Document of THE WORLD BANK Report No. 17325-GUB STAFF APPRAISAL REPORT REPUBLIC OF GUINEA-BISSAU WATER AND ENERGY PROJECT May 18, 1998 Water and Urban II Country Department 14 Africa Region CURRENCY EQUIVALENTS Currency Unit = CFA Franc US$1.00 580 CFAF (As of May 1998) FISCAL YEAR January 1 to December 31 WEIGHTS AND MEASURES I meter 3.28 feet I hectare = 2.47 acres 1 kilometer = 0.625 miles I liter = 0.220 Imperial gallons I Imperial gallon = 4.545 liters I cubic meter = 220 Imperial gallons ABBREVIATIONS AND ACRONYMS ADP-EDP Aguas de Portugal-Electricidade de Portugal (Water of Portugal - Electricity of Portugal) AfDB African Development Bank AFD Agence Francaise de Developpement AGEOPPE Agencia Guineense de Execuqdo de Obras de Interesse Puhlico e Promo,co de Emprego (Public Works Executing Agency) BOAD West African Development Bank CGE Compagnie Generale des Eaux (General Water Company) EAGB Electricidade e Alguas de Guine-Bissau (Electricity and Water Utility of Guinea-Bissau) EDI Economic Development Institute EIA Environmental Impact Assessment EIB European Investment Bank EMP Environment Monitoring Plan GDP Gross Domestic Product IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding IDA International Development Association KfW Kreditanstalt fir Wiederaufbau NCB National Competitive Bidding MDRRNA Minisfirio do Desenvolvimento Rural, Recursos Naturais e do Ambiente (Ministry of Rural Development, Natural Resources and Environment) MEIRN (Former) Minist&rio da Energia, Industria e Recursos Naturais (Former Ministry of Energy, Industry and Natural Resources) MESTC Ministerio do Equipamento Social, Transportes e Comunicaqdo (Ministry of Social Infrastructure, Transport and Communication) NGO Non-Governmental Organization PPF Project Preparation Facility PROMAS Programa de Melhoramento de Agua e Saneamento (Project Preparation Unit: Water and Sanitation Program) OC Operating Company SEE Secretariado do Estado da Energia (Secretary of State for Energy) SNEAS Sociedade Alacional de Electricidade, Agua e Saneamento (National Company for Energy, Water and Sanitation) Vice President: Jean-Louis Sarbib, AFR Country Director: Mahmood A. Ayub, AFC 14 Sector Manager: Letitia A. Obeng, AFTU2 Team Leader: Leslie Pean, AFTU2 REPUBLIC OF GUINEA-BISSAU WATER AND ENERGY PROJECT TABLE OF CONTENTS I. INTRODUCTION .................................................... 1 II. THE SECTOR A. Sector Background ...................................................... 1 B. Sector Issues .................................................... 4 C. Sector Strategy .................................................... 5 D. IDA Involvement in the Sector .................................................... 7 III. THE PROJECT A. Project Objectives .................................................... 10 B. Project Description .................................................... 10 C. Project Preparation .................................................... 12 D. Project Costs .................................................... 14 E. Financing and Lending Arrangements .................... ................................ 15 IV. PROJECT IMPLEMENTATION A. Project Management .................................................... 17 B. Procurement .................................................... 22 C. Disbursements .................................................... 28 D. Project Accounting and Auditing .................................................... 28 E. Project Reporting, Monitoring and Supervision .................................................... 29 F. Performance Indicators .................................................... 30 G. Environmental Aspects .................................................... 30 V. FINANCIAL AND ECONOMIC ANALYSIS A. Introduction .................................................... 32 B. Financial Analysis .................................................... 33 C. Economic Analysis .................................................... 37 VI. PROJECT JUSTIFICATION AND RISKS A. Project Benefits .................................................... 39 B. Project Sustainability .................................................... 39 C. Project Risks .................................................... 40 VII. AGREEMENTS TO BE REACHED AND RECOMMENDATIONS A. Agreements to be Reached .................................................... 42 B. Recommendation .................................................... 45 ANNEXES 2-1 Organizational Structure of EAGB 2-2 Organization Chart of the New Institutional Arrangements and Matrix of Responsibilities 3-1 Estimated Project Costs and Detailed Cost Tables 4-1 Implementation Schedule 4-2 Remuneration Agreement for the Operating Company 4-3 Project Supervision Plan 4-4 Key Performance Indicators 4-5 Summary of Environment Monitoring Plan 5-1 Demand and Supply of Water and Energy in Bissau 5-2 Economic Evaluation of the Water Component 5-3 Economic Evaluation ofthe Energy Component 6-1 List of Documents Available in the Project Files Map: IBRD No. 22943 i REPUBLIC OF GUINEA-BISSAU WATER AND ENERGY PROJECT INTERIM FUND CREDIT AND PROJECT SUMMARY Borrower Republic of Guinea-Bissau Beneficiaries Asset-holding management company (SNEAS), Water and Electricity Utility, Ministry of Rural Development, Natural Resources and Environment (MDRRNA), Secretary of State for Energy (SEE) Poverty category Program of Targeted Interventions Amount SDR 15 million (US$20.25 million equivalent) Terms Standard IDA with forty years maturity. On-Lending: US$20.25 million equivalent of the Interim Fund Credit would be provided by the Government to SNEAS, of which 50% (US$10.125 million) would be on-lent at IBRD terms (20 years, including 5 years of grace, at an annual interest of 7%), and 50% would be provided to SNEAS in the form of equity. Economic Rate of The ERR of the Water component is 52%, while the ERR for the Energy Return component is 92%. Project objectives The proposed project addresses the issues of lack of access to reliable sources of water and energy. Specific project objectives are four: (i) to carry out institutional reform in the water and electricity sectors; (ii) to build institutional capacity by strengthening the Ministry of Rural Development, Natural Resources and Environment (MDRRNA) and the Secretary of State for Energy (SEE); (iii) to provide reliable and potable water supply in Bissau and secondary centers on a sustainable basis through cost recovery, and improve the pluvial drainage system in Bissau; and (iv) to enable the power sector to provide an economic and reliable supply of electricity to the largest number of people, and thus support the conditions for sustainable economic growth. The overall development objectives of the project are: (i) to alleviate the effects of poverty and improve health by increasing access to safe and affordable water and sanitation; (ii) to ensure reliable and affordable supply of water and electricity for economic growth; and (iii) to ensure sustainability by improving water pricing and electricity tariffs for cost recovery and developing the Government's regulatory and planning capacity in these sectors. ii Project description The main components of the project are: (i) institutional reform of the electricity and water sectors, including the financing of a social and reserve fund to pay for overstaffing of the utility during the transition period and for government arrears for water and electricity bills; (ii) rehabilitation and extension of the water system in Bissau and in three secondary centers; (iii) rehabilitation and extension of existing power generation and distribution facilities in Bissau and secondary centers, the environmental clean-up of the oil spill behind EAGB's plant, and the development of the traditional energy sector; and (iv) rehabilitation and extension of the pluvial drainage system in Bissau. Benefits The project will: (i) improve quality and access to safe water of urban and peri-urban dwellers, especially the poor, (ii) provide for the demands of electricity and water of commercial and industrial users, allowing for better development of urban areas as centers of economic growth; (iii) increase time savings for women and children, particularly among the poor, which would translate into greater opportunities for education and employment; (iv) provide for implementation of mitigating measures for water and electricity works and for clean up of the environmentally hazardous oil spill behind EAGB's power plant; and (v) improve the viability of private provision of water and electricity. Overall the project will make the water and electricity utility a viable entity and decrease the pressure of the utility on public resources. Other benefits from the institutional reform include: (a) efficiency gains, which will be shared by consumers through adequate tariff regulation; (b) greater sustainability of electricity supply through investment in the sector; and (c) savings in public resources, which the Government can reallocate to social programs. In addition, the energy efficiency improvement program that will be carried out to promote energy conservation will provide more benefits to the population. Risks The main risks are on the institutional side, namely, the possibility of political and social opposition to the restructuring of the utility company and to transferring the management of EAGB to a private operating company through a lease/concession contract. However, the Government has demonstrated its commitment to this reform by agreeing to carly out an institutional reform in signed Letters of Sector Policy for the two sectors, and by launching the bidding documents for the selection of the operating company prior to negotiations. To mitigate this risk further, a workshop was organized in February 1997 with all the stakeholders involved, including users, to discuss the implications and consequences of the institutional reform. Social problems could occur as a result of the institutional reform. Staff reduction could create dissatisfaction, leading to work stoppage and difficulties for the new operating company. In order to mitigate some of iii Risks (continued) these problems, all former workers of EAGB will automatically be recruited by the new operating company while EAGB is liquidated. The operating company will have a six-month period to make staff adjustments. The project will finance, through a social fund, the payment of overstaffmg for this period. On the water side, the main risks are: (a) slow implementation of the policy to discontinue the practice of providing free water at the standpipes; and (b) the pace at which communities would be mobilized and sensitized to participate in the process, and their willingness to pay for water and sanitation services. The first risk would be mitigated by a time-bound action plan based on a willingness-to-pay study to introduce cost-recovery through water vendors at the metered standpipes. The second risk would be mitigated by a systematic use of beneficiary assessments and an extensive community participation program involving the mayors, NGOs and community leaders. On the energy side, the main risk is associated with the institutional location of the Secretariat of Energy which has recently been moved from MEIRN to the office of the Prime Minister. This raises the risk of political interference and lack of compliance with the autonomy of SNEAS in overseeing the functioning of the sector. This risk will be mitigated by making sure that the convention between SNEAS and the Government is transparent and that the new Secretary of Energy is fully on board with the institutional reforms under way. This report was prepared by a team that included: Mr. Leslie Pean (Senior Project Officer and Team Leader), Mr. Matar Fall (Sanitary Engineer), Mr. Claude Sorel (Private Sector Development Specialist), Mr. Jan Janssens (Senior Sanitary Engineer), Mr. Benard Abeille (Procurement Specialist), Mr. Marcos Sugar (Disbursement Officer), Mr. Kishor Uprety (Counsel), Ms. Rumana Huque (Urban Planner), Mr. Greg Fazzary (Energy Specialist), Mr. Mark Makanda (Financial Analyst), Mr. Agilson Perazza (Environmental Specialist), Ms. Lizmara Kirchner (Language Staff Assistant) and Ms. Fanny Barrett (Program Assistant). Mr. Mahmood A. Ayub is the Country Director for Guinea- Bissau and Ms. Letitia A. Obeng is the Sector Manager for this operation. iv Estimated Project Cost US$ million equivalent Project Components 1. Institutional Reform and Capacity Building Technical assistance, studies, training, equipment, 1.27 4.35 5.62 19% community participation, project supervision (SNEAS), liquidation of EAGB, social and reserve fund 2. Water Supply Rehabilitation & expansion of production capacity 1.48 5.08 6.57 22% and distribution network, connections, installation of standpipes and low-income connections, metering 3. Energy Rehabilitation & expansion of generating capacity; 3.19 9.22 12.42 42% environmental clean up; Environment Monitoring Plan; traditional energy component 4. Pluvial Drainage Rehabilitation of network, extension of primary 1.15 1.70 2.85 10% network, special networks 5. PPF Refinancing 0.39 1.60 1.99 7% TOTAL PROJECT COST' 8.53 24.22 32.75 111%i Note: Figures may not add up due to rounding. Cost estimates are based on consultant evaluations and project designs. a Local costs are net of duties on imported equipment and materials. b In June 1996 prices. c Physical contingencies have been calculated on civil works only. v Financing Plan US$ million equivalent 1. Institutional Reform & Capacity Building 0 5.95 0 5.95 | 2. Water Supply 0.58 7.01 0 7.59 3. Energy and Environmental Cleaning 0.92 1.97 11 13.89 4. Pluvial Drainage 0 3.33 0 3.33 5. PPF Refinancing 0 1.99 0 1.99 Note: Figures may not add up due to rounding. a Cofmancing commitments to be confirmed prior to effectiveness. Estimated IDA Disbursement (US$ million) By semester Annual 4 ~~.100 3,75 3.75 2.00 2.00 0.1S 0.17 0.10 0.10 0l Cumulatie 4. 00 8.1l0 11 .S5 15 .60 1 7.6 0 1 9.60 1 9.7 S 9.95 20 .05 20.1 5 2. REPUBLIC OF GUINEA-BISSAU WATER AND ENERGY PROJECT I. INTRODUCTION 1.01 Country Background: Situated on the West African coast, Guinea-Bissau is a small country both in terms of land mass with 36,125 km2,which includes some 30 islands forming the Bijagos archipelago, and in terms of population, with an estimated one million inhabitants. It is one of the poorest countries in the world with a per capita income of roughly US$250 (1995 dollars). Other social indicators reflect a dismal picture of pervasive poverty. Theyinclude a life expectancy of 38 years at birth, the lowest in the world; an under-five year mortality rate of 136 per 1000 live births (40% higher than the Sub-Saharan African average); a fertility rate of about six; and an adult literacy rate of 55%. About 80% of the population lives in rural areas, most making a living from subsistence farming. The agriculture sector accounts for over 45% of GDP producing mainly export crops, 80% of which are cashews. 1.02 Guinea-Bissau is in the midst of a radical transition. After 20 years of single party rule, the country came under the rule of a democratically elected government in the fall of 1994, for the first time since independence in 1974. On the economic side, progress towards building a market-based economy has shown promise in recent years, although much remains to be done to dismantle a well entrenched command economy. H. THE WATER AND ENERGY SECTORS A. Sector Background 2.01 Sector Organization and Management: A public enterprise, the Electricity and Water Company of Guinea-Bissau (EAGB) is in charge of both water and electricity supply and distribution in the city of Bissau. EAGB's Board of Directors is composed of representatives of the Ministry of Finance, the Ministry of Rural Development, Natural Resources and Environment (MDRRNA), and representatives of employees of EAGB, the Chamber of Commerce, the Municipality of Bissau, and the Director General of EAGB. Policy directives are set by MDRRNA for the water sector, and the Secretary of State for Energy (SEE) for the energy sector. The Board approves policies, major investment plans, and borrowing, as well as water and electricity tariffs. This approval process has not worked well in the past and there have been many delays that have had a negative impact on the functioning of the utility. 2.02 EAGB was created in 1983 to be in charge of water and electricity production and distribution for the country. In practice, EAGB only serves the capital, Bissau, with MDRRNA being responsible for electricity and water in the secondary cities. In 1991, EAGB entered into a 2 profit-sharing arrangement with a consortium consisting of Electricite de France (EDF) and Lyonnaise des Eaux (LYSA) to run electricity and water supply operations in Bissau under a performance-based management contract, which was in effect until July 30, 1997. The organizational structure set up under this arrangement is presented in Annex 2-1. In spite of recent improvements in the company's administration, maintenance and distribution, the performance of EAGB under the contractual arrangement with EDF/LYSA has, on the whole, been less than satisfactory. There has been very little investment in the sectors in the past five years. Production and distribution of both water and electricity remain far below demand and are of deteriorating quality. There are enormous losses in both sectors due to fraud and technical problems. The tariff schedule is not coherent with inflation or the cost of gasoil. The Government is in arrears in paying its bills to the utility. Weak commercial management (lack of computerization of clients, lack of street names and addresses, lack of meters for water, difficulties in cutting service to clients who do not pay their bills) combined with poor personnel management (relatively unskilled and under-motivated staff) have only added to the problems of the utility. Poor quality services have exacerbated poor revenue collection systems, with the result that EAGB is currently undergoing a severe cash flow crisis, thereby putting in question its short-term viability. The performance and management problems of the utility have also resulted in the withdrawal of other donors from both sectors. 2.03 Currently EAGB has about 5,000 customers for water (4,000 legal and 1,000 illegal connections) and about 12,000 customers for electricity. In 1994, the price for water was US$0.19/m3, barely covering half of production costs, and revenues from water contributed less than 11% to EAGB's turnover of US$10 million. The Government, however, instituted a tariff increase and, in December 1996, prices stood at US$0.29/m3. The price for electricity currently is US$0.3 1/kWh. 2.04 Water Supply: The capital city of Bissau currently has a basic water supply infrastructure inherited from the colonial period which covers the center of Bissau and some limited extensions in the urban fringes. However, this distribution network was built more than 30 years ago and has not been significantly rehabilitated. In 1992, of the over 200,000 people who lived in Bissau, less than 20,000 inhabitants had direct access to drinking water through unmetered private connections, while another 25,000 residents obtained safe water from 50 public standpipes. For the remainder of the population, water supply is either unreliable, unsafe or distant. In areas without pumped water supply, the population draws highly contaminated water from shallow wells. In the absence of meters, daily water production in Bissau is estimated to be around 17,000 m3 with a total storage capacity of 1,180 m3 which is insufficient to satisfy daily peak demand. Approximately 70% of the total quantity pumped from groundwater sources is lost through leakage and illegal connections. Although pumped water is of good chemical and bacteriological quality, it is distributed without any treatment and thus does not protect consumers against accidental water contamination. The irregularity of water supply in Bissau is in large part due to frequent power cuts which disrupt pumping of water. The problems in the water sector translate directly into low productivity among the population, including frequent absenteeism due to sickness, and high medical expenses. 2.05 Energy Sector: Peak demand for electricity is estimated to be about 15MW but the available units in EAGB have the capacity to produce 11.8MW, i.e. about 2/3 of total demand. 3 Unable to properly maintain the facilities due to cash flow difficulties, EAGB was able to produce a mere 6.85MW in May 1996. This low rate of production (compounded with high inefficiency of the system with 40% losses) is insufficient to meet daily average demand for electricity, let alone demand during peak times. The consequences are frequent black-outs or load shedding, which can last from several hours to many days. Customer dissatisfaction with the service only serves to exacerbate already existing problems of revenue collection, with the result that EAGB has been living under a constant cash flow crisis. 2.06 The problems of the electricity sector in the country have negatively impacted industrial and commercial activities. An unreliable supply of electricity damages equipment, disrupts economic activity, and deters investments. In many cases, employers have had to resort to buying their own generators in order to continue economic activity, at high economic cost--an entrepreneur using a generator pays US$0.43/kWh, higher than the average tariff of US$0.31/kWh charged by EAGB for industrial and commercial consumers. As for the environment, poor maintenance of the plant has led to serious consequences. Oil coming from the diesel engines and from the reservoirs has been leaking into the soil and damaging the environment around the plant. As a consequence, water, fish and agricultural land producing vegetables have been contaminated. It is estimated that 10% of the fuel and grease oil used by the engines leaks into the soil. In addition, the waste water and oil waste are discharged without treatment in two open sewers going into the adjacent rice growing fields. Noise and vibrations from the machines and gas pollution from the two generators also negatively affect surrounding neighborhoods. Finally, there are fire hazards in the plant and no safety measures to deal with them. 2.07 Traditional Energy: Traditional fuels (fuelwood and charcoal) represent an estimated 95% of the total national energy consumption. The household sector is responsible for more than 85% of the total consumption of both fuelwood and charcoal. Rural consumption of fuelwood has been estimated at some 480,000 tons per year, and urban consumption of fuelwood and charcoal at 70,000 and 20,000 tons respectively. Total consumption of traditional fuels is estimated to represent the harvesting of some 740,000 tons per year. While rural consumption of traditional fuels represents the lion's share of consumption, the supply of the urban markets represents an environmental threat to Guinea-Bissau's environment and forest as it entails the intensive harvesting of forest in geographically concentrated areas. 2.08 Pluvial Drainage: There are five underground collectors for storm water drainage under the main streets in the center of Bissau. Due to the lack of regular maintenance, however, they are clogged with garbage and sand. The negative effects of this can be clearly illustrated by the case of Bandim market, the largest market in Bissau. The drainage canals around the market are choked with garbage, human waste and waste water from the surrounding neighborhoods, yet the merchants use water from these same drainage canals to wash their vegetables and fruits. Although newly paved urban roads are usually designed with lateral open concrete channels, during rainy seasons, flooding is frequent since the capacity of the drainage network is neither sufficient nor adequately maintained. Bissau's suburbs are substantially under-equipped with drainage infrastructure. In areas with steep slopes, erosion is a problem due to the high intensity of storms and the absence of protective vegetation. 