Document of The World Bank FILE COPY FOR OFFICIAL USE ONLY Report No. 5068a-AL STAFF APPRAISAL REPORT ALGERIA ALGIERS REGIONAL WATER SUPPLY PROJECT June 11, 1984 Water Supply and Sewerage Division Europe, Middle East and North Africa Regional Office This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
Transcript
Document of
The World Bank
FILE COPYFOR OFFICIAL USE ONLY
Report No. 5068a-AL
STAFF APPRAISAL REPORT
ALGERIA
ALGIERS REGIONAL WATER SUPPLY PROJECT
June 11, 1984
Water Supply and Sewerage DivisionEurope, Middle East and North Africa Regional Office
This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.
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CURRENCY EQUIVALENTS(As of April 2, 1984)
Currency Unit = Algerian Dinar (DA) 100 CentimesDA 1 = US$ 0.21US$1 = DA 4.80DA 1,000,000 - US$ 208,333
ABBREVIATIONS
ft = foot m = meterha hectare mm = millimeterKm = kilometer Mm3 = million of cubic metersinh = inhabitant m3/sec cubic meters per secondlcpd = liters per capita per day min minute
MEASURES AND EQUIVALENTS
Metric System U.K. System
Kilometer (km) = 0.62 mile (mi)hectare (ha) = 2.47 acres (a)Meter (m) = 3.28 feet (ft)Cubic meter (m3) 220 gallons (g)Million cubic meters/year (Mm3/year = 0.603 million gallons per day (mgd)Liter (1) = 0.220 gallon (g)Liters per second (1/sec) 19,000 gallons per day (gd)Kilogram/cm2 = 0.981 Bar
GLOSSARY OF ACRONYMS
EPEAL = Entreprise de Production, de Cestion et de Distributiond'Eau d'Alger
DGE = Direction Generale de l'ExploitationDGIH = Direction Generale des Infrastructures HydrauliquesDWH = Direction de la Wilaya d'Alger Chargee de l'HydrauliqueSEDAL = Societe des Eaux de l'Agglomeration d'AlgerSONADE = Societe Nationale de Distribution d'Eau Potable et
IndustrielleSNC Societe Nationale de Comptabilite
EPEAL's FISCAL YEAR
January 1 - December 31
FOR OFFICIAL USE ONLY
ALGERIA
ALGIERS REGIONAL WATER SUPPLY PROJECT
STAFF APPRAISAL REPORT
Table of Contents
Page No.
I. INTRODUCTION ............................................. 1
II. THE WATER SUPPLY AND SEWERAGE SECTOR ..................... 2
Background .......................................... 2Water Resources ............................. 3Sector Organization ................................. 4Service Levels ...................................... 5Constraints to Sector Development ................... 5Investment Program in the Sector .................... 6Previous Bank Loans in the Sector ................... 7Bank's Objectives for the Sector .................... 8
III. THE PROJECT AREA ........................................ 8
General Features .................................... 8Water Production Facilities ......................... 9Conveyance System ................................... 9Existing Distribution Network ....................... 10Existing Sewerage ................................... 10
IV. DEMAND AND MARKET ASPECTS ............................... 11
Water Consumption ................................... 11Composition of the Demand ........................... 12Population Forecast .................. 12Projected Water Consumption ......... ................ 13
V. THE PROPOSED PROJECT .................................. 13
Project Genesis and Concept .......... ............... 13Objectives of the Project ............. .............. 15Project Description ................................. 15Cost Estimates ................................... 8
This report was prepared and written by Mr. Fritz Rodriguez and Mr. Nabil Shehadeh.
This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.
Table of Contents (Continued)
Page No.
Project Execution .................................. 19Project Financing ................................... 20Reimbursement of the Government ..................... 21Procurement ......................................... 22Disbursement ........................................ 22
VI. PROJECT IMPLEMENTATION AND OPERATION ................... 23
Executing Agency ................................... 23Operation and Maintenance .......................... 24Project Accounts and Audit ......................... 25Reporting .......................................... 25
VII. THE BENEFICIARY ........................................ 26
VIII. FINANCIAL ANALYSIS ...................................... 31
Past and Present Financial Position .... ............ 31Revenues ................................. 32Financial Studies .................................. 34Financing Plan ..................................... 35Future Financial Performance ....................... 36Monitoring System .................................. 36
IX. ECONOMIC ANALYSIS ...................................... 37
Objectives of the Proposed Investments .... ......... 37Least-Cost Solution ................................ 37Project Justification .............................. 38Affordability ...................................... 38Environmental Impact of the Project .... ............ 38Institution Building ............................... 38Adequacy of EPEAL's Pricing Policies .... ........... 39Risks .............................................. 39
X. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS ..... ....... 39
Table of Contents (Continued)
LIST OF ANNEXES
Annex No.
1 Development of Water Resources in the Algiers-Sebaou Region2 Terms of Reference for Technical Assistance in Setting-Up a
Regulatory Agency for Water Supply and Sewerage3 Service Levels in Urban Areas in Mid-19814 Terms of Reference for Carrying Out a Survey of the Water Supply
and Sewerage Sector5 Water Consumption and Sales in Algiers Wilaya, Past and Forecast6 Population and Housing in Algiers Wilaya7 Forecast of Water Demand and Sales in Algiers Wilaya8 Isser Water Transfer to Keddara Reservoir9 Detailed Cost Estimates10 Annual Project Investments11 Bar Chart of Construction Schedule12 Allocation of the Loan Proceeds13 Estimated Schedule of Disbursements14 Organization Chart of the Ministry of Hydraulics15 EPEAL - 1984 Organization Chart16 Terms of Reference for Organization, Management and Financial
Studies17 EPEAL - Income Statements - 1983-199218 EPEAL - Table of Sources and Application of Funds - 1983-199219 EPEAL - Balance Sheets - 1983-1992
20 Assumptions for Financial Projections21 Mlonitoring Indicators22 Assumptions for Economic Evaluation of the Project23 Calculation of the Long-Run Average Incremental Cost of Water24 Distribution of Annual Expenses by Households in Greater Algiers25 Selected Documents and Data Available in the Project File
Map No.
16088 Urban Areas to be Served16089R General Layout of the Project Facilities
ALGERIA
ALGIERS REGIONAL WATER SUPPLY PROJECT
STAFF APPRAISAL REPORT
I. INTRODUCTION
1.01 Since Algeria's independence in 1962, there has been an explosion ofits urban population which has grown at an annual rate of more than 5percent. This has been particularly acute in Algiers, the nation's capitaland largest city, whose population has more than tripled since 1962 to itspresent level of 2.1 million. However, in spite of the rapid growth of thepopulation, the expansion of the cities' social infrastructure has not keptpace with the urban growth, and public services such as water supply,sewerage, transport, telecommunication, etc. are very deficient. The watersupply system of Greater Algiers has basically remained the same since theearly seventies and the city is experiencing severe water shortages. Theunsatisfied demand has now reached 46 percent of the production.
1.02 The Government is aware of this situation and has placed theimprovement of water supply to Greater Algiers among its highest priorities.Such improvement, however, would entail the transfer of water resourceslocated outside the Algiers basin and costly river regulation schemes. Itwould also require better management of the services and greater participationof consumers in raising funds needed for expanding the services. It is adifficult task for which the Government has clearly expressed its desire toreceive assistance from the Bank, whose involvement in the sector would befully justified, as adequate water supply and sewerage have becomeprerequisite to urban renewal and continued industrial growth of Algeria.
1.03 The proposed project involves the construction of an impounding damon Oued Boudouaou and another on Oued Isser, two river basins adjacent toGreater Algiers, to regulate an annual flow of 160 Mm3 for urban watersupply. Because of the present institutional weaknesses of the sector, theproject includes important software elements. A sector study would be carriedout and another study would outline the policies and functions of a nationalregulatory authority to be set up for the water supply and sewerage sector.The project further includes management assistance to the water supply and
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sewerage company in Greater Algiers to assist it in the development andimplementation of more effective policies and procedures.
1.04 The total estimated cost of the proposed works and technicalassistance is US$770.5 million, with a foreign exchange component of US$392.4million. A Bank loan of US$290.0 million to finance partly this component isproposed. The execution of some of the project components has started sinceearly 1982 and the construction of the remaining elements is programmed tobegin by mid-1985. Bids for this construction have already been received.The proposed project is technically sound and represent the least costalternative for increasing water supply to Greater Algiers. It would amountto an investment of about US$ 219 per capita, which is acceptable consideringthe obsolescence of the existing system and the need to provide at once alarge production increase.
1.05 A Bank loan (S-17AL) of US$5.0 million was made in 1980 for theproject preparation which was carried out by the Ministry of Hydraulics withthe assistance of British consultants. Formulation of a master plan fordevelopment of water resources in the Algiers/Sebaou region was also financedunder the loan. The Bank reviewed the feasibility study of the master planand actively participated in the formulation of the water supply project forGreater Algiers, which was originally appraised in June 1981. Furtherprocessing of a loan for the project, however, was stopped, awaiting theGovernment's approval of a tariff increase in Greater Algiers and moreprogress by the Algiers water company in strengthening its organization andprocedures. These issues were finally resolved and a Bank mission composed ofMessrs. Fritz Rodriguez and Nabil Shehadeh updated the project appraisal inMarch 1984.
II. THE WATER SUPPLY AND SEWERAGE SECTOR
Back round
2.01 Algeria is the largest country of North Africa and occupies an areaof about 2.3 million Km2 which is divided by the Saharan Atlas into twodistinct regions. North of the Atlas is a semi-arid area which encompasses acoastal strip along the Mediterranean, the interior plains, some highlandsnear the coast and the high plateaux located at about 200 kms from the coast.More than 95 percent of the Algerian population lives in this region. Themean annual rainfall in the northern areas varies from 300 mm to 1,000 mm,exceeding 600 mm only in the central and eastern coastal parts where therichest arable land is found. South of the Atlas is the Sahara where the meanannual rainfall is less than 100 mm, but which is rich in mineral resources.There are 17 major river basins in the country.
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2.02 Administratively, Algeria is divided into 31 provinces (wilayate) 11,160 counties (dairate) and 704 communes. The current total population isestimated at 21 million. More than half of the population live in urban areaslocated along the Mediterranean. About 40 percent of the urban population isconcentrated in the three largest metropolitan areas, Algiers, Oran andConstantine, whose annual population growth rate is estimated to be more than5 percent. Most of the rural population resides in fixed settlements whichneed to be equipped with water supply and sanitation facilities; only a smallportion of the rural population, roaming in the high plateaux, can beconsidered dispersed.
Water Resources
2.03 Water resources in Algeria are generally limited and difficult toexploit. Most of the surface water sources are dry in summer, are of poorquality and thus cannot readily be used for domestic and industrial supply.In general, regulation of the rivers through costly reservoirs is required inorder to obtain economically exploitable yields. On the other hand, the rateof infiltration from storm runoff and surface sources is high and as a result,groundwater is available all over the country and represents more thantwo-thirds of the available water resources. The salinity of a large portionof the groundwater, however, is high, restraining its use for domesticconsumption and irrigation. A majority of the cities are supplied withgroundwater.
2.04 Overall, the average yield of the existing fresh water sources withfull development of storage is estimated at 7 billion m3/year, which shouldbe sufficient to cover the water needs for urban, industrial and agriculturaluse until the early part of the next century. Beyond that time, it wouldbecome necessary to resort to reclamation of wastewaters and later on todesalination, to meet the demand. This situation already exists in somedensely populated river basins where the present demand actually exceeds theavailable resources in these basins, and for which water needs to betransferred from adjacent basins. The scarcity of water within those basinsand the need for high capital investments in water production and transmissionfacilities may constitute serious constraints to rapid industrialization inthese regions.
2.05 In the Algiers area, groundwater is now used for both urban supplyand irrigation. The present water demand in this area exceeds the potentialcapacity of the groundwater aquifer which is already over-exploited.Consequently, the groundwater level is lowering rapidly, with the possibledanger of sea water intrusion into the aquifer and the subsequent degradation
1/ Recent proposals have been made by the Government to establish 48 wilayate.
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of the water quality. To satisfy the growing demand, surface water sourcesmust be developed to complement the groundwater production. The preparationof a master plan of water resources in the Algiers-Sebaou region (see Map16089R) was financed under Loan S-17AL. An outline of the master plan ispresented in Annex 1.
Sector Organization
2.06 The Ministry of Hydraulics (established in 1977, incorporating theformer Secretariat of Hydraulics set up in 1970) is responsible for thedevelopment and conservation of the country's water resources and the planningand construction of water supply and sewer systems. Thirteen regionalauthorities, recently created, operate and maintain water supply and seweragefacilities in large urban areas; in the rest of the country, municipalentities are responsible for water production and distribution and for sewagecollection in their municipalities.
2.07 The Government's objective is to decentralize the management andoperations of water supply and sewerage, leaving such responsibility toregional enterprises set up to provide services in one or more adjacent riverbasins. A first experience with a regional enterprise was made with thecreation of a wilaya authority, the "Soci6te des Eaux de l'Agglom6rationd'Alger - SEDAL", which provided water supply and sewerage services in GreaterAlgiers. SEDAL was set up as part of the Bank's first operation in thesector, the Algiers Sewerage Project (Loan 1545-AL). The SEDAL experience wasconclusive and the Government in May 1983 established twelve more enterprises,based on SEDAL's organization as a model. At the same time, SEDAL wasreplaced by a regional authority, "Entreprise de Production, de Gestion et deDistribution d'Eau d'Alger - E.P.E.AL.".
2.08 In conjunction with the sector reorganization, the Government issueda Water Code (Law No. 83-17 of July 16, 1983), to regulate the allocation andcollection of water resources, and to set out financial policies for thesector. In addition to dealing with ownership, concession and use of thewater resources, the Water Code prescribes that water utilities should bemanaged as commercial enterprises and should implement the tariffs necessaryto make them financially self-supporting. It also recommends that tariffs forindustrial and commercial usage be set sufficiently high to encourage economicuse of water.
2.09 To coordinate the operations of the regional authorities and to someextent arrive at cross-subsidizing financial resources in the sector, theMinistry of Hydraulics is considering the setting up of a national regulatoryagency, which would function under this Ministry's authority. The agencywould assist the Ministry in planning water supply and sewerage investments inthe country and in establishing the level of Government contributions to theregional authorities. It would also formulate detailed policies for thesector and oversee the operations of the regional authorities. The Ministryof Hydraulics would request the assistance of organization consultants forestablishing the functions and a work agenda for the national agency. Terms
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of reference for this assistance, which has been included in the project, aregiven in Annex 2. During negotiations, assurances were obta-ined that, notlater than January 1, 1986, consultants for the organization assistance willbe retained in accordance with the Bank Group Guidelines for the Use ofConsultants, and under terms and conditions satisfactory to the Bank.
Service Levels
2.10 Presently, the existing water supply and sewerage systems in most ofthe cities are obsolete and over-loaded. Though more than 80 percent of theurban population is provided with direct water service lines, only a third ofthis population can be considered well served. Preliminary results of asurvey of water supply and sanitation services in 36 cities with populationsranging from 500,000 to 2,000 are shown in Annex 3. The overall per capitaconsumption varies widely from 286 liters/day in El Golea in the central partof Algeria to 20 liters/day in Chegoun in the Kabylie Mountains, but in mostcases is considered inadequate. The per capita allowance is further greatlyreduced by the high volume of unaccounted-for water which in most of thecities reaches around 50 percent of the production. In general, water supplyin the cities is intermittent and available not more than 12 hours a day.
2.11 About 70 percent of the urban population is connected to public sewernetworks which in most cases are combined systems evacuating also stormwaterrunoff. Wastewaters in the cities are in most cases discharged untreated intothe Mediterranean or rivers. About 70 percent of the rural locations areprovided with public water supply systems and 60 percent of them have sewersystems. About 40 percent of the rural population has direct access to publicwater supply networks; only 25 percent to sewerage.
Constraints to Sector Development
2.12 Until recently, the lack of sound financial policies in the sectorwas certainly a major constraint to its accelerated development. In general,all over the country, water tariffs have remained low during the last decade.The municipalities, which were responsible for water supply services, werereluctant to implement effective tariffs which would have encouraged consumersto economize on their water use. This situation has lasted until now, becausepast investments in water supply and sewerage were financed by Governmentgrants to the municipalities. In addition, the municipal water supplyagencies in most cases had delayed payment for their water purchases from bulksuppliers like SEDAL and SONADE 2/. As water demand has been increasingrapidly, the bulk suppliers in turn had been forced to make more lnvestmentsin production facilities, in spite of the municipalities' large overduepayments to them.
2.13 Administrative burden has also been another constraint to the sectordevelopment. The Ministry of Hydraulics, which is responsible for theconstruction of all major water supply and sewerage facilities, has beentaking unusually long delays in implementing its work programs. In
2/ Soci6t6 Nationale de Distribution d'Eau Potable et Industrielle.
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particular, bidding of the works has been long delayed, which has resulted insome cases in cost overruns. Though procurement regulations and schedules arewell defined in codes, they have not been respected in most cases. The Bankhas undertaken various project implementation reviews with the Government, todetermine how the procurement process and project execution can be streamlined.
2.14 Further, the number of engineers and administrative staff in thesector is very limited. Other sectors offer better salaries and benefits andyoung professionals tend to join them instead of the water supply sector. Tolessen this constraint, the Ministry of Hydraulics created in 1974 aspecialized school, the "Institut d'Hydrotechnique et de Bonification - IHB".But, so far, the Institut has produced few graduates.
2.15 As part of the proposed project, the Ministry of Hydraulics willcarry out a sector study which among other things will try to diagnose thecauses for the slowness of the sector development. Terms of reference forthis study are outlined in Annex 4. Consultants would assist the Ministry ofHydraulics in carrying out the sector study and would be retained inaccordance with the Bank Group Guidelines for the Use of Consultants, andunder terms and conditions acceptable to the Bank, not later than July 1, 1985.
