-th session of the "Conseil Superieur de l'Eau et du Climat" held in Rabat in 1994. The limitation of treatment to anaerobic is due to the need to keep the sewerage user charge within tolerable/affordable limits (see chapter IV), which limits the amount of first phase investments. However, the anaerobic systems would abate the pollution in a very significant way, and thus substantially improve the hygienic conditions of the current re-use of waste water. For Fes and Marrakech, a pre-treatment plant is envisaged prior to the lagoon system to abstract heavy metals (chromium, in particular) to allow the utilization of sludge for agricultural purpose and recover part of the costs. For Casablanca, the depollution system already exists: it consists of floatable removal system, a pumping station and an ocean outfall and diffuser (3600 m long; 2.2 m diameter) system. This excellent system funded by RAD and the French Ministry of Finance was inaugurated in January 1995; (c) equipment to upgrade operational efficiency, and provide adequate maintenance (O&M) including laboratory sewage quality control equipment; (d) consulting services consisting: (i) of final design and bidding documents to complete the existing documentation and including work supervision; (ii) update and address the Regies account issues; and (iii) tariff study conceming in particular tariff structure and contribution by industries. Consulting services would be carried out jointly by the Regies and consultants in the framework of close partnerships; (e) technical assistance to strengthen sewerage services and allow private operators to provide sewerage management services; and - 56 - ANNEX 2-3 Page 2 of 2 (f) training. Sewerage facilities and social house connections are quantified hereunder: RAD-Casablana - sewers and ancillary civil works (manholes etc); diameters from 300 to 2500 mm; length: 51 Km; - rehabilitation of 63 Km of existing sewers; and - 14,500 social sewerage house connections. RADEEF-F*s: - sewers and ancillary civil works (manholes etc); diameters from 200 to 2300 mm; length: 125 Km; - rehabilitation of 150 Km of existing sewers; - 21,000 social sewerage house connections; - heavy metal removal pre-treatment facility; - olive oil residue treatment plant; and - lagoon waste water treatment plant. RADEEMA-Marrakech: - sewers and ancillary civil works (manholes etc); diameters from 300 to 2,000 mm; length: 122 Km; - rehabilitation of 113 Km of existing sewers; - 11,400 social sewerage house connections; - heavy metal removal pre-treatment facility; and - lagoon waste water treatment plant. RN R 0 C EA N ATLANTIQUE 1 4 A ~~~~~~~~~~~~~~~~~ASSA ANlsseAENEr sEcrEURl !L| AIN MARROUDA ASSAINISSEMENT OAR BOUAZZA REHABILIrArION DES RESEAUX I REHASILITrATION DES RE3EAUX C o r I E R | D A IDN DE ONA HAAD/EOIA ASSAINISSEMENTr SIDI AODUMwE i-. _ rir AJLLIL NORD A SSAINISSEWEN r MOHNAAdEDM ASSAINISSEMERr OULFA DAR BEN YAKHLEF 8 DUAZZA-EsT 1 g 1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~' - 58- KINGDOM OF MfOROCCO ( b Koudyat El Bayda SECOND SEWERAGE AND WATER Annex 2-5 RE-USE PROJECT RADEEF SEWERAGE SYSTEM OF FES E ad Haj Tahar (RADEEFR - - - -a d eYe Decharge publique 0 ~~~~~~~~~~~~Jel Hellouf Blad My Idriss SlaSl /l t El \~ Tghat. \ < t \: J L Strij G~~~~~C2naoua\ ---G. ,/ { ~Merhaz , Hip oaiS N ; IL>: G D A t~~~~~~~~~~~~~~~~ Bouzi --d * j a a d q< - R lad My. 1k MARRAKECH - ASSAINISSEMENT . . PROGRAMME DINVESTISSEMENT 'COURT TERME' - LOCALISATION DE PRINCIPAUX PROJETS '-~~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ /7 --I co *ec \ t- . {Sh \ IeBelbekarurval [ r | lae A 1- ( ) ' , / | t"namirJ - oue,d H6a | \\_ * * t ; \ \ * W . 4?4.4 off M ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~mzne hn1 OS I-s / _ ____-;__ _ __ - __ __ _ __ _R_ _ . t . | Gu~~~~~~~~oiec.i -teuhm - 4* r T C) U 1 t / g * ttenl . . , / .s ,, , . $Xfy . \\ , ,, , t cz~~~~~~Be E KINGDOM OF NOROCOD NATION-WIDE SEWERAGE INVESTHDIT PROGRAM STATUS OF SEWERAGE FEASIBILITY STUDIES AND MASTER PIANS IN 137 ONEP CENTERS PROGRAMM DES ETUDES D'ASSAIMSSEMENT M DM I1 __ DUA IO k T DW OMP IKXEGA SDA sEkfl) SDJIA bA NkIULE AZLL Ac) RIU AMInR EY C GUMNI E7 C A.BMATHAR ~ EC A29J A EC (Ml) SDWA E L ZAKAPE SDA 1)9) AOUAA P EC AZLC LB9HDKC'D EP EC ULKANDAR E E EC DEDOU E AD EC I F.C DLAP;LA DA 0 STE U ESSAOUIRA W A (7) BEN5SUMANI 5TE A), CHEFCOIA0PJENE EP EC KBAJIED 17 EC JERRADA 17 EC KWEKANE EP EC)l) DAWRA U D 0. HL 17 A,) MIrAOrF EC BENSUMANII SA EC (7.2) HAD FORT EP EC E.WR 1 C LADATA.OAH Ad. ELJR 17 I 4SIFSDA F Cil ERaHIL SDA'AID LC KSRAG)?AA EP EC OUNIZA EP C JEEHA E7 C CUIED AMUI 7 I AJ D d LIWN l E MD) O TAIMA Ep Ah) Y Y NRAJIIM ( EC OA AR FP EC EAAS ARRASS EP EC(m) TA7IALA EC SADI AI A.c EKUUD EDA IC (A3 APLAARA N V A OTA7L A SDA.A7D LC OUKAIRIDEN IP Ad 7 UZN7KA APO'D EC(&U\) MAAZIZ EP EC(Ml) TAOUNATE SDA'APD EC(I/D) TAFOCiALT SA Ad ERRACIUDIA SDA EC () TARAYA iDA U SE3T EL OMDANE E A,. SRI AHAL WDA ECIW) BROU SA A,d. OUAZZAN! 1P EC TAFCKiALT API) lC(S W C (Ml) TAIRAOIr EPl EIC TECIANAOUT 1 IC DEMNATE ECC() OUUI' EP EC TAOLJRRT IDLA IC)U PAN SDA LC TAL1OLANE E7 C TiNQiIR F? IC FU).A" D Ad. RkOLIAN( APS ECCMl) IaDELT E7 EC TAWUDANT 7 Ad. ZAGORA SDA L95 POATAE 17 IC SATAZI 7 IC pj U7DELT SCDA (CD.) KHOUMIiWA EP IIC STFRAT Er SC (NDAD 17 IEC OUAOUZAiHT SDA A, TASllHA EP EC I 1i;v AcLu SDA Adk AITOURR SDA Ad. AFOURER SDA Adc D EL CUEDDARI SDA Ad. KLANE SDA Ah L 2UAREA IDA Ad. AOUF07JSS SDA A.1, AIT AfiA SDA Ad. A7 ZIAZ SDA Ad. BENAAHM.T) SDA A.k IELM MALHIA SDA Ah O.EL IIA) SDA Ad. U EL AROUI 'DA Ad M17T SDA Ad. R.IILIFT SIDA Ar AKrLLNA iDA LC S YAlA SDA A,) KEL Kt7NR SDA M TISSA SDA Ad. ZA7O SDA Ad. KHENIFPRA DA A,). KAS 1A13LKA IDA Ax) CliIDAAYA IDA LC S YZAEFt SDA A,. FSSAMJ IA Ad. MWOUNA IDA Ax.h I.M-II.) SOA LC 1EHDT2{AR SDA Aeh SESIHASEA IDA A,. SEOURA SDA Ad TA7DLLALT SDA Ad. YUSOIDFIA ISDA LC I________ *AD TAROUDANT SDA'APD L (95) L)DNTANOLIS iDA:APD LC(9 UEZZNE SDA.AP L.(t9) U7550U SDA. APD L(95) IDEIDU Sl3A:APDL L(95) hDELT SDA.APD L (75) KSRXYiHNA SDAA L(95) OUED AMU L SDA APD L9) EL A70UNE SDA APED L(95) liNQISE SDA. L9t )9)) _________ LEE_ DEM-AT`E iDA.APD L(95) IAAAZ)Z SDA.AP L()9 AIDIR SDA APD LIS5) SAIIA SDA APD L(I) LICIYATACH) SDA.AID L() QJE(I' sDA'AID 1)95 I).WIUBSN SDA. AID 1L95) TAHALA SDA AM L)) ____ -> -1 - _anintL4b_l -S- _______ _DA.APD_ A L-I Adg11_) _<_A hi "AI'ADI' SD L:91) OULEan WA L(495) V AYACCXUB SWA 195) 5 A.TAZI SUA 1495) S.KACDM SUA Al 5LRAA SDA 1) ISsMAP SDA II S.Y.QHAAB WDA Af iTOCAS SDA I.(9)) A CE 117)5( WDA'AID hi( ECAZZTEW.AI 0,C)4) IENIaISSlT SDA:AP F C (4)) Tt___ flETl ISDA AP EC i)).) _ _ _ _ _ _ _ _ _ _ Ax. h ).~ A).~,x) x d A.. DA - Ed.kI. O9...dM..... Ax) 04.a.) 0. p.... (iA.U( IC (.):t x-- .. . AID AZ.. P..t. difi' CEr...) 54.B. ILA 1Ai-Ell --' 11 dV i de STEP: Sx.o dET.Vs.. VI EI..d. do p,esecAo.. I.. . 69etbM d.0.9 KINGDON OF Nro SECOND SEWERAGE AM lAlTEt R-USE PROJECT fSE RAGE SYSTEN OF FES WRAOEEF) COST ESTIPATES JANW Y 1996 PtICES ON MILLION USS MILLION Total Locat Foreiwi Total Local Devi - Sewers-clvfl uorks 415.2 166.1 249.1 U.2 18.5 27.7 - Treatmont Plants 121.5 60.7 60.8 13.5 6.7 6.8 - Equipent 21.0 --- 21.0 2.3 --- 2.3 - Consulting services 18.0 2.7 15.3 2.0 0.3 1.7 T.A and training 4.8 0.7 4.1 0.5 0.1 0.4 A. Base Cost 580.5 230.2 350.3 64 5 25.6 38.9 B. Physical contingencies 58.1 23.0 35.1 6.5 2.6 3.9 C. Sub-Total A+B 638.6 253.2 385.4 71.0 28.2 42.8 a 0. Price contingencies 95.8 38.0 57.8 10.6 4.2 6.4 E. Total Cost (net of taxes and custom duties) 734.4 291.2 443.2 81.6 32.4 49.2 F. Taxes and duties 117.5 117.5 --- 13.1 13.1 --- G. Total Cost (Including taxes and custom duties) 851.9 408.7 443.2 94.7 45.5 49.2 H. Interest during construction (IDC) 21.1 --- 21.1 2.3 --- 2.3 1. Total Cost (Including taxes, duties and IDC) 873.0 408.7 464.3 97.0 45.5 51.5 Exchange rate S 1.0 = DH 9.0 0 0 Ln 14 KINGDOW OF OROCC NATIONAL SEWERAGE PROGRAM SEWERAGE SYSTEM OF KARRAKECH (RADEENA) COST ESTIMATES JANUARY 1996 PRICES ON MILLION USS MILLION Total Locat Forelan Total Local Devises - Sewers-civil works 285.6 114.2 171.4 31.7 12.7 19.0 - Treatment Ptants 33.0 13.2 19.8 3.7 1.5 2.2 - EqUipment 8.0 --- 8.0 0.9 ... 0.9 - COnsulting services 14.0 2.1 11.9 1.6 0.Z 1.4 - T.A and training 3.0 0.5 2.5 0.3 0.1 0.2 A. Base Cost 343.6 130.0 213.6 38.2 14.5 23.7 B. Physical contingencfes 34.4 13.0 21.4 3.8 1.4 2.4 C. SUb-Total A+B 378.0 143.0 235.0 42.0 15.9 26.1 D. Price contingencies 56.7 21.4 35.3 6.3 2.4 3.9 E. Total Cost( net of taxes and duktied) 434.7 164.4 270.3 48.3 18.3 30.0 F. Taxes and duties 69.6 69.6 ... 7.7 7.7 --- G. Totat Cost (Inctudinq taxes and custom dUties) 504.3 234.0 270.3 56.0 26.0 30.0 H. Interest during construction (IOC) 12.4 --- 12.4 1.4 ... 1.4 1. Total Cost (inctudjnq taxes duties and IDC) 516.7 234.0 282.7 57.4 26.0 31.4 ExdwWang rate $1.0 a DN9.0 0 ii| KINGDOM OF MOROCCO NATIONAL SEWERAGE PROGRAM SEWERAGE SYSTEM OF CASABLANCA (RAO) COST ESTIMATES JANUARY 1996 PRICES ON MILLION USt MtLLION Total Locat Foreign Total Local Foreign - Sewers & civil works 522.2 208.9 313.3 58.0 23.2 34.8 - Equipement 10.0 --- 10.0 1.1 1.1 - Consulting Services 30.0 4.5 25.5 3.3 0.5 2.8 - T.A & training 4.0 0.6 3.4 0.4 0.1 0.3 A. Base cost 566.2 214.0 352.2 62.8 23.8 39.0 B. Physical contingencies 56.6 21.4 35.2 6.3 2.4 3.9 C. Subtotal A+S 622.8 235.4 387.4 69.1 26.2 42.9 1 D. Price contingencies 93.4 35.3 58.1 10.4 3.9 6.5 W E. Total cost (Net of taxes & custom duties) 716.2 270.7 445.5 79.5 30.1 49.4 F. Taxes and duties 114.6 114.6 -- 12.8 12.8 ... G. Total cost (including taxes & custom duties) 830.8 385.3 445.5 92.3 42.9 49.4 H. Interest during construction (IDC) 20.6 --- 20.6 2.3 ... 2.3 1. Totat cost (incLuding taxes, duties & IDC) 851.4 385.3 466.1 94.6 42.9 51.7 Exchange rate: S 1.0 m ON 9.0 0 It! KINGDOW OF nOROCCO NATIONAL SEUERAG PROGtNA SEWERAGE SYSTEUS OF NADOb. TANGIERS AND TETnIJA COST ESTIMATES JANUARY 1996 DR MILLION U^S MILLION Totat Local Foreign Total LocUl Foreign Al. RAEEN (Vadbr) Sewers & civil works 91.5 36.6 54.9 10.1 4.1 6.0 - Tre.tment plants 50.0 20.0 30.0 5.6 2.2 3.4 - Equipelent 23.0 ... 23.0 2.6 --- 2.6 * ConsuLting Services 10.0 1.5 8.5 1.1 0.2 0.9 - T.A & training 4.0 0.6 3.4 0.4 0.1 0.3 - Subtotat Al 173.5 58.7 119.8 19.8 6.6 13.2 A2. RAID (Tnqlers) - Sewers & civil works 223.4 89.4 134.0 24.7 9.9 14.8 1 - Tretme nt Pltnt 27.6 11.0 16.6 3.1 1.2 1.9 - Equipment 25.7 --- 25.7 2.9 --- 2.9 45 - Consulting Services 10.0 1.5 8.5 1.1 0.2 0.9 - T.A & training 5.0 0.7 4.3 0.6 0.1 0.5 - Subtotal A2 291.7 102.6 189.1 32.4 11.4 21.0 A3. RDE fTetoLmn) - Sewers & civit works 95.2 38.1 57.1 10.6 4.Z 6.4 - Treatment Plant 25.0 10.0 15.0 2.8 1.1 1.7 - Equipement 14.0 .-. 14.0 1.6 .-. 