Document of

The World Bank

FOR OFFICIAL USE ONLY

3785Report No. ?785a-TUN

STAFF APPRAISAL REPORT

TUNISIA

NATIONAL RURAL WATER SUPPLY PROJECT

(Sixth Water Supply Project)

April 5, 1982

Water Supply and Sewerage DivisionEurope, Middle East and North Africa Regional Office

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

(As of October 1981)

Currency Unit = Tunisian Dinar (D) 1,000 MillimesD 1 =US$ 2.00US$ 1 = D 0.500

ABBREVIATIONS

ft = foot m3/sec cubic meters per secondlcpd = liters per capita per day Mm3 million of cubic metersm = meter mm millimetersec = second gr/l = gram per liter

MEASURES AND EQUIVALENTS

Metric System US System

Kilometer (km) = 0.62 mile (mi)Hectare (ha) = 2.47 acres (a)Meter (m) = 39.37 inches (in)Cubic meter (m3) = 264 US gallons (g)Million cubic meters/year (Mm3/year) = 0.72 million US gallons per day

(mgd)Liter (1) = 0.264 US gallon (g)Liters per second (I/sec) = 22,800 US gallons per day (gd)

GLOSSARY OF ACRONYMS

ADB = African Development BankAFESD Arab Fund for Economic and Social DevelopmentDGR = Direction du Génie RuralIBRD International Bank for Reconstruction and DevelopmentIDA International Development AssociationIDB Islamic Development BankKfW = Kreditanstalt flUr WiederaufbauOED Operations Evaluation DepartmentONAS Office National de l'AssainissementPPAR = Project Performance Audit ReportRDE = Régie de Distribution des EauxRDP Rural Development ProgramSFD Saudi Fund for DevelopmentSIDA Swedish International Development AuthoritySMIG = Salaire Minimum Interprofessionnel GarantiSONEDE Société Nationale d'Exploitation et de Distribution

f des EauxUSAID United States Agency for International Development

SONEDE's FISCAL YEAR

January 1 - December 31

FOR OFFICIAL USE ONLYTUNISIA

NATIONAL RURAL WATER SUPPLY PROJECT

STAFF APPRAISAL REPORT

Table of ContentsPage Nc.

I. THE WATER SUPPLY SECTOR .................................. 1

General Features .......................................... i Water Resources .......................................... lPopulation and Service Levels ................ ........... 2Constraints and Priorities in the Sector ................. 3Previous Bank Loans and Credits in the Sector ............ 4SONEDE's Fifth Development Plan (1977-81) ................ 5SONEDE's Sixth Development Plan (1982-86) ................ 5The Rural Water Supplies Sub-Sector ...................... 7The Sewerage Sub-Sector .................................. 7

II. WATER DEMAND ............................................. 8

Water Consumption and Production ......................... 8House Connections ...................- 9Composition of the Demand ................................ 9Future Water Sales ....................................... 9

III. THE BORROWER ....

Background ............................................... IlPast Performance .........................................Organization and Management .............................. ilStaffing ................................................. 12Current Practices and Procedures ......................... 12Project Implementation Capacity .......................... 13

IV. THE PROJECT .............................................. 14

Project Genesis .......................................... 14Project Objectives ....................................... 14SONEDE's Sixth Development Plan (1982-86) ................ 15Project Description ...................................... 15Project Cost ............................................. 16Rural Water Supplies Component ........................... 16Selection Criteria ................. 17House Connections ........................................ 18

This report was prepared and written by Mr. Johan Van Beuzekom and Mr. NabilShebadeh.

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwisx be disclosed without World Bank authorization.

Table of Contents (Continued) Page No.

Water Meters ............................................. . ....... 19Procurement .............. ......... 19

Contract Review ..... . ................. ..... .......... . . . . s * s S 5 * 19Disbursements ................................ . . .......... 20

Disbursement Profiles ........ . .......... . 21Advance Contracting and Retroactive Financing ............ 22Monitoring System ...................................... . 22

V. FINANCIAL ANALYSIS . . .. ....................... . 23

Past and Present Financial Performance ................... 23Revenues .................................................. ........ 23Financing Plan and Future Financial Performance .......... 26

VI. JUSTIFICATION ............................................ 29

Least Cost Solution ........... ........................... 29Institution Building ... 0........................... 29Beneficiaries ..................... .... 29Affordability ...... 0........... ,... ,....... .* 30Economic Justification ..................... ............. 30Environmental and Health Aspects ......................... 30Risks .................................................... . ....... 31

VII. AGREEMENTS REACHED AND RECOMMENDATIONS ................... 32

LIST OF ANNEXES

Annex No.

1. Population Distribution2. Implementation Schedule3. SONEDE's Sixth Development Plan (1982-86)4. House connections: past and forecast numbers5. Repartition of water consumption over consumers6. Water consumption: past and forecast volumes7. Project cost and annual investments8. Selection criteria for rural centers9. Documentation for rural centers10. Statement of allocated creditsIl. Monitoring indicators12. Organization chart, SONEDE13. Income statement14. Cash flow statement15. Balance sheets16. Financial assumptions17. Selected documents in project file

Map No. 16155 - Tunisia: Major water supply systems

TUNISIA

NATIONAL RURAL WATER SUPPLY PROJECT

STAFF APPRAISAL REPORT

I. THE WATER SUPPLY SECTOR

General Features

1.01 Centrally located on the southern bank of the Mediterranean Sea,Tunisia occupies an area of 160,000 km2 which is rather poorly endowed withnatural resources. The Saharan Atlas that runs from west to east at about 280kms south from the northern coastline, separates the country into two distinctregions. To the north of the Atlas it is a semi-arid area where a majority of

the population lives and where potentially irrigable land is found. Indus-tries and other economic activities are concentrated in the northern coastalareas. The mean annual rainfall in this region fluctuates around 600 mm. Tothe south of the Atlas it is an arid land with an average annual rainfall ofless than 100 mm (see Map IBRD No. 14146).

1.02 Tunisia is administratively divided into 18 governorates, 136counties and 155 communes. Nearly half of the estimated total population of6.4 million, which is growing at an average annual rate of 2%, is consideredurban. More than one-third of the urban population resides in the two largestmetropolitan areas of Tunis and Sfax. Meanwhile, the rural population iswidely dispersed into more than 3,500 locations which are often isolated fromeach other and whose low density population to a great extent impedes rapidimplementation of water supply and sanitation systems.

Water Resources

1.03 The overall water balance in Tunisia is well known. The total annualexploitable water resources amounts to 3 billion cubic meters, of which 58% isalready under exploitation including 7% for potable water. By the year 2000,more than 90% of the exploitable water resources will be under exploitation,of which 22% for potable water. Most groundwater resources in northernTunisia have a limited capacity, making them only suitable for potable watersupply systems for smaller towns, the larger population centers being more andmore dependent on treated surface water. However, most of the fresh surfacewater resources are found in the north-west of the country, requiring largeimpounding reservoirs to optimize availability and long transmission mains andcanals to convey the water to the consumption centers. These problems arecompounded by the fact Éhat many groundwater resources and some surface waterresources have such a high salinity that, unless mixed with fresh water fromother resources, they are unfit for human consumption or even irrigation.Water demand for urban and agricultural use could soon exceed the availablewater resources, and does so already in the southern part of the country where

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resources are supplemented from the north, and by 1986 even Sfax will have tobe supplemented with water from the north. Consequently, it becomes graduallynecessary to resort more and more to desalination and reuse of treated waste-water.

