Completion Report Armenia: Water Supply and Sanitation Sector Project

Home , Abovyan, Aghavnatun, Akunk, Anushavan, Aragatsotn (village), Arevadasht

Completion Report

Project Numbers: 40296-013 and 45299-001 Loan Numbers: 2363 and 2860 September 2018

Armenia: Water Supply and Sanitation Sector

Project

This document is being disclosed to the public in accordance with ADB’s Public Communications Policy 2011.

CURRENCY EQUIVALENTS

Currency unit – dram (AMD)

L2363

At Appraisal At Project Completion (29 August 2007) (31 December 2012) AMD1.00 = $0.00297 $0.00248 $1.00 = AMD336.50 AMD403.58

L2860

At Appraisal At Project Completion (16 January 2012) (30 April 2017) AMD1.00 = $0.00257 $0.00206 $1.00 = AMD389.00 AMD484.68

ABBREVIATIONS

ADB – Asian Development Bank AWSC – Armenia Water and Sewerage Company DMF – design and monitoring framework EIRR – economic internal rate of return EMP – environment management plan FIRR – financial internal rate of return GAP – gender action plan IEE – initial environmental examination ICB – international competitive bidding km – kilometers NCB – national competitive bidding O&M – operation and maintenance PCR – project completion report PCU – project coordination unit PGC – project governing council PMU – project management unit PPMS – project performance management system PPP – public–private partnership SAUR – Société d'Aménagement Urbain et Rural SCWE – State Committee for Water Economy SDR – special drawing right WACC – weighted average cost of capital WSPIU – Water Sector Project Implementation Unit WSS – water supply and sanitation

NOTES

(i) The fiscal year (FY) of the Government of Armenia and its agencies ends on 31 December.

(ii) In this report, “$” refers to United States dollars.

Vice-President Wencai Zhang, Operations 1 Director General Werner Liepach, Central and West Asia Department (CWRD) Director Yong Ye, Urban Development and Water Division, CWRD

Team leader Cesar Llorens, Senior Urban Development Specialist, CWRD Team members Gohar Mousaelyan, Senior Project Officer, CWRD Anna Sargsyan, Project Analyst, CWRD

In preparing any country program or strategy, financing any project, or by making any designation of or reference to a particular territory or geographic area in this document, the Asian Development Bank does not intend to make any judgments as to the legal or other status of any territory or area.

CONTENTS

Page BASIC DATA i I. PROJECT DESCRIPTION 1 II. DESIGN AND IMPLEMENTATION 1 A. Project Design and Formulation 1 B. Project Outputs 2 C. Project Costs and Financing 3 D. Disbursements 4 E. Project Schedule 4 F. Implementation Arrangements 5 G. Technical Assistance 5 H. Consultant Recruitment and Procurement 6 I. Gender Equity 7 J. Safeguards 7 K. Monitoring and Reporting 7 III. EVALUATION OF PERFORMANCE 8 A. Relevance 8 B. Effectiveness 9 C. Efficiency 10 D. Sustainability 10 E. Development Impact 12 F. Performance of the Borrower and the Executing Agency 13 G. Performance of the Asian Development Bank 13 H. Overall Assessment 14 IV. ISSUES, LESSONS, AND RECOMMENDATIONS 14 A. Issues and Lessons 14 B. Recommendations 15

APPENDIXES

1. Design and Monitoring Framework 16 2. Project Outputs 19 3. Project Cost at Appraisal and Actual 33 4. Project Cost by Financier 34 5. Contract Awards and Disbursement of ADB Loan Proceeds 36 6. Procurement Packages for ADB Financing 40 7. Implementation Schedule 46 8. Status of Compliance with Loan Covenants 48 9. Economic Reevaluation 67 10. Financial Reevaluation 70 11. Gender Action Plan 76 12. Contribution to the ADB Results Framework 83

BASIC DATA

Original Loan L2363-ARM: Water Supply and Sanitation Sector Project

A. Loan Identification 1. Country Armenia 2. Loan number and financing source 2363 (SF) 3. Project title Water Supply and Sanitation Sector Project 4. Borrower Armenia 5. Executing agency State Committee for Water Economy 6. Amount of loan SDR23,498,000 7. Project completion report number 1710 8. Financing modality Sector project loan

B. Loan Data 1. Appraisal – Date started 13 April 2007 – Date completed 13 May 2007 2. Loan negotiations – Date started 6 September 2007 – Date completed 7 September 2007 3. Date of Board approval 31 October 2007 4. Date of loan agreement 18 December 2007 5. Date of loan effectiveness – In loan agreement 16 February 2008 – Actual 28 May 2008 – Number of extensions 2 6. Project completion date – Appraisal 31 December 2012 – Actual 31 December 2012 7. Loan closing date – In loan agreement 30 June 2013 – Actual 20 February 2013 – Number of extensions None 8. Financial closing date – Actual 20 February 2013 9. Terms of loan – Interest rate The original interest rate was 1.00% per annum during the grace period and 1.50% per annum thereafter. The original interest rate was revised by the amendment to Loan Amendment effective from 1 January 2017, with an interest rate of 2.93% per annum on the amount of the loan withdrawn from the loan account and outstanding.

– Maturity (number of years) – Grace period (number of years) 32 8 10. Terms of relending (if any) The Borrower re-lent the proceeds of the Loan to the Armenia Water and Sewerage Company (AWSC) under a Subsidiary Loan Agreement upon the same terms and conditions. – Interest rate The terms for relending the proceeds of the Loan included (i) interest at the same rate as the interest applicable to the Loan; (ii) a repayment period, including a grace period, identical to that of the Loan; and (iii) the AWSC bearing the foreign exchange risk of such proceeds of the Loan relent thereto. – Maturity (number of years) 32 – Grace period (number of years) 8 – Second-step borrower AWSC

11. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval 24 June 2008 8 November 2012 52.54 months

Effective Date Actual Closing Date Time Interval 28 May 2008 20 February 2013 56.84 months

b. Amount ($ million) Original Increased Cancelled Last Amount Undisbursed Allocation during during Revised Disbursed Balance (1) Implemen- Implemen Allocation (5) (6 = 4–5) tation -tation (4=1+2–3) Category (2) (3) Works 9.90 4.79 14.69 14.69 0.00 Equipment and Materials 16.70 0.93 17.63 17.63 0.00 Training 0.60 0.60 0.00 0.00 0.00 Consulting Services (4A Management, Design, and 3.20 0.30 2.90 2.90 0.00 Supervision and 4B Project Management) Interest Charge 1.20 0.40 0.80 0.80 0.00 Incremental Costs 0.29 0.29 0.29 0.00 Unallocated 4.40 4.40 0.00 Total 36.00 6.01 5.70 36.32 36.32 0.00 Note: Numbers may not sum precisely because of rounding.

iii

Loan L2860-ARM: Water Supply and Sanitation Sector Project – Additional Financing

A. Loan Identification 1. Country Armenia 2. Loan number and financing source 2860 (SF) 3. Project title Water Supply and Sanitation Sector Project – Additional Financing 4. Borrower Armenia 5. Executing agency State Committee for Water Economy 6. Amount of loan SDR25,886,000 7. Project completion report number 8. Financing modality Sector project loan

B. Loan Data 1. Appraisal – Date started 23 September 2011 – Date completed 28 September 2011 2. Loan negotiations – Date started 9 February 2012 – Date completed 21 February 2012 3. Date of Board approval 12 April 2012 4. Date of loan agreement 3 May 2012 5. Date of loan effectiveness – In loan agreement 2 June 2012 – Actual 14 September 2012 – Number of extensions 1 6. Project completion date – Appraisal 30 April 2017 – Actual 30 April 2017 7. Loan closing date – In loan agreement 31 October 2017 – Actual 31 October 2017 – Number of extensions None 8. Financial closing date – Actual 17 January 2018 9. Terms of loan – Interest rate The original interest rate was 1.00% per annum during the grace period and 1.50% per annum thereafter. The original interest rate was revised by Loan Amendment effective from 1 January 2017, with an interest rate of 2.31% per annum during the grace period and thereafter on the amount of the Loan withdrawn from the Loan Account and outstanding. – Maturity (number of years) – Grace period (number of years) 32 8 10. Terms of relending (if any) The Borrower re-lent the proceeds of the

Loan to the AWSC under a Subsidiary Loan Agreement upon the same terms and conditions. After the termination of AWSC operations as of 31 December 2016, and the change to a lease contract with Veolia, the Borrower became fully responsible for the terms of the loan. – Interest rate The terms for relending the proceeds of the Loan included (i) interest at the same rate as the interest applicable to the Loan; (ii) a repayment period, including a grace period, identical to that of the Loan; and (iii) the AWSC bearing the foreign exchange risk of such proceeds of the Loan relent thereto. – Maturity (number of years) 32 – Grace period (number of years) 8 – Second-step borrower AWSC

11. Disbursements a. Dates Initial Disbursement Final Disbursement Time Interval 22 October 2012 26 October 2016 48.16 months

Effective Date Actual Closing Date Time Interval 14 September 2012 31 October 2017 61.58 months

b. Amount ($ million) Category Increased Cancelled during during Last Original Implemen- Implemen Revised Amount Undisbursed Allocation tation -tation Allocation Disbursed Balance (1) (2) (3) (4=1+2–3) (5) (6 = 4–5) Works 30.00 1.00 31.00 31.00 0.00 Equipment and 2.00 0.90 2.90 2.90 0.00 Materials Consulting Services – 2.37 0.03 2.40 2.40 0.00 Management, Design, and Supervision Project Management 1.18 0.58 0.60 0.60 0.00 Interest Charge 1.10 0.20 0.90 0.90 0.00 Unallocated 3.35 3.35 0.00 0.00 0.00 Total 40.00 1.93 4.13 37.90 37.90 0.00 Note: Numbers may not sum precisely because of rounding.

C. Project Data 1. Project cost ($ million) Cost Appraisal Estimate Actual Foreign exchange cost Not applicable Not applicable Local currency cost Not applicable Not applicable Total 95.00 92.62

2. Financing plan ($ million) Loan L2363-ARM and Loan L2860-ARM Cost Appraisal Estimate Actual Implementation cost Borrower financed 19.00 18.37 ADB financed 73.70 72.51 Other external financing 0.00 0.00 Total implementation cost 92.70 90.88 Interest during construction costs Borrower financed 0.00 0.00 ADB financed 2.30 1.74 Other external financing 0.00 0.00 Total interest during construction costa 2.30 1.74 a The project cost at appraisal and actual differs because of the changes in the SDR/$ exchange rate during project implementation, as the loans were provided in SDR.

3. Cost breakdown by project component ($ million) Loan L2363-ARM and Loan L2860-ARM Component Appraisal Estimate Actual A. Infrastructure Investments 76.7 88.8 B. Management Improvement and Development 1.7 2.0 C. Contingencies 14.3 0.0 D. Financing Charges During Implementation 2.3 1.7 Totala 95.0 92.6 Note: Numbers may not sum precisely because of rounding. a The project cost at appraisal and actual differs because of the changes in the SDR/$ exchange rate during project implementation, as the loans were provided in SDR.

4. Project schedule Loan L2363-ARM Item Appraisal Estimate Actual Date of contract with consultants Design and supervision consulting firm March 2008 26 March 2008 Legal consultant December 2008 8 January 2009 2008–2009 audit firm June 2010 30 March 2009 2010–2011 audit firm June 2011 18 May 2011 2012 audit firm June 2012 18 May 2012 Completion of engineering designs March 2010 31 December 2011 Civil works contracts (11 ICB and 31 NCB) Date of award October 2008 30 September 2008 Completion of work July 2012 31 October 2012 Equipment and supplies Dates First procurement February 2008 14 February 2008 Last procurement January 2011 3 February 2011 Completion of equipment installation December 2012 31 December 2012

Loan L2860-ARM Item Appraisal Estimate Actual Date of contract with consultants Design and supervision consulting firm January 2013 26 December 2012 Legal consultant April 2013 3 March 2014 6 years project audit firm March 2013 7 July 2014 Completion of engineering designs November 2014 2 March 2015 Civil works contracts (28 ICB and 1 Shopping) Date of award May 2013 24 July 2013 Completion of work May 2016 30 April 2017 Equipment and supplies Dates First procurement October 2012 4 December 2012 Last procurement May 2015 30 June 2015 Completion of equipment installation June 2015 30 June 2015

5. Project performance report ratings Ratings Implementation Period Development Objectives Implementation Progress

Loan 2363 From 31 October 2007 to 31 August 2009 Satisfactory Satisfactory From 1 September 2009 to 31 May 2010 Highly Satisfactory From 1 June 2010 to 31 December 2010 Satisfactory From 1January 2011 to31 March 2013 On Track

Loan 2860 From 12 April 2012 to 31 March 2013 On Track From 1 April 2013 to 31 December 2013 Potential Problem From 1 January 2014 to 31 December 2017 On Track

D. Data on Asian Development Bank Missions No. of No. of Specialization Name of Mission Date Persons Person-Days of Membersa Inception Mission 12–21 June 2008 3 10 a(2), b Review Mission 1 26 March–3 April 2009 2 9 a, c Review Mission 2 20–25 November 2009 2 6 b, d Review Mission 3 3–9 May 2010 2 7 c, d Midterm Review 21–27 November 2010 3 7 c, d e Review Mission 4 13–19 May 2011 2 7 a, c Review Mission 5 and 28 October–2 November 2012 1 6 a Inception Mission Review Mission 6 29 April–1 May 2013 3 3 a, e(2) Review Mission 7 8–16 September 2013 3 9 a, e(2) Review Mission 8 6–12 February 2014 4 7 a(2), e(2) Review Mission 9 13 March–12 April 2014 3 31 a(2), e Review Mission 10 22–28 January 2015 3 7 a, e(2) Project Completion Review a a = urban development specialist, b = project analyst, c = project implementation officer, d = project administration, e = project officer.

I. PROJECT DESCRIPTION

1. To improve living standards, public health, and the environment, the Government of Armenia has made it a priority to improve the delivery of water and sanitation services. Capital investment and operation and maintenance (O&M) of these services were neglected in the initial period following Armenia’s independence from the Soviet Union in 1991. As a result, water supply and sanitation (WSS) systems often operated for only a few hours a day, with high nonrevenue water (NRW) losses, and were not financially viable. Most of Armenia’s population were exposed to an unsafe and unreliable water supply and inadequate sanitation services.

2. To address these WSS sector problems, the government implemented water sector policy and legislative reforms and, given the level of investment required, sought Asian Development Bank (ADB) assistance to prepare a proposed project that would undertake (i) priority infrastructure rehabilitation and improvement, (ii) improvement in operational and financial management, and (iii) tariff reform.

3. At appraisal, the project impact was to improve public health and environment for about 576,000 people living in 16 towns and about 125 villages. The project outcome was improved access to safe, reliable, and sustainable WSS services in these towns and villages, managed on commercial principles and with environmentally sound practices. This was to be achieved with the following outputs: an extended program of rehabilitation and replacement of WSS systems, improved water services in project towns and villages, a strengthened Armenia Water and Sewerage Company (AWSC) and self-managed project villages not covered by the AWSC, and improved community management skills. The project cost at appraisal in 2007 was $45 million, with an ADB loan approved for $36 million on 31 October 2007. The project was successfully implemented and the government requested additional financing to expand the scope to additional villages. The cost for this was an additional $50 million, with ADB financing approved for $40 million on 12 April 2012. The project impact and outcome was expanded to cover 29 towns and 160 villages, with updated output targets.

II. DESIGN AND IMPLEMENTATION

A. Project Design and Formulation

4. The project at appraisal, during implementation, and at completion was fully aligned with the government’s development strategies, water sector (WSS) policy, and reform agenda, and with ADB’s country partnership strategy1 and operational priorities2. The government had implemented a National Water Policy in 2005, and a National Water Program in 2006, and these provided the framework for improving the quality and efficiency of the WSS systems.

5. The government adopted a public–private partnership (PPP) approach for the AWSC as one of the four regional utilities and for the Yerevan Water and Sewerage Company, with the AWSC operating under a management contract, and the Yerevan Water and Sewerage Company operating under a lease contract. Over the project’s 10-year (2007–2017) life span, the government evaluated the achievements, cost effectiveness, and efficiency of this approach while developing a policy for the next generation of PPP contracts. It decided to have an integrated national utility under one lease contract from 2017 to generate economies of scale and provide

1 ADB. 2006. Armenia: Economic Report and Interim Operational Strategy, 2006–2009. Manila. 2 ADB. 2012. Country Operations Business Plan: Armenia, 2012–2013. Manila.

2 the basis (as per the 15-year lease contract) for customer service quality and performance to be maintained, and for the utility to be financially sustainable.

6. The sector project modality was appropriate given the government policy and investment framework, as it provided the opportunity to prioritize the investments using comprehensive subproject selection criteria (based on technical, financial, and social criteria). The project design addressed the key causes of poor and inadequate water supply and service provision, and the design and monitoring framework (DMF) in the report and recommendation of the President3 included relevant target indicators. Based on the successful implementation of the project under Loan 2363, the project expanded with additional financing (under Loan 2860 in 2012) to include additional towns and villages (para. 3). The range of activities undertaken did not change during project implementation, with the exception of the improvement of community management skills (para. 11). The project outcomes and output targets were nearly all fully achieved, with DMF details provided in Appendix 1. The project preparation and fact finding involved consultation with and participation of stakeholders, which developed project awareness and ownership.

B. Project Outputs

7. Effective project implementation resulted in almost all project output indicator targets being achieved. Water supply systems in 29 towns and 160 villages were rehabilitated, replaced in full or part, and/ or extended by 2017, with 57,600 water meter chambers installed (target 40,000). By 2016, households in project towns and villages had access to reliable supplies of potable water that meets Armenian water quality standards for more than 16 hours per day on average (target 15 hours). A sex-disaggregated customer complaints database was established with all the incoming calls and complaints recorded by the AWSC Call Center staff. This involved public outreach and awareness campaigns. From 2012 (under Loan 2860), public outreach and awareness meetings in subproject towns, facilitated by a nongovernment organization, were undertaken. As a gender indicator (under Loan 2860 only), in 10 subproject towns, these meetings involved 285 participants of which 185 (65%) were female.

8. Although all project towns and villages have access to potable water for more than 16 hours per day on average, households were not registered at the AWSC by gender, and for this reason the AWSC was not able to disaggregate the data to ensure that “all households headed by women in project towns and villages have access by 2017 to potable water supply 15 hours per day.”4

9. The project output indicator target for NRW loss reduction was achieved, with the level of losses within the overall AWSC service perimeter, including the project area (based on the AWSC’s third quarterly report, 2016), reduced to 67.3% by September 2016. Under Loan 2363, NRW loss was reduced to 72.7% (by 2012) and under Loan 2860 it was reduced to 78.3% (by 2015). The project achieved tariff collection efficiency on average (in all towns and villages under the AWSC service area) of about 91.0%, as of December 2015. This was slightly less than the indicator target of 95.0%. As part of the ASWC’s human resource development initiatives during the project implementation period, more than 53 training programs were conducted with 660 participants, of which 165 were females. More details on the project outputs are provided in Appendix 2.

3 ADB.2007. Report and Recommendation of the President to the Board of Directors: Proposed Loan to Armenia for the Water Supply and Sanitation Sector Project. 4 ADB.2012. Report and Recommendation of the President to the Board of Directors: Proposed Loan to Armenia for the Water Supply and Sanitation Sector Project-Additional Financing, page 13 and 14.

10. To demonstrate to consumers the effectiveness of the rehabilitated WSS system, a project pilot zone was established (based on agreed eligibility criteria) in Malishka village (with 939 customers). The rehabilitated works were completed in April 2011, providing 100% water supply coverage and metering, 24-hour water supply with the desired pressure, and achieving 100% collection efficiency.

11. The SCWE realized during the early stages of project implementation that the planned improvement of communities’ management skills was not required because the village water supply systems that were merged into the AWSC perimeter during project implementation would be maintained and operated by the AWSC. The government and ADB therefore agreed during the loan review mission (20–25 November 2009) that this activity was not relevant and would not be undertaken in the project.

C. Project Costs and Financing

12. The project was implemented within budget. At appraisal, the overall project cost was estimated at $95.0 million. This includes the original project appraisal in 2007 of $45.0 million with an ADB loan (Loan 2363 $36.0 million) and government financing of $9.0 million, and the additional project financing at project appraisal in 2012 of $50.0 million with an ADB loan (Loan 2860 $40.0 million) and government financing of $10.0 million. Refer to Appendix 3 for details. ADB was to finance 80% of total cost ($76.0 million) from ADB Special Funds resources, and the government was to finance 20% of project cost ($19.0 million). Details are provided in Appendix 4, Table A4.1.

13. The overall project cost at completion was $92.6 million (with Loan 2363 accounting for $45.3 million—the small increase reflecting exchange rate movements—and Loan 2860 accounting for $47.3 million). ADB financed $74.2 million (80% of the overall cost—with Loan 2363 accounting for $36.3 million and Loan 2860 accounting for $37.9 million) and the government financed the equivalent of $18.4 million (20% of the overall cost). Refer to Appendix 4, Table 4.2 for details.

14. As planned at appraisal, the overall project component A (infrastructure investments) accounted for $76.7 million (97.8% of project cost—at base cost). Under Loan 2363 it was $37.4 million (97.9% of project cost—at base cost) to finance subprojects, and cover the civil works, materials and equipment, and design and supervision of this work, and under the additional financing project (Loan 2680) it was $39.3 million (97.8% of project cost—at base cost) to include a further 10 subprojects. The project expanded in scale with Loan 2363 covering 18 subprojects and Loan 2680 covering an incremental 10 subprojects. The actual overall expenditure on component A was $88.8 million, which was 97.8% of total project cost.

15. At appraisal, the overall project component B (management improvement and development) accounted for $1.7 million (2.2% of project cost—at base cost). At project completion it was $2.0 million (2.2% of project cost—at base cost). Under Loan 2363 it was $0.8 million (2.1% of project cost—at base cost) to finance training and public outreach programs ($0.6 million) and the project management consultants ($0.2 million). At implementation, ADB jointly with the SCWE agreed that the training and public outreach program would be included in the design and supervision consultant contract under component A (so an efficient coordinated package of services could be provided when implementing each subproject).

16. The actual project management consultant costs increased from $0.2 million to $1.2 million (2.7% of base cost). This cost increase resulted from an underestimation of project

4 management costs at appraisal, and once the project management unit (PMU) staff (eight professional staff and three support staff) and the project coordination unit (PCU) staff (one professional staff and one support staff) were recruited, the scale of the shortfall was identified and loan reallocations were undertaken to this category. Under Loan 2860 $0.9 million (2.2% of project cost—at base cost) was allocated to cover the project management consultant costs. The actual expenditure was $0.8 million (1.7% of base cost). The project cost and financing plan at appraisal and at completion are in Appendixes 3 and 4. There were eight reallocations of loan proceeds under Loan 2363 and four reallocations under Loan 2860.

D. Disbursements

17. Total project loan disbursements were $74.25 million (including $1.74 million for interest during construction). This included $36.32 million under Loan 2363 and $37.93 million under Loan 2860. Of the $76.00 million loan proceeds at appraisal, 97.70% was disbursed and $1.75 million was cancelled at loan closing. The variation in the cancellation amount reflects exchange rate movements of the dollar and SDRs over the loan period. Loan proceeds were disbursed according to ADB’s Loan Disbursement Handbook (2015, as amended from time to time).

18. The imprest account procedure was used under both loans. The imprest ceiling under Loan 2363 was initially $0.5 million. It was increased to $1.0 million, and finally to $1.5 million in the second year of the project to ensure the efficient and timely payment of invoices, including interim work payments. Under Loan 2860 the imprest ceiling was set at $1.5 million based on the previous loan implementation, and this supported timely implementation.

19. The advance procurement and use of retroactive finance worked effectively, with the first disbursement made on 24 June 2008, which was less than 1 month after loan effectiveness, and the final disbursement was on 26 October 2016. Loan disbursements (under Loans 2363 and 2860) are detailed by quarter over the project implementation period (Appendix 5), and indicate that the disbursement projections were realistic, with actual disbursements closely aligned with the estimates.

E. Project Schedule

20. The project implementation was effective, with the schedule being implemented as per the agreed appraisal and loan agreement timelines. Loan 2363 was approved on 31 October 2007, the loan agreement was signed on 18 December 2007, and it became effective on 28 May 2008. Project implementation started immediately. The loan physical completion date was 31 December 2012, which was the same as the appraisal date, and the loan was closed on 20 February 2013, 4 months ahead of the loan agreement closing date of 30 June 2013.

21. Loan 2860 was approved on 12 April 2012, the loan agreement was signed on 3 May 2012, and it became effective on 14 September 2012. The loan physical completion date was 30 April 2017, which was the same as the appraisal date, and the loan was closed on 17 January 2018, 2.5 months later than the loan agreement closing date of 31 October 2017, as some additional time was required for final financial settlement. The project procurement packages are outlined in Appendix 6, with the implementation schedule detailed in Appendix 7. With both loans, loan effectiveness was delayed by about 3 months because of elections and resulting changes in government. These delays did not affect project implementation.

F. Implementation Arrangements

22. The project implementation arrangements were satisfactory and resulted in the project achieving the planned project outputs and outcomes as per the DMF indicators. The State Committee for Water Economy (SCWE), as the executing agency, coordinated project implementation, with a PCU staffed by a project coordinator and an administrative assistant. The PCU served as the secretariat for the project governing council (PGC), and liaised with respective government agencies to support project implementation. The PGC met regularly, reviewed project progress, provided guidance on implementation and policy issues as required, and ensured coordination between the project and other ongoing and planned WSS infrastructure development activities in Armenia.

23. The AWSC, as the implementing agency, recruited qualified staff for its PMU. The AWSC was operating under a management contract with the Société d'Aménagement Urbain et Rural and this provided another layer of management expertise when planning, designing, and implementing the subprojects. The subproject selection criteria had a strong focus on improving service delivery and system operational performance. The PMU was supported by a team of consultants, who were responsible for overall project implementation, including (i) selecting subprojects; (ii) overseeing the consulting firm’s activities, such as subproject feasibility studies, detailed engineering designs, public awareness campaign implementation, and construction supervision; (iii) conducting project procurement; and (iv) undertaking additional construction supervision of all subprojects by PMU WSS engineers. These management systems worked effectively during implementation.

24. The integration of the AWSC and the other regional utilities with the Yerevan Water Company to form one national company under a lease (Veolia) on 1 January 2017 resulted in significant changes in implementation arrangements in the closing stages of the project. At the end of 2016, the majority of the civil works had been completed, with ongoing small civil works remaining under three contracts. The PMU arrangement was changed, with a transfer to another established PMU—the Water Sector Project Implementation Unit (WSPIU) agency—under the SCWE. This transfer, combined with the loss of the experienced project PMU staff, impacted on the delivery of the final project progress reports. There were also significant changes in the SCWE senior management staff.