Investment Program in the Sector
2.16 The second Four-Year Investment Plan (1974-77) included DA 4.0billion (US$920 million) or about DA 240.0 (US$55.2) per capita for watersupply and sewerage works. About DA 1.0 billion (US$230 million) of thisamount was to complete works initiated during the previous investment plan(1970-73). These investments accounted for about 4 percent of the totalcapital expenditures in the public sector. The selection of communities,where investments were made, was based on the population growth rate,population density, percentage of population served, possibility of improvingand expanding services and reducing water losses. With a few exceptions, sofar, all projects in the water supply and sewerage sector have been financed100 percent by Government grants, and the municipal authorities havepractically no debt.
2.17 It is estimated that, during the first Five-Year Plan (1980-1984),investments in the order of DA 6.0 billion (US$1.3 billion) or about DA 300(US$62.5) per capita, would be made in the sector. During the forthcomingFive-Year Plan (1985-1989), the Ministry of Hydraulics is proposing to investDA 45.0 billion (US$9.4 billion) in the hydraulic sector, 50 percent of whichin water supply and sewerage works. The projected substantial increase ofinvestments during the next plan (almost four times the level of investmentsduring the preceding plan in current prices) demonstrates the Government'scommitment to improving rapidly the conditions and service levels in thesector.
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Previous Bank Loans in the Sector
2.18 The Bank became involved in the sector in 1978 when the first loan(1545-AL, US$82.0 million) was made for the Algiers Sewerage Project, tofinance the construction of sewer interceptors and a sewage treatment plant inGreater Algiers, and management and engineering studies in the cities ofAlgiers, Constantine and Oran. One of the objectives of this project was tostrengthen the sector organization in Greater Algiers through the creation ofa regional water supply and sewerage authority (SEDAL). In spite of somedelays in implementing agreed policies, the SEDAL experience has been good, asproved by recent Government decision to set up similar authorities in the restof the country. The Algiers Sewerage Project provided for the carrying out ofa study of SEDAL's organization, management, tariffs and financial structure.The study was originally scheduled to be completed in September 1979 and therecommendations regarding SEDAL's financial policies and performance were tobe implemented as of 1980. This schedule, however, was not met and the studywas completed only in March 1981. EPEAL, which has succeeded SEDAL, hasstarted to implement the new organization since January 1982.
2.19 Meanwhile, EPEAL's financial position has remained good, followingthe implementation of a 67 percent tariff increase which was effected underthe Algiers Sewerage Project. As a start towards the implementation of newfinancial policies for EPEAL, the Government has recently approved a 41percent increase of the water rates in Greater Algiers. Other steps thatshould be taken in the implementation of the financial policies would be setout in the agreement for the proposed project.
2.20 The execution of the works included in the Algiers Sewerage Project,after some initial delays, has been progressing recently extremely well; worksare to be completed by the end of 1987. The initial delays have been due tovarious causes such as the failure to inscribe the project in the nationalbudget and to appoint consultants, rethinking of the project concept, delaysin the review and approval of bidding documents and in the procurementprocess. As of May 1, 1984, US$11.3 million was disbursed and loandisbursements are forecast to continue to pick up rapidly with the recentaward of the remaining contracts under the project and the acceleration of theexecution of the works.
2.21 The studies in Constantine were completed in 1982 and a projectdefined for this city; its construction is scheduled to start soon. Thestudies in Oran are still under way. The closing date of Loan 1545-AL wasextended for a year to December 31, 1984 and would have to be extended furtherto allow full disbursement of the loan.
2.22 EPEAL's prime responsibility is to provide water supply services,whose quality directly affects the public perception of its performance. Asalready mentioned, these services are at present rather deficient, because ofinsufficient production. To help improve them, the Bank in 1980 made a loanof US$5.0 million (S-17AL) to finance water supply studies in Greater
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Algiers. As in the case of Loan 1545-AL. the selection process of consultantswas delayed and the studies started in April 1981, a year later thanoriginally scheduled in the loan agreement. The original closing date of theloan has been extended to December 31, 1984, but no further extension of theclosing date would be necessary, as the studies are practically completed. Asof May 1, 1984, US$2.6 million has been disbursed and an additional US$1.4million would be disbursed by the end of the year. The original cost of thestudies has been substantially decreased due to the appreciation of the US$vis-a--vis other currencies, The unused balance of the loan (US$1.0 million)would be cancelled. The proposed project is based on the recommendations ofthese studies.
Bank's Objectives for the Sector
2.23 The Banik role and sector lending strategy are essentially gearedtowards assisting the Government in strengthening its project implementationcapacity and establishing a strong institutional framework for the sector.The existing Bank-financed projects have been implemented with some delays inthe schedule of the appraisal reports, and the Bank has reviewed with theGovernment the causes for such delays and suggested some actions, such as aproject inscription in the budget prior to its appraisal, packaging of worksin single contracts, decentralization of project construction supervision,which should improve project implementation performance. The Bank'sinvolvement in the sector would be particularly effective in providing thenecessary expertise in institution building, policy formulation and stafftraining. It is also expected that the Bank's association with the sectordevelopment would help to enhance the standing of the new regionalauthorities, strengthen their independence and ensure the implementation offinancial policies that could lead to the finiancial viability of the sector.
III, THE PROJECT AREA
General Features
3.01 Algiers WLlaya, with a current population of 2.8 million, isAlgeria's most populated provInce. It is also the most urbanized with 2.5million people or almost 90 percent of the total population living in urbanlocatiors. About 84 percent of the urban population is concentrated inAlgiers City, the nation's capital, and the political, economic and culturalcenter of Algeria. Algiers City is divided into 5 dairates (boroughs) and 13communes (wards). (See Map 16088). Greater Algiers, which is made up ofAlgiers City and 10 more communes, extends along the Mediterranean coast fromthe Sahel Hills to the Mitidja Plain. Four more communes in Algiers Wilayaare not administratively integrated in the metropolitan area. But their totalpopulation accounts for less than 3 percent of the urban population in thewilaya. Water supply and sewerage services in Greater Algiers are provided byEPEAL.
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3.02 A relatively mild climate prevails in Greater Algiers, though hightemperatures are occasionally recorded in summer. The mean annual rainfallvaries from 580 mm to 760 mm, but is unevenly distributed through the year.Most of the rainfall occurs during the months of October through March, whileit is practically dry from June through August. Rainstorms of high intensity(more than 100 mm per hour) and duration (more than one hour) often occurduring the rainy season. Algiers City's configuration is rugged, making boththe installation and operation of a public water supply system very costly.East of the city the land is flatter. But at the same time, convenient sitesfor service reservoirs cannot be found and expensive elevated tanks must bebuilt.
Water Production Facilities
3.03 Potable water in Algiers Wilaya comes from some 145 wells sunk in theMitidja and Sahel Plains. The wells are incorporated into 12 main well fieldsknown as: Mazafran I, Mazafran II, Baraki, Haouch Felit, Oued Adda, TroisCaves, Haouch Bel-Abbes, Boureah, Thenia, Zemmouri, BirKhadem/Birmandreis andHamiz. The well fields are owned and managed by EPEAL. They account for morethan 96 percent of the total water production in the Wilaya. The remainingproduction comes from isolated wells owned by municipalities located outsideof Greater Algiers. Total water production in 1983 averaged 412,000 m3/day,of which about 83 percent came from the three main fields of Mazafran I,Mazafran II and Baraki. With the exception of the Mazafran and Hamiz WellFields, which are located respectively some 40 kms. west and east of AlgiersCity, all the other fields are situated within the limits of Greater Algiers,in the southern part of the metropolitan area (see Map IBRD No. 16089R).
3.04 The groundwater aquifers have been overexploited for some time and asa result, the water level in the wells has been lowering at an average rate of0.40 m/year. The increasing water heads in the well fields collection systems~have resulted in decreasing production of the existing wells. To maintain theproduction level, it has been necessary to increase the number of wells or toequip the existing ones with more powerful pumping equipment. The Mazafran IIWell Field, which accounts for 27 percent of the total available waterproduction, was put in operation in July 1979. Water from all the well fieldsis of good quality and only requires normal disinfection.
Conveyance System
3.05 Most of the production of the three main well fields (Mazafran I,Mazafran II and Baraki) is conveyed to a central pumping station (El Harrach)from where water is boosted to the elevated areas of Greater Algiers. Waterproduction in the other well fields is consumed locally. Two pipelines, a900-mm and a 800-mm concrete, convey water from the Mazafran Well Fields tothe El Harrach Pumping Station. In addition, from Mazafran I a 600-mmpipeline supplies water to the western part of Greater Algiers. Another600-mm pipeline, connected to the Mazafran-El Harrach Main, provides water tothe elevated central areas of Algiers City. The Baraki Well Field transits
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its production through four pipelines (a 1,000-mm, a 900-mm, a 700-mm and a400-mm) to the El Harrach Pumping Station.
3.06 With the exception of the 600-mm pipeline serving the western areasof Greater Algiers, water flow in the conveyance system is boosted by the wellpumps and four pumping stations. Twenty-three motor pumps with a total powerof 13,600 HP are in operation in El Harrach Pumping Station. Some300,000 m3 are transited daily through this station which was recentlyrenovated and can provide many additional years of service. In general, theexisting conveyance system is in good condition, though bursting of theMazafran II Pipeline has in the past occurred at various times, because ofconstruction faults in the pipe laying. Recently, the pipe foundations werereinforced in some sections of the pipeline.
Existing Distribution Network
3.07 Because of the rugged configuration of Algiers City, the waterdistribution network is one of the most complex and expensive to operate.Besides, the network is old and overloaded, as it was conceived to serve lessthan one-fourth of the current population. The distribution network isdivided into various pressure zones, with elevations varying from 0 along thecoast to 400 m in the Sahel Hills, and is made up of cast-iron pipes ofdiameters varying from 100-mm to 600-mm. The network functions by gravityonly in a narrow strip along the coast. As ground elevations further inlandincrease rapidly, water must be boosted to reach the service areas. Inaddition to the El Harrach Station, five main booster pumping stations
~-m-aintain water flows and pressures in the distribution network. Availableservice storage in the network amounts to 130,000 m3 or about 35 percent ofthe average daily consumption, which is considered adequate.
3.08 The existing water distribution network needs to be restructured andexpanded to provide better continuous service to the consumers. In addition,a leak detection and repair program should be undertaken without delay toreduce water losses in the network, which are currently estimated at 14percent of production. Preparation of a master plan for water distribution inGreater Algiers, which was partly financed under Loan S-17AL, was completedrecently. A first construction stage of the plan is included in the proposedproject and is expected to be completed at the end of 1989, by the time newproduction facilities, which are also included in the proposed project, wouldbecome operational.
Existing Sewerage
3.09 The 13 communes of Algiers City are served by a combined sewer systemin which both wastewaters from households and industries, and stormwaterrunoff are collected and evacuated in the same conduits. Other districts ofGreater Algiers, specially the industrial area, are equipped with separatesewer systems where wastewaters and runoff are collected and drained indifferent conduits. Most of the water customers are connected to the sewer
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network and about 80 percent of water supplied to domestic consumers returnsto the sewers. The existing sewer systems are relatively in good condition.There are 8 main sewage collectors, of which all but three are canalizedthrough their entire length in close channels. The majority of industries inthe El Harrach River basin use dry type processes requiring little water.Some industries of cellulose, barm and soap, however, use large individualvolumes of water and discharge strong wastewaters.
3.10 Presently, wastewater generated in Greater Algiers is dischargedwithout treatment into the Algiers Bay and El Harrach River whose allowablepollutional loading is very limited. It is estimated that the amount of wastematters actually poured into the river is 20 times greater than itspermissible loading. As a result, waters along the coast and in El HarrachRiver are highly polluted and malodorous. The emission of hydrogen sulphide,characteristic of anaerobic decomposition in the river, can be detected a halfmile away. Black sludge deposits and bubbles of decomposition gases can beobserved along El Harrach River banks, which are densely populated withlow-income people who now face increasingly unpleasant living conditions, aswell as serious health risks.
3.11 In addition, potentially valuable vacant land at the river mouth ispresently unused, because of the pollution problems. Recreational and fishingactivities have many years ago ceased along the coast and in the river. TheAlgiers Sewerage Project, which is partly financed by the Bank (Loan 1545-AL,US$82.0 million) and whose objective is to redress environmental conditions inthe El Harrach Basin, is currently under construction.
IV. DEMAND AND MARKET ASPECTS
Water Consumption
4.01 Current available water production for the Algiers Wilaya isestimated at 150.2 Mm 3/year, which is about 46 percent lower than thecalculated demand of 219.9 Mm3/year. No production increase is foreseen,until the proposed project becomes operational at the end of 1988, by whichtime the potential annual demand would be about 265 Mm3. Thus, as thedemand will continue to exceed the available supply, it will be necessary tocontinue to ration out water, which in some areas is already served only a fewhours a day. Of the current total production, 96 percent or 144.2 Mm3/yearcome from EPEAL's well fields. The rest is generated at individual wellsoperated by municipalities located outside the Greater Algiers area.
4.02 The evolution of water consumption and sales in Algiers Wilaya duringthe last four years is shown in Annex 5. Present per capita consumption forall usages averages only 108 liters/day, which is considered low for a city ofthe size and composition of Algiers. Since the demand was not met in recentyears, the potential per capita consumption can only be estimated. In the
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coming years, the available per capita consumption will continue to decrease,as the population increases, while production remains at the 1983 level.About 98 percent of the urban population in the Algiers Wilaya receives directwater supply services through some 95,000 service lines. Total water sales inthe wilaya in 1983 reached 94.6 Mm3/year, resulting in about 37 percent ofthe production unaccounted-for.
Composition of the Demand
4.03 A breakdown of water consumed in Greater Algiers in 1983 apportionsthe different uses as follows:
Essentially, water consumed in Greater Algiers is for domestic and public useswhich account for almost 75 percent of total consumption. The commercial andindustrial sector accounts for slightly more than 20 percent of the totalconsumption. Other uses correspond to water consumed in street washing,public gardens, etc.
Population Forecast
4.04 Results of the 1966 and 1977 census in Algiers Wilaya are shown inAnnex 6. Between 1966 and 1977 the Algiers Wilaya's population grew at anaverage annual rate of 5 percent. The rate of population growth in AlgiersCity was, however, less (about 4.6 percent), while it remained at a high of6.5 percent in the rest of the wilaya. A similar trend is expected tocontinue in the future, as the population in Greater Algiers seems to beinflecting towards its saturation level. Meanwhile, it is expected that thepopulation in the suburban areas will continue to grow much faster than in therest of the country, since the metropolitan area will remain an attractivepole for the population of a large number of medium and small cities in theadiacent wilayate.
4.05 Estimated mid-year urban populations in Algiers Wilaya in the years1985 through 2000 are given in Annex 5. They have been estimated assumingthat the population growth would average 4.1 percent in the eighties and then3.6 percent in the nineties. Under the Government-approved urbanization planfor Greater Algiers, most urban development would continue to take place irnthe eastern part of the wilaya, on the right bank of El Harrach River. The1977 census recorded 288,400 households in Algiers Wilaya, resulting in anaverage occupancy of 6.8 persons per household. This occupancy level isexpected to remain unchanged during the next ten years.
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Projected Water Consumption
4.06 Because of the current water shortage in Greater Algiers, it has notbeen possible to use the present water sales to estimate the per capitaconsumption and future water requirements, as the potential demand largelyexceeds available supply. To estimate future water demands, it has beennecessary to assume an average per capita water consumption which has beendetermined on the basis of levels of water consumption in other north Africancapital cities 3/, where climatic and social conditions are similar to thosein Greater Algiers. It has been further assumed that the per capitaconsumption will increase slowly through the years, as the country's economycontinues to grow.
4.07 Forecast water consumption up to the year 2000 is shown in column 8of Annex 5 and illustrated in Annex 7. It is anticipated that by early 1989the proposed project would become operational and that the demand would be metfully. It is further assumed that by that year the entire urban populationwould be connected to the water network and that unaccounted-for water wouldslowly decrease to level at about 25 percent by 1995. Water sales areprojected to increase by 90 percent in 1989 and then to continue to rise at anannual growth rate of about 5 percent. Average per capita water usage isforecast to increase to 49.1 m3/year by 1995. The maximum day demand iscalculated to be about 20 percent higher than the yearly average demand. Themaximum hour demand is expected to exceed by 70 percent the yearly averagedemand. A minimum residual pressure of 3 bars (43.5 psi) would be maintainedin the distribution network.
V. THE PROPOSED PROJECT
Project Genesis and Concept
5.01 In 1980, the Bank made a loan of US$5.0 million (S-17AL) to theGovernment of Algeria to partly finance a Water Supply Engineering Projectwhich covered inter alia: (i) the assessment of urban, industrial andagricultural water needs in Greater Algiers and surrounding areas; (ii) thepreparation of a master plan for the use of water resources in theMitidja/Isser/Sebaou region; (iii) the detailed design and preparation oftender documents for a first construction stage of water production facilitiesfor the Algiers Conurbation; and (iv) the preparation of a master plan ofpotable water distribution in Greater Algiers, and the detailed design andtender documents for a first construction phase of this plan. The Bank wasconcerned with the evident water shortage in Algeria's largest urban area and
3/ Average per capita water consumption in the metropolitan area of Tunis isabout 70 m3/year; 53 m3/year in the Rabat-Casablanca Conurbation.
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the Government's apparent lack of technical capability to eliminate suchshortage. The Engineering Project was recently completed and bids forconstruction of the first phase of production and distribution facilities inGreater Algiers were received at the end of March 1983.
5.02 Greater Algiers is now served by groundwater whose current productionhas already exceeded the safe yield of the aquifer and cannot be increased tomeet the demand. There is no other major aquifer in the area and the nextsource of supply would have to be surface water. Various alternatives ofsurface water have been identified and evaluated in previous studies. Onealternative would be to divert water from Oued Mazafran into a reservoirlocated at Douera, west of Algiers City (see Map No. 16089). A secondalternative would consist of building an impounding dam on Oued El Harrach atRocher des Pigeons. A third one would be to impound waters of three oueds,Isser, Boudouaou and Hamiz, in a reservoir located at Keddara, east of AlgiersCity.