4 B. Sector Issues 2.09 Inadequate Institutional, Legal and Regulatory Framework: Following recommendations from the Board of EAGB, the Government formulates water and energy policies, is responsible for regulation, and determines and approves tariffs. There is no clear separation of responsibilities and the laws establishing the duties of the main stakeholders are not enforced. The main issue facing the water and power sectors in Guinea-Bissau is the lack of corporate autonomy of EAGB, its non-commercial organization and poor performance. EAGB is the only institution in the country that currently has the technical capacity to deliver water and energy to the population, even though it serves only the capital city at the moment. However, the performance-based management contract that EAGB functioned under proved to be inadequate and has led to deteriorating services and a financial crisis for the company. It also failed to develop trust between potential private operators in the public-private partnership in Guinea- Bissau. There are four main complaints raised by the private sector: (a) the lack of Government commitment to reforms and tariff adjustment; (b) the absence of financing to carry out investment (an intended investment by the European Investment Bank of US$8 million in the energy sector was canceled due to the non-observance by the Government of its financial obligations); (c) lack of support in commercial litigations; and (d) Government arrears in paying its own water and electricity bill. 2.10 The management problems of EAGB should not be attributed only to the Government. In many areas, internal management problems in EAGB itselfcan help explain why the majority of the targets considered under the management contract were not achieved. Some of these areas are tariff restructuring, training, inventory, management information system, staffing, subscribers' census, internal auditing procedures, project accounting, etc. Current management has tried to begin addressing some of these areas such as consumers census, external auditing, tariff restructuring, combating fraud, and improving collection. However, much remains to be done. It has been estimated that EAGB loses US$800,000 per year of fuel because of leakages in the diesel storage tanks. In the area of personnel, EAGB's ratio of customer per employee of 36 is low. A ratio of 100 would seem to be more reasonable as a medium to long term target. Measures would need to be taken both inside EAGB and outside to detect accounting collusion, clandestine non-meter users, low reading and corrupt meter users, thereby reducing theft to acceptable levels. 2.11 This situation clearly indicates a need for institutional reform of the water and energy sectors. Government is not in a position to take over the full responsibility for service delivery in these sectors, and it is evident that private sector involvement will need to be sustained and encouraged. The end of the management contract with EDF/LYSA on July 30, 1997 offered the Government an ideal opportunity to consider a new institutional structure for management of water and energy, both for Bissau and for the rest of the country. While the new institutional arrangements are being established, EAGB is being managed by a team of expatriates composed of the former executive director and an assistant, supported by three expatriate consultants in the areas of water, electricity, finance and accounting who carry out follow-up missions for two 5 weeks every two months. The whole team supplying technical assistance to EAGB is paid from the financial resources of a PPF and their contract will continue until the new institutional arrangements being carried out under the proposed project are in place. 2.12 Water Sector: Apart from the need for reform of the institutional structure under which water supply is managed and delivered, there are three main issues. First, even the large secondary cities (which in reality resemble small towns) do not have a systematic organization for water supply as donor interventions have concentrated strictly in rural areas. Second, in order for any system to be economically viable, the tariff structure for water needs to be revisited. Not only is the current price of water far below costs, but the Government does not pay for water, and public standpipes provide water free of charge. Government has been reluctant to discontinue this practice in the past. Third, with technical losses amounting to 70%, a program of leak detection and repairs is essential at this stage. These are issues that need to be addressed directly, particularly given the level of poverty in the country and the ability of consumers to pay for water. 2.13 Energy Sector: The four main issues in the energy sector relate to capacity, tariffs, technical losses, and management. First, capacity is one of the biggest constraining factors since, of the seven generators capable of producing electricity, only two are considered to be technically acceptable. The government currently lacks the capital necessary for investment in the expansion of electricity generating capacity. Second, under the on-going Energy Project (Cr.2237-GUB), restructuring of tariffs for electricity has been extensively discussed and debated. The Government has recently agreed to and implemented some adjustments in tariffs, paving the way to making this sector more competitive. Third, technical losses contribute significantly to the financial problems of the sector--repairs to the existing plants and transformers, and installation of meters are necessary to curb these losses. Fourth, both sector and company management have been deficient, in particular in terms of debt management, billing and collection policies. There needs to be greater incentive for improved debt management, billing and collection, issues that will be addressed through the institutional reform. C. Sector Strategy 2.14 Institutional Reform: The Government intends to carry out institutional reform in the water and energy sectors in order to make it more efficient and competitive. Following comparisons of various alternatives, the Government has decided to establish two companies: * A state owned national utility authority, an asset holding management company called the Sociedade Nacional de Energia, Agua e Saneamento (SNEAS); and * A water and electricity utility company, leased to a private operating company, the foreign investor/manager. SNEAS will be the owner of the facilities of EAGB and will be fully responsible for sector development, including identification, preparation, financing and implementation of new projects. SNEAS will not be an executing agency and will contract out the management of all systems (in Bissau and outside) and the execution of all works to qualified firms and enterprises, either national or international. SNEAS will also issue sector consolidated accounts and service 6 the debt. The Government has already agreed that SNEAS will have user representatives on its board to ensure greater responsiveness to the ultimate clients. SNEAS will sign a lease/concession contract with a new private operating company to operate and maintain the facilities of the utility in Bissau, bill customers and collect charges,for a period that will be determined in the contract. The lease/concession contract would specify the division of roles and responsibilities between the Government and the operating company, especially regarding tariffs, new investments and performance standards. An organogram of the new institutional arrangements is presented in Annex 2-2, along with a matrix of roles and responsibilities of the different actors. 2.15 This institutional restructuring will set the stage for improvement in the performance and efficiency of water and electricity services in the country, and thus form the crux of the proposed project. The Government has addressed the options for institutional reform in two Letters of Sector Policy on the water and energy sectors that have been sent to IDA for review. The Letters of Sector Policy were reviewed during appraisal and confirmation was given on the timetable for recruitment of the new operating company. The new institutional arrangements, including roles and responsibilities of the actors involved and coordination between them were also reviewed during appraisal and were finalized at negotiations. The signing of the decree for the creation of SNEAS was a condition of negotiations. This condition was met and the Government has already advertised for and selected a candidate for the position of Director General of SNEAS (also reviewed by IDA). The launching of the documents calling for bids for the lease/concession contract between SNEAS and the operating company, also a condition of negotiations, was carried out in January 1998. 2.16 Water Sector Strategy: The government strategy for the water sector has been outlined in the Letter of Sector Policy which defines sector management and establishes the permanent rights and obligations of users. The Water Sector Policy Letter was reviewed during appraisal, and the signed letter was submitted to IDA before negotiations. The Govermnent has already undertaken the following steps in defining its water sector strategy: (i) harmonization of the framework of intervention with other donors and establishment of three phases for the development of the water sector--an emergency phase (which would be addressed through the proposed project), a second phase until the year 2006, and the last until 2016; (ii) revision of the master plan for the sector; and (iii) preparation of a global investment program until 2006. An important element in carrying out these plans has been the integration of on-going interventions by other donors, such as AfDB and AFD, as well as those planned under the proposed project, into the Government's long-term strategy. 2.17 The most immediate needs in the water sector are the rehabilitation of existing systems and associated improvements in operations and maintenance. The medium- and long-term development strategy for the water sector is to: (i) improve existing systems to provide acceptable levels of service to a rapidly increasing population through better management of the utility company; (ii) maximize the supply of water available from existing sources and water systems by reducing leakage from the current unacceptable rate of 70%; (iii) manage water demand more effectively by instituting an appropriate tariff policy based on metered consumption; (iv) ensure that tariff increases are sufficient to allow the sector to reach equilibrium by 2005 while taking into account consumer ability to pay for water; and (v) follow a 7 strategy of first rehabilitating existing systems and then following up with programs of carefully planned expansion in order to defer high, long-term capital costs until new investment becomes essential and consumers are willing to pay for it. 2.18 Energy Sector Strategy: The financial crisis that EAGB is currently facing is one of the main problems in the energy sector. EAGB has consistently been unable to collect on its bills, lacking funds to procure fuel, spare parts and supplies, facilities are degraded and the quality of service provided is deficient. The institutional reform of the sector will address some of these management and performance problems. The problems of incentive and autonomy of the public utility to carry out management improvement and to make efficient decisions will also be resolved through the institutional reform. The Government aims to reach financial equilibrium in the sector, which will be done through a combination of adjustments in the tariff structure, settlements of government arrears with the utility, preparation of a list of"clients cautionnes"--a list of 10 institutions which would be the only ones to be protected from electricity cut-offs if they do not pay their bills--and through privatization of the suppliers of fuel (DICOL and Guin6e Gas). Government has already taken important steps to achieve these goals and has committed itself in the Energy Sector Policy Letter reviewed during appraisal. The letter was finalized and a signed copy submitted to IDA before negotiations. Government has also drafted an Electricity Law to regulate the electricity sector, including measures to address fraud by giving to the private sector the right to disconnect non-paying customers. The passing and publication of the new Electricity Law will be a condition of project effectiveness (para. 7.03a). D. IDA Involvement in the Sector 2.19 Rationale for IDA Involvement: One of the main objectives of the Country Assistance Strategy (CAS) to Guinea-Bissau discussed on June 10, 1997 is to promote private sector development. This project will support this objective by: (i) helping to create an enabling environment for private sector growth through well-targeted and action-oriented legal and regulatory reforms; (ii) improving basic infrastructure for a more efficient private sector and encouraging job creation; and (iii) nurturing grassroots enterprise development and an increasingly stronger government-business community partnership. The institutional reform proposed under the project will pave the way for more active participation of the private sector in the production and distribution of water and electricity. IDA also aims to foster the conditions for the long-term development of the economy by remedying financial imbalances through limiting new investments to the most urgent needs. Lack of maintenance and absence of new investments in the water sector have led to a severe deterioration in the water supply, with households and conventional enterprises experiencing daily breaks in supply. Ensuring supply of safe and affordable water involves improvement of the energy sector as well. Investment in the energy sector is justified on its own ground, however, as any vision of development of the economy and of the productive sectors, such as industry, fishing and tourism, will require reliable and affordable supplies of electricity, a sector that is currently facing severe financial as well as capacity constraints. 8 2.20 IDA has been involved in the water and energy sectors mainly through two projects. The ongoing Transport and Urban Infrastructure Project (Cr.2748-GUB) became effective in January 1996. While the project's main objective is to rehabilitate and improve the management of economic and social infrastructure through better contract management services, it has a specific water component which was meant to serve as a pilot operation for the current project. This component addresses the most urgent needs in Bissau, namely the rehabilitation of the primary water distribution network through renovation of pipes, rehabilitation of existing reservoirs, and improvement of the drainage system, as well as a pilot program for testing sustainable methods for solid waste collection and disposal. 2.21 On the energy side, IDA's involvement in the sector began with an energy project (Cr. 2237-GUB) approved in 1991. The aims of this project were to address medium-term supply of electricity and petroleum products, namely through the rehabilitation and expansion of electricity generation and petroleum storage and handling facilities; expansion of the distribution network; and institutional strengthening. This project has had a negative experience due to the lack of incentives of the operator to make changes and to maintain equipment, laxism of the Government leading to the loss of an intended EIB investment of US$8 million, and interference of the Government in the daily activities of the operator. However, through this project, background studies to assess energy needs and alternatives for expansion have been carried out, and have set the stage for the lease/concession contract for the utility. The government has also prepared a Letter of Sector Policy under this project which takes into account measures for sustainability of the reforms, including the adoption of a new tariff structure. The proposed project would support and build on these efforts at revitalization and expansion of the energy sector, particularly in the creation of new generating capacity and extension of supply to the secondary centers. 2.22 Lessons Learned from Previous IDA Involvement: The key problems that have been highlighted in the implementation of relevant Bank projects in Guinea-Bissau are the following: (i) the need for the Project Coordination Unit to have full authority and responsibility to carry out its tasks, and the importance of having high-level representation from the other ministries and institutions involved in the project in order to resolve conflicts; (ii) the need to have Government commitment to policy changes up front before the project becomes effective; (iii) counterpart funding cannot be assumed--the availability of counterpart funds has been a recurrent and persistent problem; (iv) only guaranteed donors' support, based on firm commitment, should be counted in the fnancing plan; (v) financing of operations and maintenance of any infrastructure built or rehabilitated, and financing for continuity of any services initiated under the project needs to be discussed with the Govemnment and firm assurances sought of their continued financing through concrete mechanisms, such as special funds (e.g., the Road Fund); and (vi) the selection of works and their cost evaluation needs to be done carefully during appraisal and later substitution should be avoided. 9 2.23 In light of these lessons, the following steps have been taken for the proposed project: * Government commitment: The Government has signed two Sector Policy Letters on water and energy supporting the institutional reform, has created a Comit6 de Pilotage to oversee the reform, and has taken all the necessary steps to hire a private operator for the utility. * Autonomy and authority of project coordinating units: The proposed project will be implemented by an asset holding management company, SNEAS, which will have both autonomy and authority to make major decisions regarding investments and debt repayments in the water and energy sectors. * Sector contribution: The water and energy sectors will contribute under SNEAS a total of US$1.5 million towards the project from the sales of water and electricity. * Cofinancing: A cofinancing amount of US$8.5 million is not yet assured, but BOAD and AFD have expressed a strong interest in financing the electricity generation and distribution component. Confirmation of this cofinancing amount is a condition of project effectiveness. As for the traditional energy component (US$2.5 million), the Dutch cooperation has expressed a strong interest in financing this component starting next calendar year. This component will be scaled back unless firm commitments are obtained in early 1999. 10 m. THE PROJECT A. Project Objectives 3.01 Given the untenable situation that EAGB faces in terms of providing safe and affordable water and ensuring a reliable supply of electricity to the population, the overall development objectives are: (a) to alleviate the effects of poverty and improve health by increasing access to safe and affordable water and sanitation; (b) to ensure reliable and affordable supply of water and electricity for economic growth; and (c) to ensure sustainability by improving water pricing and electricity tariffs for cost recovery and developing the Government's regulatory and planning capacity in these sectors. 3.02 Specific project objectives are four: * Institutional reform: to carry out institutional reform in the water and electricity sectors with a view toward: (i) encouraging competition and private sector participation by reducing the government's involvement in these sectors and introducing, under open competitive bidding, a lease/concession contract with private management; and (ii) ensuring efficient consumer and producer behavior by introducing commercial pricing under incentive regulation. a Capacity building: to build institutional capacity by strengthening the Ministry of Rural Development, Natural Resources, and Environment (MDRRNA) and the Secretariat of Energy (SEE). * Urban water supply and drainage: to provide reliable and potable water supply in Bissau and secondary centers on a sustainable basis through cost recovery, and to improve the pluvial drainage system in Bissau. * Energy: to enable the energy sector to supply an economic and reliable supply of electricity to the largest number of people, and thus support the conditions for sustainable economic growth. These objectives will be addressed through four components dealing with: (i) Institutional Reform and Capacity Building, (ii) Urban Water Supply, (iii) Energy, and (iv) Pluvial Drainage. These components are described in detail below. B. Project Description 3.03 Component A: Institutional Reform and Capacity Building (base cost US$5.62 million). This component comprises: (i) technical support to the Government in hiring a new private operating company for the utility through international competitive bidding; (ii) financial and technical assistance to the Government to operate and manage the utility during the transition period, August 1997 to June 1998, including assistance to carry out the liquidation of EAGB; (iii) technical, legal and financial support for the creation of the asset-holding management company, SNEAS, and for its operation during the first two and a half years of project life; (iv) training, studies and technical assistance; (v) equipment (vehicles, computers, etc.) necessary to carry out 11 the execution of project components; (vi) community participation, including community mobilization, assistance to laid-off workers for their reinsertion through micro-enterprise creation and energy-saving campaigns; (vii) financing of a social and reserve fund to pay for government arrears for water and electricity bills; and (viii) a program to improve general government procurement and financial management. 3.04 Under the training, studies and technical assistance sub-component, three workshops will be conducted during the first year of project execution in order for the complexities of the institutional reform to be properly understood and accepted by all parties involved. The first will deal with the reading of the contracts involved (contract plan, performance contract, lease/concession contract, etc.) to ensure that all parties share the same understanding of the contracts. The second will deal with the definition of the starting point with the operating company, and the third will clarify the roles of the different actors (Government, SNEAS, operating company, etc.). At least two studies are envisaged under the sub-component. In collaboration with the operating company, SNEAS will conduct a tarification study, including a beneficiary assessment of water supply during the first year of project execution, in particular to determine consumer preferences between public standpipes and low-income house connections. A second study will be conducted following the completion of the electrical works on the power plant and prior to the mid-term review, to review output capacity and re-evaluate the demand for electricity. 3.05 The community participation sub-component will involve a series of activities aimed at (i) mobilizing communities through the strengthening and building up of community-based organizations with a view to involving beneficiaries in assessing their needs in water and sanitation and working with the parties involved (SNEAS, the operating company, municipalities, AGEOPPE) to implement, operate and maintain the systems built; (ii) implementing an information, training and communication program to create awareness of the communities' and Government's roles and responsibilities in water and sanitation; (iii) contributing to the institutional capacity building component of the project by providing training for technical service staff of MDRRNA and SEE in community participation in delivering urban services and on environmental issues. The community participation component will also include a sensitization campaign to reduce excessive energy use and wastage. 3.06 The sub-component to improve general government procurement and financial management will aim to address the issues that impede programs' implementation by: (a) increasing the efficiency and transparency of public procurement through consultant services and necessary training for the issuance of a legal framework, the establishment of an adequate regulatory body and a procurement training program for civil servants handling procurement; and (b) enhancing accounting and reporting capacity through advisory services for establishing a standard accounting system, and ensuring appropriate training of project financial managers and accountants. 3.07 Component B: Urban Water Supply (base cost US$6.57 million). This component comprises (i) rehabilitation and extension of the primary and secondary water supply network in Bissau and in selected secondary cities (Bafata, Gabu and Bolama) with the replacement of about 7 kms of old asbestos pipelines and installation of 13 kms of new PVC pipelines; (ii) 12 rehabilitation and extension of the tertiary water supply network in Bissau and in selected secondary cities with the replacement of about 14.5 kms of old asbestos pipelines and installation of 10 kms of new PVC pipelines; (iii) rehabilitation of 1,000 existing connections in Bissau and installation of about 1,000 new connections, all old and new connections equipped with meters; (iv) rehabilitation of 76 public standpipes and installation of 20 new ones;(v) construction of two reservoirs for Bissau; and (vi) construction of two boreholes. The project envisages a specific component aimed at ensuring that low-income users are adequately serviced under the new institutional arrangements by providing for low-income house connections (branchements sociaux) at lower rates and the provision of public standpipes that will be privatized. 