Nicaragua Project for the Improvement and Sustainable Management of Drinking Water and Sanitation Services in Urban and Periurban Areas (Ni-L1145)
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PUBLIC SIMULTANEOUS DISCLOSURE DOCUMENT OF THE INTER-AMERICAN DEVELOPMENT BANK NICARAGUA PROJECT FOR THE IMPROVEMENT AND SUSTAINABLE MANAGEMENT OF DRINKING WATER AND SANITATION SERVICES IN URBAN AND PERIURBAN AREAS (NI-L1145) LOAN PROPOSAL This document was prepared by the project team consisting of: Thierry Delaunay, Project Team Leader (WSA/CNI); Keisuke Sasaki, Alternate Project Team Leader (INE/WSA); María del Rosario Navia, Irene Cartín, and Kleber Machado (INE/WSA); Sergio Pérez (WSA/CHA); David Baringo and Serge-Henri Troch (VPS/ESG); María Landazuri-Levey (LEG/SGO); Jorge Seigneur and Santiago Castillo (FMP/CNI); Axel Rodríguez (consultant WSA/CNI); and Samar Rimawi and Mario Rodríguez (CID/CNI) This document is being released to the public and distributed to the Bank’s Board of Executive Directors simultaneously. This document has not been approved by the Board. Should the Board approve the document with amendments, a revised version will be made available to the public, thus superseding and replacing the original version. CONTENTS PROJECT SUMMARY I. DESCRIPTION AND RESULTS MONITORING ................................................................ 1 A. Background, problem addressed, rationale................................................... 1 B. Objectives, components, and cost ................................................................ 9 C. Key results indicators ................................................................................. 11 II. FINANCING STRUCTURE AND MAIN RISKS ............................................................... 11 A. Financing instruments ................................................................................ 11 B. Environmental and social risks ................................................................... 12 C. Special considerations ................................................................................ 13 III. IMPLEMENTATION AND MANAGEMENT PLAN ............................................................ 15 A. Summary of implementation arrangements ................................................ 15 B. Summary of arrangements for monitoring results ....................................... 16 - ii - ANNEXES Annex I Summary Development Effectiveness Matrix (DEM) Annex II Results Matrix Annex III Fiduciary Agreements and Requirements ELECTRONIC LINKS REQUIRED 1. Multiyear execution plan and annual work plan (AWP) 2. Monitoring and evaluation plan 3. Environmental and Social Management Report (ESMR) 4. Procurement plan OPTIONAL 1. Economic analysis 2. Technical viability 3. ENACAL institutional analysis 4. Financial viability 5. Progress Monitoring Report (PMR) 6. Analysis of compliance with the Public Utilities Policy 7. Draft Project Operating Regulations 8. Bibliographic references 9. Final evaluation report for the NI-L1029 program 10. Environmental and social management plans (ESMPs) for the sample projects 11. Environmental and Social Management Framework (ESMF) 12. Safeguard Policy Filter (SPF) and Safeguard Screening Form (SSF) for classification of projects - iii - ABBREVIATIONS AWP Annual work plan EBITDA Earnings before interest, taxes, depreciation, and amortization ENACAL Empresa Nicaragüense de Acueductos y Alcantarillados [Nicaraguan Water and Sewer Company] ESA Environmental and Social Assessment ESMF Environmental and Social Management Framework ESMP Environmental and Social Management Plan ESMR Environmental and Social Management Report GPI Gerencia de Proyectos e Inversiones [Projects and Investments Division] ICAS Institutional Capacity Assessment System INAA Nicaraguan Water and Sewer Institute INIDE National Development Information Institute OC Ordinary Capital NRW Non-revenue water PEDI Plan Estratégico de Desarrollo Institucional de ENACAL [ENACAL Strategic Institutional Development Plan] PMR Progress Monitoring Report PNDH National Human Development Plan UNICEF United Nations Children’s Fund W&S Water and sanitation WHO World Health Organization PROJECT SUMMARY NICARAGUA PROJECT FOR THE IMPROVEMENT AND SUSTAINABLE MANAGEMENT OF DRINKING WATER AND SANITATION SERVICES IN URBAN AND PERIURBAN AREAS (NI-L1145) Financial Terms and Conditions Source % Amount (US$) % IDB (Regular Ordinary Capital (OC)): 60 43,200,000 59.1 Borrower: Republic of Nicaragua IDB (Concessional OC): 40 28,800,000 39.4 IDB: 100 72,000,000 98.5 Executing agency: Nicaraguan Water and Local: 1,100,000 1.5 Sewer Company (ENACAL) Total: 73,100,000 100.0 Regular OC (Flexible Financing Facility)(a) Concessional OC Amortization period: 25 years 40 years Disbursement period: 5 years Grace period: 5.5 years 40 years Interest rate: LIBOR-based 0.25% Credit