Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Report No. 1292-ECT Appraisal of the Alexandria Water Supply Project Egypt February 8, 1977 Water Supply and Sewerage Division Europe, Middle East and North Africa Regional Office FOR OFFICIAL USE ONLY U Document of the World Bank FILE COPY This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.
APPRAISAL OF THE ALEXANDRIA WATER SUPPLY PROJECT EGYPT CURRENCY 1 Egyptian Pound (LE) = 100 piastres =.1000 millimes EQUIVALENTS Official Rate 1 Egyptian Pound (LE) US$2.56 or SDR 2.118 1 US Dollar = LE 0.391 Parallel Market Rate Until February 1976: 1 Egyptian Pound (LE) US$1.70 1 US Dollar = LE 0.59 From February to May 1976: 1 Egyptian Pound (LE) = US$1.56 1 US Dollar LE 0.64 From May 21, 1976: 1 Egyptian Pound (LE) US$1.47 1 US Dollar = LE 0.68 From December 1, 1976: 1 Egyptian Pound (LE) US$1.43 1 US Dollar LE O.70 WEIGHTS AND MEASURES = millimeter (1 millimeter = 0.039 inches) cm = centimeter (1 centimeter = 0.39 inches) m = meter (1 meter = 3.28 feet) km km 2 - kilometer (lkilometer = 0.62 miles) - square kilometer (1 km 2 247.1 acres) m3 = cubic meter (1 m 3 = 264.2 US gallons) m 3 /day - cubic meter per day (1 m 3 /day = 264.2 US gallons per day) i/hr = meter per hour (m/hr- 3.28 feet per hour) lcd = liters per capita per day (1 lcd - 0.26 US gallons per capita per day) lbs/in 2 = pounds per square inch 1 lb/sq in = 0.0703 kilograms per square centimeter)
FOR OFFICIAL USE ONLY Glossary of Abbreviations AWA - The Alexandria Water General Authority USAID - United States Agency for International Development WHO - World Health Organization MHR - Ministry of Housing and Reconstruction GOSSD - General Organisation for Sewerage and Sanitary Drainage GOPW - General Organisation for Potable Water AWA's Fiscal Year January 1 to December 31 This document has a rtricted distribution sd my be ud by ri#nu o* it the pfiorman of their omcial duties. Its contnts may not otlmwwu be discioed without World Dak authiotion.
APPRAISAL OF THE ALEXANDRIA WATER SUPPLY PROJECT EGYPT TABLE OF CONTENTS Page No. SUMMARY AND CONCLUSIONS... i-.. I. INTRODUCTION.... I II. SECTOR... I A. Background... 1 B. Water Resources......... I C. Water Supply......... 2 D. Sewerage...... 2 E. Constraints and Sector Policies... 3 III. THE PROJECT AREA... 3 A. General... 3 B. Existing Water Supply Facilities...... 4 C. Studies of Future Requirements and Operations... 5 D. Wastewater Disposal...... 6 IV. THE PROJECT... 6 A. Objectives of the Project...... 6 B. Project Description...... 7 C. Cost Estimates...... 7 D. Loan Amount... 9 E. Implementation........ 9 F. Disbursements... 10 V. THE BORROWER... 11 A. General... 11 B. Management, Organization Structure and Staffing... 11 C. Accounts... 12 D. Audit... 13 E. Insurance...... 13 This report was prepared and written by Mr. R.G. MacWilliam (Sanitary Engineer), Mr. G. Heyland (Financial Analyst), and Mr. K. Thomas (Financial Analyst), with the assistance of Mr. V. Nwaneri (Economist) and Mr. A. Banerjee (Technical Assistant).