5.03 An economic comparison of the three schemes showed that the KeddaraSystem is the least-cost alternative to increase potable water production toGreater Algiers and has been integrated as such in the master plan. TheKeddara System involves the construction of a 160-Mm3 impounding reservoir(Keddara) on Oued Boudouaou to store additional raw waters from Oueds Isserand Hamiz, followed by treatment and finished water conveyance to GreaterAlgiers. To that end, excess water from an existing dam (Hamiz) and part ofthe flow of Oued Isser (the second most important oued in theSebaou/Isser/Mitidja Valley) would be diverted and transferred to the KeddaraReservoir, from which raw water would be drawn and treated in a plant to bebuilt near the town of Boudouaou. The Keddara Dam and the Hamiz-KeddaraTunnel are now under construction. Detailed design and bidding of the othercomponents of the Keddara System have been completed recently and theirconstruction is expected to start by mid-1985.
5.04 There are several ways that water from Oued Isser can be diverted andtransferred to the Keddara Reservoir. Annex 8 outlines the technical andeconomic evaluation of the feasible alternatives for this transfer. Theconclusion of the evaluation is that the least-cost alternative would be tobuild a small impounding dam (18 Mm3) on Oued Isser at Beni Amrane and topump the diverted waters directly to the Keddara Reservoir (see Map 16089R).
5.05 On the basis of 40 years of stream flow records, the regulated flowof Boudouaou River at Keddara Dam would be about 20 Mm3/year, while anaverage flow of 30 Mm3/year would be diverted from the Hamiz Reservoir tothe Keddara Dam. The transfer from Oued Isser would supply an average 110Mm3/year. In total, the yearly regulated flow by the Keddara Dam would be160 Mm3. Such an increase in raw water production would be sufficient tomeet the demand up to 1993. Beyond that year, a new water supply source,which is foreseen to come from Oued Sebaou located further east to Algiers,should be put in operation.
5.06 The proposed project, which covers the construction of the KeddaraSystem and other water transmission and distribution works in Greater Algiers,
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stems from the studies included in the Water Supply Engineering Project (LoanS-17AL) and from previous studies carried out by the Ministry of Hydraulicsand the Ministry of Industry and Energy (SONATRACH) for the development anduse of the country's water resources and in particular for an increase ofwater supply to Greater Algiers. The feasibility study of the Keddara Systemwas carried out by an American consulting firm, Hydrotechnic Corporation. Thedesign of the Keddara Dam was carried out by a specialized Swiss consultingfirm and later verified by a specialized Portuguese engineering consultingfirm (KOBA associated with COYNE ET BELLIER, France), which also prepared thedetailed construction drawings. The smaller Beni Amrane Dam was designed byBritish experts (Binnie & Partners). The concept and design of the dams werereviewed by a panel of experienced and competent dams' experts of the Ministryof Hydraulics acceptable to the Bank. Normal and acceptable precautionsagainst earthquakes have been taken into account in the design of the dams.
Objectives of the Project
5.07 The objectives of the proposed project are to increase waterproduction to the level required to meet the unsatisfied demand and futuredemand up to 1993 (which is forecast to reach 308 Mm3 in that year) and toexpand and improve water distribution in Greater Algiers. The existingdistribution network is old, and a large volume of water distributed is nowlost through leaks in the system. Under the proposed project, the secondarydistribution network would be renovated and an extended program of leakdetection and repairs would be executed, in order to reduce the percentage ofunaccounted-for water to not more than 25 percent by 1995.
5.08 Under the Algiers Sewerage Project (Loan 1545-AL), managementassistance was provided to EPEAL for defining and outlining its organizationalstructure, administrative procedures and financial objectives. The executionof this assistance was successful and has led to major improvements of EPEAL'soperations. Meanwhile, the field of EPEAL's activities has been expanded tocover all the wilaya of Algiers and consequently its organization needs to bemodified to suit its new responsibility. The proposed project includestechnical assistance for updating the previous management and financialstudies and for helping EPEAL implement the resulting recommendations (para.7.10).
Project Description
5.09 The project is composed of two parts and includes:
PART I
(i) the construction of an impounding dam on Oued Boudouaou(Keddara Dam) and a tunnel to transfer excess waters of theHamiz Reservoir into the Keddara Reservoir (para. 5.10); and
(ii) the supply of mechanical and auscultation equipment for theKeddara Dam.
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PART II
(a) the construction of a diversion dam on Oued Isser at BeniAmrane, pumping facilities and a conveyance main (includingtwo tunnels) to transfer waters to the Keddara Reservoir(para. 5.11);
(b) the construction of a water treatment plant at Boudouaou, withan original capacity of 450,000 m3/day (para. 5.12);
(c) the laying of a transmission pipeline between the KeddaraReservoir and the Boudouaou Treatment Plant;
(d) the installation of a transmission pipeline to convey finishedwater to Greater Algiers (para. 5.12);
(e) the laying of two primary distribution mains and theconstruction of three new reservoirs and related pumpingstations (para. 5.13);
(f) the supply of master and domestic water meters and operationalequipment for EPEAL (para. 5.15);
(g) a leak detection and repair program aiming at reducingunaccounted-for water from a present 38 percent of waterproduction to about 30 percent by 1990 (para. 5.15);
(h) technical assistance to EPEAL in reviewing and implementingits organizational structures and management and financialprocedures (para. 7.10); and
(i) technical assistance to the Ministry of Hydraulics in carryingout a sector survey and establishing a national agency for theregulation and supervision of the regional water supply andsewerage authorities (paras. 2.09 and 2.15).
5.10 A general layout of the proposed facilities is shown on Map IBRDNo. 16089R. The Keddara Dam would be a rock embankment, with a central coreof clay. It would have a height of 108-m at the lowest point and would be486-m long at the crest. A seal gallery of 550-m long would be built alongthe dam to put in place an impervious core and cut-off wall in thefoundations. The dam would incorporate a 45-m wide surface spillway to divertflow into a channel located at the embankment toe. A tower intake, equippedwith gates allowing to draft water at three different elevations in thereservoir, would be built on the left bank of the oued. The Keddara Reservoirwould submerge a 9-Km stretch of Route No. 29 and about 7 Kms of a highvoltage electric line, which would be relocated under the project. Some 10families, whose settlement was in the Keddara Reservoir, have been relocated.
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5.11 Like the Keddara Dam, the Beni Amrane would be a rock-fill dam withan impervious element. Its capacity would be, however, only 18 Dm3. Thedam would be 38-m high and 10-m wide at the crest, and would contain a total
3amount of 655,000 m of earth and rock fill. The dam would be equipped of aside-channel spillway which would be located in a concrete structurecontaining an outlet and a number of floodgates mounted on the river bottom,to allow regular cleaning of the reservoir. The Oued Isser waters carry ahigh load of suspended solids (14 g./liter) and the Beni Amrane Reservoirwould serve as a sedimentation basin prior to the pumping of the water to theKeddara Dam. The Beni Amrane Reservoir, however, would have to be flushedregularly, specially at times of flood, to impede quick silting of thereservoir. Only two families, whose properties are within the limits of theBeni Amrane Reservoir, would need to be relocated.
5.12 From the Beni Amrane Reservoir, the water would be drawn to a pumpingstation which would transfer it through a 2-m pipeline over 28 kms to theKeddara Reservoir. Two sections of the conveyance system, totaling 1.75 kms,would be built in tunnel. The Keddara Reservoir would supply raw water to theBoudouaou Treatment Plant located some 8 kms downstream the dam. The plantwould be a conventional one and would include standard processes, such assedimentation, filtration and disinfection. A 2-m pipeline, 32-km long, wouldconvey the treated water to the city of Algiers.
5.13 The present way of feeding the existing pressure zones in GreaterAlgiers would basically remain unchanged. Two new distribution centers,however, would be established at Gu6 de Constantine and Beaulieu. The newproduction facilities would be connected to the existing El Harrach PumpingStation and to the new distribution centers, from where water would beconveyed to the service reservoirs through the existing transmission mains andtwo new primary mains. The first would connect the distribution center ofBeaulieu to the pumping station of Telemy and would serve the low leveldistricts of Algiers. The second main would convey water from thedistribution center of Gue de Constantine to a new reservoir at Sidi Garidiand would serve the high level districts located west to Algiers. Three newstorage tanks would be built respectively at Gu6 de Constantine (20,000 mi3 ),Sidi Garidi (25,000 m 3 ) and Beaulieu (40,000 M
3).
5.14 The existing main production facilities are located west to GreaterAlgiers and connected to the El Harrach Pumping Station. The new productionwould be coming from the east. Under the proposed project, the existingproduction facilities would first serve the western part of Greater Algiers,after which any excess would be conveyed to the El Harrach Pumping Station.The new production facilities would serve the eastern part where most urbandevelopment is currently taking place.
5.15 The objectives of items 5.09 (f) and (g) of Part B of the project areto arrive at establishing a better estimate of the levels of water productionand consumption in the Algiers Conurbation and to reduce unaccounted-forwater. A better knowledge of these levels would result in a more efficient
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management of the existing water supply network and the future KeddaraSystem. An appreciable volume of water (17 Mm3/year), which is actuallylost through leaks in the network, could be recuperated and used to somewhatalleviate the water shortages that are expected to be felt in Greater Algiersuntil the completion of the proposed project. EPEAL is committed to reduce by1990 the amount of unaccounted-for water to 30% of production and agreementwas reached on an action program.
Cost Estimates
5.16 The estimated total cost of the project is DA 3,698.2 million(US$770.5 million) with a foreign exchange component of DA 1,883.0 million(US$392.4 million) or 50.9 percent of the total cost. A summary of the costestimates follows. Detailed cost estimates and annual project investments forParts I and II are given in Annexes 9 and 10.
Local Foreign Total Local Foreign Total %Item ----- DA Million ------ ---- US$ Million ----
TOTAL PROJECT COST 1,814.7 1,883.5 3,698.2 378.1 392.4 770.5 125.0
(Current Prices)
% 49.1 50.9 100.0 49.1 50.9 100.0
5.17 The cost estimates are based on actual bids for construction of theproject components, and include customs duties on imported equipment andmaterials, and other taxes on sales and services. To the bid prices, a15 percent allowance has been added for physical contingencies. Constructionsupervision of the works is estimated to account for about 3 percent of theproject costs. To provide for price escalation during the project execution,local expenditures are projected to increase by 7.5 percent in 1984, 7 percentin 1985 through 1988 and 6 percent in 1989. Foreign expenditures areprojected to increase by 3.5 percent in 1984, 8 percent in 1985, 9 percent in1986 through 1988, and 7.5 percent in 1989. Price escalation, which has beenlimited to contractual ceilings, is forecast to account for about 25 percentof the sum of the base costs and the physical contingencies and constructionsupervision.
5.18 The project provides for an estimated 1,350 man-months of consultantservices for the technical assistance to the Ministry of Hydraulics and EPEAL,and for construction supervision of the proposed works.
Project Execution
5.19 A bar chart for the project execution is presented in Annex 11. Theconstruction of the Keddara Dam and the Hamiz-Keddara Tunnel (Part A of theproject) has started since January 1982 and is well under way. This partwould be completed by the end of 1986. Meanwhile, bids for the remaining
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project components (or Part B) were received at the end of March 1984. Theexecution of this part is expected to start by mid-1985 at the latest and tobe completed by the end of 1989. The production facilities, however, areprogrammed to be completed by the end of 1988, and a major production increasewould become available in early 1989. Other works in the distribution systemwould be completed by the end of 1989.
5.20 The Ministry of Hydraulics, with the assistance of consultants, issupervising the construction of the Keddara Dam and the Hamiz-Keddara Tunnel.The Ministry would also be responsible for the construction supervision of theother project components. It would retain a consulting firm to assist it insupervising the project construction. This firm would also conduct periodicreviews with the panel of experts during construction to ensure whether anymodifications in the design of the dam have become necessary. Furthermore,agreement was reached during negotiations that the Borrower would employ byJuly 1, 1988, engineering consultants to assist the Ministry of Hydraulics inannual inspections of the Keddara and Beni Amrane dams and relatedstructures. After 1992 these inspections would be done once every fiveyears. The firms would be retained in accordance with the Bank GroupGuidelines for the Use of Consultants, under terms and conditions satisfactoryto the Bank, not later than January 1, 1985.
Project Financing
5.21 The construction of Part I of the Project has been underway since1982 and the Government has already invested DA 175.7 million (US$36.6million) in this part. An additional amount of DA 84.7 million (US$17.6million) would be invested during the first semester of 1984. The remaininginvestments, for which financing is being sought, are estimated to amount toDA 3,434.2 million (US$715.4 million), with a foreign exchange component ofDA 1,772.6 million (US$369.3 million).
5.22 The project would be executed over a six-year period. A Bank loan ofUS$290.0 million, including a capitalized front-end fee, would finance part ofthe foreign exchange cost of the project. The loan would be made to theCovernai nt and would be repaid over 15 years including 3 years of grace, atthe standard variable interest rate. The loan should become effective byMarch 1985. EPEAL would finance the local cost of secondary distributionworks, of the leak detectlon and repair program, the supply of water meters,and the technical assistance program to the enterprise. The Government wouldfinance the balance of local and foreign exchange costs of the project. Onthis basis, the financing plan for the project would be as follows:
5.23 Once the construction of the project has been completed, theGovernment will transfer the ownership of the facilities to EPEAL, which willoperate and maintain them. The legislation governing the operations of watersupply and sewerage enterprises in Algeria requires that the enterprisesfinance their investments principally by long-term loans and eventuallydevelop a self-financing capability. It is therefore intended that EPEALshould reimburse the Government for part of the investments in the project.
5.24 Some of the facilities, such as the two dams, represent enormousinvestments which would be amortized over a long period of time. However, inview of the short period of time for repayment of the debt, the debt servicefor the construction of the dams would be extremely high. Further, it hasbeen necessary to lump the investments together, trying to catch up the delaysin providing an adequate water supply system in Greater Algiers. Under thesecircumstances, it would be impossible for EPEAL to assure the full debtservice on the proposed loans, if reasonable tariffs were to be maintainedduring the next five years.
5.25 Thus, it is proposed to consider the cost of the two dams as aGovernment contribution to EPEAL and to limit EPEAL's reimbursement toUS$212.0 million equivalent. To this amount would be added interest and othercharges paid by the Government on the funds during the construction period.The reimbursement would start from July 1, 1990 and would be completed over 20years, with an interest rate of 10 percent. The foreign exchange risk on theloan would be borne by the Government. Details of the reimbursementmodalities, together with the conditions of Government financing of theprogram, would be set out in a Reimbursement Agreement between the Governmentand EPEAL. The execution of this agreement, with terms and conditionssatisfactory to the Bank, will be a condition of effectiveness of the proposedBank loan.
5.26 Including the value of the dams, the Government would make an equitycontribution of DA 1980.8 million to EPEAL for the project financing. EPEALshould be required to reflect such contribution in its statutory capital.Assurances to this effect were obtained during negotiations.
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Procurement
5.27 The contract for construction of the Keddara Dam and theHamiz-Keddara Tunnel was awarded to a Yougoslav firm, Hidrotecnica, followinginternational competitive bidding consistent with the Bank's guidelines.Similarly, international competitive bidding procedures are also beingfollowed to secure the works included in Part II of the project. Bids forthis part were received on March 31, 1984. Their evaluation is now underway. The works would be awarded to a single contractor or at most to twocontractors. This solution has been adopted to speed up the bidding processand to ensure better planning and coordination of the execution of the works.In evaluating bids for the supply of equipment and materials, a 15 percentmargin of preference or the actual customs duties, whichever is lower, wouldbe allowed for goods manufactured in Algeria.
5.28 A summary of project elements and method of procurement is as follows:
Procurement Method 4/ TotalProject Element ICB LCB Other Cost
Pipeline, Treatment Plant andRelated Works 583.3 583.3
(233.3) (233.3)Equipment (Meters) 1.0 1.0
(.5) (.5)Consulting Services 23.10 23.10
(11.3) (11.3)
TOTAL PROJECT 744.2 25.6 769.8(277.2) (12.1) (289.3)
Disbursement
5.29 Annex 12 shows the allocation of the loan proceeds to various typesof expenditures. In order to avoid a repetition of long delays which have
4/ Figures in parenthesis are the amounts proposed to be financed by the Bank.
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occurred in the implementation of two previous Bank-financed projects in thesector, specially during the bidding process, advanced contracting of theproposed works has been sought, so that disbursement of the Bank loan cancommence right upon its effectiveness. The proposed Bank loan would bedisbursed against foreign expenditures made for the project from July 1,1984. US$3.6 million equivalent in retroactive financing would be foreseen asof July 1, 1984. Through July 1, 1984 the Government is projected to havealready invested US$22.4 in foreign expenditures from its own resources andwould forward the remaining foreign expenditures (of US$80.0 million) throughthe project completion.
5.30 Estimated quarterly disbursements of the loan and Government fundsare shown in Annex 13. The estimates are not based on disbursement profilesof past water supply projects in Algeria, because the status of preparation of
the proposed project is very different from that of previous water supplyprojects. Rather, the loan disbursements have been estimated on the basis ofthe work programs submitted by the contractor for the Keddara Dam and theHamiz Tunnel and bidders for Part B of the project. Disbursement is expectedto advance rapidly, as works under the contract for the Keddara Dam areprogressing well and the other contract should be awarded prior to the loaneffectiveness, two features which allow to forecast faster disbursements thanin previous projects.
5.31 In order to make prompt payments to contractors and consultants forthe project, the Bank should agree to advance regularly funds for theestablishment of a Revolving Fund in Algeria to cover these payments. TheFund would be maintained at the Central Bank of Algeria for a maximum amountof US$10.0 million which would cover the Bank's share of eligible expenditureson the project over a period of three months. The Fund would be maintained inUS dollars and replenished by reimbursement applications from the Governmentin US dollars. Applications with appropriate supporting documentation,covering the use of the Fund, should be submitted when approximately half themaximum allowed amount in the Fund has been spent. The establishment of aspecial account for the Fund at the Central Bank of Algeria would be acondition of effectiveness of the proposed loan.
5.32 The closing date of the loan would be December 31, 1991, or two yearsafter the provisional acceptance of the works, which is the time needed tomonitor the performance of the works and to return retention money on thecivil works contracts.
