REPUBLIC of ARMENIA EIB European Investment Bank Kfw

REPUBLIC OF ARMENIA State Committee of Water Economy of RA Ministry of Agriculture

EIB European Investment Bank

KfW Development Bank Communal Infrastructure Program II – Phase 3 (BMZ 2013.6634.3) and Accompanying Measures (BMZ 2013.7017.0) – (“Project”) (PN 2020 61554) – (EU-NIF)

PROJECT REPORTING ANNEX 7

3rd Quarter 2016

Reporting Period July - September 2016

Services provided by Management Contract

CONTENTS

A. FUNDAMENTALS AND GENERAL PROJECT ENVIRONMENT ...... 3 B. STATE OF ADVANCEMENT AND TIME SCHEDULE ...... 34 C. TOTAL COST AND FINANCING ………………...……………………………………………..…………..40

Report by Annex 7 of Communal Infrastructure Program II – Phase 3 (BMZ 2013.6634.3) and Accompanying Measures (BMZ 2013.7017.0) – (“Project”) for period 3rd quarter of 2016 MC year for Lori, Shirak, Nor Akunq and AWSC W&W utilities (“Utilities”)

A. FUNDAMENTALS & GENERAL PROJECT ENVIRONMENT

1. Financial situation

Audited the financial statements of Utilities, which comprise the statement of financial position as of December 31, 2015, and the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, provided to the KfW and SCWE.

Utilities financial flow (AMD million)

Lori WS CJSC

Cumulative from During the beginning of reporting No Items description the year quarter 01.01.2016 – 01.07.2016- 30.09.2016 30.09.2016 1 Revenue 370.0 129.9 2 Collection 355.9 124.2 3 Cash income from other operational income 4 Return of borrowing 5 Loan, borrowing receiving 6 Subsidies, grants 382.8 7 Other cash income 0.7 0.2 I Total Income 739.4 124.4

II Total Expenses 725.1 119.6 1 Electricity 30.8 6.3 2 Salary 219.0 81.3 3 Environmental and nature resources use fees 10.4 3.0 Operation and Maintenance of Mashinary-machanismes 4 25.9 11.8 expenses 4.1 Fuel 22.9 11.0 Repair and Operation&Maintenance of Machinary- 4.2 1.2 0 machanisms expenses 4.3 Spareparts 1.8 0.8 5 Chlorine, chloride lime, chemicals 6.4 1.5 Repairs material expenses, capital repairs and other 6 16.6 6.4 production expenses 6.1 W&W systems material expenses 16.6 6.4 6.2 WW systems repairs expenses by other organisations 0 0 7 Office and economic significance material expenses 8.3 0.3 8 Utility and other services 5.9 4.1 9 Business trip expenses 0.1 0 10 Representative expenses 2.5 0.9 11 Calculated taxes, fees 2.7 1.9 11.1 VAT 0 0 11.2 Profit tax 0 0 11.3 Other taxes (including regulation fee) 2.7 1.9 12 Investment projects Phase I interest sum 13.9 2.1 Investments Program 1 and 2 loan principal amounts 13 382.8 0 repayment III Current Balance (I-II) 14.3 4.8

Shirak WS CJSC

Cumulative from During the beginning of reporting No Items description the year quarter 01.01.2016 – 01.07.2016- 30.09.2016 30.09.2016 1 Revenue 628.7 218.4 2 Collection 592.1 205.1 3 Cash income from other operational income 21.3 18.8 4 Return of borrowing 0 0 5 Loan, borrowing receiving 0 0 6 Subsidies, grants 521.9 0 7 Other cash income 33.3 10.8 I Total Income 1168.6 234.7

II Total Expenses 1163.1 236 1 Electricity 32.2 9.7 2 Salary 282.7 91.7 3 Environmental and nature resources use fees 4.1 2.3 Operation and Maintenance of Mashinary-machanismes 4 55.1 19.9 expenses 4.1 Fuel 37.8 12.6 Repair and Operation&Maintenance of Machinary- 4.2 7.4 1.6 machanisms expenses 4.3 Spareparts 9.9 5.7 5 Chlorine, chloride lime, chemicals 6.2 4.0 Repairs material expenses, capital repairs and other 6 200.8 94.5 production expenses 6.1 W&W systems material expenses 29.1 9.7 6.2 WW systems repairs expenses by other organizations 133.8 79.1 6.3 Purchase and installation of water meters 33.7 4.4 6.4 Purchase of other equipment and fixed assets 4.2 1.3 7 Office and economic significance material expenses 1.3 0.5 8 Utility and other services 40.9 12.4 9 Business trip expenses 0.9 0.3 10 Representative expenses 0.7 0.2 11 Calculated taxes, fees 1.3 0.5 11.1 VAT 0 0 11.2 Profit tax 0 0 11.3 Other taxes (including regulation fee) 1.3 0.5 12 Investment projects Phase I interest sum 15 0 Investments Program 1 and 2 loan principal amounts 13 521.9 0 repayment III Current Balance (I-II) 5.5 -1.3

Nor Akunq CJSC

Cumulative from During the beginning of reporting No Items description the year quarter 01.01.2016 – 01.07.2016- 30.09.2016 30.09.2016 1 Revenue 326.71 120.73 2 Collection 302.74 111.08 3 Cash income from other operational income 16.99 5.25 4 Return of borrowing 5 Loan, borrowing receiving 6 Subsidies, grants 181.37 23.62 7 Other cash income I Total Income 501.10 139.94

II Total Expenses 504.47 138.92 1 Electricity 153.40 57.89 2 Salary 153.40 42.58 3 Environmental and nature resources use fees 127.07 0.61 Operation and Maintenance of Mashinary-machanismes 4 1.39 8.54 expenses 4.1 Fuel 22.82 5.37 Repair and Operation&Maintenance of Machinary- 4.2 13.58 0.27 machanisms expenses 4.3 Spareparts 1.65 2.90 5 Chlorine, chloride lime, chemicals 7.60 1.44 Repairs material expenses, capital repairs and other 6 12.18 3.90 production expenses 6.1 W&W systems material expenses 8.49 3.22 6.2 WW systems repairs expenses by other organisations 3.69 0.68 7 Office and economic significance material expenses 8.92 4.25 8 Utility and other services 13.63 4.11 9 Business trip expenses 10 Representative expenses 1.77 0.84 11 Calculated taxes, fees 38.33 14.76 11.1 VAT 35.81 12.47 11.2 Profit tax 11.3 Other taxes (including regulation fee) 2.53 2.29 12 Investment projects Phase I interest sum 116.66 Investments Program 1 and 2 loan principal amounts 13 5.00 repayment

III Current Balance (I-II) (3.37) 1.03

AWSC CJSC

Cumulative from During the beginning of reporting No Items description the year quarter 01.01.2016 – 01.07.2016- 30.09.2016 30.09.2016 1 Revenue 4 062.5 1 469.4 Collection 2 3 528.3 1 319.0 /in bank accounts/ 3 Cash income from other operational income 0.1 0.0 4 Return of borrowing 77.0 0.0 5 Loan, borrowing receiving 0.0 0.0 6 Subsidies, grants 2 456.8 934.8 6.1 Operational subsidy 1 057.2 391.5 6.2 Subsidy for loan principal amounts repayment 1 399.6 543.3 7 Other cash income 41.4 20.1 I Total Income 6 103.7 2 273.8

