World Bank Document · AH - Administration de l ... Ministere de ['Agriculture et de la ... Regie Autonome Intercommunale de Distribution d'Eau et d'Electricite de Fes RADEEMA

Document of

The World Bank

Report No. 15433-MOR

STAFF APPRAISAL REPORT

KINGDOM OF MOROCCO

SECOND SEWERAGE AND WATER RE-USE PROJECT

MARCH 29, 1996

Private Sector Development Finance and Infrastructure DivisionMaghreb and Iran Department

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

Pub

lic D

iscl

osur

e A

utho

rized

CURRENCY EQUIVALENT(as of January 1996)

Currency Unit Moroccan Dirham (DH) - 100 centimesUS$1.00 - DH 9.0DH1.00 - US$0.1111DHI,000,000 - US$111,111

MEASURES AND EQUIVALENTS

I millimeter (mm) - 0.04 inches

I meter (m) - 3.28 feetI kilometer (km) - 0.62 milesI square meter (m2) - 10.8 square feet

I hectare (ha) - 2.47 acresI square kilometer (km2) - 0.368 square milesI liter (1) - 0.264 US gallonsI cubic meter (m3) - 264 US gallonsI cubic meter per second (m3/s) - 35.4 cubic feet per secondI liter per capita per day (lcd) - 0.264 US gallons per capita per dayI liter per second (I/s) - 0.035 cubic feet per second

PRINCIPAL ABBREVIATIONS AND ACRONYMS USEDADB - African Development BankAH - Administration de l'HydrauliqueCFD - Caisse Francaise de DeveloppementCIRF - Centre Inter-Regies de FornationCLs - Collectivites LocalesCSE - Conseil Superieur de l'Eau et du ClimatDEPP - Direction des Entreprises Publiques et ParticipationsDGCL - Direction Generale des Collectivites LocalesDRSC - Direction des Regies et Services ConcedesEIB - European Investment BankEU - European UnionKfW - Kreditanstalt fur Wiederaufbaulcd - Liters per capita per dayMARA - Ministere de ['Agriculture et de la Reforme AgraireME - Ministry of EnvironmentMOF - Ministry of FinanceMOI - Ministry of InteriorMOPW - Ministry of Public WorksMOPH - Ministry of Public HealthO&M - Operation and MaintenanceONEP - Office National de l'Eau PotableRAD - Regie Autonome Intercommunale de Distribution d'Eau et d'Electricite de

CasablancaRADEEF - Regie Autonome Intercommunale de Distribution d'Eau et d'Electricite de

FesRADEEMA - Regie Autonome Intercommunale de Distribution d'Eau et d'Electricite de

MarrakechRAMSA - Regie Autonome Multiservices d'AgadirTA - Technical AssistanceUSAID - United States Agency for International Development

FISCAL YEARJanuary 1 - December 31

KINGDOM OF MOROCCOSECOND SEWERAGE AND WATER RE-USE PROJECT


Table of Contents

LOAN AND PROJECT SUM4MARY .......................... i

I THE WATER SUPPLY AND SANITATION SUB-SECTOR .... ........ 1A. Country Background, Water Resources and Sub-sector Organization .. .. 1B. Drinking Water Supply and Sewerage Sub-sector Strategy .... ....... 1C. Rationale for Bank Involvement ........................... 1D. Sewerage Sub-sector Issues and Proposed Actions ............... 1

II. THE PROJECT .3.................................... 3A. The Nation-Wide Sewerage Investment Program. 3B. Eligibility Criteria. 4C. Project Description. 5D. Status of Project Preparation - Follow-up Project. 5E. Cost Estimates. 5F. Project Financing Plan. 6G. The Borrowers and the Implementing Agencies. 6H. Procurement. 7I. Reporting and Monitoring. 8J. Disbursements. 8K. Project Risk. 9L. Environmental Aspects. 9

II. FINANCIAL ANALYSIS .. 10A. Past and Current Financial Performance of Regies .10B. Regies Future Financial Performance - The Arrears Issue ......... 11C. Audit and Insurance .12

IV. ECONOMIC JUSTIFICATION AND RISKS .13

V. AGREEMENTS AND RECOMMENDATION . .16A. Agreements .16B. Conditions of Board Presentation .18C. Recommendation .18

This report, prepared by Messrs. Sergio Culegari, Sr. Sanitary Engineer, Task Manager, Fathi Ben Slimane, Sr.Financial Analyst; Piotr Wilczynsli, Sr. Environmental Specialist and Mrs. Laura Raimondo, Economist, is basedon the findings of the pre-appraisal and appraisal missions which took place respectively in November-December1994 and in May 1995. The responsible Division Cbief is Mr. Amir Al-Khafaji; the Director is Mr. Daniel Ritchie;and the Regional Vice President is Mr. Kemal Dervis.


STAFF APPRAISAL REPORTL1Sr OF ANNEXES

Annex 1-1 Country and Sub-sector Background, Water Resources and Current

Sector OrganizationAnnex 1-2 Drinking Water Supply and Sewerage Sub-sector StrategyAnnex 1-3 Bank's Involvement and Lessons Learned in the Water Supply and

Sewerage Sub-sectorAnnex 1-4 Sewerage Sub-Sector Policy LetterAnnex 1-5 Addendum No. 1 to the "Protocole d'Accord" made between the

Government and RADEEFAnnex 1-6 Bank Note on Privatization of Urban Water Distribution and Sewerage

ServicesAnnex 2-1 Forecast of Population, Water Consumption and Water DemandAnnex 2-2 1995 Statistical DataAnnex 2-3 Project DescriptionAnnex 2-4 RAD-Casablanca Sewerage WorksAnnex 2-5 RADEEF-Fes Sewerage WorksAnnex 2-6 RADEEMA-Marrakech Sewerage Works

Annex 2-7 Status of Sewerage Feasibility Studies and Master Plans in 137 ONEP

CentersAnnex 2-8 Cost EstimatesAnnex 2-9 Project Financing PlanAnnex 2-10 Implementation ScheduleAnnex 2-11 Current Organization of ONEP and the RegiesAnnex 2-12 Organization Chart of a Typical RegieAnnex 2-13 Monitoring Performance IndicatorsAnnex 2-14 Estimated Semi-Annual Disbursement ScheduleAnnex 2-15 Limitation of Project Risks-Elaboration of the Environmental Analysis

Annex 3-1 Financial Projections: Tables 3-1 to 3-12Annex 3-2 Assumptions for Financial ProjectionsAnnex 3-3 Sensitivity AnalysisAnnex 3-4 RADEEF Arrears Settlement Plan - Global Arrears Matrix as of

March 1, 1995Annex 3-5 Bank's letter of March 1,1995 to the Minister of Interior, concerning

sub-sector arrearsAnnex 3-6 Letter of the Minister of Interior dated December 7, 1994 to the R6gies

ordering the Regies to curtail service to Collectivites Localesaccumulating arrears

Annex 3-7 Letter of the Minister of Interior to the Wali and Governors orderingthem to assist the Regies in recovering their arrears.

Annex 4 Economic Analysis (including Tables 1 to 5)

Selected Documents in Project FileMap IBRD No. 26877 - Regies.

KINGDOM OF MOROCCOSECOND iEWERGE AND WATER 1UaE rIROJECT

STAFF APPRAISAL REPORTLlff OF ANNEXES

Annex 1-1 Country and Sub-sector Background, Water Resources and CurrentSector Organization

Annex 1-2 Drinking Water Supply and Sewerage Sub-sector StrategyAnnex 1-3 Bank's Involvement and Lessons Learned in the Water Supply and

Sewerage Sub-sectorAnnex 1-4 Sewerage Sub-Sector Policy LetterAnnex 1-5 Addendum No. 1 to the "Protocole d'Accord" made between the

Government and RADEEFAnnex 1-6 Bank Note on Privatization of Urban Water Distribution and Sewerage

ServicesAnnex 2-1 Forecast of Population, Water Consumption and Water DemandAnnex 2-2 1995 Statistical DataAnnex 2-3 Project DescriptionAnnex 2-4 RAD-Casablanca Sewerage WorksAnnex 2-5 RADEEF-Fes Sewerage WorksAnnex 2-6 RADEEMA-Marrakech Sewerage WorksAnnex 2-7 Status of Sewerage Feasibility Studies and Master Plans in 137 ONEP

CentersAnnex 2-8 Cost EstimatesAnnex 2-9 Project Financing PlanAnnex 2-10 Implementation ScheduleAnnex 2-11 Current Organization of ONEP and the RegiesAnnex 2-12 Organization Chart of a Typical RegieAnnex 2-13 Monitoring Performance IndicatorsAnnex 2-14 Estimated Semi-Annual Disbursement ScheduleAnnex 2-15 Limitation of Project Risks-Elaboration of the Environmental AnalysisAnnex 3-1 Financial Projections: Tables 3-1 to 3-12Annex 3-2 Assumptions for Financial ProjectionsAnnex 3-3 Sensitivity AnalysisAnnex 3-4 RADEEF Arrears Settlement Plan - Global Arrears Matrix as of

March 1, 1995Annex 3-5 Bank's letter of March 1,1995 to the Minister of Interior, concerning

sub-sector arrearsAnnex 3-6 Letter of the Minister of Interior dated December 7, 1994 to the Regies

ordering the Regies to curtail service to Collectivites Localesaccumulating arrears

Annex 3-7 Letter of the Minister of Interior to the Wali and Governors orderingthem to assist the Regies in recovering their arrears.

Annex 4 Economic Analysis (including Tables 1 to 5)

Selected Documents in Project FileMap IBRD No. 26877 - Regies.

-i-

dependent on already constrained public budget financing, and waterbornediseases and infant mortality would be significantly reduced. The projectwould benefit the whole population of Fes through the rehabilitation ofexisting interceptors and the construction of wastewater treatment plants and,would benefit the poor, in particular, since social sewerage house connectionswould be located in low income neighborhoods. The total additionalpopulation serviced through the proposed project is estimated at 300,000people to which about 200,000 equivalent inhabitants are to be added,representing the equivalent increase in industrial pollution.

Risks: The project would not pose specific technical risks. Execution of physicalcomponents would be straightforward. The risks mostly involve theGovernment's willingness to enforce the stipulations of the "Protocoled'Accord" and in particular i) adaptation of the legal framework to enhanceRADEEF's managerial and financial autonomy; ii) needed sewerage chargeadjustments; iii) settlement of arrears; and iv) reinstatement of RADEEF'sautonomy. The tariff structure and the industries contribution level will bebased on a tariff study which is a component of the proposed project. The1994 and 1995 significant tariff increases (40% for water and 48% forsewerage), the 1993 settlement of 33% of the "Collectivit6s Locales" (CLs)arrears, the 1994 settlement of Government arrears, shifting from a priori toa gosteriori control, prove that the Government is committed to the Regies'sustainability. Technical assistance and training under the project wouldreinforce the Government's and RADEEF's commitment to the neededreforms by identifying and enforcing the implementation of proceduresnecessary for sound financial management and sustainable autonomy.Sustainability would be enhanced through possible privatization of water andsewerage services, following the current review by the Government of privatefirms' proposals. A Bank note of December 1994 was distributed to theGovernment, reminding it, inter alia, of the basic principles of soundprivatization: competition and transparency. Technical assistance inimplementing, operating, and maintaining project works would also minimizeany technical risks.

Estimated Costs: UsS MillionTotal LoW Foreism h of Total

R6gie: RADEEF

Sewerage works, equipment,consulting servicesTA and training 81.6 32.4 49.2 84Taxes and duties 13.1 13.1 - 14Interest during construction 2.3 - 2.3 2

TOTAL 97.0 45.5 51.5 100

Financing Plan: uS$ MiIinTotal LocalPri % of Total

Proposed IBRD loan 40.0 7.6 32.4 41

Co-financier (CFD) 23.6 4.5 19.1 24

RADEEP 18.8 18.8 - 20

Home owners 14.6 14.6 - 15

TOTAL 97.0 45.5 51.5 100

Estimated Disbursement:

US S MIILLION

FY 1997 1998 19 2000 N 2001 2002 2003

Annual 1.2 2.8 8.0 10.0 8.0 6.0 4.0

Cumulative 1.2 4.0 12.0 22.0 30.0 36.0 40.0

Economic Rate of Return: 11.5% using tariffs as a proxy for benefits evaluation.

President Report No. P-6846-MOR

Mapi IBRD No. 26877

MNIPI, March 1996



I. THE WATER SUPPLY AND SANlTATION SUB-SECTOR

A. Country Background. Water Resources and Sub-Sector Organization

1.01 The country and sector background, water resources and current sector organization aredescribed in Annex 1-1.

B. Drinking Water Supply and Sewerage Sub-Sector Strategy

1.02 The proposed project fits into the Bank's current CAS of November 1993 supportingGovernment efforts to deepen adjustment and reform, alleviate poverty, strengthen public sectorand natural resource management, and encourage private sector development. Details of thisStrategy are given in Annex 1-2. The proposed project is also consistent with the World Bankstrategy for water resources management' and MENA strategy for managing water2, in that itis an outcome of an analysis taking into account social, environmental and economic objectives;it supports more efficient sewage collection, treatment and disposal in an environmentallysustainable and economically viable manner, and promotes decentralized management as wellas a system of water charges to endow municipal water utilities, R6gies, with operational andfinancial autonomy.

C. Rationale for Bank Involvement

1.03 The Government recognizes that the establishment of efficient and cost-effective sewerageand pollution control management systems, as well as institutional management, are critical tothe country's overall development. Based on long-standing relationships in the sector, theGovernment has requested continued Bank participation as a development catalyst, both at themicro-level of sanitation and at the macro-level to assist in addressing intra-sectorial issues.Details concerning Bank-funded projects including lessons learned from previous Bank operationsare given in Annex 1-3. The proposed project would lead to improved operational efficiency ofsector agencies, particularly the Regies, and to expanded sewerage service levels benefitting lowincome consumers. Focussing on social sector development through comprehensive action plansin the water and sewerage sector would be part of the overall post-adjustment strategy. It wouldfollow on the successes and avoid the shortcomings of the ongoing Greater Casablanca SewerageProject in addressing sector-wide institutional and financial issues through the establishment ofglobal eligibility criteria (see para. 2.02). The proposed project would directly benefit the Regieof Fes, while supporting ongoing policy changes affecting all Regies and adopting theGovernment's social sewerage connection program.

1 water Resources Managemnt The World Bank, 1993

2. A strategy for managing water in the Middle East and North Africa The World Bank, 1994.

- 2 -

D. Sewerage Sub-Sector Issues and Proposed Actions

Institutional Aspects

1.04 Currently sewerage systems are not operated satisfactorily by the Municipalities,essentially because their revenues (municipal taxes) are insufficient, and there are no allocationsmade for a specific service like sewerage. To overcome these shortcomings, the Governmentintends to adopt a basic institutional scheme in line with the "charte communale" of 1976entrusting responsibility for sewerage services to the "Collectivites Locales" - CLs(Municipalities), as per its Sub-Sector Policy Letter (see Annex 1-4).

Cost Recory

1.05 The Government agrees that full cost recovery through sewerage user charges toapproximate the long-term marginal cost (LRMC) of sewerage works is the optimal solution tobe pursued (see Sub-Sector Policy Letter in Annex 1-4). This is in line with the Governmenteconomic strategy of discontinuing its involvement in services to be provided in localcommunities (CLs) and also in line with the Bank policy. However, the implementation of thissolution can sometimes face serious socio-economic constraints, as sewerage charges cannotexceed the affordability level.

1.06 During appraisal, the Bank has carried out financial projections for the sewerage activityof three Regies: RAD of Casablanca, RADEEF of Fes and RADEEMA of Marrakech.Furthermore, during pre-appraisal the Bank has carried out preliminary financial projections forthe sewerage activity of four additional Regies: RADEEC of Settat, RADEEN of Nador, RAIDof Tangiers and RDE of Tetouan and five ONEP centers, to determine the order of magnitudeof sewerage charges needed to reach financial viability (applying the above-mentioned costrecovery assumption). The financial projections take into account house owners' contributionswhich consist of a 'Participation au Premier Etablissement -PPE" paid by new house owners anddevelopers, proportional to the surface area of premises to be connected to the seweragenetwork. In addition, a 20% surcharge is added to the cost of house connections for constructioncost and 10% for work supervision on the cost of the tertiary network. These contributions andthe methodology are defined in the Regies By-laws. The financial projections show that fundingsewerage investments at IBPD loan terms is appropriate for the cities of Casablanca, Fes andMarrakech, for which the resulting user service charges are acceptable. Similarly, fundingsewerage investments at EEB loan terms is appropriate for the cities of Nador, Tangiers, Tetouanand Settat, where the resulting user service charges are also acceptable. For the five ONEPcenters, the application of IBRD terms would result in sewerage charges far too high relativeto users' ability to pay, and if costs were to be recovered through user charges only. Therefore,additional financial projections were carried out under the assumption that funding would beprovided through donor grants.

1.07 The first phase investment program which includes the proposed project (Fes), as wellas Casablanca and Marrakech, would not need any Govemment subsidy for funding the requiredinvestments. The resulting average sewerage user charges range between 1.5 and 3.5 DH/m3(17 to 31 US cents per m3) during the implementation period, same order of magnitude as thelong-term marginal cost of sewerage works, which compares with current water tariffs rangingbetween 3.5 and 6.5 DH/m3 (or 31 - 57 US cents per m3). For the city of FRs, a study of thetariff structure will be carried out, to identify for each beneficiary the sustainable level of

- 3 -

sewerage charges and, if a contribution from the central or local budget is set, design thesewerage charge structure in such a way that lower income beneficiaries would benefit mostfrom of the contnbution. The European Investment Bank would provide external fundingthrough loans at concessional terms for the sewerage systems of Marrakech, Nador, Settat,Tangiers and Tetouan without any need of Government subsidy. Similarly, no Governmentsubsidy would be needed for the sewerage systems of Erfoud, Errachidia, Goulmima, Ouarzazateand Rich, if external funding is provided by a donor grant - eventually the European Union (EU)or the Kreditanstalt fur Wiederaufbau (KfW). The results of preliminary financial projectionsshow, in fact, that sewerage user charges remain at a tolerable level for small-size communitiesonly if investments are funded through grants or subsidies. This means that, due to the limitationof donor grant amounts, most of the sewerage systems needed in the 235 small-and middle-sizetowns can be implemented only if funding is provided by massive Government subsidies. Underthis assumption, Bank funding would still be feasible, provided that debt service is assumed bythe Govemment which would yield the assets to the communities as equity contribution.

Conditionalities

1.08 The above-mentioned institutional set-up and cost recovery plan would be implementedthrough conditionalities agreed with by the Govemment, RADEEF and donors (CFD, EIB, EU,KiW, USAID).

Two conditionalities were complied with prior to appraisal:: (i) availability of an adequateenvironmental impact analysis (EIA) of the proposed sewerage works; and (ii) availability of1993 and 1994 audit reports;

Three conditionalities were complied with prior to negotiations: (i) transfer of sewerageresponsibility to the autonomous water, electricity and sewerage utility RADEEF of FRs; (ii)availability of a draft addendum to the RADEEF "Protocole d'Accord", covering theimprovement of its managerial autonomy and financial and operating performance for thesewerage activity; and (iii) carrying out by RADEEF a vigorous sanitary education campaign,to inform the population of Fes about appropriate use of sewerage facilities. The agreedaddendum No. 1 to the RADEEF "Protocole d'Accord" is shown in Annex 1-5.

Agreements were reached during negotiations that, prior to Board presentation, the followingconditionalities would be complied with: (i) signature of the above-mentioned addendum to the"Protocole d'Accord" satisfactory to the Bank; and (ii) reception by the Bank of the GovernmentSewerage Sub-sector Policy Letter satisfactory to the Bank including, inter aia, the eligibilitycriteria (complied with on March 15, 1996).

II. THE PROJECT

A. The Nation-Wide Sewerage Investment Program

2.01 Currently in Morocco the urban population (about 14 million inhabitants) lives in 260Municipalities (communes urbaines), 20 of which have a population ranging from 100,000 to3 million people. The rural population (about 12 million inhabitants) lives in 1,290 ruralcommunities (communes rurales) grouping 31,000 douars (villages). The progressive migrationof rural population to urban areas makes the sewerage issue even more urgent in those areas.Sewerage feasibility studies and master plans are partly finalized and partly under way in

- 4 -

13 cities (by the Regies and Municipalities) and 137 towns (by ONEP), with the assistance ofconsultants, through funds provided by the Bank and other co-financiers. These studies wouldidentify for each city or town a justified phased investment program. Based on data gatheredfrom these studies, the estimated per capita investment needed to cover sewerage needs in theyear 2000 is ranging between $60 to $180 for large cities and small towns respectively, whichtranslates into a global estimated investment of $1.4 billion. The coverage of sewerage needsbeyond the year 2000 will require additional investments on the same order of magnitude.

B. Eligibility Criteria

2.02 During appraisal, the Government has agreed that each city and town need to complywith the following eligibility criteria, to be included in the nation-wide sewerage investmentprogram, irrespective of the fund source; confirmation of this agreement was reached duringnegotiations as per Sewerage Sub-Sector Policy Letter (see Annex 1-4 and para. 1.08). Theyconsist of: (a) availability of a thorough sewerage feasibility study and master plan giving fulljustification (technical, economic, financial) for the recommended investment; (b) availabilityof an adequate environmental impact analysis (EIA) of the proposed sewerage works; (c) transferof the sewerage responsibility from Municipalities to autonomous utilities; and (d) availabilityof audit report(s) of said utilities.

EMect Appo:ach and Objectives

2.03 The implementation of the above-mentioned investment program depends on the timelyavailability of adequate funds at appropriate terms. The pre-appraisal mission has identified afirst phase sewerage investment program concerning twelve cities and towns for which thoroughsewerage feasibility studies and master plans satisfactory to the Bank, were available:Casablanca, FRs, Marrakech, Nador, Settat, Tangiers, Tetouan, Erfoud, Errachidia, Goulmima,Ouarzazate, and Rich. The Govemment wishes to first use grants and funds at concessionalterms which would be made available for small cities and towns. The Bank intervention wouldconcern the city of FRs where sanitation issues are most acute; this would constitute the proposedBank project. The Bank was instrumental in mobilizing funds at concessional terms: (i) fromCFD to secure parallel financing to complete the external funding of the Fes sewerage system;(ii) from EIB to secure external parallel funding needed to finance the sewerage systems ofMarrakech, Nador, Settat, Tangiers and Tetouan; and also in interesting the EU and KfW toprovide parallel grant funds for the sewerage systems of Erfoud, Errachidia, Goulmima,Ouarzazate and Rich. The project would develop the Govemment sector strategy by improvingthe operational and financial perfommance of sector institutions, extending ongoing rehabilitationand expansion programs, expanding sewerage services to the poor and mobilizing adequatefinancial resources to fund delayed infrastructure investments. The Govemment is currentlyreviewing a privatization proposal from a French company for water, electricity and sewerageservices for Casablanca. Privatization would improve the efficiency of sewerage services, andbring in funds which would reduce the Govemment contribution to project funding. A Bank noteof December 1994 (see Annex 1-6! was distributed to the Government, reminding, inter aia,the basic principles of a sound privatization: competition and transparency. Assurances werereached during negotiations that the Government would mention the privatization option in thesewerage sub-sector policy letter (see Annex 1-4 . The project would establish a consistentframework within which it would replicate any further project in the sewerage sector, to allcities complying with eligibility criteria mentioned above. The role of the Bank wouldessentially consist in assessing compliance with eligibility criteria, in lieu of the classic project

cycle (preparation, prappraisal and appnaisal). The project's major objecdve is to achievesatisfctory public health condidons by transporting and adequatdy ftraing and disposingeffluents far from the populated areas; this would drasically reduce the waterbome diseaseswhich are the major cause of morbidity.

C. r

2.04 The project area is the entire country in so far as it supports institutional and financialreforms of water distribution and sewerage utilities (R6gies) and ONEP which operate all overthe country (IBRD Map No. 25095). Forecasts and statistical data concerning sewerage facilitiesof the three major cities of Casablanca, Fes and Marrakech are given in Annexes 2-1and2-2.Sewerage works were identified and justified on the basis of priorities set forth in the feasibilitystudies and master plans, as mentioned in para 2.03 above. The proposed project would focuson the city of Fes and include sewage collection system, pollution control works, equipment,consulting services, technical assistance and taining. A detailed description of sewelage worksis given in Anexc 2-3. Sewerage works are shown in Anes 2-(L4fl, 2-s l3E and2-6 (ItADEEMA).

D. Status of tPre aon - FoloW-U Proect

2.05 Project preparation is well advanced. Sewerage feaibility studies and master planssatisfactory to the Bank are available. The first phase sewerage works of the twelve cities andtowns considered during pre-appraisal are identified and justified. Part of final design andbidding documents is also completed. The completion of final design and bidding documents ofsewerage works of the city of FPs is scheduled for mid 1997. Terms of reference for consultingsavices, TA and traing are available. Due to the different progress of project preparation -sewerage master plans have been finalized for 12 cities and towns, and some are just staringor are underway (Agadir, Melnes, Kenitra, Rabat-Sai, Safi, Oujda, and 137 ONEP centers) -(see Anne 2-7), it is likely that the proposed project would be followed by a further project

at a two to three years interval. The preparation of the proposed project would be closelycoordinated with the ongoing activities in the water and sewerage sector.

E. Cost Ffl

2.06 The estimated costs for the sewerage worls of the project city of Pes (icluding taxes,duties and interest during constucton) are detailed in Annex 2-8 and summarized in Table 2-1(see next page). Annex 2-8 also provides detailed cost estimates of sewerage works for the citiesof Casablanca and Marrakech considered dunng appraisal, as well as Nador, Settat, Tangiers,Tetouan, Errachidia, Erfoud, Goulmima, Ouarzazate and Rich considered during pre-appraisal.

2.07 The project cost is estimated at US$97.0 million equivalent, with a foreign exchangecomponent of US$51.5 million (53%). Taxes and duti estimated at about US$13.1 millionequivalent would be funded entirely by the Pes water and sewerage utility and by the houseowners. The base cost estimates are expssed in January 1996 prices. Cost estimates are basedon data provided by the feasibility studies, master plans, and final deign. Unit costs are basedon recently awarded contracts. Physical contingencies of 10% have been added to the costs ofall components and price contingencis toalling 15% of the base costs and physicalcontingencies are based on the following inflation rates:

-6 -

1997 1998 1999 2000 2001 2002 2003

Porcgn E=xhange 1.6 2.1 2.4 2.2 2.5 2.3 2.2

Loal Curency 4.3 4.3 4.3 4.2 4.2 4.2 4.2

Table 2-1 SuMmary Of Estimated ProieCt Costs(ZConSKg Baxe: January 1MU3

mmo 1d Pemba Taol LoaM F

Rdgio: RADEEF

- Sewers and Civil Works 415.2 166.1 249.1 46.2 18.5 27.7- Treatment Plants 121.5 60.7 60.8 13.5 6.7 6.8- Equipment 21.0 - 21.0 2.3 - 2.3- Consulting Services 18.0 2.7 15.3 2.0 0.3 1.7- T.A and Traning 4.8 0.7 4.1 0.5 0.1 0.4

A. Base Cost 580.5 230.2 350.3 64.5 25.6 38.9B. Physical Contingencies 58.1 23.0 35.1 6.5 2.6 3.9C. Price Contingencies 95.8 38.0 57.8 10.6 4.2 6.4D. Total Cost(net of taxes and duties) 734.4 291.2 443.2 81.6 32.4 49.2E. Taxes and duties 117.5 117.5 - 13.1 13.1 -F. Interest during

consruction-IDC 21.1 - 21.1 2.3 -- 2.3G. Total Cost (including taxes,

duties & IDC) 873.0 408.7 464.3 97.0 45.5 51.5

The project provides for: (a) an estimated 180 man-months of consulting services and 20 man-months of TA, and (b) an estimated 12 man-months for training.

F. ae ct Plan

2.08 The Project financing plan would be as follows:

Table 2-2: Poect pancing Plan

US MillinLOW Lo Fon % of Toal

Prpood 3RD loan 40.0 7.6 32.4 41 Stadard IRDCo.-fincier (CFD) 23.6 4.5 19.1 24 Standard CFDRADEEF 1I.8 18.8 - 20 Own contributionRome ownen 14.6 14.6 - 15 Own contribution

TOTAL 97.0 45. 51.5 100

The detailed project financing plan is shown in Annex 2-9.

G. Ihe Borrowers and tmetng A

3 Exchange rate = US$1 = DH 9.0

- 7 -

2.09 The proposed IBRD contrbution of US$40.0 million would finance 63% of the projectforeign exchange and 23% of local currency costs through a loan agreement to be made withRADEEF. Thirty-seven percent of the project foreign exchange and 14% of local currency costswould be funded by CFD. Home owners and RADEEF would fund 73 % of the local currencycosts plus taxes and duties or 35 % of the investment program. The whole amount of the loanwould be guaranteed by the Government. The foreign exchange risk on the loan would be borneby RADEEF.

