Document of THE WORLD BANK Report No.17289 MAS PROJECT APPRAISAL DOCUMENT REPUBLIC OF MAURITIUS ENVIRONMENTAL SEWERAGE AND SANITATION PROJECT January 16, 1998 Water and Urban 1 Infrastructure Department Africa Region CURRENCY EQUIVALENTS (As of January 12, 1998) Currency Unit = Mauritian rupee (Mau Rs) US$ 1.00 = Mau. Rs. 22.425 Mau. Rs. 1.00 = US$ 0.045 FISCAL YEAR July 1 - June 30 SYSTEM OF WEIGHTS AND MEASURES: Metric I meter (m) = 3.28 feet 1 hectare (ha) = 2.47 acres 1 kilometer (km) = 0.625 miles I liter 0.220 imperial gallons (I) i cubic meter (m3) = 220 I Vice President: Callisto Madavo, AFR Country Director: Michael Sarris, AFC08 Technical Manager: Jeffrey Racki, AFTU 1 Task Team Leader: Abdelmoula Ghzala, AFTT 1 ABBREVIATIONS AND ACRONYMS BADEA Banque Arabe pour le Developpment Economique de l'Afrique (Arab Bank for the Economic Development of Africa) BOD Biological Oxygen Demand BTO Back-to-Office report CAS Country Assistance Strategy CFD Caisse Francaise de Developpement (French Development Fund) CHA Central Housing Authority COL Collaboration CON Consultation CWA Central Water Authority EA Environmental Assessment EDF European Development Fund EIB European Investment Bank ERR Economic Rate of Return FAC Fonds d'Aide et de Cooperation (Assistance and Cooperation Fund - French Cooperation) FY Fiscal Year GIS Geographical Information System GOM Government of Mauritius KfW Kreditanstalt fur Wiederaufbau (German Fund for International Cooperation) IBRD International Bank for Reconstruction and Development ICB International Competitive Bidding IDA International Development Association IEPS Initial Executive Project Summary IFRR Internal Financial Rate of Return IS Information Sharing LIBOR London Inter-Bank Offered Rate LMTD Long and Medium Term Debt Service m3/d Cubic meters per day MAFC Ministry of Agriculture, Fisheries and Cooperatives MEDRC Ministry of Economic Development and Regional Cooperation MLGE Ministry of Local Government and Environment MOF Ministry of Finance MOH Ministry of Health MPU Ministry of Public Utilities MR Moderate risk NARV Net Annual Rental Value NEAP National Environmental Action Plan NGO(s) Nongovernmental Organization(s) NPV Net Present Value NR No risk NSP National Sewerage Program OECF Overseas Economic Cooperation Fund (Japan) O&M Operation and Maintenance PAD Project Appraisal Document PHRD Population and Human Resources Development (Japanese grant) PIP Project Implementation Plan PPF Project Preparation Facility PTI Program of Targeted Interventions SFD Saudi Fund for Development SMP Sewerage Master Plan UNDB United Nations Development Business WWA Waste Water Authority MAURITIUS ENVIRONMENTAL SEWERAGE AND SANITATION PROJECT PROJECT APPRAISAL DOCUMENT CONTENTS Page No. Project Financing Data 1 BLOCK 1: Project Description 2 1. Project Development Objectives 2 2. Project Components 2 3. Benefits and Target Population 2 4. Institutional and Implementation Arrangements 3 BLOCK 2: Project Rationale 5 5. CAS Objectives Supported by the Project 5 6. Main Sector Issues and Government Strategy 5 7. Sector Issues to be Addressed by the Project and Strategic Choices 6 8. Project Alternatives Considered and Reasons for Rejection 6 9. Major Related Projects Financed by the Bank and/or Other Development Agencies 7 10. Lessons Learned and Reflected in the Project Design 7 11. Indications of Borrower Commitment and Ownership 7 12. Value Added of Bank Support 8 BLOCK 3: Summary Project Assessments 8 13. Economic Assessment 8 14. Financial Assessment 8 15. Technical Assessment 8 16. Institutional Assessment 9 17. Social Assessment 10 18. Environmental Assessment 10 19. Participatory Approach 12 20. Sustainability 12 21. Critical Risks 13 22. Possible Controversial Aspects 13 BLOCK 4: Main Loan Conditions 1 4 23. Project Conditionalities 14 24. Other 14 BLOCK 5: Readiness for Implementation 1 5 BLOCK 6: Compliance with Bank Policies1 5 Annexes Page No. 1. Project Design Summary 16 2. Detailed Project Description 20 3. Estimated Project Costs 25 4. Economic Analysis of the Capital Investment in the Project 29 5. Financial Analysis 36 6. Procurement and Disbursement Arrangements 64 7. Project Processing Budget and Schedule 71 8. Documents in Project File 72 9. Status of Bank Group Operations in Mauritius 73 10. Mauritius at a Glance 74 ii INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Africa Regional Office Country Department 08 Project Appraisal Document Mauritius Environmental Sewerage and Sanitation Date: January 16, 1998 1 Draft [X] Final Task Team Leader: Abdelmoula Ghzala Country Director: Michael Sarris Sector Manager: Jeffrey Racki Project ID: 1921 Sector: Water Supply & Sanitation Lending Instrument: Sector Investment and Maintenance Loan PTI: [ ] Yes [X] No Project Financing Data [X] Loan [ Credit [ Guarantee [] Other iSpecifyl For Loans/Credits/Others: Amount: US$ 12.4 million Proposed Terms: [ ] Multicurrency [XI Single currency Grace period (years): 5 years [] Standard Variable [ ] Fixed [X] LIBOR-based Years to maturity: 15 years Commitment fee: 0.75% Interest: 6.03% T ......................................................................................................................................................................................................................................................... Financing plan (US$m): US$ 65.6 million Source Local Foreign Total Government 11.9 5.7 17.6 Cofinancier: Overseas Economic Cooperation Fund (OECF) - 2.2 31.5 33.6 Japan IBRD 0.0 12.4 12.4 Other - Local industry in-kind contribution 1.9 0.0 1.9 (industrial wastewater pretreatment) Borrower: Government of Mauritius Guarantor: N/A Responsible agency(ies): Waste Water Authority (WWA) of the Ministry of Public Utilities (MPU) Estimated disbursements (Bank FY/US$M): 1998 1999 2000 2001 2002 2003 Annual 2.8 11.1 19.7 21.1 8.4 2.4 Cumulative 2.8 13.9 33.6 54.7 63.1 65.6 For Guarantees: N/A Partial Credit Partial risk Expected effectiveness date: May 1998 Closing date: June 2003 Project Appraisal Document Page 2 Country: Mauntius Project Title: Environmental Sewerage and Sanitation Block 1: Project Description 1. Project development objectives (see Annex I for key performance indicators): The proposed project will address severe wastewater pollution from heavily urbanized areas of Port Louis, targeting the city's southern districts, industrial zones and affected coastal zones. The main objectives are to: (i) improve the health and sanitary conditions of the populations in these areas; (ii) reverse the current trend of environmental pollution on the island and in its coastal zone; and (iii) support Government efforts to implement priority institutional and technical measures identified in the Sewerage Master Plan. ...............................................................................................................................................................................................I.......... 2. Project components (see Annex 2 for a detailed description and Annex 3 for a detailed cost breakdown): Component Category Cost Incl. Contingencies % of Total (US$M) A. Physical Component - Montagne Jacquot Sewerage Physical 57.2 87.2 System (i) Land acquisition and compensation (ii) Pipelines and sewers (iii) Pumping stations (iv) Treatment Plant (v) Sea outfall (vi) Industrial pretreatrnent (vii) Supervision B. Wastewater Sector Equipment and Expertise Institution-building/Policy 4.6 7.0 (i) Sector studies (ii) Sector expertise (iii) Equipment to support CWA/WWA joint billing Physical system C. WWA Institution-building Institution-building/Other 3.8 5.8 (i) WWA program management assistance (ii) WWA personnel training (iii) Support for Industrial waste management program implementation Total 65.6 100 3. Benefits and target population: The project is expected to mitigate the risk of water-borne disease epidemics (notably hepatitis A), which, if not addressed, will impose substantial direct and indirect costs on the tourism and export industries. The project will also have a direct impact on human health by protecting potable, irrigation, and marine water resources from industrial and household wastewater pollution, and eliminating sewer back-ups and overflows. Sound public sector management of wastewater will benefit the country as a whole; the Montagne Jacquot component will directly improve the living conditions of a concentrated urban population in Port Louis. The project is expected to protect the vulnerable water resources of the Port Louis Lagc on, in addition to the marine and coastal ecosystems of Port Louis and the northwest shore. Treatment and future reuse of urban wastewater for irrigation will benefit agriculture and conserve potable water resources. Industry will be encouraged to utilize clean technologies, and to operate in an environmentally sound manner. The project will contribute to reducing the costs of cleaning up pollution and will generate revenues to sustain wastewater services. Project Appraisal Document Page 3 Country: Mauntius Project Title: Environmental Sewerage and Sanitation 4. Institutional and implementation arrangements: Implementation period: FY98-FY03 (6 years), to correspond to GOM absorptive capacity for all projects in the National Sewerage Program (NSP). Executing ageney: The Waste Water Authority Project coordination: WWA, assisted by external consultants, will be responsible for project implementation and coordination with other projects in the NSP. WWA will coordinate tariff collection with the Central Water Authority (CWA). The Steering Committee (see below) will ensure donor and overall NSP coordination. Project oversight (policy guidance. etc.): Steering Committee, chaired by the Ministry of Economic Development and Regional Cooperation (MEDRC) and comprising high-level officials from MEDRC, MPU, Ministry of Finance (MOF), and the Ministry of Local Government and Environment (MLGE). Implementation arrangements: WWA will be the project implementing agency. A "contract of delegation" between the GOM and the WWA will confer on WWA the function of "maitre d'ouvrage delegue" for wastewater sector management and will specify the relative roles and responsibilities of WWA and MPU (see Project Implementation Plan). A Steering Committee, chaired by MEDRC and comprising officials of MEDRC, MOF, MPU and MLGE, will oversee NSP and the project to ensure coordination and timely implementation of necessary sector policy development and reform. On a larger scale, the Steering Committee will ensure national interagency coordination and coordination between all donor-funded activities in the NSP. Cofinancing arrangements: The Japanese Overseas Economic Cooperation Fund (OECF) will provide parallel financing. OECF has committed to financing construction of the Montagne Jacquot treatment plant, the two pumping stations and the sea outfall. The Bank has financed preparatory studies and design work, and will finance the transmission and rising mains and the institutional strengthening component. OECF components will be subject to OECF procurement guidelines, while the Bank-financed components will following Bank procurement guidelines. There are no major incompatibilities between the Bank and OECF guidelines. Physical component: Final engineering and design work for the Montagne Jacquot system will be completed by the WWA before Board presentation (February 12, 1998), with assistance from internationally-selected consultants financed under a PHRD Grant. Prequalification and bids will be coordinated to minimize start-up delay and to enable award of contract upon effectiveness. WWA will acquire the land and rights of way for construction and will manage construction of the Montagne Jacquot system through contracts with consultants, selected according to International Competitive Bidding. The project will be implemented in five and a half years, completed by December 31, 2002 and closed on June 30, 2003. Sector equipment and expertise: The WWA is responsible for engaging the expertise and procuring equipment, defining study terms of reference, managing implementation of the studies and proposing sector legislation and reforms based on study results. Expertise will include provision of and training in software to support the new billing arrangements with CWA. Sewage sector reforms, the cost recovery system and institutional restructuring of WWA for its future role will require actions by the GOM as a whole and by other national institutions involved in the sector. The Ministry of Public Utilities will ultimately be responsible for making changes in sector policy, particularly those that lead to integration of water and wastewater sector management. Wastewater sector reforms will be carried out in a consistent and coordinated manner with the reforms planned for the other utilities, e.g. reform of the water sector and the CWA (particularly those relating to tariffs and the cost recovery system) and establishment of a utilities investment corporation to hold the assets of the water, wastewater and electricity sectors. The Steering Committee is to ensure coordination between reforms in the wastewater sector and other related sectors (such as environment, regional administration, industry, etc.). The MPU, through WWA, will take the lead in designing and launching the public awareness campaign on water and wastewater sector issues, including the National Connection Program, new tariffs and the implementation of the NSP. The WWA will procure equipment (water meters), in consultation with CWA, in support of the joint billing with the CWA. Project Appraisal Document Page 4 Country: Mauritius Project Title: Environmental Sewerage and Sanitation 4. Institutional and implementation arrangements (continued): Institution-building component: WWA will be responsible for the institutional strengthening component and for ensuring implementation of staff training and timely input of appropriate technical expertise as defined in the Project Implementation Plan. Critical activities are addressed in the Institutional Action Plan, integrated into the Project Implementation Plan with detailed performance indicators as part of project conditions, and was finalized and agreed on during negotiations. WWA, with the assistance of PHRD-financed consultants, will develop and propose arnendments to existing sectoral legislation, and work with MLGE and MEDRC to draft and enact necessary intersectoral legislation. WWA, assisted by technical assistance, will be responsible for negotiating an agreement with industry on pretreatment standards and methods, and will oversee compliance. Cost recovery arrangements: Cost recovery will be implemented by the WWA in concert with CWA: a sewerage tariff is to be introduced July 1, 1998, as a surcharge to the water tariff corresponding to the amount of water used. The exact tariff level, structure and periodic revision over the project life were finalized prior to and agreed upon during negotiations. Revenues will be collected by the CWA and the sewerage surcharge transferred to the WWA. Industrial compliance with pretreatment standards (set by the MLGE) will be monitored by the MLGE and reported to WWA; WWA will be responsible for monitoring industrial contribution to pretreatment, and imposing penalties for noncompliance. Procurement: Works wholly or partly funded by IBRD will be procured in accordance with the Bank's Guidelines for Procurement under IBRD Loans and IDA Credits (published January 1995; revised January and August 1996). Consultancy services wholly or partly financed by IBRD will be procured in accordance with the Bank's Guidelines for Selection and Employment of Consultants by World Bank Borrowers (January 1997). The Borrower's procurement regulations and procedures have been reviewed and found acceptable. Before negotiations, a General Procurement Noticewas prepared by WWA and transmitted to IBRD for publication in the United Nations Development Business (UNDB) to advertise all assignments expected to be financed by IBRD under the project. WWA will use Standard Bidding Documents published by the Bank for preparation of bidding and prequalification documents for works to be procured under International Competitive Bidding (ICB), and for Requests for Proposals and consulting service contracts. Detailed project procurement arrangements are given in Annex 6. Accounting. financial reporting and auditing arrangements: Under the project, WWA will implement (before June 30,1999) a cost accounting system tracing the cost of the various services, including depreciation, the cost of capital and other common costs, and associated revenues, to provide a full basis for cost recovery and tariff policy. WWA will keep separate project accounts together with their statutory financial statements. Content of terms of reference for the annual audits of the project accounts was agreed upon at negotiations. Auditing will be carried out by independent auditors acceptable to the Bank, and the reports of such audits will be submitted to the Bank no later than six month after the end of the Borrower's fiscal year. Monitoring and evaluation arrangements: Supervision. The Bank will devote some 80 staff weeks for supervision of loan progress through FY2003. During the first three years, supervision will focus on progress towards achieving specific objectives such as works, implementation of WWA institutional action plan, tariffs and cost-recovery targets, implementation of the industrial waste management program and the performance of involved agencies. Particular attention would be given during supervision and project reviews to implementation of the national sewerage connections program, including execution of the reticulation system, WWA staffing, implementation of the WWA training program and the operation and financial performance of the WWA. In addition, effluent quality monitoring will be carefully monitored (particularly industrial effluent) to ensure compliance with quality standards. Project Appraisal Document Page 5 Country: Mauntius Project Title: Environmental Sewerage and Sanitation 4. Institutional and implementation arrangements (continued): Monitoring: Overall project monitoring will be based on indicators confirmed during appraisal and the Project Implementation Plan which was finalized by the Borrower and agreed on during negotiations. Monitoring will be carried out by the Steering Committee, chaired by MEDRC, and assisted by consultants as necessary. Progress under each project component and the Institutional Action Plan will be monitored and coordinated by WWA under the guidance of the Steering Committee. Progress reports will be prepared by WWA every six months and submitted to the Bank within one month thereafter. No later than three months after completion of the project, GOM will prepare and furnish to the Bank a report on the execution of the project, its costs and the benefits derived and to be derived from it. Mid-term review: A Mid-term Review will be carried out in June 1999 by the Bank, together with GOM and OECF. In addition to covering all areas included in annual reviews, the Mid-term Review will assess the implementation status of the National Sewerage Program, the various sectoral studies, degree of implementation of policy reforms, institutional arrangements, tariffs and the cost-recovery system, the regulatory framework, private sector participation and evolution of the role of WWA in the sector. Prior to the Mid-term Review, WWA will contract a consulting firm (under project finance) to review and assess the progress of NSP and WWA restructuring, conduct a study on water and sanitation sectors and prepare the necessary documentation for the Review. In particular, the Review will consider and discuss the results of the following studies and reports: (i) review of past performance and implementation of the NSP in general, and the Montagne Jacquot project in particular; (ii) review of recommendations and proposals of the study on public utilities (water, wastewater and electricity sectors), including a 5-10 year action plan to implement recommendations; and (iii) review of the project implementation plan (PIP) and recommendations for updating/amending the PIP for the remainder of project implementation. It is expected that the Mid-term Review will result in determination of a general framework for future integrated water and sanitation sector policy and development, which will in turn guide reforms of policies and institutions in the two sectors and related sectors. At this time, the technical and financial viability of the proposed Utilities Investment Corporation, Ltd will be reviewed and evaluated. Block 2: Project Rationale 5. CAS objective(s) supported by the project Document number and date of latest CAS discussion: Report No. 16426, April 22, 1997 The proposed project supports the CAS objective to safeguard the environment through better strategic planning and wastewater management. The project focuses on this latter, and as part of the Government's National Sewerage Program, fits well within the sector strategy developed with broad public participation and consultation. ~~~~~~~~~~~~~~~......................................................................................................................................................................I........... .............................................. 