1.04 Prospections have indicated large quantities of fossil groundwater inthe extreme south of the country, in the Continental Intercalaire aquifer(Jurassic) which extends as far as Morocco and the Continental Terminalaquifer (Miocene). The great depth (over 1,000 m), the high salinity (over 4gr/l) and the high temperature (70 C) of these aquifers make large scaleexploitation for potable water at the present non feasible.

1.05 The Ministry of Agriculture manages all water resources in thecountry. The "Société Nationale d'Exploitation et de Distribution des Eaux"(SONEDE), an autonomous public entity, which is supervised by the Ministry ofAgriculture, is responsible for the production and distribution of potablewater in urban areas and large villages. The Direction du Génie Rural (DGR)is responsible for the rural areas and villages with a population of under5Q*. Conscious of the need to conserve and use effectively scarce waterresources, the Government enacted in 1975 a water code to regulate the collec-tion and allocation of the water sources, and to establish usage priorities.As provided in the code, a National Water Committee was set up to assist theMinistry of Agriculture in the management of the water resources. The Govern-ment bas also prepared three master plans for long-range development and useof the water resources in the northern, central and southern regions of thecountry. The first phase of the Northern Master Plan, which involves theimpounding and transfer of the Medjerdah River waters, is under execution.The Bank is providing financial assistance to the Government (Loan 1431-TUN,Sidi Salem Multipurpose Project) for the execution of this phase. The secondphase is under preparation with assistance from the German Government. TheMaster Plan for Central Tunisia has reached the draft stage and is awaitingGovernnent clearance. The Master Plan for southern Tunisia has been com-pleted. Bank loan 1796-TUN is for the Southern Irrigation Project based onthis study. Finally, the Government is embarking on a potable water conser-vation plan which, in the long run, may reduce potable water consumption percapita by 15%.

Population and Service Levels

1.06 The latest census of 1975 recorded the total population at 5.6 mil-lion, of which 47.5% or 2.7 million lived in urban areas. Of the rural popu-lation, which in that year reached 2.9 million or 52.5% of the total popula-tion, only about one million resided in rural agglomerated villages. Theremaining rural population was dispersed in isolated scattered locations. Intbe last fifteen years the percentage of rural population compared to thetotal population has steadily decreased from 60% in 1966 to the present 50%.It is anticipated that the rural population will stay during the next tenyears at its present level of about 3 million to represent about 40% of thetotal population by 1990.

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1.07 The total population is projected to grow at an average annual rateof 2% through the end of this decade to reach 7.7 million by 1990 and 9.1 mil-lion by the year 2000. But the urban population would grow at a much fasterrate (about 3.3% per annum), with a substantial part of this growth stemmingfrom rural migration to urban areas. The population distribution betweenurban, rural agglomerated and rural isolated, is likely to continue to move infavor of the urban population, with the rural dispersed population accountingfor less than 20% of the total population by the end of this century (seeAnnex 1). In the event of the population growing at a faster rate than 2 percent, e.g. 2.2% as assumed by some planners, the impact on the project wouldbe favorable as the number of beneficiaries would increase marginally in theearly stages.

1.08 More than 80% of the urban population is concentrated in cities withmore than 10,000 inhabitants. About 12% of this population or 400,000 peoplehave an income below the Bank-adopted Urban Poverty Threshold (UPT) of D 120(US$ 240) per person per year. Almost half of the rural agglomerated popula-tion lives in villages of less than 500 inhabitants. Some 70% of the ruralagglomerations, or about 3,025 villages, have less than 200 inhabitants. Asthe average per capita investments in water supply increase as the number ofpeople per system decreases, it is understandable that SONEDE concentrates itsefforts on the medium-size cities and the larger rural agglomerated villages.

1.09 Presently, about 64% of the total population has access to safe pipedwater supply. This includes almost all of the urban population (about 97%) ofwhich about 80% are supplied with water through private house connections. Inthe rural areas only about 24% of the population has access to safe publicwater supply, and of these about one in five through private house connec-tions. These service levels compare favorably with similar countries innorthern Africa.

Constraints and Priorities in the Sector

1.10 The major constraint to rapid expansion of public potable watersupply in Tunisia is the remote location of fresh water sources from the urbancenters, which requires the construction of long transmission pipelines. Theresult is that water is very costly because of high capital and operatingexpenses of these pipelines. Another constraint is the high salinity of manysources of which water can only be used in conjunction with fresh water fromother sources. The per capita investments in transmission facilities tend to

become prohibitive as the population per system decreases.

1.11 Because of the high investment costs, the multitude of small rural

agglomerations and budget constraints, the Government has given its firstpriority to the urban sector where it could serve more people with its limitedfinancial resources. The Government's objective for this sector is to have92% of the urban population connected to the water supply systems by the endof 1986. The Government's second priority is to provide about 60% of theagglomerated rural population with potable water in 1986. The scattered ruralpopulation has not yet received much attention, because their settlements are

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generally not large enough to warrant the installation of public water supplysystems which would entail exorbitant per capita investments. These peopleobtain their water from shallow wells, irrigation canals, cisterns or publictaps at the nearest center.

Previous Bank Loans and Credits in the Sector

1.12 Since 1968, the Bank Group has become extensively involved in thesector and bas assisted in financing five projects of SONEDE (four loans and acredit). SONEDE itself was set up in 1968 under the first Bank operation.The first loan (581-TUN) of US$ 15 million, made in January 1969, was tofinance water supply works in the regions of Tunis and Sousse. In June 1970the International Development Association made a credit (209-TUN) of US$ 10.5million to assist in the financing of improvement and expansion works in eightareas of the country. These first two projects were jointly financed with theSwedish International Development Authority (SIDA). These two projects con-stituted the major part of the National Water Supply Program for the 1968-73period. The projects were successfully implemented albeit with some delay,and are the subject of a Project Performance Audit Report prepared afterclosure of the loan and the credit in December 1976 by the Operations Evalua-tion Department (OED) (February 1978). The main conclusions of the PPAR arethat the success of these two projects is mainly due to the presence of anefficient autonomous institution whicb was created in the framework of thefirst project, and an equitable tariff policy which insures the financialviability of this institution. A second loan (989-TUN) of US$ 23 million wasmade in May 1974 to help SONEDE finance the construction of water supplysystems for the second largest city, Sfax. This loan was closed on June 30,1980. A related Project Completion Report was issued on June 25, 1981 and ispresently being reviewed by the OED. The project was also successfully imple-mented and the main objective to supply the city of Sfax with sufficient waterof an acceptable quality was achieved. A lesson learned from this project,which is now consequently being implemented by the Bank, is not to appraise aproject on the basis of feasibility studies which were weak and incomplete.The project design and appraisal estimate had to be revised during the imple-mentation period, causing cost and time overruns. In June 1977 the Bankapproved a loan of US$ 21 million (Loan 1445-TUN) to finance the constructionof production and distribution facilities in five northern provinces. TheKuwait Fund for Arab Economic Development is co-financing this project. InMay 1979 a sector loan of US$ 25 million (Loan 1702-TUN) to finance the watersupply in a number of rural villages was approved. In addition, the BankGroup assisted in the financing of a tourism infrastructure project (Loan858-TUN and Credit 329-TUN of September 28, 1972), which included water supplyworks valued at US$ 18.5 million. Finally, the Sidi Salem Multipurpose Pro-ject (Loan 1431-TUN) includes a potable water supply component. This projectwhich is mainly geared towards agriculture, includes the construction of theSidi Salem dam. A portion of the water stored in the reservoir behind the damwill be conveyed to the Tunis, Cap Bon and Sousse areas and will help tosatisfy the domestic and industrial water demand.