II Total Expenses 5 785.3 2 033.7 1 Electricity 1 027.6 342.8 2 Salary 2 019.4 707.2 3 Environmental and nature resources use fees 32.1 0.0 Operation and Maintenance of Mashinary-machanismes 4 292.4 98.1 expenses 4.1 Fuel 171.8 57.2 Repair and Operation&Maintenance of Machinary- 4.2 100.6 36.2 machanisms expenses 4.3 Spareparts 20.0 4.7 5 Chlorine, chloride lime, chemicals 128.4 44.3 Repairs material expenses, capital repairs and other 6 175.3 74.4 production expenses 6.1 W&W systems material expenses 58.5 28.3 6.2 WW systems repairs expenses by other organisations 116.7 46.1 7 Office and economic significance material expenses 11.6 4.5 8 Utility and other services 184.1 64.9 9 Business trip expenses 18.5 4.9 10 Representative expenses 0.9 0.5 11 Calculated taxes, fees 12.6 3.9 11.1 VAT 0.0 0.0 11.2 Profit tax 0.0 0.0 11.3 Other taxes (including regulation fee) 12.6 3.9 12 Investment projects Phase I interest sum 0.0 0.0 Investments Program 1 and 2 loan principal amounts 13 0.0 0.0 repayment 14 EBRD, WB, ADB loan principal amounts repayment 1 399.6 543.3 15 Other expenses 482.8 145.1 III Current Balance (I-II) 318.4 240.1

2. Tariff structure, tariff applications, tariff adjustments (including private households and legal entities)

Current tariff for water and waste water services per m3 (including VAT) Utility Tariff Lori 180.98 Shirak 172.21 Nor Akunq 202.63 AWSC 179.78

3. State of implementation of measures and detailed state of (de-) commissioning for each respective investment area.

Lori WSC

Decommissioning and Commissioning of zones Lori current commission decommission zones situation at Note Note status status 3rd quarter Will be new 6.1 old zone from yes no October 1st Will be new 6.2 old zone from yes no October 1st 7 new yes yes will be will be 8 old implemented no no implemented during phase III during phase III 1 new yes yes 2 new yes yes 3 new yes yes 4 new yes yes 5 new yes yes Reason: connected with for KPI s 9.1 Partly new ring system and yes yes calculating 8 zone (phase losses only III) Reason: connected with for KPI s 9.2 Partly new ring system and yes yes calculating 8 zone (phase losses only III) 10 new yes yes 11 new yes yes 12 new yes yes Reason: for KPI s connected with 13 partly new yes yes calculating ring system and losses only 8 zone (phase III 14 new yes yes 15 new yes yes Old new yes yes Lernapat Darpas new yes yes

Shirak WSC

Note decommissioning and Commissioning of zones Shirak zones current commission decommission zones situation at Note Note status status 3rd quarter Azatan new yes yes Achurya new yes yes n Maralik new yes yes

4.1 new yes yes

Will be finished 3.1 old yes ongoing during Phase III

Will be finished 2 old yes ongoing during Phase III

will be new Will be finished 3.2 old starting from yes ongoing starting 1 October 1 October

4. Achievements and Targets of the Indicators

Performance Indicators

PI 1 PI 1 Continuity of Cumulated per Target 3rd quarter 2016 comments water (hour/day) 30.09.2016 >13/24 Lori WS 20.9 / 23.8 21.1 / 24 12.5 / 24 old/new network Shirak WS 20.7 / 23 22 / 23.5 13.7 / 24 old/new network Overall service Nor Akunq 23.9 23.9 24 area Overall service AWSC 18.7 18.7 18 area(average) Gegharkunik 19.4 19.4 18 Syunik 23.1 23.1 23.8 Vayots Dzor 24 24 24

PI 2 PI 2 Electricity Target Cumulated per consumption 3rd quarter 2016 <0.6 (weighted Comments 30.09.2016 (kwh/m3) average) No electricity for water production, Lori WS n.a. n.a. 0.36 100% gravity water No electricity for water production, Shirak WS n.a. n.a. 0.36 100% gravity water Nor Akunq 0.53 0.53 0.47 AWSC (average) 0.6 0.55 Gegharkunik 0.64 0.63 0.58 Syunik 0.02 0.023 1.39 Vayots Dzor 0.42 0.28 0.25

PI 3 PI 3 Overall Water Cumulated per Target 3rd quarter 2016 Comments Losses (%) 30.09.2016 <65/<35 Lori WS 69.3 / 28.8 73.3 / 28.7 58 / 29 old/new network Shirak WS 77.5 / 32.9 77.2 / 32.6 58 / 33 old/new network Overall service Nor Akunq 69.5 69 53 area Overall service AWSC (average) 67.3 67.2 68 area(average) Gegharkunik 69.9 73.5 70 Syunik 60.7 45.2 60 Vayots Dzor 54.9 57.2 69

PI 4 PI 4 Collected Cumulated per Target revenue (Million 3rd quarter 2016 Comments 30.09.2016 (12 months) AMD) Lori WS 124.2 355.9 485 Shirak WS 205.1 592.1 878 Nor Akunq 111.1 302.7 464 AWSC (average) 1331 3569 1,950 Gegharkunik 110 302 n.a. Syunik 205 567 n.a. Vayots Dzor 60 152 n.a.

PI 5 Target PI 5 Water quality Cumulated per 3rd quarter 2016 (>95 weighted Comments (%) 30.09.2016 average) Lori WS 100 100 95 Shirak WS 99.8 99.8 95 Nor Akunq 100 100 95 AWSC (average) 98.8 98.6 95 Gegharkunik 98.9 99.5 95 Syunik 99.2 98.1 95 Vayots Dzor 100 100 95

Monitoring Indicators MI 1 MI 1 Average Target daily production Cumulated per 3rd quarter 2016 (<1.2 weighted Comments per customer 30.09.2016 average) (m3/day) Lori WS 0.85 0.85 1.4 Shirak WS 1.84 1.84 2.2 Nor Akunq 1.27 1.14 0.9 AWSC (average) 2.27 2.16 1.3 Gegharkunik 1.97 2.15 n.a. Syunik 3.37 2.85 n.a. Vayots Dzor 1.61 1.45 n.a.

MI 2 MI 2 Staff ratio Target Cumulated per (N*/1,000 3rd quarter 2016 (<6.0 weighted Comments 30.09.2016 customers) average) Lori WS 5.0 5.0 5.0 Shirak WS 4.9 4.9 5.0 Nor Akunq 5.2 5.2 7.0 AWSC (average) 4.4 4.4 5.8 Gegharkunik 3.5 3.6 n.a. Syunik 5.4 5.4 n.a. Vayots Dzor 5.8 5.8 n.a.

MI 3 MI 3 Customers Target complying with Cumulated per (average 3rd quarter 2016 Comments min. WS duration 30.09.2016 weighted target (%) >99) Lori WS 100/100 100/100 100 Town/villages Shirak WS 100/100 100/100 100 Town/villages Overall service Nor Akunq 100 100 100 area Overall service AWSC (average) 100 100 99 area Gegharkunik 100 100 60 24 hours supply Syunik 100 100 94 24 hours supply Vayots Dzor 100 100 100 24 hours supply

MI 4 MI 4 Working Target ratio (operating Cumulated per (average expenditures/ 3rd quarter 2016 Comments 30.09.2016 weighted revenue collected target >120) (%) Lori WS 105.5 104 100 Shirak WS 73.8 73.9 95 Nor Akunq 89.8 102.8 110 AWSC (average) 106 117 132.9 Gegharkunik n.a. n.a. 90 Syunik n.a. n.a. 140 Vayots Dzor n.a. n.a. 173 13

MI 5 MI 5 Expenditures Target for maintenance Cumulated per (average 3rd quarter 2016 Comments & repair (% total 30.09.2016 weighted target op. costs) >13) staff cost included 3rd quarter 9.6 Lori WS 18.6 18.4 15 Mio AMD and for the 9 months 25.7 Mio AMD staff cost included 3rd quarter 41.5 Shirak WS 17.6 19.6 15 Mio AMD and for the 9 months 123 Mio AMD staff cost included 3rd quarter 12,5 Nor Akunq 19.9 18 12 Mio AMD and for the 9 months 40,2 Mio AMD AWSC (average) 13.6 14.7 10 Gegharkunik n.a. n.a. n.a. Syunik n.a. n.a. n.a. Vayots Dzor n.a. n.a. n.a.