VI. PROJECT IMPLEMENTATION AND OPERATION
Executing Agency
6.01 The Ministry of Hydraulics through its "Direction Gen6rale desInfrastructures Hydrauliques" (DGIH) would be responsible for the construction
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of the project. Under the current organization of the Ministry of Hydraulics,DGIH is in charge of the design and construction of water works forirrigation, water supply, sanitation and drainage. DGIH is well organized andstaffed. It is presently divided into three major departments: waterresources development, water supply and sewerage, and irrigation anddrainage. Below the departments are various divisions in charge of specificfields (see Annex 14, Organization Chart of the Ministry of Hydraulics).
6.02 DGIH is currently managed by a competent, dynamic and veryinfluential Chief Engineer. The present staff numbers 66 civil engineers, 30technicians and 410 foremen. In addition, 64 foreign advisors providetechnical assistance to the agency. A team of 9 civil engineers and 30technicians has been assigned for the construction supervision of the KeddaraDam and the Hamiz Tunnel. A similar but more staffed team would be formed forthe construction supervision of the other project components. However, inview of the importance of the works and the expertise required for theirproper execution, DGIH would be assisted by specialized engineeringconsultants for construction supervision of the project (para. 5.20).
6.03 The metering and leak detection and repair programs would be executedby EPEAL, the regional authority responsible for providing water supply andsewerage services in Greater Algiers. The installation of the meters and theworks under the leak detection and repair program would be carried out byEPEAL's own technicians who are the only specialists in Algeria of this typeof work. The Bank loan will be disbursed against only the supply of equipmentand materials for the programs.
6.04 DGIH carries insurances covering motor vehicles, fire damages andthird party liability. It is also insured for workmen's compensation. Allsupply and civil works contracts on the project will be insured against lossand damage in shipment, work accidents, fire and property damages.
Operation and Maintenance
6.05 A department of the Ministry of Hydraulics, the "Direction G6n6ralede l'Exploitation - DGE" operates and maintains dams and irrigation structuresin Algeria. The DGE would continue to provide such services to EPEAL for theKeddara Dam, the Hamiz-Keddara Tunnel and the Beni Amrane Dam. EPEAL wouldpay DGE for its services.
6.06 Maintenance of the Keddara Dam, the Beni Amrane Dam and related workswould require special attention, since any structural failure could result insevere loss of life and property in the Boudouaou Valley and the Isser Plain.As a precautionary measure, engineering experts should inspect the damsregularly to ensure that no structural deficiency is developing in the damsand reservoir banks. Following an inspection, the Ministry of Hydraulicswould carry out any remedial actions suggested by the consultants and foundnecessary (see para. 5.20).
6.07 The other project facilities, after they are completed, will behanded over to EPEAL which will be responsible for their operation and
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maintenance. A training program for EPEAL's staff was included in the AlgiersSewerage Project (Loan 1545-AL) and is currently under implementation (para.7.14). One major success of this program has been the creation of a trainingschool which has already graduated 24 electro-mechanical engineers. Moretraining is being undertaken to cover other fields like plumbing,administration, etc.
6.08 Thus, it is expected that by the time the proposed project becomesoperational in early 1989, EPEAL will have the technical capability and thestaff required to operate and maintain the project facilities properly. Thetraining program, as defined in the Algiers Sewerage Project (Loan 1545-AL),is progressing well and sufficient funds are available for its execution. Noamendment of the program or additional funds are required under the proposedproject.
Project Accounts and Audit
6.09 DGIH maintains records and separate accounts for its projects. Afinancial controller from the Ministry of Finance permanently controls theaccounts. The present system is satisfactory. Data on project expenditureswould be sent regularly to the Bank as part of DGIH's quarterly progressreports (para. 6.10).
Reporting
6.10 In order to measure progress in the project implementation, agreementwas sought during negotiations that DGIH and EPEAL will submit quarterlyreports to the Bank. The reports will in particular cover:
(a) progress in procurement of equipment, materials and civil works;
(b) progress in construction of the proposed facilities; and
(c) expenditures incurred and updated cost estimates of remainingworks.
6.11 DGIH and EPEAL would, within six months following the closing date ofthe loan, prepare and submit to the Bank a completion report on the executionand initial operation of the project, its costs and the benefits derived or tobe derived from it, the performance and fulfillment by the Government, theBank, DGIH and EPEAL of their respective obligations under the Loan Agreementand the Project Agreement and the accomplishment of the objectives of the Bankloan.
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VII. THE BENEFICIARY
Background
7.01 The project facilities would be operated by EPEAL, a publicenterprise established by Presidential Decree No. 83-333 dated May 14, 1983.In accordance with the decree, EPEAL is responsible for the provision ofdomestic and industrial water and the collection and treatment of wastewaterin the wilaya of Algiers. EPEAL was set up, as one of thirteen new regionalwater supply and sewerage companies, in a major reorganization of the sector,to replace SEDAL, the Wilaya company, which was responsible for the sameservices (para. 2.07). SEDAL itself was created in 1977 as part of the firstBank-financed operation in the sector, the Algiers Sewerage Project (Loan1545-AL). Under the Bank loan, management assistance was provided to SEDAL toestablish its organization and financial policies. EPEAL, in fact, is notdifferent from its predecessor, except that it operates under the tutelage ofthe Ministry of Hydraulics and its jurisdiction covers a larger territoryextending over the wilaya of Algiers.
7.02 EPEAL is a young public-owned enterprise. It has a corporatestatute, is financially autonomous and managed as a commercial undertaking.Its parent authority (the Ministry of Hydraulics) exercises overallgovernmental control of the enterprise, such as, approving its investmentprogram and annual budgets, annual accounts and decisions on borrowing andtariff levels.
7.03 The former SEDAL was formed through the merger of three water supplycompanies 5/ and the sewerage service of the city of Algiers. EPEAL hascompleted the takeover of the water supply and of the major seweragefacilities in Algiers. The transfer of responsibility for the secondarynetwork is to be completed by end 1987.
Past Performance
7.04 EPEAL is the beneficiary of Loan 1545-AL made in April 1978 tofinance partly sewerage works in Greater Algiers. The executing agency of thesewerage project was the "Direction de la Wilaya d'Alger Charg6e del'Hydraulique - DWH", while EPEAL was essentially responsible for theexecution of management and financial studies for the company. Contrary tothe rest of the project, the consultants for the studies were employedpromptly and the studies were completed with slight delays in the appraisalreport schedule. EPEAL has put in place the organizational structure
5/ They were (i) SONEDE-WA, a division of the National Water ProductionCompany serving the Western part of Algiers; (ii) ECOEVA, a municipalcompany serving the rest of Algiers; and (iii) Societ6 Alg6rienne desCompteurs d'Eau (SACE), a service company which was managing water metersin individual apartment buildings served by SONEDE-WA and ECOEVA.
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recommended under the studies, and as a result, the company's administrativeprocedures have improved. SEDAL's financial situation was affected by delaysof the Government approval of increased tariffs (see Chapter VIII).
Organization and Management
7.05 Annex 15 shows the current organizational structure of EPEAL. ABoard, chaired by the Director General, supervises EPEAL's activities. AllBoard members are full-time managers of EPEAL, with the exception of two whoare workers' representatives. The General Director is appointed byPresidential decree upon nomination by the Minister of Hydraulics. He isresponsible for the day-to-day operations of the Company, which are handled bysix departments: water operations, sewerage operations, administrative,finance, commercial, and engineering studies and new works. The DirectorGeneral is also assisted by two divisions, one for organization and dataprocessing, and another for legal matters.
7.06 The ongoing Algiers Sewerage Project included a technical assistancecomponent for setting up EPEAL's structure. The organization and managementpart of the studies included the definition of EPEAL's organizationalstructure, the preparation of statements of objectives for all functionalunits and detailed organization of the units. The studies, which werecompleted in 1981, covered also the provision of assistance for improvingbilling and collection, accounting procedures, fixed assets and materialscontrol systems. They further included a study of computerization of EPAL'sactivities and the feasibility of acquiring data processing equipment for thecompany.
7.07 As a result of the assistance, substantial progress and improvementshave been achieved in the company's organization, notably in reorganizing thecommercial department, the operating districts, and the finance department.In addition, EPEAL is in the process of purchasing computer equipment and hasimplemented the systems developed by the consultants for billing. Theimplementation of the studies' recommendations was affected, however, by (i)the expectation that a different organization might be needed following aproposed sector organization (para.7.01); (ii) the unavailability of adequateoffice space, due to delays in achieving the construction of the company'shead office; and (iii) a lack of qualified staff to continue theimplementation of the studies' recommendations.
7.08 The sector reforms are now known and EPEAL's jurisdiction has beenexpanded to cover the whole Algiers Wilaya. As a result, there is a need forrevising EPEAL's organizational structure and management requirements. EPEAL,in accord with the Ministry of Hydraulics, believes that the management studyshould be updated to fit its expanded organization. However, given themagnitude and volume of the ongoing water supply and sewerage programs, EPEALwould not be able to provide the staff needed for the updating work.
7.09 Therefore, an important component of the project (para. 5.09, h) isthe provision of technical assistance to EPEAL in establishing a revisedorganization and management procedures. The assistance would also cover a
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review of EPEAL's financial policies. Terms of reference for the technicalassistance are outlined in Annex 16; they were discussed and finalized duringnegotiations.
Management Assistance
7.10 The program of management assistance would comprise a review of thestudies, which were carried out under the Algiers Sewerage Project, an updateof the organizational and management structure of EPEAL, and the provision ofassistance during the implementation of the study's recommendations. Thefollowing aspects would be covered:
(i) an evaluation of progress made in implementing therecommendations and systems of the previous studies;
(ii) an update and definition of the broad lines of the company'sorganizational structure and its relationship with thesupervising authority and other agencies of the Governmentand the Algiers Wilaya;
(iii) an update of job description and statements of objectives forall main functional departments;
(iv) development of detailed organizational structure for alldepartments and divisions together with an organization planand staffing requirements;
(v) development of general and cost accounting procedures andpractices; and
(vi) provision of assistance and training for the implementationof the recommended organization, and of revised systems andprocedures. The latter will include in particular provisionof guidance to EPEAL's staff in inventoring and reconcilingpast accounts.
7.11 The assistance for the financial aspects is described in para.
8.13. During negotiations, assurances were obtained from EPEAL that, notlater than March 31, 1985, it will employ qualified consultants inaccordance with the Bank Group Guidelines for the Use of Consultants, andunder terms and conditions acceptable to the Bank, to carry out themanagement assistance program. Assurances were obtained that, at theconclusion of the studies, EPEAL will promptly review theirrecommendations with the Government and the Bank and implement the agreedstructures and procedures.
Staf fing
7.12 At the end of 1983, EPEAL had 1,200 staff, or an average of 59employees per 10,000 people served. This ratio is considered adequateand would be further reduced after EPEAL takes over the rest of
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municipalities in Algiers Wilaya (para. 7.01). EPEAL plans to reach aratio of 43 employees per 10,000 people served by the end of 1990, a yearafter the project completion. The staff ratio would be one of theprincipal indicators that would be monitored during the project execution(para. 8.19).
7.13 EPEAL's salaries and conditions of employment are somewhatadequate, though lower than those in the private sector. Consequently,because of a shortage of skilled engineers and accountants in thecountry, EPEAL has found some difficulties in recruiting qualifiedstaff. To overcome this, EPEAL has been carrying out a training programand has sent abroad young staff to specialize in sanitary engineering,administration and finance.
7.14 The General Director is assisted by a training coordinator whooversees the company's training needs and programs. A training centerwas set up as part of the Algiers Sewerage Project. The center, whichbecame operational in 1981, had already graduated 45 electro-mechanicalassistant engineers. Seventeen others would be graduated at the end of1984. The duration of the studies is 18 months, after which graduatesare integrated automatically in EPEAL's personnel. Besides its full-timetraining programs, the center is used for training seminars andshort-term courses. In 1983, ten administrative staff were trained tobecome accounting personnel. EPEAL is closely monitoring its trainingneeds and is using training as a means to rotate and promote staff.
7.15 EPEAL has received assistance from the "Soci6t6 des Eaux deMarseilles-France" for conducting courses for assistant engineers. Forother courses, EPEAL uses the services of the "Ministere de la FormationProfessionelle" Twenty-four candidates, who have received EPEAL'sfellowships, are now enrolled in civil and sanitary engineering coursesin the Federal Republic of Germany. A first group of graduates (sixengineers) is expected to join EPEAL in September 1984 and the remainderby the end of 1987. Under the terms of their fellowships, they arerequired to work for EPEAL for at least ten years after their return tothe country.
Current Accounting Practices
7.16 EPEAL keeps its accounts in accordance with the "Plan ComptableNational" which is acceptable. The company's accounts were computerizedas from January 1, 1983, using a Government-owned computer outlet. Abroader plan for computerization of the accounts, together with otheractivities, has been developed under the previous management assistanceprogram (para. 7.10), and EPEAL is expected to acquire computer equipmentby the end of 1984. EPEAL performs annual inventories of its stocksprior to finalizing its annual accounts.
7.17 So far, EPEAL's accounts have been based on an estimate of theassets of the merger companies, and EPEAL's take-over of their accounts.Some deficiencies existed in the old accounts and persisted afterwards,
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and because of lack of documentation, it has not been possible toconsolidate the accounts. EPEAL's auditors have indicated thatconsolidation of the past accounts and actions to strengthen EPEAL'spractices in this field, are required in order to ensure that EPEAL'sfinancial statements truly represent the company's financial situation.
7.18 Actions to streamline the accounting procedures and financialreporting should aim to: (i) update and complete the implementation offixed assets and material control procedures, which is under way as partof the previous management assistance; (ii) develop general and costaccounting procedures and financial reporting requirements; (iii) trainthe accounting and financial staff; and (iv) reconcile and consolidatepast accounts in conjunction with an appropriate inventory of EPEAL'sassets and liabilities. The first two tasks are part of the managementassistance to be provided under the proposed loan. Training of thefinancial staff would also be carried out under the proposed managementassistance, and through special courses at the training center. Theassistance to EPEAL would further include guidance on proper ways toconsolidate the past accounts.
Billing and Collection
7.19 EPEAL bills its customers every six months for water consumedand a fixed charge for meter rental and connection maintenance. Inaddition, in some apartment buildings, EPEAL reads individual meters andapportions the consumption and charges between tenants. For suchservices, EPEAL charges a special fee for reading and billing. Bills areprepared manually for customers with master meters, whereas forindividual customers, bills are computerized using a Government-ownedcomputer outlet.
7.20 From the merger companies, EPEAL has inherited a backlog ofreceivables, which at the time of the creation of the former SEDAL,amounted to about 2 years of billing. The number of deteriorated meterswas high and EPEAL experienced many problems in identifying customers'contracts and accounts. About two-thirds of these old receivablesrepresent debts which should be written off through reconciliation andconsolidation of past accounts and an Action Plan to reduce by end 1984the receivables to not more than nine months of water sales (excludingaccounts dating from prior to 1979) and to not more than six months ofwater sales by the end of 1987 was agreed during negotiations. This planincludes measures to write off old accounts and to collect from publicsector debtors directly through the Ministry of Finance. Thecomputerization of billing by end 1984 will further improve the system.
7.21 EPEAL plans to install individual meters for tenants inapartment buildings and to phase out progressively the use of mastermeters, as part of a general tariff policy issued in the water code(para. 2.08). The phasing out, however, should be first completed,before a progressive tariff structure can be introduced for water usage.EPEAL is also planning to introduce quarterly billing of its customers.
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Audit
7.22 As a socialist enterprise, by law EPEAL's accounts are subjectto be audited by "La Cour des Comptes". In addition, an external auditof EPEAL's annual financial statements is carried out by the "Societ6Nationale de Comptabilite (SNC)" - a state accounting firm which receivedtechnical assistance under Bank Loan 1185-AL (SNMC Expansion Project).
7.23 Existing arrangements between the Bank and EPEAL provide forsubmission to the Bank of the auditors' annual report within six monthsafter the close of each fiscal year. Past audits have been satisfactory,but have been received with some delays, due to the time needed by EPEALto review the reports prior to their submission to the Bank. It has nowbeen established that after the close of a fiscal year, a period of ninemonths is needed to finalize the audit, before it can be sent to theBank. Consequently, it is now proposed that EPEAL's financial statementsshould be submitted to the Bank within six months of the end of eachfiscal year and the audit report within nine months. Assurances to thiseffect were obtained during negotiations.
Insurance
7.24 EPEAL carries insurance covering motor vehicles. Other assetsare self-insured by the Government. EPEAL is also insured for workmen'scompensation. All supply and civil works contracts for the project willbe insured against loss and damage in shipment, accidents, fire andproperty damage.
VIII. FINANCIAL ANALYSIS
Past and Present Financial Position
8.01 EPEAL's statements of income, sources of application of funds , andbalance sheet for 1983 are shown in Annexes 17 through 19. In 1983, EPEAL hada cash surplus of about DA 19.0 million which was declining, as tariffs hadremained unchanged since 1978. Though its net income in 1983 was negative(the operating ratio was about 120 percent), EPEAL contributed significantlyto its new investments after servicing its debt. EPEAL's net cash generationand customers' contributions financed about 19% of the water supply andsewerage investments in Greater Algiers in 1983; the remainder was financed byborrowing (18%) and Government contributions (63%). The company's debtservice in 1983 remained low, reflecting the long delays in the investmentprogram and Government financing through equity contributions.
8.02 EPEAL's initial equity was provided by the Government in transferringthe ownership of fixed assets (less related debts) of the previous watersupply operators in Algiers and the sewerage department of the municipality ofAlgiers. New water and sewerage systems which have been built by the Algiers
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Wilaya in the past five years, were passed to EPEAL as equity contributions.As a result, EPEAL's capital structure is sound, as reflected by itsdebt:equity ratio which remained at about 3:97 until the end of 1983. Thelevel of inventory and receivable accounts, however, is high (para. 7.20).Measures to redress this situation are under way and would be strengthened bythe management assistance to be provided to EPEAL under of the project (para.7.10).