1.13 SONEDE's performance under these Bank operations has been good, withthe result of great improvements in the sector. The percentage of urban popu-lation connected to the systems, which was only 43% in 1968, has now reached80%. Today SONEDE is a financially viable public entity managed by experi-enced and dedicated staff.

SONEDE's Fifth Development Plan (1977-81)

1.14 SONEDE performed well in implementing the Fifth Development Plan.The objective that it had set to serve 64% or 4.1 million of the estimated1981 population of 6.4 million has been attained. Of this population segment68% or 2.75 million are served through private bouse connections. During thePlan period the consumed volume of potable water increased at a rate of 7% peryear from 98 million cubic meters in 1977 to 140 million cubic meters in1981. Of the total investment program which amounted to D 173 million incurrent prices, 162 million or 94% has been realized. As inflation was higherover the Plan period than anticipated, in constant prices about 89% of theFifth Plan has been realized. The under-run is mainly caused by delays in therealization of the Sahel project caused by the late delivery of the requiredpipes. The investments were financed by internal cash generation (D 36.1 mil-lion), consumers' contributions (D 32.1 million), Government contribution (D37.4 million) and loans (56.4 million).

SONEDE's Sixth Development Plan (1982-86)

1.15 The Government's objectives for the 1982-86 Plan period in the urbanwater supply sector are to keep abreast of the increasing industrial, touris-tic and domestic water demand, and to augment the proportion of the urbanpopulation having direct access to piped water in their homes from the present80% to 92%, leaving only 8% of the urban dwellers depending on public stand-pipes for their water supply. Simultaneously, and as one of the efforts todiscourage urban migration, the Government intends to improve service levelsin the rural areas by improving the water supply systems in 76 semi-ruralcenters, and by providing new water supply systems in 212 rural centers. Theagglomerated rural population that is going to have access to a safe watersupply would accordingly increase from the present 675,000 (45%) to about900,000 (60%), of which one in three is expected to be served through aprivate house connection.

1.16 SONEDE has, based on sound technical and economic studies, prepared aFive Year Development Plan (1982-86) detailing the investments necessary toachieve the above-mentioned objectives. After discussions between SONEDE, therelevant authorities in'the supervising Ministry of Agriculture, the Ministryof Finance and Planning and the Bank, the Plan bas been reduced from an origi-nal D 340 million to D 275 million (in current values) by deferring someinvestments of lower priority, and, being considered the least imperfect solu-tion, is now acceptable to all parties concerned. The related project imple-mentation schedule is shown in Annex 2. The investment plan (see Annex 3) canbe sub-divided into several categories.

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A. Ongoing major projects (D 51.2 million)This category includes the major regional projects which were startedduring the Fifth Development Plan. Studies have been completed and execu-tion is in progress. Cost estimates are based on contracted prices andexpected price adjustments. The projects concerned and the estimatedcurrent investment costs are:

i. Water supply for Tunis and Cap Bon (D 8.2 million).

ii. Reinforcement of the distribution network in Greater Tunis (D 8.5million).

iii. Supplying the Sahel with water from the north (D 26.8 million).

iv. Industrial water for Gabes (D 1.7 million).

v. Water supply in southern Tunisia (D 6.0 million).

B. New major projects (D 113.5 million)This category includes the new major regional projects of which implemen-tation is expected to start during the Plan period. All studies for pro-jects in this category are in progress or have been completed. The pro-jects concerned and their cost estimates are:

i. Water supply to Bizerte, Menzel Bourguiba and Mateur (D 19.8 million).

ii. Distribution network for the Sahel (D 11.8 million).

iii. Improvements to water distribution in Sfax (D 5.2 million).

iv. Supplying Sfax with water from the north (D 39.0 million).

v. Water supply in the Cap Bon area (D 5.0 million).

vi. Renewal of supply lines to Tunis (D 2.0 million).

vii. Water supply in the extreme south (D 30.7 million).

C. Ongoing routine projects (D 68.0 million)This category includes projects related to normal expansion of productionand distribution systems in middle sized towns; all renewals; acquisitionof equipment and supplies; and construction of office and workshop accom-modation for SONEDE. Cost estimates amount to D 68.0 million, made on atrend basis and recent unit prices.

D. Projects in rural areas (D 42.4 million)This category covers SONEDE's involvement in the rural areas and includestwo types of project:

i. Improvements to water supply systems in 76 larger rural and semi-urban centers (D 24.0 million).

ii. New water supply systems for 212 rural centers (D 18.4 million).

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The Rural Water Supplies Sub-Sector

1.17 Water supply for the dispersed rural population, including thoseliving in centers with a population of less than 500, falls within the purviewof the "Direction du Génie Rural" (DGR) of the Ministry of Agriculture. Theactivities in this sub-sector have remained rather limited during the FifthPlan period (1977-81) and investments amounted to only D 15 million. About1800 water points were constructed or improved, 900 wells were sanitized andequiped with hand-pumps and simple water supply systems were constructed inabout 260 rural centers. The Government intends to boost these activities,and plans to more than double its investments for the Sixth Plan period (1982-86) with D 20 million in the budget of the Ministry of Agriculture and asimilar amount to be provided by the Rural Development Program for projects tobe executed by the DGR. Major constraints to develop this sub-sector are thehigh costs of per capita investment without cost recovery, and the lack of anefficient institution to operate and maintain the installations.

The Sewerage Sub-Sector

1.18 The service level in the sewerage sub-sector is significantly lowerthan in the water supply sector. In the rural areas, virtually no publicsewerage exists, but most houses provided with private water connectionspossess individual waste water disposal systems (septic tanks or seepagepits). Most urban areas possess rudimentary sewage collection systems, albeitonly an estimated 40% of the urban population have their dwellings connectedto a public sewer (against 71% for Greater Tunis). In an effort to improve onthis situation, the Government, with Bank assistance, established in 1974 anational sewerage authority, the "Office National de l'Assainissement" (ONAS),which is responsible for the planning, construction, operation and maintenanceof sewerage systems, as well as for flood control. Up to now ONAS has concen-trated its activities on Greater Tunis, Sfax and tourism areas, and hasaccepted responsibility for the 23 largest communities in the country, cover-ing about 56% of the urban population, with a connection rate of 62%. ONASintends to expand its activities, in order to cover all urban areas by 1990and achieve a connection rate of 60% by 1986 and 80% by 1990. It investedabout D 65 million during the Fifth Development Plan (1977-81) realizing about20% above its planned activities. For the Sixth Development Plan ONAS hasprojected investments up to D 160 million, D 40 million for Greater Tunis andD 120 million for the remainder of the country.