2.10 All project components are designed to allow for an implementation period of about sevenyears, i.e., from mid 1996 to 2003 (Aamc 2-10). The implementing agency would be the RdgieRADEEF. Consulting services would be provided to support RADEEF in bidding documentpreparation, procurement, and works supervision. TA would be provided to RADEEF for theorganization of its sewerage department and training for wastewater treatment facilities andequipment use. The operation and maintenance of all facilities would be carried out byRADEEF. The organization of the Regies is described in Annex 2-11. The organizational chartof a typical R6gie is shown in Annex 2-12.

R. Procurement

2.11 Civil works, sewers and equipment would be procured in accordance with the Bank'sGuidelines. Eligible domestic manufacturers of pipes and equipment bidding under InternationalCompetitive Bidding (ICB) procedures would be awarded a 15% preference on the CIF priceor the prevailing custom duty applicable to non-exempt importers, whichever is less, providedthe local value added to the product is not less than 20% of the ex-factory bid price. The supplyand installation of pipes and equipment will be tendered as single packages and grouped in sucha way as to maximize competition. Local Competitive Bidding (LCB) procedures, acceptable tothe Bank and in which foreign bidders would have an opportunity to participate would be usedfor the following: contracts for equipment and vehicles estimated to cost less than US$75,000each, up to a total amount of US$400,000; and contracts for civil works estimated to cost lessthan US$2,500,000 each, up to a total amount of US$10,000,000. Contracts below US$50,000for equipment and vehicles, up to a total amount of US$250,000 would be awarded under LocalShopping (LS) procedures in accordance with the Bank's Guidelines. Consultants would berecruited in accordance with Bank Guidelines. Terms of reference for the various asignmentswere reviewed by the Bank. Due to the urgency of rehabilitation works, some project activities(procured in accordance with Bank Guidelines) would be carried out prior to loan signing.Consequently a small amount of retroactive financing (less than US$0.7 million) would beprovided under the proposed Bank loan.

2.12 All contracts awarded through ICB and LCB, as well as all consultant appointmentsabove US$100,000 for firns and US$50,000 for individuals, will be subject to prior Bankreview. This will result in prior review of about 90% of total procurement. All other contractswill be subject to selective a posteriori review by the Bank.

2.13 Procurement arrangements are summarized in Table 2-3 where the figures in parenthesrepresent amounts financed by the Bank and the others are the total amounts of the projectelements.

- 8 -

Table 2-3: Amounts and Methods of Prcurment

(US $ million)PsoictA L3aOt B : dwhr k4 x TOtal

REamQ(a) Sewen & Civil Works 58.8 10.0 - 20.9 39.7

(31.0) (5.0) - (36.0)(b) Supply and installation

of equipment 1.7 0.4 0.3' 1.5 3.9(1.4) (0.3) (0.2) (1-9)

(c) Consultunts,TA & tiuinzg - - 2.2 1.2 3.4

(2.1) (2.1)

TOTAL 60.5 10.4 2.5 23.6 97.0Bank loan (32.4) (5.3) (2.3) - (40.0)RADEEP 16.9 1.6 0.3 - 1.1House ownen 13.2 1.2 0.2 - 14.6Co-finncier (CFD) - - - 23.6 23.6

I. Reporting and Monitoring

2.14 RADEEF would report twice a year on the progress of project implementation and theachievements of the project would be monitored. RADEEF would also prepare anImplementation Completion Report (ICR). These reporting requirements were agreed uponduring negotiations. Key indicators for RADEEF are mentioned in Annex 2-13. Agremntwas reached during negotiations that during project implementation: (a) a yearly review wouldbe conducted by the Bank to verify the compliance by RADEEF on the actions stipulated in theperformance agreement (Protocole d'Accord and its addendum), including: implementationmeasures, water tariff and sewerage charge adjustments, self-financing of no less than 25% onaverage of the investment program, account receivables no more than three months of waterbilling by 1998, and debt service no more than 1.2.; (b) an annual report covering all theindicators to be submitted by RADEEF no later than September 30 of each year of projectimplementation, and identifying appropriate remedial measures if indicators stipulated in theagreements are not realized; (c) a mid-term review to be carried out jointly with the Bank nolater than October 31, 1999, to verify the implementation of the -Protocole d'Accord' and itsaddendum and identify appropriate remedial measures to complete the project as scheduled, andto achieve all the project objectives; and (d) annual audit reports on the accounts of the previousyear, project accounts and special accounts (to be prepared by independent audit firms acceptableto the Bank) based on terms of reference to be agreed on by the Government and the Bank, nolater than June 30 of the foLlowing year.

J. Disbursent

2.15 Loan proceeds would be disbursed as shown in Table 2-4 on the basis of fulldocumentation, except for eligible expenditures with a value below US$100,000. These wouldbe covered by statements of expenditure. This documentation would be made available forreview at the project audit offices of the implementing agencies. The loan would be disbursedagainst foreign exchange expenditures and part of local expenditures over seven years, this

4 NBF: Not Bank Finnced5 Loca Shopping

- 9 -

period being based on experience gained from the implementation of similar projects with ONEEPand the R6gies. The Bank loan includes US$0.7 million of retroactive financing for urgent workscarried out after March 1, 1996. In order to expedite disbursements, agm=nL was reacheddurin" negotiations that the Government will establish a Special Account for RADEEF at theNational Treasury in the amount of five percent of the loan amount. This account will be usedto prefinance eligible expenditures under the Bank loan and will be replenished on the basis ofstandard Bank procedures. Applications for replenishment of the Special Account will besubmitted to the Bank on dates to be specified by the Bank. The project disbursement schedule,in line with the standard disbursement profile for water supply and sewerage projects includingpreparation of bidding documents and work construction, is shown in Annex 2-14.

2.16 The risk of delaying project implementation and having to finance a higher proportionof project costs would be borne by RADEEF. Assuming implementation begins in mid 1996,loan proceeds would be fully disbursed by June 30, 2003. The closing date would beDecember 31, 2003.

Table 2-4: Bank Loan Disbursemnt Categof (in US$ million)

Catesory Estimated Esfimated cost of Allocated PcrOentagCes ofTotal Cost Components Funded by Amounts of Expenditur

Bank (net of taxes and Bank Loan Financed by ankduties) Loa

1. Civil Works and Sewers 89.7 68.8 29.8 75%

11. Supply and installation of 3.9 2.4 1.2 100% of FEequipment and vehicles 80% of LE

m. Consuling Services and 3.4 2.2 2.0 100%traning _ _ _ _ _ _ _ _ _ _ _ _ _ _

IV. Unallocated - 7.0

Total 97.0 73.4 40.0

FE: foreign expenses; LE: 100% of local expenses (ex-factory cost) and 80% of local expenditures for otheritems procured locally.

K. Poect Risks

2.17 The project would not pose specific technical risks. The risks mostly involve theGovemment's willingness to enforce the stipulations of the "Protocole d'Accord' made, and itsaddendum to be made, with RADEEF and, in particular, agree on the needed user seweragecharge adjustments. Annex 2-15 explains how the project risks will be kept within tolerablelimits.

L. Environmental Aspects

2.18 This project is a first major effort of the Government and the Bank to address a backlogof water pollution issues in accordance with the country's environmental priorities and theMEENA Environmental Strategy. Minimizing existing environmental health problems related topoor water quality observed for some time, has been the decisive factor in determining prioritiesfor site selection for the project. This has been especially an issue of concern in the Fes Valley.The project will reduce the flow of raw sewage and industrial effluent into surface waters ofhighly urbanized areas in which agricultural production takes place. Upgrading of the municipalinfrastructure in the municipality of FRs will have a significant impact on environmental health

- 10-

of communities located along the rivers downstream of Fes. At the same time, it will improvethe living conditions of people in the municipalities by controlling flooding of raw sewage in theold city of Fes.

2.19 Environmental benefits of this project will also include improvement in the quality of thewastewater used for irrigation by bringing it to levels recommended by the Bank. This willimprove the quality of foodstuffs produced by private farmers. The institutional aspect of theproject allows for expanding the scope of work of water utilities to also cover wastewatertreatment. Effluent monitoring will be conducted by the utility. Quality monitoring will also becarried out by the responsible agencies: ONEP, the Administration de l'Hydraulique (AH) andthe Ministry of Environment (ME). An environmental impact analysis has been carried out byME, ONEP and consultants for the twelve cities and towns considered during pre-appraisal andappraisal, in accordance with Bank requirements, and mitigation measures have beenincorporated into the project design. These include sludge handling in such a way as to allowfor separation of heavy metals from industrial wastewater before it is mixed with municipalwastewater. Sludge will be used in agriculture. For each wastewater treatment plant, effluentstandards were set to allow for wastewater to be used in the farming of products to be cooked.For the purpose of environmental rating this project has been rated as " B " in accordance withO.D. 4.01.

m. FINANCUL ANALYSIS

3.01 RADEEF generates its revenues from consumers' charges and contributions. Water andelectricity revenues are based on consumptions metered and billed to users. During the 1990-1994 period, RADEEF electricity revenues covered its operating expenses including depreciationcosts and met its financial requirements under Loan No. 2910-MOR, while water revenues donot. Water activities generated operating deficit due to the preponderance of operating expensesover total revenues. The shortage to cover operating expenses as well as investments is madeup by customers' contributions and subsidies from electricity. In 1994, the FRs Municipalityentrusted the sewerage activity to the "Regie Autonome Intercommunale de Distribution d'Eauet d'Electricite de FRs" (RADEEF). To date, no financial statements are available regarding thesewerage activity. The financial analysis covers the three activities: water, electricity andsewerage.

A. Pad and Current Performance of

3.02 RADEEF's past and present performance is shown in its financial statements for fiscalyears 1990 through 1994, summarized in Annex 3-1 (Tables 3-1, 3-2, 3-3, 3-4, 3-5, 3-6).During this period, RADEEF performed satisfactorily and met its financial requirements for theelectricity activity. However, the financial statements of its water supply activity show that thefinancial equilibrium and operating efficiency are low and show deficits due to thepreponderance of operating expenses and interest over total revenues, and deferral of tariffadjustments. However, working ratio improved slightly from 109% in 1990 to 92% in 1994 andits operating ratios improved from 133% in 1990 to 108% in 1994. As a consequence, the netoperating deficit and net deficit after taxes decreased, respectively, from DH22.0 million toDH11.0 million and from DH26.0 million to DH20.0 million. The consolidated financialstatements showed an overall satisfactory performance in 1994.

- 11 -

3.03 RADEEF's low profitability in water supply activity is mainly compounded by (a) theinadequacy of tariff to keep up with escalating operating costs, and (b) the low water distributionnetwork efficiency, due to insufficient maintenance and rehabilitation as well as lack ofresources. In addition, according to the Moroccan fiscal code, net income before taxes issubject to a 36% (40% up to 1992) corporate income tax, but in case of net losses, a 2.5% taxis levied on actual turnover.

3.04 This lack of performance in its water supply activities is being addressed to some extent,by the 1993, 1994 and 1995 average tariff increases of more than 25% each year, and throughappropriate measures covenanted in the Fifth Water Supply Project and related "Protocoled'Accord" (Loan 3364-MOR) i.e. annual tariff adjustment, settlement of arrears, implementationof new tariff structure and improvement of network efficiency from 64% in 1994 to 80% in2000.

3.05 Tables 3-2, 3-3, 3-5 and 3-6 of Annex 3-1 show how RADEEP's water supply equity haseroded: cumulated retained losses reaching about 35 % of equity in 1994. Furthermore, balancesheets have increasingly expanded from the large accumulation of unpaid bills owed to RADEEF(account receivable representing about 33 % of total assets) and by RADEEF (account payablerepresenting about 15 % of total equity and liabilities). Throughout the period, RADEEF's debtto equity and current ratio were satisfactory, and its cash generation reached the required level.Trhe RADEEF financial performance for both water supply and electricity activities is expectedto improve drastically in 1995 and thereafter, due to settlement of all arrears owed by theGovernment and CLs as of December 1992, and annual water tariffs adjustments in 1994, 1995and 1996 of about 25% each year, implementation of new tariff structure for electricity in 1996,as well as Government's and RADEEF's commitment to meet financial and operatingrequirement stated in Loan Agreement 3664-MOR and "Protocole d'Accord" signed between theGovernment and RADEEF on December 6, 1993.

B. RADEEF's Future Fnancial Performance

3.06 Financial projections for water supply and power activities, as well as the consolidatedfinancial projections suggest that under the assumptions outlined in Annex 3-2 and theagreements reached under the 5th Water Supply Projects, RADEEF would perform satisfactorilyand meet all financial and operational requirements in terms of efficiency (80%), debt servicecoverage (1.2) and cash generations (25%) (Anne= 2-13) provided that the adequate tariffstructure will be implemented in 1996 and tariffs level adjusted as described in Annex 3-2. TheRADEEF's forecast financial statements are presented in Annex 3-1 (Tables 3-7 through 3-15).

3.07 The financial analysis for the proposed project suggests that the average sewerage usercharges of RADEEF should be at DHL.0 in 1996 and would increase to reach DH3.09 in 2002and 3.61 in 2004. The first increase in the average sewerage charge of about 25% should bein effect in January 1997. Thereafter, sewerage charges are assumed to increase by 17% eachyear in average as foreseen in Annex 3-2. On this basis, projections indicate that these tariffswould allow RADEEF's to achieve satisfactory operating efficiency and financial performancethroughout 1996-2002 period. They would allow RADEEF to adequately cover operatingexpenses and other recurrent charges, including debt service and produce acceptable overaU netcash generation over the implementation period. It would keep its operating ratio at a satisfactorylevel (average operating ratios will be 82% decreasing from 909% in 1996 to 73% in 2002), and

- 12 -

generate a net internal cash, including customer contributions for new connections, to servicethe debt (1.6), and cover a substantial portion of its investment program (33%). The RADEEF'sdebt-to-equity ratio would be satisfactory, it would be kept at less than 50% as would be its debtservice coverage. Under the above assumptions, the average debt-to-equity ratio would be about46%. The Loan Agreement would contain a debt limitation covenant, whereby no new debtwould be incurred without consulting with the Bank unless future internal cash generation wereat least 1.2 times future debt service, including that on the proposed borrowing, and the self-financing ratio were no less than 25%.

3.08 The Government and the RADEEF cost recovery policy aims at preserving the short-andlong-term financial viability of the three sub-sectors. At the same time, it aims at ensuring thatlow-income water supply users are serviced by the sewerage systems, and to creating appropriateincentives for decreasing the quantity of domestic and industrial effluents and discharge ofwastewater through adequate tariff levels and structure. The current structure approved in 1994that became effective in 1995 for RAD and RADEEF is still low compared to the potable watertariffs and the expected level of services to be delivered. Agreement was reached duringnegotiations that, the "Protocole d'Accord" signed on December 16, 1993 between theGovernment and RADEEF will be completed with an addendum providing appropriate usercharges and structures (including identification of charges by category of consumer and tranchesof water consumption). It will include a provision for the annual revision of user charges on thebasis of updated financial projections acceptable to the Bank, and in the light of the Regie'medium-term cash flow needs (para. 3.07).

The Arrears Issue

3.09 As has been the case for the Fifth Water Supply Project (Loans 3664-MOR and 3665-MOR), the settlement of mutual debts is a national issue and does not only apply to publicutilities. Annex 3-4 is a matrix showing the arrears due to the Regies ONE and ONEP by theGovernment and the Collectivites Locales (CLs) as of March 1, 1995. The arrears owed by CLsis the major issue regarding Regies' own current liabilities. The national budget allocations for1993, 94 and 95 to the Regies have not been sufficient to meet the costs of providing electricityand water to the Administration as well as the local communities (CLs). Consequently, arrearsare building up. The Government is taking action to address the arrears issue through (a)settlement of arrears of CLs and the Administration (see the Bank's letter to the Minister ofInterior of March 1,1995 given as Annex 3-5; (b) two vigorous incitations of the Minister ofInterior to the R6gies to curtail water and electricity to CLs which have been accumulatingarrears (Annexes 3-6 and 5-7) and (c) debt rescheduling which is currently being discussed.During negotiations, the situation of the RADEEF arrears was examined and the apropriatemeasures to be taken were identified and agreed upon (Annex 3-4).

3.10 Annexes 3-6 and 3-7 specify the RADEEF's legal right to discontinue service tocustomers whose payments are in arrears. Agreement was reached during negotiations thatRADEEF would reduce private and parastatal receivables to under three months of billing by1998, by strengthening its commercial department, and implementing new and appropriate billingand collection procedures, including disconnection campaigns.

3.11 Fixed assets: Long-term debt. The addendum to the RADEEF's "Protocole d'Accord"would provide, as outlined in the Fifth Water Supply Project, that sewerage assets will be

- 13 -

inventoried and revalued, and that the Treasury and the RADEEF would evaluate undisbursedloans onlent to RADEEF. Fixed assets have been brought into account based on their historicalcost. The capital expenditure is assumed to be incorporated into the balance sheet at its actualcost. The inflated balances of accounts payable and receivable are assumed to be reducedsharply, under the proposed settlement arrangement (paras. 3.07 to 3.10), and then to taper offslowly, to a more reasonable level.

C. Audit and Iluac

3.12 The existing project agreement between the Regies and the Bank (under Loan 3664-MOR)provides for an audit of the Regie by independent auditors. Agreement was reached du=inegotiations that audited financial statements, project accounts, and special accounts be preparedby independent audit firms acceptable to the Bank, in accordance with terms of reference to beagreed on by the Bank, RADEEF, and the Government, and that the audit reports should includeauditor opinion on the commitment of RADEEF on arrears setdement, and submitted to the Bankwithin six months after the closing of the fiscal year. The quality of the audits performed to-dateby independent auditors has been improved. Until 1994, RADEEF accounts were not certifieddue to discrepancies in its accounting procedures and weak internal control. These discrepanciesare being addressed through studies financed under Loan 2825-MOR which recommendationswould be implemented in 1996 and 1997.

3.13 On the tariff assumption and arrears (paras. 3.08 to 3.10) and those of fixed assets andworking capital (para. 3.11), RADEEF would be able to perform its new responsibilities andreach operational and financial targets outlined in paragraph 3.07. However, a sensitivityanalysis shows that cash flow ratio, and operating efficiency are particularly sensitive torevenues, investment fluctuation and interest charges (Anne 3-3!. Therefore, the financialsituation will be closely monitored during project implementation.

3.14 Under the project, RADEEF will further develop the skills of the departments in chargeof intemal audit and organization, in line with the recommendations of the Regie restructuringstudy (Anne& 4 and the ongoing study for implementing accounting and management systems.

IV. ECONOMC JUSTlCATION AND RISKS

l?oject benefits

4.01 The project would have major benefits stemming from: (a) reduction in the health hazardsto the local population through better sewerage infrastructure, increased connections andtreatment of wastewaters; (b) improvement of environmental conditions through treatment ofwastewater, separation of heavy metals from industrial wastewaters and rehabilitation of theexisting infrastructure; (c) promotion of local resource mobilization and cost recovery; and(d) improved operational efficiency of RADEEF.

4.02 By the year 2004, year of expected completion of investment works, approximately 1million people will live in the targeted project area. Currently, 480,000 million people areserved by sewerage infrastructure, and this number should reach 880,000 million in 2004 whenall the additional benefits of the project will materialize. The project would benefit thepopulation of Fes through the rehabilitation of existing interceptors and the construction of

- 14 -

wastewater treatment plants and would benefit the poor, in particular, since most seweragesystem extensions would be located in low income neighborhoods. The total additionalpopulation serviced through the proposed project is estimated at 300,000 people to which about200,000 million equivalent inhabitants are to be added, representing the equivalent increase inindustrial pollution. The project would provide a total of 21,000 social sewerage houseconnections, and the level of sewerage service should increase from 65 percent in 1994 to 84percent in 2004 for the project area. It is estimated that the implementation of the proposedinvestments, excluding consulting services and technical assistance, will have a positive impacton local unemployment rates by employing 22,000 person/year of skilled and unskilled locallabor. For the first time, sewvage would be collected in Fes and Marrakech (in this latter cityexternal funds would be provided by EIB), while in Casablanca additional sewage is currentlycaptured and channelled to an ocean outfall of 3.6 Km made operational in January 1995. Thisis expected to greatly improve the sanitary situation of the area and reduce the diffusion ofwaterborne diseases whose incidence in Morocco and in the project areas is still high.

4.03 Impact on health. More than 900,000 cases (3 out of 100 people) of diarrhea and 2000of cholera were registered in 1993. Children between 0 and 11 years old are the most affectedgroup with 405,000 cases of diarrhea, and 33 percent of total cholera cases. The project areaof FRs, is among the provinces where the incidence of waterborne diseases is the highest.According to the analysis carried out by Esrey (1991) on over 144 studies, sanitation facilitieswould decrease diarrhea morbidity by 26 percent, and improved water supply and sanitationwould decrease child mortality by 55 percent. Since it is the first time that wastewater will betreated in FRs and Marrakech and a large number of people will be newly serviced by thesystem, the project is expected to have significant health benefits.

4.04 In order to evaluate the whole set of positive externalities and benefits stemming from theproject, a comparison of land values of sample areas in Morocco, before and after sewerageinfrastructure implementation , has been carried out. The appreciation attributable to theexpected benefits of the provision of sewerage infrastructure has been estimated at 4 billion DHfor Casablanca for 4500 ha of newly equipped areas and 570 million DH for Marrakech for2,850 ha of newly equipped areas. For the city of FRs, data were not available. However,given the scarcity of land, netland appreciation for new development, the value for the newlyequipped areas is expected to be at least higher than the one surveyed in Marrakch where landis abundant. Some of these benefits are partially captured by the participation in projectfinancing of house owners' contributions.

4.05 Water re-use. In the inland cities of Fes and Marrakech, raw sewage is currently usedfor irrigation under extremely bad hygienic conditions. The proposed project would makeavailable wastewater treated according to effluent standards allowing for wastewater to be usedin farming products to be cooked. The treated water flow will dominate the irrigation perimetersby gravity down the slope from the treatment plants (2,000 ha and 200 ha for Marrakcch andFes respectively) - see Annex 4. The proposed project does not include the construction of theirrigation perimeters which is currently undertaken by peasants. For the moment, no waterreuse for agriculture is foreseen in Casablanca where the treatment of sewage and the pumpingof treated water to agricultural areas, would impose an additional cost of around 4DH/m3. Evenif this cost is likely lower than the opportunity cost of water, this investment would not be viablefor RAD since the level of water tariffs for irrigation in agriculture is so low that it restrains anydevelopment of a market for treated wastewater.

- 15 -

4.06 Impod mobilization of local resources and affordabil. The introduction of full costrecovery of the proposed investments and management of the sewerage infrastructure byqualified technical institutions in Fes and Marrakech, will overcome the chronic problem ofinsufficient municipal resources for the provision of sanitation services. The project wasconceived in such a way as to limit the investment costs of this first tranche of investments asmuch as possible and allow for tariffs that will be increased slowly over a seven-year period andreach an average value of around 3.34DH/m3. It was estimated that, in FRs, yearly paymentsfor the consumption of 100 liters per capita per day (ld) in an average family of six peoplewould represent about 2.5% of the expenditure distribution average projected for year 2001, at3 percent yearly increases in real terms during the 1991-2001 period and measured at 1994prices. The yearly payments would represent 4 percent of the average expenditure forconsumption estimated for the cumulative distribution of 44 percent of population. Assumingthat the consumption of low income customers is likely to be lower than 100 lcd, i.e. 60 lcd,the budget share of the urban poor would be 2.6 due to the tariff structure that benefits lowconsumption customers. Table 5 in Annex 4 shows the budget shares for different expendituregroups calculated at 1988 tariffs and 2001 tariffs. These values are within the range ofacceptability by Bank standards.

Least-cost solution

4.07 The project's physical components represent the first phase investments identified in thesewerage feasibility study and master plans of the project cities. The most economic alternative(sewerage systems working by gravity) was selected to meet the demand for improved sanitationservices and the expected quality objectives for the discharged effluents. For sewage treatment,a phase approach has been adopted and different process alternatives have been studied andcompared by analyzing discounted capital and operating costs. In FRs and Marraketch, given thecost of land and its availability, the lagoon anaerobic system has proven to be the mosteconomical. Capability of progressive expansion to meet higher effluent standards in the futurewas also taken into consideration.

Economic rate of return and sensitivity analysis

4.08 Project economic evaluation for rehabilitation, and new investment components compriseseparate assessments for RADEEF and for the Regies considered during appraisal. The averageselling price for the sewerage service which will apply in 1999, year in which part of the projectis expected to start operations, has been considered in order to calculate revenues. The use ofthe expected price charged for delivering the service as a proxy for benefits is extremelyconservative since most of the benefits deriving from the existence of a performing sewerageinfrastructure are not quantified and hardly quantifiable. The costs and benefits streams presentedin Tables 1. 2. 3 Annex 4, include the net additional cost of meeting the sewerage servicedemand up to 2004. The expected ERR is estimated at 11.5 percent for RADEEF. Given thenature of the project and the wide positive externalities that it would produce, the expected ERRcan be considered satisfactory. The ERR of the project is slightly lower.

4.09 The sensitivity analysis indicates that the switching values for tariff levels in 1999 isaround 1.60 DH/m3 at 1995 prices for RADEEF (see Table 4, Annex 4!. This conditionrepresents approximately the project tariff level estimated for year 1999. Therefore, compliancewith the proposed financial projections will be a determinant of the financial viability of the

- 16 -

project. A 20 percent increase in the costs and 20 percent decrease in the benefits will make theproject non-viable. This indicates that the project will have to be implemented on schedule andaccording to the technical specifications agreed to avoid cost overruns. The benefits are in factless manageable since the amount of wastewater collected and treated depends on the level ofwater consumption which is affected mainly by other variables than sewerage tariffs. However,if the projected financial tariff increases are implemented in a timely fashion, the ERR for theproject will substantially improve even if there were a reduction of 20 percent in benefits.

4.10 According to a 1994 poverty assessment, about 18% of those whose incomes are belowthe poverty threshold and 20% with incomes only just above, are concentrated in urban areas.Basic services such as sewerage infrastructure have direct and indirect benefits for the well-beingof the population and its productivity. 50 % of the urban poor are served by a sewerage system,25 % by individual systems and 25 % are unserved. The proposed project will extend sewerageinfrastructure to newly reclaimed areas, medinas, areas where social housing projects have beencarried out during recent years and where a high percentage of poor live. These areas represent35% of the area that will be newly equipped. In these areas, the project would provide for atotal of 21,000 social sewerage house connections. Most of the existing bidonvilles will not,however, be served by sewerage, but sanitary campaigns will be provided to improve the currentsituation.

Risks

4.11 The project would not pose specific technical risks. The risks mostly involve theGovernment's willingness to enforce the stipulations of the RADEEF's "Protocole d'Accord"and in particular i) adaptation of the legal framework to enhance RADEEF's manageral andfinancial autonomy; ii) needed sewerage charge adjustments; iii) settlement of arrears; and iv)reinstatement of RADEEF's autonomy. However, the significant water tariff increases of 1992,1993 and 1994, reinforcement of the Regies autonomy, efforts to reach a solution for the arrearsand positive Government attitude towards privatization, prove the Government's commitmentto the sustainability of water and sewerage operations. Technical assistance and training underthe project would reinforce the Government's and the sewerage operators' commitment to theneeded reforms, by identifying and enforcing the implementation of procedures necessary forsound financial management and genuine autonomy. The appointment of financially autonomoussewerage departments for the implementation, operation and maintenance of sewerage works,would also minimize technical risks.

V. AGREEMENTS AND RECOMMEDIATION

A. Agreements

5.01 During negotiations, agreement was obtained on the following:

(a) the Govern t will:

(i) honor all commitments undertaken in the current "Protocole d'Accord" madebetween the Government and RADEEF, and in the addendum to the "Protocole d'accord"to be made between Government and RADEEF covering the managerial and financialautonomy and the sewerage activity of RADEEF, concerning, in particular: a posteriori

- 17 -

control, procurement, human resources management, implementation of therecommendation of the management and accounting system study, arrears settlement, andannual water tariff and sewerage charge adjustments, (paras. 1.08 and 3.08 to 3.10);

(ii) during project implementation: (a) give the Bank the opportunity to carry out acomprehensive yearly review to verify the implementation by RADEEF of actions andassess performance according to specific indicators stipulated in the "Protocole d'Accord"entered into with RADEEF and its addendum to be entered into with RADEEF, and(b) take the Bank review into account when finally agreeing on indicators (para. 2.14);

(iii) carry out a joint mid-term review of project implementation with the Bank andRADEEF no later than October 31, 1999, to identify and enforce remedial measuresneeded so that al objectives fixed by the "Protocole d'Accord" entered into betweenGovernment and RADEEF and its addendum to be entered into with RADEEF may befully achieved (para. 2.14);

(iv) open a Special Account at the National Treasury to prefinance eligibleexpenditures of RADEEF (para. 2.15); and

(v) confirm the eligibility criteria for a city or town to be included in the Nation-WideSewerage Investment Program, irrespective of the financing source (para. 2.02);

(b) RADEEF will:

(i) honor aU commitments undertaken in the "Protocole d'Accord" entered intobetween the Government and RADEEF and its addendum to be entered into with theGovernment (para. 1.08);

(ii) during project implementation give the Bank the opportunity to carry out acomprehensive yearly review of RADEEF expenditure program, to verify RADEEFimplementation of measures contemplated in the "Protocole d'Accord" and in itsaddendum to be entered into between the Government and RADEEF and, in particular,assess its performance according to the level of monitoring indicators mentioned in para2.14;

(iii) carry out a joint mid-term review of project implementation with the Bank andGovernment no later than October 31, 1999, to identify and enforce remedial measuresneeded so that all objectives fixed by the "Protocole d'Accord" entered and to be entered(addendum covering the sewerage activity) into between the Government and RADEEFmay be fully achieved (para. 2.14);

(iv) reach on average a cash generation ratio no less than 25% on average of theinvestment program (para 2.14);

(v) prepare an annual report on all the indicators no later than September 30, take theBank review into account when agreeing on the indicators, and promptly take allnecessary measures to comply with the agreed values of the above-mentioned indicators

- 18 -

(para. 2.14). This annual report should forecast the cost of operation for the next fiscalyear and, on the basis thereof, recommend tariff and sewerage charge adjustments in linewith the covenanted cash generation, to be submitted to the Government and to beforwarded to the Bank for its review and comments (para 2.14);

(vi) take all necessary actions to ensure that its accounts receivables from seweragecharges be kept under three months of billing (paras. 3.09 and 3.10);

(vii) not incur any additional debt without prior agreement with the Bank, unless itsnet revenues are at least 1.2 times its debt service requirements (para. 3.07);

(viii) cause its accounts (including, arrears settlement, project and special accounts) tobe audited by auditors acceptable to the Bank and that the audited accounts, together withthe auditors' report, be made available to the Bank no later than six months after the endof each fiscal year (para. 3.12); and

(ix) carry out, no later than December 31, 1998 a detailed tariff structure study(para. 10 of Annex 4).

