The Study on Improvement of Water Supply System in Managua in the Republic of Nicaragua

No.

JAPAN INTERNATIONAL COOPERATION AGENCY (JICA)

EMPRESA NICARAGÜENSE DE ACUEDUCTOS Y ALCANTARILLADOS SANITARIOS (ENACAL)

THE STUDY ON IMPROVEMENT OF WATER SUPPLY SYSTEM IN MANAGUA IN THE REPUBLIC OF NICARAGUA

FINAL REPORT

Volume II : Main Report

DECEMBER 2005

NIHON SUIDO CONSULTANTS CO., LTD. ASIA AIR SURVEY CO., LTD. GE JR 06-002

Currency Conversion Rates used in this Study:

US$ 1.00 = C$ 16.2834 = JPY 106.0900 = EUR 0.7583

Date of Application: December 10, 2004 Rates Quoted from: The Central Bank of Nicaragua

FINAL REPORT

Volume I : Executive Summary (English Version) Volume II : Main Report (English Version) Volume III : Supporting Report – Part 1 (English Version) Volume IV : Supporting Report – Part 2 (English Version) Volume V : Executive Summary (Spanish Version) Volume VI : Main Report (Spanish Version)

PREFACE

In response to the request made by the Government of the Republic of Nicaragua, the Government of Japan decided to conduct the Study on Improvement of Water Supply System in Managua in the Republic of Nicaragua and entrusted the study to the Japan International Cooperation Agency (JICA).

JICA sent to Nicaragua a study team headed by Mr. Sadanobu SAWARA of Nihon Suido Consultants, Co., Ltd. five times between July 2004 and December 2005. The study team was composed of members from Asia Survey Co., Ltd and Nihon Suido Consultants, Co., Ltd. JICA also established an Advisory Committee headed by Mr. Yoshiki OOMURA, senior advisor of the Institute for International Cooperation JICA, which, from time to time during the course of the study, provided specialist advice on technical aspects of the study.

The team held discussions with the officials concerned of the Government of the Republic of Nicaragua, and conducted field surveys of the study area. Upon returning to Japan, the team conducted further studies and prepared the present report.

I hope that this report will contribute to the promotion of the project and to the enhancement of friendly relationship between the two countries.

Finally, I wish to express my sincere appreciation to the officials concerned of the Government of the Republic of Nicaragua for their close cooperation extended to the team.

December 2005

Etsuo KITAHARA Vice President Japan International Cooperation Agency December 2005

Mr. Etsuo KITAHARA Vice President Japan International Cooperation Agency Tokyo, Japan

Letter of Transmittal

Dear Sir,

We are pleased to submit to you this Final Report on the Study on Improvement of Water Supply System in Managua in the Republic of Nicaragua. This report incorporates the views and suggestions of the authorities concerned of the Government of Japan and your Agency. It also includes the comments made on the Draft Final Report by Empresa Nicaragüense de Acueductos y Alcantarillados Sanitarios (ENACAL) and other authorities concerned of the Republic of Nicaragua.

The Final Report comprises a total of six volumes as listed below.

The report contains our findings, conclusions and recommendations with regard to the formulation of a Long-term Improvement Plan of the water supply system in Managua up to the year 2015 and identification of a Priority Project which is proposed to be implemented in the short- to medium-term future.

We wish to take this opportunity to express our sincere gratitude to your Agency, the Ministry of Foreign Affairs and the Ministry of Health, Labour and Welfare of the Government of Japan for their valuable advice and suggestions. We also wish to express our deep appreciation to the relevant officers of ENACAL and other authorities concerned of the Government of Nicaragua for their close cooperation and assistance extended to us during our investigations and study.

Very truly yours,

Sadanobu SAWARA Team Leader, Study on Improvement of Water Supply System in Managua in the Republic of Nicaragua SUMMARY

I. INTRODUCTION

This document constitutes the Volume II : ‘Main Report’ of the Final Report on the “Study on Improvement of Water Supply System in Managua in the Republic of Nicaragua (hereinafter referred to as the ‘Study’)”, which has been undertaken since July 2004 by a team of consultants (hereinafter referred to as the ‘Study team’) under the auspices of the Japan International Cooperation Agency (hereinafter referred to as the ‘JICA’) with the main objectives of (i) formulating a long-term improvement plan for the water supply system in Managua up to the year 2015, and (ii) identifying priority projects that are to be implemented in the short to medium terms. Empresa Nicaragüense de Acueductos y Alcantarillados Sanitarios (hereinafter referred to as ‘ENACAL’), the state enterprise which is currently responsible for the provision of water and wastewater management services in the Study area, is the Executing Agency of the Study. The Study area comprises the entire administrative area of Managua city plus urban areas of Ticuantepe and Nindiri located alongside the Carretera Masaya. JICA and ENACAL agreed to implement the Study upon signing the “Minutes of Meeting on the Scope of Works for the Study” in Managua on March 2, 2004.

The Study team started the first field work in Nicaragua on July 19, 2004. Since then until mid October 2004, the Study team concentrated its efforts on collecting data and information that are related to the existing water services in Managua. Those efforts included field inspections of existing water supply infrastructure and meetings with managers of ENACAL’s various departments, the presidents of INNA (Instituto Nicaragüense de Acueductos y Alcantarillados) and CONAPAS (Comisión Nacional de Agua Potable y Alcantarillado Sanitario y Saneamiento), and local representatives of multilateral and bilateral donor agencies that have been providing assistance to ENACAL such as JICA, IDB (Banco Interamericano de Desarrollo), AECI (Ofcina Técnica de Cooperación, Embajada de España en Nicaragua), Consejero Económico y Comercíal Embajada de España, and KfW (Agencia del Kfw para América Central). In the meantime, the Study team also conducted various field surveys and measurement works in order to avail itself of additional information on the existing conditions of the water services in Managua. They included: leakage/wastage surveys in 10 selected areas; measurements of flows and pressures at more than 25 locations in the distribution network; water consumption and awareness surveys on randomly-selected 450 domestic users, 100 commercial/institutional users and 50 industrial users; and water quality sampling and analysis of samples taken from both existing and prospective water sources and from 10 household taps selected at random within the existing distribution system.

In late October 2004, the Study team prepared the Interim Report and submitted it to JICA and ENACAL. The report presented the progress of the Study made by mid October 2004 and the Study team’s initial assessments of various technical, financial and institutional problems revolving around the existing water service in Managua. Based on those assessments, the report also presented the Study team’s recommendations on basic policies and strategies for the formulation of a long-term improvement plan of the water supply system in Managua up to the year 2015. The Study team made slide presentations of the report to the management of ENACAL and the representatives of other government agencies, such as INAA, INETER (Instituto Nicaragüense de Estudios Territoriales) and FISE (Fondo de Inversion Social de Emergencia), in Managua on October 28 and 29, 2004. In a meeting held in Managua on January 20, 2005 with the members of the Steering Committee of the Study, the Study team also presented the outcome of the Study and the basic strategies for the formulation of a long-term water supply improvement plan. Comments received from participants during these presentation meetings became valuable inputs into subsequent stages of the Study and in

S - 1 preparing study reports.

Relatively high levels of arsenic and lead concentrations were detected at some of the 10 existing water sources that were subjected to the water quality analysis during the first field work in Nicaragua. In this respect, a consensus was reached among parties concerned that this is an issue directly affecting the safety of water supply, and therefore that a supplemental water quality analysis covering a greater number of existing wells in the study area should be carried out during the second field work in Nicaragua to find out the extent of the problem. The parties also agreed that the long-term improvement plan and the priority project to be proposed in the Final Report should be reviewed and finalized taking the outcome of the supplementary water quality analysis into account.

The second field work in Nicaragua started in July 2005 and included a supplementary water quality analysis which examined arsenic and lead concentrations of a large number of existing wells within the study area. Based on the outcome of the water quality analysis, the long-term improvement plan and the priority project were reviewed and finalized, and ultimately the Final Report was prepared.

The Final Report comprises a total of six volumes as listed below. Volume I : Executive Summary (English Version) Volume II : Main Report (English Version) Volume III : Supporting Report – Part 1 (English Version) Volume IV : Supporting Report – Part 2 (English Version) Volume V : Executive Summary (Spanish Version) Volume VI : Main Report (Spanish Version)

In the early 1990s, JICA conducted a similar study called “The Study on Water Supply Project in Managua” with the objective of urgently developing new water sources and thereby mitigating water shortages in the capital city, which had resulted from a huge influx of population during and after the civil war in the 1980s. Completed in 1993, this study recommended medium- and long-term underground water development schemes which included the development of new well fields at two locations in the southeast of the city. Based on the recommendation, JICA subsequently implemented two grant aid projects, namely ‘Managua I Project’ and ‘Managua II Project’. They were completed in 1997 and 2000 respectively. In each of these projects, a new well field and associated water transmission and distribution facilities were constructed. Combined, these two well fields are now supplying approximately one-thirds of water currently used in the city.

It is recommended that ENACAL make use of this JICA study effectively. In this regard, ENACAL is advised to open up dialogue with donors on the earliest possible occasion to discuss about their financial assistance for the implementation of the priority project proposed by this study. It is hoped that, just like the 1993 JICA study, this study will provide the basis for the subsequent implementation of the proposed priority project and thereby contribute to the improvement of the water services in Managua, the capital city of Nicaragua.

S - 2 II. OUTCOME OF THE STUDY

II-1. Water Balance Study

The daily maximum water demand in the Study area was estimated at 397,739 m3/day in 2015. On the other hand, our assessment of existing water sources indicated that the total sustainable yield from them would be 402,950 m3/day in 2015, which consists of 372,950 m3/day from both existing and relocated wells and 30,000 m3/day from Lake Asososca. It should be noted that the abstraction from Lake Asososca is proposed to be gradually reduced from the current 56,500 m3/day to 30,000 m3/day in 2015 in order to protect the water quality of the lake from contamination.

Figure S-1 shows the total potential yield from existing sources against the projected daily average and maximum water demands. It is envisaged that the total water demand in the Study area will gradually decrease over the 10 years from 2010 and 2015 despite the steady increase in domestic and non-domestic demands during the same period. This is because of the accelerated reduction in leakage and wastage envisaged in this Study. It is proposed that leakage and wastage combined should be reduced from the current 45% to 25% in 2015.

500,000 Sustainable Yield from Existing Sources in 2015 = 402,950 m3/day 450,000

400,000

350,000 Ineffective Water 300,000

250,000

200,000

Water Demand (m3/day) Demand Water 150,000 Effective Water

100,000 Daily Maximum Water Demand 50,000 Daily Average Water Demand Total Water Consumption 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year

Figure S-1 Potential Yield of Existing Sources vs Water Demand

Figure S-1 shows that although the sustainable yield in 2015 from existing water sources would be able to satisfy the projected daily maximum demand in 2015, there would be a deficit of supply capacity against the projected daily maximum demands in years before 2015. This implies that until 2015 the proposed reduction in the volume of abstraction from Lake Asososca would need to be implemented carefully so as to avoid any deficit of supply to meet the projected daily maximum demands. Finally, our water balance study concluded that existing water sources would be able to meet the water demand in the study area until the target year 2015.

S - 3 II-2. Water Quality Analysis

This study included the water quality analysis of 10 existing water sources and 5 prospective water source both in the dry season and in the wet season. As a result of this water quality analysis, three existing wells were found to contain arsenic with concentrations exceeding the maximum allowable limit of the drinking water standard i.e.10 ppb and three existing wells were found to contain lead with concentrations higher than the maximum allowable limit of 10 ppb. In order to find out the extent of these water quality problems, a supplementary water quality analysis was then carried out by the study team to examine the arsenic concentrations of all existing ENACAL’ s wells in the study area and the lead concentrations of 28 wells selected by the study team. The outcome of these water quality analyses and our recommendations based on the outcome are summarized as follows:

(A) Existing water sources

(i) The lead concentrations were found to be lower than the detection limit in all of the 28 samples tested in the supplementary water quality analysis. For final confirmation, an additional sample was taken from each of the three wells where high lead concentrations were previously detected and retested. As a result, none of these additional samples exhibited lead concentrations above the detection limit. It was concluded from this supplementary analysis that lead is not a problem. (ii) Fifteen wells in Zona Baja and Zona Alta are found to contain arsenic with concentrations equal to or larger than 8 ppb. Among these, four wells have arsenic concentrations exceeding the maximum allowable limit of the drinking water standard (10 ppb). On the other hand, arsenic concentrations of existing wells in Zona Alta Superior are generally low. All the existing wells in the study area were classified into four categories shown in Table S-1 based on their current arsenic concentrations. It is recommended that countermeasures for Category A wells should be completed as soon as possible since their current concentrations already exceed 10 ppb. It is recommended for Category B wells that countermeasures should have been completed by 2015, target year of the long-term improvement plan. The arsenic concentration shown in Table S-1 is defined that it should be the arsenic concentration of the blended water, in case where water produced from more than one wells is merged at one place or otherwise get mixed before it is actually distributed to customers.

Table S-1 Classification of Existing Wells by Arsenic Concentration Arsenic Urgency to Category Concentration: X Actions take actions (ppb） Extremely Countermeasures should have been A X≧10.0 High completed as early as possible. Countermeasures should have been B 8.0≦X<10.0 High completed by 2015 at the latest. No immediate action will be required. Instead, arsenic concentration should be closely monitored four times a year (every 3 C 6.0≦X<8.0 Medium months), based on which a decision should be made whether it is necessary to implement any countermeasures before 2015. No action will be required before 2015 except that arsenic concentration should be monitored twice a year (once in the dry D X<6.0 Low season and the other in the wet season) and the data obtained should be evaluated in respect of how the concentration changes with time.

S - 4

All of the ENACAL’s wells in the study area were classified based on their current arsenic concentrations. As a result, the following 15 wells were classified as Category A or B wells and countermeasures were proposed against them in this study. In 2003, the four Category A wells combined supplied 10,600 m3/day while the eleven Category B wells supplied a total of 37,200 m3/day. They were respectively equivalent to 2.7% and 9.3% of the total volume of water supplied in the same year i.e. 398,800 m3/day.

Arsenic Water Supplied from Nos. of Category Concentration:X Well Identification No. the Wells in 2003 Well （ppb） (m3/day) A X≧10.0 4 27,28,29,46 10,600 B 8.0≦X<10.0 11 8,10,11,30,52,57,68,77,78,91,112 37,200

(iii) ENACAL’s records indicate that the nitrate concentration at No.10 well exceeded the maximum allowable limit of the drinking water standard in the past. The records also show that the nitrate concentrations at No.8 and No.9 wells doubled during the last decade to exceed the recommendation value of the drinking water standard at present. Water quality analysis conducted in this study revealed that No.8 and No.10 wells also contain relatively high concentrations of arsenic. It is recommended that these three wells should be abandoned in the long run for relocation to higher elevation areas. (iv) No sign of contamination by BTEX, trihalomethanes, or chlorophenols was detected at Lake Asososca. However, existing data indicate that the chloride concentration has been increasing in groundwater between the lake and the nearby industrial zone. It is advised that ENACAL implement precautionary measures to preserve the water quality of the lake. (v) Except for the arsenic and nitrate problems, water samples taken from existing water sources generally satisfy the requirements of the drinking water standards in Nicaragua. It should be noted however that although arsenic concentrations were examined at almost all the existing water sources, other important health-related parameters specified in the drinking water standards were examined only at a fraction of existing water sources. It is therefore recommended that ENACAL should examine the safety of water it distributes to its customers by testing, at least twice a year (each in the dry and wet seasons), the water quality of all the existing water sources in accordance with the requirements of the drinking water standards.

(B) Prospective water sources

(i) Nicaragua Lake (Surface Water): Water is high in Aluminum and Iron. Except for these two parameters, the quality of water generally satisfies the requirements of drinking water quality standards. Among all the prospective water sources examined in this Study, this lake is considered to be most prospective in terms of water quality. (ii) Lomas Del Gavilan (Groundwater): Manganese exceeds its standard recommendation value. Otherwise, water is suited for drinking purposes. This source is considered to be second most prospective in terms of quality. (iii) Sierras Doradas (Groundwater): Lead, Aluminum, Magnesium and Potassium concentrations exceed their standard limits. The prospective of developing this source is low. (iv) Avinic No.4 (Groundwater): This irrigation well has high Arsenic and Iron concentrations and is therefore not recommendable for future development. (v) Cuatro Esquinas (Groundwater): Water in a dug well is high in Aluminum. Although it is otherwise suited for drinking purposes, this well appears to be quite susceptible to contamination in the future.

S - 5

Water quality analysis conducted by ENACAL covers only basic water quality parameters which ENACAL can analyze by itself in its in-house laboratory. Despite being required by the drinking water standards, heavy metals and pesticides are not examined by ENACAL. This means that ENACAL is not examining the safety of water it supplies to customers. It is recommended that ENACAL contract out the analysis work of all such parameters to local laboratories in Nicaragua (e.g. CIRA/UNAN and LAQUISA). With regard to a few parameters which can not be analyzed in Nicaragua (e.g. trihalomethanes), ENACAL is advised to contract out the analysis work to laboratories in the U.S.A.

It is recommended that ENACAL should carry out the testing of all existing water sources twice a year, once in the dry season and the other in the wet season, each time covering all the water quality parameters required by the drinking water standards. Further, ENACAL is recommended to carry out the arsenic testing four times a year (every three months) for those wells that have an arsenic concentration equal to or larger than 6.0 ppb but smaller than 8.0 ppb at present. ENACAL is also recommended to carry out regular water quality monitoring of existing wells that are located in between Lake Asososca and the nearby industrial area to observe how water quality of those wells changes with time.

(D) Establish control over construction and operation of fuel filling stations

Water sources must be protected against all forms of contamination and pollution through the legal system. There are many fuel filling stations in Managua, some of which are located immediately adjacent to ENACAL’s wells. It is essential that the existing groundwater sources are protected against possible contamination by fuel filling stations, petrochemical industries and other chemical manufacturing and storage facilities. All relevant existing laws for the granting of licenses for construction and operation of such facilities should be reviewed and reformed as necessary.

(E) Strengthening of ENACAL’s capability to analyze water quality

Monitoring and evaluation is the last line of defence against the possible pollution and contamination of existing water sources. Already it is known that some sources are at risk. Responsibility for monitoring and evaluation rests with the ENACAL Environmental Department which was recently upgraded with laboratory equipment, including an atomic absorption spectrometer and a gas chromatograph, financed by PAHO and UNICEF, to extend its analyses capability to carry out all of the testing required by the PAHO standards. Strengthening is required by further training of the personnel on this equipment particularly for the detection of heavy metals and pesticides. Further, an UPS (Uninterrupted Power Supply) device with an integrated voltage stabilizer will need to be procured and installed in the laboratory before ENACAL can actually start using the equipment.

II-3. Assessment of Water Sources

In conclusion, our assessment of existing water sources indicated that, with the implementation of the various measures described below, existing water sources including Lake Asososca would be able to sustain a total supply capacity of 402,950 m3/day in 2015.

(A) Restoration of design production capacity at Managua I and II Well Fields

Our review of ENACAL’s operation records indicated that when the volume of abstraction from

S - 6 Lake Asososca was in the order of 30,000 to 40,000 m3/day in the past, the water level of the lake remained being high and fairly stable. Given that the depletion of the water level in the lake increases the risk of contamination from nearby industrial areas, it is proposed that the abstraction from the lake should be reduced in the long run from the current 56,500 m3/day to 30,000 m3/day. In the meantime, in order to compensate for the reduction of abstraction from the lake, it is proposed that the current production capacity of the Managua I Well Field (53,000 m3/day) should be increased by 18,000 m3/day to its design production capacity of 71,000 m3/day and so should be increased the current production capacity of the Managua II Well Field (44,000 m3/day) by 12,000 m3/day to its design production capacity of 56,000 m3/day.

(B) Countermeasures against wells with high arsenic concentrations

Against each of the 15 wells that were classified into Category A or Category B, countermeasures were proposed as shown in Table S-2.

Table S-2 Countermeasures Against Wells with High Arsenic Concentrations Category Well No. Name of Well Proposed Countermeasures To be abandoned and a replacement well/s should 27 Sabana Grande No.1 be constructed in higher elevation areas A 28 Sabana Grande No.2 Same as above 29 Sabana Grande No.3 Same as above 46 Villa Libertad Same as above 8 San Antonio Same as above 10 Mercado Oriental Same as above 11 Col. Tenderi To be abandoned without any replacement To be mixed with water from other source/s for 30 Sabana Grande No.4 dilution 52 La Mascota To be abandoned without any replacement To be mixed with water from other source/s for 57 Plaza de Sol B dilution Maintain the existing system which dilutes 68 Villa Austria arsenic by mixing with water from other source/s 77 Villa Fraternidad Same as above 78 Buenos Aires Same as above 91 Laureano Mairena To be abandoned without any replacement To be mixed with water from other source/s for 112 Anexo V. Libertad dilution

Ten existing wells that are not functioning at present or being barely operated at significantly low production rates are proposed to be subjected to urgent rehabilitation through cleaning of wells and replacement of well pumps. In order to sustain the current production rates of existing sources in the future, criteria for replacement of existing wells and well pumps were established as shown below and based on that criteria 16 wells and 40 well pumps were selected for replacement by 2015. • Well pumps that have been in service for more than 20 years should be replaced, • Wells that have been in service for more than 30 years should be replaced.

(D) Establish control over the use and development of groundwater sources

The water sector authorities must have full control of the use and development of water sources. Private water sources and supplies should not be allowed within the ENACAL’s service area without the issuing of a license by the relevant authority in the water sector, after a proper review of each application. The laws should be reviewed and reformed as necessary to protect the interests of ENACAL. It is proposed that water meters should be installed at all existing

S - 7 private wells and ENACAL should be allowed to collect both water supply and sewerage charges from the well users based on meter reading.

II-4. Leakage Surveys

Leakage surveys conducted in 10 selected micro sectors demonstrated that the measurement of minimum night flows with the use of a portable type ultrasonic flow meter and the implementation of leakage detection/reduction measures within micro sectors is a quite effective means to reduce leakage. The outcome of the surveys also indicated that: (i) leakage currently accounts for 35% of water distributed into the system; (ii) wastage currently accounts for 10% of water distributed into the system; (iii) leakage and wastage are high in Zona Baja, medium in Zona Alta, and low in Zona Alta Superior; (iv) leakage and wastage are particularly high in asentamientos where water is available on a continuous basis and with good pressures; (v) All the leaks detected during the surveys existed in service connection pipes; (vi) The current unconstrained per capita domestic water demand in Managua is 175 lpcd; (vii) At least 16% of existing water meters are defective; and (viii) Approximately 9% of existing connections are either unauthorized or illegal.

It is proposed in this Study that leakage and wastage be reduced to 23% and 2% respectively by 2015. The following problems will need to be addressed to achieve that goal. • Distribution network is not divided into a number of micro sectors (small distribution districts) which can be hydraulically isolated • Many of existing water meters have been in service for more than 10 years • Lack of coordination on the reduction of leakage, illegal connections and meter related losses. • No mechanism to deal effectively with the massive wastage of water and loss of revenue in its supply to low-income settlements • Existing water tariff structure is not designed to provide consistent incentives for the efficient use of water or to provide social protection for the extremely poor. • Location of the meter, meter installation and responsibility for maintenance • Customers do not trust ENACAL’s meter reading, billing and collection • The public’s low awareness on water conservation • No mechanism to deal effectively with the media, civic groups and customers

II-5. Measurement of Flows and Pressures

Field measurement of flows and pressures was carried out at various strategic locations within the existing water supply system in order to assess the current water supply conditions. The outcome of this measurement suggested us the following. (i) Most of existing flow meters are functioning properly. (ii) At Asososca, the amount of gravity flow to Zona Baja varies significantly depending on the number of pumps used for distribution to Zona Alta. (iii) San Judas, Schick and Altamira tanks are not receiving as much water as have been envisaged by the detailed design of the Managua I Project. (iv) More than half of the water gravitated to Altamira from the Santo Domingo tank is pumped in reverse direction to high ground areas near the Santo Domingo tank. (v) The capacity of the transmission facilities constructed under the Managua I and II projects is not being fully utilized at present. This is mainly because the Managua I and II well fields are currently able to produce only 75 to 80% of their respective design production capacity.

S - 8 (vi) The volumes of water produced from existing wells in Zona Baja fluctuate significantly corresponding to the variation of the local water pressure in the distribution network. This is because those wells are connected directly to the distribution network. (vii) Water supply conditions are generally good in most areas of Managua city except in the following areas (see Figure S-2 for their locations) where the level of water service is extremely poor and residents are suffering from severe water shortages. a. Area supplied from the San Judas tank b. Area supplied from the Schick tank c. Area supplied from the Sabana Grande well field

Oeste(West) Centro (Center) Este (East)

Zona Baja

Zona Alta

Zona Alta b c a Superior

LEGEND

Major Pipeline Well Reservoir/Tank Pumping Station Zone Boundary Poor Supply Area

Figure S-2 Areas with Severe Water Shortages

II-6. Water Consumption and Awareness Surveys

Water consumption and awareness survey was carried out for randomly selected 450 domestic users and 150 non-domestic users (industrial, commercial and institutional users) in order to have a better understanding on the actual situation of water consumption by these users and to assess their views on the ENACAL’s water services. The outcome of the surveys is summarized as follows:

(A) Water Consumption and Awareness Survey of Domestic Users

The results of the water consumption and awareness survey on domestic users are summarized in Table S-3.

S - 9 Table S-3 Results of Water Consumption and Awareness Survey on Domestic Users Tariff Category Item Unit Total Middle- High- Low-income income income Registered Domestic Users of Household (HH) 168,313 56,702 99,523 12,088 ENACAL Samples Taken in the Surveys HH 449 91 324 34

Water Consumption Survey Size of Household Person/HH 5.07 5.34 4.81 4.94 Water Supply Connection ％ 96＊ 100 95＊ 100 Sewerage Connection ％ 72498159 Meter Installation ％ 70 2 87 94 Water Consumption Rate m3/HH/Month 28.73 N/A 27.17 48.18 Same as above ℓpcd 189 N/A 188 325 Daily Water Supply ％ 86 82 86 94 24-hr Water Supply ％ 67 59 69 79 Adequate Water Pressure ％ 69 63 73 38 Own Storage Facilities ％ 47 57 44 53 Purchasing bottled water ％ 21 11 23 26

Awareness Survey Satisfied with Water Service ％ 45 48 43 65 Dissatisfied with Water Servic ％ 52 49 54 35 Dissatisfied with Meter ％ 24112815 Reading and Billing Dissatisfied with Water Qualit ％ 3 2 3 3 Dissatisfied with Quantity ％ 19 26 19 12 Tariffs are Expensive ％ 41 11 50 35 Tariffs are Inexpensive ％ 37 45 33 53 Average Willingness-to-Pay C$/Month 121 91 122 250 Amount * Lower than 100% as some households were being disconnected by ENACAL at the time of the surveys.

(B) Water Consumption Survey of Non-domestic Users

The results of water consumption survey on non-domestic users are summarized in Table S-4.

Table S-4 Results of Water Consumption Survey on Non-domestic Users Commercial & Institutional Item Unit Total Industrial Sub-total Gov't Education Medical Hotel Shop Office Other Registered Non-domestic No. 6,179 285 5,894 N/A N/A N/A N/A N/A N/A N/A Users of ENACAL Samples Taken in the No. 149 49 100 3 10 1 5 23 19 39 Survey

Water Supply Connection ％ 97 92 99 100 100 100 100 100 100 97 Sewerage Connection ％ 87 84 89 67 70 100 80 96 100 87 ㎥/Sample/ Unit Consumption Rate 393 621 165 1005 159 47 180 72 82 129 Month Daily Water Supply ％ 87 98 86 67 70 100 80 91 89 85 24-hr Water Supply ％ 77 89 74 67 50 100 80 74 89 72 Adequate Water Pressure ％ 78 87 77 67 70 100 80 74 79 79 Good Quality ％ 66 78 64 0 70 100 60 48 74 72 Poor Quality ％ 29 22 33 100 30 0 40 52 26 21 Odor ％ 7490002013118 Unpleasant Appearance ％ 6 6 6 33 10 0 0 4 0 5 Bad Taste ％ 11 8 12 0 20 0 0 26 11 3 Other Quality Problems ％ 14 16 14 0 20 0 0 17 16 5

S - 10 II-7. Water Transmission and Distribution Systems

Our study identified the following critical problems in the existing water transmission and distribution systems. It is recommended that efficiency of the water transmission and distribution systems should be increased by implementing improvement measures to address such critical problems. (1) It is not possible to obtain accurate information on the state of water being distributed over the entire city area. It is not possible to delineate the extent of area supplied by each major water source. (2) O&M of the existing water transmission and distribution systems are highly complicated, making it difficult for ENACAL to deal with emergencies promptly. (3) Although water is generally abundant in most areas of Zona Baja, there are three distinct areas in Zona Alta and Zona Alta Superior (See Figure S-2 for their locations) where the level of service is currently extremely poor and the residents are suffering from severe water shortages. This clearly demonstrates that water is not properly distributed over the entire service area. (4) Due to the lack of distribution zoning system, it is not possible to obtain accurate information on the geographic distribution of non-revenue water or to decide priority areas for the reduction of non-revenue water. (5) No provision has been made for the extension of service to newly developing areas such as Esquipulas and Las Jaguitas. (6) Many of existing water transmission pump stations have been deteriorated and require the renewal of existing pumps and electric panels. (7) There is a need to improve water supply conditions in Ticuantepe and Nindiri and in other high elevation areas along the Carretera Masaya.

Our assessment of these problems indicated that there is a clear need for better matching of supply sources with their supply areas. It is therefore essential that the existing distribution network is divided into a number of large, hydraulically isolated distribution zones (macro sectors) to ensure that intended matching is not hypothetical but is actually put in place on the ground.

II-8. ENACAL’s Financial Capacity

Examination of the financial statements of ENACAL for recent years shows an extremely worrying trend as regards its short and long term financial positions. Over recent years, ENACAL has continuously been operating its services in deficit. With respect to the water supply service in Managua, the accumulated deficit totalled to C$ 243 million (US$ 15 million) in 2003, which is equivalent to 76% of the total annual income generated from the service in the same year. It is estimated that by the end of fiscal year 2005 this amount will further increase to C$ 420 million (US$ 25.8 million), which is approximately 120% of the projected total annual income in the same year. The overall picture is one of the water utilities falling into a deep financial crisis. In order to strengthen the ENACAL’s financial capacity, there is a clear need for a substantial tariff increase. Tariffs should be able to recover a reasonable level of O&M and depreciation expenses by 2010. Further, they should also enable ENACAL to pay interests on long-term debts by 2015.

Although it is not possible to develop a full-scale financial model of ENACAL within the time and resources available for this Study, we have conducted a financial simulation analysis based on the following scenarios and assumptions. (i) Leakage and wastage will be reduced to 35% in 2010 and 25% in 2015 (ii) The water supply system will be improved in accordance with the long-term development plan proposed by this Study

S - 11 (iii) External financing by donors will carry an annual interest rate of 2.0%, 10 years of grace period and 35 years of repayment period. (iv) A new set of domestic tariffs shown in Table S-5 will be effectuated in 2007 and thereafter until 2015 domestic tariffs will be increased every year at the rate of 3.5% p.a. in real term. There will be no changes in the existing non-domestic tariffs. (v) Direct O&M costs (excluding energy cost which is already high at present) will be increased to 200% of the current level of expenditure in 2008 and onward (vi) Indirect O&M costs (sales and administration expenses) will be increased to 150% of the current level of expenditure in 2008 and onward (vii) The level of inventory will be maintained at 0.05% of the total book value of fixed assets at the end of each fiscal year (viii) The average turnover ratio of accounts receivable will be increased from 1.0 in 2003 to 4.0 in 2005 and 6.0 in 2015 (ix) ENACAL’s contribution to the Central Level will continue based on the unit volumetric charge of C$ 0.56 per every cubic meter of water sold (x) Any shortage in working capital will be met by short-term borrowings from the central government at the interest rate of 5% p.a.

Table S-5 Existing and Proposed Water Tariffs

EXISTING TARIFFS IN MANAGUA IN 2004 PROPOSED TARIFFS

Variable Charge Variable Charge Fixed Charge Fixed Charge User Category Consumption RateUser Category Consumption Rate （C$/Month） (m3/Month) （C$/m3）（C$/Month） (m3/Month) （C$/m3） Domestic Users Domestic Users 1. High Income 8.56Less than 20 5.88 1. Un-subsidized 9.18Less than 10 5.28 Between 21-50 5.88Between 11-30 7.54 More than 51 13.20Between 31-50 9.84 More than 51 12.00 2. Middle Income 4.24Less than 20 3.54 Between 21-50 5.88 2. Subsidized 0.00Less than 10 0.00 More than 51 10.48Between 11-30 3.50 Between 31-50 5.25 3. Low Income 1.06Less than 20 1.99More than 51 9.00 More than 21 2.50

Non-domestic Users 8.56Less than 50 6.76 Non-domestic Users 8.56Less than 50 6.76 More than 51 14.49More than 51 14.49

Figure S-3 summarizes the results of our simulation analysis. It is envisaged from this analysis that, from 2010 onward, ENACAL’s revenues would be able to recover the projected O&M and depreciation expenses. Further, ENACAL would also be able to generate a net profit after payment of interests on long-term debts, which can be used for the amortization of long-term debts or for the reduction of the accumulated deficit.

Our financial simulation of ENACAL’s operations suggested that there is a distinct need for a substantial tariff increase. The domestic tariffs used in our analysis are quite compatible with that currently adopted in Matagalpa. Further, tariffs for the low-income category are designed to protect the “extremely poor” whose consumption is less than 10m3 monthly and to provide a stimulus to encourage people in low-income settlements to request for installation of water meters.

The above financial simulation analysis assumes that a new set of domestic tariffs shown in Table S-5 will take effect in 2007, and thereafter until 2015 domestic tariffs will be increased every year by 3.5% in real term. It is anticipated in this case that although the accumulated deficit will increase to C$862 millions in 2011, it will rapidly decrease afterwards to zero in 2018. Figure S-4 shows the results of the simulation where the tariffs are increased only by 1.5% p.a. instead of 3.5% p.a. It is anticipated in this case that the accumulated deficit will balloon to more than C$1,000 millions in 2012 and it will continue to remain at a significantly

S - 12 high level for a long period of time afterwards.

Finally, it is essential that ENACAL separates the financial account of water services in Managua from that covering the rest of the country. The establishment of an independent financial account is necessary to obtain accurate information on the financial performance of water services in Managua, to evaluate the efficiency of the water service operations in Managua, and to decide and implement the measures to strengthen the financial capacity of water services in Managua.

1,000

800

600

400

200

-200 Balance (C$Million) -400

-600

-800

-1,000 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Ye ar

Operating Revenue Operating Expenses Operating Balance Ordinary Balance Accumulated Deficit Figure S-3 Projection of Financial Balance and Accumulated Deficit

1,000

800

600

400

200

-200

Balance (C$Million) -400

-600

-800

-1,000

-1,200 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Ye ar

Operating Revenue Operating Expenses Operating Balance Ordinary Balance Accumulated Deficit Figure S-4 Projection of Financial Balance and Accumulated Deficit (2)

S - 13 III. LONG-TERM IMPROVEMENT PLAN (LIP)

III-1. Basic Strategies Adopted for Developing LIP

Chapter II discussed various problems of the existing water supply system in Managua. Although having an adequate supply capacity, the existing water supply system can not meet the current water demand satisfactorily. It is largely because of the inefficiency of the water transmission and distribution systems and the high levels of leakage and wastage which combined accounts for 45% of the volume of water distributed into the distribution system. As a result, there are three distinct areas, namely San Judas, Schick and Laureles Sur, in the study area, where the current extremely poor water supply condition is recognized as one of the most critical social problems in Managua. Further, ENACAL has not been able to deal effectively with the recent rapid increase in water demand in the Esquipulas, Jaguitas, Ticuantepe and Nindiri areas and in areas along the Carretera Masaya.

Our assessment of existing water sources indicated that the total water supply capacity in Managua would gradually decrease in years to come. Relatively high concentrations of arsenic and nitrate were detected at several wells used by ENACAL. In some wells, the concentrations already exceed the maximum allowable limits of the drinking water standards. Our study suggested that the volume of intake from Lake Asososca will need to be decreased to 30,000 m3/day in the future in order to protect the lake from possible contamination. Due to a backlog of repairs and maintenance, many wells and well pumps are not functioning at present or being barely operated at significantly low production rates. In the absence of regular replacement programs, many wells and well pumps have already been used beyond their normal useful life.

Taking all of these problems into account, a basic strategy for developing a long-term water supply improvement plan for Managua up to the year 2015 was established. Figure S-5 shows the basic strategy adopted in this study for developing a long-term improvement plan (LIP). The strategy is based on the four basic policies shown below and to achieve the goals shown in Table S-6 by implementing both physical and non-physical improvement measures. Table S-7 indicates the relationship between (a) the problems of the existing water supply system in Managua and (b) the basic policies and goals of the long-term improvement plan (LIP).

Four Basic Policies of LIP

(1) Rehabilitation and protection of existing water sources

(2) Reduction of leakage/wastage (3) Increase in the efficiency of water transmission and distribution systems (4) Establishment of a basic financial framework for the management of water services in Managua

S - 14

Figure S-5 Basic Strategies Adopted for Development of LIP

S - 15 Table S-6 Policies and Goals of LIP Policies Goals 1. Rehabilitation and protection (1) The total production capacity of existing sources will be sustained. of existing water sources (2) Water quality of existing sources will be protected. (3) Safety of water supply will be assured. 2. Reduction of leakage/wastage (1) Water resources will be conserved. (2) The volume of water that can be delivered to customers will increase. (3) Large-scale investments for the development of new water sources can be deferred. (4) Revenues from water sale will increase. (5) Public awareness on the efficient use (conservation) of water will increase. 3. Increase in the efficiency of (1) The state of water being distributed over the entire city area can be water transmission and assessed precisely. distribution systems (2) O&M of the water supply system will become easier and ENACAL will be able to deal with problems in a more prompt and appropriate manner. (3) The equity of water service will be enhanced by strengthening supplies to areas where water supply conditions are currently extremely poor. (4) The economic growth of the region will be sustained by strengthening supplies to areas where rapid developments have been taking place in recent years. (5) Old water transmission pump stations will be rehabilitated. (6) Secondary/tertiary distribution mains and service connections will be installed to cater for increased service populations in the future. 4. Establishment of a basic (1) ENACAL will spend a sufficient level of expenses for the O&M of the financial framework for the existing water supply system in Managua. management of water services (2) Depreciation expenses will be recovered through tariffs and used for in Managua the replacement/rehabilitation of deteriorated equipment and facilities. (3) Financial evaluation of the water services in Managua will become possible.