MI 6

MI 6 Water supply interruptions/max Cumulated per Target 3rd quarter 2016 Comments duration of repair 30.09.2016 (24/36) (hours) Lori WS 0 0 24/36 new / old network Shirak WS 0 0 24/36 new / old network Overall service Nor Akunq 0 0 24 area Settlement with/ AWSC (average) 0 0 24/36 without investment Gegharkunik 0 0 n.a. Syunik 0 0 n.a. Vayots Dzor 0 0 n.a.

MI 7 Target MI 7 Collection Cumulated per (average 3rd quarter 2016 Comments efficiency (%) 30.09.2016 weighted target >97) Lori WS 96 96 96 Shirak WS 94 94 96 Nor Akunq 92 93 96 AWSC (average) 91 88 96 Gegharkunik 82 82 98 Syunik 96 96 99 Vayots Dzor 91 92 99

MI 8 Target (average MI 8 Metering Cumulated per weighted target 3rd quarter 2016 Comments ratio (%) 30.09.2016 >96, valid for all customers categories) Lori WS 99.4 99.4 100 Shirak WS 96 96 95 Nor Akunq 99.9 99.9 100 AWSC (average) 87 87 98 Gegharkunik 75 75 95 Syunik 90 90 95 Vayots Dzor 90 90 95

MI 9 Target MI 9 Operational Cumulated per (average cost recovery 3rd quarter 2016 Comments 30.09.2016 weighted target ratio (%) >104) Lori WS 99.8 100 100 Shirak WS 120.2 119.7 100 Nor Akunq 120.9 105.2 100 AWSC (average) 124 111 103 Gegharkunik n.a. n.a. 73 Syunik n.a. n.a. 113 Vayots Dzor n.a. n.a. 140

MI 10 MI 10 Service rate Target controlled sewage Cumulated per (average 3rd quarter 2016 Comments collection/ 30.09.2016 weighted target evacuation (%) >65) Lori WS 89% 89% 90 Shirak WS 80% 80% 73 Nor Akunq 75% 75% 55 AWSC (average) 50% 50% Gegharkunik 51% 51% 51 Syunik 68% 68% 70 Vayots Dzor 76% 76% 60

MI 11 Target MI 11 Service rate Cumulated per (average controlled sewage 3rd quarter 2016 Comments 30.09.2016 weighted target treatment (%) >85) Only mechanical Lori WS n.a. n.a. 0 treatment is done in old WWTP Shirak WS n.a. n.a. 0 Nor Akunq n.a. n.a. 96 AWSC (average) 9 9 Gegharkunik 47 47 Syunik 0 0 0 Vayots Dzor 23 23 60 15

Outputs indicators

OPI 1 OPI 1 Domestic ws connection Cumulated Target 3rd quarter total/created or per (<53,500/ Comments 2016 rehabilitated 30.09.2016 <46,500) (No/No) Created or Lori WS 41,200/0 41,200/0 39,181/22,495 rehabilitated under Phase III Created or Shirak WS 54,275/0 54,275/0 53,199/46,111 rehabilitated under Phase III Created or Nor Akunq 19,848 19,848 19,162 rehabilitated under Phase III Created or AWSC (average) 274,250/0 274,250/0 n.a. rehabilitated under Phase III Created or Gegharkunik 33,122/0 33,122/0 32,841/n.a. rehabilitated under Phase III Created or Syunik 31,427/0 31,427/0 30,750/0 rehabilitated under Phase III Created or Vayots Dzor 9,226/0 9,226/0 9,993/0 rehabilitated under Phase III

OPI 2 OPI 2 Capacity of water treatment Cumulated 3rd quarter Target plant constructed/ per Comments 2016 (<52,000) rehabilitated 30.09.2016 (m3/day) Under Phase III the possibility of maintaining the Lori WS 0 0 0 operation of WTP is under investigation as Novoseltsovo water sources alternative No WTP existing Shirak WS n.a. n.a. n.a. (chlorination only) No WTP existing Nor Akunq n.a. n.a. n.a. (chlorination only) AWSC (average) n.a. No WTP existing Gegharkunik 0 0 0 (chlorination only) Syunik 0 0 52,000 No WTP existing Vayots Dzor 0 0 0 (chlorination only)

OPI 3 OPI 3 Capacity of reservoirs or raw Cumulated Target 3rd quarter water storage per (<48,000/ Comments 2016 facilities constructed/ 30.09.2016 31,500) rehabilitated m3/m3) Constructed/ Lori WS 0 0 17,017/n/a. Rehabilitated under Phase III Constructed/ Shirak WS 0 0 47,740/31,500 Rehabilitated under Phase III No construction/ Nor Akunq n.a. n.a. 6,950/0 rehabilitation planned under Phase III Constructed/ AWSC (average) 0 0 n.a. Rehabilitated under Phase III Constructed/ Gegharkunik 0 0 30,465/3,000 Rehabilitated under Phase III Constructed/ Syunik 0 0 31,738/5,000 Rehabilitated under Phase III Constructed/ Vayots Dzor 0 0 5,200/800 Rehabilitated under Phase III

OPI 4 OPI 4 Number and capacity of pumping Cumulated 3rd quarter Target stations constructed/ per Comments 2016 (<12) rehabilitated 30.09.2016 (No/m3/h) Constructed/ Lori WS 0 0 6 Rehabilitated under Phase III No construction/ Shirak WS n.a. n.a. n.a. rehabilitation planned under Phase III Constructed/ Nor Akunq 0 0 12 Rehabilitated under Phase III Constructed/ AWSC(average) 0 0 n.a. Rehabilitated under Phase III Constructed/ Gegharkunik 0 0 n.a. Rehabilitated under Phase III Constructed/ Syunik 0 0 n.a. Rehabilitated under Phase III Constructed/ Vayots Dzor 0 0 n.a. Rehabilitated under Phase III

OPI 5 OPI 5 Capacity of Cumulated sewage plant 3rd quarter Target per Comments constructed/ 2016 (<115,000) 30.09.2016 rehabilitated (P.E.) No construction/ rehabilitation planned Lori WS n.a. n.a. 0 under Phase III No construction/ rehabilitation planned Shirak WS n.a. n.a. 0 under Phase III Constructed/ Nor Akunq 0 0 50,000 Rehabilitated under Phase III AWSC (average) 126,668 126,668 n.a. Gegharkunik 75,926 75,926 115,000 No WWTP Syunik 0 0 0 available/not planned Vayots Dzor 18,380 18,380 25,000

OPI 6 OPI 6 Length of Cumulated sewer and/or water 3rd quarter Target per Comments pipes built/upgraded 2016 <300 30.09.2016 km/km Constructed/ Lori WS 0 0 212/0 upgraded under Phase III Constructed/ Shirak WS 0 0 278/18 upgraded under Phase III Constructed/ Nor Akunq 0 0 72/9 upgraded under Phase III Constructed/ AWSC (average) 0 0 n.a. upgraded under Phase III Constructed/ Gegharkunik 0 0 296/0 upgraded under Phase III Constructed/ Syunik 0 0 283/0 upgraded under Phase III Constructed/ Vayots Dzor 0 0 96/0 upgraded under Phase III