6. Main sector issues and Government strategy: High urbanization (40%) and economic growth have led to municipal and industrialpollution at a level that threatens human and environmental health. The 1990 National Environmental Action Plan (NEAP), prepared with Bank assistance, identified inadequate disposal of urban wastewater as a growing threat to the quality of underground water resources, and marine and coastal zone ecosystems. Existing wastewater infrastructure does not handle effluent in an environmentally sound manner. An increase in maintenance resources is needed to strengthen infrastructure performance. The NEAP also identified a the need to strengthlen and coordinate the institutionalframework, and clarify and enforce legislation to overcome problems in the sector. Based on the recommendations of the NEAP, the GOM developed a Sewerage Master Plan (SMP) in 1992, and the related National Sewerage Program, of which the proposed project is an integral part. Institutional studies of both the water and wastewater sectors have noted the growing imbalance between the water and wastewater sectors, in terms of infrastructure, management and cost recovery (for example, water services are currently available to 90% of the population, while the public sanitation network covers only 18%). The GOM strategy is to reduce these imbalances and Project Appraisal Document Page 6 Country: Mauritius Project Title: Environmental Sewerage and Sanitation 6. Main sector issues and Government strategy continued: ultimately move the sectors toward closer coordination and integration by increasing sewerage infrastructure, connections and treatment, reforming water and wastewater institutions and legislation, and integrating cost-recovery measures. Although the GOM will reform and increase sewerage tariffs to cover recurrent costs, depreciation and contribute to debt service, it is committed to maintaining affordability for service. 7. Sector issues to be addressed by the project and strategic choices: The project will provide needed wastewater infrastructure in Montagne Jacquot, one of the priority regions defined in the Sewerage Master Plan. The project will also address institutional and regulatory weaknesses by providing support to the newly established (March 1996) WWA, and providing a coherent framework for interagency coordination in sector management and policy development. A new WWA Act, slated for promulgation in 1998, will replace earlier legislation and effect restructuring of WWA as "maitre d'ouvrage delegue" and enable closer coordination among the water, wastewater and environment sectors. Legislative reforms in related sectors will be coordinated by the Steering Committee. This alternative was chosen as being simpler than simultaneously revising the myriad wastewater and intersectoral legislations. Since private sector capacity is not well established in Mauritius, the project willfacilitate involvement of the private sector by strengthening the WWA to plan infrastructure investments and manage wastewater service contracts, and package works and O&M contracts to correspond to private sector capacity. The project introduces cost-recovery mechanisms as a means of generating maintenance resources, and economic incentives/disincentives for industrial compliance with environmental standards to reduce the cost of wastewater treatment and disposal. The wastewater tariffs to be introduced in July 1998 respect the GOM's commitment to affordability of service, and therefore increase gradually and do not fully cover cost of service provision (they will gradually come to cover recurrent costs, depreciation and will contribute to debt service). Given the imbalances between the water and wastewater sectors, it was decided to move gradually towards integration of the sectors. As noted above, the proposed WWA Act will enable better coordination with the water and Wastewater tariffs will be determined as a percentage of metered water consumption (subject to affordability criteria for domestic consumers), and will be jointly billed and collected by CWA with the water bills. Although not currently planned, the project could be expanded in the future to include a component for reuse of treated urban and industrial wastewater in agricultural irrigation as a means of preserving potable water resources. environment sectors. Finally, in preparation for the Mid-term Review, a study will be conducted on the water and wastewater sectors and will generate a framework, recommendations and an action plan for integrated management of the two sectors. The Mid-term Review will futher review the results of the study on public utilities and will evaluate the financial and technical viability of the proposed Utility Investment Corporation, Ltd. .......................~~~~~~~~~~~.................................................................................................................................................................................................... 8. Project alternatives considered and reasons for rejection: 1. The immediate involvement of the private sector to provide and manage wastewater services was rejected due to the initial need to: (i) establish a coherent national framework within which the private sector could operate; (ii) determine and enforce environmental regulations; (iii) strengthen WWA capacity to plan and manage infrastructure investments; and (iv) allow local private sector capacity to develop. Once these have been achieved through the project, more responsibility may devolve to the private sector through construction, service and/or maintenance contracts. 2. Three main alternatives were under consideration for design of the Montagne Jacquot sewerage system: (i) primary wastewater treatment with sea outfall disposal (100 m deep); (ii) secondary treatment with sea outfall (30 m deep); and (iii) tertiary treatment with reuse and sea outfall disposal. The appropriate technology has been chosen through updating of the preparatory feasibility study with further site investigations and analyses and consultations with experts and is reflected in the detailed system design. Based on these studies, an amended alternative (i) has been chosen (as recommended by the consultants and accepted by GOM), given current needs, relative costs, and social acceptability of wastewater reuse. The new alternative proposes pretreatment of industrial effluent, primary wastewater treatment with disinfection, and sea outfall disposal of only 30m deep. In future, as resources and social acceptance grow, treatment and infrastructure may be upgraded progressively to allow use of option (iii). Project Appraisal Document Page 7 Country: Mauritius Project Title: Environmental Sewerage and Sanitation 9. Major related projects financed by the Bank and/or other development agencies (completed, ongoing and planned). World Bank: * Mauritius Environmental Monitoring and Development Project (ongoing) * Mauritius Port Development and Environmental Protection Project (ongoing) * GEF Indian Ocean Oil Spill Contingency Planning Project (planned) Other Donors: Within the framework of the National Sewerage Program: * Caisse Francaise de Developpement (CFD) - Grand Baie Sewerage Project * European Development Fund (EDF) - St. Martin Treatment Plant Extension Project * KfW/ European Investment Bank (EIB) - Baie de Tombeau Sewerage Project * Banque Arabe pour le Developpement Economique de l'Afrique (BADEA) - CHA Estates Infrastructure Rehabilitation * Nordic Investment Bank/Nordic Development Fund - Sewerage Master Plan Urgent Works Project * Saudi Fund for Development (SFD) - Plaines Wilhelms Additional Sewerage Works Project 10. Lessons learned and reflected in the proj ect desig n: -.-.-.-. ............ Given the number of donor-financed sewerage projects within the National Sewerage Program, there is a needfor tight coordination among the GOM and all donors. The project falls within a clearly defined master plan, and includes a Steering Committee to ensure coordination among GOM agencies and donors, and implementation of the sector policies. The project addresses the limited absorptive and implementation capacity of the WWA through an institutional strengthening component and investment phasing. Institutional strengthening consists of providing necessary technical assistance to the WWA and in training and assisting WWA to play its future role of planning and programming sector activities, contracting out and managing the contracts, and monitoring the related quality of environment. Investments in works and equipment will be phased according to local implementation and financial capacity. Extensive preparatory studies address the need to adopt environmentally sound technology in project design. The project incorporates cost- recovery mechanisms (user fees, treated wastewater reuse, industrial wastewater pretreatment, economic incentives) to ensure financial sustainability. In addition, tender documents are to be ready before project effectiveness so as to facilitate implementation. ................................................................................................................................................................................................................................................... 11. Indications of borrower commitment and ownership: The GOM has shown steady commitment to developing and applying sound environmental policy. Following the 1990 NEAP, the GOM developed a Sewerage Master Plan to define programs to provide long-term solutions for the safe disposal of household and industrial liquid waste. This plan resulted in the National Sewerage Program which is being implemented with donor support. Following the recommendations of the SMP, the GOM created the Waste Water Authority, in March 1996, as an autonomous agency within the Ministry of Energy and Water Resources. The August 1997 government reorganization consolidated infrastructure agencies (including the WWA) within the new Ministry of Public Utilities, facilitating interagency coordination. The WWA is to be restructured through a new Act to enable it to play its new role as "maitre d'ouvrage delegue" and to facilitate private sector involvement, with support from the proposed operation. To this end, the GOM is drafting the new WWA Act and has drafted and submitted to Parliament the Sector Policy Letter. The GOM has also committed to revising and applying wastewater tariffs to improve cost recovery. The GOM has also taken the initiative in reforming the public utility sectors (including the wastewater sector) by proposing to create a utility investment corporation to manage the investments for all utilities (water, wastewater and electricity). Project Appraisal Document Page 8 Country: Mauritius Project Title: Environmental Sewerage and Sanitation 12. Value added of Bank support: The World Bank has been actively involved in environmental initiatives in Mauritius, and has developed a supportive working relationship with the GOM. Bank assistance has supported the NEAP, the Environmental Monitoring and Development Project and the Sewerage Master Plan Study. The Bank's strategy is to maintain its lead role in assisting the GOM to achieve the goals set in the NEAP and Sewerage Master Plan, and to contribute to the financing of the National Sewerage Program. While the Bank and other donors are assisting in providing the physical investments defined in the NSP, the proposed Bank operation adds components to improve sector management and ensure financial sustainability for the sector as a whole. In addition, the Bank has been instrumental in mobilizing Japanese OECF funding for environmental protection initiatives in Mauritius. Block 3: Summary Project Assessments (Detailed assessments are in the project file. See Annex 8) 13. Economic Assessment [X] Cost-Benefit Analysis : NPV=Mau Rs 1. 1 16 [] Cost Effectiveness [] Other (see Annex 4): billion; ERR= 23% (Please refer to following Analysis: [Specify] section) Fiscal impact (for all projects): The GOM will contribute US$ 17.6 million over 6 years to project financing, representing 26.3 % of total project financing. This contribution will come from the Government's Capital Budget. Cost-recovery measures included in the project (tariffs, fees, pollution penalties) are designed to cover O&M and depreciation expenditures in the Current Account Budget, and a gradually increasing share of the debt service in the Capital Budget. This analysis is detailed in Annex 5. i4. Financial Assessmen t (see Annex 5) NPV at estiated Discoun t Rate of 1%a .Mu Rs 29) milion; IFRR= 8.1 i The proposed sewerage scheme and technology for the Port Louis South and Lower Beau Bassin/Coromandel areas, known as the Montagne Jacquot Sewerage System, was selected as the least-cost and most environmentally sound solution to wastewater pollution problems affecting these areas. This solution was selected after feasibility studies involving technical and economic comparison of various alternatives. The Internal Financial Rate of Return (IFRR), which in constant prices relates the sewerage revenues to the capital and operating costs of the Montagne Jacquot sewerage facilities, was computed as an indication of the minimum economic return. The life of the project has been estimated at 30 years. Revenues attributable to the project were used as a first estimate of the consumer's willingness to pay in quantifying the estimated internal rate of return for the proposed project. The cost stream includes: (i) base costs and physical contingencies for civil works, equipment, engineering studies, supervision and operation and maintenance for the transport, treatment and disposal of wastewater for Port Louis South and Lower Beau Bassin/Coromandel; and (ii) the investment costs for additional household and industrial connections (to be financed by GOM and implemented by WWA). The IFRR is approximately 8.1%. The IFRR is considered to be acceptable given: (i) the nearly total lack of cost-recovery mechanisms at present; and (ii) the social nature of the propose project with its intangible anticipated health, economic and environmental benefits. The computation of the IFRR is shown in Annex 5. .T..... .......... ................................................ .................... .... ........... ...........I..................................... ........................ ......... .............. ............ .......... 15. Technical Assessment: The project concerns the transport, treatment and disposal of wastewater from the areas of Port Louis South and Lower Beau Bassin/Coromandel. The tributary areas include residential, commercial and industrial wastewater sources, with industry concentrated on the industrial estates of Plaine Lauzun, Coromandel, and La Tour Koenig. The existing sewerage service consists of preliminary treatment works at Fort Victoria and Pointe aux Sables, and shallow ocean outfalls to dispose of the wastewater. The existing wastewater works provide inadequate treatment and create severe pollution problems in the vicinity of the ocean outfalls and should therefore be replaced. A new wastewater treatment plant will be constructed at Montagne Jacquot; the site has been chosen for ease of expansion to provide additional capacity. in future years and to provide higher levels of treatment, if required. Two new wastewater pumping stations and a new transmission main will be constructed to transport the wastewater from Fort Victoria and Pointe aux Sables to the Montagne Jacquot site. Project Appraisal Document Page 9 Country: Mauritius Project Title: Environmental Sewerage and Sanitation 15. Technical Assessment continued: Different wastewater treatment alternatives were developed based on receiving-water quality standards for ocean waters and for wastewater reuse in irrigation; two main options were retained. It was concluded that the ocean water quality standards could be met with treatment works providing preliminary and primary treatment, disinfection, sludge stabilization, and sludge dewatering processes, with the effluent discharged through an ocean outfall 645 meters long at ad (Alternative 1). For Alternative 2, reuse of treated wastewater in irrigation, it was concluded that water quality standards could be met by treatment works providing preliminary, primary and secondary treatment, disinfection, sludge stabilization, and sludge dewatering processes, with effluent not used for irrigation to be discharged into the ocean at a depth of 20 meters. The decision on which alternative to implement was based on the preliminary results of a study to determnine the economic and technical feasibility of reusing treated wastewater from the Montagne Jacquot treatment plant in agricultura irrigation. As the feasibility of irrigation reuse cannot be established for the immediate future, the study recommended implementation of the Alternative 1. This alternative provides flexibility in that the primary treatment works can be expanded and the level of treatment increased at any time in the future. For the effluent discharge, an ocean outfall at a depth of 100 meters deep was deemed impractical. An ocean outfall at a depth of 30 meters will provide satisfactory dispersal of effluent receiving primary treatment and disinfection. This meets water quality standards for recreational waters at the adjacent shore and at the Pointe aux Sables reef and lagoon. Wastewater Flows: The average dry-weather wastewater flow from the service area is projected to grow from 24,800 cubic meters per day (m3/d) in 1997 to 60,500 m3/d in 2017. Essentially all of the growth in flow will be due to increases in population served. In the Pointe aux Sables service area, the average daily domestic flow will more than triple over the same period, from 6,500 m3/d in 1997 to over 19,900 m3/d in 2017. Domestic flow from Fort Victoria is projected to increase from 10,000 m3/d to 25,000 m3/d during this period. The proposed investment, designed to respond to immediate needs, also provides the capacity to treat the wastewater flows projected for the year 2005, an average daily flow of 48,000 m3/d. An additional incremental investment by WWA of about US$3.5 million, envisaged for 2010, would provide the capacity to treat projected wastewater flow for the year 2017, estimated at 60,000 m3/d. ................................................................................................................................................................................................................................................ 16. Institutional Assessment: The Government of Mauritius has defined the sewerage program (NSP), presently under implementation with the assistance of the donor community, as a national priority. The GOM is in the process of taking the necessary measures to facilitate program efficiency and enable implementation of the most appropriate policy reforms to respond to the present and future needs of the sector. The scope of the NSP, and consequently donor concerns about national capacity to implement this program, call for the definition of the future role of WWA coherent with the sector policy and the overall objectives of the NSP. This will involve: (i) review and modernization of the sector's legal and institutional frameworks; (ii) adoption and progressive implementation of appropriate cost-recovery mechanisms to allow financial sustainability; (iii) subsequent restructuring, strengthening and training of WWA to adequately play its future role as "maitre d'ouvrage delegue"; and (iv) adoption of the necessary measures to ensure proper program implementation. All of these aspects are included in a Sector Policy Letter that the GOM has prepared. In addition, the GOM will draft and promulgate a new WWA Act to provide a legal basis for WWA's new structure and function and to define its role, responsibilities and interactions with other concerned institutions, governmental or private. a. Executing agencies: The WWA will retain overall responsibility for project execution. During project preparation, WWA has been assisted by international consultants and by technical expertise provided under the project and by the European Union. Project Appraisal Document Page 10 Country: Mauntius Project Title: Environmental Sewerage and Sanitation 16. Institutional Assessment continued: b. Project management: WWA will carry out day-to-day project management activities. Given the limited capacity and experience of WWA, it will be assisted, over the life of the project, by external consultants with international experience and practical operational backgrounds in the overall management of sewerage systems. The institutional strengthening component will provide needed training to supplement the external technical assistance in developing WWA's capacity to plan and manage contracts for capital projects and operation and maintenance. Design and specifications for construction of the Montagne Jacquot Sewerage System have been developed during project preparation by international consultants, selected according to World Bank guidelines, financed through a Japanese PHRD Grant. The construction works are conventional in nature and therefore no major risks are expected during implementation. Construction will be carried out by private contractors selected through international competitive bidding. Sea outfall construction is expected to proceed with contractor prequalification. Given its limited experience, and the scope of the works to be undertaken, WWA will be assisted in construction supervision by external consulting engineers, to be selected internationally. The consulting duties will include verification of compliance with specifications for works and equipment, and supervision of construction, installation, testing and commissioning of the various physical components. ~~~~~~~~.... i~ ................................................................................................................................................................................................................................ 17. Social Assessment: A social assessment, undertaken as part of the environmental impact assessment, looked at the impact of the proposed project on stakeholders (residents, businesses and workers) in the project and neighboring areas. The project will improve environmental living conditions and reduce health threats for populations in heavily urbanized and industrial areas of Port Louis (southern districts and affected coastal area). Tariffs for cost-recovery will be set according to a cost- recovery study that examined ability and willingness to pay for sewerage service (affordability). Costs for populations will be somewhat offset by pretreatment of effluent by industries, which will reduce the overall cost of service. For the country as a whole, there is a need to convince the population of the need to connect to the public sewer system and to pay for sewerage services. The cost of connection is relatively high (Rs. 15,000, approximately US$750), a strong disincentive to switch from on-site sewerage. In addition, sewerage tariffs historically have been set quite low, billing has been haphazard, and collection has not been enforced. The WWA will launch a public awareness campaign to inform the population of the improvements in service underway through the NSP; this will be linked to information on the new tariffs so as to instill the idea of paying for better service. Sewerage tariffs determined as a percentage of water consumption will increase the transparency of the service provided, and the new system ofjoint billing with water fees should increase collection and reinforce the interrelated nature of the two sectors. The GOM is currently considering a National Sewer Connection Program, to provide incentives (economic and otherwise) for households to connect to public sewers. 