III-2. Rehabilitation and Protection of Existing Water Sources

The following measures are proposed for the rehabilitation and protection of existing water sources. Table S-8 provides the details of proposed measures and their priority for implementation. • Restoration of the design production capacity of the Managua I well field • Restoration of the design production capacity of the Managua II well field • Stage-wise rehabilitation and renewal of aged wells and well pumps • Taking measures against wells that have relatively high levels of nitrate concentrations • Taking measures against wells that have relatively high levels of arsenic concentrations • Reduction in the volume of abstraction from Lake Asososca • Establish control over the use and development of groundwater by the private sector • Establish control over the construction and operation of facilities which otherwise could contaminate groundwater • Continuous monitoring and evaluation of water quality at sources by ENACAL • Increase the analytical capacity of the ENACAL’s laboratory

S - 16

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1. Rehabilitation and 1. Rehabilitation Goals Policies iri AL's creasing quality at sources Policies and Goals of Long-term of Goals and Policies Improvement Plan (LIP) Inadequate maintenance of wells and well pumps well and wells of maintenance Inadequate of Degradation water and in areas along MasayaC. Sur） Laureles Schick, Judas, （San areas supply poor extremely 3 Delay in the replacement of wells and well pumps that have that pumps well and wells of replacement the in Delay life useful average their exceeded already Nind Ticuantepe, Jaquitas, Esquipulas, in increase demand Rapid Problems ofExisting Water Supply Managua in System ＊＊＊Asososca Lake at quality water of protection the for Needs ＊leakage/Wastage of level High ＊systems dsitribution and transmission water in efficiency Low ＊＊ ● ● ● ● ＊ water service is inadequate The total supply capacity from existing sources is gradually de gradually is sources existing from capacity supply total The ENAC of quality the capacity, supply havingan adequate Despite S-7 Table Wate of Existing Relationship Between “Problems

S - 17 III-3. Reduction of Leakage/Wastage

The following measures are proposed for the reduction of leakage and wastage. Table S-9 provides the details of proposed measures and their priority for implementation. • Micro-sectoring of the distribution network and implementation of leakage/wastage reduction measures in the micro sectors • Replacement of aged water meters • Reorganization of the existing Commercial Department • Review/revision of the existing water tariff structure • Review/revision of the “Reglamento de Servicios al Usuario” • Strengthening ENACAL’s capacity in meter reading, billing and collection • Increasing public awareness • Improvement of water supply and sanitation conditions in low-income settlements through community participatory approaches

III-4. Increase in the Efficiency of Water Transmission and Distribution Systems

The following measures are proposed for increasing in the efficiency of water transmission and distribution systems. Table S-10 provides the details of proposed measures and their priority for implementation. • Macro-sectoring of the distribution network • Improvement of water supply conditions in the San Judas, Schick and Laureles Sur areas and extension of water supply to the Jaguitas and Esquipulas areas • Strengthening of water supplies in Veracruz and areas along the Carretera Masaya • Strengthening of water supplies in Ticuantepe and Nindiri • Strengthening of water supply in Zona Baja • Rehabilitation of water transmission pump stations • Provision of secondary and tertiary distribution mains and service connections to cater for the increased service population in the future

III-5. Establishment of a Basic Financial Framework for the Management of Water Services in Managua

The following measures are proposed for the establishment of a basic financial framework for the management of the water services in Managua. Table S-11 provides the details of proposed measures and their priority for implementation. • Establishment of an independent financial account for the water services in Managua • Tariff increase • Minimizing headquarters’ expenses and establishing appropriate rules for the division of such expenses • Training

S - 18 Table S-8 Rehabilitation and Protection of Existing Water Sources (1/2)

Measures Description Priority １A Restoration of the design - The current production capacity of the Managua I Well Field (53,000 m3/day) will be High production capacity of the increased by 18,000 m3/day to its design production capacity (71,000m3/day). The Managua I Well Field. work will include the renewal of 1 well (W7) and rehabilitation of 4 wells (E4, W3, W6 & W8) through cleaning of wells and replacement of well pumps. １B Restoration of the design - The current production capacity of the Managua II Well Field (44,000 m3/day) will High production capacity of the be increased by 12,000 m3/day to its design production capacity (56,000m3/day). Managua II Well Field. The work will include the renewal of 1 electric transformer (P11) and 1 electric panel (P13); and rehabilitation of 4 wells (P6, P8, P1 & P16) through cleaning of wells and replacement of well pumps. １C Stage-wise rehabilitation and (a) 10 wells that are currently malfunctioning or barely operated at significantly low High renewal of aged wells and production rates will be rehabilitated. The work will include the rehabilitation of 6 well pumps wells in Zona Baja (No.17, No.18, No.22, No.24, No.25 & No.80), 1 well in Zona Alta (No31) and 3 wells in Zona Alta Superior (No.71, No.75 & No.108) through cleaning of wells and replacement of well pumps. (b) 22 wells, of which well pumps will have been in service for more than 20 years in Medium 2010 will be rehabilitated. The work will include the rehabilitation of 1 well in Zona Baja, 7 wells in Zona Alta and 14 wells in Zona Alta Superior through cleaning of wells and replacement of well pumps. (c) 18 wells, of which well pumps will have been in service for more than 20 years in Low 2015 will be rehabilitated. The work will include the rehabilitation of 8 wells in Zona Baja, 4 wells in Zona Alta and 6 wells in Zona Alta Superior through cleaning of wells and replacement of well pumps. (d) 10 wells which will have been in service for more than 30 years in 2010 will be Medium renewed. The work will include the renewal of 4 wells in Zona Baja, 1 well in Zona Alta and 5 wells in Zona Alta Superior. (e) 6 wells which will have been in service for more than 30 years in 2015 will be Low renewed. The work will include the renewal of 5 wells in Zona Baja and 1 well in Zona Alta Superior. １D Taking measures against (a) No.8 and No.10 wells in Zona Baja will be abondoned and substitute wells will be High wells that have relatively high constructed in the San Judas area by 2010. The work will include the construction of levels of nitrate 3 new wells and a raw water supply main (PVC150：1.0km). concentrations

(b) No.9 well in Zona Baja will be abandoned and substitute wells will be constructed in Low the Esquipulas area by 2015. The work will include the construction of 2 new wells and a raw water supply main (PVC150：1.0km).

1E Taking measures against (a) Four wells, namely No.27, No.28, No.29 and No.46 will be abandoned and substitute High wells that have relatively high wells wll be constructed in the Jaquitas area by 2010 to supply areas that are currently levels of arsenic supplied by these four wells. The work will include the construction of 5 new wells, a concentrations water tank (4,000m3) and distribution mains (DIP300 to 450 ：2.9km & PVC250： 1.1km).

(b) Direct distribution from Well No.57 will be discontinued. Water from this well will Low be first transported to the Altamira Tank for mixing with water from other sources and then distributed from the tank. Water from Well No.68 will continuously be sent to the Las Americas Tank (as is the case at present) for mixing with water from the Managua II well field. Direct distribution from Well No. 112 will be discontinued. Water from this well will be first sent to the Las Americas Tank for mixing with water from the Managua II well field and then distributed from the tank. Direct distribution from Well No.30 will be discontinued. Water from this well will be mixed with water from the neighboring Well No.31before it is distributed to customers. Water from Wells No.77 and No.78 will continuously be injected directly into the 900 mm diameter distribution trunk main (as is the case at present) and thus it will be mixed with water from the Las Mercedes well field.

S - 19 Table S-8 Rehabilitation and Protection of Existing Water Sources (2/2) １F Reduction in the volume of - The volume of abstraction from Lake Asososca will in the long run be reduced to Low abstraction from Lake approximately 30,000m3/day with a view to maintaining the water level of the lake Asososca. high enough to prevent the intrusion of groundwater into the lake.

1G Establish control over the - Usage and development of groundwater by the private sector will be controlled High use and development of strictly with a view to maintaining the sustainability of public water services. groundwater by the private Private wells will be metered and both water and sewerage charges will be collected sector from users by ENACAL based on metered consumptions.

1H Establish control over the - Construction and operation of gas stations and other chemical High construction and operation manufacturing/storage facilities will be controlled strictly with a view to preventing of facilities which otherwise them from spilling gasoline and other hazardous chemicals into the ground. could contaminate groundwater

1I Continuous monitoring and - ENACAL will analyze water quality of all the existing water sources twice a year High evaluation of water quality (once in the dry season and the other in the wet season), covering all the water at sources by ENACAL quality parameters included in the National Drinking Water Quality Standards. Wells currently having an arsenic concentration between 6.0 μg/l and 8.0 μg/l will be tested for arsenic four times a year (every three months). The results of the analyses will be evaluated and countermeasures will be explored when problems are encountered. 1J Increase the analytical - ENACAL's staff in the laboratory will receive adequate training in analytical skills High capacity of ENACAL's required for the measurement of the concentrations of heavy metals (using an laboratory atomic absorption spectroscopy) and pesticides (using a gas chromatograph). UPS (Uninterrupted Power Supply) devices will be installed in the laboratory to protect these analytical equipment from sudden electricity surges and power failures.

Table S-9 Reduction of Leakage/Wastage (1/2)

Measures Description Priority 2A Micro-sectoring of the (a) The existing distribution network in Zona Baja will be divided into 170 micro sectors High distribution network and and measures for reducing leakage and wastage will be implemented in each of the implementation of leakage established micro sectors. The work will include the procurement of vehicles and and wastage reduction valves, measurement of minimum night flows, and detection/repair of approximately measures 32,000 visible/invisible leaks.

(b) The existing distribution network in Zona Alta will be divided into 100 micro sectors Medium and measures for reducing leakage and wastage will be implemented in each of the established micro sectors. The work will include the procurement of valves, measurement of minimum night flows, and detection/repair of approximately 20,000 visible/invisible leaks. (c) The existing distribution network in Zona Alta Superior will be divided into 110 Low micor sectors and measures for reducing leakage and wastage will be implemented in each of the established micro sectors. The work will include the procurement of valves, measurement of minimum night flows, and detection/repair of approximately 28,000 visible/invisible leaks. 2B Replacement of aged water - Water meters that have already been in service for more than 10 years will be High meters. replaced. The work will include the replacement of 72,000 meters.

2C Enabling the existing - Four units, namely LAU (Leakage Abatement Unit), ICCU (Illegal Connection High Commercial Department to Control Unit), AIPU (Asentamiento Improvement Program Unit), and CMBU play more integrated roles in (Customer Metering and Billing Unit) will be established within the existing reducing leakage, wastage Commercial Department, and each unit will be staffed by personnel who has and illegal connections and in experience in that particular field. increasing revenues from water sale

S - 20 Table S-9 Reduction of Leakage/Wastage (2/2) 2D Review/revision of the - Existing water tariffs for domestic customers will be reviewed and revised with a High existing water tariff structure view to providing more consistent incentives for the efficient use of water. The limit of essential (subsistence) consumption for an average household will be established and subsidized tariffs will only be applied to metered consumption below that limit. Subsidized tariffs will never be applied to un-metered connections. Relatively high levels of fixed charges will be applied to un-metered domestic customers to provide a stimulus to encourage such customers to request the installation of a meter.

2E Review/revision of - "Reglamento de Servicios al Usuario"will set forth that (a) water meters will in High "Reglamento de Servicios al principle be installed within the premises of customers and (b) customers will be held Usuario" liable for any damages except normal wear and tear to water meters, including tampering. It will also set forth that (a) water meters will in principle be installed aboveground and (b) ENACAL has a right to decide the location and method of meter installation at its own discretion. Fines and penalties for illegal users will be increased.

2F Strengthening ENACAL's - Registry of customes will be reorganized and updated. Classification of customers by High capacity in meter reading, use category will be defined more clearly and applied without discrimination. Meter billing and collection readers will be trained in social communication skills. Meter reading, billing and collection systems will be related to the geographic coverages of macro sectors. Information on meter reading, billing and collection will be managed exclusively by CMBU (Customer Metering and Billing Unit) of the Commercial Department but will be shared with other units and departments of ENACAL through a computer network. 2G Increasing public awareness - ENACAL will implement campaigns through the mass media (TV, radio and High newspapers) to increase public awareness on issues such as water conservation, illegal connections and payment of water charges. Curriculums for primary and secondary schools will include tours of water supply facilities. Government will designate March 22nd as the "Nicaraguan Water Day" and ENACAL will organize exhibitions and arrange an inspection tour of water supply facilities on that particular day. In the dry season, ENACAL will send loudspeaker-mounted vehicles to areas where water is relatively abundant asking residents to stop watering roads/gardens or using swimming pools 2H Improvement of water supply (a) Databases on approximately 166 low-income settlements in Managua will be High and sanitation conditions in developed. Information compiled in the databases will include ages of the settelment, low-income settlements total number of households, average household size, ownership of land titles, water through community supply conditions, sanitary environments, conditions of other infrastructure (roads, participatory approaches electricity, telephone, sewerage, solid wastes disposal) , community organizations, and priority needs of residents.

(b) Pilot projects will be implemented through community participatory approaches to High improve water supply and sanitation conditions in 3 low-income settlements each selected from Type A, Type B and Type C settlements . The work will include the procurement of 2 vehicles and consultancy/NGO services, supply/installation of 750 water meters, provision of 750 new water service connetions and 1,160 new sewerage service connections, and construction of internal water/sewerage reticulation systems. (c) Water supply and sanitation conditions in 81 Type A settlements will be improved High through community participatory approaches. The work will include the procurement of 2 vehicles and consultancy/NGO services, supply/installation of 27,000 water meters, provision of 9,000 new sewerage connections, and construction of internal sewerage reticulation systems. (d) Water supply and sanitation conditions in 52 Type C settlements will be improved High through community partipatory approaches. The work will include the procurement of 2 vehicles and consultancy/NGO services, provision of 12,500 new water connections and 12,500 new sewerage service connections, and construction of internal water and sewerage reticulation systems. (e) Water supply and sanitation conditions in 30 Type B settlements will be improved Medium through community participatory approaches. The work will include the procurement of 2 vehicles and consultancy/NGO services, supply/installation of 6,000 water meters, provision of 6,000 new water connections and 12,000 new sewerage service connections, and construction of internal sewerage reticulation systems.

S - 21 Table S-10 Increase in the Efficiency of Water Transmission and Distribution Systems

Measures Description Priority 3A Macro-sectoring of the - The existng distribution network will be divided into a number of hydraulically- High distribution system isolated macro sectors with a view to ensuring appropriate matching of water sources with their supply areas. The work will include the installation of 101 valves (50～ 800mm) for the isolation of macro sectors and 31 bulk water meters (150～800mm) for the measurement of flows into macro sectors. 3B Improvement of water supply (a) Wate supply conditions in the San Judas area will be improved. The work will High conditions in the San Judas, include the construction of a water tank (2,000m3), a transmission pump station Schick and Laureles Sur (74kw), a transmission main (PVC150：1.5km) and distribution mains (DIP300： areas and extension of water 0.3km & PVC250：2.3km). supply to the Jaguitas and Esquipulas areas

(b) Water supply conditions in the Schick and Laureles Sur areas will be improved. High Water supply will be extended to the Esquipulas and Jaquitas areas where many housing development schemes are being implemented. The work will include the construction of a water tank (5,000m3), a transmission main (DIP300：1.0km) and distribution mains (DIP300～500：6.6km & PVC150～200：5.6km). 3C Strengthening of water - Water supply in Veracruz and areas along the Carretera Masaya will be strengthened. High supplies in Veracruz and The work will include the construction of a transmission pump station (150kw), a areas along the Carretera transmission main (PVC250 ： 4.1km), a distribution pump station (225kw) and a Masaya distribution main (DIP350：0.6km).

3D Strengthening of water (a) Water supply in Ticuantepe will be strengthened. The work will include the High supplies in Ticuantepe and construction of a new well and a raw water supply main (PVC150：1.0km). Nindiri

(b) Water supply in Nindiri will be strengthened. The work will include the construction High of a new well and a raw water supply main (PVC150：4.0km).

3E Strengthening of water - Water supply capacity in Zona Baja will be strengthened in the medium- and long- Low supply in Zona Baja term future to compensate the reduction in the volume of abstraction from Lake Asososca and the relocation of 3 wells to higher elevation areas. The work will include the construction of a pump suction well (1,000m3), a transmission pump station (300kw) and a transmission main (DIP450：4.4km).

3F Rehabilitation of water - Existing transmission pump stations including those located at Asososca and km8 Medium transmission pump stations will be rehabilitated. The work will include the replacement of pumps and electric panels at exisitng pump stations (Total pumping capacity:1,500kw).

3G Provision of small diameter (a) Provision of secondary and tertiary distribution mains to cater for the increased Medium distribution pipes and service service population during the 10 years from 2005 to 2015. The work will include the connections to cator for the construction of small diameter distribution mains (PVC 50～250) to supply 49,500 increased service population new service connections. in the future

(b) Provision of service connections to cater for the increased service population during Medium the 10 years from 2005 to 2015.The work will include the installation of 49,500 new metered service connections.

S - 22 Table S-11 Establishment of a Basic Financial Framework for the Management of Water Services in Managua

Measures Description Priority 4A Establishment of an - ENACAL will estalish an independent financial account for the water services in High independent financial Managua. To this end, the ENACAL's current financial account will be divided into account for the water services two, one covering the water services in Managua and the other covering the water in Managua services in the rest of the country.

4B Tariff increase - Domestic tariffs in Managua will be increased at least to the level of the domestic High tariffs currently applied in Matagalpa. At the same time, a special low tariff block (lifeline tariff block) for a subsistence monthly consumption will be provided in tariff structures to protect the extremely poor. The poor will be allowed to pay connection charges in installments over a long period of time. 4C Minimizing headquarters' - ENACAL will minimize its headquarters' expenses and establish appropriate rules for High expenses and establishing dividing such expenses between different financial accounts. appropriate rules for the division of such expenses

4D Training - ENACAL's staff in the Financial Department will receive training on issues such as High "Revenue Requirements", "Water Tariff Structures", "Cross-subsidization of Water Tariffs", "Depreciation" and "Cost Recovery".

III-6. Preliminary Cost Estimates of LIP

Table S-12 shows the estimated project costs of LIP. They are expressed in United States Dollars using the currency exchange rates of US$1.0 ＝ JPY106.0900 ＝ EUR0.7583 ＝ C$16.2834 publicized by the Central Bank of Nicaragua on 10 December 2004. Base Costs are estimated based on the December-2004 price. Other assumptions used in the estimate are as follows: • Engineering fees (D/D and C/S）: 7％ of Base Cost • Physical Contingency: 5％ of (Base Cost + Engineering Fees) • Price Contingency: 3.9％p.a.（starting from 2006） • Project Administration Cost: 2.5% of （ Base Cost ＋ Engineering Fees ＋ Physical Contingency＋Price Contingency）

It is assumed that 70 % of the total project cost is Foreign Component Cost and the remaining 30% is Local Component Cost. Applying the annual price escalation rates of 3% for Foreign Component Cost and 6% for Local Component Cost, the average price escalation rate of 3.9% （0.7x0.03＋0.3x0.06=0.039）was obtained. The project cost is provisionally divided into “Donor” and “ENACAL” components because their financing costs are different. This division is necessary for the financial evaluation of ENACAL’s water services and for the economic/financial evaluation of the proposed LIP. In principle, those ranked “high” in priority are included in the “Donor” component.

S - 23 Table S-12 Preliminary Cost Estimates of LIP (US$ 1,000)

Measures/Items First Stage (2006 to 2010) Second Stage (2010 to 2015) Total (2006 to 2015) Donor ENACAL Total Donor ENACAL Total Donor ENACAL Total Rehabilitation and protection of 1. 8,217 6,850 15,068 0 6,058 6,058 8,217 12,908 21,125 existing water sources

2. Reduction of leakage/wastage 22,197 325 22,522 9,354 14,057 23,411 31,551 14,383 45,933

Increasing in the efficiency of water 3. 9,126 9,440 18,566 0 14,501 14,501 9,126 23,941 33,067 transmission and distribution systems Establishment of a basic financial 4. framework for the management of 000000000 water services in Managua

Total Base Cost 39,540 16,615 56,155 9,354 34,616 43,970 48,894 51,231 100,126

Engineering Fees (D/D & C/S) 2,768 1,163 3,931 655 2,423 3,078 3,423 3,586 7,009

Physical Contingency 2,115 889 3,004 500 1,852 2,352 2,616 2,741 5,357

Price Contingency 6,338 2,645 8,982 2,712 14,016 16,728 9,050 16,661 25,710

Project Administration Cost 0 1,802 1,802 0 1,653 1,653 0 3,455 3,455

Total Project Cost 50,761 23,113 73,875 13,221 54,561 67,782 63,982 77,674 141,656

III-7. Implementation and Disbursement Schedules of LIP

Table S-13 shows the proposed implementation and disbursement schedules of LIP.

S - 24 Table S-13 Implementation & Disbursement Schedules of LIP (1/4) 1. Rehabilitation and protection of existing water sources

First Stage (2006 to 2010) Second Stage (2011 to 2015) Base Cost 2006 2007 2008 2009 20102011 2012 2013 2014 2015 Measures (US$ 1,000) 1234123412341234123412341234123412341234

1A Restoration of the design production - 1,080 capacity of the Managua I Well 0.30 0.70 Field 0 324 756

0.15 0.25 0.30 0.30

3,080 462 770 924 924 (c) 0

0.20 0.200.20 0.20 0.20

2,520 504 504 504 504 504 (d) 0

0.15 0.25 0.30 0.30

3,770 566 943 1,131 1,131 (e) 0

0.20 0.200.20 0.20 0.20

2,262 452 452 452 452 452 1D Taking measures against wells that (a) 1,185 have relatively high levels of nitrate 0.30 0.70 concentrations 0 356 830 (b) 0

0.30 0.70

808 243 566 1E Taking measures against wells that (a) 3,842 have relatively high levels of arsenic 0.30 0.70 concentrations 0 1,153 2,689 (b) 0

0.30 0.70

467 140 327 (c) 0

1F Reduction in the volume of - 0 abstraction from Lake Asososca

1G Establish control over the use and - 0 development of groundwater by the private sector 0

1H Establish control over the - 0 construction and operation of facilities which otherwise could contaminate groundwater 0 1I Continuous monitoring and - 0 evaluation of water quality at sources by ENACAL 0

1J Increaqse the analytical capacity of - 0 ENACAL's laboratory

0 Sub-Total 21,125 0 3,493 7,465 2,055 2,055 956 1,199 1,522 1,097 1,283 Donor 8,217 0 2,465 5,75200000 00 ENACAL 12,908 0 1,028 1,713 2,055 2,055 956 1,1991,522 1,097 1,283

S - 25 Table S-13 Implementation & Disbursement Schedules of LIP (2/4) 2. Reduction of leakage/wastage

First Stage (2006 to 2010) Second Stage (2011 to 2015) Base Cost 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Measures (US$ 1,000) 1234123412341234123412341234123412341234

2A Micro-sectoring of the distribution (a) 1,959 network and implementation of 0.20 0.60 0.20 leakage and wastage reduction measures 0 392 1,176 392 (b) 0

0.35 0.45 0.20

929 325418 186 (c) 0

0.35 0.45 0.20

1,188 416 535 238

2B Replacement of aged water meters - 3,337

0.20 0.60 0.20

0 667 2,002 667

2C Re-organization of the existing - 0 Commercial Department

2D Review/revision of the existing - 0 water tariff structure

2E Review/revision of "Reglamento de - 0 Servicios al Usuario"

2F Strengthening ENACAL's capacity - 0 in meter reading, billing and collection 0

2G Increasing public awareness - 0

0 2H Improvement of water supply and (a) 790 sanitation conditions in low-income 0.50 0.50 settlements through community participatory approaches 0 395 395 (b) 2,080

0.70 0.30

0 1,456 624 (c) 9,192

0.20 0.40 0.40

0 1,838 3,677 3,677 (d) 14,193

0.20 0.40 0.40

0 2,839 5,677 5,677 (e) 0

0.35 0.35 0.30

12,266 4,293 4,293 3,680 Sub- Total 45,933 0 1,454 5,028 6,360 9,6799,772 4,479 4,709 4,214 238 Donor 31,551 0 1,454 5,028 6,360 9,354 9,354 0 000 ENACAL 14,3830000325418 4,479 4,709 4,214 238

S - 26 Table S-13 Implementation & Disbursement Schedules of LIP (3/4) 3. Increasing in the efficiency of water transmission and distribution system

First Stage (2006 to 2010) Second Stage (2011 to 2015) Base Cost 2006 2007 2008 20092010 2011 2012 2013 2014 2015 Measures (US$ 1,000) 1234123412341234123412341234123412341234 3A Macro-sectoring of the distribution 1,341 network 0.30 0.70 0 402 939 3B Improvement of water supply (a) 891 conditions in the San Judas, Schick 0.30 0.70 and Laureles Sur areas and extension of water supply to the Jaguitas and 0 267 624 Esquipulas areas (b) 4,059 0.30 0.70 0 1,218 2,841 3C Strengthening of water supplies in 1,680 Veracruz and areas along the 0.30 0.70 Carretera Masaya 0 504 1,176 3D Strengthening of water supplies in (a) 431 Ticuantepe and Nindiri 0.30 0.70 0 129 302 (b) 724 0.30 0.70 0 217 506 3E Strengthening of water supply in 0 Zona Baja 0.20 0.50 0.30 2,833 567 1,416 850 3F Rehabilitation of water transmission 0 pump stations 0.100.15 0.15 0.15 0.15 0.15 0.15 2,446 245 367 367 367 367 367 367 3G Provision of small diameter (a) 0 distribution pipes and service connections to cator for the increased service population in the 11,843 1,073 1,096 1,120 1,144 1,169 1,195 1,221 1,247 1,275 1,303 future (b) 0

6,819 618 631 645 659 673 688 703 718 734 750 Sub-Total 33,067 1,691 4,465 8,154 2,048 2,209 2,250 2,857 3,748 3,226 2,420 Donor 9,126 0 2,738 6,389 0 0 0 0 000 ENACAL 23,941 1,691 1,727 1,7652,048 2,209 2,250 2,857 3,748 3,226 2,420

4. Establishment of a basic financial framework for the management of water services in Managua

First Stage (2006 to 2010) Second Stage (2011 to 2015) Base Cost Measures 2006 2007 2008 2009 2010 20112012 2013 2014 2015 (US$ 1,000) 1234123412341234123412341234123412341234 4A Establishment of an independent 0 financial account for the water services in Managua 0 4B Tariff Increase 0

0 4C Minimizing headquarters' expenses 0 and establishing appropriate rules for the division of such expenses 0 4D Training 0

0 Sub-Total 00000 0 0 0 00 0 Donor 000000 0 0 000 ENACAL 00000000 000 Total Base Cost 100,126 1,691 9,412 20,647 10,463 13,94312,978 8,535 9,979 8,537 3,941 Donor 48,894 0 6,657 17,169 6,360 9,354 9,354 0 000 ENACAL 51,231 1,691 2,755 3,478 4,103 4,589 3,624 8,535 9,979 8,537 3,941

S - 27 Table S-13 Implementation & Disbursement Schedules of LIP (4/4) Cost First Stage (2006 to 2010) Second Stage (2011 to 2015) Item (US$ 1,000) 2006 2007 2008 2009 20102011 2012 2013 2014 2015 Base Cost Total 100,126 1,691 9,412 20,647 10,463 13,943 12,978 8,535 9,979 8,537 3,941

Donor 48,894 0 6,657 17,169 6,360 9,354 9,354 0 000 ENACAL 51,231 1,691 2,755 3,478 4,103 4,589 3,624 8,535 9,979 8,537 3,941 Engineering Fees (D/D & C/S) Total 7,009 118 659 1,445732 976 908 597 699 598 276 Donor 3,423 0 466 1,202 445 655 6550000 ENACAL 3,586 118 193 243 287 321254 597 699 598 276 Physical Contingency Total 5,357 90 504 1,105 560 746694 457 534 457 211 Donor 2,616 0 356 919 340 500 500 0 0 00 ENACAL 2,741 90 147 186 219 246 194 457 534 457 211 Price Contingency Total 25,710 74 841 2,821 1,944 3,302 3,762 2,945 4,015 3,942 2,064 Donor 9,050 0 595 2,346 1,182 2,215 2,7120 0 0 0 ENACAL 16,661 74 246 475 762 1,0871,051 2,945 4,015 3,942 2,064 Project Administration Costs Total 3,455 49 285 650 342 474459 313 381 338 162 Donor 00000000000 ENACAL 3,455 49 285 650 342 474 459 313 381 338 162

Grand Total 141,656 2,02311,700 26,668 14,041 19,44218,802 12,847 15,607 13,872 6,653

Donor 63,982 0 8,074 21,635 8,327 12,725 13,221 0 000 ENACAL 77,674 2,023 3,626 5,033 5,7146,717 5,581 12,847 15,607 13,872 6,653

IV. PRIORITY PROJECT (PPT)

IV-1. Selection of Priority Project

Of the various projects included in LIP, those ranked “high” in priority were selected to form the Priority Project (PPT). Table S-14 presents a summary of the proposed PPT.

S - 28 Table S-14 Priority Project (1/4) 1. Rehabilitation and protection of existing water sources

Measures Description １A Restoration of the design - The current production capacity of the Managua I Well Field (53,000 m3/day) will be production capacity of the increased by 18,000 m3/day to its design production capacity (71,000m3/day). The Managua I Well Field. work will include the renewal of 1 well (W7) and rehabilitation of 4 wells (E4, W3, W6 & W8) through cleaning of wells and replacement of well pumps.

１B Restoration of the design - The current production capacity of the Managua II Well Field (44,000 m3/day) will production capacity of the be increased by 12,000 m3/day to its design production capacity (56,000m3/day). Managua II Well Field. The work will include the renewal of 1 electric transformer (P11) and 1 electric panel (P13); and rehabilitation of 4 wells (P6, P8, P1 & P16) through cleaning of wells and replacement of well pumps. １C Stage-wise rehabilitation and (a) 10 wells that are currently malfunctioning or barely operated at significantly low renewal of aged wells and production rates will be rehabilitated. The work will include the rehabilitation of 6 well pumps wells in Zona Baja (No.17, No.18, No.22, No.24, No.25 & No.80), 1 well in Zona Alta (No31) and 3 wells in Zona Alta Superior (No.71, No.75 & No.108) through cleaning of wells and replacement of well pumps. １D Taking measures against (a) No.8 and No.10 wells in Zona Baja will be abondoned and substitute wells will be wells that have relatively high constructed in the San Judas area by 2010. The work will include the construction of levels of nitrate 3 new wells and a raw water supply main (PVC150：1.0km). concentrations

1E Taking measures against (a) Four wells, namely No.27, No.28, No.29 and No.46 will be abandoned and substitute wells that have relatively high wells wll be constructed in the Jaquitas area by 2010 to supply areas that are currently levels of arsenic supplied by these four wells. The work will include the construction of 5 new wells, a concentrations water tank (4,000m3) and distribution mains (DIP300 to 450 ：2.9km & PVC250： 1.1km).

1G Establish control over the use - Usage and development of groundwater by the private sector will be controlled and development of strictly with a view to maintaining the sustainability of public water services. Private groundwater by the private wells will be metered and both water and sewerage charges will be collected from sector users by ENACAL based on metered consumptions.

1H Establish control over the - Construction and operation of gas stations and other chemical manufacturing/storage construction and operation of facilities will be controlled strictly with a view to preventing them from spilling facilities which otherwise gasoline and other hazardous chemicals into the ground. could contaminate groundwater

1I Continuous monitoring and - ENACAL will analyze water quality of all the existing water sources twice a year evaluation of water quality at (once in the dry season and the other in the wet season), covering all the water quality sources by ENACAL parameters included in the National Drinking Water Quality Standards. Wells currently having an arsenic concentration between 6.0 μg/l and 8.0 μg/l will be tested for arsenic four times a year (every three months). The results of the analyses will be evaluated and countermeasures will be explored when problems are encountered. 1J Increase the analytical - ENACAL's staff in the laboratory will receive adequate training in analytical skills capacity of ENACAL's required for the measurement of the concentrations of heavy metals (using an atomic laboratory absorption spectroscopy) and pesticides (using a gas chromatograph). UPS (Uninterrupted Power Supply) devices will be installed in the laboratory to protect these analytical equipment from sudden electricity surges and power failures.

S - 29 Table S-14 Priority Project (2/4) 2. Reduction of leakage/wastage

Measures Description 2A Micro-sectoring of the (a) The existing distribution network in Zona Baja will be divided into 170 micro sectors distribution network and and measures for reducing leakage and wastage will be implemented in each of the implementation of leakage established micro sectors. The work will include the procurement of vehicles and and wastage reduction valves, measurement of minimum night flows, and detection/repair of approximately measures 32,000 visible/invisible leaks.

2B Replacement of aged water - Water meters that have already been in service for more than 10 years will be meters. replaced. The work will include the replacement of 72,000 meters.

2C Enabling the existing - Four units, namely LAU (Leakage Abatement Unit), ICCU (Illegal Connection Commercial Department to Control Unit), AIPU (Asentamiento Improvement Program Unit), and CMBU play more integrated roles in (Customer Metering and Billing Unit) will be established within the existing reducing leakage, wastage Commercial Department, and each unit will be staffed by personnel who has and illegal connections and in experience in that particular field. increasing revenues from water sale

2D Review/revision of the - Existing water tariffs for domestic customers will be reviewed and revised with a existing water tariff structure view to providing more consistent incentives for the efficient use of water. The limit of essential (subsistence) consumption for an average household will be established and subsidized tariffs will only be applied to metered consumption below that limit. Subsidized tariffs will never be applied to un-metered connections. Relatively high levels of fixed charges will be applied to un-metered domestic customers to provide a stimulus to encourage such customers to request the installation of a meter.

2E Review/revision of - "Reglamento de Servicios al Usuario"will set forth that (a) water meters will in "Reglamento de Servicios al principle be installed within the premises of customers and (b) customers will be held Usuario" liable for any damages except normal wear and tear to water meters, including tampering. It will also set forth that (a) water meters will in principle be installed aboveground and (b) ENACAL has a right to decide the location and method of meter installation at its own discretion. Fines and penalties for illegal users will be increased.

2F Strengthening ENACAL's - Registry of customes will be reorganized and updated. Classification of customers by capacity in meter reading, use category will be defined more clearly and applied without discrimination. Meter billing and collection readers will be trained in social communication skills. Meter reading, billing and collection systems will be related to the geographic coverages of macro sectors. Information on meter reading, billing and collection will be managed exclusively by CMBU (Customer Metering and Billing Unit) of the Commercial Department but will be shared with other units and departments of ENACAL through a computer network. 2G Increasing public awareness - ENACAL will implement campaigns through the mass media (TV, radio and newspapers) to increase public awareness on issues such as water conservation, illegal connections and payment of water charges. Curriculums for primary and secondary schools will include tours of water supply facilities. Government will designate March 22nd as the "Nicaraguan Water Day" and ENACAL will organize exhibitions and arrange an inspection tour of water supply facilities on that particular day. In the dry season, ENACAL will send loudspeaker-mounted vehicles to areas where water is relatively abundant asking residents to stop watering roads/gardens or using swimming pools.

S - 30 2H Improvement of water supply (a) Databases on approximately 166 low-income settlements in Managua will be and sanitation conditions in developed. Information compiled in the databases will include ages of the settelment, low-income settlements total number of households, average household size, ownership of land titles, water through community supply conditions, sanitary environments, conditions of other infrastructure (roads, participatory approaches electricity, telephone, sewerage, solid wastes disposal) , community organizations, and priority needs of residents.

(b) Pilot projects will be implemented through community participatory approaches to improve water supply and sanitation conditions in 3 low-income settlements each selected from Type A, Type B and Type C settlements . The work will include the procurement of 2 vehicles and consultancy/NGO services, supply/installation of 750 water meters, provision of 750 new water service connetions and 1,160 new sewerage service connections, and construction of internal water/sewerage reticulation systems.

(c) Water supply and sanitation conditions in 81 Type A settlements will be improved through community participatory approaches. The work will include the procurement of 2 vehicles and consultancy/NGO services, supply/installation of 27,000 water meters, provision of 9,000 new sewerage connections, and construction of internal sewerage reticulation systems.

(ｄ) Water supply and sanitation conditions in 52 Type C settlements will be improved through community partipatory approaches. The work will include the procurement of 2 vehicles and consultancy/NGO services, provision of 12,500 new water connections and 12,500 new sewerage service connections, and construction of internal water and sewerage reticulation systems.

S - 31 Table S-14 Priority Project (3/4) 3. Increase in the efficiency of water transmission and distribution systems

Measures Description 3A Macro-sectoring of the - The existng distribution network will be divided into a number of hydraulically- distribution system isolated macro sectors with a view to ensuring appropriate matching of water sources with their supply areas. The work will include the installation of 101 valves (50～ 800mm) for the isolation of macro sectors and 31 bulk water meters (150～800mm) for the measurement of flows into macro sectors. 3B Improvement of water supply (a) Wate supply conditions in the San Judas area will be improved. The work will conditions in the San Judas, include the construction of a water tank (2,000m3), a transmission pump station Schick and Laureles Sur (74kw), a transmission main (PVC150：1.5km) and distribution mains (DIP300： areas and extension of water 0.3km & PVC250：2.3km). supply to the Jaguitas and Esquipulas areas

(b) Water supply conditions in the Schick and Laureles Sur areas will be improved. Water supply will be extended to the Esquipulas and Jaquitas areas where many housing development schemes are being implemented. The work will include the construction of a water tank (5,000m3), a transmission main (DIP300：1.0km) and distribution mains (DIP300～500：6.6km & PVC150～200：5.6km).

3C Strengthening of water - Water supply in Veracruz and areas along the Carretera Masaya will be strengthened. supplies in Veracruz and The work will include the construction of a transmission pump station (150kw), a areas along the Carretera transmission main (PVC250 ： 4.1km), a distribution pump station (225kw) and a Masaya distribution main (DIP350：0.6km).

3D Strengthening of water (a) Water supply in Ticuantepe will be strengthened. The work will include the supplies in Ticuantepe and construction of a new well and a raw water supply main (PVC150：1.0km). Nindiri

(b) Water supply in Nindiri will be strengthened. The work will include the construction of a new well and a raw water supply main (PVC150：4.0km).

S - 32 Table S-14 Priority Project (4/4) 4. Establishment of a basic financial framework for the management of water services in Managua

Measures Description 4A Establishment of an - ENACAL will estalish an independent financial account for the water services in independent financial Managua. To this end, the ENACAL's current financial account will be divided into account for the water services two, one covering the water services in Managua and the other covering the water in Managua services in the rest of the country.

4B Tariff increase - Domestic tariffs in Managua will be increased at least to the level of the domestic tariffs currently applied in Matagalpa. At the same time, a special low tariff block (lifeline tariff block) for a subsistence monthly consumption will be provided in tariff structures to protect the extremely poor. The poor will be allowed to pay connection charges in installments over a long period of time.

4C Minimizing headquarters' - ENACAL will minimize its headquarters' expenses and establish appropriate rules for expenses and establishing dividing such expenses between different financial accounts. appropriate rules for the division of such expenses

4D Training - ENACAL's staff in the Financial Department will receive training on issues such as "Revenue Requirements", "Water Tariff Structures", "Cross-subsidization of Water Tariffs", "Depreciation" and "Cost Recovery".

IV-2. Preliminary Cost Estimates of PPT

Table S-15 shows the preliminary cost estimates of PPT. Currency exchange rates and other assumptions used in the cost estimates are the same as that used in the case of LIP.