25. To support the WSPIU, ADB’s Armenia Resident Mission (ARRM) staff and former PMU staff provided WSPIU staff with specific project instructions in January and February 2017 on ADB’s financial management systems and procedures, procurement arrangements under the project, and disbursement status.

G. Technical Assistance

26. ADB approved a small-scale technical assistance grant on 2 April 2007 of $150,0005, to assist preparation of the proposed project. The technical assistance was effective in preparing a proposed project that addressed key water supply problems, and resulted in an ensuring loan. The design proposed was relevant, and included efficient implementation modalities.

5 ADB. 2007. Technical Assistance to Armenia: Municipal Services & Infrastructure Development Sector . Manila. (TA 4925-ARM, approved on 2 April.)

H. Consultant Recruitment and Procurement

27. Consultant recruitment was undertaken in accordance with ADB’s Guidelines on the Use of Consultants (2007, as amended from time to time). A national consulting company was selected under Quality- and Cost-Based Selection (QCBS) for the provision of services for project design, supervision of civil works, and public awareness campaigns under both Loan 2363 and Loan 2860. These contracts were efficiently implemented, with timely supervision and completion of all works. The initial scope of design and civil works supervision services, and the contract amount were increased by about 15%, which was necessary given the expansion in the number of subprojects.

28. At appraisal under Loan 2363, it was proposed to contract 1,366 person-months of national consulting services for engineering and management improvement services, which included 796 person-months of professional staff and 570 person-months of support staff inputs. At project completion, the actual number of person-months used for national consulting services was 969, comprising 639 person-months of professional staff and 330 person-months of support staff.

29. At appraisal under Loan 2860, it was proposed to contract 1,466 person-months of national consulting services for engineering design, construction supervision, capacity building, and public awareness campaigns, including 546 person-months of key staff inputs, 600 person- months of non-key staff inputs and 320 person-months of administrative support staff. At project completion, 1,941 person-months had been used, including 509 person-months of professional staff inputs and 1,432 person-months of support staff inputs.

30. Civil works, goods, and services were procured in accordance with ADB’s Procurement Guidelines (2007, as amended from time to time). During project implementation, the following procurement and selection methods were used: (i) for civil works — ICB, National Competitive Bidding (NCB), and shopping contracts; (ii) for goods (equipment and materials)—ICB, shopping, and direct contracts; and (iii) for consulting services — QCBS, Least Cost Selection (LCS), Single Source Selection (SSS), and Individual Consultant (IC) contracts. The project awarded 71 civil works contracts (under Loan 2363, 11 ICB and 31 NCB contracts, and under Loan 2860, 28 ICB contracts and 1 shopping contract), all of which were successfully completed.

31. Based on Loan 2363 procurement experience, under Loan 2860, all civil works contracts were undertaken as ICB contracts, rather than NCB, to streamline the contract bid preparation processes and attract more international bidders. The project awarded 25 supply contracts (12 ICBs, 8 shopping, and 5 direct—for supply of minor goods—contracts) for equipment and materials, all of which were successfully completed.

32. Procurement arrangements under the overall project were successful. A large number of procurement contracts were implemented as planned. Under both loan projects (Loans 2363 and 2860) there was one terminated civil works contract, initiated by the project management office because of the contractors’ nonperformance. The completion dates of a few of the civil works contracts were extended because of unexpected technical issues arising during construction of the works, which required design changes before they could completed. The requirement under Loan 2860 for prior review by ADB of all contract variation orders impacted on the timeline required for completion of these civil works contracts.

I. Gender Equity

33. The project was particularly beneficial to women. While gender benefits were identified under Loan 2363, with the additional financing (Loan 2860) in 2012, the project was categorized as effective gender mainstreaming, with most of the activities in the Gender Action Plan (GAP) identified as relevant to project outputs and outcome. A social development specialist was mobilized in the PMU to coordinate implementation of the GAP and reporting. The DMF included a number of features with direct gender benefits for women. The GAP included 18 actions, of which 17 were successfully implemented by project completion. Of the 15 GAP targets, 12 targets were achieved, one was partially achieved and two were not achieved. For example, data was not segregated for civil works, therefore, it was not reported if women were contracted. However, women were recruited in other types of jobs, such as maintenance, engineering, water utility, and project implementation. Implementing a sex-disaggregated database of the water utility customers was not achieved because of the difficulty and resources required by the AWSC for this activity. Details on the GAP actions, targets, and achievements are provided in Appendix 11.

34. The project’s GAP resulted in practical benefits for women and girls through gender- responsive and sustainable water supply provision to households, schools, and kindergartens in the project towns and villages. By 2016, all project towns and villages had access to drinking water for more than 16 hours, on average, per day. The provision of potable water and other basic infrastructure had a direct positive impact on women and children through reducing women’s time and labor inputs for water collection, performing household responsibilities, and caring for family members.

J. Safeguards

35. Both Loan 2363 and Loan 2860 projects were categorized B for environment, B for involuntary resettlement, and C for indigenous peoples. The PMU prepared the initial environmental examinations (IEEs) for each subproject under the project (18 IEEs under Loan 2363 and 10 IEEs under Loan 2860). Each subproject comprised several civil works packages. The environment management plans (EMPs) were prepared for each design package under each subproject (71 EMPs under the whole project). There were no resettlement issues. During the subproject civil works implementation, the PMU coordinated implementation of the EMPs, with no major deviations or noncompliances recorded, and identified minor issues that were corrected by the contractors. The PMU’s environmental specialists and the design and supervision consultants conducted environmental quality monitoring on a regular basis.

36. There were no issues relating to involuntary resettlement or indigenous peoples under the overall project. There were minor physically or economically affected and/or displaced households recorded during project implementation. The only cases involved small areas of municipal land acquisition for the construction of daily regulation reservoirs, ranging from 200 cubic meters to 2,000 cubic meters. This was required in a few municipalities, with these small pieces of municipal land identifed and duly leased to the utility for long-term use.The PMU prepared and disclosedfor each subproject under Loan 2860 the resettlement due diligence reports . The overall project did not have any impact on indigenous people.

K. Monitoring and Reporting

37. Loan covenants were relevant, and all major loan covenants were complied with, with the exception of the tariff plan and tariff price increase to cover operating costs (under Loan 2363) and the same covenant under Loan 2860, which required an approved tariff plan by the first

8 quarter of 2014. This did not occur, and the latest tariff increase—in 2009—did not cover operating costs. Furthermore, from 2013 the government was preparing policy options and planning for the next generation of water utility PPP operations.

38. The government following ADB’s recommendation took action during Loan 2860 implementation to fully cover the operating costs and ensure sustainability through an internal cross subsidy approach, that in 2016, ended on a government decision to merge all existent water utilities (including the AWSC) and have one lessee managing the companies. From 1 January 2017, the AWSC was transferred to Veolia under a national lease contract for 15 years. Veolia has a set of key performance indicators to achieve under the contract, and will (i) reduce energy costs and NRW, (ii) maintain the water supply systems in its service area, (iii) collect the annually established tariff, and (iv) pay the government an annual lease fee. On this basis, the government has put in place a sustainable model for service delivery and for sustainable financing of the water supply system. The annual lease fee will repay the loan.

39. Another covenant that was partially complied with under Loan 2363 required a project performance monitoring system to be established and reports to be completed, both of which were achieved. However, the monitoring was to be done for 3 years after project completion, and this did not occur. Similar partial compliance in monitoring arose with Loan 2860 as the government did not submit a final report, or a compliant project completion report. The status of the loan covenants is detailed in Appendix 8.

40. The PMU established a well-structured and detailed project-based performance management system, and produced and submitted quarterly and annual progress reports on project implementation to ADB and relevant government agencies on time until the latter part of 2016. The integration of the AWSC and the other regional utilities with the Yerevan Water Company into one national company under a lessee (Veolia) on 1 January 2017 resulted in significant changes in implementation arrangements in the closing stages of the project. The PMU arrangement was changed, with a transfer to another established project implementation unit (PIU)—the WSPIU. This change, plus the loss of the experienced project PMU staff, impacted on the delivery of the final project progress reports at the end of 2016, and project monitoring in 2017. In parallel with these changes at the end of 2016 there were significant changes in the SWCE senior management staff.

41. The PMU established a sound financial management system with internal financial and accounting controls that met ADB’s requirements. The PMU recorded all transactions and balances, and prepared regular and reliable financial statements and financial monitoring reports. Annual financial audits were undertaken in a format and manner acceptable to ADB and were submitted on time. The final project audit (1 January–30 November 2017) was conducted and completed in time, on 8 December 2017, and submitted to ADB.

III. EVALUATION OF PERFORMANCE

A. Relevance

42. The project is rated highly relevant, both at appraisal and on completion. The intended project outcome was fully aligned with the government’s development strategies, water sector (WSS) policy, and reform agenda, and to ADB’s country partnership strategy11 above and operational priorities during the 2012-2013 period. Further details on the government’s water policy, WSS program, and framework are provided in para. 4.

43. The government adopted a PPP approach for the four regional utilities and the Yerevan Water and Sewerage Company, with the AWSC operating under a management contract (which was audited annually by an independent technical auditor), and the Yerevan Water and Sewerage Company operating under a lease contract. Over the project’s 10-year (2007–2107) life span, the government evaluated the achievements, cost effectiveness and efficiency of this approach, while developing a policy for the next generation of PPP contracts. It decided to have an integrated national utility under one lease contract from 2017 to generate economies of scale and provide the basis (as per the 15-year lease contract) for customer service quality and performance to be maintained, and for the utility to be financially sustainable.

44. A sector project modality was appropriate, as it provided the opportunity to prioritize the investments using a comprehensive subproject selection criteria (based on technical, financial, and social criteria). The government coordinated investment in the sector with the development partners and ensured interventions were prioritized and complementary. While there were some minor inconsistences in the DMF target dates (which are noted in Appendix 1), these did not mar the quality of the project. The impact indicators could have been better aligned to public health indicators, and could have included an environmental dimension. Also, more precise and targeted gender indicators would have enabled better monitoring of project activity performance.

B. Effectiveness

45. The project is rated effective. It achieved its outcome targets, with more than 894,785 residents in 29 towns and 160 villages across Armenia having, by 2016, access to at least 16 hours of water per day that meets Armenian water quality standards. It assisted the ASWC in improving its technical, financial, and management capacity by (i) reducing NRW losses within the overall AWSC service perimeter, including the project area (based on the AWSC’s third quarterly report of 2016), to 67.3% by September 2016; increasing metering levels to 83.0% (Loan 2860 in 2015); increasing financial capacity through revenue collection to 91.0% on average (Loan 2860 in 2015); and improving productivity per employee, as measured by the number of employees per 1,000 customers.

46. The project outcome was achieved through the effective implementation of the project outputs and targets: (i) water systems in 29 towns and 160 villages were rehabilitated, replaced, or extended by 2016, with 57,600 water-meter chambers installed; (ii) households gained access to drinking water for 16 hours per day on average; (iii) a sex-disaggregated customer complaints database was established and operated; (iv) public outreach and awareness campaigns were undertaken in all 10 subproject towns; and (v) NRW was reduced to 67.3% within the overall ASWS service perimeter—under Loan 2363 it was reduced to 72.7% (2012) and under Loan 2860 to 78.3% (2015). Households had access to more than 16 hours of water per day on average, however, as these households were not registered by gender, the AWSC was unable to disaggregate data to ensure that all households headed by women had access by 2017 to potable water supply for 15 hours per day. During project implementation, more than 53 training programs were conducted, with 660 participants, of whom 25.0% were female.

47. Data from the comprehensive project performance monitoring system was used to measure project outcomes and output indicators. Where required, supplementary data was provided from other relevant AWSC reports. The subproject civil works contract had safeguard and environmental management plans that were effectively monitored.

48. The government and the project’s priority of rehabilitating the water supply system was appropriate given the poor state of the water supply systems, and the limited number of works being undertaken under the project for emergency and urgent replacement of damaged sewers.

C. Efficiency

49. The project is rated efficient. The economic internal rates of return (EIRRs) estimated for the five subprojects at appraisal, under the two loans, were economically viable, with EIRRs above the economic opportunity cost of capital, which was estimated at 12.0%. The EIRRs were 25.0% for the Abovyan subproject, 21.0% for the Ararat subproject, 19.2% for the Lori subproject, 17.6% for the Gegharqunik subproject, and 17.3% for the Ararat five-communities subproject. This fifth subproject was not implemented after further review and assessment during implementation. At project completion, using the same methodology and economic opportunity cost of capital of 12%, three of these four subprojects were economically viable (the Abovyan subproject with an EIRR of 13.7%, the Ararat subproject with an EIRR of 17.3%, and the Lori subproject with an EIRR of 23.2%); the Gegharqunik subproject had an EIRR of 10.5%. The details of the economic reevaluation are outlined in Appendix 9.

50. Sensitivity analysis was undertaken for (i) a 20% increase in O&M cost, (ii) a 20% decrease in benefits, (iii) a 20% decrease in O&M costs, and (iv) a combined 20% increase in O&M cost and 20% decrease in benefits. The sensitivity scenarios for all four subprojects indicate that (i) all subprojects are economically viable with a 20% decrease in O&M costs; (ii) the Lori subproject is resilient and economically viable with changes in all of the parameters; (iii) the Ararat subproject is sensitive to the combined 20% increase in O&M cost and 20% decrease in revenue; and (iv) the Abovyan subproject is sensitive to an increase of 20% in O&M cost, a decrease of 20% in benefits, and the combined 20% increase in O&M cost and 20% reduction in benefits.

51. Efficient project processes were established for procurement, contract, project, and financial management. Details on planned and actual contract awards and disbursements are in Appendix 5.

52. The project quantifiable benefits were identified at appraisal, covering the incremental and non-incremental water, and time savings. At appraisal, the health benefits and improved productivity were identified as a benefit, but were not quantified. At project completion, these benefits remained nonquantified, though they have generated economic benefits and would have increased economic returns. The EIRRs for three of the subprojects were lower at completion, and this reflected lower actual economic benefits and markedly higher economic costs than estimated at appraisal, as noted in the financial reevaluation of the subprojects.

D. Sustainability

53. The project is assessed as likely to be sustainable. The financial reevaluation was undertaken on the representative subprojects identified at appraisal. It involved four of the five appraisal subprojects, as the fifth subproject was not implemented under Loan 2363. The change in scope, at the feasibility and design stage, of some subprojects may affect the accuracy of the comparison. The project investments were designed to rehabilitate and expand the system’s physical infrastructure and to improve AWSC system operational efficiency and performance with increased customer service provision in terms of water access, quality, and hours of service. The AWSC would be operated commercially, with tariffs based on cost recovery, and under the subsidiary loan agreement, and would repay the loan.

54. The AWSC increased revenue significantly (with higher sales volume, billing, and collection rates) and met key performance target indicators, though given it was expanding and servicing smaller towns and villages, it had higher operating costs than estimated at appraisal (in part from energy cost rises) that also increased significantly over the 2007-2017 period. As the government did not approve tariff increases, the AWSC tariff did not achieve cost recovery, and a government subsidy was needed to cover the shortfall.

55. The subproject financial internal rates of return (FIRRs) and financial net present values are lower than at appraisal, with the FIRRs of three subprojects below the weighted average cost of capital (WACC) of 2.2%. Only one subproject (Abovyan) has a FIRR of 5.8% that is above the WACC. The lower FIRRs reflect the significantly higher actual O&M costs (including higher energy costs), the lack of adoption of the planned tariff increases during the project resulting in actual revenues at lower levels than at appraisal.

56. The project is likely to be sustainable, given the government’s policy shift from financial self-sustainability for the AWSC and the other regional utilities to one of financial self-sustainability with a Veolia lease operating a national utility for 15 years from 1 January 2017. The government’s national lease decision was based on the benefits identified from economies of scale, lower management costs, opportunities for a significant reduction in energy use through adopting a national system approach with increased use of gravity-fed water and efficient pumping, and the expectation of reductions in NRW losses. The lease contract has defined key performance indicators on service quality, system maintenance and investment, and reduction in energy losses and NRW. The change to a lease contract has improved the likelihood of financial sustainably of the WSS utility in Armenia. The assumption is that after this contract period a similar lease contract will be used to operate the system.

57. Veolia will pay a lease fee to the government which will cover the loan repayments. The tariff is defined in the lease, with mechanisms for price adjustment (as per approval by the Public Sector Regulatory Commission), and the lessee’s annual fee to the government should be adequate to meet the debt repayment on the existing loans that were previously the responsibility of the regional water utilities. As defined in the lease contract, over the 15 years the lease fee payment will total AMD89.0 billion, and AMD37.5 billion of capital investment will be undertaken. As part of the contract, the government wants to integrate the remaining 580 villages that are outside the system into the network in a phased process. In addition, the government wants to expand wastewater treatment. Importantly, the tariff structure does not distinguish urban from rural consumers and thereby transfers a cross-subidy from the former to the latter (where costs of service deliver are higher).

58. The Veolia contract has a number of key performance indicators for service delivery, technical and financial operations. The four mandatory performance indicators are (i) continuity of supply, (ii) water quality, (iii) reduction in NRW, and (iv) consumer satisfaction. The international independent technical auditor, appointed by the government, will report on the performance of the defined indicators, with penalties for nonperformance, and this will provide the basis for sustaining the WSS system, the environment quality, and public health benefits.

59. These changes have implications for the reevaluation, as while the subproject FIRRs are low, as part of the national Veolia system the subprojects will be financially sustainable. In accordance with its contract, Veolia will make significant reductions in energy, NRW, and operating costs. To provide an indication of the impact of this type of change, AWSC undertook a sensitivity analysis of the four subprojects to measure the effects of a 20% reduction in operating

12 cost. The results showed that three of the subprojects would be financially viable while the fourth would still have a return less than the WACC. Details are in Appendix 10.

E. Development Impact

60. The development impact is rated satisfactory, as all but one of the impact indicator targets were fully achieved. Also, the project contribution to the ADB results framework targets were more than doubled for both results indicators. Details are provided in Appendix 12.

61. Through the AWSC, the project supported the government’s upgrade and rehabilitation of water supply systems in 10 regions in Armenia by (i) replacing the deteriorated water supply infrastructure; (ii) improving supply pressure; (iii) constructing new mains to connect new consumers, particularly poorly served low-income communities; (iv) installing water meters for all bulk and domestic consumers; (v) repairing and remodeling water intakes, pumps, flow meters, valves, and treatment units; and (vi) providing new storage reservoirs and tube wells.

62. More than 890,000 residents (i.e., more than 180,000 households) in 29 towns and 160 villages benefited from better access to safe, reliable, and sustainable water supply by 2016. The project rehabilitated, updated, and expanded 205 kilometers (km) of water mains and 1,934 km of water distribution network (this is more than double the ADB results framework target of 600– 700 km) and individual house connections. The water supply systems in the project area were significantly expanded, covering both new customers in AWSC’s service area and the villages newly joined to the AWSC after infrastructure rehabilitation. In total 25,319 new households received access to a safe, reliable, and sustainable water supply (11,889 under Loan 2363 and 13,430 under Loan 2860). The total number of new households is more than double the ADB results framework target of 9,800–10,000.

63. Public satisfaction with the availability, quality, and quantity of water increased to 90% on average by the end of 2016. Furthermore, by 2016, all project towns and villages had access to drinking water for more than 16 hours, on average, per day and the percentage of households with 24-hour water supply had increased to 52%.

64. The project has also brought gender benefits. Gender was a crosscutting component through all project outputs. Achievements under each output contributed to reducing the amount of time women spent collecting water and performing water-related household duties. The AWSC conducted a household survey to understand the water management and knowledge gaps (50% of the participants were women) also included gender analysis.

65. Particular attention was paid to gender issues during implementation. Women comprised 62.9% of the participants in the public consultations, awareness campaigns, and social and gender surveys and studies (the GAP target was 50.0%). The GAP target of 40.0% female employment in the AWSC was only partially achieved—22.6% of the utility’s workforce are women. Female employment in the AWSC is influenced by the job skills required by the utility— manual labor is male dominant and 95.0% of customer service staff is female. Also, the female contractor participation (GAP target of 10.0%) could not be assessed as the AWSC bidding process was not registered by gender. The GAP targets (50.0% female participants) with the survey on sex-disaggregated data of household water management, household need, and knowledge gaps were achieved, with women comprising 64.9% of the participants. A “Water

13 sanitary and hygienic issues and effective water usage”6 booklet was prepared (1,000 copies) and distributed to all training participants.

66. In the AWSC’s human resources department, gender was mainstreamed and women’s employment and career opportunities were increased. Sex-disaggregated data systems were established (27.0% were female). Women accounted for 13.7% (the GAP target was 15.0%) of management; 50.0% of gender training participants were women; the quarterly and annual reports each had a separate chapter detailing the gender achievements; and a sex-disaggregated customer complaints database was established. As part of the customer outreach and information awareness, training courses and public consultations on the “Water sanitary and hygienic issues and effective water usage” were carried out in all 10 regions of Armenia, and 100% of female participants received the awareness materials. One nongovernment organization was involved during all public outreach and awareness meetings. The GAP achievements are outlined in Appendix 11.

67. The lessons learned from this project provided insights into NRW and water management know-how that are being applied in other Central and West Asia Department projects within Georgia, Kazakhstan, the Kyrgyz Republic, and Tajikistan.

F. Performance of the Borrower and the Executing Agency

68. The performance of the borrower and the executing agency is rated satisfactory. The executing and implementing agencies were effective during implementation. They were proactive at project start, with the PCU and the AWSC (implementing agency) PMU quickly established and staffed, and counterpart funds were provided as agreed during project implementation. The PMU was efficient in project implementation and planned timelines were achieved. The PGC met regularly and provided strategic support to the project. Given the success of the first loan, the borrower and the executing agency requested additional financing to undertake further urban water supply subprojects.

69. All core loan covenants were complied with, with the exception of the increase in tariff and the tariff plan for long-term financial sustainability, though this issue was resolved with the government’s decision to move to a national lease contract (1 January 2017), which established the basis for financially sustainably. All safeguard requirements were satisfactorily met.

70. The PMU established strong project peformance management and project reporting systems, which were effectively implemented. The ASWC’s financial management systems met ADB requirements, and the annual financial audit was undertaken as per requirements, with no irregularities identified. With the change in institutional arrangements (from 1 January 2017) in the final year of the project, the integration of the ASWC into a national utility, and the closure of the ASWC PMU and transfer of responsibility to the WSPIU, one issue did arise: project performance reporting systems were not maintained at the previous level and a government project completion report was not submitted in ADB format.

G. Performance of the Asian Development Bank

71. ADB’s performance is rated satisfactory. When processing the project, ADB worked closely with counterpart government agencies to initiate advanced procurement and retroactive financing. These early project actions supported by the executing and implementing agencies

6 AWSC.2013. The Adventures of Nare and Narek in the planet H20

meant implementation occurred as planned and on schedule, and resulted in the first loan (Loan 2363) closing 4 months ahead of the scheduled closing date.

72. The project was processed and administered by the Central and West Asia Urban and Water Division, with the project transferred (under the Central and West Asia Regional Department joint-venture approach) to the ARRM from February 2015. During June 2008– February 2015, there was strong ADB engagement, with one inception mission, 10 review missions (with one review mission including inception for the additional financing loan) and a midterm review. This ensured there were timely responses to project issues.

73. Project administration from the resident mission (2015 to project closing) was effective. The project officer was a senior urban specialist from ADB’s Central and West Asia Urban and Water Division, which resulted in (i) closer ADB interaction with the executing and implementing agencies, (ii) ongoing review during a peak period for implementation of the civil works for the 10 subprojects, and (iii) engagement with the government while it was developing its policy for the next phase of the PPP urban water supply management.

H. Overall Assessment

74. The overall project is rated successful, as it is assessed as highly relevant, effective, efficientI, and likely to be sustainable. The project sector loan modality was appropriate as it was responsive to investment priorities based on defined selection criteria, and the project was well designed and implemented as planned. The government sought additional financing, which was approved by ADB, to expand the scale of the project, given its effectiveness. Of the project funds of $95.0 million, $92.6 milion was disbursed, and counterpart funds were provided as required. Borrower, executing agency, and ADB engagement and performance in project implementation and administration is rated satisfactory. The project had a significant impact on the target beneficiaries and fully achieved nearly all of the DMF indicators. ADB development results were also fully achieved, with targets more than doubled.

Overall Ratings Criteria Rating Relevance Highly relevant Effectiveness Effective Efficiency Efficient Sustainability Likely sustainable Overall Assessment Successful Development impact Satisfactory Borrower and executing agency Satisfactory Performance of ADB Satisfactory ADB = Asian Development Bank. Source: Asian Development Bank.

IV. ISSUES, LESSONS, AND RECOMMENDATIONS

A. Issues and Lessons

75. ADB’s engagement with the government over the project period has resulted in effective project implementation. There were many lessons learned: (i) The effectiveness of establishing the PMU at early stage, and undertaking advance action and retroactive financing with strong government commitment resulted in project implementation and achievement of outputs as planned.

(ii) The adoption of a sector project modality provided a responsive mechanism for the selection of prioritized subproject investments that would support AWSC customer service delivery and improved operational performance. (iii) The AWSC management contract and the use of a PPP modality enabled significant improvements in water supply, water quality, and service continuity in project towns. (iv) The lack of adoption of the tariff increase and plan affected the AWSC’s financial sustainability objective during implementation. The change in 2017, integrating the water utilities into a national water utility, with a lease contract (with Veolia), has addressed this shortfall, and provided the framework for long-term sustainability. (v) Engaging the water utility in investment planning resulted in efficient alignment and allocation of resources. In the future (under the lease contract), these functions will again be separated, with the SCWE to undertake investment planning, and the mechanism will need to be established with the lessee to ensure investment is aligned with customer service, target deliverables, and performance indicators. (vi) Thre were challenges in integrating villages into the AWSC system, as village communities realized that this engagement would result in the payment of tariffs, and this required strong commitment before the investment could be successful. (vii) Given the abundance of local civil works contractors, structuring the scope of civil works to medium-size contract packages (from $1.5 million to $3.0 million) was effective, with local companies successfully undertaking contracts and generating employment. (viii) The requirement of prior approvals for all contract variations (contract price, scope, or time schedule) under Loan 2860, which was requested by ADB at negotiations, impacted on the timeliness of approvals, given there were often three to eight variations per contract (i.e., about 250 variations in all the contracts combined), and resulted in significant delays. An alternate approach would have been more effective. (ix) Despite the introduction of gender in every aspect of the project, keeping a sex- disaggregated database was a challenge. The project brought practical benefits to the women and increased the capacity of the AWSC to integrate gender into its approaches to human resources, complaints redress mechanisms, and outreach to beneficiaries. In Effective Gender Mainstreaming (EGM) projects, the ongoing participation of a gender specialist in review missions would be effective in assessing implementation.