B. Conditions of Board Presentation

5.02 Conditions of Board Presentation will be:

(i) signature of the addendum to the 'Protocole d'Accord" by Government and byRADEEF, stipulating their respective commitments and obligations (para. 1.08);and

xii) reception by the Bank of the Government Sewerage Sub-sector Policy Lettersatisfactory to the Bank.

C. Recommendation

5.03 Subject to the above conditions, the proposed project is suitable for a Bank loan in theamount of US$40.0 million at the standard variable interest rate with 20 years maturity,including five years of grace.

MN1PI, March 1996

- 19 -

ANNEX l-lPage I of 5

KINGDOM OF MOROCCO


Country and Sector Background, Water ResourcesAnd Current Sec(or Organization

Country Background

1. Morocco is situated in tihe northwestern comner of Africa. The Mediterranean Seaforms its boundary to the north, the Atlantic ocean to the east, and the narrow fertile stripof Algeria to the nortlheast. Elsewhere the country is bordered by the Sahara. The country'sfour climatic zones reflect this setting: the coastal areas, the interior plains, the mountains,and the desert. The inlteior plains and the coastal zone enjoy a mediterranean climate withthe interior having greater seasonal and diumnal temperature variations. Summers are hot anddry, whiile spring and fall rains are generally light and irregular with the main precipitationconcentrated in the few winter months. Hence either natural or artificial water storage isrequired to compensate for the seasonal and irregular rainfalls.

2. According to the last 1994 census, 12.7 million persons, or almost 49% of the totalpopulation of 26.1 million, were urbanized with urban growth rates averaging 3.5% overthe preceding decade. Natural growth accounted for about 60% of the increase, immigrationfrom rural areas for the remainder. In spite of the preeminence of Casablanca (3,531,000inhiabitanits) and the capital area, Rabat-Sal6 (1,433,000 inhiabitants), Morocco has a well-balanced network of small and medium-sized cities. About two-thirds of GDP is generatedin urban areas, and urban incomes are at least 30% higher than, and (have been increasingtwice as fast as) those in rural areas. The urban population is expected to reach 16 million,or 54% of the projected national total of 29.6 million by the end of the century.

3. - In spite of a slow down in urban population growth in the last few years, additionalurban growth and rural-to-urban migration can be expected given the country's present stateof economic development. Socioeconomic conditions are expected to give rise to more urbangrowth and rural-to-urban migration averaging 3.4% p.a. thlrough the end of the century,exacerbating deficiencies in the urban infrastructure. Since the Government decision, in1989, to donate land to slum dwellers, most slums are now being replaced by permanentdwellings, thus paving the way for the supply of basic services such as water, sanitation,and power. The result is a substantial improvement in urban development througliout thecountry.

- 20 -

ANNEX 1-1Page 2 of 5

Sector Backgrotind

4. Since the 1980's, the Government has sought to improve the provision of sewerageservices, in particular in urban areas, first through an Engineering Loan in 1977 (IBRDLoan No. S-7-MOR) and, in 1988, througli the Greater Casablanca Sewerage Project (IBRDLoan No. 2826-MOR) that includes priority sewerage works in Casablanca andMohammedia and nine sewerage master plans for Agadir, Casablanca, Fes, Marrakech,Meknes, Nador, Rabat-Sal6, Settat and Tangiers. Simultaneously, other sewerage masterplans have been undertaken for Tetouan through funds provided by USAID and the TetouanMunicipality, for Kenitra through funds provided by the Kenitra Municipality, and for 137ONEP centers, tirough funds provided by the KfW, CFD, ADB3 and ONEP, within the 5tiWater Supply Project. Financing for urgent sewerage and depollution works were providedby KfW and EIB, mainily for ONEP centers.

5. In the 1990's, additional funds have been provided by CFD, GtZ and OECF fortestling innovative sewage treatmenit techinologies. Despite these efforts, the sewerage sub-sector is grossly underdevelopcd: several densely populated urban areas are not providedwith any sewerage systems, existing sewerage systems are under-sized and deteriorated anddomestic and industrial liquid wastes are often discharged near residential areas without anyprior treatment. The environmental conditions resulting from this situation areunsatisfactory: public hcalth is seriously affected, water resources as well as the coastal seawaters are polluted. Responsibility for sewerage services is vested in the Municipalities(Collectivitds Locales) which generally do not possess adequate know-how and financialresources to operate and maintain their sewerage systems and to plan and implement theneeded rehabilitation, reinforcement and extensions. This unsatisfactory situation is furtheraggravated by a shortfall in finaicial resources in tlle 1980's wlhich led to the postponemeintof several investmilcints, with particularly negative impacts on service levels for low-incomiecconsumers.

6. The proposed project would address the sub-sector's most pressing needs arising fromltie inadequacy of tie current institutional set-up and financial resources, inadequatesewerage infrastructure works, physical deterioration and limited service to the poor.

Water Resources

7. Water is scarce in Morocco. The annual rainfall averages 30 billion m3, of which22.5 billion m3 are drained by the rivers and 7.5 billion m3 infiltrate and recharge aquifers.TIhe overall national water balance is relatively well known and with the completion of thewater resources master plans for the major river basins financed under the Second and ThirdWater Supply Projects (Loan 1724-MOR and 2006-MOR), almost all potential waterresources will have been surveyed. The water resource potential has been estimated at 21.0

- 21 -


billion m3, of whiicih 16.0 billion m3, or 52% of the potential, are being exploited.Agricultural use was about 92% with the remaining 8% for urban (5%) and industrial (3%)uses. It is estimated that the regularized volumes could reach 14.0 to 14.6 billion mn3 (ortwo thirds of tie potential) by the year 2000, of which 12.0 billion m3 (90%) would beconsumed by agriculture and 1.15 billion m3 (10%) by potable and industrial users.Although it is estimated that by the year 2000, supply and demand of water will be inbalance in the aggregate, the growth of demand, at about 3 to 4% p.a., is expected toproduce water shortages in tlie medium term.

8. Most of the potable water supplied to populated areas up to 500,000 inhabitants isgroundwater from nearby aquifers. However, due to yield limitations, surface waterresources are increasingly exploited, requiring dams, conveyance over greater distances, andtihe provision of pumping stations, treatment plants, and large transmission pipelines. Thephysical, chemical, and bacteriological quality of drinking water supplied to most ofMorocco's urban areas is acceptable. However, this is not the case in most rural areaswhere groundwater is often contaminated by unsanitary domestic waste disposal.

Sector Organization

9. Study and development of water resources for all users is the responsibility of the"Adminiistration de l'Hydraulique" (AH) within the Ministry of Public Works (MOPW).This administration is also responsible for the operation, maintenance, and control of allmajor dams. Management responsibilities of other water resources are vested witI thleMinistry of Agriculture and Rural Administration (Ministere de l'Agriculture et de laReforme Agraire - MARA), National Water Production Agency (Office Natiolial de l'EauPotable - ONEP), Local communities (Collectivites Locales - CLs) and their public utilityenterprises (Regics) an(d otlier agencics. The executive power of tie coordinating body, thcHigher Water and Climate Council (Conseil Superieur de l'Eau et du Cliniat - CSE) islinited. Allocation of water resources among various consueinrs is at present dcletriliicdby a special commission within tie Prime Minister's OfFice.

10. - Production of potable water and conveyance to the larger agglomerations is ensuredby ONEP under the supervision of the MOPW. The Regies are in charge of watcrdistribution in the 16 largest urban agglomerations. Ten of these Regies are also responsiblefor electricity distribution; three for water, electricity, and sewerage; and one for water andsewerage. The Rdgies are under die administrative tutelage of die Ministry of Interior (MOI)thiroughi its Public Utilities Directorate (Direction des Regies et Services Concedes - DRSC).Since January 13, 1993, DRSC has had the role of the Regies' a posteriori control(inspection). The finanicial tutelage of the Regies is the responsibility of the Directorate ofPublic Utilities and Participations (DEPP: Direction des Etablissements Publics et desParticipations). The R6gies performance, although limited, is gradually improving throughi

- 22 -


restructurinlg, concerning in particular the six Regies participating in the ongoing FiftlhWater Supply Project (Loan no. 3664-MOR). While some Regies still exploit their owI1groundwater resources, die quantities produced are small and are increasingly beingsupplemented by ONEP's water. ONEP is also operating the water supply systems of 200small-and-mediuin-sized agglomerations on behalf of the respective municipalities. In thepast, some ONEP centers developed to such an extent as to justify the creation of newindependent R6gies, while some others have been incorporated into existing ones. Thisprocess is likely to continiuLe albeit to a limited extent. ONEP is a well managed autonomousand sustainable institution.

11. The construction and, to some extent, the maintenance of water supply systems inrural areas has traditionally been MARA's responsibility with the rural communitiesensuring day-to-day operationis. However, with the implementation of the communal reforndatling back to 1976, MOI now plays an active role in planning, implementing, andoperating basic infrastructure in the rural communes such as water supply systems througlits Water and Sanitation Directorate -WSD (Direction de l'Eau et de l'Assainissenient) -DEA within the Local Communities General Directorate (Direction Generale desCollectivit6s Locales-DGCL) - CLs.

WVater Supply

12. Relatively higih per-capita investment costs in rural areas and budgetary constraintshiave tius so far directed most of the investments to the densely populated urban areas wherelimited financial resources can yield maximum benefits. In 1990, 90% of the urbanpopulation had access to piped water with about 76% served by house conntectiolns and 14 %by public stanidpipes. Operation and maintenance of the water supply systemiis is adequateand the quality of water is acceptable. The water service is generally continuous. However,in the rare cases of initermiittenit service, there is the potential risk of contamination fromsewage penetrating tlhrougih leaking water pipes. In rural areas, about 14% of tile totalpopulation has access to safe drinking water: 2% throughi house connectionis, 6% throughpublic standpipes, and 6% throtigh public wells. Countrywide improvements in servicelevels are being achieved throughi the responsible agencies, namely ONEP and the Regiesin urban areas, and MARA and MOI in rural areas. Government policy for urban areas isto make potable water available through house connections to 90% and 98% of thepopulation respectively in 2000 and 2020. The remaining 10% and 2% of the urbanpopulation would be supplied through public standpipes. Government policy for rural areasis to make potable water accessible to 80% of the population by the year 2010: 10% tirouglhhouse connections, 40% through public standpipes, and 30% through public wells. Thispolicy is consistenit with the Moroccan stabilization program and institutional reformsenvisaged for the sector. One of the main objectives of the post-adjustment strategy ispoverty alleviation. Therefore emphasis will be given to increasing infrastructure services

- 23 - ANNEX 1-1Page 5 of 5

to rural areas whlich would increase service levels.

13. The number of households served by house connections in the urban areas increasedby about 4% P.A. During the same period, tde service level for the population with houscconnections increased from 48% to 76%. The introduction, in 1980, of credit facilities forlow-income customers for financing the cost of individual house connections has contributedmore than 20% of the improvement in the service level. A recent assessment of theinvestments needed to meet future water supply demand showed that this would require,depending on the desired service level, between 0.6% and 0.3% of GNP, or between 7%and 3 % of gross fixed investmenits. For the Five Year Plan 1988-92, sector investmentstotalled US$694 million.

Sewerage

14. Sewerage has not developed commensurately with water supply. Although sewagccollection systemns exist in most medium-sized and large cities, they have not been extendedto cope with the rapid growth of the population and industry. In most cases, they areinsufficienlt and poorly maintained. Communities in the hinterland discharge untreatedsewage into rivers, whichi are usually not perennial, whereas communities along the coastdisclharge effluent at the shoreline. This practice seriously pollutes the environment andcreates a major healtlh hazard. So far sewerage has been the responsibility of the CLs, whichface financial constraints and have limited know-how. Consequently, they have been unableto ensure the proper functioninlg of their sewerage systems which are generally in a seriousstate of disrepair. Maintenianlce often entails repairs after breakdowns. Lack of personnelwith adequate technical skills is common and compounds maintenance deficiencies. TheGovemrnment, with the Bank's assistance, has been examining ways to improve themanagement of the sewerage sub-sector. In 1985, as a pilot operation, the Governmcnttransferred the sewerage responsibility in the Greater Casablanca area from thie municipalautlhorities to the water and electricity distribution Regie (RAD). In 1991 and 1994, thisexperience was replicated in Agadir and Fes respectively where the CLs entrusted the waterdistribution R6gie RANMSA and the Water and Electricity Distribution Regie RADEEF withlresponsibility for sewerage. A substantial improvement of sewerage services is expecteddtrough tde proposed project.

- 24 -

ANNEX 1-2Page I of 2

KINGDONI OF MOROCCO

SECOND SEWERAGE AND WASTE WATER REUSE PROIECT

Drinkiti2 Water SUDily and Sewerage Sector Strategv

1. The Bank strategy for the sewerage subsector is developed in a policy paper on waterresources management issued in 1993 and in the MENA strategy for managing water of 1994.At the country level, the Bank strategy for the sewerage subsector is highlighted in a WatcrSector Review issued in December 1994, and in an Environmental Strategy Note issued inMarch 1994. The Government strategy for the drinking water supply and sewerage sector waselaborated in a sector strategy letter under the Fifth Water Supply Project approved by the Boardin November 1993. The proposed project would focus mainly on the urban population which ismost affected by sanitation problems and for which the sector strategy, as defined in the abovementioned letter, is as follows:

(a) For the year 2000: provide adequate water service to 90% of the inhabitantsthrough house connections and to 10% of the inhabitants through publicstandpipes, and adequate sanitation to 90% of the inhabitants through sewerageand individual sanitation systems; and

(b) For the year 2020: provide adequate water service to 98% of the inhabitantsthrough house connections and to 2% of the inhabitants through public standpipes,and adequate sanitation to all inhabitants through sewerage and individualsanitation systems.

The current situation is that water service is provided to 76% of the inhabitants through houseconnections and 14% through public standpipes, and 80% of the inhabitants are provided withsanitation through sewerage and individual sanitation systems.

Government Sector strategy for the rural population is to make:

(c) potable water accessible to 80% of the population by the year 2010: 10% throughhouse connections, 40% through public standpipes and 30% through public wells.Currently, 14% of the rural population has access to potable water: 2% throughhouse connections, 6% through public standpipes and 6% through public wells.

2. In the sewerage subsector, the Bank strategy is to assist the Government in the creationof competent and sustainable institutions capable of: (a) implementing sound operations,maintenance, and cost recovery policies; (b) efficiently managing sewerage works; (c)

- 25 -ANNEX 1-2Page 2 of 2

safeguarding the environment from pollution and health hazards through the application ofappropriate technologies for sewage collection, treatment and disposal; and (d) planning andimplementing adequate expansion programs. The present strategy hinges on the: (a) a pilot effortin which sewerage assets were transferred by the Municipality of Casablanca to RAD, thecountry's largest Regie; (b) development of sewerage master plans for 13 other cities served bywater and electricity distribution Regies; and (c) rehabilitation and expansion of sewerage works,to include the construction of required sewage treatment plants, culminating in the appropriatere-use of wastewater. Currently, RAD, RAMSA and RADEEF are entrusted with tileresponsibility for sewerage services in Casablanca, Agadir and Fes, respectively, through eachof their sewerage departments. Technical assistance (TA) and training are being provided toRAD through Loan 2826-MOR, the sewerage department of which is satisfactorily run andorganized. The sewerage department of RAMSA, although weak, is improving its performancethrough training and the purchase of maintenance equipment. The Caisse Francaise deDeveloppement (CFD) is ready to fund TA and equipment for RAMSA to further develop thecapability of its sewerage department. Prior to shifting sewerage responsibilities from the localcommunities (CLs) to other R6gies, competent and sustainable sewerage departments are to becreated within each R6gie. These departments are supported by adequate TA, training andequipment and provided with adequate financial resources through user charges.

3. The above development program and strategy are consistent with the Government'sobjectives for rationalizing public enterprises, as supported by the Public EnterpriseRationalization Project (PERL 1). They are being implemented through the ongoing NationalWater Supply Rehabilitation Project (Ln. 2825-MOR), the Greater Casablanca Sewerage Project(Ln. 2826-MOR), the Fifth Water Supply Project (Loans 3664-MOR and 3665-MOR) and theproposed Second Scwerage and Water Re-Use Project.

- 26 -

ANNEX 1-3Page I of 3

KINGDOM OF MOROCCO

SECOND SEWERAGE AND WASTE WATER RE-USE PROJECT

Bank's Involvemenit and Lessons Learned in the Water SuDPlYand Sewerage Sector

Bank Involvement

1. The First Water Supply Project (Loan 850-MOR of US$48 million, dated July, 1972),completed in 1980, supported the establishment of ONEP and financed the construction of waterproduction facilities for the coastal zone from Kenitra to Casablanca. This project also helpedthe newly created ONEP strengthen its institutional capacity by financing the construction oftraining facilities and consultant services for management development, in-service training, anda tariff study. The project's main physical objective was to ensure safe and reliable water supplyto the coastal area of Morocco extending from Kenitra to Casablanca, through the expansion ofan existing water treatment plant, and construction of a dam, pumping station, and transmissionfacilities. The Project Performance Audit Report (No. 3721, dated December 16, 1981)concluded that the project had achieved its physical objectives and was instrumental in helpingONEP develop into a competent water production authority.

2. The Second Water Supply Project (Loan 1724-MOR of US$49.0 million, dated June 1979and completed in 1987) continued the strengthening of ONEP's managerial and financialcapacities, contributed to tie financing of the expansion of water production facilities for thecoaslal zone from Kenitra to Casablanca and Greater Agadir, and provided, on a pilot basis, tilemeans for low-income customers to finance the cost of individual house connections through arevolving fund. The Project Performance Audit Report, (No. 8725, June 8, 1990) concludedthat the project had achieved its primary objective and that the project benefits appeared to besustainable.

3. The Third Water Supply Project (Loan 2006-MOR of US$87 million, dated September1981 and completed in 1989), financed the construction of regional water supply systems, watersupply systems in medium-sized towns in the country's hinterland, and a substantial expansionof credit facilities to finance house connections for ONEP's and three Regies' low-incomecustomers. The social connections programs were satisfactorily implemented withi theinstallation of 130,000 house connections since 1980. This was the first time in Morocco, thatthe Bank (a) helped finance improvements to water distribution systems, (b) addressed the issueof water resources planning, development, and management, and (c) became involved in therural sector by helping finance the Errachidia-Erfoud-Rissani Regional Water Supply Project anda study on water supply systems in rural areas. This operation also defined and implementedadequate arrangements to ensure proper operation and maintenance of rural water supply systemsoll a pilot basis. The Project Completion Report for Loan 2006-MOR was issued to the Board

- 27 -


of Directors on the end of June 1993. An audit of the project by OED is currently underway.

4. The National Water Supply Rehabilitation Project, or Fourth Water Supply Project, (Loan2825-MOR of US$60.0 million, dated July 1987), which became effective in April 1988,supports the Government's broad-based effort to rationalize sector development. This ongoingproject provides for a development program that includes the rehabilitation of some ONEPfacilities, the partial rehabilitation of water distribution facilities of 11 Regies, water resourcemaster plans for AH, and updating of water supply master plans of the same Regies. It waslaunched concomitantly with the Public Enterprise Restructuring Loan (PERL I - Loan 2820-MOR) under which the Government and ONEP signed a performance contract specifying theirrespective obligations in terms of tariff levels, operating ratios, Ministry of Finance control overinvestments, and the Government's contribution to ONEP's investment program. Disbursemcntsof Loan 2825-MOR are progressing satisfactorily.

5. The first Bank loan to the sewerage sector was an Engineering Loan (S-7-MOR of August1977), which assisted in the financing of a sewerage study for the Greater Casablanca area. TheProject Completion Report of June 14, 1984 concluded that the project-financed studies had beensuccessfully completed and had assisted the Government in addressing the major aspects of thesewerage sector in general. A follow-on project, the ongoing Greater Casablanca SewerageProject (Loan 2826-MOR of US$60.0 million, dated July 1987), which became effective inOctober 1988, has been assisting the Government in carrying out sewerage master plans of ninemajor cities as well as rehabilitation works in the sewerage system of Casablanca. Most of thesewerage master plans are progressing satisfactorily, and the disbursement rate for the RAD(Casablanca) sewerage rehabilitation works is improving due to the current strengthening of thesewerage department.

6. The Fifth Water Supply Project (Loan 3664-MOR of US$128.0 million and 3665-MORof US$32.0 million, dated December 1993), which became effective in September 1994,stipports the Government policy towards the sustainability of the water, sewerage and electricitydistribution Regies and of ONEP. This ongoing project provides a development programincluding rehabilitation, expansion and reinforcement of the water distribution facilities andreinforcement of operational and managerial capabilities of six Regies (RAD-Casablanca,RADEEF-Fs, RADEM-Meknds, RADEEMA-Marrakech, RAK-Kenitra and RED-Rabat-Sale)and ONEP, including consulting services, technical assistance and training. Disbursements ofloan proceeds are just starting.

7. In addition, seven Bank-financed irrigation and rural development projects include watersupply components providing for potable water at public standpipes in villages within therelevant project areas. Two urban development projects provide for infrastructure, includingwater distribution and sewers in the project areas. The Pilot Project for the CommunalInfrastructure Fund (FEC), financed under Loan 2272-MOR, and the First Municipal FinanceProject (Loan 3616/17-MOR) are geared towards improving the financing of municipalinfrastructure investments, including water and sewerage. These projects also aim to strengthen


FEC's organization and staffing, improve its loan preparation, appraisal of sub-projects, projectpipeline development, programming of operations, and financial planning.

Lessons Leamed

8. The following main lesson learned from previous Bank operations was taken into accountlin the preparation of the proposed project: with the main constraint for access of the poor tosewerage service being the cost of sewerage house connections and the payment procedure, theproposed project would provide for 32,500 social house connections, to be paid for in 60 equalmonthly installments. The proposed project would provide for sensitization and education of thepopulation to use sewerage systems in an appropriate way, and in particular to discontinue thecurrent practice of disposing solid wastes into the sewers.

9. ONEP was the main beneficiary of the First, Second and Third Water Supply Projects.The PCRs of the 1st, 2nd and 3rd Project and the SAR for all projects highlighted the need tostrengthen institutional capacity and operational efficiency, and to maintain full financialsustainability through adequate cost recovery. The two 'contrat-programmes" between ONEPand Govemment and the six "protocoles d'accord" made between the Regies RAD, RADEEF,RADEEM, RADEEMA, RAK and RED and the Government under the Fifth Water SupplyProject, would enable both ONEP and the Regies to achieve financial sustainability. Actually,"protocoles d'accord" or "contrat-programmes" are lease contracts and can evolve towvards"contrat d'affermage" or concessions and thus be an appropriate vehicle towards privatizationof water and sewerage services. The proposed project would apply the above-mentioned soundprinciples to the Regies restructuring and strengthening through increased efficiency andadequate cost recovery, in the framework of addenda to the existing "protocoles d'accord", tocover the sewerage activity.

- 29 -

ROYAUME DU MAROC Rabat, ie . I 'i uIAIg I9s,6MINISTERE DE L'INTERIEUR

CABINETANNEX 1-4

N0. .... /CAB. Page 1 of 4

LE MINISTRE DE L'INTERIEUR

A

MONSIEUR JAMES D. WOLFENSONPRESIDENT DE LA BANQUE INTERNATIONALE

POUR LA RECONSTRUCTION ET LE DEVELOPPEMENT1818 H. STREET N.W.

WASHINGTON DC. 20.433 U.S.A.

OBJET Strategie du Royaume du Maroc en matiere d'assainissementliquide.

Monsieur le President,

Dans le cadre de l'accord de pret relatif au deuxieme projetd'assainissement, j'ai l'honneur de vous confirmer les termes de la lettre n°211/DCL du 17 Decembre 1986 constituant la declaration de politiquegenerale du Royaume du Maroc en matiere d'assainissement liquide etvisant l'amelioration des conditions de vie des populations, la protectionde l'environnement, de la sante publique et des ressources hydrauliquesainsi que le developpement des capacites locales de gestion desequipements urbains.

Les Collectivites Locales ont ete appelees a developper leursservices d'assainissement par le recours a des organismes publics ouprives, autonomes et specialises et par la recherche de nouvellesressources financieres permettant le recouvrement de coats desequipements.

C'est dans ce cadre que s'inscrit le premier projetd'assainissement en cours d'achevement, qui a permis la restructuration, larehabilitation et l'extension des reseaux d'assainissement du GrandCasablanca. Ce projet a egalement permis aux principales agglomerations

-30 - AEX 1-4Page 2 of 4

du Royaume de disposer de plans directeurs d'assainissement definissantles dispositions d'ordre technique, operationnel, institutionnel et financierpermettant d'apporter la meilleure solution possible a moindre coit auxproblemes d'assainissement.

Concernant le deuxieme projet d'assainissement, je tiens a vousconfirmer la poursuite de la strategie du Royaume du Maroc basee sur lestrois principes suivants:

1°) - Au Plan Institutionnel:

La Charte Communale de 1976 reste le document de base de notrepolitique en matiere de decentralisation. Elle offre une souplesse et unevariete de formules en ce qui concerne la gestion autonome des servicesd'assainissement, notamment la regie directe avec budget annexe, la regieautonome existante ou a creer, les societes d'economie mixte et laconcession ou l'affermage a des entitees speialiskes publiques ou privees.

Dans les grandes agglomerations, le transfert de la gestion desservices d'assainissement aux Regies intercommunales chargees de ladistribution d'eau potable, en tant que demembrement des CollectivitesLocales, est preconise dans la mesure ou ces R6gies prennent lesdispositions necessaires pour rationaliser leur gestion et optimiser leursmoyens humains et financiers dans un souci de rentabilite reelle du secteurde l'eau et de I'assainissement.

D'une facon generale, les Collectivites Locales, sont appelees auser des prerogatives et possibilites que leur offre la Charte Communalepour developper l'organisation de leurs services d'assainissement. ll s'agitd'une strategie contractuelle basee sur la responsabilite communale,utilisant des acteurs potentiels publics ou prives. au niveau de leurscapacites specifiques.

En creant en 1991 au niveau national, une Direction speialiske del'Eau et de I'Assainissement au sein de la Direction Generale desCollectivites Locales, le Ministere de l'Interieur a contribue a la promotiondu secteur de l'assainissement et a permis la coordination des actions dansce secteur, notamment les etudes des sch6mas et plans directeurs engagesavec l'aide de la Banque Mondiale et des autres organismes decooperation.

2


Dans ce cadre, ce departement a lance l'etude d'un schemadirecteur national d'assainissemnent liquide dont l'achevement est prevupour le mois de Deembre 1996. Cette etude doit constituer un outil dereference pour un developpement et une organisation colherente et efficacedu secteur de l'assainissement liquide.

En vue de donner une nouvelle dynamique a ce secteur, et defournir un meilleur service d'assistance et de conseil aux CollectivitesLocales dans leurs efforts de developpement et d'innovation des servicesd'assainissement, un projet de loi portant creation d'une Agence Nationaled'Assainissement est en cours d'etude. Cette agence serait chargee dans lesdomaines de l'assainissement liquide des eaux usees, des eaux pluviales etdes dechets solides, de l'evaluation des besoins, de la definition despriorites et leur planification, de l'elaboration des etudes, de l'examen dessch6mas et plans directeurs, de l'elaboration et de la diffusion de lar6glementation techinique, de l'assistance et du conseil sous toutes sesformes aux Collectivites Locales et de la recherche des financements ainsique de toutes mnissions que les Collectivites Locales decident de lui confier.