1.19 The Bank has been active in the sewerage sub-sector and made a firstloan of US$ 28 million to the Government (Loan 1088-TUN - First Urban SewerageProject, February 1975) for the expansion of sewage collection systems andtreatment plants for Greater Tunis. A second loan of US$ 26.5 million (Loan1675-TUN - Second Urban Sewerage Project, April 13, 1979) was made forsewerage works in Greater Tunis and Sfax. The Bank also financed a TourismInfrastructure Project (Loan 858-TUN and Credit 329-TUN of September 1972)including US$ 16.6 million for sewerage works. A third loan is in preparationfor 30 medium sized towns.

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Il. WATER DEMAND

Water Consumption and Production

2.01 Accurate figures on water production and consumption are availablefrom as far back as 1966 when all house connections were metered and a rigidmaintenance program was introduced. In that year, when only about 40% of theurban population had access to piped water in their homes, 88.5 million cubicmeters (Mm3) of water were produced of which only 52.7 Mm3 were sold, theremaining 40% being unaccounted fori/. Since then, water sales have beengrowing at an average annual rate of 6.7% to reach 140 Mm3 in 1981 when 80%of the urban population were served through private house connections, and theunaccounted-for water was reduced to 30%. Still, this percentage of unac-counted-for water is, according to sound engineering standards, somewhat high,and SONEDE's objective is to reduce it to 25% by 1990 and 20% by the year2000. To achieve this SONEDE has started the preparation of a water conserva-tion plan. Preliminary studies have indicated that, in the long run, the unitconsumption of potable water could be reduced by 20% to 30% through a numberof measures, such as a leak detection campaign, the compulsory use of lowwater consumption fixtures, such as shower heads and flush toilets, therecirculation of industrial water and reuse of purified waste water. The Planwill include a campaign for improved service or replacement of faulty watermeters and the installation of divisional and production meters in order tomonitor the results. The Bank plans to assist SONEDE in the further prepara-tion and implementation of this water conservation effort during future super-vision missions, by making specific expertise available.

2.02 The average water consumption per connection in the Greater Tunisarea dropped from 386 m3 /year (176 lpcd) in 1973 to 248 m3 /year (113 lpcd)in 1980. This reflects the fact that, with time, more and more of the poorerpeople, consuming less water, are provided with house connections. In therural areas and the smaller towns the average consumption has always been lowand, per connection, remained virtually constant at 135 m3 /year (62 lpcd)over the same period. The average water consumption per public standpiperemained around 3000 m3 per year, or about 10 liters per capita per day.The per capita consumption is expected to increase slowly with the increase ofthe standard of living, while consumption through standpipes will slowly bephased out.

1/ The percentage of unaccounted-for water such as computed by SONEDE is madeup of: (i) water used for fire fighting and street cleaning, which isestimated to account for about 5% of the total production; (ii) defectivedomestic meter recording which is suspected to be about 3% below realsales volumes; (iii) production overestimation, known to be important forold springs and wells and believed to average 10% to 15%; and (iv) leaksin the networks, which are estimated to account for 7% to 10% of the totalproduction.

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House Connections

2.03 The number of house connections, which was 86,000 in 1966 at a ser-vice level of 40%, has increased rapidly at an average rate of 12% per year toreach 465,000 in 1981 at a service level of 80%. As most of the backlog hasbeen made up for, growth is expected to slow down to a rate of about 6% peryear, and the number of house connections is expected to increase 35,000 per

year to reach 800,000 by 1990. Annex 4 shows the actual number of connectionsfrom 1975 to the present date, and the forecast number up to the year 2000, aswell as the apportionment between the different categories.

Composition of the Demand

2.04 A breakdown of water consumed in 1975 and 1981 apportions the varioususes as a percentage of total use as follows:

1975 1981

…-----%…-------Domestic (house connections) 49.2 50.9Domestic (public standpipes) 6.0 3.0Public 24.5 22.5Commercial and industrial 12.8 17.0Tourism 7.5 6.6TOTAL 100.0 100.0

Most water consumed in Tunisia is for domestic and public (government,schools, hospitals, etc.) use, accounting for about 80% of total consumptionin 1975 and 77% in 1981. The commercial and industrial use covers about 13%

of total use in 1975 and 17% in 1981, reflecting a moderate but growing levelof industrialization, compared to industrialized countries where this levelusually lies above 35%.

2.05 Of SONEDE's clients, 26% consume less than 10 m3 of water perquarter or in the aggregate 3.4% of all water .sold; 77% consume less than 40m3 per quarter, the quantity sold in the lower tariff bracket, being in theaggregate 32% of all water sold. On the other end of the scale, 1.8% of theclients consume more than 150 m3 per quarter, or in total, 28% of all watersold. Annex 5 illustrates the repartition of water consumed per consumer, aswell for domestic consumption as for total consumption.

Future Water Sales

2.06 Figures on the actual quantities of water produced and consumed from

1975 up to 1981, and forecasts up to the year 1986 and beyonid, are summarizedin Annex 6. Future water sales have been projected making use of three dif-ferent methods, the analytical method, the trend method, and the method making

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use of mathematical models. In the first method, forecasts are elaborated forconsumption in Greater Tunis and in the remainder of the country, and sub-divided into domestic consumption, standpipes, public consumption, tourism,industry and other, and based on population growth, service levels and unitconsumption. In the second method the same geographical repartition has beenmaintained, and future consumption has been estimated by extrapolating pastconsumption trends. The third method is based on mathematical models wherethe consumption is expressed as a time function and based on statisticalfigures from the 1973-80 period. All three methods only slightly consider theproposed water conservation measures (para 2.01) as the overall impact isstill unreliable. The results of the mathematical model have been adopted forthe long term forecast up to the year 2000. The results of the three methodsare very close and give estimated water consumption in millions of m3 asfollows:

FORECAST WATER CONSUMPTION

1982 1983 1984 1985 1986

-----------million m per year-------------

Analytical method 147.6 159.0 169.8 180.4 190.8

Trend method 150.2 159.4 169.2 179.8 191.1

Mathematical model 149.5 159.6 170.4 181.9 194.2

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III. THE BORROWER

Background

3.01 The borrower of the proposed sector loan would be SONEDE, thenational water supply authority, which was established in 1968 to replace aGovernment office, the "Régie de Distribution des Eaux (RDE)", in an effort toimprove the financial and technical management of the sector. SONEDE has thestatus of an autonomous public enterprise, and is managed as a commercialundertaking. It is owned by the Government and operates under the tutelage ofthe Ministry of Agriculture. SONEDE is the borrower and beneficiary of pre-vious Bank Group lending to the sector (Loan 581-TUN, Credit 209-TUN, Loans989, 1445 and 1702-TUN), as well as the executing agency for the water supplycomponent of the Tourism Infrastructure Project (Loan 858-TUN and Credit329-TUN) and the Sidi Salem Multipurpose Project (Loan 1431-TUN).