1.6 - Conrulting Services 12.0 1.8 10.2 1.3 0.2 1.1 -T.A & training 3.0 0.4 2.6 0.3 0.1 0.2 - Subtotat AZ 149.2 50.3 98.9 16.6 5.6 11.0 B. Base cost AI+A2+A3 619.4 211.6 407.8 68.8 23.6 45.2 C. Physical contlnqencies 61.9 21.1 40.8 6.9 2.4 4.5 0. subtotal B+C 681.3 232.7 448.6 75.7 26.0 49.7 E. Price continaencies 102.2 34.9 67.3 11.4 3.9 7.5 F. Total cost (Net of taxes L custom duties) 783.5 267.6 515.9 87.1 29.9 57.2 t G. Taxes and duties 125.4 125.4 --- 13.9 13.9 M. Totat cost (fncLuding zC taxes * cuLtou duties) 908.9 393.0 515.9 101.0 43.8 57.2 1. Interest durfna construction (IbC) 13.5 --- 13.5 1.5 --- 1.5 J. Total cost (incLuding taxes, dutles & IOC) 922.4 393.0 529.4 102.5 43.8 58.7 Exdcange rate: S 1.0 * Dh 9.0 KINGDOI OF MOROCCO NATIONAL SEWERAGE PROGRAM OF SETTAT, ERfOW. ERRACHIDIA. GOtLMI"A. O"ARZAZATE. RICH COST ESTIMATES JANUARY 1996 PRICES DO MILLION USS MILLION Total Local Foreign Total Local Foreign Al. RADEEC (Settat) - Sewers & civil works 96.4 38.6 57.8 10.7 4.3 6.4 - Treatment plants 15.0 6.0 9.0 1.7 0.7 1.0 - Equipement 9.5 ... 9.5 1.1 --- 1.1 - Consulting Services 5.0 0.7 4.3 0.5 0.1 0.4 - T.A & training 2.0 0.3 1.7 0.2 --- 0.2 Subtotal Al 127.9 45.6 82.3 14.2 5.1 9.1 A2. ONEP (Erfoud,. Errachidia. Goulmima. Ouarzazate. Rich) Sewers & civil works 107.8 43.1 64.7 12.0 4.8 7.2 tn Treatment Plant 80.5 32.2 48.3 8.9 3.5 5.4 1 Equipement 7.9 ... 7.9 0.9 --- 0.9 ConsuLting Services 13.6 2.0 11.6 1.5 0.2 1.3 T.A & training 5.5 0.8 4.7 0.6 0.1 0.5 Subtotal A2 215.3 78.1 137.2 23.9 8.6 15.3 B. Base cost Ai+A2 343.2 123.7 219.5 38.1 13.7 24.4 C. Physical contingencies 34.3 12.4 21.9 3.9 1.4 2.5 0. Subtotal B+C 377.5 136.1 241.4 42.0 15.1 26.9 E. Price contingencies 56.6 20.4 36.2 6.3 2.3 4.0 F. Total cost (Net of taxes & custom duties) 434.1 156.5 277.6 48.3 17.4 30.9 0 G. Taxes and duties 69.5 69.5 ... 7.7 7.7 ... d M. Total cost (including i taxes & custom duties) 503.6 226.0 277.6 56.0 25.1 30.9 Un ta 0 1 1. Interest durinq construction ° (a J. Total cost (including taxes, duties & IDC) 503.6 226.0 277.6 56.d 25.1 30.9 Exchmne rate: S 1.0 a DN 9.0 - 66 - ANNEX 2-9 KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT FINANCING PLAN DIH million % US$ million IBRD 360.0 41 40.0 CFD (parallel financing) 212.0 24 23.6 RADEEF 169.6 20 18.8 House owners 131.4 15 14.6 TOTAL 873.0 100 97.0 -67- ANNEXI2l KINGDOM OF MlOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT IiiplenienEa(ion Scliedtile Aclivity 1996 1997 1998 1999 2000 2001 2002 2003 RADEEF (FES) - Completion of final design and bidding documents. 07.01 06.30 - Bidding, bid evaluation and contract award. 07.01 02.28 - Rehabilitation of Sew. Works Construction and SPN. 3.01 03.31 - Chromium removal facility construction , SPN. 11.01 05.31 - Lagoon treatment plant construction, SPN. 09.01 __ 01.28 - Supply of oper. equipment. 09.01 _ 7.31 T.A. and training. 07.01 0331 ANNEX 2-11 - 68 - Page 1 of 2 KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT Current Organization of the Regies Organization and Management 1. The regulatory provisions governing the management and operation of the water supply and electricity Regies are set out in Decree No. 2-64-394 of 1964. The Regies have the status of autonomous municipal utilities and are managed in accordance with commercial rules under the supervision of MOI and MOF. The first ten Regies created during the period 1961-1971 have developed into experienced technical institutions, partly as a result of the transfer of trained technical staff from the former REI and from the Morocco Water Distribution Company (Societe Marocaine de Distribution - SMD), a private Moroccan company and subsidiary of the French company "Lyonnaise des Eaux". The most recently created Regies are responsible for water supply only. The Regies have benefitted from the Inter-Regie Training Center (CIRF), created at RAD (Casablanca) in 1975, in building up their technical capability. 2. A board of ten members supervises the operations of a Regie. The provincial Governor is the Chairman of the Board of Directors, which also includes representatives of the MOI, MOF, and six elected members from the local municipal council. Regie Directors are appointed by the Minister of Interior and are responsible for day-to-day operations, although with some restrictions. Existing organizational structures vary with the size and sectoral responsibilities of the Regies. To standardize the Regies' managerial procedures and to implement a comprehensive MIS, the Regie of Rabat-Sale (RED) is currently executing an MIS study within the framework of the ongoing National Water Supply Rehabilitation Project (Loan 2825-MOR). The results of this study will be considered within the proposed project. Personnel and traininp 3. The Regies salary structures, though somewhat lower than those in the private sector, appear to be adequate when considering the whole compensation package which is designed to attract qualified personnel interested in the career prospects of these fast-growing organizations. With an average of six technical staff per 1,000 house connections in 1990, the Regies are not overstaffed when compared with other Mediterranean countries whicih average seven to nine staff per 1,000 connections. 4. In 1975, RAD was entrusted by MOI and the other Regies with the responsibility for managing and training newly recruited staff for the operation and maintenance of the water and electricity distribution networks. CIRF has been operating since July 1977 and offers two-year training courses from which 395 staff have graduated so far. This initial training, however, represents only part of the training needs of the Regies. In July 1985, RAD assessed the Regies' training needs and concluded that existing CIRF training capacity of 116 students p.a. should be increased to about 350 to allow for the recycling of administrative and accounting staff as well as that of specialized technicians. The extension of existing CIRF training facilities estimated at DH 15.5 million was included in RAD's 1987 investment budget. 5. All implementing agencies have established their training programs and will seek Bank approval of candidates' qualifications, the costs to be incurred at training institutions, and placement or re-integration of trainees into the respective implementing agencies. - 69- ANNEX 2-11 Page 2 of 2 Accounting System 6. The accounting systems of the Water Supply, Sewerage and Electricity Departments of the Regies are entirely separate, with appropriate cost centers and overhead allocations. Accounts are kept on an accrual basis. The general and cost accounting systems, which were inherited by the Regies from their previous concession owners, have a general common nucleus but vary in specific features from Regie to Regie due to the absence of a standard manual. There is no specific account for work in progress and with the exception of assets with a less than a five-year life span, depreciation is replaced by a renewal reserve which bears no relation to the value of assets in operation. Assets are accounted for at their historical value. The Rdgies accounting systems need to be upgraded to international standards to provide adequate information. 7. Aware of the above deficiencies which affect all Public Enterprises (PEs), the Govemment prepared a new National Accounting Plan with the assistance of independent experts financed under the PERL I project with PPF funding. A first draft Accounting Plan was completed in February 1987 and was circulated among Ministries and PEs for comments. The New National Accounting System was applied in the Regies between 1993 and 1994. A cost accounting study is also being executed by RED, also on behalf of the other Regies, within the framework of the ongoing National Water Supply Rehabilitation Project (Loan 2825- MOR), which includes assets inventory and evaluation. Billing and Collection 8. Billing is carried out by RAD on behalf of the 16 Water Supply and Electricity Regies. The period which elapses between RAD's receipt of the meter readings from the Regies and its return of the bills to the Regies varies between 3 and 30 days depending on the quality of the meter reading. Bills are sent out monthly to industrial customers, quarterly to domestic customers, and bi-annually to Government agencies. 9. Collections from domestic and industrial customers are generally adequate mainly because of the possibility of curtailing water supply services and collection through the judicial system. However, collection from Government agencies and CLs has been difficult. As a result, the Regies finances have been affected by sizeable arrears for water sold, leading them to withhold payables to other Government agencies. To avoid the recurrence of such a situation, a new procedure has been recently identified and put into application by the Government, whereby each Government agency is granted a specific realistic annual amount (in stamps called "vignettes") and the Regies are authorized to curtail the water service to Government agencies whose payments are in arrears. c:3katiUauursaareannexe SEtUJies & Planning Divsion _ Can trL-LICIou0 DIvilun |- Operatlon Diviuion_ Scud ies & Planning Division Construction Division 1 _ D n - _ _ _ _ _ _ _ _ _ _ _ _._ __ | Couuxereial DLegal Division t rI I~~~~~~~~~~~~ pialc e- Acontn Eavso | , - ,°: it V. C)~~~~~~C _ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ N .ol H _D~~~~ n Cz _I __ __t _ Coenan±ruica & Legl Dviviion |_ .a tt: _a>tW~~~~~~~i Fintace rnAccouiting civic ion __ d n- __ ~ ~ ~ ~ ~ ~ ~ 3 0 I0 r In IDm 'a Stck &olue Sect ion | - 1 1Z13 Internial Atudit SecLion Coueiputer Sect ioi) * U-Z rannYi -OL- - 71 - Annex2-13 Page 1 of 2 KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT Monitoring Perfonnance Indicators Stpulated In the "Protocobs d'Accord" (a) Average system efficiency should not be less than: 1995 1 996 1997 lt 1if 9 2001 20 RAD 0.70 0.71 0.73 0.75 0.75 0.75 0.75 0.75 RADEEF 0.67 0.69 0.72 0.76 0.78 0.79 0.80 0.80 RADEEMA 0.65 0.65 0.65 0.67 0.69 0.72 0.72 0.75 (b) Working ratio of not more than: inn inn ini ini 1999 mo am ma RAD 55 55 45 43 42 40 39 38 RADEEF 40 43 41 41 40 43 41 39 RADEEMiA - 41 52 50 49 47 48 47 (c) Operating ratio of not more than: lift 1996 1997 lift lf 2 21 2 RAD 84 82 72 71 68 65 60 56 RADEEF 83 90 88 87 86 89 81 73 RADEEMA - 63 80 82 82 80 81 79 (d) Account receivables for not more than: 1i99 1996 1997 lift lift 2000 RAD 10 7 5 3 3 3 RADEEF 9 8 4 3 3 3 RADEEMA 12 9 6 3 3 3 (e) Debt Service (ratio du service de la dette) not less than: 1996 li 1i99 nu i 2 2001 2n2u RAD - - - 1.2 - - - - RADEEF - - - 1.2 - - - - RADEEMA - - - 1.2 - - - - - 72 - KINGDOM OF MOROCCO Annex2-13 SECOND SEWERAGE AND WATER RE4USE PROJECT Pop 2 of 2 Monitoring Pefformance Indicators Stipulated In the "Protocols crAccord" (f) Debt ratio (ratio d'endettement); not more than: 1996 1996 1997 i I m m11 2n2u RAD 55 56 54 54 53 51 48 42 RADEEF 5 16 27 40 49 55 55 52 RADEEMA - 9 19 28 34 37 37 34 (g) Cash Generation (% of investment program) not less than: aM 1996 1997 aM aM m 2 i RAD - - 25 - - - - RADEEF - - 25 - - - - RADEEMA - - 25 - - - - (h) Average water tariff (DH/m3); not less than: 199 16 1997 1m 8 m m RAD 5.96 6.74 7.23 7.79 8.22 8.73 RADEEF 3.46 4.34 4.79 5.28 5.84 6.48 RADEEMA 5.22 5.64 6.10 6.62 7.11 7.78 (i Average sewerage charge (DH/m3); not less than: ADDENDUM TO THE RADEEF'S "PROTOCOLE D'ACCORD" Definitions: Average system efficiency: annual volume of water consumed In a given network over the annual volume of produced water. Working ratlo: operating expenses excluding depreciation and Interest over total revenues. Operating ratio: operating expenses Inciuding depreciation and Interest over total revenues. Account receivable: unpaid water sales expressed In months. Debt service ratio: net Intemal cash generation over debt service. Debt ratio: long-term debt over equity and long-term debt. Noe: Rdio orn (n) to (I) nuded ha ben corported n ntheePmol cAocord. Ratios (), h and () are hdka. Acul ras to be luaed at the wid of ch 1fisa yew, In line wlth th elpuhionf f t Proocols dAccord and of the Addendin to th RADEEFsP Prtocoa dAccorc". - 73 ~~~~~ANNEX 2.14 - 73- - KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER REUSE PROJECT Estimated Semi-Annual Disbursement Schedule' FLscal Year Amount Cumulative Percent (US$ million) Amount FY96 June 1996 0.0 0.0 0 FY97 December 1996 0.4 0.4 1 June 1997 0.8 1.2 3 FY98 December 1997 0.8 2.0 5 June 1998 2.0 4.0 10 FY99 December 1998 3.2 7.2 18 June 1999 4.8 12.0 30 FY2000 December 1999 4.8 16.8 42 June 2000 5.2 22.0 55 FY2001 December 2000 4.4 26.4 66 June 2001 3.6 30.0 75 FY2002 December 2001 3.2 33.2 83 June 2002 2.8 36.0 90 FY2003 December 2002 2.4 38.4 96 June 2003 1.6 40.0 100 1, Standard disbursement profile for water supply and sewerage projects including preparation of bidding documents and work construction . - 74 - ANNEX 2-15 KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT Limilation of Project Risks - Elaboration ol the Environmental Analysis Limitation of Project Risks 1. The significant water tariff increases of 1992, 1993 and of April 1994, the progressive settlement of arrears, the progressive reinstatement of the Regies autonomy and the positive Government attitude towards privatization (on March 14, 1996 the Municipality of Casablanca decided to entrust the responsibility for water, sewerage and electricity services to a private French company) prove the Government commitment to the sustainability of the water and sewerage operations. Technical assistance and training under the project would reinforce the Government's and the sewerage operators' commitment to the needed reforms, by identifying and enforcing the implementation of procedures necessary for sound financial management and genuine autonomy. The appointment of financially autonomous sewerage departments for the implementation, operation and maintenance of sewerage works, and the technical assistance to be provided by ANA for planning, design and coordination of sewerage works (in particular to small Municipalities), would also minimize any technical risks. Elaboration of the Environmental Analysis 2. The environmental analysis for the proposed project was carried out in accordance with TOR reflecting Bank operational directives and was completed in March 1995. The team in charge of this analysis consisted of specialists of the ME, of ONEP (the same who carried out the environmental analysis of the Fifth Water supply Project) and several individual consultants. This project, by improving sewage collection,, treatment and facilitating appropriate waste water re-use and disposal, would significantly improve the environmental conditions by enhancing public health through a drastic decrease of waterborne diseases. This project is currently assigned to category B. Appropriate specifications to minimize environmental disturbance during construction were identified through the environmental analysis and would be included in the bidding documents. XINGDOM OF NOROCCO ACTIVITU ILICTRICITI Table3-1 US-RADZIF 1. Income Statements 1988 1989 1990 1991 1992 1993 1994 ______________________________ --------- --------- --------- --------- --------- --------- --------- Total Revenues 249.63 275.12 303.92 327.86 350.36 428.82 467.41 Working expenses 219.24 245.59 271.88 313.04 331.24 402.10 422.23 Depreciations/prov. 10.73 11.56 13.27 15.38 18.92 22.73 27.84 Operating incomes 19.66 17.97 18.77 -0.56 0.20 3.99 17.34 Interest 2.60 1.30 2.27 2.03 1.75 1.31 4.17 Non operating inc./expens 1.80 1.98 2.57 -2.03 -4.41 -0.28 5.66 Income before taxes 15.26 14.69 13.93 -0.56 2.86 2.96 7.51 Income after taxes 14.69 8.81 7.31 -2.19 1.12 1.13 6.47 1 -.1 Working ratio 87.83% 89.27% 89.46% 95.48% 94.54% 93.77% 90.33% n Operating ratio 92.12% 93.47% 93.82% 100.17% 99.94% 99.07% 96.29% 1 KINGDOM OF MOROCCO ELBCTRICITY ACTIVITY Table 3-2 FZS-RADEZF 2. Balance Sheets 1988 1989 1990 1991 1992 1993 1994 ______________________________ --------- --------- --------- --------- --------- --------- --------- Net Fixed Assets 198.89 233.98 266.32 333.35 397.68 483.83 563.25 Account receivable 182.53 201.41 216.72 216.88 258.60 283.02 270.62 Other receivable 111.16 116.81 84.87 109.05 150.13 136.36 177.76 Total Assets 492.59 552.20 567.91 659.28 806.41 903.21 1011.63 Equities 274.34 343.82 402.98 478.55 578.93 643.97 741.01 Long Term Debts 20.00 18.43 16.66 14.66 12.40 40.19 48.98 Account Payable 166.60 147.89 106.70 110.97 158.15 137.85 126.33 Other Current Liabilities 31.65 42.06 41.58 55.10 56.93 81.21 95.32 Total Zquities & Liabiliti 492.59 552.20 567.92 659.29 806.41 903.21 1011.63 Current Ratio 1.48 1.68 2.03 1.96 1.90 1.91 2.02 Debt to debt & Zquity ratio 6.79% 5.09% 3.97% 2.97% 2.10% 5.87% 6.20% I!S KINGDOM OF MOROCCO ELECTRICITY ACTIVITY Table 3-3 -Fl8-RADZZI 3. Sourcex & Application of Yu 1988 1989 1990 1991 1992 1993 1994 ______________________________ --------- --------- --------- --------- --------- --------- --------- Internal Funds 28.01 21.67 22.85 15.22 21.79 25.17 38.49 Less Debt *ervLces 10.33 2.87 4.04 4.03 4.01 4.17 4.17 Increas./decrease in W.C. 16.55 29.72 54.68 -17.64 -6.69 18.36 -8.02 Customr contributions 69.97 48.71 41.93 57.38 81.83 66.06 52.19 Net internal cash generatl 71.10 37.80 6.06 86.21 106.31 68.70 94.53 BorrowLngs 0.00 11.96 9.92 0.00 2.65 6.57 9.14 Total funds available 71.10 49.76 15.98 86.21 108.96 75.27 103.67 Capital expendltures 68.30 46.64 45.61 58.33 68.48 86.95 69.24 Others 0.00 0.00 0.00 3.71 0.00 0.00 0.00 Cash increase/decrease 2.80 3.12 -29.63 24.17 40.48 -11.68 34.43 Cash beguinning of year 0.00 78.89 82.01 52.38 76.55 117.03 105.35 Cash and of year 2.80 82.01 52.38 76.55 117.03 105.35 139.78 debt service -------- -------- -------- 2.57 ------- ------- ------- cash generation ratio -------- -------- -------- 11.86% -------- -------- -------- S KINIGDOM OF MOROCCO WATER SUPPLY & SEMCEAGE ACTIVITIES Table 3-4s FES - RAD EF Iluco - Stat-euts 1988 1989 1990 1991 1992 1993 1994 Total revenues 48.25 54.22 67.71 71.56 89.84 114.97 139.25 working expenses 48.71 55.96 73.57 85.76 95.33 114.96 128.00 Depreciations/provisions 12.86 15.17 16.33 11.78 13.67 16.97 21.94 Operating incom -13.32 -16.92 -22.19 -25.99 -19.16 -16.96 -10.68 Interest 2.42 2.44 2.58 2.63 5.25 5.17 7.51 Mon operating income/expenses 0.46 0.43 1.06 2.29 4.32 1.92 2.28 Income__ before taxes -16. -19.79-- -25.83-- -30.91--- -28.7_ -2 5 -2 Income before taxes -16.20 -19.79 -25.83 -30.91 -28.73 -24.05 -20.48 Income after taxes -16.20 -19.79 -25.83 -30.91 -28.73 -24.05 -20.48 working ratio 100.95% 103.22% 108.65% 119.86% 106.11% 100.00% 91.92% operating ratio 127.60% 131.20% 132.77% 136.32% 121.32% 114.75% 107.67% . . .~~~~~~~~~~~~~~I I.,' o AI KINGDOM OF MOROCCO WATER SUPPLY & SEWERAGC ACTIVITIES Table 3-S: FEB - RADEEF -=-=====-- =---=-=-_--===s=== =Z= -=========== = =__== ==== ===__ _= Balance Sheets 1988 1989 1990 1991 1992 1993 1994 Net fixed assets 115.24 137.35 172.00 206.29 258.74 289.14 329.83 Receivable 79.48 83.43 111.68 131.08 159.98 178.20 189.14 Other receivable 35.70 28.55 28.42 24.12 24.46 28.01 46.96 Total Assets 230.43 249.33 312.10 361.48 443.18 495.35 565.93 Eqyities 172.90 187.08 198.69 205.05 217.67 231.90 238.37 Long term debt 26.02 24.36 28.01 46.53 48.72 55.89 49.26 Suppliers 12.21 18.47 26.28 20.68 39.04 66.48 83.46 Other liabilities 19.30 19.43 59.12 89.22 137.75 141.08 194.84 _______ --____----- ------- ------- ------- ------~- ----- Total Equitie 230.43 249.34 312.10 361.48 443.18 495.35 565.93 ===M== ======= ==== ======= =========== =…===== Current ratio 3.66 2.96 1.64 1.41 1.04 0.99 0.85 Debt to Equity+debt ra 13.08% 11.52% 12.36% 18.50% 18.29% 19.42% 17.13% ii uuou ov nomocoo wA!33. SUPPL a umuaain Acrzvzxuu Table 3-6 r4 - RA8Vt sources a A£plicatio. 1933 1989 1990 1991 1992 1993 1994 ______________________ --------- -------- -------- --------- --------- --------- --------- Internal cash -0.92 -2.18 -6.92 -16.50 -9.81 -1.92 8.97 working capital +/- 66.74 -1.51 22.61 12.25 -2.45 -11.09 0.14 Debt service 3.83 4.10 4.53 5.20 8.91 10.81 17.10 _________ -------- -------- --------- --------- --------- --------- Net cash generat -71.48 -4.76 -34.06 -33.94 -16.27 -1.64 -8.27 Customer contributions 189.09 33.97 37.44 37.27 41.35 38.28 24.05 Borrowing 2.13 0.00 5.60 21.11 5.86 12.81 2.95 _________ -------- -------- --------- --------- --------- --------- Availablo funds 119.75 29.21 8.98 24.44 30.94 49.45 18.73 Capital expenditures 115.24 37.28 50.98 46.07 66.12 47.37 59.75 o other capital expendit 0.00 0.00 0.00 0.00 0.00 0.00 0.00 I _________ -------- -------- --------- --------- --------- --------- Cash increase/do 4.50 -8.07 -42.01 -21.63 -35.18 2.08 -41.02 Debt service- -------- -------- -------- .A. -------- -------- -------- Cash Generation ------- -------- -------- 54.64% --- - ------- - ---- _ p St KINGDGK OF NORO0OO ACTrVITI ILICTRICITI Table 3-7 FlS-RADZIF 1. Incom Statements 1995 1996 1997 1998 1999 2000 ______________________________ --------- --------- --------- --------- --------- ------___ Total Revenues 456.19 496.34 546.73 613.00 683.13 767.10 Working expense. 