20) - Au plan finiancier:

Les Regies assurant la gestion des services d'assainissementdoivent faire face aux nouvelles clharges decoulant de cette mission etassurer A terme un autofinancement ad6quat des investissements qu'ellesdevront realiser. A cet effet, elles sont autorisees, dans le cadre de lareglementation en vigueur sur les prix, a recouvrer aupres des usagers desredevances pour services rendus et a appliquer des dispositions tarifairesappropriees au titre de la participation aux depenses de premieretablissemenet.

Selon les premieres estimations issues des etudes des plansdirecteurs d'assainissement, les besoins en investissement dans ce domainesont considerables plus particulierement en matiere de grands travauxd'infrastructure et d'epuration. Ces investissements necessiteront pour lesprochaines annees un plus grand concours des pouvoirs publics.

En vue de limiter les redevances d'assainissement a un niveautarifaire raisonnable tenant compte des capacites contributives desdifferentes couches sociales des usagers, la consistance du deuxieme projetd'assainissement a et limitee en matiere d'epuration, a un premier niveaude traiternent des eaux usees.

3

- 32 - . ANNEX 1-4Page 4 of 4

La strategie nationale en matiere d'assainissement liquide tientcompte au niveau de l'ligibilite des projets des criteres ci-apres:

- disponibilite d'etudes completes de factibilite et de plans directeursd'assainissement;

- disponibiite d'une analyse adequate d'impact sur l'environnement desouvrages d'assainissement proposes;

- transfert des services d'assainissement a des entites autonornes,publiques ou privet;

- disponibilite des rapports d'audit des institutions sollicitees pour g&erles services d'assainissement.

Pour le cas particulier de la vile de Fes le projet d'assainissementretenu a fait l'objet d'une analyse environnementale qui confirme sesavantages substantiels tout en indiquant les mesures correctivespermettant de reduire les impacts negatifs qui en resultent et qui serontnatureUement ndses en application.

Enfin, je souhaiterais attirer votre attention sur l'importance quenous accordons a ce futur accord de pret, et vous assurer que la mise enoeuvre des principes de notre strategie dans le domaine del'assainissement, sera poursuivie.

Elle s'inscrit dans une demarche globale visant la mise en placed'un plan national d'assainissement, associant l'Etat, les CollectivitesLocales, les Etablissements Publics concernms et le secteur prive, et que noussouhaitons concretiser avec le soutien technique et financier de la BanqueMondiale et celui des autres organismes d'aide et de cooperation.

Veuillez agreer, Monsieur le President, I'assurance de ma treshaute consideration./. ., 1 11 uIit.rictur

4

- 33 - ANNEX 1-5Page 1 of 18

KINGDOM OF MOROCCO


Addendum To The "Protocole D'Accord"

Made Bctweeii The Government And RADEEF


PROTOCOLE D'ACCORD PASSE LE 16 DECEMBRE 1993

ENTRE L'ETAT ET LA RADEEF

ADDENDUM N. I

Prdambule

Le present addendum N°1 complete le protocole d'accord signe le 16 decembre 1993 entre l'Etatrepresente par le Ministre d'Etat a l'lnterieur et par le Ministre des Finances et des InvestissementsExterieurs d'une part et la Regie Autonome Intercommunale de la Wilaya de Fes (RADEEF) d'autrepart definissant les obligations et les engagements de l'Etat et de la Regie dans le cadre du 5-emeprojet d'alimentation en eau.

L'addendum N' I definit les obligations et les engagements complementaires des parties en mati&rede performance et d'autonomie de gestion de la Regie.

ARTICLE 1: ETUDE DES MESURES SUSCEPTIBLES D'AMELIORER LEFONCTIONNEMENT DE LA RADEEF

Compte tenu de l'activite nouvelle d'assainissement confiee a la RADEEF, une etude des mesuresnotamment reglementaires susceptibles d'ameliorer le fonctionnement de cette R6gie sera men6e pourlui permettre d'exercer dans les meilleurs conditions d'autonomie financiere et de gestion ses activit6sen matiere de distribution d'eau, d'electricite et d'assainissement. L'Etat et la RADEEF dlaboreront,a l'aide d'un cabinet specialise, si necessaire, une etude qui aboutira a la definition d'un plan d'action.Cette etude sera lanc&e au plus tard le I juin 1997 et sera achevee au plus tard le 31 decembre 1998.

ARTICLE 2: ETUDE DE LA STRUCTURE TARIFAIRE DE LA REDEVANCE"ASSAINISSEMENT"

La RADEEF s'engage a lancer une etude complementaire a l'etude en cours concernant la structuretarifaire et la redevance d'assainissement au plus tard le 30 octobre 1997 et a I'achever au plus tardle 31 decembre 1998.

ARTICLE 3: PROCEDURE DE GESTION COMMERCIALE DES ABONNENIENTS DEL'ADMINISTRATION ET DES COLLECTIVITES LOCALES

La RADEEF s'engage a perfectionner les procedures de gestion commerciale des abonnements del'Administration et des Collectivites Locales, suivant l'Annexe 4. Dans ce cadre la RADEEF et lesCollectivites Locales du Grand Fes elaboreront, au plus tard le 30 novembre de chaque annee, uneprevision realiste des consommations d'eau et d'electricite qui leur permettra de cemer la quantit6 devignettes necessaires au paiement des factures. Cette prevision prendra en compte aussi les ecarts entreconsommations prevues et rdelles de l'exercice precedent et les arrieres, le cas echeant.

ARTICLE 4: REDEVANCE D'ASSAINISSEMENT

Pour permettre a la RADEEF d'atteindre ses objectifs physiques et financiers, la redevance

AL0- 35 - Page 3 of 1

d'assainissement sera basee sur les projections financieres de l'activitd 'assainissement' etabliespar la RADEEF, a mettre A jour A la fin de chaque exercice fiscal a l'initiative de la RADEEF.Elle est decidee et approuvee selon la reglementation en vigueur. A titre indicatif I'Annexe 2mentionne les redevances moyennes prevues sur la periode 1996-2001 qui ressortent desprojections financi6res annexees A cet addendum.

ARTICLE 5: APUREMENT DES ARRIERES

La RADEEF veillera a ce que les Administration et les Collectivites Locales et tout autreorganisme public prennent les dispositions necessaires pour l'apurement de leurs arrieres certifidsrespectifs afferents aux consommations d'eau et d'electricite (voir Annexe 3). conformement I1'echeancier quadriennal 1996-1999 (25% chaque annee) pour les Collectivites Locales, et aI'dch6ancier quadriennal 1997-2000 pour les Administrations. A cet effet et en cas de besoin,la RADEEF fera appel a l'aide de 1'Etat.

ARTICLE 6: SUIVI ET EVALUATION DE L'ADDENDUM

Le contr6le d'accompagnement de la gestion et le suivi du protocole d'accord seront exerces parle Controleur Financier de la RADEEF.

ARTICLE 7: MODALITE D'EXECUTION ET DE REVISION DE L'ADDENDUM

Le present Addendum, dont les annexes constituent une partie intdgrante, prend effet a compterde sa signature.

A la fin de chaque ann6e, il pourra etre procede d'un commun accord entre les parties a larevision de cet Addendum.

LE MINISTRE D'ET T L'INTERIEUR LEMI STREDESFINANCESET\ U ne'DES INVESTISSEMENTS

Le tit,-Isilre ~~RIEURS

wJ~~~~~~~~~L t - :;. ctnz

Sigz16 :j Mo.c.n.d i^BBAJ

LE DIRECTEUR DE LA RADEEF

LsDlre ct0.E1 9LF

Ad 6-d :')

- 36 - ANNEX 1-5Page4 of 18

Annexe 1 Assainissement de Fes - RADEEFProgramme d'investissement

Annexe 2 Projections financieres de l'activite "assainissement' de la RADEEF.

Annexe 3 Plan d'apurement des arrieres de l'Administration et des Collectivites Locales

Annexe 4 Procedure de gestion commerciale des abonnements de I'Administration et desCollectivites Locales.

ANNEX 1-5- 37 - Page 5of 18

Annexe I

ROYAUME DU MAROC

DEUXIEME PROJET D'ASSAINISSEMENT

ET REUTILISATION DE L'EAU

RADEEF

PROGRAMME D'INVESTISSEMENT

A.TRAVAUX

I. INTERCEPTEURWature untit& Nahtant I.T.

Cvolr: ip"de) mliti ens D*N)

- intercepteur gqneral + liaisons NCP 7880 ml 28,0- amenagement DO dans

l'oued Boukhareb OPL 1 u 0,7- remise en 6tat des ovoides RRM 1600 ml 0,1- liaison ovoides-ONE Zenijfour NCP 1 u 1,4- relevage ONE aval vers canald'amen6e aux lagunes EEM 1 u 6,0

- canal d'amenee aux lagunes NCP 2210 ml 6,9- franchissement SEBOU NCP 600 ml 8,1

Sous-total 51,2

II. BASSIN D'APPORT No. 1 FERME EXPERIMENTALE

- collecteur ferme experimentale NCP 2400 ml 2,0- franchissement oued Fes amont NCP 1 u 0,1- thalwegs a amenager OPL 2300 ml 0,2- dalot eaux pluviales OPL 350 ml 1,8- amenagement nouveaux quartiers ANQ 301 ha 22,6

Sous-total 26,7III. BASSIN D'APPORT No. 2 OUARTIERS NORD-FES JDID

- r6habilitation collecteurMy. Abdallah RVN 1 u 1,6

- soulagement collecteur My.Abdallah par cr6ation OPL 1 u 0,6

- amenagement nouveaux quartiers ANQ 47 ha 6,8- nouveaux collecteurssecondaires Fes Jdid NCH 500 ml 1,2

- am6lioration evacuation dupluvial Palais Royal OPL 300 u --

- collecteurs concernes parle projet AEP Lot 2 RRM 6750 ml 13,1

- r6habilitation des r6seauxde Fes Jdid RRM 1300 ml 1,7

Sous-total 25,0


- 38 -

IV. BASSIN D'APPORT No. 3 BAB SIFFER- reamenagement des abords du

collecteur Bab Siffer RVN 165 ml 1,4- amenagement nouveaux quartiers ANQ 2 ha 0,3

Sous-total 1,7

V. BASSIN D'APPORT No. 4 MEDINA

- amennagement des ouedsegouts du BV Zihoun ROE 2810 ml 13,9

- renforcement des collecteursdes bassins exterieurs NCP 1170 ml 2,6

- r6habilitation des r6seuxdu BV Zihoun RRM 4090 ml 6,6

- nouveaux collecteurs dansle BV Zihoun NCM 590 ml 1,1

- amenagement oued Fejjaline ROP 630 ml 7,3- amenagement et couverture

de l'oued Zihoun ROE 350 ml 4,4- amenagement oueds propres

du Boukhareb ROP 585 ml 3,6- nouveaux collecteurs secondairesRG Boukhareb NCM 2220 ml 4,8

- rehabilitation reseaux RG Boukhareb RRM 2560 ml 4,4- rehabilitation reseaux RD Boukhareb RRM 3850 ml 6,1- amenagement des ouedsegouts RD Boukhareb ROE 520 ml 2,6

- nouveaux collecteurs secondairesRD Boukhareb NCM 400 ml 1,2

- collecteur Jnan Boutaa NCP 410 ml 0,8- collecteurs concernees par

le projet AEP Lot 3 RRM 4110 ml 7,1- collecteurs concern6es par

le projet AEP Lot 4 a RRM 2390 ml 4,9- amenagement nouveaux quartiers ANQ 2 ha 0,3

Sous-total 71,7

VI. BASSIN D'APPORT No. 5 SARHIJ GNAOUA - JNANATES

- remplacement du collecteur Bab Khokha NCP 650 ml 1,8- prolongement collecteur Guerrouaoua NCP 319 ml 0,3- amenagement nouveaux quartiers ANQ 71 ha 7,7- collecteurs concernees par

le projet AEP Lot 4 b RRM 1110 ml 1,6

Sous-total 11,4

VII. BASSIN D'APPORT No. 6 BEN SOUDA ET OUEST

- collecteur Massira - Dokkarat NCP 8318 m 13,1- bassin de retenue carriere

Massira et foss6 OPL 5,5 ha 0,6- reprise fosse pluvial Ain Sned OPL 2000 ml 0,2- fosse pluvial voie ferree OPL 900 ml 0,1

ANNEX 1-SPage 7 of 18

- 39 -

- bassin de retenue Merja OPL 1,4 ha 0,9- recalibrage oued Ain Smen aval OPL 4400 ml 2,1- am6nagement nouveaux quartiers ANQ 274 ha 12,1

Sous-total 29,1

VIII. BASSIN D'APPORT No. 7 OUED HIMMER

- collecteurs Himmer I et II NCP 2793 ml 2,9- DO sur collecteur Wifak OPL 1 u 0,2- bassin de retenue route Ain Chkef OPL 1,5 ha 0,9- bassin de retenue Rocade OPL 1,0 ha 1,0- bassin de retenue Dokharat OPL 0,7 ha 1,3- recalibrage de l'oued Himmer OPL 5200 ml 2,3- amenagement des fosses amont OPL 3800 ml 0,2- amenagement nouveaux quartiers ANQ 282 ha 6,9

Sous-total 15,7

BASSIN D'APPORT No. 8 COLLECTEURS OUEST

- r6habilitation collecteur ouest RVN 300 ml 0,5- soulagement du collecteur ouest OPL l u 0,4- amenagement nouveaux quartiers ANQ 62 ha 8,8

Sous-total 9,7

BASSIN D'APPORT No. 9 COLLECTEUR HIPPODROME

- r6habilitation collecteur Hippodrome RVN 200 ml 0,1- reprise d'ossature

collecteur Hippodrome NCP 550 ml 1,2- amenagement nouveaux quartiers ANQ 42 ha 6,1

Sous-total 7,4

BASSIN D'APPORT No. 10 COLLECTEUR SUD

- rehabilitation collecteur Sud RVN 1860 ml 4,1--- reprise de deux DO OPL 2 u 0,1

- am6nagement nouveaux quartiers ANQ 43 ha 3,7

Sous-total 7,9

BASSIN D'APPORT No. 11 OUED MAHRAZ

- collecteur Hay Benabdellah /route de Sefrou NCP 900 ml 0,6

- prolongement collecteur Sidi Brahim NCP 730 ml 1,9- r6habilitation collecteur Villas RVN 300 ml 0,2- rehabilitation collecteur Sidi Brahim RVN 150 ml 0,2- resorption du point noir

de route de Sefrou RVN 1 u 0,7- reprise de deux DO OPL 2 u 0,1- recalibrage oued Mahraz OPL 2900 ml 3,8- reprise de la digue Dar Mahraz OPL 1 u 2,0


- 40 -

- fosses pluviaux OPL 4500 ml 0,2- amenagement nouveaux quartiers ANQ 199 ha 9,1

Sous-total 18,8

BASSIN D'APPORT No. 12 OUED BOUFEKRANE

- prolongement du coll. Boufekranesur ovoide RD NCP 387 ml 0,4

- collecteur Hay Benabdellah /Oued Boufekrane NCP 2100 ml 1,5

- amelioration du systgmeAouinat El Hajjaj RVN 1 u 0,1

- fosses pluviaux OPL 2300 ml 0,1- amenagement nouveaux quartiers ANQ 87 ha 3,9

Sous-total 6,0

BASSIN D'APPORT No. 13 AIN SMEN AMONT

- collecteur Ain Smen NCP 900 ml 0,6- r6calibrage oued Ain Smen OPL 3600 ml 0,9- foss6 pluvial OPL 1400 ml 0,1- am6nagement nouveaux quartiers ANQ 157 ha 10,8

Sous-total 12,4

BASSIN D'APPORT No. 14 OUED AIN CHKEF

- collecteur Ain Chkef NCP 2280 ml 2,3- bassin de retenue voie ferree OPL 1,4 ha 1,0- recalibrage oued Ain Chkef OPL 3200 ml 1,1- foss6s pluviaux OPL 1700 ml 0,1- am6nagement nouveaux quartiers ANQ 218 ha 16,7

Sous-total 21,2

BASSIN D'APPORT No. 15 OUED MIYITT

- collecteurs Miyitt amont NCP 3720 ml 2,9- r6amenagement oued Miyitt canalis6 RVN 1900 ml 0,5- bassin de retenue OPL 0,5 ha 0,7- r6am6nagement oued Miyitt amont OPL 2300 ml 0,5- am6nagement nouveaux quartiers ANQ 113 ha 7,6

Sous-total 12,2ENSEMBLE DE LA VILLE

- resorption des points noirsde premiere urgence DIV forfait 3,0

- lib6ration d'emprisesle long des oueds FON 5 ha 1,2

- r6habilitation des reseauxsecondaires en VN RVN 153 km 56,9

ANNEX l-SPage 9 of 18

- 41 -

- curage des r6seauxsecondaires en VN RVN 160 km 11,9

Sous-total 73,0PROTECTION CONTRE LES CRUES

- amglioration de l'oued Boukhareb OPL forfait 1,5

Sous-total 1,5

UNITES DE DEPOLLUTION INDUSTRIELLE

- unite de traitementdes margines 2-eme tranche OEP 1 u 8,5

- unite de traitement des effluentscharges en metaux lourds OEP 1 u 27,5

Sous-total 36,0

EPURATION

- r6habilitation pr6traitementstation ONE OEP 1 u 4,5

- premiere serie de lagunes OEP 20 ha 58,3- r6seau hydraulique tranche 1 OEP forfait 14,0- gquipement et amenagements tranche 1 OEP forfait 8,7

Sous-total 85,5

Sous-total A (Travaux) 524,1

B. 21.000 branchements sociaux assainissement 12,6

C. Equipement de laboratoire pour analyse effluent 1,0

D. Moyens d'exploitation 20,0

E. D.A.O et surveillance travaux 18,0

--F. Assistance technique-Formation 4,8

TOTAL 580,5millions DH HT

ANNEX 1-SPage 10 of 18

LEGENDE

RVN r6habilitation en ville nouvelle.RRM rehabilitation des reseaux en Medina.ROE rehabilitation oueds - egouts.ROP rehabilitation oueds propres: designe les travaux de reprise

specifiques aux oueds de la Medina qui devront etre totalementassainis.

NCP nouveaux collecteurs primaires et structurants.NCM nouveaux collecteurs en Medina.ANQ amenagement de nouveaux quartiers: designe a l'ha le coOt de

reseaux unitaires ou separatifs necessaires pour equiper lesnouveaux quartiers.

OPL : ouvrages de transit ou stockage de pluvial a l'amont, comme enville.

OEP ouvrages d'6puration.EEM 6quipement 6lectromecaniques.DIV divers.

Le devis estimatif comprenant divers, imprdvus, hausse desprix, taxes, droits de douane et interets pendant laconstruction figure au tableau de la page suivante

ROYALIE DU KAROC Mars 1996

DEUXIEWE PROJET b'ASSAIUISSEMEMT ET RE-UTILISATION DE LEAU

ASSAINISSENENT 1-ERE PHASE DE FES (RADEEF)

DEVIS ESTIMATIF

PRIX UNITAIRES JAVVIER 1996

DH (MILLIONS) US$ (MILLIONS)

Total Momaie Devises Total nomaie DevisesLocale Locale

- Coliecteurs-g6nie civil 415.2 166.1 249.1 46.2 18.5 27.7- Stations d'epuration 121.5 60.7 60.8 13.5 6.7 6.8 1- Equipement 21.0 --- 21.0 2.3 --- 2.3- Prestations de service 18.0 2.7 15.3 2.0 0.3 1.7 w- A.T. ex formation 4.8 0.7 4.1 0.5 0.1 0.4

A. Cocit de Base 580.5 230.2 350.3 64.5 25.6 38.9

B. Di_ ent i,s* 58.1 23.0 35.1 6.5 2.6 3.9

C. Sous-Totat A+B 638.6 253.2 3a5.4 71.0 2B.2 42.8

0. Hausse des prix 95.8 38.0 57.8 10.6 4.2 6.4

E. CoCut total (hors taxeset droits de oouane) 734.4 291.2 U 3.2 81.6 3Z.4 49.2

F. Taxes et droits de douane 117.5 117.5 --- 13.1 13.1 ---

G. Cort total (y comoris taxeset droits de douane) 851.9 408.7 U 3.2 94.7 45.5 49.2

H. Interets pendantconstruction (IPC) 21.1 --- 21.1 2.3 ... 2.3

I. CoOt total (y coemristaxes, droits dedouane et IPC) 873.0 408.7 464.3 97.0 45.5 51.5 Tao= de change: IS US = 9 DH

(0

ANNEX 1-5-44 - Page 12 of 18

Annexe 2

RADEEF - ASSAINISSEMENT

PROJECTIONS FINANCIERES

AmNSYN 2Page 1

ROYAUKE DU MAROCDEUXIMbE PRDSET D' ASSAINISSZMSNT ET REUTTLISATION DE L'EAU

FES - RADESP

F=S^S*UmanSUUflfl"s fl"" *--n ====.... Gee============ ,,,,=a n"S==e=r=="Z3 .................

Coaptes de Gention 1995 1996 1997 1996 1999 2000 2001 2002 2003

mu. msn..umn..am--- wrflsssin insflf flmnow=. ===. flu n.m....s:m...n infl=*flf unu=l*^ =S*f-lMSSSSS

Total Produitz 49.19 51.28 65.77 83.22 104.74 117.89 143.77 175.54 195.09Depenses d'exploitation 139.44 21-96 26.82 33.81 41.99 50.74 58.94 68.19 70.39

Dotations aux aaorts/provision 21.36 24-06 31.04 38.21 47.86 54.06 57.55 60.21 66.21

Resultat net dlexploit. 9.39 5.26 7.90 11.20 14.89 13.09 27.37 47.14 57.98

Charges financiero 0.77 0.99 3.22 9.61 16.97 30.61 36.80 41.95 41.17

Profits/perteo hors exploit. -0.75 -1.48 -2.28 -3.18 -4.17 -5.26 -6.46 -7.77 -9.20

Resultat net avant inmots S.37 5.76 6.97 4.77 2.09 -12.26 -2.97 12.96 26.00 9

Reoultat net apres impots 5.36 3.69 4.46 3.05 1.34 -15.20 -6.56 8.29 16.64

ratio d'explaitation kamortis 39.53t 42.82t 40.78f' 40.62t 40.091 43.04t 40.93% 38.851 36.34tratio d'exploitation apres am 82.95t 89.74t 87.98t 86.541 85.78t 88.901 80.961 73 151 70.281

_ P4

AMIEXE 2Page 2

ROYAUSE DU MAROCDEUXIEME PROJBT D'ASSAINISSEMENT ST RUTLISATION DE L' AU

PES - RADEEF

e==sen=sS=a---= C_wan e==-flin *UOw== atm==.c Min2=f--= ===M2== e==fl^e= W2=_fn flWW=f==

2. Bilan 1995 1996 1997 199B 1999 2000 2001 2002

Immobilisations n.ttea 275.42 338.23 438.57 608.38 767.60 904.43 951 49 923.34ccmtea clients 44.27 43.05 30.57 23.73 27.51 30.49 37.18 45.40Autres caznptes realis/dispo 4.85 17.64 37.29 34.26 21.76 12.22 1.4.11 15.55

Total Actif 324.54 398.92 S06.43 666.36 816.87 947.14 1002.78 984.29=-:2==:= *.= fls* - c= = f== r== f n=a= f mu:*3n2-if=f

Capitaux Propres 296.92 317.94 340.60 363.59 386.16 393.76 411.45 445.57Dettes a Long Tezme 14.90 60.76 126.34 242.16 365.04 485.00 511.92 486.41Fournimseurs 1.60 11.86 29.84 47.23 50.15 44.52 29.17 12.16Autres Dettes a C.T 11.12 8.36 10.64 13.37 15.51 23.86 50.24 40-14

- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - -

Totaj Psasif 324.S4 398.92 506.43 666.36 816.87 947.14 1002.7a 384.29fl=S = fi* = - == fl=n= * =2=s 2 == 22 Sfi== - l2fS f flU==s = W=e

ratio de liquidite 3.86 3.00 1.72 0.96 0.75 0.62 0.65 1.17ratio d'endettement 4.78% 16.04% 27.061 39.98% 48.591 55.191 55.44V 52.19%

o;_

00t

ANNSX 2Page 3

ROYAOMS DU MARDCDEUXIEM PROJET D4 ASSAINIBSBMNT ET RmUTIISA7TI10 DE LRAIU

FES - RADEEF

=inu==== =sfft.flvl.f *sS==^==nS flfls" =e=ass= ==n"c=z S a== *ufl===m um=l=g" ==_e-=

3. IRessources & EmplTois 1995 1996 1997 1998 L999 2000 2001 2002

Trisorerie brute 26.01 25.71 34.46 45.20 58.86 60.66 77.02 97.42Moins:eervice de la dette 1.74 4.60 9.17 17.13 23.99 34.28 75.63 80.78Variation du besoins de P.R. 39.86 -2.20 -35.20 -21.60 -8.73 8.30 31.76 22.02Contributions des tiers 13.56 18.83 20.47 23.13 25.40 28.07 30.71 33.60

Trisorerie nette -2.02 42.13 80.97 72.79 69.01 46.15 0.33 28.21

Emprunts 15.87 46.83 66.56 116.79 123.85 120.93 65.76 13.32 1_- - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - -- - - - - - - - - - - - - -_-- - - - - - --

Tota.l ressources dispon. 13.85 88.96 147.53 189.57 192.86 167.08 66.09 41.54

Investiseementa 17.31 75.47 119.42 L90.35 188.98 174.14 96.50 26.79Autres emplois 17.18 19.85 33.12 32.53 32.38 13.88 0.00

Variation de tresorerie -3.46 -3.69 8.26 -33.90 -28.66 -39.44 -44.29 14.75

ratio de service de la dette -------- c------- <------- 1.65 <--------<-------- <--------autofinancement -------- -------- ------- 33.27 c-------- c-------- <--------

LAz

0 N

8MM-3- 2Page 4

ROYYAUMH DU MAROCDE-XSEME PROJST D'ASSAINISSSEhEbT ET RBUTILISATION DE L'ZEAU

PES - RADREF

-=-=S= S=-=S--=C=-e=Sfl =C-===S ^=ec= aai==cu e==e=== ==s==fl as_=nD =in.==c= D n =.s

Indicateurs Financiers 1995 1996 1997 1998 1999 2000 2001 2002- - ==sn ne s==flif ScanS=" ~f= _aW zel== ==e === _- *s =DS== e = ne=S c"ane=XS===-= = =afl

- Rendement du reseau ( 671 69* 72% 76t 78t 79t 75% 75t

- Ratio d'Exploitation 4 amor 40% 43% 41k 41% 40% 43% 41t 39t

- Ratio d'exploitation (r) 83* 90% 8Bt* 87 96% 89t s1t 73%

. Anir6s (en nbre de jours)

. Particuliers 250.00 200.00 120-00 90.00 90.00 90.00 90.00 90.00

. Admistrationu 900.00 500.00 300.00 120.00 90.00 90.00 90.00 90.00

- Ratio du service de la dette<-------------------------------- 1.65 ----------------------- >- Ratio d'endettement (t) 5t 16% 27t 401 49% S5t 55 52t

00

- Autofinrncement moyen (C) <--------------------------------- 331 --------- 2.58 3.09

- Redevance uoyenne DH/m3 1.00 1.00 1.25 1.56 1.95 2.15

Iir

(ooor - L66 U! -T t m s:on9rXrUTqV( -

z gi x Onb-P %9Z-(T666 - 961) t t :S;T--l STATi.TTOD -

zNumn,v a iivx

I J~~~~ s SS&9X A191&I aI 1sZa:, ss4 ZIZIL S 3 LA3S IZ as ILgaaaas IL I zzaa ast4 sIA Ia IA AZ s Lx s sl Sa sL

tCIi

i i i i i ~ ~ ~~~ ~~ ~~ ~ ~~~ ~~ ~ ~ ~~i i i i i i i iliw ui Df i i

i i i i i i i I i i ii I i i -i

i I -i i -i i~~~~~~~~~~~~~~r i i iii

Tygii~~ MI i ii i ;r,o n r; i ;-1MU

i~ ~ ~ ~ ~ ~ ~~~~ 3 iL 3 i5 I ,iiI I i iI

1 I j ; i i i i i i i

i I i i ¶EL~~Ci i i i -- -- ; j j

i I i nlEjO :"S:jls T i i S - UiE i - lslii

34 u ; ;r L.;wT,pi,i

i E E E Y !

- 50 - ANNEX 1-5Page 18 of 18

Annexe 4

PROCEDURE DE GESTION COMMERCIALE PAR LA RADEEF

ABONNEMENTS DES COLLECTIVITES LOCALES (C.L)

ET DES ADMINISTRATIONS

La Regie prend acte de l'opportunit6 de la procedure tellequ'elle est definie ci-dessous:

1. Perfectionnement d'une procedure de gestion commerciale desabonnements des Collectivites Locales et des Administrations qui doitprendre en compte la creation de l'abonnement, la facturation desconsommations et des travaux, le recouvrement et, le cas echeant, lesr6siliations et les transferts d'abonnement. La procedure doit aussiporter sur le processus de budgetisation des previsions desconsommations et des travaux qui devraient gtre definies sur la basedes abonnements pris en charge par les C.L. et les Administrations,des consommations et les travaux realis6s anterieurement et deshypothAses de consommations A venir.