B. Recommendations

76. Future monitoring. The adoption of a national lease on 1 January 2017 provided the basis for long-term financial sustainability of the water supply system. The SWCE is now responsible for the technical auditing, the asset management system, and monitoring and reporting on the key performance indicators. All actions will need to be effective for sustainability, as will implementation of any future tariff increases. For any future engagement, it is important that ADB monitor progress in these areas.

77. Further action or follow-up. Given the progress achieved in Armenia with urban water supply, the government’s priority, and the significant investment requirements remaining for water supply, sanitation, and treatment, it is recommended that ADB continue its engagement in the sector.This may require ADB using a range of investment modalities (public, PPP or private sector).

Timing of the project performance evaluation report. It is recommended that ADB undertake the report in late 2019, after 2 years of the lease contract, and the asset management, technical audit, and key performance indicator systems should be fully operational, and it will be possible to assess the ongoing performance and effectiveness of the project investments.

16 Appendix 1

DESIGN AND MONITORING FRAMEWORK

Design Summary Performance Targets and Project Achievements (Overall Project) Indicators with Baselines (Overall Project) (Overall Project) Impact Improved public health Public satisfaction with the The public satisfaction with the availability, quality, and and environment in about availability, quality, and quantity of water increased to 90% on average by the end of 29 project towns and 160 quantity of water is 2016. villages improved. L2363-ARM: L2860-ARM:

2008 – 42% 2013 – 62%

2009 – 51% 2014 – 74%

2010 – 66% 2015 – 88%

2011 – 78% 2016 – 91%

2012 – 89% The percentage of For L2363-ARM loan project towns and villages it increased households with 24-hour from 25% (2008) to 40% (2012). water supply increases to For L2860-ARM loan project towns and villages it increased 65% in 2016 in all project from 33% (2013) to 49% (2015). towns and villages. As of November 2016 the percentage of households with 24-hours water supply in the project are increased to 52%. All households in project The average number of daily hours of drinking water towns and villages have services in all project towns and villages is more than 16 access by 2016 to reliable hours per day by 2016. supplies of potable water for at least 15 hours per For L2363-ARM loan project towns and villages it is 16.2 day on average that meets hours per day on average by 2012. Armenian quality For L2860-ARM loan project towns and villages it is 19.3 standards. hours per day on average by 2015. Outcome Improved access to safe, About 700,000 residents in The Project positively changed the lives of more than reliable, and sustainable the project towns and 894,785 residents of 29 towns and 160 villages across WSS in about 29 towns villages directly or indirectly Armenia by 2016. and up to 160 project benefit by 2012 from The average number of daily hours of drinking water villages, managed on reliable supplies of potable services in all project towns and villages is more than 16 commercial principles and water for at least 15 hours hours per day by 2016. with environmentally per day that meets For L2363-ARM loan project towns and villages it is 16.2 sound practices Armenian water quality hours per day on average by 2012. standards. For L2860-ARM loan project towns and villages it is 19.3 hours per day on average by 2015. There is an inconsistency with this performance target and indicator, as it refers to 2012 (when it should be 2016) and the wording doesn’t use the same terminology as the Output indicator No.2 and Impact indicator, which is “15 hours per day on average”. The technical, financial, 1. The technical capacity of AWSC improved with the and managerial capacity of following: the AWSC is further • water losses reduced improved by 2016. L2363-ARM: from 83% (2008) to 72.7% (2012) L2860-ARM: from 83.3% (2013) to 78.6% (2015) • metering level increased L2363-ARM: from 65% (2008) to 81% (2012) L2860-ARM: from 80% (2013) to 83% (2015)

Appendix 1 17

Design Summary Performance Targets and Project Achievements (Overall Project) Indicators with Baselines (Overall Project) (Overall Project) 2. The financial capacity of AWSC improved with the following: Revenue collection with the second loan project increased up to 92% (2015) in average. For L2363-ARM loan project towns and villages it was 79% by 2012. For L2860-ARM loan project towns and villages it is was 92% by 2015. 3. The management capacity of AWSC improved with the following: Productivity (# of employees per 1,000 consumers) improved per project. L2363-ARM: from 5.64 (2008) to 5.14 (2012) L2860-ARM: from 9.2 (2013) to 7.5 (2015) Outputs Water supply systems in Water supply systems in 29 towns and 160 villages are 1. Extended program of 29 towns and up to 160 rehabilitated, replaced in part or in full, and/or extended by rehabilitation and villages are rehabilitated, 2016. replacement of water replaced in part or in full, supply and sewerage and/or extended by 2016. 57,660 water meter chambers are installed in all project systems in more project About 40,000 water meters areas. towns and villages are installed in all project areas. 2. Further improvements All households in project The average number of daily hours of drinking water in water services as per towns and villages have services in all project towns and villages is more than 16 updated performance access by 2016 to reliable hours per dayon average. targets and indicators in supplies of potable water more project towns and for at least 15 hours per For L2363-ARM loan project towns and villages it is 16.2 villages day on average that meets hours per day on average by 2012. Armenian water quality For L2860-ARM loan project towns and villages it is 19.3 standards. hours per day on average by 2016. A sex-disaggregated Sex-disaggregated customer complaints database customer and complaints established with all the incoming calls and complaints database is in place. recorded and analyzed by the AWSC Call center staff. One local nongovernment Public outreach and awareness campaigns/trainings organization and/or female undertaken in all 10 subproject’s towns under the L2860- community leaders are ARM loan project, with 285 participants out of which 185 involved in the outreach (65%) were female. and awareness campaign in each project town. One NGO was involved during the all public outreach and awareness meetings in all subproject towns. All households headed by While the average number of daily water supply in all project women in project towns towns and villages is more than 16 hours per day, the and villages have access project covered all households in the identified communities; by 2017 to potable water however, the households were not registered at AWSC by supply 15 hours per day. gender and AWSC was unable to disaggregate the data 3. Extended program to Nonrevenue water is AWSC achieved the target with the Nonrevenue water further expand the reduced to 70% in project (losses) reduced to 67.3 % in overall AWSC service AWSC’s operational and towns and villages by perimeter including the project area (based on AWSC institutional capacity 2016. quarterly report QIII 2016) by September 2016. L2363-ARM: L2860-ARM: 2008 – 83% 2013 – 83.3% 2009 – 82.1% 2014 – 80.3% 2010 – 80.2% 2015 – 78.6% 2011 – 73.5% 2012 – 72.7%

18 Appendix 1

Design Summary Performance Targets and Project Achievements (Overall Project) Indicators with Baselines (Overall Project) (Overall Project) Tariff collection efficiency AWSC achieved the target with the tariff collection efficiency in project towns and of approximately91% in all towns and villages under the villages is improved to 95% AWSC service area in average as of December 2015. by 2016. L2363-ARM: L2860-ARM: 2008 – 61% 2013 – 93% 2009 – 65% 2014 – 93% 2010 – 74% 2015 – 93% 2011 – 76% 2012 – 79% The AWSC human AWSC introduced sex-disaggregated human resources resource management data-base and during the project implementation period, strategy is further more than 53 training programs have been conducted with developed to include 660 participants in total, which included165females (25%). further management training provided to AWSC staff, with 25% of training participants being women.

Source: Asian Development Bank.

Appendix 2 19

PROJECT OUTPUTS

A. Introduction

1. Both Loan 2363-ARM: Water Supply and Sanitation Project and its Additional Financing Loan 2860-ARM: Water Supply and Sanitation Project - Additional Financing (hereinafter the project) undertook: (i) rehabilitation and upgrading water supply infrastructure (including some improvement of sewerage systems); (ii) improvement in the performance of water services; (iii) improvement in the management and operational efficiency of the AWSC water utility company. The project comprises two components: (A) municipal infrastructure rehabilitation and improvement; and (B) management improvement and capacity development. This appendix details implementation achievements of the project component outputs.

B. Component A: Municipal Infrastructure Rehabilitation and Improvement

2. This component focused on: (i) rehabilitation and replacement of the deteriorated water supply infrastructure by reducing leakage; (ii) improving supply pressure; (iii) constructing new mains to connect new consumers, particularly poorly served low-income communities; (iv) installing water meters to all bulk and domestic consumers;(v) repairing/remodeling water intakes, pumps, flow meters, valves, and treatment units; and (vi) providing new storage reservoirs and tube wells at technically viable locations.

3. At appraisal, it was expected to rehabilitate (replace in part or in full, and/or extend) water supply systems (hereinafter WSS) in 29 towns and up to 160 villages (the details are presented in Table 1) and install about 40,000 water meter chambers in all project areas. It was expected that about 700,000 residents in the project towns and villages directly or indirectly benefit from reliable water supply for at least 15 hours per day that meets Armenian water quality standards.

4. During the project 71 civil works contracts and 25 contracts for supply of the equipment and materials were awarded and successfully completed. With savings under L2363 and L2860 projects,9 additional civil works contracts have been added to the initial project scope. In total $70.74million of ADB financing were disbursed on the infrastructure investments (including $45.70 million on civil works, $20.55 million on materials and equipment and $4.49 million on consulting services for design and supervision, legal services and project audit).

5. Civil works are outlined in summary below and listed in detail in Tables 2 and 3:

• 2.140 km of water main and network constructed and reconstructed, • 4.4 km sewerage system is constructed, • 59 Water Supply Daily Regulation Reservoirs rehabilitated and constructed, • 4 Chlorination Stations rehabilitated and constructed, • 21 Pumping Stations rehabilitated and constructed, • 3 Drinking Water Treatment Plants are rehabilitated.

6. The improvements in water supply services, operational efficiency and performance achievements under the project are:

• Water supply systems in 29 towns and 160 villages are rehabilitated, replaced in part or in full, and/or extended by 2016,

20 Appendix 2

• 894,785 residents in the project towns and villages directly or indirectly benefited from reliable water supply services, • Over 57,660 water meter chambers are installed in all project areas, • The average number of daily hours of drinking water services in all project towns and villages is more than 16 hours per dayon average. • Tariff collection efficiency increased from 61% up to 93% in average, • water metering increased from 65% to 82% in average,

7. The government strategy was to concentrate on the WSS improvements, as a first priority measure. It was agreed between SCWE and ADB that the first priority during the implementation of the project was the WSS rehabilitation and only a limited number of works were implemented covering the emergency/urgent replacement of damaged sewers that were causing the potential danger for polluting water supply systems in 11 locations during the implementation of the Loan 2363.

8. The project invested in the redesign of the overall WSS systems to address existing problems, and include updating of consumer database, conversion of illegal connections to registered accounts and monitoring of water quality. By redesigning the overall WSS systems, this component addressed the existing problems of the systems being overdesigned/under- designed. It also included updating of consumer databases, conversion of illegal connections to registered accounts, and monitoring of water quality.

9. At appraisal of Loan 2363 it was planned that a pilot zone will selected in the project area to demonstrate 100% water supply coverage, 100% metering, 24-hour water supply with the desired pressure, and 100% collection efficiency. This was aimed to build confidence of consumers in the project area in an efficient and strongly governed WSS system. Based on eligibility criteria agreed during the project appraisal, the Malishka village (with total number of 939 customers) was selected to demonstrate the efficiency of the rehabilitated WSS and improved water supply services. The rehabilitation works were completed in April 2011. The catchments and daily water regulation reservoir have been fully rehabilitated; new pumping station, chlorination station and contact reservoir have been constructed; 100% network (38 km of network and house connections) was rehabilitated; 1119 water meter chambers have been installed. As a result of the project the population has access to 24 hours of water supply, receiving 100% disinfected water, water-metering level of 100% and collection efficiency became 100%.

C. Component B: Management Improvement and Capacity Development

10. The Management Improvement and Capacity Development component was directed to the improvement the operational and management efficiency of the AWSC by (i) increasing public awareness of municipal infrastructure rehabilitation and improvement through public awareness and media campaigns, (ii) strengthening service contracts between the AWSC and municipal governments governing the use of locally owned distribution networks and the contracts between the company and communities taking bulk water supply, (iii) developing a disconnection policy for non-payers, and (iv) preparing a strategy to develop the AWSC’s human resources by improving staff training and development.

11. Public awareness campaign was carried out in all the project communities ensuring active involvement of women based on the gender policy of ADB. During the campaigns information on the different aspects of the project was provided to the public including information on the technical, social, gender, safety measures and environmental impact. As part of public awareness

Appendix 2 21 campaign, courses on the “Water sanitary and hygienic issues and effective water usage” were carried out in 10 regions of the country. Booklets on “Water sanitary-hygienic issues and effective water usage” were prepared and distributed to the participants of the meetings (285 inhabitants, including 185 women (64.9%)). The public awareness and media campaigns and the significant improvements in service delivery under the project were effective, as indicated in the public satisfaction rates rising to 80% in 2015 from 42% in 2008.

12. Financial management improved through the introduction of new accounting procedures, a computerized billing and collection system, and a system of mapping asset inventories. The nonrevenue water (losses) reduced to 67.3 % in overall AWSC service perimeter by September 2016 from 83% in 2008.

13. From 2012 to 2016 the AWSC revised the all Service Contracts with municipal governments (WSS municipal infrastructure use Service Contracts Resigning with AWSC). To fully understand the basis for non-payment of the customers, the AWSC’s customer service center regularly conducted surveys of non-paying customers. Both AWSC’s commercial department and legal departments took appropriate actions and established the public awareness and enforcement procedures which resulted to increase in collection rates. Tariff collection significantly increased from 61% in 2008 to 93% in 2015.

14. In Accordance with the AWSC’s Human Resource Development Strategy the AWSC’s Human Resource Department via the “Training and Development Center” continuously implemented numerous training programs to improve staff special skills in technical, financial, operational, commercial and other areas. During the project implementation period, more than 53 training programs were conducted with more than 660 participants in total, including 165 female.

15. A related activity was financed by ADB grant ($30,000) to produce 82,000 copies of a 16- page illustrated booklet, which were distributed at 36 schools. The program was initiated by AWSC to raise awareness about water conservation in the towns where it operates.

16. During early stage of the project implementation it was realized that the planned activities for “Improvement of Communities’ Management Skills” were not relevant, as the water supply systems in villages that were merged into the AWSC perimeter during project implementation will automatically be maintained and operated by the AWSC. Thus, during the loan review mission from 20 to 25 November 2009, it was agreed by the government and ADB not to cover the subcomponent for “Improvement of Communities’ Management Skills” under the project.

22 Appendix 2

Table 1: Detailed number of Towns and Villages covered under the project WATER SUPPLY AND SANITATION WATER SUPPLY AND SANITATION SECTOR N. Region SECTOR PROJECT PROJECT-ADDITIONAL FINANCING Town village population Town village population 1 2 3 4 5 6 7 8 Talin 7,540 Talin Ujan 3,389 Aruch 1,230 Aragatsotn 1,178 Partizak 420 Nor Yedesia 1,280 Nor Amanos 776 Kosh 3,235 Arevut 280 Dprevank 80 Kanch 280 Shamiram 1,610 Hakko 375 Tsaghkahovit 1,710 Sorik 163 Shenkani 200 Karaberd 1,295 Ria Taza 450 Oshakan 1 ARAGATSOTN Vardablur 580 Voskevaz Sangyar 380 Voskehat Geghadzor 1,100 Berqarat 925 AmreTaza 295 Geghadir 650 Hnaberd 2,400 Voskevaz 4,700 Voskehat 1,250 (Arag) Oshakan 5,480 Ararat Vedi 14,800 21,800 /Banavan/ Artashat 25,733 Vedi Masis 21,376 Ararat 8,432 Surenavan 2,710 Vosketap 5,360 Armash 2,700 Masis 1,744 Yeraskh 860 Burastan 2,265 Taperakan 4,458 Azatavan 3,429 Ginevet 520 Baghramyan 1,952 Nor Ughi 861 Berqanush 2,100 Vanashen 2,614 Dalar 3,095 Dashtakar 730 Mrgavan 2,091 Urtsadzor 3,150 Shahumyan 4,480 Aygepat 1,610 Dimitrov 1,675 Yeghegnavan 2,067 Aygezard 3,852 Noyakert 2,421 V.Artashat 4,770 Lanjazat 1,606 Mrganush 1,307 V.Dvin 2,702 Byuravan 1,525 2 ARARAT Dvin 3,138 Nshavan 2,143 Mrgavet 2,413 Hovtashen 1,250 Norashen 3,472 Abovyan Kaghcrashen 3,703 Mrgavet Getazat 2,232 Arevshat 2,430 Abovyan 1,587 Kanachut 1,290 Mkhchyan 5,208 Getapnya 1,300 Darakert 2,708 Dashtavan 2,252 Norabats 2,800 Nor Kyuri 1,250 Marmarashen 3,765 Ghukasavan 2,373 Khachpar 2,800 Zorak 1,863 Arbat 1,950

Appendix 2 23

WATER SUPPLY AND SANITATION WATER SUPPLY AND SANITATION SECTOR N. Region SECTOR PROJECT PROJECT-ADDITIONAL FINANCING Town village population Town village population Ayntap 9,040 Ejmiatsin 57,200 Amberd 1,798 Shenik 1,052 Aygeshat 2,044 Argina 538 Dasht 1,084 Artamet 217 Doghs 1,510 Arevadasht 451 Lernamerdz 515 Aghavnatun 3,521 3 ARMAVIR Musaler 2,948 Shahumyan 1,920 Shahumyan 1,220 TF Ptghunk 1,991 Norakert 3,240 Ferik 399 Gavar Sevan 23,262 26,621 /Hatsarat/ Gagarin 1,489 Sevan Tsovazard 2,200 Noratus 6,782 Lchashen 5,026 Sarukhan 9,029 4 GEGHARKUNIK Hayravanq 864 Karmirgyugh 5,511 Berdkunq 320 Gandzak 4,552 Lchap 1,230 Ddmashen 2,832 Chkalovka 598 Norashen 559 Lchashen Tashir 12,300 Alaverdi 16,524 Stepanavan 16,600 Stepanavan Metsavan 7,300 Mets Parni 2,171 Sarchapet 3,152 Dashtadem 150 Odzun 5,800 Arevatsag 782 5 LORI Tsater 443 Teghut 887 Shnogh 3,365 Metsavan Sarchapet Odzun Charentsavan 24,806 Hrazdan 56,375 Abovyan 45,000 Tsaghkadzor 15,000 Kaghsi 2,285 Charentsavan 6 KOTAYK Karashamb 2,580 Abovyan / Solak 2,568 Akunk 2,128 Argel 3,366 Solak 2,483 Kaghsi Artik 21,500 Artik Anushavan 2,197 Nor Kyank Getapnya 830 Hovtashen Hovtashen 350 Vardakar Horom 2,531 Geghanist Meghrashen 1,500 Mets Mantash Nor Kyank 1,929 Meghrashen Vardakar 774 Panik Panik 3,158 Spandaryan 7 SHIRAK Mets 2,514 Mantash PokrMantash 2,850 Arevshat 2,060 Geghanist 1,260 Spandaryan 1,715 Salut 108 Torosgyugh 314 Vardablur 105

24 Appendix 2

WATER SUPPLY AND SANITATION WATER SUPPLY AND SANITATION SECTOR N. Region SECTOR PROJECT PROJECT-ADDITIONAL FINANCING Town village population Town village population Musayelyan 393 Hartashen 184 Zuygaghbyur 510 Karmravan 234 Ashotsk 2,967 Bavra 538 Goris 23,200 Meghri 5,150 Sisian 16,800 Kapan Kapan 46,750 Goris 8 SYUNIK Agarak 5,980 Brnakot 2,176 Karchevan 403 Achanan 190 Syunik 1,427 Yeghegnadzor 9,540 Vayk 6,814 Getap 2,363 Jermuk 7,200 Gomq 188 Zaritap 1,600 9 VAYOTS DZOR Malishka 5,303 Nor Aznaberd 175 Shatin 2,045 Berd 8,600 Dilijan 14,300 Ayrum 2,675 Noyemberyan Noyemberyan 5,587 Berd 10 TAVUSH Ijevan 2,040 Zorakan 1,041 Deghdzavan 297 Ptghavan 1,115 Haghtanak 1,380 Bagratashen 2,859 Berdavan 3,465 Berdavan TOTAL 20 102 594,285 20 77 300,500

Note: The settlements marked in red color and underlined in the columns 6 and 7 are the ones where the rehabilitation works continued under the additional financing project, so due to this overlap the total number of the Towns and Villages covered under the project is: 29 Towns and 160 Villages

Appendix 2 25

Table 2: Detailed list of works implemented under L2363-AM loan project EXTERNAL SYSTEM DISTRIBUTION NETWORK Investment Name of (St) (PE) Water Region Replacement House amount settlements Water Water meter Sewers Structures of pipelines connections /AMD/ main main chambers (km) /km/ /km/ /km/ /km/ (pcs) Artashat town 19.380 5.926 673 0.963 319,864,607 Lanjazat village 0.637 7.608 3.061 337 127,587,008 V.Dvin village 4.600 1.636 364 60,689,752 Dvin village 4.402 1.183 433 65,367,875 Mrgavet village 9.457 2.128 367 108,539,761 Khaghtsrashen village 5.610 2.365 300 63,339,404 Norashen village 7.051 2.781 382 82,074,497 Getazat village 5.129 2.413 317 68,276,680 Arevshat village 2.541 0.590 113 25,702,289 Abovyan village 5.069 1.230 183 56,885,909 Kanachut village 5.662 2.508 280 70,769,125 Water main 16.104 246,755,209 Surenavan village construction 250m3 DRR 4.565 59,599,755 Armash village 12 water taps 2.423 18,513,761 Erasgh village construction 180m3 DRR 4.375 54,717,114 Vedi town 7.881 2.354 539 0.349 132,623,913 Taperakan village 2.556 1.234 654 94,307,526 Ginevet village 1.365 0.408 62 17,413,930 Nor Ughi village 2.155 0.324 48 21,801,314 Vanashen village 0.252 0.256 14,991,100 ARARAT Urtsadzor village 2.605 0.968 154 35,731,738 Dashtakar village 1.522 0.061 13 14,222,154 Yeghegnavan-Noyakert 0.016 6.955 163,425,296 water main Noyakert village 3 water taps 1.727 0.917 7,866,205 Yeghegnavan village 2 water taps 4.100 0.181 1,735,840 Aygepat village 2.464 0.552 82 24,701,114 Mghchyan village 9.786 2.619 398 122,454,186 reconstruction ''Banavan'' Ararat town 0.022 0.194 30,593,324 DRR Getapnya village 5.166 1.984 265 73,409,640 Darakert village 4.761 1.324 195 65,161,450 Dashtavan village 3.993 1.220 163 41,908,192 construction 2000m3 DRR Norabats village 1.103 2.390 5.815 2.980 378 517,438,237 and p/s Masis town 5.311 3.505 432 133,798,001 Nor Kyuri village 2.423 0.820 135 30,572,595 Marmarashen village 5.276 2.380 272 86,024,117 Ghukasavan village 3.253 0.703 154 61,064,582 Khachpar village 3.417 0.875 181 62,071,920 Zorak village 5.820 1.738 263 98,977,550

26 Appendix 2

EXTERNAL SYSTEM DISTRIBUTION NETWORK Investment Name of (St) (PE) Water Region Replacement House amount settlements Water Water meter Sewers Structures of pipelines connections /AMD/ main main chambers (km) /km/ /km/ /km/ /km/ (pcs) Arbat village 5.043 1.174 235 100,787,110 reconstruction of main for Ayntap village 0.422 12.295 3.357 725 296,518,530 Kharberd DRR Ghukasavan-Geghanist 0.070 4.126 212,566,269 water main Tsamakaberd district, ''Gomadzor'' DRR, Sevan town 0.271 9.334 2.468 1.930 119 260,669,510 Dzknget-Sevan water main Tsovazard village 0.016 19.057 12.804 445 206,279,429 Lchashen village 0.004 1.926 21,674,266 GEGHARKUNIK Hayravank village 10.308 5.678 193 171,782,791 Berdkunq village 0.026 5.046 2.875 83 82,518,851 Lchap village 6.101 3.632 161 95,376,432 Gagarin Lchashen-Sevan main 4.810 51,659,415 construction of "Noratus" t.Gavar 1000m3 DRR 0.255 0.086 90,765,653 and Artsvakar p/s Ejmiatsin town 14.959 6.314 1024 0.396 294,599,733 Argina village 1.440 27,121,700 repair 2 deep wells and Shenik village 0.983 3.962 1.121 179 100,862,232 ARMAVIR chl/s construction p/s and chl/s, Artamet village 0.210 0.658 61,383,145 repairmen deep well Arevadasht village 2.925 33,850,400 Abovyan town 0.122 37.156 12.807 863 980,408,289 Kaghsi village construction 300m3 DRR 0.193 0.210 33,017,891 Karashamb village construction 300m3 DRR 0.089 6.917 3.356 240 162,490,078 reconstruction 2000m3 Charentsavan town 0.054 0.481 0.100 86,875,698 DRR construction 300m3 DRR KOTAYK Solak village and p/s, rehabilitation 0.296 1.111 5.622 1.677 314 155,315,327 100m3 DRR Argel village 2.044 0.548 90 0.163 60,382,756 reconstruction Makravan Hrazdan town 1.819 0.653 1.862 431,990,354 N2 p/s construction of mains Tsaghkadzor town 0.052 0.969 36,002,541 supplying DRRs construction Geghadzor Water main 300m3 DRR 0.042 12.454 210,478,029 ARAGATSOTN and new chl/s Sangyar village 5 water taps 0.910 12,576,472 Vardablur village 8 water taps 2.220 33,145,611