18. Environmental Assessment (EA): Environmental [X] A [II B Ill C Category Two of the three main sources of water pollution in Mauritius are from waste water sources: contamination of domestic water supplies by overflowing of sewerage during cyclones and floods, and disposal of industrial waste (e.g. dyes) into natural water bodies (MLGE 1991). The purpose of the Montagne Jacquot Sewerage and Sanitation Project is to provide a long-term solution for the treatment and disposal of wastewater in the Port Louis South and Lower Beau Bassin/ Coromandel area, to achieve pollution abatement to a level that allows the disposal of treated effluents in the natural environment and to maintain sustainable development of economic activities of Mauritius. A full environmental assessment was carried out as part of project preparation, as required by the World Bank and the GOM's National Environment Policy. Mitigation measures from the EA will be incorporated into project design, and will form the basis of standards for treated wastewater prior to disposal. Project Appraisal Document Page 11 Country: Mauritius Project Title: Environmental Sewerage and Sanitation 18. Environmental Assessment continued: The environmental and socio-economic impacts of the Montagne Jacquot water and sanitation project are expected to be overwhelmingly positive. The present discharge arrangements in the Port Louis area and south beyond Pointe aux Sables are resulting in extremely poor environmental quality, unacceptable impacts on human health and well-being, and degradation of the marine environment to such a serious extent that only a few species can survive in the areas affected by wastewater discharges. The implementation of the Montagne Jacquot project, and in particular the decommissioning of several outfalls and their replacement with a single ocean outfall off Montagne Jacquot, is expected to have some immediate beneficial effects, but because of the exceptionally serious degraded state of the local marine environment, natural rehabilitation of the currently affected areas will take some time. It may even take several years before normal seaside activities such as swimming, fishing, various activities in boats and beachcombing can be resumed in the Bain des Dames and at Pointe aux Sables without fear of serious health implications. The processes of natural rehabilitation may be assisted nevertheless, by community efforts at beach cleaning, and there is little doubt that development of strategic plans with the relevant government agencies for enhancing economic opportunities, will assist in regenerating the worst affected communities and help them to realize the economic potential of the area. Because of the proximity of the Bain des Dames and Pointe aux Sables communities to the main commercial center of Mauritius, and the recognition they have already received as potential recreational zones in the city, it is likely that development of tourism and services, may well assist in the expansion of employment opportunities in the area. Potential negative impacts associated with the project Construction phase impacts. The principal negative impacts associated with the Montagne Jacquot project would be experienced during the construction phase, and primarily caused by the trench digging operation to lay the main transfer pipeline from Fort Victoria via Pointe aux Sables works to Montagne Jacquot. Whether the route chosen is along the main road or through the lagoon off Pointe aux Sables, mitigation of the negative impacts is not a straightforward matter and contractors will need to be closely supervised, to ensure implementation of the recommended mitigation measures, as well as efficient and competent management of the construction activities. No resettlement is involved, but construction of the pipeline will most likely cause serious disruptions in traffic for approximately 3 months. Every attempt will be made to reduce this disruption, including carrying out construction activities at night or outside of rush hours. Impacts of the ocean outfall. Although the wastewater discharge at Montagne Jacquot is expected to fall well within the required effluent standard, and to achieve the desired water quality standards in the receiving environment, the actual environmental impacts of the discharge cannot be accurately predicted on the basis of the available information. Experience from elsewhere suggests that the performance of individual outfalls and environmental impacts on living communities, depends so much on the physical dispersion characteristics of the receiving environment, that generalizations can be misleading. Nevertheless, because of the introduction of a disinfection stage into the effluent treatment process, the potential health hazards for swimmers, divers etc. in the vicinity of the outfall will be negligible. The potential impacts of treated effluent on benthic communities, and in particular corals, are exceptionally difficult to predict accurately. Despite the system of diffusers and expected dispersion and dilution performance of the outfall, the relatively slow bottom currents may militate against steady removal of effluent out of the main discharge area, leading to progressive eutrophication of coastal waters off. Montagne Jacquot. Because of the extreme sensitivity of corals to elevated nutrient concentrations, it is highly likely that some bleaching and death will be observed in communities near to the discharge. Inevitably loss of corals leads to progressive deterioration of the reef ecosystem, since it is dependent on coral productivity to drive the system, so that the greater resilience of associated species becomes more or less irrelevant. Project Appraisal Document Page 12 Country: Mauntius Project Title: Environmental Sewerage and Sanitation 18. Environmental Assessment continued: While it is obviously preferable to avoid any deterioration in coastal marine communities and reef ecosystems in particular because of the many important resource generation and protection functions they serve, there are very few locations around the coast of Mauritius where it is possible to avoid coral reefs. The site adopted for the Montagne Jacquot outfall is one of the few breaks in the reef on the west coast suitable for an outfall, where the consequences of some deterioration in reef communities (not of exceptional quality or diversity) are acceptable, on grounds of making possible the urgent and very necessary improvements in environmental quality further north. Impacts of the Montagne Jacquot WastewaterTreatment Plant. Providing the new wastewater treatment plant at Montagne Jacquot is efficiently and properly managed, the potentially significant impacts can be mitigated in the course of normal remedial action on site and/or through supervision and monitoring of staff activity. A plant of this type occasionally produces offensive odors, and if they prove to be unacceptable to the local residents, it is possible to consider including an odor control system. The project plans include a buffer zone (detailed in the environmental mitigation plan) between the plant and the neighboring community, which should mitigate most of the noise and smell problems. Additionally, the sludge disposal operation will have to be managed cleanly and efficiently, or it may result in complaints from the general public. The technology on site will be relatively straightforward to manage, and so ensuring that the plant staff are conscientious and committed to running a well managed operation is probably the most important element in ensuring future trouble-free operations. i9. Parti ipatory Approach: Id entif ication.Prepation Impemnent io n Operation Beneficiaries/community groups CON Intermediary NGOs Academic institutions Local government Other donors IS/CON/COL Local Industry CON CON/COL CON/COL ~~~~~~~~~~~....................................................I.............................................................................................................................................................................. 20. Sustainability: Environmental and health benefits will be sustained by the continuous functioning of the Montagne Jacquot system, which depends on available resources for and provision of routine maintenance. Industrial compliance with environmental regulations is also critical to sustain project benefits. These factors should be assured by the cost-recovery mechanisms (tariffs, economic incentives for environmental compliance, etc.), and by improved sector management. Project Appraisal Document Page 13 Country: Mauntius Project Title: Environmental Sewerage and Sanitation 21. Critical Risks (see fourth column of Annex 1): Project outputs to development objectives Risk Risk Risk Minimization Measure Rag Risk that new MPU not able to work with NR Clariy roles and responsibilities in implementation plan during negotiations other Ministries Risk of inadequate GOM enforcement MR Project will strengthen regulatory and legislative frameworks for capacity for tariff collection and industrial environmental management; GOM is already using economic incentives/ compliance penalties and legal measures to encourage compliance. Gradual, affordable and transparent tariffs, and joint billing with water charges should improve revenue collection. Risk of inadequate WWA management MR Project includes institutional strengthening through training and technical capacity expertise. Works will be phased to match development of institutional capacity. Risk that National Connection Program not MR Government is committed to carrying out the National Connection Program, implemented completely or on time and will combine connection incentives with public awareness. Risk of inadequate maintenance of MR Project includes technical assistance for operation and maintenance; Montagne Jacquot system construction contracts to include O&M for 3 years after construction. Thereafter, sufficient private sector and WWA management capacity should be established. Project components to outputs Risk Risk Risk Minimization Measure Ratn Risk of inadequate WWA absorptive MR Project will be phased to correspond to institutional strengthening measures; capacity works will be packaged in suitable lots. Risk of slow start-up due to newly NR Continuity of staff in newly restructured agencies/Ministry restructured MPU and relevant agencies Risk that cost-recovery measures may not be MR Tariffs will be set according to cost-recovery study that examined ability and affordable or feasible (resistance to paying) willingness to pay. Tariffs will be phased for gradual increase. Risk that coflnancing will not be available NR OECF has indicated its commitment to project Overall project risk rating Risk Rating NR ................................................................................................................................................................................................. 22. Possible Controversial Aspects: There may be social resistance to paying increased tariffs, however increases will be phased to avoid undue hardship. Likewise, there may be social resistance to connecting to public sewers due to the relatively high connection cost and lack of acceptance of the need to connect. This will be addressed by the public awareness campaign and incentives built into the National Connection Program. Industry may be reluctant to comply with effluent pretreatment requirements. The project includes clear effluent and pretreatment standards and an industrial compliance plan, which will be negotiated with industry. This compliance plan will be supported by economic incentives and penalties to ensure compliance. Reuse of treated wastewater for agricultural irrigation does not have widespread acceptance. If proven feasible by the wastewater reuse study, this component may be added later, when more socially acceptable. Project Appraisal Document Page 14 Country: Maurtius Project Title: Environmental Sewerage and Sanitation Block 4: Main Loan Conditions 23. Project conditionality: Most of the necessary policy and institutional reforms have been achieved under the National Sewerage Program. According to the findings of the preparation studies, additional policies may need to be enacted to institute cost recovery, environmental guidelines and define the future role of WWA. The following conditions identified for project preparation have been fulfilled: Prior to Negotiations: * Draft Institutional Action Plan (institutional reforms and institutional strengthening measures needed to ensure sustainable operation and maintenance of sewerage system, including staffing and responsibilities of WWA and timing of interventions) prepared and submitted to Bank. * Commencement of land acquisition program. * Draft Sector Policy Letter furnished to the Bank. * Proposals for agreements with industry defining level and procedures for pretreatment. * Draft legislation on cost-recovery measures (tariffs, penalties, fees) prepared and submitted to the Bank. * Project Implementation Plan (PIP) prepared. During Negotiations: * Agreement on industrial pretreatment standards developed by the Ministry of Local Government and Environment. * Agreement with GOM on cost-recovery policy, tariff level and structure, tariff collection, and revenue management system. * Agreement with GOM on Institutional Action Plan. * Finalization of PIP. * Agreement with GOM on Sector Policy Letter. * Agreement on a date and format for a Mid-term review. Prior to Board: * Commitment on financing plan by OECF and GOM. * Institutional Action Plan adopted and under implementation, according to timetable agreed upon during negotiations; * Prequalification and tender documents for construction of Montagne Jacquot works prepared and acceptable to the Bank. * Steering Committee established. . Sector Policy Letter received from GOM. Effectiveness Conditions: The following conditions are to be met prior to project effectiveness: * Consultants and technical experts selected and contract ready to be negotiated. * OECF funds ready to be disbursed. * Program for wastewater quality monitoring agreed. * Land acquisition completed. . ........................................................................................................................................................................................................................... 24 ter [classify according to convenant types used in the Legal Agreements database.] Project Appraisal Document Page 15 Country: Maurtius Project Title: Environmental Sewerage and Sanitation Block 5: Readiness for Implementation [XI The engineering design documents for the first year's activities are complete and ready for the start of project implementation (prior to Board). [ ] Not applicable [X] The procurement documents for the first year's activities are complete and ready for the start of project implementation. (prior to Board). [X] The Project Implementation Plan has been appraised and found to be realistic and of satisfactory quality (following negotiations). []The following items are lacking and are discussed under loan conditions (Section G): Block 6: Compliance with Bank Policies [X] This project complies with all applicable Bank policies. [ ] [The following exceptions to Bank policies are recommended for approval: . The project complies with all other applicable Bank policies.] Task Team Leader: Abdelmoula Ghzala Secto anage): Jeffrey Racki Country DiLctor: MichaelSarris) Page 16 Page I of 4 Annex 1 Project Design Summary Narrative Summary Key Performance Indicators1 Monitoring and Critical Assumptions and Risks Supervision CAS Objective (CAS Objective to Bank Mission) Improved management of the environment, * Marine/coastal ecosystems maintained at current Ministry of Local especially for ecotourism and waste treatment levels (number/diversity of flora and fauna) Government and * Potable water quality maintained Environment (MLGE) Project Development Objectives (Development Objectives to CAS Objective) Improve health and sanitary conditions for * % drop in water-borne diseases (Hepatitis A, eye Ministry of Health Assumes awareness of public health and sanitary practices by affected populations in Port Louis (southern and skin diseases) by end of project population districts, industrial zones) and coastal regions * improved potable water quality MLGE eversecurent trend of environmental falling levels of BOD, organic and chemical MLGE/ Ministry of Risk of industrial noncompliance with environmental pollution from wastewater contamination in marine and ground water in Public Utilities (MPU)/ regulations significant selected areas (i.e. sea outfall, Port Ministry of Agriculture, Louis Lagoon, selected beaches, coral reefs, etc). Fisheries and Assumes household connections to sewerage system and Cooperatives (MAFC) sanitary practices Support GOMimplementation of priority * Reform of WWA MPUinistry of Assumes GOM commitment to Sewerage Master Plan institutional and technical measures in * Water/wastewater sector policy integration Economic Development despite personnel changes, reshuffling, and restructuring Sewerage Master Plan * Construction of Montagne Jacquot system and Regional Cooperation (MEDRC) 1 Baseline and targeted values should be shown, with the latter divided into values expected at mid-term, end of project and full impact. Page 17 Page 2 of 4 Narrative Summary Key Performance Indicators2 Monitoring and Critical Assumptions and Risks Supervision Project Outputs (Outputs to Development Objectives) Sustainable provision of * Transfer of effluents works begin in 1999; completed by end of MPU/WWA Assumes adequate management capacity in WWA wastewater services in priority 2001 area: Completion and operation * Pumping stations works start in 2000; completed by end of 2001 of Montagne Jacquot Sewerage * Treatment plant works begin in 1999; completed by end of 2001 System * Sea outfall works begin in 2001; completed by end of 2001 * Treatment plant operation to start by mid-2002 at 25,000 m3 * Volume treated to increase to 48,000 m3 by 2010, and to 60,000m3 by 2014. * Cost-recovery system established by July 1998. Wastewater CWA/WWA Risk of inadequate maintenance funding or lack of tariffs determined on metered water consumption, collected by maintenance CWA and transferred to WWA. * National Sewer Connection Program underway: house MPU Risk of delays in implementation of National Sewer connections rising an average of 8,500 per year (minimum Connection Program (due to inadequate incentives, time targets are 32,000 total connections in 1998/1998, 91,000 total required for public awareness), may jeopardize full connections by 2004, and 109,000 total connections by 2007. utilization of new infrastructure and cost recovery. Sewer reticulation to be carried out according to following table. improved sector management and SteeringC Cmmite in place by Jly 1998 MPUM i Assumesth r mes that restructured MPU facilitates interagency interagency coordination * WWA restructuring action plan started by June 1998; WWA coordination fully restructured by end of 2002 Risk that new MPU not able to work with other Ministries * WWA staffing/training program carried out Assumes low staff turnover * Procurement contracting time for large contracts reduced from WWAIMPU present level to approximately 3 months by 2003 MPU/World Bank * Working ratio increases from 50% in 1998 to 85% in 2002/2003 Assumes implementation of connection program and cost (NSP operation) recovery * Operating ratio goes from 65% in 1998 to 110% in 2002/2003 CWA/WWA (NSP operation) to 90% in 2006/2007. * Outsourcing of O&M on existing infrastructure increasing from Assumes private sector absorptive capacity 0% in 1998/1999 to 75% in 2002/2003. * CWA/WWA agreement signed June 1998. * Agreed tariff billing and transfer system in place by July 1998 * Sector legislation reform: (i) review sector legal framework (2/98); (ii) draft MPU/WWA contract of delegation (3/98); (iii) WWA Act - drafted (4/98) and promulgated (9/98); (iv) review for conformation other related acts (9/98) and draft revisions by midterm review (6/99); (v) Integrated water/wastewater policy framework drafted by Midterm Review (6/99); (vi) new contract of delegation signed (2/01). * Infrastructure mapping and inventory carried out (12/98) * Replacement of worn existing sewerage infrastructure, as specified in contract of delegation. 2 Baseline and targeted values should be shown, with the latter divided into values expected at mid-term, end of project and full impact. Page 18 Page 3 of 4 Narrative Summary Key Performance Indicators3 Monitoring and Critical Assumptions and Risks Supervision Project Outputs continued (Outputs to Development Objectives) ........................................................................................................................ .................................................. ............................................................................................................ ................. Better compliance with wastewater regulations * WWA/lndustry agreement negotiations MLGE/MPU/MAFC Risk of inadequate GOM enforcement capacity by industry completed by 05/99 and signed by 06/99. * Industrial effluent standards proposed by WWA, Water Resources Unit and Dept. of Fisheries to Dept. of Environment by Midterm Review (6/99). * Industrial effluent meets standards agreed in WWA/industrial agreement by operation (2003). Project Components Inputs (Components to Outputs) 1. Montagne Jacquot sewerage system Bank, counterpart and cofinancier funding World Bank (WB)/ Assumes that cofinancing is available (a) Land acquisition and compensation OECF/MPU Assumes choice of environmentally sound project technology (b) Pipelines and sewers (c) Pumping stations (d) Treatment plant (e) Sea outfall (f) Industrial pretreatment (g) Supervision Feasibility study and detailed design WWA ~~~~~~~~~~~~~~~.....I............ ........I........................................................... .................................................. ............ . .........I...................................................................................................S 2. Sector Studies and Expertise WB/MPU/Steering Committee ........... ........................................................................ .......................................................................................................... ......................................................................................... 3. WWA Institution-building Institutional and Cost-recovery study Risk of inadequate WWA absorptive capacity (a) WWA program management assistance (b) WWA Staff Training WWA established Assumes that WWA able to operation within new MPU and (c) Support for industrial waste management WWA/lndustry agreement that newly restructured agencies able to work together program Assumes that WWA and industry will reach agreement 3 Baseline and targeted values should be shown, with the latter divided into values expected at mid-term, end of project and full impact. Page 19 Page 4 of 4 National Sewer Connection Program Annual Reticulation (equivalent connections) 1998/1999 1999/2000 2000/2001 2001/2002 2002/2003 National Total 4,500 10,000 10,000 10,000 10,000 Montagne Jacquot region (of total) 1,000 2,500 2,500 2,500 2,500 Page 20 Annex 2 Detailed Project Description Project Component A - US$57.2 million (total cost of component) Montagne Jacquot Sewerage System. This component, an integral element of the Government's Sewerage Master Plan, comprises the physical construction of the Montagne Jacquot Sewerage System, including acquisition of the treatment plant site, industrial pretreatment of wastewater, construction of pipelines and sewers, two pumping stations, the treatment plant and the sea outfall, and supervision works. On the basis of a pre-feasibility study, three technological options were considered. The final design of the sewerage works was defined on the basis of preparation studies on technical feasibility, cost of technologies, environmental impact and cost-recovery feasibility. The chosen option consists of the following subcomponents: (i) Land acquisition and compensation: The WWA will first acquire the site for construction of the Montagne Jacquot Treatment Plant, including a buffer zone between the plant and the neighboring community. WWA will also acquire all rights of way necessary for construction of the treatment plant and transmission mains. The pumping stations will be built on sites currently occupied by outdated pumping stations, so no land acquisition is required for them. There will be no resettlement due to the project, however construction of transmission mains may interrupt operation of businesses, in which case, compensation may be paid. This subcomponent is financed entirely by the Government of Mauritius. (ii) Pipelines and sewers: Pipelines will be constructed to accommodate the forecast increasing flows and will carry wastewater from the Fort Victoria and Pointe aux Sables pumping stations directly to the Montagne Jacquot treatment plant. The network will consist of transmission and rising mains connecting the pumping stations with the Montagne Jacquot plant; additional connections would be added as needed to connect the industrial estates and residences to the transmission mains. At the present time, all transmission and rising mains will be land based, but with the option for "cross-bay" connection from Fort Victoria to Pointe aux Sables if a contractor submits a technically feasible proposal, as the Environmental Impact Assessment deemed this option environmentally sound. This subcomponent will be funded by the World Bank. (iii) Pumping stations: Two new pumping stations are to be constructed on the sites of the Fort Victoria and Pointe aux Sables pumping stations, which are currently inadequate to handle even current wastewater flows in an environmentally sound manner. The new works are needed to handle the forecast increasing wastewater flows; the existing works will be left in place to handle emergencies. The pumping stations are centrally located and can therefore facilitate effluent transmission with the use of minimum of force mains and optimized usage of gravity sewers. In particular, Pointe aux Sables is located to handle transfer of wastewater from the new developments and industrial estates, and can utilize existing gravity sewers. The construction contract will include three years of operation and maintenance, after which time O&M will be opened for contracting by the general private sector. The Overseas Economic Cooperation Fund (OECF) will finance this subcormiponent. (iv) Treatment Plant. The Montagne Jacquot Treatment Plant will utilize primary treatment plus disinfection. Initially, the plant will be constructed with the capacity to handle a 48,000 m3 flow. In a later phase, the plant may be expanded to handle 60,000 m3. Sludge will be stabilized and dewatered and transported by truck for disposal in a sanitary landfill. As with the pumping stations, the construction contract Page 21 will include three years of operation and maintenance, after which time these activities will be opened for contracting to the private sector at large. This subcomponent will be financed by OECF and GOM. (v) Sea outfall. Based on the findings of the environmental impact analysis, industrial and urban wastewater that has undergone preliminary and primary treatment with disinfection may safely be disposed of in an open sea outfall of 30 meters deep. The effluent from the plant will be discharged by gravity to the open sea off the coast of Montagne Jacquot through a pipe line leading to a series of six diffusers at an average depth of 30 meters. The outfall will be approximately 645 meters out from the shore line. The diffusers will spaced at 10 meters to prevent intermixing before the plumes reach the surface. OECF and GOM will provide financing for this subcomponent. (vi) Industrial Pretreatment. Under the project, industries in unserved areas will contribute to building pretreatment works that will be connected to the Montagne Jacquot system. As part of the project, an agreement is to be negotiated and signed between the WWA and industries specifying industrial effluent standards, pretreatment measures and monitoring arrangements (see component C). This agreement will be supported by economic incentives, such as polluter pays and an industrial facilitation fund to encourage compliance. This subcomponent is to be financed by industry. (vii) Supervision of works. All construction works (pipelines, pumping stations, treatment plant and sea outfall) will be supervised by independent contractors. OECF and GOM will fund one contract for supervision of OECF-financed subcomponents, and the Bank will finance a contract for supervision of pipeline and sewer construction. Project Component B - US$4.6 million (total cost of component) Sector Equipment and Expertise. This component, cofinanced by the World Bank and the GOM, addresses the need for reforms in the water and wastewater sectors in the interest of achieving improvements in and integration of policy and management of both sectors. In particular, the project will clarify the linkages (legal, fiscal and organizational) between WWA, the Central Water Authority (CWA), the Water Resource Unit of the Ministry of Public Utilities, the Ministry of Environment and Quality of Life and the Ministry of Agriculture, Fisheries and Cooperatives. This will be achieved by engaging technical assistance to carry out the studies listed below, strengthen intersectoral coordination and assist with preparing recommendations for Mid-term Review discussion of the general framework for integrated sector policy and development and draft policies and an action plan to implement recommendations, as well, preparation of the awareness campaign to support initiatives in the water and wastewater sectors, and establishment of the National Sewer Connection Program to be implemented over 10 years. (i) The studies in this component consist of: (a) mapping of the sewer networks; (b) a Household Connection inventory and feasibility study; (c) GIS and digital software; (d) institutional studies for the Midterm review (progress on and need for new restructuring of sector institutions); (e) implementation of the public awareness campaign; (f) project implementation audit; and other studies as needed. (ii) Expertise will be provided to carry out the above studies and to upgrade and train in software necessary to carry out joint billing for water and wastewater services. (iii) The above expertise will be complemented by provision of water meters to support the joint billing. WWA will procure this equipment according to CWA specifications. This will be financed by the GOM. Page 22 Project Component C - US$3.8 million (total cost of component) WWA Institution-building. This component, cofinanced by the World Bank and the GOM, addresses the financial and institutional constraints in the provision of wastewater services, as identified in the Sewerage Master Plan. The project will assist the Waste Water Authority (established in March 1996) in its development from a division within the Ministry of Public Utilities to an autonomous agency with overall responsibility for constructing, operating, maintaining and financing wastewater infrastructure. Subcomponents include: (i) WWA program management assistance to strengthen WWA to assume its new role as "mailtre d'ouvrage delegu6." This will include technical assistance on cost accounting and on preparation of terms of reference for studies and contracts, the contracting procedure and management of project contracts with the private sector. The technical assistance will also support the WWA in outsourcing of O&M on the existing wastewater infrastructure and eventual contracting out of O&M and construction on future works. This will enable the WWA to focus on planning, programming and managing contracts for future works. (ii) WWA staff training program. This program will focus on the training of the WWA staff in their new role to: (i) manage the ongoing National Sewerage Program, including contracting out of works and services, supervision of construction, future supervision of operation and maintenance of wastewater treatment systems; (ii) plan and program future required investments/extensions in the sector; (iii) monitor, with MLGE, environmental quality and standards and implement mitigating measures; and (iv) manage projects and facilitate private sector involvement in the wastewater services. The program includes training both in-country and abroad. (iii) Support for implementation of the industrial waste management program. As noted in Component A, industry is to contribute to the project by pretreating its effluent. This subcomponent focuses on developing a framework for negotiation between WWA and industry, negotiating an agreement on pretreatment standards, methods, monitoring arrangements and incentives and strengthening WWA to monitor and ensure compliance with standards and regulations. During negotiations, agreement was reached with the GOM on pretreatment standards, to be set by WWA in consultation with the Ministry of Local Government and Environment (MLGE), and a timetable to install and operate pretreatment facilities, to be determined and agreed upon by the WWA and industry. Industry would then install pretreatment facilities, either at-source or collective, for which incentives may be provided by the GOM (tax incentives, facilitation fund, penalties). During implementation, industries, the MLGE and WWA will monitor the quality of pretreated industrial effluent against these standards and WWA will review the results semi-annually. Any industry not meeting the standards, according to the agreed-upon timetable, would be subject to "polluter-pays" penalties. Implementation arrangements: Implementation arrangements are detailed in the Project Implementation Plan (PIP). WWA is currently preparing engineering and design work for the Montagne Jacquot system with assistance from internationally- selected consultants financed under a Japanese PHRD Grant and a Project Preparation Facility advance. WWA will manage construction of the Montagne Jacquot system through contracts with consultants, selected according to International Competitive Bidding. Cost recovery will be implemented by the WWA in concert with CWA: sewerage tariffs will be determined according to amount of metered water. Revenues will be collected by the CWA and the sewerage surcharge transferred to the WWA. Industrial compliance with pretreatment standards (set by the MLGE) will be monitored by industry, the MLGE and reported to WWA; WWA will conduct its own monitoring to check industrial contribution to pretreatment, and imposing penalties for noncompliance. WWA will also be responsible for implementing the environmental mitigation plan (see -. f 8 Page 23 Project Implementation Plan, Annex 5). WWA will be responsible for the institutional strengthening component, and for ensuring that appropriate technical expertise is engaged, equipment procured and staff training carried out according to the Project Implementation Plan. WWA will develop and propose amendments to existing sectoral legislation, and work with the MLGE and the MEDRC to draft and enact necessary intersectoral legislation. The Steering Committee will ensure coordination between program agencies and among all donor-funded projects within the NSP. Procurement: Works wholly or partly funded by IBRD will be procured in accordance with the Bank's Guidelines for Procurement under IBRD Loans and IDA Credits (published January 1995; revised January and August 1996). Consultancy services wholly or partly financed by IBRD will be procured in accordance with the Bank's Guidelines for Selection and Employment of Consultants by World Bank Borrowers (January 1997). The Borrower's procurement regulations and procedures have been reviewed and found acceptable. Before negotiations, a General Procurement Notice was prepared by WWA and transmitted to IBRD for publication in the United Nations Development Business (UNDB) to advertise all assignments expected to be financed by IBRD under the project. WWA will use Standard Bidding Documents published by the Bank for preparation of bidding and prequalification documents for works to be procured under International Competitive Bidding (ICB), and for Requests for Proposals and consulting service contracts. Detailed project procurement arrangements are given in Annex 6. Accounting, financial reporting and auditing arrangements: Under the project, WWA will implement (before June 30,1999) a cost accounting system tracing the cost of the various services, including depreciation, the cost of capital and other common costs, and associated revenues, to provide a full basis for cost recovery and tariff policy. WWA will keep separate project accounts together with their statutory financial statements. Terms of reference for the annual audits of the project accounts were agreed upon at negotiations. Auditing will be carried out by independent auditors acceptable to the Bank, and the reports of such audits will be submitted to the Bank no later than six month after the end of the Borrower's fiscal year. Monitoring and evaluation arrangements: Supervision. The Bank will devote some 80 staff weeks for supervision of loan progress through FY2003. During the first three years, supervision will focus on progress towards achieving specific objectives such as works, implementation of WWA institutional action plan, tariffs and cost-recovery targets, implementation of the industrial waste management program and the performance of involved agencies. Particular attention would be given during supervision and project reviews to implementation of the national sewerage connections program, including execution of the reticulation system, number of WWA employees, implementation of the WWA training program and the operation and financial performance of the WWA. In addition, effluent quality monitoring will be carefully monitored (particularly industrial effluent) to ensure compliance with quality standards. Monitoring: Overall project monitoring will be based on indicators confirmed during appraisal and the Project Implementation Plan which were finalized by the Borrower and agreed on during negotiations. Monitoring will be carried out by the Steering Committee, chaired by MEDRC, and assisted by consultants as necessary. Progress under each project component and the Institutional Action Plan will be monitored and coordinated by WWA under the guidance of the Steering Committee. Progress reports will be prepared by WWA every six months, commencing in November 1998, and submitted to the Bank within one month thereafter. No later than three months after completion of the project, GOM will prepare and furnish to the Bank a report on the execution of the project, its costs and the benefits derived and to be derived from it. Mid-term review: A Mid-term Review will be carried out in June 1999 by the Bank, together with GOM and OECF. In addition to covering all areas included in annual reviews, the Mid-term Review will assess the Page 24 implementation status of the National Sewerage Program, the various sectoral studies, degree of implementation of policy reforms, institutional arrangements, tariffs and the cost-recovery system, the regulatory framework, private sector participation and evolution of the role of WWA in the sector. Prior to the Mid-term Review, WWA will contract a consulting firm (under project finance) to review and assess the progress of NSP and WWA restructuring, conduct studies on public utilities and on the water and sanitation sectors and prepare the necessary documentation for the Review. In particular, the Review will consider and discuss the results of the following studies and reports: (i) review of past performance and implementation of the NSP in general, and the Montagne Jacquot project in particular; (ii) review the recommendations and proposals of the study on the water and wastewater sector studies, including a 5-10 year action plan to implement recommendations; and (iii) review of the project implementation plan (PIP) and recommendations for updating/amending the PIP for the remainder of project implementation. It is expected that the Mid-term Review will result in determination of a general framework for future integrated policy and development of the public utilities sectors (water, wastewater and electricity), which will in turn guide reforms of policies and institutions in these and related sectors. The Mid-term Review will also evaluate the technical and financial viability of the proposed utilities investment corporation based on sector studies. Page 25 Annex 3 Mauritius Environmental Sewerage & Sanitation Project Components Project Cost Summary (US$ Million) Project Components % % Total Foreign Base Local Foreign Total Exchange Costs A. Montagne Jacquot Sewerage System 12.1 35.4 47.6 75 87 B. Waste Water Sector Equipment & Expertise 0.2 3.7 4.0 94 7 C. WWA Institutional Building - 3.3 3.3 100 6 Total BASELINE COSTS 12A 42.5 54.8 77 100 Physical Contingencies 1.0 4.2 5.2 81 10 Price Contingencies 2.6 2.9 5.5 52 10 Total PROJECT COSTS 16.0 49.6 65.6 76 120 Note: Figures may not add up to total due to rounding Page 26 Mauritius Environmental Sewerage & Sanitation Project Components Project Cost Summary (USS Million) Project Components % % Total Foreign Base Local Foreign Total Exchange Costs A. Montagne Jacquot Sewerage System Land Acquisition & Compensation 2.4 0.0 2.4 0 4 Pipelines & Sewers 2.6 7.8 10.4 75 19 Pumping Stations 1.1 5.4 6.5 83 12 Treatment Plant 2.9 9.9 12.8 77 23 Sea Outfall 0.9 6.7 7.5 89 14 Industrial Pretreatment 1.4 0.0 1.4 0 3 Supervision of Works 0.9 5.7 6.5 87 12 Subtotal Montagne Jacquot Sewerage System 12.1 35A 47.6 75 87 B. Waste Water Sector Equipment & Expertise Sector Expertise 0.0 0.5 0.5 100 1 Sector Studies 0.0 1.8 1.8 100 3 Equipment to support CWA/WWA joint billing system 0.2 1.4 1.7 85 3 Subtotal Waste Water Sector Equipment & Expertise 0.2 3.7 4.0 94 7 C. WWA Institutional Building WWA Program Management Assistance 0.0 2.4 2.4 100 4 WWA Personnel Training 0.0 0.6 0.6 100 1 Industrial Waste Management Program 0.0 0.3 0.3 100 1 Subtotal WWA Institutional Building 0.0 3.3 3.3 100 6 Total BASELINE COSTS 12.4 42.5 54.8 77 100 Physical Contingencies 1.0 4.2 5.2 81 10 Price Contingencies 2.6 2.9 5.5 52 10 Total PROJECT COSTS 16.0 49.6 65.6 76 120 Note: Figures may not add up to total due to rounding Page 27 Mauritius Enviromnental Sewerage & Sanitation Project Components Project Cost Summary (Mau Rs Million) (US$ Million) % % Total Foreign Base Local Foreign Total Local Foreign Total Exchange Costs A. Montagne Jacquot Swewrage System Land Acquisition & Compensation 50.0 0.0 50.0 2.4 0.0 2.4 0 4 Pipehnes & Sewers 54.6 165.4 220.0 2.6 7.8 10.4 75 19 Pumping Stations 22.6 113.6 136.2 1.1 5.4 6.5 83 12 Treatment Plant 62.0 208.8 270.8 2.9 9.9 12.8 77 23 Sea OutfaUl 18.1 140.8 158.9 0.9 6.7 7.5 89 14 Industrial Pretreatment 30.0 0.0 30.0 1.4 0.0 1.4 0 3 Supervision of Works 18.4 119,4 137.8 0.9 5.7 6.5 87 12 Subtotal Montagne Jacquot Sewerage System 255.7 748.0 1,003.7 12.1 35.4 47.6 75 87 B. Waste Water Sector Equipment & Expertise Sector Expertise 0.0 10.0 10.0 0.0 0.5 0.5 100 1 Sector Studies 0.0 39.0 39.0 0.0 1.8 1.8 100 3 Equipment to support CWA/WWA joint billing systern 5,3 29.8 35.0 0.2 1.4 1.7 85 3 Subtotal Waste Water Sector