OPI 7 OPI 7 Domestic connections to Cumulated 3rd quarter Target sanitation services per Comments 2016 <40000 total/created or 30.09.2016 rehabilitated N/N Considered domestic connections to sewage system as per today Lori WS 36,668/0 36,668/0 35,147/0 and created or rehabilitated under Phase III Considered domestic connections to sewage system as per today Shirak WS 43,420/0 43,420/0 38,720/0 and created or rehabilitated under Phase III Considered domestic connections to sewage system as per today Nor Akunq 14,886/0 14,886/0 10,499/0 and created or rehabilitated under Phase III Considered domestic connections to sewage system as per today AWSC (average) 137,125/0 137,125/0 n.a. and created or rehabilitated under Phase III Considered domestic connections to sewage system as per today Gegharkunik 16,892/0 16,892/0 16,740/0 and created or rehabilitated under Phase III Considered domestic connections to sewage system as per today Syunik 21,370/0 21,370/0 21,368/0 and created or rehabilitated under Phase III Considered domestic connections to sewage system as per today Vayots Dzor 7,011 7,011 6,015/0 and created or rehabilitated under Phase III

OPI 8 OPI 8 Connection Cumulated rate water supply 3rd quarter Target per Comments (common taps) 2016 <100 30.09.2016 % Lori WS 99 99 100 Shirak WS 94 94 100 Nor Akunq 100 100 100 AWSC (average) 100 100 n.a. Gegharkunik 100 100 100 Syunik 100 100 100 Vayots Dzor 100 100 100

OPI 9 Cumulated OPI 9 Connection 3rd quarter Target per Comments rate sewerage % 2016 <100 30.09.2016 Lori WS 89 89 90 Shirak WS 80 80 73 Nor Akunq 75 75 55 AWSC (average) 50 50 n.a. Gegharkunik 51 51 51 Syunik 68 68 69 Vayots Dzor 76 76 100

Outcome Indicators

OC 1 OCI 1 In (ex.) Cumulated Comments 3rd quarter filtration rate per Target No data available/Data to 2016 sewerage (%) 30.09.2016 be submitted Lori WS n.a. n.a. n.a. Shirak WS n.a. n.a. n.a. Nor Akunq n.a. n.a. n.a. AWSC (average) n.a. n.a. n.a. Gegharkunik n.a. n.a. n.a. Syunik n.a. n.a. n.a. Vayots Dzor n.a. n.a. n.a.

OC 2 OCI 2 Treatment/disposal/ Cumulated Comments utilization of sludge 3rd quarter per Target Data to be submitted (EIB from sewage 2016 30.09.2016 requirement) treatment plants (M3/d) Lori WS n.a. n.a. n.a. Shirak WS n.a. n.a. n.a. Nor Akunq n.a. n.a. n.a. AWSC (average) 1.31 1.23 n.a. Gegharkunik 1.03 0.84 n.a. Syunik 0 0 113 Vayots Dzor 0.15 0.16 140

OC 3 OCI 3 Effluent Quality (sewage) in Cumulated compliance with 3rd quarter Comments per Target Armenian standards 2016 Data to be verified 30.09.2016 (total No/a/ No not complying) Lori WS n.a. n.a. n.a. Shirak WS n.a. n.a. n.a. Nor Akunq n.a. n.a. n.a. AWSC (average) n.a. n.a. n.a. Gegharkunik n.a. n.a. n.a. Syunik n.a. n.a. n.a. Vayots Dzor n.a. n.a. n.a.

Core Result Indicators

CRI 1 CRI 1 Employment Cumulated 3rd quarter Target Comments during construction per 2016 (<150) Data to be submitted (Person years) 30.09.2016 No own construction staff Lori WS 0 0 n.a. for Phase III in Utility No own construction staff Shirak WS 0 0 n.a. for Phase III in Utility No own construction staff Nor Akunq 0 0 n.a. for Phase III in Utility No own construction staff AWSC (average) 0 0 n.a. for Phase III in Utility No own construction staff Gegharkunik 0 0 150 for Phase III in Utility No own construction staff Syunik 0 0 150 for Phase III in Utility No own construction staff Vayots Dzor 0 0 50 for Phase III in Utility

CRI 2 CRI 2 Employment – Cumulated additional direct jobs 3rd quarter Target Comments per during operation 2016 (<5) Data to be submitted 30.09.2016 (Person Years) Lori WS 0 0 0 Shirak WS 0 0 0 Nor Akunq 0 0 4 AWSC (average) 0 0 n.a. Gegharkunik 0 0 0 Syunik 0 0 5 Vayots Dzor 0 0 0

CRI 3 CRI 3 Cumulated 3rd quarter Target Comments Energy efficiencies per 2016 (<1,100/<520) Data to be submitted realized MWh/a/%) 30.09.2016 No electricity for water Lori WS n.a. n.a. 450/50 production, 100% gravity water No electricity for water Shirak WS n.a. n.a. 230/79 production, 100% gravity water Nor Akunq 1,178 3.199 4,080/105 AWSC 8,303 21,959 n.a. Gegharkunik 1,758 5,516 3,350/50 91 272 New pumping station in Syunik 1,060/563 Kapan Vayots Dzor 6 73 30/0

CRI 4 CRI 4 Cumulated Comments Carbone footprint 3rd quarter per Target Data to available/not (relative) (CO2 tones 2016 30.09.2016 measured equivalent) Lori WS n.a. n.a. 450/50 Shirak WS n.a. n.a. 230/79 Nor Akunq n.a. n.a. 4,080/105 AWSC (average) n.a. n.a. n.a. Gegharkunik n.a. n.a. n.a. Syunik n.a. n.a. n.a. Vayots Dzor n.a. n.a. n.a.

5. Payment system

In all Utilities the collection for provided services for water and wastewater is being implemented only via bank system, or cash payment terminals.

6. Conclusion of service contracts

Each active customer (served customer) has a contract with WS supply company according to the PSRC standard form.

7. Operation and Maintenance of water supply network and sewerage network

Lori WS Name of the activity unit 3rd quarter of 2016 Comments Replacement and repair of m/mm 800/D20-200 water supply network Sewerage network damage pcs 456 and block Replacement of sewer line m 293/D200-300mm Sewer line installation m - Sewer line flashings m 8921

Shirak WS Name of the activity unit 3rd quarter of 2016 Comments 443/600,130/500, 351/32, 395/300, Replacement and repair of m/mm 63/20, 180/63, water supply network 30/40, 154/90, 46/75 Sewerage network damage pcs 1690 and block Replacement of sewer line m 113/150-400 Sewer line installation m 56/150 Sewer line flashings m 2850

Nor Akunq Name of the activity unit 3rd quarter of 2016 Comments Replacement and repair of 300/40, 250/110, m/mm water supply network 300/160 Sewerage network damage pcs 261 and block Replacement of sewer line m - Sewer line installation m - Sewer line flashings m 3,400.0

AWSC Name of the activity unit 3rd quarter of 2016 Comments Replacement and repair of m/mm n.a. water supply network Sewerage network damage pcs 2,721 and block Replacement of sewer line m 920 Sewer line installation m 0 Sewer line flashings m 64,300