3.08 Component C: Energy (base cost US$12.42 million). In the energy sector, the project addresses electricity generating capacity and distribution, environmental issues, and support for the development of the traditional energy sector. The sub-components are the following: (i) Electricity generating capacity and distribution which includes investment for rehabilitation and expansion of the central power plant and the distribution network in Bissau, autonomous power generation and distribution in the secondary cities of Bafata, Gabu, Canchungo and Farim, and the installation of meters, storage tanks, and safety equipment. Cofinanciers (BOAD and AFD) have expressed a strong interest in financing this component. The detailed works to be carried out under the rehabilitation and expansion of the electricity generating capacity (in accordance with a least-cost expansion program) will be decided after the technical studies are completed. (ii) Environmental clean-up consists of the clean up of the oil spill behind the EAGB plant which has had a disastrous environmental and health impact on the surrounding area. (iii)Environment Monitoring Plan aims to monitor the quality of the environment in Bissau and the three secondary cities as a result of the project. (iv) Traditional energy involves the development of the traditional energy sector through institutional strengthening, implementation of a wood-fuels supply pilot project and promotion of private sector inter-fuel substitution. 3.09 Component D: Pluvial Drainage (base cost US$2.85 million). This component would provide for the restoration of the storm water drainage collector network in Bissau through the rehabilitation of 8,340 meters of covered canals and the construction of 3,060 meters of new collectors, and special works in the areas of Luanda, Plaque and the Bairro Militar to control erosion and flooding. C. Project Preparation 3.10 Identification and preparation. The proposed project was identified in 1994. Feasibility studies were prepared by the Government with the help of several consulting firms and financed by a Japanese grant of US$1 million. The following activities were financed under this grant: (i) a project preparation unit called PROMAS (Programa de Melhoramento deAgua e Saneamento), reporting directly to the former MEIRN, was created; (ii) a review of water demand, including water use patterns and locations of potential users was carried out; (iii) a beneficiary assessment to determine the public's willingness to pay for water and their preferences for types of service (private connections, yard taps, and so on) was completed; (iv) detailed engineering designs and tender documents for the water supply and urban sanitation systems were completed, which form the basis of the current project design and; (v) an Environmental Impact Assessment was carried out which was cleared by IDA in November 1996--detailed mitigation plans were formulated to 13 correct any negative impact that may result from works implemented under the project. Preparatory studies for the energy component and a review of the organizational and institutional set up of EAGB are complete and were financed under the Energy Project (Cr. 2237-GUB). 3.11 Project Preparation Facility. A Project Preparation Facility (PPF) and two supplemental PPFs were also approved for disbursement in the course of project preparation. The PPFs would be refinanced from the proposed IDA Credit. Activities financed by the PPFs include: * Technical assistance for the preparation, issuance and evaluation of bidding documents for the future lease/concession contract with an operating company for the water and electricity utility and for the establishment of SNEAS. * Preparation of an Environment Monitoring Plan to ensure adherence to environmental management standards and compliance with mitigating measures for each component of the project. * Preparation of a Manual of Procedures for the project, including statutes and conventions between the Government, SNEAS and the operating company to guide overall project implementation. * Operating support to continue project preparation; conducting consensus-building workshops; setting up of an accounting system for project expenditures and for adequate internal controls to ensure the reliability of SOEs as a basis for disbursement. * Design studies and preparation of bidding documents for the power plant and water reservoirs. 3.12 Consensus-building. A planning-by-objectives workshop (ZOPP) was organized in March 1996 with major stakeholders, in which participants identified the main constraints in the water and electricity sectors, reviewed main issues and priorities, and determined the objectives, short and long term, to assign to the project, as well as the main results to be expected. In February 1997, a second ZOPP workshop was organized to discuss with stakeholders the new institutional arrangements for the water and energy sectors. The workshop addressed the specific institutional set-up for the asset holding management company to be created which would manage all government assets in the water and energy sectors, and be in charge of planning and major investment decisions. Based on a review of African and global experience, it also discussed the significance and consequences of transferring the commercial operations of EAGB to a private operating company through a lease/concession contract. The workshop helped to build consensus among stakeholders on key issues, such as the extent of the lease vs. concession, management efficiency and its relationship with labor cost reduction, tariff adjustments in relation to ability to pay, and responsibilities of the operating company for maintenance, among others. 3.13 Institutional Reform. In addition to the ZOPP workshops, significant work was carried out in the area of institutional reform. Government was sensitized to the feasibility of the institutional reform through seminars and study tours in neighboring countries (Senegal, Guinea and Cote d'Ivoire) to review similar experiences and disseminate results. A pre-qualification process for hiring the new operating company was successfully carried out and two enterprises from France and Portugal were selected. In order to clarify issues with the pre-qualified companies, a Memorandum of Information was produced and discussed with the candidates at a 14 pre-bidding conference which took place in Lisbon between September 30 and October 2, 1997. The conference was convened and attended by a high-level delegation of the Government headed by the Minister of Economy and Finance. The conference clarified that there would be three types of bidding documents expected under this project, namely documents for(i) the lease/management contract; (ii) works to be executed by the operating company; and (iii) works that would not be executed by the operating company. The bidding documents for (i) and (ii) would be under a single package. The conference explained the rationale for the inclusion of the works in the bidding documents. Putting the operating company in charge of works will guarantee that there will be no significant delays in their execution, which would in turn have a direct impact on achieving contractual target values of performance. All other works to be financed through the project (rehabilitation of the power plant and construction of water reservoirs and boreholes) would be carried out through independent bidding in which the operating company will not be permitted to participate due to conflicts of interests. However, the operating company would be allowed to participate in the programming and follow-up of the works. During negotiations, assurances were given that this program of works will be submitted to IDA for no objection prior to calling for tenders (para. 7.01a). 3.14 The conference also reviewed other issues, such as remuneration of the operating company, initial capital structure, acquisition of operating equipment, social aspects of the institutional reform, tariff setting and structure, performance indicators, and the process for the call for bids. On all these issues, representatives of the Government and the qualified firms exchanged views and reached agreements. The prequalification process was successfully completed, and draft bidding documents were prepared. A two-day meeting was held between the Government, IDA and the prequalified firms in Paris in December 1997 to review the draft bidding documents and clarify any further concerns and questions. The bidding documents were finalized taking into account the issues raised during the Paris meeting. The launching of the call for bids for hiring the new operating company was a condition of negotiations. The documents were cleared by IDA and the call for bids was published on January 19, 1998. The choice of the operating company will be made in May 1998. D. Project Costs 3.15 The estimated total cost of the project is US$32.75 million equivalent, excluding direct and indirect taxes and duties (Annex 3-1). For the water and drainage components, these project costs are based on the findings of a feasibility study finance under a PHRD grant. For the energy component, the costs are based on a study financed under the current Energy Project (Cr. 2237- GUB). Base costs are expressed at July 1997 levels with 10% added for physical contingencies on civil works. Local inflation was estimated at 8.6% for 1998, going down to 5% by 2002, taking into account a stabilization of the economy as a result of the country's recent entry into the franc zone. Table 3-1 outlines the main project components and the associated costs. 15 Table 3-1 Estimated Project Cost US$ million equivalent Project Components 1. Institutional Reform and Capacity Building Technical assistance, studies, training, equipment, 1.27 4.35 5.62 19% community participation, project supervision (SNEAS), liquidation of EAGB, social and reserve fund 2. Water Supply Rehabilitation & expansion of production capacity 1.48 5.08 6.57 22% and distribution network, connections, installation of standpipes and low-income connections, metering 3. Energy Rehabilitation & expansion of generating capacity; 3.19 9.22 12.42 42% environmental clean up; Environment Monitoring Plan; traditional energy component 4. Pluvial Drainage Rehabilitation of network, extension of primary 1.15 1.70 2.85 10% network, special networks 5. PPF Refinancing 0.39 1.60 1.99 7% TOTAL PROJECT COST" 8.53 24.22 32.75 111% Note: Figures may not add up due to rounding. Cost estimates are based on consultant evaluations and project designs. ' Local costs are net of duties on imported equipment and materials. b In June 1996 prices. c Physical contingencies have been calculated on civil works only. E. Financing and Lending Arrangements 3.16 The proposed IDA Credit would finance US$20.25 million of the total project costs, i.e. institutional reform and capacity building, water supply, pluvial drainage and portions of the energy component including the environmental clean up of the oil spill behind EAGB's plant. Cofinanciers (BOAD and AFD) will finance US$8.5 million for investment in power generation, including repair and refurbishment of current diesel engines as well as the purchase of new engines. Confirmation of cofinancing for electricity generation and distribution will be a condition of credit effectiveness (para. 7.03b). The local contribution (estimated at US$1.5 million) will come from the asset holding management company, SNEAS, generated through 16 revenues from sales of water and energy. The local contribution will fimance autonomous power generation in secondary cities, and standpipes and low-income house connections in the poor neighborhoods of Bissau and secondary cities. As for the US$2.5 million for the traditional energy component, the Dutch cooperation has agreed to finance this component starting next calendar year. This component will be scaled back unless firm commitments are obtained by early 1999. Table 3-2 Financing Plan US$ million equivalent l.Institutional Refornn & Capacity Building 0 5.95 0 5.95 2.Water Supply 0.58 7.01 0 7.59 3. Energy and Environmental Cleaning 0.92 1.97 11 13.89 4. Pluvial Drainage 0 3.33 0 3.33 5. PPF Refinancing 0 1.99 0 1.99 Note: Figures may not add up due to rounding. a Cofinancing commitments to be confirmed prior to effectiveness. Estimated IDA Disbursement by semester Annual 4.00 4.10 3.75 3.75 2.00 2.00 0.1 S 0.17 0.10 0.10 O.lO Cumulative 4.00 8.10l l .S5 15.60 17.60 19.60 19.78 19.95 20.05 20.15 20.25 3.17 The proposed IDA Credit of US$20.25 million will be made to the Government. The Government will pass 50% of the credit (US$10.125 million equivalent) to SNEAS on IBRD terms (20 years, including 5 years of grace, at an annual interest rate of 7%), and provide 50% to SNEAS in the form of equity. During negotiations, agreement was obtained on creating a special account in a foreign commercial bank acceptable to IDA to be managed by SNEAS (para. 7.01b). Conditions for financing SNEAS were reviewed during appraisal and were finalized at negotiations (para. 7.01c). 17 IV. PROJECT IMPLEMENTATION A. Project Management 4.01 Implementation: A Project Implementation Schedule was reviewedduring appraisal and agreed upon at negotiations (para. 7.TOd). The schedule is presented in Annex 4-1. SNEAS will have primary responsibility for coordination and management of the project. SNEAS will be in charge of management of the investment program, management of debt service, production of consolidated accounts for the two sectors, and will be in charge of supervising the activities of the operating company. SNEAS will delegate the pluvial drainage and enviromnent components to AGEOPPE who will contract private sector entities through national competitive bidding (NCB). The implementation of the traditional energy component will be the joint responsibility of the MDRRNA and the Secretariat of Energy. SNEAS will be responsible for monitoring the project, writing up progress reports and managing the special account. 4.02 Financing the Operations of the New Institutions. During the course of project preparation and appraisal, the following terms and conditions for financing the operations of the new institutions were agreed upon. It was agreed that the operating company (OC) will: * collect from the customer the full water and electricity rate, that is, a rate sufficient to cover sectoral operating expenses and yield an acceptable rate of return on SNEAS assets; * retain part of it, the lease contractor rate (LCR), to cover its own operating expenses, depreciate its own assets and remunerate its own equity; and * pay back to SNEAS a "rental fee" for each cubic meter of water and kilowatt hour of electricity produced, intended to cover SNEAS' own operating expenses, service the sectoral debt, and finance part of the investment program. The consumer rate includes the rental fee paid to SNEAS. 4.03 The operating company will operate and maintain the systems at its own risk and its only revenues would be the lease contractor rate (LCR). Therefore, the OC would have real incentives to improve the collection ratio, cut operating costs, and reduce the unaccounted-for water and electricity losses. SNEAS' only revenues would be the rental fee paid back by the OC for each cubic meter of water and kilowatt hour of electricity produced, that is, the difference between the "consumer rate" (which initially would be substantially lower than the full rate) and the LCR. Therefore, SNEAS would have real incentives to obtain from the Government consumer rates always sufficient to at least maintain a positive cash flow. 4.04 The electricity sector will be in financial equilibrium from project start in 1998 but it will support the water sector on a declining basis until 2005. It is expected that the full sectoral financial burden would be gradually transferred to the customer by 2005. 4.05 The Operating Company. The Operating Company (OC) would have a General Manager who will be in charge of the daily management of the company. The Government will not beon the board of the OC. The OC will sign a contract with SNEAS and one with the Government for 18 a period of 15 years, revisable every 5 years, specifying the roles and responsibilities of the three parties. The signing of the two contracts would be a condition of effectiveness (para. 7.03c). Performance contracts would also be signed which would include clearly defined performance targets in the two sectors. These targets would be reviewed at the end of the first two years of project life, and every 3 years thereafter, to take into account results obtained and any changes in circumstances (para. 7.03c). 4.06 Selection of the Operating Company and Prequalification. In order to ensure transparency and fairness, the selection of the OC will be carried out prior to project effectiveness, following international consultation, on the basis of proposals made by prequalified professional companies. The bidding document includes drafts of the OC statutes and the lease and management contract. Since the price for a cubic meter of water will be given, the only parameter that will be used to select the final candidate will be the lease contractor rate (LCR), exclusive of taxes and custom duties, that the OC would retain on each kilowatt of electricity produced. Bank guidelines for procurement of works and goods, rather than the ones for the use of consultants, apply for such a lease contract since the provision of a cubic meter of water and of a kilowatt hour (distributed, billed and collected) keeps closer similarity to the provision of civil works than to the ones of consultants' services, and since the lowest LCR constitutes the least cost solution for the Government and the consumers. The prequalification bidding process started on June 9, 1997 and was closed on August 18, 1997. The prequalification notice was published in Jeune Afrique, Marches Tropicaux and Development Business. It was specified that joint ventures between water and electricity companies would be considered. The prequalification process was successful in selecting two firms (the French CGE and the Portuguese joint venture ADP-EDP) and a prebidding conference, organized by the Minister of Economy and Finance, the Minister of Social Infrastructure (MESTC) and the Secretary of State for Energy (SEE) took place in Lisbon from September 30th to October 3, 1997 with the two prequalified firms. A subsequent meeting with the two prequalified firms took place in Paris December 11-12, 1997, to discuss the draft bidding documents before launching the bidding process. 4.07 Autonomy and Incentive Regulation. The OC would be free to define its own organization and procedures to meet its contractual obligations. It would be free to hire and fire its staff, both local and expatriate. The staff of the operating company would primarily come from the old EAGB. The OC would procure its imports from Bank group eligible member countries only. Since the OC would obtain a lump-sum remuneration for each cubic meter of water and kilowatt hour of electricity produced, it would implicitly be encouraged to implement cost reduction programs and, in particular, to replace expensive but initially needed expatriates, by correctly trained and paid local staff. There are several examples in neighboring countries of excellent training programs implemented by private or semi-private companies seeking cost effectiveness, which have attained the objectives of transferring know-how and management to local staff. 4.08 Financing the Operating Company. The LCR is expected to cover all OC's operating expenses as well as depreciation of its own facilities and the remuneration of its equity. The method for calculating the LCR is given in detail in Annex 4-2. Both its foreign exchange and local currency component would be regularly revised in accordance with cost index formulas. 19 There would also be mandatory re-negotiations of the LCR every five years or if actual conditions of operations (mainly water sales) differ substantially from the ones on which it was established. These re-negotiations would, inter alia, be based on data provided by the OC on its actual expenses and verified by SNEAS and its auditors so that the consumers and SNEAS could, in turn, benefit from successful cost reduction implemented by the OC. The proposed project would finance the services of a legal counsel to SNEAS for all issues related to interpretation of the lease contract, and of a consultant for regular revision of water and electricity rates (consumer rate structure as well as LCR). The lease contract also specifies penalties for poor performance (non-justified water cut-off or low pressure) which would apply to both components of the LCR. For that purpose, a security deposit of US$ 0.4 million equivalent would be made by the OC at a local bank. 4.09 Government Bills. The volume of water and electricity consumed by the central government (clients cautionnes) has been estimated and this amount was budgeted. In order to protect the OC against late payments by the central government due to cash flow problems, a revolving fund was created and will be managed by SNEAS. The contract between the State and SNEAS indicates detailed budgeting and payment procedures. 4.10 Environmental Considerations. The lease contract with the OC would specify the environmental responsibilities of the latter. The contract will provide for an environmental audit to determine the main pre-existing environmental conditions prior to contract signature. The thorough identification and the extent of the environmental problems will provide the"pollution stocks" and "pollution flows" related to the power plant, and SNEAS or OC responsibilities for mitigation and remediation would be clearly specified in the lease contract. The audit will also provide the baseline information for "pollution flows" and future liabilities under the OC's responsibility. The OC's main environmental responsibilities would be to: * Avoid contamination of soil, groundwater, plantation areas and mangroves due to leakage and spills of diesel oil and grease and inoperative oil separator devices. * Avoid environmental contamination due to discharge of polluted cooling water and other waste waters on the "bolanhas" and the Geba Estuary. * Avoid the contamination of the "bolanhas" due to leakage from the severely contaminated area. * Avoid environmental contamination due to Central (power plant) air emissions during present operational condition and during future Central expansion. * Avoid environmental contamination due to mishandling of Central solid wastes. * Prevent noise pollution from power generators in the Central beyond an established level. * Avoid submitting Central workers and neighborhoods to risks of fire and/or explosions due to unsafe procedures or operations. 4.11 The lease contract with the OC would clearly specify the environmental regulations containing minimum environmental standards and indicators for environmental monitoring to be executed by the OC under supervision of SNEAS. An agreement to comply with present and any future environmental regulations and setting a timetable for achieving OC compliance with acceptable standards would be clearly settled. These recommendations are valid for either a lease contract in the short term--where the terms of the environmental mitigation/remediation measures 20 are specified in the EIA prepared in 1997 and approved by the Bank and SNEAS--or in the event that the OC will be contracted after the project has been implemented. In this case, the environmental audit must be updated concerning compliance with environmental mitigation programs recommended in the EIA. 4.12 Maintenance. The OC would be responsible for regular maintenance of the facilities. However, since such maintenance has been carried out in a deficient manner, there is a need for rehabilitation. The proposed project would finance a comprehensive rehabilitation program which was identified during project preparation. The OC would implement it within an allocated budget, using its own labor, affiliates and/or subcontractors to implement the works. 4.13 The Asset Holding Management Company (SNEAS). The passing of a decree authorizing the creation of SNEAS was a condition of negotiations. During negotiations, assurances were obtained to ensure that SNEAS would not be an executing agency and would contract out the management of all systems (in Bissau and outside) and the execution of all works to qualified firms and enterprises, either national or international (para. 7.01e). SNEAS would comprise only two departments: (a) the department of finance and administration, which would be in charge of sector accounting and general administration; and (b) the department oftechnical supervision and studies and new works, including works in secondary cities, which would be responsible for identification, preparation and supervision of new projects, as well as environmental monitoring. The proposed project would finance an advisor to SNEAS' General Manager who would assist in sector planning and financial management. 4.14 Staffing. SNEAS would have a small staff and will use consultants and contractors to carry out studies, monitor construction, environmental issues, and the execution of operational activities. During negotiations, assurances were obtained that SNEAS staff will be limited to a maximum of 20 persons, and that it will maintain its annual expenses on personnel to less than 95 million CFAF in 1998, 114 million in 1999 and 105 million in 2000 (para. 7.01e). The official creation of SNEAS and the presentation to IDA of its statues is a condition of Board Presentation of the project (para. 7.02a). 