Equipment & Expertise 5.3 78.8 84.0 0.2 3.7 4.0 94 7 C. WWA Institutional Building WWA Program Management Assistance 0.0 51.1 51.1 0.0 2.4 2.4 100 4 WWA Personnel Training 0,0 12.0 12.0 0.0 0.6 0.6 100 1 Industrial Waste Management Program 0.0 6.0 6.0 0.0 0.3 0.3 100 1 Subtotal WWA Institutional Building 0.0 69.1 69.1 0.0 3.3 3.3 100 6 Total BASELINE COSTS 261.0 895.8 1,156.8 12.4 42.5 54.8 77 100 Price Contingencies 21.1 89.6 110.7 1.0 4.2 5.2 81 10 Physical Contingencies 55.7 60.2 115.9 2.6 2.9 5.5 52 10 Total PROJECT COSTS 337.7 1,045.7 1,383.4 16.0 49.6 65.6 76 120 Note: Figures may not add up to total due to rounjing Page 28 Mauritius Environmental Sewerage & Sanitation Project Components by Financiers (US$ Million) OECF IBRD GOM Private Sector Total (US$ Million) Amount % Amount % Amount % Amount % Amount 0/% A. Montagne Jacquot Sewerage System Land Acquisition & Compensation 0.0 0.0 0.0 0.0 2.5 100.0 0.0 0.0 2.5 3.7 Pipelines & Sewers 0.0 0.0 6.8 55.0 5.6 45.0 0.0 0.0 12.4 19.0 Pumping Stations 6.6 85.0 0.0 0.0 1.2 15.0 0.0 0.0 7.7 11.8 Treatment Plant 13.4 85.0 0.0 0.0 2.4 15.0 0.0 0.0 15.7 24.0 Sea Outfall 7.7 85.0 0.0 0.0 1.4 15.0 0.0 0.0 9.1 13.8 Industrial Pretreatment 0.0 0.0 0.0 0.0 0.0 0.0 1.9 100.0 1.9 2.9 Supervision of Works 6.0 76.1 0.7 8.4 1.2 15.5 0.0 0.0 7.9 12.0 Subtotal Montagne Jacquot Sewerage System 33.6 58.8 7.5 13.1 14.2 24.7 1.9 3.4 57.2 87.2 B. Waste Water Sector Equipment & Expertise Sector Expertise 0.0 0.0 0.2 40.0 0.3 60.0 0.0 0.0 0.5 0.8 Sector Studies 0.0 0.0 1.7 80.0 0.4 20.0 0.0 0.0 2.1 3.2 Equipment to support CWA/WWA joint billing system 0.0 0.0 0.0 0.0 1.9 100.0 0.0 0.0 1.9 2.9 Subtotal Waste Water Sector Equipment & Expertise 0.0 0.0 1.9 41.7 2.7 58.3 0.0 0.0 4.6 7.0 C. WWA Institutional Building 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 WWA Program Management Assistance 0.0 0.0 2.2 80.0 0.6 20.0 0.0 0.0 2.8 4.3 WWA Personnel Training 0.0 0.0 0.5 80.0 0.1 20.0 0.0 0.0 0.7 1.0 Industrial Waste Management Program 0.0 0.0 0.3 80.0 0.1 20.0 0.0 0.0 0.3 0.5 Subtotal WWA Institutional Building 0.0 0.0 3.0 80.0 0.8 20.0 0.0 0.0 3.8 5.8 Total Disbursement 33.6 51.3 12.4 19.0 17.6 26.8 1.9 2.9 65.6 100.0 Note: Figures may not add up to total due to rounding ANNEX 4 National Sewerage Program Mauritius Environmental Sewerage and Sanitation Project Economic Analysis of the capital investment of the project (Montagne Jacquot Sewerage System) Program Objectives The National Sewerage Program is designed to remove a public health threat that could severely affect the national economy. The program also aims at reducing the present level of coastal pollution resulting from discharge of raw sewage into coastal waters near populated residential areas. The Montagne Jacquot Sewerage System Project, an integral component of the Program, addresses these issues at the national level and, in particular, for the area of Port Louis South. Potential Environmental Health Threats The safety of the public water supply in Port Louis is monitored by the Environmental Health Unit in the Ministry of Health (MOH). Samples are taken regularly from various points of the distribution system and undergo bacteriological tests. While the drinking water supply is generally safe, results from sample testing in the years 1994 and 1996 show some intrusion of contaminants from sewage. The likely explanation for this contamination is intrusion of contaminated groundwater into the distribution system during periods when the system is empty or under lower pressure than the surrounding groundwater. If demand for sewerage infrastructure continues to vastly outpace supply, and if the current infrastructure ages without replacement, there is a potential that such contamination could lead to the spread of infectious diseases, such as cholera or typhoid, could spread to the entire population directly through the water distribution system or indirectly through infected persons that handle contaminated food. Without the project the current unsatisfactory state of environmental threat could be expected to deteriorate further. Economic and population growth would fuirther strain the present rudimentary sewerage system and on-site sanitation systems, increasing groundwater contamination in the Port Louis area. As noted above, contamination of potable water in the Port Louis distribution system could trigger a water-related epidemic, such as cholera or typhoid fever. Such an epidemic would have a disastrous impact on the country's important tourism industry. In addition, eutrophication of the coastal waters off Fort Victoria and Point aux Sables would increase further and remain a danger to the public at large, to fishing, and to the marine environment. With the project these threats would be removed. The project could be expected to produce a number of benefits: Annex 4 Page 30 (a) direct benefits to residential water supply consumers, in the form of increased consumption, since the sewerage network would replace the septic tanks which serve at least one third of the population. As a result, septic tank users would save the cost of periodic tank emptying. Similarly, industrial consumers could increase their water consumption due to the increase in sewerage capacity; (b) direct benefits to present and future consumers in the Fort Victoria and Pointe aux Sables areas could be expected to produce higher real estate values reflecting discontinuation of raw sewage discharge into nearby coastal waters. Real estate value increases are a proxy for the discounted net environmental benefits over future years; (c) benefits from avoiding potential loss of tourism revenue, other production losses and higher curative health care costs that would occur should the present unsatisfactory environmental situation trigger a water-related epidemic. The project is akin to buying insurance against catastrophic scenarios, the cost of which would surpass the premium of the insurance policy; (d) intangible benefits in the form of the preservation of the aquatic environment, now under stress from raw sewage discharge off Fort Victoria and Pointes aux Sables. The Principles of Economic Evaluation The economic evaluation of the Montagne Jacquot Sewerage System comprises two phases: first, a least-cost analysis and second, a cost-benefit analysis. The least-cost analysis tests whether the expected project objectives could be met by alternative project designs at a lower economic cost than the proposed design. The analysis is contained in the engineering studies and confirms that the project, as designed, is indeed the least-cost, environmentally sound solution. It employs simple and well-tested technology to collect sewage, pump it to a primary treatment plant to be constructed at Montagne Jacquot and discharge the treated sewage into the sea via a submarine outfall at a point well outside the ecologically sensitive coral reefs. At the discharge point, ocean currents and dissolution will be sufficient to render the discharges ecologically safe. An important complementary control for the potential threat of a water-related epidemic is to ensure that the water supply system operates at full pressure at all times. This would involve Central Water Authority redesign and improvement of operations in the Port Louis area. At present, the most serious contamination occurs when cyclones pass over Mauritius and are followed by torrential rains. At these times, turbidity in the river from which Port Louis receives its raw water rises to such high levels that the treatment plant cannot purify the water. The plant is routinely shut down and the distribution system eventually empties from negative pressure, causing seepage from septic cesspools that could contaminate both the water distribution system and groundwater reserves. The economic cost-benefit analysis is more involved. It compares the economic costs and benefits of the Montagne Jacquot project component over the construction period and over its assumed 30-year period of operation. Detailed calculations are shown in Annex 4-Table 01 and Table 02. All costs and benefits are expressed in constant mid-1997 prices. All investment and operating costs are net of import duties and of either taxes or subsidies. Prices for unskilled labor Annex 4 Page 31 and for foreign exchange have not been shadow-priced. Mauritius enjoys full employment and labor rates are assumed to reflect relative labor scarcity. Similarly, foreign exchange can be freely traded in the open economy and the exchange rate is assumed to reflect the scarcity of foreign exchange. Assumptions for the Economic Cost-Benefit Calculation! Incremental project costs are those of the Montagne Jacquot project component. Additional costs are charged to reflect additional sewage collection costs necessary to connect consumers that now rely on septic tanks. The off-setting cost savings from not having periodic emptying of septic tanks have not been quantified, implying a slight overestimation of operation and maintenance costs. It has been assumed that there are no sunken investment costs. Three kinds of project benefits have been quantified: First, incremental consumer payments for newly charged sewage collection and treatment are assumed to measure mainly the consumers' willingness to have their sewage removed. Second, the rise in land values has been estimated for the Pointe aux Sables area. The entire area adjacent to the beaches is about 400 hectares. At present, the value is considerably lower than comparable areas elsewhere in the Port Louis area, in part due to raw sewage pollution of the coastal area. An informal survey of property prices revealed that the prices for undeveloped land could be expected to double or even treble if coastal pollution is discontinued. In order to avoid double-counting benefits and to be conservative, the assumption has been made that prices would rise substantially less, or on the order of 50 percent on average. For the same reasons, the area of influence has been reduced by 10 percent to avoid the risk of double-counting between consumer payments and rises in property values. Third, benefits in the form of avoided potential loss of tourism revenue, attributable to the project, have been estimated in the following fashion: (a) A trend-line for total tourism revenue has been projected by applying a least-squares analysis to the 1986-1995 period. Annual tourism revenue for each of these years was deflated using Mauritius' consumer price index. (b) Total tourism revenue was then projected for each of the years 2002-2032, while keeping constant annual tourism revenue from 2007 onwards. This level of revenue corresponds to the with project scenario. (c) The assumption was then made that a cholera epidemic would strike Mauritius in the year 2002/2003, corresponding to the first year of operation of the Montagne Jacquot sewerage system. Such an epidemic would be expected to substantially lower tourism flows to Mauritius. The estimate is that the reduction in annual tourism would be 10 percent below the with project scenario. As a point of comparison, in the case of a similar cholera epidemic in Perui in 1991, the decline in gross tourism earnings due to the cholera epidemic ranged from 28 percent to 6 percent. (d) Epidemics are a matter of probability. At present, Mauritius is free of cholera. However, there is a probability, assumed to be 10 percent, that an outbreak could result from the arrival of Annex 4 Page 32 an infected visitor coinciding with unfavorable conditions in the water supply distribution system. Avoided tourism revenue losses are then multiplied by this probability. (e) Not all losses in gross tourism revenue are net losses. The estimated, probability- weighted tourism revenue losses are then multiplied by 80 percent, implying that variable costs are on the order of 20 percent in the Mauritius tourism industry. The Internal Rate-of-Return of the Montagne Jacquot Sewerage System Project component The internal rate-of-return is calculated for the Montagne Jacquot project component as 23%. This rate is considered satisfactory since it is well above the 10 percent estimated opportunity cost of capital in Mauritius. The average weight of each of the three main benefits expected is presented in Table 4-01: Table 4-01 |Benefit contribution to Cons. Payments Land value Prob.loccurencel Total Benefits |Total Benefits 43% 21% 36%0 | 100% I In addition, the project has intangible social and environmental benefits that have not been quantified. Sensitivity Analysis Table 4-02 presents the various assumptions tested and their influence on overall project internal rate-of-return. Table 4-02 Sensitivity/ERR + 20% | + 10% Base Case | 10%/ - 20% Inv. Cost 17% 20% 23% 28% 35% Cons. Payments n.a. n.a. 23% n.a. 19% Land value 25% n.a. 23% n.a. 21% Table 4-03 tests the influence of the probability of occurrence of an epidemic. Table 4-03 Base Casel I Prob.foccurence'"i 5.00/0 7.5% 10% 12.5% | 15.0% / Sensitivity/ERR 19% 21% 23% 25% 1 27% The internal rate-of-return for the project is fairly robust. In all cases tested, the projected rate- of-return can be reduced, but is still above the opportunity cost of capital. Annex 4 Page 33 Poverty Alleviation Impact 'The project is expected to alleviate poverty since it would improve sanitary conditions in Port Louis and, over time, raise connection rates both of which would favor the lower-income population in Port Louis proportionately more. Permanent improvement in environmental health could also be expected to favor the poorer population more since they would most likely be the first to be affected by a water-related epidemic. Acmex4-Table 01 Economic Cost-Benefit Analysis of the Montagne Jacquot System (Millions of Mau Rs in 1997 prices) FY 97/98 98/99 99/00 0001 01/2 02/03 03/04 005 05/06 06/07 07/08 08/09 09/10 10/27 Costs Investment Costs With the Project Conveyance&Treatment 66 150 327 373 151 43 Wastewater Collection 0 32 75 53 60 67 74 95 79 87 95 0 0 0 House Connections 15 45 45 45 45 45 45 45 45 45 45 45 45 45 Total With the Project 81 226 447 472 256 155 119 140 124 132 140 45 45 45 Without the Project 5 5 5 5 5 5 5 5 5 5 3 5 5 S Incremental Investinent Costs 76 221 442 467 251 150 114 135 119 127 135 40 40 40 Operations & Maintenance With the Project 3 3 3 3 3 35 37 39 41 43 45 45 45 45 Without the Project 5 5 5 5 3 5 5 | 5 5 5 5 5 S Incremental O&M -2 -2 -2 -2 -2 30 32 34 36 38 40 40 40 40 Totl Incremental Costs 74 219 440 465 249 180 147 169 155 165 175 80 S8 80 Benefits 1. Consumer Payments With the Project 35 100 107 118 132 141 155 164 173 182 191 191 191 191 Without the Project 10 10 10 10 10 10 10 10 10 10 10 10 10 10 Incremental Payments 25 90 97 108 122 131 145 154 163 172 181 181 181 181 2. Increase in Land Vadue, Pointe aux Sables Area Benefitting, hectares 0 40 40 40 40 40 40 40 40 40 40 40 40 40 Estimated hncrease, mn./ha 0 2 2 2 2 2 2 2 2 2 2 2 2 2 Total Increase during Year 0 80 80 80 80 80 80 80 80 80 80 80 80 80 3. Avoided Costs from an Epidemic Tourism Revenue With Project 11,000 11,600 12,300 12,900 13,500 14,200 14,800 15,500 16,100 16,700 17,535 18,412 19,332 19,500 Tourism Revenue Without Project 11,000 11,600 12,300 12,900 13,500 12,780 13,320 13,950 14,490 15,030 15,782 16,571 17,399 17,400 Incremental Revenue 0 0 0 0 0 1,420 1,480 1,550 1,610 1,670 1,754 1,841 1,933 2,100 Less Saved Variable Costs 0 0 0 0 0 -284 -296 -310 -322 -334 -351 -368 -38 -420 Incremental Avoided Costs 0 0 0 0 0 1,136 1,184 1,240 1,288 1,336 1,403 1,473 1,547 1,680 Probabibility of Occurrence 10% 10% 10% 10% 10% 10% 10% 10% 10% Weighted Incremental Avoided Costs 0 0 0 0 0 114 118 124 129 134 140 147 155 168 _~~~~~ _ Total Benefits from Project 25 170 177 188 202 325 343 358 372 3861 402 409 416 429 Net Benefits from Project -49 -49 -2631 -276 -47 145 197 18 217 221 226 329 336 349 Annex 4-Table 02 Montagne Jacquot Sewerage System Cost-Benefit Analysis COSTS BENEFITS YEAR Total Cost Cons. Payments Land value Prob.loccurencel Total Benefits Net Benefits (in million Mau Rs) (in million Mau Rs) (in million Mau Rs) (in million Mau Rs) (in million Mau Rs) (in million Mau Rs) 97/98 74 25 0 0 25 -9 98W99 219 90 80 0 170 -49 99/90 440 97 80 0 177 -263 WM/91 465 108 80 0 188 -276 0V02 249 122 80 0 202 -47 02/3 180 131 80 114 325 145 03/04 147 145 80 118 343 197 0405 169 154 80 124 358 189 05/C6 155 163 80 129 372 217 06/07 165 172 80 134 386 221 07/W8 175 181 so 140 402 226 08/1>9 80 181 80 147 409 329 05/10 80 181 80 155 416 336 l10ll 80 181 80 168 429 349 11/12 80 181 80 168 429 349 17/13 80 181 80 168 429 349 13/14 80 181 80 168 429 349 14/15 80 181 80 168 429 349 15/16 80 181 80 168 429 349 16/17 80 181 80 168 429 349 17/18 80 181 80 168 429 349 18/19 80 181 80 168 429 349 19/20 80 181 80 168 429 349 20/21 80 181 80 168 429 349 2V22 80 181 80 168 429 349 22/23 80 181 80 168 429 349 23/24 80 181 80 168 429 349 24/25 80 181 80 168 429 349 25/26 80 181 80 168 429 349 26/27 80 181 80 168 429 27/28 80 181 80 168 429 28/29 80 181 80 168 4 449 29/30 80 181 80 168 429 30/31 80 181 80 168 429 3V32 80 181 801 1681 429 Total 4,358 5,741 2,720 4,757 13,2D 8,85 Internal Rate of Retu rn. _ _ il INPV at estimated discounted Rate I 10°h |NPV | 1,750l 1,310| 6991 8571 2,865 1,116 ANNEX 5 FINANCIAL ANALYSIS THE WASTE WATER AUTHORITY A. Past and present financial performances Accounting and Auditing: As per WWA Act of 1991, the Waste Water Authority (formerly the Waste Water Division) is responsible for: * implementation of the Investment Program of the sanitation sector; * operation of all sanitation infrastructure (e.g. sewer networks, wastewater treatment plants); and * management of the sanitation budget. The WWA, currently equivalent to a Government department, follows the Government of Mauritius Financial Management Manual (August 1990) in its financial and accounting procedures, resource management, and control and audit procedures. The procedure for the approval and award of its contracts is governed by the 1994 Central Tender Bill with all tenders of Rs 500,000 and above being handled directly by the Central Tender Board. The Financial Management Manual applicable to the Ministries/Departments does not prescribe procedures for recording and accounting for fixed assets. Wastewater Tariffs Tariffs prior to July 1996: Previously, the sewerage tax was based on a percentage of the net annual rentable value (NARV) of the property for those connected to a sewerage network. For the different types of property, the percentage was: 1Domestic 1.0 % - Commercial 1.5 % - Industrial 2.0 % New Tariffs: As of July 1, 1996, in conformity with the WWA Act of 1991, new tariffs have been determined as follows: * Domestic: For domestic connections, the monthly charge will be Rs 25.00 per household per month. The billing will be effected on a quarterly basis. * Commercial: For commercial connections, the rate will be 2.0 percent of the NARV, with billing effected on a yearly basis. * Industrial: For industrial connections, the charge will be based on the water consumed, i.e. Rs 2.00 per m3 of water consumed. The billing will be effected on a monthly basis and according to Central Water Authority (CWA) procedures. These new tariffs represent a provisional means for better cost recovery. Annex 5 Page 37 Past and present financial performance Expenditures The expenditures of the Waste Water Authority are financed by the National Budget and are shown in Table 5-1 for a number of fiscal years. Table 5-1: Expenditures of the WWA for the period 1992-97 (In Mau Rs Million) FE d t 92-93 93 94 94 95-96 96-97 Recurrent 30.3 36.5 38.2 38.1 44.6 |Capital 33.7 28.3 15.0 39.7* 38.2 Total 64.0 64.8 52 6 77.8 82.8 * Actual expenditure 39.7. The budget figure voted was 173 Mau Rs. million. The total expenditure for 1995-96 shows a marked increase over that of previous years, which corresponds to the start of Investment Program implementation. WWA Recurrent Costs: At the present level of recurrent costs and service connections, the cost of operation and maintenance (excluding depreciation and debt service) by the WWA for the current fiscal year, 1996-97, is Rs 4.10 per m3 of water flow. When translated to a fixed charge, the equivalent payment required from households to cover this cost will be Rs 82 per month. According to the proposed tariff, domestic consumers are expected to pay Rs 25 per month only, or less than 30 percent of the recurrent cost. They are thus heavily subsidized. The same is true for commercial and industrial consumers. Whereas the extent of subsidy to commercial consumers could not be estimated in the absence of the likely payment based on the NARV, the subsidy in case of industrial consumers is estimated to be over 50 percent. Expenditure on Existing Wastewater Facilities and Funding: The consolidated capital expenditure on sewerage works over the year is not available. From the information gathered from the Master Plan report and the budgets of the Waste Water Division, total expenditure on capital works over the last 25 years, between 1970-95, is estimated at Rs 208 million. Full information on funding of the capital works is also not available. However, it can be assumed that a substantial portion of the expenditure was met from national budgetary resources. Revenue: The revenue for the Waste Water Authority is derived principally from: * the sewerage tax; and * miscellaneous fees. The sewerage tax has been defined above. Miscellaneous revenues include: * house connection survey fees; * cesspool and septic tank emptying fees; and * house connections constructed by the Waste Water Authority. Annex 5 Page 38 At present, the average cost for a household connection to a new sewer network is about Rs 7,000 (from the household to the boundary of the property); to connect a household to an existing sewer costs between Rs 10,000 to 15,000 (from the household to the sewer network). For many households the relatively high cost of such works actually slows the rate of house connection and hence affects improvement in wastewater collection. Incentives will have to be identified to overcome this obstacle, such concessionary interest on loans, GOM sharing part of the work costs, etc. The revenue collected during past financial years is shown in Table 