Table S-15 Preliminary Cost Estimates of PPT (US$ 1,000) Measures/Items First Stage (2006 to 2010) Second Stage (2010 to 2015) Total (2006 to 2015)

Donor ENACAL Total Donor ENACAL Total Donor ENACAL Total

Rehabilitation and protection of 1. 8,217 0 8,217 0 0 0 8,217 0 8,217 existing water sources 2. Reduction of leakage/wastage 22,197 0 22,197 9,354 0 9,354 31,551 0 31,551

Increasing in the efficiency of water 3. 9,126 0 9,126 0 0 0 9,126 0 9,126 transmission and distribution systems Establishment of a basic financial 4. framework for the management of 000000000 water services in Managua Total Base Cost 39,540 0 39,540 9,354 0 9,354 48,894 0 48,894 Engineering Fees (D/D & C/S) 2,768 0 2,768 655 0 655 3,423 0 3,423 Physical Contingency 2,115 0 2,115 500 0 500 2,616 0 2,616 Price Contingency 6,338 0 6,338 2,712 0 2,712 9,050 0 2,616 Project Administration Cost 0 1,269 1,269 0 331 331 0 1,600 1,600

Total Project Cost 50,761 1,269 52,030 13,221 331 13,551 63,982 1,600 65,582

IV-3. Implementation and Disbursement Schedules of PPT

Table S-16 shows the proposed implementation and disbursement schedules of PPT.

S - 33 Table S-16 Implementation & Disbursement Schedules of PPT (1/4) 1. Rehabilitation and protection of existing water sources

First Stage (2006 to 2010) Second Stage (2011 to 2015) Base Cost 2006 2007 2008 2009 20102011 2012 2013 2014 2015 Measures (US$ 1,000) 1234123412341234123412341234123412341234

1A Restoration of the design production - 1,080 capacity of the Managua I Well 0.30 0.70 Field 0 324 756

1B Restoration of the design production - 710 capacity of the Managua II Well 0.30 0.70 Field 0 213 497 1C Stage-wise rehabilitation and (a) 1,400 renewal of aged wells and well 0.30 0.70 pumps 0 420 980 1D Taking measures against wells that (a) 1,185 have relatively high levels of nitrate 0.30 0.70 concentrations 0 356 830 1E Taking measures against wells that (a) 3,842 have relatively high levels of arsenic 0.30 0.70 concentrations 0 1,153 2,689

1G Establish control over the use and - 0 development of groundwater by the private sector 0

1J Increaqse the analytical capacity of - 0 ENACAL's laboratory

0 Sub-Total 8,217 0 2,465 5,752 0 000000 Donor 8,217 0 2,465 5,752 0 0 0 0 0 00 ENACAL 0000000000 0

S - 34 Table S-16 Implementation & Disbursement Schedules of PPT (2/4) 2. Reduction of leakage/wastage

First Stage (2006 to 2010) Second Stage (2011 to 2015) Base Cost 2006 2007 2008 2009 2010 20112012 2013 2014 2015 Measures (US$ 1,000) 1234123412341234123412341234123412341234

2A Micro-sectoring of the distribution (a) 1,959 network and implementation of 0.20 0.60 0.20 leakage and wastage reduction measures 0 392 1,176 392 2B Replacement of aged water meters - 3,337

0.20 0.60 0.20

0 667 2,002 667

2C Re-organization of the existing - 0 Commercial Department

2D Review/revision of the existing - 0 water tariff structure

2E Review/revision of "Reglamento de - 0 Servicios al Usuario"

2F Strengthening ENACAL's capacity - 0 in meter reading, billing and collection 0

2G Increasing public awareness - 0

0 2H Improvement of water supply and (a) 790 sanitation conditions in low-income 0.50 0.50 settlements through community participatory approaches 0 395 395 (b) 2,080

0.70 0.30

0 1,456 624 (c) 9,192

0.20 0.40 0.40

0 1,838 3,677 3,677 (d) 14,193

0.20 0.40 0.40

0 2,839 5,677 5,677

Sub- Total 31,551 0 1,454 5,028 6,360 9,354 9,354 0 000 Donor 31,551 0 1,454 5,028 6,360 9,354 9,354 0 0 00 ENACAL 00000000000

S - 35 Table S-16 Implementation & Disbursement Schedules of PPT (3/4) 3. Increasing in the efficiency of water transmission and distribution system

First Stage (2006 to 2010) Second Stage (2011 to 2015) Base Cost 20062007 2008 2009 2010 2011 2012 2013 2014 2015 Measures (US$ 1,000) 1234123412341234123412341234123412341234 3A Macro-sectoring of the distribution 1,341 network 0.30 0.70 0 402 939 3B Improvement of water supply (a) 891 conditions in the San Judas, Schick 0.30 0.70 and Laureles Sur areas and extension of water supply to the Jaguitas and 0 267 624 Esquipulas areas (b) 4,059 0.30 0.70 0 1,218 2,841 3C Strengthening of water supplies in 1,680 Veracruz and areas along the 0.30 0.70 Carretera Masaya 0 504 1,176 3D Strengthening of water supplies in (a) 431 Ticuantepe and Nindiri 0.30 0.70 0 129 302 (b) 724 0.30 0.70 0 217 506 Sub-Total 9,126 0 2,738 6,389 0 0 00000 Donor 9,126 0 2,738 6,3890 0 000 00 ENACAL 000000000 0 0

4. Establishment of a basic financial framework for the management of water services in Managua

0 4C Minimizing headquarters' expenses 0 and establishing appropriate rules for the division of such expenses 0 4D Training 0

0 Sub-Total 00000 0 0 0 0 0 0 Donor 000000 0 0 000 ENACAL 00000000 000 Total Base Cost 48,894 0 6,657 17,169 6,360 9,3549,354 0 000 Donor 48,894 0 6,657 17,169 6,360 9,354 9,354 0 000 ENACAL 00000000000

S - 36 Table S-16 Implementation & Disbursement Schedules of PPT (4/4) Cost First Stage (2006 to 2010) Second Stage (2011 to 2015) Item (US$ 1,000) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Base Cost Total 48,894 0 6,657 17,169 6,360 9,354 9,3540 0 0 0

Donor 48,894 0 6,657 17,169 6,360 9,354 9,354 0 000 ENACAL 000 00000000 Engineering Fees (D/D & C/S) Total 3,423 0 466 1,202445 655 655 0 0 0 0 Donor 3,423 0 466 1,202 445 655 6550000 ENACAL 0000000 0 000 Physical Contingency Total 2,616 0 356 919 340 500 5000 0 0 0 Donor 2,616 0 356 919 340 500 500 0 000 ENACAL 00000000000 Price Contingency Total 9,050 0 595 2,346 1,182 2,215 2,712 0 0 0 0 Donor 9,050 0 595 2,346 1,182 2,215 2,712 0 000 ENACAL 0000000 0 000 Project Administration Costs Total 1,600 0 202 541 208 318 3310 0 0 0 Donor 00000000000 ENACAL 1,600 0 202 541 208 318 331 0000

Grand Total 65,582 008,276 22,176 8,535 13,04313,551 00 0

Donor 63,982 0 8,074 21,635 8,327 12,725 13,2210 0 0 0 ENACAL 1,600 0 202 541 208318331 0 0 0 0

V. RECOMMENDATIONS

V-1. Reduction of Intake Amount from Lake Asososca

It is recommended in our Study that the amount of abstraction from Lake Asososca should be reduced to 30,000 m3/day in order to protect the water quality of the lake from contamination. Further, our study also recommends that three existing wells in Zona Baja should be relocated to higher elevation areas because of their water quality problems. These recommendations, however, do not necessarily mean that they should be implemented immediately. Instead, they should be implemented on a step-by-step basis corresponding to the development of substitute water sources which adequately make up for any deficit in the supply capacity in areas currently supplied from those sources.

V-2. Coordination with Other Donors

Our Study indicated that (a) increasing in efficiency of the water transmission and distribution system and (b) reducing leakage and wastage are the two major goals that are critical to the sustainability of the water service in Managua. Thus, the long-term improvement plan proposed by this Study has been developed with the objective of achieving these two crucial goals. It is recommended that all on-going and future improvement projects in Managua should, in principle, be implemented in accordance with the development strategies and priorities proposed in the long-term improvement plan. In particular, it is recommended that ENACAL coordinate the on-going projects financed by the Government of Spain and IDB to ensure that the scopes of those projects are consistent with the long-term improvement plan proposed by this Study. Such coordination is particularly important in the following areas. • One of the major components included in the Spanish Government’s “Proyecto de

S - 37 Optimización del Sistema de Abastecimiento, Mejora de los Indices de Macro y Micomedición, Planificación y Mejoramiento Medioambiental” is the micro-sectoring (including the implementation of non-revenue water reduction activities in micro sectors) of a 800 km distribution network in Zona Baja, which is equivalent to two-thirds of the total length of existing distribution pipes in the zone. However, it has not been clear about in which specific area/s of Zona Baja these improvement works will be implemented. It is therefore recommended that ENACAL discuss and agree with the Government of Spain that the proposed improvement works will be implemented in the western two-thirds area of Zona Baja. • The Spanish Government’s project also includes the procurement of 100,000 water meters. Nonetheless, it is still unknown where they will be installed. It is recommended that ENACAL use approximately three-quarters of them to replace existing aged water meters in Managua, which have been in service for more than 10 years. • Approximately US$ 3.6 millions have been earmarked for the reduction of non-revenue water under the IDB’s “Programa de Modernización del Sistema de Agua Potable”. However, how and where these funds will be used is still unknown to date. It is recommended that ENACAL discuss and agree with IDB/Service Contractor that the funds will be used for the micro-sectoring (including the implementation of non-revenue water reduction activities in micro sectors) of a 400 km distribution network in the eastern one-thirds area of Zona Baja. • Micro-sectoring of the existing distribution network in Zona Baja under these on-going projects should be consistent with the macro-sectoring plan of Zona Baja proposed by the long-term improvement plan.

V-3. Methods of Micro-sectoring

The micro-sectoring plan envisaged by the Spanish Government project includes the installation of a bulk meter for each micro sector and the continuous monitoring of the flow at a remote station through a telemetry system. However, there seems to be no point in making such sophisticated and expensive arrangements. Continuous monitoring of the flow is unnecessary for the reduction of non-revenue water. Instead, minimum night flows should be measured manually and as and when necessary with the use of a portable type ultrasonic flow meter. This method has been tested in our Study and proved to be quite effective in reducing non-revenue water. It is recommended that ENACAL propose the revision of the method to the Spanish Government.

V-4. Reduction of Leakage and Wastage

Our leakage surveys demonstrated that the micro-sectoring of the distribution network, measurement of minimum night flows with the use of a portable type ultrasonic flow meter, and the implementation of leak detection and repair works within micro sectors can effectively reduce leakage. In contrast, however, the reduction of wastage may require a rather holistic approach given that it is not a straightforward engineering issue but is the issue involving many complex social and institutional elements. In effect, there seems to be no magic bullet that can drastically reduce wastage within a short timeframe. One of the elements making this issue extremely complicated is the existence of many low-income settlements in Managua. Either directly or indirectly, the following elements constitute the grounds for the massive wastage of water in the city. It is therefore recommended that ENACAL review these elements carefully and recommend revisions to INAA as necessary. • Water tariff structure for domestic use (design concepts, cross-subsidy, fixed charges applied to non-metered customers)

S - 38 • Existence of many non-metered connections • Existence of many illegal users and non-payment customers • Location of water meter and method of its installation • Customers’ responsibility for maintenance of water meters

In reducing wastage, different approaches must be adopted for low-income settlements from the rest of the city. In order to reduce wastage in low-income settlements, we recommend that ENACAL take the following steps. (i) Carrying out continuous water awareness campaigns for economic use of water (ii) Establishing databases of all asentamientos in the city, including the year of establishment, total population and the number of households, socio-economic conditions, status of infrastructure development (water, sanitation, electricity, telephone, solid wastes disposal, schools, roads, etc.), land titles, community based organizations, priority needs of communities, availability of water service, and conditions of existing internal reticulation systems for water and sewerage services. (iii) Classifying asentamientos according to the current availability of water service (iv) Implementing pilot projects using community participatory approaches (v) Evaluating the outcome of the pilot projects (vi) Implementing improvement works using community participatory approaches

It is also recommended that ENACAL have NGOs and Civil Society Groups actively involved in taking these approaches. Their involvement throughout the entire process is essential for the participation of communities. The ultimate objective of the proposed pilot projects is to provide a stimulus to encourage the residents of low-income settlements to relate their water consumption to their water bills. This can only be achieved by installing water meters and charging them based on meter reading. In doing so, however, it is necessary to mitigate any unacceptable impacts that might fall on the extremely poor.

V-5. Population in the Study Area

In this Study, future population and water demand have been projected based on the population estimates produced by INEC in July 2004 as they are the latest and only available “official” estimates in the country at the time of this Study. INEC periodically reviews the 1995 census results and produces its estimates. On-going projects financed by other donors (for example, Lake Managua and City of Managua Environmental Improvement Program) have also adopted one of those INEC’s estimates as a baseline for projecting future population. A census is undertaken by the Nicaraguan Government at intervals of 10 years and the next one is scheduled for 2005. It is recommended that ENACAL review the results of the next census carefully and notify JICA and other donors accordingly if there is any substantial divergence between the census results and the INEC’s existing estimates.

S - 39 THE STUDY ON IMPROVEMENT OF WATER SUPPLY SYSTEM IN MANAGUA IN THE REPUBLIC OF NICARAGUA

DRAFT FINAL REPORT Volume II : Main Report

Table of Contents

PREFACE LETTER OF TRANSMITTAL SUMMARY

1. INTRODUCTION...... 1-1

2. EXISTING WATER SUPPLY SYSTEM...... 2-1 2.1 DESCRIPTION OF EXISTING WATER SUPPLY SYSTEM ...... 2-1 2.1.1 Water Sources and Production Facilities...... 2-1 2.1.2 Transmission and Distribution Facilities...... 2-2 2.1.3 Service Connections...... 2-5 2.2 COORDINATION WITH OTHER DONORS...... 2-5 2.2.1 IDB and Spanish Government Projects...... 2-6 2.2.2 Coordination with the Projects Funded by Other Donors ...... 2-7 2.3 FIELD INSPECTION OF EXISTING WATER SUPPLY FACILITIES ...... 2-10 2.4 FIELD MEASUREMENT OF FLOWS/PRESSURES, LEAKAGE AND WATER QUALITY...... 2-13 2.4.1 Measurement of Flows and Pressures ...... 2-13 2.4.2 Leakage Survey...... 2-19 2.4.3 Water Quality Analysis...... 2-29 2.5 WATER CONSUMPTION AND AWARENESS SURVEYS ...... 2-40 2.5.1 Methodologies Used for the Surveys ...... 2-40 2.5.2 Water Consumption by Domestic Users...... 2-41 2.5.3 Water Consumption by Industrial Users...... 2-42 2.5.4 Water Consumption by Institutional & Commercial Users...... 2-43 2.5.5 Awareness Survey on Domestic Users ...... 2-43 2.5.6 Domestic Users in Low-income Settlements ...... 2-45 2.5.7 General Evaluation of Domestic Users ...... 2-47 2.6 WATER SOURCES...... 2-49 2.6.1 Present Conditions of Water Sources Used by ENACAL...... 2-49 2.6.2 Evaluation of Wells by Type of Water Level Variation ...... 2-51 2.6.3 Evaluation of Sources by Water Quality ...... 2-55 2.6.4 Evaluation on the Sustainability of Lake Asososca...... 2-55 2.6.5 Evaluation on Corrosion of Well Casings and Screens ...... 2-57 2.6.6 Future Capability of Existing Water Sources ...... 2-59 2.7 WASTEWATER MANAGEMENT SYSTEM...... 2-60 2.7.1 Existing Wastewater Management System...... 2-60 2.7.2 Ongoing Improvement Works ...... 2-60 2.8 REGULATORY, INSTITUTIONAL AND ORGANIZATIONAL ASPECTS...... 2-62 2.9 FINANCIAL ASPECTS...... 2-68 2.9.1 Present Conditions of Financial System Structure ...... 2-68 2.9.2 Financial Statements of Managua Water Supply System ...... 2-68 2.9.3 Management Characteristics...... 2-74

- i - 2.9.4 Water Production Costs...... 2-77 2.9.5 Water Tariff System...... 2-77 2.9.6 Financial Constraints for Future Development ...... 2-83

3. IDENTIFICATION OF MAJOR PROBLEMS AND BASIC STRATEGIES FOR IMPROVEMENT ...... 3-1 3.1 OVERVIEW OF CURRENT PROBLEMS AND CONSTRAINTS ...... 3-1 3.1.1 Social and Institutional Problems...... 3-1 3.1.2 Financial Problems and Constraints...... 3-3 3.1.3 Technical Problems ...... 3-9 3.2 BASIC STRATEGIES FOR IMPROVEMENT...... 3-11 3.2.1 The Overall Objective of Long-term Improvement Plan (LIP)...... 3-11 3.2.2 Basic Strategies for Improvement ...... 3-12

4. LONG-TERM IMPROVEMENT PLAN...... 4-1 4.1 ASSESSMENT OF FUTURE WATER BALANCE...... 4-1 4.1.1 Population...... 4-1 4.1.2 Water Demand...... 4-4 4.1.3 Water Balance...... 4-5 4.2 IMPROVEMENT OF WATER TRANSMISSION AND DISTRIBUTION SYSTEMS...... 4-8 4.2.1 Objectives of the Improvement ...... 4-8 4.2.2 Macro Sectoring...... 4-9 4.2.3 Proposed Water Transmission and Distribution Systems ...... 4-12 4.2.4 Summary of the Proposed Improvement Works...... 4-19 4.3 REHABILITATION AND RELOCATION OF EXISTING WELLS...... 4-21 4.3.1 Rehabilitation of Existing Wells...... 4-21 4.3.2 Relocation of Existing Wells...... 4-22 4.4 REDUCTION OF LEAKAGE AND WASTAGE...... 4-25 4.4.1 Major Components of Leakage and Wastage...... 4-25 4.4.2 Proposed Proactive Leakage Control Program...... 4-27 4.4.3 Proposed Wastage Reduction Programs...... 4-29 4.4.4 Asentamientos Improvement Program...... 4-31 4.4.5 Targets for Leakage and Wastage Reduction...... 4-34 4.5 MAINTENANCE OF EXISTING AND PROPOSED FACILITIES ...... 4-36 4.5.1 Maintenance of Wells...... 4-36 4.5.2 Maintenance of Transmission and Distribution Facilities...... 4-36 4.6 STRENGTHENING OF ENACAL’S INSTITUTIONAL CAPACITY ...... 4-38 4.7 STRENGTHENING OF ENACAL’S FINANCIAL CAPACITY ...... 4-42 4.7.1 Management of Managua Water Supply by ENACAL ...... 4-42 4.7.2 Financial Planning for Long-term Improvement Plan...... 4-42 4.7.3 Strengthening of ENACAL’s Financial Capacity...... 4-47 4.8 DEVELOPMENT OF ENACAL’S HUMAN RESOURCES CAPACITY ...... 4-49 4.9 WORKS INCLUDED IN LONG-TERM IMPROVEMENT PLAN...... 4-51 4.9.1 Rehabilitation and Protection of Existing Water Sources...... 4-51 4.9.2 Reduction of Leakage/Wastage ...... 4-51 4.9.3 Increase in the Efficiency of Water Transmission and Distribution Systems.... 4-52 4.9.4 Establishment of a Basic Financial Framework for the Management of Water Services in Managua...... 4-52 4.10 PRELIMINARY COST ESTIMATES OF LONG-TERM IMPROVEMENT PLAN .. 4-57 4.10.1 Assumptions Used for Cost Estimate...... 4-57 4.10.2 Results of Cost Estimate ...... 4-58

- ii - 4.11 IMPLEMENTATION AND DISBURSEMENT SCHEDULES OF LONG-TERM IMPROVEMENT PLAN...... 4-58 4.12 EVALUATION OF LONG-TERM IMPROVEMENT PLAN...... 4-63 4.12.1 Economic and Financial Evaluation...... 4-63 4.12.2 Social Evaluation...... 4-70 4.12.3 Engineering Evaluation...... 4-74

5. PRIORITY PROJECT ...... 5-1 5.1 SELECTION OF PRIORITY PROJECT...... 5-1 5.2 PRIMARY DESIGN OF PROPOSED FACILITIES...... 5-6 5.2.1 Preliminary Design of Wells ...... 5-6 5.2.2 Increasing Efficiency in Water Transmission and Distribution Systems...... 5-8 5.3 PRELIMINARY COST ESTIMATES OF PRIORITY PROJECT ...... 5-21 5.4 IMPLEMENTATION AND DISBURSEMENT SCHEDULES OF PRIORITY PROJECT...... 5-21 5.5 EVALUATION OF PRIORITY PROJECT...... 5-26 5.5.1 Economic and Financial Evaluation of Priority Project...... 5-26 5.5.2 Social Evaluation...... 5-32 5.5.3 Engineering Evaluation...... 5-33

6. ENVIRONMENTAL AND SOCIAL CONSIDERATIONS ...... 6-1 6.1 EVALUATION PROCESS OF ENVIRONMENTAL AND SOCIAL IMPACTS OF THE PROPOSED PROJECT...... 6-1 6.1.1 Description of the Proposed Long-term Improvement Project ...... 6-1 6.1.2 Description of the Project Site...... 6-2 6.1.3 Initial Matrix for Scoping...... 6-3 6.2 PUBLIC CONSULTATION...... 6-3 6.2.1 Identification of Stakeholders ...... 6-3 6.2.2 Stakeholders Meeting...... 6-3 6.2.3 Measures Proposed by Stakeholders for Mitigating Adverse Impacts ...... 6-5 6.3 EVALUATION OF ENVIRONMENTAL AND SOCIAL IMPACTS OF THE PROPOSED PROJECT...... 6-6 6.3.1 Environmental and Social Impacts Scoping of the Proposed Project ...... 6-6 6.3.2 Scoping of Potential Impacts (Final)...... 6-7 6.3.3 Considerations of Alternatives...... 6-10 6.4 WATER CONSERVATION, REDUCTION OF ILLEGAL CONNECTIONS AND IMPROVEMENT OF COST RECOVERY IN LOW INCOME SETTLEMENTS...... 6-10 6.4.1 Basic Strategies ...... 6-10 6.4.2 Roles of ENACAL ...... 6-11

7. RECOMMENDATIONS ...... 7-1 7.1 REDUCTION OF INTAKE AMOUNT FROM LAKE ASOSOSCA ...... 7-1 7.2 COORDINATION WITH OTHER DONORS...... 7-1 7.3 METHOD OF MICRO-SECTORING...... 7-2 7.4 REDUCTION OF LEAKAGE AND WASTAGE...... 7-2 7.5 POPULATION IN THE STUDY AREA...... 7-3

- iii - List of Tables

Table Title Page

Table 2.1.1 Estimated Productions of Existing Water Sources (m3/d) ...... 2-1 Table 2.1.2 Existing Pipeline Length by Material (Meters) ...... 2-4 Table 2.2.1 Major Projects Undertaken by Other Donors in Managua...... 2-6 Table 2.2.2 Project Components to be Financed by IDB and Spanish Government...... 2-8 Table 2.3.1 Details of Field Visit...... 2-12 Table 2.4.1 Results of Leakage Survey...... 2-21 Table 2.4.2 Conditions of Connections in 10 Micro Sectors...... 2-25 Table 2.4.3 Sampling Locations Selected for Existing Water Sources ...... 2-29 Table 2.4.4 Sampling Locations Selected for Prospective Water Resource...... 2-29 Table 2.4.5 Sampling Locations Selected for Tap Waters...... 2-30 Table 2.4.6 Water Quality Parameters for Analysis ...... 2-33 Table 2.4.7 Results of Water Quality Analyses for Existing Water Sources ...... 2-34 Table 2.4.8 Results of Water Quality Analyses in Prospective Water Sources ...... 2-37 Table 2.4.9 Results of Tap Water Quality...... 2-38 Table 2.4.10 Classification of Existing Wells by Arsenic Concentration...... 2-39 Table 2.5.1 Last 12 Months Consumption Record (m3/month)...... 2-42 Table 2.5.2 Willingness to Pay of Users...... 2-45 Table 2.5.3 Asentamientos Users Monthly Income...... 2-45 Table 2.5.4 Willingness to Pay in Asentamientos ...... 2-46 Table 2.6.1 Type of Water Level Variation...... 2-53 Table 2.6.2 Examination Sites and Measurement Schedule...... 2-57 Table 2.6.3 Future Supply Capability (m3/day)...... 2-59 Table 2.7.1 Ongoing Projects in Managua ...... 2-61 Table 2.9.1 Balance Sheet of Water Supply and Sewerage Services in ENACAL: 2001-2003...... 2-69 Table 2.9.2 Profit and Loss Table of Water Supply and Sewerage Services in ENACAL: 2001-2003...... 2-70 Table 2.9.3 Cash Flow Table of Water Supply and Sewerage Services in ENACAL: 2001-2003...... 2-71 Table 2.9.4 Financial Statement of Water Supply Services in Managua City: 2001-2003...... 2-73 Table 2.9.5 Management Indices of Water Supply Service in Managua City: 2001 to 2003...... 2-76 Table 2.9.6 Unit Price and Production Cost of Water in Managua City: 2001-2003 ...... 2-78 Table 2.9.7 Water Tariff in Managua City: 2004...... 2-79 Table 2.9.8 Water Meter Installation Charge: 2004...... 2-80 Table 2.9.9 National Average Water Rate...... 2-81 Table 3.1.1 Level of Cost Recovery...... 3-4 Table 3.1.2 Level of Cost Recovery and Capability of Water Utility ...... 3-4 Table 3.2.1 Policies and Goals of LIP...... 3-14 Table 4.1.1 Actual Population and Population Growth Rate in Nicaragua...... 4-1 Table 4.1.2 Estimation of Population in the Study Area ...... 4-2 Table 4.1.3 Projection of Population 2004-2015...... 4-3 Table 4.1.4 Record of Domestic and Non-Domestic Water Consumption in 2003...... 4-4 Table 4.1.5 Summary of Water Demand Projection in Study Area...... 4-5 Table 4.2.1 Transmission Amount from Managua I System...... 4-16 Table 4.2.2 Future Water Demand in Ticuantepe and Nindiri...... 4-16 Table 4.2.3 Measures against Well having High Arsenic Concentration ...... 4-19 Table 4.3.1 Rehabilitation Plan for Managua I and Managua II Wells ...... 4-21

- iv - Table 4.3.2 Classification of pumps based on the year of use and urgency of replacement...... 4-22 Table 4.3.3 Number of subject well for renewal ...... 4-22 Table 4.3.4 Production Capacity of 3 Wells to be relocated ...... 4-22 Table 4.3.5 Actual Production Capacity of 4Wells of Villa Austria Macro Sector to be Relocated...... 4-23 Table 4.4.1 Categorization of Asentamientos with Water Related Conditions ...... 4-32 Table 4.4.2 Indicators of Leakage Levels in Managua and Recommended Provisional Criteria for Managua Water Supply ...... 4-35 Table 4.5.1 Contents of the Monitoring Plan ...... 4-36 Table 4.5.2 Maintenance of Facilities ...... 4-37 Table 4.7.1 New Water Tariff Proposed as Tentative Plan ...... 4-43 Table 4.9.1 Rehabilitation and Protection of Existing Water Sources (1/2)...... 4-53 Table 4.9.1 Rehabilitation and Protection of Existing Water Sources (2/2)...... 4-54 Table 4.9.2 Reduction of Leakage/Wastage (1/2) ...... 4-54 Table 4.9.2 Reduction of Leakage/Wastage (2/2) ...... 4-55 Table 4.9.3 Increase in the Efficiency of Water Transmission and Distribution Systems.. 4-56 Table 4.9.4 Establishment of a Basic Financial Framework for the Management of Water Services in Managua...... 4-57 Table 4.10.1 Preliminary Cost Estimates of LIP (US$ 1,000) ...... 4-58 Table 4.11.1 Implementation & Disbursement Schedules of LIP (1/4) ...... 4-59 Table 4.11.1 Implementation & Disbursement Schedules of LIP (2/4) ...... 4-60 Table 4.11.1 Implementation & Disbursement Schedules of LIP (3/4) ...... 4-61 Table 4.11.1 Implementation & Disbursement Schedules of LIP (4/4) ...... 4-62 Table 4.12.1 Economic Benefits of Proposed Project...... 4-65 Table 4.12.2 Economic Project Cost ...... 4-66 Table 4.12.3 Economic Cost and Benefit Stream of Long-term Improvement...... 4-67 Table 4.12.4 Average Water Consumption and Water Charge in 2006 and 2015 ...... 4-68 Table 4.12.5 Financial Project Cost ...... 4-69 Table 4.12.6 Financial Cost and Benefit Stream of Long-term Improvement ...... 4-72 Table 4.12.7 Summary of Engineering Evaluation on the Long-term Improvement Plan... 4-75 Table 5.1.1 Priority Project (1/4)...... 5-2 Table 5.1.1 Priority Project (2/4)...... 5-3 Table 5.1.1 Priority Project (3/4)...... 5-5 Table 5.1.1 Priority Project (4/4)...... 5-6 Table 5.3.1 Preliminary Cost Estimates of PPT (US$ 1,000)...... 5-21 Table 5.4.1 Implementation and Disbursement Schedule of PPT (1/4) ...... 5-22 Table 5.4.1 Implementation and Disbursement Schedule of PPT (2/4) ...... 5-23 Table 5.4.1 Implementation and Disbursement Schedule of PPT (3/4) ...... 5-24 Table 5.4.1 Implementation and Disbursement Schedule of PPT (4/4) ...... 5-25 Table 5.5.1 Economic Benefits of Proposed Project ...... 5-27 Table 5.5.2 Economic Costs of Priority Project ...... 5-27 Table 5.5.3 Economic Cost and Benefit Stream of Priority Project...... 5-29 Table 5.5.4 Average Water Consumption and Water Charge from Ordinary Consumers in 2006 and 2010 ...... 5-28 Table 5.5.5 Financial Costs of Priority Project ...... 5-30 Table 5.5.6 Financial Cost and Benefit Stream of Priority Project ...... 5-31 Table 5.5.7 Engineering Evaluation for O&M and Implementation of Improvement Works ...... 5-34 Table 6.1.1 Description of the Proposed Long-term Improvement Project...... 6-1 Table 6.1.2 Description of the Project Site...... 6-2 Table 6.1.3 Stakeholders meeting participants...... 6-3 Table 6.3.1 Matrix of Scoping (Final)...... 6-7

- v - Table 6.3.2 Checklist for Scoping (Final) ...... 6-8 Table 6.3.3 Summary of Potential Impacts (Final) ...... 6-9 Table 6.3.4 Summary of Alternatives...... 6-10 Table 6.3.5 Comparison of Alternatives...... 6-10

List of Figures

Figure Title Page

Figure 2.1.1 Major Water Supply Facilities in Managua...... 2-3 Figure 2.2.1 Time Schedules of the Projects of IDB and Spanish Government...... 2-9 Figure 2.3.1 Existing Organization Chart...... 2-11 Figure 2.4.1 Location of Flow Measurement ...... 2-15 Figure 2.4.2 Flow Pattern in the Study Area...... 2-16 Figure 2.4.3 Location of Pressure Measurement ...... 2-17 Figure 2.4.4 Poor Water Supply Area...... 2-18 Figure 2.4.5 Flow Measurement Results for Managua I System ...... 2-19 Figure 2.4.6 Leakage Levels in the Ten Micro Sectors Surveyed...... 2-20 Figure 2.4.7 Average Leakage Levels in Different Zones in Managua...... 2-22 Figure 2.4.8 Effectiveness of Leak Detection and Repair Work in the Selected 3 Micro Sectors...... 2-23 Figure 2.4.9 Percentage of Problematic Connections in Each Micro Sector...... 2-24 Figure 2.4.10 Incidences of Illegal Connections Compared with the Average Leakage Ratios in Different Elevation Zones ...... 2-25 Figure 2.4.11 Per Capita Consumption in 10 Micro Sectors ...... 2-26 Figure 2.4.12 Present Water Use in Managua...... 2-28 Figure 2.4.13 Sampling Locations for Existing Water Sources and Tap Water...... 2-31 Figure 2.4.14 Sampling Locations of Prospective Water Sources...... 2-32 Figure 2.5.1 Water Meter Condition...... 2-41 Figure 2.5.2 Water Supply Condition...... 2-42 Figure 2.5.3 Water Uses in Industrial Sector...... 2-43 Figure 2.5.4 Type of Claims to ENACAL Services in All Type of Users ...... 2-44 Figure 2.5.5 Satisfaction on Meter Reading...... 2-44 Figure 2.6.1 Distribution of Existing Wells in Study Area ...... 2-50 Figure 2.6.2 Annual Production (1990 to 2003) ...... 2-51 Figure 2.6.3 Analysis Example of Water Level Variation Caused by Rainfall ...... 2-52 Figure 2.6.4 Distribution of Type of Delay Time after Rainfall ...... 2-54 Figure 2.6.5 Water Levels of Asososca Lake and Managua Lake...... 2-56 Figure 2.6.6 Lower Limit of Discharge...... 2-57 Figure 2.6.7 Results of Corrosion Tests ...... 2-59 Figure 2.8.1 Organization of CONAPAS...... 2-63 Figure 2.8.2 IAA Organization...... 2-64 Figure 2.8.3 ENACAL Organization...... 2-66 Figure 2.8.4 National Institutional Structure Water & Sanitation Sector ...... 2-67 Figure 2.9.1 Business Performance of ENACAL, Managua City and Water Supply Services in Managua City: 2003 ...... 2-74 Figure 2.9.2 Transition of Operational Performance of Water Supply Service in Managua City: 2001-2003...... 2-75 Figure 2.9.3 Present Water Charge by Tariff Category...... 2-80 Figure 2.9.4 Trend of Average Water Rate and CPI ...... 2-82 Figure 2.9.5 Water Charges of Medium Class Household by Service Area: 2004...... 2-83

- vi - Figure 3.1.1 Vicious Circle of Water Service Operation...... 3-4 Figure 3.2.1 Basic Strategies Adopted for Development of LIP...... 3-13 Figure 4.1.1 Annual Population Growth Rate ...... 4-3 Figure 4.1.2 Sustainable Yield Capacity vs Water Demand ...... 4-6 Figure 4.1.3 Water Demand without Reduction of Ineffective Water Ratio...... 4-7 Figure 4.2.1 Poor Water Supply Service Area ...... 4-8 Figure 4.2.2 Macro Sectoring in the Study Area...... 4-10 Figure 4.2.3 Schematic Water Supply System for Each Macro Sector in 2015...... 4-11 Figure 4.2.4 Proposed Transmission and Distribution Facilities in Sierra Maestra...... 4-13 Figure 4.2.5 Proposed Transmission and Distribution Facilities in Esquipulas and Las Jaguitas ...... 4-15 Figure 4.2.6 Water Supply System in Ticuantepe and Nindiri ...... 4-17 Figure 4.2.7 Transmission System to San Cristobal Tank ...... 4-18 Figure 4.2.8 Summary of Proposed Transmission and Distribution System ...... 4-20 Figure 4.3.1 Relocation of 3 Wells in Zona Baja...... 4-23 Figure 4.3.2 Relocation of 4 wells in Villa Austria Macro Sector...... 4-24 Figure 4.4.1 Physical and Commercial Water Losses ...... 4-26 Figure 4.4.2 Leakage Levels of Ten Micro Sectors Expressed in Terms of Liters per Connections per Hour ...... 4-28 Figure 4.4.3 Typical Work Schedule of Leakage Survey ...... 4-29 Figure 4.6.1 Leakage, Illegal Connections, Billing & Asentamiento Sections ...... 4-40 Figure 4.7.1 Profit and Loss of Water Supply Services: 2005 – 2015...... 4-45 Figure 4.7.2 Profit and Loss of Water Supply Services (Case 2): 2005 – 2015...... 4-46 Figure 5.2.1 Preliminary Design of Wells...... 5-7 Figure 5.2.2 Macro Sectoring in the Study Area...... 5-8 Figure 5.2.3 Standard Drawing for Isolation Valves ...... 5-9 Figure 5.2.4 Separation of San Judas Area into Two Macro Sectors ...... 5-10 Figure 5.2.5 Proposed Transmission and Distribution Facilities in Sierra Maestra ...... 5-11 Figure 5.2.6 Standard Drawing for Typical Trench Details ...... 5-12 Figure 5.2.7 Preliminary Design for Sierra Maestra Tank ...... 5-13 Figure 5.2.8 Proposed Transmission and Distribution System in Esquipulas and Las Jaguitas ...... 5-14 Figure 5.2.9 Proposed Transmission and Distribution Facilities in Esquipulas ...... 5-15 Figure 5.2.10 Preliminary Design of Esquipulas Tank ...... 5-16 Figure 5.2.11 Proposed Distribution Facilities in Las Jaguitas ...... 5-17 Figure 5.2.12 Preliminary Design of Las Jaguitas Tank...... 5-18 Figure 5.2.13 Water Supply System in Ticuantepe and Nindiri ...... 5-19 Figure 5.2.14 Proposed Transmission and Distribution Facilities for Nindiri Area ...... 5-20

Abbreviations & Acronyms

ACDI Canadian Agency for Institutional Development AIPU Asentamiento Improvement Program Unit ALMA Managua Municipality AMAT Water Supply Company of Matagalpa AMUNIC Association of Municipalities of Nicaragua ANC Non-revenue Water ANISA Nicaraguan Association of Sanitary and Environmental Engineering, Nicaragua Chapter of AIDIS AN National Assembly ASDI Swedish Agency for Cooperation

- vii - ATP Affordability to Pay BCIE Central American Bank for Economic Integration BID Inter-American Development Bank BIRF, B.M International Bank for Reconstruction and Development, World Bank BCN Central bank of Nicaragua BOD Biochemical Oxygen Demand B/C Benefit-Cost Ratio C$ Córdoba (Currency of Nicaragua) CABEI Central American Bank for Economic Integration CAPS Committees for Potable Water and Drainage CAPRE Regional Coordinating Committee of Institutions for potable water and drainage of Central America, Panama and Dominican Republic CEPIS Pan-American Center for Sanitary and Environmental Engineering for OPS CI Cast Iron CIDA Canadian International Development Association CIRA Center for Investigations of Aquatic Resources CMBU Customer Metering and Billing Unit CNRH National Commission of Hydraulic Resources COD Chemical Oxygen Demand CONAPAS National Commission of Potable Water and Sanitary Sewer System COSUDE Switzerland Development Cooperation C/S Construction Supervision D/D Detailed Design DI Ductile Iron DO Dissolved Oxygen DULEX Dukedom of Luxemburg - Development E & M Electrical & Mechanical EBIT Earning Before Interest and Taxes EBITDA Earning Before Interest, Taxes, Depreciation and Amortization EIA Environmental Impact Assessment EIRR Economic Internal Rate of Return ENACAL Nicaraguan Company of Aqueducts and Sewer Systems ENTRESA Nicaraguan Company of Electrical Transmission SA EMAJIN Water Supply Company of Jinotega ENEL Nicaraguan Company of Electricity EPA, USEPA Environmental Protection Agency, USA EU European Union EUR Euro (Currency of European Union) FAD Spanish Fund for Development Support FIRR Financial Internal Rate of Return FISE Social Investment fund for Emergency FMI (IMF) International Monetary Fund FY Financial (or Fiscal) Year GDP Gross Domestic Product GI Galvanized Iron GIS Geographical Information System gpm U.S.A.Gallon per Minute (equal to 3.785 liters per minute) GPS Global Positioning System GRN Government of Republic of Nicaragua GTZ Gesellschaft fur Technische Zusammenarbeit (German Assistance Agency) HDPE High Density Polyethylene HRD Human Resources Development HWL High (or Head) Water Level

- viii - IAA Intendencia of Aqueducts and Sewer System IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding ICCU Illegal Connection Control Unit IDA International Development Association IDB Inter-American Development Bank IDC Interest During Construction IDR Institute of Rural Development IEE Initial Environmental Examination in Inch INAA Nicaraguan Institute of Aqueducts and Sewer Systems INATEC National Technological Institute INIFOM Nicaraguan Institute of Municipal Development INE Nicaraguan Institute of Energy INEC Nicaraguan Institute of Statistics and Census INETER Nicaraguan Institute of Territorial Studies INTUR Nicaraguan Institute of Tourism IVA Value Added Tax JBIC Japan Bank for International Cooperation JICA Japan International Cooperation Agency JPY Currency of Japan (Yen) KfW Kreditasnstalt Fur Wiederaufbau (Credit Institute for Reconstruction) kV Kilovolt LAQUISA LABORATORIOS QUIMICOS, S.A. LAU Leakage Abatement Unit LCB Local Competitive Bidding LIDECONIC League for the Defense of Consumer of Nicaragua LIP Long-term Improvement Plan (proposed in this study) lpcd Liters per Capita per Day LRMC Long Run Marginal Cost MAGFOR Ministry of Agricultural and Forestry MARENA Ministry of the Environment and natural resources MCM Million Cubic Meters MHCP Ministry of Finance and Public Credit MIFIC Ministry of Development, Industry and Trade MINREX Ministry of Foreign Affairs MINSA Ministry of Health mg/l Milligram per Liter MLD Million Liters per Day MMC Millions of cubic meters MNF Minimum Night Flow MPa Mega Pascals MTI Ministry of Transport and Infrastructure MW Megawatt NDF (FDN) Nordic Development Fund NGO Non-Government Organization MPN Most Probable Number NPV Net Present Value NRW Non-revenue Water NTON Nicaraguan Obligatory Technical Standards WHO World Health Organization ODA Official Development Assistance OECD Organization for Economic Cooperation and Development

- ix - OPEC Organization of Petroleum Exporting Countries OPS Pan-American Health Organization O & M Operation and Maintenance PAHO Pan-American Health Organization PE Polyethylene PED Managerial Plan for Development PFI Plan for Institutional Strengthening PIU Project Implementation Unit PND National Development Plan PNUD United Nations Development Program PPT Priority Project (proposed in this study) ppm Parts per Million ppb Parts per Billion psi Pound per Square Inch p.a. Per Annum PSP Private Sector Participation PRSP Poverty Reduction Strategy Paper PVC Polyvinyl Chloride RAAN Autonomous Region North Atlantic RAAS Autonomous Region South Atlantic RASNIC Networks for potable water and drainage in Nicaragua SCADA Supervisory Control and Data Acquisition SCF Standard Conversion Factor SER Shadow Exchange Rate SECEP Secretariat for Coordination and Strategy of the Presidency SGPRS Strengthened Growth and Poverty Reduction Strategy SIAF Financial Management Information System SIDA Swedish International Development Cooperation Agency SINAPRED National System for the prevention, mitigation and attention to disasters SISEP Superintendence of Public Services STP Sewage Treatment Plant SWISS – AID Agency of Switzerland for Cooperation for Development TELCOR Nicaraguan Institute of Telecommunication and Post TOR Terms of Reference TWL Top Water Level UE European Union UFW Unaccounted-for Water U.K. United Kingdom UNAN Autonomous National University of Nicaragua UNDP United Nations Development Program UNICEF United Nations Children’s Fund U.S.A United States of America USAID United States Aid Agency US$ United States Dollars WHO World Health Organization WS&S Water Supply and Sanitation WTP Willingness to Pay Xolotlan Name for the Lake known as Lake Managua

- x -

CHAPTER 1

INTRODUCTION

CHAPTER 1

INTRODUCTION

1 - 1 preparing study reports.