4.15 Training of Staff SNEAS would also be in charge of a training program for laid-off workers from the former EAGB to be executed by NGOs specialized in the field of plumbing and electro mechanic and electrical works. SNEAS would manage the training program for the higher and intermediate staff of the Secretariat of Energy. The proposed project would finance participation of SNEAS and SEE higher-level staff in selected seminars, regularly organized by specialized training agencies in Africa and/or Europe, focusing on project technology and procurement. During negotiations, assurances were obtained that SNEAS will submit to the Bank, not later than two months before the end of each fiscal year, a detailed training program for the coming year (para. 7.01f). 4.16 Accounting and Auditing. SNEAS would hire auditors acceptable to the Bank, financed under the proposed project, to define accounting procedures for the record of assets and debt service and to follow up on their implementation. Duringnegotiations, assurances were obtained that SNEAS will be responsible for the preparation of consolidated sectoral accounts. In addition, SNEAS will issue separate financial statements, including balance sheets, income 21 statements and sources and use of funds statements for the energy and water activities separately (para. 7.01g and 7.03f). 4.17 Certification and auditing of accounts are crucial for the success of the restructuration of the utility and of the institutional reform. During negotiations assurances were obtained that SNEAS will have its financial statements audited annually and would submit to the Bank the audited financial statements with the corresponding audits for review no later than six months following the close of the fiscal/financial year (para. 7.0 Ig). Audits would also be required every six months to cover the OC's customer accounting procedures and accounts, including the monitoring of compliance with financial convenants outlined in paragraph S.11 (para. 7.01 h). The proposed project would finance audits as incremental costs. 4.18 Expenditure Budgets and Financial Forecasts. To avoid financial deadlocks which could result from inappropriate investments and/or financing, it is important that improvement programs be regularly revised in line with expected sectoral revenues and already committed expenses. Therefore, during negotiations, assurances were obtained that SNEAS will transmit to the Bank for review financial forecasts for at least the following three years, along with its annual operating and capital expenditure budgets for the following year, not later than two months before the end of each fiscal year (para. 7.01i). This exercise would be part of the annual revision of the convention or contract signed between the Government and SNEAS. 4.19 Debt Service. The current debt of EAGB to suppliers and the sectoral debts accrued prior to the beginning of SNEAS activities in July 1998, including the Scorpio Project financed by AfDB, will be transferred to the Government for their management and service. During negotiations, assurances were obtained that these debts will be serviced bythe Government (para. 7.01j). The amount of these debts will be stipulated in the convention or enterprise contract to be signed between the Government and the SNEAS. 4.20 Inventory of Fixed Assets. An inventory of fixed assets was carried out and presented in the bidding documents. During negotiations, assurances were obtained that the assets would be annually re-valued (on a pro forma basis) and along consistent procedures acceptable to IDA (para. 7.01k). Auditors would also be requested to provide guidance to SNEAS to set up re- evaluation procedures. 4.21 Convention between the Government and SNEAS. The Government and SNEAS' medium-term objectives and commitments would be part of the convention to be agreed upon on a three-year rolling basis. From the SNEAS side, the main commitment would be related to the implementation of the investment program and the production of sectoral consolidated accounts and regularly revised medium-term forecasts. From the Government side, the emphasis would be put on the respect of the agreed upon investment program, the approval of regular consumer rate increases as well as proper budgetary and payment procedures for the water and electricity consumption of central and local government agencies. The signing of the convention between SNEAS and the Government covering the period 1998-2001, which would include a subsidiary agreement for the amount of the credit being provided to SNEAS (on-lent and as equity), will be a condition of effectiveness (para. 7.03d). 22 4.22 Management of Funds. During negotiations, agreement was reached on using the Trust Fund model to have SNEAS open a fiduciary account in a private commercial bank to manage the funds received from the operating company (para. 7.011). A letter of instruction giving irrevocable permanent guidelines on the utilization of the funds would be given to the commercial bank. The issuance of the letter of instruction to the commercial bank, following review by IDA, will be a condition of project effectiveness (para. 7.03e). Operating costs of SNEAS would be met partially through the equity part of the proposed IDA credit for the first three years (100% for the first two years and 50% for the third year), and thereafter will be financed through the proceeds of the lease/concession contract with the operating company. B. Procurement 4.23 No special exceptions, permits, or licenses need to be specified in the Credit documents for International Competitive Bidding (ICB), since Guinea-Bissau's procurement practices allow IDA procedures to take precedence over any contrary provisions in local regulations. Procurement of works, goods and services financed by the IDA credit will be carried out in accordance with the Guidelines for Procurement under IBRD Loans and IDA Credits (January 1995, revised in January and August 1996 and September 1997). Consultants services contracts financed by IDA will be procured in accordance with Bank's Guidelines for the Selection of Consultants by the World Bank Borrowers, published in January 1997. National Competitive Bidding (NCB) advertised locally would be carried out in accordance with Guinea-Bissau's procurement laws and regulations, acceptable to IDA, provided that: (i) any bidder is given sufficient time to submit bids (four weeks); (ii) bid evaluation and bidder qualification are clearly specified in bidding documents; (iii) no preference margin is granted to domestic contractors and manufacturers; (iv) eligible firms are not precluded from participation; (v) award will be made to the lowest evaluated bidder; and (vi) prior to issuing the first call for bids, draft standard bidding documents are submitted to IDA and found acceptable. Agreement was obtained during negotiations that the Bank's Standard Bidding Documents (SBD) for goods or works under ICB and the Standard Letter of Invitation Package for Consultant's Services will be used (para. 7.01m). 4.24 The procurement methods for items to be financed by IDA are summarized in Table 4. 1. Three types of procurement would be carried out under the project: (i) for the recruitment of the operating company under a lease/concession contract; (ii) for the works to be executed by the operating company, and (iii) for the works that would not be executed by the operating company. Procurement for (i) and (ii) are in a single package and cannot be separated. Procurement under this project would involve mainly civil works, equipment, and consultancy services. Civil works under the water component would consist of the rehabilitation of the existing network in Bissau and the secondary urban centers, and construction of water transport and distribution pipelines. Contracts for these works are included in the call for bids for the lease management contract and would be awarded through international competitive bidding (ICB), after a prequalification of firms. Physical works carried out under the rehabilitation and extension of the electricity network and the construction of reservoirs would be awarded through international competitive bidding (ICB) to which the operating company would not be allowed to participate due to conflicts of interest. During appraisal, the government was informed of the future link of the project with the 23 Interim Trust Fund (ITF), in particular regarding the origin of bidders. In addition, the Government was informed that any advance procurement, including consultant services, will take into account the restrictions specific to ITF. Table 4-1 Summary of Proposed Procurement Arrangements (US$ million equivalent, net of duties and taxes) 1. Civil Works 8.81a 0.97 8.99 18.77 (8.81) (0.97) (0) (9.78) 2. Goods and Equipment 0.24 0.70 0.2 1.15 (0.24) (0.70) (0) (0.95) 3. Consulting Services 1.23 0.17 5.20 3.31 9.92 (5.20) (0) (5.20) 4. Training 0.725 0.725 (0.725) (0.725) 5. Operating Costs 0.205 0.205 (0.205) (0.205) 6. PPF Refinancing 1.99 1.99 (1.99) (1.99) Note: Figures may not add up due to rounding. Figures in parentheses are US$ million equivalent, to be financed by IDA. Local costs are net of duties on imported equipment and material. Contingencies have been calculated for works financed by IDA and donors only. a out of which US$3 million are for the drainage component procured by AGEOPPE 4.25 Procurement under the project will be generally handled by SNEAS with the assistance of short-term consultants. In order to reduce the workload of SNEAS and the need for consultants, the implementation of all civil works under the drainage component (construction and rehabilitation) financed by the IDA credit (and also by other donors interested in such arrangements) will be delegated by SNEAS to the AGETIP-type contract management agency, 24 AGEOPPE. AGEOPPE will contract consultants services for the preparation of detailed design studies, bidding documents and construction supervision, and contractors for the execution of the works. AGEOPPE will be responsible for the overall planning of the works and the preparation of the technical specifications and any other information needed by consultants to prepare the detailed design studies and bidding documents. For all other procurement handled by SNEAS, the procurement methods described below and summarized in Table 4-2 will apply. 4.26 Civil Works. The total cost for civil works is estimated at US$18.77 million for the whole five-year program. Civil works contracts financed by IDA are for US$9.78 million, of which US$3.25 million will be works that will be included in the bid for the lease/concession contract with a private operating company (being hired under ICB), which will be entirely responsible for their execution. Works for the drainage component will be managed by AGEOPPE and carried out through ICB, and are estimated to cost less than US$1,000,000 per contract for an aggregate of US$3,000,000. Works for the environmental clean up are estimated to cost less than US$100,000 per contract, up to an aggregate amount of US$1.25 million and would be procured through NCB procedures applicable to AGEOPPE and described in the Manual of Procedures which is acceptable to IDA. AGEOPPE will maintain a roster of contractors eligible for NCB, according to procedures acceptable to IDA, as spelled out in the Manual of Procedures. Contracts for small works estimated to cost less than US$20,000 per contract, up to an aggregate amount of US$1,000,000, may be procured under lump-sum, fixed price contracts awarded on the basis of quotations obtained from three qualified domestic contractors invited to bid by way of discounts, either on the total price or the on the unit price. The invitation shall include reference unit prices established by an engineer, a detailed description of the works, including basic specifications, the required completion date, a basic form of agreement acceptable to IDA, and relevant drawings where applicable. The award would be made to the contractor who offers the lowest price quotation for the required work, provided he demonstrates he has the experience and resources to successfully complete the contract. 4.27 Goods and Equipment. The total cost for goods and equipment is estimated at US$0.95 million, including equipment, supplies, vehicles, etc. Of this amount, goods and equipment costing about US$0.24 million (excluding duties and taxes) would be procured through ICB and other equipment amounting to US$0.26 million (excluding duties and taxes) would be procured through NCB. Procurement of small equipment, furniture and vehicles costing less than US$20,000 equivalent per contract up to an aggregate of US$100,000 may be procured through prudent local shopping, or up to US$100,000 through international shopping on the basis of quotations obtained from at least three reputable suppliers. Spare parts, operating expenditures, minor off-the-shelf items, and other proprietary items costing less thanUS$5,000 equivalent per contract up to an aggregate of US$50,000 equivalent, may be procured directly from manufacturers and authorized local distributors. 4.28 Consultants' Services and Training financed by IDA would be for: (i) studies, preparation of bidding documents, data collection, accounting systems, audit and impact analysis; (ii) long term technical assistance, short term consultancies on specific technical matters and training. Consultants financed by IDA, totaling US$6.6 million would be hired in accordance with the Bank's Guidelines for Selection and Employment of Consultants by World Bank 25 Borrowers dated January 1997. It will be addressed through competition among qualified short- listed firms in which the selection will be based on Quality- and Cost-Based Selection (QCBS) by evaluating the quality of the proposal before comparing the cost of the services to be provided. For audits of a standard nature, the Least Cost Selection (LCS) will be the most appropriate method--the firm with the lowest price will be selected, provided its technical proposal received the minimum mark. Contracts for consultants services estimated at less than US$100,000 per contract up to an aggregate of US$300,000 would be based on Consultants' Qualifications (CQ), taking into account the consultants' experience and competence relevant to the assignment. Services for lectures and small studies which can be delivered by Individual Consultants will be selected through comparison of qualifications against job description requirements among those expressing interest in the assignment or approached directly. A contract management agency (AGEOPPE was identified by the Government as the proper agency) would be selected on a Sole Source basis for the drainage works and the environmental clean-up. AGEOPPE's fees are estimated at about US$250,000. AGEOPPE is a body recently established under Bank financing and has demonstrated, since 1995, a capacity to manage civil works contracts at economical costs. For training abroad and in-country, the program--containing names of candidates, cost estimates, content of the courses, periods of training, institution selection--would be reviewed by IDA annually. 4.29 Short-lists for contracts estimated under US$100,000 may be comprised entirely of national consultants if a sufficient number of qualified firms (at least three) are available at competitive costs. However, if foreign firms have expressed interest, they will not be excluded from consideration. The standard request for proposal as developed by the Bank will be used for appointment of consultants. Simplified contracts will be used for short-term assignments i.e., those not exceeding six months, carried out by individual consultants. The Government will be briefed during negotiations about the special features of the new guidelines, in particular with regard to advertisement and public bid opening. 4.30 IDA Review. All contracts for construction of civil works and purchase of goods above the threshold value of US$100,000 will be subject to IDA's prior review procedures. The use of IDA's Standard Bidding Documents would considerably expedite the prior review process as IDA review would primarily focus on invitation to bid, the bid data sheet, contract data, technical specifications, bill of quantities/schedule of requirements and other contract-specific items. The review process would cover about 87% of the total value of the amount contracted for works and about 60% of the amount contracted for goods. Selective post-review of contracts awarded below the threshold levels will apply to about one in three contracts. Draft standard bidding documents for goods or works under ICB and the Standard Letter of Invitation Package for Consultant's Services were reviewed and agreed upon with IDA during negotiations (para. 7.01m). Prior review will include the review of budgets, short-lists, selection procedures, letters of invitation, proposals, evaluation reports and draft contracts. Prior IDA review will not apply to contracts for the recruitment of consulting firms and individuals estimated to cost less than US$100,000 and US$50,000 equivalent, respectively. However, the exception to prior IDA review will not apply to the Terms of Reference of such contracts, regardless of value, to single- source hiring, to assignments of a critical nature as determined by IDA, or to amendments of contracts raising the contract value above the prior review threshold. 26 4.31 For consultant contracts estimated above US$200,000, opening financial envelopes will not take place prior to receiving the Bank's no-objection to the technical evaluation. For contracts estimated to cost less than US$200,000 and more than US$100,000 the Borrower will notify IDA of the results of the technical evaluation prior to opening the financial proposals. Documents related to procurement below the prior review thresholds will be maintained by the Borrower for ex-post review by auditors and by IDA supervision missions. SNEAS will be required to maintain all relevant procurement documentation for subsequent review by IDA. SNEAS will submit to IDA periodic procurement schedules detailing each procurement in progress and completed as part of the normal project reporting exercise. 4.32 Thresholds for procurement methods are given in Table 4-2. All thresholds stated in this section shall be reviewed by the Borrower and IDA on an annual basis. 4.33 As a condition for negotiations, the Government submitted to IDA a Manual of Procedures for project management and implementation. Assurances were obtained during negotiations that the Government will: (a) use the Manual of Procedures for project implementation (para. 7.01n); (b) apply the procedures and arrangements outlined above; and (c) review the procurement plan and procurement arrangements each year at the annual review with IDA and other donors. During implementation, all bidding documents, bid evaluation reports, and draft contracts transmitted to IDA for review will contain an updated copy of the procurement plan. Procurement information will be collected and recorded as follows: (a) prompt recording of contract award information by the Borrower; and (b) semi-annual reports to the Bank by the Borrower indicating: (i) revised cost estimates for individual contracts and the total project, including best estimates of allowances for contingencies; (ii) revised timing of estimated, procurement actions, including experience with completion time and completion cost for individual contracts; and (iii) compliance with aggregate limits on specified methods of procurement. 4.34 A detailed procurement plan for works, goods and services to be procured under the two first project years was prepared and agreed upon during negotiations. It will be updated and reviewed on a regular basis during annual reviews. The Government gave assurances at negotiations that it will take the necessary measures to ensure that procurement phases do not exceed the following target time periods (para. 7.0 o): Preparation of bidding documents 4 (12 for large contracts) Preparation of bids by bidders 4 (6 for ICB) Bid evaluation 2 (4 for large contracts) Signature of contracts 2 Payments 4 27 Table 4-2 Thresholds for Procurement Methods and Prior Review ICB NCB Other below US$20,000 - - X No review. Aggregate amount: US$ 100,000 above US$100,000 X Prior IDA review below US$100,000 - X No review. Aggregate above US$20,000 amount: US$300,000 below US$20,000 - X No review. Aggregate amount: US$150,000 below US$5,000 - X No review. Aggregate direct purchase from amount: US$50,000 manufacturers or authorized dealers All TORs or sole source contracts are subject to IDA :_________ __ pnor review Audit N/A N/A N/A Least Cost Prior Review AGEOPPE N/A N/A N/A Sole Source Prior Review Firms above US$200,000 N/A N/A X Prior Review + Review of Technical Evaluation Report before opening financial proposal between N/A N/A X Prior Review + Transmittal US$100,000 of score obtained on and 200,000 Technical Evaluation. Combined evaluation report. N/A N/A X Post Review below US$100,000 N/A N/A X Short list may comprise below US$100,000 entirely local firms if available Individuals above US$50,000 N/A N/A X Prior Review below US$50,000 N/A N/A X Post Review 28 C. Disbursements 4.35 The closing date of the proposed credit will be September 30, 2003. The proposed IDA credit would be disbursed against the categories shown in Table 4-3. Table 4-3 Allocation and Disbursement of IDA Credit A. Civil works 9.0 100% of foreign expenses, 95%o local expenses B. Goods and equipment 0.95 100% of foreign expenses, 95% of local expenses C. Consulting Services 6.09 100% D. Training 0.72 100% E. Operating Costs 0.15 100% until December 31, 2001 F. PPF Refinancing 1.99 as in the PPF agreements G. Unallocated 1.33 4.36 Disbursements will be made in accordance with procedures and policies outlined in the Bank's Disbursement Handbook. A special account for SNEAS covering four months of eligible expenditures will be established at a commercial bank acceptable to IDA (para. 7.01b). Half of the initial deposit will be made available to the special account upon credit effectiveness, and the remaining balance will be made available as needed. Replenishments of the special account should be made every month and must be fully documented, except for operating costs and training expenditures and for contracts valued at less than (i) US$300,000 equivalent for civil works, (ii) US$200,000 for goods; (iii) US$100,000 for consultants (firms); and (iv) US$50,000 for individual consultants. SNEAS will maintain all supporting documents in its office for review by visiting supervision missions and external auditors. D. Project Accounting and Auditing 4.37 Accounting for project expenditures and special account transactions, including statements of expenditures would be maintained by SNEAS in accordance with sound and internationally recognized accounting principles and practices. Agreement was obtained during negotiations for SNEAS to have the project accounts, special accounts, and statement of 29 expenditures audited annually by qualified independent auditors acceptable to IDA, which will include a separate opinion on the use of SOEs and the operation of the special account. Agreement was obtained on ensuring that the audited accounts, together with the auditors' reports, are submitted to IDA no later than six months following the close of their fiscal/fnancial year (para. 7.01p). Setting up of the financial management system (including establishing the project account) and appointment of auditors acceptable to IDA are conditions of project effectiveness (para. 7.03f). 4.38 If (a) the required audited financial statements are not received 'by the due date, (b) the auditor's opinion indicates deficiencies in the accounting and internal controls (including ineligible expenditures) or in the reliability of the financial statements, or (c) the Bank considers the scope or quality of the audit statements to be unacceptable, the Bank may take the following actions: (i) until acceptable audited financial statements are received or a remedial action plan is agreed upon, the Bank normally will not extend the closing date on the loan and normally may delay negotiations or Board presentation of any new loans benefiting the defaulting entity; (ii) if within four months after the due date the Bank does not receive acceptable audited financial statements, the Bank may discontinue the use of the SOE procedure; (iii) if the Bank does not receive acceptable audited Special Account financial statements, it may withhold the replenishment of the Special Account; (iv) after nine months following the due date or if the audited financial statements reveal major deficiencies in internal controls, including inadequate evidence that funds have been used for eligible expenditures, the Bank may suspend disbursements on that loan until it is satisfied that the Borrower and the project implementing entities have taken adequate remedial action. E. Project Reporting, Monitoring and Supervision 4.39 SNEAS would prepare quarterly progress reports covering all project components within one month after the end of each quarter. These reports would include progress achieved against agreed implementation and disbursement schedules as well as key performance.indicators, work programs and cost estimates for the coming quarter and for the total project. The main purpose of the reports would be to provide timely and updated information on implementation of project components, to highlight issues and problem areas, to recommend actions, and to comment on the progress made toward implementing previous recommendations. SNEAS would prepare a completion report within six months of the final disbursement in accordance with IDA guidelines. 