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Djizzak and Surkhandarya Rural Water Supply and Sanitation Sector (Supplementary) Financed by Technical Assistance Special Fund

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Djizzak and Surkhandarya Rural Water Supply and Sanitation Sector (Supplementary) Financed by Technical Assistance Special Fund Technical Assistance Consultant’s Report Project Number: 40007-02 September 2008 Republic of Uzbekistan: Djizzak and Surkhandarya Rural Water Supply and Sanitation Sector (Supplementary) Financed by Technical Assistance Special Fund Prepared by David King, Marcus Napud, Nelson Jose, Andrew Mcintyre, Wandert Benthem and Islohotkonsaltservis, Ltd. Tashkent, Uzbekistan For Uzbekistan Communal Services Agency (UCSA) This consultant’s report does not necessarily reflect the views of ADB or the Government concerned, and ADB and the Government cannot be held liable for its contents. All the views expressed herein may not be incorporated into the proposed project’s design. SUMMARY OF SUB PROJECT FEASIBILITY STUDIES I DESCRIPTION OF SUBPROJECTS FS 1 TERMEZ CITY SUB-PROJECT А. Project Area The regional centre Termez is located in the south of the Surkhandarya oblast. Termez rayon borders in the north on Kumkurganskim area, in the east on the Republic of Tadjikistan, on the west Angor and Muzrabat rayon, in the south Afghanistan. Altitude above sea level is 302 m. The average annual precipitation is 200-170 mm. Figure 1 presents the rayon map, delineating the subproject existing and planned works. Figure 1 – Termez city Map B. Social and production infrastructure According to official Oblast data of January 2008 the city population is 127,280 people. Local administration is a City Khokimiyat and 33 Makhalla Committees. There is a railway station, an international river port, and airport. Termez is the industrial and cultural centre of Surkhandarya oblast. There is a cotton-cleaning plant, brickworks, meat-and-dairy enterprise and complex of ferroconcrete items and structures. Termez City has Termez State University, a music school, agricultural and medical colleges. The average income per capita in estimated at 55,200 sum. 1 C. Existing Situation in Water Supply and Sanitation Water supply of Termez is from two groundwater water intakes "Manguzar" and "Northern". Parts of the boreholes on both these water-intakes have failed. The second elevation pumping stations need of equipment replaced. The centralized water supply system is obsolete and only partially operating. A water supply household survey in Termez city identified that the population complains of a lack of potable water. Water is supplied zonally on a schedule of 6 hours a day. 55 % of housing in the city is connected to a centralized sewage system. Rehabilitation of the waste water treatment plants and disposal system is planned. Physical coverage of the water supply network is 95 %. D. Subproject Reconstruction of the water supply of Termez is based on Resolution № 890 and ADB concepts. Total population covered by the end of the subproject construction (2014) is projected to be 147,040 person. Overall supply of water will make 63,710 m3/day. The Water supply in Termez City is sourced from deep groundwater aquifers. Development scheme will include: 1) “Manguzar” water-intake: reconstruction of 13 boreholes (11 in operation and 2 in reserve), cleaning and re-equiping of two reservoirs of 5 000m3 and 3 000m3 capacity, repair of pumping plant with installation of new pump-power equipment, repair and re-equip chlorination plant, replace process communications, installation of water meters, repair and replace electrical switchboards and control devices and electric power supply networks. 2) “Northern” water-intake - reconstruction of 8 boreholes (6 operating, 2 reserve), Clean and re-equip two 2 000m3 reservoirs, repair pumping station with installation of new pump-power equipment. Repair and re-equip the chlorination plant. Replace process communications, install water meters. Repair and replace power supply devices and networks. 3) 4-th micro-rayon – Re-equip boreholes (1 operating and 1 reserve) and pumping station, install transformers, install water meters. Clean and re-equip 1000m.3 reservoir. 4) 5-th micro- rayon – Re-equip two boreholes (1 operating and 1 reserve) and pumping plant, install transformer substation, install of water meters. Clean and re-equip a 1000m 3 reservoir. 