414.24 468.49 512.76 562.09 618.08 679.71 Depreciations/prov. 27.60 44.16 50.37 56.85 63.98 71.74 Operating incomes 14.35 -16.31 -16.40 -5.95 1.07 15.65 Interest 6.35 6.35 6.35 6.35 6.35 6.35 Non operating inc./expens 0.00 -25.81 -29.65 -32.14 -35.46 -39.37 Income before tazes 8.00 3.15 6.89 19.84 30.18 48.67 Income after taxes 6.95 2.08 4.55 13.09 19.92 32.12 Working ratio 90.80% 94.39% 93.79% 91.70% 90.48% 88.61% X Operating ratio 96.85% 103.29% 103.00% 100.97% 99.84% 97.96% 1 0 Mi l KINGDOK OF MOROCCO ELECTRICITY ACTIVITY Table 3-8 FIs-RADzzF minmm ,, mmm......,..........minmmmmmin ======mmmrn inminmmw m mm, 2. Balance Sheets 1995 1996 1997 1998 1999 2000 ______________________________ --------- --------- --------- --------- --------- --------- Wet Fixed Assets 653.08 719.93 784.88 854.91 928.75 1011.27 Account receivable 237.94 214.07 183.93 147.81 113.58 125.10 other receivable 215.10 134.29 135.14 159.58 197.32 213.31 Total Assets 1106.12 1068.29 1103.95 1162.29 1239.66 1349.69 Equities 811.06 835.47 863.45 913.54 982.02 1082.01 Long Term Debts 55.82 48.60 44.74 40.49 35.82 31.14 Account Payable 141.06 83.09 91.60 100.98 111.32 122.71 other Current Liabilities 98.18 101.13 104.16 107.29 110.50 113.82 Total Zquities A Liabiliti 1106.12 1068.29 1103.95 1162.29 1239.66 1349.69 Current Ratio 1.89 1.89 1.63 1.48 1.40 1.43 Debt to debt & Zquity ratio 6.44% 5.50% 4.93% 4.24% 3.52% 2.80% 1 vflI KINGDOK OF MOROCCO ILICTRICITY ACTIVITY Table 3-9 FFS-RADKZF an i i w_ _m # mmsmm =mmrmmm mmm mmin mmi*- --- 3. Sources & Application of Fu 1995 1996 1997 1998 1999 2000 ______________________________ --------- --------- --------- --------- --------- --------- Internal Funds 40.91 41.58 49.12 62.91 75.49 93.94 Loes Debt services 6.35 13.57 10.22 10.60 11.03 11.03 Increase/decrease in W.C. -58.02 28.60 -43.96 -50.65 -49.59 -4.79 Customer contributions 71.00 22.33 23.43 36.99 48.56 67.87 Net internal cash generati 163.57 21.74 106.30 139.95 162.61 155.57 Borrowings -28.66 0.00 0.00 0.00 0.00 0.00 …_______ -------- -------- -------- -------- -------- Total funds available 134.92 21.74 106.30 139.95 162.61 155.57 Capital expenditures 89.83 100.00 103.17 113.49 123.07 137.99 Others 0.00 0.00 0.00 0.00 0.00 0.00 …_______ -------- -------- -------- -------- -------- Cash increase/decrease 45.09 -78.26 3.13 26.46 39.55 17.58 Cash beguinning of year 139.78 184.87 106.61 109.74 136.20 175.75 Cash end of year 184.87 106.61 109.74 136.20 175.75 193.33 debt service ------- ------- 8.64 -------- -------- -------- cash generation ratio -------- -------- 71.84% -------- -------- -------- L L ,"8g r KINGDOK OF MOROCCO FIFTH WATSK SPPLY PROJtCT Table 3-10s FFS - RAD3F Inco Statements 1995 1996 1997 1998 1999 2000 in zcnz = = =OMSEW -- ======== ---- -- Total revenues 160.57 202.76 240.86 274.82 312.37 354.80 Working expenses 141.23 176.85 183.37 202.64 225.38 255.60 Depreciations/provisions 22.50 28.66 29.95 34.30 38.36 41.35 Operating income -3.16 -2.76 27.55 37.88 48.63 57.84 Interest 6.70 10.10 14.78 18.82 21.65 23.42 Non operating income/expenses -0.52 0.00 1.37 0.95 0.50 -0.03 Income before taxes -9.34 -12.85 11.40 18.10 26.48 34.45 Income after taxes -9.34 -13.39 7.30 11.59 16.95 22.05 - working ratio 87.96% 87.22% 76.13% 73.74% 72.15% 72.04% operating ratio 101.97% 101.36% 88.56% 86.22% 84.43% 83.70% o0 K_ S a._ KIOKDM OF oiOCCO r rir W13 UPLY PR33C! Table 3-11s PVS - RADE 2. Balance Sheets 1995 1996 1997 1998 1999 2000 ________________________________ --------- -------- -------- --------- --------- --------- Not Fixed Assets 307.33 371.07 434.14 458.48 460.37 456.63 Account receivable 168.43 154.48 99.56 69.11 71.78 78.98 Other Account receivable 38.02 25.54 25.62 26.06 47.41 76.36 Total Assets 513.78 551.10 559.32 553.66 579.57 611.97 Equities 239.69 234.27 253.42 276.68 304.93 336.46 Long term debt 54.67 97.63 130.14 149.48 150.04 154.89 Account payable 91.37 79.56 67.95 50.13 56.50 47.73 Other current liabilities 128.05 139.64 107.79 77.33 68.05 72.88 _________ -------- -------- --------- --------- --------- Total Equity & Liabilit 513.78 551.10 559.31 553.63 579.52 611.96 1 0i Current ratio 0.94 0.82 0.71 0.75 0.96 1.29 Debt to debt & equity ratio 18.57% 29.41% 33.93% 35.08% 32.98% 31.52% I FIFT WAT SUPPLY PROJECT Table 3-12: Ft8 - RADEF Sources & Application of Funds 1995 1996 1997 1998 1999 2000 Internal cash 19.86 18.51 43.59 54.67 65.19 73.23 Working capital +/- -39.54 -17.35 -45.38 -7.36 -3.38 11.08 Debt Service 13.81 19.77 36.77 38.77 46.91 47.53 Net cash generation 45.59 16.08 52.20 23.25 21.66 14.62 Customer contributions 11.19 9.84 15.15 15.65 16.29 15.26 Borrowing 12.00 50.66 51.36 36.34 22.80 26.50 Available fund. 68.77 76.59 118.70 75.24 60.75 56.39 Capital expenditures 0.00 75.47 77.86 44.81 27.95 28.91 Other capital expenditures 0.00 9.98 6.84 4.81 2.49 -1.53 Cash increase/decrease 68.77 -8.86 34.01 25.63 30.31 29.00 X Cash beguinning of year -128.89 -60.12 -68.98 -34.97 -9.34 20.97 Cash end of year -60.12 -68.98 -34.97 -9.34 20.97 49.97 Debt service 4.30 1.81 2.42 1.60 1.46 1.31 Cash generation --------- -------- 30.00% --------- --------- --------- oq IY KINGDOM OF MOROCCO aOsCOD uswnA1D v sAR n-iXs PRa.ECT Table 3-13: FlS - RAD531 mssasmmnmmasnsm=====================mm ========= ======X== =====9=*= == insmss flf=n===mm Ineome utatemsts 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 ssssmnnsnn innmsi smana m a an saaaa.nan manna aa=a===s ,,,,Sa wm, . . = = =======mm ,.=., =======mm . , =_, Total revenues 49.19 51.28 65.77 83.22 104.74 117.89 143.77 175.54 195.09 216.80 Working expenses 19.44 21.96 26.82 33.81 41.99 50.74 58.84 68.19 70.89 72.55 Depreciations/provisions 21.36 24.06 31.04 38.21 47.86 54.06 57.55 60.21 66.21 70.54 operating incom 8.39 5.26 7.90 11.20 14.89 13.09 27.37 47.14 57.98 73.71 Interest 0.77 0.99 3.22 9.61 16.97 30.61 36.80 41.95 41.17 44.45 Non operating inc./expens -0.75 -1.48 -2.28 -3.18 -4.17 -5.26 -6.46 -7.77 -9.20 -10.76 Income before taxes 8.37 5.76 6.97 4.77 2.09 -12.26 -2.97 12.96 26.00 18.50 Income after taxes 5.36 3.69 4.46 3.05 1.34 -15.20 -6.56 8.29 16.64 25.62 working ratio 39.53% 42.82% 40.78% 40.62% 40.09% 43.04% 40.93% 38.85% 36.34% 33.46% operating ratio 82.95% 89.74% 87.98% 86.54% 85.78% 88.90% 80.96% 73.15% 70.28% 66.00% o t 4* 0- K I or° oeeomcc. inucm mM am -A Its-su v.w.s !able 3-14t MU - PAJt *mmm_ r-_ inmm m# m_mmins mwmums _mmmmWm sanmrnminm m i m i n _nMMi nu_ Balance Shosts 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Not Fixed Assets 275.42 338.23 438.57 608.38 767.60 904.43 951.49 923.34 909.12 876.44 Account receivable 44.27 43.05 30.57 23.73 27.51 30.49 37.18 45.40 50.46 56.07 Other Account receiv. 4.85 17.64 37.29 34.26 21.76 12.22 14.11 15.55 33.28 75.91 Total Assets 324.54 398.92 506.43 666.36 816.87 947.14 1002.78 984.29 992.85 1008.42 Equities 296.92 317.94 340.60 363.59 386.16 393.76 411.45 445.57 489.78 544.85 Long term debt 14.90 60.76 126.34 242.16 365.04 485.00 511.92 486.41 461.52 422.69 Account payable 1.60 11.86 28.84 47.23 50.15 44.52 29.17 12.16 12.86 13.50 Other current liab. 11.12 8.36 10.64 13.37 15.51 23.86 50.24 40.14 28.68 27.38 Total Equity & Liab. 324.54 398.92 506.43 666.36 816.87 947.14 1002.78 984.29 992.85 1008.42 Current ratio 3.86 3.00 1.72 0.96 0.75 0.62 0.65 1.17 2.02 3.23 Debt to debt & equity 4.78% 16.04% 27.06% 39.98% 48.59% 55.19% 55.44% 52.19% 48.51% 43.69% Pu KINGDOM OF ma-o 33com smeZRhGu AND MWER a-u.. PiOJM~ Table 3-15 FM - RAMW mminm=nW.in mmm um imm m fniminininim ====am.m~m m~mmmmmmmrninm inimimm~min Resources & AMplicati 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Internal Funds 26.01 25.71 34.46 45.20 58.86 60.66 77.02 97.42 108.98 123.34 Leso: Debt service 1.74 4.60 9.17 17.13 23.99 34.28 75.63 80.78 79.31 82.58 Increase decrease in V 39.86 -2.20 -35.20 -21.60 -8.73 8.30 31.76 22.02 -6.95 5.53 Customer contributions 13.56 18.83 20.47 23.13 25.40 28.07 30.71 33.60 36.76 40.22 _________ -------- -------- --------- --------- --------- --------- --------- --------- --------- Not cash generat -2.02 42.13 80.97 72.79 69.01 46.15 0.33 28.21 73.38 75.45 _________ -------- -------- --------- --------- --------- --------- --------- --------- --------- Borrowings 15.87 56.78 81.40 141.29 147.47 142.79 75.84 13.32 16.60 0.00 Total available 13.85 98.91 162.38 214.07 216.48 188.94 76.18 41.54 89.98 75.45 0 _________ -------- -------- --------- --------- --------- --------- --------- --------- --------- Capital expenditure 17.31 75.47 119.42 190.35 188.98 174.14 96.50 26.79 43.26 32.07 Others 17.18 19.85 33.12 32.53 32.38 13.88 0.00 6.22 0.00 _________ -------- -------- --------- --------- --------- --------- --------- --------- --------- Cash increase decrease -3.46 6.27 23.11 -9.40 -5.03 -17.57 -34.21 14.75 40.49 43.38 Cash beguinning of year -3.46 2.81 25.92 16.52 11.48 -6.09 -40.30 -25.55 14.94 Cash end of year -3.46 2.81 25.92 16.52 11.48 -6.09 -40.30 -25.55 14.94 58.32 Debt service <------- <------- c------- 1.65 c------- …------- e------- <-------> Cash generation <------ <------ <------ 33.27% <------ <------ <------ <------> O Q m lh SEON SRMAR&WAM uNC Table 3-16: lum Semmi for [996-26 (La cunrt DH mihion) incme Slatemmta 19X 17 196 19 2000 2001 2002 Tota revenues 57.85 64.27 79.02 94.48 113.31 126.52 141.33 Wodidng expenses 23.80 33.58 39.37 46.24 53.61 60.32 65.85 1 Dereciation & Provision 12.46 17.91 25.38 31.50 36.87 42.34 46.40 Operating incone 21.59 12.78 14.27 16.74 22.83 23.86 29.08 Interes 2.00 3.00 8.53 14.58 22.59 28.21 30.53 Non operting income -1.20 -2.46 -3.77 -5.13 -6.55 -8.03 -9.58 Net income before taxes 20.79 12.24 9.51 7.29 6.79 3.68 &13 Net income after taxes 13.31 7.84 6.08 4.66 4.35 2.35 5.20 Wodbing raio 41.14% 52.25% 49.82% 48.94% 47.31% 47.68% 46.59% Opeating ratio 62.68% 80.12% 81.94% 82.28% 79.85% 81.14% 79.42% C:AZMSANNEX1EMA S (sheet 1) U, C KINGDOM OF MOROCCO SECOND SEWERAGE & WATER RE-USE PROJECT RADEEMA - MARRAKECH Table 3-17: Balance Sheets for 1996-2004 (in current DH million) Balan Sheets 1996 1997 1998 1999 2000 2001 2002 Net fixed assets 294.46 378.52 514.40 635.12 741.91 781.96 776.46 Receivable 12.21 9.88 6.23 7.58 9.24 10.39 11.68 Other receivable 10.54 15.57 23.72 23.26 24.04 17.76 13.61 Cash 20.03 35.60 17.82 9.05 0 .00 12.97 45.76 Total Assets 337 24 439.57 562.17 675.01 775.19 823.08 847.51 Equities 277.91 313.08 348.56 384.36 420.48 456.89 493.64 Retained eanings 13.31 21.14 27.23 31.89 36.23 38.59 43.78 Long term debts 29.48 76.49 143.76 211.69 270.42 288.08 278.72 Suppliers 8.87 19.40 30.84 32.94 29.78 20.70 10.54 Other liabilities 7.67 9.46 11.78 14.13 18.28 18.82 20.83 Total Equities & Liabilities 33724 439.57 562.17 675.01 775.19 823.08 847.51 Current ratio 2.591 2.12 1.121 0.85 0.69 1.04 2.2 Debt/Equity&debtratio 9.19%1 18.62% 27.67% 33.71% 37.19% 36.77% 34.15% cAz\s\rncxe\mar.xds (sheet 2) 0 KINGDOM OF MOROCCO SECOND SEWERAGE & WATER RE-USE PROJECT RADEEMA _ MARRAKECH Table 3-18: Sources & Application of Funds for 1996-2004 (in curent DH milion) Sources & Application of funds [99 17 1998 9 2000 2001 2002 Intemal cash generation 24.83 24.36 33.86 42.78 53.85 61.08 68.31 Woing capital +- 6.21 -9.62 -9.26 -3.55 2.99 1.86 5.30 Debt service 4.12 6.87 13.66 19.43 25.21 50.91 52.90 Customr contributions 36.08 37.63 39.25 40.94 42.66 44.45 46.32 Net cah generation 50.58 64.74 68.71 67.84 68.31 52.76 56.43 Borrowing 30.11 47.64 67.91 68.56 59.36 40.03 13.02 Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Availablefiiwds 80.69 112.38 136.62 136.40 127.67 92.79 69.45 Investments 60.66 96.80 154.40 145.16 138.28 78.26 36.66 Cash increase/decrease 20.03 15.58 -17.78 -8.76 -10.61 14.53 32. 