8. Overall water losses differentiated in rehabilitated and non – rehabilitated zones

Lori WS Water balance

Unbilled Supplied Billed Billed Billed Unbilled Unbilled metered Authorized Water Losses # Name water Authorized metered unmetered Authorized unmetered consump Consumption % (m3) Consumption consumption consumption Consumption consumption tion 1 2 3 4=5+6 5 6 7=8+9 8 9 10=4+7 11 New zones 478527 311279 307299 3980 29225 29225 340504 28.84 1 Pressure zone 1 37524 23714 23622 92 1684 1684 25398 32.32 2 Pressure zone 2 45709 28974 27537 1437 3024.1 3024.1 31998.1 30.00 3 Pressure zone 3 17903 7331 7266 65 4602 4602 11933 33.35 4 Pressure zone 4 34248 21848 21848 0 1605 1605 23453 31.52 5 Pressure zone 9.1 59675 44253 43521 732 1264 1264 45517 23.73 6 Pressure zone 9.2 14772 9866 9727 139 253 253 10119 31.50 7 Pressure zone 10 12180 8042 8042 0 404 404 8446 30.66 8 Pressure zone 11 8858 5515 5497 18 758 758 6273 29.18 9 Pressure zone 12 37136 25268 24939 329 1516 1516 26784 27.88 10 Pressure zone 13 45572 35759 35694 65 864 864 36623 19.64 11 Pressure zone 14 7803 4527 4509 18 929 929 5456 30.08 12 Pressure zone 15 7658 4966 4924 42 530 530 5496 28.23 13 Old Lernapat 5108 3203 3201 2 375 375 3578 29.95 14 Darpas 14691 9346 9328 18 948 948 10294 29.93 15 Pressure Zone 5 129 84 84 0 0 0 84 34.88 16 Pressure Zone 7 129751 78583 77560 1023 10469.2 10469.2 89052 31.4 25

Unbilled Supplied Billed Billed Billed Unbilled Unbilled metered Authorized Water Losses # Name water Authorized metered unmetered Authorized unmetered consump Consumption % (m3) Consumption consumption consumption Consumption consumption tion Old Zones 2824704 402071 396307 5764 465197 6950 458247 867268 69.3 1 Pressure Zone 6 1069036 279860 275619 4241 321194 1461 319733 601054 43.8 2 Pressure Zone 8 631538 73268 73158 110 21329 0 21329 94597 85.0 3 New Lernapat 104165 607 607 0 531 0 531 1138 98.9 4 Amrakits 43890 1911 1605 306 2864 0 2864 4775 89.1 5 Gyulagarak 145434 6249 6249 0 8003 0 8003 14252 90.2 6 Vardablur 160592 8539 8539 0 8003 0 8003 16542 89.7 7 Hobardzi 61628 3399 3399 0 2106 0 2106 5505 91.1 8 Kurtan 188459 7688 7664 24 10649 3405 7244 18337 90.3 9 Dzoragyugh 30971 574 574 0 1516 0 1516 2090 93.3 10 Dzoragetavan 33204 2627 2621 6 758 0 758 3385 89.8 11 Antaramut 26422 397 397 0 1117 0 1117 1514 94.3 12 Vahagni 53369 5387 4476 911 2106 0 2106 7493 86.0 13 Yeghegnut 25973 843 843 0 758 0 758 1601 93.8 14 Vahagnadzor 25883 1109 1109 0 758 0 758 1867 92.8 15 Pambak 26643 1045 1027 18 2084 2084 0 3129 88.3 16 Gugark 122562 8568 8420 148 6486 0 6486 15054 87.7 WTP 74935 74935 74935 74935 Total 3303231 713350 703606 9744 494423 6950 487473 1207773 63.4

Shirak WS Water balance

Unbilled Unbilled Supplied Billed Billed Billed Unbilled metered unmetered Authorized Water Losses # Name water Authorized metered unmetered Authorized consumpt consumptio Consumption % (m3) Consumption consumption consumption Consumption ion n 1 2 3 4=5+6 5 6 7=8+9 8 9 10=4+7 11 New zones 1 Akhuryan 1 70420 43453 43278 175 3927 0 3927 47380 32.7 2 Maralik/ 91000 56102 55992 110 5214 0 5214 61316 32.6 Dzorakap 3 Azatan 68950 43445 43445 0 3150 0 3150 46595 32.4 Gyumri PZ 4.1 293180 185145 179571 5574 10902 0 10902 196047 33.1 New zones 523550 328145 322286 5859 23193 0 23193 351338 32.9 Old zones 1 Bayandur 37768 1835 1757 78 14405 0 14405 16240 57.0 2 Gusanagyugh 53917 5760 5409 351 3304 0 3304 9064 83.2 3 Karnut 25039 1291 1134 157 11700 0 11700 12991 48.1 4 Kaps 67357 4706 3834 872 14732 0 14732 19438 71.1 5 Gtashen 28790 968 968 0 3744 0 3744 4712 83.6 6 Meghrashat 40992 2247 2196 51 16380 0 16380 18627 54.6 7 Hatsik 67394 6636 6627 9 26739 0 26739 33375 50.5 9 Hovuni 71058 3004 3004 0 22197 0 22197 25201 64.5 10 Hayrenyats 75873 3865 3290 575 12168 0 12168 16033 78.9 11 Lusakert 67793 3159 2982 177 3744 0 3744 6903 89.8 12 Amasia 235161 12082 9408 2674 5867 0 5867 17949 92.4 13 Goghovit 43737 2142 2124 18 25271 0 25271 27413 37.3 14 Gyumri 5966740 818220 758514 59706 144970 0 144970 963190 83.9 15 Akhuryan 2 112112 16908 15280 1628 17110 0 17110 34018 69.7 16 Mayisyan 136412 11353 10496 857 14405 0 14405 25758 81.1

Unbilled Unbilled Supplied Billed Billed Billed Unbilled metered unmetered Authorized Water Losses # Name water Authorized metered unmetered Authorized consumpt consumptio Consumption % (m3) Consumption consumption consumption Consumption ion n 17 Aregnadem 40857 1207 1148 59 10062 0 10062 11269 72.4 18 Keti 44353 4007 3951 56 2106 0 2106 6113 86.2 19 Shirak 26426 2570 2229 341 7956 0 7956 10526 60.2 20 Vahramaberd 113188 5992 5573 419 16370 0 16370 22362 80.2 21 Marmashen 146394 8300 7918 382 12168 0 12168 20468 86.0 22 Vorji 42745 1471 1296 175 12168 0 12168 13639 68.1 23 Haykavan 45543 5689 6323 -634 897 0 897 6586 85.5 24 Akhurik 56367 4664 3928 736 11228 0 11228 15892 71.8 25 Arapi 66616 5185 5182 3 8824 0 8824 14009 79.0 26 Gharibjanyan 53493 5125 5019 106 9593 0 9593 14718 72.5 27 Getq 61018 2512 2512 0 16165 0 16165 18677 69.4 28 Djradzor 27043 786 68 718 224 0 224 1010 96.3 29 Hoghmik 49299 2345 2152 193 13081 0 13081 15426 68.7 30 Aygabats 44530 5099 4862 237 10896 0 10896 15995 64.1 31 Horom 54190 9296 8973 323 7226 0 7226 16522 69.5 32 Lengesavan 50346 1280 720 560 23160 0 23160 24440 51.5 33 Voskehask 56580 6785 6707 78 599 0 599 7384 86.9 34 Beniamin 60797 4212 4147 65 11206 0 11206 15418 74.6 35 Saratak 81409 5124 5023 101 9341 0 9341 14465 82.2 36 Yerasgavors 44411 4998 4879 119 7956 0 7956 12954 70.8 Main 431347 431347 0 431347 431347 transmissions Old zones 8627095 980823 909633 71190 959305 0 959305 1940128 77.5 Total 9150645 1308968 1231919 77049 982498 0 982498 2291466 75.0

Nor Akunq CJSC Water balance

12 Noravan 32,277 8,978 8,978 0 269 0 269 9,247 71.35 13 Lukashin 35,919 17,583 17,583 0 0 0 17,583 51.05 Total 2,240,181 600,003 599,773 230 82,076 17,650 64,426 682,079 69.55

9. Collection and discharge of Wastewater in rehabilitated zones

Data not available.