5) Re-lay 4.3 km of water mains D=600 mm. Re-lay 2 km water mains D=400 mm. Reconstruct and build 11 km of new distribution networks D=300-200 mm and 47.7 km of.D=150-100 mm. 6) The school sanitation improvement program will be accompanied by the Hygiene Education Program (HEP) addressed to school children, teachers and makhallya committees. E. Environmental and social impact This subproject will have beneficial impact on the population of Termez through; enhanced local economies, contribute to reduction of poverty, and introduce improved hygienic practices and the economic use of water resources. Identified negative impacts during construction are very moderate in extent and can be easily mitigated. The project does not foresee any negative impacts in the long term. City branch PU "Suvokova ".is responsible 2 for; (i) O&M of water supply and sanitary systems in the regional centre, and distribution of water and pump stations (ii), registration of consumers, billing and revenue collection. F. Subproject Investment and Per Capita Cost For Termez subproject cost estimates have been developed using survey data obtained during site visit. A least cost option was developed after considering alternative water sources their relative distances from the city, necessary construction of for the delivery and distribution of water, and the number of consumers served. Investment costs were based on the population estimates at project completion in 2014. The total investment is estimated at $ 13.81 million including taxes and duties, and contingencies. This will service a target population of 147,040 at the per capita cost of $94.0. G. Economic and financial analysis Benefit-cost analysis was undertaken to determine subproject economic and financial viability. The main viability parameters used are the EIRR and ENPV for economic analysis, and FIRR and FNPV for financial analysis. The proposed subproject is economically viable if the resulting EIRR exceeds the economic opportunity cost of capital EOCC at 12%, and ENPV is positive. Similarly, the subproject is financially viable if FIRR is greater than the weighted average cost of capital WACC at 4.22%, and FNPV is positive. In the economic analysis, the quantifiable benefits related to incremental and non-incremental water that result into time-cost savings were compared with capital and O&M costs that have been converted from financial costs using shadow pricing and after elimination of transfer payments. The resulting cash flows were discounted at the EOCC. In the financial analysis, net revenues, calculated at a collection rate of 80-90 % of gross sales, were compared with capital and O&M costs and the resulting net cash flows were discounted at the WACC of 4.22 %. The subproject was subjected to sensitivity analysis to assess the effects of adverse circumstances on viability. The sensitivity scenarios include: a 10% increase in capital cost, a 10% increase in O&M cost, a 10% decrease in revenue, and a one-year delay in implementation. The results of the analysis show that the subproject is economically viable with EIRR at 31.1 % and an ENPV of Sum 6504 million for the base case. The subproject is also found financially viable with FIRR at 5.5% and an FNPV of Sum 1658 million. In all economic and financial sensitivity scenarios, the subproject remained robust. The results are summarized in Table 1. Table 1: Summary Economic and Financial Analysis for Termez Particulars Change EIRR ENPV EIRR SV FIRR FNPV FIRR SV Base Case 31.1% 6504 5.5% 1658 Investment Cost +10% 22.5% 5017 44% 4.8% 761 17.5% O&M Cost +10% 30.5% 6321 609% 5.3% 1364 Benefit -10% 20.7% 3533 37% 4.4% 258 11.9% Implementation 1 yr delay 21.6% 4843 22% 4.8% 759 SV = Switching Value H. Average Incremental Cost and Cost Recovery In assessing the appropriate water charge to attain the required level of cost recovery, both average economic and financial incremental costs AIC were calculated. AIC is an approximation of long term marginal costs and AIEC is the appropriate target for tariff setting. Subproject AIEC and AIFC are at Sum 132 and Sum 125 respectively. With AIEC higher than AIFC, setting the tariff at AIEC would result in sufficient cost recovery level. Termez vodokanal is projected to post a positive return on net fixed assets (ROA) of 2.4% to 16.3% 3 from 2016 to 2020. Debt Service Ration (DSR) will be greater than 1.2 during the projection period. I. Tariff affordability The viability of subproject operation ultimately depends on household capacity to pay for their monthly water bills. As the Project aims to extend water service to the poor within the community, the proposed tariff was tested against the average income of the low-income household. The affordability analysis shows that the proposed tariffs will result to a monthly bill to household income ratio of 0.3 to 1.6 during the projection period for families belonging to the low-income group. 4 FS 2 SARIASIYA SUB-PROJECT А. Project Area Sariasiyskiy Rayon is situated on the foothills of Gissarak mountain range in the north of Surkhandarya Region and borders on the Republic of Tajikistan in the north and in the east, Kashkadarya Region in the west, Boysun, Kumkurgan, Denau and Uzun rayons in the south. The rayon covers 380,095 hectares of which 15,806 ha are classified as irrigated agricultural lands consisting of 10,296 ha of crop lands, 209 ha of permanent crops, 916 ha of small holdings (farmlands) and 3 613 ha. of dry lands. The remainder 128,383 ha is designated as pasture and 61,115 as forest. Rayon topography ranges from 500 m. to 4,500 m. asl. Annual mean precipitation is 250 – 308 mm. Figure 2 presents the rayon map, delineating the subproject, existing, and planned works.
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