1 - 2

CHAPTER 2

EXISTING WATER SUPPLY SYSTEM

CHAPTER 2

EXISTING WATER SUPPLY SYSTEM

2.1 DESCRIPTION OF EXISTING WATER SUPPLY SYSTEM

Almost all the population in Managua, approximately one million people, are presently enjoying water supply operated by ENACAL. Regardless through authorized or unauthorized connections most of the people are consuming water produced by ENACAL since there are vary few alternative reliable water sources available in Managua. ENACAL is, however, suffering from difficulties in fulfilling such high water needs due to various constraints.

From the technical view points the following are likely to be major constraints ENACAL is confronted with: • Decreasing production capacities of the existing water sources, • Tendency of water quality deterioration in some wells and Asososca Lake, • Growing water demand at the high elevation areas and recently developing area extending to the south along Careterra Masaya, Ticuantepe and Nindiri • Difficulty of supplying water in some high elevation areas, • Energy-inefficiency and operational difficulties due to rather complicated configuration of the water transmission and distribution, • Increasing water loss due to leakage and wastage by water users and uncontrolled consumption through unauthorized connections, • Various water related problems taking place in a number of asentamientos such as high level of wastage, unauthorized connections, poor water supply and sanitation.

2.1.1 Water Sources and Production Facilities

Managua Water Supply is totally dependent on groundwater for its production sources. Major sources are Managua I Well Field, Managua II Well Field, Las Mercedes Well Field, and Lake Asososca. Lake Asososca is a caldera lake and has almost no catchment area of surface water and its water is derived from groundwater. The total production estimated by Gerencia de Operaciones is approximately 380,000 m3/day. The estimated daily production of each major source is tabulated in Table 2.1.1. These major sources contribute 56% to the total production. The number of wells in service is 114, and three wells are under construction. The locations of major water sources are illustrated in Figure 2.1.1. In addition, there are 4 wells in Ticuantepe and Nindiri with a total production capacity of approximately 6,600 m3/day.

Table 2.1.1 Estimated Productions of Existing Water Sources (m3/d) Name of Source Production (m3/d) Description Managua I 53,603 15 wells Managua II 45,667 16 wells Las Mercedes 56,050 13 wells Asososca Lake 56,516 Other wells 167,553 70 wells Total 379,389 114 wells + Asososca Note: The production data is average for the period of 2001 to 2004 except for Asososca Lake (2001 – 2003).

Since many flow meters at production wells and pumping stations are out of order ENCAL has abandoned to read the flow meters and estimates the flow from the pump operation hours.

Waters from these water sources are disinfected by chlorination and pumped to the consumers

2 - 1 directly or through the pumping stations. The treatment currently adopted in the Managua system is disinfection by the use of gaseous chlorine as well as hypochlorite solution.

2.1.2 Transmission and Distribution Facilities

The elevation of the service area ranges approximately from +45 m to over +300 m, and the service area is divided into three zones, namely, Zona Baja (below +85m), Zona Alata (+85m to +135m), Zona Alta Superior (over + 135m) as shown in Figrure 2.1.1.

Waters abstracted by pumping from Lake Asososca and the wells are transmitted and distributed through the distribution networks. The total length of the transmission and distribution pipelines is approximately 1,670 km. The configuration of the major transmission and distribution pipelines and the service reservoirs are also shown in Figure 2.1.1.

There are twenty five (25) major pumping stations and eighty (80) service reservoirs of which total capacity is 57,521 m3 that is equivalent to approximately 4 hour capacity for average daily water demand. The system is so operated to respond to demand variation by pump operation schedule.

2 - 2 Figure 2.1.1 Major Water Supply Facilities in Managua

2 - 3 ENACAL records water flows, water levels of reservoirs and operation hours of well pumps and transmission/distribution pumps properly and keeps all data at Statistic Section, Depto. Eeplotation, GCIA. de Operationes. Most of the flow data are, however, not measured directly by the flow meters but calculated from the pump operation hours even where flow meters are available.

District meters (Macro meters) in the distribution network were installed during the 1990’s. Most of them are, however, abandoned

The total length of pipelines in the Managua city of more than 20 mm in diameter is estimated at about 1,670 km, as shown in Table 2.1.2. Pipelines more than 300 mm in diameter are mainly ductile and cast iron pipe and those less than 300 mm in diameter are mainly PVC and asbestos cement pipes.

Table 2.1.2 Existing Pipeline Length by Material (Meters) Diameter Asbestos Galvanized PVC Ductile Iron Cast Iron TOTAL (in.) (mm) Cement Steel 3/4" 20 340 0 0 0 1,282 1,622 1" 25 11,504 0 0 0 197 11,701 2" 50 352,984 124 0 3,966 20,066 377,140 3" 75 68,281 53,332 0 7,699 0 129,312 4" 100 167,734 374,347 0 17,603 247 559,931 6" 150 53,587 179,914 84 14,347 0 247,932 8" 200 20,354 30,808 0 16,470 0 67,632 10" 250 0 1,500 4,645 1,776 0 7,921 12" 300 0 114,248 3,610 7,163 0 125,021 14" 350 0 0 7,350 0 0 7,350 16" 400 0 1,553 6,272 43,984 0 51,809 18" 450 0 0 812 0 0 812 20" 500 0 0 9,003 6,339 0 15,342 24" 600 0 0 1,751 22,173 0 23,924 28" 700 0 0 13,229 1,500 0 14,729 30" 750 0 0 120 2,835 0 2,955 32" 800 0 0 19,269 2,032 0 21,301 36" 900 0 0 0 3,634 0 3,634 40" 1000 0 0 512 1,098 0 1,610 Total 674,784 755,826 66,657 152,619 1,671,678 source: Dpto. Agua Potable, ENACAL

As for the asbestos cement pipes (ACP), ACP contributes approximately 40% to the total length of pipeline, and more than 85 % of ACP were installed before 1980. As far as leakage repair records are concerned the leakage from the pipes from 3” to 12” in this range of diameters most ACP pipes belong to is, however, not significant in number. This is also attributed from the fact that most of ACP pipes were generally observed in good shape with proper soil coverage during field survey.

The program for valve rehabilitation and fire hydrant replacement was commenced in 1996, and 1,445 valves and 800 fire hydrants were replaced in 1996-1997. In addition, SCADA (Supervisory Control and Data Acquisition) system for the distribution network was introduced in 1998. This SCADA system is now out of order due to lightning accident, but it had covered 16 wells, 16 booster stations and 36 service reservoirs. The control center of this system was located at the ENACAL’s old building at Careterra Norte. ENACAL is now planning to repair and relocate the system to the main building.

2 - 4 2.1.3 Service Connections

There are approximately 170,000 connections as of the year 2004. Among which, metered connections are approximately 114,000 in number. The rest of the connections are connected to the users in asentamientos without water meters.

Water meters are installed at road side outside the customers’ premises protected with concrete cases and cast iron covers. Majority of the service pipes is of PVC.

In 1996-1997, 25,000 customer meters were replaced in the zones, 5, 6, 7 and 9. Recently ENACAL purchased 27,000 new water meters through the IDB fund but most of them will be used for the water supply schemes outside YEAR New Connec. Managua. There are various types of water meters being used. 1998 1,085 Although 25,000 water meters had been replaced, the rest of old 1999 1,613 water meters are considered still in service. The average number of 2000 1,314 water meters installed for new connections in the past 6 years from 2001 1,097 1996 to 2003 is about 1,296 connections per year. Supposing that 2002 1,122 1,300 water meters have been installed every year for the past 10 2003 1,545 years, it is assumed that 13,000 water meters have been installed in Average 1,296 Source: Gerencia de Operaciones the past 10 years. It can be presumed that 38,000 water meters have been newly installed or replaced within 10 years, and the rest of 72,000 water meters (65% of the total) are of age of more than 10 years since their installation.

Water pressure in lower elevation zones tends to be high and sometimes excessive causing the increase of wastage specially during nighttime. In order to measure leakage and wastage ENACAL defined 265 micro sectors. Micro sectors were defined to be isolated districts where the total water inflows into the sectors can be measured by master meters (macro meters) installed at the inlet points. Approximately 50 micro meters were also installed at asentamientos in1998. Most of these meters are, however, not used unfortunately due to malfunctioning, and the program of macro meter reading has been withdrawn since the year 2002.

2.2 COORDINATION WITH OTHER DONORS

IDB, Spanish Government, KfW and EU are major donors presently operating the projects related to ENACAL in Managua. Table 2.2.1 summarizes the major projects presently undertaken by these donors.

Among these projects, the projects closely interrelated to the present Study are considered to be IDB’s Program to Modernize Management of Water and Sewerage Services and the Project by Spanish Government for Optimization of Water Supply System, Improvement of Macro and Micro Flow Measurements, Planning and Environment. The details of these projects and time schedules were discussed with the officials of these donor agencies as well as ENACAL officials concerned, and are described below.

2 - 5 Table 2.2.1 Major Projects Undertaken by Other Donors in Managua PROJECT NAME DONOR PRESENT STATUS MAJOR COMPONENTS Program to Modernize the IDB, OPEC Bidding for 1. Business Strengthening for ENACAL Management of Water and Sewerage Consultant 2. Water Supply and Sewerage Services Selection Connections in Asentamientos of Managua Project for Optimization of Water Spain Preparation of 1. Improvement of Distribution Network Supply System, Improvement of Bidding for in Zona Baja of Managua Macro and Micro Flow Consultant 2. Procurement of Water Meters and Measurements, Planning and Selection Computer System for Improving the Environment Customer and Facilities Management Lake Managua and City of Managua IDB, KfW, Under Construction 1. Construction of Waste Water Environmental Improvement NDF for Phase 1, Treatment Plant Program Bidding for Phase 2 Construction of Sewer Mains, Pumping Stations and Interceptors

Integrated Project for Managua EU Under Improvement of Water Supply in Periphery (Proyecto Integrado implementation Sandino City Managua Periferia (One of the Components of PRAAC))

2.2.1 IDB and Spanish Government Projects

Main objectives of these two projects are similar, as they are related to enhancing the capacities of operation and management of ENACAL. Major scopes of these projects are summarized in Table 2.2.2. One of the common issues addressed in the two projects is to reduce technical and commercial loss of water. Major approaches of the two projects are, however, different.

The approach of IDB’s Program covers more broad area, and the project is composed of two subprograms. One is to enhance the capacity of the commercial management covering the entire ENACAL’s business areas, and the other is to augment the number of house connections for water supply as well as sewerage in the settlements (asentamientos) in Managua.

The former subprogram includes the improvement of the commercial management dependent upon the input of the service contract with a consulting firm based on the performance basis. The fee for the consultant employed in this contract will be determined based on the level of achievement. This subprogram also includes the introduction of computerized information system for modernizing commercial management and administration, and design and implementation of abatement program of Non Revenue Water (NRW). The consultant employed should develop the detailed plan of these programs together with the investment plans so that ENACAL implement the programs to achieve a certain level of improvement under the advice of the consultant.

The latter subprogram is to expedite new sewerage connections at ten (10) asentamientos in Managua. Connecting the houses in asentamientos to the sewer system is major concern as the new wastewater treatment plant and sewer interceptors are presently under construction by the co-financing of IDB, KfW and NDF to improve Lake Managua environment as described in Section 2.2.2. It is the key issue to control the project benefit of the sewerage project to increase the number of sewerage connections.

In order to facilitate the new connections micro credit financing is planned so that the households in asentamientos could purchase necessary materials for sewerage connections and toilet facilities. Regarding water supply connections, as most of the households have already authorized or unauthorized connections new connection work is less significance. There are,

2 - 6 however, many substandard connections and/or unauthorized users these are to be replaced/rehabilitated and registered as EANCAL customers in this subprogram. Domestic water meters are, however, not to be installed in asentamientos in this program as ENACAL has presently no plan to install individual water meters in asentamientos. Only public education and promotion campaign for customer registration and water conservation will be carried out.

The Project of Spanish Government is mainly the study on the technical improvement of the water distribution control system of Managua including field works. Total of 800 km of distribution pipeline is selected as the pilot project areas in Zona Baja in Managua. District metering (establishment of Micro Sectors) is conducted there together with analysis of leakage and other water losses. The computerized facilities and customer management using GIS is also introduced during the project.

2.2.2 Coordination with the Projects funded by Other donors

General Manager’s Office and the Department of Planning are the key units for operating these two projects. The Team had several discussions with these departments as well as the donor agencies, and the latest schedules for these two projects were confirmed. Figure 2.2.1 shows the time schedules of the above two projects compared with that of the present JICA Study. It is noted, however, since the schedules in Figure 2.2.1 was drawn as the most optimistic case there is a possibility these schedules might be further delayed.

Regarding IDB Project, it is now under the tender evaluation process and the commencement of the consulting services for the Project is expected more or less after the issuance of Draft Final Report of this JICA Study even when all the necessary processes left for the contract awarding are finalized at the most earliest timing.

Of the Spanish Government Project, the timing of the commencement of the consulting services is far later than the issuance of the Final Report of the JICA Study. Accordingly, it is expected that the present JICA Study outputs can be effectively utilized in the succeeding these projects. The coordination with these projects would be expected in the following processes: • These projects are to start with the review and study on the present situation of various aspects of the ENACAL’s activities, and the consultants to be employed will need the consultation of ENACAL’s key officials to formulate the detailed strategies for the improvement work. This is because the consultants’ terms of references in the bidding documents for these projects describe the only outlines of the consulting services and called for more consultations of ENACAL to determine the details. In this context, ENACAL can direct the consultants employed to develop the detailed strategies based on the results of the JICA Study as it will be available when they start the projects. • The JICA Study results will contain many findings and actual measurement results though the field works. Distribution flow/pressure data, leakage data and other water loss parameters can be utilized effectively in these future projects. ENACAL should provide such information for the consultants employed as the information related to these projects will be integrated in the JICA Study Reports, so that their detailed strategies be proposed in line with the framework of the proposed improvement works of the JICA Study.

2 - 7

Financed by IDB and Spanish Government Financed by Table 2.2.2 2.2.2 Table to be Components Project

2 - 8 Cont' Cont' Consultants' Work Consultants' WorkConsultants' 2/21

45days 12/10 Three bids were submitted. Consultants' Work delayed 10/27 45days delayed 2004 2005 2006 8/2 7/2 7/1 789101112123456789101112123 Projects of IDB and Spanish Government of IDB Projects Tender Announce Tender T/D of Distribution Starting Preparation of Tenders Open Tender Evaluation Tender Tenders Technical of list the for Objection No Tenders Financilal of Negotiation and Opening Contract of Award Work Consulting Govmt. Spanish from Documents Tender on Objection No T/D of Distribution Starting Preparation of Tenders Open Tender Contract of Award Arrangement Loan Work Consulting Work Consulting in Nicaragua Study Field of Start Interim Report Report Final Draft Final Report Figure 2.2.1 2.2.1 Figure Schedules of the Time IDB Spanish Government STUDY JICA

2 - 9 2.3 FIELD INSPECTION OF EXISTING WATER SUPPLY FACILITIES

A field visit took place to the control centre of the Operation and Distribution Section, Asososca intake works, Managua I Well Field, and two typical pumping stations (the only method of treatment is chlorination which takes place at the source works). The control centre is known as P3 and is located at the Asososca intake works. The operation of the whole of the Managua water supply system is controlled from this centre on a 24 hour basis with two controllers equipped with computers and radio communications and three mobile staff with radios.

(1) Operation

Control of operation of the source works, pumping stations, reservoirs and the transmission and distribution system is managed on a routine basis from the P3 centre which also responds to any problems that may occur such as imbalance in the distribution system, power failures etc. Instructions are issued via the radio system to those locations equipped with radio and to the three mobile units for the less important pumping stations. Generally the pumping stations are operated using two 12 hour shifts per day.

(2) Maintenance

Maintenance of pumping plant and associated equipment, in all cases is carried out by the Electrical & Mechanical Department (located near the airport). Due to the situation ENACAL finds itself in, financial restrictions only make it possible to respond to requests for corrective maintenance. Due to the general condition of the plant, so much time is taken up with corrective maintenance that a preventative maintenance program is currently not viable. For example at both of the pumping stations visited, the E & M department was working on water tanks and switchboards. The E & M department is able to respond within the hour to attend to emergencies and usually the next day for less urgent problems.

Maintenance of the buildings, painting of water tanks and the like at the pumping stations etc. is done by the Tanks and Small buildings section. Again, maintenance is restricted to essential works due to financial constraints for basic equipment. Not withstanding this, the facilities at the locations visited were generally in a reasonable state of repair.

(3) Personnel and Training

All personnel are employees of ENACAL except for the security guards who are contracted from a private company. Not all locations have these security personnel.

Generally, operators are trained within ENACAL. Training is given on operation of the plant and equipment, including specific on the job training. ENACAL also operates short courses through the Human Resources section and most operators appear to have received training in Human Relations, and Plant Safety. Some specialist training has been given from outside sources, for example on computers and telemetry (N.B. the SCADA system is not operational)

Details of the field visit are given in Table 2.3.1 and the organization chart is shown in Figure 2.3.1.

2 - 10

General Manager Operations in the Operations 5 Regions

Works Potable Sewerage Electrical Meter Department Water Department Mechanical Workshop Department Department

Operations & Hydrogeology Scania 96 Distribution Control of Statistical Telemetry Vactor 92 Section Sources Operations (SCADA) Rotor Sound Section Section Section

Maintenance Maintenance Maintenance Customer of of of Tanks & Complaints Distribution Civil Works Small (127) Section Section Buildings Section

Figure 2.3.1 Existing Organization Chart

2 - 11 Table 2.3.1 Details of Field Visit Location & Plant Operating Conditions Training (P3) Operation & Operates 3 No. 8hr shifts/day All experienced personnel with Distribution Section 2 No. Supervisors per shift (Total 6 people) 15-36 years service. For all locations Control Center Located at Plant Maintenance is by E & M dept. All Trained on computers, and Asososca, equipped with corrective, no time for preventative SCADA (telemetry system) under computers and radio maintenance. Swedish Aid communication system for the Coordination of the Maintenance of buildings and grounds by the Trained by ENACAL on Human intake, chlorination units, Tanks and Small Buildings Dept. (Due to lack Relations and Safety of Plant wellfields, pump stations, of funds for basic equipment, is not able to water tanks etc. provide an efficient service) Asososca Intake Operates 2 No. 12hr shifts/day 1. Intake Pumping Station 1 No. operator per shift On the Job training for pump 1 No. diver (with Launch) operation. 3 No. pump sets (2 or 3 used daily) 2.Distribution Pumping Trained by ENACAL on Human Station & Chlorination Operates 2 No. 12hr shifts/day Relations and Safety of Plant Unit 1 No. operator per shift 4 No. pump sets (2+2 standby) 3 No. pump sets (1+ 2 small for standby) 1 No. chlorination Unit (1+1 chlorinators) Carretera Sur Shifts – Not known (operator absent) Km 8 Pumping Sation 1 No. unskilled operator (2 in the past) Attendants are not trained to (pumps stopped earlier due 3 No. pump sets (standby not known) operate pumpsets. to power failure, and won’t 1 No. Security guard (absent) Operation is by mobile units under restart until P3 mobile unit Office is not used the direction of the P3 control arrives) No radio communications. centre Carretera Masaya Operates 1 No.(24hr ) shifts/day Km 8 Pumping Station 1 No. operator (Total 3) Experience 4 years with 3 No. pump sets (2+1 standby) ENACAL. (No security employed) Trained by ENACAL on Operators control pumps, valves, levels, Operation of plant pressure, and flow meters. P3 give instructions on manipulation of valves Trained by ENACAL on Human to vary supply conditions. Relations and Safety of Plant Radio communication available Managua I Well field Operates 2 No. 12hr shifts/day 2 No. Operators per shift (3 total) Experience 14-15 years with 1 No. Ground Maintenance (T & C Dept) ENACAL (at this location for 3-6 1 No. Office cleaner years). 3 No. Security Guards (private company) 1 Well fields 15 No. Well pumps (2 well pumps removed to Trained by ENACAL on other locations). No standby. Operator visit Operation of plant wells every 2 hrs. Trained by ENACAL on Human 2 Transmission 5 No. pumps to San Domingo (no standby). Relations and Safety of Plant Pumping Station All pumps operate for 24hrs/day Radio communications available

2 - 12 2.4 FIELD MEASUREMENT OF FLOWS/PRESSURES, LEAKAGE AND WATER QUALITY

2.4.1 Measurement of Flows and Pressures

(1) Objectives of Measurement

The existing records on the volume of water produced from each existing source as well as the volume of water transmitted and distributed from each service reservoir were reviewed. Further, in collaboration with ENACAL, the measurement of flows and pressures at various strategic points within the existing transmission and distribution systems has been carried out. This was done to have a better understanding on the geographic distribution of water and disparity in supply conditions between various parts of the service area as well as on the volume of water actually received by each tank included in the Managua I and Managua II Systems. The locations for flows and pressures measurement were selected based on the proposal from the Study Team and the opinion of ENACAL through several meetings with ENACAL. The ENACAL cooperated with the Study Team in doing the measurement. Mainly the measurement works were carried out by staff organized from the ENACAL.

Before the commencement of actual measurement with ENACAL, the demonstrations of instruments which were used for the measurement of flows and pressures and also for the leakage surveys were conducted for ENACAL staff on 9th and 10th of September 2004. The demonstrations were executed for the explanation of instruments and the training for the usage of instruments as the one of technology transfer by this Study. Also during the measurement, the technology transfer of the manipulation of the instruments to the counterpart has been done partly.

The objectives of the flow and pressure measurement are outlined as follows: • to understand the geographic distribution of water and the disparity in supply conditions between various parts of the service area • to have opportunities to execute technology transfer for the explanation of instruments and the training for the usage of instruments for the measurement

It is noted that the results of flow and pressure measurement at the selected locations are only for reference in order to understand present flow pattern in the Study Area and water supply condition, and do not represent present water supply system.

(2) Flow Measurement

To achieve the objectives mentioned above, flow rates were measured at 20 locations shown in Figure 2.4.1. Before the measurement each measurement location site was surveyed together with ENACAL in order to check the site conditions and decide the exact flow measurement points. Excavation works including backfill and restoration, if necessary, were done by ENACAL.

The results of the measurement are detailed in Supporting Report No.5. Based on the flow measurement, in summary, the following issues have been identified principally.

a. It could be confirmed that most existing flow meters were almost accurate. b. At Asososca flow rate to Zona Baja by gravity changes depending on the number of pump operation for Zona Alta. c. Enough water planned by Managua I Project is not supplied to San Judas, Schick and

2 - 13 Altamira Tanks. d. At Altamira water more than half of transmitting water from Santo Domingo Tank by gravity is pumping up to upper area in the direction of Santo Domingo Tank. e. Transmission facilities of Managua I and II have not been used enough for their capacities and well production amounts of Managua I and II were not reached to the planned capacities. f. Flow rates from wells of Zona Baja were fluctuated according to the water pressure, because water pumped up from well is directly flowed into distribution pipeline.

In conclusion of the flow measurement survey in the Study Area, the results are summarized in Figure 2.4.2.

(3) Pressure Measurement

Pressures were also measured at various locations spreading across the existing service area. For this purpose, each elevation zone in Managua was divided into three districts, namely Western District (Oeste), Central District (Centro) and Eastern District (Este), and at least three locations were selected in each district. The locations of measurement were determined after reviewing pipe network drawings and in consultation with ENACAL as shown in Figure 2.4.3, and finally total 38 locations consisting of 33 locations in Managua and 5 locations outside Managua were selected.

The results of the measurement are detailed in Supporting Report No.5. Based on the pressure measurement, in summary, most area in the Study Area has no serious problem in water supply condition. However the following three areas as shown in Figure 2.4.4 are facing the problem of poor service, such as lack of enough water continuously for 24 hours with enough pressure.

a. Area supplied from San Judas Tank (Area “a” in Figure 2.4.4) The reason the water supply condition of this area is bad is that enough water does not come to San Judas Tank from Santo Domingo Tank by Managua I System b. Area supplied from Schick Tank (Area “b” in Figure 2.4.4) This area is facing the same problem as area supplied from San Judas Tank. Problem is that there is not enough water for proper water supply from Schick Tank. c. Area supplied by Sabana Grande Well Field (Area “c” in Figure 2.4.4) This area has no appropriate distribution network, so water can not be distributed to all of this area with enough water pressure. In addition this area is classified into asentamiento and has problems on illegal connection.

2 - 14 12. Managua II Well12. Managua II Field 12 16. Km18.5 16. Km18.5 Carretera Masaya 16 7. Well Field Mercedes Las ７ 15. Km14.5 Carretera Masaya Carretera 15. Km14.5 11 15 13. Las Americas Las 13. 10. Schick 13 10 20 11. Managua 11. Managua I Well Field ９ 20. Rafaela Herrera Well Rafaela Herrera 20. ８ 18 ６５ 9. Santo Domingo Santo 9. Lake Managua 4. Unan 6.Cristbal San 19 ４ 5. Altamira 8. Km8 Carretera Masaya Carretera 8.Km8 19. Olof Palme Well Palme Olof 19. 18. Altos de Domingo 18. Altos Santo 3. San Judas ３ 17. Km16 Carretera Sur １ 17 ２ 14 1. Asososca 2. Km8.5 Carretera Sur Carretera 2. Km8.5 Major Pipeline Major Well Reservoir/Tank Pumping Station for Flow Locations Measurement LEGEND 14. Km9.2 Sur Carretera １

Figure 2.4.1 Location of Flow Measurement

2 - 15

y a d / 3

m y a P /d 2 3 2 m 6 3 , 8 4

,7 Station Pumping 44 Managua II Transmission II Managua P P P P P P y da Las Mercedes Well Field Las Mercedes 3/ m 1

Km14.5 CM Km14.5 9 y 2

, Km18.5 CM a 6 d / 3

5 3 P

7 P , 5 5

Las Americas Las ay

y d

a /

d 3 / 3 m

7 m

3 Santo Domingo

0 ,4

0 6 8

, 5 4 Pumping Station Pumping Schick

Managua I Transmission I Managua

y y

a a

d d

/ /

3 3

m m

0 6

1 3

9 1

8 a

: / :

3 n

i u

8 1

San Cristobal

Km8 CM m

4 ,

6 Altamira 2

Unan

6 4 3 , 8

y a

d /

31,610 m3/day 31,610 m3

y 4

a ,

d 4

San Judas San 2

y 1

P 4 ,

5 1

P y

6 9 , 2

d / 3 m

4 4 9 , 2 Asososca P Km8.5 CS Km9.5 CS LEGEND Major Pipeline Major Well Reservoir/Tank Station Pumping measured Flow Rate by the Study P 8,346 m3/day 8,346

Figure 2.4.2 Flow Pattern in the Study Area

2 - 16 38 595973-1327301 37 590639-1329456 35 589154-1333948 9 588144-1342874 36 20 19 586236-1339375 586423-1329033 34 586277-1340503 8 585536-1332463 18 585258-1343238 33 7 17 32 584521-1339804 583926-1342573 31 584102-1338640 583672-1336876 16 584189-1341065 583446-1337653 583211-1340833 30 29 15 581346-1342658 582050-1335450 581996-1338358 28 581727-1341593 6 5 14 581400-1335450 Lake Managua Lake 581117-1343235 580608-1340460 27 4 13 579403-1339702 579747-1337655 579537-1342553 10 12 577710-1340695 577644-1342745 576649-1339653 576594-1338703 3 11 24 25 1 2 26 23 576357-1337920 576475-1339986 576534-1340986 576429-1342903 575910-1343976 575904-1343214 22 21 573279-1336344 572655-1338055 Major Pipeline Major Well Reservoir/Tank Pumping Station Locations for Measurement Coordinate Zone Boundary LEGEND 30 E - N

Figure 2.4.3 Location of Pressure Measurement

2 - 17 Oeste(West) Centro (Center) Este (East)

Zona Baja

Zona Alta

Zona Alta b c a Superior

LEGEND

Major Pipeline Well Reservoir/Tank Pumping Station Zone Boundary Poor Supply Area

Figure 2.4.4 Poor Water Supply Area

(4) Problems Identified for Transmission and Distribution System

1) Inefficient Transmission and Distribution System

At present for the transmission and distribution system along the Masaya Road, for example, water produced at Managua I Well Field flows to Altamira Reservoir (HWL = 157.15 m) from Santo Domingo Reservoir (HWL = 256.25 m) by gravity. However, water is then supplied to higher areas than Altamira where are located between Altamira and Santo Domingo by pumping. Since in Nicaragua the electricity charge is very high, the energy costs for pump operations are extremely high and it has pressed the management of ENACAL. Such inefficient transmission and distribution system is needed to be improved.

In addition it is identified that some tanks are not filled for 24 hours sometimes even during the night, because the transmission and distribution pipelines are not separated clearly or there may be not enough water for the Managua water supply system.

In order to improve and maintain a stable water supply, the following measures are necessary to consider for the master plan of the Managua Water Supply System. a. separation of small or medium size of distribution zone (macro sector) b. improvement of transmission and distribution system c. distinction of the transmission and distribution pipelines

2) Not Effective Use of Managua I and II Facilities

The following are enumerated as the causes of the poor water supply services above-mentioned.

2 - 18 • Enough water planned by Managua I System is not supplied to San Judas and Schick Tanks properly. • Transmission facilities of Managua I and II have not been used enough for their capacities and well production amounts of Managua I and II were not reached to the planned capacities.

The result of evaluation for Managua I System by comparing the flow measurement by the Study and design capacity is summarized in Figure 2.4.5. As the results, water of 56,400 m3/day was pumped to Santo Domingo Tank from Managua I Transmission Pumping Station. Since the flow meter for transmission line is out of order at present, past data of transmission flow are not available for Managua I System. Average production from wells for past 4 years is estimated at about 53,600 m3/day. Design capacity of the station is, however, 71,000 m3/day. Basic Design in 1995 Flow Measurement in 2004 by JICA Study

Altamira Altamira 6,983 m3/day 4,421 m3/day (10 %) (8 %)

22,898 m3/day 18,955 m3/day San Judas 14,829 m3/day (32 %) San Judas (36 %) (21 %) 7,846 m3/day 8,346 m3/day (11 %) 37,727 m3/day (15 %) Unan 16,074 m3/day (53 %) Unan 26,415 m3/day (23 %) (47 %)

Km8 CM 53,801 m3/day 14,315 m3/day Km8 CM 4,800 m3/day (76 %) (20 %) (9 %)

68,116 m3/day Schick Schick (96 %) 2,801 m3/day 0 m3/day Santo Domingo (4 %) Santo Domingo (0 %)

18.75 MGD 56,437 m3/day 71,000 (70,917) m3/day (100 %) (100 %)

Managua I Transmission P Managua I Transmission P Pumping Station Pumping Station

Transmission Flow Diagram of Managua I System note: Because the measurement date are different, the total flow to tanks is not equal to the flow transmitted from Managua I Figure 2.4.5 Flow Measurement Results for Managua I System

Equally according to the result of flow measurement at Managua II Transmission Pump Station, the transmission flow to Las Americas Tank is 44,783 m3/day on average during 2 days measurement. According to the statistic data of ENACAL, the average transmission flow for past 4 years is calculated at 45,700 m3/day. On the other hand the capacity of transmission pumping station of Managua II is designed at 39 m3/min (56,160 m3/day) by 3 pumps. If Managua I and II System are operated in the full capacity, the water supply system will be considerably improved

2.4.2 Leakage Survey

The Leakage Survey was carried out at ten micro sectors selected from the different elevation zones of the Managua system, namely, four (4) micro sectors from Zona Baja, three (3) from Zona Alta, and three (3) from Zona Alta Superior.

(1) Objectives and Procedures of Leakage Survey

The objectives of the leakage survey are outlined as follows: • to measure the magnitude of leakage in ten Model Districts (Micro Sectors),

2 - 19 • to evaluate the effectiveness of Leak Detection and Repair Work, • to identify dominating factors of water leakage and Non Revenue Water, • to provide basic information for improving leakage and wastage reduction, • to obtain basic information on water consumption, and • to transfer technical know-how of field leakage survey to ENCAL personnel through OJT.

The Survey was composed of the following major field works (See Supporting Report No.4 for details): • Continuous 24 Hour Flow and Pressure Measurement in Ten Model Districts, • Customer Meter Reading during 24 Hour Flow Measurement, • Leak Detection in Selected Three Micro Sectors, and • Non Revenue Water Survey in the selected Micro Sector among the three.

(2) Results of Leakage Survey

The summary of the leakage survey results is tabulated in Table 2.4.1, and major outputs are described below

LEAKAGE RATIOS EXPRESSED AS THE PERCENTAGES OF QUANTITIES SUPPLIED

The leakage ratio in each micro sector was calculated from the measured MNF, and expressed in terms of percentage of quantities supplied. The leakage ratio differs from area to area ranging from 7% to 46% as shown in Figure 2.4.6. The overall leakage ratio for the ten micro sectors surveyed was 30% on average.

Leakage Survey Results in 10 Micro Sectors

50% 46% 46% 45% Zona Baja

39% 38% 40% Zona Alta

35% 32% Zona Alta Superior 30%

24% 25% 23% 20% 20% 17% Leakage Ratio 15%

10% 7%

o o n a e d ta t ch de ap ado is rcos a c r d on A E is rio m Dora s T e el e omb o B del Valle ll Lo io El El Do P s a M rr rt V pa el Ba e d R ia Loma la P. J. Chamorro n il lo V o C Figure 2.4.6 Leakage Levels in the Ten Micro Sectors Surveyed

PRIORITY ZONE FOR LEAKAGE ABATEMENT

The average leakage ratios in the three zones of different elevations; Zona Baja, Zona Alta, and Zona Alta Superior were 41%, 30% and 17%, respectively as shown in Figure 2.4.7. There is a tendency that leakage level is the highest in Zona Baja. The first priority should be placed on this zone for leakage abatement.