79 Debt service coverage 1.79 Self finawing 20% P go cAz\x\amxe\j.x1s (sheet 3) o - 93 - ANNEX3-19 Page 19 of 24 INGDOM OF MOROCCO SECOND SEWERAGE AND WATER REUSE PROJECT RAD - CASABLANCA Table 3-19: Income Statenenb for 1990-1994 (in current DH million) Income Statnents 1990 1991 1992 1993 1994 Total Revenues (1) 191.51 245.73 221.25 146.57 151.65 Working expenses (1) 132.49 165.28 153.33 88.95 81.44 Depreciations & provisions 7.28 11.11 28.21 35.19 60.31 Operating income 51. 74 69.34 39.71 22.42 9.90 Interest 6.92 5.92 9.86 20.51 54.98 Non operating income/loss 3.60 0.36 0.94 27.59 -10.73 Net income before taxes 41.22 63.06 28.91 -25.68 -34.35 Net income after taxes 41.22 63.06 28.91 -25.68 -34.35 Working ratio (%) 69 67 691 611 54 Operating ratio (%) 73 72 821 851 93 (1) Revenues and working expenses include investment expenses purchased by RAD. The new accounting chart recommends that investments should be recorded with fixed assets in the balance sheets. Starting 1993, appropriate adjustments and assumptions were made taking into account auditors recommendations, and national accounting chart principles and procedures in recording investment expenses. c:\z\s\annexe\r&d.x1s (sheet 1) - 94 - ANNEX 3-20 Page 20 of 24 KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER REUSE PROJECT RAD - CASABLANCA Table 3-20: Balance Sheets for 1990-1994 (in current DH million) Balance Sheets 1990 1991 1992 1993 1994 Net Fixed Assets 380.14 493.02 581.18 1105.98 1584.96 Receivable 223.98 317.52 314.60 161.73 105.22 Other receivable 5.58 9.58 46.39 35.98 52.25 Cash 0.00 0.00 0.00 0.00 245.00 Total Assets 609.70 820.12 942.17 1303.70 1987.43 Equities 336.39 427.18 460.46 530.70 552.28 Retained eamings 214.62 277.68 305.97 280.22 245.53 Long term debts 31.65 80.80 104.36 420.01 762.03 Other current liabilities 27.04 34.47 71.38 72.76 427.59 Total Equities & Liabilities 609.70 820.12 942.17 1303.69 1987.43 Debt/Equity Ratio in %5.143 10.28 11.981 34.12 48.85 Current Ratio 8.49 9.49 5.065 2.721 0.94 c:\z\a\annexe\rad.x1s (sheet 2) - 95 - ANNEX3-21 Page 21 of 24 KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER REUSE PROJECT RAD - CASABLANCA Table 3-21: Sources & Application of Fumds for 1990-1994 (in current DH million) Sources & Application of Funds 1990 1991 1992 1993 1994 Internal Cash generason 55.42 80.09 66.37 18.37 69.04 Worling capital +/- 47.82 97.54 33.89 -163.28 -395.07 Debt Service 6.92 5.92 9.86 23.72 76.21 Customer contributions 55.41 90.79 21.71 58.67 21.58 Net cash generation 56.09 6742 44.33 216.60 409.48 Government contribution -4.07 -3.83 -5.53 16.16 0.00 Borrowing 6.46 7.43 36.91 315.66 363.24 Available Funds 58.48 71.02 75.71 548.42 772.72 New investments 58.48 71.02 75.71 548.42 527.72 Other capital expenditure 0.00 0.00 0.00 0.00 0.00 Cash increase/decrease 0.00 0.00 0.00 0.00 245.00 Debt Service __ 4.4 Self financing __ 31% _ c\z\s\annexe\rad.xls (sheet 3) KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER REUSE PROJECT RAD - CASABLANCA Table 3-22: Income Statements for 1995-2004 (in cunrent DH million) Income Statements | 995 1996 1997 1S 1999 2000 2001 2002 Total Revenues 205.95 233.98 265.67 302.04 342.80 389.66 442.54 502.79 Working expenses 113.17 129.19 118.59 129.84 142.74 157.31 171.19 183.28 Depreciations & provisions 59.59 63.63 72.36 83.93 90.99 94.74 95.89 96.71 Operating income 33.19 41.16 74.72 88.27 109.07 137.61 175.46 222.80 Interest 74.28 80.80 76.07 74.25 76.86 81.41 84.54 81.86 Non operating income/loss -21.30 -10.71 -11.82 -13.10 -14.54 -16.20 -18.07 -19.91 Net income before taxes -19.79 -28.93 10.47 27.12 46.75 72.40 108.99 160.85 Net income after taxes -24.39 -34.19 _ 6.70 17.35 29.92 46.33 69.76 103.95 Working ratio (%) 54.95 55.211 44.641 42.991 41.64 40.37 38.68 36.45 Operaing ratio(%) 83.88 82.411 71.84 70.78 68.18 64.68 60.35 55.69 c:Vza'annexMWad.ds (sheet 4) 0 EINGDOM OF MOROCCO SECOND SEWERAGE AND WATER REUSE PROJECT RAD - CASABLANCA Table 3-23: Balance Sheets for 1995-2004 (in current DH million) Balance Sheets 1995 1996 7 199 19 2000 2001 2002 Net Fixed Assets 1541.76 1558.01 1636.58 1784.42 1915.25 1989.55 1990.55 1922.90 Receivable 177.41 189.81 143.83 122.59 83.62 95.08 108.14 123.01 1 Other receivable 41.49 30.16 48.12 64.74 73.81 72.49 58.81 38.34 Cash 242.98 178.07 161.18 102.63 117.96 136.21 193.77 313.22 Total Assets 2003.64 1956. 05 1989.71 2074.38 2190.64 2293.33 2351.27 2397.47 Equities 559.35 581.16 606.34 635.84 669.51 708.44 752.88 794.37 Retained eanings 221.15 186.96 193.66 211.00 240.92 287.26 357.01 459.96 Long term debts 958.46 975.63 957.50 994.37 1038.78 1056.70 1005.09 912.05 Suppliers 169.44 132.68 147.32 142.22 143.68 135.37 121.92 106.68 Other liabilities 95.25 79.62 84.89 90.95 97.75 105.56 114.37 124.41 Total Equities & Liabilities 2003.65 1956.05 1989.71 2074.38 2190.64 2293.33 2351.27 2397.47 DebUEquity Ratio in % 55.12 55.95 54.481 54.01 53.29 51.49 47.521 42.10 0 Current Ratio 1.74 1.871 1.52j 1.241 1.141 1.261 1.531 2.05J c:\z\nmnxo\rd.xIs (shea 5) 0r-l KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER REUSE PROJECT RAD - CASABLANCA Table 3-24: Sources & Application of Funds for 1995-2004 (in current DH million) Sources & Application of Funs 19 1996 197 18 19 2000 2001 2002 Interal Cash generation 82.01 92.52 135.34 153.37 172.94 194.60 218.84 246.52 Woking capital +/- 224.33 53.46 -47.94 -5.56 -38.17 10.64 4.03 -0.43 Debt Service 160.75 168.49 166.38 164.44 166.59 168.04 204.63 201.27 Consumer contributions 28.37 32.52 37.00 42.59 48.21 55.12 62.52 61.40 '.0 Net cash generation -274.70 -96.91 53.90 37.08 92.73 71.04 72.70 107.08 X Govemnment contribution 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Borrmoing 281.53 102.27 66.96 119.75 127.28 100.81 67.79 26.36 Awulabe Funds 6.83 5.36 120.86 156.83 220.01 171.85 140.49 133.44 New investments 0.00 53.66 107.25 181.90 180.25 138.83 78.46 13.98 Other capital expenditure 8.84 16.61 30.50 33.50 24.43 14.77 4.47 0.00 Cash increase/decrease -2.01 -64.91 -16.89 -58.57 15.33 18.25 57.56 119.46 Debt Service _ 1.27 _ Self finacing _ 38% _ c:Az\mexe\rad.xI (sheet 6) 0h - 99 - ANNEX 3-2 Page 1 of 3 KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT ASSUMPIONS FOR FINANCIAL PROJECTIONS Inflation 1. It is assumed that annual local inflation related to the increase in consumer prices will be 4.5 percent in 1995, 4.3 percent from 1996 to 1999, and 4.2 percent in 2000 and thereafter. Annual foreign price increases are estimated at 4.5 percent in 1995, 3.3 percent in 1996, 2.3 percent in 1997, 2.5 percent from 1998 to 2001, 2.4 percent in 2002 and 2.1 percent thereafter. The exchange rate in January 1995 was about DH 8.90 per US Dollar. It is assumed that the exchange rate will vary in relation with those of inflation rates. Financial Forecasts 2. The Regies main financial statements, Income Statements, Balance Sheets and Sources and Application of Funds are summarized in Tables 3-1 to Table 3-18 in Annex 3-1. Water Production and Distributions 3. Production and consumption of water are estimated to increase respectively by about 2 percent in 1995 and 1996 and 3 percent per year thereafter for RAD, 2.5 percent per year from 1996 to 2002 for RADEEMA, and 3 percent per year from 1995 to 2002 for RADEEF. The Regies efficiency is expected to progressively improve, reaching 75 percent in 1998 for RAD, in 2002 for RADEEMA and in 2000 for RADEEF. The population served and new connections are forecast to increase by about 4.5 percent per year. New connections are assumed to increase by about 30,000 for RAD, 42,000 for RADEEF and 25,000 for RADEEMA over the project period (1995-2002). Other related activities increase would be based on the number of new connections and consumers at the end of each year. Revenues 4. Regies' revenues for each activity are forecast on the basis of the current average tariff applied to the electricity and water consumers and to the volume of water consumed by users connected to sewer networks. These volumes are estimated to be equal to the volume of potable water consumed. The average sewerage charge is DHl.00/m3 in 1995. It is expected to be increased by 17 percent p.a. through 2002 and by the rate of local inflation thereafter. The average tariff will be increased to DHl.25/m3 in 1997 and would be further increased by 25 percent in 1998 and 1999, 10 percent in 2000, 20 percent in 2001, and 2002 and by 8 percent thereafter. Revenues related to works and services for all activities are based on average price - 100 - ANNEX 3-2 Page 2 of 3 for connection and number of new connections, charges for clearing and cleaning, and local inflation rate. Average tariffs taken into consideration are shown in the table 3-1A hereunder: Table 3-1A: Average Tariff DR/mr3 19 6 1997 1998 1999 200 2001 2002 RAD 1.66 1.86 2.08 2.33 2.61 2.92 3.27 RADEEF Sewerage 1.00 1.25 1.56 1.95 2.15 2.58 3.09 Water 4.34 4.79 5.28 5.84 6.48 Electricity 1.01 1.07 1.14 1.21 1.28 RADEEMA 1.48 1.63 2.04 2.44 2.93 3.22 3.55 Operational Expenses 5. Maintenance costs of the existing facilities are estimated on the basis of their current value. They include materials and external services which are forecast respectively at about 3 percent of the R6gie's gross fixed assets in operation depending on their composition and age and the need for materials for house connections and network expansion. Wage increases are estimated at about 11 percent of which 8 percent is for salary adjustments. It is assumed that the number of RADEEF employees will increase by about 40 to fill new positions resulting from the extension of networks in areas of intervention and from creation of the new sewage activities. 