5-2 below. Table 5-2: Revenue collected by the WWA (in Mau Rs million) Revenue Source 92-93 93-94 94-95 95-96 96-97 Sewerage Tax 7.3 6.6 6.4 6.9 9.5 Miscellaneous 3.3 5.3 2.3 3.0 2.7 Total 10.6 11.9 8.7 9.9 12.2 As evident in the above table, the sewerage tax is the WWA's main source of revenue. Conclusion: At present level of recurrent cost and number of service connections, the cost of Operation and Maintenance (O & M) (excluding depreciation and debt service) by the WWA for the current fiscal year, has been estimated to Mau Rs 3.2 per cum of estimated wastewater flow. When translated to a monthly wastewater charge, the equivalent payment required from the domestic households will be Mau Rs 64 at an average wastewater flow of 20 cum per month. According to the new tariff in place, the domestic consumers are expected to pay Mau Rs 25 per month only, or the equivalent of about 40% of the actual 0 & M. These new tariffs, at this level imply a heavy level of subsidy. The same is also true for the commercial and industrial consumers. There is clearly a need to develop a sound and financially sustainable cost recovery policy which would take into account the constraints of affordability, equitability and willingness to pay. The proposed new cost recovery system is described in the following sections of this annex. Annex 5 Page 39 B. The National Sewerage Program Program cost estimates: The National Sewerage Program, defined by the Sewerage Master Plan, has identified and prioritized 13 medium and large-scale projects (including works underway) to be implemented over next six years. The aggregate cost of these priority projects will be Mau. Rs. 5.511 billion by 2002-03. Details of the per project cost estimates and yearly phasing are provided in Annex 5-01. The broad break-down under generic categories is provided in Table 5-3: Table 5-3 National Sewerage Program Summary Cost Estimates Estimated (Mau Rs miilion) Cost Base Costs: Land 111 Civil Works 3,260 Equipment & Materials 1,376 Other 124 Total NSP Base Costs: 4,870 Contingencies: Physical 359 Price 297 Total Contingencies 656 Total Program Costs 5,526 Financing arrangements: The funding arrangements, for both external loans and grants and the Government contribution, are in the process of effectiveness, negotiation and/or finalization. Table 5-4 summarizes the funding arrangements proposed by the Government for implementation under the National Sewerage Program. Details by project and yearly phasing are given in Annex 5-02-A and Annex 5-02-B. Onlending of external loans/grants and Government counterpart contributions are discussed later in this Annex. Table 5-4 National Sewerage Program Proposed Financing Arrangements Estimated (Mau Rs million) Cost Total Program Costs: 5,526 Source of Financing. Govt. of Mauritius 1,848 External Agencies- Loan 3,150 External Agencies- Grant 498 Private Sector Financing 30 Total Financing 5,526 Annex 5 Page 40 C. Cost Recovery Options and Targets Cost recovery principles: Financial management and pollution control in the wastewater sector is a totally new area in Mauritius, and is one in which public involvement will be of major importance. The extent of cost recovery expected from consumers of wastewater services under the overall short and medium-term sector objectives must be considered carefully. The following cost-recovery options have been considered: 1. Operation and maintenance cost ( 0 & M) 2. 0 & M cost plus depreciation; 3. 0 & M cost plus the higher of depreciation or debt service ( for external loan onlending only); 4. 0 & M cost plus the higher of depreciation or debt service ( for onlending of total Program costs); Cost Recovery Targets: To derive a medium-term tariff, beginning fiscal year 1998-99 to fiscal year 2006-07, cost recovery targets have been calculated to arrive at the level of recovery required for the four options stated above. Details are given in Annex 5-03. Table 5-5 summarizes the results, at constant mid- 1997 prices, of the cost recovery analysis for the various options and estimates the required average wastewater tariffs applicable to the water bill. Table 5-5 Ntlooal Sowemoe pNogro SUMMARY AVERAGE COST RECOVERY REQUIRED UNDER VARIOUS OPTMONS (in consiL tlMoo osl nn3) (At Mid-t997 Pnek-) OPTfNAPEAR 19981999 |1999/500 2500/5w00 |711pl02 20|4/203| 2002(2004 20O/2005 2|087006 206/2007 A. Avetngeo W9t.eeat Cort 1. Operation & Maintenance Cost 2.5 2.6 2.8 2.7 6.1 5.9 55 5.2 5.0 2 Op-rotin & Maintemtnce pi.s Doprcioti.o 3.3 3.7 4.3 4.2 11.1 10.9 10.0 9.4 9.0 3. Operation & Maintenatnce plus Oeprijtioo or 3.3 3.7 4.3 4.2 11.1 15.8 14.4 13.3 324 DebtSevice - Etternal boo1t) - Highor of the two 4. Oporon & Maintenance plus Doprciationor 3.3 3.7 4.3 4.2 11. 23.5 21.2 19.5 18.2 Dobt Sokice (Total costs)- Higher of the two B. A-orag Woteoatr Taiff reqi-ed 3. OpeoIrotoMaiston nc -Cost 2.2 2.2 2.5 2.3 5.3 5.1 4.8 45 4.3 2 Operation & M.ijtenance plot Doprociation 2.8 3.2 3.8 3.7 9.7 9.5 8.8 8.2 7.9 3. Operation& Moiotnnc pus. Deprci-tionfor 2.8 3.2 3.8 3.7 9.7 13.8 125 11.6 10.8 DebL S-rvico (Etornl lIons) - Higher of tho two 4. Operatin & Maintosance pies Dprocietior or 2.8 3.2 38 3.7 9.7 20.5 185 37.0 t5.9 Debt Service (tal co-to)- Higher of the two The relation of these costs and required average tariff levels to household income and affordability levels for water tariffs are discussed below. D. Domestic Affordability Analysis Affordability is the economic and financial ability of the consumer to demand certain goods and services given his other needs. Affordability also influences a consumer's willingness to pay. It is difficult to fix the affordability level for water supply and sewerage, given that water is usually considered a basic human need, and sewerage service levels are derived from water consumption. Annex 5 Page 41 However, it has been accepted, although more as a rule of thumb, that expenditure on urban water supply and sewerage should not exceed more than 4 to 6 percent of household income. In Mauritius, Household Budget Survey (July 1994) reported the average monthly household income for 1991-92 as Rs 6,500, with 62 percent of the population earning below the monthly average, and 7 percent earning less than Rs 2,000. The survey reports average expenditure on water as 1.4 percent (Rs 67.8) of monthly income. Considering a real term increase of 2.5 percent in the income level over the past several years the average monthly household income for 1996-97 has been assumed to be Rs 7,540. Table 5-6 examines the relationship between the proposed water charges, analyzed by the CWA relative to income, and the amount available to meet the wastewater charges for the forecast period. The analysis in this table shows that water charges in relation to household income rise over the period, with the maximum amount available for wastewater charges remaining stable at around Mau Rs 150/per month from 1998 through 2003, and then rising to allow better recovery of wastewater costs. It further suggests that wastewater charges should be maintained at around 2-3 percent of average household income. Table 5-6 National Sewerage Prograns SUMMARY DOMESTIC AFFORDABILrIY ANALYSIS (in constant Mau Rs/nm3) (At Mid-1997 Prices) OPTION/YEAR 1998/1999 1999/200D5 27l2O1 2001/2052 201D22003 200/20 24 0 2 D02005 20/006' 2001207 A. Average Monthly Household coe 7,722 7,915 8,113 8,316 8,524 8,737 8,955 9,179 9,409 B.Assumed Expenditsueon Water & Wastewater 4% 4% 4% 4% 4% 4.25% 450% 4.75% 5.00% 309 317 325 333 341 371 403 436 470 C. Average Monthly Water Charges 160 169 178 187 195 20D 205 210 215 2.1% 21% 22% 2.2% 2.3% 2.3% 2.3% 2.3% Z3% D. Income Avaibble for Wastemvater Charges 149 148 147 146 146 171 198 226 255 I.9 b 1.9' 1.8% 1.8% 1.7% 2.0 72.2 2.5!. 2.7% E. Estisaled Waste-ater Domestic affodable tariff 5.64 5.59 555 5.54 53 6.49 S7.5 856 69. Whereas the analysis in Table 5-7 below shows that the wastewater charges as a percent of water charges need to be fixed at between about 25 percent in 1998/99 to about 175 percent in 2004/05 under the four cost recovery options considered, the affordability analysis shows that the wastewater charges should represent a maximum of 100 percent of the water charges. Table 5-7 further indicates that the monthly wastewater charges in relation to monthly household income, under the four recovery options considered, varies between 0.5 percent to 1 percent, to recover the O&M cost alone, to 4 percent (in fiscal year 2004/05) to recover full Program costs. The analysis shows that the expected cost recovery in 2004/05 will be 1.8% if depreciation is recovered, and will be 3.5% for option 3 and 4.0% for option 4 if debt service is also to be recovered. Desired cost recovery falls within the assumed combined household expenditure level of 4 to 6 percent on water and wastewater charges, depending on the year and the recovery option considered. Annex 5 Page 42 Table 5-7 NationlI Sewernge Progran SUMMARY AVERAGE COST RECOVERY REQUIRED IN RELATION TO HOUSEHOLD INCOME (in constant Mau Rs/n,3) (Al Mid-1997 Prices) OPTIONYEAR 1994t999 1999/l00 200201 2/2002 2002/00 20032004 20042005 2005/2006 20062007 astewtatr Charges Ve-sn Household Income 1. Opration & MantenanceC st 38 38 42 40 93 89 84 79 76 0.5% 0.5% 05.% 0.5% 1.1% 1.0% 0e9% 0.9% 0.% 2. Operation & Maintenance pls Depreciation 41 49 55 65 63 168 165 154 145 0.5% 0.6% 0.7% 0.8% 0.7% 1.9% 1.8% 1.7% I.5% 3. Operation & Maintenance pIs Depreati.on or 41 49 55 65 63 168 317 290 269 Debt Servie (E.ternal ioans) - Higher of the two 0.5% 0.6% 0.7% 0.8% 0.7% 1.9% 3.5% 3.2% 29% Opsrat.on & Maui ce pts Depreciation or 41 49 s5 65 63 168 358 325 299 DebtService (Total costS)- Higher of the two 05% 0.6% 0.7% 0.8% 0.7% 1.9% 4.0% 35% 3.2% E. Proposed Water and Wastewater Tariffs Tariff principle: Since water connection metering has proven workable, the level of wastewater service used may easily be determined from the volume of water consumed. The option retained for recovering wastewater charges is to levy these charges as a percentage of the water tariff, based on the volume of water consumed, and to combine both charges on one bill. Discharged wastewater is estimated at 75 to 80 percent of water consumption. Tariff level: Based on the analysis presented for the cost-recovery options and targets and household income, wastewater tariffs for domestic users, using the affordability criteria, will be fixed as a percentage of water charges beginning in fiscal year 1998-99, (i.e. July 1, 1998). These rates will gradually rise over the years, with the limitation that in they do not exceed the domestic water charges for that year. The non-domestic charges will be fixed at a rate equal to water charges as of the same date. Based on these consideration and the assumption for the proposed water tariffs, the required wastewater tariffs have been calculated and are presented below: in current and constant prices. Table 5-8 National Sewerage Program Proposed Water & Wastewater Tariffs (in current Mas R./cumn) 19981999| 1999/2000 | '2 1I 2001/002| 2002/2003 I2002/204 2004/2000 2005/200t 2006/2007 P-oposed Water Tariffs Domestic 6.3 6.3 7.3 8.5 8.8 9.1 9.6 10.0 10.5 Non Domestic 13.0 13.6 14.2 14.9 15.5 16.2 17.0 17.8 18.7 Proposed Wastewater Tariffs Domestic (aS % of Water Tanff) 45% 45%/e 6t0/ 750/a 85% 100% 100% 100% 100% Non Domestic ( as % of Water Tanff)% 100% 100X 100% 100% Domestic 28 2.8 4.4 6.4 7.5 9.1 9.6 10.0 10.5 Non Domestic 13.0 13.6 14.2 149 155 162 170 178 18.7 Annex 5 Page 43 Table 5-9 National Sewerage Progmm Proposed Water & Wastewater Tariffs Base: mid-1997 (in constant Mau Recum) 199/1999 1999/2000 2001 2o002002 2|2 20052004| 2004/2000 2005/2006 20082007 Proposed Water Tariffs Domestic 6.0 5.8 6A 7.1 7.1 7.0 71 71 7.1 Non Domestic 12 4 125 12A4 125 12.4 12.4 125 12.5 126 Proposed Wastewater Tariffs Domestic (as % of WaterTariff 45% 451% 60('o 75% 85% IC00/s 100% 100% 100% Non Domestic (as % of WaterTaiff1 100% 100% Ice% 100% 100% 100% 100% 100% 100% Domestic 27 2.6 3.8 5.3 6.0 7.0 71 7.1 7.1 Non Domestic 124 1215 12.4 12.5 124 124 12.5 125 12.6 Tariff Structure: the principle retained is that: (i) users will be charged on their wastewater generation, determined as a percentage of their actual water consumption; and (ii) there will be a lower tariff for less affluent domestic consumers, with cross-subsidization by more affluent domestic and non-domestic consumers. Considering overall affordability, the combined cost to the household for both water and wastewater is relevant since these two originate from the same utility (water). Billing and collections of wastewater charges: wastewater charges will appear on the same bill as the water charges. The bills will be issued and collected by the CWA. CWA will receive, for these services, a pre-agreed percentage of the arnount collected. All specific stipulations will be agreed upon by WWA and CWA, to be implemented by July 1, 1998. F. Affordability Test The household affordability test for the proposed water and wastewater charges, over the years of the forecast period, is presented in Table 5-10 below. The results show that the combined charges are between 3 to 4.6 percent of average household income, at constant income and price levels, and are affordable given the criteria of a maximum 4 percent expenditure for water and wastewater for 2002-03 and 5 percent for 2006-07. The suggested wastewater charges fully meet the operation and maintenance costs, and depreciation for all years of the covered forecast period. The tariffs can also contribute partially to the debt service. Table 5-10 Natissal Sewerage P-ogr.. AFFORDABIUTY TEST o p,p-sed Waler d Wastewater Chages (is -onstant Ma. Rs/m3) (At Mid-1997 Prices) OPTION/YEAR 199N/999 1999/200 209200 2002 2002/20 200/200 2002000 2005/2006 200W07 A Dssestk WaterChsuges 160 169 178 18/ 19' 201 205 210 215 B Domestic Wastewater Chages (is %) 45% 45% 60%/ 75°/ 850% 100% 100% 100% 100% C Domesc WastewaterCharges 72 76 107 140 166 200 205 210 215 D. Tota Monthly Charges 232 245 285 326 361 400 410 420 430 Monthly Household Income 7,722 7,915 8,113 8,316 8,524 8,737 8,955 9,179 9,409 FTtal Monthly Charges to Hou ehold Income 3 30% 31% 1 3.5% 39%/s 4.2% 4.6% 46% 4,6°/ 46% Annex 5 Page 44 G. Future financial projections The financial forecasts for the period are presented in the proforma tables and tables and graphs of Annexes 5-01 to 5-1 1. These include wastewater flows and equivalent water flows to be billed, income statements, sources and uses of funds under the different options (i.e. without the debt service, with the debt service for onlending external loans only, with the debt service for onlending the total National Sewerage Program cost), balance sheet and cash analysis graphs and tariff analysis graphs. The following assumptions have been made for the financial analysis: 1. Proposed works under the National Sewerage Program: 1.1. capital costs estimated for the 13 identified large and medium projects considered fo priority implementation are as updated by WWA in August 1997 and in January 1998, for the Montagne Jacquot Sewerage Project and include estimated physical and price contingencies. 1.2. Physical completion targets for the projects are based on the National Sewerage Program updated by WWA in December 1997. 1.3. The Sewerage Connection Investment Program for the forecast period, still to be finalized, has been estimated to cost about Mau Rs 2.2 billions for the period up to fiscal year 2006/2007, and is to be financed by GOM up to fiscal year 2002/03, and thereafter through WWA internal sources of funds. 2. Inflation factor: 2.1. Local inflation assumed is 5 percent over the forecast period. 3. Operation and Maintenance Cost: 3.1. Existing recurrent costs have been assumed to increase by 5 percent per annum in real terms. 3.2. For the proposed projects, the 0 & M costs are based on estimates made by consultants in project feasibility studies, when available, and on the best judgment estimates when studie were not available. 4. CWA service fee for billing and collection. 4.1. For the financial projections, it has been assumed that CWA will receive a 5 percent fee on collected wastewater revenues for billing and collecting wastewater charges. 5. Provision for renewal of existing assets. 5.1. A provision for renewal of existing assets has been considered for the financial projections. This provision is estimated at about 5 percent of the book value of these assets, pending revaluation. Annex 5 Page 45 6. Depreciation: 6.1. Depreciation of the fixed assets under WWA management has been computed on the straight line method on rates based on the following estimated useful life of the new assets Asset Nature Life Rate Civil works/ Sea outfalls 40 years 2.5 percent Equipment/ Materials 15 years 6.67 percent 6.2 The depreciation rate is 4 percent of the estimated value of the existing assets, pending revaluation. 7. Wastewater Flows and flows to be considered for revenue generation. 7.1. For revenue projection, wastewater flows have been determined based on possible coverage by the National Sewerage Program and estimated increases in service demand generated by the Sewerage Connection Investment Program of about Mau Rs 2.2 billions over the forecast period ( i.e. an average of about Mau Rs 200 millions per annum). These estimated wastewater flows have been converted into water flow equivalents for billing and revenue generation purposes on the basis of a water-to-wastewater conversion rate of 80 percent. A 10 percent allowance has been made for possible demand elasticity response for domestic users; this becomes a 5 percent allowance for non-domestic users and Government agencies. 8. Long and Medium-Term Debt Service (LMlTD) 8.1. Two options are considered for the financial projections: 8.2. Option 1: All external loan funds are assumed to be onlent to the WWA under the above conditions to carry an average interest at 5 percent, repayable over 20 years excluding the construction project period 1998-2003. The currency exchange risk has been assumed to be taken by GOM. 8.3. Option 2: All National Sewerage Program costs (including GOM contribution and external grants) are assumed to be onlent to the WWA under the above conditions to carry an average interest at 5 percent, repayable over 20 years excluding the construction project period 1998-2003. The currency exchange risk has been assumed to be taken by GOM. H. Conclusions and Management of the Long and Medium Term Debt From the overall analysis presented and the forecast financial statements for the period 1998- 2007, it can be concluded that revenues generated through the proposed wastewater tariffs as percentage of the water tariffs, will allow, as illustrated by the Graph 5-1 1 below: 1. Coverage of the full 0 & M costs in all years; Annex 5 Page 46 2. Coverage of full 0 & M and depreciation in all years, except in fiscal year 2002/2003 when most of the pumping and treatment facilities become operational; The financial cash flow generated through the wastewater tariffs fixed at the affordability level will not allow the full coverage of the debt service, even if, only the external loans to GOM are onlent to the WWA, at the soft conditions considered. The cash flows generated can gradually contribute to a higher level of coverage of the debt service as indicated below in both options of the Debt Service: Debt Ratio 2003/2004 2004/2005 2005/2006 2006/2007| Option 1 (Onlending of Extemal Loans) 0% 0% 17% 22% Option 2 (Onlending of Total NSP costs) 0% 0% 9% 13% Graph 5-11 I%M.u Rs/m3 WWA- Cost Recovery OptionslTarifs required- Average Weighted Tariff 2.00 ,.,,.....--;--.... . ;-,,;..... - --i:.... ..... 10.00 - - - - - - - - - ' - - - - - - 5. 0 -- -- - --- ---- ----------------- . - 98199 99500 00.01 01)02 00 0304 04/05 05/06 06.07 -. O&M -4- O&M+ Depreciation O&M LMTD Optioni eQO&M LMTD Option2 -U-Average Weighted T-aff The graph 5-12 below, presents, in the case of onlending of the total NSP cost to the WWA, the level of tariffs required to allow, over the forecast period: (i) the annual financial equilibrium; and (ii) the long and medium terms financial equilibrium. Annex 5 Page 47 Graph 5-12 f g(buRs/m3 WWA- C-st Recovery OpUsiuns/Iariff requlel vrg egb uS-snr,rl i. us 30.0 ;0? 25.00 ~~ 20.00 10.00 500 r 00'01 01102-O&M+ OIp#5ciation o034 -A041M LMTD OpQW 0607 --X|O&M LMTD Option2 --Average Weighted Tariff -Xf Tariff Required for LT full cost recovery From the above analysis, it was agreed with GOM, that: 1. The infrastructure investment assets for the NSP will not be vested in the new WWA to be created but will be managed by the new WWA within the framework of the foreseen- contract ( reflecting the "MaStrise d'Ouvrage deleguee") between GOM and WWA. 2. These assets will remain the property of the State. 3. The liabilities associated with these assets ( long and medium terms debt service) will therefore not be onlent to the new WWA, and will remain the responsibility of the State. 4. In addition to covering 0 & M and depreciation, the revenues generated from the proposed tariffs will also contribute partially and gradually to the debt service, through a "User Fee" and/or a percentage of the free cash flow generated. 5. The modalities and level of the contribution to the debt service through the proposed tariffs, are to be defined within the foreseen contract (reflecting the "Maitrise d'Ouvrage deleguee") between GOM and WWA. H. Financial Analysis- Montagne Jacquot Sewerage project Internal Financial Rate of Return (IFRR) The Internal Financial Rate of Return (IFRR), which in constant prices relates the sewerage revenues to the capital and operating costs of the Montagne Jacquot sewerage facilities, was computed as an indication of the minimum economic return. The life of the project has been Annex 5 Page 48 estimated at 30 years. Revenues attributable to the project were used as a first estimate of the consumer's willingness to pay in quantifying the estimated internal rate of return for the proposed project. The cost stream includes: (i) base costs and physical contingencies for civil works, equipment, engineering studies, supervision and operation and maintenance for the transport, treatment and disposal of wastewater for Port Louis South and Lower Beau Bassin/Coromandel; and (ii) the investment costs for reticulation for additional household and industrial connections ( to be financed by GOM during the first five years of the forecast period and implemented by WWA). The IFRR is approximately 8.1%. The IFRR is considered to be acceptable given: (i) the nearly total lack of cost-recovery mechanisms at present; and (ii) the social nature of the proposed project with its intangible anticipated health, economic and environmental benefits presented in Annex 4. The computation of the IFRR is shown below in Table 5-13. Table 5-13 isoinmontol Snnoomgn & Sonilolion Projoct Fund RB of ROBeh for Montgn Joq.ot Pont YEAR A. nn t B. Cn.nlio ('I l r oinesmnt(0)i Op-rnting cotr) Tool Codt Ne Con-onno Se-r-g.Flnow I in.Rnr-nn I Neti (in miBion M .oRn (in miiiion Mou R.) (in million Mo. R.) (in million Mon Rn) jllion M.o R (in 50)) (in miiiion m3/yeer) (in million Meu Rn) (in million M. Rn) 97/98 60.7 0.0 60.7 -20 5S7 0.0 7.3 25.0 -33. 