Appendix 2 27

EXTERNAL SYSTEM DISTRIBUTION NETWORK Investment Name of (St) (PE) Water Region Replacement House amount settlements Water Water meter Sewers Structures of pipelines connections /AMD/ main main chambers (km) /km/ /km/ /km/ /km/ (pcs) RyaTaza village 6 water taps 1.611 24,072,663 AmreTaza village 4 water taps 0.191 2,021,655 Geghadzor village 6 water taps 2.500 33,168,150 Geghadir village 3 water taps 0.624 5,847,588 Hnaberd village 9 water taps 1.704 22,915,391 Berqarat village 6 water taps 2.202 21,340,903 Tsaghkahovit village 1.190 0.087 0.452 21,946,225 Shenkani village 1 water taps 0.001 87,283 rehabilitation 2x500m3 Voskevaz village 1.260 7.584 3.500 487 184,464,409 DRRs Voskehat village rehabilitation 500m3 DRR 3.406 1.052 146 58,529,654 rehabilitation p/s and DRR Oshakan village 4.287 1.689 274 110,824,006 area Talin town 4.438 2.171 207 87,028,726 Ujan village rehabilitation 500m3 DRR 0.068 11.428 2.073 305 224,888,919 Aragatsotn village 2.578 0.655 144 69,460,285 Nor Yedesia village 0.802 13,802,309 Kosh village construction p/s 0.159 5.955 1.217 131 125,440,856 Dprevanq village repair DRR fence 0.386 0.038 5 10,411,719 Shamiram village repair DRR fence 3.760 0.913 120 67,567,513 construction and Ghazaravan village 0.040 6,702,060 reconstruction deep wells Agarak village repair p/s 0.337 18,615,704 replacement of pump of Aksyutin p/s, Tashir town 12.912 3.307 541 0.409 310,035,475 repairmentNovoseltsovo p/s the construction of Metsavan village distribution valve unit at 2.994 0.603 104 37,910,004 LORI entrance to village reconstruction p/s and Sarchapet village 0.081 8.027 0.809 0.403 57 133,283,494 accumulating reservoir rehabilitation 2x400m3 Stepanavan town 0.156 0.718 6.909 2.641 356 265,633,302 DRRs and Getavan p/s Odzun village 15.601 5.838 905 159,431,726 Tsater village 0.839 3.557 1.886 163 43,732,243 reconstruction WTP, Berd town repairmen Prukants DRR, 0.275 5.853 0.490 55 0.651 310,932,601 construction new p/s TAVUSH Ayrum town 1.440 0.150 22 15,447,254 Noyemberyan town 0.023 0.598 2.546 0.058 49,905,891 Deghdzavan village 9.604 2.145 0.300 79 110,379,551 Haghtanak village repair 2x250m3 DRRs 0.096 0.974 4.484 1.345 214 101,643,172

28 Appendix 2

EXTERNAL SYSTEM DISTRIBUTION NETWORK Investment Name of (St) (PE) Water Region Replacement House amount settlements Water Water meter Sewers Structures of pipelines connections /AMD/ main main chambers (km) /km/ /km/ /km/ /km/ (pcs) construction 2 new deep Berdavan village wells, 0.191 0.969 9.940 3.770 302 221,755,499 repair 2 deep wells and p/s Ijevan town 1.682 15.114 4.509 742 310,613,014 repair WTP and 2x330m3 Agarak village 0.415 2.645 220,610,360 DRR, reconstruction p/s Karchevan village 1.456 0.669 94 27,835,280 SYUNIK Goris-Kornidzor water Goris town 0.080 24.103 13.513 1358 0.260 536,311,030 main section Sisian town 0.035 24.780 7.998 1088 359,233,656 Kapan town 3.279 16.119 7.202 659 345,682,059 Artik town Mets Mantash, structure of Mantash PokrMantash, Arevshat, intake 0.810km, water Spandaryan, Geghanist, intake pipe 0.676km, Getapnya, Panik, rehabilitation of 2 groups 4.284 1.714 20.226 8.174 1133 0.137 1,153,458,327 Anushavan, Meghrashen, DRRs, reconstruction of Nor Kyank, valve unit at entrance to Vardakar, Hovtashen, villages Norashen villages Torosgyugh village 3.580 68,701,070 SHIRAK Vardaghbyur village 0.020 0.355 4,978,215 Musayelyan village 0.787 14,016,300 Hartashen village 0.505 0.461 7,134,250 Zuygaghbyur village 0.755 0.167 9,174,010 Karmravan village 0.031 2.307 0.488 0.306 45,866,650 repair 3 captures and DRR Ashotsk village 0.099 1.595 0.749 0.266 87,745,756 fences rehabilitation DRRs valve Bavra village 1.287 0.276 0.073 24,842,835 units, repair deep well Underground intake Salut village 2.102 42,712,589 138,0m Eghegnadzor town 0.800 4.115 1.608 162 0.502 143,544,978 construction new p/s, chl/s, 50m3 contact Malishka village 0.242 0.654 26.979 11.024 1119 491,587,637 reservoir, repair catchments and DRR VAYOTS DZOR repair 400m3և 50m3 Getap village 0.128 2.642 10.777 3.284 364 147,440,954 DRRs Shatin village reconstruction capture 3.539 0.854 133 27,487,071 construction capture, Nor Aznaberd village 0.159 0.522 0.072 14 22,989,165 reconstruction DRR fence Gomq village repair 2 capture 0.075 1.010 0.320 0.078 13 18,628,472

Appendix 2 29

30 Appendix 2

Table 3: Detailed list of works implemented under L2860-AM loan project EXTERNAL SYSTEM DISTRIBUTION NETWORK Water (St) (PE) Investment Replacement House meter Region Settlements Water Water amount Structures of pipelines connections chambe main main /AMD/ /km/ (km) rs /km/ /km/ (pcs) Oshakan village 22.405 9.769 1147 386,929,735 Voskevaz village 14.696 6.756 792 268,878,187 Voskehat village 3.997 1.571 106 44,433,732 Ferik village 3.041 0.830 88 26,412,221 Amberd village 6.829 3.496 332 84,045,020 Aygshat village 4.870 2.621 263 65,072,081 Dasht village 6.755 1.895 206 82,186,084 ARMAVIR Doghs village 4.347 1.906 170 46,742,966 Lernamerdz village 2.825 0.820 98 31,057,998 Aghavnatun village 11.938 5.859 650 175,820,712 Musaler village 0.005 7.349 2.372 326 108,232,598 Shahumyan village 0.004 6.242 2.926 271 105,857,123 Shahumyan P/P 0.001 2.801 2.003 148 52,303,185 Ptghunk village 0.111 7.838 2.267 273 82,671,538 Norakert village 0.013 12.818 3.932 685 183,290,794 Vedi town 15.157 3.567 583 282,019,421 Ararat town 6.794 1.354 188 122,838,809 GMF Banavan 3.382 0.082 14 54,036,535 Ararat village 20.666 5.942 1151 299,567,198 Vosketap village 13.586 1.597 369 170,295,756 Garni-Yeraskh, Garni GMF 335,913,406 water main 3.250 1.670 Masis village 0.001 2.275 0.580 82 26,895,920 Burastan village 0.005 4.791 1.200 210 46,528,856 Azatavan village 0.002 10.540 2.400 437 122,562,503 Baghramyan village 0.004 3.880 1.160 174 46,160,704 Berqanush village 0.006 4.954 1.330 242 63,989,115 ARARAT Dalar village 0.852 0.370 47 9,909,146 Mrgavan village 0.001 2.060 0.960 113 28,064,595 Shahumyan village 0.004 9.920 2.660 406 119,403,076 Dimitrov village 0.001 10.796 1.427 287 117,013,673 Aygezard village 10.363 4.037 491 107,366,656 Verin Artashat village 10.028 4.365 564 124,088,039 Mrganush village 4.542 1.182 181 39,005,784 Byuravan village 5.091 1.479 216 46,502,560 Nshavan village 7.849 3.109 401 76,095,416 Hovtashen village 0.355 6.068 2.178 230 54,174,687 Abovyan village 5.797 1.267 146 70,675,006 Mrgavet village 3.953 1.214 147 78,034,886

Appendix 2 31

EXTERNAL SYSTEM DISTRIBUTION NETWORK Water (St) (PE) Investment Replacement House meter Region Settlements Water Water amount Structures of pipelines connections chambe main main /AMD/ /km/ (km) rs /km/ /km/ (pcs) Stepanavan town reconstruction p/s 0.063 0.995 15.481 3.897 777 401,462,625 Mets Parni village 7.705 2.204 327 107,187,318 System of Hovdara 5.999 8.142 1.617 459,249,254 Metsavan village 0.179 8.755 4.268 509 196,977,829 Sarchapet village construction p/s 0.098 6.246 2.568 263 168,757,121 Lernahovit village 1,286,115 LORI Alaverdi town reconstruction 2x350m3 DRRs 0.399 0.116 12.378 4.548 533 420,937,943 Arevatsag village 7.954 1.603 298 113,672,299 Odzun village 1.102 0.060 19 19,445,725 reconstruction 300m3 DRR, Teghut village 150,714,345 construction p/s 0.385 0.585 6.229 1.135 177 Shnogh village 6.183 3.688 536 125,171,215 Hrazdan town 26.068 5.722 557 489,733,468 Kaghsi village 9.371 2.595 295 94,737,893 construction 1000m3 DRR and Tsaghkadzor town 476,008,138 p/s 2.048 4.438 3.032 0.259 KOTAYK Akunk village reconstruction p/s 0.011 0.935 11.060 3.704 481 214,881,250 Charentsavan town 0.127 18.362 0.757 64 474,739,569 Solak village 8.013 0.880 208 134,546,808 Abovyan town 4.924 0.385 37 88,357,659 reconstruction 2x500m3, Noyemberyan town 2x150m3, 384,808,551 250m3, 500m3 DRRs 25.512 6.067 1035 Berdavan village reconstruction 160m3 DRR 0.135 4.871 1.494 180 47,892,329 Berd town reconstruction 400m3 DRR 0.427 0.405 27.786 9.036 1323 510,596,677 TAVUSH Dilijan town (intake) 0.339 0.986 0.277 36 67,913,367 Ptghavan-Bagratashen main 3.087 100,570,617 Bagratashen village 1.350 7.934 1.959 844 174,855,101 Ptghavan village 4.543 6.258 2.176 288 142,569,089 Zorakan village 0.970 13,273,043 reconstruction 500m3, 1000m3 Noratus village 263,772,081 DRRs 0.016 0.315 21.731 4.286 658 Sarukhan village 32.318 6.007 1190 367,660,899 Gavar town /dist. Hatsarat/ reconstruction 500m3 DRR 1.764 2.184 32.765 10.366 1351 575,492,674 Karmirgyugh village reconstruction 2x500m3 DRRs 0.002 3.820 24.087 5.269 595 413,697,939 Gandzak village reconstruction p/s 0.060 19.284 4.995 752 271,319,116 GEGHARKUNIK Ddmashen village 14.865 4.663 487 147,298,093 Sevan town 129,014,215 /Sevan-Dzknget water main/ 2.150 Lchashen village 30.556 9.199 897 485,097,794 Chkalovka village 2.747 1.006 123 89,780,161 Norashen village 1.787 0.213 31 56,005,636

32 Appendix 2

EXTERNAL SYSTEM DISTRIBUTION NETWORK Water (St) (PE) Investment Replacement House meter Region Settlements Water Water amount Structures of pipelines connections chambe main main /AMD/ /km/ (km) rs /km/ /km/ (pcs) reconstruction 4x250m3, Goris town 2x1000m3, 261,944,738 500m3 DRRs 0.667 5.486 2.830 241 Brnakot village reconstruction DRR 0.144 12.941 6.585 468 204,526,497 reconstruction WTP and SYUNIK Meghri town 1000m3, 380,341,820 500m3 DRRs 7.068 4.814 3.890 588 Kapan town reconstruction DRR 6.730 17.861 2.187 304 787,387,543 Syunik village 1.927 0.591 111 54,708,453 Achanan village 0.970 0.620 22,502,714 Vayk town 0.155 7.148 1.789 241 308,801,740 VAYOTS DZOR Jermuk town 1.693 2.749 0.060 6 139,093,758 Zaritap village 1.580 9.252 1.497 249 189,983,129 Artik town 12.818 5.545 625 242,941,833 Nor Kyank village 0.055 11.785 3.805 341 250,799,709 Vardaqar village 7.476 2.490 267 93,336,487 Hovtashen village 3.875 0.819 92 69,752,547 SHIRAK Geghanist village 2.839 44,578,789 MecMantashvollage 2.412 52,737,886 Meghrashen village 12.046 3.367 328 184,524,263 Panik village 19.631 6.697 693 290,195,455 Spandaryan village 5.696 1.256 158 86,078,984 Talin town reconstruction 2x1000m3 DRRs 0.082 20.810 6.188 673 486,268,091 Water main 11 captage fences - 1.9 km 13,753,899 Aruch village 0.032 0.118 7.993 1.778 229 121,429,744 Partizak village 0.049 0.056 3.762 0.741 85 49,388,789 Nor Amanos village 0.003 0.096 6.485 0.811 168 119,574,568 ARAGATSOTN Arevut village 5.525 0.501 38 66,818,416 Kanch village 2.888 0.535 32 28,779,248 Hako village 2.149 0.775 34 21,093,851 Sorik village 2.024 1.131 35 26,138,289 Karaberd village 0.001 10.908 6.121 245 190,174,125

Appendix 3 33

PROJECT COST AT APPRAISAL AND ACTUAL ($'millions)

Appraisal Estimatea Actuala L2363- L2860- Total L2363- Total Component/ Item L2860-ARM ARM ARM Project ARM Project A. Infrastructure Investments 1. Civil Works 13.50 35.10 48.60 19.63 39.12 58.76 3. Materials and Equipment 20.30 2.00 22.30 21.17 3.52 24.69 4. Design and Supervision 3.60 2.20** 5.80 2.47 2.91** 5.38 Subtotal (A) 37.40 39.30 76.70 43.28 45.55 88.83

B. Management Improvement and Development 1. Training and Public Outreach Programb 0.60 0.00 0.60 0.00 0.00 0.00 2. Project Management Consultants 0.20* 0.90 1.10 1.21* 0.83 2.04 Subtotal (B) 0.80 0.90 1.70 1.22 0.83 2.05 Total Base Cost (A+B) 38.20 40.20 78.40 44.49 46.38 90.87

C. Contingencies 1. Physical 2.70 3.70 6.40 0.00 0.00 0.00 2. Price 2.90 5.00 7.90 0.00 0.00 0.00 Subtotal (C) 5.60 8.70 14.30 0.00 0.00 0.00

D. Financing Charges During Implementation 1.20 1.10 2.30 0.80 0.94 1.74

Total (A+B+C+D) 45.00 50.00 95.00 45.29c 47.32c 92.62c aNote: Numbers may not sum precisely because of rounding. bThis subcomponent was included with the Design and Supervision consultancy contract (subcomponent A.3) thus the relevant costs are included under the subcomponent A.3. cThe project cost at appraisal and actual differs due to the changes in the SDR/USD exchange rate during the project implementation, as the loans have been provided in SDR. * Includes the audit fees of $ 54,170 for the audit of the annual project financial statements for 2007–2012 was financed from government and ADB loanresources. **Includes the audit fees of $ 87,559 for the audit of the annual project financial statements for 2012–2017was financed from government and ADB loanresources. Source: Asian Development Bank appraisal estimates and actual costs.

34 Appendix 4

PROJECT COST BY FINANCIER

Table A4.1: Project Cost at Appraisal by Financier

ADB ADB ADB Gov Gov Gov Total Cost L2363- L2860- Total L2363- L2860- Total ARM ARM Project ARM ARM Project Cat. Item Amount Amount Amount % of Amount Amount Amount % of Amount Taxes and Cost Cost Duties Category Category 1 Works 9.90 27.79 37.69 78% 3.60 7.31 10.91 22% 48.60 8.35

2 Goods 16.70 1.67 18.37 82% 3.60 0.33 3.93 18% 22.30 3.93 Consulting Services (Design & Supervision 3 3.60 1.83 5.43 85% 0.60 0.37 0.97 15% 6.40 0.97 and Project Technical & Financial Audits) Incremental costs - 4 Project Management 0.20 0.75 0.95 86% 0.00 0.15 0.15 14% 1.10 0.15 and Operating Costs 5 Interest charge 1.20 1.10 2.30 100% - - - 0% 2.30 -

6 Unallocated 4.40 6.86 11.26 79% 1.20 1.84 3.04 21% 14.30 3.04

Total project cost 36.00 40.00 76.00 80% 9.00 10.00 19.00 20% 95.00 100% 16.44

Gov: Government Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank appraisal estimates and actual costs.

Appendix 4 35

Table A4.2: Project Cost at Completion by Financier

1 Works 14.69 31.01 45.70 78% 4.94 8.12 13.06 22% 58.76 9.79

2 Goods 17.63 2.91 20.55 83% 3.54 0.61 4.15 17% 24.69 4.15 Consulting Services (Design & Supervision 3 2.07 2.42 4.49 83% 0.41 0.48 0.90 17% 5.38 0.90 and Project Technical & Financial Audits) Incremental costs - 4 Project Management 1.13 0.65 1.77 87% 0.08 0.18 0.27 13% 2.04 0.27 and Operating Costs 5 Interest charge 0.80 0.94 1.74 100% - - - 0% 1.74 -

6 Unallocated - - 0% - - - 0% - -

Total project 36.32 37.93 74.25 80% 8.98 9.39 18.37 20% 92.62 100% 15.10 Gov: Government Note: Numbers may not sum precisely because of rounding. Source: Asian Development Bank appraisal estimates and actual costs.

36 Appendix 5

CONTRACT AWARDS AND DISBURSEMENT OF ADB LOAN PROCEEDS

Figure 5.1: L2363-ARM - Annual and Cumulative Contract Awards and Projections of ADB Loans L2363-ARM - Cumulative Contract Awards and Projections

40 35 30 25 20

$ Millions $ 15 10 5 0 Cumulative Awards Projected Cumulative Awards Actual

Table 5.1: L2363-ARM - Annual and Cumulative Contract Awards and Projections of ADB Loans1

Source ADB Records 2008 2009 2010 2011 2012 2013

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Projected

Contract Awards Projected $0.0 $2.4 $0.0 $0.1 $3.3 $4.9 $3.6 $0.0 $3.4 $1.2 $2.1 $2.5 $3.6 $3.4 $3.0 $2.8 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0

Cumulative Awards Projected $0.0 $2.4 $2.4 $2.5 $5.8 $10.7 $14.2 $14.2 $17.6 $18.7 $20.8 $23.2 $26.9 $30.2 $33.2 $36.0 $36.0 $36.0 $36.0 $36.0 $36.0 $36.0 $36.0 $36.0

Actuals

Contract Awards $0.0 $2.6 $0.1 $2.0 $4.1 $1.9 $2.9 $5.0 $5.7 $3.6 $1.7 $0.6 $1.6 $1.7 $0.7 $0.0 $0.1 $1.2 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0

Cumulative Awards Actual $0.0 $2.6 $2.7 $4.7 $8.8 $10.7 $13.7 $18.6 $24.4 $28.0 $29.6 $30.2 $31.9 $33.6 $34.3 $34.3 $34.4 $35.5 $35.5 $35.5 $35.5 $35.5 $35.5 $35.5

1 Contract awards projections are based on Mainframe data (eOps was not available until Q4 2010). Changes in projections: (i) Q4 2010 eOps system launch, (ii) closure of the loan

Appendix 5 37

Figure 5.2: L2860-ARM - Annual and Cumulative Contract Awards and Projections of ADB Loans L2860-ARM - Cumulative Contract Awards and Projections

40 35 30 25 20

$ Millions $ 15 10 5 0 Cumulative Awards Projected Cumulative Awards Actuals

Table 5.2: L2860-ARM - Annual and Cumulative Contract Awards and Projections of ADB Loans2

2012 2013 2014 2015 2016 2017 2018

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Projected Contract Awards $0.0 $0.0 $0.0 $0.0 $2.4 $13.1 $8.9 $0.1 $0.1 $0.1 $4.6 $0.1 $5.8 $0.1 $0.1 $0.1 $0.1 $0.1 $0.1 $0.1 $0.1 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Projected Cumulative Awards $0.0 $0.0 $0.0 $0.0 $2.4 $15.5 $24.4 $24.5 $24.6 $24.6 $29.2 $29.3 $35.0 $35.1 $35.2 $35.2 $35.3 $35.4 $35.4 $35.5 $35.5 $35.5 $35.5 $35.5 $35.5 $35.5 $35.5 $35.5 Projected Actuals

Contract Awards $0.0 $0.0 $0.0 $0.7 $3.3 $0.3 $7.8 $3.7 $4.7 $3.5 $4.7 $2.6 $1.2 $0.0 $3.0 $1.2 $0.1 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 -$0.2 $0.0 $0.0 $0.0 Cumulative $0.0 $0.0 $0.0 $0.7 $4.0 $4.3 $12.2 $15.9 $20.6 $24.1 $28.8 $31.4 $32.6 $32.6 $35.6 $36.9 $37.0 $37.0 $37.0 $37.0 $37.0 $37.0 $37.0 $37.0 $36.7 $36.7 $36.7 $36.7 Awards Actuals

2 Contract awards projections are based on eOps baseline projections at effectiveness. Changes in projections: (i) Loan review mission, 28 Oct – 2 Nov 2012 – new CAD for entire sector loan, (ii) Resolution No 378, 6 April 2016 – Conversion of ADF resources, (iii) Financial closure, repayment of unused funds.

38 Appendix 5

Figure 5.3: L2363-ARM - Annual and Cumulative Disbursement and Projections of ADB Loan Proceeds L2363-ARM - Cumulative Disbursement and Projections

40 35 30 25 20

$ Millions $ 15 10 5 0 Cumulative Disbursements Projected Cumulative Disbursements Actual

Table 5.3: L2363-ARM - Annual and Cumulative Disbursement and Projections of ADB Loan Proceeds3

Source ADB Records 2008 2009 2010 2011 2012 2013

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Projected

Disbursements Projected $0.0 $0.9 $0.1 $0.1 $1.2 $1.1 $1.6 $2.5 $2.5 $2.9 $3.2 $2.2 $2.4 $3.5 $2.0 $2.0 $3.9 $3.9 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Cumulative Disbursements $0.0 $0.9 $1.0 $1.1 $2.3 $3.3 $5.0 $7.5 $10.0 $12.9 $16.1 $18.3 $20.7 $24.2 $26.2 $28.2 $32.1 $36.0 $36.0 $36.0 $36.0 $36.0 $36.0 $36.0 Projected Actuals

Disbursements $0.0 $0.7 $0.0 $1.3 $0.9 $3.8 $3.3 $2.9 $3.5 $2.3 $3.3 $3.0 $3.3 $1.9 $2.6 $1.8 $0.7 $0.2 $0.1 $0.3 $0.0 $0.0 $0.0 $0.0

Cumulative Disbursements Actual $0.0 $0.7 $0.7 $1.9 $2.8 $6.6 $9.9 $12.8 $16.3 $18.6 $21.9 $24.9 $28.2 $30.1 $32.7 $34.5 $35.1 $35.3 $35.4 $35.6 $35.7 $35.7 $35.7 $35.7

3 Disbursement projections are based on Mainframe data (eOps was not available until Q4 2010), Changes in projections: (i) Q4 2010 eOps system launch, (ii) closure of the loan

Appendix 5 39

Figure 5.4: L2860-ARM - Annual and Cumulative Disbursement and Projections of ADB Loan Proceeds L2860-ARM - Cumulative Disbursement and Projections 40 35 30 25 20

$ Millions $ 15 10 5 0 Cumulative Disbursements Projected Cumulative Disbursements Actuals

Table 5.4: L2860-ARM - Annual and Cumulative Disbursement and Projections of ADB Loan Proceeds4

2012 2013 2014 2015 2016 2017 2018

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

Projected Disbursements $0.0 $0.0 $0.0 $0.0 $0.4 $2.0 $2.7 $2.7 $2.4 $2.8 $3.0 $3.0 $4.5 $2.6 $2.5 $2.5 $1.5 $1.0 $0.9 $0.9 $0.1 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 $0.0 Projected Cumulative Disbursements $0.0 $0.0 $0.0 $0.0 $0.4 $2.4 $5.1 $7.8 $10.2 $13.0 $15.9 $18.9 $23.4 $26.0 $28.6 $31.1 $32.6 $33.6 $34.5 $35.5 $35.5 $35.5 $35.5 $35.5 $35.5 $35.5 $35.5 $35.5 Projected Actuals

Disbursements $0.0 $0.0 $0.0 $1.5 $1.0 $0.0 $3.7 $3.6 $1.0 $0.0 $5.6 $5.9 $1.9 $1.0 $4.5 $2.7 $1.7 $0.7 $0.4 $0.2 $0.2 $0.0 $0.1 -$0.1 $0.0 $0.0 $0.0 $0.0 Cumulative Disbursements $0.0 $0.0 $0.0 $1.5 $2.5 $2.5 $6.2 $9.8 $10.8 $10.8 $16.4 $22.3 $24.1 $25.1 $29.7 $32.4 $34.0 $34.8 $35.1 $35.3 $35.5 $35.5 $35.6 $35.5 $35.5 $35.5 $35.5 $35.5 Actuals

4 Disbursement projections are based on eOps baseline projections at effectiveness. Changes in projections: (i) Loan review mission, 28 Oct – 2 Nov 2012 – new CAD for entire sector loan, (ii) Resolution No 378, 6 April 2016 Conversion of ADF resources, (iii) Financial closure, repayment of unused funds.