6. The Regies will pay the Government a 34 percent corporate tax based on their positive net income or 2.5 percent based on their total turnover in case of negative net income. Bad Debt 7. A provision for potentially bad debts of 3 percent of total revenues will be used over the 1996-2002 period. - 101 - ANNEX 32 Page 3 of 3 DQ=kcition 8. The Regies only depreciate assets with a life span of five years or less, overall depreciation is replaced by a renewal reserve which represent 5 percent of total fixed assets in operation. For the financial projection, the average depreciation for water supply and sewerage infrastructure and equipment of the Regies is about 4 percent, and about 5% for electricity activities in the line with the Moroccan accounting code. Interest 9. New investments are assumed to be financed by loans at an interest rate of about 7.5 percent p.a. and .025 percent commission charges with a repayment period of 20 years, including five years of grace. Financing will cover about 65 percent of the Regie's total investment program. Charges for foreign exchange risks are borne by the Regies and recorded as non-operating revenues and/or expenses. Non-operating revenues and/or expenses 10. Non-operating revenues and/or expenses take into account the exceptional profits resulting from reintegrating depreciation of assets financed through customer contributions, and exchange risk born by the Regies. Balance Sheets 11. Fixed assets have been brought into account in their historical cost. The new investments are assumed to be incorporated in the balance sheet at their actual cost. Concerning water supply as well as sewerage activities fixed assets, the "Protocole d'Accord" provides that these assets will be inventoried and revalued in line with the procedures recommended in the study initiated in 1993 in the framework of the ongoing Loan 2825-MOR. 12. Inventories are assumed to be equal to six months of expenditures for materials and supplies. Account receivables are expected to decrease at the same pace as those for water bills from 9 months in 1995 to 3 months in 1998 for RADEEF. They will be kept at three months thereafter. This assumes settlement of cumulated arrears in 1994 over the period of 1995-1997 and improvements in the billing and collection system of the Rgie. Suppliers are assumed to represent three months of operating expenses and three months of investments. Other receivable and payable essentially comprise income and liabilities to be received and or paid as well as unpaid TVA to or by the R6gies and Treasury. Adjustment of previous accounts receivable and payable as well as taxes and penalties due to the Government and various suppliers would be offset in 1995, 1996 and 1997. - 10a - ANNEX 3-3 KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE&USE PROJECT Sensitivity Analysis A sensitivity analysis to test the expected financial performance of the project indicates that net cash generation and debt service coverage ratios are sensitive to changes in revenues and size of investment program as shown in the following table. Tariffs, efficiency, and investments and their impact on revenues will therefore be closely monitored during project implementation with a view to maintaining an appropriate level of financial and debt service coverage ratios. Base Case RAD FES MARAK. Cash generation 38% 33% 25% Debt Service Coverage 1.3 1.7 1.8 Working ratio 42% 41% 48% Operating ratio 66% 83% 79% Constant Tariff 70% investments Cash generation N.A. 17% N.A. Debt Service Coverage 0.8 0.7 0.8 Working ratio 62% 69% 60% Operating ratio 95% 135% 110% Base Case Tariff 50% less efficiency Cash generation 22% 30% 13% Debt Service Coverage 1.2 1.5 1.5 Working ratio 45% 43% 52% Operating ratio 72% 87% 86% Constant Tariff Cash generation N.A. 1.1% N.A. Debt Service Coverage 0.7 0.3 .5 Working ratio 63% 83% 71% Operating ratio 79% 155% 117% KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT R. A. D. E. E. F. SITUATION DES ARRIERES AU 31/12/1995 ColLectivit6s Locales TOTAL Administration CONSOMMATION Eau et Electricit6 TRAVAUX CoLlectivites 1993 - 1995 TOTAL TOTAL 1987 -92 1993 -95 Locales Adainistration GENERAL . TOTAL TOTAL Consommat ion Travaux CONVENTIONNE IMPAYE SUR CONTENTIEUX CERTIFIE CONVENTIONNE A CONTENTIEUX A ECHEANCE CONVENTION CERTIFIER RADEEF 36,1 4,3 45,8 45,8 86,2 a8,5 170,7 51,8 26 77,8 248,5 PLAN D'APUREMENT - Collectivites Locales sur 4 ans (1996 - 1999)-25% chaque annde - Administrations: sur 4 ans (1997 - 2000) o0 CN s ~~~~~~r'j so = ituw wooI A mw so1 =; D wjt a bDm. i, 1 :J t t-. uc Ta-_) IU NW. UW, m.uII 66. _ PtAl mJA _D - L5 i OD 11 nt Ho" g. 09 P P a 1 s 41 ) no 1HrC' o &so so PT-S- F % W D 1 am s DD SU= a') I h 2 LgO J )On ! z - C VU *9 3N:I: i - Y **vtH 96L' I OD _U ua NWo 9Mi LJ tMEN s 9W uaMD 3 SC 0 0-?-t_ 3PCJ SC saUDD w 9. _t% -- r vs I WW La MRZI. , TsuaM,-c=Dm L , ;- L rw sD. X D tJOM mo rw vs 5 A,m o am lit wmsrOg so u a so K w tLi) Ct 0 I Ot8C tPf ' c Mi_ rvV Vr Igo; C c D1 1-: i: rL: = r f CE I CD I G t C t t C O C 0 G D D D D D O JAt. I~~~~~~~ ~~~~~ C f. C C C O O D C i C D I, ;rj C C C C C ~~~~~~~~~~~C, c C. C c c c* c CC t . I . C C, C C c- C c t'M I tl Cg t C C I r C C C C CC 6; Sl D C A ID C C C C, C C C C C, C C C C C C LI A. ,O . c c c c C t C - : C c ; C c C Cs C c:5.S i DJ ~ t t CC C C C C C C O DC i, I C C C C C C C C C C r C :C;, 1 9C C 1 C C C C C C C ClCLI C C C C C ±140 iD IC I C C C C L C C C C 0 C C C1 tCtD I x7 I C C C C DC D C. CrtO. za: C t * rC C C C C C t C C D r C r C C : d bo ; IC C C C C . I c t r r D C Li C. C C C biI0 r; C ; C Ct C !- C C Ct C C C Dt C C C CJ I0L= t. . , C , C . !C. C C - sttr~t3 'i C- t C C C C C tt C C C C OIl l1 C. C D C C: - I C I DI t C C C C C_ Ci * °C' C = .C f SUDlUaAUC.a salp aldU U -U u C U-S nr- r IasuLMaZt-Mj8u; scMuca:8 r3~~~,C43 - 3A1... AI~~~~~~~~~ V.~~ i~~ ~~ .1HZ WV,' ~~~~~~ ~ .~~~NC '~~ ~~A3~~YC' ~~~ C~~:C3I- ii~~~~~~' ~~ - 105 - ANNEX 3-5 KINGDONI OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT The World Banik INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 1818 H Street, N.W. (202) 477-1234 INTERNATIONAL DEVELOPMENT ASSOCIATION Washington, D.C.20433 Cable Address INTBAFRAD U.S.A. Cable Address INDEVAS Rabat, le 1-er mars 1995 S.E. Monsieur le Ministre d'Etat A l'Interieur (DGCL) Ministere d'Etat A l'Int6rieur Rabat Objet : Arri6r6s dOs par les Collectivites Locales aux Regies de distribution d'eau et d'electricit6, a l'ONE et A l'ONEP. - Demande d'audience. Monsieur le Ministre d'Etat, Je me permets de solliciter votre intervention, pour avoir l'honneur d'une audience aupr6s de S.E.M. le Secretaire General du Ministere d'Etat A l'Int6rieur et de M. le Directeur Gen6ral des Collectivites Locales. En effet, l'apurement des arrieres cites en objet contribuerait de facon significative A re-etablir l'equilibre financier des Regies, de l'ONE et de l'ONEP. Par ailleurs, une partie des engagements des Collectivites Locales vis-a-vis des R6gies figure dans les protocoles d'accord passes le 16.12.1993 entre l'Etat et les Regies, dans le cadre du 5-elme projet d'alimentation en eau potable financ6 avec le concours de la Banque Mondiale. Etant donn6 le caractere complexe et delicat de ce dossier, il serait A mon avis opportun de le discuter dans une seance de travail avec S.E. Monsieur le Secretaire General du Ministere d'Etat A l'Interieur et M. le Directeur General des Collectivites Locales, pour identifier la solution la plus appropriee pour l'apurement cit6 ci-dessus. Veuillez agreer, Monsieur le Ministre d'Etat, l'assurance de ma tres haute consideration. Chef Projet BANQUE MONDIALE Division Developpement du Secteur Privg Finances et Infrastructure Departement du Maghreb et de l'Iran R6gion Moyen Orient et Afrique du Nord - 106 - MINISTERE DE LOINTERIEUR 1%,tlia. 1c {/ 7,18)1 SECRETARIAT GENERAL DIRECTION DES REGIES ET SERVICES CONCEDES N° 160/DRSC/DAF 1.1< A liVlS I'll 1)W'IET lA , A 'INVTlE'llDUR. FT A L 'INFOR RIA17 0 NON A!,. LES l)IR?ECTEURS GE'VERAU. DE.S R-EGIES DE: RA.Dl)-R ED. 111A!. LES DIRECTEURS DES REGIES DE: RADEEA[- R IDEEF- RA DEE,1, l - RAt DEEO-&IA[S,A-RDE-RA ID-R'?DEEC- lL lDEE'r-RtDEES-ki4K-RA DEET,A-R.A/DEEJ- RA DEEN. -S/C DE Itfilf. LES I4LIS DU RAIND CASABLANC,.I- i;l Al.B T rS ALE -, IEKCNE.S- FES-MA ,, lolKECI- 0 UJDAl -,A,GADIR TETOU,AiV. S/C DE ,lI,lf.LES GOUVERNEURS DES PROVzINCES DE: TA NG ER-SE7TAT -BENI A1ELLAL-SAFI-KENITRA -TZA - EL JADIDA-NADOR. OI3,j :1' \ I\iilA YES DIES AD)MINISTRATIIONS. 11 a elc constate qu'un certain nomblre d'Adiniistrationis onit accuiiiule des impay6s de consommiiationi d'eau et d'el6ctricit6 et ce mialgrd la IllisC Cii place dii systlme des vignettes objet de. Ia Circulaire de NonIsiCuL Ic Premiicr Miiiiistre N'69/CAB du 13/11/1992 Cetie Circlaire a pr6conis6 la coupure pour toute po)lice dwit Ia LtCIMact loll in'a pas 6et reglee daiis soni integrali(6. Lors dc Ia r6uiiion du CIPEP, tenue cle 15 Novenilbre 1994, le iouverneimient a donin6 dcs inistructionis feriiids aux distributeurs (le rcslcctcr leurs engnacrients a l'6gard dc leurs fournisseurs et au besoin Ic proceder ~ la suspension de la fourniture de I'61ectricitd et de 1'eall pouir towLe Adiniiiistratioi (ilni ne r6gle pas ses factures dans Ies d6lais p)rdsc rits. Coniptc lictn de cc (qui p)r6ceLIC, les regies sooit leinuleS de veilic- a la stricte application dce ces inistructionis. En cas de conitestationi par une Adriiiistrarioni d'Ulle oU plusicurs factures, la r6gie (levra souniettre le dossier y aff6rent a Mvronsieuir Ic Gotiverineur (le la Province oll de la Pr6fecture concerin6 afin u'tinc solutioin soit trouvec dlans on d6lai ne d6passaut pas 15 jooirs Le [Iiiiistc ed' Etlt ia I' Phlit-iemir et S I' Inirormi.atioii Siguiie: Dr-iss IIASItI - 107 - ANNEX 3-7 Page 1 of 2 ROYAUME DU MAROC Rabat, le 15 JUIN 1995 MlNISTERE DE L'INTERIEUR SECRETARIAT GENERAL DIRECTION DES REGIES ET DES SERVICES CONCEDES N° 53 /SG Le Ministre d'Etat a l'Int6rieur A Messieurs les Walls du Grand-Casablanca - Rabat-SalW - Mekin?s - Fes - Marrakech- Tftouan - OuJda-Angad - Agadir et Gouveueurs des Provinces de Tanger - Safi - licnitra - El Jadida - Settat - Beni MeUal - Taza - Nador 03 DJ E T !: - Reglement des arrlres. Lors (le la r1-6lIo11, tenue le 2 Juln 1995, au slege du MilnIstre de 'lnitlrIeur, au sujcl de l'examnen du plan de d6veloppenicnt des lRcglcs et du problibne de leurs arrilres, II a elc6 constatl la Iciteur du processus de recouvrenient des cr(aniccs donl sonl ltd6bItcuL-s, a .Icur cgard, les Aclriiiiilsiratiolis, Ics Collectlvil6s Locales, Ics E tablissemients hiblics c(. les particullci-s. CctLc situaioni eniiti-aine des retards liiportarits clans le palceiet par les R4dgles des arrleres contractls vIs a vis de l'ONE1' et de l'ONE. Cel etat de chose, s'Il s'telrnIse, ne nianquera pas de p)ortcr uil grave prejudicc au bDon fonctionneniient des InstiutlIons lpubliucs, en g6n6ral, cl des RegIes, en parlic ullcr-. Aussi, cst-Il UrgCent ILIC CCS dernl6rcs prennenlt Ics iniesuIes appIr9pi-lees pour lt ie d6slntfressdes par ses erancliers, qu'lls relevent de l'AdmilnlIstratlon ou des secteurs public cl prIvc. Alrisi, cies scrotil cii mesuic dc proceder, dains Ics d6laIs Ics nicillcurs, au r6gleimenit dces dicles 6eCIIucs CIIVClS VONE cl I'ONEI'. ANNEX 3-7 -108 - Page 2 of 2 A ce ULire, elles solIl lenues d'obseiver a la arigueur l'applicatlon des clauses des conventiorns passecs avec Ics Offlces producteurs et de falre pi-evalolr les clauses Iegales de sauvegarde des conlrats d'aboninenient. souscrits librenienL par les consoniiiiateurs. P'ar ailleurs, 11 apparuLent aux WRgies d'adoplei- Ics noriiies d'une gesiuon rationnelle eL, particulle-ement, de s'assure- une maialtise parfalLe de la facLuraLlon, souvent soutrce dc coniiestatlon legItimie de la part des abdiiiis. Le secteur de disLilbutioin de i'eau ct le Il'echricild repr6sente, en effet, un doiialne shratlglque, lres senisible, qul touclie toule la population. C'esl pourqUOl, 11 doll elre gere dans la plus par-falte transparence.. Jc vous linvite, aInisl que les P'r6sidents des ComnmunauLes Urbalnes et les Presidents cles Consells Municipaux Inntresses, a veliler scrupuieLIseileiiL A la bonne marchie des R6gles. J'appelle, 6galenienl, les Directeurs des WRgIes a al)pliqucr, avec fernimel cl iigucui-, les iinstluctionis colitelLues danis la Circulaire de Monsieur le Premiei Ministre n° 69/Cab en date du 13 Novenibi-e 1992 et dans celle de Monsieur le Ministire d'Elat n° 160/DRSC du 7 D6cemiibre 1994 auLorisaniL la COUr)LIIeC d'Catu cl fCIlectricite pour toute p)oliCe dotiL la facLuratlon n'auira pas cle ri-gle dans soni inlL&graIIte./. I.e lifin Ire J1 il I'lot:'rif-rnr - 109 - ANNUA Page 1 of 8 IEINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RIEUSE FROD3C Economic Anvsk 1. The purpose of this note is to explain the underlying assumptions and the methodology used in the calculation of the rate of return of the project components to be executed by the Regies. In Morocco, financial prices are close to economic prices, in particular with reference to the exchange rate, interest, and tradeable commodities reflecting minimal overall distortion in the economy. The Standard Conversion Factor (SCF) has been evaluated, by the Country Operation Division, at 0.90. Project investments and operating costs are expressed in constant 1994 prices and are converted into economic costs by removing taxes and duties, and border pricing the local component for all cost categories. 