TABLE OF CONTENTS (Continued) Page No. VI. FINANCE... o. ***** **** * * **... *.*... 13 A. Present Financial Position...*... 13 B. Financing Plan....... 14 C. Tariffs... 15 D. Future Performance...... 16 VII. JUSTIFICATION... o... 17 A. Environmental Impact and Health Benefits... 17 B. General Objectives...... *.... 17 C. Demand... 18 D. Least Cost Solution... 18 E. Economic Analysis oo.o..............*... 18 F. Risks... o......... 19 VIII. RECOMMENDATIONS......... 19 LIST OF ANNEXES 1. Sector Organization 2- Description of Alexandria Water Supply Facilities 3. Forecast of Population, Connections, Consumption and Production 4. Project Description 5. Construction Schedule 6. Key Indicators 7. Schedule of Disbursements 8. Cost Estimates 9. AWA - Organization 10. Suggested Terms of Reference for a Management Systems Study 11. Tariffs 12. AWA: Financial Statements, 1972-85 13. Assumptions for Financial Projections 14. Incremental Economic Cost of Water in Alexandria LIST OF MAPS IBRD 12323 - IBRD 12325 - Alexandria Water Supply Alexandria Water Supply Project
APPRAISAL OF THE ALEXANDRIA WATER SUPPLY PROJECT EGYPT SUMMARY AND CONCLUSIONS i. Alexandria is Egypt's second largest city with a population of 2.4 million and an expected future growth rate of 2.7% per annum. It is a highly commercial and industrialized city and a major tourist resort. Alexandria's water supply facilities, using Nile water supplied by Canals, were operated and administered by a local private company, founded in 1879; in 1968 it was converted into the "Alexandria Water General Authority" (AWA), a public sector organization. In recent years AWA also assumed responsibility for water supply to the coastal western desert about 300 km from Alexandria. AWA's treatment capacity has been unable to keep pace with demand, and currently, facilities are operating at about 30% above their design capacity. This continuous and growing overload carries considerable risks for the maintenance of a safe and reliable service at optimum water quality. Furthermore, essential maintenance of the installations cannot be carried out owing to the need for uninterrupted production from the overloaded plants. ii. To help alleviate Alexandria's increasing water requirement until about 1990, a project is proposed for partial Bank financing representing the first Bank group assistance to Egypt in this sector. The main component of the project would add 350,000 m 3 /day of treatment capacity to help eventually raise AWA's combined production capacity to 1,150,000 m 3 /day. A long term (to year 2000) Master Plan for Water and Sewerage in Alexandria has also been initiated by the Government with aid from USAID and studies will begin soon. iii. The proposed investments would include (i) the extension of three existing treatment plants; (ii) the construction of a new one; (iii) installation of trunk water mains and booster stations; (iv) renewals of operational equipment; (v) the purchase of self propelled water barges to supply ships in Alexandria port; and (vi) procurement of trucks and operational vehicles, and water meters. The co-ordination and implementation of the project and the whole AWA program would be the responsibility of a project unit assisted by consulting engineers for final design and preparation of tender documents. Consultant services for training AWA's staff in operational techniques will also be provided. iv. The total cost of the Bank assisted project is assessed at LE 47.5 million (US$121.7 million) with an estimated foreign exchange component of LE 21.9 million (US$56 million). The proposed loan of US$56 million would cover 100% of this foreign exchange cost (46% of the total cost). The remainder would be financed by Government loans and AWA's internal cash generation.
- ii - v. Goods and services to be financed under the project would be procured through international competitive bidding in accordance with the Bank Group's guidelines. Domestic manufacturers would be allowed a preference of 15% or the actual customs duty, whichever is lower. First equipment and materials deliveries are expected in 1978 and the bulk of construction works would occur during 1979 and 1980. Project completion is scheduled for 1981. vi. The proposed loan would be made to AWA with the guarantee of the Arab Republic of Egypt. AWA's management is experienced and dedicated, although it has some difficulties in promoting and rewarding suitable staff to improve its overall performance. Measures to help correct this constraint are proposed in the project. vii. AWA's financial performance was sound until 1971 but from 1972 the low tariffs established in 1963 could no longer cover increasing costs. Partial rises in tariffs for some groups of customers in 1976 were insufficient to bridge the gap. Immediate further increases in tariffs are, therefore, required for AWA to regain its financial viability. Further gradual adjustments to achieve an average revenue at the level of the long-term average incremental costs would be required, while maintaining a progressive rate structure, which enables poorer citizens to obtain a piped water supply. viii. Agreement having been reached during negotiations-on the principal issues, the project is suitable for a Bank loan of US$56 million to AWA for 20 years including a 4-1/2 years grace period.