40 Appendix 6

PROCUREMENT PACKAGES FOR ADB FINANCING L2363-ARM Final Cost Contract Signing Contr. Completion Proc. Contr Contract Categ'y Description and Title of Packages Supplier/ Contractor Method No. Price No. Planned Actual Planned Actual ($ '000) (1. Works as well as 2a. Equipment and Materials 1.+2.a for Works) Improvement of WSS Systems 38 899.54

1.1 Improvement of Goris Town WSS NCB Oct-08 30-09-08 ShMSh-23 OJSC 1-01 581.99 Dec-09 26-12-09 1.2 Improvement of Artik Town WSS ICB Nov-08 09-01-09 Shinashkharh LLC 1-02 1,019.88 Sep-10 01-09-10 1.3 Improvement of Echmiatsin Town WSS ICB Dec-08 04-12-08 Artezia-Sanloret JV 1-03 781.48 Feb-10 26-02-10 1.4 Improvement of Talin Town WSS NCB Oct-08 07-11-08 Vani LLC 1-04 242.70 Dec-09 15-11-09 1.5 Impr. of Surenavan, Armash, YeraskhVill. WSS ICB Dec-08 02-02-09 ShMSh-23 OJSC 1-05 1,037.55 Feb-10 02-02-10 1.6 Improvement of Artashat WSS NCB Dec-08 12-12-08 Vani LLC 1-06 920.09 Dec-10 27-12-10 1.7.1 Impr. of Vedi-Ararat Reg. Setl. WSS, Pack. 1 NCB May-09 07-04-09 AIS LLC 1-07/1 356.25 Apr-10 24-12-09 1.7.2 Impr. of Vedi-Ararat Reg. Setl. WSS, Pack. 2 NCB May-09 07-04-09 Artashatshin LLC 1-07/2 527.58 Apr-10 10-12-09 1.8.1 Impr. of Masis Reg. Setl. WSS, Package 1 NCB Mar-09 16-02-09 Shinashkharh LLC 1-08/1 742.61 Feb-10 16-02-10 1.8.2 Impr. of Masis Reg. Setl. WSS, Package 2 NCB Mar-09 18-02-09 Agat 777 LLC 1-08/2 694.19 Feb-10 15-01-10 1.8.3 Impr. of Masis Reg. Setl. WSS, Package 3 NCB Apr-09 07-05-09 Shinashkharh LLC 1-08/3 842.65 May-10 24-02-10 1.8.4 Impr. of Masis Reg. Setl. WSS, Package 4 NCB Apr-09 03-07-09 Ararat-Chanshin LLC 1-08/4 780.52 Jul-10 14-05-10 1.8.5 Impr. of Masis Reg. Setl. WSS, Package 5 ICB Apr-09 11-09-09 Ashocq-Kapavor JV 1-08/5 1,137.48 Dec-10 08-12-10 1.8.6 Impr. of Masis Reg. Setl. WSS, Package 6 NCB Apr-09 27-02-09 Ashotck LLC 1-08/6 566.49 Dec-10 24-12-10 1.9.1 Impr. of Sevan Reg. Setl. WSS, Package 1 NCB Apr-09 08-04-09 Sahakyanshin CJSC 1-09/1 763.36 Nov-10 22-11-10 1.9.2 Impr. of Sevan Reg. Setl. WSS, Package 2 NCB Apr-09 30-07-09 Art&Tat-Artezia JV 1-09/2 1,186.08 Dec-10 30-12-10 1.10.1 Impr. of Echmiatsin-1 RS WSS, Package 1 NCB May-09 18-07-09 Artezia-Sanlo. JV 1-10/1 518.32 Jul-10 22-02-10 1.10.2 Impr. of Echmiatsin-1 RS WSS, Package 2 NCB May-09 22-07-09 ShMSh-23 OJSC 1-10/2 450.65 Sep-10 31-08-10 1.11 Improvement of Abovyan Reg. Setl. WSS ICB Jun-09 11-09-09 Agat 777-ShMSh 23 JV 1-11 3,143.83 Mar-11 31-10-11 1.12 Improvement of Aparan Region Setl. WSS ICB Nov-09 25-12-09 Agat-777 LLC 1-12 1,048.69 Jun-11 30-09-11 1.13 Improvement of Berd Reg. Setl. WSS NCB Jul-09 11-08-09 Transgazshin LLC 1-13 817.64 Jun-11 27-04-11 1.14 Impr. of Noiemberyan Reg. Setl. WSS ICB Nov-09 1-03-10 Shinashkharh LLC 1-14 1,217.36 Mar-11 25-07-11 1.15 Impr. of Charentcavan Reg. Setl. WSS ICB Nov-09 02-04-10 SADE OJSC Arm Branch 1-15 2,181.24 Apr-11 30-06-12 1.16 Improvement of Echmiatsin-2 RS WSS ICB Dec-09 18-02-10 Ashotck LLC-Kapavor 1-16 1,444.86 Feb-11 26-05-11 1.17 Impr. of Armavir Reg. Setl. WSS NCB Dec-09 05-03-10 Artashatshin LLC 1-17 603.07 Mar-11 31-10-11 1.18 Improvement of Meghri Reg. Setl. WSS NCB Dec-09 29-12-09 Manuela LLC 1-18 172.39 Dec10 17-08-10

Appendix 6 41

1.18.1 Improvement of Meghri Reg. Setl. WSS/1 NCB Apr-11 31-03-11 Artashatshin LLC 1-18/1 460.05 Apr-12 31-07-12 1.19 Improvement of Goris Reg. Setl. WSS NCB Jan-10 29-01-10 Ararat-Chanshin LLC 1-19 883.08 Jan-11 27-12-10 1.20 Improvement of Sisian Reg. Setl. WSS NCB Apr-10 30-12-09 Norogshin-Vargos JV 1-20 963.77 May-11 30-05-11 1.21 Improvement of Artik Reg. Setl. WSS ICB Apr-10 18-06-10 Artezia-Sanlo. JV 1-21 2,116.76 Jun-11 18-12-11 1.22 Improvement of Ashotck Reg. Setl. WSS NCB Jun-10 10-03-10 Shinashkharh LLC 1-22 821.53 Mar-11 20-12-10 1.23 Impr. of Eghegnadzor Reg. Setl. WSS ICB Jul-10 02-04-10 Vayotc Dzor-ShMSh-23 JV 1-23 2,287.94 Apr-11 31-07-11 1.24 Impr. of Artashat Reg. Setl. WSS NCB Sep-09 16-09-09 AIS-Spitak 1 JV 1-24 963.12 Sep-10 03-03-10 1.25 Impr. of Artashat Town WSS NCB Feb-10 25-02-10 AIS LLC 1-25 857.12 Feb-11 24-12-10 1.26 Impr. of Kapan Town WSS NCB Dec-11 26-05-11 Artashatshin LLC 1-26 919.24 May-12 23-12-11 1.27 Impr. of Ijevan Town WSS NCB Feb-11 07-02-11 Baghramyanshin 1-27 822.57 Feb-12 31-05-12 Petrako LLC-Arpa-Sevan 1.28 Impr. of Tashir Town WSS NCB Apr-11 30-05-11 1-28 600.06 May-12 31-07-12 OJSC JV 1.28.1 Impr. of Tashir Reg. Setl. WSS NCB Apr-12 06-04-12 ShMSh-23 OJSC 1-28/1 862.77 Jul-12 31-10-12 1.29 Impr. of Stepanavan Town WSS NCB Mar-11 08-04-11 Silvana and Mkhitar LLC 1-29 437.58 Apr-12 31-05-12 Petrako LLC-Arpa-Sevan 1.30 Impr. of Alaverdi Reg. Setl. WSS NCB Apr-12 04-04-12 1-30 587.64 Jul-12 31-10-12 OJSC JV 1.31 Impr. of Sevan Town WSS: Main Moovement NCB Mar-11 23-03-11 Parex-Gaz LLC 1-31 521.88 Mar-12 30-04-12 Impr. of Noyak., Yeghegn., Aygepat, Mkchanviil. 1.32 NCB Feb-11 17-02-11 AIS LLC 1-32 1,007.83 Feb-12 30-06-12 WSS 1.33 Construction Permissions 7.65 Dec-13 31-12-12 Equipment and Materials for Strengthening of

2.b AWSC 1,902.23

2.1 4WD Vehicles S Feb-08 14-02-08 Magas Invest LLC 2-01 81.66 Mar-08 03-06-08 2.2 IT Equipment S Feb-08 12-02-08 Online LLC 2-02 18.39 Mar-08 17-03-08 2.3 Office Furniture S Feb-08 14-02-08 Hrashq LLC 2-03 32.54 Mar-08 04-03-08 2.4 Accountancy Software DC May-08 26-05-08 Hash. Ham. LLC 2-04 4.95 Jul-08 15-07-08 2.5 Backhoe Loaders ICB Oct-08 12-01-09 Galoper LLC 2-05 938.56 Feb-09 08-07-09 2.6.1 Equipment and Materials, Lot 1 ICB Aug-10 24-08-10 Ashotsk LLC 2-06/1 244.75 Jan-11 17-02-11 2.6.2 Equipment and Materials, Lot 2 ICB Aug-10 02-09-10 Magga AK 2-06/2 267.17 Jan-11 25-01-11 2.8 Office Furniture DC Mar-09 16-03-09 Kahui. Ash. LLC 2-08 1.93 Mar-09 16-03-09 2.9 Office Equipment DC June-09 04-06-09 Aray LLC 2-09 0.63 June-09 08-06-09 2.11 Office Equipment DC Apr-10 20-04-10 Agat-777 LLC 2-10 2.97 June-10 03-06-10 2.10 Insurance DC June-09 04-06-09 Griar 2-11 12.36 May-10 20-04-10 2.11.1 Steel Pipes S Sep-10 28-09-10 Ashotsk LLC 2-11.1 101.19 Nov-10 11-10-10

42 Appendix 6

2.12 Water meters S Jan-11 03-02-11 Ashotsk LLC 2-12 96.75 Mar-11 28-02-11 Cutt. Equipm., Road Signs,Float valves, Sewer Flow 2.13 S Dec-10 01-12-10 Ashotsq LLC 2-13 98.31 Dec-10 24-12-10 meter 2.14 Other minor goods S/DC 2-14 0.06 Jun-13 31-10-12 3. Training 4.04 3.1 AWSC Trainings T 4.04 Jun-13 31-12-11 4. Consulting Services 3,379.35 4A. Management, Design and Supervision 2,474.15 4A. Management, Design and Supervision* QCBS Mar-08 26-03-08 JINJ-HGSN JV 4A-01 2,474.15 Jun-13 31-10-12 4B Project Management 905.20 4B-00 PMU and PCU Salary IC 827.87 Jun-13 31-12-12 4B-01 Leagal Consultant IC Dec-08 08-01-09 G. Chakmishyan 4B-01 23.16 Jun-13 31-12-12 4B-02 Audit for 2008-2009 SSS Jun-10 30-03-09 GT Amiot LLC 4B-02 9.91 Jun-10 30-06-10 4B-03 Audit for 2010-2011 LCS Jun-11 18-05-11 GT Amiot LLC 4B-03 29.85 Jun-12 05-10-12 4B-03 Audit for 2012 LCS Jun-12 18-05-12 GT Amiot LLC, Ext 4B-03 14.41 Jun-13 30-06-13 5. Interest Charge 801.31 Dec-13 6. Unallocated 0.00 Dec-13 7. Incremental Costs 305.93 Dec-13 TOTAL*: 45,292.401

Appendix 6 43

Procurement Packages for ADB Financing L2860-ARM Cost Description and Title of Packages Procur Contract Signing Supplier/ Contractor Contr. Final Contr. Categ'y Method No. Contract Completion No. Planned Actual Price Planned Actual ($ '000) Civil Works / Rehabilitation of Water Supply 28 ICB/ 1. 39,121.63 Systems (WSS) 1S Improvement of water supply systems in Oshakan, ICB May-13 24-07-13 Artashatshin LLC 1-01/1 1,650.94 Aug-14 27-10-15 Voskevaz and Voskehat villages Improvement of water supply systems in Amberd, JV of HB Construction LLC- Aygeshat, Dasht, Doghs, Lernamerdz and Aghavnatun ICB May-13 24-07-13 1-01/2 1,056.41 Aug-14 17-03-15 Parex-Gaz LLC villages 1-01 Improvement of water supply systems in Amberd, S-1- Aygeshat, Dasht, Doghs, Lernamerdz and Aghavnatun S June-15 22-06-15 SHMSH-23 OJSC 85.47 Dec-15 19-12-15 01/2 villages Improvement of water supply systems in Musaler, Consortium of Artezai LLC- Shahumyan, Poultry of Shahumyan, Ptghunk and ICB May-13 25-07-13 1-01/3 1,282.28 Aug-14 10-12-14 Sanloret LLC Norakert villages Improvement of water supply systems in Vedi and Consortium of Ararat- Ararat towns and Banavan GMF, Ararat,Vosketap ICB May-13 21-08-13 1-02/1 2,230.65 Aug-14 22-12-14 Chanshin LLC-Artezia LLC villages Improvement of water supply systems in Masis, Consortium AIS LLC - Burastan, Azatavan, Baghramyan, Berkanush, Dalar, ICB May-13 4-09-13 1-02/2 2,173.27 Aug-14 04-05-15 1-02 SHMSH OJSC Mrgavan, Shahumyan and Dimitrov villages Improvement of water supply systems in Aygezard, Verin Artashat, Mrganush, Byuravan, Nshavan, JV of Eghvardshin OJSC- ICB May-13 22-08-13 1-02/3 1,425.36 Aug-14 28-02-15 Hovtashen, Mrgavet and reconstruction of Abovyan Doroghnik LLC village external water main Consortium of Four Improvement of water supply systems in Hrazdan town ICB Jul-13 11-10-13 Directions LLC-Ashotsq 1-03/1 1,393.50 Oct-14 01-04-15 and Qaghsi village LLC 1-03 Improvement of Water Supply Systems in Consortium of Emoshin ICB Jul-13 18-07-14 1-03/2 1,578.32 Oct-14 16-11-15 Tsaghkadzor town and Akunk village LLC-Arpa-Sevan OJSC Improvement of the Water Supply Systems in ICB June-15 19-08-15 Agat-777 LLC 1-03/3 1,459.79 Sep-16 25-02-17 Charentsavan, Abovyan towns and Solak village Improvement of water supply systems in Stepanavan ICB Jul-13 13-11-13 Shinashkarh LLC 1-04/1 1,169.69 Oct-14 30-10-15 town and Mets Parni village Improvement water supply systems in Metsavan, Sarchapet and Lernahovit villages and reconstruction ICB Jul-13 26-11-13 Agat-777 LLC 1-04/2 1,918.85 Oct-14 27-06-16 1-04 of Hovdra external water main Consortium of Improvement of water supply system in Alaverdi town ICB Jul-13 17-01-14 “Shinashkharh LLC-Spitak- 1-04/3 1,878.93 Oct-14 30-12-15 and Arevatsag, Odzun, Teghut, Shnogh villages 1 OJSC” Improvement of water supply systems in Noyemberyan ICB Oct-13 03-03-14 Spitak-1 OJSC 1-05/1 975.39 Jan-15 30-10-15 town 1-05 Improvement of water supply systems in Berd town ICB Oct-13 12-05-14 Ararat-Chanshin LLC 1-05/2 1,167.27 Jan-15 07-08-15 Improvement WSS in Dilijan town and Bagratashen, Consortium of “Gazkomshin ICB June-15 24-08-15 1-05/3 1,041.74 Sep-16 28-12-16 Pthavan, Zorakan villages LLC-SHMSH-23 OJSC”

44 Appendix 6

Cost Description and Title of Packages Procur Contract Signing Supplier/ Contractor Contr. Final Contr. Categ'y Method No. Contract Completion No. Planned Actual Price Planned Actual ($ '000) Improvement of Water Supply Systems of Noratus and Consortium of Dziloproduc. ICB Oct-13 18-02-14 1-06/1 1,476.80 Jan-15 16-06-15 Sarukhan Villages coop-Shinashkarh LLC Improvement of water supply systems in Gavar town Consortium of Artashati ICB Oct-13 22-05-14 1-06/2 2,247.02 Jan-15 30-11-15 and Karmirgyugh village ETSSH LLC-Spitak-1 OJSC Improvement of Water Supply Systems in Gandzak 1-06 ICB Oct-13 13-08-14 Agat-777 LLC 1-06/3 933.85 Jan-15 08-07-16 and Ddmashen villages Improvement of water supply systems in Sevan town ICB Oct-13 5-02-14 SHMSH-23 OJSC 1-06/4 306.05 Jan-15 15-03-15 Consortium of Gazkomshin Improvement of Water Supply Systems in Lchashen, ICB Nov-14 29-10-14 LLC-Baghramyanshin 1-06/5 1,369.50 Feb-16 30-06-16 Chkalovka and Norashen villages OJSC Consortium of Sisian (Nor Improvement of water supply systems in Goris town ICB Jul-14 26-04-14 Bak) Norogshin OJSC- 1-07/1 1,032.02 Oct-15 25-09-15 and Brnakot village Megru TSHSHD LLC 1-07 Improvement of Water Supply Systems in Meghri town ICB Nov-14 01-12-14 Megru TSHSHD LLC 1-07/2 804.08 Feb-16 27-05-16 Consortium of Kapani Improvement of Water Supply Systems in Kapan town ICB Aug-14 18-07-14 CHSHSH LLC-Ararat- 1-07/3 1,942.30 Nov-15 23-05-16 and Syunik and Achanan villages Chanshin LLC Improvement of Water Supply Systems in Vayq, 1-08 ICB Jul-14 10-06-14 SHMSH-23 OJSC 1-08/1 1,395.53 Oct-15 02-06-16 Jermuk towns and Zaritap village Improvement of the Water Supply Systems in Artik town and Nor Kyank, Vardakar, Hovtashenvillages and Consortium of Artezia LLC ICB June-15 02-11-15 1-09/1 1,572.76 Sep-16 30-04-17 reconstruction of the external water main in Geghanist, and Agat-777 LLC 1-09 Mets Mantash villages Improvement of Water Supply Systems in Meghrashen, Panik and Spandaryan villages (Shirak ICB April-15 05-08-15 “Ararat-Chanshin” LLC 1-09/2 1,173.25 Jul-16 07-03-17 region) Improvement of Water Supply Systems in Talin town ICB Oct-14 01-12-14 Baghramyanshin OJSC 1-10/1 1,036.47 Jan-16 08-09-16 Improvement of Water Supply Systems in Aruch, 1-10 Consortium of “Europe Partizak, Nor Amanos, Arevut, Kanch, Hako, Sorik and ICB Feb-15 27-03-15 1-10/2 1,337.94 May-16 01-10-16 LLC-Artezia LLC” Karaberd villages (Aragatsotn region) 1-11 Construction Permissions Apr-13 30-06-15 6.21 Aug-15 30-08-15 9ICB/ 2. Goods 3,522.50 1S 2-01 Procurement of 12 (twelve) units of Backhoe Loaders ICB Oct-12 28-12-12 Four Directions LLC 2-01 951.14 Jun-13 28-06-13 Supply of 10 sets of Ultrasonic Clamp-On Flow Meters ICB Oct-12 10-04-13 SEBA DYNATRONIC 2-02/2 108.14 Aug-13 08-08-13 2-02 and 4 sets of Ferromagnetic Locators Supply of 71 sets of Float Valves ICB Oct-12 12-04-13 Ashotsq LLC 2-02/3 204.57 Aug-13 10-08-13 Supply of 100 km of Polyethylene PE-100 Pipes for ICB Oct-12 04-12-12 Shahart LLC 2-03/1 401.19 Aug-13 04-04-13 Drinking Water 2-03 Supply of 26.4 km of High Density Polyethylene Double ICB Oct-12 04-12-12 Shahart LLC 2-03/2 473.11 Aug-13 04-04-13 Wall Corrugated Sewer Pipes Procurement of 12 sets of rotodynamic surface pumps ICB 11-12-13 WILO SE 2-04/1 330.40 Aug-13 30-05-14 2-04 with 7 sets of tied control panels Oct-12 Procurement of 3 sets of rotodynamic surface pumps ICB 16-12-13 Euroterm CJSC 2-04/2 191.51 Aug-13 13-06-14

Appendix 6 45

Cost Description and Title of Packages Procur Contract Signing Supplier/ Contractor Contr. Final Contr. Categ'y Method No. Contract Completion No. Planned Actual Price Planned Actual ($ '000) Procurement of 10 sets of submerged bore hole pumps ICB 23-12-13 Grundfos Kazakhstan LLP 2-04/3 211.61 Aug-13 09-06-14 with 5 sets of tied control panels Supply of Servers and Thin Clients for IT Desktop 2-05 S Nov-12 08-04-13 Doxx Computer LLC 2-05 97.99 Aug-13 06-08-13 Virtualization and Cloud Computing 2-06 Other minor goods S/DC 2-06 0.00 Dec-16 30-04-17 Consortium of Agat-777 Procurement of 25 000 sets of residential high 2-07 ICB Jan-14 14-04-14 LLC and BaylanOlcuAletleri 2-07 523.44 Feb-15 24-02-14 accuracy water meters San Ve Tic LTD STI Supply of Furniture for 5th floor of AWSC's 2-08 S May-15 30-06-15 Agat-777 LLC 2-08 29.41 Jun-15 10-07-15 Administrative Office 3. Consulting Services 2,906.65 3A. Design and Supervision 2,819.09 WSSP- Design and Construction Supervision of Civil Works 3A. QCBS Jan-13 26-12-12 HGSN LLC - JINJ LLC JV AF- 2,815.44 Dec-16 30-04-17 and Public Awareness Campaign 4A/1 MR. GEVORG IC-3A- 3A-01 Legal consultant – Lawyer IC Apr-13 03-03-14 3.65 Mar-16 30-04-17 CHAKMISHYAN 01 3B. Project Technical and Financial Audits 87.56 6 years Audit Services for “Water Supply and LCS- 3B. LCS Mar-13 07-07-14 GRANT THORNTON CJSC 87.56 Apr-17 31-10-17 Sanitation Sector Project-Additional Financing 3B Incremental Costs - 4. 830.42 Project Management and Operating costs Incremental Costs - 4-01 DC Oct-12 30-04-17 741.78 Apr-17 30-04-17 Project Management and Operating costs Rehabilitation of 5th floor of AWSC's Administrative 4-02 S Nov-13 12-11-13 Agat-777 LLC 1-12 88.645 Mar-14 06-05-14 Office 5 Interest Charge 942.71 6 Unallocated TOTAL: 47,323.923

46 Appendix 7 IMPLEMENTATION SCHEDULE

L2363 Implementation Schedule Project Stage/ 2007 2008 2009 2010 2011 2012 Activity Component 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 Start-up Stage Establish PCU & PMU - planned Initial Establish PCU & PMU - actual Activities Recruitment of Individual Consults. (Pack A)-planned Recruitment of Individual Consults. (Pack A)-actual Recruitment of Domestic Firm (Pack B) planned Recruitment of Domestic Firm (Pack B) actual Loan Effectiveness - planned Loan Effectiveness - actual Updating Project Implem. Plan (PIP) - planned Updating Project Implem. Plan (PIP) - actual Opening of Imprest Account - planned Opening of Imprest Account - actual First Withdrawal to Imprest Account - planned First Withdrawal to Imprest Account - actual Component A : Baseline Socio Economic Survey - planned Municipal Baseline Socio Economic Survey - actual Infrastructure Rehab Customer Needs Assessments - planned &Implem. Customer Needs Assessments - actual Tech Surveys - planned Tech Surveys - actual Feasibility Studies - planned Feasibility Studies - actual Detailed Engineering Design - planned Detailed Engineering Design - actual Bid Process Management - planned Bid Process Management - actual Implem. of Subproject - planned Implem. of Subproject - actual Component B : Management Training in Tech and Fin Management - planned Implem. and Development Training in Tech and Fin Management - actual Implem. of Fin Management System - planned Implem. of Fin Management System - actual Rationalizing existing tariff and tariff plan - planned Rationalizing existing tariff and tariff plan - actual Implem. of Cost Reduction Measures - planned Implem. of Cost Reduction Measures - actual Implem. and measurement of overall operating efficiency - planned Implem. and measurement of overall operating efficiency - actual Implem. of Regulatory System - planned Implem. of Regulatory System - actual Implem. of Public Outreach Program - planned Implem. of Public Outreach Program - actual Water Quality Monitoring - planned Water Quality Monitoring - actual Data Collection and updating of - planned Data Collection and updating of PPMS - actual

Appendix 7 47

L2860 Implementation Schedule Project Stage/ 2012 2013 2014 2015 2016 2017 Activity Component 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 Approval of the existing of PCU and Start-up Stage PMU - planned Initial Activities Approval of the existing of PCU and PMU - actual Recruitment of Individual Consults. (Package A)-planned Recruitment of Individual Consults. (Package A)-actual Recruitment of Domestic Firm (Package B) planned Recruitment of Domestic Firm (Package B) actual Loan Effectiveness - planned Loan Effectiveness - actual Updating Project Implementation Plan (PIP) - planned Updating Project Implementation Plan (PIP) - actual Opening of Imprest Account - planned Opening of Imprest Account - actual First Withdrawal to Imprest Account - planned First Withdrawal to Imprest Account - actual Component A : Municipal Baseline Socio Economic Survey - Infrastructure planned Rehab & Baseline Socio Economic Survey - Improvement actual Customer Needs Assessments - planned Customer Needs Assessments - actual Technical Surveys - planned Technical Surveys - actual Feasibility Studies - planned Feasibility Studies - actual Detailed Engineering Design - planned Detailed Engineering Design - actual Bid Process Management - planned Bid Process Management - actual Implementation of Subproject - planned Implementation of Subproject - actual Component B : Management Increasing public awareness - planned Improvement Increasing public awareness - actual and Strengthening the service contracts - Development planned Strengthening the service contracts - actual Developing disconnection policy for non-payer- planned Developing disconnection policy for non-payer - actual Preparing AWSC’s HR development strategy - planned Preparing AWSC’s HR development strategy - actual

48 Appendix 8

STATUS OF COMPLIANCE WITH LOAN COVENANTS

Original Loan L2363-ARM: Water Supply and Sanitation Sector Project

No. Covenant Reference in Status of Compliance Agreements

Main Covenants of the Loan Agreement (LA) 1. Executing Agency; Project Coordination Unit Schedule 5, Complied with. SCWS shall be the Project Executing Agency and, as such, para. 1 of the shall have overall responsibility for Project execution. SCWS LA shall ensure that a Project Coordination Unit (“PCU”) is established to support SCWS in coordination of Project implementation, appraising Subprojects, and preparation of the Project completion report. The PCU shall be headed by a Project Coordinator and comprise two national WSS consultants, one financial analyst/economist and support staff. The Borrower shall ensure that (a) the PCU technical staff is involved in the preparation of feasibility studies to facilitate timely appraisal of Subproject; and (b) a representative of the PCU is included in the procurement tender commission. The PCU shall coordinate closely with ADB, AWSC and other government agencies concerned.

2. Project Implementing Agency; Project Management Unit Schedule 5, Complied with. AWSC shall be the Project Implementing Agency. The para. 2 of the Borrower shall cause AWSC to establish a Project LA Management Unit (the “PMU”) to manage the day-to-day coordination, implementation, and administration of the Project. The PMU shall recruit the project consultants in coordination with the PCU. The PMU, with the support of project consultants, shall be responsible for (a) preparing Subproject feasibility studies in coordination with the PCU; (b) preparing detailed engineering designs and tender documents; and (c) undertaking construction supervision of all Subprojects. The PMU shall be headed by a Project Manager and staffed by the WSS engineer/ monitoring specialist, procurement specialist, financial/accounting specialist, support staff.

3. Project Governing Council Schedule 5, Complied with. The Borrower shall ensure that a Project Governing Council para. 3 of the (“PGC”) is established to be responsible for (a) guiding the LA PGC was established on 16 overall policy and strategic direction of the Project; (b) September 2008. overseeing the implementation progress of Subprojects; and (c) assisting with the coordination among other donor-funded projects relating to water sector. The PGC shall operate in accordance with Resolution No. 765 “On the Activities of Project Implementation with the Proceeds of Loans and Grants Provided to the Republic of Armenia by Foreign States and International Financial Institutions”, dated December 22, 1999. The PGC shall be chaired by Chairman of SCWS and include senior officers from AWSC, the Borrower’s Ministry of Finance and Economy, Ministry of Nature Protection, SCWS, and other ministries as may be required, and representatives of civil societies. The PGC shall meet quarterly to ensure timely Project Implementation.

Appendix 8 49

No. Covenant Reference in Status of Compliance Agreements 4. Project Implementation Agreement Schedule 5, Complied with. The Borrower shall cause SCWS and SWCS to execute a para. 4 of the Project Implementation Agreement identifying the roles and LA responsibilities of SCWS and AWSC, and coordination and reporting arrangements under the Project.