2. Justification des montants comptabilis6s par la RADEEF etcontestes par les C.L. et les Administrations et recours en cas debesoin, A l'arbitrage de l'Etat. L'analyse doit se faire paranciennete de creance et doit d6finir les mesures A prendre Al'chelle des C.L./Administrations et Regies pour assainir lasituation. Ces mesures peuvent inclure entre autre: 6cheancier(maximum sur quatre annees 1996-1999), budgetisation complementaireet annulation de cr6ances.

3. La decentralisation du traitement informatique et desprocedures de releve, facturation, recouvrement et r6siliation, ainsique le suivi des travaux abonnements et leur prise en charge dans lefichier facturation et le suivi des impayes devraient permettre der6duire les d6lais de facturation, relance et recouvrement a desvaleurs normales.

4. S'assurer que la programmation des paiements des montantsechus, des conventions signes avec les C.L. ainsi que des impay6s surles consommations de 1992 et 1993 des C.L. et des ecarts entre lesmontants factures et les montants des vignettes emises pour lepaiement des consommations des Administrations, conformement A lacirculaire du Premier Ministre NO 69 du 13 novembre 1992.

- 51 -KINGDOMI OF MOROCCO


The wotld bduIkIIIEmAIloNAL SANk toR REOCMSIPUCI1ON AMO Ov*L4/II tSId 1 N.tI. t2021 ?TJ-1234INIlERIAilo"Al otvftopv rkI AssociAtioN Udsiiioton. b.t.20431 trnble Aclireqs i 18ArNAD

U. l A. C.bt Addregs ItDEvAS

ANNEX 1-6

Page 1 of 2

tlote de ln nissiotn 1int s E id ptivotlgijotti do I disEtributlionde leau potab1o eL do tigddAlhiontisiht dOs ville.

A. siltuation actusele

I. arandes villes

Dlans les gratides villes, la tietVice de dldttibUtioft dleau esLasstir6 par seize orgaii1smeos public mUhicIjpUk 1 les n6gles4 onzedentire elles assureltL la oetvice da Ia dIdLtrlbtiUloi deIlelectricith et trols asautettia 19 1 I I z"alilBfmeht. 1i& oilIl'assaiflissement ost dosUti lidl- ieU mUhicipailteIu (dd,is treizevt i les) , celles-ci sotit ell traln dia caoldAtht I 1poosibilltA ded6l6quer la responsabtll6 de 1 {""anIuoomot dux 11glos.

it. villes do dille ntoye"td ot l Iioon Villou

latis environ 200 villes de potAtI tallte et de tatile inoyetiiie, leservice de lleaU egt aglU.e pt3 t IOfitoP et le serviced'assaliiissemeriL esE assUre pdr Its muticipaIIL6g.

Dans les adLres vilies, lea netvices de dEiA-tibutlon d'eau et1I assainissemiiL sotit assUrts pdkt Ian mUtiIcItpdIItds.

B. Recomnmafdatlonti dlordrto cig4ttdi

Utne privaUisatLotl alnie et ttthspdtahtb des services dedisributloti dleatu et d'asoeitil ifiseht devtoit Pe fIkAte sur la basedes principes sulvatiLsi

- 11ie participatHon stibstaitilolle dii uecttit ptive 4atocain d-alws lecadre d'uii parLenat-la dyve dod 9acletd§ 6Ltahg6rea teputeest

- Adjudication de cotiLrats do cohcoeslol datftetmage oti nutrestypes de contraLs prlvds oulte h deg appels d'offres1ntermintlonaux. Ces appeIs d1otlies ofat-iOht lances auprbs desocletes pt-d-quallfties srLIvahL Uihe VItocAdUtt fotmellt de prd-qualification. Lea documtiets diflhoI3u3 d1offtet nerdle"L prepardspar des consultanLt inde ehddtits pddondaht Utie bolide ekp6riencedans le doMalte de lt diaetibuti,tt dg il'oU et de liassalniosemetiLainsi qijlen matibte contLractutilel

- la maolns-disance dd fti el do IoaU et de Ia tedevanice"assalillssement" devtalt etro Il pkdm6Lt-e-cle pout- l'adjudicatloildu contrat, parmrl les ofEteg etbiles dhans It pltil tespect desregles do dossier d'appel d'otftona

La participaLton de ta hanqUet UA HddlOe daho le tinglicemelit d'unieop6ratlon de privailsailo0t pelUt do tltBo gdltUoihE 61 le coiitraLest adjutq a la sUlte dlutie comptilLIon Ihbatiatiobatet

-52 - ANNEX;1-6

Page 2 of 2

La !3arque Mohdlale peUt aidet. ie AIUtEi14t Matocalhes a pteparerles documehts d'appel d'ofEteg, A 6VdiUet ibs ofttttg lnlh qu'enmaEtlere cotitractUell.

St I'Adtiinlstratlon decide; poUt deg thiohgts qUi Iul sotih ptopres,d'at~ttbutt UH cohttat do PVat1VAU§AOH pdt eltht§hEd ditectt avectine socl6te pt-lvee, is hneoCidiotld deVtd1Oht dQtt lieu sur labase de tetmes de t6t6tetic d6Ldl4ied A ptePitet pnt UH cotisulatit1nd6pendaht. It est tocomttdhd6 tlUe iAdntiH1tt6Uibth solt 8sgisitepetindait 1e hecocilHoh8s pt- Uh bc"t1UlittiiL dydht Utle largeexperitence dciiis le domEltlhe de ia qtqtIbh de ia ditt-Ibutohn del'eatu poEmble et de i'hsih1 emeIt nlhl tUIen tnatii:recotitractUelle.

Lers cl;uses coliLlractuelles sotit dlUhe i1pdttahCe cohttid6table pottrlerurs effeLs a mioyen et a lothg t£ttne, ptUique la dut6e mintilma.rd'lili coiitEt-n diaffetmage varie etti:tt iU tat 1i dtg et celle d'unieconicession, de 20 a1 25 alis.

uJtn coliLtraE htlocl6 peUL aussl nboUEit i Uiti glUtion 61quitable,poijrvu que toUs les aspects -oheit oightmUh1tht to 1.qd1t6s datis latratisparence la plus cotmplete.

c. juieiIsg tince dobVent gLtd OkIVAU86691

La privalsatott des getviceg dt digtkibUtion d I eau etd'assalttssemetiL est Uhie soliUbhti 1et§le tititi tioUletneht: parcnqulelle petmet d'optimicet ia qUdilte dp§ iFvibee, mdie sUrtoutilrarce qultlle permnet de- moblillmo dog folidd 0JAVA§ poUt fth8hcer timsocLeur oU 8cLUellemhL, lo oh d'otigilieessentiiellemetntl 6LniqUe.

L,es effeLs de la ptivaLiatlotl sttleht ltpottahtgs subttut autilveau des RMles oU de cetta:i: "dT hCO9qUtl botit btt)itttUite5 alixproblemes tels qUe! igesLIoti lhsit bfdil"dtiep tititg 1hndd&quats,manque de fotids pot- gietdte ae tehitftctta ied tUvteg dleau etd'assalnlissemeit, eLc.

D. concluslonl

Pour conclUte, In privatsatluoh dog tetVicet dI aU potable ietd'assalnllssomeht aU Mlatoc ddit A-ti- dtjtiVemehL poUtsUilVie. Ellenecessite Uhe prepatatlon tolght tUdt l1 ttibUtiot de tohttats ades compagtiles prIvees seta basee IUt UHt1 detltiltloh citite desdevolrs e-t des tespongdbi1le Lit 80:69 btAip6titlo ttitte dessoumissiotihatteg qU811tfies qLii opPe Ht de ptilf6ttatce, uneRpatticipatioti substatitIelle di B§dtOU k IijVe Hitbcdli. Cettemuuli:re de procedet, qtiolquei ioHgli. mati hi wwlt qLl pthtmettra desclectlonner des soc6L6es qUi ptIlttquhht ehvets log Uragers ullprix juste.

VdIL & ttAbdI Id io bAcembte g994

- 53 -

ANNEX 2-1

KINGDOM OF MOROCCO


Table 1: Forecast or Pogulation. Water Consumptionand Water Demand

City Considered during appraisal Casablanica Fes Marrakech

UTILITY RAD RADEEF RADEENIA

Year 1995 2000 1 2000 1995 2000

- Population (thousands) 3,107 3,895 787 922 672 802.4

- Average consumption domestic (lcd) 70 70 87 87 78 78

- Industry and commerce (Icd) 18 20 8 8 11.5 12

- Goverunent institutions and local administrations (lcd) 20 20 54 53 22.5 22

- Total average consumption (lcd) 108 110 149 148 114 114

- Average system efficiency 0.70 0.75 0.67 0.75 0.65 0.72

- Total demand on production (thousand m3/d) 486 501 187 195 121 124

- Total average consumption (thousand m'ld) 340 376 126 146 78 89

- 54 -

ANNEX 2-2

KINGDOM OF MOROCCO

SECOND SEWERAGE AND WATER REUSE PROJECT

Table 2: 1995 Statistical Data

City Considered During Appraisal Casablanca FRs MarrakechiR6gie RAD RADEEF RADEEMA

Unit

1. Total population 1000 3,107 787 672

2. Population served by % 70 65 81sewerage house connections 1000 2,175 512 544

3. Number of connections 1000 128 62 79

4. Number of technical(') U 6 1.2 1.9personnel/1000 connections

5. Population served by % 2 2 3individual sanitation 1000 70 16 17.6

6. Population non-served 5 28 33 16by any sanitation system 1000 990 662 94(most living in slums)

" The ratios for RADEEF AND RADEEMA refer to 1996, first year of full operation of thesewerage departments. These ratios will increase according to the development of sewerageactivities and the expected transfer of personnel from the municipalities.


KINGDOMI OF MOROCCO


Project Description

The proposed project would focus on the city of Fes. As the cities of Casablanca and Marrakech werealso appraised, the following description includes the sewerage components of the three cities:

(a) rehabilitation, reinforcement and expansion of sewerage facilities consisting of supply andlaying of interceptors, sewers, sewerage house connections and lining of existing sewers requiringrehabilitation and ancillary works (manholes for inspection and maintenance, etc). The materials wouldbe reinforced concrete and PVC which are manufactured in Morocco. No pumping equipment isrequired, as both the existing and future sewerage combined systems (transporting organic andindustrial sewage as well as drainage water) would operate by gravity. In the Fes Medina, the layingof sewers will be closely coordinated with the laying of water pipelines in the framework of theongoing Fifth Water Supply Project (Loan 3664-MOR);

(b) waste water treatment works consisting of lagoon anaerobic systems in Fes and Marrakech,including floatable removal, making treated waste water available for re-use, in line withrecommendations made in the 8-th session of the "Conseil Superieur de l'Eau et du Climat" held inRabat in 1994. The limitation of treatment to anaerobic is due to the need to keep the sewerage usercharge within tolerable/affordable limits (see chapter IV), which limits the amount of first phaseinvestments. However, the anaerobic systems would abate the pollution in a very significant way, andthus substantially improve the hygienic conditions of the current re-use of waste water. For Fes andMarrakech, a pre-treatment plant is envisaged prior to the lagoon system to abstract heavy metals(chromium, in particular) to allow the utilization of sludge for agricultural purpose and recover partof the costs. For Casablanca, the depollution system already exists: it consists of floatable removalsystem, a pumping station and an ocean outfall and diffuser (3600 m long; 2.2 m diameter) system.This excellent system funded by RAD and the French Ministry of Finance was inaugurated in January1995;

(c) equipment to upgrade operational efficiency, and provide adequate maintenance (O&M)including laboratory sewage quality control equipment;

(d) consulting services consisting: (i) of final design and bidding documents to complete the existingdocumentation and including work supervision; (ii) update and address the Regies account issues; and(iii) tariff study conceming in particular tariff structure and contribution by industries. Consultingservices would be carried out jointly by the Regies and consultants in the framework of closepartnerships;

(e) technical assistance to strengthen sewerage services and allow private operators to providesewerage management services; and


(f) training.

Sewerage facilities and social house connections are quantified hereunder:

RAD-Casablana

- sewers and ancillary civil works (manholes etc); diameters from 300 to 2500 mm;length: 51 Km;

- rehabilitation of 63 Km of existing sewers; and

- 14,500 social sewerage house connections.

RADEEF-F*s:

- sewers and ancillary civil works (manholes etc); diameters from 200 to 2300 mm;length: 125 Km;

- rehabilitation of 150 Km of existing sewers;

- 21,000 social sewerage house connections;

- heavy metal removal pre-treatment facility;

- olive oil residue treatment plant; and

- lagoon waste water treatment plant.

RADEEMA-Marrakech:

- sewers and ancillary civil works (manholes etc); diameters from 300 to 2,000 mm;length: 122 Km;

- rehabilitation of 113 Km of existing sewers;

- 11,400 social sewerage house connections;

- heavy metal removal pre-treatment facility; and

- lagoon waste water treatment plant.

RN R

0 C EA N ATLANTIQUE1 4 A ~~~~~~~~~~~~~~~~~ASSA ANlsseAENEr sEcrEURl!L| AIN MARROUDA

ASSAINISSEMENT OAR BOUAZZA REHABILIrArION DES RESEAUX I REHASILITrATION DES RE3EAUXC o r I E R | D A IDN DE ONA HAAD/EOIA

ASSAINISSEMENTr SIDI AODUMwEi-. _ rir AJLLIL NORD A SSAINISSEWEN r MOHNAAdEDM

ASSAINISSEMERr OULFA DAR BEN YAKHLEF8 DUAZZA-EsT

1 g 1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~'

- 58-KINGDOM OF MfOROCCO (

b Koudyat El Bayda SECOND SEWERAGE AND WATER Annex 2-5

RE-USE PROJECT RADEEFSEWERAGE SYSTEM OF FES E

ad Haj Tahar (RADEEFR

- - - -a d

eYe Decharge

publique 0 ~~~~~~~~~~~~Jel Hellouf

Blad My Idriss

SlaSl /l t El \~

Tghat. \< t \: J L Strij G~~~~~C2naoua\

--- G. ,/ { ~Merhaz, Hip oaiS

N ; IL>: G D A

t~~~~~~~~~~~~~~~~ Bouzi -- d

* j a a d q< - R lad My. 1k

MARRAKECH - ASSAINISSEMENT . .PROGRAMME DINVESTISSEMENT 'COURT TERME' -

LOCALISATION DE PRINCIPAUX PROJETS

'-~~ ~ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~ /7 --I

co *ec \ t- . {Sh \ IeBelbekarurval [

r | lae A 1-

( ) ' , / | t"namirJ - oue,d H6a | \\_ * * t ; \ \ * W . 4?4.4

off M ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~mzne hn1 OS

I-s / _ ____-;__ _ __ -__ __ _ __ _R_

_ . t . | Gu~~~~~~~~oiec.i -teuhm - 4* r T

C) U1 t / g * ttenl . . , / .s ,, , . $Xfy . \\ , ,, , t cz~~~~~~Be E

KINGDOM OF NOROCOD

NATION-WIDE SEWERAGE INVESTHDIT PROGRAM

STATUS OF SEWERAGE FEASIBILITY STUDIES AND MASTER PIANS

IN 137 ONEP CENTERS

PROGRAMM DES ETUDES D'ASSAIMSSEMENT

M DM I1 __ DUA IO k T DW

OMP IKXEGA SDA sEkfl) SDJIA bA NkIULE AZLL Ac) RIU AMInR EY C GUMNI E7 C A.BMATHAR ~ EC A29J A EC (Ml) SDWA

E L ZAKAPE SDA 1)9) AOUAA P EC AZLC LB9HDKC'D EP EC ULKANDAR E E EC DEDOU E AD EC I F.C DLAP;LA DA 0

STE U ESSAOUIRA W A (7) BEN5SUMANI 5TE A), CHEFCOIA0PJENE EP EC KBAJIED 17 EC JERRADA 17 EC KWEKANE EP EC)l) DAWRA U D

0. HL 17 A,) MIrAOrF EC BENSUMANII SA EC (7.2) HAD FORT EP EC E.WR 1 C LADATA.OAH Ad. ELJR 17 I 4SIFSDA F CilERaHIL SDA'AID LC KSRAG)?AA EP EC OUNIZA EP C JEEHA E7 C CUIED AMUI 7 I AJ D d LIWN l E MD) O

TAIMA Ep Ah) Y Y NRAJIIM ( EC OA AR FP EC EAAS ARRASS EP EC(m) TA7IALA EC SADI AI A.c EKUUD EDA IC (A3 APLAARA N V A

OTA7L A SDA.A7D LC OUKAIRIDEN IP Ad 7 UZN7KA APO'D EC(&U\) MAAZIZ EP EC(Ml) TAOUNATE SDA'APD EC(I/D) TAFOCiALT SA Ad ERRACIUDIA SDA EC () TARAYA iDA U

SE3T EL OMDANE E A,. SRI AHAL WDA ECIW) BROU SA A,d. OUAZZAN! 1P EC TAFCKiALT API) lC(S W C (Ml)TAIRAOIr EPl EIC TECIANAOUT 1 IC DEMNATE ECC() OUUI' EP EC TAOLJRRT IDLA IC)U PAN SDA LC

TAL1OLANE E7 C TiNQiIR F? IC FU).A" D Ad. RkOLIAN( APS ECCMl) IaDELT E7 ECTAWUDANT 7 Ad. ZAGORA SDA L95 POATAE 17 IC SATAZI 7 IC pj U7DELT SCDA (CD.)

KHOUMIiWA EP IIC STFRAT Er SC (NDAD 17 IECOUAOUZAiHT SDA A, TASllHA EP EC I

1i;v AcLu SDA Adk AITOURR SDA Ad. AFOURER SDA Adc D EL CUEDDARI SDA Ad. KLANE SDA Ah L 2UAREA IDA Ad. AOUF07JSS SDA A.1,

AIT AfiA SDA Ad. A7 ZIAZ SDA Ad. BENAAHM.T) SDA A.k IELM MALHIA SDA Ah O.EL IIA) SDA Ad. U EL AROUI 'DA Ad M17T SDA Ad.

R.IILIFT SIDA Ar AKrLLNA iDA LC S YAlA SDA A,) KEL Kt7NR SDA M TISSA SDA Ad. ZA7O SDA Ad. KHENIFPRA DA A,).

KAS 1A13LKA IDA Ax) CliIDAAYA IDA LC S YZAEFt SDA A,. FSSAMJ IA Ad. MWOUNA IDA Ax.h

I.M-II.) SOA LC

1EHDT2{AR SDA AehSESIHASEA IDA A,.SEOURA SDA AdTA7DLLALT SDA Ad.YUSOIDFIA ISDA LC I________

*AD TAROUDANT SDA'APD L (95) L)DNTANOLIS iDA:APD LC(9 UEZZNE SDA.AP L.(t9) U7550U SDA. APD L(95) IDEIDU Sl3A:APDL L(95) hDELT SDA.APD L (75)KSRXYiHNA SDAA L(95) OUED AMU L SDA APD L9) EL A70UNE SDA APED L(95)

liNQISE SDA. L9t )9)) _________

LEE_ DEM-AT`E iDA.APD L(95) IAAAZ)Z SDA.AP L()9 AIDIR SDA APD LIS5) SAIIA SDA APD L(I)

LICIYATACH) SDA.AID L()QJE(I' sDA'AID 1)95I).WIUBSN SDA. AID 1L95)TAHALA SDA AM L))

____ -> -1 - _anintL4b_l -S- _______ _DA.APD_ A L-IAdg11_) _<_A hi "AI'ADI' SD L:91)OULEan WA L(495) V AYACCXUB SWA 195)5 A.TAZI SUA 1495)S.KACDM SUA Al

5LRAA SDA 1)ISsMAP SDA IIS.Y.QHAAB WDA AfiTOCAS SDA I.(9))

A CE 117)5( WDA'AID hi( ECAZZTEW.AI 0,C)4) IENIaISSlT SDA:AP F C (4))Tt___ flETl ISDA AP EC i)).) _ _ _ _ _ _ _ _ _ _

Ax. h ).~ A).~,x) x d A.. DA -Ed.kI. O9...dM.....Ax) 04.a.) 0. p.... (iA.U( IC (.):t x-- .. . AID AZ.. P..t. difi'

CEr...) 54.B. ILA 1Ai-Ell -- ' 11 dV i de

STEP: Sx.o dET.Vs.. VI EI..d. do p,esecAo.. I.. . 69etbM d.0.9

KINGDON OF Nro

SECOND SEWERAGE AM lAlTEt R-USE PROJECT

fSE RAGE SYSTEN OF FES WRAOEEF)

COST ESTIPATES

JANW Y 1996 PtICES

ON MILLION USS MILLION

Total Locat Foreiwi Total Local Devi

- Sewers-clvfl uorks 415.2 166.1 249.1 U.2 18.5 27.7

- Treatmont Plants 121.5 60.7 60.8 13.5 6.7 6.8

- Equipent 21.0 --- 21.0 2.3 --- 2.3

- Consulting services 18.0 2.7 15.3 2.0 0.3 1.7

T.A and training 4.8 0.7 4.1 0.5 0.1 0.4

A. Base Cost 580.5 230.2 350.3 64 5 25.6 38.9

B. Physical contingencies 58.1 23.0 35.1 6.5 2.6 3.9

C. Sub-Total A+B 638.6 253.2 385.4 71.0 28.2 42.8 a

0. Price contingencies 95.8 38.0 57.8 10.6 4.2 6.4

E. Total Cost (net oftaxes and custom duties) 734.4 291.2 443.2 81.6 32.4 49.2

F. Taxes and duties 117.5 117.5 --- 13.1 13.1 ---

G. Total Cost (Including taxesand custom duties) 851.9 408.7 443.2 94.7 45.5 49.2

H. Interest duringconstruction (IDC) 21.1 --- 21.1 2.3 --- 2.3

1. Total Cost (Includingtaxes, duties and IDC) 873.0 408.7 464.3 97.0 45.5 51.5 Exchange rate S 1.0 = DH 9.0

0

0

Ln 14

KINGDOW OF OROCC

NATIONAL SEWERAGE PROGRAM

SEWERAGE SYSTEM OF KARRAKECH (RADEENA)

COST ESTIMATES

JANUARY 1996 PRICES

ON MILLION USS MILLION

Total Locat Forelan Total Local Devises

- Sewers-civil works 285.6 114.2 171.4 31.7 12.7 19.0

- Treatment Ptants 33.0 13.2 19.8 3.7 1.5 2.2

- EqUipment 8.0 --- 8.0 0.9 ... 0.9

- COnsulting services 14.0 2.1 11.9 1.6 0.Z 1.4- T.A and training 3.0 0.5 2.5 0.3 0.1 0.2

A. Base Cost 343.6 130.0 213.6 38.2 14.5 23.7

B. Physical contingencfes 34.4 13.0 21.4 3.8 1.4 2.4

C. SUb-Total A+B 378.0 143.0 235.0 42.0 15.9 26.1

D. Price contingencies 56.7 21.4 35.3 6.3 2.4 3.9

E. Total Cost( net oftaxes and duktied) 434.7 164.4 270.3 48.3 18.3 30.0

F. Taxes and duties 69.6 69.6 ... 7.7 7.7 ---

G. Totat Cost (Inctudinq taxesand custom dUties) 504.3 234.0 270.3 56.0 26.0 30.0

H. Interest duringconstruction (IOC) 12.4 --- 12.4 1.4 ... 1.4

1. Total Cost (inctudjnqtaxes duties and IDC) 516.7 234.0 282.7 57.4 26.0 31.4

ExdwWang rate $1.0 a DN9.0

0ii|

KINGDOM OF MOROCCO

NATIONAL SEWERAGE PROGRAMSEWERAGE SYSTEM OF CASABLANCA (RAO)

COST ESTIMATESJANUARY 1996 PRICES

ON MILLION USt MtLLION

Total Locat Foreign Total Local Foreign

- Sewers & civil works 522.2 208.9 313.3 58.0 23.2 34.8

- Equipement 10.0 --- 10.0 1.1 1.1

- Consulting Services 30.0 4.5 25.5 3.3 0.5 2.8

- T.A & training 4.0 0.6 3.4 0.4 0.1 0.3

A. Base cost 566.2 214.0 352.2 62.8 23.8 39.0

B. Physical contingencies 56.6 21.4 35.2 6.3 2.4 3.9

C. Subtotal A+S 622.8 235.4 387.4 69.1 26.2 42.9 1

D. Price contingencies 93.4 35.3 58.1 10.4 3.9 6.5 W

E. Total cost (Net of taxes& custom duties) 716.2 270.7 445.5 79.5 30.1 49.4

F. Taxes and duties 114.6 114.6 -- 12.8 12.8 ...

G. Total cost (includingtaxes & custom duties) 830.8 385.3 445.5 92.3 42.9 49.4

H. Interest duringconstruction (IDC) 20.6 --- 20.6 2.3 ... 2.3

1. Totat cost (incLudingtaxes, duties & IDC) 851.4 385.3 466.1 94.6 42.9 51.7

Exchange rate: S 1.0 m ON 9.0

0

It!

KINGDOW OF nOROCCO

NATIONAL SEUERAG PROGtNA

SEWERAGE SYSTEUS OF NADOb. TANGIERS AND TETnIJACOST ESTIMATES

JANUARY 1996

DR MILLION U^S MILLION

Totat Local Foreign Total LocUl Foreign

Al. RAEEN (Vadbr)Sewers & civil works 91.5 36.6 54.9 10.1 4.1 6.0

- Tre.tment plants 50.0 20.0 30.0 5.6 2.2 3.4

- Equipelent 23.0 ... 23.0 2.6 --- 2.6

* ConsuLting Services 10.0 1.5 8.5 1.1 0.2 0.9

- T.A & training 4.0 0.6 3.4 0.4 0.1 0.3

- Subtotat Al 173.5 58.7 119.8 19.8 6.6 13.2

A2. RAID (Tnqlers)- Sewers & civil works 223.4 89.4 134.0 24.7 9.9 14.8 1

- Tretme nt Pltnt 27.6 11.0 16.6 3.1 1.2 1.9

- Equipment 25.7 --- 25.7 2.9 --- 2.9 45


- T.A & training 5.0 0.7 4.3 0.6 0.1 0.5

- Subtotal A2 291.7 102.6 189.1 32.4 11.4 21.0

A3. RDE fTetoLmn)- Sewers & civit works 95.2 38.1 57.1 10.6 4.Z 6.4

- Treatment Plant 25.0 10.0 15.0 2.8 1.1 1.7- Equipement 14.0 .-. 14.0 1.6 .-. 1.6

- Conrulting Services 12.0 1.8 10.2 1.3 0.2 1.1

-T.A & training 3.0 0.4 2.6 0.3 0.1 0.2

- Subtotat AZ 149.2 50.3 98.9 16.6 5.6 11.0

B. Base costAI+A2+A3 619.4 211.6 407.8 68.8 23.6 45.2

C. Physical contlnqencies 61.9 21.1 40.8 6.9 2.4 4.5

0. subtotal B+C 681.3 232.7 448.6 75.7 26.0 49.7

E. Price continaencies 102.2 34.9 67.3 11.4 3.9 7.5

F. Total cost (Net of taxesL custom duties) 783.5 267.6 515.9 87.1 29.9 57.2 t

G. Taxes and duties 125.4 125.4 --- 13.9 13.9

M. Totat cost (fncLuding zC

taxes * cuLtou duties) 908.9 393.0 515.9 101.0 43.8 57.2

1. Interest durfna construction(IbC) 13.5 --- 13.5 1.5 --- 1.5

J. Total cost (incLudingtaxes, dutles & IOC) 922.4 393.0 529.4 102.5 43.8 58.7 Exdcange rate: S 1.0 * Dh 9.0

KINGDOI OF MOROCCO

NATIONAL SEWERAGE PROGRAM OF SETTAT, ERfOW.ERRACHIDIA. GOtLMI"A. O"ARZAZATE. RICH

COST ESTIMATES

JANUARY 1996 PRICES

DO MILLION USS MILLION

Total Local Foreign Total Local Foreign

Al. RADEEC (Settat)

- Sewers & civil works 96.4 38.6 57.8 10.7 4.3 6.4

- Treatment plants 15.0 6.0 9.0 1.7 0.7 1.0

- Equipement 9.5 ... 9.5 1.1 --- 1.1


- T.A & training 2.0 0.3 1.7 0.2 --- 0.2

Subtotal Al 127.9 45.6 82.3 14.2 5.1 9.1

A2. ONEP (Erfoud,. Errachidia. Goulmima. Ouarzazate. Rich)

Sewers & civil works 107.8 43.1 64.7 12.0 4.8 7.2 tn

Treatment Plant 80.5 32.2 48.3 8.9 3.5 5.4 1

Equipement 7.9 ... 7.9 0.9 --- 0.9

ConsuLting Services 13.6 2.0 11.6 1.5 0.2 1.3

T.A & training 5.5 0.8 4.7 0.6 0.1 0.5

Subtotal A2 215.3 78.1 137.2 23.9 8.6 15.3

B. Base costAi+A2 343.2 123.7 219.5 38.1 13.7 24.4

C. Physical contingencies 34.3 12.4 21.9 3.9 1.4 2.5

0. Subtotal B+C 377.5 136.1 241.4 42.0 15.1 26.9

E. Price contingencies 56.6 20.4 36.2 6.3 2.3 4.0

F. Total cost (Net of taxes& custom duties) 434.1 156.5 277.6 48.3 17.4 30.9 0

G. Taxes and duties 69.5 69.5 ... 7.7 7.7 ... d

M. Total cost (including i

taxes & custom duties) 503.6 226.0 277.6 56.0 25.1 30.9 Un ta

0 1

1. Interest durinq construction ° (a

J. Total cost (includingtaxes, duties & IDC) 503.6 226.0 277.6 56.d 25.1 30.9 Exchmne rate: S 1.0 a DN 9.0

- 66 -

ANNEX 2-9

KINGDOM OF MOROCCO


FINANCING PLAN

DIH million % US$ million

IBRD 360.0 41 40.0

CFD (parallel financing) 212.0 24 23.6

RADEEF 169.6 20 18.8

House owners 131.4 15 14.6

TOTAL 873.0 100 97.0

-67- ANNEXI2l

KINGDOM OF MlOROCCO


IiiplenienEa(ion Scliedtile

Aclivity 1996 1997 1998 1999 2000 2001 2002 2003

RADEEF (FES)

- Completion of final design andbidding documents. 07.01 06.30

- Bidding, bid evaluation andcontract award. 07.01 02.28

- Rehabilitation of Sew. WorksConstruction and SPN. 3.01 03.31

- Chromium removal facilityconstruction , SPN. 11.01 05.31

- Lagoon treatment plantconstruction, SPN. 09.01 __ 01.28

- Supply of oper. equipment. 09.01 _ 7.31

T.A. and training. 07.01 0331

ANNEX 2-11- 68 - Page 1 of 2

KINGDOM OF MOROCCO


Current Organization of the Regies

Organization and Management

1. The regulatory provisions governing the management and operation of the water supply and electricityRegies are set out in Decree No. 2-64-394 of 1964. The Regies have the status of autonomous municipalutilities and are managed in accordance with commercial rules under the supervision of MOI and MOF. Thefirst ten Regies created during the period 1961-1971 have developed into experienced technical institutions,partly as a result of the transfer of trained technical staff from the former REI and from the Morocco WaterDistribution Company (Societe Marocaine de Distribution - SMD), a private Moroccan company andsubsidiary of the French company "Lyonnaise des Eaux". The most recently created Regies are responsiblefor water supply only. The Regies have benefitted from the Inter-Regie Training Center (CIRF), created atRAD (Casablanca) in 1975, in building up their technical capability.