Revenues
8.03 EPEAL derives its revenues essentially from water sales which untilrecently were charged at a flat uniform rate of DA 1.00/m 3 (US$0.21f/m3) 6/for all types of usage. Additional revenues come from charges for newconnections, meter rental, connection maintenance fees, and service fees formeter reading and billing of tenants in apartment buildings. The old tariffwas implemented in 1978 under the Algiers Sewerage Project (Loan 1545-AL), asa temporary measure to redress the financial situation of SEDAL, thepredecessor of EPEAL. Under the loan, EPEAL is committed, in each fiscalyear, to raise revenues sufficient to cover the aggregate amount of itsoperating and maintenance costs, plus debt service in excess of provision fordepreciation. EPEAL was further required to carry out, with consultants'assistance, a study of its financial structure and policies to determine howits financial performance should be improved in the future.
8.04 The study, which was completed in 1981, was based on EPEAL'sprojected financial position and investments during a five-year period(1981-1985). It recommended that about 50 percent of the investments befinanced by borrowing, 10 percent by EPEAL's own cash generation and theremaining 40 percent by Government equity contributions. The study alsorecommended the introduction of progressive rates for different types andlevels of consumption. The implication of the recommended financial policywas that the average tariff needed to be increased by about 40 percent andadjusted subsequently in accordance with inflation and changes in EPEAL'sinvestment program.
8.05 Parallel to the EPEAL study, the Government, however, undertook anoverall assessment of the sector organization and financial policies, and wasreluctant to apply, in isolation in Greater Algiers, the EPEAL's proposal.So, although the Government was willing to approve a policy essentiallyconceived to strengthen EPEAL's self-financing capability, a decision on thatmatter was postponed pending completion of the sector assessment. This wascompleted recently and the Government has issued legislation giving the watersupply and sewerage enterprises a commercial statute and recommending theimplementation of appropriate and efficient tariffs. At the same time, the
6/ In addition, prior to the creation of EPEAL, SEDAL used tosell bulk water to some adjacent municipalities in AlgiersWilaya at the rate of DA 0.601/m3 (US$0.13/m3). Butthis accounted for only 6 percent of the total sales.
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Government recently approved a 40 percent tariff increase in the AlgiersWilaya, thus implicitly approving the EPEAL's proposal.
8.06 The new approved tariff structure, which was outlined in themanagement study, for the first time introduces a new block rate for public,commercial and industrial consumption. This rate is set at DA 2.00/m3
(US$0.42), while domestic consumption continues to be charged at DA 1.O/M3
(US$0.21/m3). The Government's objectives in introducing the new rate areto:
(i) rationalize the use of water through pricing of the services,notably for higher levels of consumption; and
(ii) increase EPEAL's self-financing capacity as part of a broaderobjective of enrolling the sector enterprises inparticipating in the financing of their investments.
8.07 A water code, which was issued by Law No. 83-17 in July 1983,recommends that rates for water consumption should be set on the basis ofusage and should be progressive in accordance with volumes consumed. Towardsthis goal, a first step has been taken by EPEAL with the introduction of adifferential tariff for public, commercial and industrial consumption. Theobjective is to induce large consumers to restrict their consumption, which inturn would help reduce future capital outlays. The next step would be toallocate a first usage block charged at a rate affordable by low-incomefamilies and to introduce progressive rates for domestic consumption. Thegrounds for this have been laid down in the financial studies financed underLoan 1545-AL. An update of these studies would determine the timing forintroduction of the progressive rates .
8.08 The "Loi des Finances" for 1984 (issued in December 1983), whichapplies to EPEAL as a socialist enterprise, states that investments of thesocialist enterprises should be financed by local and external borrowing,Government equity contributions, and the enterprises' own internal cashgeneration. The share of each of the financing sources would depend on thenature of the investments and is to be determined by the Ministry of Finance.
8.09 As indicated earlier, past investments in the sector were financedmostly by Government contributions. EPEAL's self-financing, includingrepayment of its debt, so far, has accounted for less than 10 percent of itstotal investments. But there is an increasing awareness in Algeria of theneed to improve the self-financing capability of the public enterprises,including the water supply and sewerage companies. Nevertheless, a decisionon the level of EPEAL's future self-financing ratio would depend to a largeextent on the volume of the proposed investments compared to the current levelof its fixed assets. The timing of the investments in relation to the demand,and the potential for EPEAL to generate revenues on the basis of reasonableand affordable tariffs, must also to be taken into account in fixing the levelof self-financing.
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8.10 The proposed investments (1984-1991) would almost triple EPEAL'scurrent gross fixed assets because the proposed project would more than doubleEPEAL's present water production capacity. Because of the need to provide atonce a large increase in order to meet a fully justified pent-up demand, theproposed facilities are lumpy and costly but will produce water for the nextsixty years. However, the repayment period of the Bank's loan is set at 15years, including three years of grace, which is about one-fifth of thedepreciable asset life. As a result, EPEAL should expect to confront a highdebt service. Therefore, in the beginning, a low self-financing from internalcash generation should be available. As the debt service decreases,self-financing should increase progressively. This objective, however, shouldavoid sudden high increases of the tariffs, which are difficult to implement.
8.11 A forecast of EPEAL's future finances (para. 8.17) shows that EPEALwould achieve increasing self financing and would be able to finance, with itsnet internal cash generation, about 7 percent of its investments during theyears 1986-1990. Subsequently, this ratio would increase to 15 percent in1991 and 25 percent thereafter. To achieve that, the average tariff wouldjust have to be increased more or less in accordance with the projected annualinflation rate of 7 percent during the investment period.
8.12 At negotiations agreement was reached with the Government and EPEALthat:
(i) the Government will enable EPEAL to implement the tariffsnecessary to achieve a ratio of net cash generation to itscapital investments (during the year considered and twosuccessive years, divided by three) of not less than 7 percent inthe years 1986 through 1990, not less than 15 percent in the year1991, and not less than 25 percent in the years thereafter; and
(ii) not later than October of each year, starting in 1985, EPEAL willprepare and review with the Government and the Bank its financialforecast for the next two fiscal years, indicating the estimatednet internal cash generation ratios in these years.
Financial Studies
8.13 As indicated earlier (para. 7.10), the project includes an update ofthe financial and tariff studies which were carried out under the sewerageproject. The new studies would assist EPEAL in formulating and implementinglong range pricing policies and structures for water supply and sewerageservices in the Algiers Wilaya. They would in particular help EPEAL planappropriate actions for the progressive phasing out of the existing mastermeters on service lines to apartment buildings. Terms of reference for thestudies are given in Annex 16. They were discussed and agreed with theGovernment and EPEAL during negotiations. Agreement was also reached withEPEAL that, at the conclusion of the studies, it will promptly review theirrecommendations with the Government and the Bank, and adopt the agreedpolicies and structures.
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Financing Plan
8.14 The following sets out an estimate of the fund requirements for theinvestments during the period 1984-1991 and the sources from which they wouldbe met. The financing plan assumes that tariffs would be increased asprojected in para. 8.12 above.
Financing Plan (1984-1991)
DA US$ 7/Million --------- %
Requirements
Proposed Project 3,694.80 769.75 68.9Sewerage Project 738.20 153.79 13.8Other Investments 636.50 132.60 11.9Capitalized Interest 284.39 59.25 5.3Increase in Working Capital 5.35 1.11 0.1
Proceeds from Bank Loan 8/ 1,183.9 246.64 22.0Proceeds from ExpectedFinancing 8/ 511.75 106.61 9.5
Proceeds from Bank Loan1545-AL 8/ 416.88 86.85 7.8
Other Borrowing Local Banks 48.90 10.18 0.9
Total 2,688.66 560.12 50.1
Government Equity 2,670.58 556.38 49.9
Total Sources 5,359.24 1,116.50 100.0
8.15 In addition to the portion of the Bank loan (US$212.0 million), thesources of funds include those Government funds onlent to EPEAL which will
7/ Based on a constant rate of exchange of US$ 1 = DA 4.88/ Includes refinanced interest during construction.
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be reimbursed by EPEAL. Other sources are the existing Bank Loan 1545-AL andborrowing from local banks.
8.16 The proposed financing plan is sound. Under the plan, about 50percent of the capital requirements would be financed by EPEAL's internal cashgeneration (10 percent) and borrowing (40 percent). About 50 percent would befinanced by a Government equity. Given the magnitude of the proposedinvestments, the proposed level of self-financing appears to be adequate.
Future Financial Performance
8.17 EPEAL's forecast financial statements from 1984 through 1992 aregiven in Annexes 17 through 19. The assumptions made in preparing thesestatements are discussed in Annex 20. EPEAL's financial performance isexpected to improve starting from 1984 when the new tariff is applied duringthe remaining year. Its performance would improve further in 1985, as itsoperating ratio would decrease from 120 percent in 1983 to 89 percent. Theoperating ratio is projected to reach about 75 percent in 1989 and to improvefurther in the ensuing years, reaching about 70 percent in 1992.
8.18 EPEAL's internal cash generation ratio would increase from 7 percentin 1988 to 25 percent in 1992. The rate of return on net fixed assets(including all facilities for water supply, wastewater and pollutionabatement) would be 4 percent in 1992 increasing to 7 percent in the year1995. The rate of return on net fixed assets of the water supply facilitiesis about 5 percent in 1992 and is expected to reach 8.4 percent in 1995(assuming a break-even for wastewater operations). This indicates that, overthe years, the company's self-financing capability as well as the rate ofreturn on its net fixed assets would continue to increase, bringing aboutprogressive improvement in the sector's financial autonomy. Followingcompletion of the tariff studies and the likely introduction of progressiveblock tariffs which will result in a significant increase in revenues,EPEAL's financial performance would further improve.
Monitoring System
8.19 Annex 21 shows the technical and financial indicators which would bemonitored during the project execution. This Annex also gives the valuesforecast for the indicators in the years 1986 through 1992. These values werediscussed and agreed with EPEAL during negotiations. Agreement was alsoreached with EPEAL that it will: (i) report the evolution of the indicators tothe Bank on a quarterly basis during the project execution, and on an annualbasis for five years after the project completion; and (ii) carry out anyreasonable remedial action suggested by the Bank, aiming at meeting thetargeted values of the indicators.
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IX. ECONOMIC ANALYSIS
Objectives of the Proposed Investments
9.01 The need for improving and increasing water supply to Greater Algiersseems obvious. The current supply is about 46 percent short of the demand,which is already considered restrictive for an urban agglomeration of the sizeof Greater Algiers. The present per capita consumption in Greater Algiersaverages 108 liters/day; it reaches 200 liters/day in neighboring countrieswith less per capita income. The shortage of running potable water inside thedwellings, coupled with defective sanitation and population congestion in theinner city, seems to be the leading cause of some infectious diseases inGreater Algiers. Cholera, typhoid, paratyphoid, dysentery and infectioushepatitis appear to be endemic in Algiers Wilaya.
9.02 The proposed works would increase water production to the levelrequired to eliminate the current supply deficit and to meet the 1993 averagedemand. The project would benefit some 3.5 million people living in theAlgiers Wilaya; about a third of them are low-income consumers. It would helpmeet water supply requirements in the developed districts of Greater Algiers,but more particularly would permit to improve water supply services in thedeveloping and poorer districts, such as El Harrach and Hussein Dey. They arethe areas where the lowest income people live and where water supply servicesare most deficient. The proposed project would also help meet water supplyrequirements in the industrial districts of Rouiba and Ain Taya, whereindustrial development has been slowed by the lack of basic services.
Least-Cost Solution
9.03 So far, groundwater has been used for both municipal and agriculturalwater uses in Algiers Wilaya. Groundwater is a relatively inexpensive watersource for urban supply, because in most cases it does not need to be treatedand is generally found close to urban agglomerations. This is the case ofGreater Algiers which is being supplied with water from the Mitidja andMazafran Aquifers. But for some time, the extraction rate from these aquifershas been exceeding their recharge, and as the aquifers' reserves have beendepleted, the water table has been declining, making it possible for sea waterto intrude in the aquifers and deteriorate the quality of the groundwater.Undoubtedly, higher volumes of groundwater cannot be extracted from theaquifers and surface water sources must be looked upon to meet the demand inAlgiers Wilaya.
9.04 There are various sources around the major urban agglomerations inAlgiers Wilaya, that could be tapped for potable water supply. Among them,the closest are El Harrach River, the Isser/Boudouaou River and OuedMazafran. An economic comparison of the possible alternatives on thosesources, with the possibility of expanding and integrating them with otherfarther surface water resources, like the Sebaou River, showed that theproposed project (the Isser/Boudouaou) is the least-cost solution at discountrates of 6 percent to 12 percent.
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Project Justification
9.05 The overriding justification for the proposed project is the need toprovide Greater Algiers with decent urban water supply services. The wholeconcept of urban development rests upon the premises that basic amenities,such as water supply, are available, and no urban agglomeration canharmoniously grow without adequate public water supply. The proposed projectis the least-cost solution to provide such supply. The many health andenvironmental benefits that the proposed project would generate, such as: (i)reduced expenses for health care; (ii) welfare improvement of women andchildren who actually spend much time looking for water; (iii) higherproductivity of children in school; (iv) improved welfare of the population,stemming from a cleaner and better environment; and (v) workers' higherproductivity as a result of better health, should produce a high economicreturn on the proposed investments. These benefits are, however, difficult toquantify and a true economic rate of return cannot be calculated.
Affordability
9.06 The results of a survey of household expenses for basic items,carried out in 1980, are given in Annex 24. Water supply for domesticconsumption accounts for a small portion (less than 1 percent) of thehouseholds' total expenses and is not considered a burden on the householdbudgets. It is estimated that even the lowest income segment of thepopulation in the project area would spend not more than 1.3 percent of theirincome for water supply services, well below the usually accepted norm of 5percent.
Environmental Impact of the Project
9.07 As already discussed in this report, the shortage of potable waterhas resulted in deplorable sanitary conditions in Greater Algiers. Theobjectives of the project are to eliminate the water shortage and tocontribute to the improvement of environmental conditions in the mostpopulated area of the country. As a result of the project, wastewater inGreater Algiers will increase and will need to be disposed of properly.Improvement and expansion of the sewer systems are currently being carried outunder the Algiers Sewerage Project (Loan 1545-AL). The expectation is that,once the sewerage project has been completed, wastewater would be quicklyevacuated from the urbanized areas, with no detrimental impact on theenvironment.
Institution Building
9.08 A first step towards the reorganization and strengthening of thewater supply and sanitation sector in Algeria was taken with the AlgiersSewerage Project (Loan 1545-AL), which included the setting up of a new waterauthority (SEDAL) in Greater Algiers, and feasibility studies in the secondand third largest cities, Oran and Constantine. The objective was to put inplace a financially viable water authority that could be used as a model insetting up similar organizations in other cities and wilayate. This wasattained, as the Government has set up water companies similar to SEDAL intwelve regions of the country.
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9.09 It remains that water supply services provided by EPEAL in GreaterAlgiers are still deficient, due to the current production deficit. Theproposed project is conceived to provide the additional supply and to helpEPEAL establish itself as a more effective regional water authority. Solvingthe water supply problem in Greater Algiers is a difficult task for which theGovernment and EPEAL need to receive outside technical assistance, if thistask is to be carried out successfully. The Bank can provide such assistanceto the Government and the leverage required to push for implementation ofsound managerial and financial policies in the sector.
Adequacy of EPEAL's Pricing Policies
9.10 For the purposes of testing the adequacy of the water supply pricingin Algeria, the average incremental cost (AIC) of providing water supply inGreater Algiers is calculated at different discount rates (6 percent to 10percent). The calculation shows that AIC varies between 1.28 DA/m3
(US$0.28) and 2.06 DA/m3 (US$0.42) at discount rates of 6 percent and 10percent respectively. At any discount rate, the commercial, industrial andpublic consumers pay tariffs which are higher than the AIC. In addition, itis envisaged that a progressive tariff structure be generalized once theindividual domestic meters have been installed to replace the master buildingmeters. If present tariffs are used as a proxy for benefits, the economicrate of return is 8 percent.
Risks
9.11 There is a risk that the Government would not implement the tariffincreases in the timely fashion required to maintain the self-financing ratiosindicated as financial performance objectives for EPEAL. In view of therecent decisions taken by the Government regarding the overall institutionaland financial framework and objectives for the sector, which emphasize thatwater utilities should be managed as commercial enterprises and shouldimplement the tariffs necessary to make them financially self-supporting, thisrisk appears relatively unlikely. There are no special risks involved in hetechnical execution of the project. The availability of contracts or bids formost of the components allows a relatively confident estimate of projectcosts. In spite of this, the volume of works for components such as dams andtunnels might increase substantially, resulting in a decrease of the return onthe investments. There is a further risk that procurement problems woulddelay project implementation. However, the advanced status of procurement andthe proposed packaging of project components into two or three large contractsreduces this risk.
X. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS
10.01 During negotiations, agreements and understandings were reached onvarious issues referred to in Chapter II to VIII of this report.
- 40 -
10.02 A condition of effectiveness of the proposed loan would be theexecution of a Reimbursement Agreement between the Government and EPEAL, withterms and conditions satisfactory to the Bank (para. 5.25). Another conditionof effectiveness would be the establishment by the Ministry of Finance of aspecial account for a revolving fund at the Central Bank of Algeria (para.5.31).
10.03 Provided that agreement can be reached on the foregoing conditions,the proposed project is suitable for a loan of US$290.0 million to theGovernment of Algeria for a term of 15 years including 3 years of grace.
June 11, 1984
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ANNEX 1Page 1 of 5
ALGERIA
ALGIERS REGIONAL WATER SUPPLY PROJECT
DEVELOPMENT OF WATER RESOURCES IN THE ALGIERS-SEBAOU REGION
Study Area
1. The Algiers-Sebaou area is located in the central part of Algeria andembraces six wilayate 1/: Algiers, Tizi Ouzou, Bejaia, Blida, Bouira andMedea. It extends along the Mediterranean coast from Tipaza in the west tosouth of Ain Boucif in the east. The distance between these two points isabout 230 kms with the city of Algiers located midway. The Algiers-Sebaouregion covers a total area of about 10,750 kmz extending over the catchmentbasins of Oued Mazafran in the west, Oued Isser in the center and Oued Sebaouin the east. In addition to these oueds, the region contains perhaps thelargest aquifer in Algeria, the Mitidja, which presently provides water tourban settlements in the area and for irrigation in the Mitidja Plain.