5. Counterpart Financing Schedule 5, Complied with. The Borrower shall ensure that (a) all counterpart financing para. 5 of the necessary for the Project is allocated and released in time to LA The government counterpart funds enable timely completion of Project activities; and (b) during 208-2012 have been provided additional counterpart funds are promptly provided for any in time. shortfall of funds or cost overruns.

6. Collection Efficiency Schedule 5, Complied with. The Borrower shall ensure that AWSC and other service para. 6 of the providers have adequate enforcement mechanisms and LA AWSC had disconnection powers to effectively collect service fees and penalize procedures for illegal connections. defaulters of payment of WSS bills in order to improve the For non-payment AWSC had the collection efficiency, deter non-payment and ensure legal procedures to enforce the sustainability of WSS operations. payment of outstanding arrears. AWSC enforced this during the project with legal actions.

The tariff collection efficiency for L2363-ARM loan project area increased 61% to 79% by 2012. 7. Tariff Schedule 5, Not complied with. The Borrower shall ensure that (a) tariff plan is prepared for para. 7 of the annual tariff settings that take into account the service costs LA The tariff of 2009 was adopted on 1 including inflation, which will be implemented by 10 January March 2009 at the rate of 179.78 2009; and (b) the tariff to be adopted in January 2010 fully AMD;however it still was not fully covers the operating cost. covering the operating costs.

Actions were taken by the government during the L2860-ARM project implementation to fully cover the operating costs and ensure sustainability. 8. Subproject Selection Criteria Schedule 5, Complied with. The Borrower shall ensure and shall cause AWSC to ensure para. 8 of the that all Subprojects are selected in accordance with the LA All 18 initially envisaged subprojects following selection criteria: as well as additional 7 subprojects (a) each Subproject is in conformity within the Project Area; were selected in accordance with the (b) each Subproject is located within the Project Area; Subproject Selection Criteria. (c) the existing water supply network and equipment of the Subproject is dilapidated, corroded and leaking, and/or sewer pipes are broken and clogged resulting in serious water supply shortages and adverse environmental problems; (d) each Subproject is technically viable considering the least cost and technically sound options, and economically and financially feasible; (e) for a village that is covered under AWSC, the village administration and/or community have, on a long-term basis and in a manner acceptable to SCWS, committed to: (i) provide periodic (at least semi-annual) inspection of the WSS system, water source and catchments, water supply treatment, and otherwise comply with technical and sanitary requirements in accordance with Borrower’s legislation; and

50 Appendix 8

No. Covenant Reference in Status of Compliance Agreements (ii) engage managerial and technical support and training from AWSC with respect to operation and maintenance of WSS system within its responsibility; (f) each Subproject complies with ADB safeguard policies and has no significant environmental impacts (i.e., do not fall within category A or category B-sensitive subprojects according to categorization under the ADB’s Environment Policy [2002]); and (g) each Subproject can be completed within the Project implementation period.

9. Environmental Schedule 5, Complied with. The Borrower shall ensure and shall cause AWSC to ensure para. 9 of the that: LA IEE and EMP were developed (a) all Project facilities are constructed, operated, maintained accordingly for all 25 subprojects. and monitored in conformity with applicable laws and regulations of the Borrower, including national and local regulations and standards for environmental protection, health, labor and occupational safety, and ADB’s Environment Policy. (b) IEEs are prepared for Subprojects in accordance with the environmental assessment and review procedures agreed with ADB; and ADB’s approval is obtained for IEEs of any Subproject estimated to cost more than $2,000,000 equivalent prior to award of the respective civil works contract; (c) mitigating measures and monitoring program identified in the environmental management plans (EMPs) in all IEEs are fully implemented and in particular, that all mitigation measures identified in the EMPs and IEEs are incorporated in the bidding documents; and (d) implementation of EMPs and any violation of environmental standards are monitored and reported to ADB semi-annually in accordance with the specifications set forth in the IEEs.

10. Land Acquisition and Resettlement Schedule 5, Complied with. The Borrower shall ensure and shall AWSC to ensure that: para. 10 of the (a) to the extent possible, none of the works entail any land LA acquisition, conversion, donation or restrictions of access that will trigger ADB’s Involuntary Resettlement Policy, and the Resettlement Framework; (b) in the event of any unforeseen land acquisition or resettlement needs for a Subproject, a Resettlement Plan (RP) is prepared for the Subproject and implemented in accordance with applicable laws and regulations of the Borrower, ADB’s Involuntary Resettlement Policy, and the Resettlement Framework; (c) all RPs are updated based on detailed engineering designs and detailed measurement survey; (d) all draft RPs, updated RPs and final RPs are disclosed to affected people immediately upon completion and submitted for ADB approval; (e) all necessary counterpart funds for land acquisition and resettlement are provided and released on a timely basis; (f) grievance redress procedures are established by the Borrower and made operational, prior to the commencement of land acquisition and resettlement activities; (g) all compensations and entitlements under the RPs are paid to affected persons in full on a timely basis at

Appendix 8 51

No. Covenant Reference in Status of Compliance Agreements replacement cost at least fifteen (15) days prior to demolition of structure from the corridor of impact; (h) no contract for works under a Subproject is awarded until the updated RP, as may be applicable to the Subproject, has been approved by ADB; (i) no works commence until all compensations have been paid and entitlements provided to the affected persons in accordance with the RP, to the satisfaction of ADB; and (j) implementation of RPs is monitored by AWSC and an independent monitoring agency on a monthly basis and reported to ADB.

11. Labor, Health and Social Protection Schedule 5, Complied with. The Borrower through SCWS shall cause AWSC to ensure para. 11 of the that all works contractors (a) comply with all applicable labor LA laws; (b) use their best efforts to employ women and local people, including disadvantaged people, living in the vicinity of the relevant subproject; (c) disseminate information at worksites on the risks of sexually transmitted infections, including HIV/AIDs, for those employed during construction; (d) provide equal pay to men and women for work of equal type; (e) provide safe working conditions for male and female workers; and (f) abstain from child labor. Works contracts for all Subprojects must include specific clauses on these undertakings, and compliance will be strictly monitored during implementation.

12. The Borrower through SCWS shall cause AWSC to ensure Schedule 5, Complied with. that the Project facilities rehabilitated or constructed under the para. 12 of the Project comply with technical specifications of the design, and LA that construction supervision, quality control, and Project management are performed according to internationally accepted standards and practices.

13. Gender Schedule 5, Complied with. The Borrower through SCWS shall cause AWSC to ensure para. 13 of the that women participate in the Subprojects design and LA implementation, through active involvement in monitoring and evaluation of the Project impact on health and sanitation. The public awareness will target women’s engagement as promoters in the public awareness program on public health, hygiene improvement and Project benefits.

14 Good Governance Schedule 5, Complied with. The Borrower shall ensure and cause AWSC to ensure that, in para. 14 of the the event that (a) any change in ownership of any Project LA facility rehabilitated or constructed under the Project; (b) any sale, transfer, or assignment of interest or control in any Project facility rehabilitated or constructed under the Project; or (c) any lease or other contract or other modification of the SCWS’s or AWSC’s functions and authority over operation and maintenance of any such Project facility rehabilitated or constructed under the Project, is anticipated, ADB’s consent shall be obtained at least six months prior to the implementation of such plan, and any such change is carried out in a legal and transparent manner.

15. Anticorruption Schedule 5, Complied with. The Borrower shall ensure and shall cause AWSC to ensure para. 15 of the that all contracts financed by ADB in connection with the LA

52 Appendix 8

No. Covenant Reference in Status of Compliance Agreements Project include provisions specifying the right of ADB to audit and examine the records and accounts of SCWS and AWSC, all contractors, consultants, and other service providers as they relate to the Project.

16. Project Performance Management System (PPMS) Schedule 5, Complied with. The Borrower shall cause AWSC to ensure that para. 16 of the comprehensive PPMS is established and maintained to LA L2363-ARM: Baseline was created monitor and evaluate the technical performance and social for 2008 and then updated for 2009, and economic benefits of the Project, especially for the poor 2010, 2011 and 2012. and for women. To measure the Project’s impact on beneficiaries, particularly low-income groups, baseline information shall be updated at the beginning of implementation of each Project component. This information shall be the basis for determining the resulting impacts. Indicators that can be monitored will comprise (a) institutional improvement indicators, covering revenue generation, financial management, O&M, and unaccounted for water; (b) Subproject implementation indicators for the various categories, including levels of coverage and service delivery; and (c) sectoral impact indicators, covering economic growth, public health, and community participation. AWSC shall continue to update and submit to ADB the PPMS at six (6) month intervals for at least 3 years after the Project completion.

Particular Covenants of the Loan Agreement (LA) and Project Agreement (PA) 1. In the carrying out of the Project and operation of the Project Section, 4.01 Complied with. facilities, the Borrower shall perform, or cause to be Article 4 of the performed, all obligationsset forth in Schedule 5 to this Loan LA Agreement.

2. (a) The Borrower shall (i) maintain, or cause to be Section, Complied with. maintained, separate accounts for the Project; (ii) have such 4.02(a) Article accounts and related financial statements audited annually, in 4 of the LA All audit reports have been accordance with appropriate auditing standards consistently conducted for the accounts from loan applied, by independent auditors whose qualifications, effectiveness up to the project experience and terms of reference are acceptable to ADB; (iii) completion on 31 December 2012 furnish to ADB, as soon as available but in any event not later and the respective reports were than six months after the end of each related fiscal year, submitted to ADB. certified copies of such audited accounts and financial statements and the report of the auditors relating thereto “Independent Auditors Report and (including the auditors' opinion on the use of the Loan Management Letter as of: proceeds and compliance with the financial covenants of this 31 December 2008, Loan Agreement as well as on the use of the procedures for 31 December 2009, the imprest account and statement of expenditures), all in the 31 December 2010, English language; and (iv) furnish to ADB such other 31 December 2011, information concerning such accounts and financial 31 December 2012. statements and the audit thereof as ADB shall from time to time reasonably request.

3. (b) The Borrower shall enable ADB, upon ADB's request, Section, Complied with. to discuss the Borrower's financial statements for the Project 4.02(b) Article and its financial affairs related to the Project from time to time 4 of the LA with the auditors appointed by the Borrower pursuant to Section 4.02(a) here above, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an

Appendix 8 53

No. Covenant Reference in Status of Compliance Agreements authorized officer of the Borrower unless the Borrower shall otherwise agree.

4. The Borrower shall enable ADB’s representatives to inspect Section, 4.03, Complied with. the Project facilities, all other plants, sites, properties and Article 4 of the equipment of the Borrower and/or AWSC, and any relevant LA records and documents. 5. The Borrower shall take all action which shall be necessary on Section, 4.04, Complied with. its part to enable AWSC to perform its obligations under the Article 4 of the Project Agreement, including the establishment and LA maintenance of tariffs as stipulated in paragraph 7 of Schedule 5 to this Loan Agreement, and shall not take or permit any action which would interfere with the performance of such obligations.

6. (a) The Borrower shall exercise its rights under the Section, Complied with. Subsidiary Loan Agreement in such a manner as to protect the 4.05(a), Article . interests of the Borrower and ADB and to accomplish the 4 of the LA purposes of the Loan.

7. (b) No rights or obligations under the Subsidiary Loan Section, Complied with. Agreement shall be assigned, amended, or waived without the 4.05(b), Article prior concurrence of ADB. 4 of the LA

8. (a) AWSC shall implement the Project with due diligence Section Complied with. and efficiency, and in conformity with sound administrative, 2.01(a), Article financial, engineering, environmental and water supply and II of the PA sanitation practices.

9. (b) In the implementation of the Project and operation of Section Complied with. the Project facilities, AWSC shall perform all obligations set 2.01(b), Article forth in the Loan Agreement to the extent that they are II of the PA applicable to AWSC.

10. AWSC shall make available, promptly as needed, the funds, Section 2.02, Complied with. facilities, services and other resources which are required, in Article II of the addition to the proceeds of the Loan, for the carrying out of the PA Project.

11. (a) In the carrying out of the Project, AWSC shall employ Section Complied with. competent and qualified consultants and contractors, 2.03(a), Article acceptable to ADB, to an extent and upon terms and II of the PA conditions satisfactory to ADB.

12. (b) Except as ADB may otherwise agree, all Goods, Section Complied with. Works and consulting services to be financed out of the 2.03(b), Article proceeds of the Loan shall be procured in accordance with the II of the PA provisions of Schedule 4 to the Loan Agreement. ADB may refuse to finance a contract where Goods, Works or consulting services have not been procured under procedures substantially in accordance with those agreed between the Borrower and ADB or where the terms and conditions of the contract are not satisfactory to ADB.

13. AWSC shall carry out the Project in accordance with plans, Section 2.04, Complied with. design standards, specifications, work schedules and Article II of the construction methods acceptable to ADB. AWSC shall furnish, PA or cause to be furnished, to ADB, promptly after their preparation, such plans, design standards, specifications and

54 Appendix 8

No. Covenant Reference in Status of Compliance Agreements work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request.

14. (a) AWSC shall take out and maintain with responsible Section Complied with. insurers, or make other arrangements satisfactory to ADB for, 2.05(a), Article insurance of Project facilities to such extent and against such II of the PA risks and in such amounts as shall be consistent with sound practice.

15. (b) Without limiting the generality of the foregoing, Section Complied with. AWSC undertakes to insure, or causeto be insured, the Goods 2.05(b), Article to be imported for the Project and to be financed out of the II of the PA proceeds of the Loan against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such Goods.

16. AWSC shall maintain, or cause to be maintained, records and Section 2.06, Complied with. accounts adequate to identify the Goods, Works and Article II of the consulting services and other items of expenditure financed PA out of the proceeds of the Loan, to disclose the use thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition.

17. (a) ADB and AWSC shall cooperate fully to ensure that Section Complied with. the purposes of the Loan will be accomplished. 2.07(a), Article II of the PA 18. (b) AWSC shall promptly inform ADB of any condition Section Complied with. which interferes with, or threatens to interfere with, the 2.07(b), Article progress of the Project, the performance of its obligations II of the PA under this Project Agreement or the Subsidiary Loan Agreement(s), or the accomplishment of the purposes of the Loan.

19. (c) ADB and AWSC shall from time to time, at the Section Complied with. request of either party, exchange views through their 2.07(c), Article representatives with regard to any matters relating to the II of the PA Project, AWSC and the Loan.

20. (a) AWSC shall furnish to ADB all such reports and Section Complied with. information as ADB shall reasonably request concerning (i) the 2.08(a), Article . Loan and the expenditure of the proceeds thereof; (ii) the II of the PA Goods, Works and consulting services and other items of expenditure financed out of such proceeds; (iii) the Project; (iv) the administration, operations and financial condition of AWSC; and (v) any other matters relating to the purposes of the Loan.

21. (b) Without limiting the generality of the foregoing, Section Complied with. AWSC shall furnish to ADB quarterly reports on the execution 2.08(b), Article of the Project and on the operation and management of the II of the PA Project facilities. Such reports shall be submitted in such form and in such detail and within such a period as ADB shall reasonably request, and shall indicate, among other things, progress made and problems encountered during the quarter under review, steps taken or proposed to be taken to remedy

Appendix 8 55

No. Covenant Reference in Status of Compliance Agreements these problems, and proposed program of activities and expected progress during the following quarter.

22. (c) Promptly after physical completion of the Project, but Section Partially Complied with. in any event not later than three (3) months thereafter or such 2.08(c), Article later date as ADB may agree for this purpose, AWSC shall II of the PA Due to the fact that the L2860-ARM prepare and furnish to ADB a report, in such form and in such loan project is an additional financing detail as ADB shall reasonably request, on the execution and project to the L2363-ARM loan initial operation of the Project, including its cost, the project, it was agreed with ADB that performance by AWSC of its obligations under this Project the combined PCR for L2363-ARM Agreement and the accomplishment of the purposes of the and L2860-ARM loan projects will be Loan. furnished upon the physical completion of the additional financing project. 23. (a) AWSC shall (i) maintain separate accounts for the Project Section Complied with. and for its overall operations; (ii) have such accounts and 2.09(a), Article related financial statements (balance sheet, statement of II of the PA income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and (iii) furnish to ADB, promptly after their preparation but in any event not later than 6 months after the close of the fiscal year (FY) to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the financial covenants of the Loan Agreement as well as on the use of the procedures for imprest account/statement of expenditures), all in the English language. AWSC shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

24. (b) In addition to annual audited financial statements Section Complied with. referred to in paragraph (a) of this Section, AWSC shall furnish 2.09(b)(i), to ADB: Article II of the (i) within four (4) months after the end of each PA FY, unaudited annual financial statements on its operations for such fiscal year; and

25. (ii) within one (1) month after the end of each Section Complied with. FY, financial projections of its operations 2.09(b)(ii), . (including income statements, balance Article II of the sheets and cash flow statements) for the PA next FY.

26. (c) AWSC shall enable ADB, upon ADB's request, to Section Complied with. discuss AWSC’sfinancial statements and its financial affairs 2.09(c), Article from time to time with the auditors, appointed by AWSC II of the PA pursuant to Section 2.09(a) here above, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of AWSC unless AWSC shall otherwise agree.

56 Appendix 8

No. Covenant Reference in Status of Compliance Agreements 27. AWSC shall enable ADB's representatives to inspect the Section 2.10, Complied with. Project, the Goods and Works financed out of the proceeds of Article II of the the Loan, all other plants, sites, properties and equipment of PA the AWSC, and any relevant records and documents.

28. (a) AWSC shall, promptly as required, take all action Section Complied with. within its powers to maintain its corporate existence, to carry 2.11(a), Article on its operations, and to acquire, maintain and renew all rights, II of the PA properties, powers, privileges and franchises which are necessary in the carrying out of the Project or in the conduct of its business.

29. (b) AWSC shall at all times conduct its business in Section Complied with. accordance with sound administrative, financial, 2.11(b), Article environmental and public utility practices, and under the II of the PA supervision of competent and experienced management and personnel.

30. (c) AWSC shall at all times operate and maintain its Section Complied with. plants, equipment and other property, and from time to time, 2.11(c), Article promptly as needed, make all necessary repairs and renewals II of the PA thereof, all in accordance with sound administrative, financial, engineering, environmental, public utility, and maintenance and operational practices.

31. Except as ADB may otherwise agree, AWSC shall not sell, Section 2.12, Complied with. lease or otherwise dispose of any of its assets which shall be Article II of the required for the efficient carrying on of its operations or the PA disposal of which may prejudice its ability to perform satisfactorily any of its obligations under this Project Agreement. 32 Except as ADB may otherwise agree, AWSC shall apply the Section 2.13, Complied with. proceeds of the Loan to the financing of expenditures on the Article II of the Project in accordance with the provisions of the Loan PA Agreement and this Project Agreement, and shall ensure that all Goods, Works and consulting services financed out of such proceeds are used exclusively in the carrying out of the Project.

33. Except as ADB may otherwise agree, AWSC shall duly Section 2.14, Complied with. perform all its obligations under the Subsidiary Loan Article II of the Agreement, and shall not take, or concur in, any action which PA would have the effect of assigning, amending, abrogating or waiving any rights or obligations of the parties under the Subsidiary Loan Agreement.

34. AWSC shall promptly notify ADB of any proposal to amend, Section 2.15, Complied with. suspend or repeal any provision of its Charter and shall afford Article II of the ADB an adequate opportunity to comment on such proposal PA prior to taking any action thereon.

Appendix 8 57

Additional Financing Loan L2860-ARM: Water Supply and Sanitation Sector Project – Additional Financing

No. Covenant Reference in Status of Compliance Agreements Main Covenants of the Loan Agreement (LA) 1. Implementation Arrangements Complied with. The Borrower shall ensure and shall cause AWSC to ensure Schedule 5, that the Project is implemented in accordance with the detailed Para 1 of the arrangements set forth in the PAM. Any subsequent change LA to the PAM shall become effective only after approval of such change by the Borrower and ADB. In the event of any discrepancy between the PAM and this Loan Agreement, the provisions of this Loan Agreement shall prevail.

2. Counterpart Financing Schedule 5 Complied with. The Borrower shall ensure that (a) all counterpart financing Para 2of the The government counterpart funds necessary for the Project is allocated and released in time to LA during 2012-2017 have been enable timely completion of the Project activities; and (b) provided on time. additional counterpart funds are promptly provided for any shortfall of funds or cost overruns.

3. Collection Efficiency Schedule 5 Complied with. The Borrower shall ensure that AWSC and other service Para 3of the providers have adequate enforcement mechanisms and LA AWSC had disconnection power to effectively collect service fees and penalize procedures in place against illegal defaulters of payment of WSS bills in order to improve the connections. For non-payment collection efficiency, deter non-payment and ensure AWSC had the legal procedures to sustainability of WSS operations. enforce the payment of outstanding arrears. AWSC enforced this during the project with legal actions.

The tariff collection efficiency for L2860-ARM loan project area increased to 93% by 2015. 4. Tariff Schedule 5 Not complied with. Para. 7 of Schedule 5 to the Initial Loan Agreement shall be Para 4 of the deleted and replaced in its entirety by the following: By no later LA ADB raised the tariff plan with SCWE than the end of the first quarter of 2014, the Borrower shall several times, but it did not result in ensure that a tariff plan (“Proposed Tariff Plan”) has been a decision or a tariff plan being submitted and recommended to the Borrower’s Public submitted to the PSRC. From 2013 Services Regulatory Commission (“PSRC”) for the PSRC’s Government was preparing policy consideration and approval which such tariff plan shall options and planning for the next promote the achievement of long-term financial sustainability generation of water utility PPP and commercial viability of AWSC’s business and ensure a operations. In 2016 the government gradual reduction in the government subsidy to AWSC over decided to merge all existent water time. Without limiting the generality of the foregoing, the utilities (including AWSC) and have Proposed Tariff Plan, and each subsequent tariff plan one lessee managing the submitted to the PSRC, shall include an adjustment to the companies. applicable tariff to take into account consumer price index (“CPI”) increases in Armenia, calculated based on the CPI From 1st January 2017 the AWSC increase in Armenia during the previous calendar year as was transferred to Veolia under the determined by the National Statistical Service of Armenia. The national lease contract for 15 years. Borrower and AWSC shall consult with the ADB on the Veolia has a set of key performance contents of the Proposed Tariff Plan prior to its submission to indicators to achieve under the the PSRC. In the event the PSRC does not adopt the contract, and will reduce energy Proposed Tariff Plan in the form submitted to the PSRC, the costs and NRW, it will maintain the Borrower and AWSC shall engage in discussions with ADB to overall water supply systems in its service area, collect the annually

58 Appendix 8

No. Covenant Reference in Status of Compliance Agreements discuss the contents of subsequent tariff plans to be proposed established tariff and pay the to the PSRC for the next tariff review cycle. government an annual lease fee.

On this basis the Government has put in place a sustainable model for service delivery, and sustainably financing the water supply system. Over time this lease fee will cover repayment of the loan investments. 5. Subproject Selection Criteria Schedule 5 Complied with. Para 5 of the The Borrower shall ensure and shall cause AWSC to ensure LA All 10 Subprojects have been that all Subprojects are selected in accordance with the selected in accordance with the following selection criteria: agreed with ADB’s “Subprojects Selection Criteria”. (a) each Subproject is in conformity with the Investment Program;

(b) each Subproject is located within the Project area;

(c) the existing water supply network and equipment of the Subproject is dilapidated, corroded and leaking, and/or sewer pipes are broken and clogged resulting in serious water supply shortages and adverse environmental problems;

(d) each Subproject is technically viable considering the least cost and technically sound options, and economically and financially feasible;

(e) for a village that is not covered under AWSC, the village administration and/or community have, on a long-term basis and in a manner acceptable to SCWE, committed to:

(i) provide periodic (at least semi-annual) inspection of the WSS system, water source and catchments, water supply treatment, and otherwise comply with technical and sanitary requirements in accordance with Borrower’s legislation; and

(ii) engaged managerial and technical support and training from AWSC with respect to operation and maintenance of WSS system within its responsibility;

(f) each Subproject complies with ADB safeguard policies and has no significant adverse environmental and social impacts (i.e., would not be classified as a category A Subproject in accordance with the Safeguard Policy Statement); and

(g) each Subproject can be completed within the Project implementation period.

6. Environment Schedule 5 Complied with. The Borrower shall ensure and shall cause AWSC to ensure Para 6 of the that the Project and all Project facilities comply with (a) all LA In the frame of 10 Subprojects 28 applicable laws and regulations of the Borrower relating to EMPs and 10 IEEs are developed environment, health and safety; (b) the Environmental and submitted to ADB. Safeguards; and (c) all measures and requirements set forth

Appendix 8 59

No. Covenant Reference in Status of Compliance Agreements in IEE, the EMP, and any corrective or preventative actions set forth in Safeguards Monitoring Reports.

7. Land Acquisition and Resettlement Schedule 5, Complied with. The Borrower shall ensure and shall AWSC to ensure that: Para 7 of the (a) none of the works entail any permanent land LA For 10 Subproject out of 10, the acquisition, conversion, degradation or restriction on number of 10 LAR Due Diligence use or access on private properties that will trigger Reports have been developed and ADB’s Involuntary Resettlement Safeguards, and all submitted to AWSC with Detailed Projects facilities remain, and Project activities are Design by the Design and conducted, within existing right-of-way; and Supervision Consultant. (b) in the event any unforeseen land acquisition or resettlement activities are required for Subproject, such land acquisition and/or resettlement activities are implemented in compliance with (a) all applicable laws and involuntary resettlement; (b) the Involuntary Resettlement Safeguards; (c) the RF; and (d) all measures and requirements set forth in RP for such Subproject, and any corrective or preventative actions set forth in Safeguards Monitoring Report.