Past Performance

3.02 As previously mentioned (paragraph 1.13), SONEDE has successfullyimplemented the projects financed by the first Bank credits and loans. Mostof the project facilities became operational in 1978, and water supply ser-vices in the project areas have since greatly improved. The implementation ofthe fourth and fifth water supply projects (Loans 1445 and 1702-TUN) is pro-gressing well and according to the appraisal schedule. The setting up ofSONEDE has also been successful and has produced the reforms necessary forimproving water supply operations in the country. At the end of 1981, afterthirteen years of operations, SONEDE has more than doubled its water sales(from 63.4 Mm3 in 1968 to 140 Mm3 in 1981), and more than quadrupled thenumber of house connections (from 102,000 to 465,000).

Organization and Management

3.03 Annex 12 shows the current organizational structure of SONEDE. ABoard of twelve members, chaired by SONEDE's General Manager, supervises thecompany's activities. Nine Board members are public officials and representthe Government Ministries and other public agencies involved in the waterresources sector. The remaining three Board members, though appointed by theMinister of Agriculture, represent the private sector and SONEDE's customers.The overall control exercised by the Government, beyond the appointment of theBoard Directors, covers other decision processes such as approval of thecompany's investment programs, borrowings and tariff levels.

3.04 The General Manager is appointed by the Minister of Agriculture andis responsible for the day-to-day operations which are handled by five depart-ments; two departments for production and distribution in Greater Tunis andthe rest of the country, and three for new works, engineering studies, andadministration and finance. Two divisions in charge of internal audit and

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organization, and operational control assist the General Manager in preparinglong-range planning and policies. Under the existing agreements for the pre-

vious loans, SONEDE is committed to consult with the Bank before making any

changes in its organization and administrative structure.

Staffing

3.05 At the end of April 1981, SONEDE's staff numbered 3,820, or anaverage of 1.06 employee per 1,000 people served. This ratio is consideredadequate for SONEDE's decentralized organization type, and should decreaseslowly, as SONEDE is now sufficiently staffed with engineering and administra-tive personnel to meet the requirements of further expansion of its opera-tions. SONEDE's salaries and conditions of service are competitive with thoseof other sectors and are adequate to recruit and retain qualified personnel.

3.06 Current staff training in SONEDE is considered satisfactory. In col-laboration with the Employment and Training Office, SONEDE maintains a con-tinuous training program for its personnel. In addition, a number of short-term seminars covering various aspects of its operations are arranged eachyear by SONEDE for its staff. It also regularly arranges for overseasscholarships for its engineers to specialize in sanitary engineering and otherareas related to water supply. SONEDE is also giving attention to the train-ing of its staff on the planning, financial and economic evaluation of pro-jects. In the future, the staff will be encouraged to follow specializedcourses of the Economic Development Institute of the Bank Group and of otheradvanced institutions.

Current Practices and Procedures

3.07 SONEDE's accounting system is comprehensive. Its financial accounts,billing of water sales, related charges and new connections, inventory controland payroll are performed on a computer programmed and operated by its staff.A cost accounting section monitors the cost effectiveness of each section andactivity. SONEDE performs annual physical inventory controls and recordedlevels of inventories are reliable.

3.08 SONEDE's operations are monitored by a Technical Controller and aFinancial Controller who are appointed by the Government, and who are advisorymembers of the Board of Directors. In addition, an external audit of SONEDE'sfinancial statements is carried out annually by independent auditors who areacceptable to the Bank. The existing arrangements between the Bank and SONEDEprovide for the submission to the Bank of the auditors' annual report withinsix months after the close of each fiscal year. Future audit reports willinclude a paragraph on expenditures made for works carried out on forceaccount and credits made to low income consumers (see para 4.21). In thepast, audits have been satisfactory and received with only slight delays. Thecovenant on audit has been restated in the agreement for the proposed project.

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3.09 SONEDE bills its customers on a rotating basis every three months forthe volume of water consumed and for a fixed charge covering meter rent andconnection maintenance. Collection from customers is efficient. As ofDecember 31, 1980, accounts receivable stood at about 2 months of sales.Accounts receivable from private consumers were at about 55 days of billing,while accounts receivable from the Government offices and municipalities wereat about 109 days of sales. The Government, at SONEDE's request, had put intoeffect a special collection system from Government agencies. The system,which was extended to include municipal authorities in 1978, is based on earlytransfer of a portion of the water consumption budget at the concernedagencies to SONEDE, with accounts to be settled at year end. The existingagreements between the Government and the Bank commit the former to take allnecessary steps to enable SONEDE to receive full payment for water consumed byall national, regional and municipal entities within 120 days of billing.However, since such payment is made through budgetary allocations under theGovernment collection system from Government agencies, it is proposed to main-tain the corresponding covenant in the legal documents.

3.10 SONEDE carries insurances covering motor vehicles, fire damages forbuildings, third party liability and special coverage for damages caused bypolluted water accidentally distributed by SONEDE, all of which are consideredadequate. SONEDE is self-insured for workments compensation and has set up aspecial fund for this purpose. Projections of the fund requirements indicatethat the current contributions towards this fund are sufficient. All supplyand civil works contracts for the project will be insured by private companiesagainst loss and damage in shipment, accidents, fire and property damages.

Project Implementation Capacity

3.11 Although, at first glance, SONEDE's Sixth Development Plan appears tobe rather ambitious, being 60% higher in current values than the Fifth Devel-opment Plan, in constant values or in physical volume it is only about 8%higher. SONEDE has the capacity to implement such a Plan, having satisfac-torily implemented the Fifth Plan and having increased its staff by about 25%over the last Plan period (1977-81). For the coming Plan period, 1982-86,this growth is expected to continue at a somewhat slower rate of 2% per year,which, however, will be more than adequate to cope with the additional work-load. Likewise, it is not expected that SONEDE will encounter major difficul-ties in preparing the 200 or so studies required for the rural centers. Thedesign office is well staffed, with over 30 highly qualified and well moti-vated senior professional staff, including engineers, hydrologists, statisti-cians, and an economist, supported adequately by lower level staff. Besides,eight more engineers are expected to be engaged before May 1982. In order tostreamline design procedures, SONEDE is establishing three regional designoffices, attached to the regional directors, which will inter alia facilitateand speed up the gathering of basic information for the central design office,and undertake designs of the simpler projects on the spot.

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IV. THE PROJECT

Project Genesis

4.01 The proposed project is the result of a continuing dialogue betweenthe Bank and SONEDE on the sector development and ways to finance SONEDE'sinvestments. This dialogue has in the past resulted in five Bank projects andthe establishment of SONEDE during the first one. In the framework of thefifth project SONEDE has undertaken to prepare a study called the "NationalWater Supply Plan", including a review of past performance, service levels,objectives for future involvement and a tariff study. The study recommends arevised long term financial policy based on a financial equilibrium for SONEDEwhere revenues should cover all normal current expenditures and debt serviceand a self-financing of 40% of new investments (see Chapter V). On the basisof this study, SONEDE has prepared its Sixth Development Plan for the period1982-86 and proposals for a tariff increase in line with the new financialpolicy. The proposed project would result in a Bank participation of about 6%in the financing of SONEDE's Sixth Development Plan (1982-86).