2. A board of ten members supervises the operations of a Regie. The provincial Governor is theChairman of the Board of Directors, which also includes representatives of the MOI, MOF, and six electedmembers from the local municipal council. Regie Directors are appointed by the Minister of Interior andare responsible for day-to-day operations, although with some restrictions. Existing organizational structuresvary with the size and sectoral responsibilities of the Regies. To standardize the Regies' managerialprocedures and to implement a comprehensive MIS, the Regie of Rabat-Sale (RED) is currently executingan MIS study within the framework of the ongoing National Water Supply Rehabilitation Project (Loan2825-MOR). The results of this study will be considered within the proposed project.

Personnel and traininp

3. The Regies salary structures, though somewhat lower than those in the private sector, appear to beadequate when considering the whole compensation package which is designed to attract qualified personnelinterested in the career prospects of these fast-growing organizations. With an average of six technical staffper 1,000 house connections in 1990, the Regies are not overstaffed when compared with otherMediterranean countries whicih average seven to nine staff per 1,000 connections.

4. In 1975, RAD was entrusted by MOI and the other Regies with the responsibility for managing andtraining newly recruited staff for the operation and maintenance of the water and electricity distributionnetworks. CIRF has been operating since July 1977 and offers two-year training courses from which 395staff have graduated so far. This initial training, however, represents only part of the training needs of theRegies. In July 1985, RAD assessed the Regies' training needs and concluded that existing CIRF trainingcapacity of 116 students p.a. should be increased to about 350 to allow for the recycling of administrativeand accounting staff as well as that of specialized technicians. The extension of existing CIRF trainingfacilities estimated at DH 15.5 million was included in RAD's 1987 investment budget.

5. All implementing agencies have established their training programs and will seek Bank approval ofcandidates' qualifications, the costs to be incurred at training institutions, and placement or re-integrationof trainees into the respective implementing agencies.

- 69- ANNEX 2-11Page 2 of 2

Accounting System

6. The accounting systems of the Water Supply, Sewerage and Electricity Departments of the Regiesare entirely separate, with appropriate cost centers and overhead allocations. Accounts are kept on an accrualbasis. The general and cost accounting systems, which were inherited by the Regies from their previousconcession owners, have a general common nucleus but vary in specific features from Regie to Regie dueto the absence of a standard manual. There is no specific account for work in progress and with theexception of assets with a less than a five-year life span, depreciation is replaced by a renewal reserve whichbears no relation to the value of assets in operation. Assets are accounted for at their historical value. TheRdgies accounting systems need to be upgraded to international standards to provide adequate information.

7. Aware of the above deficiencies which affect all Public Enterprises (PEs), the Govemment prepareda new National Accounting Plan with the assistance of independent experts financed under the PERL Iproject with PPF funding. A first draft Accounting Plan was completed in February 1987 and was circulatedamong Ministries and PEs for comments. The New National Accounting System was applied in the Regiesbetween 1993 and 1994. A cost accounting study is also being executed by RED, also on behalf of the otherRegies, within the framework of the ongoing National Water Supply Rehabilitation Project (Loan 2825-MOR), which includes assets inventory and evaluation.

Billing and Collection

8. Billing is carried out by RAD on behalf of the 16 Water Supply and Electricity Regies. The periodwhich elapses between RAD's receipt of the meter readings from the Regies and its return of the bills to theRegies varies between 3 and 30 days depending on the quality of the meter reading. Bills are sent outmonthly to industrial customers, quarterly to domestic customers, and bi-annually to Government agencies.

9. Collections from domestic and industrial customers are generally adequate mainly because of thepossibility of curtailing water supply services and collection through the judicial system. However, collectionfrom Government agencies and CLs has been difficult. As a result, the Regies finances have been affectedby sizeable arrears for water sold, leading them to withhold payables to other Government agencies. Toavoid the recurrence of such a situation, a new procedure has been recently identified and put intoapplication by the Government, whereby each Government agency is granted a specific realistic annualamount (in stamps called "vignettes") and the Regies are authorized to curtail the water service toGovernment agencies whose payments are in arrears.

c:3katiUauursaareannexe

SEtUJies & Planning Divsion _

Can trL-LICIou0 DIvilun |-

Operatlon Diviuion_

Scud ies & Planning Division

Construction Division 1 _ D n -

_ _ _ _ _ _ _ _ _ _ _ _._ __

| Couuxereial DLegal Division t rI

I~~~~~~~~~~~~ pialc e- Acontn Eavso | , - ,°:

it V. C)~~~~~~C

_ _ _ _ _ _ _ _ _ _ _ _ _ _ __ _ N .ol H

_D~~~~ n Cz

_I __ __t _ Coenan±ruica & Legl Dviviion |_ .a tt:_a>tW~~~~~~~i

Fintace rnAccouiting civic ion __

d n-__ ~ ~ ~ ~ ~ ~ ~ 3 0

I0

r In

IDm 'a

Stck &olue Sect ion | - 1

1Z13

Internial Atudit SecLion

Coueiputer Sect ioi)

* U-Z rannYi

-OL-

- 71 - Annex2-13Page 1 of 2


Monitoring Perfonnance IndicatorsStpulated In the "Protocobs d'Accord"

(a) Average system efficiency should not be less than:

1995 1 996 1997 lt 1if 9 2001 20RAD 0.70 0.71 0.73 0.75 0.75 0.75 0.75 0.75RADEEF 0.67 0.69 0.72 0.76 0.78 0.79 0.80 0.80RADEEMA 0.65 0.65 0.65 0.67 0.69 0.72 0.72 0.75

(b) Working ratio of not more than:

inn inn ini ini 1999 mo am maRAD 55 55 45 43 42 40 39 38RADEEF 40 43 41 41 40 43 41 39RADEEMiA - 41 52 50 49 47 48 47

(c) Operating ratio of not more than:

lift 1996 1997 lift lf 2 21 2

RAD 84 82 72 71 68 65 60 56RADEEF 83 90 88 87 86 89 81 73RADEEMA - 63 80 82 82 80 81 79

(d) Account receivables for not more than:

1i99 1996 1997 lift lift 2000

RAD 10 7 5 3 3 3RADEEF 9 8 4 3 3 3RADEEMA 12 9 6 3 3 3

(e) Debt Service (ratio du service de la dette) not less than:

1996 li 1i99 nu i 2 2001 2n2u

RAD - - - 1.2 - - - -RADEEF - - - 1.2 - - - -RADEEMA - - - 1.2 - - - -

- 72 -

KINGDOM OF MOROCCO Annex2-13SECOND SEWERAGE AND WATER RE4USE PROJECT Pop 2 of 2

Monitoring Pefformance IndicatorsStipulated In the "Protocols crAccord"

(f) Debt ratio (ratio d'endettement); not more than:

1996 1996 1997 i I m m11 2n2u

RAD 55 56 54 54 53 51 48 42RADEEF 5 16 27 40 49 55 55 52RADEEMA - 9 19 28 34 37 37 34

(g) Cash Generation (% of investment program) not less than:

aM 1996 1997 aM aM m 2 i

RAD - - 25 - - - -

RADEEF - - 25 - - - -

RADEEMA - - 25 - - - -

(h) Average water tariff (DH/m3); not less than:

199 16 1997 1m 8 m m

RAD 5.96 6.74 7.23 7.79 8.22 8.73RADEEF 3.46 4.34 4.79 5.28 5.84 6.48RADEEMA 5.22 5.64 6.10 6.62 7.11 7.78

(i Average sewerage charge (DH/m3); not less than:

ADDENDUM TO THE RADEEF'S "PROTOCOLE D'ACCORD"Definitions:Average system efficiency: annual volume of water consumed In a given networkover the annual volume of produced water.

Working ratlo: operating expenses excluding depreciation and Interest overtotal revenues.

Operating ratio: operating expenses Inciuding depreciation and Interest overtotal revenues.

Account receivable: unpaid water sales expressed In months.

Debt service ratio: net Intemal cash generation over debt service.

Debt ratio: long-term debt over equity and long-term debt.

Noe: Rdio orn (n) to (I) nuded ha ben corported n ntheePmol cAocord.Ratios (), h and () are hdka. Acul ras to be luaed at the wid of ch 1fisayew, In line wlth th elpuhionf f t Proocols dAccord and of the Addendin to thRADEEFsP Prtocoa dAccorc".

- 73 ~~~~~ANNEX 2.14- 73- -KINGDOM OF MOROCCO

SECOND SEWERAGE AND WATER REUSE PROJECT

Estimated Semi-Annual Disbursement Schedule'

FLscal Year Amount Cumulative Percent(US$ million) Amount

FY96 June 1996 0.0 0.0 0

FY97 December 1996 0.4 0.4 1June 1997 0.8 1.2 3

FY98 December 1997 0.8 2.0 5June 1998 2.0 4.0 10

FY99 December 1998 3.2 7.2 18June 1999 4.8 12.0 30

FY2000 December 1999 4.8 16.8 42June 2000 5.2 22.0 55

FY2001 December 2000 4.4 26.4 66June 2001 3.6 30.0 75

FY2002 December 2001 3.2 33.2 83June 2002 2.8 36.0 90

FY2003 December 2002 2.4 38.4 96June 2003 1.6 40.0 100

1, Standard disbursement profile for water supply andsewerage projects including preparation of biddingdocuments and work construction .

- 74 -

ANNEX 2-15KINGDOM OF MOROCCO


Limilation of Project Risks - Elaboration olthe Environmental Analysis

Limitation of Project Risks

1. The significant water tariff increases of 1992, 1993 and of April 1994, the progressivesettlement of arrears, the progressive reinstatement of the Regies autonomy and the positiveGovernment attitude towards privatization (on March 14, 1996 the Municipality of Casablancadecided to entrust the responsibility for water, sewerage and electricity services to a privateFrench company) prove the Government commitment to the sustainability of the water andsewerage operations. Technical assistance and training under the project would reinforce theGovernment's and the sewerage operators' commitment to the needed reforms, by identifyingand enforcing the implementation of procedures necessary for sound financial management andgenuine autonomy. The appointment of financially autonomous sewerage departments for theimplementation, operation and maintenance of sewerage works, and the technical assistance tobe provided by ANA for planning, design and coordination of sewerage works (in particular tosmall Municipalities), would also minimize any technical risks.

Elaboration of the Environmental Analysis

2. The environmental analysis for the proposed project was carried out in accordance withTOR reflecting Bank operational directives and was completed in March 1995. The team incharge of this analysis consisted of specialists of the ME, of ONEP (the same who carried outthe environmental analysis of the Fifth Water supply Project) and several individual consultants.This project, by improving sewage collection,, treatment and facilitating appropriate waste waterre-use and disposal, would significantly improve the environmental conditions by enhancingpublic health through a drastic decrease of waterborne diseases. This project is currentlyassigned to category B. Appropriate specifications to minimize environmental disturbance duringconstruction were identified through the environmental analysis and would be included in thebidding documents.

XINGDOM OF NOROCCOACTIVITU ILICTRICITI

Table3-1 US-RADZIF

1. Income Statements 1988 1989 1990 1991 1992 1993 1994______________________________ --------- --------- --------- --------- --------- --------- ---------

Total Revenues 249.63 275.12 303.92 327.86 350.36 428.82 467.41Working expenses 219.24 245.59 271.88 313.04 331.24 402.10 422.23Depreciations/prov. 10.73 11.56 13.27 15.38 18.92 22.73 27.84

Operating incomes 19.66 17.97 18.77 -0.56 0.20 3.99 17.34

Interest 2.60 1.30 2.27 2.03 1.75 1.31 4.17Non operating inc./expens 1.80 1.98 2.57 -2.03 -4.41 -0.28 5.66

Income before taxes 15.26 14.69 13.93 -0.56 2.86 2.96 7.51

Income after taxes 14.69 8.81 7.31 -2.19 1.12 1.13 6.47 1

-.1Working ratio 87.83% 89.27% 89.46% 95.48% 94.54% 93.77% 90.33% nOperating ratio 92.12% 93.47% 93.82% 100.17% 99.94% 99.07% 96.29% 1

KINGDOM OF MOROCCOELBCTRICITY ACTIVITY

Table 3-2 FZS-RADEZF

2. Balance Sheets 1988 1989 1990 1991 1992 1993 1994______________________________ --------- --------- --------- --------- --------- --------- ---------

Net Fixed Assets 198.89 233.98 266.32 333.35 397.68 483.83 563.25Account receivable 182.53 201.41 216.72 216.88 258.60 283.02 270.62Other receivable 111.16 116.81 84.87 109.05 150.13 136.36 177.76

Total Assets 492.59 552.20 567.91 659.28 806.41 903.21 1011.63

Equities 274.34 343.82 402.98 478.55 578.93 643.97 741.01Long Term Debts 20.00 18.43 16.66 14.66 12.40 40.19 48.98Account Payable 166.60 147.89 106.70 110.97 158.15 137.85 126.33Other Current Liabilities 31.65 42.06 41.58 55.10 56.93 81.21 95.32

Total Zquities & Liabiliti 492.59 552.20 567.92 659.29 806.41 903.21 1011.63

Current Ratio 1.48 1.68 2.03 1.96 1.90 1.91 2.02Debt to debt & Zquity ratio 6.79% 5.09% 3.97% 2.97% 2.10% 5.87% 6.20%

I!S

KINGDOM OF MOROCCOELECTRICITY ACTIVITY

Table 3-3 -Fl8-RADZZI

3. Sourcex & Application of Yu 1988 1989 1990 1991 1992 1993 1994______________________________ --------- --------- --------- --------- --------- --------- ---------

Internal Funds 28.01 21.67 22.85 15.22 21.79 25.17 38.49Less Debt *ervLces 10.33 2.87 4.04 4.03 4.01 4.17 4.17Increas./decrease in W.C. 16.55 29.72 54.68 -17.64 -6.69 18.36 -8.02Customr contributions 69.97 48.71 41.93 57.38 81.83 66.06 52.19

Net internal cash generatl 71.10 37.80 6.06 86.21 106.31 68.70 94.53

BorrowLngs 0.00 11.96 9.92 0.00 2.65 6.57 9.14

Total funds available 71.10 49.76 15.98 86.21 108.96 75.27 103.67

Capital expendltures 68.30 46.64 45.61 58.33 68.48 86.95 69.24Others 0.00 0.00 0.00 3.71 0.00 0.00 0.00

Cash increase/decrease 2.80 3.12 -29.63 24.17 40.48 -11.68 34.43Cash beguinning of year 0.00 78.89 82.01 52.38 76.55 117.03 105.35Cash and of year 2.80 82.01 52.38 76.55 117.03 105.35 139.78

debt service -------- -------- -------- 2.57 ------- ------- -------cash generation ratio -------- -------- -------- 11.86% -------- -------- --------

S

KINIGDOM OF MOROCCOWATER SUPPLY & SEMCEAGE ACTIVITIES

Table 3-4s FES - RAD EF

Iluco - Stat-euts 1988 1989 1990 1991 1992 1993 1994

Total revenues 48.25 54.22 67.71 71.56 89.84 114.97 139.25

working expenses 48.71 55.96 73.57 85.76 95.33 114.96 128.00

Depreciations/provisions 12.86 15.17 16.33 11.78 13.67 16.97 21.94

Operating incom -13.32 -16.92 -22.19 -25.99 -19.16 -16.96 -10.68

Interest 2.42 2.44 2.58 2.63 5.25 5.17 7.51

Mon operating income/expenses 0.46 0.43 1.06 2.29 4.32 1.92 2.28Income__ before taxes -16. -19.79-- -25.83-- -30.91--- -28.7_ -2 5 -2

Income before taxes -16.20 -19.79 -25.83 -30.91 -28.73 -24.05 -20.48

Income after taxes -16.20 -19.79 -25.83 -30.91 -28.73 -24.05 -20.48

working ratio 100.95% 103.22% 108.65% 119.86% 106.11% 100.00% 91.92%

operating ratio 127.60% 131.20% 132.77% 136.32% 121.32% 114.75% 107.67%

. . .~~~~~~~~~~~~~~I

I.,'o AI

KINGDOM OF MOROCCOWATER SUPPLY & SEWERAGC ACTIVITIESTable 3-S: FEB - RADEEF

-=-=====-- =---=-=-_--===s=== =Z= -=========== = =__== ==== ===__ _=

Balance Sheets 1988 1989 1990 1991 1992 1993 1994

Net fixed assets 115.24 137.35 172.00 206.29 258.74 289.14 329.83Receivable 79.48 83.43 111.68 131.08 159.98 178.20 189.14Other receivable 35.70 28.55 28.42 24.12 24.46 28.01 46.96

Total Assets 230.43 249.33 312.10 361.48 443.18 495.35 565.93

Eqyities 172.90 187.08 198.69 205.05 217.67 231.90 238.37Long term debt 26.02 24.36 28.01 46.53 48.72 55.89 49.26Suppliers 12.21 18.47 26.28 20.68 39.04 66.48 83.46Other liabilities 19.30 19.43 59.12 89.22 137.75 141.08 194.84

_______ -- ____----- ------- ------- ------- ------ ~- -----

Total Equitie 230.43 249.34 312.10 361.48 443.18 495.35 565.93===M== ======= ==== ======= =========== =…=====

Current ratio 3.66 2.96 1.64 1.41 1.04 0.99 0.85Debt to Equity+debt ra 13.08% 11.52% 12.36% 18.50% 18.29% 19.42% 17.13%

ii

uuou ov nomocoowA!33. SUPPL a umuaain AcrzvzxuuTable 3-6 r4 - RA8Vt

sources a A£plicatio. 1933 1989 1990 1991 1992 1993 1994______________________ --------- -------- -------- --------- --------- --------- ---------

Internal cash -0.92 -2.18 -6.92 -16.50 -9.81 -1.92 8.97working capital +/- 66.74 -1.51 22.61 12.25 -2.45 -11.09 0.14Debt service 3.83 4.10 4.53 5.20 8.91 10.81 17.10

_________ -------- -------- --------- --------- --------- ---------

Net cash generat -71.48 -4.76 -34.06 -33.94 -16.27 -1.64 -8.27

Customer contributions 189.09 33.97 37.44 37.27 41.35 38.28 24.05Borrowing 2.13 0.00 5.60 21.11 5.86 12.81 2.95

_________ -------- -------- --------- --------- --------- ---------

Availablo funds 119.75 29.21 8.98 24.44 30.94 49.45 18.73

Capital expenditures 115.24 37.28 50.98 46.07 66.12 47.37 59.75 oother capital expendit 0.00 0.00 0.00 0.00 0.00 0.00 0.00 I

_________ -------- -------- --------- --------- --------- ---------

Cash increase/do 4.50 -8.07 -42.01 -21.63 -35.18 2.08 -41.02

Debt service- -------- -------- -------- .A. -------- -------- --------Cash Generation ------- -------- -------- 54.64% --- - ------- - ----

_pSt

KINGDGK OF NORO0OOACTrVITI ILICTRICITI

Table 3-7 FlS-RADZIF

1. Incom Statements 1995 1996 1997 1998 1999 2000______________________________ --------- --------- --------- --------- --------- ------ ___

Total Revenues 456.19 496.34 546.73 613.00 683.13 767.10Working expense. 414.24 468.49 512.76 562.09 618.08 679.71Depreciations/prov. 27.60 44.16 50.37 56.85 63.98 71.74

Operating incomes 14.35 -16.31 -16.40 -5.95 1.07 15.65

Interest 6.35 6.35 6.35 6.35 6.35 6.35Non operating inc./expens 0.00 -25.81 -29.65 -32.14 -35.46 -39.37

Income before tazes 8.00 3.15 6.89 19.84 30.18 48.67

Income after taxes 6.95 2.08 4.55 13.09 19.92 32.12

Working ratio 90.80% 94.39% 93.79% 91.70% 90.48% 88.61% X

Operating ratio 96.85% 103.29% 103.00% 100.97% 99.84% 97.96% 1

0

Mi

l

KINGDOK OF MOROCCOELECTRICITY ACTIVITY

Table 3-8 FIs-RADzzF

minmm ,, mmm......,..........minmmmmmin ======mmmrn inminmmw m mm,

2. Balance Sheets 1995 1996 1997 1998 1999 2000______________________________ --------- --------- --------- --------- --------- ---------

Wet Fixed Assets 653.08 719.93 784.88 854.91 928.75 1011.27

Account receivable 237.94 214.07 183.93 147.81 113.58 125.10

other receivable 215.10 134.29 135.14 159.58 197.32 213.31

Total Assets 1106.12 1068.29 1103.95 1162.29 1239.66 1349.69

Equities 811.06 835.47 863.45 913.54 982.02 1082.01

Long Term Debts 55.82 48.60 44.74 40.49 35.82 31.14

Account Payable 141.06 83.09 91.60 100.98 111.32 122.71

other Current Liabilities 98.18 101.13 104.16 107.29 110.50 113.82

Total Zquities A Liabiliti 1106.12 1068.29 1103.95 1162.29 1239.66 1349.69

Current Ratio 1.89 1.89 1.63 1.48 1.40 1.43

Debt to debt & Zquity ratio 6.44% 5.50% 4.93% 4.24% 3.52% 2.80% 1

vflI

KINGDOK OF MOROCCOILICTRICITY ACTIVITY

Table 3-9 FFS-RADKZF

an i i w_ _m # mmsmm =mmrmmm mmm mmin mmi*- ---

3. Sources & Application of Fu 1995 1996 1997 1998 1999 2000______________________________ --------- --------- --------- --------- --------- ---------

Internal Funds 40.91 41.58 49.12 62.91 75.49 93.94

Loes Debt services 6.35 13.57 10.22 10.60 11.03 11.03

Increase/decrease in W.C. -58.02 28.60 -43.96 -50.65 -49.59 -4.79Customer contributions 71.00 22.33 23.43 36.99 48.56 67.87

Net internal cash generati 163.57 21.74 106.30 139.95 162.61 155.57

Borrowings -28.66 0.00 0.00 0.00 0.00 0.00…_______ -------- -------- -------- -------- --------

Total funds available 134.92 21.74 106.30 139.95 162.61 155.57

Capital expenditures 89.83 100.00 103.17 113.49 123.07 137.99

Others 0.00 0.00 0.00 0.00 0.00 0.00…_______ -------- -------- -------- -------- --------

Cash increase/decrease 45.09 -78.26 3.13 26.46 39.55 17.58

Cash beguinning of year 139.78 184.87 106.61 109.74 136.20 175.75

Cash end of year 184.87 106.61 109.74 136.20 175.75 193.33

debt service ------- ------- 8.64 -------- -------- --------

cash generation ratio -------- -------- 71.84% -------- -------- --------L

L ,"8gr

KINGDOK OF MOROCCOFIFTH WATSK SPPLY PROJtCT

Table 3-10s FFS - RAD3F

Inco Statements 1995 1996 1997 1998 1999 2000in zcnz = = =OMSEW -- ======== ---- --

Total revenues 160.57 202.76 240.86 274.82 312.37 354.80

Working expenses 141.23 176.85 183.37 202.64 225.38 255.60

Depreciations/provisions 22.50 28.66 29.95 34.30 38.36 41.35

Operating income -3.16 -2.76 27.55 37.88 48.63 57.84

Interest 6.70 10.10 14.78 18.82 21.65 23.42

Non operating income/expenses -0.52 0.00 1.37 0.95 0.50 -0.03

Income before taxes -9.34 -12.85 11.40 18.10 26.48 34.45

Income after taxes -9.34 -13.39 7.30 11.59 16.95 22.05 -

working ratio 87.96% 87.22% 76.13% 73.74% 72.15% 72.04%

operating ratio 101.97% 101.36% 88.56% 86.22% 84.43% 83.70%

o0

K_ S

a._

KIOKDM OF oiOCCOr rir W13 UPLY PR33C!