8. Without limiting the application of the Involuntary Resettlement Schedule 5, Complied with. Safeguards, the RF of the RPs, the Borrower shall ensure, and Para 8 of the shall cause AWSC to ensure, that no physical or economic LA displacement takes place in connection with Subproject unit; (a) compensation and other entitlement have been provided to affected people in accordance with the RP for such Subproject; and a comprehensive income and livelihood restoration program has been established in accordance with RF for such Subproject 9. Indigenous Peoples Schedule 5, Complied with. The Borrower shall ensure and shall cause AWSC to ensure Para 9 of the that the Project does not cause any impact on indigenous LA people within the meaning of the SPS. If there is such an impact, the Borrower shall cause AWSC to prepare, disclose and implement an indigenous people plan in accordance with all application laws and regulations of the Borrower relating to indigenous peoples and the SPS 10 Human and Financial Resources to Implement Safeguards Schedule 5, Complied with. . Requirements Para 10 of the The Borrower shall make available or cause AWSC to make LA available necessary budgetary and human resources to fully implement the EMPs and the RPs. 11 Safeguards- Related Provisions in Bidding Documents and Schedule 5, Complied with. . Works Contract Para 11of the The Borrower shall ensure, or cause AWSC to ensure, that LA All points included in the Civil Works all bidding documents and contracts for Works contain Contracts. provisions that require contractors to; EMPs for each subproject have been (a) comply with the measures relevant to the incorporated in the Contract as a separate attachment. contractors set forth in the IEE, EMP and applicable RP (to the extent they concern impacts on affected people during construction), and any corrective or preventative actions set forth in Safeguards Monitoring Report (b) make available a budget for all such environmental and social measures, (c) provide the Borrower with a written notice of any unanticipated environmental, resettlement or indigenous peoples risks or impacts that arise

60 Appendix 8

No. Covenant Reference in Status of Compliance Agreements during construction, implementation or operation of the Project that were not considered in the IEE, EMP, and applicable RP. (d) Adequately record to condition of roads, agricultural land and other infrastructure prior to starting to transport materials and construction and Reinstate pathways, other local infrastructure, and agricultural land to at least their pre-project condition upon the completion of construction. 12. Safeguards Monitoring and Reporting Schedule 5, Complied with. The Borrower shall do the following of cause AWSC to do the Para 12 of the following: LA 1. (a)submit semi-annual Safeguards Monitoring Report to ADB and disclose relevant information from such reports to affected person promptly upon submission: 2. (b)if any un unanticipated environmental and/or social risks and impacts arise during construction, implementation or operation of any Subproject that were not considered in the IEE, EMP and applicable RF, promptly inform ADB of the occurrence of such risks or impacts, with detailed description of the event and proposed corrective action plan: and 3. (c) report any actual or potential breach of compliance with the measures and requirements set forth in any EMP or RP promptly after becoming aware of the breach.

4. 13. Prohibited List of Investments Schedule 5, Complied with. 5. The Borrower shall ensure or cause AWSC to ensure that no Para 13 of the proceeds of the Loan are used to finance any activity included LA in the list of prohibited investment activities provided in Appendix 5 of the SPS.

14. Labor; Health and Social Protection Schedule 5, Complied with. The Borrower shall ensure or shall cause AWSC to ensure Para 14, 15 of . that all Works contractors (a) comply with all applicable labor the LA laws; (b) use their best efforts to employ local people, including disadvantaged people, living in the vicinity of the relevant Subproject; (c) disseminate information at worksites on the risks of sexually transmitted infections, including HIV/AIDS, for those employed during construction; (d) provide equal pay to men and women for work of equal type; (e) provide safe working conditions for male and female workers; (f) abstain from child labor; and (g) comply with the provisions of the Gender Action Plan applicable to Works contractors. Works contracts for all Subprojects must include specific clauses on these undertakings, and compliance will be strictly monitored during implementation.

The Borrower shall ensure or shall cause AWSC to ensure that the Project facilities rehabilitated or constructed under the Project comply with technical specifications of the design, and that construction supervision, quality control, and Project management are performed according to internationally accepted standards and practices.

Appendix 8 61

No. Covenant Reference in Status of Compliance Agreements 15. Gender and Development Schedule 5, Complied with. The Borrower shall ensure and shall cause AWSC to ensure Para 16 of the that the Gender Action Plan is fully implemented in a timely LA Public outreach and awareness manner, and that adequate resources are allocated for this surveys and trainings undertaken in purpose. Gender-related targets to be obtained under the all 10 subproject’s towns under the Gender Action Plan shall include, among others, each of the L2860-ARM loan project, with 285 following: (i) sex-disaggregated survey of household water participants out of which 185 (65%) management, household need and knowledge gaps is were female. conducted with 50% female respondents; (ii) gender analysis survey is conducted and public relations campaign is informed Sex-disaggregated HR database by gender analysis; (iii) 10 trainings are conducted in the was available at AWSC.Sex- target towns and villages as a part of the awareness disaggregated customer complaints campaign, with 50% women's participation; (iv) sex- database was established with all disaggregated HR data-base is in place; and (v) database on the incoming calls and complaints complaints and customer feedback on a sex-disaggregated recorded by the AWSC Call center basis established, and content of complaints analyzed by staff. gender.

16. Good Governance Schedule 5, Complied with. The Borrower shall ensure and cause AWSC to ensure that, Para 17 of the in the event that (a) any change in ownership of any Project LA facility rehabilitated or constructed under the Project; (b) any sale, transfer, or assignment of interest or control in any Project facility rehabilitated or constructed under the Project; or (c) any lease or other contract or other modification of the SCWE’s or AWSC’s functions and authority over operation and maintenance of any such Project facility rehabilitated or constructed under the Project, is anticipated, ADB’s consent shall be obtained at least six months prior to implementation of such plan, and any such change is carried out in a legal and transparent manner.

17. Governance and Corruption Schedule 5, Complied with. The Borrower, the Project Executing Agency, and AWSC shall Para 18,19 of (i) comply with ADB’s Anticorruption Policy (1998, as the LA amended to date) and acknowledge that ADB reserves the right to investigate directly, or through its agents, any alleged corrupt, fraudulent, collusive or coercive practice relating to the Project; and (ii) cooperate with any such investigation and extend all necessary assistance for satisfactory completion of such investigation.

The Borrower, the Project Executing Agency and AWSC shall ensure that the anticorruption provisions acceptable to ADB are included in all bidding documents and contracts, including provisions specifying the right of ADB to audit and examine the records and accounts of the executing and implementing agencies and all contractors, suppliers, consultants, and other service providers as they relate to the Project.

Particular Covenants of the Loan Agreement (LA) and

Project Agreement (PA) 1. In the carrying out the Project and operation of the Project Section, 4.01 Complied with. facilities, the Borrower shall perform, or cause to be Article 4 of the performed, all obligations set forth in Schedule 5 to this Loan LA Agreement and the Project Agreement.

2. The Borrower shall enable ADB's representatives to inspect Section, 4.02 Complied with. the Project, the Goods and Works, and any relevant records Article 4 of the and documents. LA

62 Appendix 8

No. Covenant Reference in Status of Compliance Agreements 3. (a) The Borrower shall (i) maintain, or cause to be Section, Complied with. maintained, separate accounts for the Project; (ii) have such 4.03(a) Article accounts and related financial statements audited annually, in 4 of the LA accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; (iii) furnish to ADB, as soon as available but in any event not later than 6 months after the end of each related fiscal year, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the financial covenants of this Loan Agreement as well as on the use of the procedures for imprest account and statement of expenditures), all in the English language; and (iv) furnish to ADB such other information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

4. (b) The Borrower shall enable ADB, upon ADB's Section, Complied with. request, to discuss the Borrower's financial statements for the 4.03(b), Article Project and its financial affairs related to the Project from time 4 of the LA to time with the auditors appointed by the Borrower pursuant to subsection (a) hereinabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of the Borrower unless the Borrower shall otherwise agree..

5. The Borrower shall take all actions which shall be necessary Section, 4.04, Partially complied with. on its part to enable AWSC to perform its obligations under the Article 4 of the Project Agreement, including the establishment and LA Please refer to the Covenant No.4 maintenance of tariffs as stipulated in paragraph 4 of Schedule “Tariff” of the Main Covenants of the 5 to this Loan Agreement, and shall not take or permit any Loan Agreement (LA) above. action which would interfere with the performance of such obligations. 6. (a) The Borrower shall exercise its rights under the Section, Complied with. Subsidiary Loan Agreement in such a manner as to protect the 4.05(a), Article interests of the Borrower and ADB and to accomplish the 4 of the LA purposes of the Loan.

7. (b) No rights or obligations under the Subsidiary Loan Section, Complied with. Agreement shall be assigned, amended, or waived without the 4.05(b), Article prior concurrence of ADB. 4 of the LA

8. (a) AWSC shall carry out the Project with due diligence and Section 2.01. Complied with. efficiency, and in conformity with sound applicable Article II of the administrative, financial, engineering, environmental and PA water supply and sanitation practices.

(b) In the carrying out of the Project and operation of the Project facilities, AWSC shall perform all obligations set forth in the Loan Agreement to the extent that they are applicable to AWSC.

9. AWSC shall make available, promptly as needed, the funds, Section 2.02. Complied with. facilities, services, land and other resources as required, in Article II of the addition to the proceeds of the Loan, for the carrying out of the PA Project.

Appendix 8 63

No. Covenant Reference in Status of Compliance Agreements 10. (a)In the carrying out of the Project, AWSC shall employ Section Complied with. competent and qualified consultants and contractors, 2.03.Article II acceptable to ADB, to an extent and upon terms and of the PA conditions satisfactory to ADB.

(b)Except as ADB may otherwise agree, AWSC shall procure all items of expenditures to be financed out of the proceeds of the Loan in accordance with the provisions of Schedule 4 to the Loan Agreement. ADB may refuse to finance a contract where any such item has not been procured under procedures substantially in accordance with those agreed between the Borrower and ADB or where the terms and conditions of the contract are not satisfactory to ADB.

11. AWSC shall carry out the Project in accordance with plans, Section Complied with. design standards, specifications, work schedules and 2.04.Article II construction methods acceptable to ADB. AWSC shall of the PA furnish, or cause to be furnished, to ADB, promptly after their preparation, such plans, design standards, specifications and work schedules, and any material modifications subsequently made therein, in such detail as ADB shall reasonably request.

12. (a)AWSC shall take out and maintain with responsible Section Complied with. insurers, or make other arrangements satisfactory to ADB for 2.05.Article II insurance of Project facilities to such extent and against such of the PA risks and in such amounts as shall be consistent with sound practice.

(b)Without limiting the generality of the foregoing, AWSC undertakes to insure, or causeto be insured, the Goods to be imported for the Project against hazards incident to the acquisition, transportation and delivery thereof to the place of use or installation, and for such insurance any indemnity shall be payable in a currency freely usable to replace or repair such Goods.

13. AWSC shall maintain, or cause to be maintained, records and Section 2.06. Complied with. accounts adequate to identify the items of expenditure Article II of the financed out of the proceeds of the Loan, to disclose the use PA thereof in the Project, to record the progress of the Project (including the cost thereof) and to reflect, in accordance with consistently maintained sound accounting principles, its operations and financial condition.

14. (a)ADB and AWSC shall cooperate fully to ensure that the Section 2.07. Complied with. purposes of the Loan will be accomplished. Article II of the PA (b)AWSC shall promptly inform ADB of any condition which interferes with, or threatens to interfere with, the progress of the Project, the performance of its obligations under this Project Agreement or the Subsidiary Loan Agreement, or the accomplishment of the purposes of the Loan.

(c)ADB and AWSC shall from time to time, at the request of either party, exchange views through their representatives with regard to any matters relating to the Project, AWSC and the Loan.

64 Appendix 8

No. Covenant Reference in Status of Compliance Agreements 15. (a)AWSC shall furnish to ADB all such reports and information Section 2.08. Partially Complied with. as ADB shall reasonably request concerning (i) the Loan and Article II of the the expenditure of the proceeds thereof; (ii) the items of PA The AWSC furnished to ADB expenditure financed out of such proceeds; (iii) the Project; requested reports includingQPRs (iv) the administration, operations and financial condition of during the project implementation. AWSC; and (v) any other matters relating to the purposes of the Loan. Due to the transfer of AWSC to a national utility under Veolia, on 1 (b)Without limiting the generality of the foregoing, AWSC shall January 2017, the AWSC PMU furnish to ADB quarterly reports on the execution of the Project operation was terminated, with and on the operation and management of the Project facilities. dismissal of the key responsible Such reports shall be submitted in such form and in such detail PMU, and the transfer of and within such a period as ADB shall reasonably request, and responsibility to another PIU shall indicate, among other things, progress made and (WSPIU). This change resulted in problems encountered during the quarter under review, steps the non-completion of final report, taken or proposed to be taken to remedy these problems, and and the submission of a non- proposed program of activities and expected progress during compliant PCR, that was not in ADB the following quarter. format. ADB made numerous requests for this to be rectified but no (c)Promptly after physical completion of the Project, but in any action was taken to rectify the eventnot later than 3 months thereafter or such later date as shortfall. ADB may agree for this purpose, AWSC shall prepare and furnish to ADB a report, in such form and in such detail as ADB shall reasonably request, on the execution and initial operation of the Project, including its cost, the performance by AWSC of its obligations under this Project Agreement and the accomplishment of the purposes of the Loan.

16. (a) AWSC shall (i) maintain separate accounts for the Project Section 2.09. Complied with. and for its overall operations; (ii) have such accounts and Article II of the related financial statements (balance sheet, statement of PA income and expenses, and related statements) audited annually, in accordance with appropriate auditing standards consistently applied, by independent auditors whose qualifications, experience and terms of reference are acceptable to ADB; and (iii) furnish to ADB, promptly after their preparation but in any event not later than 6 months after the close of the fiscal year to which they relate, certified copies of such audited accounts and financial statements and the report of the auditors relating thereto (including the auditors' opinion on the use of the Loan proceeds and compliance with the financial covenants of the Loan Agreement and the Project Agreement as well as on the use of the procedures for imprest account and statement of expenditures), all in the English language. AWSC shall furnish to ADB such further information concerning such accounts and financial statements and the audit thereof as ADB shall from time to time reasonably request.

(b) In addition to annual audited financial statements referred to in subsection (a) hereinafter, AWSC shall furnish to ADB:

(i)within four (4) months after the end of each fiscal year, unaudited annual financial statements on its operations for such fiscal year; and

(ii)within one (1) month after the end of each fiscal year, financial projections of its operations (including income statements, balance sheets and cash flow statements) for the ensuing fiscal year.

Appendix 8 65

No. Covenant Reference in Status of Compliance Agreements (c) AWSC shall enable ADB, upon ADB's request, to discuss AWSC's financial statements and its financial affairs from time to time with the auditors appointed by AWSC pursuant to subsection (a) hereinabove, and shall authorize and require any representative of such auditors to participate in any such discussions requested by ADB, provided that any such discussion shall be conducted only in the presence of an authorized officer of AWSC unless AWSC shall otherwise agree.

17. AWSC shall enable ADB's representatives to inspect the Section Complied with. Project, the Goods and Works, all other plants, sites, 2.10.Article II properties and equipment of AWSC, and any relevant records of the PA and documents. 18. (a)AWSC shall, promptly as required, take all action within its Section Complied with. powers to maintain its corporate existence, to carry on its 2.11.Article II operations, and to acquire, maintain and renew all rights, of the PA properties, powers, privileges and franchises which are necessary in the carrying out of the Project or in the conduct of its operations.

(b)AWSC shall at all times conduct its operations in accordance with sound applicable administrative, financial, environmental and public utility practices, and under the supervision of competent and experienced management and personnel.

(c)AWSC shall at all times operate and maintain its plants, equipment and other property, and from time to time, promptly as needed, make all necessary repairs and renewals thereof, all in accordance with sound applicable administrative, financial, engineering, environmental, public utility and maintenance and operational practices.

19. Except as ADB may otherwise agree, AWSC shall not sell, Section 2.12. Complied with. lease or otherwise dispose of any of its assets which shall be Article II of the required for the efficient carrying on of its operations or the PA disposal of which may prejudice its ability to perform satisfactorily any of its obligations under this Project Agreement.

20. Except as ADB may otherwise agree, AWSC shall apply the Section 2.13. Complied with. proceeds of the Loan to the financing of expenditures on the Project in accordance with the provisions of the Loan Agreement and this Project Agreement, and shall ensure that all items of expenditures financed out of such proceeds are used exclusively in the carrying out of the Project. 21. Except as ADB may otherwise agree, AWSC shall duly Section Complied with. perform all its obligations under the Subsidiary Loan 2.14.Article II Agreement, and shall not take, or concur in, any action which of the PA would have the effect of assigning, amending, abrogating or waiving any rights or obligations of the parties under the Subsidiary Loan Agreement. 22. AWSC shall promptly notify ADB of any proposal to amend, Section Complied with. suspend or repeal any provision of its Charter, which, if 2.15.Article II implemented, could adversely affect the carrying out of the of the PA Project or the operation of the Project facilities. AWSC shall afford ADB an adequate opportunity to comment on such proposal prior to taking any affirmative action thereon.

66 Appendix 8

No. Covenant Reference in Status of Compliance Agreements 23. This Project Agreement shall come into force and effect on the Section Complied with. date on which the Loan Agreement comes into force and 3.01.Article III effect. ADB shall promptly notify AWSC of such date. of the PA

24. All the provisions of this Project Agreement shall continue in Section 3.02. Complied with. full force and effect notwithstanding any cancellation or Article III of the suspension under the Loan Agreement. PA

25. Any notice or request required or permitted to be given or Section Complied with. made under this Project Agreement and any agreement 4.01.Article IV between the parties contemplated by this Project Agreement of the PA shall be in writing. Such notice or request shall be deemed to have been duly given or made when it shall be delivered by hand, mail or facsimile to the party to which it is required or permitted to be given or made at its address hereinafter specified, or at such other address as such party shall have designated by notice to the party giving such notice or making such request. The addresses so specified are:

Appendix 9 67

ECONOMIC REEVALUATION

A. Introduction

1. The economic reevaluation was undertaken, in accordance with ADB’s Guidelines. It is based on a reevaluation of the representative sub-projects identified in the Report and Recommendation of the President to the Board of Directors for Loan 2363 and Loan 2680. Under Loan 2363 two sub-projects (Abovyan and Ararat (with five rural communities)) were identified, and under Loan 2680 3 sub-projects (Gegharqunik, Lori and Ararat) were identified.

2. The economic analysis, based on the economic internal rates of return (EIRRs) were reevaluated, on the basis of the non-incremental and incremental projects costs and benefits using the revised scope and actual costs incurred with these sub-projects during implementation. The economic reevaluation is undertaken on four of the five appraisal sub-projects, as the fifth sub-project was not implemented under Loan 2363.

B. Methodology

3. The project economic benefits include both quantifiable and non-quantifiable benefits. The quantifiable as identified at appraisal cover the incremental water supply, the non-incremental water and the time and water savings. At appraisal the health benefits and improved productivity from improved access and water quality and associated lower disease and health issues while identified as a benefit were not quantified. At project completion these benefits while identified remain nonquantified.

4. Economic benefits from the cost savings on non-incremental supply (to connected and unconnected user households) are estimated based on the resource cost savings. The incremental benefits of increased volume of sales are estimated and based on the incremental demand and willingness to pay.

5. In determining the economic costs and benefits, the standard methodology for calculating EIRRs and economic net present values (ENPVs) of the sub-projects was used consistent with the ADB guidelines for economic analysis of investment projects. Financial prices are converted to economic values which involves the removal of taxes and other transfer charges, and the application of standard wage rate factors for skilled and unskilled labor of 1 and 0.7 respectively, to establish economic prices. The economic opportunity cost of capital used is the same as at appraisal of 12 percent.

6. In calculating the economic internal rates of return (EIRRs) the following assumptions are used: • Project economic projection is analyzed over a period of 25 years. • Capital investment costs are detailed for each sub-project, with the actual sub-project capital investment cost spread over the construction contract period, and with taxes (20%) removed from this capital cost... • O&M costs have been determined based on estimates of average actual O&M costs taken from the project performance monitoring system for the years 2013 to 2015 (latest data available), with taxes deducted (20%). As the sub-projects involve rehabiliation and expansion of existing systems, there was an a O&M cost prior to the project, which continued through the construction period. .The assumption is that there will be an efficiency improvement with O&M of 0.8% per year, as under the Veolia contract there will be reductions in energy costs , as per their performance indicators.

68 Appendix 9

• For economic prices of non-incremental and incremental water, the resource cost savings and average incremental economic cost of the water were estimated. The economic non- incremental water price is based on time and cost savings, which included water collection cost, storage costs of water, tanker costs of water and bottled water use. The economic incremental water price is based on the average of the economic price of: household willingness to day per m3 of water (previous survey data updated for domestic inflation); and the the incremental economic cost per m3 of water for the sub-project. Details are provided for each sub-project. • A domestic price numeriere is the basis used for the economic analysis.

7. In the appraisal economic analysis, the EIRR and ENPV sub-project projections were based on pre-feasibility study reports. The PCR reevaluation has used a similar methodology to that at appraisal, and where variations in assumptions were required these are detailed.

8. In estimating the sub-project economic costs and benefits, as outlined above the subproject economic costs are the actual capital investment and O&M costs, and for the economic benefits the sub-project non-incremental and incremental water volumes are estimated based on the sub-project investment, improved system efficiency and consumer demand, and the benefits are estimated using the respective economic prices for incremental and non-incremental water as outlined above.

C. Economic Reevaluation

9. The sub-project EIRRs and ENPVs were recalculated at project completion. As noted for some of the four sub-projects the scope of the sub-projects changed from the appraisal estimates, with adjustment in costs. Three of the sub-project EIRRs at project completion are lower than at appraisal, and while three of the sub-projects have EIRRs above the economic cost of capital, which at appraisal was estimated at 12 percent, for one sub-project (Gegharqunik) the EIRR is below the opportunity cost of capital at 10.5 percent. The comparison of the appraisal and completion EIRRs is provided in Table 1. The sub-project EIRRs for three of the sub-projects were lower at completion, and this reflected lower actual economic benefits and markedly higher economic costs than estimated at appraisal.

Table 1: Sub-project EIRRs Sub-Project Appraisal EIRR % Completion EIRR % Abovyan 25.0 13.7 Lori 19.2 23.2 Ararat 21.0 17.3 Gegharqunik 17.6 10.5

10. Sensitivity analysis was undertaken for a: (i) 20% increase in O&M cost; (ii) 20% decrease in benefits; (iii) 20% decrease in O&M cost; and (iv) combined 20% increase in O&M cost and decrease in benefits. The sensitivity scenarios for all four sub-projects indicate that they are sensitive to all these changes. The results are outlined in Table 2 and indicate that three of the sub-projects have EIRRS above 12 percent (Abovyan, Lori and Ararat). With the Lori sub-project it is resilient and viable with changes in all the parameters, the Ararat sub-project is sensitive the combined 20 percent increase in O&M cost and decrease in benefits. All sub-projects have EIRRs above 12 percent with a 20 percent decrease in O&M costs.

11. The Abovyan sub-project is sensitive to the following: an increase of 20% in O&M cost; a decrease of 20% in revenue; and the combined 20% increase O&M and 20% reduction in benefits.

Appendix 9 69

Table 2: Sub-project Sensitivity Analysis Sub-project EIRRs % Abovyan Lori Ararat Gegharqunik Base Case 13.7 23.2 17.3 10.5 Decrease 20% in O&M 17.7 25.4 20 13.0 Increase 20% in O&M cost 9.7 21.2 14.7 8.0 Decrease 20% in benefits 6.8 17.7 12.0 5.8 Combined 20% increase O&M and 2.1 15.8 9.5 3.1 20% reduction in benefits

70 Appendix 10

FINANCIAL REEVALUATION

A. Introduction

1. The financial reevaluation was undertaken, in accordance with ADB’s Guidelines. It is based on a reevaluation of the representative sub-projects identified in the Report and Recommendation of the President to the Board of Directors for Loan 2363 and Loan 2680. Under Loan 2363 two sub-projects (Abovyan and Ararat (with five rural communities)) were identified, and under Loan 2680 3 sub-projects (Gegharqunik, Lori and Ararat) were identified.

2. In the appraisal financial analysis, the projections were based on pre-feasibility study reports, and the analysis used discounted cash flow analysis, financial internal rates of return (FIRRs) and sensitivity analysis based on calculations with a constant price base. While for the second Loan 2680, the sub-project analysis details were available, for the earlier Loan only the appraisal summary of the analysis was available. The PCR financial reevaluation has used a similar methodology, and where variations in assumptions were required these are detailed.

B. Tariffs and Policy Changes

3. The appraisal financial analysis was based on determining the level of cost recovery from users required to cover all operation and maintenance costs (O&M) expenses and eventually capital to achieve financial sustainability. The analysis was based on each sub-project contributing to the financial sustainability of the AWSC.

4. To achieve this sustainability objective with AWSC, Government had committed in the project to implement a tariff reform plan, and increase tariffs as required when customers had access to improved services (better water quality, increased hours of service and new customers with access). The appraisal analysis was based on regular tariff price increases every three years, with the increases to remain within the affordability of low income households, set at approximately 5 percent of average household income. At these projected tariff levels the subprojects were identified as viable. While the project loan covenants included this planned tariff policy plan, it was not implemented, with tariff increases occurring in 2004 and 2005 prior to the project, with only one increase occurring during the project period (2007-2017) on 1 April 2009.

5. Under Loan 2680 (approved in 2012) the tariff reform policy plan was expected to be implemented. This did not occur for political reasons, with actions postponed as the Government decided by 2013 (under Decree No.1366-A (5/12/2013)) that it was going to move the water supply system to the next phase of PPP development, with the establishment of one national water utility that would replace the five regional utilities (including AWSC), and tender this to have one lessee operating the system. This change while delayed, was implemented, and on 1 January 2017 when Veolia became the lessee of the national water supply and sanitation system under a 15-year lease contract.

6. This lease contract is based on one national uniform tariff, so effectively the Yerevan city users (who have lower cost provision) will be cross subsidizing the towns and rural villages connected in the system. The tariff is defined in the lease, with mechanisms for price adjustment (as per approval by the Public Sector Regulatory Commission), and the lessee is to pay an annual fee to Government, which over time should be adequate to meet the debt repayment on the existing loans, that were previously the responsibility of the regional water utilities. As defined in the lease contract over the 15 years the lease fee payment will total 89 billion AMDs, and 37.5 billion AMD of capital investment will be undertaken. The Government as part of the contract

Appendix 10 71 wants to integrate the remaining 580 villages that are outside the system into the network in a phased process.

7. The Government decision on a national lease was based on the benefits identified from economies of scale, lower management costs, opportunities for a significant reduction in energy use through adopting a national system approach with increased use of gravity fed water and efficient pumping, and the expectation of reductions in NRW losses. In addition, the Government wanted to expand wastewater treatment. The lease contract has defined key performance indicators (KPIs) on service quality, system maintenance and investment, and reduction in energy losses. This change to a lease contract has improved the likelihood of financial sustainably of the water supply and sanitation utility in Armenia.

8. The lease contract has implications in terms of the financial reevaluation as AWSC no longer exists, and the tariff pricing to be used in the reevaluation does not include the tariff increases as per the appraisal analysis. In addition, it is likely that for some sub-project systems their source of water may be adjusted as the opportunity could now exist to link into different mains systems, which will reduce energy costs.

9. Armenian water charges are the lowest in the region, and are likely to remain so as under the latest Government Development Program (2014-2025), water drinking charges are not to exceed 2.5% of consumer spending in the poorest quintile of the population, given daily consumption of 70 liters per capita per day. This threshold is much tighter than the typical affordability threshold used in most countries, which is a level up to 5 % of consumer spending.