Project Objectives

4.02 The objectives of the project are;

(i) to strengthen SONEDE in:

(a) its financial position by supporting the adoption of a new longrange financial policy aiming at a "Financial Equilibrium" whichwould allow SONEDE to self-finance about 40% of its futureinvestments through inter alia periodic tariff adjustments

(b) its involvement in the rural areas;

(c) its capacity for developing and managing sector type projects.

(ii) to induce other financing agencies (international, bilateral and pri-vate) to participate in the financing of SONEDE's Development Plan.Experience has demonstrated that the Bank's involvement in projectsacts as a catalyst to other lenders, so although the Bank's financialcontribution would only represent about 6% of SONEDE's Sixth Develop-ment Plan, it would greatly enhance SONEDE's creditability for otherloans, thus ensuring a total financing of the Development Plan.

(iii) to improve living conditions in the rural areas by making safe wateravailable to an increased portion of the rural population;

(iv) to encourage the less affluent section of the population in urban aswell as in rural areas to connect up to the piped water supply sys-tems by providing them with credit facilities for the related costs.

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(v) to reduce potable water consumption through the preparation andimplementation of a water conservation plan.

SONEDE's Sixth Development Plan (1982-86)

4.03 The proposed project covers a small portion of SONEDE's Sixth Devel-opment Plan as described in paragraphs 1.16 and 1.17. The Plan is well pre-pared and based on sound technical and economic studies and least costsolutions, and includes all investments required to achieve the objectives theGovernment has set for the Sixth Plan period (see para. 1.16). These objec-tives are realistic and aim at maintaining and slightly improving the servicelevels in the urban areas and greatly improving the service level for theagglomerated rural population, in a general effort to enhance agriculturalproduction by improving living conditions in rural areas and discouragingmigration of rural dwellers to urban areas.

4.04 The bulk of SONEDE's investments are planned to be realized duringthe first three years of the Plan period (D 178 million out of D 275 millionin current values) so that unavoidable and unforeseeable delays will have onlya minor impact on total investments planned for the five year period. It hasbeen estimated that out of the planned D 275 million in current values (D 234million in constant March 1982 values), D 264 million in current values (D 224million in March 1982 constant values) or about 95% can be realized (see Annex3). An implementation schedule (Annex 2) indicates a tentative timing for allactivities related to SONEDE's sixth investment plan, including the proposedBank project.

4.05 SONEDE proposes to finance its investment plan for 24% out ofinternal cash generation, 20% out of consumers' constributions, 39% fromidentified and expected external borrowing and 17% from Government contribu-tions, as discussed in detail in para. 5.14.

Project Description

4.06 The proposed project would be a sector loan covering SONEDE's activi-ties in the rural areas and the house connections program, both for a threeand a half year period (January 1982 - June 1985) and would include:

(i) the expansion and improvement of existing water supply systems andthe construction of new water supply systems in about 150 ruralvillages and semi-urban centers, all having populations over 500, andassuming that about 60% of the villages and centers included in thePlan would be eligible for Bank financing;

(ii) credit facilities for low-income customers of SONEDE, covering thecost of the individual bouse connections and related works;

(iii) the acquisition of about 80,000 water meters for the house connec-tions mentioned above.

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Project Cost

4.07 The project cost is estimated at D 31.8 million (US$ 63.6 million)

with a foreign exchange component of D 16.0 million (US$ 32.0 million),expressed in March 1982 prices, and is made up as shown in the followingtable. The detailed project cost and annual investments are set out inAnnex 7. Total required Bank financing including the 1.5% front end feeamounts to uS$ 30.5 million.

PROJECT COST

Local Foreign Total Local Foreign Total

------D million------ ------ us$ million------

I. Rural Centers 8.160 8.025 16.185 16.320 16.050 32.370

II. House Connections 7.000 7.000 14.000 14.000 14.000 28.000

Sub-Total 15.160 15.025 30.185 30.320 30.050 60.370

III. Water Meters 0.620 1.000 1.620 1.240 2.000 3.240

Total project cost 15.780 16.025 31.805 31.560 32.050 63.610

Front end fee - 225 225 - 450 450

Total required financing 15.780 16.250 32.030 31.560 32.500 64.060

4.08 The cost estimates include all taxes and customs duties, amountingto 20% of the total cost, as well as physical (15%) and price contingen-cies. The Government has requested that the 1.5 per cent front end fee, orapproximately US$ 450,000, be financed out of the Bank loan. Price escala-tion, for local as well as foreign procurement, is projected to average8.5% for 1982 and 7.5% for 1983 through 1985. The current exchange rate ofthe Tunisian dinar to the US dollar (IUS$ = DT 0.500) is assumed to remainconstant during the project execution.

4.09 The Bank loan of US$ 30.5 million would cover the full foreignexchange cost of the rural centers and house connections component as wellas the front end fee. Local cost for these components and the cost ofwater meters will be borne by SONEDE and government equity contributions.

Rural Water Supplies Component

4.10 SONEDE has an ongoing program to expand its activities in therural areas and plans, in the framework of the Six.th Development Plan(1982-86), to introduce new water supply systems in about 212 villages

scattered all over the country. The population of these villages, which donot possess public water supply systems at the moment, varies from 500 to

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2000, with an average around 600. The inhabitants of these villages dependfor their water supply on usually polluted sources, such as wells, surfacewater, or rainwater, or they fetch water from a neighbouring center alreadyprovided with a public water supply system. Water vendors flourish inthese villages, selling water at prices as high as 10 millimes per liter.This same expansion program also includes for the Plan period 76 largevillages and semi-urban centers where SONEDE is already in charge of thewater supply, but where urgent improvements and extensions to the produc-tion or distribution systems are necessary. These centers have a popula-tion varying from 2000 to 20,000, with an average of about 3,800.

4.11 The rural water supplies component of the proposed Bank projectconsists of a slice of this ongoing program, covering practically allinvestments during the first three years of the Plan period (1982-84). Theestimated project cost amounts to about 60% of the planned investments forthe Plan period. A selection procedure, described in detail in para. 4.12,will ensure that priority is given to those centers where, with the limitedfunds available, benefits are maximized.