10. Registered customers

Lori WS 2015 2016

July August September July August September

Total number of 39,295 39,327 39,340 39,419 39,443 39,450 residential customers Number of served 27,138 27,207 27,313 25,666 25,720 26,077 residential customers % 69.0 69.2 69.4 65.1 65.2 66.1

Shirak WS 2015 2016

July August September July August September

Total number of 51,870 51,934 51,987 52,494 52,494 52,613 residential customers Number of served 38,654 38,139 37,943 37,540 36,515 37,045 residential customers % 74.5 73.4 72.9 71.5 69.6 70.4

Nor Akunq 2015 2016

July August September July August September Total number of 18,388 18,414 18,421 19,022 19,040 19,047 residential customers Number of served 15,368 15,442 15,511 15,775 15,829 15,895 residential customers % 84 84 84 83 83 83

AWSC 2015 2016

July August September July August September Total number of 265,332 265,905 266,753 270,239 270,661 270,969 residential customers Number of served 190,611 191,562 187,646 199,241 201,014 198,158 residential customers % 72 72 70 74 74 73

Residential customers who made payments

Lori WS 2015 2016

July August September July August September Total number of served residential 27,138 27,207 27,313 25,666 25,720 26,077 customers Number of residential customers 22,401 22,769 22,804 21,414 21,635 21,521 who made payments % 82.5 83.6 83.4 83.4 84.1 82.5

Shirak WS

2015 2016 July August September July August September Total number of served residential 38,654 38,139 37,943 37,540 36,515 37,045 customers Number of residential customers 29,990 30,428 30,208 30,516 30,954 30,568 who made payments % 77.6 79.8 79.6 81.3 84.8 82.5

Nor Akunq

2015 2016 July August September July August September Total number of served residential 15,368 15,442 15,511 15,775 15,829 15,895 customers Number of residential customers 11,519 11,437 11,361 11,613 11,648 11,779 who made payments % 75 74 73 74 74 74

AWSC

2015 2016 July August September July August September Total number of served residential 190,611 191,562 187,646 199,241 201,014 198,158 customers Number of residential customers 125,150 122,341 122,410 127,937 129,282 127,153 who made payments % 66 64 65 64 64 64 31

11. Number of booster pumping stations in operation

Quantity Lori WS 4 Shirak WS 76 Nor Akunq 0 AWSC 104 Gegharkunik 2 Syunik 1 Vayots Dzor 0

12. Water production and flows condition of storm water network / flooding

Data not available.

13. Utilization / treatment / disposal of sludge and residues (quantities / methods / costs)

Not applicable.

14. Total collection efficiency for households and legal entities

Lori WS 3rd quarter 2016 Cumulated

% % Residential customers 96 97 From Budgetary customers 91 90 From Economic customers 95 96 Collected revenues (1+2+3) 96 96

Shirak WS 3rd quarter 2016 Cumulated

% % Residential customers 96 97 From Budgetary customers 89 83 From Economic customers 85 90 Collected revenues (1+2+3) 94 94

Nor Akunq 3rd quarter 2016 Cumulated

% % Residential customers 93 96 From Budgetary customers 87 72 From Economic customers 94 95 Collected revenues (1+2+3) 92 93

AWSC 3rd quarter 2016 Cumulated

% % Residential customers 88 86 From Budgetary customers 99 88 From Economic customers 97 96 Collected revenues (1+2+3) 91 88 32

15. Have there been any changes in the environmental legislation relevant for the project?

No changes in the environmental legislation relevant to the project took place.

16. Have the approvals required by environmental legislation been given on a reliable basis?

Requirements foreseen under environment legislation are on reliable basis.

17. Have there been any complaints or suits regarding environmental impacts?

There were no cases of complaints or suits regarding environmental impacts.

18. Are the intended controls being ensured?

Controls are ensured.

19. What other measures of environmental protection are planned?

None at the moment.

20. Which are the main polluters of water and produce highest amount of wastewater (households / industry)?

Households.

21. How is the water quality of the receiving bodies developing?

Satisfactory.

B. STATE OF ADVANCEMENT AND TIME SCHEDULE

1. State of Advancement of the Project

- CONSULTANTS ASSIGNMENT

Lot 1: Data Consulting Contract Title: Design, Technical and Author Supervision of Water Supply network and Sewer systems of the Shirak Water and Sewerage CJSC Contract No.: CIP II-P3-SH Employer/ Shirak Water & Sewerage CJSC / Contact Person: Mr. Patrick Lorin Consultant/ Association of Gitec Consult GmbH (Germany) and HGSN LLC Contact Person: (Armenia) / Mr. Wolfgang Jendrischewski Contract Award Date: 7th April 2016 Commencement Date: 5th September 2016 Contract Period: 42 months Contract amount: EUR 1,599,970.00 Type of service rendered: Design, Technical and Author Supervision of Water Supply network and Sewer systems

Lot 2/1: Data Consulting Contract Title: Design, Technical and Author Supervision of Water Supply network and Sewer systems of the Lori Water and Sewerage CJSC Contract No.: CIP II-P3-L Employer/ Lori Water & Sewerage CJSC / Contact Person: Mr. Patrick Lorin Consultant/ SRP Schneider & Partner Ingenieur Consult GmbH/ Contact Person: Mr. Frank Ehrlicher Contract Award Date: 16th May 2016 Commencement Date: 15th September 2016 Contract Period: 42 months Contract amount: EUR 733,752.95 Type of service rendered: Design, Technical and Author Supervision of Water Supply network and Sewer systems

Lot 2/2: Data Consulting Contract Title: Design, Technical and Author Supervision of Water Supply network and Sewer systems of the Nor Akunq CJSC Contract No.: CIP II-P3-NA Employer/ Nor Akunq CJSC / Contact Person: Mr. Patrick Lorin Consultant/ SRP Schneider & Partner Ingenieur Consult GmbH/ Contact Person: Mr. Frank Ehrlicher Contract Award Date: 16th May 2016 Commencement Date: 15th September 2016 Contract Period: 42 months Contract amount: EUR 714,223.10 Type of service rendered: Design, Technical and Author Supervision of Water Supply network and Sewer systems

Lot 3: Data Consulting Contract Title: Design, Technical and Author Supervision of Water Supply network and Sewer systems of the Armenian Water and Sewerage CJSC Contract No.: CIP II-P3-AWSC Employer/ Armenian Water and Sewerage CJSC / Contact Person: Mr. Patrick Lorin Consultant/ Association of Safege SAS and Jinj LLC / Contact Person: Mr. Armen Khudinyan Contract Award Date: 11th May 2016 Commencement Date: 5th September 2016 Contract Period: 42 months Contract amount: EUR 1,335,400.00 Type of service rendered: Design, Technical and Author Supervision of Water Supply network and Sewer systems Manpower:

Lot 4: Data Consulting Contract Title: Design, Technical and Author Supervision of Water Supply network and Sewer systems of the Armenian Water and Sewerage CJSC Contract No.: CIP II-P3-VILL Employer/ Armenian Water and Sewerage CJSC / Contact Person: Mr. Patrick Lorin Consultant/ To be identified Contact Person: Contract Award Date: To be identified Contract Signing Date: To be identified Commencement Date: To be identified Contract Period: To be identified Contract amount: To be identified

- AWARD OF CONTRACTS FOR GOODS AND SERVICES Contracts for goods and services were not awarded during the reporting period.