2. The population in the study area in 1981 was estimated at 6.1 millionor about a third of the country's total population. Algiers City, thenation's capital, with an estimated population of 2.1 million, is the largesturban agglomeration in Algeria. Other important provincial cities such asBlida (population 180,000), Tizi Ouzou (population 50,000) are also located inthe region. These urban settlements are surrounded by some 124,000 ha ofirrigable land, 70 percent of which is found in the Mitidja Plain, consideredone of the most prolific lands in Algeria. Irrigation is actually practisedin some areas of the Mitidja Plain, using groundwater and surface water fromHamiz Dam, originally built during the last century, renovated and extended inthe forties.
3. Urban water shortage has been chronic in the area, particularly inGreater Algiers where current available production covers less than half ofthe demand. Irrigation is now practised on a limited scale in the cultivatedland. Agricultural production has substantially decreased in the MitidjaPlain which used to provide a major portion of the country's food needs.Because of the decrease in production, today almost half of the basic foodproducts, like wheat, cereals, etc. are imported.
4. The Government's objective for the area is to provide it with thehydraulic infrastructure necessary to meet domestic and industrial water
1/ Based on the former geographical separation of thecountry into 31 wilayate.
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ANNEX 1Page 2 of 5
demand in the shortest delay, and progressively to expand irrigation in thecultivated land. The objective is to have all arable land in the area fullyirrigated by the year 2010. To that end, the Government has commissioned thepreparation of a water master plan for the development of water resources inthe area. The plan was prepared with the assistance of a consortium ofBritish engineering firms, Binnie & Partners and W.S. Atkins International andits preparation was partially financed by a Bank loan of US$5.0 million (LoanS-17AL).
Water Demand
5. Urban water demand in the Algiers-Sebaou region has been estimated asfollows:
Year Mm3/year
1985 2971990 4132000 6332010 921
In 1981, the demand was calculated to be about 207 Mm3/year, but only 163Mm3 was supplied during that year. It is foreseen that by the year 2010 theurban population would reach about 14.2 million distributed in some 43 citiesand their water needs would amount to 921 Mm3/year or about 178 lpcd.Meanwhile, depending on the types of crops and irrigation systems adopted inthe region, yearly agricultural water demand would fluctuate between 5450 and9270 m3/ha, with an average demand of 740 Mm3 during the year 2010.Almost two-thirds of this volume or 492 Mm3 would be used in the MitidjaPlain.
Water Resources
6. So far, water needs in the Algiers-Sebaou region have been met bygroundwater extracted principally from the Mitidja Aquifer. In 1981, about294 Mm3 was extracted from this aquifer: 168 Mm3 was for urban supply andthe remaining 126 Mm3 for agriculture. The volume pumped in that yearexceeded the normal recharge of the aquifer, resulting in theover-exploitation of the aquifer. Because of the good quality of thegroundwater, it should be reserved for urban supply, while surface waterscould be used for irrigation. It should be noted that irrigation with surfacewater in the Mitidja Plain would result in an increase of recharge in theaquifer, allowing in the future a larger extraction rate from the aquifer.
7. Major oueds and dam sites in the Algiers-Sebaou area are shown on Map16089R. Based on the selected dam sites and capacities in the Mitidja area,the total regulated volume of water in this area would be 524 Mm3/yeardistributed as follows:
The Hamiz Dam already exists and three others, Al Mouskakbal, Keddara and BouKourdan, are now under construction. Based on the proposed dam sites andcapacities in the catchment basins of Oueds Isser and Sebaou, the regulatedvolume of water would be about 527 Mm3/year for Isser and 611 Mm3/year forSebaou. Thus, the total regulated volume of water in the Algiers-Sebaouregion would be about 1,662 Mmn3/year, just enough to meet the urban andagricultural demand of 1,661 Mm3 in the year 2010.
8. The type of water resources as well as their expected production inthe year 2010 are shown below:
Resource Origin Capacity, Hm3tyear
Small dams and local sources 187Groundwater 353Major structures on surface
water sources 1,122
Total 1,662
As it can be seen, a major share of the demand would be met by surface watersthrough impounding and diversion dams on the three main oueds of Sebaou, Isserand Mazafran. The Mitidja Aquifer would be used exclusively for urbansupply. About 36 Mm3/year of water coming from small dams and local sourceswould be for potable and industrial uses, and the remaining 151 Mm3/year foragriculture. Of the production of the large surface water schemes, 531Mm3/year would be used to meet the urban demand and the remaining 591Mm3/year in irrigation.
9. Most of the irrigable land in the study area is found in the MitidjaPlain. Water demand for irrigation in this plain would depend upon the typeof crop and irrigation system in usage there. But even for the lowestconsumptive use and the most efficient irrigation system, the minimum demandhas been calculated to be 492 Mm3/year in the Mitidja and 51 Mm3/year inthe Sahel. Thus, even if all the systems located in the Mitidja Valley wereto be reserved for irrigation in the plain, additional water would need to bebrought in from outside.
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ANNEX 1Page 4 of 5
10. Because of the high cost of water transmission in irrigation 11,water sources should be assigned first to the closest irrigable lands. Inprinciple, the Mazafran/Douera and Rocher des Pigeons schemes, which arelocated in the Mitidja Plain, should be assigned to irrigation in theMitidja. Their combined production is estimated at 210 Mm3/year. Thebalance of irrigation needs should thus come from Oued Isser or Oued Sebaou.Water in the Koudiat Acerdoune Reservoir (see Map 16089R), however, cannot beused alone for irrigation, because of its high salinity. It must be mixedwith a fresher surface water source, like Oued Sebaou, before it is used inirrigation. In essence, this constitutes a constraint in the design of thewater master plan, since that water from Oued Sebaou, in spite of its outsidelocation, must be brought in for irrigation in the Mitidja Plain.
11. Thus, once local demand in the Sebaou area has been satisfied, theremaining resources in the Sebaou Valley would be transferred to the MitidjaPlain and the Sahel. Water demand in the Sebaou basin in the year 2010 hasbeen estimated at 75 Mm3 for urban supply and 47 Mm3 for irrigation. Itis estimated that outside demand for the use of water resources of the SebaouBasin would be 21 Mm3 in 1990, 149 Mm3 in 2000 and 275 Mm3 in 2010.
Proposed Master Plan
12. In designing the master plan for the use of water resources in theAlgiers-Sebaou region, it has been assumed that urban water demand would havefirst priority and would be met more than 95 percent of the time. Meanwhile,for irrigation uses which are second in priority, a shortage of water shouldnot occur more than 20 percent of the time and the maximum shortage during ayear should not exceed 50 percent of the water needs.
13. As previously mentioned, the major schemes in the Mitidja Plainshould be built at once to meet the irrigation demand in this area. Followingthe construction of the Keddara scheme, water from the Sebaou Basin would bebrought in to meet the domestic and industrial water demand in Greater Algiersand along the route Sebaou-Algiers. In addition, fresh water from the SebaouBasin would be needed to be mixed with those of the Koudiat AcerdouneReservoir to meet the residual irrigation demand in the Mitidja Plain. So,alternative designs of the master plan would come down to the most economicalscheme in the Sebaou Basin to meet the urban demand and the residualirrigation demand at the lowest cost.
1/ Estimated at DA O.l/m 3/year/km in Algeria.
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ANNEX 1Page 5 of 5
14. The proposed water master plan would include:
(i) the tapping of the Mitidja Aquifer to meet domestic and industrialwater demand in cities in the Mitidja Plain and west to theSahel. This demand has been estimated at 353 Mm3 in the year2010, of which 116 Mm3 for Greater Algiers and 237 Mm3 for the
remaining cities;
(ii) the completion of the Mazafran/Douera System and the constructionof the Rocher des Pigeons Dam (1990) and of Koudiat Acerdoune Dam(2000) to provide 330 Mm3/year to areas in the center and eastto the Mitidja Plain; and
(iii) the construction of Souk el Tleta Dam (1989), Taksebt Dam (1992)and Djemma Tizra Dam (2005) in Oued Sebaou basin to supply295 Mm 3/year to Greater Algiers and cities along the lineSebaou-Algiers, and 154 Mm 3/year for irrigation in the Mitidjaarea.
15. The estimated total cost of the water master plan is DA 12.4 billion(US$ 2.6 billion) in 1983 prices, excluding the cost of distribution networksin the cities. Under the proposed plan, the production of raw water wouldreach 985 Mm3 in the year 2010. The cost price of raw water is calculatedto be DA 2.1/m3 (US$ 0.4) at the discount rate of 10 percent.
April 16, 1984
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ANNEX 2Page 1 of 4
ALGERIA
ALGIERS REGIONAL WATER SUPPLY PROJECT
TERMS OF REFERENCE FOR TECHNICAL ASSISTANCE IN SETTING-UP
A REGULATORY AGENCY FOR WATER SUPPLY AND SEWERAGE
Introduction
1. The Government of Algeria has recently established thirteen regionalenterprises to be responsible for the provision of drinking water and thecollection and treatment of wastewater in various regions of the country. Theenterprises have their head offices located respectively in the cities ofAlgiers, Oran, Constantine, Annaba, Mostaganem, Tizi Ouzou, Setif, Batna,Tiaret, Bechar, Laghouat, Medea and Ouargla, and in principle cover adjacentwilayate. Additional regional authorities would be set up to cover the entirecountry. The Government's objective is to decentralize water supply andsewerage operations, giving the responsibility for such services to theregional enterprises. It is believed that such a decentralized system wouldfit better the country's physical characteristics and administrativeorganization.
2. Nevertheless, the proposed system may present some problems, if theoperations of the regional authorities are not regulated and controlled by acentral agency. With a national authority, it is possible to apply a uniformtariff, thus allowing cross-subsidization between regions. For the proposedsystem, one regional authority might be highly financially profitable becauseof its tariff level and population served, while other authorities might needoperating subsidies. Each authority might choose to apply its own policiesand procedures, which might not be in line with national goals.
3. To avoid these problems, the Ministry of Hydraulics is consideringsetting up a national agency to regulate and oversee the operations of theregional authorities. This agency will operate under the Ministry ofHydraulics' authority. In order that the agency should be fully equipped totackle the above problems in the most efficient way, consultants are to beretained to advise on certain aspects of the agency's functions andorganization. The required services are described below.
Functions
4. On the basis of the objectives set out for the agency, the consultantwill outline the main functions of the agency. To this end, it is envisagedthat the consultant will study and develop (but will not necessarily belimited to) the following aspects of the agency's operations:
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ANNEX 2Page 2 of 4
A. On the Technical Side
(i) supervision of the technical operations of the regional companies;
(ii) collection of sector data, such as the levels of production andsales, consumption by households, industry, commerce and publicentities, number of service lines, storage availability, number ofsewer connections, sewage treatment, water quality, etc.
(iii) planning and progress of training programs, evaluation of trainingneeds; and
(iv) progress in project implementation, updating of project costs.
B. On the Financial Side
(a) supervision of the financial operations of the regional companies;
(b) review of the financial results and auditors' reports on theresults;
(c) evaluation of the companies' financial position and forecast oftheir future financial situation; and
(d) examination of specific operations, such as metering, billing andcollection procedures, purchasing, storekeeping, transport, etc.
C. On the Planning Side
(i) examination of the companies' medium-term plans for theimprovement and expansion of their services;
(ii) review of the companies' investment programs; and
(iii) review of their annual budgets.
5. The agency will constitute a link between the regional companies andto that end will take appropriate actions to keep the companies informed ofdevelopment in the sector. In addition, the agency's goal is to rationalizeand harmonize procedures in the sector. The agency will provide guidelines onappropriate procedures for planning, budget preparation and control, andproject preparation. The consultant is expected to provide a draft of theguidelines and procedures.
6. The agency will discuss with the regional companies their long-termplans to reach certain levels of service in their areas. An importantfunction of the agency will be to determine how the Government's contributionsand other external funds should be distributed between the companies. The
- 48 -
ANNEX 2Page 3 of 4
agency will prepare individual financing plans for the companies, taking intoaccount the financial position of each of them and the resources available.The end result of these plans would be a sort of cross-repartition of thefinancial resources available in the sector. The agency will prepare anddistribute relevant reports consolidating the technical and financial data ofthe regional companies.
Organization Studies
7. Based on the functions outlined above, the consultant will study andproposed an appropriate organization for the agency. The study will cover thefollowing aspect:
(a) preparation of detailed organization charts for each division/department within the proposed structure;
(b) preparation of statements of objectives and responsibility foreach senior management position;
(c) establishment of appropriate procedures for planning and decisionmaking;
(d) definition of the principal line and staff relationships;
(e) determination of appropriate ways for liaison and consultationwith the regional agencies and other Government entities.
Timetable and Reports
8. It is envisaged that the study will be completed in an elapsed timeof not more than 10 months (from mobilization of the consultant's team inAlgiers).
9. The following reports are to be submitted:
(i) not later than the end of the sixth month, a first report onorganization and management, containing recommendations on thematters set out in the terms of reference; two months will beallowed for consideration of this report by the Authorities,discussion with the consultant, and determination of any revisionwhich may be necessary;
(ii) at the end of the assignment, a final report on organization andmanagement, incorporating any revisions made to the first reportand including in addition the results of the consultant's studiesunder the terms of reference.
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ANNEX 2Page 4 of 4
10. The interim report is to be submitted in 20 copies, and the finalreport in 50 copies, in the French language, and delivered initially to theSecretary General of the Ministry of Hydraulics.
Proposals
11. Proposls in 5 copies in the French language should be submittedby to:
12. Proposals should contain. inter alia:
(a) a description of the consulting firm (or firms) and its areas ofspecialism;
(b) a description of other relevant assignments previously carried outby the firm;
(c) an explanation of the way in which the consultant proposes toapproach the assignment, including any comment he may wish to makeon the terms of reference or any modifications he may wish topropose in the interests of better achieving the objectives of theassignment;
(d) a brief description of any special methodology to be employed (forexample, use of computers);
(e) a staffing chart for the assignment, showing each specialist to beemployed and indicating the nature and duration of his involvement(distinguishing time in Algeria from time at the home office);
(f) an explanation of how supervision of the assignment is to bemaintained by the firm's principals;
(g) curricula vitae of key personnel nominated for the assignment; and
(h) a statement of any special facilities the consultant may requirein carrying out the assignment.
13. Proposals will be judged on technical merit and fees. The consultantshould indicate in its offer any assistance that should be provided by theAlgerian authorities to him, such as accommodation, local transportation andother administrative matters.
April 19, 1984
- 50 -
ANNEX 3
AILERIA
ALGIERS REGIONAL WATER SUPPLY PROJECT
SERVICE LEVELS IN UREBAN AREAS IN MID-1981
Estimated WATER SUPPLY SERVICES SANITATION SERVICESPopulation Consumption Per Cap. Cons. Storage Service Ave. No. Of % of Pop. T of Pop. Other Type of
City In 1,000 m3/day I/day Volume, m3 % of Cons. Lines Pers. Per Line With Sewer With S. Tank Systemr Sewerage
Terms of Reference for Carrying Out a Surveyof the Water Supply and Sewerage Sector
Background
1. The Government of Algeria intends to carry out a study of thewater supply and sewerage sector. This effort would constitute a part ofGovernment's overall promotion of the sector development which wasrecently enhanced by issuing the Water Code and establishing a number ofregional water supply and sewerage companies.
2. The objective of the study is to analyze the current situationin the sector, to provide the Ministry with basic data for planning thedevelopment of the sector, and finally, to establish a methodology forcontinued and updated planning for the growth of the sector. Besidesassessing the water service levels in the country, the study wouldinclude a description of the current situation of water supply andsewerage systems, comments and recommendations on availability ofresources and the organization and financial setup of the sector.
3. The Government plans to employ qualified consultants to carryout these studies in collaboration with the Ministry's Departments ofplanning. The services to be performed under this study are describedbelow.
Objectives
4. The objective of the study is to cover 90% of the totalpopulation of Algeria, starting with the most urbanized agglomerations.The consultant should determine at the early stage of Phase 'A' of thestudy (as described below) the size of agglomeration which could beconsidered the smallest to be covered under the study.
5. The execution of the study would be organized in four phases asfollows:
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ANNEX 4Page 2 of 5
Phase 'A' - Preparation of a Questionnaire for Conducting the Survey
6. Under this phase the following tasks should be performed:
(a) review of previous sector studies and results of census of1977;
(b) establish a list of agglomerations to be covered by thestudy; and
(c) determine the population, number of dwellings, and otherrelevant data concerning the level of service for each ofthe agglomerations included under (b) as was reported inthe 1977 census.
7.In preparing the questionnaire,consideration should be given to
future use of the information to be collected under the study. Theconsultant should familiarize the Ministry's staff with the dataprocessing program to be used in performing the study.
8. The following data should be collected for each locality:
(i) total population (urban and rural), and dispersedpopulation;
(ii) households and average number of persons per family;
(iii) economic and social infrastructure (large industries,hospitals, schools, etc.);
(iv) water resources (surface and groundwater);
(v) water supply transmission and distribution systems(reservoirs, pumping station, pipes, etc.);
(vi) individual and master connections and metering(domestic, commercial and industrial);
(vii) sewerage networks and collectors, and type of sewagetreatment and discharge;
(viii) organizational setup of water supply and sewerageservices in the area; and
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ANNEX 4Page 3 of 5
(ix) financial aspects of provision of the services such ascurrent tariffs and financial reporting on operationand investments.
Phase 'B' - Data Collection
9. During this phase the consultant should proceed with fieldcollection of the data and filling out the questionnaire. The consultantshould verify the data through visits and interviews with the agenciesconcerned with the survey.
Phase 'C'
10. Subsequent to the completion of Phase 'B' the consultant shouldproceed with a manual tabulation of certain elements of the data in orderto establish some parameters. These may include, for instance, thefollowing:
(i) consumption per capita per day;
(ii) the level of service; and
(iii) unaccounted-for water.
11. At a later stage the consultant should carry out a completecomputerized treatment of the data for submission of results.
