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Document of The World Bank Public Disclosure Authorized Report No: 18989 CO PROJECT APPRAISAL DOCUMENT ONA Public Disclosure Authorized PROPOSED LOAN IN THE AMOUNT OF US$85 MILLION TO THE DISTRICT OF CARTAGENA WITH THE GUARANTEE OF THE REPUBLIC OF COLOMBIA Public Disclosure Authorized FOR THE CARTAGENA WATER SUPPLY, SEWERAGE AND ENVIRONMENTAL MANAGEMENT PROJECT June 28, 1999 Public Disclosure Authorized Finance,Private Sector and InfrastructureDepartment Colombia,Ecuador and VenezuelaCountry Managing Unit Latin Americaand the CaribbeanRegional Office CURRENCY EQUIVALENTS (Exchange Rate Effective May 31, 1999) Currency Unit = Peso ($) $1682.12 = US$1.00 $1 million = US$594.5 FISCAL YEAR January I - December 31 ABBREVIATIONS AND ACRONYMS ACUACAR Aguas de Cartagena (the water and sewerage company of Cartagena) AGBAR Aguas de Barcelona (The water and Sewerage company of Barcelona) BOD Biochemical Oxygen Demand CARDIQUE Corporaci6n Autonoma del Canal del Dique (the regional environmental authority in Cartagena) CAS Country Assistance Strategy CIOH National Oceanographic Institute CRA Comisi6n Reguladora de Agua (Water Regulating Committee) DAMARENA The Municipal Environmental Department of the District of Cartagena DAP Direcci6n de Agua Potable y Saneamiento (Water and Sanitation Directorate) DIMAR Marine and Port Directorate DNP Departamento Nacional de Planeaci6n (National Planning Department) DTF Deposito Termino Fijo (interest rate of a fixed term deposit) EPD Empresas Publicas Distritales (the previous water and sewerage utility of Cartagena) FINDETER Financiera de Desarrollo Territorial (a second tier financial intermediary for regional and local infrastructure investment established in 1990) HDPE High Density Poly Ethylene Km Kilometer Kw Kilowatt M Meter MCM Million Cubic Meter Mm Millimeter M3/d Cubic meter per day M3/s Cubic meter per second NGO Non Governmental Organization PIU Project Implementation Unit PLC Programmable Controller PMR Project Management Report PSP Private Sector Participation RCCP Reinforced Concrete Cylindrical Pipe SS Suspended Solids SSPD Superintendencia de Servicios Publicos Domiciliarios (Superintendency of Domestic Public Services) WSS Water and Sewerage Sector Vice President: S. Javed Burki Country Management Unit Director: Andr6s Solimano Sector Management Unit Director: Danny Leipziger Task Manager: Menahem Libhaber Colombia Cartagena, Water Supply Sewerage and Environmental Management Project CONTENTS A. Project Development Objective ............ 2..........................................2 Project development objective and key performance indicators .............................................. 2 B. Strategic Context ...................................................... 2 1. Sector-related CAS goal supported by the project ................................................... 2 2. Main sector issues and Government strategy ....................................................... 2 3. Sector issues to be addressed by the project and strategic choices .......................... 3 C. Project Description Summary....................................................... 7 1. Project components....................................................... 7 2. Key policy and institutional reforms supported by the project ................................ 8 3. Benefits and target population....................................................... 9 4. Institutional and implementation arrangements...................................................... 10 D. Project Rationale ....................................................... 1 1. Project alternatives considered and reasons for rejection ........................................ 11 2. Major related projects financed by the Bank and/or other development agencies ...................................................... 12 3. Lessons learned and reflected in proposed project design ....................................... 12 4. Indications of borrower commitment and ownership .............................................. 14 5. Value added of Bank support in this project ...................................................... 14 E. Summary Project Analyses..................................................... 15 1. Economic ..................................................... 15 2. Financial ..................................................... 16 3. Technical ..................................................... 17 4. Institutional ......... 19.............19 5. Social...................... 19 6. Environmental assessment ................... 21 7. Participatory approach ................... 23 F. Sustainability and Risks ............................................ 24 1. Sustainability......... 24 2. Critical risks . 25 3. Possible controversial aspects............................ 