98/99 144.7 31.8 1765 -20 1745 1.3 9.6 90.0 -84.5 99iO 3224 74.8 397.2 -.0 3952 3.0 10. 96.9 -298.3 Ot!OI 368.5 53.5 421.S -20 419.8 2.1 11.3 1OS -311.3 OY01 1463 59.7 206.1 -ZO 2D41 24 IZO 121.7 -82. 073/0 43.1 66.5 109.7 30.4 140.1 Z7 127 131.1 -9. 03p4 74.5 894 321 121.5 3.0 13.6 145.0 23. OC5 94.9 113.9 34.1 148.0 3.S 14.5 154.3 6 O/09 78.9 94.7 3610 130.0 3.2 15.1 163.4 32 0p7 86.5 104.2 379 1421 3.5 165 1722 30. 07/tM 95.5 114.6 40.0 154.6 3.8 17.5 181.3 26. 000 0.eo 0.0 40.0 40.0 17.5 181.3 141.3 O91O 0.e 0e0 40.0 40.0 17.5 181.3 141.3 IVA,11 40.0 40.0 17.5 181.3 141.3 IV12 40.0 40.0 17.5 101.3 141.3 12/13 40.0 40.0 175 181.3 141.3 17/14 40.0 40.0 175 181.3 141.3 1411i 40.0 40.0 17.5 181.3 141.3 10/16 40.0 40.0 17.5 1033 141.3 161t7 40.0 40.0 17.5 101.3 141.3 17/1S 40.0 40.0 17.5 101.3 141.3 ISV19 40.0 40.0 17.5 181.3 141.3 18/TB 40.0 40.0 17.5 101.3 141.3 2/21 40.0 4L00 175 101.3 141.3 ZV22 400 400 175 181.3 141.3 223 4t00 4040 17.5 181.3 141.3 2/2 40.0 401) 175 101.3 1413 2430 400 40O 175 101.3 141.3 233 400 400 175 101.3 141.3 20/23 400 400 175 101.3 141.3 T.tn 1,0SS.7 7169 1,000.7 96408 2469.5 267 47349 4,03 1.9003 I fo nioia Rob f i n R INl!V at ennaoed iffodv Rats no iit 100% Nl!Vy EE E 1,197 203 IAOO IS 129 26 1,2Z -J (0) lnvnstenn wststre. - tod boA. theo n-cHonwo-rks for tho MonW.Unn)orqnot S-onrogoSynten nod B, nf.,ork -t-ioon for new- hlnoeholdoo d indstin connections (0, OpoorLng -nd mointo4no -conreroprennt thre wmputon of Ore dotnild entioroo for M-ontogno Jeinquot Sorc-V Synt-n -1n N.otionl . en tge boriff ppo.ed (b.nd on propoed Woed Trdiffs) take into -noid-tn-hon tho fordoility/.iriingneon topoy. Annex 5 Page 49 Sensitivity Analysis: Table 5-14 presents the various assumptions tested and their influence on overall project internal rate-of-return. Table 5-14 Sensitivity/FIRR 20%0 | Base -200/o Investment 6.4% 8.1% 10.6% Revenues 12.1% 8.1% 4.1% O&M 7.4% 8.1% 8.8% ANNEX 5-01 SUMMARY NATIONAL SEWERAGE INVESTMENT PROGRAM (Mau Rs/million) SI. No. Project Estimated Cost Cost Projected Expenditure _ _l Cost Already to be 1997/1998 1998/1999 1999/2000 2000/2001 2001/2002 2002/2003 Incurred Incurred I Plaines Wilhems i St. Martin - Phase I 60.0 40.0 20.0 20.0 ii St. Martin - Phase 11 780.0 780.0 13.0 76.7 153.4 306.8 230.1 iii CHA Phase I 22.0 14.6 7.4 7.4 iv Plaines Wilhems Trunk Sewer 450.0 450.0 - 10.0 44.0 88.0 176.0 132.0 v Urgent Works 51.8 31.0 20.8 20.8 vi CHA Phase 11 142.5 4.9 137.6 41.3 82.6 13.8 Total 1,506.3 90.5 1,415.8 102.5 169.3 211.2 394.8 406.1 132.0 II Port Louis South & Lower Basin i CHA Phase II 142.5 4.9 137.6 41.3 82.6 13.8 ii Montagne Jacquot 1,222.2 10.0 1,212.2 71.8 163.3 357.3 407.6 165.2 47.1 iii Urgent Works 158.2 73.8 84.4 42.2 42.2 Total 1,522.9 88.7 1,434.2 155.2 288.1 371.1 407.6 165.2 47.1 III Port Louis North i Baie du Tombeau 800.0 10.0 790.0 50.0 111.0 222.0 296.0 111.0 Total 800.0 10.0 790.0 50.0 111.0 222.0 296.0 111.0 - IV Rural Areas Grand Baie 450.0 450.0 50.0 60.0 120.0 160.0 60.0 Total 450.0 - 450.0 50.0 60.0 120.0 160.0 60.0 - V Others i Reticulation System (Unspecified) 1,196.6 1,196.6 113.0 240.2 240.2 313.0 290.2 ii Revolving Fund for House Connections 50.0 50.0 50.0 Total 1,246.6 - 1,246.6 - 163.0 240.2 240.2 313.0 290.2 Grand Total/a 5,525.9 189.2 5,336.7 357.7 791.3 1,164.4 1,498.6 1,055.3 469.3 Percent Works of Total 100% 3% 97% 6% 14% 21% 27% 19% 8% /a: Includes estimated contingencies of Mau Rs 656 million (physical Rs.359 million and price Rs.297 million). ANNEX 5-02-A SUMMARY NATIONAL SEWERAGE INVESTMENT PROGRAMME FINANCING PATrERN (Mau Rs million) SI. No. Project Estimated Cost Cost Financing Pattern Cost Already to be Government External Agencies Private Sector Total Incurred Incurred Grant Loan I Plaines Wilhems i St. Martin - Phase I 60.0 40.0 20.0 60.0 60.0 ii St. Martin - Phase II 780.0 780.0 367.0 413.0 - 780.0 iii CHA Phase I 22.0 14.6 7.4 22.0 22.0 iv Plaines Wilhems Trunk Sewer 450.0 450.0 90.0 360.0 450.0 v Urgent Works 51.8 31.0 20.8 51.8 . 51.8 vi CHA Phase II 142.5 4.9 137.6 31.4 _ 111.2 142.5 Total 1,506.3 90.5 1,415.8 600.2 413.0 493.2 1,506.3 II Port Louis South & Lower Basin i CHA Phase II 142.5 4.9 137.6 31.4 111.2 142.5 ii Montagne Jacquot 1,222.2 10.0 1,212.2 298.6 20.0 873.7 30.0 1,222.2 iii Urgent Works 158.2 73.8 84.4 158.2 _ _158.2 Total 1,522.9 88.7 1,434.2 488.1 20.0 984.8 30.0 1,522.9 III Port Louis North i Baie du Tombeau 800.0 10.0 790.0 335.0 65.0 400.0 800.0 Total 800.0 10.0 790.0 335.0 65.0 400.0 - 800.0 IV Rural Areas Grand Baie 450.0 450.0 150.0 300.0 450.0 Total 450.0 - 450.0 150.0 300.0 450.0 V Others i Reticulation System (Unspecified) 1,196.6 - 1,196.6 263.3 933.4 1,196.6 ii Revolving Fund for House Connections 50.0 - 50.0 11.0 39.0 50.0 Total 1,246.6 - 1,246.6 274.3 972.4 - 1,246.6 Grand Total 5,525.9 189.2 5,336.7 1,847.6 498.0 3,150.3 30.0 5,525.9 percent . 33% 9% 57% 1% 100% NATIONAL SEWERAGE INVESTMENT PROGRAM YEARWISE FINANCING AND COUNTERPART FUNDING ANNEX 5-02-B (Mau Rs million) Project Estimated Cost Cost Projected Expenditure Cost Already to be 1997/1998 1998/1999 1999/2000 2000/2001 2001/2002 2002/2003 Incurred Incurred St. Martin - Phase I Govemment 60.0 40.0 20.0 20.0 Extemal Agency - Loan - - Total 60.0 40.0 20.0 20.0 St. Martin - Phase II Government 367.0 - 294.1 4.9 28.9 57.8 115.7 86.7 External Agency - Loan Extemal Agency - Grant 413.0 - 485.9 8.1 47.8 95.6 191.1 143.4 Total 780.0 - 780.0 13.0 76.7 153.4 306.8 230.1 CHA Phase I Government Extemal Agency - Loan 22.0 14.6 7.4 7.4 Total 22.0 14.6 7.4 7.4 _ Plaines Wilhems Trunk Sewer Government 90.0 - 90.0 - 2.0 8.8 17.6 35.2 26.4 Extemal Agency - Loan 360.0 - 360.0 8.0 35.2 70.4 140.8 105.6 Total 450.0 - 450.0 - 10.0 44.0 88.0 176.0 132.0 Urgent Works Government 210.0 104.8 105.2 63.0 42.2 External Agency - Loan _ - Total 210.0 104.8 105.2 63.0 42.2 CHA Phase II Government 62.7 2.1 59.7 17.9 35.8 6.0 External Agency - Loan 222.3 7.7 215.5 64.6 129.3 21.5 Total 285.0 9.8 275.2 82.6 165.1 27.5 Montagne Jacquot Government 298.6 298.6 60.0 40.8 82.2 51.0 19.8 44.7 Extemal Agency - Loan 873.7 873.7 1.8 122.5 260.1 341.6 145.4 2.3 Extemal Agency - Grant 20.0 10.0 10.0 10.0 Private Sector 30.0 30.0 15.0 15.0 Total 1,222.2 10.0 1,212.2 71.8 163.3 357.3 407.6 165.2 47.0 Baie du Tombeau Goverranent 335.0 4.2 331.0 21.0 46.5 93.0 124.0 46.5 External Agency - Loan 400.0 5.0 395.0 25.0 55.5 111.0 148.0 55.5 External Agency - Grant 65.0 0.8 64.0 4.1 9.0 18.0 24.0 9.0 Total 800.0 10.0 790.0 50.0 111.0 222.0 296.0 111.0 Grand Baie Government 149.9 - 149.9 16.7 20.0 40.0 53.3 20.0 External Agency - Loan 300.2 - 300.2 33.4 40.0 80.0 106.7 40.0 Total 450.0 - 450.0 50.0 60.0 120.0 160.0 60.0 Others Government 274.3 - 274.3 - 35.8 52.8 52.9 68.9 63.9 Extemal Agency - Loan 972.4 - 972.4 127.1 187.4 187.4 244.1 226.4 Total 1,246.6 - 1,246.6 - 163.0 240.2 240.2 313.0 290.2 Summary Government 1,847.4 151.1 1,622.7 203.4 252.1 340.6 414.5 277.1 135.0 External Agency - Loan 3,150.5 27.3 3,124.1 132.2 482.4 695.3 854.1 625.8 334.3 Extemal Agency - Grant 498.0 10.8 559.9 22.1 56.8 113.6 215.1 152.3 - 'Private Sector 30.0 _ 30.0 15.0 15.0 Grand Total 5,525.9 189.2 5,336.7 357.8 791.3 1,164.4 1,498.6 1,055.3 469.3 AVERAGE COST RECOVERY REQUIRED UNDER VARIOUS OPTIONS ANNEX 5-03 (At Mid-1997 Prices) (Mau Rs/rnillion) OPTION/YEAR 1996/1997 1997/1998 1998/1999 1999/2000 2000/2001 20012002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 1. Operation and Maintenance Cost Recurrent - Existing\a 43.28 45.44 47.72 50.10 52.61 55.24 58.00 60.90 63.94 67.14 70.50 Recurrent - Additional 0.00 4.62 9.59 22.49 24.88 144.67 151.57 151.57 151.57 151.57 Total 43.28 45.44 52.33 59.70 75.09 80.12 202.67 212.47 215.51 218.71 222.06 Annual Sewerage Volume estimated (Mm3/y) 15.15 19.32 20.58 23.36 26.42 29.66 33.01 36.24 39.50 42.34 44.79 Sewerage Cost ( Mau Rq/rn3) 2.9 2.4 2.5 2.6 2.8 2.7 6.1 5.9 5.5 5.2 5.0 Required Average Tariff (Mau Rs/cun) 2.5 2.0 Z2 Z2 Z5 2.3 5.3 5.1 4.8 4.5 4.3 Z O&M Cost plus Depreciation Recurrent - Existing\a 43.28 45.44 47.72 50.10 52.61 55.24 58.00 60.90 63.94 67.14 70.50 Recurrent - Additional 0.00 4.62 9.59 22.49 24.88 144.67 151.57 151.57 151.57 151.57 Depreciation 8.00 15.11 26.83 39.62 45.60 165.22 181.20 181.20 181.20 181.20 Total 43.28 53.44 67.45 86.52 114.71 125.72 367.89 393.67 396.71 399.91 403.27 Annual Sewerage Volume estimated (Mm3/y) 15.15 19.32 20.58 23.36 26.42 29.66 33.01 36.24 39.50 42.34 44.79 Sewerage Cost ( Mau Rs/m3) Z9 2.8 3.3 3.7 4.3 4.2 11.1 10.9 10.0 9.4 9.0 Required Average Tariff (RS/cum) Z Z4 2.8 3.2 3.8 3.7 9.7 9.5 8.8 8.2 7.9 3. O&M, Depreciation or Debt Service (onlending exter. Lo s) - Higher of the Two Recurrent - Existing\a 43.28 45.44 47.72 50.10 52.61 55.24 58.00 60.90 63.94 67.14 70.50 Recurrent - Additional 0.00 4.62 9.59 22.49 24.88 144.67 151.57 151.57 151.57 151.57 Depreciation 8.00 15.11 26.83 39.62 45.60 165.22 Debt Service: Principal Repayment 180.80 180.80 180.80 180.80 Interest 180.80 171.76 162.72 153.68 Total 43.28 53.44 67.45 86.52 114.71 125.721 367.89 574.06 568.07 562.23 556.54 Annual Sewerage Volume estimated (Mm3/y) 15.15 19.32 20.58 23.36 26.42 29.66 33.01 36.24 39.50 42.34 44.79 Sewerage Cost (Mau Rs/m3) Z9 2.8 3.3 3.7 4.3 4.2 11.1 15.8 14.4 13.3 12.4 Required Average Tariff (RS/cum) 2.5 Z4 Z8 3.2 3.8 3.7 9.7 13.8 12.5 11.6 10.8 4. O&M, Depreciation or Debt Service (onlending total cost) Higher of the Two Recurrent - Existing\a 43.28 45.44 47.72 50.10 52.61 55.24 58.00 60.90 63.94 67.14 70.50 Recurrent - Additional 0.00 0.00 4.62 9.59 22.49 24.88 144.67 151.57 151.57 151.57 151.57 Depreciation 0.00 8.00 15.11 26.83 39.62 45.60 165.22 0.00 0.00 0.00 0.00 Debt Service: Principal Repayment 319.67 319.67 319.67 319.67 Interest 319.67 303.69 287.70 271.72 Total 43.28 53.44 67.45 86.52 114.71 125.72 367.89 851.80 838.86 826.08 813.45 Annual Sewerage Volume estimated (Mm3/y) 15.15 19.32 20.58 23.36 26.42 29.66 33.01 36.24 39.50 42.34 44.79 Sewerage Cost (Mau Rs/m3) 2.9 Z8 3.3 3.7 4.3 4.2 11.1 23.5 21.2 19.5 18.2 Required Average Tariff (RS/cum) 2.5 2.4 Z8 3.2 3.8 3.7 9.7 20.5 18.5 17.0 15.9 \a: For existing recurrent expenditure a real term increase of 5% has been assumed over the base 1997 estimates NATIONAL SEWERAGE PROGRAM ANNEX 5-04 FLOW PROJECrIONS - Unit 1996/1997 1997/1998 1998/1999 1999/200M 200/200W. 2001/2002 2002/203 2003/2004 2004/2005 2005/2006 2006/2007 A. CONNECTIONS (No.) 1. Port Louis, Lower Basin, Plain Wilhems Domestic: 2DW/. Population Served 173,000 173,000 250,000 300,000 350,000 400,000 450,000 500,000 550,000 575,000 600,000 Comnections Required 31,455 31,455 45,455 54,545 63,636 72,727 81,818 90,909 100,000 104,545 109,091 Existing Connections-Year Begning 31,455 38,455 45,455 54,545 63,636 72,727 81,818 90,909 100,000 104,545 New Connections Required 7,000 9,091 9,091 9,091 9,091 9,091 9,091 4,545 4,545 Regularisation 7,000 Feasible 3,000 3,000 Inv. Programme 4,000 6,091 9,091 9,091 9,091 9.091 9,091 4,545 4,545 Estimated Connections-Year Closing 31,455 38,455 45,455 54,545 63,636 72,727 81,818 90,909 100,000 104,545 109,091 Non Domestic: Estimated % Area (National) 60% 60% 60% 60% 60% 60% 60% 60% 60% 60% Required Non Domestic Connections 4,300 6,056 6,229 6,609 6,748 6,852 7,163 7,450 7,748 8,058 8,380 Existing Connections-Year Begning 3,100 3,100 5,100 5,600 6,100 6,600 6,850 7,100 7,350 7,650 7,950 Regularisation 2,000 New Connections 500 500 500 250 250 250 300 300 300 Estimated Connections-Year Closing 3,100 5,100 5,600 6,100 6,600 6,850 7,100 7,350 7,650 7,950 8,250 Governnment Agencies: Estimated Adm. Connections 1,800 1,818 1,836 1,855 1,873 1,892 1,911 1,930 1,949 1,969 2 Grand Baie Domestic: Estimated Connections-Year Closing 1,730 3,410 5,110 6,820 9,100 12,142 Non Domestic: Estimated Connections-Year Closing 1,430 2,000 2,290 2,860 3,570 4,460 Total Connections-Year End Domestic 38,455 45,455 54,545 63,636 74,457 85,228 96,019 106,820 113,645 121,233 Non Domestic 5,100 5,600 6,100 6,600 8,280 9,100 9,640 10,510 11,520 12,710 Government Agencies . 1,800 1,818 1,836 1,855 1,873 1,892 1,911 1,930 1,949 1,969 Total Connections 45,355 5Z873 62,482 72,091 84,610 96,220 107,570 119,260 127,115 135,912 B. TOTAL SEWERAGE VOLUME Mm3/year 1. Sewerage Volume possible Domestic 8.08 9.88 11.68 14.02 16.35 19.13 21.90 24.67 27.45 29.20 31.15 Non-domestic 7.07 7.07 7.77 8.46 9.15 9.79 10.25 10.65 11.18 11.74 12.34 Government Agencies 0.00 2.37 2.39 2.41 2.44 2.46 2.49 2.51 2.54 2.56 2.59 Total 1. 15.15 19.32 21.84 24.89 27.94 31.38 34.64 37.84 41.17 43.51 46.08 2. Sewerage Volume assumed Domestic 8.08 9.88 10.78 12.85 15.18 17.74 20.52 23.29 26.06 28.33 30.18 Non-domestic 7.07 7.07 7.42 8.11 8.81 9.47 10.02 10.45 10.92 11.46 12.04 Govemment Agencies 0.00 2.37 2.38 2.40 2.42 2.45 2.47 2.50 2.52 2.55 2.57 Total 2. 15.15 19.32 20.58 23.36 26.42 29.66 33.01 36.24 39.50 42.34 44.79 3. Equivalent Water Volume assumed Domestic 80% 10.10 12.35 13.48 16.06 18.98 22.18 25.65 29.11 32.58 35.41 37.72 Non-domestic 80% 8.84 8.84 9.27 10.14 11.01 11.84 12.52 13.06 13.65 14.33 15.05 Government Agencies 80% 0.00 2.96 2.97 3.00 3.03 3.06 3.09 3.12 3.15 3.19 3.22 Total 3. 18.94 24.15 25.72 29.20 33.02 37.08 41.26 45.30 49.38 52.92 55.99 4. Equivalent Water Volume considered for revenue generatio Domestic 90% 9.09 11.12 12.13 14.45 17.08 19.96 23.08 26.20 29.32 31.87 33.95 Non-domestic 95% 8.40 8.40 8.81 9.64 10.46 11.25 11.90 12.41 12.97 13.61 14.30 Government Agencies 95% 0.00 2.81 2.82 2.85 2.88 2.91 2.94 2.97 3.00 3.03 3.06 Total Water Volume for Revenue Generation 17.49 22.32 23.76 26.94 30.42 34.12 37.92 41.58 45.2 48.51 51.30 Estimate National Connections Program Units Price 1997/1998 1998/1999 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004 200412005 2005/2006 2006/2007 Total Domestic 4,000 9,091 9,091 10,821 10,771 10,791 10,801 6,825 7,587 79,778 Non Domestic 500 500 500 1,680 820 540 870 1,010 1,190 7,610 Government Agencies 18 18 18 19 19 19 19 19 19 169 Total New Connections _ 4,518 9,609 9,609 12,519 11,610 11,350 11,690 7,855 8,797 87,557 Total investment required millions Mau Rs 1 0.025 - 113 240 240 313 290 284 292 196 2 220 2,189 WASTE WATER AUTHORITY ANNEX 5-05 INCOME STATEMENT (Mau Rs/million) ItenVYear 1997/1998 1998/1999 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 ASSUMPTIONS | Equivalent Water Flow for revenue generation (million/cum) Domestic 11.1 12.1 14.5 17.1 20.0 23.1 26.2 29.3 31.9 33.9 Non-domestic 8.4 8.8 9.6 10.5 11.2 11.9 12.4 13.0 13.6 14.3 Government Agencies 2.8 2.8 2.9 2.9 2.9 2.9 3.0 3.0 3.0 3.1 Proposed Average Water Tariffs (RS/cum) Domestic 6.3 6.3 7.3 8.5 8.8 9.1 9.6 10.0 10.5 Non-Domestic 13.0 13.6 14.2 14.9 15.5 16.2 17.0 17.8 18.7 Wastewater Charges (Percent of Water Charges) Domestic 0% 45% 45% 60% 75% 85% 100% 100% 100% 100% Non-Domestic 0% 100% 100% 100% 100% 100% 100% 100% 100% 100% Proposed Average Wastewater Tariffs (Mau RS/cum) Domestic 2.8 2.8 4.4 6.4 7.5 9.1 9.6 10.0 10.5 Non-Domestic - 13.0 13.6 14.2 14.9 15.5 16.2 17.0 17.8 18.7 INCOME Waste Water Sale: Domestic 34.4 41.0 74.8 127.2 172.6 238.4 281.5 319.7 355.9 Comercial 114.5 131.0 148.5 167.6 184.4 201.1 220.4 242.9 267.7 Government Agencies 16.5 17.4 24.5 32.5 38.7 48.1 50.9 54.0 57.2 Other Income 4.0 l 4.2 4.4 4.6 4.9 5.1 5.4 5.6 5.9 Total 52.6 169.4 193.7 252.3 332.0 400.6 492.6 558.2 622.2 686.7 EXPENDITURE CWA remuneration on sale 5.8 6.6 8.7 11.5 13.9 17.1 19.3 21.6 23.8 Operation and Maintenance: Recurrent - Existing 47.6 52.4 57.6 63.4 69.7 76.7 84.3 92.8 102.1 112.3 Recurrent - Additional - 4.8 10.6 26.0 30.2 184.6 203.1 213.3 223.9 235.1 sub-total 47.6 57.2 68.2 89.4 99.9 261.3 287.5 306.0 326.0 347.4 Surplus/-DeficUt Before Depreciation 5.0 106.4 118.9 154.2 220.6 125.4 188.1 232.8 274.6 315.5 Depreciation 8.0 15.1 26.8 39.6 45.6 165.2 181.2 181.2 181.2 181.2 Provision for Ex. Assets Renewal 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 Interest Surplus/-Deficit For The Year (3.0) 81.3 82.0 104.6 165.0 (49.8) (3.1) 41.6 83A 124.3 ItenVYear 1997/1998 1998/1999 1999/2000 2000/2001 2001/2002 12002/2003 2003/2004 2004/2005 12005/2006 2006/2007 Working Ratio 91% 37% 39% 39% 34%~ 69% 62% 58%T 56% 54% Operating Ratio 106% 52% 58% 59% 50% 112% 101% 93% 87% 82% Surplus/-Deficit For The Year/ Revenue For The Year -6% 48% 420%o 41% 50%j -120/o -1% 70/o 13% 18% Proposed Average Wastewater Tariff in Mau Rs/m3 696 703 815 9.59 10.441 11.73 1 12.21 | 12.71 13.27 Proposed Average Wastewater Tariff in US$/m3 | 0.33 0.33 0.39 0.46 0.50 0.56 0.58 0.61 0.63 Proposed Average Wastewater Tariff in Constant Mau Rs/m3 6.60 6.38 7.07 7.97 8.29 8.92 8.89 8.86 8.85 ANNEX 5-06-A WASTE WATER AUTHORITY SOURCES AND APPLICATIONS OF FUNDS (Mau Rs/million) Itern/Year 1997/1998 1998/1999 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 SOURCES Internal Sources Surplus/-Deficit For the Year (3) 81 82 105 165 (50) (3) 42 83 124 Add: Depreciation & Provision 8 25 37 50 56 175 191 191 191 191 Total Intemal Sources 5 106 119 154 221 125 188 233 275 315 Capital Sources Government Contribution: Own (Equity Contribution) 355 252 341 414 277 135 - - - - Grant (External Sources) 33 57 114 215 152 - Loan (External Sources) 159 482 695 854 626 334 Total Capital Sources 547 791 1,149 1,484 1,055 469 Other Sources Total Sources 552 898 1,268 1,638 1,276 595 188 233 275 315 APPLICATIONS Capital Expenditure 547 791 1,149 1,484 1,055 469 284 292 196 220 Ex. Assets Renewal 10 10 10 10 10 10 10 10 10 Debt Service: Principal Interest sub-total Increase/-Decrease in Working Capital 5 19 4 11 13 24 16 11 11 11 Total Applications 552 821 1,164 1,504 1,078 503 310 313 217 241 Cash Surplus/-Deficit For the Year 0 77 105 134 197 92 (122) (81) 57 75 Opening Balance - 0 77 182 316 513 605 483 402 460 Closing Balance 0 77 182 316 513 605 483 402 460 534 ANNEX 5-06-B WASTE WATER AUTHORITY SOURCES AND APPLICATIONS OF FUNDS Considering Debt Service Obligation ( External Loans only) (Mau Rs million) ItenrYear 1997/1998 1998/1999 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004 200412005 2005/2006 2006/2007 SOURCES Internal Sources Surplus/-Deficit For the Year (3) 81 82 105 165 (50) (3) 42 83 124 Add: Depreciation & Provision 8 25 37 50 56 175 191 191 191 191 Total Intemal Sources 5 106 119 154 221 125 188 233 275 315 Capital Sources Government Contribution: Own (Equity Contribution) 355 252 341 414 277 135 - Grant (External Sources) 33 57 114 215 152 - - Loan (External Sources) 159 482 695 854 626 334 - Total Capital Sources 547 791 1,149 1,484 1,055 469 - Other Sources Total Sources 552 898 1,268 1,638 1,276 595 188 233 275 315 APPLICATIONS Capital Expenditure 547 791 1,149 1,484 1,055 469 284 292 196 220 Ex. Assets Renewal 10 10 10 10 10 10 10 10 10 Debt Service\a Principal 181 181 181 181 Interest 181 172 163 154 sub-total 362 353 344 334 Increase/-Decrease in Working Capita 5 19 4 11 13 24 16 11 11 11 Total Applications 552 821 1,164 1,504 1,078 503 672 666 561 575 Cash Surplus/-Deficit For the Year 0 77 105 134 197 92 (483) (433) (286) (260) Opening Balance 0 77 182 316 513 605 121 (312) (598) Closing Balance 0 77 182 316 513 605 121 (312) (598) (858) ANNEX 5-06-C WASTE WATER AUTHORITY SOURCES AND APPLICATIONS OF FUNDS Considering Debt Service Obligation (Total Program Costs) (Mau Rs million) Item/Year 1997/1998 1998/1999 1999/2000 2000/2001 2001/2002 2002/2003 2003/2004 2004/2005 2005/2006 2006/2007 SOURCES Internal Sources Surplus/-Deficit For the Year (3) 81 82 105 165 (50) (3) 42 83 124 Add: Depreciation & Provision 8 25 37 50 56 175 191 191 '191 191 Total Intemal Sources 5 106 119 154 221 125 188 233 275 315 Capital Sources Government Contribution: Own (Equity Contribution) 355 252 341 414 277 135 Grant (Extemal Sources) 33 57 114 215 152 - Loan (External Sources) 159 482 695 854 626 334 Total Capital Sources 547 791 1,149 1,484 1,055 469 Other Sources Total Sources 552 898 1,268 1,638 1,276 595 188 233 275 315 APPLICATIONS Capital Expenditure 547 791 1,149 1,484 1,055 469 284 292 196 220 Ex. Assets Renewal 10 10 10 10 10 10 10 10 10 Debt Service\a Principal 320 320 320 320 Interest . 320. 304 288 272 sub-total 639 623 607 591 Increase/-Decrease in Working Capital 5 19 4 11 13 24 16 11 11 11 Total Applications 552 821 1,164 1,504 1,078 503 949 937 -825 832 Cash Surplus/-Deficit For the Year 0 77 105 134 197 92 (761) (704) (550) (517) Opening Balance 0 77 182 316 513 605 (157) (860) (1,410) Closing Balance 0 77 182 316 513 605 (157) (860) (1,410) (1,927) ANNEX 5-07 WASTE WATER AUTHORITY BALANCE SHEET (Mau Rs/million) Iten/As of June 30 of each Year 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 ASSETS Fixed Assets under WWA management Gross Block 334 655 1,180 1,420 4,909 5,696 5,980 6,272 6,468 6,688 Less: Depreciation 8 23 50 90 135 300 482 663 844 1,025 Net Fixed Assets 326 632 1,130 1,331 4,773 5,396 5,498 5,609 5,624 5,663 Work-in-Progress 413 883 1,507 2,751 318 Total 739 1,515 2,638 4,082 5,091 5,396 5,498 5,609 5,624 5,663 Current Assets Accounts Receivable 9 28 32 42 55 67 82 93 104 114 Stores & Spares 1 2 4 5 31 34 36 37 39 Cash Balance 0 77 182 316 513 605 483 402 460 534 Total 9 106 216 362 573 702 599 531 601 688 Total Assets 748 1,621 2,854 4,444 5,665 6,098 6,097 6,140 6,225 6,351 LIABILITIES Shareholder Fund: Govermnent Contribution: 747 1,538 2,688 4,171 5,227 5,696 5,696 5,696 5,696 5,696 Surplus/-Deficit (3) 78 160 265 430 380 377 419 502 626 Total 744 1,617 2,848 4,436 5,656 6,076 6,073 6,114 6,198 6,322 Loans Current Liabilities: Creditors 4 5 6 7 8 22 24 26 27 29 Total 4 5 6 7 8 22 24 26 27 29 Total Liabilities 748 1,621 2,854 4,444 5,665 6,098 6,097 6,140 6,225 6,351 Annex-5-08 (In Mau Rs million) WWA - Financial Equilibrium -1998-2007-Debt Service-Option 1. 