Table 3-11s PVS - RADE

2. Balance Sheets 1995 1996 1997 1998 1999 2000________________________________ --------- -------- -------- --------- --------- ---------

Not Fixed Assets 307.33 371.07 434.14 458.48 460.37 456.63Account receivable 168.43 154.48 99.56 69.11 71.78 78.98

Other Account receivable 38.02 25.54 25.62 26.06 47.41 76.36

Total Assets 513.78 551.10 559.32 553.66 579.57 611.97

Equities 239.69 234.27 253.42 276.68 304.93 336.46

Long term debt 54.67 97.63 130.14 149.48 150.04 154.89

Account payable 91.37 79.56 67.95 50.13 56.50 47.73

Other current liabilities 128.05 139.64 107.79 77.33 68.05 72.88_________ -------- -------- --------- --------- ---------

Total Equity & Liabilit 513.78 551.10 559.31 553.63 579.52 611.96 1

0i

Current ratio 0.94 0.82 0.71 0.75 0.96 1.29

Debt to debt & equity ratio 18.57% 29.41% 33.93% 35.08% 32.98% 31.52%

I

FIFT WAT SUPPLY PROJECT

Table 3-12: Ft8 - RADEF

Sources & Application of Funds 1995 1996 1997 1998 1999 2000

Internal cash 19.86 18.51 43.59 54.67 65.19 73.23

Working capital +/- -39.54 -17.35 -45.38 -7.36 -3.38 11.08

Debt Service 13.81 19.77 36.77 38.77 46.91 47.53

Net cash generation 45.59 16.08 52.20 23.25 21.66 14.62

Customer contributions 11.19 9.84 15.15 15.65 16.29 15.26

Borrowing 12.00 50.66 51.36 36.34 22.80 26.50

Available fund. 68.77 76.59 118.70 75.24 60.75 56.39

Capital expenditures 0.00 75.47 77.86 44.81 27.95 28.91

Other capital expenditures 0.00 9.98 6.84 4.81 2.49 -1.53

Cash increase/decrease 68.77 -8.86 34.01 25.63 30.31 29.00 X

Cash beguinning of year -128.89 -60.12 -68.98 -34.97 -9.34 20.97

Cash end of year -60.12 -68.98 -34.97 -9.34 20.97 49.97

Debt service 4.30 1.81 2.42 1.60 1.46 1.31

Cash generation --------- -------- 30.00% --------- --------- ---------

oq

IY

KINGDOM OF MOROCCOaOsCOD uswnA1D v sAR n-iXs PRa.ECT

Table 3-13: FlS - RAD531

mssasmmnmmasnsm=====================mm ========= ======X== =====9=*= == insmss flf=n===mm

Ineome utatemsts 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

ssssmnnsnn innmsi s�mana m a an saaaa.nan manna aa=a===s ,,,,Sa wm, . . = = =======mm ,.=., =======mm . , =_,

Total revenues 49.19 51.28 65.77 83.22 104.74 117.89 143.77 175.54 195.09 216.80

Working expenses 19.44 21.96 26.82 33.81 41.99 50.74 58.84 68.19 70.89 72.55

Depreciations/provisions 21.36 24.06 31.04 38.21 47.86 54.06 57.55 60.21 66.21 70.54

operating incom 8.39 5.26 7.90 11.20 14.89 13.09 27.37 47.14 57.98 73.71

Interest 0.77 0.99 3.22 9.61 16.97 30.61 36.80 41.95 41.17 44.45

Non operating inc./expens -0.75 -1.48 -2.28 -3.18 -4.17 -5.26 -6.46 -7.77 -9.20 -10.76

Income before taxes 8.37 5.76 6.97 4.77 2.09 -12.26 -2.97 12.96 26.00 18.50

Income after taxes 5.36 3.69 4.46 3.05 1.34 -15.20 -6.56 8.29 16.64 25.62

working ratio 39.53% 42.82% 40.78% 40.62% 40.09% 43.04% 40.93% 38.85% 36.34% 33.46%

operating ratio 82.95% 89.74% 87.98% 86.54% 85.78% 88.90% 80.96% 73.15% 70.28% 66.00%

o t

4* 0-

K I or° oeeomcc.inucm mM am -A Its-su v.w.s

!able 3-14t MU - PAJt

*mmm_ r-_ inmm m# m_mmins mwmums _mmmmWm sanmrnminm m i m i n _nMMi nu_

Balance Shosts 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Not Fixed Assets 275.42 338.23 438.57 608.38 767.60 904.43 951.49 923.34 909.12 876.44Account receivable 44.27 43.05 30.57 23.73 27.51 30.49 37.18 45.40 50.46 56.07Other Account receiv. 4.85 17.64 37.29 34.26 21.76 12.22 14.11 15.55 33.28 75.91

Total Assets 324.54 398.92 506.43 666.36 816.87 947.14 1002.78 984.29 992.85 1008.42

Equities 296.92 317.94 340.60 363.59 386.16 393.76 411.45 445.57 489.78 544.85Long term debt 14.90 60.76 126.34 242.16 365.04 485.00 511.92 486.41 461.52 422.69Account payable 1.60 11.86 28.84 47.23 50.15 44.52 29.17 12.16 12.86 13.50Other current liab. 11.12 8.36 10.64 13.37 15.51 23.86 50.24 40.14 28.68 27.38

Total Equity & Liab. 324.54 398.92 506.43 666.36 816.87 947.14 1002.78 984.29 992.85 1008.42

Current ratio 3.86 3.00 1.72 0.96 0.75 0.62 0.65 1.17 2.02 3.23Debt to debt & equity 4.78% 16.04% 27.06% 39.98% 48.59% 55.19% 55.44% 52.19% 48.51% 43.69%

Pu

KINGDOM OF ma-o 33com smeZRhGu AND MWER a-u.. PiOJM~

Table 3-15 FM - RAMW

mminm=nW.in mmm um imm m fniminininim ====am.m~m m~mmmmmmmrninm inimimm~min

Resources & AMplicati 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Internal Funds 26.01 25.71 34.46 45.20 58.86 60.66 77.02 97.42 108.98 123.34Leso: Debt service 1.74 4.60 9.17 17.13 23.99 34.28 75.63 80.78 79.31 82.58Increase decrease in V 39.86 -2.20 -35.20 -21.60 -8.73 8.30 31.76 22.02 -6.95 5.53Customer contributions 13.56 18.83 20.47 23.13 25.40 28.07 30.71 33.60 36.76 40.22

_________ -------- -------- --------- --------- --------- --------- --------- --------- ---------

Not cash generat -2.02 42.13 80.97 72.79 69.01 46.15 0.33 28.21 73.38 75.45_________ -------- -------- --------- --------- --------- --------- --------- --------- ---------

Borrowings 15.87 56.78 81.40 141.29 147.47 142.79 75.84 13.32 16.60 0.00

Total available 13.85 98.91 162.38 214.07 216.48 188.94 76.18 41.54 89.98 75.45 0_________ -------- -------- --------- --------- --------- --------- --------- --------- ---------

Capital expenditure 17.31 75.47 119.42 190.35 188.98 174.14 96.50 26.79 43.26 32.07Others 17.18 19.85 33.12 32.53 32.38 13.88 0.00 6.22 0.00

_________ -------- -------- --------- --------- --------- --------- --------- --------- ---------

Cash increase decrease -3.46 6.27 23.11 -9.40 -5.03 -17.57 -34.21 14.75 40.49 43.38Cash beguinning of year -3.46 2.81 25.92 16.52 11.48 -6.09 -40.30 -25.55 14.94Cash end of year -3.46 2.81 25.92 16.52 11.48 -6.09 -40.30 -25.55 14.94 58.32

Debt service <------- <------- c------- 1.65 c------- …------- e------- <------->Cash generation <------ <------ <------ 33.27% <------ <------ <------ <------>

O Qm

lh

SEON SRMAR&WAM uNC

Table 3-16: lum Semmi for [996-26(La cunrt DH mihion)

incme Slatemmta 19X 17 196 19 2000 2001 2002

Tota revenues 57.85 64.27 79.02 94.48 113.31 126.52 141.33

Wodidng expenses 23.80 33.58 39.37 46.24 53.61 60.32 65.85 1

Dereciation & Provision 12.46 17.91 25.38 31.50 36.87 42.34 46.40

Operating incone 21.59 12.78 14.27 16.74 22.83 23.86 29.08

Interes 2.00 3.00 8.53 14.58 22.59 28.21 30.53Non operting income -1.20 -2.46 -3.77 -5.13 -6.55 -8.03 -9.58

Net income before taxes 20.79 12.24 9.51 7.29 6.79 3.68 &13

Net income after taxes 13.31 7.84 6.08 4.66 4.35 2.35 5.20

Wodbing raio 41.14% 52.25% 49.82% 48.94% 47.31% 47.68% 46.59%

Opeating ratio 62.68% 80.12% 81.94% 82.28% 79.85% 81.14% 79.42%

C:AZMSANNEX1EMA S (sheet 1)

U, C

KINGDOM OF MOROCCOSECOND SEWERAGE & WATER RE-USE PROJECT

RADEEMA - MARRAKECH

Table 3-17: Balance Sheets for 1996-2004(in current DH million)

Balan Sheets 1996 1997 1998 1999 2000 2001 2002

Net fixed assets 294.46 378.52 514.40 635.12 741.91 781.96 776.46Receivable 12.21 9.88 6.23 7.58 9.24 10.39 11.68Other receivable 10.54 15.57 23.72 23.26 24.04 17.76 13.61

Cash 20.03 35.60 17.82 9.05 0 .00 12.97 45.76

Total Assets 337 24 439.57 562.17 675.01 775.19 823.08 847.51

Equities 277.91 313.08 348.56 384.36 420.48 456.89 493.64Retained eanings 13.31 21.14 27.23 31.89 36.23 38.59 43.78Long term debts 29.48 76.49 143.76 211.69 270.42 288.08 278.72Suppliers 8.87 19.40 30.84 32.94 29.78 20.70 10.54Other liabilities 7.67 9.46 11.78 14.13 18.28 18.82 20.83

Total Equities & Liabilities 33724 439.57 562.17 675.01 775.19 823.08 847.51

Current ratio 2.591 2.12 1.121 0.85 0.69 1.04 2.2

Debt/Equity&debtratio 9.19%1 18.62% 27.67% 33.71% 37.19% 36.77% 34.15%

cAz\s\rncxe\mar.xds (sheet 2) 0

KINGDOM OF MOROCCOSECOND SEWERAGE & WATER RE-USE PROJECT

RADEEMA _ MARRAKECH

Table 3-18: Sources & Application of Funds for 1996-2004(in curent DH milion)

Sources & Application of funds [99 17 1998 9 2000 2001 2002

Intemal cash generation 24.83 24.36 33.86 42.78 53.85 61.08 68.31Woing capital +- 6.21 -9.62 -9.26 -3.55 2.99 1.86 5.30Debt service 4.12 6.87 13.66 19.43 25.21 50.91 52.90Customr contributions 36.08 37.63 39.25 40.94 42.66 44.45 46.32

Net cah generation 50.58 64.74 68.71 67.84 68.31 52.76 56.43

Borrowing 30.11 47.64 67.91 68.56 59.36 40.03 13.02Others 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Availablefiiwds 80.69 112.38 136.62 136.40 127.67 92.79 69.45

Investments 60.66 96.80 154.40 145.16 138.28 78.26 36.66

Cash increase/decrease 20.03 15.58 -17.78 -8.76 -10.61 14.53 32. 79

Debt service coverage 1.79

Self finawing 20% P

go

cAz\x\amxe\j.x1s (sheet 3)o

- 93 - ANNEX3-19Page 19 of 24

INGDOM OF MOROCCOSECOND SEWERAGE AND WATER REUSE PROJECT

RAD - CASABLANCA

Table 3-19: Income Statenenb for 1990-1994(in current DH million)

Income Statnents 1990 1991 1992 1993 1994

Total Revenues (1) 191.51 245.73 221.25 146.57 151.65Working expenses (1) 132.49 165.28 153.33 88.95 81.44Depreciations & provisions 7.28 11.11 28.21 35.19 60.31

Operating income 51. 74 69.34 39.71 22.42 9.90

Interest 6.92 5.92 9.86 20.51 54.98Non operating income/loss 3.60 0.36 0.94 27.59 -10.73

Net income before taxes 41.22 63.06 28.91 -25.68 -34.35

Net income after taxes 41.22 63.06 28.91 -25.68 -34.35

Working ratio (%) 69 67 691 611 54Operating ratio (%) 73 72 821 851 93

(1) Revenues and working expenses include investment expenses purchased by RAD. The newaccounting chart recommends that investments should be recorded with fixed assets in the balancesheets. Starting 1993, appropriate adjustments and assumptions were made taking into accountauditors recommendations, and national accounting chart principles and procedures in recordinginvestment expenses.

c:\z\s\annexe\r&d.x1s (sheet 1)

- 94 - ANNEX 3-20Page 20 of 24

KINGDOM OF MOROCCOSECOND SEWERAGE AND WATER REUSE PROJECT

RAD - CASABLANCA


Balance Sheets 1990 1991 1992 1993 1994

Net Fixed Assets 380.14 493.02 581.18 1105.98 1584.96Receivable 223.98 317.52 314.60 161.73 105.22Other receivable 5.58 9.58 46.39 35.98 52.25Cash 0.00 0.00 0.00 0.00 245.00

Total Assets 609.70 820.12 942.17 1303.70 1987.43

Equities 336.39 427.18 460.46 530.70 552.28Retained eamings 214.62 277.68 305.97 280.22 245.53Long term debts 31.65 80.80 104.36 420.01 762.03

Other current liabilities 27.04 34.47 71.38 72.76 427.59

Total Equities & Liabilities 609.70 820.12 942.17 1303.69 1987.43

Debt/Equity Ratio in %5.143 10.28 11.981 34.12 48.85Current Ratio 8.49 9.49 5.065 2.721 0.94

c:\z\a\annexe\rad.x1s (sheet 2)

- 95 - ANNEX3-21Page 21 of 24


RAD - CASABLANCA

Table 3-21: Sources & Application of Fumds for 1990-1994(in current DH million)

Sources & Application of Funds 1990 1991 1992 1993 1994

Internal Cash generason 55.42 80.09 66.37 18.37 69.04Worling capital +/- 47.82 97.54 33.89 -163.28 -395.07Debt Service 6.92 5.92 9.86 23.72 76.21Customer contributions 55.41 90.79 21.71 58.67 21.58

Net cash generation 56.09 6742 44.33 216.60 409.48

Government contribution -4.07 -3.83 -5.53 16.16 0.00Borrowing 6.46 7.43 36.91 315.66 363.24

Available Funds 58.48 71.02 75.71 548.42 772.72

New investments 58.48 71.02 75.71 548.42 527.72Other capital expenditure 0.00 0.00 0.00 0.00 0.00

Cash increase/decrease 0.00 0.00 0.00 0.00 245.00

Debt Service __ 4.4

Self financing __ 31% _

c\z\s\annexe\rad.xls (sheet 3)


RAD - CASABLANCA

Table 3-22: Income Statements for 1995-2004(in cunrent DH million)

Income Statements | 995 1996 1997 1S 1999 2000 2001 2002

Total Revenues 205.95 233.98 265.67 302.04 342.80 389.66 442.54 502.79

Working expenses 113.17 129.19 118.59 129.84 142.74 157.31 171.19 183.28

Depreciations & provisions 59.59 63.63 72.36 83.93 90.99 94.74 95.89 96.71

Operating income 33.19 41.16 74.72 88.27 109.07 137.61 175.46 222.80

Interest 74.28 80.80 76.07 74.25 76.86 81.41 84.54 81.86

Non operating income/loss -21.30 -10.71 -11.82 -13.10 -14.54 -16.20 -18.07 -19.91

Net income before taxes -19.79 -28.93 10.47 27.12 46.75 72.40 108.99 160.85

Net income after taxes -24.39 -34.19 _ 6.70 17.35 29.92 46.33 69.76 103.95

Working ratio (%) 54.95 55.211 44.641 42.991 41.64 40.37 38.68 36.45

Operaing ratio(%) 83.88 82.411 71.84 70.78 68.18 64.68 60.35 55.69

c:Vza'annexMWad.ds (sheet 4)

0

EINGDOM OF MOROCCOSECOND SEWERAGE AND WATER REUSE PROJECT

RAD - CASABLANCA


Balance Sheets 1995 1996 7 199 19 2000 2001 2002

Net Fixed Assets 1541.76 1558.01 1636.58 1784.42 1915.25 1989.55 1990.55 1922.90Receivable 177.41 189.81 143.83 122.59 83.62 95.08 108.14 123.01 1

Other receivable 41.49 30.16 48.12 64.74 73.81 72.49 58.81 38.34

Cash 242.98 178.07 161.18 102.63 117.96 136.21 193.77 313.22

Total Assets 2003.64 1956. 05 1989.71 2074.38 2190.64 2293.33 2351.27 2397.47

Equities 559.35 581.16 606.34 635.84 669.51 708.44 752.88 794.37

Retained eanings 221.15 186.96 193.66 211.00 240.92 287.26 357.01 459.96

Long term debts 958.46 975.63 957.50 994.37 1038.78 1056.70 1005.09 912.05

Suppliers 169.44 132.68 147.32 142.22 143.68 135.37 121.92 106.68

Other liabilities 95.25 79.62 84.89 90.95 97.75 105.56 114.37 124.41

Total Equities & Liabilities 2003.65 1956.05 1989.71 2074.38 2190.64 2293.33 2351.27 2397.47

DebUEquity Ratio in % 55.12 55.95 54.481 54.01 53.29 51.49 47.521 42.10 0

Current Ratio 1.74 1.871 1.52j 1.241 1.141 1.261 1.531 2.05J

c:\z\nmnxo\rd.xIs (shea 5) 0r-l


RAD - CASABLANCA

Table 3-24: Sources & Application of Funds for 1995-2004(in current DH million)

Sources & Application of Funs 19 1996 197 18 19 2000 2001 2002

Interal Cash generation 82.01 92.52 135.34 153.37 172.94 194.60 218.84 246.52Woking capital +/- 224.33 53.46 -47.94 -5.56 -38.17 10.64 4.03 -0.43Debt Service 160.75 168.49 166.38 164.44 166.59 168.04 204.63 201.27Consumer contributions 28.37 32.52 37.00 42.59 48.21 55.12 62.52 61.40

'.0

Net cash generation -274.70 -96.91 53.90 37.08 92.73 71.04 72.70 107.08 X

Govemnment contribution 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00Borrmoing 281.53 102.27 66.96 119.75 127.28 100.81 67.79 26.36

Awulabe Funds 6.83 5.36 120.86 156.83 220.01 171.85 140.49 133.44

New investments 0.00 53.66 107.25 181.90 180.25 138.83 78.46 13.98Other capital expenditure 8.84 16.61 30.50 33.50 24.43 14.77 4.47 0.00

Cash increase/decrease -2.01 -64.91 -16.89 -58.57 15.33 18.25 57.56 119.46

Debt Service _ 1.27 _

Self finacing _ 38% _

c:Az\mexe\rad.xI (sheet 6)

0h

- 99 - ANNEX 3-2

Page 1 of 3

KINGDOM OF MOROCCO


ASSUMPIONS FOR FINANCIAL PROJECTIONS

Inflation

1. It is assumed that annual local inflation related to the increase in consumer prices willbe 4.5 percent in 1995, 4.3 percent from 1996 to 1999, and 4.2 percent in 2000 and thereafter.Annual foreign price increases are estimated at 4.5 percent in 1995, 3.3 percent in 1996, 2.3percent in 1997, 2.5 percent from 1998 to 2001, 2.4 percent in 2002 and 2.1 percent thereafter.The exchange rate in January 1995 was about DH 8.90 per US Dollar. It is assumed that theexchange rate will vary in relation with those of inflation rates.

Financial Forecasts

2. The Regies main financial statements, Income Statements, Balance Sheets and Sourcesand Application of Funds are summarized in Tables 3-1 to Table 3-18 in Annex 3-1.

Water Production and Distributions

3. Production and consumption of water are estimated to increase respectively by about 2percent in 1995 and 1996 and 3 percent per year thereafter for RAD, 2.5 percent per year from1996 to 2002 for RADEEMA, and 3 percent per year from 1995 to 2002 for RADEEF. TheRegies efficiency is expected to progressively improve, reaching 75 percent in 1998 for RAD,in 2002 for RADEEMA and in 2000 for RADEEF. The population served and new connectionsare forecast to increase by about 4.5 percent per year. New connections are assumed to increaseby about 30,000 for RAD, 42,000 for RADEEF and 25,000 for RADEEMA over the projectperiod (1995-2002). Other related activities increase would be based on the number of newconnections and consumers at the end of each year.

Revenues

4. Regies' revenues for each activity are forecast on the basis of the current average tariffapplied to the electricity and water consumers and to the volume of water consumed by usersconnected to sewer networks. These volumes are estimated to be equal to the volume of potablewater consumed. The average sewerage charge is DHl.00/m3 in 1995. It is expected to beincreased by 17 percent p.a. through 2002 and by the rate of local inflation thereafter. Theaverage tariff will be increased to DHl.25/m3 in 1997 and would be further increased by 25percent in 1998 and 1999, 10 percent in 2000, 20 percent in 2001, and 2002 and by 8 percentthereafter. Revenues related to works and services for all activities are based on average price

- 100 - ANNEX 3-2

Page 2 of 3

for connection and number of new connections, charges for clearing and cleaning, and localinflation rate.

Average tariffs taken into consideration are shown in the table 3-1A hereunder:

Table 3-1A: Average Tariff DR/mr3

19 6 1997 1998 1999 200 2001 2002

RAD 1.66 1.86 2.08 2.33 2.61 2.92 3.27

RADEEF

Sewerage 1.00 1.25 1.56 1.95 2.15 2.58 3.09

Water 4.34 4.79 5.28 5.84 6.48

Electricity 1.01 1.07 1.14 1.21 1.28

RADEEMA 1.48 1.63 2.04 2.44 2.93 3.22 3.55

Operational Expenses

5. Maintenance costs of the existing facilities are estimated on the basis of their currentvalue. They include materials and external services which are forecast respectively at about 3percent of the R6gie's gross fixed assets in operation depending on their composition and ageand the need for materials for house connections and network expansion. Wage increases areestimated at about 11 percent of which 8 percent is for salary adjustments. It is assumed thatthe number of RADEEF employees will increase by about 40 to fill new positions resultingfrom the extension of networks in areas of intervention and from creation of the new sewageactivities.

6. The Regies will pay the Government a 34 percent corporate tax based on their positivenet income or 2.5 percent based on their total turnover in case of negative net income.

Bad Debt

7. A provision for potentially bad debts of 3 percent of total revenues will be used over the1996-2002 period.

- 101 - ANNEX 32

Page 3 of 3

DQ=kcition

8. The Regies only depreciate assets with a life span of five years or less, overalldepreciation is replaced by a renewal reserve which represent 5 percent of total fixed assets inoperation. For the financial projection, the average depreciation for water supply and sewerageinfrastructure and equipment of the Regies is about 4 percent, and about 5% for electricityactivities in the line with the Moroccan accounting code.

Interest

9. New investments are assumed to be financed by loans at an interest rate of about 7.5percent p.a. and .025 percent commission charges with a repayment period of 20 years,including five years of grace. Financing will cover about 65 percent of the Regie's totalinvestment program. Charges for foreign exchange risks are borne by the Regies and recordedas non-operating revenues and/or expenses.

Non-operating revenues and/or expenses

10. Non-operating revenues and/or expenses take into account the exceptional profits resultingfrom reintegrating depreciation of assets financed through customer contributions, and exchangerisk born by the Regies.

Balance Sheets

11. Fixed assets have been brought into account in their historical cost. The new investmentsare assumed to be incorporated in the balance sheet at their actual cost. Concerning watersupply as well as sewerage activities fixed assets, the "Protocole d'Accord" provides that theseassets will be inventoried and revalued in line with the procedures recommended in the studyinitiated in 1993 in the framework of the ongoing Loan 2825-MOR.

12. Inventories are assumed to be equal to six months of expenditures for materials andsupplies. Account receivables are expected to decrease at the same pace as those for water billsfrom 9 months in 1995 to 3 months in 1998 for RADEEF. They will be kept at three monthsthereafter. This assumes settlement of cumulated arrears in 1994 over the period of 1995-1997and improvements in the billing and collection system of the Rgie. Suppliers are assumed torepresent three months of operating expenses and three months of investments. Other receivableand payable essentially comprise income and liabilities to be received and or paid as well asunpaid TVA to or by the R6gies and Treasury. Adjustment of previous accounts receivable andpayable as well as taxes and penalties due to the Government and various suppliers would beoffset in 1995, 1996 and 1997.

- 10a -

ANNEX 3-3

KINGDOM OF MOROCCO

SECOND SEWERAGE AND WATER RE&USE PROJECT

Sensitivity Analysis

A sensitivity analysis to test the expected financial performance of the project indicatesthat net cash generation and debt service coverage ratios are sensitive to changes in revenues andsize of investment program as shown in the following table. Tariffs, efficiency, and investmentsand their impact on revenues will therefore be closely monitored during project implementationwith a view to maintaining an appropriate level of financial and debt service coverage ratios.

Base Case RAD FES MARAK.

Cash generation 38% 33% 25%Debt Service Coverage 1.3 1.7 1.8Working ratio 42% 41% 48%Operating ratio 66% 83% 79%

Constant Tariff70% investments

Cash generation N.A. 17% N.A.Debt Service Coverage 0.8 0.7 0.8Working ratio 62% 69% 60%Operating ratio 95% 135% 110%

Base Case Tariff50% less efficiency

Cash generation 22% 30% 13%Debt Service Coverage 1.2 1.5 1.5Working ratio 45% 43% 52%Operating ratio 72% 87% 86%

Constant Tariff

Cash generation N.A. 1.1% N.A.Debt Service Coverage 0.7 0.3 .5Working ratio 63% 83% 71%Operating ratio 79% 155% 117%

KINGDOM OF MOROCCO


R. A. D. E. E. F.

SITUATION DES ARRIERES AU 31/12/1995

ColLectivit6s Locales TOTAL Administration

CONSOMMATION Eau et Electricit6 TRAVAUX CoLlectivites 1993 - 1995 TOTAL TOTAL

1987 -92 1993 -95 Locales Adainistration GENERAL

. TOTAL TOTAL Consommat ion Travaux

CONVENTIONNE IMPAYE SUR CONTENTIEUX CERTIFIE CONVENTIONNE A CONTENTIEUX

A ECHEANCE CONVENTION CERTIFIER

RADEEF 36,1 4,3 45,8 45,8 86,2 a8,5 170,7 51,8 26 77,8 248,5

PLAN D'APUREMENT

- Collectivites Locales sur 4 ans (1996 - 1999)-25% chaque annde- Administrations: sur 4 ans (1997 - 2000)

o0

CN

s ~~~~~~r'j

so = ituw wooI A mw so1 =; D wjt a bDm. i, 1 :J t t-. uc Ta-_)

IU NW. UW, m.uII 66. _ PtAl mJA _D - L5 i OD 11 nt Ho" g. 09 P P a 1 s 41 ) no 1HrC' o &so so PT-S- F % W D 1 am s DD SU= a')

I h 2 LgO J )On ! z -C VU *9 3N:I: i - Y **vtH 96L' I OD _U ua NWo 9Mi LJ tMEN s 9W uaMD 3 SC 0 0-?-t_ 3PCJ SC saUDD w

9. _t% -- r vs I WW La MRZI. , TsuaM,-c=Dm L , ;- L rw sD. X D tJOM mo rw vs 5 A,m o am lit wmsrOg so u a so K w tLi)

Ct0

I Ot8C tPf ' c Mi_ rvV Vr Igo; C c D1 1-: i: rL: = r f CE

I CD I G t C t t C O C 0 G D D D D D O JAt.

I~~~~~~~ ~~~~~ C f. C C C O O D C i C D

I, ;rj C C C C C ~~~~~~~~~~~C, c C. C c c c* c CC

t .I . C C, C C c- C c t'M

I tl Cg t C C I r C C C C CC 6; Sl D C A

ID C C C C, C C C C C, C C C C C C LI A.

,O . c c c c C t C - : C c ; C c C Cs C c:5.S

i DJ ~ t t CC C C C C C C O DC

i, I C C C C C C C C C C r C :C;,

1 9C C 1 C C C C C C C ClCLI C C C C C ±140

iD IC I C C C C L C C C C 0 C C C1 tCtD

I x7 I C C C C DC D C. CrtO.

za: C t * rC C C C C C t C C D r C r C C : d bo

; IC C C C C . I c t r r D C Li C. C C C biI0

r; C ; C Ct C !- C C Ct C C C Dt C C C CJ

I0L= t. ., C ,

C . !C. C C - sttr~t3

'i C- t C C C C C tt C C C C OIl l1 C. C D C C:

- I C I DI t

C C C C C_ Ci * °C'

C = .C

f SUDlUaAUC.a salp aldU U -U u C U-S nr- r IasuLMaZt-Mj8u; scMuca:8r3~~~,C43 - 3A1... AI~~~~~~~~~ V.~~ i~~ ~~ .1HZ WV,' ~~~~~~ ~ .~~~NC '~~ ~~A3~~YC' ~~~ C~~:C3I- ii~~~~~~' ~~

- 105 - ANNEX 3-5

KINGDONI OF MOROCCOSECOND SEWERAGE AND WATER RE-USE PROJECT

The World BanikINTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT 1818 H Street, N.W. (202) 477-1234INTERNATIONAL DEVELOPMENT ASSOCIATION Washington, D.C.20433 Cable Address INTBAFRAD

U.S.A. Cable Address INDEVAS

Rabat, le 1-er mars 1995

S.E. Monsieur le Ministre d'EtatA l'Interieur(DGCL)Ministere d'Etat A l'Int6rieurRabat

Objet : Arri6r6s dOs par les Collectivites Locales aux Regies dedistribution d'eau et d'electricit6, a l'ONE et A l'ONEP.- Demande d'audience.

Monsieur le Ministre d'Etat,

Je me permets de solliciter votre intervention, pour avoirl'honneur d'une audience aupr6s de S.E.M. le Secretaire General duMinistere d'Etat A l'Int6rieur et de M. le Directeur Gen6ral desCollectivites Locales.

En effet, l'apurement des arrieres cites en objet contribuerait defacon significative A re-etablir l'equilibre financier des Regies,de l'ONE et de l'ONEP. Par ailleurs, une partie des engagements desCollectivites Locales vis-a-vis des R6gies figure dans lesprotocoles d'accord passes le 16.12.1993 entre l'Etat et lesRegies, dans le cadre du 5-elme projet d'alimentation en eau potablefinanc6 avec le concours de la Banque Mondiale.

Etant donn6 le caractere complexe et delicat de ce dossier, ilserait A mon avis opportun de le discuter dans une seance detravail avec S.E. Monsieur le Secretaire General du Ministered'Etat A l'Interieur et M. le Directeur General des CollectivitesLocales, pour identifier la solution la plus appropriee pourl'apurement cit6 ci-dessus.

Veuillez agreer, Monsieur le Ministre d'Etat, l'assurance de matres haute consideration.

Chef Projet

BANQUE MONDIALE

Division Developpement du Secteur PrivgFinances et Infrastructure

Departement du Maghreb et de l'IranR6gion Moyen Orient et Afrique du Nord

- 106 -

MINISTERE DE LOINTERIEUR 1%,tlia. 1c {/ 7,18)1SECRETARIAT GENERAL

DIRECTION DES REGIESET SERVICES CONCEDES

N° 160/DRSC/DAF

1.1< A liVlS I'll 1)W'IET lA , A 'INVTlE'llDUR.