2 - 20 113 30% 43% 0.29 2.46 21.7 21 2,380 4,091 1,240 2,851 2,344 1,747 2,694 Total Average El Dorado El a p Tisca Reparto Eden Barrio El Valle Lomas del Belmonte Periodista Colonia del Colonia Villa P. Villa J. Chamorro % 42% 59% 47% 68% 25% 26% 32% 49% 51% 33% km 1.60 1.48 0.97 1.27 1.76 1.72 3.20 2.98 1.80 4.20 mm 150 150 100 150 150 150 150 150 150 150 Mpa 0.29 0.22 0.204 0.38 0.40 0.37 0.27 0.27 0.24 0.22 m3/d 168 209 82 101 203 243 237 304 164 633 m3/d 120m3/d 300 217 73 300 210 149 66 163 87 214 114 285 288 195 172 388 317 177 606 No./km 123 172 163 134 133 52 68 128 110 115 m3/hr/km 2.9 6.6 1.1 4.7 1.3 1.9 0.3 1.9 3.0 3.0 r th g MicroSector Unit MaterialInlet Pipe Dorado Valle Nominal Pipe Inlet Los ArcosDiamete Mombacho Pipe per Connections Len WaterAverage A.C.Pressure Total Inflow PVCMNF(Leakge)Water Consumption A.C. m3/dLeakage Ratio m3/d m3/dLeakage Unit per ofLength Pipeline 288 PVC 176 112MNF per Connection % l/hr/connec PVC 509 Domestic of Sum 276 233 24Watermeter Readings 38.9% PVC 155 45.8% 129 26 38 PVC 16.8% 311 167 144 7 46.3% PVC 269 215 20.0% 54 PVC 35 330 23.9% 251 79 AC 10 351 7.1% 326 25 23.3% 592 37 454 38.4% 138 336 5 207 31.6% 129 950 650 15 300 27 26 Total Length ofTotal Length Pipe Network Zone of ConnectionNo. nos. 196 254 Low 158 Low Low 170 Low 234High Super High Super 89 High Super High 217 High 382 High 198 482 Non Revenue Water Possible (Minimum Level) Non Revenue Water Possible (Minimum Ratio Level) Average Consumption for Past 6-months Meter Readings Table 2.4.1 2.4.1 Table Survey of Leakage Results

2 - 21 Average Leakage Ratio

45% 41% 40%

35% 30% 30%

25%

20% 17% 15%

10%

0% Zona Baja Zona Alta Zona Alta Superior

Figure 2.4.7 Average Leakage Levels in Different Zones in Managua

LOCATIONS OF LEAKS DETECTED

The Team carried out leak detection during the midnights using leak detectors and listening bars in the most aggravated three areas among the ten (10) micro sectors. Intensive leak detection was carried out in the three micro sectors and the following are found out:

• Thirty (30) leaks were found out, and the all the leaks were located on the PVC service pipes. • Four (4) among the thirty (30) leaks belong to underground leakage. The underground leakage was very large in quantity. • Majority of leaks (80%) occurred from pipes and joists. The rest were from meters or stop cocks.

EVALUATION OF THE EFFECTIVENESS OF LEAK DETECTION AND REPAIR WORK

As a result of leak repair works the average leakage ratio of 44% for the three micro sectors was reduced to 27%. Figure 2.4.8 illustrates the reduction of leakage ratios in the three micro sectors after these works. The balance between Total Inflow and MNF is regarded as water consumption. The amount of water consumptions are almost constant but MNF could be reduced largely after the leak detection and repair works.

Moreover, in one of the three micro sectors, Los Arcos, there was significant leakage found out in the government premises but the leaks could not be repaired during the survey. The MNF of the government premises was separately measured on the following day and it was 45 m3/d. (See Supporting Report No.4 for details) If this leakage was stopped the leakage level in Los Arcos could be reduced to 17%, and the overall average leakage ratio in the ten micro sectors could drop to 23% on average.

2 - 22

1. LOA ARCOS Unit: m3/d

509 371 233 326 MNF 102 57

Total Inflow 276 269 269

Leakage Ratio 46% 28% 17%

2. VILLA P.J. CHAMORRO

311 250 144 MNF 86

Total Inflow 167 164

Leakage Ratio 46% 34%

3REPARTO TISCAPA

336

129 2 5 0 MNF 50 Total 207 200

Leakage Ratio 38% 20%

original After leak repair

Figure 2.4.8 Effectiveness of Leak Detection and Repair Work in the Selected 3 Micro Sectors

Establishing micro sectors and carrying out MNF measurement are, thus, very effective measures to select the priority areas so that ENACAL can carry out strategically the leakage reduction. Furthermore, the results of the Leakage Survey proved that leak detection by using leak detectors during midnight succeeded by immediate repair of leaks found out is very effective to reduce the leakage to a satisfactory level.

CONDITIONS OF CUSTOMERS’ METERS

• Most of the customer meters are installed outside the customers’ properties, and properly cased in the meter boxes with cast iron covers. The customer meters are located at the side walks in ordinal residential areas and the access to meters seem rather easier. The situations of the installations show, however, in some micro sectors that there are many meter boxes without covers, and many meters could not be located. • Significant number of water meters indicated zero consumption during the survey even though water is actually consumed and their monthly consumptions are registered in ENACAL billing cycle. It is indicative that such connections have malfunctioning water meters or by-pass connections, and many customers are eventually billed by the estimates without actual meter reading. At least approximately 16% of the total water meters surveyed are defective. Percentage of problematic connection in each micro sector is shown in Figure 2.4.9.

2 - 23 • Various water meters of different manufacturers are being used, and most of them are of metric unit but gallon unit meters are also used. • Many meters seem to be left without reading for a long period of time. There are many water meters not functioning and some are covered with soil or submerged in water with offensive dirt. Such situation is likely to discourage meter readers to make appropriate reading.

Percentage of Problematic Connections

60%

50%

40%

30%

20%

10%

s ho ro ta te lle en do co c s d apa a di Va c l E s amor rio lmon el i Dor os Ar h E T e L Be s d o El Dorado Momba l Pe rri Vall ma de o Ba parto P. J. C a L a Re ill oni V l Co Figure 2.4.9 Percentage of Problematic Connections in Each Micro Sector

CONDITIONS OF DIRECT CONNECTIONS OR ILLEGAL CONNECTIONS

The direct connections are significant in number in several micro sectors as shown previously in Table 2.4.2, and the volume of water consumption through such connections is likely to be also considerable. As continuous water flows were often observed in such houses during mid-night time while the Team conducted the leak detection, indicating that lots of water is considered being wasted probably from abused taps for no useful use. Approximately 9% of the total connections in the ten micro sectors are regarded as illegal direct connections, and this percentage is constant over the three zones as shown in Figure 2.4.10.

2 - 24 Table 2.4.2 Conditions of Connections in 10 Micro Sectors

Villa P. J. Barrio El Reparto Colonia del Lomas del MicroSector Unit Valle Dorado Los Arcos Mombacho El Dorado Belmonte Chamorro Eden Tiscapa Periodista Valle Zone Low Low Low Low High High High Super High Super High Super High

No. of Connection 196 254 158 170 382 198 482 234 89 217

Inlet Pipe Material A.C. PVC A.C. PVC PVC PVC AC PVC PVC PVC Inlet Pipe Nominal mm 150 150 100 150 150 150 150 150 150 150 Diameter Total Length of Pipe km 1.60 1.48 0.97 1.27 2.98 1.80 4.20 1.76 1.72 3.20 Network Connections per Pipe No./km 123 172 163 134 128 110 115 133 52 68 Length Average Water Mpa 0.29 0.22 0.204 0.38 0.27 0.24 0.22 0.40 0.37 0.27 Pressure Leakage Ratio % 39% 46% 17% 46% 23% 38% 32% 20% 24% 7%

Direct Connections without meters or Disconnected nos. 2 12 21 34 65 21 12 11 6 30 (Potential Illegal Users)

Percentage of Direct Connections or Disconnected (Potential % 1% 5% 13% 20% 17% 11% 2% 5% 7% 14% Illegal Users)

Connections with zero consumption reading nos.34745542302735265 18 or damaged or non readable meters

Percentage of Problematic Meters % 18% 31% 40% 31% 9% 15% 7% 12% 6% 10% among Existing Meters

Percentage of Problematic Connections % 18% 34% 48% 45% 25% 24% 10% 16% 12% 22%

Meter Apparently Damaged nos.2261791400 Meter No Work (Indicating zero nos. 30 65 26 22 15 9 22 19 3 15 consumption)

Meter buried nos.0522147022

Meter Not Located nos.001915432000

Meter Not Readable nos.2222323301

Meter Removed nos.04715223032

Meter Removed but Illegaly Connected nos. 0 8 14 33 13 19 9 11 3 28

Total of Problematic Meters nos.34867676954847371148

Average Leakage Ratio VS Percentage of Illegal Direct Connections in Each Zone

45% 41% 40% Leakage Illegal Direct Connection 35% 30% 30% 25%

20% 17%

Leakage Ratio 15% 10% 9% 9% 9% 5%

0% Zona Baja Zona Alta Zona Alta Superior

Figure 2.4.10 Incidences of Illegal Connections Compared with the Average Leakage Ratios in Different Elevation Zones

2 - 25 There are several types of illegal connections as considered below:

(1) Water meters are removed but directly connected,. (2) Water meters are removed but connected with hoses specially during the night, and (3) Water meters and pipes can not be located but water is supplied through by-pass pipes laid by illegal users.

ESTIMATED PER CAPITA CONSUMPTIONS

The results of continuous 24 hour flow measurement survey also provided the useful information on the present water consumption. Figure 2.4.11 summaries the water consumptions in each micro sector obtained from the analysis of the 24 hour flow and MNF. For this analysis all the consumption of major non-domestic customers are deducted from the flow data to obtain the domestic customers’ consumptions more accurately.

Per capita consumptions vary within the range of 151 to 278 lpcd depending on the customers’ life styles probably related to their income levels in the different micro sectors surveyed.

El Dorado Reparto Tiscapa

Barrio El Eden Lomas del Valle Belmonte Colonia del Periodista

Villa P. J. Chamorro Mombach Los Arcos

Valle Dorado

0 50 100 150 200 250 300 liter per capita per day

Figure 2.4.11 Per Capita Consumption in 10 Micro Sectors

Categorizing the micro sectors into “High Income” and “Medium Income” brackets the following per capita consumptions were set forth at the different income levels:

High Income Customers: 260 lpcd Medium Income Customers: 175 lpcd

Of the customers in asentamientos where those are categorized into “Low Income” bracket, if 160 lpcd, which is the figure adopted by ENCAL to bill to the customers in asentamiento, the average per capita consumption for all the domestic customers in the entire Managua was then estimated at 175 lpcd considering the proportions of the numbers of connections in these customer types.

2 - 26 (3) Assessment of Present Leakage and Wastage Levels of the Entire Managua System

Present water use in the entire Managua system was estimated based on the information obtained by this Leakage Survey, production records, and customers’ information collected from the related departments of ENACAL.

As it was presumed 100% of the population in Managua are presently dependent on the ENACAL’s water supply system, water produced from water sources is assumed to be demarcated as shown in Figure 2.4.12. Water users in Managua can be categorized into the four types, ordinal domestic users who are mainly categorized in medium or high income bracket in the water tariff structure, Aentamiento users, non-domestic users and other users not registered or suspended users based on the ENACAL billing system.

Figure 2.4.12 illustrates how the water produced is presently demarcated to these different types of users on the basis of annual production of the year 2003.

From the analysis shown in this Figure the following key indicators are suggested:

Wastage Level including leakage and wastage derived from consumers’ misuse and excessive use is estimated at 45% in the entire system of Managua.

Leakage Level in the entire system of Managua is estimated at 35% in terms of the percentage of quantity supplied.

2 - 27 Figure 2.4.12 2.4.12 Figure in Managua Use Water Present

2 - 28 2.4.3 Water Quality Analysis

(1) Objectives and Methodologies of Water Quality Analysis

The objectives of the water quality analyses are as follows: • to evaluate the sustainability of the existing water sources in terms of water quality, • to assess the exploitability of new water sources in terms of water quality, and • to evaluate the present tap water quality in terms of bacteriological safety.

Ten water samples from the selected existing water sources, five samples from prospective water sources, and ten tap water samples were taken for water quality analyses. Given the seasonal variation of water quality, sampling was carried out twice at each sampling point during the Study. a) Locations of Water Sampling

Water sampling locations were determined in close consultation with ENACAL as listed in Tables 2.4.3, 2.4.4 and 2.4.5 for the existing water sources, prospective water sources and tap waters, respectively. The geographic locations of these sampling points are shown on Figures 2.4.13 and 2.4.14.

Table 2.4.3 Sampling Locations Selected for Existing Water Sources No. Name Sampling Point Remarks

1 Asososca Before and after chlorination The only surface water source in Managua 2 PP No.5 Las Mercedes Zona Baja in the east of the city, located north of Managua II 3 PP No.9 4 Distrito II PP Monseñor Lezcano The typical well of the Zona Baja in the west of the city 5 PP E-3 Managua UNO 6 PP W-5 To assess the implication of water quality on the corrosion of 7 PP No.15 pumps at Managua I Well Field Managua DOS 8 PP No.7 9 Veracruz Veracruz No.3 (Valle Gothel 3) Located between Managua I and Managua II Well Field 10 Distrito III PP Julio Martínez The typical well of the Zona Alta area in the west of the city

Table 2.4.4 Sampling Locations Selected for Prospective Water Resource Discharge Ground Level Static Water No. Name Remarks (gpm) (m) Level (m) 1 ANIVIC No.4 (SECTOR TISMA) 1100 157 20.8 Irrigation Well 2 CUATRO ESQUINAS (LA PIEDRA) - 84 25.7 Digging well POZO LOMAS DEL GAVILAN (1.5 KM 3 160 215 89.8 Water supply AL NORTE DE NINDIRI) POZO SIERRAS DORADAS Private water 4 50 287 158 (TICUANTEPE) supply Nicaragua 5 SECTOR DEL GUAYABO - 42 - Lake

2 - 29 Table 2.4.5 Sampling Locations Selected for Tap Waters No District Sampling Point Location 1 D-II Batahola Norte Colegio Carlos Fonseca Enacal km 5 Sur 1 C al norte 2 C arriba. 2 D-VI Unidad de Propósito Colegio Modesto Armijo De Gasolinera Texaco 6 c. Norte 3 D-VI Mayoreo Gasolinera Shell Mayoreo Contiguo a los semáforos Mayoreo 4 D-II Monseñor Lezcano Contiguo donde fue Gasolinea Esso Entrada principal del Cementerio 1/2 C Este Escuela Víctor Manuel Lazo 5 D-V Veracruz Comunidad de Veracruz （Filial ENACAL） 6 D-V Carretera Masaya Gasolinera Texaco Gasolinera Texaco Carretera Masaya 7 D-V 14 de Septiembre Colegio 14 de Septiembre Colegio 14 de Septiembre 8 D-III Hialeah Pulpería De Rotonda el Periodista 6 Sur 1 arriba 9 D-III El Pilar Colegio el Pilar De Raspados Loly 1 c abajo 2 c al sur. De semáforos Portezuelo 1 c al sur 3 c 10 D-IV Santa Rosa Colegio Santa Rosa abajo.

2 - 30 Figure 2.4.13 Sampling Locations for Existing Water Sources and Tap Water Water Tap and Sources Water Existing Sampling Locations for 2.4.13 Figure

2 - 31

Figure 2.4.14 Sampling Locations of Prospective Water Sources b) Water Quality Parameters

The list of water quality parameters to be analyzed is determined in consultation with ENACAL as shown in Table 2.4.6.

Since ENACAL’s own data for majority of common physical and chemical parameters of water quality are available for the existing water sources these data were utilized for the evaluation. Instead, BTEX, PAHs, Trihalomethanes and Chlorophenols were included in the list since ENACAL was concerned about the contamination by these substances in some existing water sources but not capable of analyzing these parameters in its laboratory. c) Laboratories

The water quality sampling and analysis works were contracted out by the study team to the CIRA/UNAN which was selected based on the recommendations of the ENACAL’s Environmental Department. With regard to three parameters, namely BTEX, Trihalomethanes and Chlorophenols, CIRA/UNAN subcontracted the analysis work to a laboratory in Houston, Texas U.S.A.

2 - 32 Table 2.4.6 Water Quality Parameters for Analysis Notes : (1) Except PP Monseñor Lezcano, which is not in danger of pesticides contamination. Parameter Existing Source Prospective Source Tap Water 1 Arsenic XX 2 Boron X X 3Cadmium X X 4 Chromium X X 5 Lead X X 6 Total Mercury X X 7Manganese X X 8Hydrogen sulfide X X 9 Aluminum X X 10 Copper X X 11 Cyanide X X 12 Zinc X X 13 Dissolved Oxygen X X 14 pH X X 15 Temperature X X 16 Electrical Conductivity X X 17 Sodium X 18 Sulfate X 19 Total dissolved solids X 20 Magnesium X 21 Calcium X 22 Potassium X 23 Carbonate X 24 Bicarbonate X 25 Color X 26 Turbidity X 27 Fluoride X 28 Chlorine X -) 29 Nitrate (as NO3 - 30 Nitrites (as NO2 ) X 31 Hardness X 32 Total Iron X 33 Langelier Index X Pesticide (1) 34 a-BHC X X 35 b-BHC X X 36 d-BHC X X 37 Lindane X X 38 Heptachlor X X 39 Heptachlor epoxide X X 40 a-Endasulfane X X 41 b-Endasulfane X X 42 Aldrin X X 43 Dieldrin X X 44 Endrin X X 45 p,p’-DDE X X 46 p,p’-DDD X X 47 p,p’-DDT X X 48 Toxafene X X 49 PAHs (2) XX 50 BTEX (2) XX 51 Trihalomethanes (3) X 52 Chlorophenols (3) X 53 Coliform Organisms X 54 Free Residual Chlorine X (2) Sampled only at Las Mercedes PP No.5 & No.9, PP Monseñor Lezcano, Ticuantepe, and Nindiri, where petroleum contamination from nearby gas stations or the international airport is concerned.. (3) Sampled only at Asososca, after chlorination.

2 - 33 (2) Results of Water Quality Analysis

a) Existing Water Sources

The results of the water quality analyses for the selected 10 existing water sources are summarized in Table 2.4.7.

Table 2.4.7 Results of Water Quality Analyses for Existing Water Sources

Asososca Las MercedesManagua I Managua II CAPRE Standard n

PP Detection Sampling After PP Julio Veracruz Parameters unit Surface Monseñor PP No.5 PP No.9 PP E3 PP W5 PP No.7 PP No.15 Limit season Chlorination Martínez No. 3 Lezcano Maximum Recommendatio Metals As μg/L 2.02 Wet 3.85 5.94 7.17 10.34 9.72 2.37

The results of pesticides and PAHs are shown only for the data detected as positive in Table 2.4.7. BTEX, Trihalomethanes and Chlorophenols were not detected from all the samples and these results are not shown in the table. The complete analysis data including these results are compiled in Annex 2A to Supporting Report No.2.

2 - 34

Most of water quality parameters of the existing water sources, except several substances explained below, conformed to the National Drinking Water Standard in Nicaragua, which was established in 1994. This standard is subject to Comité Coordinador Regional de Instituciones de Agua Potable y Saneamiento de Centroamerica, Panama y Republica Dominicana (hereinafter called "CAPRE guidelines"), which was referred to WHO Guidelines for drinking-water quality 1993 (hereinafter called “WHO guidelines”).

Arsenic Arsenic concentrations exceeded CAPRE guideline value in the samples from Las Mercedes No.5 Well, Las Mercedes No.9 Well and Managua II No.15 Well.

Lead Lead concentrations in Monseñor Lescano Well, Managua II No7 Well and Managua II No15 Well exceeded CAPRE guideline value.

Aluminium Aluminum concentration in Las Mercedes No 5, Las Mercedes No.9 and Managua I E3, exceeded the CAPRE guideline value.

PAHs Six kinds of Polycyclic Aromatic Hydrocarbons (hereinafter called "PAHs"), were detected in Las Mercedes No.5 and three kinds of PAHs were detected in Las Mercedes No.9. The total PAHs in Las Mercedes Well No.5 exceeded CAPRE guideline value.

Pesticides One of the pesticides, Heptachlor, was detected in Lake Asososca and Las Mercedes Wells No. 5 and No. 9. However, these concentrations were less than the CAPRE guideline value.

BTEX BTEX was analyzed for the samples from Las Mercedes PP No.5 & No.9, PP Monseñor Lezcano, Ticuantepe, and Nindiri, but not detected from none of the samples.

Trihalomethanes and Chlorophenols Trihalomethanes, and Chlorophenols were analyzed only for the water from lake Asososca but not detected.

- Nitrate (as NO3 ) • Reviewing the ENACAL’s vast records of past water quality analysis data for the existing water sources nitrate concentrations in several wells located at central Managua in Zona Baja were highlighted. • Marcado Oriental Well (No.10) showed high nitrate concentrations exceeding 100 mg/l in the year 1998’ data, and this well has a tendency of high nitrate concentrations frequently exceeding the maximum allowable level of CAPRE guideline. • Other wells such as Olof Palme (No.9) and San Antonio (No.8) wells also show a tendency of increase in nitrate concentration. The nitrate concentrations have doubled during the last 10 years as explained in Figure 2.7.8 of Supporting Report No. 2.

Among the samples analyzed during the Study arsenic, lead, aluminium and PAHs were detected at the levels exceeding the CAPRE guideline values in some wells. This fact, however, does not necessarily mean that water quality of water being distributed is not suitable for direct ingestion. Since the Managua water system presently abstracts waters from more than 110 water sources it is recommended that further analysis of concentrations of these substances are carried

2 - 35 out to ensure the safety of drinking water and to evaluate the magnitude and extent of such contaminants in the Study area. b) Prospective Water Sources

Water samples were taken from the five prospective water sources. The results of the analyses are summarized in Table 2.4.9 as the average for wet and dry seasons, and their evaluations are described as follows:

• Nicaragua Lake: Except the concentrations of aluminum and iron all the other water quality parameters analyzed conform to CAPRE guideline values. Among all the prospective water sources examined in this Study, this lake is considered to be most prospective in terms of water quality.

• Lomas Del Gavilan: Manganese concentration in wet season exceeds the recommendation value of CAPRE guideline. High concentration of aluminum was also detected in the dry season . This source is considered to be second most prospective in terms of quality.

• Sierras Doradas: Lead, aluminum, magnesium and potassium concentrations exceeded the guideline values. The prospective of developing this source is low.

• Avinic No.4: This irrigation well has high arsenic and iron concentrations exceeding the CAPRE guideline. Sulfate is also higher than other samples. This source is therefore not recommendable for future development.

• Cuatro Esquinas: Water sample from this dug well showed high concentrations of aluminum. Pp-DDT was detected although the concentration was below CAPRE guideline value. This well appears to be quite susceptible to contamination in the future.

2 - 36 Table 2.4.8 Results of Water Quality Analyses in Prospective Water Sources Sampling points Unit Nicaragua Nindiri Ticuantepe Tisma Tisma CAPRE Lake maximu m El Guayabo Lomas Del Sierra Avinic Cuatro guideline Parameters Gavilan Doradas No.4 Esquinas Metals As ug/L

2 - 37 c) Tap Water

Tap water samples were taken from 10 places for the examination of coliform organisms and free residual chlorine to know the bacteriological safety of distributed water. The results of two seasonal samples at each sampling point are shown in Table 2.4.9.

No coliform organisms were detected in all the samples. The concentration of residual chlorine, however, fluctuates between less than 0.2 mg/l to 3.0 mg/l. Such fluctuation implies that there might be under-dosing or over-dosing of chlorine in the existing system.

Although the highest concentration of residual chlorine detected is lower than the CAPRE guideline’s maximum allowable level of 5 mg/l it is much higher than the recommendation value of 0.5 – 1.0 mg/l.

On the other hand, the lowest concentration was detected at less than 0.2 mg/l from the five samples. This result of residual chlorine does not guarantee whether sufficient residual chlorine is available at these locations but bacteriological contamination was denied by the results of the coliform tests as far as the sampled tap waters are concerned.

Table 2.4.9 Results of Tap Water Quality Coliform Organisms Residual Chlorine (mg/L) No Sampling Point Both seasons Wet season Dry season 1 Colegio Carlos Fonseca, Batahola Sur nd 3.0 1.5 2 Colegio Modesto Armijo nd 3.0 1.5 3 Gasolinera Shell Mayoreo nd 1.5 1.5 Contiguo donde fue Gasolinea Esso, 4 nd <0.2 <0.2 Monseňor Lezcano Escuela Victor Manuel Lazo 5 nd <0.2 <0.2 (Filial ENACAL) 6 Gasolinera Texaco, Las Colinas nd 3.0 3.0 7 Colegio 14 de Septiembre nd 3.0 <0.2 8 Pulpería Hialeah nd <0.2 1.0 9 Colegio el Pilar nd <0.2 <0.2 10 Colegio Santa Rosa nd 3.0 1.0 Note: nd: not detected

(3) Supplementary Water Quality Analysis

As a result of the water quality analysis, three existing wells were found to contain arsenic with concentrations exceeding the maximum allowable limit of the drinking water standard i.e.10 ppb and three existing wells were found to contain lead with concentrations higher than the maximum allowable limit of 10 ppb. In order to find out the extent of these water quality problems, a supplementary water quality analysis was then carried out by the study team to examine the arsenic concentrations of all existing ENACAL’ s wells in the study area and the lead concentrations of 28 wells selected by the study team. This time, analytical work was contracted out to the LAQUISA (Laboratorios Quimicos Sociedad Anónima) by the study team. The outcome of these water quality analyses and our recommendations based on the outcome are summarized as follows: a) Arsenic

Fifteen wells in Zona Baja and Zona Alta are found to contain arsenic with concentrations equal

2 - 38 to or larger than 8 ppb. Among these, four wells have arsenic concentrations exceeding the maximum allowable limit of the drinking water standard (10 ppb). On the other hand, arsenic concentrations of existing wells in Zona Alta Superior are generally low. All the existing wells in the study area were classified into four categories shown in Table 2.4.10 based on their current arsenic concentrations. It is recommended that countermeasures for Category A wells should be completed as soon as possible since their current concentrations already exceed 10 ppb. It is recommended for Category B wells that countermeasures should have been completed by 2015, target year of the long-term improvement plan. The arsenic concentration shown in Table 2.4.10 is defined that it should be the arsenic concentration of the blended water, in case where water produced from more than one wells is merged at one place or otherwise get mixed before it is actually distributed to customers.

Table 2.4.10 Classification of Existing Wells by Arsenic Concentration Arsenic Urgency to take Category Concentration: X Actions actions (ppb） Countermeasures should have been A X≧10.0 Extremely High completed as early as possible. Countermeasures should have been B 8.0≦X<10.0 High completed by 2015 at the latest.

No immediate action will be required. Instead, arsenic concentration should be closely monitored four times a year (every 3 C 6.0≦X<8.0 Medium months), based on which a decision should be made whether it is necessary to implement any countermeasures before 2015.

No action will be required before 2015 except that arsenic concentration should be monitored twice a year (once in the dry D X<6.0 Low season and the other in the wet season) and the data obtained should be evaluated in respect of how the concentration changes with time.

Arsenic Category Concentration:X Nos. of Well Well Identification No. （ppb） A X≧10.0 4 27,28,29,46 B 8.0≦X<10.0 11 8,10,11,30,52,57,68,77,78,91,112 b) Lead

The lead concentrations were found to be lower than the detection limit in all of the 28 samples tested in the supplementary water quality analysis. For final confirmation, an additional sample was taken from each of the three wells where high lead concentrations were previously detected and retested. As a result, none of these additional samples exhibited lead concentrations above the detection limit. It was concluded from this supplementary analysis that lead is not a problem.

2 - 39 (4) Capability of Local Laboratories to Analyze Arsenic

Only two laboratories were identified as being capable of analyzing arsenic in Nicaragua. They are: (i) CIRA/UNAN (Centro para la Investigación en Recursos Acuáticos de Nicaragua/Universidad Nacional Autónoma de Nicaragua) in Managua (ii) LAQUISA (Laboratorios Quimicos Sociedad Anónima) in León

The study team visited their laboratories; inspected the analytical equipment used; and interviewed the analysts who are actually in charge of arsenic analyses about the methods used for the calibration of the equipment and for the quality control of their analysis works. In addition, each laboratory was requested to analyze several control samples which only study team knew the locations of sampling and the arsenic concentration values (obtained through the previous analyses). As a result, LAQUISA was found to be practicing better quality control than CIRA/UNAN. The results of analysis presented for the control samples by LAQUISA were also found to be more consistent than that presented by CIRA/UNAN. It is therefore recommended that whenever there is a need for ENACAL to analyze arsenic, it should contract out the analysis work to LAQUISA.

2.5 WATER CONSUMPTION AND AWARENESS SURVEYS

2.5.1 Methodologies Used for the Surveys

The samples for domestic consumption and awareness surveys were selected in base to last ENACAL users database (August 2004), distribute the total sample number (450 households) over the 10 ENACAL commercial zones of Managua (for Commercial Zone distribution of ENACAL see Fig of Annex 6.E, Supporting Report No.6)., Ticuantepe Municipio and Nindirí Municipio in proportion to their residential population; identify and pick-up on a random basis were selected number of households from each zones using the last ENACAL users database.

The sample for industrial consumption survey were selected classifying in three types: with only ENACAL water supply service, with self water well service, and with combination service; distribute sample over the Study Area, covering all consumers type with self well services and mixed services (18 samples), identify and pick-up on a random basis of the selected number of consumers from industries with only ENACAL services (remain 33 samples). The sample for commercial-institutional consumption survey were distribute the total sample number (100 consumers) over the 10 commercial zones of Managua, Ticuantepe and Nindiri in proportion to the zones commercial-institutional users; identify and pick-up on a random basis (using random software program) of the selected number of commercial-institutional users from each zones.

Ten interviewers conforming five teams were employed to conduct the domestic survey, industrial survey and commercial-institutional survey and they were trained during the pre-test survey period. ENACAL officers planned and supervised the interview and the JICA Study Team monitored their interviews and inappropriate interviews were corrected.

Three type of questionnaires were used for the interview surveys: domestic, commercial -institutional and industrial users (See Supporting Report No.6 for details). The questionnaires filled by the interviewers was checked and processed by ENACAL officers and the JICA Study Team.

2 - 40 2.5.2 Water Consumption by Domestic Users

(1) Household Size and Water Supply and Sewerage Service Coverage and Years of Service

Average household size for all domestic users is 5.07 persons in the Study Area. In the Study Area, 96% of users have ENACAL water supply service. Average year of water supply service is more than 20 years in all area. The sewerage service of ENACAL, except Zone 4 (a special zone, isolated, west side high level of Managua with high income residential area), lower water supply and sewerage coverage areas are Zone 8, 9, 5, 6 and 7.

(2) Water Meters Conditions

Only 70% of Domestic users have water meters and 51% of them are no functioning. (See Figure 2.5.1).

WATER METER CONDITION

90% % 83 82 % % %

79 78 78 % 80% % 73 % 73 71 %

67 70% % % % 61 % 60 % 59 % 58 57 % 55

60% 54 % % 51 % 49 % 46 % 45

50% % 43 41

40%

30%

20%

10%

0% Z1 Z2 Z3 Z4 Z5 Z6 Z7 Z8 Z9 Z10+T+N Study Area Metered Houses (All Area) Meter in Good Condition (All Area) Figure 2.5.1 Water Meter Condition

(3) Water Consumption

According to ENACAL water meter record, last 12 months monthly average of water consumption per household in survey house is 28.73 m3/month (See Table 2.5.1). Considering the sampled household size (5.07 persons per house), the average per capita consumption is 189 liters per day.

2 - 41 Table 2.5.1 Last 12 Months Consumption Record (m3/month) Last 12 month Zone Consumption 1 24.80 2 26.84 3 36.18 4 20.88 5 33.14 6 30.63 7 35.12 8 16.67 9 25.83 10+T+N 21.40 Study Area 28.73

(4) Water Supply Condition

86% of consumers have water service every day. Only 67% of consumers have water service all day. 69% of consumers have water service with good pressure. Weak water supply service are in commercial zone 3, 6, 7 and 8. 75% of consumers satisfied in water quality. About half of consumers storage water, but this proportion is very low in Commercial Zone 1, 2 and 9.

WATER SUPPLY CONDITION IN ALL AREA

100% % % % % 93 93 93 93 % 91 % % % %

89 89 % 88 88 % % % % 86 86 %

90% 85 85 85

84 % % % % % % % % 80 80 80 80 80 80 79 79 % % % %

% % 80% 76 76 76 76 75 % 75 % % 73 % 71 71 % % % 70 % 69 69 69 % 68 % % % % 67 66

70% 65 65 % 65 % 63 62 60% %

53 % % 48 % %

47 50% % 46 46 % 44 44 %

41 40%

30% % 25

% % 21 20 20%

10%

0% Z1 Z2 Z3 Z4 Z5 Z6 Z7 Z8 Z9 Z10+T+N Total

Every Day Service All Day Service Good Pressure Good Quality Water Water Storage Figure 2.5.2 Water Supply Condition

2.5.3 Water Consumption by Industrial Users

(1) Water Uses

38.8% of industries uses water for industrial process, 20.4% of them uses for refrigeration and boiling, 36.7% uses water for washing machines. 71.4% of industries use water for their

2 - 42 employees sanitary needs (domestic uses) and 73.5% uses water service for drinking uses.. Average consumption of ENACAL water is 621.3m3/month. (See Figure 2.5.3).

6.1% Other Uses

Sprinkle Gardens 22.4%

36.7% Washing Machines

Ref rigeration/Boiling 20.4%

Industrial Process 38.8%

Domestic Water Uses 71.4%

Drinking Water Uses 73.5%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Figure 2.5.3 Water Uses in Industrial Sector

(2) Water Supply Condition

98% of industrial users with ENACAL services receive water supply every day, 89% industries receive water for 24 hours. 87% industries have good pressure services from ENACAL, 22% industries with poor quality: 4% with odor, 6% with color, 8% in taste and 16% with other quality problems

2.5.4 Water Consumption by Institutional & Commercial Users

(1) Type of Institutional & Commercial Users and Type of Water Uses 3% of users are government institutions, 10% educational center, 1% hospital& clinic, 5% are hotel, 23% shops, 19% offices and 39% are other commercial users. 8% of users use water for institutional& commercial their employees and/or students needs, 85% for visitors or clients, 22% for sprinkle local garden, 38% for other uses. Average consumption of these users are 165 m3/month..

(2) Water Supply Condition 86% of users have every day service, 74% of users have all day service, 77% of users have good pressure service. Only 64% of users have service with good water quality, 9% of water with odor, 6% with color, 12% with bad taste and 14% with other quality problems.

2.5.5 Awareness Survey on Domestic Users

(1) Water Supply Service Satisfaction 45% of all users are satisfied in ENACAL Services, 52% of users have same kind of claims to ENACAL services. Higher claims areas are zona 6, 7, and 8. Most of claims in all type of users are related to meter and billing services with 46% of claims, follow by improvement in water supply service with 38%.

2 - 43

TYPE OF CLAIMS TO ENACAL SERVICES IN ALL TYPES OF USERS

90% 86

% 80% 77 % 70 70% % % 63 62

60% % % 53

53 % % 50 50 % %

47 % 50% 46 45 % % 38 38

40% % 33 % 29

% % % 26

30% 25 25 % %

21 20 % % 16 20% 16 % % % % 13 13 13 13 % % % % 10 10 10 10 %

% 9 % % 8 7 7 % % % % % 6 6 6 % 6

10% 5 5 % % % 3 3

2 % % % % % % % % % % % 0 0 0 0 0 0 0 0 0 0 0 0% Z1 Z2 Z3 Z4 Z5 Z6 Z7 Z8 Z9 Z10+T+N Study Area

Related to Meter&Bill Attention of Service Water Quality Improvement of Water Supply Other

Figure 2.5.4 Type of Claims to ENACAL Services in All Type of Users

(2) Meter Lecture and Bill Collection Satisfaction

70% of users of ENACAL have meters and only 54% of them (38% of all users) is lecture monthly, and only 35% metered users (only 25% of all users) are satisfied with the meter reading. ENACAL meter lecture have very low consumer satisfaction and consequently the highest number of claims. 85% of user receipt water bill and almost all them are satisfied in bill distribution and collection.

SATISFACTION ON METER LECTURE % 100 100% % % 94 % 92 % 90 90 % % % % 90% 85 % % 83 83 83

82 82 % % % 79 78 78 % 80% % % 74 73 73 % % 71 71 % % % % %

67 67 66 66

70% 65 % % % % 62 % 61

60 60 59 % % % %

60% 55 % % 54 54 54 % 52 % 52 51 % 50 48 % % % % 46 46 46

45 %

50% % % 43 42 41 % % 38

% 36

40% 35 %

% % % % 29 28 28 27 27 30% % 24 % 21

20%

10% 0% Z1 Z2 Z3 Z4 Z5 Z6 Z7 Z8 Z9 Z10+T+N Study Area

Metered Houses Lectured Periodically by ENACAL Monthly Frecuency of Lecture Conform with Lecture Satisfaction with Lecture Staff

Figure 2.5.5 Satisfaction on Meter Reading

2 - 44 (3) Willingness to Pay (WTP)

Mean value of WTP in all type of users are, C$121/month, and the lowest answer was C$10/month from a user of Tariff 01 in zone 9.

Table 2.5.2 Willingness to Pay of Users WTP Mean Lowest Effective Zone No. Answer Other Value Answer Answer (C$/month) (C$/month) Z1 18% 23% 60% 100 30 Z2 39% 15% 46% 124 60 Z3 27% 24% 49% 144 50 Z4 0% 21% 79% 187 50 Z5 24% 33% 42% 140 50 Z6 4% 16% 80% 112 20 Z7 0% 4% 96% 131 45 Z8 0% 25% 75% 114 40 Z9 3% 13% 85% 95 10 Z10+T+N 0% 29% 71% 86 50 Study Area 14% 20% 67% 121 10

(4) Water Service Cost Opinion

41% of all users think that water service bill is expensive, 37% of all users think that water bill is cheap.

2.5.6 Domestic Users in Low-income Settlements

(1) Asentamientos

ENACAL grouped low income settlements as a generic name of asentamientos, with special subsidized tariff 10. There are approximately 55,000 users of ENACAL. In domestic users survey 91 users asentamientos were interviewed, with 0.17% of survey coverage (List of asentamientos and their location by Districts are shown in Supporting Report No.6). In asentamientos, average household size is 5.34 persons, 5% more than average household size of the Study Area. In asentamientos, there are an average of 2.6 working persons /house. 6% of family in asentamientos have a income less than C$599/month, this low income families (extremely poor) is high in zone 3, 5 and 9. 53% of asentamientos users have income between C$600 to C$1,599/month, 29% have income between C$1,600 to C$3,099, and 12% of users have high income with more than C$3,100/month.

Table 2.5.3 Asentamientos Users Monthly Income Working Less than C$600 to C$1,600 to More than Zone persons/ N/A C$599/month C$1,599/month C$3,099/month C$3,100/month users Z1 3.6 17% 0% 40% 60% 0% Z2 3.6 16% 0% 40% 60% 0% Z3 2.2 75% 20% 40% 40% 0% Z42.00%0%100%0%0% Z5 2.0 71% 50% 0% 0% 50% Z6 2.6 9% 0% 67% 24% 10% Z7 2.9 0% 0% 71% 14% 14% Z8 3.0 50% 0% 40% 60% 0% Z9 2.8 43% 25% 25% 0% 50% Z10+T+N 2.0 0% 0% 0% 100% 0% Total 2.7 11% 6% 53% 29% 12%

2 - 45

(2) Water supply and sewerage service conditions in asentamientos

From information of interviewers, ENACAL and site verification, most of water sources for domestic users in the Study Area is from ENACAL wells. There aren’t shallow wells or rivers for domestic uses in urban area. Same asentamientos of low and middle land are connected to the ENACAL water supply system without any technical and legal considerations. In high lands of extreme southwest (Zona 8 of District III) and southeast (Zona 6 in District V and District VI) of Managua city, some households use ENACAL water supply system complemented by private tankers supply. The water supply coverage in surveyed asentamientos is 100% and sewerage coverage is very low with 49%.

Only 59% of asentamientos have 24 hours of service, remain asentamientos have limited hourly supply service. Water storage in bucket or barrel is 56%, the highest storage rate are shown in 3 areas of the Managua, southwest and southeast high land areas (Zonas 8, 5 and 6). Only 2% of householders in asentamientos have water meter, households without meter apply flat rate service from ENACAL. Its very difficult to estimate volume of consumption in asentamientos, because there aren’t water meter in asentamientos area.

