Document of The WorldBank FILECOPY FOR OFFICIAL USE ONLY Public Disclosure Authorized Report No. 5068a-AL Public Disclosure Authorized STAFF APPRAISAL REPORT ALGERIA ALGIERS REGIONAL WATER SUPPLY PROJECT Public Disclosure Authorized June 11, 1984 Public Disclosure Authorized Water Supply and Sewerage Division Europe, Middle East and North Africa Regional Office 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 Bank authorization. CURRENCY EQUIVALENTS (As of April 2, 1984) Currency Unit = Algerian Dinar (DA) 100 Centimes DA 1 = US$ 0.21 US$1 = DA 4.80 DA 1,000,000 - US$ 208,333 ABBREVIATIONS ft = foot m = meter ha hectare mm = millimeter 3 Km = kilometer Mm = million of cubic meters 3 inh = inhabitant m /sec cubic meters per second lcpd = liters per capita per day min minute MEASURES AND EQUIVALENTS Metric System U.K. System Kilometer (km) = 0.62 mile (mi) hectare (ha) = 2.47 acres (a) Meter (m) = 3.28 feet (ft) Cubic meter (m3) 220 gallons (g) 3 Million cubic meters/year (Mm /year = 0.603 million gallons per day (mgd) Liter (1) = 0.220 gallon (g) Liters per second (1/sec) 19,000 gallons per day (gd) 2 Kilogram/cm = 0.981 Bar GLOSSARY OF ACRONYMS EPEAL = Entreprise de Production, de Cestion et de Distribution d'Eau d'Alger DGE = Direction Generale de l'Exploitation DGIH = Direction Generale des Infrastructures Hydrauliques DWH = Direction de la Wilaya d'Alger Chargee de l'Hydraulique SEDAL = Societe des Eaux de l'Agglomeration d'Alger SONADE = Societe Nationale de Distribution d'Eau Potable et Industrielle SNC Societe Nationale de Comptabilite EPEAL's FISCAL YEAR January 1 - December 31 FOR OFFICIAL USE ONLY ALGERIA ALGIERS REGIONAL WATER SUPPLY PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. INTRODUCTION ............................................. 1 II. THE WATER SUPPLY AND SEWERAGE SECTOR ..................... 2 Background .......................................... 2 Water Resources ............................. 3 Sector Organization ................................. 4 Service Levels ...................................... 5 Constraints to Sector Development ................... 5 Investment Program in the Sector .................... 6 Previous Bank Loans in the Sector ................... 7 Bank's Objectives for the Sector .................... 8 III. THE PROJECT AREA ........................................ 8 General Features .................................... 8 Water Production Facilities ......................... 9 Conveyance System ................................... 9 Existing Distribution Network ....................... 10 Existing Sewerage ................................... 10 IV. DEMAND AND MARKET ASPECTS ............................... 11 Water Consumption ................................... 11 Composition of the Demand ........................... 12 Population Forecast .................. 12 Projected Water Consumption ......... ................ 13 V. THE PROPOSED PROJECT .................................. 13 Project Genesis and Concept .......... ............... 13 Objectives of the Project ............. .............. 15 Project Description ................................. 15 Cost Estimates ................................... 8 This report was prepared and written by Mr. Fritz Rodriguez and Mr. Nabil Shehadeh. 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 Bank authorization. Table of Contents (Continued) Page No. Project Execution .................................. 19 Project Financing ................................... 20 Reimbursement of the Government ..................... 21 Procurement ......................................... 22 Disbursement ........................................ 22 VI. PROJECT IMPLEMENTATION AND OPERATION ................... 23 Executing Agency ................................... 23 Operation and Maintenance .......................... 24 Project Accounts and Audit ......................... 25 Reporting .......................................... 25 VII. THE BENEFICIARY ........................................ 26 Background ......................................... 26 Past Performance ................................... 26 Organization and Management ........................ 27 Management Assistance .... .........................28 Staffing ........................................... 28 Current Accounting Practices ....................... 29 Billing and Collection ............................. 30 Audit .............................................. 31 Insurance .......................................... 31 VIII. FINANCIAL ANALYSIS ...................................... 31 Past and Present Financial Position .... ............ 