FT A L 'INFOR RIA17 0 NON

A!,. LES l)IR?ECTEURS GE'VERAU. DE.S R-EGIES DE:RA.Dl)-R ED.111A!. LES DIRECTEURS DES REGIES DE: RADEEA[-R IDEEF- RA DEE,1, l - RAt DEEO-&IA[S,A-RDE-RA ID-R'?DEEC-lL lDEE'r-RtDEES-ki4K-RA DEET,A-R.A/DEEJ- RA DEEN.-S/C DE Itfilf. LES I4LIS DU RAIND CASABLANC,.I-i;l Al.B T rS ALE -, IEKCNE.S- FES-MA ,, lolKECI- 0 UJDAl -,A,GADIRTETOU,AiV.S/C DE ,lI,lf.LES GOUVERNEURS DES PROVzINCES DE:TA NG ER-SE7TAT -BENI A1ELLAL-SAFI-KENITRA -TZA -

EL JADIDA-NADOR.

OI3,j :1' \ I\iilA YES DIES AD)MINISTRATIIONS.

11 a elc constate qu'un certain nomblre d'Adiniistrationis onitaccuiiiule des impay6s de consommiiationi d'eau et d'el6ctricit6 et cemialgrd la IllisC Cii place dii systlme des vignettes objet de. Ia Circulaire deNonIsiCuL Ic Premiicr Miiiiistre N'69/CAB du 13/11/1992

Cetie Circlaire a pr6conis6 la coupure pour toute po)lice dwitIa LtCIMact loll in'a pas 6et reglee daiis soni integrali(6.

Lors dc Ia r6uiiion du CIPEP, tenue cle 15 Novenilbre 1994, leiouverneimient a donin6 dcs inistructionis feriiids aux distributeurs (lercslcctcr leurs engnacrients a l'6gard dc leurs fournisseurs et au besoinIc proceder ~ la suspension de la fourniture de I'61ectricitd et de 1'eallpouir towLe Adiniiiistratioi (ilni ne r6gle pas ses factures dans Ies d6laisp)rdsc rits.

Coniptc lictn de cc (qui p)r6ceLIC, les regies sooit leinuleS deveilic- a la stricte application dce ces inistructionis.

En cas de conitestationi par une Adriiiistrarioni d'Ulle oUplusicurs factures, la r6gie (levra souniettre le dossier y aff6rent aMvronsieuir Ic Gotiverineur (le la Province oll de la Pr6fecture concerin6 afinu'tinc solutioin soit trouvec dlans on d6lai ne d6passaut pas 15 jooirs

Le [Iiiiistc ed' Etlt ia I' Phlit-iemiret S I' Inirormi.atioiiSiguiie: Dr-iss IIASItI

- 107 -ANNEX 3-7

Page 1 of 2

ROYAUME DU MAROC Rabat, le 15 JUIN 1995MlNISTERE DE L'INTERIEUR

SECRETARIAT GENERALDIRECTION DES REGIES ETDES SERVICES CONCEDES

N° 53 /SG

Le Ministre d'Etat a l'Int6rieur

AMessieurs les Walls du Grand-Casablanca - Rabat-SalW -

Mekin?s - Fes - Marrakech- Tftouan - OuJda-Angad - Agadiret Gouveueurs des Provinces de Tanger - Safi -

licnitra - El Jadida - Settat - Beni MeUal - Taza - Nador

03 DJ E T !: - Reglement des arrlres.

Lors (le la r1-6lIo11, tenue le 2 Juln 1995, au slegedu MilnIstre de 'lnitlrIeur, au sujcl de l'examnen du plan ded6veloppenicnt des lRcglcs et du problibne de leurs arrilres, II aelc6 constatl la Iciteur du processus de recouvrenient descr(aniccs donl sonl ltd6bItcuL-s, a .Icur cgard, lesAclriiiiilsiratiolis, Ics Collectlvil6s Locales, Ics E tablissemientshiblics c(. les particullci-s.

CctLc situaioni eniiti-aine des retards liiportaritsclans le palceiet par les R4dgles des arrleres contractls vIs avis de l'ONE1' et de l'ONE.

Cel etat de chose, s'Il s'telrnIse, ne nianquera pasde p)ortcr uil grave prejudicc au bDon fonctionneniient desInstiutlIons lpubliucs, en g6n6ral, cl des RegIes, enparlic ullcr-.

Aussi, cst-Il UrgCent ILIC CCS dernl6rcs prennenlt IcsiniesuIes appIr9pi-lees pour lt ie d6slntfressdes par seserancliers, qu'lls relevent de l'AdmilnlIstratlon ou des secteurspublic cl prIvc. Alrisi, cies scrotil cii mesuic dc proceder, dainsIcs d6laIs Ics nicillcurs, au r6gleimenit dces dicles 6eCIIucs CIIVClSVONE cl I'ONEI'.

ANNEX 3-7-108 - Page 2 of 2

A ce ULire, elles solIl lenues d'obseiver a la arigueurl'applicatlon des clauses des conventiorns passecs avec IcsOfflces producteurs et de falre pi-evalolr les clauses Iegales desauvegarde des conlrats d'aboninenient. souscrits librenienLpar les consoniiiiateurs.

P'ar ailleurs, 11 apparuLent aux WRgies d'adoplei- Icsnoriiies d'une gesiuon rationnelle eL, particulle-ement, des'assure- une maialtise parfalLe de la facLuraLlon, souventsoutrce dc coniiestatlon legItimie de la part des abdiiiis.

Le secteur de disLilbutioin de i'eau ct le Il'echricildrepr6sente, en effet, un doiialne shratlglque, lres senisible,qul touclie toule la population. C'esl pourqUOl, 11 doll elre geredans la plus par-falte transparence..

Jc vous linvite, aInisl que les P'r6sidents desComnmunauLes Urbalnes et les Presidents cles ConsellsMunicipaux Inntresses, a veliler scrupuieLIseileiiL A la bonnemarchie des R6gles.

J'appelle, 6galenienl, les Directeurs des WRgIes aal)pliqucr, avec fernimel cl iigucui-, les iinstluctionis colitelLuesdanis la Circulaire de Monsieur le Premiei Ministre n° 69/Caben date du 13 Novenibi-e 1992 et dans celle de Monsieurle Ministire d'Elat n° 160/DRSC du 7 D6cemiibre 1994auLorisaniL la COUr)LIIeC d'Catu cl fCIlectricite pour toute p)oliCedotiL la facLuratlon n'auira pas cle ri-gle dans soni inlL&graIIte./.

I.e lifin Ire J1 il I'lot:'rif-rnr

- 109 - ANNUAPage 1 of 8

IEINGDOM OF MOROCCOSECOND SEWERAGE AND WATER RIEUSE FROD3C

Economic Anvsk

1. The purpose of this note is to explain the underlying assumptions and the methodologyused in the calculation of the rate of return of the project components to be executed by theRegies. In Morocco, financial prices are close to economic prices, in particular with referenceto the exchange rate, interest, and tradeable commodities reflecting minimal overall distortionin the economy. The Standard Conversion Factor (SCF) has been evaluated, by the CountryOperation Division, at 0.90. Project investments and operating costs are expressed in constant1994 prices and are converted into economic costs by removing taxes and duties, and borderpricing the local component for all cost categories.

2. Investment costs associated with the rehabilitation of sewerage infrastructure, expansionof the network and treatment of effluents cover procurement of pipes, civil works, waste watertreatment plants, expenses for consulting services, studies, technical assistance and trainingcontributing to improving the efficiency of the existing system and expansion to unserved areas.Cost of connections and revenues from customers contributions were not taken into considerationin the evaluation of costs and benefits.

3. Fes is the only Regie for which the proposed project finances physical investments.However, the economic evaluation was carried out on the proposed investments of the threeRegies which were assessed during appraisal and it is presented hereafter. Directly quantifiablebenefits of the project components would be revenues generated by the collection and treatmentof waste waters carried by the system in Fes and Marramech and revenues generated by theadditional volume of waste water collected in Casablanca (extension and reinforcing of thesystem represent 85 % of the investment costs. In Casablanca, the project is expected to raisethe rate of connection to the sewerage system from 0.7 in 1996 to 0.79 in 2004. 900,000 newpeople will be served and 56 million m3 of effluents will be collected and channelled to theoutfall. The project components operated by RADEEF and RADEEMA which will likely starttheir first investments in this subsector under the proposed project, consist of large rehabilitationprograms (due to the obsolescence of the existing system) and the installation of a waste watertreatment plant to treat the current and projected volume of waste water. In FRs, the project isexpected to improve the connection rate from 0.69 in 1996 to 0.84 in 2004 serving 300,000additional customers. In Marrakech, the connection rate will increase from 0.8 in 1996 to 0.88in 2004 serving 100,000 additional population. In both towns, the project will benefit, however,the whole population since rehabilitation of the primary network and construction of the wastewater treatment plants will improve the service for all and will treat current and expectedeffluents. To evaluate these benefits, the assumption that 75 % of the effluents being producedby the population served through connections will be treated and will benefit from rehabilitation,was made.

4. The demand projections estimating the additional volume of effluents to be collected andtreated in the participating Regies during project operations are calculated with the sameassumptions that were adopted in the evaluation of the Vth Water Supply project, but they havebeen updated to reflect 1993 and 1994 real consumption levels. They are reported for 1995 and

- 110 - ANNEX 4Page 2 of 8

2000 in Annex 2-1. Revenues have been calculated by applying the projected tariff level in thefirst year of partial operation of the project, 1999. The tariff, expressed in constant 1995 prices,are 1.72 dh/m3 for RADEEF, 2.10 dhJm3 for RAD and 1.83 dh/m3 for RADEEMA.

5. The AIC of providing sewerage infrastructure connecting by 2010 93%, 85% and 94%of the population for RADEEF, RAD and RADEEMA respectively, was calculated. It was alsoassumed that the quality objectives would be maintained. The AIC represents in this case abenchmark value against which the projected financial tariffs are compared to assure thatresources are used efficiently (see Table 1,2,3, hereafter).

6. The main unquantified benefit of the project is the positive impact on health and theimprovement of the urban environment. Attempts to quantify, as benefits, the costs of treatmentthat would be saved if the morbidity rates of selected water borne diseases such as diarrhea,cholera, typhoid were decreased because of the implementation of the project were carried outduring preparation and pre-appraisal. At the moment, however, specific information ontreatment costs, length of the disease by age group and duration of hospital study for eachconsidered disease, are not available.

7. The practice of using raw waste waters for irrigation purposes is currently used on about700 ha in Morocco, two-thirds of which are in the Fes area. In Fes, the treated waste water willbenefit existing perimeters which are currently irrigated with raw sewage. In Marrakech, alarger area of agricultural land, around 2000 ha, designated for cultivation of olive trees, wheatand beans, would benefit from the treated waste waters.

8. Another way to look at the whole set of positive extemalities and benefits that sewerageinfrastructure can generate is to use hedonic pricing as an indication of the likely impact of theproject through a comparison of land values of a sample of areas before and after sewerageinfrastructure was implemented. During project preparation, each Regie conducted a smalsurvey to evaluate the differential in land values. According to several developers, the provisionof sewerage infrastructure can influence land value appreciation even more than electricity anddirect water supply. The survey was done in areas that were already fully equipped except forsewerage. Treating the provision of potable water, electricity and sewerage as equivalent to theprovision of complementary goods, it can be assumed that, i.e. only 30% of the appreciation isattributable to sewerage services. In the case of Fes, data was unfortunately not available;however, surveys conducted in Casablanca and Marrakech shed light on the range of the net landappreciation value that can be expected in Fes where land shortages are experienced. In the caseof Casablanca, the average appreciation spread was 300 dh/m2 over a sample of about 3,000 haof different location and nature of development; this would mean 2.7 billion DH (1994) areattributable to the expected benefits and extemalities of the provision of sewerage infrastructure.If the same average value was applied to the project areas (around 4,500 ha) where extensionsof the system and new connections are going to be implemented and accounted for in theprobable rental values of that land, the project would have an expected ERR of 28%. In thecase of Marrakech, the average appreciation value was much lower, 20 DH/m2, also reflectingthe abundance of land around the town; however, considering the areas that will be equippedduring project implementation or where major rehabilitation will reduce flooding of sewerage,the net land appreciation value would be 570 million DH (1994); also, in this case, the additionalvalue incorporated into the land price is substantial. Hedonic pricing helps quantify thosebenefits that the population will get from the project that would remain otherwise unaccounted

- 111 - ~~~ANNEX4Page 3 of 8

for with traditional economic evaluation techniques.

9. The R6gies apply differential water tariffs to residential customers, with the lowest tarifflevel applied to customers consuming 24 m3 or less per trimester. For RAD, the first Regie tostart operating sewerage services, those who fall into this tranche of consumption are currentlyexempted from paying user fees for sewerage service while a flat rate is applied to the othertranches of consumption. Based on the financial projections for the three Regies camed outduring the preparation of the Vth Water Supply project and the proposed project, the averagewater and sewerage charges are projected to reach their highest value in real terms by 200, thefollowing: DH7.5/m3 and DH8.7/m3 for RADEEF for the second and third tranche respectivelyat 1995 prices; DHIO.9/m3 and DH14.2/m3 for RAD and DH8.1/m3 and DHIO.9/m3 forRADEEMA.

10. Assuming that the tariff structure underlying the projected average would be the sameas the current structure, and that the structure of the consumption expenditure distrbution wouldbe the same as in 1990/911, in Fes the yearly payments for the consumption of 100 liters per dayper person in an average family of six people would be about 1.2% of the mean of theexpenditure distribution projected for year 2001, at 3 percent yearly increases in real termsduring the 1991-2001 period and measured at 1995 prices. The yearly payments would represent2 percent of the mean expenditure for consumption estimated for the cumulative distribution of44 percent of population. It would represent, however, 4.3 percent of the household budgetsof the urban poor. Assuming that the consumption of low income customers is likely to belower than 100 lI/d/p, i.e. 60 lI/d/p or 43 1/d/p, the budget share would be 1.8 and 0.8respectively due to the tariff structure that benefits low consumption customers. Table 5 showsthe budget shares for different expenditure groups calculated at 1988 tariffs and 2001 tariffs.The values of budgets shares indicate that the expenditures for water and sewerage accordingto the projected tariffs, are within the range of acceptability by Bank standards. However, thesecalculations were done using mean expenditures for consumption calculated in 1990/91 at thenational level for urban areas. Therefore, during negotiations, agreement was reached withRADEEF to carry out no later than December 31. 1998. a detailed tariff study for defining atariff structure more appropriate for keeping the budget shares of expenditures for water andsewerage under 5 percent of household income or expenditures, if the latter is the datumavailable. The study will also define the most appropriate and economically viable tariffstructure for each category of customers.

Kingdom of Morocco, 'Poverty, Adjustment and Growth", The World Bank, 1994, Volume II, Table 3.

KINGDOM OF MOROCCO

SECOND SEWERAGE AND WATER RE-USE PROEClT

Economic iustification

Table 1: Cost and Benefit Stream (1995 DH million)

REGIE: RAJFEF - Fes

1 2 3 4 5 6 7 8 9 10 11 12 13 14-20 21 22 23 24 25-40

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 010-16 2017 2018 2019 2020 2021-36

COSTS

1. Investments

- Pipelines and civil works 25.7 77.1 128.5 128.5 102.8 51.4

- Equipment 1.1 3.2 5.3 5.3 4.2 2.1 10.G 11.0

Consulting services, T.A., training 1.1 3.4 5.6 5.6 4.5 2.2

-Physical contingencies 2.8 8.4 13.9 13.9 11.1 5.6

Total Investments 30.7 92.0 153.3 153.3 122.6 61.3

2. O&M costs

- Pipelines and civil works 4.63 5.14 5.14 5.14 5.14 5.14 5.14 5.14 5.14 5.14 5.14 5.14 5.14 5.14

- Equipment 0.95 1.05 1.05 1.05 1.05 1.05 1.05 105 1.05 1.05 1.05 1.05 1.05 1.05

- Chemicals and energy 0.5 0.8 1 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2 1.2

- Personnel 3.3 4.2 5.2 6.2 7.1 7.8 8.4 9.2 10.0 10.0 10.0 10.0 i0.0 10.0 10.0 10.0 10.0 10.0 10.0

j - Frais generaux 1.00 1.27 1.55 1.86 2.14 2.33 2.53 2.76 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00 3.00

Total O&M costs 4.34 5.52 6.71 8.55 10.07 16.66 18.37 19.34 20.40 20.40 20.40 20.40 20.40 20.40 20.40 20.40 20.40 20.40 20.40

TOTAL COSTS 35.0 97.5 160.0 161.9 132.7 78.0 18.4 19.3 20.4 20.4 20.4 20.4 20.4 20.4 30.4 31.4 20.4 20.4 20.4

BENEFITS

Revenus fran additional waste 31.7 42.5 51.3 55.2 64.5 67.6 72.5 76.7 81.8 85.5 89.6 92.2 9.4 96.40 96.40 96.40 96.40 96.40

water collected and treated

BENEFIT-COSTS -35 -65.8 -117.5 -110.5 -77.6 -13.5 49.3 53.2 56.3 61.4 65.1 69.2 71.8 76.0 66.0 65.0 76.0 76.0 76.0

ERR and NPV 11.5% 58.13 Average 1999 tarif 1.72 95DH/m3

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-36

Totalg nvestments in fin. term. 31.9 101.3 166.3 167.7 137.0 79.5 84.1 85.6 88.8 90.7 92.7 94.6 96.49 98.41 100.3 41.29 41.29 41.29 41.29

Nctwatcrcollected 7.5 18.3 24.6 29.7 31.9 37.3 39.1 42.0 44.4 47.4 49.5 51.8 53.4 55.8 55.8 55.8 55.8 55.8 0

NPV (10%) of invcstments 952.2 m

NPV (10%) of collected water 375.6 4-

AIC 2.535 ° 1

m:\l«n\\Sy&5xC§d.xLS oD


Ecoenic iustification

Table 1: Cost and Benefit Stream (1995 DH million)

REGIE: RAD -Casablanca

1 2 3 4 5 6 7 8 9-20 21 22 23 24 25 26 27 28 29 30-40

1997 1998 1999 2000 2001 2002 2003 2004-15 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026-35COSTS

1. Investments

- Pipelines and civil works 25.9 77.6 129.3 129.3 103.4 51.7- Equipment 0.5 1.5 2.6 2.6 2.1 1.0 5.3 6.4- Consulting services, T.A., training 1.7 5.2 8.6 8.6 6.9 3.4

I - Physical contingencies 2.8 8.4 14.0 14.0 11.2 5.6Total Investments 30.9 92.7 154.5 154.5 123.6 61.8

2. O&M costs-Pipelines and civil works 4.66 5.17 5.17 5.17 5.17 5.17 5.17 5.17 5.17 5.17 5.17 5.17 5.17 5.17 1

- Equipment 0.369 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41 0.41

- Personnel 1.87 4.01 5.66 6 9g 9.67 11.12 12.01 12.89 12 89 12.89 12.89 12.89 12.89 12.89 12.89 12.89 12.89 12.89 12.89

Frais generaux 0.56 1.20 1.70 2.08 2-90 3.34 3.60 3.87 3.87 3.87 3.87 3.87 3.87 3.87 3.87 3.87 3.87 3.87 3.87

!Total O&M costs 2.43 5.22 7 35 9.03 12.58 19.48 21.19 22.34 22.34 22.34 22.34 22.34 22.34 22.34 22.34 22.34 22.34 22.34 22.34

ITOTAL COSTS I 33.3 97.9 161.9 163.5 136.2 81.3 21.2 22.3 22.3 27.7 28.7 22.3 22.3 22.3 22.3 22.3 22.3 22.3 22.3

BENEFITS

Revenus from additional 24.1 39.0 52.9 66.0 74.9 84.3 94.0 94.0 94.0 94.0 94.0 94.0 94.0 94.0 94.0 94.0 94.0 94.0

waste water collected

BENEFIT-COSTS -33.3 -73.8 -122.9 -110.6 -70.2 -6.3 63.1 71.7 71.7 66.4 65.3 71.7 71.7 71.7 71.7 71.7 71.7 71.7 71.7

ERR andMNPV _ _ _ 11.9% 71.47 _ Average 1999 tarif 2.10 95DH/m3

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 7008 2009 2010 2011 2012 2013 2014 2015-36Total Investments in fin. term. 95DDH 168.1 93.2 140.1 128.4 96.8 51.7 51.0 48.0 45.1 42.0 39.1 . ..' 33.7 31.3 29.1 10.9 9.9 9.0 8.2Net water collected 3.813 11.5 18.56 25.21 31.43 35.68 40.13 44 78 49.64 56.01 65.24 71.95 78.78 85.72 85.7 85.7 85.7 85.71 11NPV (10%) of investments 1182NPV (10%) of collected waler 464

m:\iaur%s=wi\a\spri.x1sA

1MNGDOM OF MOROCCO

SECOND SEWERAGE AND WATER RE-USE PlROJECT

EctDMic jsifiaio

Table 3: Cast and Benefit Stream (199 DH million)

REGIE: RADEEMA - Maakech

1 2 3 4 5 6 7 8 9-20 21 22 23 24 25 26 27 28 29 30-40

1997 1998 1999 2000 2001 2002 2003 2004-15 2016 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025-35

COSTS

1. Investnbts

- Pipelines and civil works 15.8 47.4 78.9 78.9 63.2 31.6

- Equipment 0.4 1.2 2.1 2.1 1.6 0.8 3.6 4.4

- Consulting services, T.A., training 0.9 2.6 4.3 4.3 3.4 1.7

- Physical contingencies 1.7 5.1 8.5 8.5 6.8 3.4

Ttal lnvestmnts 18.8 56.3 93.8 93.8 75.1 37.5 3.6 4.4

2. OhM costs- Pipelines and civil works 2.84 3.16 3.16 3.16 3.16 3.16 3.16 3.16 3.16 3.16 3.16 3.16 3.16 3.16

- Equipment 0.30 0.33 0.33 0.33 0.33 0.33 0.33 0.33 0.33 0.33 0.33 0.33 0.33 0.33

- Personnel 3.5 3.7 3.9 4.0 4.3 4.5 4.7 4.9 5.1 5.06 5.06 5.06 5.06 5.06 5.06 5.06 5.06 5.06 5.06

-Fraisgeneraux 1.05 1.10 1.16 1.21 1.28 1.34 1.41 1.47 1.52 1.52 1.52 1.52 1.52 1.52 1.52 1.52 1.52 1.52 1.52

Total OM costs 4.55 4.77 5.01 5.26 5.53 8.94 9.58 9.84 10.07 10.07 10.07 10.07 10.07 10.07 10.07 10.07 10.07 10.07 10.07

TOTAL COSTS 23.3 61.1 98.8 99.1 80.6 46.5 9.6 9.8 10.1 13.7 14.5 10.1 10.1 10.1 10.1 10.1 10.1 10.1 10.1

BENEFITS

Revemus from waste water 23.9 28.9 31.1 34.0 38.3 41.1 42.8 45.8 48.4 51.8 51.8 51.8 51.8 51.8 51.8 51.8 51.8 51.8

collcted and ttd

BENEFIT-COSTS -23.3 -37.2 -70 -68 -46.6 -8.19 31.48 32.93 35.75 34.71 37.29 41.69 41.69 41.69 41.69 41.69 41.69 41.69 41.69

ERR and NPV 11.2% 27.45 Average 1999 tarif 1.82 95DH/m3

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Totallnvestment infin.tcnm. 19.71 64.11 103.8 104 84.61 48.74 50.41 51.73 53.075 54.12 55.18 56.23 57.28 58.33 59.38 21.01 21.01 21.01 21.01

netwatercollectedandtreated 12.52 13.05 15.78 17.02 18.62 20.94 22.46 23.396 25.07 26.47 28.32 29.48 30.69 31.95 31.95 31.95 31.95 31.95 0

NPV of investments 574.8 f

NPV of collected war 213.9

AIC 2.69m:MdiUMWMmp2.xs X

KINGDOM OF MOROCCO



Table 4: Sensitivity analysis on ERR and IRR

RADEEF RADEEMA | RAD

VARIABLES ERR (%) NPV ERR (%) NPV ERR (%) NPV

(milLion 95DH) (miLlion 95DH) (million 95DH)

Base case 11.5 56 11.2 27 11.9 71

(a) 20% increase in investment costs 9.9 -3 8.9 -30 9.5 -22

(b) (a) and 20% decrease in benefits 7 -130 7.6 -70 8.4 -73

Switching values (at ERR = 10% RADEEF RADEEMA RAD

Reduction of expected additional 15% 8% 5%

consumption (% per year)

Connection rate in 2003 77% 81% 75%

RADEEF RADEEMA RAD

VARIABLES IRR (%) NPV IRR (%) I NPV IRR (%) NPV

(million 95DH) (million 95DH) (million 95DH)

Base case 10.9 35 10,7 16 11.4 53

(a) Benefits evaluated applying 14.7 207 16.6 163 18.6 48.3

financial projections at 1995 prices

(b) (a) and 20 % decrease in benefits 11.1 45 13.9 108 17.1 42.8

Switching values RAD RADEEF RADEEMA

Tariffs 1.73 94 DH/m3 1.57 94 DH/m3 1.7 94 DH/m3

C :\Zakia\Mor\Sergio\Annexe\Tabsen. xls

- 116 -

ANNEX 4KINGDOM OF MOROCCO Page 8 of 8



Table 5: Budget shares for water and sanitation in 1998 and 2001

1 case: 100 I/p/d for a family of RADEEF RADEEMA RAD

six people 1998 2001 1998 2001 1998 2001

Mean of the expenditure distribution 1.2 1.3 1.2 1.3 1.8 1.8

(9223 dh per year per person in 1990/91)

Mean of the expenditure for the cumulative 1.5 1.5 1.5 1.6 2.2 2.2

distribution of 61 % of population


Mean of the expenditure for the cumulative 1.9 2 1.9 2.1 2.9 2.9

distribution of 44 % of population(5786 DH per year per person in 1990/9 1)

Mean of the expenditure of urban poor 4.1 4.3 4.1 4.5 6 6.2

(10% of population)



six people 1998 2001 1998 2001 1998 2001

Mean of the expenditure of urban poor 1.7 1.8 1.6 1.8 2.9 2.6

(10% of population)



six people (< =24 m3 per quarter) 1998 2001 1998 2001 1998 2001

Mean of the expenditure of urban poor 0.8 0.8 0.7 0.8 1.2 1.2

(10% of population)


Note: The expenditure structure would be the same as 1990/91 structure and it was assumed that expenditure levels

would grow by 3 percent in real terms during the 1991-2001 period.

Every value used in the calculation was expressed at 1995 prices

m:\Iaura\mor\sewii\tab5 .xIs

- 117 -

KINGDOM OF MOROCCO


SELECTED DOCUMENTS IN PROJECT FILE

1. Aide-Memoire - Deuxieme Projet d'assainissement et reutilisation de 1'eau - Missiond'evaluation - 19 mai 1995.

Plan directeur d'assainissement de Fes (d6cembre 1995):

2. Mission 1. 1 - Tome 1 - Rapport final3. Mission 1. 1 - Tome 2 - Rapport final - Annexes4. Mission 1. 1 - Rapport final - Dossier des plans5. Mission 1.2 - Rapport final - Tome 1 - Avant Projet Sommaire6. Mission I.2 - Rapport final - Avant Projet Sommaire - Sommaire des Annexes7. Mission 1.2 - Rapport final - Avant Projet Sommaire - Plans8. Mission 1.2 - Rapport final - Tome 2 - Etude d'impact9. Mission 11. 1 - Rapport final - Organisation du Service d'Assainissement (RADEEF)

Deuxieme Projet d'assainissement et reutilisation de l'eau - EvaluationEnvironnementale - 3 volumes (avril 1995):

10. Volume 111. Volume 212. Volume 3

13. La Pollution des eaux de surface (Bassin hydrographique de S6bou) - 1994

IBRD 26877

36' 12° 36

TANGER Mediterranean Sea

MOROCCO RI ( TETOUAN

SECOND SEWERAGE AND WATER / RDEI /

RE-USE PROJECT HoroAheO ( CAoUEt---

REGIES LOCATION El 'K*,

ATLANTIC OCEAN / OU/ DA

___ r TACUNATE )~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~__1 OUDO

RE3 REGIES ,,f

O HEADQUARTERS OF REGIES /___ yRADERTA \

* PROVINCE CENTERS SERVED BY REGIES KENITRA,6 RA , E. TAZA Ji

MOUNTAINS S FES TAZA

ISOHYET TeAB4A E HEMISSET ME NES\ '_______

RIVERS AND WADIS Skh* uj

FES PROViNCE CAPITALS M.h.o-od, f _

RABAT NATIONAL CAPITAL RA BEN

- PROVINCE ROUNDARIES 'MANRu . .

-.- INTERNATIONAL BOUNDARY EL JAD-

- - - - INTERNATIONAL BOUNDARY (APPROXIMATE)

. /Khemis \ K /KHOURIBGA: _ 0 J,.~~~~~~~~~~~~~~~~~Nthm oP p ow.nceco,Isresm Oodo/ ZeTmo

nome pl plOVIIliE sopltnl , j/ ~~~~Benu 0 \t El Boro- _ tT'a "ITt

1320 (SAFI A - \ APPROX ATE BOUANDARY.FIGIG o) 3210

ESSAOUIRA MARAEC

KILOMFETERS *A. hlelloul .I '

TON ,t ~.'* OTATA , . ' i t * e _ o r n1

125 -t < , - MARCH lS><

IMAGING

Report No: 15433 MORType: SAR