26 G. Main Loan Conditions . 27 1. Effectiveness conditions .27 2. Other .27 H. Readiness for Implementation................................... 28 I. Compliance with Bank Policies ................................... 28 Annexes Annex 1. Project Design Summary .29 Annex IA Key Performance Indicators .31 Annex 2. Detailed Project Description.33 Annex 3. Estimated Project Costs .45 Annex 4. Cost-Benefit Analysis Summary.50 Annex 5. Financial Assessment of Project Entities .63 Annex 6. Procurement and Disbursement Arrangements.77 Table A. Project Costs by Procurement Arrangements .82 Table Al. Consultant Selection Arrangements ................................. 83 Table B. Thresholds for Procurement Methods and Prior Review .84 Table C. Allocation of Loan Proceeds.85 Annex 7. Project Processing Budget and Schedule.86 Annex 8. Documents in Project File.87 Annex 9. Environmental Assessment Summary .89 Annex 10. Social Assessment Summary Country at a Glance.102 Annex I 1. Statement of Loans and Credits .109 Annex 12. Country at a Glance.111 Maps Section: IBRD 30299 Project Location IBRD 30300 Secondary Sewerage Networks IBRD 30301 Primary Sewage Collection System IBRD 30302 Main Wastewater Conveyance System, Treatment Installations and Submarine Outfall IBRD 30303 Parallel Water Pipeline Dolores-Albornoz IBRD 30304 Water Supply Works Colombia Cartagena Water Supply, Sewerage and Environmental Management Project Project Appraisal Document Latin America and the Caribbean Regional Office Colombia, Ecuador and Venezuela Country Managing Unit (LCC4C) Date: June 28, 1999 Task Team Leader/Task Manager: Menahem Libhaber Country Manager/Director: Andres Solimano Sector Manager/Director: Danny Leipziger Project ID: CO-PE- Sector: Water Supply & Program Objective Category: Environmentally Sustainable 44140 Sanitation Development Lending Instrument: Sector Investment Loan Program of Targeted Intervention: [X] Yes [ ] No ProjectFinancing Data [X] Loan [ Credit [] Guarantee [] Other [Specify] For Loans/Credits/Others: Amount (US$m): 85.0 Proposed terms: [ Multicurrency [X] Single currency, specify US Dollar Grace period (years): 5 [] Standard [] Fixed [X] LIBOR-based Variable Years to maturity: 17 Commitment fee: 0.75% Service charge: N/A% Front-end Fee 1% Financing plan (US$m): Source Local Foreign Total Government 20.0 0.0 20.0 District of Cartagena (Municiplaity) 7.6 0.0 7.6 ACUACAR (the water company of Cartagena) 4.6 0.0 4.6 IBRD including Front-end Fee of 1% 28.0 57.0 85.0 Total 60.2 57.0 117.2 Borrower: The District of Cartagena Guarantor: The Government of Colombia Responsible agency(ies): Aguas de Cartagena (ACUACAR) Estimated disbursements (Bank FY/US$M): 1999 2000 2001 2002 2003 2004 Annual 6.0 17.3 27.5 17.7 13.0 3.5 Cumulative 6.0 23.3 50.8 68.5 81.5 85.0 Project implementation period: 5 years Expected effectiveness date: October 30, 1999 Expected closing date: December 31, 2004 OSD PAD Form: July 30, 1997 Page 2 A: Project Development Objective 1. Project development objective and key performance indicators (see Annex 1): The project development objectives are to: (i) improve the water and sewerage services of Cartagena and the sanitary conditions of the city's poorest population, by expanding water and sewerage coverage, particularly in the city's poor neighborhoods, (ii) facilitate the environmental cleanup of water bodies surrounding the city (Cartagena Bay, Caribbean beaches and Cienaga de la Virgen lake) by providing adequate collection, treatment and disposal of the entire flow of the city's wastewater; and (iii) improve the sustainability of water and sewerage services in Cartagena by leveraging Bank support to shore up the private sector participation (PSP) model pioneered by ACUACAR, the city's mixed-capital water and sanitation utility, against the prospect of political interference. The key performance indicators for the project development objectives are: (a) "environmental indicators which measure sewerage coverage rate and volume of sewage treated; (b) ) "utility-based" indicators which measure the operational and financial efficiency of ACUACAR; and (c) financial indicators of the District of Cartagena. Details on the performance indicators are provided in Annex IA. B: Strategic Context 1. Sector-related Country Assistance Strategy (CAS) goal supported by the project (see Annex 1): CAS document number: 17107-CO Date of latest CAS discussion: November 6, 1997 Improve sustainable infrastructure services. The project would address part of the CAS agenda by focusing on: (i) improving infrastructure services and (ii) ensuring sustainable development. Colombia's poor and deteriorating infrastructure has long been identified as a critical constraint to faster economic growth. The new
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