The Study Team identify three types of expectation: • Asentamientos of lowland (Type A Asentamientos), “we want, sewerage facilities…, in rainy seasons overflow of drainage system is problem… ”. • Other different type expectation are in asentamientos of highland zones 3,6, 7 and 8, South High land areas of southwest an south west of Managua (The Study Team called C Type Asentamientos): “we want service at least 3 days a week….; new pipelines for get a good service…” . • The mixed type of expectation is observed in middleland of the city (The Study Team called Type B Asentamientos) : “ we want more service pressure….; sewerage facilities….; we don’t have water meter, the pipelines was donated by an European country, we not pay …….”.

Details of asentamientos type distributions is shown in Supporting Report No.6”.

(3) Willingness to Pay (WTP)

Average WTP are C$93 and the lowest answer are C$45, this average WTP is 60% more than actual flat rate for asentamientos.

Table 2.5.4 Willingness to Pay in Asentamientos WTP Mean Value Lowest Answer Zone Effective Answer (C$/month) (C$/month) Z1 100% 74 50 Z2 75% 113 76 Z3 75% 101 50 Z4 100% 50 50 Z5 57% 78 50 Z6 74% 93 50 Z7 100% 57 45 Z8 70% 114 50 Z9 86% 104 60 Z10+T+N 100% 120 120 Total 78% 93 45

2 - 46 (4) Affordability To Pay (ATP)

There are 6% or more households in asentamientos in extremely poor conditions (in this Study, consider families with revenue per month less than C$599 or US$37), 53% of households have C$600 to C$1,599 per month income, 23 % of households have C$1600 to C$3,099 per month income and 12% of households have income more than C$3,100.

Regardless extremely poor families, the electricity expenditure is C$122 to C$245 per month., and about 95% of householders have electricity meters.

2.5.7 General Evaluation of Domestic Users

(1) Survey coverage

The household survey carried out in the Study Area covers a total of 450 houses out of 168,313 users of the Study Area (from ENACAL Users cadastral Data). The survey coverage is 0.26%. The number of interview in asentamientos (low income areas), was 91, 20% of the total interview. In all the Study Area, asentamientos represents 33% of users, this low coverage in asentamientos results from difficulty in access to targeted houses: incomplete address, incomplete cadastral data, absence of householders, etc.

(2) Users types and characteristics

In the Study Area, there are 12% of population are less than 6 years old and 63% of the users are more than 18 years old. The average household size is 5.07 persons, but in asentamientos the average rise to 5.34. Anyway, is less than estimate value in 1995 National Census (5.37 for Managua City). 96% of users have ENACAL water supply service, 72% with sewerage service of ENACAL, and 95% have electricity service. Only 71% of users have water meter and 51% of them are in good condition; but 95% of same users have electricity meter.

(3) Water Supply Conditions

86% of users have water supply service every day, 67% have all day supply service, 69% have water service with good pressure and 75% receipt water with good quality. Results of this situation, only 47% of the consumers storage water and 21% of users buy water in bottles. In asentamientos the storage of water was found in 56% of interviewed houses, with storage 0.667 barrels to 2.0 barrels per house. Water supply service is weak in zone 3, 6 and 7. In asentamientos, higher supply problems are in zones 3, 6, 7 and 8.

In interviewed metered houses, last 12 months consumption registered 28.73 m3/month, that represents 189 liters /day per capita consumption (considering 5.07 persons/house).

(4) Water Supply Service Satisfaction

52% of users have claims against ENACAL service and most of them (46%) are related to metering and billing service. In asentamientos more request (claims) are to improve water supply service (more days, more hours, more pressure of water supply). This request is high in zones 3, 5, 6, 7 and 8, all of them in high areas (south) of Managua.

(5) Willingness to Pay

Willingness to Pay (WTP) is high in asentamientos than formal barrios (tariff 01). Mean value of WTP in all type of users are C$121/month, and the lowest answer was C$10/month (an

2 - 47 illegal users of tariff 01). In asentamientos areas this value were C$93 and C$45 respectively. 41% of all users think that actual water bill is expensive, but in asentamientos areas, 44% of them express that actual bill rate is cheap and just. There are some exception in asentamientos with facilities constructed by donations in 80 and 90 decades, that the no payment culture is high.

(6) Affordability to Pay (ATP)

In asentamientos areas, there are 2.6 working persons/house. 6% of families have an revenue less than C$599/month; 53% of asentamientos users have C$600 to C$1,599/month revenue and 41% of users have more than C$1,600/month revenue. In the other size, same asentamientos users pay for electricity service C$203/month in average. As INEC calculated the cost of water supply service is 54% of water supply service in Managua Consumer Price Index (IPC), estimation for ATP for water bill in asentamientos is C$109/month.

(7) Organization

There are 4 organization active in asentamientos (MINSA health center and 3 NGO), and 3 communities organization (only in zone 6).

(8) Non residential users

In institutional & commercial users, 3% are government institutions, 10% educational center, 1% medical center, 5% hotels, 23% shops, 19% offices and 39% other commerce local. In this sector 85% of users use water for visitors or clients, 22% for sprinkle local garden, 8% for their personnel uses and 38% for other uses. Average consumption is 165m3/month.

2 - 48 2.6 WATER SOURCES

2.6.1 Present Conditions of Water Sources Used by ENACAL

(1) General

As of December 2004, water sources of ENACAL in the Study Area consist of 114 wells and Asososca Lake. An inventory of the wells is provided in Supporting Report No3 and their locations are shown in Figure 2.6.1. Seven wells that are supplying water to Sandino City and three Wells of Carretera Sur, out of the Study Area were not the subject of this evaluation. Then four wells in Ticuantepe and Nindiri are considered in this Study.

(2) Production from Existing Wells and Asososca Lake

The water productions from wells and Asososca Lake are shown in Figure 2.6.2. The annual production in 1993 was about 100.8 million m3 (276,000m3/day). The annual production, however, has increased in 2003 to 145.6 million m3 (397,700m3/day), by 44% since the year 1993.

2 - 49 Figure 2.6.1 Distribution of Existing Wells in Study Area Area in Study Wells of Existing Distribution 2.6.1 Figure

2 - 50 160,000 ASOSOSCA LAKE ALL WELLS TOTAL 140,000

120,000

100,000

80,000

60,000 Production (1,000 m3 ) (1,000 Production

40,000

20,000

0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Year

Figure 2.6.2 Annual Production (1990 to 2003)

2.6.2 Evaluation of Wells by Type of Water Level Variation

Data of extraction volume and water level of each well are shown in Supporting Report No.3. The detail investigation is discussed in that Supporting Report. The Study team identified hydro geological different type of wells.

(1) Type of Water Level Variation

The number of wells whose water level is monitored for more than 3 years is 76. In many of the 76 wells their water levels have been lowering from the year 2000 to 2002. In order to determine whether this phenomena is the effect of aging of wells or the effect of volume of rainfall, a graph showing the relation between the extraction volume and dynamic water level was made and analyzed. a) Present Condition of the Variations in Water Level

Figure 2.6.3 shows the sample of variation in dynamic water level. In the figure, the relation between the extraction volume and dynamic water level measured during the pumping test is also shown. As shown in the results of pumping test, within a certain range of extraction volume, dynamic water level lowers in proportion to the volume of extraction.

In 1998, the lower limit of the dynamic water level was approximately 140m when the extraction was 3.0m3/min. If the result of pumping test was taken into consideration, the depth is estimated as 143.5m when the extraction is 3.5m3/min. However, as the water depth of 2000 and 2001, which is 147m, shows, the water depth was lower than that of 1998. The fact that the tendency of dynamic water level of each year is different indicates the volume of rainfall of precedent years affects that dynamic water level.

2 - 51 MANAGUA I W-1 No.118

115

Pumping Test 125

1/15

5/5 135 1998 4/13 1999 Annual Variation

Water Level (m) Water Level 3/16 2000 2001 4/2 2002 4/21 145 2003 Pumping Test

2.0 2.5 3.0 3.5 4.0 Pump Discharge (m3/min)

Figure 2.6.3 Analysis Example of Water Level Variation Caused by Rainfall

Based on these analyses, the tendency of variation in dynamic water level in the wells in Managua City can be divided into a few types as summarized on Table 2.6.1. b) Annual Variation in Water Level Indicates Seasonal Changes

1998 data in Figure 2.6.3 shows that the water level was 131m on January 15. The level lowered to 137m on March 16, 142m on April 2 and 145m, which was the lowest level, on April 21 and restored to 136m-131m from May 5 to May 11. This phenomenon is considered to be reflecting the seasonal variation, in other words change in the amount of rainfall, rather than caused by the variation in extraction volume. Therefore, the difference between the upper and lowest limit of dynamic water level of each year represents the variation in the amount of rainfall. In many wells annual variation in water level is large. c) Classification of Wells with Water Level Variation Type

Characteristics of each well are formed by the quality of aquifers. And the water level of the wells is most strongly affected by the water level of the major aquifers. In the wells classified as variation type A, the effect of small rainfall in 2000 and 2001 emerged after approximately two years (as shown Table 2.6.1). It is assumed that wells categorized as Type A collect water from almost the same aquifers. As for Type B, variation in water level does not show clear relation with the precedent rainfall. This may indicate that in the case of Type B wells, quality of multiple aquifers are compounded.

2 - 52 Table 2.6.1 Type of Water Level Variation Number Type Variation of Water Level Delay Time Evidence for Delay Time of Wells Water level at 2001, 2002 Variation of water level Increase of water A 5 Months 28 year are lower level caused by Hurricane to Water level at only 1995 B 2 years 12 Increase of water level caused by Hurricane year are lower Variation of water level is C - 27 - not clear

The distribution of well categorized as Type A, B and C is as shown in Figure 2.6.4. In Oriental area, which includes Managua I, Veracruz, Managua-II, Sabana Grande and Las Mercedes, and Occidental area, which include Asososca Lake and Carretera Sur, majority of the wells are Type A. In Central there are many Type B wells. Type A and Type C wells also exist in Central but their distribution is not clear. d) Effect of Hurricane on the Well Water Level

The time lag between rainfall and their effect on the ground water level was confirmed by the time of appearance of the effect of a hurricane, as observed in Asososca Lake. Although clear conclusion was not reached due to the absence of ground water level monitoring data, variation in dynamic water level of some wells show the effect of the hurricane of October 1998. According to the evidence, the increase in the ground water level (1-4m) caused by the hurricane appeared after 5 months to 2 years for both Type A and Type B wells.

2 - 53

Figure 2.6.4 Distribution of Type of Delay Time after Rainfall after Time of Delay Type Distribution of 2.6.4 Figure

2 - 54

(2) Evaluation of Wells According to the Type of Water Level Variation

The result of analysis of overall variation in ground water level, in which the ground water recharge time is taken into consideration, leads to the conclusion that the evaluated wells are generally in good condition except for 23 wells for which no sufficient monitoring data were available. The result of the evaluation focused on the water level restored during the period of pumping stopped indicates that the wells of Managua I and II are considered to be in good conditions.

2.6.3 Evaluation of Sources by Water Quality

(1) Groundwater

Arsenic concentrations in Las Mercedes No.5, Las Mercedes No.9, Managua II No.15, Sabana Grande No.1, Sabana Grande No.2 and Sabana Grande No.3 are over CAPRE guideline values.

Lead concentrations in Monsenor Lescano, Managua II No7 and Managua II No15 are over the guideline value. Higher concentrations were detected from the samples taken in the dry season. Monsenor Lezcano Well in the downtown is located near a gas station.

Aluminum concentrations in Las Mercedes No.5, Las Mercedes No.9 and Managua I E3 are over the guideline value.

Some wells in Zona Baja have been getting high concentrations of nitrate. It is presumed that the past earthquake might have damaged sewer pipelines and there is a possibility that nitrate comes from wastewater. Nitrate concentrations of Mercado Oriental (No.10) have exceeded CAPRE guideline value frequently. Nitrate concentrations of Olof Palme (No.9) and Nitrate in San Antonio (No.8) wells have doubled exceeding the recommendation value of CAPRE guidelines in the past ten years. In general, water quality of wells in the central Managua of Zona Baja have a tendency of getting gradually deteriorated.

(2) Asososca Lake

Water samples from Asososca Lake were taken from 2 places, pumped water and water after chlorination. The analytical results are summarized followed: • One pesticide, Heptachlor, was detected. However, this concentration is less than the guideline. Concentrations of other parameters are under the guideline. • Any BTEX, Trihalomethanes, and Chlorophenols are not detected.

Some past reports indicated the possibility of the contamination from the industrial zone located in the vicinity of the lake. Considering the result of this Study, contamination from the industrial zone was not detected for the samples taken in this Study. However, this result does not necessarily deny any possibility that Asososca Lake will be contaminated in the future. It is recommended to continue the water quality monitoring for Asososca Lake and groundwater around the lake, especially for groundwater between industrial zone and the Lake.

2.6.4 Evaluation on the Sustainability of Lake Asososca

(1) The Present Conditions

Asososca Lake has a surface area of about 0.8 km2, a maximum depth of about 100 m. Asososca

2 - 55 Lake is in the west of the city, and its water quality is suited for drinking. Because of this, the lake is the first water source in Managua. Still now, the disinfected water of Asososca Lake is the one of the main water source in Managua city.

The data of extraction, water level and precipitation at Asososca Lake are shown in Supporting Report No.3. Water levels of Asososca Lake and Managua Lake from 1990 to 2004 are shown in Figure 2.6.5. In 2004, the water level of Asososca Lake is about 5.5 m lower than its peak level in 2000 year and, as a result, it is 3 m lower than that of Managua Lake, 2 km distant. The amount of precipitation in the drainage basin and the rate of extraction from the lake largely control the water level of Asososca Lake.

44 Managua L. Asososca L. 42

3,4 Managua Lake ) 40 1,2

5 6 38

Water Level (m Level Water 36

34 1 to 6 shows the peak of Water Level Asososca Lake 40,000 30,000 ≒ ≦ affected Hurricane M itch (Oct./1998) Wat er Product ion(m3/day) 32 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Year

Figure 2.6.5 Water Levels of Asososca Lake and Managua Lake

(2) The Effect in the Water Level by Hurricane Mitch

As can be seen in Figure 2.6.5, Hurricane Mitch (1998) gave a significant impact on the water level of Managua Lake. The water level of the lake rose about 4.5m by Hurricane and it took 6 years to decrease to its normal water level. However, it took only 2 years in the case of Asososca Lake. Groundwater flows into the lake from many aquifers. The example of Hurricane Mitch (October 1998) indicates that it takes 4 months to approximately one year and three months before the rainwater infiltrates into each aquifer to become ground water and then affects the water level of the lake.

(3) Investigation on Optimum Extraction from Asososca Lake

The result considered how rainfall and extraction affect water level in the period are as follow. • In the dry season in each year (December, January to April; hereinafter called “high water season”) water level at the lake is high, in the season of large rainfall (June to October; hereinafter called “low water season”) water level is lower. • Because groundwater from many aquifers flow into the Lake, water level in the Asososca Lake relate to precipitation before few months to a year and few months. It is concluded that mainly 5 months to 9 months are required before rainwater infiltrate into each aquifer and ground water flow into the lake. In this study 7 months is

2 - 56 considered as delay time for evaluation on extraction from the lake. • The difference between water level at the lake in low water season of a certain year and in next year is determined by the amount of precipitation and extraction of one year during low water season to next low water season. In the case that extraction from the lake is more than inflow water level in low water season of next year is lower than the previous year. To the contrary in the case that extraction is less than inflow water level in low water season of next year is higher than in the same season of last year. • Figure 2.6.6 shows the relation with annual extraction and a difference of water level in low water season for two years running. According to Figure 2.6.6 it is concluded that the optimum extraction that water level does not vary in the lake is from 35,000m3/day to 80,000m3/day. The optimum extraction is in connection largely with precipitation, extraction (35,000m3/day) in 1995 year that is affected by precipitation of 1994 year (annual precipitation; 550mm) is taken as critical extraction value.

2.0

1.5 ) 1.0

0.5

0.0

-0.5

-1.0

-1.5

-2.0 Normal Years on Precipitation Difference of Lowest WaterLevel (m Lower Limit -2.5 Affected by Hurricane Mitch -3.0 0 102030405060708090100110120 Extraction (1,000 m3/day)

Figure 2.6.6 Lower Limit of Discharge

• Considering extremely drought year and balance of water level at Asososca Lake and at Managua Lake in past years, it is considered that the optimum extraction at Asososca Lake is 30,000m3/day.

2.6.5 Evaluation on Corrosion of Well Casings and Screens

Considering of some previous studies on corrosion of pumps, the examination was conducted in the four wells shown in Table 2.6.2 for confirming the advance of corrosion for water quality.

Table 2.6.2 Examination Sites and Measurement Schedule No. Examination site Depth of Test Setting Schedule of Measurement 1 MANAGUA I E-4 147m to153m Dec. 2004 Mar.2005 Jun.2005 2 MANAGUA I JICA No.1 145m to 151m 8/Oct. (2 months (5 months (8 months 3 MANAGUA II P-6 60m to 66m /2004 later) later) later) 4 MANAGUA II P-16 78m to 84m

Two pieces of each of the three types of metal testing plate were placed in one PVC pipe (2 inch

2 - 57 diameter and 60cm length) and suspended to the certain depth in the 4 wells. A nylon string in a way that they do not touch each other hanged the plates. Three PCV pipes with testing plates were set at a 3m interval of depth in one well.

The each first set in the 4 wells were removed after 2 months on December 2004. This time, test pieces of first sets were recovered after two months and the surface was cleaned by ACETON to remove corroded parts. After this cleaning, the weight was measured. The loss of weight of three metals for corrosion is shown in Figure 2.6.7. While some corrosion or oxidation were observed on the surface of iron and cast iron test pieces, the change of the same level was not observed on stainless steel pieces. (Photo 2.6.1(a)-(d))

Iron Cast Iron Stainless S. Iron Cast Iron Stainless S. Photo 2.6.1(a) JICA No.1(Dec./2004) Photo 2.6.1(b) E-4(Dec./2004)

Iron Cast Iron Stainless S. Iron Cast Iron Stainless S. Photo 2.6.1(c) P-6 (Dec./2004) Photo 2.6.1(d) P-16 (Dec./2004)

Among iron and cast iron test pieces, black significant corrosion was found on the surface of the piece from P-6 well. Test pieces from JICA-1 and E-1 show some degree of oxidation. Almost no change was observed on test pieces of P-16.

The results of measurement shows similar trend found in visual observation. In E-4, less oxidation was found in Cast Iron pieces than Iron pieces. In other wells, no difference was observed between two types of iron. The followings are the summary of the observation. • In ordinary ground water, corrosion or oxidation rarely happens • Oxidation tends to occur in the water of Well E-4 and JICA-1 of Managua I group • Temperature of water of Managua II P-6 was high compared to other wells in the same area. This water causes severe corrosion and need pump material resistant to high temperature. • Stainless steel resists corrosion and oxidation regardless of the type of water in this region.

2 - 58 These are the results of corrosion tests for two months. If the corrosion and oxidation testing is continued for a long period, the results become clearer. Therefore, use of stainless steel pumps in Managua I and for Managua II stainless pump or high resistant material is effective for the prevention of the corrosion and oxidation problem.

0.400

0.350 JICA-1 E - 4 0.300 P - 6 0.250 P-16 0.200

0.150

Corrosion Loss ( g ) LossCorrosion ( g 0.100

0.050

0.000 Iron Cast Iron Stainless Steel

Figure 2.6.7 Results of Corrosion Tests

2.6.6 Future Capability of Existing Water Sources

As discussed in Section 3.3 of Supporting Report No.3 there is no significant problem on the sustainability of existing water sources, therefore, the average of the supply of the last four years (2000-2004) will be used as the potential supply capacity. Proposed pump renewal as well as wells renewal, rehabilitation and relocation will increase the actual production of ENACAL by 10%. Detailed actual production and planned production are shown in Supporting Report No.3, Annex 3.4.

Table 2.6.3 Future Supply Capability (m3/day) Actual Production Planned Production No. Wells Field Comments (m3/day) (m3/day) 1 Asososca Lake 45,800 30,000 2 Managua Uno 45,667 71,000 15 wells 3 Managua Dos 53,603 56,000 16 wells 20 wells excluding 5 wells 4 Zona Baja 92,802 85,817 w/quality problems 14 wells excluding 6 wells 5 Zona Alta 56,532 40,770 w/quality problems 35 wells excluding No. 60, 95 6 Zona Alta Superior 67,778 76,128 and 117 wells which serve the areas outside the study area 7 Ticuantepe & Nindiri 6,966 6,634 4 wells

8 new wells in San Judas area 7,767 7.397 3 wells

9 Sub-total（1 to 8） 376,915 373,747 107 wells + Asososca 12 wells (3 in Sierra Maestra, 2 10 Proposed Wells 0 29,200 in Esquipulas, 5 in Las Jaguitas, 1 in Nindiri and 1 in Ticuantepe) 11 TOTAL (9 + 10) 376,915 402,947 119 wells + Asososca

2 - 59 2.7 WASTEWATER MANAGEMENT SYSTEM

2.7.1 Existing Wastewater Management System

ENACAL Managua is responsible for about 900km of sewers which are separate from the pluvial drainage system which is operated by the municipality. The system comprises of 700km of network of 8 inch diameter and 200km of sewer mains and collectors of 10 to 30 inch diameter. Up to the year 2000 all of the pipes installed were concrete (except for crossing drainage channels where DI pipes were used).

Most of the system is between 40-50 years old and in bad condition. Sewers laid since year 2000 are of PVC and this material will be used for future sewer systems which will use the simplified shallow, small diameter sewer systems as proposed by the Brazilian Team from the World Bank in 1995. Tests using this system are said to have proved satisfactory.

There are no wastewater treatment works in Managua and the effluent is discharged by gravity, directly into Lake Managua via 22 outlets on the shoreline without flap valves. In October 1998, hurricane Mitch caused severe maintenance problems with the introduction of a high amount of silt from the lake.

Sewers in the old city centre are in very bad condition with some sections where the pipe walls have disappeared due to the steep gradients and hence high velocity of the somewhat corrosive effluent. This is also evident on a more minor scale in other parts of the system. Coverage of the supply area is about 60% with a further 30% using pit latrines in the settlements and the remainder using septic tanks which are mainly emptied by 5 private companies direct into the sewers (ENACAL also provides a small emptying service).

ENACAL has little control over the discharge of wastewater into its system and it is hoped to correct this by drawing up regulations via a committee comprised of ENACAL, the municipality, the Ministry of the Environment & Natural Resources, and the presidents of the private companies. All recent new developments in urban areas are equipped with septic tanks.

A Canadian Consultant developed a master plan for the sewerage system in 1995/96 and components based on this plan are being implemented using IDB finance. Some rehabilitation of sewers took place after 1995, and Phase 1 of the new interceptor system is now complete.

Maintenance is carried out by the sewerage section of the Operations Department (see Figure 2.3.1). The major operation & maintenance problems are lack of finance and lack of equipment. This has lead to an increase in corrective maintenance as the system deteriorates and hence there is no possibility of carrying out preventative maintenance.

The workforce numbers 38 and is generally long serving. The sewer and manhole maintenance team has some workers who have been well trained by the manufactures of the sewer cleaning equipment. This knowledge is then passed on to others by on the job training. The Vactor equipment is old, and the Scania equipment has been in use since 1996; the use of both suffers from frequent lengthy vehicle breakdowns. There are other units in the sewerage section for maintenance of connections and installation of new connections, and maintenance of the collectors.

2.7.2 Ongoing Improvement Works

ENACAL currently has an investment program for capital works being implemented totaling US$ 114.53 million. From the list of the projects in Nicaragua in both water supply and

2 - 60 sanitation, it is noted that the Lake Managua and City of Managua Environmental Improvement Program requires an investment of about half of this total amount.

The works include the building of a coastal collector, pumping stations and a wastewater treatment plant. Completion of the project is expected by 2007, and will allow the expansion of coverage of the sewerage system to be increased significantly. Details of the project financing are as follows:

Table 2.7.1 Ongoing Projects in Managua Financier 2004 2005 2006 2007 Total US$ x 1,000 IDB (Loan) 1,581.50 7,261.60 4,769.40 3,679.00 17,291.50 Nordic Fund (Loan) 1,630.50 2,317.40 2,775.50 0.00 6,723.40 KfW (Grant) 10,002.40 7,239.60 5,345.40 5,071.20 27,658.60 Local funds 1,652.80 993.00 1,110.20 539.20 4,295.20 Treasury funds 724.80 520.50 520.40 0.00 1,765.70 Total 15,592.00 18,332.10 14,520.90 9,289.40 57,734.40 Source: IDB

Current situation of the ongoing works:

(1) IDB Loan (Phase II) Sewers & Interceptors

Phase I works which replaces about 20 kilometers of sewers and constructs the first section of the interceptor (with the 2015 capacity of 180,000m3/day) is complete.

Phase II allows for about 20 kilometers of sewers to be replaced or rehabilitated, and a new sewer to be constructed to the new wastewater treatment plant (with the 2025 capacity of 250,000 m3/day). Design by an external consultant commenced in November 2004 and will be completed by June 2005. Design work includes the third and last interceptor for construction in the next phase. Phase II is scheduled for completion by late 2007. Interceptors will be concrete pipes (ASTM 3) of diameters between 30 and 84 inches.

(2) KfW Grant Wastewater treatment plant.

A contract has recently been signed by Biwater ( a UK company) to Design, Build and Operate for a period of 5 years, a wastewater treatment plant comprising of sedimentation, trickle filters, final sedimentation, sludge digester, and effluent discharge to Lake Managua. (with the 2015 capacity of 180,000m3/day). The design period is 6 months followed by a 2 year construction period for completion in 2007

(3) Nordic Fund (FDN loan) Pumping stations

Five pumping stations and the main pumping facility at the treatment works inlet are currently being designed by the same consultant designing the interceptors. Design will be completed by June 2005 and this will be followed by a one year construction period for completion in 2006. The contract will follow international tendering procedures with the supply of plant from Nordic countries.

2 - 61 2.8 REGULATORY, INSTITUTIONAL AND ORGANIZATIONAL ASPECTS

The conceptual framework for the water & sanitation sector has its basis in the government policies as set out in the National Development Plan (PND) and the Strategy for Strengthening Economic Growth and Reduction of Poverty (ERCEP).

A document has now been produced by CONAPAS, for the Government of the Republic of Nicaragua entitled “Sectoral Strategies for Potable Water & Sanitation” (2005-2015) dated December 2004

The document presents the current situation of the sector, the visions at years 2009 and 2015, as well as the strategies and necessary activities to reach the Millennium Goals and the PND. The Strategies consider the main aspects that comprise the sector, such as: the Legal and Institutional Framework, Economics and Finances, Plan of Investments, the Rural Sub-sector, Community Participation and Communication with the Population, Health, Environment and Poverty Reduction, Governance, Investigation and Technological Development and Systems of Monitoring and Evaluation.

This overall strategy has been accepted as the framework for development in the sector and all stakeholders including the regulator and the service providers are required to follow this strategy. This is a significant step in the development in the sector, and the government institutions that comprise the sector are:

The National Commission of Potable Water and Sanitary Sewer System (CONAPAS), is responsible for organizing the fixing of policies, planning and coordination of the water sector, under the general direction of SECEP. CONAPAS is the leading entity of the Sector and is integrated with the following Institutions and Ministries whose chief executives form the Board of Directors: • Secretariat of Coordination and Strategies of the Presidency (SECEP) • Nicaraguan Institute of Aqueducts and Sewer system (INAA) • Nicaraguan Company of Aqueducts and Sewer system (ENACAL) • Ministry of Health (MINSA) • Nicaraguan Institute of Territorial Studies (INETER) • Ministry of natural resources and the Environment (MARENA) • Fund of Social Investment of Emergency (FISE)

Representatives of these institutions and ministries form a Technical Committee which is part of the structure of CONAPAS and meets on a regular basis. The permanent staff is the secretariat soon to be reinforced with sections for Information Systems and Monitoring and Evaluation.

To ensure good communications with civic groups CONAPAS will consult with specialist organizations in the sector, such as the Network of Water and Sanitation of Nicaragua (RASNIC), the Nicaraguan Association of Sanitary and Environmental Engineering (ANISA) and other none governmental organizations. The Organization of CONAPAS is shown in Figure 2.8.1.

2 - 62 Board of Directors

Chief Executives of: SECEP IAA (was INAA) ENACAL INETER MINSA MARENA FISE

Technical Executive Consultative Committee Secretariat Committee Representatives from: Representatives of SECEP Civil Society IAA (was INAA) (None Governmental ENACAL Organizations) INETER Information Monitoring & including: MINSA Systems Evaluation RASNIC MARENA & FISE CONAPAS Permanent Staff ANISA

Figure 2.8.1 Organization of CONAPAS

Most importantly, CONAPAS will arrange consultation meetings with a “Submesa”, of potable water and sanitation, a contact group for consultations in which will participate: a) State Institutions related to the Sector (CONAPAS), the Ministry of Foreign Affairs (MINREX), the Ministry of Finance and Public Credit (MHCP) and others; b) International Organizations (including; BM, BID, JICA, UN, KfW, CONSUDE, etc.) c) Organizations from civil society (including RASNIC ANISA etc.)

The Secretariat of Coordination and Strategy of the Presidency (SECEP), is the entity responsible to preside over CONAPAS and to administer its Executive Secretariat. The mission of SECEP is to prepare the policies, strategies and plans of national strategic development.

The “Intendencia” of Aqueducts and Sewer Systems (IAA), recently succeeded the Nicaraguan Institute of Aqueducts and Sewer Systems (INAA), under law No. 511 of 20th January 2005. This new law created the autonomous state organization “Superintendencia” of Public Services (SISEP) with administrative, functional and financial control of the “Intendencias” of former INAA, INE, TELCOR and a new “Intendencia” for Care of the Users and Customers of the three public service providers (See Figure 2.8.2).

2 - 63 Figure 2.8.2 IAA Organization

SUPERINTENDENCE OF PUBLIC SERVICES (SISEP)

IAA CARE OF USERS AND TELCOR INE (Formerly CONSUMERS OF IAA INE TELCOR INAA)

Audit

Department for Department Department of Department of Services to of Administration Automated Consumers Studies & Finance Systems

Inspection Legal Tariff Environmental Department Department Department Management Department

The Superintendent of SISEP and the Intendents of these Public Services are required to have relevant qualifications for the posts and they will be selected from a list prepared by the State President or the Deputies of the National Assembly for approval by not less than 60% of the National Assembly. There will be a Board of Directors of SISEP comprised of the Superintendent, who will be the board president, and the four Intendents.

Law No. 275 of 1998, the law of reform of INAA, has been revoked. However, IAA retains responsibility for the regulation of the sector, the tariff and the overall control of provision of the services of potable water and sanitation. Under the Intendencia for Care of customers and Users, non-profit making organizations of consumers, users and customers have the right to be represented before the Superintendencia of Public Services in accordance with the new law and its regulations.

The Nicaraguan Company of Aqueducts and Sanitary Sewer system (ENACAL), is the main Operating Company at the national level for Urban Services. ENACAL provides services in the whole Nicaraguan territory, with the exception of some places that are operated locally (e.g. Jinotega and Matagalpa); specifically it provides services to 181 cities and towns with a total of 410,000 registered users approximately at May 2004, of which Managua represents 50%, León and Chinandega approximately (ENACAL West) 16% of the domestic connections and the rest 34% of the domestic connections. See Figure 2.8.3.

As an institution, ENACAL has severe problems in its operating, commercial, and financial systems. Currently, a plan exists to improve the institutional capacity of ENACAL through an IDB loan No. 1049/SF-NI, totaling US $13.9 millions, of which US $11.6 millions will be dedicated to finance a consultant for a Service Contract and investments in equipment. The

2 - 64 contract is for a period of 5 years and covers all the regions where ENACAL provides services, and is scheduled to commence in the near future.

The objectives of the Contract are to support in the short-term the modernization of ENACAL with a program of institutional and managerial strengthening that will allow it to implement high-priority work, to improve the provision of services, the operational efficiency and the financial income, with integral and sustainable solutions.

The Fund of Social Investment for Emergency (FISE), is the State Institution that takes charge of coordinating the rural sector of potable water and sanitation in the execution of investments.

The Ministry of Health (MINSA), is the entity responsible to oversee the hygiene conditions of the provision of the service of potable water and sanitation, especially regarding the quality of the water for human consumption.

The Ministry of the Environment and Natural Resources (MARENA), is the Ministry in the sector to look after the preservation of water resources, the sources of potable water in the hydrographical basins and the bodies of water that receive the discharge of the treated waste waters. Equally, it has the responsibility to undertake environmental campaigns that are able to increase the awareness of the population on the efficient use of water and the protection of the hydrographical basins.

The Nicaraguan Institute of Territorial Studies (INETER), is in charge of making an appropriate inventory of the water resources that potentially are sources of potable water, as well as to prepare the urban planning required for the formulation of projects of expansion of networks of potable water and of sanitary sewer systems. Equally, it has the responsibility of looking after the aspects connected with the reduction of the vulnerability of the systems of water and sanitation in connection with the occurrence of extraordinary events.

The government national institutional structure for the water and sanitation sector is shown in Figure 2.8.4. Other institutions directly connected with the water sector are:

The Municipalities, the municipalities will gradually assume greater responsibilities and they will have a greater involvement in the management of the services of potable water and sanitation.

The Association of Municipalities of Nicaragua (AMUNIC), representing all municipalities.

The “Submesa” of potable water and sanitation (as detailed above).

The National Commission of Hydraulic Resources (CNRH), is responsible for the zone to look after the surveillance and preservation of the utilization of water resources as sources of water for human consumption.

The National System of Prevention of Disasters (SINAPRED), is the Institution that takes charge to improve the conditions of preparation and attention due to emergencies from the occurrence of natural events.

Special Organizations in the Sector, such as Network of Water & Sanitation of Nicaragua (RASNIC), The Association of Sanitary and Environmental Engineers of Nicaragua (ANISA) and other NGO’s to be consulted on aspects of the sector.

2 - 65 Human Financial Services & Imports & Resources Purchases Finance & Finance Management Department Administration & Digital Systems & Systems Cartography Department Development Organization Commercial Info Commercial ReEng & Control South North Leon Department Managua Commercial Settlements RANN/RAAS Orient (East) Chinandega Auditor Occidental (West) Legal Advisor High Users/Debtors Care Section Billing & collection Technical to districts Customer Energy PRRAC Improvements Department MAJICO Drainage Central Lab. SANEBAR I SANEBAR Department Water Quality Management PROMASAPA Environmental General Manager General Board of Directors of Board Executive President Assistant to ExecutiveAssistant President Projects in Progress Finance Water & Water Bluefield Project & Sewerage Engineering Department Investments Administration Rural Pipelines Well Construction Information Internal Control External Advisor External Works Sewerage Metering & Distribution Mech & Elec Sewerage Operations Department Potable Water Instrumenation Lake Managua RCB NSRCB Madriz North South (West) Occidental RAAN/RAAS Orient (East) Training Training Planning Quality & Quality Planning & Planning Department Productivity Development Figure 2.8.3 Figure Organization ENACAL

2 - 66

Government of Nicaragua

Environmental Health Water & Sector Sector Sewerage MARENA MINSA Sector

Policy & Provision of Economic Regulations Rural INETER Strategy Services Regulator & Standards Sector Water CONAPAS ENACAL IAA FISE Resources & through under Urban Planning SESEP SISEP IAA

ENACAL Private Municipal Empresas All other areas CAPS Empresas Management Departmentales in Nicaragua MIFIC

A few small A few small 35,000 410,000 About MINSA Empresas are Municipalities connections connections 4,800 operated operate AMAT- nation wide Committees MARENA privately under the EMAJIN distributed as participate direction of (Matagalpa shown below mainly in ENACAL & Jinotega) Rural areas Managua 50%

Occidental (West) (Chinandega and Leon) 16%

Orient (East) RAAN/RAAS North South 34%

Figure 2.8.4 National Institutional Structure Water & Sanitation Sector

2 - 67 2.9 FINANCIAL ASPECTS

2.9.1 Present Conditions of Financial System Structure

The financial system of ENACAL is all brought under one umbrella of the computerized “Administrative and Financial System”. Among 16 Departments and two Autonomous Districts in the country, ENACAL manages water supply and sewerage systems in 14 Departments and two Autonomous Districts except Jinotega and Matagalpa Departments.

ENACAL establishes branch offices called as “Sucrusal” in the respective administrative areas concerned, which are located in their capital towns as called “Municipio”. Each branch office has a computer expert of financial system, who sends the following data of the water supply and sewerage sanitation systems in the department every month: billing, receivables, purchasing, check, inventory of fixed assets, payroll, etc. Managua Department among 14 Departments and two Autonomous Districts has the largest water supply and sewerage sanitation system among these Sucrusals. As a matter of course, the water supply and sewerage sanitation system of Managua City in Managua Department is the largest in ENACAL’s entire systems.

The central office of ENACAL compiles the financial data and information from the respective Sucrusals into the consolidated financial statements of ENACAL every month. The Departments and Autonomous Districts do not have any crosslink information system among them. In coming few years, the management system including financial system will be modernized through the project of “Program to Modernize the Management of Water and Sewerage Services” by IDB and OPEC.

2.9.2 Financial Statements of Managua Water Supply System

(1) Financial Statements of ENACAL

The financial system of ENACAL is completely centralized in the head office in Managua City. Since any financial statements of branch service systems are not compiled in the computerized financial system, it is impossible to get the respective local department financial data and information at present.

The financial statements of ENACAL in the latest three years between 2001 and 2003 were shown in Tables 2.9.1 to 2.9.3. They were based on the external audit documents. Table 2.9.1 shows balance sheet (B/S). The total assets were aggregated to C$3,070 million in 2003. Of the total assets, the fixed assets accounted for C$2,697 million or 88%. This structural proportion is reasonable as a water supply and sanitation enterprise.