Selection Criteria

4.12 The proposed project will yield benefits to three types of con-sumers: (i) those having no access to a public water supply at the momentand who would be provided with water through public standpipes; (ii)similar to the first group, but who would be provided with water throughprivate house connections, and (iii) those consumers in the larger vil-lages, now having access to public water through standpipes, and who,thanks to the project, would be be able to obtain water in their homesthrough private house connections. Each type of beneficiary will benefitthrough the consumption of an increased quantity of safe public water, andin order to maximize the benefits of the project, the cost of water must beminimized. Accordingly, the main selection criterion is related to themarginal cost of water for the system under consideration, which should belimited to a predetermined ceiling value. This value has been so deter-mined that 60% of the projects qualify, and is computed making use of astatistical model based on the analysis of a representative sample of 15village water supplies. The resulting selection criterion is that the mar-ginal cost of water for any village under consideration should be less thanUS$ 1.50 equivalent per cubic meter in 1981 values. The method of calcu-lating the marginal cost for each rural water supply system is exposed inAnnex 8. The adopted ceiling value is reasonable and amounts to about 2.8times the average marginal cost of water in Tunisia as a whole. As can beexpected, the cost of water in rural centers is higher than the averagecountry cost because of a lack of economy of scales and the unfavourableclimatological and hydrogeological conditions in the interior, where mostof the villages are situated. Other selection criteria include (i) thetotal estimated project cost per village water supply system should be lessthan US$ 1.5 million equivalent in 1981 prices; (ii) the proposed projectshould be the least cost solution; (iii) sufficient water resources for thelife span of the project should have been identified and (iv) local costfinancing should be secured. Sub-projects satisfying all five selectioncriteria would automatically qualify for financing under the Bank project.

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Sub-projects not satisfying one or more of the selection criteria would

require a special justification by SONEDE and the explicit approval of theBank to qualify for Bank financing.

4.13 For each sub-project SONEDE will prepare a feasibility study andan appraisal report following the outline given in Annex 9. For sub-projects satisfying all selection criteria, SONEDE will make these reportsavailable to the Bank for ex post review. For sub-projects not satisfyingone or more of the selection criteria, SONEDE will forward these reports,together with an additional project justification, to the Bank for ex antereview and to obtain explicit approval in writing for Bank financing.SONEDE demonstrated its capability and capacity to prepare these studiesand reports, based on design criteria acceptable to the Bank, in the frame-work of the fifth water supply project whicb is progressing satisfactorily.

4.14 During negotiations assurances were obtained from SONEDE that itwill follow the selection criteria as described in para. 4.12, and pre-pare and forward to the Bank, before related bids are awarded, the feasi-bility studies and appraisal reports as described in para. 4.13.

House connections

4.15 SONEDE has an ongoing program to install house connections onforce account and is expecting to install about 35,000 house connectionsper year during the Sixth Plan period (1982-86) (see Annex 4). A bouseconnection becomes the property of the consumer after having been installedby SONEDE at cost. The water meter remains the property of SONEDE, forwhich the consumer is charged a rental fee which he pays quarterly,together with a maintenance fee for his connection and the charges for theconsumed water. SONEDE extends credit facilities to low income consumersso that they also are able to connect up to the water distribution system.Records show that about 75% of all connections are made on credit. Thecredit program is, however, declining as SONEDE has difficulties in secur-ing the required foreign exchange. In order to safeguard the credit pro-gram, which secures access to safe potable water for the poor, a houseconnections component, covering 75% of a three and a half year slice ofSONEDE's house connections program has been included in the proposed Bankproject. The Bank will finance the foreign exchange component of the bouseconnection, estimated at 50%, and SONEDE will finance the local cost com-ponent. SONEDE will submit to the Bank, on a monthly basis, a list of allbouse connections that benefited from a SONEDE credit, showing the amountsof the granted credits (see Annex 10), and the Bank will reimburse theforeign exchange component of 50% to SONEDE. Credit facilities are onlyextended for domestic supplies to consumers owning their bouses, or toleaseholders subject to agreement of the owner, who assumes joint liabil-ity. Commercial and industrial consumers are excluded. Experience hasshown that virtually all connections made on credit belong to low incomeconsumers, consuming less than 40m3 per quarter, and 18 m3 per quarteron the average. It is therefore agreed not to burden the application pro-cedures more by imposing additional eligibility criteria. The interest

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rate will be the average between the Bank rate (11.6%) and the Tunisian re-discountable rate (9.75% in 1982). Moneys received from clients in repay-ment of their credits will be used again to finance additional houseconnections. During negotiations, assurances were obtained that SONEDE'scredit facilities for financing house connections will be based on aredemption period of five years, and an interest rate which will be theaverage between the rate for local medium term credits available to SONEDEand the Bank rate, and will be in the order of 11% p.a.

Water Meters

4.16 The third and last component of the proposed project covers theacquisition of the water meters required to implement SONEDE's house con-nections program (see para. 4.15). As the water meters remain the propertyof SONEDE and are not covered under the credit facilities for house connec-tions, they are included in the proposed project as a separate component.SONEDE intends to purchase the water meters of local manufacturers throughLCB, and finance the purchase from its own resources.

Procurement

4.17 The rural water supplies component of the proposed project willcomprise a large number of small sub-projects widely dispersed, both intime and location. It is therefore not expected that contracts for civilworks, including the laying of pipes, and with an estimated total volume ofUS$ 16.5 million, will attract international attention. Local competi-tive bidding, according to SONEDE's standard procedures which are accept-able to the Bank, is therefore the most efficient and economic method ofprocurement, and is foreseen for all works contracts under US$ 800,000equivalent. For the exceptional civil works contracts above US$ 800,000ICB is foreseen. For works in some of the smaller and isolated villages itwill even be doubtful to attract local contractors at reasonable rates. Itis therefore foreseen that 15% of the civil works, representing up toUS$ 2.5 million, will be executed under force account by, or on behalf of,SONEDE.

4.18 Most of the equipment and pipes and fittings with an estimatedtotal amount of US$ 17.5 million will be procured in bulk by SONEDE and putat the disposal of the civil works contractors. These contracts will beprocured through international competitive bidding (ICB) in accordance withthe Bank's guidelines, and a margin of preference of 15% or the actualcustoms duties (whichever is less) will be allowed for domestic manufac-turers. Smaller contracts, for which grouping is not practicable and forwhich ICB would be too cumbersome, will be procured through local competi-tive bidding, in accordance with SONEDE's standard procedures which areacceptable to the Bank. For this type of contract, an individual andaggregate ceiling of US$ 200,000 and US$ 1 million have been agreed upon.

Contract Review

4.19 Between 100 and 150 contracts are expected to make up the esti-mated US$ 18.5 million in the materials supply category under the proposed

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project. A proposed threshold of US$ 200,000 for prior Bank review ofprocurement documentation would result in about 15% of the number of con-tracts covering about 80% of the value contracted. On that basis about 20contracts amounting to about US$ 15 million over the five year procurementperiod would be subject to prior review. Random checking of smaller supplycontracts would be carried out in the field. About 200 contracts areexpected to make up for the estimated US$ 13.8 million in the works cate-gory. Most of these contracts will be small with an average value of US$70,000, and are expected to be local. They will be checked at randomduring supervision missions, with the exception of the very few contractsabove US$ 800,000 which will be subject to prior Bank review.

Disbursements

4.20 The proposed loan of US$ 30.5 million would be disbursed againstthe cost of the project items as follows:

Category Amount of the loan % of expenditureallocated expressed in to be financed

US$ million

1. Civil Works

(a) Carried out by 4.80 40contractors

(b) Carried out through 1.00 40force account

2. Acquisition of materials 8.25 100% of foreign(with or without instal- expenditure andlation) 60% of local

expenditure

3. Credits to low-income consumers 14.00 50

4. Front end fee on Bank loan 0.45 amount due

5. Unallocated 2.00

TOTAL 30.50

4.21 Disbursements for works on force account, and for credits allocatedto consumers, will be made against certificates of expenditure and statementsof allocated credits, as this is the only practicable method. The supportingdocumentation is not to be submitted for review but has to be retained bySONEDE and kept available for inspection by the Bank during the course ofsupervision missions (see Annex 10). SONEDE has the administrative andaccounting capability to prepare and maintain the necessary records, and

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furthermore, these certificates of expenditure and statements of allocatedcredits will be audited by independent auditors who are acceptable to the Bank(3.08).