APPRAISAL OF THE ALEXANDRIA W4ATER SUPPLY PROJECT EGYPT I. INTRODUCTION 1.01 The Alexandria Water General Authority (AWA) has requested Bank financing for foreign exchange expenditures of a project designed to help expand and improve the Alexandria water supply system. The proposed works, estimated to cost US$121.7 million, include the provision of additional treatment plant capacity, the replacement of obsolete equipment and the provision of essential maintenance equipment to improve operations. The proposed loan of US$56 million would finance 100% of the estimated foreign exchange requirement and would be made to AWA with the guarantee of the Arab Republic of Egypt. This would be the first Bank Group lending to Egypt in this sector. 1.02 Following a Bank identification mission in November 1975, AWA prepared a Feasibility Study reviewing the existing water supply situation and outlining the need for future expansion. 1.03 The feasibility study was reviewed in March 1976 and the project was appraised in May 1976 by a mission consisting of Messrs. R. MacWilliam, Sanitary Engineer, (Chief of Mission) and G. Heyland, Financial Analyst. II. SECTOR A. Background 2.01 Most of Egypt's population of about 37 million, which is estimated to grow at 2.5% per annum, and most of the country's economic activity, is concentrated from Cairo to the Delta, an area which accounts for less than 4% of the country's land area of 1 million km 2. Cairo, Egypt's capital, is the largest city of the country with a population of about 7.5 million. Alexandria, the second largest city, has 2.4 million inhabitants. B. Water Resources 2.02 The predominant source of water to Egypt is the Nile River, which provides an assured supply of some 55 billion m3 of water each year. Increasing use of water by different sectors of the economy is, however, moving
-2- Egypt towards a situation where a lack of adequate water supply will not only inhibit economic growth but, if allowed to continue, will also endanger the health of the population. The Government has therefore requested the Bank to act as executing agency for a UNDP-financed Master Plan for Water Resource Development in Egypt. This Master Plan will be prepared within the long-term perspective of Egypt's social and economic development over the next 25 years, but will be designed also to give recommendations on short-term policy and investment issues. C. Water Supply 2.03 Treated and filtered water is estimated by Government sources to be available to approximately 80% of the urban population and 20% - 25% of the rural population. Potable water is drawn from two sources; either artesian wells. or directly from the Nile and irrigation canals. South of Cairo, artesian water is usually of good quality although sometimes containing iron and manganese salts. To the north of Cairo artesian water is characteristically brackish and requires blending with sweeter surface water. Artesian water in the coastal areas of the Delta is generally not suitable for human consumption, and communities depend entirely on surface water. 2.04 Provision of drinking water in Egypt is the responsibility of four public institutions. In Cairo and Alexandria separate Authorities, which commenced operations as private utility companies in the last century, are now responsible to the local Governors. The Canal Zone cities are served by the Suez Canal Authority. Water in all other Governorates, both urban and rural, is the responsibility of the General Organisation for Potable Water (GOPW). (For further details see Annex 1). The provision of additional water to Alexandria is recognized as urgent and was included in Egypt's five-year plan. Other cities face similar needs but Alexandria is the only one, at present, with a feasible project in a sufficiently advanced state of preparation. D. Sewerage 2.05 The responsibility for the provision of sewerage services throughout Egypt lies with the General Organisation for Sewerage and Sanitary Drainage (GOSSD). The GOSSD designs and constructs sewerage and drainage facilities in all Egyptian towns and carries out the maintenance of the Alexandria and Cairo sewerage systems. Its technical services are made available to the Governorates which operate and maintain provincial sewerage and drainage systems. In addition to Cairo, Alexandria and the Canal Zone cities, 10 major cities in Lower Egypt and four major cities in Upper Egypt have sewerage systems. Wastewater systems without any form of treatment facilities exist in a further 12 major Delta towns.
- 3 - E. Constraints and Sector Policies 2.06 The preliminary findings of a joint IBRD/WHO Water Supply and Sewerage Sector Survey, undertaken in July 1976, are that central government planning and program implementation has largely stifled local accountability and initiative. Water tariffs are low and the revenues generated in any case revert to the central budget from which funds for new construction and operating costs must in turn be obtained. As a result of this approach staff morale is low, there is no premium on efficiency, little incentive for financial discipline and steady decline in service. The Government's target of providing a comprehensive social water service remains unrealized while the poor use polluted water, buy expensive water from vendors or make large investments in handpumps and storage. In the sewerage service similar constraints apply. 2.07 The Bank's objective, in dealing with present constraints, should be to promote autonomy in the funding, management and operations of the water and sewerage facilities. The proposed project in Alexandria would demonstrate the advantages accruing to the introduction of improved management and operating techniques, better financial planning and the development of an organizational structure responsive to acute service needs of local inhabitants and would encourage the establishment of further autonomous public utilities in Egypt. III. THE PROJECT AREA A. General 3.01 The area to benefit from the proposed project includes the City of Alexandria as well as the adjacent Governorates of Behera and Mersa Matruh. Alexandria, founded by Alexander the Great in 332 BC., is the second largest city in Egypt. It is the nation's principal seaport and a most important industrial center. Strung out 25 kilometers along a narrow strip of Mediterranean coastline., it is the country's busiest and most popular holiday resort with excellent road and rail connections to Cairo, 180 kilometers distant. The climate is equable with a temperature variation of 150C - 250C and an annual rainfall of only 150 mm - 200 mm. The city is heavily residential, houses a university with all major faculties, supports important industrial activity and is a hive of business and commercial life. 3.02 The present population served by AWA is approximately 2,600,000 and is expected to increase by 2.7% per annum in Alexandria and by 2.5% per annum in the areas of the adjacent governorates supplied. Population is accommodated mostly in large apartment dwellings with a small, but increasing, percentage in low-cost housing in new development areas. It is estimated that one million people visit the city during the summer season for a stay of