2 - 68 Table 2.9.1 Balance Sheet of Water Supply and Sewerage Services in ENACAL: 2001-2003 (Unit: C$ Million) Item 2001(1) 2002(1) 2003(2) I. Assets 3,078.01 3,328.00 3,069.64 1. Fixed Assets 2,572.24 2,891.07 2,696.97 (1) Land 212.60 213.05 337.22 (2) Plant & Equipment 2,696.16 2,652.22 3,366.06 (3) Construction in Progress 815.09 1,292.73 262.23 (4) Accumulated Depreciation -1,151.61 -1,266.93 -1,268.53 2. Current Assets 489.05 435.49 370.16 (1) Cash & Bank Deposits 73.83 48.07 12.65 (2) Transitory Investment 2.36 48.13 83.52 (3) Account Receivable 343.88 252.95 205.01 1) Water Supply & Sanitation Services 360.51 386.83 468.81 2) Other Account Receivable 129.09 71.21 17.10 3) Allowance for Doubtful Account -145.72 -205.09 -280.89 (4) Inventories 53.54 84.05 66.50 (5) Advance Payment 15.43 2.29 2.48 4. Other Assets 16.73 1.43 2.50 II. Liability and Capital 3,078.01 3,328.00 3,069.64 1. Capital 1,969.40 2,023.65 1,524.30 (1) Equity 1,742.27 1,957.76 1,373.47 (2) Surplus of Assets Revaluation 590.40 590.40 847.59 (3) Accumulated Surplus/Loss -363.27 -524.50 -696.76 1) Profit or Loss for the Year -152.01 -255.60 -172.15 2) Profit or Loss for the Previous Years -276.10 -363.27 -524.50 3) Adjustment of Loss for the Previous Years 64.85 94.36 -0.10 2. Liability 1,108.61 1,304.34 1,545.34 (1) Fixed Liability 877.83 949.46 1,100.95 1) BID*1 631.42 722.05 814.46 2) Nordico Fund (FND*2) 83.62 95.71 111.29 3) Other Fixed Debts 187.03 198.64 254.24 - Less: Portions of Short-Term Debts in items 1 -58.71 -103.31 -153.00 4) Labor Reserve 34.47 36.37 73.96 (2) Current Liability 230.78 354.88 444.39 1) Short-term Debt 58.71 103.31 155.95 2) Credit Providers 8.72 32.47 47.79 3) Others 163.34 219.11 240.64 Source: (1) Estados Financieros al 31 de diciembre del 2002 y 2001, June 2003, Grant Thornton (2) Informe de Auditoria Financiera y de Cumplimientio por los Anos Terminados al 31 Diciembre de 2003 y 2002 Remarks: *1 Banco Ineramericano de Desarrollo *2 Fondo Nordico para el Desarrollo ENACAL has recorded the huge amount of account receivable as shown in Table 2.9.1. The total amount of water supply and sanitation services was aggregated to C$469 million at the end of 2003. The central government already decided to subsidize the accumulated accounts receivable privileged to the following obligors: public universities, municipal government offices in Managua, and pensioners. By the end of 2006, the central government will clear off them to ENACAL. The total amount was estimated as around C$48 million as of 2002. In addition, ENACAL itself is planning to collect a half of the rest accounts receivable within 24 months, according to the IDB report.

In 2003, the balance sheet of ENACAL reported C$1.52 billion of capital. Of the capital, donation and contribution accounted for C$1.37 billion or 90%. Most of them might come from foreign countries and international organizations as grant. In the same balance sheet, the

2 - 69 outstanding of fixed liability of ENACAL was C$1.1 billion. It was broken down as follows.

Inter-American Development Bank (IDB) C$814 million Nordic Fund C$111 million French Government C$90 million OPEC C$77 million Austrian Government C$42 million Others C$44 million (Less: Portions of Short-Term Debts) -C$153 million

Table 2.9.2 Profit and Loss Table of Water Supply and Sewerage Services in ENACAL: 2001-2003 (Unit: C$ Million) Item 2001(1) 2002(1) 2003(2) I. Revenue 674.80 766.80 679.96 1. Sales Revenues 671.85 671.94 695.32 (1) Water Supply 582.23 583.25 608.02 (2) Sewerage Services 89.63 88.69 87.30 2. Service Reduction -36.79 -50.56 -43.83 3. Financial Revenue 11.15 10.32 9.24 4. Other Revenues 28.58 135.10 19.22 II. Expenditure 826.81 1,022.40 1,056.87 1. Operating Expenses 196.76 225.00 324.56 2. Maintenance Expenses 174.02 164.03 97.58 3. Expenses of Sales 135.58 135.64 175.27 4. Expenses of Administration 114.29 100.41 204.58 5. Depreciation 120.75 115.34 114.20 6. Financial Expenditures 75.27 91.84 137.44 7. Other Expenses 10.14 190.15 3.25 III. Balance of the Year -152.01 -255.60 -376.91 IV. Subsidy for Losses of Previous Years 204.76 V. Accumulated Deficit 1. Balance for the Previous Years at Beginning of the Year -276.10 -363.27 -524.50 2. Adjustment of Loss for the Previous Years 64.85 94.36 -0.10 3. Balance of Accumulated Deficit at End of the Year -363.27 -524.50 -696.76 Source: (1) Estados Financieros al 31 de diciembre del 2002 y 2001, June 2003, Grant Thornton (2) Informe de Auditoria Financiera y de Cumplimientio por los Anos Terminados al 31 Diciembre de 2003 y 2002

As shown in the profit and loss (P/L) table of Table 2.9.2, the operation results of ENACAL have created the deficit for long time. The annual deficits were C$152 million in 2001, C$256 million in 2002 and C$377 million in 2003. At the end of the fiscal year 2003, the accumulated deficit was aggregated to C$697 million, although ENACAL had received subsidies (C$205 million) for losses of previous years.

2 - 70 Table 2.9.3 Cash Flow Table of Water Supply and Sewerage Services in ENACAL: 2001-2003 (Unit: C$ Million) Item 2001(1) 2002(1) 2003(2) I. Net Flow of Operation Activity 1. Net Losses of the Year -152.01 -255.60 -172.15 2. Adjustment to Reconcile Net Losses with Actual Operation Activities (1) Depreciation 120.75 115.34 114.20 (2) Provision for Account Uncollectible 46.56 59.36 75.81 (3) Loss due to Devaluation of Loans 49.63 55.13 - (4) Other Adjustments - - 403.68 (5) Change in Assets & Liabilities 1) Increase (Decrease) of Account Receivable -141.09 31.57 -27.87 2) Increase (Decrease) of Advance Payment -11.55 13.14 -0.19 3) Increase (Decrease) of Inventory 8.02 -30.51 17.55 4) Increase (Decrease) of Other Assets -11.61 15.30 -1.07 5) Increase (Decrease) of Credit Providers -44.69 23.74 15.33 6) Increase of Interest Payment 66.66 34.32 47.90 7) Increase of Deposits for Guarantees 1.51 7.23 1.07 8) Increase (Decrease) of Account Payable -10.35 19.06 -50.04 9) Increase of Labor Reserve 1.64 1.90 37.59 10) Increase (Decrease) of Notes Payable 17.89 -4.85 22.60 Cash Procurement (Utilization) in Operation Activity -58.65 85.14 484.41 II. Cash Flow of Investment Activities 1) Increase of Property, Plants and Equipment -383.82 -434.16 -3.77 2) Increase (Decrease) of Transitory Investment 1.85 -45.77 -35.39 Net Cash Utilization in Investment Activities -381.97 -479.93 -39.16 III. Cash Flow in Financial Activities 1) Increase of Loans 13.98 69.73 167.52 2) Increase of Equity 400.57 215.49 -585.26 3) Increase of Adjustment for Previous Years 64.85 94.36 -0.10 Cash Flow Procurement for Financial Activities 479.40 379.58 -417.84 Increase (Decrease) of Net Cash Amount 38.77 -15.21 27.41 Balance at the Beginning of the Year 35.11 73.88 58.67 Balance at the End of the Year 73.88 58.67 86.08 Source: (1) Estados Financieros al 31 de diciembre del 2002 y 2001, June 2003, Grant Thornton (2) Informe de Auditoria Financiera y de Cumplimientio por los Anos Terminados al 31 Diciembre de 2003 y 2002 Nore: Some figures in the table above were revised on the B/S and P/L.

Table 2.9.3 shows the cash flow (C/F) statements for the recent three years. As shown in the table, the actual operation activities in 2001 and 2002 had a comparatively small change like –C$59 million in 2001 and C$85 million in 2002. Most of investment activities were covered by financial activities, particularly by donations and contributions. On the other hand, since the financial activities went down to –C$418 million in 2003, the investment activities shrank suddenly. It was covered by the adjustment to reconcile this reduction with the actual operation activities.

(2) Financial Statements of Managua Water Supply System

In order to compile financial statements of water supply service in Managua City, the study team set up the following given conditions and assumptions. 1) Financial statements of Managua City compiled by ENACAL were used as basic data, which including both water supply and sewerage services. 2) Financial statements of water supply service were compiled as differences of the total

2 - 71 service figures and the sewerage figures. The general figures were allocated in proportion to ratios of water supply and sewerage services in the respective management divisions. 3) The capital and liabilities of water supply in Managua City were also constituted to be proportionate to ENACAL’s entire composition. 4) Financial revenue and other revenue were counted for the revenues for water supply, because these revenues did not generated in the sewerage services. 5) Since the extraordinary gains and losses occurred in relation to assets and liabilities, these figures were divided proportionally based on the ratio (84%:16%) of asset values between water supply and sewerage treatment in 2002. 6) The expenses of “Registration and Tariff Collection” and “Cost Center” in the original P/L table were together brought into the expenses of “Sales” in the F/L revised. In the same manner, the expenses of “Administration” and “Finance and Others” were brought into those of “Administration”.

The financial statements of water supply services only in Managua City were compiled as shown in Table 2.9.4, based on the given conditions and assumptions mentioned above.

The sales amount of water supply and sewerage sanitation services in Managua City in 2003 was C$359 million. That of water supply services was C$318 in the same year, accounting for 89% of the total service revenue in Managua City. In the same manner, its percentages were 83% in 2001 and 84% in 2002. Then, the percentage was around 85% as an average of the fiscal years 2001 to 2003. Furthermore, the operational performance of water supply service in Managua city accounted for 47% of that of the entire ENACAL in 2003. These ratios shifted to 45% in 2001 and 38% in 2002. Then, the sales scale of water supply service only in Managua City accounted for 43% of the total ENACAL’s revenue.

2 - 72 Table 2.9.4 Financial Statement of Water Supply Services in Managua City: 2001-2003 (Unit: C$ Million) Item 2001 2002 2003 Balance Sheet I. Assets 797.66 1,043.92 339.38 1. Fixed Assets 638.89 811.69 218.87 (1) Land 10.40 10.50 10.60 (2) Plant & Equipment 565.86 680.21 621.54 (3) Construction in Progress 425.00 516.43 15.79 (4) Accumulated Depreciation -362.37 -395.45 -429.06 2. Current Assets 158.04 231.50 119.78 (1) Cash & Bank Deposits 15.08 10.18 0.19 (2) Transitory Investment -1.34 -0.97 0.00 (3) Account Receivable 225.02 278.23 341.42 (5) Allowance for Doubtful Account -131.33 -115.19 -235.67 (6) Inventory 13.47 13.07 0.00 (7) Other Current Assets 37.15 46.18 13.83 4. Other Assets 0.73 0.73 0.73 II. Liability and Capital 797.66 1,043.92 339.38 1. Equity 631.61 759.89 241.78 (1) Equity 762.02 899.94 484.61 (2) Accumulated Surplus/Loss -130.41 -140.05 -242.83 1) Profit or Loss for the Year -15.11 -9.64 -102.78 2) Profit or Loss for the Previous Years -115.30 -130.41 -140.05 2. Liability 166.05 284.03 97.59 (1) Fixed Liability 131.48 206.75 69.53 (2) Current Liability 34.57 77.28 28.06

Profit and Loss Table I. Revenue 302.63 288.56 318.42 1. Sales Revenues 317.31 316.77 342.66 2. Service Reduction -24.81 -35.47 -26.94 3. Financial Revenue 8.15 4.91 0.09 4. Other Revenues 1.98 2.35 2.61 II. Expenditure 317.99 284.17 405.34 1. Operating Expense 52.29 62.69 146.13 2. Expense of Maintenance 143.52 140.93 81.81 3. Expenses of Sales 85.93 36.98 126.62 4. Expenses of Administration 1.42 8.29 17.16 5. Depreciation 33.23 33.08 33.61 6. Financial Expenditure 1.60 2.20 0.03 III.Balance of Ordinary Gains and Losses -15.36 4.39 -86.92 IV.Extraordinary Gains and Losses 0.26 -14.03 -15.86 V. Balance of the Year -15.11 -9.64 -102.78 VI.Accumulated Deficit 1. Balance for Previous Years at Beginning of the Year -115.30 -130.41 -140.05 2. Balance of the year -15.11 -9.64 -102.78 3. Balance of Accumulated Deficit at End of the Year -130.41 -140.05 -242.83

ENACAL had a deficit of C$377 million in 2003, as shown in Figure 2.9.1. In the same way, Managua City recorded deficit of C$53 million in the same year. Furthermore, the water supply service of Managua City also recorded deficit of C$87 million, which was larger than the performance of water supply and sewerage services of Managua City. This means that the water supply service had deficit on its performance but that the sewerage services could have surplus in 2003.

2 - 73 800 680 Unit: C$ Million 600 359 400 318

200 100% 53% 47% 0 ENACAL Managua City Managua City (W/S only) -200 -53 -87 -400 -377 -412 -405 -600

-800

-1,000 -1,057 Revenue Expenditure Balance -1,200

Figure 2.9.1 Business Performance of ENACAL, Managua City and Water Supply Services in Managua City: 2003 As mentioned above, although the water supply service of Managua City recorded deficit in 2003, it had some surplus on its ordinary performance in 2002, as shown in Figure 2.9.2. The increment of surplus in 2002 was attributed to cost savings of the sales division as shown in Table 2.9.4. On the other hand, the deficit in 2003 was attributed to cost increase of the both divisions of operation and sales. Thus, ENACAL is not stable on financial performance not only in Managua City but also in the entire ENACAL. This was because ENACAL itself is still under the way of organizational reform since taking over water supply and sewerage treatment services from INAA.

2.9.3 Management Characteristics

On the basis of the financial statements, the financial analysis was conducted to characterize the water supply service in Managua City. As a result of the analysis, several management indices are calculated for improvement of the water supply management. Table 2.9.5 shows management indices calculated through the analysis. The management conditions in 2001 to 2003 were discussed from the following points of view: profitability, safety, productivity and soundness.

2 - 74 400 318 303 289 300

200

100 4 0 2001-15 2002 2003 -100 -87 -200

-300 -284 -318 -400 Revenue Expenditure Balance Unit: C$ Million -405 -500

Figure 2.9.2 Transition of Operational Performance of Water Supply Service in Managua City: 2001-2003

The water supply service of ENACAL has to be managed in the same rational and effective manner as a private business is managed in private market. Thus, the management should introduce a private management system and establish management targets based on objectively quantitative data and information. Management indices of water supply service are one of the most effective sources compiled authentic sources. In the table, the indices of Japanese indices of water supply service are listed as statistical standard data of the water supply business in Japan.

The profitability was evaluated through the indices of No.1 index of “ratio of net operation profit to total capital” and No.2 of “turnover of total capital” in the table. The first index was worse than the Japanese index. The second index was better than the Japanese one. This is because the total capital is small as compared with that of the Japanese case. One of the main reasons of the small capital is the accumulated deficit which resulted in the scale-down of the capital. No.3 index of “ratio of net expense to net sales amount” was much worse than the Japanese index. The index of more than 100 means that the net expense is more than the net sales amount, i.e., a negative spread condition. The more sales of water, the more ENACAL increases deficit.

The safety was judged from the indices of No.4 to No.8 in the table. The ratios of fixed assets were checked through No.4 of “fixed asset ratio” and No.5 of “ratio of fixed assets to long-term capital”. The former ratio is desirable to be less than 100%. Even if the former ratio were in worse condition but if the latter ratio were less than 100%, the safety might be fair within the permissible range of safety. As shown in the table, the index of No4 was not in good condition, but the index of No.5 was less than 100%. Thus, the management of fixed assets is in fair condition. Although the index shows better condition in terms of fixed assets, the total amount of the fixed assets seems to be too small because of little investment for replacement and reproduction.

2 - 75 Table 2.9.5 Management Indices of Water Supply Service in Managua City: 2001 to 2003 Index in No. Item Unit 2001 2002 2003 Japan*4 1. Ratio of Net Operating Profit to Total Capital % - 0.58 - 0.67 2. Turnover of Total Capital 0.46 0.37 1.31 0.13 3. Ratio of Net Expense to Net Sales Amount % 109 101 128 95 4. Fixed Assets Ratio % 101.2106.8 90.5 182.6 5. Ratio of Fixed Assets to Long-term Capital % 83.7 84.0 70.3 94.5 6. Current Ratio % 457 297 427 302 7. Turnover of Account Receivable 1.3 1.0 0.9 7.9 8. Ratio of Depreciation to Fixed Assets % 5.9 4.9 5.4 3.4 9. Annual Production per Employee *1 454 462 571 5,706 10. Unit Price C$/m3 4.8 4.6 5.1 19.7 11. Unit Production Cost C$/m3 5.2 4.6 6.6 18.8 12. Utilization Ratio of Fixed Assets *2 205 166 663 1.0 13. Monthly Compensation per Employee *1 6.1 6.4 8.0 - 14. Ratio of Compensation to Net Sales Amount % 16.1 16.5 16.9 19.3 15. Number of Employees per Water Supplied *3 1.8 1.6 1.4 1.2 Note: *1: C$1000/Person; *2: m3/C$1000; *3: Persons/1000m3/day; *4: In 2001 except No.10 and 11 in 2002

Yet, No.7 index of “turnover of account receivable” was quite worse as compared with the Japanese index. It indicates speed of bill collection. A period of bill collection is calculated applying the following formula: Period of Bill Collection = 365 days / Turnover of Account Receivable. Applying this formula, the index of 1.0 means that it takes one year to collect the whole account receivable. Thus, the ratio should be improved as soon as possible for financially safety purpose. Incidentally, the index of 7.9 of Japanese case means almost 1.5 months for collection.

The ratio of depreciation to fixed assts (No.8) shows a size of depreciation against a book value of fixed assets depreciable. An inverse number of the ratio, then, shows an average economic life of fixed assets. For instance, 5.4% in 2003 indicates around 19 years of economic life. Furthermore, the fixed assets have already depreciated around 70% of the total value in 2003, although this percentage in Japan was around 32% on average in 2002. Thus, this is proof that new investment and replacement works might be delayed or stagnant from the standard schedule.

The productivity was evaluated through the indices of No.9 to No.15. The index of No.10 “Unit Price” was C$4.8/m3 in 2001, C$4.6/m3 in 2002 and C$5.1/m3 in 2003 was obviously smaller than the ENACAL’s public announcement price of C$5.8/m3 in 2004, even if annual inflation rates is considered. This means that the average water price in Managua City was set in lower level. Furthermore, the index of No.11 “Unit Production Cost” shows larger than the unit prices in the respective years. This is again another evidence of the negative spread condition in water supply service in Managua City.

As shown in the number of employees per water volume supplied in No.15 index, the number of staff for water supply seems to be large as compared with the Japanese average. As shown in the table, it decreased from 1.8 persons per 1,000 m3 per day in 2001 to 1.4 persons per 1,000 m3 per day in 2004, but it was still more than the Japanese average. Thus, the number of employees should be reduced taking into account of the Japanese standard.

The soundness of financial system is assessed through the indices of profitability, safety and productivity. The sound financial conditions are not only for these indices to attain in good results but also to be in good balance among these indices. Since the indices were analyzed taking account of the Japanese ones, the evaluation results may not always be pertinent to ENACAL’s conditions. The management principle is something common in the business

2 - 76 world. These indices should be utilized properly to manage soundly the water supply business. ENACAL is said to carry out reasonable high-scores of bill-collection rate, i.e., 88% to 91% in recent years. In spite of that, ENACAL’s water supply service in Managua City recorded the total amount C$341 million of account receivable in 2003 (refer to Table 2.9.4). ENACAL has already announced for improvement of financial condition as follows. Among the total account receivable, some amounts (around C$48 million) of the diverse receivable account were already decided to be paid by the central government. Other portions were still doubtful in terms of collection. C$170 million or 37% of the total amount was reported as those uncollected before 2000. Furthermore, it is said that 45% of the total amount might be uncollectible, according to the IDB report of “Management Development Report”. In terms of Managua City, the detail segregated figures of account receivable are not clear in its financial statements. However, the situation of outstanding account receivables might be almost same as the total ENACAL. The large amount of accounts receivable always gives problems of cash flow to the management.

2.9.4 Water Production Costs

Water production costs of ENACAL were estimated in Table 2.9.6, which were based on the total production volume of water and O&M costs. Unit production costs during three years from 2001 to 2003 in the table were larger than the average unit prices, as mentioned before. The average unit prices were much smaller than the corresponding unit production costs, except 2002.

In 2003, the water production cost was C$7.2/m3 and the unit price was C$5.1/m3, as shown in the table. These figures were based on water volume of 61.5 million m3 per annum, which were sold to consumers. In the production bases, ENACAL produced 145.0 million m3 per annum. Then, its production cost was calculated as C$3.1/m3 at the plant side. Around 57% of the production was lost as non-revenue water. Anyhow, if ENACAL expected to attain a net profit of 15% under the present management conditions, it might increase the total sales’ amount of C$650 million from C$316 million in 2003, corresponding to 127 million m3 of annual volume or 100% more than 61.5 million m3 sold in 2003. It might be impossible for ENACALL to attain this target at the present water market. Thus, ENACAL seems not to have a profitable financial constitution in its management.

2.9.5 Water Tariff System

(1) Current Water Tariffs in Managua City

In principle, ENACAL collects water charges on the basis of meter-rate system. The present water tariff consists of two lines, i.e., standing and variable charges, as shown in Table 2.9.7. The tariff is classified into four categories: (a) domestic users’ group subsidized internally, (b) general residence, (c) residence along trunk roads, and (d) other users such as industrial, commercial and institutional users. The unit rates are set by the categories above and by water volume consumed. Figure 2.9.3 shows the monthly water charges by category and by water consumed.

2 - 77 Table 2.9.6 Unit Price and Production Cost of Water in Managua City: 2001-2003 Item Unit 2001 2002 2003 1. Management Data Production Million m3 131.11 134.72 145.06 Sold Volume Million m3 61.25 61.45 61.54 Non-Revenue Water Million m3 69.87 73.28 83.51 Effectivity % 46.71 45.61 42.43 Employees Persons 758 713 650 Active Connection Nos 155,905 164,865 169,843 No. of Employees per Connection Nos 4.86 4.32 3.83 2. Sales C$ Million 292.50 281.30 315.72 Water Sales C$ Million 317.31 316.77 342.66 Service Reduction C$ Million -24.81 -35.47 -26.94 3. Average Unit Price (1) Unit Price per Sold Water C$/m3 4.78 4.58 5.13 (2) Unit Price per Production C$/m3 2.23 2.09 2.18 4. Production Costs C$ Million 368.40 327.25 445.49 (1) Direct Costs of Water Production C$ Million 228.46 236.14 260.98 1) Operation C$ Million 145.03 139.95 183.82 a) Water Production C$ Million 120.39 118.43 55.03 a) Water Distribution C$ Million 0.45 0.28 0.11 a) Operation C$ Million 24.19 21.24 128.67 2) Maintenance C$ Million 22.40 21.76 23.65 3) Depreciation C$ Million 32.65 32.52 33.06 4) Others C$ Million 28.38 41.90 20.46 (2) Managerial Expenditure C$ Million 139.94 91.12 184.51 1) Sales C$ Million 85.93 36.98 126.62 2) Administration C$ Million 1.42 8.29 17.16 3) Depreciation C$ Million 0.59 0.56 0.55 4) Financial Expenditure C$ Million 1.60 2.20 0.03 5) Transfer to Central Level C$ Million 50.41 43.09 40.16 5. Unit Production Cost (1) Unit Production Cost per Sold Water 1) Direct Cost Costs Only C$/m3 3.73 3.84 4.24 2) Total Cost C$/m3 6.02 5.33 7.24 (2) Unit Production Cost per Produced Water 1) Direct Cost Costs Only C$/m3 1.74 1.75 1.80 2) Total Cost C$/m3 2.81 2.43 3.07

The tariff was set up into four categories mentioned above through modification of the average prices of C$5.58/m3, equivalent to around US$0.36/m3. The tariff rates are so low that the water charges can not cover the full costs of water production, as discussed in the previous section.

Yet, a domestic user, who is not classified in the four categories due to no water-meter installed, is charged in a fixed rate of C$55.86/month/household equivalent to water consumption of 26 m3/month. These users might consume domestic water of much more than 26 m3/month because of no metering condition. This condition is said to cause one of the most serious water waste for ENACAL.

2 - 78 Table 2.9.7 Water Tariff in Managua City: 2004 Category Standing Charge Variable Charge (C$/m3) (C$/Connection/month) Range of Water Consumption Water Rate Sewerage Rate Domestic Users 1. Subsidized Group 1.06 Less than 20 m3/month 1.99 0.77 More than 21 m3/month 2.50 0.99

2. General Residence 4.24 Less than 20 m3/month 3.54 1.06 Between 21-50 m3/month 5.88 1.46 More than 51 m3/month 10.48 3.45

3. Residence along 8.56 Less than 20 m3/month 5.88 1.69 Trunk Roads Between 21-50 m3/month 5.88 1.69 More than 51 m3/month 13.20 4.27 Non-domestic Users 4. Other Users Industrial, Commercial and Institutional Users 8.56 Less than 50 m3/month 6.76 1.69 More than 51 m3/month 14.49 4.27

Source: ENACAL The present tariff made ENACAL a small net operation profit in 2002, but brought about again a deficit in 2003. The profit was too small to solve the accumulated deficit for the previous years. ENACAL is planning to revise the water tariff. In order to revise the tariff, ENACAL has to get permissions from the Parliament and President Office as well as INAA. The procedure for revision of the tariff requires a long time.

Water meter reading is conducted by meter readers once a month for the respective consumers. The bills of water volume metered are prepared with a computer system and distributed to the respective consumers. The consumers can pay the water charge through banking network, directly to the water reader, or pay at a cashier’s window of ENACAL’s branch offices. Some of consumers, however, seem not to pay their water charge without delay. This causes that ENACAL’s account receivable was considerably large as discussed in the previous sections. Considerable percentage of account receivable is said to be attributed to arrearages of public agencies of the government.

In addition, most water consumers install a water meter to connect to the water distribution piping network of ENACAL. After signing a contract with ENACAL, the consumer installs connection pipes including the water meter at his own expense. In 2004, an average cost of new 13mmø connection installment was around C$400 per unit plus C$50 for guarantee. Its actual cost depends on the site conditions of a new consumer. As a result, a larger diameter connection needs higher installation cost. The meter installation charge rate is tabulated in Table 2.9.8.

2 - 79 800

700

) 600

500

400

300

Water Charge (C$/month Charge Water 200

100

0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 Water Consumption (m3/month)

Category 1 Category 2 Category 3 Category 4 Figure 2.9.3 Present Water Charge by Tariff Category

Yet, a new consumer has to pay for the laying down of water meter with piping and valves, in addition to a water meter itself. Thus, its total cost is said to be around US$125 on average, which is much larger than the water meter installation charges. Nevertheless, this installation charge would be heavy burden for low-income families. This is one of reasons why the metered tariff system does not penetrate into low-income areas. For the low-income people, thus, a counter-measure for alleviating financial burden might be essential to promote the metered tariff system in Managua City.

Table 2.9.8 Water Meter Installation Charge: 2004 Connection Charge Deposit for Guarantee Connection Diameter (C$) (C$) 1. 13 mmø 400 50 2. 20 mmø 550 100 3. 25 mmø 750 150 4. 40 mmø 3,500 700 5. 50 mmø 5,000 1,000

Source: ENACAL Note: *1 A consumer is charged C$30 for each transfer of the title. *2 Aconsumer is charged C$50 for each reconection.

(2) Trend of Average Water Rate

According to ENACAL, the trend of national average water rate based on tariff of ENACAL is shown in Table 2.9.9. In 1997, the average water rate was set at C$2.78/m3. As of 2004, the average water rate was C$5.58 kip/m3 or around two times more than that in 1997.

2 - 80 Table 2.9.9 National Average Water Rate Year National Average Water Rate CPI C$/m3 US$/m3 (1999=100)

1997 2.78 0.29 79.5 1998 3.44 0.33 89.9 1999 4.31 0.36 100.0 2000 5.14 0.41 111.5 2001 5.18 0.37 113.8 2002 5.45 0.37 118.4 2003 5.58 0.36 124.5

Source: ENACAL and CBN On the other hand, a consumer price index (CPI) in 1997 was 79.5 (base: 1999=100) and rose up to 124.5 in 2003, as shown in Table 2.9.9. Then, an inflation rate during the period was around 1.56 times. Thus, the increase rate (2 times for 6 years from 1997 to 2003) of the average water rate was higher than the inflation rate (1.56 times for the same period). The water rate is going ahead of the inflation rate, as shown in Figure 2.9.4. The water consumers might be disaffected toward water price comparatively increasing in price.

According to the sales records, a household in medium income class consumes in Managua City around 26m3/month on average in 2003. That household is charged C$110.32/month for potable water based on the present tariff. INEC-EMNV shows that an average household expenditure was C$66,980/annum on average in 2001, according to the “Informe General 2001, INEC”. This annual expenditure was converted to C$73,280/annum in 2003, applying the CPIs of 113.8 in 2001 and 124.5 in 2003. This is equivalent to C$6,100/month in 2003. Accordingly, the water expense of the typical household accounted for 1.8% of the monthly expenditure. This rate was almost the same as that in the said survey, which was calculated as 1.8%, i.e., C$1,214 of water over C$66,975 of the total expenditure. Since the monthly expenditure is assumed to be equal to the monthly disposable income, this percentage is much lower than the benchmark of the upper limit supported by many donors. The benchmark is proposed as 3 ~ 5% of the range of disposable income. Thus, the water rate itself is considered to be at lower level than other commodity prices.

2 - 81 300

250 196 201 201 186 185 (5.45) (5.58) (5.58) (5.14) (5.18) 200 155 (4.31) 124 150 (3.44) 100 (2.78)

100 Price Index (1997=100)

0 1997 1998 1999 2000 2001 2002 2003 2004 Year

Average Water Rate (Index, (C$/m3)) CPI of Managua City

Figure 2.9.4 Trend of Average Water Rate and CPI

(3) Comparison of Water Tariff in Managua City with Other Waterworks

Furthermore, the water rates in Managua City are known to be cheaper than those of other service territories. Figure 2.9.5 shows water charges for an average household consuming up to 75 m3/month in the cities and service territories. The monthly charge of the typical household consuming 26m3/month in the respective cities and departments was calculated at C$90.04/month by ENACAL in Managua City, C$138.44/month by ENACAL in Departments, C$182.62/month by Local Government in Matagalpa and C$142.73/month by Local Government in Jinotega. Thus, the water consumers in Managua City can enjoy the lowest water charge among the country. An average water rate of the respective areas was C$3.46/m3 in Managua City, C$5.32/m3 in Departments, C$7.02/m3 in Matagalpa and C$5.49/m3 in Jinotega.

2 - 82 700

600

) 500

400

300

Water Charge (C$/month Charge Water 200

100

0 0 5 10 15 20 25 30 35 40 45 50 55 60 65 70 75 Water Consumption (m3/month)

Managua City Departments Matagalpa Jinotega

Figure 2.9.5 Water Charges of Medium Class Household by Service Area: 2004

2.9.6 Financial Constraints for Future Development

Through the discussions in the previous sections, the following constraints of financial aspects were observed for the future development of ENACAL. In order to formulate the current plan, it would be essential that counter measures for these constraints could be promoted in the financial plan. • Water production cost and water unit price are in negative spread condition. As discussed in Section 2.9.3, the production cost of potable water was higher than the average unit price of water in most years. This means that the more ENACAL sales water to consumer, the more it gets deficit in its management. In the financial position in 2003, ENACAL could not attain an ordinary profit in the present water market. As a result, its revenue can not cover sufficient operation and maintenance works and, of course, execute its capital replacement and new investment. • Excessive account receivable worsens cash flow. The turnovers of account receivable were nearly 1.0 for the recent three years. This means that it takes almost one year to collect the whole account receivable. It might lead to a cash flow crisis. In general waterworks, the turnover must be between 6 and 8, i.e., collecting the receivables within 45 days to 60days. It is said that the tariff collection performance is improved from the former conditions. However, ENACAL has still a lot of uncollectible receivables. These accounts would become obstacles to progress in the future. • Water supply facilities and equipment is becoming obsolete. As of 2003, the fixed assets for water supply service have already depreciated around 70% of the total book values. This means that their replacement might be delayed or stagnant from standard schedule. Too late replacement could make them impossible to recover their functions. • Labor productivity should be improved. The number of staff seems to be larger than the Japanese average, as examined from the index of the number of employees per water volume supplied. For improvement of labor productivity, professional training of staff, high profession-conscious of field workers and introduction of appropriate automation might be necessary in waterworks process.

2 - 83 • Operation and maintenance (O&M) are managed in low-cost principle. Because of lack of funds for O&M works, the level of facilities and equipment conditions are quite low. Since the water production cost is kept to be low because of low water price, essential works are left behind in the proper level of O&M works. For example, too late replacement of facilities and equipment and too little inventory are found in the financial statements. • Financial statements of Managua City waterworks can not be compiled independently. At present, the ENACAL management covers the whole country except two departments. The financial management is completely centralized by the head office. Therefore, it is impossible to compile the financial statements of Managua City waterworks. The management of the waterworks can not have the financial information for judging the management conditions of Managua City Water Supply Service.

2 - 84

CHAPTER 3

IDENTIFICATION OF MAJOR PROBLEMS AND BASIC STRATEGIES

FOR IMPROVEMENT

CHAPTER 3

IDENTIFICATION OF MAJOR PROBLEMS AND BASIC STRATEGIES FOR IMROVEMENT

3.1 OVERVIEW OF CURRENT PROBLEMS AND CONSTRAINTS

The foregoing Chapter 2 discussed a spectrum of problems and constraints that are currently revolving around the water service in Managua. They cover a broad range of technical, financial and institutional issues, and it is often difficult or even inappropriate to discuss each of these issues separately as they are closely related each other. The general view is that ENACAL has many of the most negative features of state-owned water utilities in developing countries. The continuing and mutually reinforcing problems include: • tariffs that do not adequately cover the costs of supply; • lack of funds for essential investment in rehabilitation or improvements; • high levels of leakage and water losses; • unreliable metering and billing reinforced by poor performance on bill collection; • poor overall financial performance; and • lack of adequate managerial autonomy

These problems are elaborated in the following Sections 3.1.1, 3.1.2 and 3.1.3.

3.1.1 Social & Institutional Problems

Our assessment shows that there are two critical sets of social and institutional problems that are adversely affecting the water service in Managua.

First, the water service in Managua is not operated on a financially viable basis. For a water utility to be able to provide the service on a financially viable basis, tariffs should enable the utility to recover its prudent average costs incurred in supplying the service. Cost recovery requires that average tariffs should be set at such a level to finance the ongoing provision of the services. Taking a long run perspective, this implies more than a simple requirement that revenues cover costs. In economic terms, it implies that tariffs should be sufficient to generate revenues that cover: • Operating costs, including reasonable provision for bad debts; • A level of asset replacement or “capital replacement” which, if replicated in the long run, would be sufficient to maintain a given level of service performance; • System expansion costs; and • Financing costs, including payments of interests on long-term debts and, where appropriate, a reasonable return on equity for future re-investments.

The cost recovery objective is therefore going to drive the overall level of tariffs to be recovered from service provision. This objective might conflict with other objectives, such as equity, especially when a high backlog in investments means that tariffs have to increase substantially in order to recover costs. If this is the case, full-cost recovery pricing might limit access to the service for the poor. In that case, rather than departing from full cost recovery as general rule, it would be preferable to design subsidy schemes targeted at the population which is most in need of specific assistance. Another possibility is to use other social policies to reduce poverty, rather than water tariff policy, which is only a blunt instrument for an overall objective such as “reducing poverty”.

3 - 1 Tariffs for water and wastewater services can usually be assessed against a set of potentially conflicting goals and objectives. In many cases, water tariffs are constrained by the need to meet a number of social objectives, such as the objective to give equal access to all citizens wherever they are located on the national territory, which often requires a degree of regional averaging of tariffs. Given that the services are characterized by strong natural monopoly elements, and therefore that unconstrained market outcomes would be socially and economically unacceptable, governments and regulators invariably have a role in determining how such conflicts should be balanced. It is therefore important to establish: • What those goals and objectives should be; and • How potential trade-offs can be understood and resolved.

It is only if cost recovery is in place and if water utilities are able to recover their investment (through depreciation) and an appropriate return on their capital that they will be able to continue to invest to improve the quality of its service. In Managua, tariffs have historically been set low as a policy of the Government, and there is no clear, established methodology and procedure for determining or adjusting tariffs. The ambiguity of existing laws exempts some universities and government institutions from paying their water charges. Further, a significantly large part of water revenues generated in Managua is used to subsidize the cost of services in other regions of the country. These elements combined keep ENACAL from operating its water service in Managua on a financially viable basis.

Second, there are a number of social and institutional elements that are seriously affecting the water service in Managua, but that are totally outside the control of ENACAL. An example of this is the absence of a regulatory mechanism which effectively controls the usage and development of groundwater resources by the private sector. Given that the water service in Managua is highly reliant on groundwater, and therefore that the resource must be well preserved in terms of its quantity and quality, the absence of such a regulatory mechanism is a real threat to the sustainability of existing groundwater sources used by ENACAL and thus to the sustainability of the water service in Managua.

Other social and institutional elements that are seriously affecting the water service in Managua are: • There has been a legacy of social perception in the country that water is a natural resource to be distributed by the Government free of charge. This negative but still widespread public perception has long been sustained by the lack of a Government’s clear-cut policy on the cost recovery of water services, particularly in urban areas. • Lack of law or regulation which effectively controls the construction of gas stations and other underground chemical containers, leaks from which could lead to an unrecoverable contamination of existing groundwater sources currently used by ENACAL. • Lack of law or regulation which effectively enforces an orderly development of residential areas in Managua. As a result, there are a large number of small scale housing areas scattering all over the city, extension of water service to which is extremely costly and is often not economically viable. • More than 30% of the total population in Managua live in Asentamientos. ENACAL’s records indicate that there are a total of 58,742 service connections in 183 Asentamientos in Managua, which is equivalent to approximately one-thirds of the total service connections (183,738) currently owned by ENACAL. Unemployment rate is generally high in these settlements and, as a result, many refuse to pay water charges or tap ENACAL’s pipelines illegally. In some settlements, people have constructed houses without legitimate land titles, in which case ENACAL is not in a position to even legalize illegal connections. Most, if not all, of the service connections in

3 - 2 Asentamientos are un-metered (people resist to have meters) and are being charged a fixed monthly fee of C$ 55.60 (irrespective of the actual volume of consumption), which, if calculated based on the ENACAL’s current tariff structure for low-income category, is equivalent to the water charge for a monthly consumption of 26 m3. The consequence is enormous wastage of water in these settlements. ENACAL’s field surveys in 2000 indicated that an average household in these settlements was consuming as much as 55 m3 of water monthly.

The combined effect of these two critical sets of social and institutional problems on the ENACAL’s water service in Managua is significant. Either directly or indirectly, they are responsible for most of the technical problems that currently revolves around the water service in Managua.

3.1.2 Financial Problems and Constraints

(1) Cost Recovery

Examination of the financial statements of ENACAL for recent years shows an extremely worrying trend as regards its short and long term financial positions. Over recent years, ENACAL has continuously been operating in deficit. The accumulated deficit totaled to C$ 243 million in 2003. It is estimated that this amount will further increase to C$ 420 million by the end of fiscal year 2005. The overall picture is one of the water utilities falling into a deep financial crisis.

Figure 3.1.1 shows a vicious circle of water service operation, into which a water utility with severe financial constraints is likely to fall, and moving out from which would be extremely difficult once it has already been caught in it. Most probably, ENACAL can be regarded as being one of such water utilities.