- SUPPLY OF GOODS AND RENDERING OF SERVICES Supply of goods and rendering of services were not done in the reporting period.

2. Can the project be put into operation at the intended time? Phase 1: The investment measures under the Phase 1 are completed and are commissioned including the decommissioning of the old network. It was agreed that the measures which are physically completed under the Phase 1 (Lori part), but currently not be put into operation (please refer to Annex 9 of the Separate Agreement) should be implemented within the scope of the Phase 3 and could be partially financed out of the funds of Phase 2 (please refer to point Phase 2 below) and Phase 3. Phase 2 – residual funds: The investment measures under the Phase 2 are completed and are commissioned including the decommissioning of the old network. Anyhow, after deduction of some outstanding invoices, residual funds of about EUR 595,000 will remain with the following splitting - for Lori service area – about EUR 408,000 - for Shirak service area - EUR 186,000

The MC and the PEAs suggested to use the residual funds for construction measures within the framework of the ongoing Phase 3 as well as to cover the remaining activities from Phase 1 (Lori part) as per Annex 9 of the Separate Agreement.

The proposed measures will be added to the scope of the Implementation Consultants via addenda to the current consulting contracts. Preparation of the addenda is ongoing.

Below tables summarizes the proposed measures for Lori and Shirak service areas:

Proposed usage of residual funds – Lori Estimates N Structure Brief description Current situation Solutions Costs (EUR) - Installation of a Pumps in the New reservoir The reservoir is not chlorination station (100m3), connected in use because it - Installation of 40,000 to the main pipe cannot be filled 250m of new PE 1 AMRAKITS (Novoseltsovo) by 1 (Pressure at the pipe DN 90mm

500m of New PE pipe main isn’t enough). from Pumping Ø 63mm Station to connection pipe DN 63mm New reservoir The reservoir is not - Modify the pipe to (250m3), connected in use because it Ø 160mm HOBARTSI to the main pipe cannot be filled 2 length 2100m 80,000 VARDABLUR (Novoseltsovo) by 1 (Pressure at the

900m of New PE pipe main pipe isn’t

Ø 90mm enough). New reservoir The reservoir is not - To fill reservoir by (150m3), connected in use because it water treatment to main pipe cannot be filled plant (Length of 3 GUGARK 23,000 (Novoseltsovo) by 2 (Pressure at the 1000m) 250m3 of New PE main pipe isn’t - The new inlet will pipe Ø 63mm enough). became outlet - DN 225mm L 630m for separation New reservoir (2x500 The reservoir is not of 6.1 zone and 6.2 4 NOVOSELTSOVO II 54,000 m3) in use zone - fill Novoseltsovo II reservoir by gravity Dimac pipe lines Old system not Installation DN=250 5 Old pipes 210,000 ring system completed mm L=2000m Total 407,000

Proposed usage of residual funds – Shirak Estimates N Structure Brief description Current situation Solutions Costs (euro) Not enough flow, Change inlet and we can only pass 70 outlet pipes PE Ø 1 Reservoir 3a New Reservoir 500m3 l/ s, while demand 200 200m to PE Ø 50,000 in the future will be 400, gate valves 150 l/ s Not enough flow, Change inlet and we can only pass 60 outlet pipes PE Ø 2 Reservoir 3b New Reservoir 500m3 l/ s, while demand 200 L 30m to PE Ø 30,00 in the future will be 400, gate valves 0 150 l/ s and water meters Xandilyan district, Installation De 3 missed area, Old network Old network 50mm up to 106,000 network 100mm Total 186,000

Phase 3 – Appraisal and Acceptance: Initially it was planned to appraise and accept the Project during the years 2014-2015. Anyhow, due to the several below listed reasons the Project preparation stage was shifted (i) KfW Loan and Project Agreement: the Agreement was signed on 27 December 2013, whereas the on-lending agreements on channeling the loan proceeds to the PEAs were signed in June 2016, as a result the effectiveness was reached in August 2016. (ii) EIB Finance Contract: the Contract was signed on 27 June 2014, whereas the on-lending agreements on channeling the loan proceeds to the PEAs are still not signed, as a result the effectives of the Contract is not reached so far. (iii) Implementing Financing Agreement (EU-NIF component): the Agreement was signed on 14.05.2014, whereas the On-channeling Grant Agreement was signed in July 2016. (iv) Separate Agreement to the KfW Loan and Project Agreement, EIB Finance Contract and Implementing Financing Agreement (EU-NIF component): the Agreement was signed by the KfW on 29 October 2015 and by the RA Government and PEAs on 08 December 2015. (v) Disbursement: disbursement of KfW and EIB should be made in general, after the coming into force of all above listed Financing documents, on a pari passu basis. Anyhow it was agreed between the KfW and the PEAs to start making the upfront disbursements to accelerate the project implementation as stipulated in Art.III.2 item 2.2 of the Separate Agreement. First Withdrawal Application will be provided to the KfW mid-October 2016.

Phase 3 – Selection and Contracting of Consultant (Lots 1-3): (i) On October 16, 2014 the pre-qualification for the services of the Implementation Consultants (responsible for design, construction supervision, and support in tender processes for all investment measures) was published on the Germany Trade and Invest (GTAI) website, in the local media in Armenia and in the Official Journal of the European Community (OJEU). (ii) The Expressions of Interest were submitted by the Tenderers on and before 17 November 2014 following the requirements of the Invitation of Expression of Interest. (iii) Report on the Assessment of the Applications for Pre-Qualifications for Consultancy services for 4 lots was provided to the Bank’s no-objection on 29 January 2015. (iv) No-objection on the evaluation results was received on 06.02.2015.

(v) The deadline for submission of the technical proposals was on 9th of July 2015. Anyhow, the Bank allowed the extension of the deadline for submission of the technical proposals till 24th July 2015 and then till 31st July 2015 (vi) Technical proposals in the frame of above Prequalification were received on 31st July 2015. (vii) Tender evaluation report was sent to Bank’s no-objection on 15th September 2015. Then on, 21 October 2015 it was modified after consultations with KfW. (viii) On 3rd of November the Financial Proposals of the short-listed firms were opened. The Combined evaluation report was sent to KfW’s no-objection on 04th December 2015. On 13.01.2016 KfW has granted its no-objection to the results of the Combined Evaluation Report. (ix) Invitations to start the contract negotiations were sent to the firms which gained highest combined scores were sent on January 18 2016. (x) Contracts on rendering the consultancy servicves were signed with the Consultants in April – May 2016 (xi) Contracts on rendering the consultancy services declared effective in September 2016

Phase 3 – Selection and Contracting of Consultant (Lot 4): (i) Pre-qualification under Lot 4 was cancelled by the KfW (no-objection fax dated 27.05.2015) by the request of AWSC provided that the scope of services still needed clarifications and adjustments. (ii) On 2 June 2016 KfW granted its no-objection to the proposed selection of villages, so the following villages will receive the EU grant funding (iii) On 29 June 2016 KfW granted its no-objection to proceed with the tender. Conditions of Tender and the Terms of Reference were sent to the Consultants under Lots 1-3 on 30 June 2016. The submission deadline of the proposals will be 15 of August, 2016. (iv) On 15 August 2016, AWSC received the technical and financial proposal only from one Tenderer, association of Gitec Consult (Germany) and HGSN LLC (Armenia). (v) On 8 September 2016 the Tender Evaluation Report was sent to the no-objection of KfW. On 09 September 2016 the KfW granted its no-objection to the Tender Evaluation Report with instruction to open and evaluate the financial proposal. (vi) The opening of the financial proposal took place on 14 September 2016 by the Evaluation Commitee. On the same day the Minutes of Financial proposal was sent to KfW’s consideration. In parallel, it was asked the KfW‘s no-objection to enter the negotiaions with the Tenderer. (vii) The Contract on rendering the consultancy services was not signed during the reporting period.