Table 1: Water and Sewerage Tariffs (2007-2018) AMD/ m3 2004 2005 2009 2018 Water Supply 90.36 115.65 154.47 164.45 Sanitation 10.05 24.35 25.31 26.95 Total 100.41 140 179.78 191.4 Note: The 2018 tariff allocation to water supply and sanitation is based on same proportional split as 2009 tariff.

10. The government policy change has shifted the focus from financial self-sustainability for each regional utility, to one of financial self-sustainability with a Veolia lease operating nationally. There will be cross subsidy of the cost of services by the lessee from city users to rural towns and villages. The financial reevaluation involves sub-projects of towns and villages where cost recovery, as outlined at appraisal, would require a higher tariff. This change has implications in the reevaluation as while the sub-project FIRRS are low, as part of the overall national Veolia system they will be financially sustainable.

B. Major Assumptions

11. As outlined at appraisal the project investments were designed to rehabilitate and expand system physical infrastructure (ie. mains, system networks, reservoirs, pumping stations) and to improve AWSC system operational efficiency and performance with increased customer service provision in terms of water access, quality and hours of service). The AWSC would be operated commercially, with increased revenues from increased numbers of households, greater water use and increased collection rates. Under the subsidiary loan agreement AWSC would be responsible for loan repayments to the IFIs financing investment. Under separate funding, during the project period AWSC operated with a management contract with SAUR (for the period 2004 to 2016).

72 Appendix 10

12. AWSC did increase revenue significantly (with higher sales volume, billing and collection rates) and met key performance target indicators, though given it was expanding and servicing smaller towns and villages it had higher operating costs (in part from energy cost rises) that also increased significantly over the period. As Government did not approve tariff increases, the AWSC tariff did not achieve cost recovery. The company required a Government subsidy to cover the shortfall. The level of subsidy increased during the project period from 1.21 billion AMD in 2008 to 2.17 billion AMD in 2015. From 2012 the subsidy included debt servicing, which in 2015 accounted for 0.94 billion of the total subsidy. (WB Review of Armenia’s Experience with Water Public Private Partnerships, 2017). The cost of the SAUR management contract was financed under WB and KfW projects.

13. Data Availability. A detailed project based performance management system (PPMS) was established under the project covering all key performance indicators, numbers of consumers, hours of water, water produced and water billed, collection rates, non-revenue water, and energy use, and average O&M cost. The PPMS was maintained for the sub-projects under Loan 2363 to 2012, and for the sub-projects under Loan 2680 it was implemented from 2013 to 2016. Unfortunately with the integration of AWSC into a national utility at the end of 2016, closure of the PIU that was embedded in the AWSC and termination of most PIU staff, the full range of the PPMS data was not collected and available for 2016, and the 2016 annual report was not produced. The lack of sub-project monitoring post 2012, and the absence of the complete range of 2016 data, and no monitoring by the new PIU in 2017, means that there are key data gaps, and it is difficult to fully quantify the project benefits once the new subproject investments became fully operational.

14. Financial Reevaluation. This is undertaken on four of the five appraisal sub-projects, as the fifth sub-project was not implemented under Loan 2363. The sub-projects that were analyzed at appraisal, for some when detailed design was completed there were adjustments in costs and the planned scope of activities, including the number of villages: • Under Loan 2363 the Abovyan sub-project only involved the Abovyan town and two villages; and with the second sub-project at Ararat (five rural villages) on further analysis this sub-project did not proceed. • Under Loan 2680 the three sub-projects did proceed with some adjustment in the number of villages involved.

15. In calculating the financial internal rates of return (FIRRs) the following assumptions are used:

• Project financial projection is analyzed over a period of 25 years. • Capital investment costs are detailed, with investment spread over the contract period. The civil works on the Abovyan sub-project was started in 2009 and completed in 2011 under 1 contract, and on the three Loan 2680 sub-projects there were a number of civil works contracts, in Ararat (3 contracts, 2013-2015), Lori (3 contracts 2013-2016, with 2 contracts completed in 2015), and Gegharqunik (5 contracts 2014-2016, with 3 contracts completed in 2015). • O&M costs have been determined based on estimates of average O&M costs from the PPMS system. This is used as a proxy for the sub-project costs. These costs include labor, electricity, chemicals and other materials. The energy costs by sub-project are provided separately for three of the sub-projects in the PPMS, and indicate energy costs as a percentage of total O&M costs ranged from 27 to 79 percent (in 2015).

Appendix 10 73

• During the project AWSC O&M costs rose significantly, while efficiency gains were made, more water was used, and unit energy prices almost doubled (from 25 to 45 AMD/ KWt). The actual O&M costs are significantly higher than the appraisal estimates, which appear low. For the Abovyan sub-project at appraisal energy was estimated at 30 percent of the cost, which is close to actual. Under Loan 2680 at appraisal the three sub-projects, had low O&M costs, which were based on a large labor component (93 percent of the O&M cost) and a very small energy component (1.4 percent) for Lori and Ararat sub-projects, and 8 percent for the Gegharqunik sub-project. The actual energy percentages in 2015 were 31 percent for Lori sub-project and 79 percent for Gegharqunik sub-project. • Collection rates, at appraisal it was expected that collection rates would increase from over the period of the project. The actual collection rates in the sub-projects pre the subproject capital investment were higher than the appraisal estimates, and increases post investment of 5 percent to 95% are assumed. • NRW percentage did decrease, and in the analysis this is estimated to be by 8 to 12 percent depending on the sub-project. • Tariffs. As noted above, in Table 1 the tariff rate did not change from 2009 until 2018. In the appraisal analysis a full rate was used to for all water supplied, with rate increases every 3 years. In the reevaluation, the tariff rate used is as per the Table 1 figures, and for towns it is the full rate as sanitation services are provided and in the villages it is the base rate excluding the sanitation charge. • SAUR management contract, it was not possible to separate the benefit achieved with the SAUR management contract, which was funded separately from the project, on that basis the same approach is used as per appraisal, with any benefit achieved included in the project returns.

16. Incremental Water. The actual incremental water achievements after project investment were lower than the appraisal estimates, which may in part reflect the absence of data for the full post implementation phase and benefit stream.

17. Number of new Households and Increased Hours of Water. This data (provided for the period indicates an increase in the number of households is provided for the period 2013- 2016, and a significant increase in the number of household moving form the 4 to 12 hours of water to receiving water 12 to 24 hours, and receiving water continuously (for 24 hours).

C. Weighted Average Cost of Capital

18. The average weighted average cost of capital (WACC) for the sub-projects is estimated at 2.19 percent. The details for the calculation are outlined in Table 2, with the funding allocation based on actual ADB financing 80 percent and Government 20 percent.

74 Appendix 10

Table 2: Weighted Average Cost of Capital Particulars Capital Cost ADB Loan Government (%) Equity Weighting (%) 80 20 Nominal Cost 2.93 11.08 Tax Rate 20% 0% Tax-Adjusted Nominal Cost 2.34 11.08 Inflation Rate 1.50 3.50 Real Cost 0.84 7.58 Real WACC 2.19 0.68 1.52

D. Financial Reevaluation

19. The sub-project FIRRs and financial net present values (FNPVs) were recalculated at project completion. As noted for some of the four sub-projects the scope of the sub-projects changed from the appraisal estimates, which reduces the accuracy of the comparison. The FIRRs at project completion are significantly lower than at appraisal, and the FIRRs with the three subprojects are below the WACC. Only one sub-project (Abovyan) has a FIRR of 5.8% that is above the WACC. The comparison of the appraisal and completion FIRRs is provided in Table 3. The lower FIRRs reflect the significantly higher actual O&M costs (including higher energy costs), the lack of adoption of the planned tariff increases during the project resulting in actual revenues at lower levels than appraisal.

Table 3: Sub-project FIRRs Sub-Project Appraisal FIRR % Completion FIRR % Abovyan 7.8 5.8 Lori 6.3 1.2 Ararat 6.5 0.9 Gegharqunik 4.9 -7.0

20. Sensitivity analysis was undertaken for a: (i) 20% increase in O&M cost; (ii) 20% decrease in revenue; (iii) 20% decrease in O&M cost and (iv) combined 20% increase in O&M cost and decrease in revenue. The sensitivity scenarios for all four sub-projects indicate that they are sensitive to all these changes. The results are outlined in Table 4 and indicate that the following have FIRRs above the WACC: the 20% decrease in O&M costs for 3 of the sub-projects, and for the Abovyan sub-project in base cost, for a 20% increase in investment coast and for a one year delay in implementation. For all other scenarios for the sub-projects the FIRRs are below the WACC. Three of the four sub-projects will require an operational subsidy within the overall Veolia operations budget to be financially viable.

Table 4: Sub-project Sensitivity Analysis Sub-project FIRRs % Abovyan Lori Ararat Gegharqunik Base Case 5.8 1.2 0.9 -7.0 Decrease O&M 20% 10.2 3.5 3.8 -2.4 Increase 20% in O&M cost 1.1 -1.2 -2.3 -14.5 Decrease 20% in revenue -1.2 -3.0 -4.0 - Combined 20% increase O&M and -9.1 -6.4 -8.9 - 20% reduction in revenue

Appendix 10 75

21. As outlined in an earlier section of this Appendix, the Government decision to move to a national utility under a lease contract with Veolia (from 1/1/2017), who will make an annual fee payment to Government, does provide the framework for financially sustainable water supply operations in Armenia. Veolia in discussions with the PCR team stated that as per its’ contract it will significantly reduce energy and operating costs. To provide some indication of the impact of this type of change, the sensitivity analysis of the 4 sub-projects to a 20 percent reduction in operating cost was undertaken (refer Table 4). It indicates the potential should this occur, with 3 of the sub-projects financially viable with this change (Abovyan FIRR 10.2%, Lori FIRR 3.5% and Ararat FIRR 3.8%) while Gegharqunik would still have a negative return.

76 Appendix 11

GENDER ACTION PLAN

A. Narrative Analysis

1. Most activities in the Gender Action Plan (GAP) were relevant to the outcome and outputs of the project, which was categorized “effective gender mainstreaming”. A number of important features with direct gender benefits were included in the design and monitoring framework (DMF) and in the concept.

2. In total 894,785 residents in 29 project towns and 160 villages across Armenia directly or indirectly benefited from rehabilitated and upgraded water supply infrastructure and reliable water supply services. Women and girls received practical benefits from the project and its GAP- designed features through gender responsive and sustainable water supply provision to households, schools and kindergartens in the project towns and villages. Benefits to girls and women include improvements to their businesses, health, knowledge, and education as well as eased household responsibilities and better sanitation. In some project areas they no longer need to rely on intermittent water trucks to provide water, or to walk long distances to fetch water, resulting in less time spent travelling as well as less time spent on managing the water and related tasks within households. The provision of potable water and other basic infrastructure had a direct positive impact on women and children through reduced women’s time povertyand labor inputs, including caring for family members. The average number of daily hours of drinking water services in all project towns and villages is more than 16 hours per day by 2016.

3. The Gender Action Plan (GAP) was closely monitored during the implementation of the project, withparticular attention paid to gender issues during public consultations, awareness campaign, social and gender surveys, studies, and gender courses. The capacity building and public awareness campaign was implemented through a combination of technical, public outreach, social, gender, environmental and safeguards measures, as well as media campaigns. All actions were conducted in 3 phases: (i) design stage surveys; (ii) surveys during the construction works; and (iii) surveys at the completion of construction works.

4. Semi-annual GAP monitoring reports including gender specific information on participation in public meetings, discussions, social surveys and gender courses throughout the project were timely prepared and submitted to ADB, as well as posted on the AWSC website (http://www.armwater.am/en/current-activities.html) in Activities section.

5. The project prioritized women participation in public consultations by ensuring awareness and information dissemination among women and women headed households. As part of public awareness campaign, the training courses and public consultations on the “Water sanitary and hygienic issues and effective water usage” were carried out in all 10 regions of Armenia. In addition, based on GAP requirements, the special booklet on “Water sanitary and hygienic issues and effective water usage” was prepared, published (1000 circulation) and distributed to all training participants. In total 285 households in all project area participated in the training session out of which 185 (64.91%) were female.

6. The project effectively targeted some of the disadvantaged areas of Armenia by providing improved water supply system and meeting the needs of women in particular considering the role of women in households, water collection and distribution, agriculture and livelihood activities. Armenia is a traditional country so the burden of performing household responsibilities largely if not fully falls on women. Therefore, the project has been of strategic importance to women as

Appendix 11 77 improved water supply and sanitation and knowledge on hygiene/sanitation and customer rights gave women more opportunities for addressing their needs, be active in their communities and dedicate time to other activitiesto family and employment.

7. GAP included 18 actions out of which 17 were successfully implemented at the project completion. Out of 15 GAP targets, 12 targets were achieved, one was partially achieved and two were not achieved. Therefore, some of the activities and targets were partially met. For instance, data was not segregated for civil works, therefore, it is not reported if women were contracted; however, women were recruited in other types of jobs, like maintenance, engineers, water utility and project implementation. Implementing a sex-disaggregating data-base of the water utility customers was also a difficulty as the AWSC did not consider effective to spend resources on this activity. Nevertheless, the project has some important achievements.

8. Mainly, implementation of the GAP was smooth, however, some of the constraints during implementation were linked to introducing more systemic changes and improvements inside the water company and convincing them in gender sensitive approach, including promotion of women’s employment in the water supply and sanitation sector.

9. Future water supply and sanitation project in Armenia can take a few issues for consideration: focusing on data collection from the very beginning of project implementation and taking this issue on the priority/management level; ownership of the GAP and its implementation and reporting to ADB (which in fact was in place for this project and appeared to result in high accountability and reporting on gender); finding innovative ways to address gender inequalities for giving more opportunities to women’s employment in non-traditional sectors;keeping women targeted outreach to beneficiaries; inclusion of social/gender consultant is key in implementation, coordination and monitoring of gender action plan.

10. Detailed achievement of the GAP targets and activities under the project are presented in the Gender Action Plan Matrix below.

B. Highlights of Gender Equality Results

11. Gender features of the project successfully targeted strengthening of the AWSC. This included development of human resource policy/strategy as well as gender analysis of the employment trends. Improvement of professional skills of employees was targeted through training and development plan and its implementation. New procedures for assessment of employees and increasing motivation were introduced. AWSC HR Department while announcing for Job vacancies through mass media (newspapers, career centers, social networks) included the sentence "Applications by women encouraged".

12. AWSC effectively used different sources for engaging women. HR Department was collaborating with local labor bureau as well as outreaching to people registered as unemployed and looking for jobs. During reporting period women were selected as majority of the customer service staff (95% female) or Inspectors for taking water meter reading (27.6% female) and other office-based administrative jobs – by project completion, in the water utility head office 49,7% were women employees. Also, by 2016,women were occupying technical jobs - two out of 6 engineers were women (33%).

13. In addition, the project also supported AWSC to develop feedback and complaints redress mechanism through carrying out gender workshop for staff and PMU and training introducing gender analysis of the incoming complaints. The database and analysis included the region and

78 Appendix 11 town and/or community covered, number of complaints, sex of the customer, topic of complaint. For instance, for January-June 2016, overall 4699 calls were received through hotline, out of which 64% were women; some of the active towns included Vedi, Ararat, Masis and from this area 75% of the calls came from female. The hot-line operators assigned/directed calls to relevant specialists to solve/address the issue as well as monitoring of the calls was performed. However, while the number of calls has been increasing from year to year, the trend is that in almost allcommunitieswomen were more active in reaching out to the AWSC and delivering the water supply related needs of their households.

14. The project also helped institutional strengthening through developing targeted approach to women as beneficiaries (almost 65% of the public outreach beneficiaries were women). The material of the awareness workshops was based on the survey analysis. Trainings/workshops and awareness material (booklet and training modules) was prepared for covering training topics of: water Hygiene and sanitation, water borne diseases, frequently asked questions (how to become AWSC customer, water quality control and disinfection, water & wastewater tariffs, water metering, etc.), customers rights and obligations, water company’s obligations, efficient use of potable water, women’s engagement and basicsofgender concept. As a result, women gained knowledge in efficient water use, sanitation and hygiene as well as understanding how to be active citizens to exercise their customer rights and make their voices heard. On the other hand, this has helped the water utility company to acknowledge women as an important target group of their operation and develop more effective outreach to their beneficiaries.

Appendix 11 79

Gender Action Plan Matrix

Objectives Actions and Descriptions Target/Indicator and Achievements at Project Completion Timeframe Output 1: Rehabilitated, replaced and expanded water supply and sewerage systems in project towns and villages

Gender balanced • A1 Consult women and men during • T1 Consultation meetings with • A1 Achieved. Both women and men were consulted during project employment during project implementation of WSS 50% women participation. implementationto identify the WSS issues, utility issues and construction and in systems. • T2 All job advertisements for willingness to pay for improved water service utility agency. • A2 Contracting women in civil civil works and for utility • A2. Achieved. During project implementation, jobs were awarded to works, maintenance and agency include sentence on women and it included women’s recruitment in the utility company recruitment in utilities at customer “applications by women at customer services and as meter readers and engineers services, women as meter readers encouraged', and 40% of jobs • A3Achieved. Local sources were used to disseminate information and female engineers. (utility agency) and 10% (civil about employment opportunities. AWSC liaised with labor bureau • A3 Liaise with the local labor works contractors) are but alsooutreached to the people registered and looking for jobs.T1 bureau and construction companies awarded to women. Achieved. The public consultations, social surveys and gender to help inform women of the studies have been carried out in each subproject communities, availability of jobs (direct and which aimed to identify the water supply and sanitary issues, utility indirect) during construction. issues and willingness to pay for improved water services. The relevant information on consultation meetings have been included in PMUs quarterly progress reports submitted to ADB. In total 1642 participants attended the consultation meetings out of which 1032 (62.9%) were female. • T2 Party achieved: AWSC HR Department while announcing for Job vacancies through mass media (newspapers, carrier centers, social networks) includes the sentence "Applications by women encouraged". During the project implementation period the new jobs awarded to the women constituted approximately 22.6%, women’s employment in the head office of the water utility was 49,7% by 2016 (71 of 143 employees were women). The civil work contractors were not registered at AWSC by gender, therefore information was not collected if women were contracted; however, (i) women were employed at technical positions such as engineers (33%, that is 2 out of 6 engineers), (ii) at customer servicecenter 95% were female (57 out of 60 employees),(iii) women’s recruitment in maintenance and utilities (meter readers) composed 27,6% (62 women out of 225 by 2016) and (iv) from those involvedin project implementation recruited by consultant company, i.e field surveys specialists, environmental and social specialists, etc. 50% were women.

80 Appendix 11

Output 2: Improved water services in project towns and villages

Female headed • A4 Ensure that, female headed • T3 100% female-headed • A4 Achieved. The project covered all the households, male and household have households have access to safe households in project towns female headed, of the targeted area access to reliable and reliable water. have access to 15-hour • T3 Achieved.100% of the households in the target communities, water supply. potable water supply (2017). including female headed households, were provided with water connections., After the project completion, the average number of daily water supply in all project towns and villages is more than 16 hours per day. However, the households were not registered at AWSC by gender and AWSC was unable to disaggregate the data to report the number of female headed households.

PR campaign of • A5 Conduct survey on household • T4 Survey on sex- • A5Achieved. A sex-disaggregated survey was carried out in the AWSC is informed water management, household disaggregated data of project target areas and it included issues of needs related to the by gender analysis needs (water related) and household water water use, sanitation, knowledge gaps of survey on sanitation and hygiene concerns at management, household need • A6 Achieved.Analysis conducted on the needs of women related to household water least 50% of respondents are and knowledge gaps the water use, sanitation and hygiene became the basis for further management, women). conducted (with 50% female developing effective and targeted public outreach activities household needs • A6 Analyze knowledge gaps of respondents) (2012). • T4Achieved. A survey (sex-disaggregated) was carried out to and knowledge households (especially women as • T5 Gender analysis of survey understand the water management and knowledge gaps of the gaps. household managers) on water conducted and public relations beneficiaries hygiene, sanitation environmental campaign informed with • T5Achieved. Gender analysis provided as a separate chapter and impact of sewage, consumer rights gender analysis. further campaigns were planned and carried out; as part of public and efficient water use. awareness campaign, the training courses and public consultations on the “Water sanitary and hygienic issues and effective water usage” were carried out in all 10 regions of Armenia. In total 285 households in all project area participated in the training session out of which 185 (64.9%) were female.Based on the survey and GAP requirements, the special booklet on “Water sanitary and hygienic issues and effective water usage” was prepared, published (1000 circulation) and distributed to all training participants. Output 3. Strengthened AWSC

Human resource • A7 Establish sex-disaggregated HR • T6 Sex-disaggregated HR • A7 Achieved. A sex-disaggregated HR database was established management of database. data-base in place (2012). • A8 Achieved. HR strategy/policy was developed. As a result,sex- AWSC gender • A8 Develop gender sensitive HR • T7 Annual reporting on AWSC disaggregated data on employees was collected, new mainstreamed and strategy for AWSC. HR includes gender analysis policies/approaches defined for recruitment, and training and women’s • A9 Conduct capacity development on employees. development plan elaborated. Job applications included “women employment on gender equality at the workplace • T8 10% increase of women in are encouraged to apply” opportunities and in human resource management management positions (2016) • A9 Achieved. Training was conducted at the AWSCfor career • A10 Inform annual report on human from baseline of 15%. representatives of different departments, including human resource advancement in resources of AWSC with gender • T9 All trainings conducted for development in Q4 of 2012 by ADB gender specialist. Staff analysis. AWSC and PMU staff include awareness included gender issues, gender mainstreaming, gender

Appendix 11 81

WSS sector • A11 Conduct gender training for all at least 25% women (2012- in the water supply and sanitation, women in the WSS sector and increased staff at AWSC and PMU. continuous). related. • A12 Include female AWSC staff in • T10 Sex-disaggregated • A10 Achieved. Annual HR report started to include gender analysis all training and facilitate their career customer data base in place • A11 Achieved. AWSC and PMU staff participated in gender training development. (2012). conducted in Q4 2012 • A13 Train staff working in customer • T11 Database on complaints • A12 Achieved. During project implementation, inclusion of female care call centers on sex- and customer feedback sex- staff in trainings was followed to facilitate their career advancement disaggregated data collection of disaggregated, and content of and25% of the AWSC staff(165 women out of 600 employees) customer complaints/feedback. complaints analyzed by receiving trainings were women • A14 Create sex-disaggregated gender (2012- continuous). • A13 Achieved. Customer care/complaints’ employees participated customer database. in the trainings and guidance on collecting complaints and gender analysis of data • A14 Not achieved • T6 Achieved. Sex-disaggregated HR data-base established at AWSC. As of July 2016 out of 1258 employees the number of 341 (27.1%) were female. • T7 Achieved. AWSC has prepared quarterly and annual reports, where HR separate chapter is indicated. Data on employees was presented sex-disaggregated. • T8 Not achieved. As of July 2016 out of 153 AWSC employees in management positions, 21 (13.7%) were female. • T9 Achieved. Overall 600 employees were trained out of which 165 were women (25%) • • T10Not achieved. Sex-disaggregated database was not established as the AWSC did not consider effective to spend resources on this activity. Relevant recommendations for future similar projects are included in the narrative above. • T11Achieved. Sex-disaggregated customer complaints database was established with all the incoming calls and complaints recorded by the AWSC Call center staff.

Customer outreach • A15 Develop information- • T12 At least 75% of women in • A15 Achieved. Based on the knowledge gaps revealed on earlier and information- awareness material on water project towns and villages stage of project implementation, awareness material for awareness hygiene, sanitation, customer rights receive awareness material workshops, including and a special booklet on “Water sanitary and campaign reaches and water usage efficiency based (2012- continuous). hygiene issues and effective water usage” was prepared, published women on customer needs and knowledge • T13 10 training conducted in (1000 circulation) and distributed to all training participants. gaps. the target towns and villages • A16 Achieved. Information-awareness campaigns were thoroughly • A16 Conduct information- as a part of the awareness planned and carried out covering all communities of the project. awareness campaign in the project campaign with 50% of • A17 Achieved. During outreach to the local communities, special targeted towns and villages, women’s participation (2012- target was to include vulnerable women, including single mothers including trainings and continuous). or female heads of households dissemination of information. • T14 One local NGOs and/or • A18 Achieved. The material was developed in coordination with female community leaders are ADB gender specialist. It included gender sensitive information, like

82 Appendix 11

• A17 Especially target female involved in the outreach and targeted information for women and workshops were headed households and ensure awareness campaign in each plannedconsidering availability and seasonal work of local women that they have equal participation in project town (2012- • T12Achieved. During the public awareness, 100% of women the project. continious). participants in all 10 subprojects received the awareness materials. • A18 Ensure that all the information • T15 Annual report on quantity • T13Achieved. By the end of 2015 in total 10 trainings were material is gender sensitive and it is and redress of complaints conducted in all regions (one per region). The participants were provided to women through (2012-continuous) includes highly satisfied and appreciatedhighlighted topics, such as Water channels and times suitable to their sex-disaggregated data. Hygiene and sanitation; Water borne diseases, etc. In total 285 work and domestic responsibilities . women from 10 regions participated. • T14Achieved. One NGO was involved during the all public outreach and awareness meetings in all subproject towns. • T15Achieved. All gender sensitive reports and outreach materials were prepared by using sex-disaggregated data.

Appendix 12 83

CONTRIBUTION TO THE ADB RESULTS FRAMEWORK

No. Level 2 Results Framework Unit Targets Achievements Methods / Comments Indicators (Key Outputs and Beneficiaries)

Length of water supply km 600-700 1,934 The project helped to upgrade and network rehabilitated or rehabilitate water supply systems in upgraded. 10 regions in Armenia by: (i) replacement of the deteriorated water supply infrastructure; (ii) improving supply pressure; (iii) constructing new mains to connect new consumers, particularly poorly served low-income communities; (iv) installing water meters to all bulk and domestic consumers; (v) repairing and remodeling water intakes, pumps, flow meters, valves, and treatment units; and (vi) providing new storage reservoirs and tube wells at technically viable locations.

As a result of the project, in total 205 km of steel and polyethylene water mains and 1934 km of water distribution network and individual house connections were rehabilitated and upgraded.

New households served with no. 9,800- 25,319 The water supply systems in the water supply. 10,000 project area have been significantly expanded covering both new customers in the service area of AWSC and the villages newly joined to AWSC after infrastructure rehabilitation.

More than 890,000 residents (over 180,000 households)in 29 towns

and 160 villages benefited from better access to safe, reliable and sustainable water supply by 2016.

In total 25,319 new households received access to safe, reliable and sustainable water supply (11,889 under L2363 project and 13,430 under L2860 project).

Note: km = kilometers, no = number Source: Asian Development Bank appraisal estimates and actual results.