4.40 The Government has prepared a Manual of Procedures, including statutes and conventions between the Government, SNEAS and the operating company, to guide overall project implementation. This Manual of Procedures was reviewed during appraisal andpresented to IDA as a condition of negotiations. Assurances were obtained during negotiations that the project would be carried out in accordance with the Manual of Procedures, which may not be amended without Bank approval (para. 7.0 in). Following negotiations, it will be updated to reflect the agreements reached during negotiations and presented to IDA as a condition of Board Presentation (para. 7.02b). 30 4.41 World Bank supervision missions would occur at least twice a year to supervise ongoing operations, preferably in conjunction with the cofinanciers. The supervision program for the project (Annex 4-3) and key performance indicators for monitoring the progress of the project, including the submission of copies of all consultant reports and studies financed (Annex 4-4) were discussed at appraisal and agreed upon during negotiations (para. 7.01q). During negotiations, it was also agreed that IDA, the cofinanciers, and the Government will carry out a detailed review of the entire project one year from the date of credit effectiveness; that is, around July 1999 and every year thereafter (para. 7.01r). During this review, particular attention would be paid to: (i) compliance with projects covenants, particularly those affecting financial effectiveness and audits; (ii) progress made in implementing the project components; and (iii) the performance and efficiency covenants of the water and electricity utility's lease/concession contract. The reviewers might then suggest modifications in the scope of the proposed project. F. Performance Indicators 4.42 Selective performance indicators to be monitored during project implementation have been agreed during negotiations and were included in the minutes of negotiations. The indicators of achievement of project objectives are given in Annex 4-4. G. Environmental Aspects 4.43 The project has been placed in Category A and required an Environmental Impact Assessment (EIA) study. The EIA was carried out in June-July 1996 and was cleared by IDA in November 1996. The Governnent made the EIA available to affected groups and to local NGOs in Bissau prior to negotiations, and it will be available at the Bank's Public Information Center. According to the EIA, the physical works envisaged would not generate involuntary resettlement or cause any environmental problems. Increased water supply and electricity would help improve personal hygiene and reduce health hazards. 4.44 Water pipelines would not have any significant long-term environmental impact following construction and the reinstatement of all surfaces. Care would be taken when citing pipe-fittings to ensure, as far as possible, unobtrusive locations for any chambers, the covers of which should be flush with the road surface. Exposed pipes would be protected against corrosion by bitumen-based paints of unobtrusive colors that blend in with the surroundings. The construction of the water supply system would temporarily disrupt the day to day functions in the local areas. To keep disturbances to a minimum, the Government has accepted the recommendations of the EIA to: (i) limit the amount of trench allowed to be open at any time; (ii) limit contractors' stringing operations in order to avoid having long lengths of unlaid pipes lying by the roadside; (iii) provide financial incentives within the contract for the prompt temporary reinstatement of trenches; (iv) restrict the dumping of trench spoil in unsuitable or inconvenient locations; and (v) ensure that road plates are provided to allow trench crossing. 4.45 The permanent and continuous extraction of water from groundwater aquifers, especially in Bissau, would deplete its water level and contamination by saltwater may occur. To avoid this, 31 the Government is installing special "piezometers" and will develop a mathematical model in order to control the extraction at each existing and proposed well. This study will be very important to establish a long term strategic policy of water resources use. 4.46 In addition to the environmental aspects of the water works, the project will address the issue of environmental cleaning-up of the oil spill behind EAGB's current facilities. To this effect, SNEAS, in coordination with the Government and guided by the Environmental Monitoring Plan (Annex 4-5), will ensure that the mitigating measures agreed upon are adhered to and carried out. 4.47 The main mitigating measures concerning the noise and gas emissions originated by the Central Diesel group (of the power plant) were established based on extensive consultation with the local community. To avoid nuisances and to keep air quality under control, it was agreed that the project would promote: (i) the relocation of the local school; (ii) the construction of 30m high stacks; and (iii) the use of adequate panels to reduce the noise. 32 V. FINANCUIL AND ECONOMIC ANALYSIS A. Introduction 5.01 The fundamental rationale for carrying out the institutional reform is to put both the electricity and water sectors on a sound financial footing, so that they can be independent from Government subsidies and other forms of fiscal support, in particular for their own development. The basis of this financial viability lies in delinking management of both sectors from Government and giving them access to private capital. EAGB has been facing and continues to face a dire financial situation. The utility has been making losses systematically--it has been collecting US$760,000 per month, when it needs US$960,000 to simply break even. The Government has been reluctant to allow an increase in tariffs without accompanying improvement in service delivery. This is a vicious cycle that can only deteriorate unless new investments are undertaken, coupled with institutional reform to give better incentives to the operator of the utility company. The proposed project offers a solution by proceeding on all three fronts, that is, carrying out institutional reform leading to management efficiency, instituting tariff adjustment and making new investments. It is expected that the recruitment of a new private operating company will lead to productivity gains in term of output for both sectors but also to greater efficiency. In spite of the Scorpio Project in the electricity sector and the water project financed by AfDB, Guinea-Bissau faces a short term shortage of production and distribution capacity in both the energy and water sectors. 5.02 Demand forecasts for the electricity and water sectors presented in Annex 5-1 indicates, inter alia, that demand is supply constrained. The proposed project aims to remove some of the supply constraints and offers the possibility to generate enough resources to finance part of future capital expenditures through the activities of the operating company. In addition to the investments that will be financed through the resources of the credit, the project will allow the involvement of the operating company. For example, in the area of electricity, the operating company will participate in the renewal and extension of electricity i.e., the implementation of investments, such as 6,700 connections during the first three years of project execution and the extension of 3.5 kilometers of low tension network over the duration of the lease contract. In the area of water, it is expected that the private operating company will implement 1,500 new connections, two kilometers of primary network and 4.5 kilometers of tertiary network, and finally, the extension of water supply network by two kilometers over the duration of the contract as well as the construction of 5 standpipes per year. This chapter discusses the fmances of the sector as well as the six scenarios prepared to estimate tariff increases for the water sector and tariff decreases for the electricity sector, in order to reach financial equilibrium in each sector and in both sectors. The analysis also quantifies the rationale for the institutional reform of both sectors, without which much higher increases would have been necessary to achieve financial equilibrium in 1998 while implementing an ambitious investment program. 33 B. Financial Analysis 5.03 The financial equilibrium of the water and electricity sector is affected by five main factors: (a) level of water tariffs; (b) efficiency of water distribution of the sector linked to a reform of the sector; (c) level of electricity tariffs; (d) efficiency of electricity distribution of the sector linked to a reform of the sector; and (e) the proposed project. SNEAS or a sector (water or electricity) is considered in equilibrium in a certain fiscal year when the amount of funds generated from internal sources is equal to or greater than the sum of: (i) the net increase in net working capital requirement; (ii) the capital expenditures; (iii) the repayment of long-term debt and transfer to sinking funds, if any, less the sum of (a) the increase in equity and capital subsidies, if any, and (b) new long-term borrowings. To evaluate the relative impact of these five factors on the equilibrium of each sector separately and together, six scenarios were developed. The six scenarios aim to: (a) project into the future the current situation assuming no reforms, no tariff increases nor the proposed project investment; (b) evaluate the impact of the proposed reforms supported by the proposed project and its investments; and (c) estimate alternative water tariff increases and electricity tariff decreases and their impact on financial equilibrium of each sector and of both sectors together. Tables 5-1 and 5-2 summarize these scenarios. For the electricity sector alone, equilibrium is reached in 1998 under all six scenarios, with the greatest accumulated cash flow in Scenario 6, which includes a reduction in the electricity tariff. As for the water sector, Scenario 2 would be acceptable as it would result in a financially viable sector vis-a-vis the State, but does not address the serious impact on productivity and poverty alleviation. Scenario 4 demonstrates the positive impact of the water tariff increases without the planned reforms, which would result in financial equilibrium in the year 2005. Table 5-1 Overview of Financial Scenarios for the Electricity Sector I no noi 178 |Accumulated 4,443 m 1998 Equilibrium FCFA/kWh FCFA (2012) reached in 1998 2 no no' 178 Accumulated 4,443 m 1998 Equilibrium FCFAIkWh FCFA (2012) reached in 1998 40 yes no' 178 Accumulated 30,139 m 1998 Possible reduction FCFA/kWh FCFA (2012) in tariff 4 yes noy 178 Accumulated 30,139 m 1998 Possible reduction FCFA/kWWh FCFA (2012) in tariff 5 yes yes 178 Accumulated 45,287 m 1998 Possible reduction FCFAIWh FCFA (2012) in tariff 6 yes yes 178 accumulated 45,287 m 1998 Eossible reduction FCFA/kWh F CFA (2012) lin trf i The n-umbe r of employees re:mains the same (:346), and the paid rate for receivables stays at 8,2%. Energy sales rem ain stagnant. 34 Table 5-2 Overview of Financial Scenarios for the Water Sector 3 sno no' no 5,789 m FCFA (2012) 2012+ No equilibrium during the 15 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ y ears 4 eno no' 157 to 590 628 m FCFA (2001) 2005 Tariff increase FCFA/M3 in of 18% per year _ _ _ _ _ _ _ ___ ___ ___ 2005 _ _ _ _ _ _ _ _ _ _ _ _ 3 yes noy no 2,212 m FCFA (2001) 2012+ No equilibrium deuring the 15 4 yes nol 157 to3~37 1,263 m FCFA (2003) 2005 Tariff increase FC00M5 i of 10% per year 5 yes yes no 1,299 rn FCFA (2003) 2012 Equilibrium reached in 2012 6 yes yes 157 to 232 1,166 m FCFA (2000) 2005 Tariff increase FCFA/m3 in of 5% per year 'The numier of employees remains the same (346), and the paid rate for receivables stays at 82%. Energy sales remain stagnant. 5.04 Financial Equilibrium. Restoring financial equilibrium in both sectors is necessary to (i) eliminate any form of fiscal support or subsidy and thereby release funds for other sectors; (ii) generate adequate resources to finance part of the future capital expenditures which cannot be financed through loans and also contribute as counterpart funding; and (iii) facilitate favorable conditions for future private sector participation. Financial equilibrium in the electricity sector is reached in 1998, whereas the financial equilibrium for the water sector is not achieved due to low tariffs (the lowest in the region) and the low water volumes produced and sold. However, financial equilibrium for both sectors together is reached in 1998 mainly due to the fact that electricity contributes 85% of the total volumes. Given that Scenario 6 is the one requiring the least cash flow for the water sector and also taking into consideration the fact that the tariff increase for Scenarios 2 and 4 would be socially unacceptable, this scenario is selected to be the base case. 5.05 Future Tariffs. A certain refinement as far as tariffs are concerned is possible on Scenario 6. As stated previously, the electricity tariff is considered high compared to countries in the sub-region, whereas the water tariff is comparatively low. Moreover, the electricity sector is accumulating liquidities (cash flow) over and above what is needed for operations and investments. Assuming an improved billing and collection ratio as well as a reduction in technical and non-technical losses, an adjustment in tariffs is then possible and recommended. Otherwise, average tariff of energy and water should be maintained at their current level until such efficiencies in billing, collection, etc., are achieved. Under this scheme, the tariff for electricity could decrease by 10% per year starting in July 1998 until 2005, going from 178 35 FCFA/kWh to 86 FCFA/kWh at which time such tariff would be similar to the tariff in neighboring countries. The tariff for water would increase by 10% starting in 2001 until 2005, i.e. when the reform will start generating its first impact. The future tariffs in the projections reflect the rationalization in the existing tariff structure. The existing electricity tariffs are the highest in the region at US$0.3 lkWh and water tariffs the lowest in the region at US$0.27/m3. The institutional reform will lead to a restructuration of the management of the public utility and to the elimination of accumulated outstanding debt thereby creating immediate efficiency gains. Ceteris paribus, the net effect of such change is that tariffs might go down in real terms to transfer some of the efficiency gains to the consumers. In any case, tariff adjustment will be carried out to maintain financial equilibrium in the energy sector starting in 1998 and to arrive at equilibrium in the water sector in the year 2005. 5.06 Sensitivity Analysis. In order to obtain a water sub-sector equilibrium in 2005, water tariffs must move from 157 to 253 FCFA, through an annual increase of about 10% from 2001 to 2005. In combining this variant to the electricity sector, the two sectors reach equilibrium together starting in 1998. If developed on its own, the electricity sector would be balanced asof 1998. The analysis tested the sensitivity of the rate of return to less favorable scenarios including: (a) a 20 percent increase in fuels costs; (b) a 15% decrease in fuel cost; (c) a drop of 20% in expected benefits (revenues); and (d) a drop of 2% annually in expected demand. This analysis indicates that the water investment program is most sensitive to a drop in revenues, although in this case the rate of return would be 12%.. As for the electricity investment program, it is affected by a rise of fuel cost but is the most sensitive to a drop in revenues. (a) Profitability of investments: The FRR of the water sector = 13.4% The FRR of the electricity sector = 19.3% The FRR of both = 18.6% (b) Hike of fuel cost: if fuel cost increase by 20%, the FRR will take on the following values: Fuel cost increase of 20%l 16.6% 9.5% 15.3% (c) Decrease in fuel cost: if fuel cost decrease by 15%, the FRR will take on the following values: lFuel cost decrease oflS5% l16.6% 31.2% l26.2l (d) Decrease in benefits: if benefits decrease by 20%, the FRR will take on the following values: Benefits decrease of 20% l12% l(8.1%) 2.2 L l 36 (e) Annual decrease in expected demand: if expected demand decreases by 2% annually, the FRR will take on the following values: Annual decrease of 2% in 16.2% l11.6% 15.9% expected demandl 5.07 Financial projections of SNEAS and the Operating Company. On the water side, the analysis assumes (a) an increase in management efficiency due to institutional reform of sector, and therefore better services and improved billing and collection; (b) an increase in water production and a simultaneous decrease in losses as a result of the proposed project, which has some elements of rehabilitation, leak detection and expansion to the current network; and (c) an increase in revenues due to an increase in tariffs. 5.08 For the energy component, the assumptions on which the calculations are made are the following: (a) an increase in management efficiency brought about by institutional reforms, better services and improved billing and collection; (b) a decrease in operating costs as a result of overhaul of machines and the installation of meters leading to reduction of technical as well as non-technical losses; (c) an increase in production brought about by both investment arising from the Scorpio project (re-doing all the medium tension lines in downtown Bissau) and the investment of the current proposed project (a total of US$8.5 million); and (d) an increase in revenues due to a combination of an economical tariff structure and an increase in volume produced and billed. 5.09 The operating company's profit is included in the tendered tariff with its production costs. The operating company is in charge of public lighting, including the parts (light bulbs and maintenance) while investment for the public lighting is paid for by the municipality. It remains understood that the operator is completely free to execute at his expense any investment project to increase either efficacy of the networks or the subscribed customers. He will be the only beneficiary. Royalties that the operator has to pay correspond in all cases to revenues of the asset holding company. These revenues must cover his expenses, interests on borrowing and his operation costs. 5.10 Capital Structure - The Operating Company. Besides the investment that is imposed under the contractual obligation with SNEAS and the Government, the operating company does not carry any fixed assets other than equipment and vehicles on its books. As a result it does not require a significant amount of capital either in debt or equity other than to finance the net working capital requirements. It will be the responsibility of the operating company to raise whatever capital is necessary to finance operations, either in the form of debt or equity. Social capital of the operating company, estimated at CFAF 929 million, will have to be paid in the first years of the starting up of the new company. The operating company will pay the entire amount of the social capital. According to the bidding documents, the operating company will have at least 51% of the capital of the new company, and will have up to one year to sell the remaining 37 49% to Bissau-Guinean partners. Along with the social capital, the operating company is responsible for carrying out with its own funds investments amounting to FCFA 1,870 million. 5.11 To ensure that the operating company will implement the necessary changes and bring about the financial returns projected and agreed upon, assurances were obtained during negotiations on the following: (i) SNEAS will not enter into new borrowing arrangements unless a reasonable forecast of its revenues and expenditures, which is acceptable to IDA, indicates that projected internal cash generation for each year during the term of the debt to be incurred will be at least equal to SNEAS' projected debt service for that year (para. 7.01s); (ii) SNEAS will not make any new investment until the end of the project unless such investment is, in the opinion of IDA, technically, financially and economically viable based on detailed financing plans and forecasts (para. 7.01t); (iii) SNEAS will provide the Bank with consolidated financial statements for the water and energy sectors at the end of each fiscal year. In addition, no later than three months before the beginning of each fiscal year, commencing with fiscal year 1999, SNEAS shall, on the basis of a ten-year financial projections satisfactory to IDA, review whether it would meet the requirements of financial equilibrium in any year covered by such projections and shall furnish to IDA the results of such review upon its completion. If any such review shows that the requirement of financial equilibrium for any year covered by such projections cannot be met, SNEAS, in conjunction with the Government, shall promptly take all necessary measures (including, without limitation, adjustments of the structure or levels of the electricity and water rates) in order to meet such requirements in due time (para. 7.0 1u). C. Economic Analysis 5.12 The economic analysis of the water supply component of the proposed project demonstrates that it will provide approximately 50% of the population of Bissau with potable water, with about 115,000 new customers including the secondary cities (Annex 5-1). Additional economic benefits will be (a) increased efficiency ofproduction and lower costsdue to improved management, increased employee productivity, and the consequent extension of the lifetime of the network; (b) a decrease in unaccounted-for water due to improved management and the immediate rehabilitation of the water system; (c) increased personal savings by people who formerly bought water at high rates from vendors due to greater access to a more reliable primary water supply from the utility at lower prices; and (d) a consumers' surplus as a result of the increase in water consumption per capita. Other effects, including health benefits from reductions in water-borne diseases and infant mortality, the reduction of the burden now placed on women and children to fetch water, and improvements in the urban environment as well as urban environment management, while acknowledged, have not been quantified for this analysis. 5.13 The internal economic rate of return IERR of the water component of the project is 52% (Annex 5-2). The exchange rate is assumed to be in equilibrium as a result of the CFA devaluation in 1994. Incremental revenues from the sale of water were taken as a proxy for direct use benefits. In addition to the quantified benefits included in the economic analysis, there are a number of non-quantified benefits which, if they could be included in the analysis, would further increase the IERR. Savings in time and/or investment and maintenance costs associated with other alternative sources of water to meet bathing and cleaning needs will also contribute to 38 the income effect. Finally, although some of the direct health benefits to household members are probably taken into account in the price paid for water services, the indirect benefits accruing to other members of the community are not, and thus represent additional benefits. 5.14 The current CFAF 157/m3 of water sold is equal to the actual water tariff. Annual real increases of 10% from 2001-2005 would result in an average tariff which is about 190% of the average incremental cost (AIC) by the year 2005 (Annex 5-2). 5.15 In order to ensure that the investment is justified, the cost benefit analysis of the energy component was carried out. The capital costs of the investment program together with incremental operation and maintenance costs associated with the investment program are shown in Annex 5-3. All costs are expressed in terms of their equivalent border values. The incremental demand served was determined through simulations of the operations of the utility with and without the investment program. On this basis, the internal economic rate of return (IERR) would be 92%. 39 VI. PROJECT JUSTIFICATION AND RISKS A. Project Benefits 6.01 The key benefits of the proposed project would be the following: (a) on thepoverty and health side, the project. would improve the quality and the access to safe water of urban and peri- urban dwellers, especially the poor; (b) on the economic side, it would provide for the demands of electricity and water of commercial and industrial users, allowing for better development of urban areas as centers of economic growth, as well as increase time savings for women and children, particularly among the poor, which would translate into greater opportunities for education and employment; (c) on the financial side, the project would improve the viability of private provision of water and electricity, (d) on the environment side, it would provide for the implementation of mitigating measures for water and electricity works and the cleaning up of the environmentally hazardous oil spill behind EAGB's power plant. Overall the project will make the water and electricity utility a viable entity and decrease the pressure of the utility on public resources. 