31 Revenues ................................. 32 Financial Studies .................................. 34 Financing Plan ..................................... 35 Future Financial Performance ....................... 36 Monitoring System .................................. 36 IX. ECONOMIC ANALYSIS ...................................... 37 Objectives of the Proposed Investments .... ......... 37 Least-Cost Solution ................................ 37 Project Justification .............................. 38 Affordability ...................................... 38 Environmental Impact of the Project .... ............ 38 Institution Building ............................... 38 Adequacy of EPEAL's Pricing Policies .... ........... 39 Risks .............................................. 39 X. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS ..... ....... 39 Table of Contents (Continued) LIST OF ANNEXES Annex No. 1 Development of Water Resources in the Algiers-Sebaou Region 2 Terms of Reference for Technical Assistance in Setting-Up a Regulatory Agency for Water Supply and Sewerage 3 Service Levels in Urban Areas in Mid-1981 4 Terms of Reference for Carrying Out a Survey of the Water Supply and Sewerage Sector 5 Water Consumption and Sales in Algiers Wilaya, Past and Forecast 6 Population and Housing in Algiers Wilaya 7 Forecast of Water Demand and Sales in Algiers Wilaya 8 Isser Water Transfer to Keddara Reservoir 9 Detailed Cost Estimates 10 Annual Project Investments 11 Bar Chart of Construction Schedule 12 Allocation of the Loan Proceeds 13 Estimated Schedule of Disbursements 14 Organization Chart of the Ministry of Hydraulics 15 EPEAL - 1984 Organization Chart 16 Terms of Reference for Organization, Management and Financial Studies 17 EPEAL - Income Statements - 1983-1992 18 EPEAL - Table of Sources and Application of Funds - 1983-1992 19 EPEAL - Balance Sheets - 1983-1992 20 Assumptions for Financial Projections 21 Mlonitoring Indicators 22 Assumptions for Economic Evaluation of the Project 23 Calculation of the Long-Run Average Incremental Cost of Water 24 Distribution of Annual Expenses by Households in Greater Algiers 25 Selected Documents and Data Available in the Project File Map No. 16088 Urban Areas to be Served 16089R General Layout of the Project Facilities ALGERIA ALGIERS REGIONAL WATER SUPPLY PROJECT STAFF APPRAISAL REPORT I. INTRODUCTION 1.01 Since Algeria's independence in 1962, there has been an explosion of its urban population which has grown at an annual rate of more than 5 percent. This has been particularly acute in Algiers, the nation's capital and largest city, whose population has more than tripled since 1962 to its present level of 2.1 million. However, in spite of the rapid growth of the population, the expansion of the cities' social infrastructure has not kept pace with the urban growth, and public services such as water supply, sewerage, transport, telecommunication, etc. are very deficient. The water supply system of Greater Algiers has basically remained the same since the early seventies and the city is experiencing severe water shortages. The unsatisfied demand has now reached 46 percent of the production. 1.02 The Government is aware of this situation and has placed the improvement of water supply to Greater Algiers among its highest priorities. Such improvement, however, would entail the transfer of water resources located outside the Algiers basin and costly river regulation schemes. It would also require better management of the services and greater participation of consumers in raising funds needed for expanding the services. It is a difficult task for which the Government has clearly expressed its desire to receive assistance from the Bank, whose involvement in the sector would be fully justified, as adequate water supply and sewerage have become prerequisite to urban renewal and continued industrial growth of Algeria. 1.03 The proposed project involves the construction of an impounding dam on Oued Boudouaou and another on Oued Isser, two river basins adjacent to Greater Algiers, to regulate an annual flow of 160 Mm3 for urban water supply. Because of the present institutional weaknesses of the sector, the project includes important software elements. A sector study would be carried out and another study would outline the policies and functions of a national regulatory authority to be set up for the water supply and sewerage sector. The project further includes management assistance to the water supply and - 2 - sewerage company in Greater Algiers to assist it in the development and implementation of more effective policies and procedures. 1.04 The total estimated