The following observations demonstrate the financial constraints of ENACAL. • The level of maintenance is very low. There is ample evidence that too little money has been spent on maintaining the existing infrastructure. As a result, a large number of equipment and facilities including wells and pumps have been deteriorated. • Revenues are not sufficient to cover capital replacement and debt service. As a result, ENACAL has to depend most of its capital replacement and system expansion costs on external resources. This situation has led to a high backlog of capital replacement and system expansion works. • The level of receivables is very high. It is equivalent to almost 12 months of billing at the end of the year 2002. The receivables must be written down by ENACAL to represent a realistic view of what can be collected and what should be written off. (Our general recommendation would be to write off all accounts receivable that are more than 6 months old and, say, 50% of those that are between 3 and 6 months old). • The level of stock inventory is extremely low. The financial statements for ENACAL suggest that it has been maintaining an extraordinarily low level of stocks.

For extricating ENACAL from the vicious circle, there is a clear need for a substantial tariff increase combined with measures that will drastically improve ENACAL’s efficiency in operation and maintenance (in particular, reducing leakage and wastage) within as short a timeframe as possible.

3 - 3

Figure 3.1.1 Vicious Circle of Water Service Operation

Table 3.1.1 shows the levels of cost recovery in water service. As the level of cost recovery advances from Level I to Level IV, the financial stability of a water utility increases. More importantly, the efficiency in operation and maintenance and the quality of service also increase as the level of cost recovery advances. Table 3.1.2 shows the general relationships between the levels of cost recovery and the capability of water utilities.

Table 3.1.1 Level of Cost Recovery Level Operating Expenses Capital Expenses I O&M Expenses None II O&M Expenses + Depreciation Expenses None III O&M Expenses + Depreciation Expenses Payment of Interests on Long-term Debts IV O&M Expenses + Depreciation Expenses Payment of Interests on Long-term Debts + A Reasonable Degree of Return on Equity

Table 3.1.2 Level of Cost Recovery and Capability of Water Utility Level Capability of Water Utility O&M Capital Replacement Investment (Expansion) Investment (Upgrading) I ✔ II ✔ ✔ III ✔ ✔ ✔ IV ✔ ✔ ✔ ✔

Water utilities in the Level I category are able to recover all O&M expenses (through tariffs) but have to depend their entire capital replacement and system expansion costs on external resources - either subsidies from the Government or grants from donor agencies. The absence of such external resources, at least in a timely manner, is likely to result in the deterioration of the service quality. More often than not, water utilities in this category are quite vulnerable to political influences and other pressures, consequence of which is the lack of management autonomy in running their day-to-day operations as well as in strategic planning. In a highly

3 - 4 politicized environment, managers are unable to discipline workers for poor performance or to offer rewards and promotions based on good performance. The water utilities have little control over their tariffs, financial management, and investment decisions.

Utilities in the Level II category might be able to use ‘depreciation’, which is non-payment expense, to finance most of their capital replacement needs, and thereby prevent the deterioration of the existing service quality. However, they may still have to depend their system expansion costs on external resources (such as subsidies or grants), as they still do not have adequate borrowing capacity. Thus, if they are located in a city which is still growing, they may not be able to expand the system in time for satisfying the increasing demand in the city. As with Level I utilities, they still do not have adequate managerial autonomy.

Those in the Level III category might be able to borrow loans from multilateral and bilateral donor agencies for expanding the systems. However, they may still need to have a close watch on their short-term cash flow positions. Further, they may still not be able to introduce new technologies, such as advanced water treatment methods and high pressure distribution systems, to upgrade the quality of water service.

Those that have reached Level IV would be able to enjoy all the merits and benefits of their financial stability and managerial autonomy. Funds required for system expansion can easily be obtained either by borrowing loans from donor agencies or by selling bonds in the market. Further, they might also be able to make investments for introducing new technologies to meet the sophisticated needs of modern society.

Our observation of the following financial features of ENACAL shows that ENACAL is one of the utilities which fall in the Level I category. • Deterioration of the existing infrastructure • High reliance of capital replacement and system expansion costs on external resources • High level of uncollected receivables • Little or no control over tariffs, financial management, and investment decisions

There are a number of social and economic issues that must be examined before reaching any decision on by when and to what extent the ENACAL’s cost recovery should be improved in the future. They include the level of future investments required, the level of efficiency to be achieved in operation and maintenance (in particular, with regard to the reduction of leakage and wastage), the overall level of tariffs to be recovered in order to achieve the target level of cost recovery, the structure of tariffs, affordability and willingness to pay, price elasticity of demand, social protection, and social cultures and attitudes. Nevertheless, our assessment indicates that there is a great prospect for ENACAL to improve its cost recovery. Our assessment is based on the following observations. • Most of its water sources is local groundwater which is the most economical source of supply for water service. • The efficiency in operation and maintenance (including reduction of leakage and wastage) can substantially be increased by dividing the distribution system into a number of macro and micro sectors, which can be done with a relatively small-scale investment. • The increased efficiency in operation and maintenance (reduction of leakage and wastage) would relieve ENACAL from making any large-scale investments for developing new water sources in the short to medium terms. • The current water charges are still low compared with electricity charges. Our “Water Consumption and Awareness Surveys” shows that an average household in Managua spends C$ 324 per month for electricity and C$ 122 per month for water service.

3 - 5 • Many people in Managua are consuming bottled water which is far more expensive than water supplied by ENACAL. For example, one 600 ml bottle of water costs C$ 6.00 which is 1,720 times of what is referred to by ENACAL as being the “average price of its water” i.e. C$ 5.80 per m3.

There is a growing global consensus in the water sector that water service should be operated on a full cost recovery basis so as to ensure the sustainability of the service. Our general recommendation would therefore be that ENACAL should be able to reach Level II by the year 2010 and Level III by the year 2015.

(2) Restructuring of Existing Tariff Structure for Domestic Use

The foregoing discussions have indicated that there is a clear need for a substantial tariff increase combined with measures that will drastically improve ENACAL’s efficiency in operation and maintenance. The existing tariffs will need to be increased at least to a level similar to that currently applied in Matagalpa. a) Components of Domestic Tariffs

Tariff structures for domestic water consumption vary significantly amongst OECD countries. Some countries rely entirely on fixed charges (which may vary according to some observable household characteristic) or entirely on volumetric charges, although the majority use a combination of the two. Despite the diversity of approach, there has been a general move away from fixed charges and decreasing-block tariff structures, toward volumetric charging and increasing-block structures.

A typical tariff system for public water supplies contains a number of standard elements, which combined determine a customer’s water bill. These elements include: • A connection charge, which is a one-off up-front charge for connecting a customer to the public water supply. For economic efficiency, the connection charge should not be used to recover those costs of developing the system that are influenced by the scale of average or peak demands, as this is likely to lead to the under-pricing of the final service. • A fixed charge, which is normally set for each customer type, or linked to an identifiable customer characteristic (for example, the size of the supply pipe or meter flow capacity, or the property value). Assuming that customers are metered, so that volumetric charges are possible, the fixed charge should not recover more than those ongoing customer costs that are independent of the volumes of water used. Note that the cost of peak capacity availability can be viewed as an ongoing cost that is independent of the volume of water actually used, peak capacity requirements may be reflected in differences in fixed charges between customer types. • A volumetric rate, which, when multiplied by the volume consumed during the charging period, results in the volumetric charge for the period. For economic efficiency, the volumetric rate should be set so that volumetric charges recover those costs that vary with average or peak demands made on the system. However, in practice, some of these costs may be recovered through a minimum charge in order to reduce the financial risk faced by the utility, in the event that volumes are lower than forecast. • A block structure, with different volumetric rates attached to different bands of consumption. The rates applied to different bands may be designed to achieve different objectives – social, environmental, cost recovery, etc.

3 - 6 ENACAL’s existing tariff structure for domestic use is made up simply for three different income categories, namely, low-income, middle-income and high-income categories. It is not immediately clear as to how (on what basis) ENACAL classifies its domestic customers into these categories. The basic concept underlying this tariff structure appears to be the cross-subsidization from high-income households to low-income households while middle-income households pay an average cost of the service. For each customer group, a minimum fixed charge and volumetric rates for different bands of measured consumption are applied. However, there are a large number of unmeasured customers in the system. Unmeasured customers in Asentamientos are billed on the assumption that they have consumed 26 m3 per month. As a result, they are charged CS$ 55.60 each month irrespective of the volume of water they have actually consumed. This practice undermines the economic efficiency of tariffs in two ways. First, no incentive for conservation is working on the part of unmeasured customers. Second, it is difficult to justify that the monthly consumption of 26 m3 is still within the limit of essential use, particularly when most of these unmeasured customers belong to the low-income tariff category and are paying highly subsidized water charges.

Achieving the objectives of economic efficiency and cost recovery will almost certainly require a combination of fixed and volumetric elements for domestic tariffs. The volumetric component of the charging structure should include a block structure, first, to provide an incentive for conservation (by differentiating between essential and non-essential use), and second, to ensure affordability for all social groups (in particular, for the extremely poor). The Regulations for Services (Reglamento de Servicios al Usuario) issued by INNA in February 2001 defines in its Article 3 that the basic (subsistence) monthly consumption per family is 10 m3. International experience suggests that a monthly consumption in the range between 7 m3 and 15 m3 (depending on the specific circumstances of the country where it is to be applied) can generally be accepted as essential use, and therefore that a special low cost block (lifeline tariff block) for this level of monthly consumption should be provided in tariff structures to protect the extremely poor. This is one of the key elements that need to be examined carefully when restructuring the ENACAL’s tariffs for domestic use in order to maximize economic efficiency and to protect the extremely poor.

An important goal of tariff reform would be to provide more consistent incentives for the efficient use of water. In any case, particular attention must be paid to the social impact of any proposals for tariff reform. b) Metering

In the case of commercial and industrial customers, and institutional customers, there is little justification for existence of un-metered connections. In the case of domestic customers, it could be argued that the minimal revenues that ENACAL will be able to collect from certain sections of the customer base mean that the introduction of metering for these connections is not justified on economic grounds. However, there are a number of points to note in response to this argument. First, consumption rates are generally high across all sections of the customer base in Managua. Second, the existence of a measured supply provides a valuable incentive to conserve supplies, particularly if customers’ bills are related to their consumption for levels of consumption beyond a certain minimum consumption level. Third, the implementation of a social support mechanism that retains these incentive properties is contingent on the existence of a measured supply. This suggests that there should be very few exceptions to the rule that supplies should be measured. Where an exception does arise, ENACAL should consider the use of flow restrictions in order to minimize wastage.

Our analysis has revealed that the implementation of the current tariff structure differs

3 - 7 considerably from its nominal design. The discrepancy arises because many customers are recorded as being on a metered tariff but either do not have a functioning meter or have zero recorded consumption. As a result, these customers are charged on the basis of a fixed level of monthly consumption, which is 26.0 m3 per household in Asentamientos, or 3.5 m3 per person in case where the customer is not connected to the sewerage service, or 4.5 m3 per person where if it is connected to the sewerage service. These customers are likely to be households who benefit by paying a fixed charge rather than a bill based on the volume of water that they actually consume.

The introduction of a new tariff structure should be accompanied by a publicity campaign emphasizing the importance of using meters to control and measure consumption of water. Further, restructuring of the tariff structure should introduce relatively high levels of fixed charges for un-metered domestic customers. The intension is to provide a stimulus to encourage such customers to request the installation of a meter. This will provide a strong incentive for the efficient use of the existing water resources. This is another key element that must be examined carefully when restructuring the domestic tariffs. c) Social Support System

In the face of higher tariffs following tariff increase, and improved commercialization of ENACAL, i.e. increased collection ratios, there will be a need for a social protection scheme in order to mitigate any unacceptable distributional impacts that might fall on the poor (whose consumption is within the limit of essential use). However, a key element of the social support system is the specification of how the cost of any subsidies will be funded. There are a number of broad possibilities.

First, subsidies could be funded from the budget (i.e. by taxation). Fiscal subsidies could be paid to the customers, so that there is no requirement to manipulate water tariff levels or structures (beyond the changes required for cost recovery) to achieve social objectives. Alternatively, they could be paid directly to ENACAL, to recover revenues lost as a result of modifying tariff levels or structures for some or all customers.

Second, the burden of funding could be left with ENACAL itself, although ultimately this could result in a depletion of the ENACAL’s working capital and deterioration in service standards if assets are not maintained.

Third, cross subsidies between customers could be built in to the tariff structure, so that some customers receive support, while others are charged sufficiently enough to ensure that total revenues match total costs. Cross subsidies between customer classes could be introduced in different ways, including: • Between customer classes, for example, between domestic customers and commercial & industrial customers (this approach may be unsustainable in Managua where industrial & commercial demand from ENACAL is still small and highly elastic). • Between customers within a customer class, for example, between “poor” domestic customers and “better off” domestic customers (this type of cross subsidy is currently adopted in the ENACAL’s existing tariff structure).

These possibilities will need to be evaluated in consultation with various stakeholders including CONAPAS, INAA, ENACAL and representatives of NGOs and Civic Society Groups.

3 - 8 3.1.3 Technical Problems

ENACAL is currently facing numerous technical problems across its water supply system in Managua. Virtually, they extend from water sources to service connections. Our assessment of the existing water supply system indicates that fundamental problems include (a) the degradation of water quality at sources, (b) the deterioration of existing wells and well pumps, (c) high levels of leakage and wastage, and (d) the low efficiency in the water transmission and distribution systems. As a result, the overall quality of water service in Managua has been deteriorated over recent years despite the fact that ENACAL has a supply capacity which is potentially large enough to meet the water demand in the city satisfactorily.

(1) Degradation of Water Quality at Sources

ENACAL’s records on water quality analysis indicate that three existing wells in Zona Baja contain relatively high levels of nitrate. Water quality analyses conducted in this study found that two of them are also high in arsenic concentration. It is therefore recommended that in the long run these three wells be relocated to Zona Alta or Zona Alta Superior in order to ensure the safety of water supply.

Water quality analyses conducted in this study revealed that several existing wells in Zona Baja and Zona Alta contain relatively high concentrations of arsenic. At four wells in the Sabana Grande area, arsenic concentrations exceed the drinking water standard of 10 ppb which is consistent with the WHO provisional guideline value for arsenic concentration in drinking water. In the past, ENACAL did not test arsenic and other heavy metals. It is therefore not possible to evaluate how arsenic concentrations have actually changed over time. In order to ensure the safety of drinking water, however, we recommend that countermeasures be taken against those wells that already contain 8.0 ppb or higher concentrations of arsenic at present.

Although water quality analysis conducted in this study detected no sign of contamination by BTEX, trihalomethanes, or chlorophenols at Lake Asososca, the water quality of the lake needs to be protected from contamination by preventing groundwater from entering into the lake. Our review of ENACAL’s operation records indicated that when the volume of abstraction from the lake was in the order of 30,000 to 40,000 m3/day in the past, the water level of the lake remained being high and fairly stable. Given that the depletion of the water level in the lake increases the risk of contamination, it is recommended that the abstraction from the lake should be reduced from the current 56,500 m3/day to 30,000 m3/day in the long run.

(2) Deterioration of Wells and Well Pumps

Due to a backlog of repairs and maintenance, many wells and well pumps are not functioning at present or being barely operated at significantly low production rates. In the absence of regular replacement programs, many wells and well pumps have already been used beyond their normal useful life.

3 - 9 Due mainly to the deterioration of well pumps and electrical equipment, the production rates of Managua I and Managua II Well Fields have been reduced to 75 to 80% of the respective design production capacities. In order to compensate for the reduction of abstraction from the lake, it is proposed to increase the current production capacity of the Managua I Well Field (53,000 m3/day) by 18,000 m3/day to its design production capacity of 71,000 m3/day and similarly to increase the current production capacity of the Managua II Well Field (44,000 m3/day) by 12,000 m3/day to its design production capacity of 56,000 m3/day.

(3) Leakage and Wastage

Our study indicated that approximately 45% of water distributed into the system is currently lost through leakage and wastage. Given that the existing water tariffs can not recover the Long-Run Marginal Cost of the service, and therefore that ENACAL is not able to develop new water sources unless it receives external financial assistance to do so, which is quite unlikely with the current high level of water losses, it is vital for ENACAL that it reduces leakage and wastage and thereby defers the development of new water sources for as long as possible.

Leakage surveys conducted in 10 micro sectors selected in this study demonstrated that the measurement of minimum night flows with the use of a portable type ultrasonic flow meter and the implementation of leakage detection/reduction works within micro sectors is a quite effective means to reduce leakage. The outcome of the surveys also indicated that: • leakage currently accounts for 35% of water distributed into the system; • wastage currently accounts for 10% of water distributed into the system; • leakage and wastage are high in Zona Baja, medium in Zona Alta, and low in Zona Alta Superior; • leakage and wastage are particularly high in asentamientos where water is available on a continuous basis and with good pressures; • All the leaks detected during the surveys existed in service connection pipes; • The current unconstrained per capita domestic water demand in Managua is 175 lpcd; • At least 16% of existing water meters are defective; and • Approximately 9% of existing connections are either unauthorized or illegal.

(4) Inefficiency of Water Transmission and Distribution Systems

The inefficiency of the water transmission and distribution systems can be demonstrated by the fact that no reliable information is currently available on the volumes of water that are produced,

3 - 10 transported and distributed over the vast geographic area of Managua city. The consequence is enormous confusion and difficulty in maintaining the water supply system and lack of a clear picture on the overall situation of the water service in Managua.

Our study identified the following critical problems of the existing water transmission and distribution systems. It is recommended that efficiency of the water transmission and distribution systems should be increased by implementing improvement measures to address such critical problems. (1) It is not possible to obtain accurate information on the state of water being distributed over the entire city area. It is not possible to delineate the extent of area supplied by each major water source. (2) O&M of the existing water transmission and distribution systems are highly complicated, making it difficult for ENACAL to deal with emergencies promptly. (3) Although water is generally abundant in most areas of Zona Baja, there are three distinct areas in Zona Alta and Zona Alta Superior where the level of service is currently extremely poor and the residents are suffering from severe water shortages. This clearly demonstrates that water is not properly distributed over the entire service area. (4) Due to the lack of distribution zoning system, it is not possible to obtain accurate information on the geographic distribution of non-revenue water or to decide priority areas for the reduction of non-revenue water. (5) No provision has been made for the extension of service to newly developing areas such as Esquipulas and Las Jaguitas. (6) Many of existing water transmission pump stations have been deteriorated and require the renewal of existing pumps and electric panels. (7) There is a need to improve water supply conditions in Ticuantepe and Nindiri and in other high elevation areas along the Carretera Masaya.

3.2 BASIC STRATEGIES FOR IMPROVEMENT

3.2.1 The Overall Objective of Long-term Improvement Plan (LIP)

The overall objective of the long-term improvement plan (LIP) would be to transform ENACAL into an efficient utility with a degree of financial stability and managerial autonomy. Without a sound financial and managerial base, any attempt to transform ENACAL into an efficient utility would be likely to fail. The level of financial stability envisaged in our study could be achieved if ENACAL reaches Level II of cost recovery by the year 2010 and Level III by the year 2015 (See Section 3.1.2). The level of managerial autonomy perceived in this report is more complex. In short, however, it is the autonomy which allows ENACAL to make its own decisions in running its day-to-day operations, and to control over its tariffs (within a broad regulatory framework), financial management, and investment decisions. We believe that this could automatically be achieved when ENACAL becomes financially self-sufficient, say, when it reaches Level III of cost recovery. As long as ENACAL remains dependent on subsidies or other financial assistance of the Government, it would continue to receive political influences and other pressures in running its day-to-day operations.

3 - 11 3.2.2 Basic Strategies for Improvement

Taking all the problems discussed in Section 3.1 into account, a basic strategy for developing a long-term water supply improvement plan for Managua up to the year 2015 was established. Figure 3.2.1 shows the basic strategy adopted in this study for developing a long-term improvement plan (LIP). The strategy is based on the four basic policies shown below and to achieve the goals shown in Table 3.2.1 by implementing both physical and non-physical improvement measures.

Four Basic Policies of LIP

(1) Rehabilitation and protection of existing water sources (2) Reduction of leakage/wastage (3) Increase in the efficiency of water transmission and distribution systems (4) Establishment of a basic financial framework for the management of water services in Managua

3 - 12

Figure 3.2.1 Basic Strategies Adopted for Development of LIP

3 - 13 Table 3.2.1 Policies and Goals of LIP Policies Goals 1. Rehabilitation and (1) The total production capacity of existing sources will be sustained. protection of existing water sources (2) Water quality of existing sources will be protected.

(3) Safety of water supply will be assured.

2. Reduction of (1) Water resources will be conserved. leakage/wastage (2) The volume of water that can be delivered to customers will increase.

(3) Large-scale investments for the development of new water sources can be deferred. (4) Revenues from water sale will increase.

(5) Public awareness on the efficient use (conservation) of water will increase.

3. Increase in the efficiency (1) The state of water being distributed over the entire city area can be assessed of water transmission precisely. and distribution systems (2) O&M of the water supply system will become easier and ENACAL will be able to deal with problems in a more prompt and appropriate manner. (3) The equity of water service will be enhanced by strengthening supplies to areas where water supply conditions are currently extremely poor. (4) The economic growth of the region will be sustained by strengthening supplies to areas where rapid developments have been taking place in recent years. (5) Old water transmission pump stations will be rehabilitated.

(6) Secondary/tertiary distribution mains and service connections will be installed to cater for increased service populations in the future. 4. Establishment of a basic (1) ENACAL will spend a sufficient level of expenses for the O&M of the existing financial framework for water supply system in Managua. the management of water (2) Depreciation expenses will be recovered through tariffs and used for the services in Managua replacement/rehabilitation of deteriorated equipment and facilities. (3) Financial evaluation of the water services in Managua will become possible.

3 - 14

CHAPTER 4

LONG-TERM IMPROVEMENT PLAN

CHAPTER 4

LONG-TERM IMPROVEMENT PLAN

4.1 ASSESSMENT OF FUTURE WATER BALANCE

4.1.1 Population

(1) Present Population

1) National Population

The last national census was conducted in 1995 by INEC (Instituto Nicaraguense de Estadisticas y Censos). The population of Nicaragua in 1995 was 4,357,099. Various studies by different institutions in Nicaragua have estimated the future population and annual population growth rate. For this Study, however, the future population and annual growth rate in Managua which was estimated by INEC in July 2004 is adopted. The population and annual growth rate for whole country and each departamento is shown in Table 4.1.1.

Table 4.1.1 Actual Population and Population Growth Rate in Nicaragua Population Annual Growth Rate DEPARTAMENTO Census Census 2000 2004 95/71 2000/2005 1971 1995 LA REPUBLICA 1,877,952 4,357,099 4,956,964 5,374,811 3.6 2.0 NUEVA SEGOVIA 65,784 148,492 194,041 207,718 3.5 1.7 MADRIZ 53,423 107,567 122,148 130,976 3.0 1.7 ESTELI 79,164 174,894 192,565 210,657 3.4 2.2 CHINANDEGA 155,286 350,212 396,117 431,962 3.4 2.2 LEON 166,820 336,894 365,214 384,697 3.0 1.3 MANAGUA 485,850 1,093,760 1,234,102 1,350,043 3.4 2.2 MASAYA 92,152 241,354 282,928 310,324 4.1 2.3 GRANADA 71,102 155,683 175,380 187,495 3.3 1.7 CARAZO 71,134 149,407 164,016 174,469 3.1 1.5 RIVAS 74,129 140,432 154,567 164,420 2.7 1.5 BOACO 69,187 136,949 154,400 165,686 2.9 1.8 CHONTALES 68,802 144,635 164,099 178,322 3.1 2.1 JINOTEGA 90,640 257,933 272,204 292,138 4.5 1.8 MATAGALPA 168,139 383,776 439,960 475,657 3.5 1.9 R.A.A.N. 192,716 226,634 244,970 - 1.9 R.A.A.S. 145,508 272,252 333,165 371,829 2.6 2.7 RIO SAN JUAN 20,832 70,143 85,424 93,448 5.2 2.2 Source: INEC: 1995 National Census, 2000-2005 Population projection (July 2004)

4 - 1 2) Population in the Study Area

The Study Area covers Municipio (Municipality) de Managua, urban area of Municipio de Ticuantepe in the Managua Departamento and urban area of Municipio de Nindiri in the Masaya Departamento. According to the estimation of INEC made in July, 2004, the population of these three Municipalities in 2004 is 1,055,934. The Study Area does not include all areas of Ticuantepe and Nindiri Municipalities, but includes almost all major populated area. The Study estimates that 90 % of population of Ticuantepe and Nindiri Municipalities is included in the Study Area and finally the estimate of present population in the Study Area is 1,049,837 as shown in Table 4.1.2.

Table 4.1.2 Estimation of Population in the Study Area Municipality 2,000 2,001 2,002 2,003 2,004 Remarks Managua 917,004 936,041 955,410 975,062 994,964 Ticuantepe 21,438 21,839 22,247 22,664 23,086 90% of Total Nindiri 31,349 31,492 31,616 31,717 31,787 Population Total 969,791 989,372 1,009,273 1,029,443 1,049,837 Source: INEC, Population Estimation, July 2004

(2) Population Projection for the Study Area

Future population is forecast for the Study Area including Municipio de Managua, urban area of Municipio de Ticuantepe in the Managua Departamento and urban area of Municipio de Nindiri in the Masaya Departamento. In the Study Area, any actual population data after last census in 1995 and statistics on migration (social increase or decrease) are not available. Thus the total population of the Study Area was projected on basis of estimation of population and annual growth rate for each municipality made by INEC in July 2004, because this is the one published officially. The annual growth rate of Managua Municipality adapted 2.0 %.

After forecasting the total population in Managua until 2015, district level population in Managua is also forecast considering the previous JICA study, “Comprehensive Transportation Plan in the Municipality of Managua, March 1999” and present development activities such as new road constructions and housing area developments. District level population is forecast so as to be same as the forecast for the municipal population in total. As shown in Figure 4.1.1, a higher growth rate than the average rate of 2% is expected for areas in Zona Alta Superior especially along Masaya Road and Pista Interurbana Road passing through San Judas Area. On the other hand, Zona Baja is expected a low growth rate.

4 - 2 LEGEND Growth Rate < 2.0 %/year Growth Rate = 2.0 %/year Growth Rate > 2.0 %/year Growth Rate > 4.0 %/year Main Pipeline (d ≧ 200)

Figure 4.1.1 Annual Population Growth Rate

For Ticuantepe and Nindiri in the Study Area, population estimates are carried out dividing into two area, that is, high developing area where is located at fringe of Managua Municipality along Masaya Road and other area. Population growth rates a year are adopted at 4.0 % for high developing area and the same rate as INEC estimate for other area. High developing area in Ticuantepe includes area along the Masaya Road and downtown area of Ticuantepe. High developing area in Nindiri includes Veracrus area and area along the Masaya Road.

The result of the estimation is 1,317,189 persons for 2015 in the Study Area as shown in Table 4.1.3.

Table 4.1.3 Projection of Population 2004-2015 2004 2005 2010 2015 Managua 994,964 1,015,066 1,120,715 1,237,360 Ticuantepe Urban 23,086 23,912 28,538 34,111 Nindiri Urban 31,787 32,823 38,649 45,718 Total Study Area 1,049,837 1,107,122 1,223,223 1,317,189 Source: 1) 2004 and 2005 projection estimated by INEC in July 2004 2) 2010 and 2015 projection estimated by Study Team based on annual growth of INEC calculation

4 - 3 4.1.2 Water Demand

Future water demand is calculated from the total water consumption which is obtained from the sum of domestic water consumption and non-domestic water consumption. Future domestic water consumption is calculated from the served population and the per capita water consumption. The service ratio of 100% is applied for the future water demand projection. Therefore the population in the study area is equal to the served population and the service area covers the study area.

Based on the ANC Survey by the Study described in “Supporting Report No.4” of this report, per capita water consumptions were estimated at 175 lpcd on average. In this Study, the per capita water consumption until year 2015 is assumed to be the same as the consumption in 2004, although the per capita water consumption would usually be expected to increase in the future according to the upgrading of living standards. In this Study, the per capita consumption is fixed at 175 lpcd.

Table 4.1.4 shows the number of connections and water consumption for domestic and non-domestic in 2003. Non-domestic water consumption includes consumption from industrial, commercial, government office, businesses and other institutions. As shown in the table, the percentage of non-domestic consumption in 2003 was 13.6 % of the total consumption.

Table 4.1.4 Record of Domestic and Non-Domestic Water Consumption in 2003 Connections Consumption Classification (Nos.) (%) (m3) (%) Domestic 163,607 96.3% 52,715,963 86.4% Non-Domestic 6,236 3.7% 8,322,181 13.6% Industrial 277 0.2% 544,529 0.9% Commercial & Institutional 5,959 3.5% 7,777,652 12.7% Total 169,843 100.0% 61,038,144 100.0% source: ENACAL Commercial Data Base

Water consumption for non-domestic will grow, generally, according to the increase in population and industrial development. According to the past record from 1983 to 2003, there is no big change in the percentage of non-domestic water consumption during past 20 years. Therefore, 15% of the total water consumption is applied to the percentage of non-domestic water consumption for the projection of non-domestic water consumption in the future.

The daily average water demand is calculated from the total water consumption which is obtained from the sum of domestic water consumption and non-domestic water consumption and the effective water ratio. The effective water ratio means a ratio of total water consumption (effective water) in the total distribution amount (daily average water demand). Based on the ANC survey which was implemented by this Study, the effective water ratio is estimated at 55 % in 2004, which means that 45 % water of total distribution water is ineffective. The ineffective water includes a leakage water and wastage water. The leakage ratio and wastage water ratio were estimated at 35 % and 10 % respectively.

For the demand projection, the effective water ratio will increase to 65% in 2010 and 75% in 2015. Reduction of ineffective water ratio from 45% to 25% for 10 years is rather difficult, but the reduction of leakage ratio from 35 % to 25 % and less is not an impossible plan in view of the results of the leakage ratio reduction after repairing the leakage founded by the ANC survey.

4 - 4 Peak factor, which is the ratio of daily maximum water demand and the daily average water demand, is calculated at 1.10 and 1.12 from the past records of water produced and distributed from the existing wells and Asososca Pumping Station in 2002 and 2003 respectively. In this Study, therefore, the peak factor of 1.1 is adopted for calculation of the daily maximum water demand.

Table 4.1.5 shows the summary of projected water demand in the Study Area. Water demand will gently decrease in 2010 and 2015 compared with present demand, since the reduction of ineffective water ratio is bigger than the increase of total water consumptions.

Table 4.1.5 Summary of Water Demand Projection in Study Area 2004 2005 2010 2015 Population (person) 1,049,837 1,071,802 1,187,902 1,317,189 Per Capita Consumption (lpcd) 175 175 175 175 Domestic Water Consumption (m3/day) 183,721 187,565 207,883 230,508 Non-Domestic Water (m3/day) 32,421 33,100 36,685 40,678 Consumption (15%) Total Water Consumption (m3/day) 216,143 220,665 244,568 271,186 Effective Water Ratio 55% 56% 65% 75% Daily Average Water (m3/day) 392,987 394,045 376,259 361,581 Demand Daily Maximum Water (m3/day) 432,286 433,449 413,884 397,739 Demand (x 1.1)

4.1.3 Water Balance

According to the existing water supply condition there are some water shortage areas in high elevation zone in Managua. It is, however, not clear that water shortage in such areas is caused by the lack of the water production amount comparing with the water demand, or other reasons. The water balance should be confirmed by comparing the future water demand with the sustainable yield from the existing water sources and to evaluate the necessity of new water resource development in near future up to year 2015.

As mentioned above the daily maximum water demand in 2015 will be 397,739 m3/day. On the other hand, the assessment of the existing water sources detailed in Supporting Report No.3 suggests that the total sustainable yield from these sources in 2015 would be 402,950 m3/day. Figure 4.1.2 shows this total yield in relation to the total consumption which is the effective water, the daily average water demand and daily maximum water demand.

4 - 5 500,000 Sustainable Yield from Existing Sources in 2015 = 402,950 m3/day 450,000

400,000

350,000 Ineffective Water 300,000

250,000

200,000

Water Demand (m3/day) Demand Water 150,000 Effective Water

100,000 Daily Maximum Water Demand 50,000 Daily Average Water Demand Total Water Consumption 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year

Figure 4.1.2 Sustainable Yield Capacity vs Water Demand

Figure 4.1.2 also shows that the sustainable yield in 2015 from the existing water sources would be able to satisfy the daily maximum demand in the year 2015. However, the daily maximum demand until the year 2015 exceeds the sustainable yield in 2005, and the deficit in the yield capacity to meet the day maximum demand is occurred. Although from the water source’s point of view it is recommended that the production amount from Asososca Lake will decrease from the existing amount of about 56,500 m3/day on average for 3 years from 2001 to 2003 up to 30,000 m3/day, the production from Asososca until 2010 will be needed at more than 30,000 m3/day in order to cover the deficit of sustainable yield from the existing sources. All these considerations lead to a conclusion that there is no urgent requirement for development of new water resources until the year 2015.

It should be noted that if no countermeasures against the increase of the effective water ratio is taken, new developments of water sources of 144,600 m3/day as shown in Figure 4.1.3, which corresponds more than total production capacity of Managua I and Managua II Systems, should be needed within 10 years by 2015.

4 - 6 600,000 y

500,000 Ineffective Water without countermeasures

400,000 144,600 m3/da Ineffective Water (leakage & wastage) 300,000 with countermeasures

200,000 Daily Maximum Water Demand (m3/day) Demand Water Maximum Daily Effective Water 100,000 (Total Consumption)

0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Year

Figure 4.1.3 Water Demand without Reduction of Ineffective Water Ratio

4 - 7 4.2 IMPROVEMENT OF WATER TRANSMISSION AND DISTRIBUTION SYSTEMS

4.2.1 Objectives of the Improvement

During the field surveys and measurement works, some problems were found in the existing water supply system in Managua. Among existing problems the ENACAL is facing, significant problems are identified as follows. • Water is not transmitted and/or distributed properly to whole service area, especially for three areas, (a) San Judas Area, (b) Schick Area and (c) Laureles Sur Area as shown in Figure 4.2.1. • Deterioration of water quality of water sources, Asososca Lake and wells in Zona Baja and in the east of Zona Alta • Low effective water ratio (high leakage and wastage ratio) • Decrease of production capacity of existing wells by aging well pumps and deterioration of wells themselves, including Managua I and Managua II Systems • Delay in development of water supply facilities for demand increasing area located in high altitude area indicated as “d” area in Figure 4.2.1 and Ticuantepe and Nindiri outside of Managua

Zona Baja

Zona Alta

Zona Alta b c LEGEND a Superior

Major Pipeline Well Reservoir/Tank d Pumping Station Zone Boundary Poor Supply Area Rapid Housing Development Area

Figure 4.2.1 Poor Water Supply Service Area

It is confirmed that the total amount of water sources will be secured for the demand in 2015, as detailed in Supporting Report No.3. The new water source is not needed to be developed, however, in order to meet the demand in 2015 and to provide satisfied water supply for whole service area it is necessary to increase the effective water ratio as the alternative water sources and improve the efficiency of transmission and distribution system. Although new water source development is not considered for the Master Plan, the well constructions by control of intake amount from Asososca Lake, relocations of wells which water qualities have deteriorated and rehabilitations of the existing wells will be required and included in the Master Plan.

In order to improve the efficiency of transmission and distribution system, it is necessary to understand how much water is flowed into which area. For that purpose the service area of

4 - 8 Managua Water Supply System should be divided into distribution zones (macro sectors) which have one major water supply source such as distribution tank or distribution pumping station. This is essential for improving the efficiency of transmission and distribution system and simultaneously effective for selecting the priority area for increase of effective water ratio.

As discussed above, the Master Plan on Water Supply System in Managua will put the priority on the following projects in order to solve the existing problems of ENACAL and their customers and to secure the improvement of water supply services for the citizens in the Study Area, Managua and urban area of Ticuantepe and Nindiri. • Rehabilitation of the Existing Wells especially Managua I and Managua II Systems • Macro Sectoring • Improvement of Transmission and Distribution System • Improvement of Effective Water Ratio

Rehabilitation of the existing wells and improvement of effective water ratio are described in other sections. This section includes the macro sectoring and the improvement of transmission and distribution system as mentioned hereinafter.

4.2.2 Macro Sectoring

As mentioned above in order to improve the efficiency of water transmission and distribution system, that is to say, in order to distribute effectively required water to users, it is necessary to understand a balance between supply and demand not only for entire system but also for each distribution zone (macro sector) which has only one major water supply point. The following items are considered in the macro sectoring. • Existing Hydraulic Boundary of ENACAL such as Zona Baja, Zona Alta and Zona Alta Superior • Existing Zoning System such as Commercial Zone of ENACAL and District Zone of Municipality • Exiting Water Sources especially major sources such as Asososca Lake, Las Mercedes Well Field, Managua I System, Managua II System, Veracrus Well Field • Reduction of intake amount from Asososca Lake up to 30,000 m3/day for prevention of deterioration of water quality by water level lowering • Relocation of water source in stead of reduced intake amount from Asososca Lake (candidate area for relocation is in Nindiri and Ticuantepe) • Relocation of 3 wells in Zona Baja because of deterioration of water quality (candidate areas for relocation are in Sierra Maestra near San Judas and Esquipulas) • Relocation of 4 wells in Sabana Grande because of high levels of arsenic concentrations (candidate area for relocation is in Las Jaguitas) • 5 distribution tanks at Km8 Carretera Masaya, Schick, Altamira, Unan and San Judas and transmission system to these tanks of Managua I System • 1 distribution tank at Las Americas of Managua II System • Other existing transmission and distribution facilities, such as, tanks, pumps and pipelines • Existing Operation System • Save Energy (pumping to gravity)

As the results, Managua Water Supply System was divided into 17 macro sectors in Managua Municipality, 1 macro sector in Ticuantepe and 1 macro sector in Nindiri as shown in Figure 4.2.2. Future water supply system for each macro sector in 2015 is schematically shown in Figure 4.2.3.

4 - 9 Asososca Zona Baja San Las Mercedes Cristobal Asososca Zona Alta Altamira Villa Austria Asososca Zona Sabana Grande Alta Superior San Judas Km8 CM Gravity Schick Las Jaguitas

Carretera Vieja Leon Esquipulas Unan Sierra Maestra Km8 CM Pumping

Nindiri

Ticuantepe

Figure 4.2.2 Macro Sectoring in the Study Area

4 - 10 Km18.5 CM Km18.5

a e

Managua II

n d

a s n

u P

b a r

r c a

S r G e V Las Mercedes Las P Las Jaguitas Managua I Managua Km14.5 CM Esquipulas P Schick Las Americas Rafaela Herrera P Altamira Km8 CM Unan San Cristobal P Transmission Distribution by Distribution directly or pumping Wells from by Distribution gravity Well Field San Judas San P C.Maestra P P Asososca LEGEND Km9.5 CS Km9.5 Km8.5 CS E Macro Sector Boundary Sector Macro Tank PumpingStation Name ofTank/Pumping Station Tank transmitted from transmitted Tank II System Managua Tank transmitted from transmitted Tank I System Managua S N P Km14.5 CVL W

Figure 4.2.3 Schematic Water Supply System for Each Macro Sector in 2015

4 - 11