2. Investment costs associated with the rehabilitation of sewerage infrastructure, expansion of the network and treatment of effluents cover procurement of pipes, civil works, waste water treatment plants, expenses for consulting services, studies, technical assistance and training contributing to improving the efficiency of the existing system and expansion to unserved areas. Cost of connections and revenues from customers contributions were not taken into consideration in the evaluation of costs and benefits. 3. Fes is the only Regie for which the proposed project finances physical investments. However, the economic evaluation was carried out on the proposed investments of the three Regies which were assessed during appraisal and it is presented hereafter. Directly quantifiable benefits of the project components would be revenues generated by the collection and treatment of waste waters carried by the system in Fes and Marramech and revenues generated by the additional volume of waste water collected in Casablanca (extension and reinforcing of the system represent 85 % of the investment costs. In Casablanca, the project is expected to raise the rate of connection to the sewerage system from 0.7 in 1996 to 0.79 in 2004. 900,000 new people will be served and 56 million m3 of effluents will be collected and channelled to the outfall. The project components operated by RADEEF and RADEEMA which will likely start their first investments in this subsector under the proposed project, consist of large rehabilitation programs (due to the obsolescence of the existing system) and the installation of a waste water treatment plant to treat the current and projected volume of waste water. In FRs, the project is expected to improve the connection rate from 0.69 in 1996 to 0.84 in 2004 serving 300,000 additional customers. In Marrakech, the connection rate will increase from 0.8 in 1996 to 0.88 in 2004 serving 100,000 additional population. In both towns, the project will benefit, however, the whole population since rehabilitation of the primary network and construction of the waste water treatment plants will improve the service for all and will treat current and expected effluents. To evaluate these benefits, the assumption that 75 % of the effluents being produced by the population served through connections will be treated and will benefit from rehabilitation, was made. 4. The demand projections estimating the additional volume of effluents to be collected and treated in the participating Regies during project operations are calculated with the same assumptions that were adopted in the evaluation of the Vth Water Supply project, but they have been updated to reflect 1993 and 1994 real consumption levels. They are reported for 1995 and - 110 - ANNEX 4 Page 2 of 8 2000 in Annex 2-1. Revenues have been calculated by applying the projected tariff level in the first year of partial operation of the project, 1999. The tariff, expressed in constant 1995 prices, are 1.72 dh/m3 for RADEEF, 2.10 dhJm3 for RAD and 1.83 dh/m3 for RADEEMA. 5. The AIC of providing sewerage infrastructure connecting by 2010 93%, 85% and 94% of the population for RADEEF, RAD and RADEEMA respectively, was calculated. It was also assumed that the quality objectives would be maintained. The AIC represents in this case a benchmark value against which the projected financial tariffs are compared to assure that resources are used efficiently (see Table 1,2,3, hereafter). 6. The main unquantified benefit of the project is the positive impact on health and the improvement of the urban environment. Attempts to quantify, as benefits, the costs of treatment that would be saved if the morbidity rates of selected water borne diseases such as diarrhea, cholera, typhoid were decreased because of the implementation of the project were carried out during preparation and pre-appraisal. At the moment, however, specific information on treatment costs, length of the disease by age group and duration of hospital study for each considered disease, are not available. 7. The practice of using raw waste waters for irrigation purposes is currently used on about 700 ha in Morocco, two-thirds of which are in the Fes area. In Fes, the treated waste water will benefit existing perimeters which are currently irrigated with raw sewage. In Marrakech, a larger area of agricultural land, around 2000 ha, designated for cultivation of olive trees, wheat and beans, would benefit from the treated waste waters. 8. Another way to look at the whole set of positive extemalities and benefits that sewerage infrastructure can generate is to use hedonic pricing as an indication of the likely impact of the project through a comparison of land values of a sample of areas before and after sewerage infrastructure was implemented. During project preparation, each Regie conducted a smal survey to evaluate the differential in land values. According to several developers, the provision of sewerage infrastructure can influence land value appreciation even more than electricity and direct water supply. The survey was done in areas that were already fully equipped except for sewerage. Treating the provision of potable water, electricity and sewerage as equivalent to the provision of complementary goods, it can be assumed that, i.e. only 30% of the appreciation is attributable to sewerage services. In the case of Fes, data was unfortunately not available; however, surveys conducted in Casablanca and Marrakech shed light on the range of the net land appreciation value that can be expected in Fes where land shortages are experienced. In the case of Casablanca, the average appreciation spread was 300 dh/m2 over a sample of about 3,000 ha of different location and nature of development; this would mean 2.7 billion DH (1994) are attributable to the expected benefits and extemalities of the provision of sewerage infrastructure. If the same average value was applied to the project areas (around 4,500 ha) where extensions of the system and new connections are going to be implemented and accounted for in the probable rental values of that land, the project would have an expected ERR of 28%. In the case of Marrakech, the average appreciation value was much lower, 20 DH/m2, also reflecting the abundance of land around the town; however, considering the areas that will be equipped during project implementation or where major rehabilitation will reduce flooding of sewerage, the net land appreciation value would be 570 million DH (1994); also, in this case, the additional value incorporated into the land price is substantial. Hedonic pricing helps quantify those benefits that the population will get from the project that would remain otherwise unaccounted - 111 - ~~~ANNEX4 Page 3 of 8 for with traditional economic evaluation techniques. 9. The R6gies apply differential water tariffs to residential customers, with the lowest tariff level applied to customers consuming 24 m3 or less per trimester. For RAD, the first Regie to start operating sewerage services, those who fall into this tranche of consumption are currently exempted from paying user fees for sewerage service while a flat rate is applied to the other tranches of consumption. Based on the financial projections for the three Regies camed out during the preparation of the Vth Water Supply project and the proposed project, the average water and sewerage charges are projected to reach their highest value in real terms by 200, the following: DH7.5/m3 and DH8.7/m3 for RADEEF for the second and third tranche respectively at 1995 prices; DHIO.9/m3 and DH14.2/m3 for RAD and DH8.1/m3 and DHIO.9/m3 for RADEEMA. 10. Assuming that the tariff structure underlying the projected average would be the same as the current structure, and that the structure of the consumption expenditure distrbution would be the same as in 1990/911, in Fes the yearly payments for the consumption of 100 liters per day per person in an average family of six people would be about 1.2% of the mean of the expenditure distribution projected for year 2001, at 3 percent yearly increases in real terms during the 1991-2001 period and measured at 1995 prices. The yearly payments would represent 2 percent of the mean expenditure for consumption estimated for the cumulative distribution of 44 percent of population. It would represent, however, 4.3 percent of the household budgets of the urban poor. Assuming that the consumption of low income customers is likely to be lower than 100 lI/d/p, i.e. 60 lI/d/p or 43 1/d/p, the budget share would be 1.8 and 0.8 respectively due to the tariff structure that benefits low consumption customers. Table 5 shows the budget shares for different expenditure groups calculated at 1988 tariffs and 2001 tariffs. The values of budgets shares indicate that the expenditures for water and sewerage according to the projected tariffs, are within the range of acceptability by Bank standards. However, these calculations were done using mean expenditures for consumption calculated in 1990/91 at the national level for urban areas. Therefore, during negotiations, agreement was reached with RADEEF to carry out no later than December 31. 