6.02 The project would support IDA's efforts to better integrate poverty issues in the design of urban and peri-urban investments. In the water component, systematic community participation would be encouraged at neighborhood levels to gauge the actual demand of users, particularly women, who are usually the main water carriers in low-income neighborhoods. A mere 18% of the urban population in Guinea-Bissau (and only a quarter of the total population) have access to safe drinking water. The energy component would improve the provision and expand the distribution of electricity, as well as provide the basis for general economic growth in the urban areas. Employment opportunities would be created during rehabilitation and expansion of networks as most of the civil works will be carried out by local contractors and/or subcontractors. In addition to the non-quantifiable, direct and indirect benefits mentioned above, the proposed project would ensure access to safe water for 150,000 people, and access to energy for 250,000 people. B. Project Sustainability 6.03 The proposed project would address the current weak institutional set-up of EAGB as it stands by moving from a performance-based management contract to a lease/concession contract, and by establishing an asset holding management company to manage the assets and planning aspects of the sector. The institutional reform is based on the following principles: * Incentives for the operating company: The rental fee for the private operating company for the utility is based on the amount of water and energy produced rather than distributed, meaning that the company has every incentive to increase profits by increasing distribution, cutting losses, and improving collection. * Private operator targets: As an additional incentive for the operating company to renew investments and limit losses, non-revenue water performance targets are specified in the 40 contractual agreement. These include specific targets in the water sector for installation of public standpipes and low-income house connections to ensure greater access for the poor. Sectorfinancial equilibrium: To ensure long-term sustainability and free up fiscal resources for other sectors, a specific time-frame is stipulated for reaching cash-flow equilibrium in the two sectors. It is expected that this will provide the grounds for improving management and give the private sector the flexibility needed to first, make the utility company more profitable and sustainable, and second, make the water and energy sector more efficient and effective. On the water side, the focus on involving communities to set up the tariff structure and for the maintenance and use of the facilities is expected to help ensure the sustainability of the provision of safe, affordable water to a larger proportion of the population in urban and peri-urban areas. Operation and maintenance of the water system would be independent from government subsidies. Other benefits from the institutional reform include: (a) efficiency gains, which will be shared by consumers through adequate tariff regulation; (b) greater sustainability of electricity supply through investment in the sector; and c) savings in public resources, which the Government can reallocate to social programs. In addition, the energy efficiency improvement program that will be carried out to promote energy conservation will provide more benefits to the population. C. Project Risks 6.04 Institutional Issues. The main risks are on the institutional side, namely, the possibility of political and social opposition to the restructuring of the utility company. However, various measures have been taken to mitigate this risk. Two ZOPP workshops were held in the course of project preparation to discuss institutional reform, all attended by the major stakeholders from Government, the private sector and civil society. While the Government had been slow in implementing reforms under the Energy Project, extensive dialogue and discussions of constraining factors have taken place and some of the bottlenecks ironed out. As a result of these discussions, the Government has made significant progress on reforms under the Energy Project (e.g., tariff reforms, liquidation of DICOL and Guinee Gas) and has prepared both a Water Sector Policy Letter and an Energy Sector Policy Letter which were reviewed by IDA and signed by the relevant ministers. The draft policy letters incorporate the main elements of the institutional reform proposed under this project. 6.05 As further evidence of Government commitmnent to institutional reform, a PPF was signed under this project, under which the Government hired consultants to proceed with preparation of bidding documents for hiring a new operating company. The prequalification process was successful and a prebidding conference organized by the Minister of Economy and Finance, the Minister of Social Infrastructure and the Secretary of State for Energy took place in Lisbon with the two pre-qualified firms. The bidding documents for hiring the new operating company were launched in January 1998. There is full ownership by the Government of the institutional reform process. A solution for the management of the utility during the transition period (August 1997 to June 1998) has been negotiated with the Government, using resources from a second PPF (a team consisting of external technical assistants and consultants has been 41 managing the utility). A Comite de Pilotage has been formed with high level representatives from relevant ministries, which is overseeing the reform process, and which is also responsible for the creation of SNEAS. 6.06 Social Issues. Social problems could occur as a result of the institutional reform. Staff reduction could create dissatisfaction leading to work stoppage and difficulties for the new operating company. In order to mitigate these problems, all former workers of EAGB will automatically be recruited by the operating company while EAGB is liquidated. The new operator will have a six-month period to make staff adjustments and the project will finance, through a social fund, the payment for overstaffing for that period. 6.07 Water Sector Issues. On the water side, the main risks are: (a) slow implementation of the policy to discontinue the practice of providing free water at the standpipes; and (b) the pace at which communities would be mobilized and sensitized to participate in the process, and their willingness to pay for water and sanitation services. The first risk would be mitigated by a time bound action plan based on a willingness-to-pay study to introduce cost-recovery through water vendors at the metered standpipes. The second risk would be mitigated by a systematic use of beneficiary assessments and an extensive community participation program involving the mayors, NGOs and community leaders. 6.08 Energy Sector Issues. On the energy side, the main risk is associated with the institutional location of the Secretariat of Energy which has recently been moved from MEIRN to the office of the Prime Minister. This raises the risk of political interference and lack of compliance with the autonomy of SNEAS to oversee the functioning of the sector. This risk will be mitigated by making sure that the convention between SNEAS and the Government is transparent and that the new Secretary of Energy is fully on board with the institutional reforms under way. 6.09 Private Operator Issues. The issue is whether the lowest bid for electricity will be sufficiently low to allow for financial viability of the electricity sector while itsubsidizes the water sector, and above all allows for a reduction of the tariff of electricity acceptable to the Bissau-Guinean authorities. This issue has been addressed by demanding that tariff adjustments be made to ensure that financial equilibrium be reached for both sectors jointly in 1998, and separately for electricity in 1998 and for water in 2005. 42 VH. AGREEMENTS AND RECOMMENDATION A. Agreements Reached 7.01 During negotiations, the Government agreed to the following: (a) the program of works to be executed for the power plant and water reservoirs will be submitted to IDA for no objection prior to calling for tenders (para. 3.13); (b) creation of a special account in a foreign commercial bank acceptable to IDA to be managed by SNEAS (para. 3.17), which would initially cover four months of eligible expenditures (para. 4.36); (c) conditions for financing SNEAS (para. 3.17); (d) project implementation schedule (para. 4.01); (e) SNEAS would not be an executing agency and would contract out the management of all systems (in Bissau and outside) and the execution of all works to qualified firms and enterprises, either national or international (para. 4.13). SNEAS staff will be limited to a maximum of 20 persons with annual expenditures on personnel not to exceed 95 million CFAF in 1998, 114 million in 1999 and 105 million in 2000(para. 4.14); (f) SNEAS will submit to the Bank, not later than two months before the end of each fiscal year, a detailed training program for the coming year for SNEAS and higher level staff of SEE (para. 4.15); (g) SNEAS will be responsible for the preparation of consolidated sectoral accounts. It will also issue separate financial statements, including balance sheets, income statements and sources and uses of funds statements for the energy activity and water activity separately. In addition, SNEAS will have its financial statements audited annually and would submit to the Bank the audited financial statements with the corresponding audits for review no later than six months following the close of the fiscal/financial year (para. 4.16 and 4.17); (h) SNEAS will commission an audit of the operating company every six months using an independent auditor acceptable to IDA, which would include the monitoring of compliance with financial covenants (para. 4.17); (i) SNEAS will transmit to the Bank for review, not later than two months before the end of each fiscal year, together with its annual operating and capital expenditure 43 budgets for the following year, financial forecasts for at least the following three years (para. 4.18); (j) all accrued debts of EAGB prior to July 1998 will be serviced by the Government (para. 4.19); (k) SNEAS' assets would be annually revalued (on a pro forma basis) and along consistent procedures acceptable to IDA (para. 4.20); (1) SNEAS would open a fiduciary account in a private commercial bank to manage the funds received from the operating company (para. 4.22); (m)the Bank's Standard Bidding Documents for goods or works under ICB and the Standard Letter of Invitation Package for Consultant's Services would be used (para. 4.23). Draft standard bidding to be used were also reviewed and agreed upon (para. 4.30); (n) the project would be carried out in accordance with the Manual of Procedures, which may not be amended without Bank approval (para. 4.33 and 4.40); (o) a detailed procurement plan for works, goods and services to be procured under the two first project years which will be updated and reviewed on a regular basis during annual reviews. The Government will take the necessary measures to ensure that procurement phases do not exceed the target time periods (para. 4.34); (p) SNEAS will have the project accounts, special accounts, and statement of expenditures audited annually by qualified independent auditors acceptable to IDA, which will include a separate opinion on the use of SOEs and the operation of the special account. SNEAS will also ensure that the audited accounts, together with the auditors' reports, are submitted to IDA not later than six months following the close of their fiscal/financial year (para. 4.37); (q) the supervision program, perforrnance indicators and reporting requirements, including the submission of all consultants reports and studies financed under the project (para. 4.41); (r) IDA, the cofinanciers, and the Govermment would carry out a detailed review of the entire project one year from the date of credit effectiveness, that is, around July 1999 and every year thereafter (para. 4.41); (s) SNEAS will not enter into new borrowing arrangements unless a reasonable forecast of its revenues and expenditures, which is acceptable to IDA, indicates that projected internal cash generation for each year during the term of the debt to be incurred will be at least equal to SNEAS' projected debt service for that year (para. 5.11); 44 (t) SNEAS will not make any new investment until the end of the project unless such investment is, in the opinion of IDA, technically, financially and economically viable based on detailed financing plans and forecasts (para. 5.11); (u) no later than three months before the beginning of each fiscal year, commencing with fiscal year 1999, SNEAS shall, on the basis of a ten-year financial projections satisfactory to IDA, review whether it would meet the requirements of financial equilibrium in any year covered by such projections and shall furnish to IDA the results of such review upon its completion. If any such review shows that the requirement of financial equilibrium for any year covered by such projections cannot be met, SNEAS, in conjunction with the Government, shall promptly take all necessary measures (including, without limitation, adjustments of the structure or levels of the electricity and water rates) in order to meet such requirements in due time (para. 5.11). 7.02 As conditions of Board Presentation: (a) SNEAS was created and its statutes presented to IDA (para. 4.14); (b) the Manual of Procedures was finalized, incorporating the changes agreed upon during negotiations (para. 4.40). 7.03 The conditions of effectiveness are: (a) passing and publication of a new Electricity Law (para. 2.18); (b) confirmation of agreements between all cofinancing parties (para. 3.16); (c) signing of two contracts, between the Operating Company and SNEAS, and between the Operating Company and the Government. These would specify the roles and responsibilities of the three parties, including performance contracts, and the expected outcomes. Agreed upon targets would be reviewed at the end of the first two years of project life, and every three years thereafter, to take into account results obtained and any changes in circumstances (para. 4.05); (d) signing of the convention between SNEAS and the Government covering the period 1998-2001, which would include a subsidiary agreement for the amount of the credit being provided to SNEAS (on-lent and as equity) (para. 4.21); (e) issuance by SNEAS of the letter of instruction to a commercial bank, following review by IDA, giving irrevocable permanent guidelines to the bank on the utilization of funds from the lease/concession contract with the operating company (para. 4.22); (f) setting up of a financial management system (including project account) and appointment of auditors acceptable to IDA (para. 4.37). 45 B. Recommendation With the above agreements and actions, the proposed project would be suitable for an IDA credit of SDR 15 million (US$20.25 million) equivalent to the Republic of Guinea- Bissau. GUINEA-BISSAU Water and Energy Project Organizational Structure of EAGB General Director Acdninistrative AssiLmta . . I ~~~~Adjoint Genieral ON Administrauve and Director in Charge of Technical Director Financial Director Commercial Mssions Adjoint Adjoint Technical Administrative and - Directorhni Financial Director _ _ Administrative _ Administrative L Assistant Assistant Manager Of Lmgff of Manager of Director of Director of Manager of i Accountmng m Administrative Commercial *rWater Electricity e Gene=d Sm-vices Services Services Production Distrbutionf I- GUINEA-BISSAU Water and Energy Project Institutional Arrangements | ~STATE : Concession Contract . Lease Contract , 'Contract Plan Performance Contract Asset Holding Management | Control Operating Company | i Company < ~~~~~~~~Leasing Fee m~~~~~~~~~~1 GUINEA-BISSAU Water and Energy Project Institutional Reform of the Water and Electricity Sector of Bissau - Political authority S - Legislation STATE | - Tariff setting - Management of water resources -Control r COMMITTEE FOR IMPLEMENTATION OF INSTITUTIONAL REFORM x Technical Secretariat (oversees reform process) ASSET-HOLDING MANAGEMENT COMPANY SOCIEDADE NACIONAL DE ENERGIA AGUA E - Management of assets and ... *SANEAMENTO (SNEAS) investments - Management of lease contracts Participation of the state and local authorities composed - Debt management by PROMAS, EAGB, DGE EAGB OPERtATING COMPANY - Management of water and .... Private company selected through international electricity production and distribution competitive bidding ~-Investments for rehabilitation competitive bidding and renovation ......c............ 0 k 49 ANNEX 2-2 Page 3 or 3 GUINEA-BISSAU Water and Energy Project Matrix of Sector Actors and Responsibilities STATE Definition of * Elaboration of legal and regulatory framework sector * Definition of sector policy strategy * Resources management (specifically water) Determination and approbation of tariffs and tariff system PUBLIC Management * Management of assets (development, amortization, debt service) HOLDING of * Planning and programming new investments, search for financing COMPANY means * Contract management authority for renovation works of existing infrastructure * Contract management authority for rehabilitation works of distribution network * Contract management authority for extension works of infrastructure * Control and monitoring of quality of operations and respect of contractual agreements, maintenance audit * Financial monitoring and studies for appropriate tariff adjustments * Public awareness campaign and provision of information to public PRIVATE Technical * Operations and maintenance of infrastructure and material and equipment OPERATING and required for operations COMPANY commercial * Renovation of operational equipment and meters management * Renovation of distribution network and connections * Extension of distribution network * Studies and justification of necessity of renovation and/or extension works for infrastructure * Manager of investment program * Billing and collection * Public relations with consumers Definitions Infrastructure: Infrastructure consists of all fixed assets and those moveable assets that are fixed by destination. The water supply and energy infrastructure is owned by SNEAS Operating equipment: Operating equipment consists of all moveable assets that are necessary for efficient and effective operation of the system including domestic meters. The operating equipment is owned by the operating. Maintenance of water supply infrastructure: Maintenance includes all supplies and works that are valuable or necessary for a reliable functioning of the water and electricity systems. Reliable functioning of the water supply system is hereby defined as all parts of the system including water extraction, drinking water production and transportation, and water distribution (including domestic water meters), that contribute, without interruption, to the supply of sufficient water at a suitable pressure and of good quality, that complies with the prevailing national drinking water standards and guidelines. Reliable functioning of the electricity system is hereby defined as all parts of the system including production, transport and distribution (inlcuding domestic eletricity meters), that contribute to the supply of sufficient electricity without interruption or fluctuation. Maintenance should be performed in such a way that any part of the systems will function properly at least during a period that is equal to the pre-defined depreciation period. All repairs of damages caused by whatever reason are to be considered as maintenance. Renewal of infrastructure: Investments for renewal include any studies, engineering designs, civil works, equipment and supplies, that are required to replace or renovate any part of the water and electricity infrastructure, after, as a minimum, the depreciation period of that part has passed, and provided that considerable technical arguments justify renewal. Renewal of any part of the infrastructure, for technical reasons, is considered necessary only if the gained improvement can be demonstrated in technical and in financial terms. Therefore, any decision for renewal of any part of the infrastructure should be supported by a documented proposal by the operating company. Extension of infrastructure: Extension of water and electricity infrastructure includes any studies, engineering designs, civil works, equipment and supplies that are required: (i) to extend the capacity of water or energy production, of transportation or storage, and of distribution (including domestic connections); or (ii) to upgrade the technical condition of the existing facilities through increased performance, better quality of the product or increased operational reliability. Guinea-Bissau Water & Energy Project Components Project Cost Summary % % Total (CFAF '000) (US$ '000) Foreign Base Local Forelgn Total Local Foreign Total Exchange Costs A. Institutional Reform & Capacity Building Studies 32,775.0 185,725.0 218,500.0 57.0 323.0 380.0 85 1 Technical Assistance 23,287.5 131,962.5 155,250.0 40.5 229.5 270.0 85 1 Equipment 35,776.5 321,988.5 357,765.0 62.2 560.0 622.2 90 2 Community Participation 132,968.8 398,906.3 531,875.0 231.3 693.8 925.0 75 3 Energy Efficiency Program 43,125.0 129,375.0 172,500.0 75.0 225.0 300.0 75 1 Training/Seminars 128,259.5 254,345.5 382,605.0 223.1 442.3 665.4 66 2 Liquidation EAGB 57,500.0 - 57,500.0 100.0 - 100.0 - - Financing Social & Reserve Fund 107,812.5 323,437.5 431,250.0 187.5 562.5 750.0 75 3 Operating Costs 64,972.1 368,175.4 433,147.5 113.0 640.3 753.3 85 3 Audits 30,187.5 171,062.5 201,250.0 52.5 297.5 350.0 85 1 Public Procurement Program 72,306.3 216,918.8 289,225.0 125.8 377.3 503.0 75 2 Subtotal Institutional Reform & Capacity Building 728,970.6 2,501,896.9 3,230,867.5 1,267.8 4,351.1 5,618.9 77 19 B. Urban Water Supply BISSAU 722,322.5 2,477,642.2 3,199,964.7 1,256.2 4,308.9 5,565.2 77 19 Secondary Cities 61,122.5 230,977.5 292,100.0 106.3 401.7 508.0 79 2 Low Income Connections & Standpipes (SNEAS) 71,875.0 215,625.0 287,500.0 125.0 375.0 500.0 75 2 o Subtotal Urban Water Supply 855,320.0 2,924,244.7 3,779,564.7 1,487.5 5,085.6 6,573.2 77 22 C. Energy Electricity Generation & Distribution 472,822.5 4,255,402.5 4,728,225.0 822.3 7,400.7 8,223.0 90 28 Environmental Clean-up 320,332.5 391,517.5 711,850.0 557.1 680.9 1,238.0 55 4 Environment Monitoring Plan 57,541.4 230,165.6 287,707.0 100.1 400.3 500.4 80 2 Traditional Energy Component 988,137.5 423,487.5 1,411,625.0 1,718.5 736.5 2,455.0 30 8 Subtotal Energy 1,838,833.9 5,300,573.1 7,139,407.0 3,198.0 9,218.4 12,416.4 74 42 D. Pluvial Drainage Rehabilitation of existing network in center city 130,323.8 333,701.3 464,025.0 226.7 580.4 807.0 72 3 Extension of primary network 335,340.0 409,860.0 745,200.0 583.2 712.8 1,296.0 55 4 Special Works 194,062.5 237,187.5 431,250.0 337.5 412.5 750.0 55 3 Subtotal Pluvial Drainage 659,726.3 980,748.8 1,640,475.0 1,147.4 1,705.7 2,853.0 60 10 E. PPF Refinancing 228,850.0 915,400.0 1,144,250.0 398.0 1,592.0 1,990.0 80 7 Total BASELINE COSTS 4,311,700.8 12,622,863.4 16,934,564.2 7,498.6 21,952.8 29,451.4 75 100 Physical Contingencies 235,559.2 780,888.4 1,016,447.6 409.7 1,358.1 1,767.7 77 6 Price Contingencies 360,526.0 525,500.6 886,026.6 627.0 913.9 1,540.9 59 5 Total PROJECT COSTS 4,907,786.1 13,929,252.3 18,837,038.4 8,535.3 24,224.8 32,760.1 74 111 tE[ Guinea-Bissau Water & Energy Project Project Components by Year -- Base Costs (US$ '000) Base Cost 1998 1999 2000 2001 2002 Total A. Institutional Reform & Capacity Building Studies 160.0 140.0 65.0 15.0 - 380.0 Technical Assistance 195.0 75.0 - - - 270.0 Equipment 497.4 31.2 31.2 31.2 31.2 622.2 Community Participation 225.0 300.0 200.0 100.0 100.0 925.0 Energy Efficiency Program 90.0 90.0 60.0 30.0 30.0 300.0 Training/Seminars 290.0 170.0 110.0 85.4 10.0 665.4 Liquidation EAGB 100.0 - - - - 100.0 Financing Social & Reserve Fund 750.0 - - - - 750.0 Operating Costs 289.4 248.6 215.3 - - 753.3 Audits 350.0 - - - 350.0 Public Procurement Program 251.5 251.5 - - - 503.0 Subtotal Institutional Reform & Capacity Building 3,198.3 1,306.3 681.5 261.6 171.2 5,618.9 B. Urban Water Supply BISSAU 1,366.3 2,757.6 1,416.3 25.0 - 5,565.2 Secondary Cities 127.0 254.0 127.0 - - 508.0 Low Income Connections & Standpipes (SNEAS) 125.0 250.0 125.0 - - 500.0 Subtotal Urban Water Supply 1,618.3 3,261.6 1,668.3 25.0 - 6,573.2 C. Energy Electricity Generation & Distribution 2,055.8 4,111.5 2,055.8 - - 8,223.0 Environmental Clean-up 309.5 619.0 309.5 - - 1,238.0 Environment Monitoring Plan 125.1 250.2 125.1 - - 500.4 Traditional Energy Component 613.8 1,227.5 613.8 - - 2,455.0 Subtotal Energy 3,104.1 6,208.2 3,104.1 - - 12,416.4 D. Pluvial Drainage Rehabilitation of existing network in center city 201.8 403.5 201.8 - - 807.0 Extension of primary network 324.0 648.0 324.0 - - 1,296.0 Special Works 187.5 375.0 187.5 - - 750.0 Subtotal Pluvial Drainage 713.3 1,426.5 713.3 - - 2,853.0 E. PPF Refinancing 1,990.0 - - - - 1,990.0 Total BASELINE COSTS 10,623.9 12,202.6 6,167.1 286.6 171.2 29,451.4 Physical Contingencies 473.6 853.4 432.0 5.6 3.1 1,767.7 Price Contingencies 173.7 704.1 590.0 41.1 32.1 1,540.9 Total PROJECT COSTS 11,271.3 13,760.0 7,189.1 333.3 206.4 32,760.1 Taxes - - - - - - Foreign Exchange 8,499.4 10,082.6 5,250.3 245.8 146.7 24,224.8 I I Guinea-Bissau Water & Energy Project Project Components by Year - Totals Including Contingencies (US$ '000) Totals Including Contingencies 1998 1999 2000 2001 2002 Total A. Institutional Reform & Capacity Building Studies 163.1 147.9 71.0 16.9 - 398.9 Technical Assistance 198.7 79.2 - - - 278.0 Equipment 556.9 36.1 37.3 38.5 39.8 708.6 Community Participation 230.0 319.1 220.5 114.2 118.2 1,001.9 Energy Efficiency Program 92.0 95.7 66.2 34.2 35.5 323.6 Training/Seminars 297.5 180.8 121.9 98.0 13.0 711.3 Liquidation EAGB 104.3 - - - - 104.3 Financing Social & Reserve Fund 766.5 - - - - 766.5 Operating Costs 295.0 262.6 235.2 - - 792.8 Audits 356.7 - - - - 356.7 Public Procurement Program 251.5 251.5 - - - 503.0 Subtotal Institutional Reformn & Capacity Building 3,312.1 1,373.1 752.1 301.9 206.4 5,945.5 B. Urban Water Supply BISSAU 1,517.4 3,184.9 1,695.2 31.4 - 6,428.8 Secondary Cities 140.6 292.3 151.3 - - 584.2 Low Income Connections & Standpipes (SNEAS) 140.5 292.5 151.6 - - 584.7 Subtotal Urban Water Supply 1,798.5 3,769.7 1,998.1 31.4 - 7,597.7 C. Energy Electricity Generation & Distribution 2,277.1 4,710.7 2,432.3 - - 9,420.1 Environmental Clean-up 342.6 719.1 374.5 - - 1,436.2 Environment Monitoring Plan 129.6 269.3 139.4 - - 538.4 Traditional Energy Component 626.0 1,252.0 626.0 - - 2,504.0 Subtotal Energy 3,375.4 6,951.2 3,572.2 - - 13,898.8 D. Pluvial Drainage Rehabilitation of existing network in center city 217.1 452.6 234.8 - - 904.5 Extension of primary network 366.2 768.7 400.3 - - 1,535.2 Special Works 211.9 444.8 231.7 - - 888.4 Subtotal Pluvial Drainage 795.3 1,666.1 866.8 - - 3,328.1 E. PPF Refinancing 1,990.0 - - - - 1,990.0 Total PROJECT COSTS 11,271.3 13,760.0 7,189.1 333.3 206.4 32,760.1 0 n Guinea-Bissau Water & Energy Project Table 1. Urban Water Supply Detailed Costs US$ '000) Parametrs (In %) Phy. Base Cost Cont For. Gross 1998 1999 2000 2001 2002 Total Rate Exch. Tax Rate I. Invesment Coats A. Reservoira Foragesfutur M profonds 250 m3Ih 62.5 125.0 62.5 - - 250.0 10.0 75,0 0.0 Rehabilitation de 2 forages 25.0 75.0 75.0 25.0 - 200.0 10.0 75.0 0.0 Reservoir nouveau de 700 m3 en B.A 125.0 250.0 125.0 - - 500.0 10.0 75.0 0.0 Subtotal ReservoIrs 212.5 450.0 262.5 25.0 - 950.0 B. Primary & Secondary Network 1. Urgence SM - condultes DN 200 2.9 5.7 2.9 - - 11.4 10.0 75.0 0.0 DN 100 4.8 9.6 4.8 - - 19.3 10.0 75.0 0.0 d6molition et refection de chauss6eas 4.5 9.0 4.5 - 1 8.0 10.0 75.0 0.0 Subtotal Urgence SM - condultes 12.2 24.3 12.2 - 48.7 2. Urgence OM * condultes nouvelles DN 250 85.9 171.9 85.9 - - 343.7 10.0 75.0 0.0 DN 200 20.1 40.2 20.1 - - 80.4 10.0 75.0 0.0 DN 150 5.1 10.1 5.1 - - 20.3 10.0 75.0 0.0 DN 100 66.8 133.5 66.8 _ - 267.1 10.0 75.0 0.0 Subtotal Urgence SM -conduitesnouvelles 177.9 355.7 177.9 711.4 Subtotal Primary & Secondary Network 190.0 380.0 190.0 - - 760.1 C. Tertiary Network 1. Foumiture et pose remplacement du reseau existant 145.0 290.0 145.0 - - 580.0 10.0 75.0 0.0 demolition et refection des chauss6es 120.0 240.0 120.0 - - 480.0 10.0 75.0 0.0 Reseau tertiaire nouveau (urgence) 100.0 200.0 100.0 - - 400.0 10.0 75.0 0.0 Subtotal Foumiture et pose 365.0 730.0 365.0 - 1,460.0 D. Connections (Branchements particuliers) Remplacement des B.P. existants 50.0 100.0 50.0 - - 200.0 10.0 75.0 0.0 R6alisation des nouveaux B.P. (urgence) 50.0 100.0 50.0 - - 200.0 10.0 75.0 0.0 Foumiture des materiaux pour B.P. 150.0 300.0 150.0 - - 600.0 10.0 75.0 0.0 Subtotal Connections (Branchements particullers) 250.0 500.0 250.0 - 1,000.0 E. Low income Connections - Branchements Soclaux r6alisation de nouveaux B.S. 105.0 210.0 105.0 - - 420.0 10.0 75,0 0.0 F. Public Standpipes (Bomes Fontalnes) r6alisation de B.F. existantes (BM) 9.3 18.6 9.3 - - 37.1 10.0 75.0 0.0 r6alisation de nouveaux S.F. (BM) 9.4 18.8 9.4 - - 37.5 10.0 75.0 0.0 Subtotal Public Standpipes (Bomes Fontalnes) 18.7 37.3 18.7 - 74.6 G. Equipment 1. Matiriel roulant Atelier mobile R4+4quIpement 7.5 15.0 7.5 - - 30.0 10.0 90.0 0.0 Pick-up 4X4 12.5 25.0 12.5 - - 50.0 10.0 90.0 0.0 Camion et excavatrice 20.0 40.0 20.0 - - 80.0 10.0 90.0 0.0 cyclomoteurs 2.5 5.0 2.5 - 10.0 10.0 90.0 0.0 Subtotal Materiel roulant 42.5 85.0 42.5 - 170.0 2. infonnatique - gestion des abonn6s 10.0 20.0 10.0 - - 40.0 10.0 90.0 0.0 Subtotal Equipment 52.5 105.0 52.5 210.0 H. Design & Supervision 172.6 345.3 172.6 - 690.5 0.0 90.0 0.0 Total 1,366.3 2,757.6 1,416.3 25.0 - 5,565.2 O . O Guinea-Bissau Water & Energy Project Table 2. Secondary Cities Detal(ed Costs (US$ '000) Paramentes (in %) Phy. Base Cost Cont For. Gross 1998 1999 2000 2001 2002 Total Rate Exch. Tax Rate I. Investment Costs A. Secondary Cities 1. BAFATA Groupe electrogene 3.8 7.5 3.8 - - 15.0 10.0 75.0 0.0 Groupe electrogene (I7KVA) aux forages BAF 102 & 103 3.8 7.5 3.8 - - 15.0 10.0 75.0 0.0 Pompe de forage 7.5 15.0 7.5 - 30.0 10.0 75.0 0.0 Conduite de refoulement DN80 12.5 25.0 12.5 - - 50.0 10.0 75.0 0.0 Groupeelectrogene pour forage Pisdine (17KVA) 3.8 7.5 3.8 - - 15.0 10.0 75.0 0.0 Groupe electrogene (10 KVA) au forage BAF-101 3.8 7.5 3.8 - - 15.0 10.0 75.0 0.0 Moto Pompe 7.5 15.0 7.5 - - 30.0 10.0 75.0 0.0 Nettoyage et amenagement des canivaux 2.5 5.0 2.5 - - 10.0 10.0 75.0 0.0 Cl6ture des abris des G.E. 5.0 10.0 5.0 - - 20.0 10.0 75.0 0.0 Indemnite d'loignement 10.0 20.0 10.0 - - 40.0 10.0 90.0 0.0 Studies & Supervision 5.0 10.0 5.0 - - 20.0 0.0 90.0 0.0 Subtotal BAFATA 65.0 130.0 65.0 - - 260.0 1 2. GABU Raccordement de forages 2.5 5.0 2.5 - - 10.0 10.0 75.0 0.0 G.E. de 17 KVAau forage R-315 3.8 7.5 3.8 - - 15.0 10.0 75.0 0.0 G.E. de 12 KVA au forage F-265 3.8 7.5 3.8 - - 15.0 10.0 75.0 0.0 G.E. de 17 KVA aux forages GAB-291 et292 7.5 15.0 7.5 - - 30.0 10.0 75.0 0.0 nouvelle pompe au forage R-315 1.5 3.0 1.5 - - 6.0 10.0 75.0 0.0 Abri du G.E 2.3 4.5 2.3 - - 9.0 10.0 75.0 0.0 Ream6nagement de tuyauterie 3.8 7.5 3.8 - - 15.0 10.0 75.0 0.0 Etudes et supervision 4.5 9.0 4.5 - 18.0 0.0 90.0 0.0 indemnit d'eloignement 5.0 10.0 5.0 - - 20.0 10.0 90.0 0.0 Subtotal GABU 34.5 69.0 34.5 - - 138.0 3. BOLAMA Forage 103 S: equipements hydrauliques 8.5 17.0 8.5 - - 34.0 10.0 75.0 0.0 Remplacement de cable electrque 1.3 2.5 1.3 - - 5.0 10.0 75.0 0.0 Cl6ture, abri du groupe et du forage 2.3 4.5 2.3 - - 9.0 10.0 75.0 0.0 Groupe E.G. 17 KVA et reservoir gas-oil 5.0 10.0 5.0 - - 20.0 10.0 75.0 0.0 Panneau electrique pour pompe 0.5 1.0 0.5 - - 2.0 10.0 75.0 0.0 Indemnite d'eloignement 5.0 10.0 5.0 - - 20.0 0.0 90.0 0.0 Etudes et Supervision 5.0 10.0 5.0 - - 20.0 0.0 90.0 0.0 Subtotal BOLAMA 27.5 55.0 27.5 - 110.0 Subtotal Secondary Cities 127.0 254.0 127.0 - - 508.0 B. Low Income Connections and Standpipes 125.0 250.0 125.0 - - 500.0 10.0 75.0 0.0 Total 252.0 5041.0 252.0 - 1,005 0 gT LA Guinea-Bissau Water & Energy Project Table 3. Pluvial Drainage Detailed Costs (US$ '000) Parameters (in %) Phy. Base Cost Cont. For. Gross 1998 1999 2000 2001 2002 Total Rate Exch. Tax Rate I. Investment Costs A. Rehabilitation des caniveaux 104.3 208.5 104.3 - - 417.0 10.0 55.0 0.0 B. Extention of primary network Collecteur A 174.0 348.0 174.0 - - 696.0 10.0 55.0 0.0 Collecteur A 75.0 150.0 75.0 - - 300.0 10.0 55.0 0.0 Collecteur D 15.0 30.0 15.0 - - 60.0 10.0 55.0 0.0 Collecteur E 60.0 120.0 60.0 - - 240.0 10.0 55.0 0.0 Subtotal Extention of primary network 324.0 648.0 324.0 - - 1,296.0 C. Special WorkslOuvrages Sp6ciaux Ravin Luanda 87.5 175.0 87.5 - - 350.0 10.0 55.0 0.0 Ravin BaTro Militar 50.0 100.0 50.0 - - 200.0 10.0 55.0 0.0 Ravin Plaque 50.0 100.0 50.0 - - 200.0 10.0 55.0 0.0 Subtotal Special WorkslOuvrages Sp6ciaux 187.5 375.0 187.5 - - 750.0 D. Studies & Supervision 97.5 195.0 97.5 - - 390.0 0.0 90.0 0.0 Total 713.3 1,426.5 713.3 - - 2,853.0 _~~~~~~~~~~~~~~~~~~~o Guinea-Bissau Water & Energy Project Table 4. Energy Detailed Costs US$ '000) Parameters (in %) Phy. Base Cost Cont. For. Gross 1998 1999 2000 2001 2002 Total Rate Exch. Tax Rate 1. Investment Costs A. Electricity Generation & Distribution 1. Rehabilitation & Expansion of generating capacity a. Refurbishing of Power PlantlOverhaul of Generating Units Unit 1 Pielstick 7.5 15.0 7.5 - - 30.0 10.0 90.0 0.0 Units 3 & 4 Holeby 58.8 117.5 58.8 - - 235.0 10.0 90.0 0.0 Units 5 & 7 K 6 Major 62.5 125.0 62.5 - - 250.0 10.0 90.0 0.0 Unit 6 157.5 315.0 157.5 - - 630.0 10.0 90.0 0.0 Subtotal Refurbishing of Power Plant/Overhaul of Generating Units 286.3 572.5 286.3 - - 1,145.0 b. New Diesel Generating Units One new 3 MWDiesel Unit 525.0 1,050.0 525.0 - - 2,100.0 10.0 90.0 0.0 One 300kw Staton Service Unit 40.0 80.0 40.0 - - 160.0 10.0 90.0 0.0 Two 150 kw Emergency Units 32.5 65.0 32.5 - - 130.0 10.0 90.0 0.0 Subtotal New Diesel Generating Units 597.5 1,195.0 597.5 - - 2,390.0 c. Refurbishment of General Plant Refurbish Elecricals 89.3 178.5 89.3 - - 357.0 10.0 90.0 0.0 Add Powerhouse Exhaust Fans 30.0 60.0 30.0 - - 120.0 10.0 90.0 0.0 Add Firepump and 50 m3 pond 30.0 60.0 30.0 - - 120.0 10.0 90.0 0.0 Q Subtotal Refurbishment of General Plant 149.3 298.5 149.3 - 597.0 (O d. Fuel Supply Two new 300 m3 Fuel tanks 75.0 150.0 75.0 - - 300.0 10.0 90.0 0.0 1.2 km of 150mm pipeline 45.0 90.0 45.0 - - 180.0 10.0 90.0 0.0 pumphouse at DICOL 17.5 35.0 17.5 - - 70.0 10.0 90.0 0.0 Protection & Control Devices 17.5 35.0 17.5 - - 70.0 10.0 90.0 0.0 Subtotal Fuel Suppiy 155.0 310.0 155.0 - - 620.0 e. Spare Part Stock, One Year 105.0 210.0 105.0 - - 420.0 10.0 90.0 0.0 f. Design & Supervision 240.0 480.0 240.0 - - 960.0 0.0 90.0 0.0 Subtotal Rehabilitation & Expansion of generating capacity 1,533.0 3,066.0 1,533.0 - - 6,132.0 2. Autonomous power generation In secondary cities 197.8 395.5 197.8 - - 791.0 10.0 90.0 0.0 3. installation of meters, storage tanks & safety equipment 162.5 325.0 162.5 - - 650.0 10.0 90.0 0.0 4. Miscellaneous Distribution Work 162.5 325.0 162.5 - 650.0 10.0 90.0 0.0 Subtotal Electricity Generation & Distribution 2,055.8 4,111.5 2,055.8 - - 8,223.0 B. Environmental Clean-up 1. Civil works 204.3 408.5 204.3 - - 817.0 10.0 55.0 0.0 2. Supervision & Monitoring 22.5 45.0 22.5 - - 90.0 0.0 55.0 0.0 3. Compensation costs 47.8 95.5 47.8 - - 191.0 0.0 55.0 0.0 4. Management 35.0 70.0 35.0 140.0 10.0 55.0 0.0 Subtotal Environmental Clean-up 309.5 619.0 309.5 - - 1,238.0 C. Environment Monitoring Plan 1. Technical Team 55.5 111.0 55.5 - - 222.0 0.0 80.0 0.0 2. Training 10.5 21.0 10.5 - - 42.0 0.0 80.0 0.0 3. Laboratory Equipment 19.4 38.8 19.4 - - 77.5 10.0 80.0 0.0 4. Operating Expenses 23.9 47.8 23.9 - - 95.5 0.0 80.0 0.0 5. Project Administration 15.8 31.7 15.8 6 - 83.4 0.0 80.0 0.0 i Subtotal Environment Monitoring Plan 125.1 250.2 125.1 - - 500.4 0 <4 D. Traditional Energy Component 1. Institutional Development a. Establishment & Operation of Traditional Energy Unit 25.0 50.0 25.0 - - 100.0 0.0 30.0 0.0 b. Up-date of traditional energy sector policy review Traditional energy demand studies 15.0 30.0 15.0 - - 60.0 0.0 30.0 0.0 Traditional energy supply studies 15.0 30.0 15.0 - - 60.0 0.0 30.0 0.0 Legislation & regulatory studies 18.8 37.5 18.8 - - 75.0 0.0 30.0 0.0 traditional energy & gender equity study 12.5 25.0 12.5 - - 50.0 0.0 30.0 0.0 Subtotal Up-date of traditional energy sector policy review 61.3 122.5 61.3 - - 245.0 c. Capacity building & institutional Development Staff training 12.5 25.0 12.5 - - 50.0 0.0 30.0 0.0 Regional Technical Field Trips 23.8 47.5 23.8 - - 95.0 0.0 30.0 0.0 Participation in West Africa RPTES Network 12.5 25.0 12.5 - - 50.0 0.0 30.0 0.0 Subtotal Capacity building & Institutional Development 48.8 97.5 48.8 - - 195.0 d. Particpatory energy planning workshops & seminars 25.0 50.0 25.0 - - 100.0 0.0 30.0 0.0 Subtotal nstitutional Development 160.0 320.0 160.0 - 640.0 2. Participatory Community-managed Woodfuels Supply Project a. Pilot project preparation costs Vegetation cover inventory (20,000 ha) 22.5 45.0 22.5 - - 90.0 0.0 30.0 0.0 Particpatory rapid rural appraisal 12.5 25.0 12.5 - - 50.0 0.0 30.0 0.0 Woodfuels marketing study 12.5 25.0 12.5 - - 50.0 0.0 30.0 0.0 Environmental Assessment 12.5 25.0 12.5 - - 50.0 0.0 30.0 0.0 Improved carbonazation technology study 12.5 25.0 12.5 - - 50.0 0.0 30.0 0.0 organization of the beneficiary rural community 22.5 45.0 22.5 - - 90.0 0.0 30.0 0.0 Subtotal Pilot project preparation costs 95.0 190.0 95.0 - - 380.0 b. Staff costs Technical Assistance support 23.8 47.5 23.8 - - 95.0 0.0 30.0 0.0 Implementation & supervision field staff costs 25.0 50.0 25.0 - - 100.0 0.0 30.0 0.0 Subtotal Staff costs 48.8 97.5 48.8 - - 195.0 c. Equipment & Inputs Vehicules & field equipment 36.3 72.5 36.3 - - 145.0 10.0 30.0 0.0 Fuel & maintenance of vehicules & equipment 23.8 47.5 23.8 - - 95.0 10.0 30.0 0.0 Forestry & woodcutting equipment 12.5 25.0 12.5 - - 50.0 10.0 30.0 0.0 Carbonization kilns & small tools 25.0 50.0 25.0 - - 100.0 10.0 30.0 0.0 Office equipment & supplies 25.0 50.0 25.0 - - 100.0 10.0 30.0 0.0 Subtotal Equipment & Inputs 122.5 245.0 122.5 - - 490.0 d. Community investment grant funds 37.5 75,0 37.5 - - 150.0 0.0 30.0 0.0 Subtotal articipatory Community-managed Woodfuels Supply Project 303.8 607.5 303.8 - - 1,215.0 3. Demand Management and Interfuel Substitution support a. Technical Assistance Support 25.0 50.0 25.0 - - 100.0 0.0 30.0 0.0 b. Equipment & Inputs Vehicules and testing equipment 18.8 37.5 18.8 - 75.0 0.0 30.0 0.0 Fuel & maintenance of vehicles and equipment 12.5 25.0 12.5 - - 50.0 0.0 30.0 0.0 Office equipment & supplies 18.8 37.5 18.8 - - 75.0 0.0 30.0 0.0 Subtotal Equipment & Inputs 50.0 100.0 50.0 - - 200.0 c. Support to inter-fuel substitution promotion 50.0 100.0 50.0 - - 200.0 0.0 30.0 0.0 d. Support to promotion of improved stoves 25.0 50.0 25.0 - - 100.0 0.0 30.0 0.0 Subtotal emand Management and Interfuel Substitution support 150.0 300.0 150.0 - - 600.0 Subtotal Traditional Energy Component 613.8 1,227.5 613.8 - - 2,455.0 Total 3,104.1 6,208.2 3,104.1 - 12,416.4 58 Annex 3-1 Page 9 of 10 Guinea-Bissau Water & Energy Project Table 5. Insttutional Refomm & Capacity Building Detailed Costs US$ '000) Parameters (in %) Phy. Base Cost Cont. For. Gross 1998 1999 2000 2001 2002 Total Rate Exch. Tax Rate I. Investmnent Costs A. Studies SNEAS (Studies) 70.0 50.0 20.0 15.0 155.0 0.0 85.0 0.0 SERNA (Studies) 30.0 30.0 15.0 - 75.0 0.0 85.0 0.0 OGE (Studies) 30.0 30.0 15.0 - - 75.0 0.0 85.0 0.0 DGA (Studies) 30.0 30.0 15.0 - - 75.0 0.0 85.0 0.0 Subtotal Studies 160.0 140.0 65.0 15.0 - 380.0 B. Technical Assistance One Expatriate Expert 75.0 75.0 - - - 150.0 0.0 85.0 0.0 Lawyer 75.0 - - - - 75.0 0.0 85.0 0.0 Accountant 45.0 - - - - 45.0 0.0 85.0 0.0 Subtotal Technical Assistance 195.0 75.0 - - - 270.0 C. Equipment Six vehides SNEAS (4). SERNA (1) &DGA (1) 240.0 - - - - 240.0 10.0 90.0 0.0 Combustible 94.0 94.0 10.0 90.0 0.0 Fax Machine 1.0 - - - - 1.0 10.0 90.0 0.0 Photocopying Machine 5.0 - - - 5.0 10.0 90.0 0.0 Office fumiture 27.0 - - - - 27.0 10.0 90.0 0.0 Maintenance 31.2 31.2 31.2 31.2 31.2 156.0 10.0 90.0 0.0 Computers 67.2 - - - - 67.2 10.0 90.0 0.0 Air Conditioners (12) 32.0 - - - - 32.0 10.0 90.0 0.0 Subtotal Equipment 497.4 31.2 31.2 31.2 31.2 622.2 D. Community Participation Participatoxy evaluation and social organization 60.0 90.0 60.0 30.0 30.0 270.0 0.0 75.0 0.0 Informabon, training, &communications 135.0 180.0 120.0 60.0 60.0 555.0 0.0 75.0 0.0 Community Development 30.0 30.0 20.0 10.0 10.0 100.0 0.0 75.0 0.0 Subtotal Community Participation 225.0 300.0 200.0 100.0 100.0 925.0 E. Energy Efficiency Program 90.0 90.0 60.0 30.0 30.0 300.0 0.0 75.0 0.0 F. Training & Seminars SNEAS 90.0 100.0 60.0 374 - 287.4 0.0 85.0 0.0 SERNA 80.0 20.0 20.0 15.0 10.0 145.0 0.0 0.0 0.0 DGA 120.0 50.0 30.0 33.0 - 233.0 0.0 85.0 0.0 Subtotal Training & Seminars 290.0 170.0 110.0 85.4 10.0 665.4 G. Liquidation EAGB 100.0 - - - - 100.0 0.0 0.0 0.0 H. Financing Social & Reserve Fund Social Fund 250.0 - - - - 250.0 0.0 75.0 0.0 Reserve Fund 500.0 - - - - 500.0 0.0 75.0 0.0 Subtotal Financing Social & Reserve Fund 750.0 - - - - 750.0 I. Supervision of Works 1. Current Expenses Office rent 18.5 18.5 18.5 - - 55.5 0.0 85.0 0.0 Water & Electricity 6.0 6.4 6.4 18.8 0.0 85.0 0.0 Communicaions 12.0 12.8 19.3 - 44.1 0.0 85.0 0.0 Office supplies 2.4 2.6 2.6 - - 7.6 0.0 85.0 0.0 Other services 16.8 18.0 18.0 - 52.8 0.0 85.0 0.0 Office maintenance 1.2 1.3 1.3 - - 3.8 0.0 85.0 0.0 Security & Cleaning 3.6 3.9 3.9 - - 11.4 0.0 85.0 0.0 Subtotal Current Expenses 60.5 63.5 70.0 - - 194.0 2. Trips Intemational 6.6 6.6 - - - 13.2 0.0 85.0 0.0 3. Personnel Salaries 185.2 150.0 125.2 - - 460.4 0.0 85.0 0.0 Subsidies 28.6 22.5 16.1 - - 67.2 0.0 85.0 0.0 Medical Benefits and medicines 8.5 6.0 4.0 - - 18.5 0.0 85.0 0.0 Subtotal Personnel 222.3 178.5 145.3 - - 546.1 Subtotal Supervision ofWorks 289.4 248.6 215.3 - - 753.3 J. Audits 350.0 - - - - 350.0 0.0 85.0 0.0 K. Public Procurement Program Public procurement 175.0 175.0 - - 350.0 0.0 75.0 0.0 Accountng & Reporting 76.5 76.5 - - - 153.0 0.0 75.0 0.0 Subtotal ublic Procurement Program 251.5 251.5 - - - 503.0 Total 3,198.3 1,306.3 681.5 261.6 171.2 5,618.9 Guinea-Bissau Water & Energy Project Components by Flnanciers (USS '000) Calsse FranQalse Local The Government IDA de D6veloppement BOAD SNEAS Dutch Total (Excl. Duties & Amount % Amount % Amount % Amount % Amount % Amount % Amount % For. Exch. Taxes) Taxes A. Institutional Reform & Capacity Bullding Studies 0.0 - 398.9 100.0 - - * - - - - - 398.9 1.2 336.1 62.8 Tecrnical Assistance 0.0 - 278.0 100.0 * , , , , 278.0 0.8 234.9 43.1 Equipment 0.0 - 708.6 100.0 - * - - - - 708.6 2.2 634.9 73.7 Community Partidpation 0.0 - 1,001.9 100.0 - - - - - 1,001.9 3.1 736.9 265.1 Energy Efficency Program - - 323.6 100.0 - - - - 323.6 1.0 238.2 85.4 Training/Seminars 0.0 711.3 100.0 - - - 711.3 2.2 463.2 248.0 Liquidaton EAGB - 104.3 100.0 - - - - - 104.3 0.3 - 104.3 Financing Social & Reserve Fund - 766.5 100.0 - - - - - 766.5 2.3 570.9 195.6 Operating Costs 0.0 * 792.8 100.0 - - - - 792.8 2.4 667.7 125.1 Audits . 386.7 100.0 - - - - - 356.7 1.1 302.0 54.8 Public Procurement Program - * 503.0 100.0 - - - - - - 503.0 1.5 377.3 125.8 Subtotal Institutional Reform & Capacity Building 0.0 . 5,945.5 100.0 - - - - - - 5,945 5 18.1 4,562.0 1,383.5 B. Urban Water Supply BISSAU 0.0 6,428.8 100.0 - - - - 6,428.8 19.6 4.893.9 1,534.8 Secondary Cities 0.0 - 584.2 100.0 584.2 1.8 454.7 129.5 Low Income Connections & Standpipes (SNEAS) 0.0 - - - - - 584.7 100.0 - * 564.7 1.8 431.3 153.3 Subtotal Urban Water Supply 0.0 7,013.0 92,3 - 584.7 7.7 - * 7,97.7 23,2 5,780.0 1,817.7 2 C. Energy Electricity Generation & Distribution 0.0 - 8,504.3 90.3 915.9 9.7 - 9,420.1 28.8 8,422.3 997.9 Environmental Clean-up 0.0 - 1,436.2 100.0 - - - - - - - - 1,436.2 4.4 767.0 669.2 Environment Monitoring Plan 0.0 - 538.4 100.0 - - - - - - - - 538.4 1.6 425.1 113.3 Traditional Energy Component - 17- - . . 6 9 2504.0 100.0 2,504.0 7,6 751.2 1,752.8 Subtotal Energy 0.0 - 1,974.6 14.2 - 8,504.3 .61.2 915.9 6.6 2,504.0 18.0 13898.8 42.41 10,365.6 3,533.2- D. Pluvial Drainage r_J Rehabilitabon of existing network in center city 0.0 * 904.5 100.0 - - - - - 904.5 2.8 630.8 273.6 - 0 Extension of pnrmary network 0.0 - 1,535.2 100.0 - - - - - - - 1,535.2 4.7 819.9 715.3 Special Works 0.0 . 888.4 100.0 - - - - - - . . 888.4 2.7 474.5 414.0 Subtotal Pluvial Drainage 0.0 - 3,328.1 100 0 - - 3,328.1 10.2 1,925.2 1,402.9 - it. PPF Refinancing - - 1,990.0 100.0 - - 1,900.0 6.1 1,592. 398.0 Total Disbursement 0.0 - 20,251.3 61.8 - - ,504.3 26.0 1,500.5 4.6 2,504.0 7.6 32,760.1 100.0 24,224.8 8,535.3 O 04 1997 1998 1999 2000 2001 2002 2003 .....______________ _ Q .... Q3 .Q_ Ql Q2 IQ3 Q4 Ql Q2 IQ3 IQ4 QI Q2 Q3 Q4 Q3 Q4 I Q2 Q3 Q4 I. Institutional Reform and Capacity Building Preparation Workshop Establishement of the Pilot Committee Preparation of DAO Launch of DAO Creation of SNEAS Capacity Building for SNEAS _ Hiring of Private Operator Liquidation of EAGB Community Participation _ Information and Communication Campaign _ Audits _ Strengthening institutional reform 2. Water Component Production-construction of rcservoirsiBissau _ 1 Distribution Pipelines tS , Tetirary water supply network Water connections with meters Public standpipes > Studies and supervision 3. Energy Component Investment Rehabilitation of generating capacity Autonomous power generation in sec. cities Installation of equipment (including meters) Environmental Clean-up Environmental Mfonitoring Laboratory Equipment Studies and Training Technical Assistance Traditional Energy Component Institutional development Sustainable woodfusels supply project > Demand Management 4. Pluvial Drainage Rehabilitation and expansion of networks Studies and supervision_________ 61 Annex 4-2 Page 1 of 3 GUINEA-BISSAU Water and Energy Project Remuneration Agreement for the Operating Company The calculation for the Operating Company remuneration and fees payable to the SNEAS is made separately for water and electricity, but the formulas are common to both. A. Basic Principles 1. Amounts payable by subscribers for potable water supply and electricity are billed and collected by the Operating Company for its own account. 2. The Operator will pay the public holding company, SNEAS, a fee based on the amount of water and electricity produced, adjusted to reflect targets for reducing technical and non- technical losses and for collecting bills. The calculation of these fees will be made on a yearly basis but the Operating Company will transfer to SNEAS, as an advance payment, the estimated monthly amount. 3. The Operator's remuneration covers: * operating and maintenance expenses for production and distribution facilities, including all operator charges stipulated in the leasing agreement; + general expenditure and profits of operation; and * the cost of renewing the distribution system, as specified in the leasing and the performance agreements; 4. SNEAS' income covers: + debt service for investments and rehabilitation, * a contribution to the cost of new investments, + SNEAS' administrative costs. B. Definition of average tariff 5. The average tariff per m3 (or Kwh) billed (net of taxes) each year is defined as the weighted average of all tariffs divided by total volume (m3) or quantities (Kwh) billed during the year, Tm = {(STi * Vi) + (YTj * Vj)} / Vf (1) where: Tm: average tariff billed, per m3 (CFAF/m3) T1: tariff for tariff bracket i, per m3 (CFAF/m3) of the tariff schedule Tj: tariff for tariff bracket j, per m3 (CFAF/m3) of the market gardening tariff schedule during the year. 62 Annex 4-2 Page 2 of 3 Vj: volume of water billed during the year (m3/ year) for tariff bracket i of the tariff schedule. V.: volume of water billed during the year (m3/year) for tariff bracket j Vf: total volume of water billed during the year (m3/year): Vf = Zvi + zVj (m3/year) (2) 6. Productivity Ratios The ratio of volume of water billed annually to volume of water produced annually, the system technical output is defined as: 'if= VN,V (- (3) where Vp is the volume of water produced (m3/year). The indicator of water losses is thus: 1 - 'tlf = 1 - VfVp () (4) The commercial collection rate during the year in question, i.e. the percentage of total billings which is actually collected by May 15 following the year in which the water billed was consumed, is defined as TI,. The volume of water billed for which payment was collected by May 15 following the year in which the water was consumed is thus: VP TIf 11. (m3/year) 5 and the actual amount collected by the operator, ME, is ME = Tm Vp TIf 11c (CFAF/year) (6) C. Remuneration Formula 7. The Operator is expected to reduce the water and electricity losses and to improve the percentage of total billing really collected. The target values for each year are mentioned in the Performance Contract. 8. The amount (Rp) to be paid to the public holding company SNEAS by the Operator during each year of the leasing agreement period is calculated as follows: R, = (Tm - Pe) Vp Tlf,. lr,c (FCFA) (7) where Pe is the Operator's bid price, as adjusted annually for inflation. 63 Annex 4-2 Page 3 of 3 D. Monthly Payments to SNEAS and Annual PaymentAdjastments 9. To expedite the process of monthly payments from the operator to SNEAS, monthly payments will be made on the basis of the actual amount collected from users during the month following arrangements specified in the bidding documents. The operator will transfer to SNEAS an amount Rp, defined as: Rp,m = MEm e P. (Vp,m Tf,n 11.,n) (CFAF) (8) where: Rpm: monthly payment to SNEAS MEm: actual amount collected from users during the preceding calendar month Vp,m: the volume of water produced during the preceding calendar month May 15 of each year, the annual revenue of SNEAS, Rp will be calculated on the basis of formula (7), and the operator will transfer any amount due to SNEAS for that year, by June 30 of the same year. Any amount due the operator will be subtracted from payments due to SNEAS on account of the current month, and if necessary, subsequent months. 