Phase 'D'
12. Under this phase the consultant should submit to the Ministry anoverall report comprising the results of the survey. In doing so, theconsultant should present the results of the study and recommendations inan analytical manner. The consultant should analyze the sector problems,and the issues and constraints of the sector development. This shouldcover service aspects, water resources and the discharge of wastewater,the institutional setup and financial situation of the agencies involvedin providing the services.
13. The consultant should formulate recommendations for sectordevelopment based on objectives for service levels. An estimate ofrequired investments (through a Ten-Year Program) on the basis of agreedlevels of service should also be established in the report.
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ANNEX 4Page 4 of 5
Timetables and Reports
14. It is envisaged that the survey would be completed in an elapsedtime of 12 months from mobilization of the consultant team in Algiers.The following documents and reports are to be submitted.
(i) monthly progress reports;
(ii) the preliminary report for Phase 'A' should besubmitted by the end of the second month;
(iii) not later than the end of the seventh month, apreliminary report on completion of Phase 'B';
(iv) preliminary reports on Phases 'C' and 'D' would besubmitted by the end of the eight and tenth monthrespectively; and
(v) at the end of the assignment a final reportincorporating any changes and additions resulting fromdiscussions with the Government should be submitted.
15. The monthly and preliminary reports should be submitted in (10)copies; the final report should be submitted in (50) copies. All reportswill be in French and delivered to the Ministry of Hydraulics.
Proposals
16. Proposals in five copies in the French language should besubmitted by ---------------- to:
17. Proposals should contain, inter alia:
(a) a description of the consulting firm (or firms) and itsareas of specialism;
(b) a description of other relevant assignments previouslycarried out by the firm;
(c) an explanation of the way in which the consultant proposedto approach the assignment, including any comment he maywish to make on the terms of reference or anymodifications he may wish to propose in the interests ofbetter achieving the objectives of the assignment;
(d) a brief description of any special methodology to beemployed (for example, use of computers);
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ANNEX 4Page 5 of 5
(e) a staffing chart for the assignment, showing eachspecialist to be employed and indicating the nature andduration of his involvement (distinguishing time inAlgeria from time at the home office);
(f) an explanation of how supervision of the assignment is tobe maintained by the firm's principals;
(g) curricula vitae of key personnel nominated for theassignment; and
(h) a statement of any special facilities the consultant mayrequire in carrying out the assignment.
18. Proposals will be judged on technical merit and fees. Anyassistance the Algerian authorities may be able to provide in regard toaccommodation, local transportation and other administrative mattersshould be indicated in the proposal.
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ANNEX 5
ALGERIA
ALGIERS REGIONAL WATER SUPPLY PROJECT
WATER CONSUWRICON AND SALES IN ALGIERS WILAYA, PAST AND FORECAST
Urban % of Population Ave. Percap. Total Water Unaccounted Water Existing Production Water AdditionalPopulation 1/ Population Connected 1/ Water Needs Requirerents for Water Deaand Production Deficit Sales Sales 4/
1/ Refer to aiid-year populations.2/ Increase due to the Mazafran II System which became operational in July 1979.7/ Additional production accruing frcom the Haminz System.4/ Due to proposed project which is expected to beccoe operational at the beginning of 1987.
/1
ANNEX 6
ALGIERS REGICNAL W4IER SUPPLY PROJECT
POPULATION AND HOUSI1; IN AlGIF.RS WIIAYA
1977 Census 1/ Ave. No. of 1966 Census 2/ Ave. No. ofPopulation Nuiber of Persons per Population CrMth
County Tawn Urban Rural Total Households Household Urban Rural Total Rate, 7 4/
WIlAYA OF AEIERS 1,805,400 160,800 1,966,200 288,400 6.8 1,066,039 82,342 1,148,381 5.0
1/ Taken an February 12.2/ Taken on April 4.3/ Part of this county extends outside the limits of Algiers City.4/ Calculated for the total population. Between 1966 and 1977 the total urban population in the
Wilaya of Algiers grew at an average amnual rate of 4.9%. Outside Algiers City, the urban populationin the Wilaya grew at an average annual rate of 6.7%.
- 58 -
ANNEX 7
ALGERIAALGIERS REGIONAL WATER SUPPLY PROJECT
Forecast of Water Demand and Sales in Algiers Wilaya
1 989450 1~
_ _ _ _ __ ___ _
400
SECOND STAGE
35C
30C ~ \ '~ __
FIRST STAGE OF20PROPOSED PROJEC UNACCOUNTE
50AVERAGE DEMAND
~~ V ~~WATER SALES
19075 1980 1985 1990 1995 200YEARS
Apr 11 1984 WorldS Bonk-~26206
- 59 -
ANNEX 8Page 1 of 4
ALGERIA
ALGIERS REGIONAL WATER SUPPLY PROJECT
ISSER WATER TRANSFER TO KEDDARA RESERVOIR
Regulated Flow at Keddara Dam
1. The Keddara Dam would be built on Oued Boudouaou and would receiveexcess flow from the existing Hamiz Reservoir through a tunnel connecting thetwo reservoirs. The Keddara Reservoir would have a useful capacity of160 Mm3. The regulated flow of Boudouaou River at Keddara Dam would beabout 20 Mm3/year, while an average flow of 30 Mm3 is expected to bediverted yearly from the Hamiz Reservoir to the Keddara Dam. In total, onlyabout 50 Mm3 /year would be derived from Oued Boudouaou and Oued Hamiz and amajor diversion must come from Oued Isser to reach the expected average flowof 160 Mm3/year of the Keddara System.
2. Several factors would affect the quantities of water that can betransferred to Keddara Dam. The most important one is the future constructionof an impounding structure upstream the diversion point to Keddara Dam. Asmentioned in Annex 1, as part of the master plan for the development of waterresources in the Algiers-Sebaou region, a major impounding structure, theKoudiat Acerdoune Dam, would be built in the upstream catchment of OuedIsser. The diversion structure to Keddara Dam must necessarily be locateddownstream the Koudiat Acerdoune Dam, in view of the shorter distance to theKeddara Reservoir. Therefore, the quantities of water transferred to KeddaraDam should be determined for the two sets of conditions prevailing before andafter the construction of the Koudiat Acerdoune Dam.
3. Other factors that would affect the quantities of water that would betransferred to Keddara Dam would be:
(i) the location of the diversion point on Oued Isser;
(ii) the capacity of the conveyance system between Oued Isser andKeddara Reservoir; and
(iii) the volume of water impounded at the diversion point.
Diversion Site Selection
4. Because of the high load of suspended solids (14 gr/liter) in OuedIsser, the water must settle to some degree, before it is conveyed to theKeddara Dam. This can be accomplished either through:
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ANNEX 8Page 2 of 4
(a) Impounding the oued to create a settling basin;
(b) Constructing a diversion channel within the river to slow theriver velocity and force settling of the suspended solids; and
(c) Settling of the water outside the river bed in grit chambers.
5. Fifteen sites were originally identified for the transfer of OuedIsser waters to the Keddara Reservoir. Twelve of them were eliminated becauseof geologic faults or the high cost of the needed structures. The threeremaining sites are located at Lakhdaria, Beni Amrane and Bas Isser (see Map16089R) and have been identified under such names. At both the Bas Isser andLakhdaria sites, settling of the water would take place in the river bedthrough the construction of diversion channels. The remaining structureswould include grit chambers, low lift pumping stations, sedimentation tanks,high lift pumping stations and conveyahce systems to the Keddara Reservoir.In the case of Lakhdaria, the major portion of the conveyance system wouldconsist of a tunnel (7.5 kms). For the Bas Isser scheme, a pipeline wouldlink (Keddara Dam) and the diversion point on Oued Isser. The thirdalternative, Beni Amrane, would consist of the construction of an impoundingdam on Oued Isser where settling of the water would take place. Because ofthe large retention time in the Beni Amrane Reservoir and the expectedsubstantial reduction of suspended solids, the water withdrawn from it wouldbe directly pumped through a pipeline to Keddara Dam. Two short sections ofthe pipeline would be built in tunnel.
Available Yields at Proposed Sites
6. The final choice of the site for the diversion of Oued Isser watersto Keddara Reservoir would depend upon the volumes of water available at thissite before and after the construction of the Koudiat Acerdoune Dam, and theresulting cost per m3 of water transferred to Keddara Dam. Afterconstruction of the Koudiat Acerdoune Dam, the drainage basin of Oued Isser atthe diversion point would be reduced substantially and the site must beselected, so that enough water would still be available to supply the KeddaraSystem.
7. The following table gives the regulated flows at Keddara Dam, basedon the available water transfers from the three selected alternatives:
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ANNEX 8Page 3 of 4
Before Koudiat Acerdoune After Koudiat AcerdouneConveyance Volume Regulated Volume RegulatedCapacity Transferred Flow at Keddara Transferred Flow at Keddara
8. As it can be seen from above, irrespective of the capacity of theconveyance system, the Lakhdaria diversion would not supply sufficient waterto the Keddara System to enable it to reach the proposed yield of160 Mm3/year. For Beni Amrane, a conveyance system, with a capacityslightly larger than 6 m3/s, would be able to supply the necessary flows fora yield of more than 160 Mm3/year. It should be noted that, although thedrainage basin at Beni Amrane is smaller than at Bas Isser's, the volumes ofwater transferred from Beni Amrane are larger, due to its impounding capacity.
Economic Comparison of the Proposed Sites
9. The following table gives the cost price per m3 of water diverted
from the three proposed sites, at the discount rate of 10 percent.
Before Koudiat Acerdoune After Koudiat AcerdouneConveyance Regulated Cost Conveyance Regulated CostCapacity Flow Price Capacity Flow Price
Site m3/s Mm3/year DA/m3 m3/s Mm3/year DA/m3
Lakhdaria 7 110 0.65 7 80 1.30
Beni Amrane 6 157 0.60 4 108 1.10
Bas Isser 6 135 0.61 4 105 0.81
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ANNEX 8Page 4 of 4
10. The economic comparison was carried out for the most economicconveyance capacities, 7 m3/s for the Lakdharia diversion, and 6 m 3
/s forBeni Amrane and Bas Isser before the construction of Koudiat Acerdoune Dam,and 4 m3/s after this construction. The economic comparison shows that theBeni Amrane alternative is always the cheapest, though its cost price ispractically identical to the Bas Isser's prior to the construction of theKoudiat Acerdoune Dam. Nevertheless, before the construction of the KoudiatAcerdoune Dam, the Beni Amrane alternative would be able to deliver a largervolume of water for an increased regulated yield of the Keddara System.
11. In addition to its lower cost, other technical factors tend to favorthe choice of the Beni Amrane site. This site presents many advantages, suchas a lower content of suspended solids of the water transferred to the KeddaraReservoir, a substantial storage of raw water allowing a more uniform pumpingrate to Keddara Dam, and better water quality. The Bas Isser site presentssome obvious disadvantages: Due to the short retention time in the diversionchannel, the suspended solids load of the water may be high, which may resultin substantial damages to pump impellers and a gradual reduction of thetransmission pipeline capacity. The water also may be very polluted at thispoint. The construction of the diversion weir, particularly its foundations,may be difficult and costly.
12. For these reasons, the Beni Amrane site was selected to locate thediversion structure, which would be used to convey Oued Isser waters to theKeddara Reservoir.
April 15, 1984
- 63 -
ANNEX 9
AtGERIA
AILIERS REG.IONAL WATER SUPPLY PROLJECT
IEAIAED COST ESTIMATES
Item Local Foreign Total Local Foreign Total- - D A Million - - - - - -- Us$ Million 1/ - - - Percent
PART A
Keddara Dam and Hamiz-Keddara Tuhnel 351.6 231.8 583.4 73.2 48.3 121.5 81.3Mechanical and Sounding EqulipnmEnt 3.2 11.7 14.9 0.7 2.4 3.1 2.1
0~~~~~~~~~~~~~~~~~~~Es NeWorkshop Ws t Sout ihsO- C u vson | ugtrol
Sub-Division Sub-Division
| South r | W~est [| Tesr
ISub-DivisionL | Center |LT
IWSub-Division a X
| West r n
World Baink-26208
- 70 -
ANNEX 16Page 1 of 8
ALGERIA
ALGIERS REGIONAL WATER SUPPLY PROJECT
ENTREPRISE DE PRODUCTION, DE GESTION ET DE DISTRIBUTION
D'EAU D'ALGER (EPEAL)
Terms of Reference for Organization, Management andFinancial Studies
Introduction
1. The Government of Algeria has recently established a regionalsocialist enterprise to be responsible for the provision of drinking water andthe collection and treatment of wastewater within the territory of the Wilayaof Algiers. The enterprise, "Entreprise de Production, de Gestion et deDistribution d'Eau d'Alger (EPEAL)," replaces a former Socialist Enterprise ofWilaya "Societ6 des Eaux de l'Agglomeration d'Alger (SEDAL)." It is apublic-owned enterprise, financially autonomous and managed as a commercialundertaking. EPEAL is a continuation of the former SEDAL, but is operatingunder the tutelage of the Ministry of Hydraulics, and covers a largerterritory extending over the Wilaya of Algiers.
2. EPEAL is designated as the agency which would be responsible foroperating new large water supply and sewerage schemes which are currentlybeing built by the Ministry of Hydraulics. The total cost of the new works(through 1989) is about US$950.0 million. They include the construction oftwo dams, a water treatment plant, water transmission and distribution mains,sewage main collectors and a sewage treatment plant. The sewerage componentis expected to become operational by 1987, and the water supply scheme by1989. The Government has received a loan of US$ 82 million from the WorldBank to finance the sewerage project, and has requested a Bank loan of US$245.0 million to finance part of the water supply system.
3. Shortly after its establishment in 1978, SEDAL employed consultantsto advise on aspects of its organization and management, financial structureand tariff policies. The consultants completed their work in 1980 andsubmitted a set of reports; a list of the reports is given in the attachment.They cover:
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ANNEX 16Page 2 of 8
(i) definition of SEDAL's organizational structure, statement ofobjectives for main functional units;
(ii) plans for implementation of organization changes;
(iii) a study for mechanization of data processing;
(iv) manuals for material controls, fixed assets accounting, andbilling and collection; and
(v) proposals for financial policies and tariff structure.
Objectives
4. EPEAL is in the process of implementing the studies' recommendationsfor organization and management. This has been, however, affected by anexpansion of EPEAL's jurisdiction and plans for future expansion in systemsoperation following the commissioning of the new works. In order that EPEALshould be fully equipped to discharge its responsibilities in a most effectiveway, consultants are to be retained to update the studies, which werecompleted under the previous assignment with regard to EPEAL's organizationand management and its financial structure and tariff policies. The requiredservices are as follows.
Organization and Management Studies
5. This part will comprise a review of the studies which were carriedout previously, an update of the organizational and management structure ofEPEAL, and the provision of assistance during the implementation of thestudies' recommendations. It is envisaged that the consultants managementassistance will cover (but will not necessarily be limited to) the following:
(i) an evaluation of progress made in implementing therecommendations and systems of the previous study;
(ii) an update and definition of the broad lines of EPEAL'sorganizational structure and its relationship with thesupervising authority and the other agencies of theGovernment and the Wilaya of Algiers;
(iii) an update of job description and statements of objectives forall main functional departments;
(iv) development of detailed organization structure for all maindepartments and divisions; and
(v) a plan of actions for a phased implementation of theorganizational changes.
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ANNEX 16Page 3 of 8
6. Parallel to the above-mentioned activities, the consultant shouldreview progress made in implementing the system procedures for billing andcollection, material control and fixed assets accounting. This task willinvolve updating the manuals and instructions for their implementation, andthe preparation of an action plan to continue the implementation.Re-examination of billing and collection practices should take into account:
(a) phasing out of the master meters and use of individual meters; and
(b) the findings and recommendations of the second part of the studyon tariff structures.
7. After completion and agreement on the organizational proposals, andthe updating of documents as per para. 6 above, the consultant is required toproceed to a number of detailed tasks, as follows:
(i) development of general and cost accounting manuals. The Algerian"Plan Comptable National" should be the base for the chart ofaccounts and financial reports. Special attention should be paidto the fact that major capital works are carried out by theMinistry's agencies. Accounting for liaison, and reportingrequirements to ensure prompt recording of these works andassociated transaction in EPEAL's books should be given fullattention;
(ii) development of budgeting system and procedures;
(iii) organization plan and staffing schedule for the establishment of abudget section within the finance department; and
(iv) plan and staffing schedules for the establishment of an internalaudit function covering all aspects of the company's activities.
8. As the work proceeds on items described in para. 6 and following thecompletion of the tasks described in para. 7 above, the consultant shouldassist EPEAL in implementing the organizational proposals, and the revised andnew systems and procedures. EPEAL's staff would carry out the implementationwith assistance from the consultant mainly in the following areas.
(i) overall planning and coordination of the implementation process,follow-up, reporting and update of schedules;
(ii) training of EPEAL's staff assigned for implementation. This willinclude conducting workshops and provision of on-the-job trainingto ensure smooth implementation;
- 73 -
ANNEX 16Page 4 of 8
(iii) provision of guidance and establishment of procedures to reconcileand consolidate EPEAL's current accounts, and establishment ofbalances along the recommended chart of accounts; and
(iv) special attention should be given to coordinating theimplementation with the ongoing program of computerization ofEPEAL's activities.
Tariff Studies
9. The financial and tariff studies, which were carried out under theprevious assignment, provided EPEAL with a set of projected tariffs for theyears 1980 through 1985. They also included projected financial statements.The assumptions retained for the studies' recommendations were:
(i) EPEAL should have a growing self-financing capacity of itsinvestment programs; and
(ii) that the tariff structure should be progressive based onquantities and types of water consumption.
10. The projected self-financing levels and tariffs were based on anumber of assumptions regarding the expected capital and operating costs andrates of inflation.
11. Under the present assignment, the consultant is required to prepare atariff structure which SEDAL might use for charging water supply and sewerageservices, together with a schedule of proposed rates for the years 1986-1992.In the course of this part of the study, the consultant is expected to updateforecasts of:
(a) Consumer use of the services, in terms of numbers of connections,volume of water sold, and any other measures he considersrelevant; and
(b) the operating costs of the services, taking into account theorganization structure proposed in the organization and managementstudy, including depreciation of fixed assets value, and any taxesor duties likely to be imposed on EPEAL.