1998. a detailed tariff study for defining a tariff structure more appropriate for keeping the budget shares of expenditures for water and sewerage under 5 percent of household income or expenditures, if the latter is the datum available. The study will also define the most appropriate and economically viable tariff structure for each category of customers. Kingdom of Morocco, 'Poverty, Adjustment and Growth", The World Bank, 1994, Volume II, Table 3. KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROEClT Economic iustification Table 1: Cost and Benefit Stream (1995 DH million) REGIE: RAJFEF - Fes 1 2 3 4 5 6 7 8 9 10 11 12 13 14-20 21 22 23 24 25-40 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 010-16 2017 2018 2019 2020 2021-36 COSTS 1. Investments - Pipelines and civil works 25.7 77.1 128.5 128.5 102.8 51.4 - Equipment 1.1 3.2 5.3 5.3 4.2 2.1 10.G 11.0 Consulting services, T.A., training 1.1 3.4 5.6 5.6 4.5 2.2 -Physical contingencies 2.8 8.4 13.9 13.9 11.1 5.6 Total Investments 30.7 92.0 153.3 153.3 122.6 61.3 2. O&M costs - Pipelines and civil works 4.63 5.14 5.14 5.14 5.14 5.14 5.14 5.14 5.14 5.14 5.14 5.14 5.14 5.14 - Equipment 0.95 1.05 1.05 1.05 1.05 1.05 1.05 105 1.05 1.05 1.05 1.05 1.05 1.05 - Chemicals and energy 0.5 0.8 1 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 - Personnel 3.3 4.2 5.2 6.2 7.1 7.8 8.4 9.2 10.0 10.0 10.0 10.0 i0.0 10.0 10.0 10.0 10.0 10.0 10.0 j - Frais generaux 1.00 1.27 1.55 1.86 2.14 2.33 2.53 2.76 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 Total O&M costs 4.34 5.52 6.71 8.55 10.07 16.66 18.37 19.34 20.40 20.40 20.40 20.40 20.40 20.40 20.40 20.40 20.40 20.40 20.40 TOTAL COSTS 35.0 97.5 160.0 161.9 132.7 78.0 18.4 19.3 20.4 20.4 20.4 20.4 20.4 20.4 30.4 31.4 20.4 20.4 20.4 BENEFITS Revenus fran additional waste 31.7 42.5 51.3 55.2 64.5 67.6 72.5 76.7 81.8 85.5 89.6 92.2 9.4 96.40 96.40 96.40 96.40 96.40 water collected and treated BENEFIT-COSTS -35 -65.8 -117.5 -110.5 -77.6 -13.5 49.3 53.2 56.3 61.4 65.1 69.2 71.8 76.0 66.0 65.0 76.0 76.0 76.0 ERR and NPV 11.5% 58.13 Average 1999 tarif 1.72 95DH/m3 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-36 Totalg nvestments in fin. term. 31.9 101.3 166.3 167.7 137.0 79.5 84.1 85.6 88.8 90.7 92.7 94.6 96.49 98.41 100.3 41.29 41.29 41.29 41.29 Nctwatcrcollected 7.5 18.3 24.6 29.7 31.9 37.3 39.1 42.0 44.4 47.4 49.5 51.8 53.4 55.8 55.8 55.8 55.8 55.8 0 NPV (10%) of invcstments 952.2 m NPV (10%) of collected water 375.6 4- AIC 2.535 ° 1 m:\l«n\\Sy&5xC§d.xLS oD KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT Ecoenic iustification Table 1: Cost and Benefit Stream (1995 DH million) REGIE: RAD -Casablanca 1 2 3 4 5 6 7 8 9-20 21 22 23 24 25 26 27 28 29 30-40 1997 1998 1999 2000 2001 2002 2003 2004-15 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026-35 COSTS 1. Investments - Pipelines and civil works 25.9 77.6 129.3 129.3 103.4 51.7 - Equipment 0.5 1.5 2.6 2.6 2.1 1.0 5.3 6.4 - Consulting services, T.A., training 1.7 5.2 8.6 8.6 6.9 3.4 I - Physical contingencies 2.8 8.4 14.0 14.0 11.2 5.6 Total Investments 30.9 92.7 154.5 154.5 123.6 61.8 2. O&M costs -Pipelines and civil works 4.66 5.17 5.17 5.17 5.17 5.17 5.17 5.17 5.17 5.17 5.17 5.17 5.17 5.17 1 - Equipment 0.369 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 - Personnel 1.87 4.01 5.66 6 9g 9.67 11.12 12.01 12.89 12 89 12.89 12.89 12.89 12.89 12.89 12.89 12.89 12.89 12.89 12.89 Frais generaux 0.56 1.20 1.70 2.08 2-90 3.34 3.60 3.87 3.87 3.87 3.87 3.87 3.87 3.87 3.87 3.87 3.87 3.87 3.87 !Total O&M costs 2.43 5.22 7 35 9.03 12.58 19.48 21.19 22.34 22.34 22.34 22.34 22.34 22.34 22.34 22.34 22.34 22.34 22.34 22.34 ITOTAL COSTS I 33.3 97.9 161.9 163.5 136.2 81.3 21.2 22.3 22.3 27.7 28.7 22.3 22.3 22.3 22.3 22.3 22.3 22.3 22.3 BENEFITS Revenus from additional 24.1 39.0 52.9 66.0 74.9 84.3 94.0 94.0 94.0 94.0 94.0 94.0 94.0 94.0 94.0 94.0 94.0 94.0 waste water collected BENEFIT-COSTS -33.3 -73.8 -122.9 -110.6 -70.2 -6.3 63.1 71.7 71.7 66.4 65.3 71.7 71.7 71.7 71.7 71.7 71.7 71.7 71.7 ERR andMNPV _ _ _ 11.9% 71.47 _ Average 1999 tarif 2.10 95DH/m3 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 7008 2009 2010 2011 2012 2013 2014 2015-36 Total Investments in fin. term. 95DDH 168.1 93.2 140.1 128.4 96.8 51.7 51.0 48.0 45.1 42.0 39.1 . ..' 33.7 31.3 29.1 10.9 9.9 9.0 8.2 Net water collected 3.813 11.5 18.56 25.21 31.43 35.68 40.13 44 78 49.64 56.01 65.24 71.95 78.78 85.72 85.7 85.7 85.7 85.71 11 NPV (10%) of investments 1182 NPV (10%) of collected waler 464 m:\iaur%s=wi\a\spri.x1sA 1MNGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PlROJECT EctDMic jsifiaio Table 3: Cast and Benefit Stream (199 DH million) REGIE: RADEEMA - Maakech 1 2 3 4 5 6 7 8 9-20 21 22 23 24 25 26 27 28 29 30-40 1997 1998 1999 2000 2001 2002 2003 2004-15 2016 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025-35 COSTS 1. Investnbts - Pipelines and civil works 15.8 47.4 78.9 78.9 63.2 31.6 - Equipment 0.4 1.2 2.1 2.1 1.6 0.8 3.6 4.4 - Consulting services, T.A., training 0.9 2.6 4.3 4.3 3.4 1.7 - Physical contingencies 1.7 5.1 8.5 8.5 6.8 3.4 Ttal lnvestmnts 18.8 56.3 93.8 93.8 75.1 37.5 3.6 4.4 2. OhM costs - Pipelines and civil works 2.84 3.16 3.16 3.16 3.16 3.16 3.16 3.16 3.16 3.16 3.16 3.16 3.16 3.16 - Equipment 0.30 0.33 0.33 0.33 0.33 0.33 0.33 0.33 0.33 0.33 0.33 0.33 0.33 0.33 - Personnel 3.5 3.7 3.9 4.0 4.3 4.5 4.7 4.9 5.1 5.06 5.06 5.06 5.06 5.06 5.06 5.06 5.06 5.06 5.06 -Fraisgeneraux 1.05 1.10 1.16 1.21 1.28 1.34 1.41 1.47 1.52 1.52 1.52 1.52 1.52 1.52 1.52 1.52 1.52 1.52 1.52 Total OM costs 4.55 4.77 5.01 5.26 5.53 8.94 9.58 9.84 10.07 10.07 10.07 10.07 10.07 10.07 10.07 10.07 10.07 10.07 10.07 TOTAL COSTS 23.3 61.1 98.8 99.1 80.6 46.5 9.6 9.8 10.1 13.7 14.5 10.1 10.1 10.1 10.1 10.1 10.1 10.1 10.1 BENEFITS Revemus from waste water 23.9 28.9 31.1 34.0 38.3 41.1 42.8 45.8 48.4 51.8 51.8 51.8 51.8 51.8 51.8 51.8 51.8 51.8 collcted and ttd BENEFIT-COSTS -23.3 -37.2 -70 -68 -46.6 -8.19 31.48 32.93 35.75 34.71 37.29 41.69 41.69 41.69 41.69 41.69 41.69 41.69 41.69 ERR and NPV 11.2% 27.45 Average 1999 tarif 1.82 95DH/m3 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Totallnvestment infin.tcnm. 19.71 64.11 103.8 104 84.61 48.74 50.41 51.73 53.075 54.12 55.18 56.23 57.28 58.33 59.38 21.01 21.01 21.01 21.01 netwatercollectedandtreated 12.52 13.05 15.78 17.02 18.62 20.94 22.46 23.396 25.07 26.47 28.32 29.48 30.69 31.95 31.95 31.95 31.95 31.95 0 NPV of investments 574.8 f NPV of collected war 213.9 AIC 2.69 m:MdiUMWMmp2.xs X KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT Economic iustification Table 4: Sensitivity analysis on ERR and IRR RADEEF RADEEMA | RAD VARIABLES ERR (%) NPV ERR (%) NPV ERR (%) NPV (milLion 95DH) (miLlion 95DH) (million 95DH) Base case 11.5 56 11.2 27 11.9 71 (a) 20% increase in investment costs 9.9 -3 8.9 -30 9.5 -22 (b) (a) and 20% decrease in benefits 7 -130 7.6 -70 8.4 -73 Switching values (at ERR = 10% RADEEF RADEEMA RAD Reduction of expected additional 15% 8% 5% consumption (% per year) Connection rate in 2003 77% 81% 75% RADEEF RADEEMA RAD VARIABLES IRR (%) NPV IRR (%) I NPV IRR (%) NPV (million 95DH) (million 95DH) (million 95DH) Base case 10.9 35 10,7 16 11.4 53 (a) Benefits evaluated applying 14.7 207 16.6 163 18.6 48.3 financial projections at 1995 prices (b) (a) and 20 % decrease in benefits 11.1 45 13.9 108 17.1 42.8 Switching values RAD RADEEF RADEEMA Tariffs 1.73 94 DH/m3 1.57 94 DH/m3 1.7 94 DH/m3 C :\Zakia\Mor\Sergio\Annexe\Tabsen. xls - 116 - ANNEX 4 KINGDOM OF MOROCCO Page 8 of 8 SECOND SEWERAGE AND WATER RE-USE PROJECT Economic iustification Table 5: Budget shares for water and sanitation in 1998 and 2001 1 case: 100 I/p/d for a family of RADEEF RADEEMA RAD six people 1998 2001 1998 2001 1998 2001 Mean of the expenditure distribution 1.2 1.3 1.2 1.3 1.8 1.8 (9223 dh per year per person in 1990/91) Mean of the expenditure for the cumulative 1.5 1.5 1.5 1.6 2.2 2.2 distribution of 61 % of population (7549 dh per year per person in 1990/91) Mean of the expenditure for the cumulative 1.9 2 1.9 2.1 2.9 2.9 distribution of 44 % of population (5786 DH per year per person in 1990/9 1) Mean of the expenditure of urban poor 4.1 4.3 4.1 4.5 6 6.2 (10% of population) (2741 dh per year per person in 1990/91) 2 case: 60 I/p/d for a family of RADEEF RADEEMA RAD six people 1998 2001 1998 2001 1998 2001 Mean of the expenditure of urban poor 1.7 1.8 1.6 1.8 2.9 2.6 (10% of population) (2741 dh per year per person in 1990/91) 3 case: 43 I/p/d for a family of RADEEF RADEEMA RAD six people (< =24 m3 per quarter) 1998 2001 1998 2001 1998 2001 Mean of the expenditure of urban poor 0.8 0.8 0.7 0.8 1.2 1.2 (10% of population) (2741 dh per year per person in 1990/91) Note: The expenditure structure would be the same as 1990/91 structure and it was assumed that expenditure levels would grow by 3 percent in real terms during the 1991-2001 period. Every value used in the calculation was expressed at 1995 prices m:\Iaura\mor\sewii\tab5 .xIs - 117 - KINGDOM OF MOROCCO SECOND SEWERAGE AND WATER RE-USE PROJECT SELECTED DOCUMENTS IN PROJECT FILE 1. Aide-Memoire - Deuxieme Projet d'assainissement et reutilisation de 1'eau - Mission d'evaluation - 19 mai 1995. Plan directeur d'assainissement de Fes (d6cembre 1995): 2. Mission 1. 1 - Tome 1 - Rapport final 3. Mission 1. 1 - Tome 2 - Rapport final - Annexes 4. Mission 1. 1 - Rapport final - Dossier des plans 5. Mission 1.2 - Rapport final - Tome 1 - Avant Projet Sommaire 6. Mission I.2 - Rapport final - Avant Projet Sommaire - Sommaire des Annexes 7. Mission 1.2 - Rapport final - Avant Projet Sommaire - Plans 8. Mission 1.2 - Rapport final - Tome 2 - Etude d'impact 9. Mission 11. 1 - Rapport final - Organisation du Service d'Assainissement (RADEEF) Deuxieme Projet d'assainissement et reutilisation de l'eau - Evaluation Environnementale - 3 volumes (avril 1995): 10. Volume 1 11. Volume 2 12. Volume 3 13. La Pollution des eaux de surface (Bassin hydrographique de S6bou) - 1994 IBRD 26877 36' 12° 36 TANGER Mediterranean Sea MOROCCO RI ( TETOUAN SECOND SEWERAGE AND WATER / RDEI / RE-USE PROJECT HoroAheO ( CAoUEt--- REGIES LOCATION El 'K*, ATLANTIC OCEAN / OU/ DA ___ r TACUNATE )~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~__1 OUDO RE3 REGIES ,,f O HEADQUARTERS OF REGIES /___ yRADERTA \ * PROVINCE CENTERS SERVED BY REGIES KENITRA,6 RA , E. TAZA Ji MOUNTAINS S FES TAZA ISOHYET TeAB4A E HEMISSET ME NES\ '_______ RIVERS AND WADIS Skh* uj FES PROViNCE CAPITALS M.h.o-od, f _ RABAT NATIONAL CAPITAL RA BEN - PROVINCE ROUNDARIES 'MANRu . . -.- INTERNATIONAL BOUNDARY EL JAD- - - - - INTERNATIONAL BOUNDARY (APPROXIMATE) . /Khemis \ K /KHOURIBGA: _ 0 J,.~~~~~~~~~~~~~~~~~N thm oP p ow.nceco,Isresm Oodo/ ZeTmo nome pl plOVIIliE sopltnl , j/ ~~~~Benu 0 \t El Boro- _ tT'a "ITt 1320 (SAFI A - \ APPROX ATE BOUANDARY.FIGIG o) 3210 ESSAOUIRA MARAEC KILOMFETERS *A. hlelloul .I ' TON ,t ~.'* OTATA , . ' i t * e _ o r n1 125 - t < , - MARCH lS>< IMAGING Report No: 15433 MOR Type: SAR