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AFRICAN DEVELOPMENT BANK MOROCCO DRINKING WATER QUALITY AND SERVICE IMPROVEMENT PROJECT APPRAISAL REPORT Public Disclosure Authorized Public Disclosure Authorized Authorized Disclosure Public Authorized Disclosure Public OWAS DEPARTMENT May 2016 Translated Document TABLE OF CONTENTS Acronyms and Abbreviations, …………............................................................................…………. i I – Strategic Thrust and Rationale ....................................................................................................... 1 1.1. Main Development Challenges ............................................................................................. 1 1.2. Project Linkage with Country Strategy and Objectives ........................................................ 2 1.3. Rationale for Bank Involvement ........................................................................................... 2 1.4. Aid Coordination................................................................................................................... 3 II - Project Description ........................................................................................................................ 3 2.1. Project Components .............................................................................................................. 3 2.2. Technical Solutions Adopted and Alternative Solutions Considered ................................... 4 2.3 Type of Project / Instrument ................................................................................................. 5 2.4. Project Cost and Financing Mechanisms .............................................................................. 5 2.5. Project Area and Beneficiaries .............................................................................................. 7 2.6. Participatory Approach to Project Identification, Design and Implementation .................... 8 2.7. Bank Group Experience and Lessons Reflected in Project Design ...................................... 8 2.8. Key Performance Indicators ................................................................................................ 10 III - Project Feasibility ....................................................................................................................... 11 3.1. Economic and Financial Performance ................................................................................ 11 3.2. Environmental and Social Impact ....................................................................................... 11 IV – Implementation .......................................................................................................................... 14 4.1. Implementation Arrangements ............................................................................................ 14 4.2. Monitoring .......................................................................................................................... 16 4.3. Governance ......................................................................................................................... 17 4.4. Sustainability ....................................................................................................................... 17 4.5. Risk Management ............................................................................................................... 18 4.6. Knowledge Development .................................................................................................... 19 V – Legal Framework ........................................................................................................................ 19 5.1. Legal Instrument ................................................................................................................. 19 5.2. Conditions Associated with the Bank’s Intervention .......................................................... 19 5.3. Conformity with Bank Policies ........................................................................................... 21 VI – Recommendation ....................................................................................................................... 21 Annex I. Development Indicators of Morocco .............................................................................. I Annex II. Table of the AfDB's Active Portfolio in Morocco (End-February 2016) ...................... II Annex III. Major Related Projects Financed by the Bank and Other Development Partners of Morocco ................................................................................................................... III The information and data in this report were collected by the project team, led by Mr. Belgacem BENSASSI, Chief Water and Sanitation Engineer, Project Officer, following a preparation mission to Morocco from 2 to 13 March 2015 and an assessment mission from 23 November to 4 December 2015. Currency Equivalents December 2015 UA 1 = MAD 13.8232 UA 1 = EUR 1.29707 UA 1 = USD 1.37217 Fiscal Year 1st January – 31st December Weights and Measures 1 km = kilometre = 1000 m 1 km2 = square kilometre = 1000 m2 1 ha = hectare = 10,000 m2 1 lm = linear metre 1 m3 = cubic metre 1 m3/d = cubic metre per day 1 hm3 = million cubic metres l/s = litres per second inhab/ha = inhabitants per hectare l p/d = litres per person per day Acronyms and Abbreviations AFD = French Development Agency KFW = Kreditanstalt für Wiederaufbau AFESD = Arab Fund for Economic and Social [German Public Investment Bank] Development MAFO = Morocco Field Office (AfDB) ARP = Abbreviated Resettlement Plan MEMEE = Ministry of Energy, Mines, Water BD = Bidding Documents Resources and the Environment CSP = Country Strategy Paper NHDI = National Human Development DWS = Drinking Water Supply Initiative EBRD = European Bank for Reconstruction and NSP = National Sanitation Programme Development ONEE = National Electricity and Drinking EIB = European Investment Bank Water Authority ERR = Economic Rate of Return PAPMV = Green Morocco Plan Support ESMP = Environmental and Social Management Plan Programme EU = European Union PNEEI = National Irrigation Water Saving FIRR = Financial Internal Rate of Return Programme GIS = Geographic Information System PP = Procurement Plan GIZ: German Agency for International Cooperation SAP-EAU = Water Sector Adjustment Plan IBRD = International Bank for Reconstruction and SDF = Saudi Development Fund Development SDGs = Sustainable Development Goals IsDB = Islamic Development Bank TFP = Technical and Financial Partners ISS = Integrated Safeguards System UA = Unit of Account IWRM = Integrated Water Resource Management WHO = World Health Organisation JICA = Japanese International Cooperation Agency WTG = Water Thematic Group i Project Information Sheet Client Information BORROWER: National Electricity and Drinking Water Authority (ONEE) EXECUTING AGENCY: ONEE (Water Branch) GUARANTOR: Government of Morocco (Ministry of the Economy and Finance) Financing Plan Source Amount (UA) Instrument AfDB 68.5 million AfDB loan ONEE 22.5 million - EBRD (parallel financing) 12 million - IBRD (parallel financing) 34 million - TOTAL COST 137 million - Key Financial Information of the AfDB Loan currency EUR Loan* Type Fully Flexible Loan (FFL) Interest Rate Base rate + Financing cost margin + Lending margin + Maturity premium Base Rate 6-month EURIBOR floating rate Lending Margin* 60 basis points (0.6%) Commitment Charge* None Other Charges* None Grace period 60 months FIRR, NPV (base-case scenario): 7.5% MAD 95 million ERR (baseline scenario) 15.2% MAD 217 million *if applicable Duration – Main stages (projected) Approval of concept note November 2015 Project approval May 2016 Signing of loan and guarantee agreements June-July 2016 Effectiveness of the agreements September 2016 First disbursement September 2016 Completion December 2020 ii PROJECT SUMMARY General Overview of Project 1. The project to improve water quality and the performance of DWS systems in Morocco entails strengthening and securing drinking water supply in several towns especially Bouznika, Ben Slimane, Youssoufia and Safi and improving water quality within the Bouregreg system (artificial aeration at SMBA dam and ozonation at the current treatment plant) and the performance of existing DWS systems (reduce losses, optimize operation...). The project area includes all provinces along the Rabat-Casablanca highway and especially the provinces of Bouznika and Ben Slimane (in the economic hub of Rabat-Casablanca) and Youssoufia and Safi provinces (in the economic hub of Doukkala Abda) which are experiencing an economic, tourism and industrial boom. It seeks to meet the drinking and industrial water needs of these areas up to 2030. This project, which is estimated to cost UA 137 million, is scheduled to be implemented over a period of 48 months (2016-2020). 2. Under its Component A, the project will benefit communities in the provinces of Bouznika and Benslimane, estimated at 120,000 inhabitants in 2015 (including over 50,000 inhabitants in rural areas) and of Youssoufia and Safi, estimated at 316,000 inhabitants in 2015 (including 202,000 inhabitants in rural areas). Operations under component B will benefit communities in the area that lies between Morocco’s two major cities (Rabat and Casablanca), which is the most populated and most urbanized part of the country, estimated at 5 million inhabitants in 2015 (including approximately 1 million in rural areas). Needs Assessment 3. The project was designed based on priority
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