fee: (b) N/A Inspection and supervision fee: (b) N/A Weighted-average life: 15.25 N/A Currency of approval: United States dollars Project at a Glance Program objective and description: The program’s general objective is to upgrade the drinking water and sanitation (W&S) services provided by ENACAL in urban and periurban areas of Managua and intermediate municipios. The specific objectives are to: (i) increase the coverage of sanitary sewerage and wastewater treatment in urban and periurban areas of intermediate municipios; (ii) improve the performance of drinking water services in Managua and intermediate municipios; and (iii) upgrade ENACAL’s operational, technical, and commercial management (Altamira). Special contractual conditions precedent to the first loan disbursement: (i) the project’s Operating Regulations (optional electronic link 7) will have entered into force under terms previously agreed with the Bank (paragraph 3.2); and (ii) see the Fiduciary Agreements and Requirements in Annex III. Special contractual conditions for execution: (i) see the Environmental and Social Management Report (ESMR) (required electronic link 3) on the special contractual conditions; (ii) prior to the call for tenders for the first of the contracts envisaged in Component II, the delegation for the geographical area currently covered by the “Altamira Branch” in Managua will have been formally established, and the Delegate appointed (paragraph 3.3); (iii) see the Fiduciary Agreements and Requirements in Annex III; and (iv) if ENECAL’s audited financial statements show that income is insufficient to cover the administration, operation, and maintenance requirements of ENACAL systems, the borrower agrees to meet with the Bank and executing agency within 180 days following the Bank’s request to draw up a plan of action to make funding available to cover at least operating and maintenance (O&M) costs (paragraph 3.8). Exceptions to Bank policies: None Strategic Alignment Challenges:(c) SI X PI EI Crosscutting issues:(d) GD CC X IC X (a) Under the Flexible Financing Facility (document FN-655-1), the borrower has the option of requesting changes to the amortization schedule, as well as currency and interest rate conversions. The Bank will take operational and risk management considerations into account when reviewing such requests. (b) The credit fee and inspection and supervision fee will be established periodically by the Board of Executive Directors as part of its review of the Bank’s lending charges, in accordance with the applicable policies. (c) SI (Social Inclusion and Equality); PI (Productivity and Innovation); and EI (Economic Integration). (d) GD (Gender Equality and Diversity); CC (Climate Change and Environmental Sustainability); and IC (Institutional Capacity and Rule of Law). I. DESCRIPTION AND RESULTS MONITORING1 A. Background, problem addressed, rationale 1.1 The Republic of Nicaragua has an estimated population of 5.7 million, of whom 56% live in urban areas.2 Over the last 20 years, the total population has increased by 37%, while the urban population has grown by 48.5%, reflecting the pressure the government is facing to meet the burgeoning demand for drinking water and sanitation (W&S) services.3 Projections by the National Development Information Institute (INIDE) see the country’s total population doubling over the next 25 years, which accentuates the need for the government not only to make up for investment shortfalls, but also overcome shortcomings in the organizational development, financial strengthening, and operational management of W&S providers. This operation will finance investments in W&S infrastructure (paragraph 1.23) as well as actions to upgrade the operational and financial management of urban W&S providers (paragraph 1.25) in cities and municipal seats (paragraphs 2.3 and 2.4), where the absence of sewer networks, compounded by poor management of the drinking water service, has impacts4 on health, well-being (paragraph 1.4) and the environment, disproportionately affecting the poorest people. 1.2 Coverage of W&S services. There are shortfalls in access to W&S services in Nicaragua. In 2010, improved sanitation facilities5 were available to 52%6 of the population, the lowest rate after Haiti, with significant regional inequalities: 37% in rural areas compared to 63% in urban areas.7 In 2012, only 40% of urban households in Nicaragua were connected to sanitary sewer networks;8 while the rest of urban households had individual systems9 under precarious maintenance,10 which pose a health risk11 that disproportionately impacts the 1 See bibliographic references in optional electronic link 8. 2 INIDE 2012 (http://www.inide.gob.ni/). 3 ENACAL Strategic Plan for Institutional Development (PEDI) 2013-2017. 4 Considering the limited availability of indicators, the national list was drawn up by local