64 Annex 4-3 Page 1 of 1 GUINEA-BISSAU Water and Energy Project Project Supervision Plan Project Launch Project Officer (TTL); Procurement Officer; 10 September Workshop Disbursement Of ficer; Lawyer; Auditor; 1998 Financial Analyst; Water Specialist; Energy Specialist; Enviroanental Specialist; Community Participation Specialist November Supervision Mission Project Officer (TTL); Financial Analyst; 7 1998 Water Specialist; Energy Specialist March 1999 Supervision Mission Project Officer (TTL); Financial Analyst; 7 Water Specialist; Energy Specialist Supervision Project Of ficer (TTL); Financial Analyst; 10 July 1999 Mission: Water Specialist; Energy Specialist, First Annual Review Institutional Specialist; Environmental Specialist; Community Participation Specialist November Supervision Mission Project Officer (TTL); Financial Analyst; 7 1999 Water Specialist; Energy Specialist March 2000 Supervision Mission Project Officer (TTL); Financial Analyst; 7 Water Specialist; Energy Specialist Supervision Project Officer (TTL); Financial Analyst; 10 July 2000 Mission: Water Specialist; Energy Specialist; Second Annual Institutional Specialist Review November Supervision Mission Project Officer (TTL); Financial Analyst; 7 2000 l Water Specialist; Energy Specialist Project Officer (TTL); Financial Analyst; 14 March 2001 Mid-Term Review Water Specialist; Energy Specialist, Institutional Specialist; Environmental Specialist; Community Participation Specialist September Supervision Mission Project Officer (TTL); Financial Analyst; 7 2001 Water Specialist; Energy Specialist March 2002 Supervision Mission Project Officer (TTL); Financial Analyst; 7 Water Specialist; Energy Specialist September Supervision Project Officer (TTL); Financial Analyst; 10 2002 Mission: Water Specialist; Energy Specialist; Annual Review Institutional Specialist March 2003 Supervision Mission Project Officer (TTL); Financial Analyst; 7 Water Specialist; Energy Specialist Supervision Project Officer (TTL); Financial Analyst; 10 September Mission: Water Specialist; Energy Specialist; 2003 Final Annual Institutional Specialist Review/ Completion Mission 65 Annex 4-4 Page 1 of 2 GUINEA-BISSAU Water and Energy Project Key Performance Indicators A) Institutional Reform and Capacity Building 1. Trimesteeal and semi-annual reports yes yes yes yes yes yes 2. Nuniber of meetings of the Board 6 12 12 12 12 12 3. Number of meetings witp donors 3 5 6 1 1 1 4. Number of extemal audits i I 2 2 2 5. Number of project coordination meetings (SNEAS) 10 15 20 20 20 no 6. Number of prepared projects tg 5 5 10 10 15 7. Follow-up and evaluations (frequency and number) 2 2 2 S. Existence of an adapted operational plan yes yes yes yes yes yes B) Water 5. Efficiency (average loss of water) SNEAS 1998ol 1999 2000 p 2001 2002 2003 ______________ 35% 150% 70%/ 70%/ 75% 80% 6. Measure of bore hole capacity 7. Response time to network problems SDE no yesu 8. Response time to do repairs SDEf24 Financehtoosignwithdrawalu15r15 s 1515I_ 9. Time for connection of new users 10. Detailed plan for maintenance works SDE 9/99; 9/00; 9/01; 9/02; 9/03 11. Renewal and extension of works to be done by SDE ________ 1998 1999 2000 2001-2012 Number of connections SDE 300 600 600 Number of drains SDE 1000 2500 2500 2000/year Number of standpipes SDE - - 30 5/year 12. Coverage ratio ( lsa) SDE 1998 1999 2000 1 2001 2002 | 2003-2012 80 185 187 190 95 95 13. Monthly consumption, billing and payment day to SDE 30 days after end of the month SNEAS _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 14. Registry of complaints SDE 3Ongoing 66 Annex 4-4 Page 2 of 2 C) Energy C." ~~~~~'. '-s,. ' " a 1. Electricity indicator plan SNEAS 1999 2. Triennial slipping investment plan SNEAS 9/99; 9/00, 9/01, 9/02; 9/03; 3. Tariff preposition SNEAS 1999; 2000; 2001; 2002; 2003 4. Report to be submitted every 6 months SNEAS 3/99; 9/99; 3/00; 9/00; 3/01; 9/01; 3/02; 9/02 5. Efficiency (average of loss of electricity) SNEAS 1998 | 1999 2000 2001 1 2002 T 2003 2004-2012 55% 60% 70% 75% 80% 85% 85% 6. Response time to problems in connection and low-tension SDE 3 hours network 7. Response time to repair low-tension cables SDE 12 hours 8. Response time to repair of middle-tension cables SDE 2 hours 9. Response time to reconnect medium-tension cables SDE 18 hours 10. Renewal and extension work to be done by SDE 1998 1999 2000 2001-2012 Connection SDE 1350 2700 2700 -- Low-tension (in km) SDE 5 20 20 3 by year 11. Coverage ratio (%) SDE 1998 1999 2000 2001 2002 2003-2012 o8 85 87 95 95 12. Response time to SDE inquiry SNEAS 15 days 13. Monthly consumption, billing and payment day to SDE 30 days after end of the month SNEAS _ 14. Registry of complaints SDE Ongoing D) Community Participation ,= .S v * .-F 1. Number of publicity campaigns disseminated through mass 30 60 60 50 50 40 communication means 2. Frequency of workshops 30 50 70 70 70 70 3. Number of informative and educational brochures produced 100 300 600 1000 1000 1000 4. Number of management committees formed for public 20 30 30 40 45 50 standpipes 5. Number of directors recruited for the management 20 30 30 40 45 50 committees 6. Number of standpipe management systems implemented 20 30 30 40 45 50 7. Percentage of population aware (sensitized) of the 60 70 80 90 90 95 management and utilization of water and electricity 8. Percentage of consumers that pays for water and electricity 90 90 90 90 95 95 9. Percentage of annual reduction in the number of water and 2 3 4 5 6 7 electricity connections that were cut 10. Percentage increase in the number of requested connections 5 10 10 10 10 10 11. Reduction in the number of client complaints per year (%/o) 5 5 10 10 20 30 67 Annex 4-5 Page 1 of 6 GUINEA - BISSAU Water and Energy Project SUMMARY OF ENVIRONMENT MONITORING PLAN Introduction 1. The program for improvement to the Supply of Water of Potable Water, Energy and Dranaige of Bissau and of Secondary has basically in this phase of the Project, the following components: (i) Rehabilitation and Extension of the Water Supply Network (ii) Rehabilitation of Bissau Old City Drainage System ( iii ) Rehabilitation and Expansion of the Central Diesel This program also foresees the implementation of the Environment Monitoring Plan -EMP - and its operation during 5 years period: 1998-2002. Main Objective 2. The EMP has the basic goal to monitor the environmental quality of the cities of Bissau, BafatA, Gabu and Bolama due to the implementation of water, drainage and energy sector projects. The EMP will provide these projects with environmental data or/and recommendations concerning the quality of potable water (distribution and wells), drainage water, domestic and industrial effluents, surface and groundwater, mangroves, sanitary landfill effluents, solid waste contamination and soil erosion, soil contamination and others urban environment problems like traffic regulation, fire protection, air quality, etc. All data and information will be delivered to the Government and it will be available to the public. Monitoring and Water Quality Control 3. During this entire first period of the Project program, specifically for water and sanitation components, it is proposed an environmental monitoring program as the element in identifying the impacts concerning the water and mangrove contamination. The current drainage and sewage discharge 'in natura' should be monitored in order to find possible corrective and minimizing measures. Considering the potential impact on Geba estuary based in the available data, there are strong indications that it will be necessary a sewage pretreatment in order to reduce this pollution agent. A water quality mathematical model for the city of Bissau will consolidate the decision regarding the treatment of residual waters: whether it is needed or not, the type and level of treatment and its final disposition. It will give basic information concerning the selection of the type of sanitation system more adequate for the different areas of the city. 68 Annex 4-5 Page 2 of 6 Contamination Diagnosis 4. The EMP was carried out considering the diagnosis of water contamination and the followings main aspects: (i ) Identification and classification of pollution sources and their location. It was characterized the generation for liguid and gas emissions. (ii) Identification of current treatment methods (iii ) Identification of the sites and methods of disposal of effluents and solid waste (iv ) Estimated,where possible, the historical production data and its projection of polluent emissions (v) Classification for residual waste according to their potential and risk for environmental contamination (vi ) Identification of the solid waste treatment, transport and final destination System Monitoring 5. The environmental monitoring plan for the designed systems was executed considering the following aspects: ( i) The projected systems and their construction and operation as well as the concerning current legislation. ( ii) The influence area of each projected system and structures was identified ( iii) A methodology for environmental quality control for the structure operation was defined by using indicators and variables ( iv) For the selected indicators and variables, a defined analysis methods. (v) A defined standard will control these indicators and variables (vi) A network of observation points and sample sites and an observation routine pattern as well as an established sample frequency of technical analysis. ( vii ) A technical team was designed for this Monitoring Plan ( viii ) A detailed operation costs and definition of necessary investment ( ix) A formulated Contingency Plan for non-standard intervention. (x) A simplified mathematical model for water quality. Mangrove Monitoring 6. The mangrove monitoring will basically consist, at first, on analysis and assessment of the existing mangrove subject to potential contamination and by monitoring them during the project implementation. The methodology will consist on sample extraction follow by lab analysis, data assessment and diagnostic of mangrove current situation. 7. The sample extraction sites, routine and the frequency to collect the samples was considered for each area. 8. The main activities to be considered during the mangrove monitoring are: (i) Mangrove mapping and characterization within the project's area of influence (ii) Monitoring of sedimentation rate 69 Annex 4-5 Page 3 of 6 ( iii) Monitoring of leaft litter production ( iv ) Production control of propagules of plant specimens (v) Monitoring of the fenologic phase control of mangrove vegetation (vi) Monitoring of pathogenic organisms in the mangrove sediments (vii) Profile control of salt intrusion, DBO, sulfate and water temperature (viii) Analysis of fish production recovery possibilities concerning the study area Environmental and Technical Training 9. An environmental and technical training program will be updated the government employees in charge of supervision and the execution team of this monitoring plan. This program will be focusing specially on the graduate staff. Monitoring Program Reporting 10. The results of this environment monitoring plan will be available in a monthly brief report during the project implementation. It will contain specific recommendations and orientations to the supervision team. A technical, comprehensive and public report issued every six months will contain the data collected, lab analysis results and recommendations to the project. Monitoring Program Participants 11. The overall program supervision will be done by the "Secretaria de Estado de Recursos Naturais e Ambiente do Ministerio do Desenvolvimento Rural, Recursos Naturais e Ambiente" and the implementation and operation will be executed by IUCN-"Uniio Mundial pela Natureza." Performance Monitoring Indicators 12. The Environment Monitoring Program (EMP) will assure the environment mitigating measures concerning the Project are taken into account and it will provide support and guidance during the Project implementation and its operation. The EMP will publish every month the data and recommendations concerning the Project and an every six month report. 13. The water quality mathematical model for the city of Bissau will support the future study regarding the treatment of residual waters and it will consolidate the water quality monitoring program. 14. The EMP will introduce technologies and environment management tools in Guinea-Bissau and it will contribute for the technical formation of a future environment supervision team in Guine-Bissau. 15. The Government commitment to participate in the EMN and in implementing the recommended mitigating measures to control the environment negative impacts will be very important in the consolidation of the project. 70 Annex 4-5 Page 4 of 6 Implementation Plan 16. The EMP will be operated during 5 years and the data and information will be collected by periodic campaigns promoted by a team of six technicians. The EMP will carried out the following campaigns: See Table A * 4/year for surface drainage water in Bissau * 2/year for surface drainage water in BafatA and Gabui * 1/year for salt water intrusion at Geba Estuary * Every 15 days for bacterological control of potable water reservoirs in Bissau * Every week for bacterological control of potable water reservoirs in Gabui, BafatA and Bolama * 4/year for physical and chemical parameters of potable water reservoirs in the 4 cities * 4/year for groundwater quality control in Bissau * 2/year for groundwater quality control in Gabui, BafatA and Bolama * Every day for free chloride in the potable water network in Bissau * 2/year for mangrove quality control * Every 15 days for effluent quality control from CICER, Diesel Central and Sanitary Landfill During the sample collection canpaigns the environmental indicators like soil erosion, solid waste disposal, inadequated soil utilization, etc will be observed to subsidied the environmental data and recomendations. Plan Budget 17. The Table B detailed the estimated costs for the EMP implementation and execution. The training program includes the government team responsible for the EMP supervision. Table A: Quality Water Monitoring: Frequency and types of sample analisys -~~~~~ A-0t,A-2, A-4, A-5, A-6, Agua superricia Bissau pH, Temp, DB05, OD, N02, N03, NH3, S04, P, OtG, SrS, colia ais, vibrio choleare trimatrd( mare 60lt e baixa) A-3 ~ Canal do GebP Bissau pH, Temp, DBv5, OlD, NH3, N03, N02, cor, turbidez, SS, O4G, Condutividade, coliformes fecais, vibrio choleare trimestral(mar5 alta e baix) R-16, R-6 Agua potave Bissau a pH, durBza, cor, turbidez, doretNs, N02, N03, S04, condutividade, cidez, mIcainidade trimestral 2 coliformes fecais quinzendl 144 _ ~~~~~~~~~~~vibrio choleare eventual/1^ 36 P t,1 P-tS Po5os rasos Bissau pR, DBO, NH3U, N03, N02, durezi, Colifecal7 trimestral 60 _(Bairros Piloto) vibrio cbole re eventual/1^ 45 P-16, P-17 Posos rasos Bissau(Central E1lktrica) pH, DBO, NH3, N03, N02, O.G, dureza, Coiifecal trimestrald vibtio choleare eventual/i' 6 D-l.D-10 Rede de distribuieAo (10 pontos) clato livre diiria 3650 A-03, A-OS, A-09, A-10 Canal do Geba pH, temp, OD, Salinidade, Condutividade, Cl-, S04 I campanba(more alta/baina, superf/prof) 6 E -01 Solo Central Ellctrics Pb, Cr, Zn, Cd, Cu, Ni I campanha/2' I Efluentes liquidos Central Electrica Temp, pH, O.G quinzenaU/3^ 24 E-02 Efluente CICER pH, DBOS, S.S quinzenal 24 E -03 Chorume Aterro pH, DBOS quintenal/4 24 A-10, A-Il Rio GebaBafati pH, Temp, DBOS, DQO, O.D, NH3, N03, N02, cor, turbidez, S.S O.G, condutividade, coliformes fecais, vibrio semestral choleare R-7,...R-10 Agua potivel Bafai pH, dureza, cor, turbidez, acidez, alealinidade, S04, N02, N03 trimestral 16 coliformes fe is quinzenal 96 vibrio choleare eventuaUl- 24 P-18, ..P-22 P?oos rasos Bafati pH, DBO5, Cor, NH3, N03, N02, dureza, Colifecal semestral 10 vibno choleare eventuaUI^ 3 A-12 Rio CanjanaGabOi pH, Temp, DBOS, DQO, O.D, NH3, N03, N02, eor, turbidez, SS O.G, condutividade, coliformes fecas, vibno semsatral choleare R-1l Agua potavel Gabd pH, dureza, cor, turbidez, acidez, alealinidade, S04, N02, N03 trimestral 4 coliformes fecais semanal 48 vibrio choleare eventual/- 12 P-23 P-27 Po;os raios Gabd pH1, DBOS, Cor, NH3, N03, N02, dureza, Colifecd semestral 10 vbrio choleare eventutaUI- 3 R-12 Agua potivel Bolama pH, dureza, cor, turbidez, cloretos, condutividade, acidez, alcalinidade, S04, N02, N03 trlmestral 4 coliformes feais semanal 48 vibrio choleare eventuaY/I 12 P-28 P-32 Posoa rasos Bolama pH, DBOS, Cor, NH3, N03, N02, dureza, Colifecal semeatral 10 vbrio choleare eventuadl/I^ 3 Notas: 1P AnAlise a ser realizada caso sa detecte a presen a de colifoanaes fenis. Estimou-se em 25% a contaminallo fecal das amosits TOTAL DE PARAMETROS 4427 2' Controle a ser efetuado ap6s concluidos os serviaos de limpeza e recuperagao ambiental da irea afetada pelos reaiduos da Central Electrica 3* 0 monitoramento se iniciara ap6s implantado o sistema de tratamento de efluentea da central ele'trica 4* A partir da entrada em operacao do aterro e produqlo de chorume 72 Annex 4-5 Page 6 of 6 Table B: Environmental Monitoring Plan: Budget (US$ 1000). Activities/Year 1998 1999 2000 2001 2002 Total Technical Team **Environmentalist Coordinator 13,20 13,20 13,20 13,20 13,20 66,00 **Chemist 4,80 4,80 4,80 4,80 4,80 24,00 **Technicians (4) 14,40 14,40 14,40 14,40 14,40 72,00 Consultancy Assistance 12,00 12,00 12,00 12,00 12,00 60,00 Training 12,00 12,00 Lab Equipment 70,00 70,00 Lab Material 1,50 1,50 1,50 1,50 1,50 7,50 Operator Office: **Rent 6,00 6,00 6,00 6,00 6,00 30,00 **Material, Telephone, Fax 2,00 2,00 2,00 2,00 2,00 10,00 Vehicle e Maintenance 23,60 2,20 2,20 2,50 2,50 33,00 Report Publication 2,50 2,50 2,50 2,50 2,50 12,50 Plan Administration Costs 22,68 8,20 8,20 8,25 8,25 63,36 Sub-Total 184,68 66,80 66,80 67,15 67,15 460,36 Government Supervison: **Material, Telephone, Fax 2,00 2,001 2,00 2,00 2,00 10,00 **Technical Training / Trips 15,00 15,00 30,00 Total 201,68 68,80 83,80 69,15 69,15 500,36 73 Annex 5-1 Page 1 of 1 GUINEA-BISSAU Water and Energy Project Demand and Supply of Water and Energy in Bissau Demand for Water in Bissau 000 ~ ~ ~ ~ ~ ' sY!b 195 R iiX}g 19961¢l 99 1|9 .;2 7 = Population of Bissau millions 220 229 238 247 257 268 278 290 301 366 446 Rate of population growth % 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 Rate of coverage % 25.2 25.2 25.2 27.0 28.9 31.0 33.2 35.5 38.1 53.1 71.2 Population served millions 55 58 60 67 74 83 92 103 115 195 317 Rate of growth of population served . 4.0 4.0 11.4 11.4 11.4 11.4 11.4 11.4 10.3 10.3 Water consumption M m3 1.5 1.5 1.5 1.6 1.8 2.0 2.2 2.4 2.7 4.3 6.4 Water consumption m3/day 4050 4050 4050 4467 4928 5436 5996 6614 7295 11698 17438 Rate of growth of consumption % 10.3 10.3 10.3 10.3 10.3 10.3 8.3 8.3 Productivity of network % 30 30 30 40 50 60 70 75 80 80 80 Gross production required M m3 4.9 4.9 4.9 4.1 3.6 3.3 3.1 3.2 3.3 5.3 8.0 Gross production required m3/day 13500 13500 13500 11168 9856 9059 8566 8818 9119 14623 21798 Rate of growth of required production % 0 0 -17.3 -11.8 -8.1 -5.5 3.0 3.4 8.3 8.3 Source: TECSULT - Etude de I'amelioration de l'approvisionnement en eau potable de la ville de Bissau - rapport 2D - septembre 1996 Demand for Energy in Bissau 1994 I 96 157 19 99 0~ 20~~20 07 21. Population of Bissau millions 220 229 238 247 257 268 278 290 301 366 446 Rate of population growth % 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 Estimated demand for energy GWh 27.4 29.6 32.0 34.7 37.5 40.6 43.9 47.5 51.4 76.2 113.1 Rate of growth of estimated demand 8.2 8.2 8.2 8.2 8.2 8.2 8.2 8.2 8.2 8.2 Gross production required GWh 44.5 58.8 53.0 53.9 55.0 56.4 57.9 60.4 63.0 93.4 138.6 Rate of growth of required production % 32.2 -9.9 1.7 2.1 2.4 2.7 4.2 4.4 8.2 8.2 Source: DECON - Etude pour 1'extension de la puissance installee du systeme d'alimentation de ia ville de Bissau - scenario Supply of Energy in Bissau (potential) 1994. 1995 14996| 1997 1998 1999 .209 i^2O01 002i 07 2012 Production Capacity I I I I I I i l I Total existing groups MW 5.4 7.9 8.9 8.9 7.7 7.7 7.7 5.7 4.2 4.2 1.3 Extension during the year MW __| 1.5 1.5 | _ _ 8.0 ______ Total new groups MW _ | 1.5 3.0 3.0 11.0 11.0 11.0 11.0 11.0 Total power installed MW 5.4 7.9 8.9 10.4 10.7 10.7 18.7 16.7 15.2 15.2 12.3 Production Productivity & Distribution Charge factor % 78.2 62.2 46.1 47.5 50.0 50.0 50.0 50.0 50.0 50.0 50.0 Gross production GWh 37.0 43.1 35.9 43.3 46.9 46.9 81.9 73.1 66.6 66.6 53.9 Productivity of the central power plant % 90.7 90.4 96.0 96.0 96.0 96.0 96.0 96.0 96.0 96.0 96.0 Net production GWh 33.6 38.9 34.5 41.6 45.0 45.0 78.6 70.2 63.9 63.9 51.7 Productivity of the network 67.8 55.7 63.0 67.0 71.0 75.0 79.0 82.0 85.0 85.0 85.0 Potential supply of energy GWh 22.8 21.7 21.7 27.9 31.9 33.7 62.1 57.6 54.3 54.3 44.0 Power shortage _ i _ _ _ _ _____ Powerrequired MW 10.2 13.4 12.1 12.3| 12.6 12.9 13.2| 13.8 14.4 21.3 31.6 Powershortage MW 4.8 5.5 3.2 1.9 | 1.9 2.2 0.0 0.0 0.0 6.1 19-3 Source: DECON - Etude pour I'extension de la puissance installee du systeme d'alimentation de la ville de Bissau - scenario Economic Evaluation of the Water Component Water sold Water sold Incremental Water rate Incremental Consumer Total Capital Operating Operating Incremental Total Net Year W/Project WO/Project Revenues Surplus Benefits Costs Costs W/ Costs WO/ Incremental Benefits Mm3 Mm3 Mm3 CFA/m3 MFCFA MFCFA MFCFA MFCFA Project Project MFCFA Costs MFCFA 1998 1.89 1.68 0.21 157 33 10 44 461 589 651 -62 399 -355 1999 2.29 1.68 0.61 157 96 86 182 1837 492 651 -159 1677 -1495 2000 2.53 1.68 0.85 157 133 168 301 1301 437 651 -214 1088 -787 2001 2.97 1.68 1.29 173 223 403 627 610 443 651 -208 401 225 2002 3.42 1.68 1.74 190 331 800 1131 25 444 651 -207 -182 1313 2003 3.86 1.68 2.18 209 457 1398 1855 9 441 651 -210 -200 2055 2004 4.31 1.68 2.63 230 605 2247 2852 0 447 651 -204 -204 3056 2005 4.76 1.68 3.08 253 779 3404 4183 0 463 651 -188 -188 4371 2006 5.20 1.68 3.52 253 892 4512 5403 0 487 651 -164 -164 5567 2007 5.66 1.68 3.98 253 1007 5796 6803 0 512 651 -139 -139 6942 -s 2008 5.66 1.68 3.98 253 1007 5796 6803 0 525 651 -126 -126 6929 2009 5.66 1.68 3.98 253 1007 5796 6803 0 538 651 -113 -113 6916 2010 5.66 1.68 3.98 253 1007 5796 6803 0 552 651 -99 -99 6902 2011 5.66 1.68 3.98 253 1007 5796 6803 0 567 651 -84 -84 6887 2012 5.66 1.68 3.98 253 1007 5796 6803 0 582 651 -69 -69 6872 Present Values @ 10 % 16.15 20,865 2,151 18,714 Average Incremental Costs (AIC) (CFA/m3)= 133 Internal Economic Rate of Return 52% K I Economic Evaluation of the Energy Component Energy sold Energy sold Incremental Electricity Consumer Capital Operating Operating Incremental Total Net Year W/Project WO/Project rate Surplus Costs Costs W/ Costs WO/ Costs Incremental Benefits Gwh Gwh Gwh CFA/Gwh MFCFA MFCFA Project Project MFCFA Costs MFCFA 1998 24.00 24.00 0.00 169 1956 -2789 3210 3210 0 -2880 -923 1999 26.50 24.00 2.50 152 2384 -2999 3178 3210 32 -2967 -583 2000 42.60 24.00 18.60 137 4156 -1638 4629 3210 -1419 -3057 1099 2001 45.80 24.00 21.80 123 4782 -144 4796 3210 -1586 -1730 3051 2002 49.30 24.00 25.30 111 4541 -92 5727 3210 -2517 -2609 2841 2003 53.10 24.00 29.10 100 6165 0 5791 3210 -2581 -2581 3584 2004 57.20 24.00 33.20 90 6927 0 6241 3210 -3031 -3031 3896 2005 61.60 24.00 37.60 86 7577 0 6739 3210 -3529 -3529 4048 2006 66.60 24.00 42.60 86 8192 0 7753 3210 -4543 -4543 3649 2007 71.90 24.00 47.90 86 8844 0 8388 3210 -5178 -5178 3666 2008 71.90 24.00 47.90 86 8844 0 8687 3210 -5477 -5477 3367 2009 71.90 24.00 47.90 86 8844 0 8996 3210 -5786 -5786 3058 2010 71.90 24.00 47.90 86 8844 0 9316 3210 -6106 -6106 2737 2011 71.90 24.00 47.90 86 8844 0 9649 3210 -6439 -6439 2405 2012 71.90 24.00 47.90 86 8844 0 9993 3210 -6783 -6783 2061 Present Values @ 10 % 204.18 (27 602) 16298 Average Incremental Costs (AIC) (CFA/m3) 135 92% Internal Economic Rate of Return 76 Annex 6-1 Page I of I GUINEA - BISSAU Water and Energy Project LIST OF DOCUMENTS AVAILABLE IN THE PROJECT FILES I. Guinea-Bissau's Water Sector. 2. Guinea-Bissau's Energy Sector. 3. Past Performance of EAGB. 4. Letter of Sector Policy for Water and Sanitation. 5. Letter of Sector Policy for Energy. 6 Detailed description of the Community Participation Sub-Component. 7. Detailed description of the Public Procurement Program. 8. Improving Access to Water for the Urban Poor. 9. Detailed description of the Traditional Energy Sub-Component. 10. Environmental Impact Assessment Summary. 11. Assumptions and Detailed Scenarios for Financial Analysis. 12. Financial Equilibrium for SNEAS and Operating Company -- Scenario 6A. 13. Financial Projections. IBRD 22943 SENEGAL _ ,2no .s >SitI \ ~~~~~~~~~~~~~~~~~~~~~~~~~~FAFI _' Con:br.\,, p '\1 f ~~~~~~~~~~~~~~~~~~~c~~~~~ = sono < - <~~~~~~~~EU M-\s>,16l oo)neb,>L >Jbc ;> XB[-,8 o~iooseo,z .ob Cac.he J , , 510 CGUINE GUINEABS 00 .0.000.0 00 50 00.0 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~d6. ATLANTIC ' L: ' osee gqep 2Bnoco|f l^ 6, OCEAN Xn / w_pR /;. I. B.da °r 1 .., 1,o tMadim. d.B.6 Led _1n,9as~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~UNR Nh. UIAA\ <~~~~~~B 000000t/ mod Btobl 55