-4- several weeks. The city and governorate area is 2,680 km2 with a density of 896 persons/km2; the adjacent Governorates of Behera and Mersa Matruh, in contrast, have densities of 244 and 0.5 respectively. 3.03 Industries settled in the area include cotton ginning, cotton seed oil, leather tanning, metal works, paper, soap, textile manufacture, footware, cigarettes, brewing, soft drinks and foodstuffs. Future expansion allows for oil refining, tire production, iron making, port developmet and the establishment of a free trade zone. Physical planning of all development is ostensibly under the aegis of the Governor but policy and much of the thrust comes from Government's central planners concerned with the promotion of economic growth. 3.04 Efforts are now being made to develop the tourist potential to the west of Alexandria where there are many attractive beaches. Also rural growth continues in the area with the development of irrigated land fed by the extension of the El Nasr canal from the Noubaria canal. In this respect a Bank financed project for fruit and vegetables development approved in 1976 (LN 1181-EGT) is of importance because water for this and the proposed project is drawn from the El Nasr canal. These developments in the adjacent Governorates of Behera and Mersa Matruh are integrated with the provision of water from the Alexandria water supply system. B. Existing Water Supply Facilities 3.05 The existing water supply facilities are detailed in Annex 1 and shown on Maps IBRD 12323 and 12325. 3.06 The AWA's source water is obtained from the Mamoudia and Noubaria Canals fed from the Rosetta branch of the Nile. It supplies treated potable water to some 2.6 million inhabitants and also meets the requirements of industry and shipping. The Authority's area of supply includes the Governorate and City of Alexandria and extends 300 km west to Mersa Matruh and 70 km south into the adjacent Governorate of Behera. In Behera 4% of the population is served and in Mersa Matruh Governorate 80%. 3.07 The AWA delivers water by pumping through about 2000 km of water mains from five treatment plants with a combined rated capacity of 550,000 m 3 /day. These plants, however, are consistently overloaded by as much as 32%, on average, and their general appearance is poor. They suffer from a chronic lack of maintenance, the control displays and recorders are inoperative, flow regulators are disconnected and much equipment is obsolete and long overdue for replacement. Despite these defects, drinking water of acceptable, but declining quality is being produced daily to meet demand. The distribution system is being extended at the rate of 30-40 km each year. 3.08 An unusual feature of the AWA's operations is the supply of water to Mersa Matruh (estimated population 75,000) 300 kilometers to the west of Alexandria and the coastal western desert area. The original supply line was provided during World War II to the historic battle site at El Alamein
and thereafter extended to Mersa Matruh. This is now being augmented by a 250 mm - 350 mm pipeline with 12 pumping stations running parallel and crossconnected at El Alamein. 3.09 The AWA has been labouring under increasing difficulty to meet rising water demand due to economic expansion and population growth in the service area. Inability to generate more revenues from its customers and increasing dependence on Government-allocated funds for operations have further crippled its effectiveness. Insufficient funds have been made available for the timely construction of new treatment capacity or refurbishing the old. Some of the more elderly filter units should have been retired but are still at work as they must contribute to total production. Water plants cannot be adequately maintained because there is no spare capacity when units are taken out of service for any length of time. To remedy this situation the AWA has developed a renewal and expansion program aimed at raising water production by 600,000 m3/day to a total of 1,150,000 m3/day. This, on projected water demand, would meet needs to about 1990. 3.10 As part of this program AWA is carrying out a wholly Governmentfinanced project which would add 250,000 m3/day. This includes the extension of three existing plants at Rond Point, Manshia and Mariout. It would also include renewing parts of the old desert pipeline and makce overdue structural repairs. 3.11 Present consumption of water averages about 110 lcd for domestic consumers and 50 lcd equivalent used by industry and other large consumers, such as Goverrment institutions; details of consumption are in Annex 2. It is estimated however that about 38% of total water production is unaccounted for mainly due to inaccurate or inoperative meters, theft and unquantified system loss. Water meters of up to 1-1/2" diameter of Egyptian manufacture have been installed in recent years, but are of poor quality. During negotiations agreement was reached with AWA that a leak detection and waste reduction study will be undertaken and that the findings will be reviewed with the Government and the Bank within twelve months of loan signing. 3.12 The AWA agreed during appraisal to make an immediate start on a study of the adequacy of the existing metering and further agreed during negotiations that this would be completed and reported upon to the Government and the Bank not later than June 30, 1977. C. Studies of Future Requirements and Operations 3.13 The Feasibility Report prepared by AWA for the proposed project focused on providing water for the short term needs (up to 1990) by raising production capacity and renewing obsolete equipment. A USAID financed study will, however, review Alexandria's water needs in the period beyond that catered for by the project and help prepare a Master Plan formulating these requirements to the year 2000.