Document of The World Bank FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No: 33397-TN PROJECT APPRAISAL DOCUMENT ON A PROPOSED LOAN Public Disclosure Authorized IN THE AMOUNT OF EUR 3 1.O MILLION (US38.03 MILLION EQUIVALENT) TO THE SOCIbTE NATIONALE D’EXPLOITATION ET DE DISTRIBUTIONDES EAUX (NATIONAL PUBLIC WATER SUPPLY UTILITY) WITH THE GUARANTEE OF THE REPUBLIC OF TUNISIA FOR AN Public Disclosure Authorized URBAN WATER SUPPLY PROJECT October 13,2005 FINANCE, PRIVATE SECTOR AND INFRASTRUCTUREGROUP (MNSIF) MIDDLE EAST AND NORTH AFRICA (MNA) This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World authorization. Public Disclosure Authorized Bank 11 CURRENCY EQUIVALENTS (Exchange Rate Effective May 11,2005) Currency Unit = Tunisian Dinar (TND) 1.258 TND = US$ 1 US$O.795 = TND 1 1 US$ = EUR 0.8 106 (Aug 3 1,2005) FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS DGRE Direction GknCrale des Ressources en Eaux (Water Resources Department) DSCR Debt Service Coverage Ratio EMP Environmental Management Plan ERP Entreprise Resource Planning GEG Ghdir El Gollah (location ofTunis water treatment plant) GIS Geographic Information System GOT Government ofTunisia IRR Internal Rate ofReturn LLCR Long Term Liability Coverage Ratio MAWR Ministry ofAgriculture and Water Resources MDG Millenium Development Goals MDT Millions ofTunisian Dinars MENA Middle East and North Africa MESD Ministry ofEnvironment and Sustainable Development NPV Net Present Value O&M Operation and Maintenance ONAS Office National d’ Assainissement (National Sewerage Board) PCN Project concept note PIU Project Implementation Unit PSP Private Sector Participation SIL Specific Investment Loan SONEDE SociCtk Nationale d’Exploitation et Distribution des Eaux (National Public Water Supply Utility) ST4 Water treatment unit 4, expansion ofGhdir el Gollah WTP) ssw State Secretary ofWater (attached to MAWR) TND Tunisian dinar WS&S Water supply and sanitation WTP Water treatment plant WHO World Health Organisation Vice President: Christiaan J. Poortman Country ManagerDirector: Teodore 0. Ahlers Sector Manager: Jonathan Walters Task Team Leader: Pier Francesco Mantovani TUNISIA TN-URBAN WATER SUPPLY PROJECT APPRAISAL DOCUMENT FOR OFFICIAL USE ONLY CONTENTS Page A . STRATEGIC CONTEXT AND RATIONALE ................................................................. 3 1. Country and sector issues.................................................................................................... 3 2 . Rationale for Bank involvement ......................................................................................... 4 3 . Higher level objectives to which the project contributes .................................................... 5 B. PROJECT DESCRIPTION ................................................................................................. 5 1. Lending instrument ............................................................................................................. 5 2 . Project development objective and key indicators.............................................................. 6 3 . Project components ............................................................................................................. 6 4 . Lessons learned and reflected in the project design............................................................ 9 5 . Altematives considered and reasons for rejection .............................................................. 9 C. IMPLEMENTATION ........................................................................................................ 10 1. Institutional and implementation arrangements. ............................................................... 10 2 . Monitoring and evaluation ofoutcomeshesults ................................................................ 11 ... 3 . Sustainablllty ..................................................................................................................... 11 4 . Critical risks and possible controversial aspects ............................................................... 11 5 . Loadcredit conditions and covenants ............................................................................... 12 D . APPRAISAL SUMMARY ................................................................................................. 13 1. Economic and financial analyses ...................................................................................... 13 2 . Technical ........................................................................................................................... 19 3 . Fiduciary ........................................................................................................................... 19 4 . Social................................................................................................................................. 20 5 . Environment ...................................................................................................................... 20 6 . Safeguard policies ............................................................................................................. 22 7 . Policy Exceptions and Readiness...................................................................................... 23 Annex 1: Country and Sector Program Background.............................................................. 24 Annex 2: Major Related Projects Financed by the Bank andor other Agencies ................. 28 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not be otherwise disclosed !without World Bank authorization. 1v Annex 3: Results Framework and Monitoring ........................................................................ 29 Annex 4: Detailed Project Description...................................................................................... 32 Annex 5: Project Costs ............................................................................................................... 39 Annex 6: Implementation Arrangements ................................................................................. 43 Annex 7: Financial Management and Disbursement Arrangements ..................................... 47 Annex 8: Procurement Arrangements ...................................................................................... 50 Annex 9: Economic and Financial Analysis ............................................................................. 63 Annex 10: Safeguard Policy Issues............................................................................................ 92 Annex 11: Project Preparation and Supervision ................................................................... 111 Annex 12: Documents in the Project File ............................................................................... 112 Annex 13: Statement of Loans and Credits ............................................................................ 113 Annex 14: Country at a Glance ............................................................................................... 114 Annex 15: Map: IBRD 34059 ................................................................................................... 116 Tunisia 1 Project Appraisal Document Urban Water Supply Project October 2005 TUNISIA TN-URBAN WATER SUPPLY PROJECT APPRAISAL DOCUMENT MIDDLE EAST AND NORTH AFRICA MNSIF I Date: October 6,2005 Team Leader: Pier Francesco Mantovani Country Director: Theodore 0.Ahlers Sectors: Water supply (90%);Central Sector ManagerDirector: Jonathan D. Walters government administration (10%) Themes: Regulation and competition policy (P);Water resource management (S);Pollution management and environmental health (S) Project ID: PO64836 Environmental screening category: Partial Assessment Lending Instrument: Specific Investment Loan Safeguard screening category: B For Loans/Credits/Others: Borrower: Societe Nationale d'Exploitation et de Distribution des Eaux (SONEDE) Av. Slimane Ben Slimane Manar I1 2092 Tunis Tunisia Tel: (216) 71-887-000Fax: (216) 71-871-000 [email protected] www.sonede. com. tn Guarantor: Government of Tunisia Project implementation period: Start Jan 2006 End: Jun 2011 Expected effectiveness date: January 2006 Expected closing date: December 201 1 Tunisia 2 Project Appraisal Document Urban Water Supply Project October 2005 Does the project depart from the CAS in content or other significant respects? [ ]Yes [XINo Re$ PAD A.3 Does the project require any exceptions from Bank policies? Re$ PAD D. 7 [ ]Yes [XINO Have these been approved by Bank management? [ ]Yes [XINO Is approval for any policy exception sought from the Board? [ ]Yes [XINO Does the project include any critical risks rated “substantial” or “high”? [ ]Yes [XINO Re$ PAD C.5 Does the project meet the Regional criteria for readiness for implementation? [XIYes [ ]No Re$ PAD D. 7 Project development objective Re$ PAD B.2, Technical Annex 3 The Project development objectives are to: 0 Sustain the reliability and quality ofwater service in Greater Tunis and selected urban centers, through augmentation, upgrade and renewal ofwater supply infrastructure. 0 Enhance the competitiveness and sustainability of SONEDE operations, through modernization ofmanagement practices and information systems, for better cost control, enhanced revenue and more responsive