1,800 1 ,60 0 . . . . : f .- S .. C .. . :. : ff C~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~. . ... 1,600 1,400 1,200 1,000 800 600 400 } , X A A , : ' , ,: :. .~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.... 200 98/99 99/00 00/01 01/02 02/03 03/04 04/05 05106 06/07 ! App. of Funds without LMTD App. of Funds with LMTD Interest _ App. of Funds with total LMTD 1Sources of Funds Annex-5-09 (in-Ma Rs million) 600 - 400 ,.X (400) (600) (800) (1,000) 1Cash Position without LMTD M Cash Position with LMTD Interest * Cash Position with total LMT Annex-5-10 I M u RsIm3 WWA- Cost Recovery OntlonsTarits rmc,gired.AvYr9peialfled Tarlf in tconstant Matt Rs fa. i~-~7 20.00 ~ ~ ~ ~ ~ ~ ------ - ... ---- ....Mu..* t7} -. --- - -- 205.00 ...... .. .. . . .= .. . . ...... ... ..... . .. . ... . . .r -____ __ + _v 20.00 - ----- ---C-- 5 .0 0 --------------------------- . . . -_-.-.-. 98199 99100 00101 01102 02103 03104 04105 05106 06107 _4-- O&M -U-- O&M_ Depreciation -4- O&M LMTD Option I -e-- O&M LMTD Option2 _ Average Weighted Tariff Annex-5-1 I uRJ3 WWA- Cost Recovery OptionsiTarifts required- Average Weighted Tariff-Tariff for full cost recovery 98/99 90 00 10 02/03 03/04 04/05_ 0506 06/07 -4-+O&M _4-O&M+ Depreciation -h--O&M LMTD Option1 -*--O&M LMTD Option2 -Average Weighted Tariff --*-Tariff Required for LT full cost recovery Page 64 Annex 6 Mauritius Environmental Sewerage and Sanitation Project Procurement and Disbursement Arrangements Procurement Arrangements The following procurement arrangements will apply to all wholly or partly funded IBRD financed contracts. General. Works wholly or partly financed by IBRD would be procured in accordance with the Bank's Guidelines for Procurement under IBRD Loans and IDA Credits, published in January 1995 and revised in January and August 1996. No goods will be financed under the IBRD loan. Consultancy services wholly or partly financed by IBRD would be procured in accordance with the Bank's Guidelines for Selection and Employment of Consultants by World Bank Borrowers, published in January 1997. The borrower's procurement regulations and procedures have been reviewed and have been found acceptable. As soon as possible, and no later than by the time of negotiations, a General Procurement Notice is to be prepared by WWA and transmitted to IBRD for publication in the United Nations Development Businesses to advertise all assignments expected to be financed by IBRD under the project. Standard bidding and other similar documents published by the Bank will be used by WWA for the preparation of International Competitive Bidding (ICB) for works and prequalification documents, and for Requests for Proposals and contracts for consulting services.. Table A below provides information on the project elements and their estimated costs and methods of procurement, including elements financed by the Bank, as well as those financed by other sources (OECF, GOM, and private sector). Procurement of Civil Works. Civil works contracts for the supply and laying of pipelines and sewers and prequalification of contracts will be procured under ICB in accordance with Bank Guidelines. Procurement for the OECF parallel-financed construction of sewage pumping stations, the treatment plant and the sea outfall sewer will be done according to OECF Procurement Guidelines. Prior and post review by the Bank for Works contracts. All IBRD-financed works contracts above the threshold of US$ 2,000,000 per contract, and all prequalification documents will be subject to prior review procedures in accordance with the Bank's Guidelines. All other contracts under these thresholds will be subject to post review. Procurement of Consulting Services. Recruitment of consulting firrns for the strengthening of WWA, training of its personnel, supervision of works, sectoral expertise and studies will be carried out under the Quality and Cost Based Selection method (QCBS) in accordance with the Bank's Guidelines. Exception to using the QCBS method will apply to financial audits (Least Cost Selection). Consulting assignments that cost less than US$ 200,000 per contract, for which at least three Mauritian firmns are capable, will be recruited on the basis of a short list of Mauritian firms. Recruitment of individual consultants for assistance to the WWA and/or MPU to carry out program and/or project implementation will be done on the basis of qualifications and experience in accordance with the Bank's Guidelines. Prior and post review by the Bank for Consultancy contracts. All consultant contracts expected to cost the equivalent of US$ 100,000 per contract with firms, and US$ 50,000 per contract with individuals will be subject to prior review by the Bank. For contracts above $ 200,000 each, the technical evaluation report will be sent for no-objection to IBRD before opening the financial envelope. All other contracts under these thresholds will be subject to post review. These procurement thresholds are summarized in Table B below. Page 65 Procurement implementation schedule and advance procurement actions. It was agreed that WWA will provide by negotiations a detailed timetable for implementation of the investment. This timetable will be used as a basis for monitoring procurement processing. In particular, the following advance procurement actions have been identified and agreed on with the GOM and WWA as critical milestones to enable signing of major and important contracts soon after Loan effectiveness. The following documents will also be prepared by WWA and transmitted to IBRD for review by negotiations: (a) draft General Procurement Notice; (b) draft Specific Procurement Notice for the construction works, works supervision, WWA assistance and major studies; (c) draft prequalification documents for civil works; (d) draft bidding documents for civil works; (e) TORs, short list, LOI, draft model contract for construction supervision; and (f) TORs, short list, LOI, draft model contract for WWA Program Management Assistance, and important consulting assignments and studies. Reporting. It has been agreed with WWA that a monthly progress report up to Loan Effectiveness will be prepared in sufficient detail and transmitted to IBRD. During project implementation (after effectiveness), a semestrial report will be adequate. These details will include: major procurement actions dealt with during the previous months and major procurement actions planned for the following months, an update of the Procurement Implementation Table, time taken to carry out specific actions such as prequalification, completion of essential bidding documents, bid evaluation and compliance with aggregate limits on specified methods of procurement. Disbursement Arrangements The total estimated disbursement, covering all sources of funding (IBRD, OECF, GOM and private sector) over the project life are summarized in the last of the following tables. The total loan proceeds would be disbursed over five and a half years. IBRD loan disbursements will cover the following percentages indicated below: Civil Works (US$7.5 million) 13.1% of total expenditures Consulting Services (US$4.4 million) 57.1% of total expenditures excluding taxes Training (US$0.5 million) 71.4% of total expenditures excluding taxes Closing date. The Closing Date is June 30, 2003, six months after completion of project execution (December 31, 2002). The schedule of estimated disbursements is presented in the penultimate table. An aggregate amount of up to US$300,000 has been included in the project costs to refinance the PPF. This is for expenditures on engineering and technical expertise devoted to project preparation. Minimum disbursements. The minimum application amount for payments directly to the Loan account or for issuance of Special commitments will be US$50,000 equivalent. Disbursements will be fully documented except that withdrawals will be made on the basis of Statements of Expenditures for the items below: * Civil works contracts not exceeding US$200,000 equivalent; * Consulting firm contracts not exceeding US$100,000 equivalent, and individual consultant contracts valued at less than US$50,000 equivalent. Special Account. If requested by the Borrower, and to facilitate disbursements against eligible expenditures for small contracts not exceeding US$250,000 equivalent, a Special Account will be established in the WWA. The Special Account will be opened and maintained in a commercial bank, acceptable to the Bank, with an authorized allocation of US$500,000, corresponding to about four months of expenditures. Replenishment application will be submitted at monthly intervals and will include reconciled bank statements as well as other appropriate supporting documents. Page 66 Table A: Procurement Arrangements Mauritius Environmental Sewerage & Sanitation Project Procurement Arrangements (US$ Million) Procurement Method Procurement Arrangements International Non (US$ Million) Competitive Bank Bidding Other Financed Total Land & Rights of Way 0.0 0.0 2.5 * 2.5 Civil Works 12.4 - 24.8 37.2 (6.8) - - (6.8) Equipment & Goods - - 11.6 '* 11,6 Consultant Services & Engineering - 6.6 7.0 ** 13.6 - ~ (5.1) -(5.1) Training - 0.7 - 0.7 - (0.5) - (0.5) Total 12.4 7.3 45.9 65.6 (6.8) (5.6) - (12.4) Note: Figures in parenthesis are the respective amounts financed by IBRD * Wholly financed by GOM 4 Under parallel financing by OECF under its own procurement procedures * Under parallel financing by OECF, GOM (US$ 1.9 million) and Private Sector (US$ 1.9 million) under their own procurement procedures Page 67 Table B: Thresholds for Procurement Methods and Prior Review Mauritius Enviromnental Sewerage & Sanitation Project Thresholds for Procurement Methods and Prior Review (US$) Expenditure Category Contract Value Procurement Contracts Subject to (Threshold) Method Prior Review * A. Civil Works* > 2,000,000 I.C.B. 2,000,000 Aggregate value: $14.5 million B. Consultant Services & Engineering Firms Q.C.B.S./L.C.S. 100,000 Aggregate value: $4 mnillion Individual Individuals 50,000 Aggregate value: $1 million Note: * Civil works contracts above US$ 2,000,000 each will be subject to Prequalification. =* AU Prequalification documents will be subject to prior review. ** For contracts above $ 200,000, the technical evaluation report will be required by IBRD for no objection. Page 68 Table C: Allocation of Loan Proceeds Mauritius Environmental Sewerage & Sanitation Project Allocation of Loan Proceeds IBRD (US$ Million) Suggested Allocation of Loan Proceeds Expenditure Category Loan Financing Amount % 1. Civil Works 6.6 55 2. Consulting Services & Training 5.0 80 3. Refunding of PPF 0.3 4. Unallocated 0.5 - Total 12.4 Loan amounts financed by IBRD Page 69 Mauritius Environmental Sewerage & Sanitation Project Project Components by Year-Totals Including Contingencies (US$ Million) Estimated commitments Totals Including Contingencies (US$ Million) 97/98 98/99 99/00 00/01 01/02 02/03 Total A. Montagne Jacquot Sewerage System Land Acquisition & Compensation 2.5 - - - - - 2.5 Pipelines & Sewers - 4.0 4.1 4.4 - - 12.4 Pumping Stations - - 3.8 3.9 - - 7.7 Treatment Plant - 2.2 3.8 3.9 4.1 1.7 15.7 Sea Outfall - - 2.2 4.5 2.3 - 9.1 Industrial Pretreatment - - 0.9 1.0 - - 1.9 Supervision of Works - 1.3 2.0 2.0 1.8 0.7 7.9 Subtotal Montagne Jacquot Sewerage System 2.5 7.5 16.8 19.8 8.2 2.4 57.2 B. Waste Water Sector Equipment & Expertise 0 Sector Expertise 0.2 0.2 0.1 - - - 0.5 Sector Studies 0.1 1.2 0.6 0.2 0.0 - 2.1 Equipment to support CWA/WWA joint billing system - 1.0 1.0 - - - 1.9 Subtotal Waste Water Sector Equipment & Expertise 0.3 2.3 1.7 0.2 0.0 - 4.6 C. WWA Institutional Building - - - - - - - WWA Program Management Assistance 0.1 1.0 0.9 0.8 0.1 - 2.8 WWA Personnel Training - 0.2 0.2 0.2 0.0 - 0.7 Industrial Waste Management Program - 0.2 0.1 0.1 - - 0.3 Subtotal WWA Institutional Building 0.1 1.4 1.1 1.1 0.2 - 3.8 Total PROJECT COSTS 2.8 11.1 19.7 21.1 8.4 2.4 65.6 Note: Figures may not add up to total due to rounding Page 70 IBRD Disbursement (in US$ million) Annual 0.1 2.3 4.2 3.8 1.9 0.1 Cumulative 0.1 2.4 6.7 10.4 12.4 12.4 Percentage 1% 20% 54% 84% 99% 100% Note: Figures may not add up to total due to rounding Total Project Disbursement (in US$ million) Annual 2.8 11 1 19.7 21.1 8.4 2.4 Cumulative 2.8 13.9 33.6 54.7 63.1 65.6 Percentage 4% 21% 51% 83% 96% 100% Note: Figures may not add up to total due to rounding Page 71 Annex 7 Mauritius Environmental Sewerage and Sanitation Project Project Processing Budget and Schedule A. Project Budget (US$000) Planned Actual (At final PCD stage) 304.2 238.7 B. Project Schedule Planned Actual (At final PCD stage) Time taken to prepare the project (months) First Bank mission (identification) 01/12/199 QJ112/1992 Appraisal mission departure 06/29/1997 06/29/1997 Negotiations 12/081997 Q1/0711998 Planned Date of Effectiveness 05/15/1998 J__/19__ Prepared by: Waste Water Authority Preparation assistance: PPF and Japanese PHRD Grant. Utilized studies financed by FAC (French cooperation) Bank staff who worked on the project included: Name Specialtv Abdelmoula Ghzala (AFTTI) Engineering (Task Team Leader) Philippe de Naurois (AFTTI) Financial Analyst (Team member) Alison Cave (AFTT2) Urban Planning (Team member) Andrea Heggen (AFTTI) Project Assistant (Team member) Elizabeth Monosowski (AFTE I) Environment Klas Ringskog (LATAD) Economics - water and sanitation sectors Augusta Dianderas (TWUWS) Institutional analysis - water and sanitation sectors Elizabeth Adu (LEGAF) Legal aspects Said Al Habsy (LEGAF) Legal aspects (negotiations) Guillermo Yepes (TWUWS) Water and sanitation Yves Guillou (LOAAF) Disbursement Betrand Ah-Sue (AFTS2) Procurement Page 72 Annex 8 Mauritius Environmental Sewerage and Sanitation Project Documents in the Project File* A. Project Implementation Plan Draft Government Project Implementation Plan (6113197) Draft Government Project Implementation Plan (October 1997) Government Project Implementation Plan (1/10/98) B. Bank Staff Assessments Final Initial Executive Project Summary (IEPS) and Departmental Review Meeting Minutes (6/28/96) Draft Project Appraisal Document (PAD) and Minutes of Appraisal Decision Meeting (6/27/97) Draft PAD and Minutes of Technical Discussions (12/22/97) Draft PAD and Minutes of Negotiations (1/10/98) C. Other * Identification mission BTO including aide-memoire and implementation schedule (2/27/96) * Preparation mission BTO including revised timetable, aide-memoire (6/5/96) * Draft IEPS(6/24/96) * Japanese Grant Agreement (PHRD) (signed) (7/3/96) • Transmittal form for PPF request (including procurement plan and inital executive project summary) (8/8/96) • Preparation mission BTO (9/3/96) * Countersigned letter of agreement for PPF 298-0 MAS (incuding amendment letter dated 9/13/96) (10/4/96) * Bank preparation mission with OECF observer participation BTO and aide-memoire (2/27/97) * Prefeasibility Report * Feasibility Report (June 1997) * Institutional Study (July 1997) * Appraisal Mission BTO including aide-memoire (August 1997) * Environmental Impact Assessment (August 1997) * Draft Sector Policy Letter (October 1997) * Draft Institutional Action Plan (October 1997) * Post-appraisal mission BTO with aide-memoire *Including electronic files. Page 73 Annex 9 Status of Bank Group Operations in Mauritius IBRD Loans and IDA Credits in the Operations Portfolio Active Loans Project ID Loan or Fiscal Borrower Purpose IBRD Cancellations Undisbursed Difference LastARPP Credit Year between actual Supervision RatingsS No. d expected Development Implementation disbursements4: Objectives Progress MU-PE-1906 L33330 1991 GOM Agric Services 10.00 6.00 2.48 8.21 S S MU-PE-1914 L32770 1991 GOM Environ Monit. & 12.37 0.00 2.26 2.26 S S Dev MU-PE-1899 L34010 1992 GOM Ind And Vocat Traini 5.40 1.00 1.27 2.03 S S MU-PE-1920 L35780 1993 GOM Education Sector 20.00 0.00 11.11 5.45 S S MU-PE-1918 L37360 1994 GOM Tech Asst. 7.70 0.00 4.19 3.32 S S MU-PE-1926 L39090 1995 GOM Port Dev. & Env Prot 23.40 0.00 13.62 -9.78 S S MU-PE-1923 L38590 1995 GOM H & T Education 16.00 0.00 13.72 6.49 U U MU-PE-1926 L39080 1995 GOM PortDev. &EnvProt 7.10 0.00 7.10 3.73 S S Total 101.97 7.00 55.76 21.72 Active(8)Loans Closed (29) Loans Total Total Disbursed (IBRD and IDA) 39.21 274.63 313.84 of which has been repaid 2.06 186.65 188.71 Total now held by IBRD and IDA 92.91 87.98 180.89 Amount sold 0.00 4.95 4.95 Of which repaid 0.00 4.95 4.95 Total Undisbursed 55.76 0.00 55.76 Actual disbursements to date minus intended disbursements to date as projected at appraisal. 5Rating of 1-4: see OD 13.05. Annex D2. Preparation of Implementation Summary (Form 590). Following the FY94 Annual Review of Portfolio performance (ARPP), a letter- based system will be used (HS = highly Satisfactory, S = satisfactory, U = unsatisfactory, HU = highly unsatisfactory): see proposed improvements in Project and Portfolio Performance Rating Methodology (SecM94-901), August 23, 1994. Page 74 Annex 10 Mauritius at a glance 8/28/97 Sub- Upper- POVERTY and SOCIAL Saharan middle- Mauritius Africa Income Development diamond' Population mid-1996 (millions) 1.1 600 479 GNP per capita 1996 (USS) 3,690 490 4,540 Life expectancy GNP 1996 (billions US$) 4.2 294 2,173 Average annual growth, 1990-96 Population (1) 1.3 2.7 1.5 GNP Gross Labor force () 1.8 2.6 1.8 per primary Most recent estimate (latest year available since 1989) capita enrollment Poverty: headcount index (X ofpopulatfon) 11 Urban population (% oftotalpopulation) 41 31 73 Life expectancy at birth (years) 71 52 69 Infant mortality (per 1,000 l.ve births) 16 92 35 Access to safe water Child malnutrition I% of children Under 5) Access to safe water 1% of populabon) 100 47 86 Illiteracy (% of population age 15+) 17 43 13 Mauwtius Gross primary enrollment (% ofschool-age population) 107 72 107 Male 107 78 .. Upper-rniddb-incoregroup Female 107 65 .. KEY ECONOMIC RATIOS and LONG-TERM TRENDS 1975 1988 1998 1996 Economic ratios' GDP (billions US$) 0.7 1.1 3.9 4.3 Gross domestic investment/GOP 26.3 23.5 25.3 25.8 Openness of economy Exports of goods and services/GDP 56-.7 53.5 59.6-. 61.1 O Gross domestic savings/GDP 27.3 21.6 22.7' 21.9 Gross national savings/GDP -29.5-- 20:9 :24.7-- 23.3 Current account balance/GDP 2.7 -2.8 -0.6 -2.2 Interest payments/GDP 0.2 .2.6 14 Savings Investment Total debtUGOP 7.9 58A 45.7 Total debt service/exports 4.5 23.4 8.5 Present value of debt/GDP . .. 41.4 Present value of debt/exports .. .. 64.5 Indebtedness 1975-85 1986-96 . 1998 1996 1997-06 (average annual growth) .MauniNus GDP 3.1 -5.6 - 4.3 6.1 - .. --Upper-middlincome group GNP per capita 1.0 4.7 2.8 4.5 .. Exports of goods and services 4.3 6.4 7.6 6.1 STRUCTURE of the ECONOMY (% of GDP) 1975 1985 1996 1996 Growth rates of output and investment (A) Agriculture 22.3 15.3 9.4 9.7 20 Industry 24.7 . 29.2 32.9 32.1 lA Manufacturing 16.3 . 20.6 23.7 23.3 o S I r Services 53.0 55.5 57.6 58.2 92 93 94\;/r. Private consumption 61.6 66.9 65.1 68.3 -D2 General govemmentconsumption *1l.1 11.5 12.2 9.8. |GD1 .-4 GoP Imports of goods and services 55.6 . 55.4 62.3 64.9. 19754t8 1986-96 1996 1996 (average annual growth) . Growth rates of exporta and imnports (%) Agriculture -0.7 -0.2 7.4 11.5 is Industry -3.9 6.9 4.1 5.1 Manufacturing 5.1 .6.5 5.7 5.7 10 Services 3.8 6.6 5.2 6.0 Private consumption ` 1.4 6.0 4.4 6.1 o \ General government consumption ,3.7 4.7 3.2 4.6 .92 93 99 y 9 Gross domestic investment -2.5 4.2 -19.2 6.0 4 Imports of goods and services -1.3 6.2 -3.6 5.8 Exports lImports Gross national product 2.5 5.8 4.2 5.6 Note: 1996 data are preiiminary estimates. The diamonds show four key indicators in the country (in bold) compared with its income-group average. If data are missing, the diamond will be incomplete. Mauritius PRICES and GOVERNMENT FINANCE 1976 1985 1996 1996 Domestic prices Inflation (%) (% change) is Consumer prices 14.8 6.7 6.0 7.3 Implicit GDP deflator 5.3 8.2 4.0 6.0 Govemment finance (% of GOP) Current revenue .. 22.0 18.6 18.9 91 92 93 94 95 96 Current budget balance .. -1.0 -1.7 0.0 - GDP def. CPI Overall surplus/deficit .. -5.6 -6.1 -6.0 TRADE 1976 1985 1996 1996 (millions USS) Export and import levels (mill. USS) Total exports (fob) .. 430 1,539 1,652 2,500 Sugar .. 186 364 396 Textiles .. .. 7 8 2,00 Manufactures .. 170 852 908 1,50 Total imports (cif) 7 526 3 7 35 1, 009 ,13 :jjjjjj Food .. 87 307 325 Fuel and energy .. 74 138 148 soo Capital goods .. 72 397 433 o- _ _ _+_ i _ Export price index (19871 00) .. 64 105 106 90 91 92 93 94 95 96 Import price index (1987=100) .. 59 135 138 U Exports mlmports Terms of trade (1987=100) .. 109 78 77 BALANCEofPAYMENTS 1975 1986 1996 1996 (millions US$) Current account balance to GDP ratio (%) Exports of goods and services 369 576 2,349 2,490 o Imports of goods and services 366 596 2,454 2,646 AV Resource balance 4 -20 -104 -156 -2 Net income 3 -49 -26 -49 Netcurrenttransfers '12 40 105 110 4- Current account balance, before official capital transfers 18 -30 -25 -95 4 -. Financing items (net) 34 48 169 131 Changes in net reserves -52 -18 -144 -36 4 Memo: Reserves including gold (milL US$) 166 42 887 919 Conversion rate (1ocaW1US$) 6.0 15.4 17.4 17.9 EXTERNAL DEBT and RESOURCE FLOWS 1976 1986 1996 1996 (millions US$) Composition of total debt, 1995 (mill. USS) Total debt outstanding and disbursed 52 629 1,801 IBsRD 8 117 140 124 G 140 IDA 8 20 17 16 351 17 D Total debtservice 17 140 216 13 IBRD 1 14 34 30 IDA 0 0 1 1 E Composition of net resource flows 413 Official grants 13 14 22 Official creditors 12 37 -17 Private creditors -4 -19 285 Foreign direct investment 4 8 15 F Portfolio equity 0 0 4 .. 767 World Bank program Commitments 8 0 39 7 A - IBRD E - Bilateral Disbursements 7 31 11 14 B-IDA D-Othermultlateral F - Private Principal repayments 0 6 24 21 C - IMF G - Short-term Net flows 7 25 -13 -7 1 1 interest payments 0 8 11 9 Net transfers 7 17 -24 -17 Development Economics 8/28/97