Consultants Activities (Lots 1-4): With reference to the Commencement Dates of the Consulting Contracts the whole Implementation Schedule was updated correspondingly. Despite of the shifting in the Implementation Schedule the MC and PEAs are of opinion that the Project can be put into the operation at the intended time. (For the details please refer to the Annex 1 to this report).

3. Can the project organization perform its tasks, in particular its coordination functions? The regional Water Utilities Shirak CJSC, Lori CJSC, Nor Akunq CJSC and AWSC will be the Project Executing Agencies (PEAs) until December 31st, 2016. All four PEAs will be operators in their service areas of the existing and the new water supply and waste water infrastructure as well as of the wastewater treatment until 31st December 2016 as a reform of the water sector is currently under operation.

C. TOTAL COST AND FINANCING

1. Target/actual comparison of cost and financing

As the Consultancy Contracts are already signed and the amounts of the Contracts are fixed, the line “Consulting Services” in the Annex 3 to this report is updated. Moreover, additional line “Monitoring Consultant” is inserted and the estimation calculated in the amount of 3.5 % of the total financing for each Utility is added. Due to these changes, the amounts under the line “Contingencies” are also updated. For the details please refer to the Annex 2 to this report.

2. How much of the total project funds (FC loan, EIB loan, EU-NIF funds, etc.) have been utilized, accounted for and disbursed by the end of the period under review?

FC loan, EIB loan and EU-NIF funds were not received by the end of the reporting period.

3. Which amounts of Armenian contribution have been utilized, by the end of the period under review?

Armenian Contribution funds were not received by the end of the reporting period.

Implementation Schedule Annex 1

Description of Activity 2014 2015 2016 2017 2018 2019

I II III IV I II III IV I II III IV I II III IV I II III IV I II III IV Overall and Consultant's Activities

Phase 1 1 1

Phase 2 - Residual Funds 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

Phase 3 - Implementation Project Preparation and Planning Appraisal and acceptance 2 2 2 2 2 2 2 2 2 2 2 On-going activities Selection/contracting of consultants phase 3 2 2 2 2 2 2 2 General activities 3 Consultant's activities Shirak, Lori, AWSC 4 Construction period Inception report 3 5 Defects liability period Detailed design 3 3 Attaining design approval and construction permits 3 3 Tender documents 3 3 Tendering/contracting 3 3 Supervision 3 3 3 3 3 3 Construction period 4 4 4 4 4 4 Defects liability 5 5 5

Nor Akunq Inception report 3 Detailed design 3 3 Attaining design approval and construction permits 3 3 Tender documents 3 3 Tendering/contracting 3 3 Supervision 3 3 3 3 3

Construction period 4 4 4 4 4

Defects liability 5 5 5 5

Annex 3 Lori Summary of project cost

No. Item Phase 3 Estimations Commitments Estimations & Budget [EUR] [EUR] Commitments [EUR] [EUR]

Reticulation system Vanadzor L1 1,219,835 1,219,835 0 1,219,835 town L2 Reticulation system villages 2,950,685 2,950,685 0 2,950,685 L3 New reservoirs villages 312,000 312,000 0 312,000 Water transmission system L4 752,000 752,000 0 752,000 (ring feeder) L5 Water production facilities 180,000 180,000 0 180,000 L6 Novoseltsovo main 450,000 450,000 0 450,000 L7 Water meters, equipment 544,000 544,000 0 544,000

Total I 6,408,520 6,408,520 0 6,408,520 Consulting Services, including Implementing Consultant 641,000 641,000 733,753 733,753 Monitoring Consultant 279,650 279,650 (estimation, 3.5%) Total II 641,000 920,650 733,753 1,013,403

Contingencies 940,480 660,830 568,077

Grand Total 7,990,000 7,990,000 733,753 7,990,000

Shirak Summary of project cost

No. Item Phase 3 Estimations Commitments Estimations & Budget [EUR] [EUR] Commitments [EUR] [EUR]

Reticulation system Gyumri S1 9,963,040 9,963,040 0 9,963,040 town S2 Reservoirs Gyumri town 270,000 270,000 0 270,000 S3 Reticulation system villages 2,166,251 2,166,251 0 2,166,251 S4 Reservoirs villages 364,000 364,000 0 364,000 S5 Sewerage system 500,000 500,000 0 500,000 S6 Water meters, equipment 660,000 660,000 0 660,000 S7 Investigations of water meters 100,000 100,000 0 100,000 S8 12 additional villages 2,600,000 2,600,000 0 2,600,000

Total I 16,623,291 16,623,291 0 16,623,291 Consulting Services, including Implementing Consultant 1,662,000 1,662,000 1,599,970 1,599,970 Monitoring Consultant 726,600 726,600 (estimation, 3.5%) Total II 1,662,000 2,388,600 1,599,970 2,326,570

Contingencies 2,474,709 1,748,109 1,810,139

Grand Total 20,760,000 20,760,000 1,599,970 20,760,000

Nor Akunq Summary of project cost

No. Item Phase 3 Estimations Commitments Estimations & Budget [EUR] [EUR] Commitments [EUR] [EUR]

Wastewater treatment plant N1 4,500,000 4,500,000 0 4,500,000 Armavir Rehabilitation of sewerage N2 350,000 350,000 0 350,000 pumping station N3 Main pressure pipeline 800,000 800,000 0 800,000 Rehabilitation of sewerage N4 500,000 500,000 0 500,000 network Rehabilitation of reticulation N5 500,000 500,000 0 500,000 networks N6 Water meters, equipment 450,000 450,000 0 450,000

Total I 7,100,000 7,100,000 0 7,100,000 Consulting Services, including Implementing Consultant 710,000 710,000 714,223 714,223 Monitoring Consultant 306,250 306,250 (estimation, 3.5%) Total II 710,000 1,016,250 714,223 1,020,473

Contingencies 940,000 633,750 629,527

Grand Total 8,750,000 8,750,000 714,223 8,750,000

AWSC Summary of project cost

No. Item Phase 3 Estimations Commitments Estimations & Budget [EUR] [EUR] Commitments [EUR] [EUR]

A1 Marz Vayots Dzor 1,120,000 1,120,000 0 1,120,000 A2 Marz Syunik 6,480,000 6,480,000 0 6,480,000 A3 Marz Gegharkunik 7,280,000 7,280,000 0 7,280,000 A4 Purchase of equipment 1,120,000 1,120,000 0 1,120,000

Total I 16,000,000 16,000,000 0 16,000,000 Consulting Services, including Implementing Consultant 1,600,000 1,600,000 1,335,400 1,335,400 Monitoring Consultant 700,000 700,000 (estimation, 3.5%) Total II 1,600,000 2,300,000 1,335,400 2,035,400

Contingencies 2,400,000 1,700,000 1,964,600

Grand Total 20,000,000 20,000,000 1,335,400 20,000,000