12. In developing his proposals for the tariff structure and rates, theconsultant should thoroughly examine and evaluate the following:
(a) the economic efficiency of the proposed tariffs, in terms of theirreflection of the estimated long-run marginal cost of the services;
- 74 -
ANNEX 16Page 5 of 8
(b) the extent to which EPEAL's activities convey benefits to awider public than its own connected customers - for example, bysafeguarding health and protecting against stormwater damage -and the possibility of recovering (by taxes or otherwise) suchbenefits in the form of income for EPEAL;
(c) the effect (if any) of the proposed tariffs on the forecast ofwater sales, and the adequacy of the resultant total revenues tocover costs as defined in para. 11(b) above;
(d) the extent to which identifiable groups or classes of consumersimpose special costs on the system, which should be reflected inspecial charges to those consumers;
(e) the possibility and justification of charging to industriesrates which would take into account the quality of the liquidwastes discharged by these industries;
(f) whether the proposed levels of charges are within the reasonableability-to-pay of all consumer groups, and whether a case existson these or any other grounds for concessionary rates to beapplied to particular consumer groups or levels of consumption;
(g) the effectiveness of the proposed water rates in discouragingwaste and inessential use of water, since this is EPEAL's policy;
(h) the means of recovering the cost of supplies delivered freethrough public taps; and
(i) consistency of the tariffs with the methods of assessment andbilling which is to be reviewed under terms of reference (para.6 above).
13. The consultant should review the cost of providing other servicesassociated with the provision of water by EPEAL to its customers. Theyinclude fees for meter rental and maintenance, new connections, special feesfor reading and billing of individual meters, etc. The consultant shouldprovide EPEAL with proposals for:
(a) methods for establishing the fees;
(b) uniform fees for all the operating districts, and a timetablefor their implementation; and
(c) methods for updating the costs of the services and a mechanismfor updating the fees.
- 75 -
ANNEX 16Page 6 of 8
14. On the basis of his forecasts of operating costs, future investmentsand replacement of obsolete assets, and revenues available from the proposedtariffs, the consultant should prepare projections of the resultant cash flowsfrom operations. The consultant is then required to propose:
(i) the proportions in which it would be appropriate to apply thiscash flow to:
(a) debt service on borrowed funds; and
(b) contributions to EPEAL's current or future capitalexpenditures as set out in EPEAL's financial objectives.
(ii) the proportions in which funds provided to EPEAL by theGovernment should accordingly be divided between capitalcontributions and loans;
(iii) the appropriate terms (interest, maturity and graceperiods) for any loan funds so provided; and
(iv) the life expectancy of assets acquired or built with thefunds so provided.
15. In carrying out this part of the studies, it is expected that theconsultant will wish to examine a number of alternatives. In evaluating thesealternatives he should pay particular regard to the declared objectives ofGovernment with respect to the financing of investments by enterprises, as setout in the Finance Law of 1984. Similar consideration should be given toEPEAL's financial objectives which should be determined in agreement with theGovernment.
16. At the conclusion of this part of the studies, the consultant shouldprepare complete financial projections (income statements, balance sheets andcash flow statements) for the recommended alternative. In the event he wishesto submit alternative schemes for consideration, financial projections shouldbe completed for each alternative.
Performance Indicators
17. The final part of the studies comprises the updating of performanceindicators by which EPEAL's progress towards its objectives may be monitored.The performance indicators should be capable of precise and unambiguousexpression, and within the capacity of EPEAL's information systems tocalculate and report promptly and accurately. They may include (but are notnecessarily limited to) cash generation ratios, balance sheet ratios, measuresof unit costs and service levels. If appropriate, separate indicators may bedeveloped for different parts of the company's operation, including inparticular the water supply and sewerage operations.
- 76 -
ANNEX 16Page 7 of 8
18. The consultant should establish within EPEAL the methodology forupdating the findings of the tariff study and the preparation of updatedprojections. To ensure that this task is carried out properly, the consultantshould:
(i) provide relevant training to EPEAL's assigned staff during thepreparation of the studies; and
(ii) coordinate this task with the development of budget systems andthe setting up of a budgeting section (para. 7 (ii and iii).
Timetables and Reports
19. It is envisaged that the organization/management study and thetariff/financial study will be carried out in parallel, and an elapsed time ofnot more than 12 months (from mobilization of the consultant's team inAlgiers) is allowed for completion of the studies. Assistance in implementingthe organizational changes and new systems (para. 8) will continue for another12 months.
20. The following reports are to be submitted:(i) not later than the end of the sixth month, a first report on
organization and management, containing recommendations on thematters set out in terms of reference (paras. 5 and 6). Twomonths will be allowed for consideration of this report by theAuthorities, discussion with the consultant, and determinationof any revision which may be necessary;
(ii) not later than the end of the eight month, revised manuals asper para. 7 should be submitted together with a detailedimplementation plan; and
(iii) by the end of the twelfth month of the assignment:
(a) a final report on organization and management,incorporating any revision made to the first report andincluding an updated plan of action for implementation; and
(b) a report on tariffs and finance, covering the mattersdescribed in terms of reference (paras. 11-18) and settingout the financial projections referred to in para. 16 ofthe terms of reference.
21. The interim reports are to be submitted in 20 copies, and the finalreports in 50 copies, in the French language, and delivered initially to theDirector General of EPEAL.
- 77 -
ANNEX 16Page 8 of 8
Proposals
21. Proposals in five copies in the French language should be submittedby --------------------to:
23. Proposals should contain, inter alia:
(a) a description of the consulting firm (or firms) and its areas ofspecialism;
(b) a description of other relevant assignments previously carriedout by the firm;
(c) an explanation of the way in which the consultant proposes toapproach the assignment, including any comment he may wish tomake on the terms of reference or any modifications he may wishto propose in the interests of better achieving the objectivesof the assignment;
(d) a brief description of any special methodology to be employed(for example, use of computers);
(e) a staffing chart for the assignment, showing each specialist tobe employed and indicating the nature and duration of hisinvolvement (distinguishing time in Algeria from time at thehome office);
(f) an explanation of how supervision of the assignment is to bemaintained by the firm's principals;
(g) curricula vitae of key personnel nominated for the assignment;and
(h) a statement of any special facilities the consultant may requirein carrying out the assignment.
24. Proposals will be judged on technical merit and fees. Any assistancethe Algerian authorities may be able to provide in regard to accommodation,local transportation and other administrative matters should be indicated inthe proposal.
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ANNEX 16AttachmentPage 1 of 2
ALGERIA
ALGIERS REGIONAL WATER SUPPLY PROJECT
ENTREPRISE DE PRODUCTION, DE GESTION ET DE DISTRIBUTION
D'EAU D'ALGER (EPEAL)
Organization, Management and Financial Studies
List of Reports and Documents Prepared under SEDAL's Study (1980)
Report/Document Title Date
Organization and Management
1. Evolution de la Structure d'Organisation (June 1980)
2. Manuel: Gestion des Abonnes (Vols. 1-2) (March 1980)
3. Nomenclature des Stocks (March 1980)
4. Manuel: Achats - Stocks (March 1980)
5. Manuel: Gestion du Fichier des Immobilisations (March 1980)
6. Instructions Pour l'Initialisation du Fichierdes Immobilisations (March 1980)
7. Definition de la Politique de Mechanisationde Traitement (August 1979)
8. Resum6 de Mise au Point du Projet (March 1980)
Finance and Tariffs
1. Options de Structure Financiere et de laPolitique Tarifaire (January 1980)
2. Propositions de Principes de Politiques Tarifaires (January 1980)
3. Cout Marginal Moyen a Long term de l'Eau Potabled'Alger (January 1980)
- 79 -
ANNEX 16AttachmentPage 2 of 2
4. Note Relative aux Amortissements Pris en Comptedans le Prix de Revient de l'Eau (January 1980)
5. L'Externalite du Projet d'Assainissement desEaux de la Ville d'Alger (January 1980)
6. Les Indicateurs Financiers a Utiliser pourle Controle de 1'Execution du Projetd'Assainissement des Eaux de la Ville d'Alger (January 1980)
ALGERIA
ALGIERS REGIONAL WATER SUPPLY PROJELT
EPEAL: INCl0NE STATEMENTS - ACTUAL (1983) AND PROJECiED (1984-1992)
1. Internal Inflation: The following inflation rates were used:
1984 - 1988 - 7%1989 - 1990 - 6%
1991 - 1992 - 5%
2. Operating Revenues
(i) Projection of Water Sales
Future water sales are assumed to increase slightly duringthe period 1984-1988, as a result of expected improvement inunaccounted-for water which is projected to reach 28% in1992. Sales include additional sales which are expected as aresult of extending EPEAL's area of operation (1984-1985 andonward). Water sales from 1989 onward are projected on thebasis of expected demand and the production levels asenvisaged under the project.
(ii) Water Revenues
Water revenues for 1984 and 1985 are based on the assumptionthat the tariff increase would be introduced as from July 1,1984. It is expected that the following increase would beapplied, starting from 1986, on the basis of proposedfinancial objectives by EPEAL. Tariff increases throughoutthe projection period are expected to be on average 7%annually.
(iii) Meter Rental and Maintenance
These were projected on the basis of the following:
(a) EPEAL will complete its gradual phasing out of themaster metering and the introduction of individualmeters by 1989. Meters for replacement and newconnections would be on a rental basis (currently about20% of individual meters are rented).
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ANNEX 20Page 2 of 4
(b) All rates for meter rentals and fees for meter andconnection maintenance would also be uniform throughEPEAL's area of operation. These rates varysubstantially between operating districts (between atotal of DA 26.0 and DA 54.0 for a meter of samediameter).
(c) Special fees for metering and renting individual meters(currently DA 60.0 and DA 28.0 respectively per meter)would be replaced once the phasing out of master metersis completed, by the uniform rate (para. 2 (iii(b)).The projected rates are based on the expected cost ofproviding the service. They are calculated for themid-year average number of connections.
(iv) New Connections
Connections are the property of the customers. They arebilled at their cost, plus a service tax of 11.1X (currentlyat about DA 1,700 and DA 200 for master meters and individualmeters respectively). From 1986 onward all new connectionsare projected to be individual.
3. Operating Expenses
(i) Personnel: Personnel expenses are projected to increase onthe basis of the forecast number of staff based on adecreasing ratio of employees per population served. Newstaff for operating the new project and sewerage facilitiesare taken into account in the following years of operations.
(ii) Energy and Fuel: Future levels of consumption are projectedassuming gradual improvement of efficiency. Energy requiredfor operating the project and the sewerage facilities areestimated on the basis of the 1984 prices adjusted forinflation.
(iii) Materials and Maintenance: Their quantities are based on theestimated number of new connections, the current maintenanceprograms, and consumption of chemicals. The projectionsinclude operations' requirements for the new facilities to beconstructed under the project and the sewerage project basedon consumption requirements.
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ANN1EX 20Page 3 of 4
(iv) Taxes: Calculated according to their nature: a tax of 2.53%on gross revenues, a tax of 11.1% on all purchases ofmaterials plus a 6% tax on salaries.
(v) Capital Expenses: This represents the cost of connectionextensions (material, labor, overhead, and taxes) included inthe foregoing items which are constructed by EPEAL and areincorporated in its assets.
(vi) Depreciation: Calculated at straight-line rates based on theestimated service lives of major assets components. Theannual average depreciation rates approximates 2.5% throughthe projection period, which is somewhat lower than usualbecause of the dams.
Balance Sheets and Statements of Sources and Application of FundsEPEAL's Balance Sheet for 1982
4. EPEAL's Balance Sheets for 1982 were adjusted to reflect thefollowing:
(i) The incorporation in EPEAL's fixed assets of the water supplyfacilities which were constructed by the DWHA during the period1980-1982 for EPEAL's account. The net value of the works isincorporated in the assets.
(ii) A decrease of the accounts receivable for unidentified accountsinherited from EPEAL's predecessors. According to EPEAL's auditreport (1981), 43% of the receivables would have to bewritten-off through reconciliation and consolidation of pastaccounts (currently under way).
(iii) Change in EPEAL's equity to reflect the above adjustments.
Accounts Receivable
5. Receivables for water consumption are assumed to decline followingimprovements in billing and collection envisaged under the project and arebased on target collection periods. Accounts receivable are expected to reachthree months of billing by 1990. Other accounts are projected to varyslightly over the projection period.
Inventories
6. In 1983 inventories represented about 12 months of consumption ofmaterials and chemicals. This high level is expected to decrease through theimplementation of the materials control system which is currently under way.A declining level is therefore projected to reach an annual average level ofsix months by 1990.
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ANNEX 20Page 4 of 4
Accounts Payable7. They are projected as follows:
(i) Customers' deposits - in accordance with EPEAL's program forinstalling a uniform system of metering (para. 2 (iii)).Deposit per customer is calculated on an average six-monthconsumption, plus other fees, and is adjusted along expectedtariff increases.
(ii) Suppliers (including retention money): A declining ratio permonth of total purchase of materials and EPEAL's routineinvestments is projected. This ratio is assumed to reachthree months of total purchase (excluding the projectedinvestments for which working capital would be financed bythe implementing agencies).
Long and Medium-Term Loans
8. They include loans to the Government for the project, like theproposed Bank loan and commercial banks's loan, which would be partlyreimbursed by EPEAL to the Government. Conditions of the reimbursement are asfollows:
(i) Proceeds of the existing Bank loan (Loan 1545-AL). Chargeson the loan (7.45% interest, repayment over 17 years plus 3years of grace) are calculated as per the existingReimbursement Agreement and assuming that EPEAL will startrepaying the loan plus interest during construction byJanuary 1, 1987.
(ii) Proceeds of the proposed Bank loan, which are to bereimbursed by EPEAL. Charges on the loan are assumed to beat an of interest rate of 10%. The loan is repayable intwenty-five years including five years of grace.
(iii) Other loans include projected loans from various sources tocover the foreign exchange requirements. It is assumed thatEPEAL would repay these loans with an interest rate of 11%,over a 20-year period including five years of grace. Thisitem includes borrowing expected for financing the next majorinvestments (1990 and after) on similar terms andconditions.
(iv) Current and projected medium-term loans: These are fromlocal government-owned development and commercial banks forfinancing EPEAL's portion of investments. They are chargedat 5.5% annual interest rate and are payable over five yearsplus two years of grace.
ALGERIA
ALGIERS REGIONAL WATER SUPPLY PROJECT
Monitoring Indicators
Indicators 1986 1987 1988 1989 1990 1991 1992
I. Staffina
Total Staff 1/ 1,280 1,283 1,334 1,454 1,454 1,454 1,454Staff Per 10,000 People Served 48 46 46 48 46 45 43
Operating Ratio %2 79 81 89 79 81 74 69Debt Equity Ratio x 15:85 20:80 25:75 28:72 31:69 32:68 30:70Debt Service Coverage (times) 21.5 2.5 1.5 3.4 1.1 1.1 1.3Average Rate in DA per m3 Sold 1.61 1.70 1.83 1.95 2.25 2.50 2.60Collection Period (day)3 238 207 165 125 90 90 90Self-financing Ratio % 7% 7% 7% 7% 7% 15% 25%
I/ At year end (December 31).2/ Total operating expenses divided by total revenues x 100.3/ Accounts recievable at a given date divided by daily average of billing.
- 8a -
ANNEX 22Page 1 of 2
ALGERIA
ALGIERS REGIONAL WATER SUPPLY PROJECT
ASSUMPTIONS FOR ECONOMIC EVALUATION OF THE PROJECT
1. The project costs are those of the initial works and for equipmentrenewal, in order to utilize fully the project faci-li ties. The operatingcosts for the proposed water supply project are expressed in constant prices.Both the capital and operating costs are taken net of taxes and customsduties. Taxes are calculated to amount to about 15 percent of the totalproject cost, and customs duties to about 25 percent of the cost of importedmaterials and equipment.
2. The following assumptions have been made in calculating the internalrate of return:
(a) the average life of the assets is 50 years;
(b) since there is no excess capacity at present, all incremental-water sales are credited to the project;
(c) all values in the cost and benefit streams are expressed interms of the 1984 price levels, in order to achieve a commonbase for the caiculation. The additional quantities of waterprovided are valued at the tariff of DA 1.61/m3; and
(d) only the incremental operating costs are charged to theproject. All operating costs are adjusted to the 1984 pricelevels by an annual inflation factor of about 7 percent. Theincremental operating cost in each year is then the differencebetween the adjusted operating costs and the 1984 operatingcosts.
Long-Run Average Incremental Cost of Water
3. The following gives the long-run average incremental cost ofproviding water to the Algiers IWJilaya, at various discount rates:
- 89 -
ANNEX 22Page 2 of 2
Discount Volumes Total Cost IncrementRate, % Discounted Discounted Cost, DA/m3
I/ The average size of a household is 6.8 persons.
- 92 -
ANNEX 25
ALGERIA
ALGIERS REGIONAL WATER SUPPLY PROJECT
Selected Documents and Data Available in the Project File
1. Etude G6n6rale Compl6mentaire sur l'Am6nagement Isser-Keddara-Hamiz etEtude Sommaire d'Identification sur l'Am6nagement du Sebaou (4 Volumes),Hydrotechnic Corporation, July 1980.
2. Avant-Projet Preliminaire, Projet Sebaou-Alger-Mitidja, HydrotechnicCorporation, November 1977
3. Options de Structure Financiere et de Politique Tarifaire Proposees pourla SEDAL, Peat, Marwick and Mitchell & Co., Consultants, January 1980.
4. Propositions de Principes de Politiques Tarifaires, Peat, Marwick andMitchell & Co., Consultants, January 1980.
5. Cout Marginal Moyen a Long-Terme de l'Eau Potable Distribu6e dans leGrand Alger, Peat, Marwick and Mitchell & Co., Consultants, January 1980.
6. Evolution de la Structure d'Organisation de la SEDAL, Peat, Marwick andMitchell & Co., Consultants, June 1980.
7. Detailed Design of Keddara Dam, Tesco-Viziterv.
8. Water Code - Law No. 83-17 of July 16, 1983.
9. Loi de Finances, Official Journal, December 31, 1983.
10. Creation of Regional Water Companies, Official Journal, May 17, 1983.