4.22 The closing date of the proposed loan would be December 31, 1986 toallow sufficient time to complete the project and to release retention monies.

4.23 The estimated schedule of disbursements is as follows:

Estimated schedule of Disbursements

FY and semester Disbursements Cumulative %per semester----------- US$ millions----------

1983Ist Semester 3.46 3.46 il2nd Semester 4.70 8.16 27

1984Ist Semester 4.26 12.42 412nd Semester 5.06 17.48 58

1985lst Semester 4.64 22.12 742nd Semester 4.28 26.40 88

1986lst Semester 2.00 28.40 952nd Semester 1.00 29.40 98

1987Ist Semester 1.10 30.50 100

Disbursement Profiles

4.24 Statistical evidence in the Bank shows that disbursements for theWater Supply sector in the EMENA region extend over an eight year period,while country-wide disbursement for Tunisia was extended over seven and a halfyears. Taking into account that the proposed project is a sector loan cover-ing a three year slice of a small portion of SONEDE's investment plan, and therelative efficiency of the implementing agency, it is highly probable that theproposed project can be completed and fully disbursed within a five yearperiod.

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Advance Contracting and Retroactive Financing

4.25 The proposed project covers a portion of SONEDE's Development Planfor the 1982-86 period, of which implementation will be started on January 1,1982. Studies for the water supply systems in the rural areas are welladvanced and the first bid documents are expected to be ready early 1982.Except for house connections, no expenditures of any importance are expectedto be made before the signing of the loan, which is expected to take place inJune 1982. The house connections component of the proposed project consistsof a slice of a continuing program where SONEDE is expected to allocatecredits as from January 1, 1982. It would mean undue hardship and sufferingfor the truly needy if the house connections program had to be delayed forabout six months, till after the signing of the loan. Also, in order to con-tribute to a speedy and effective execution of the project, it is recommendedthat SONEDE be allowed advance contracting in accordance with the Bank'sguidelines, and retroactive financing for the house connections component upto an amount of US$ 2.0 million, which is about 7% of the loan amount.

Minitoring System

4.26 During project execution appropriate indicators will monitor thefinancial and technical targets set for the project. Annex 11 provides theforecast values of these indicators which have been discussed with SONEDEduring negotiations, and which may be adjusted annually in agreement with theBank. Assurances were obtained during negotiations from SONEDE that:

(i) it will report quarterly to the Bank on the progress of the projectcomponents and on the evolution of the relevant monitoringindicators; and

(ii) it will take any reasonable remedial action discussed with the Bank,should this become desirable, for the proper execution of the pro-ject, the efficient management of the institution, or meeting thetargets as set by the monitoring indicators.

Progress in the execution of house connections to be financed under the res-pective project component will be monitored through the statements on allo-cated credits.

4.27 Also, agreement was reached at negotiations that within six monthsfollowing the closing date of the loan SONEDE will prepare and submit to theBank a completion report on the execution and the initial operation of theproject components, the costs and the benefits derived or to be derivedthereof, the performance and the fulfilment by SONEDE of its obligations underthe Loan Agreement, and the accomplishment of the objectives of the Bank loan.

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V. FINANCIAL ANALYSIS

Past and Present Financial Performance

5.01 SONEDE's income statements, cash flow statements and balance sheetsfor the years 1978 through 1981 are shown in Annexes 13, 14 and 15. SONEDEhas in the past (1978-1981) earned a surplus averaging US$ 6.0 million (D 3.0million) a year. The average rate of return on its net fixed assets in opera-tion, after deduction of customers' contribution, and estimated assets in vil-lages with less than 2,000 inhabitants!/, fluctuated between 8.1% and 11.4%during the period 1978 to 1980 and satisfied the financial covenants for theseyears. During the same period the operating ratio varied beween 63% in 1979and 76% in 1980. Preliminary results of 1981 indicates, however, a decline inprofitability. This is due to rapidly increasing operating costs resultingmainly from general salary adjustments in the.country, and deferral of actionon tariffs until the beginning of 1982 when the Sixth Development Plan andrelated financing plan are determined (para. 5.08 below). Including the pre-liminary results of 1981, SONEDE has financed about 38% of its investment pro-grams out of internally generated funds and customers' contributions over theperiod 1978-1981; in addition, the Government contributed about 22% of theseinvestments in the form of equity. The remainder (40%) was financed throughmedium and long-term loans.

5.02 The major part of SONEDE's initial equity was provided by the Govern-ment in transferring the ownership of fixed assets (less related debts) of the"Regie de Distribution des Eaux" (RDE) to SONEDE (see para. 3.01). Theseassets were valued at about US$ 32.0 million (D 16.0 million). With itssteady improvement in surplus earnings and customers' contributions SONEDE wasable to build up its own equity which passed from D 93.0 million in 1978 toD 154.3 million in 1981. SONEDE's funds constitute 55%-60% of its equity,while the remainder is provided by accumulated Government contributions.

5.03 SONEDE's working capital (current assets less current liabilitiesexcluding customers' deposits) was adequate in the last four years. The cur-rent assets/liabilities ratio averaged about 1.1 during this period and isprojected to stay at the same level in the years covered by the projections.Cash balances were adequate also for day-to-day operations and they are pro-jected to increase slightly with regard to the requirements of operation. Thedebt:equity ratio which remained around 25;75 between 1978 and 1980 is fore-cast to increase to a level of 34:66 between 1982 and 1987. SONEDE's debtservice ratio was satisfactory at a level of approximately equal to or higherthan 2.

Revenues

5.04 SONEDE derives its revenues essentially from water sales through con-nections which are practically all metered, and from charges for meter rentals

1/ This definition was agreed upon under the Fifth Water Supply Project toSONEDE (Section 5.05 of Loan Agreement 1702-TUN).

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and connections maintenance. Water consumed through standpipes is paid for bythe communities. In addition, new customers pay the cost of their connectionsplus a contribution towards the capital cost of the distribution network and adeposit covering at least three months of service. SONEDE levies for theGovernxnent a tax of 4.3% on water sales, and of 7.5% on services. SONEDEaccords credit facilities to the new low income customers for payment of theconnection costs and contribution to the cost of the distribution networks.Credit plus interest is repaid over a five year period with installments addedto customers water invoices billed quarterly. Up to the end of 1981, con-sumers were charged interest on these credits at 8% per annum; effectiveJanuary 1982 this rate was increased to 11% per annum (para. 4.15).

5.05 SONEDE's average tariff until the end of 1981 was about D 0.120/m3

(US$ 0.24/m3). The related tariff structure which is uniform throughout thecountry, was implemented in late 1979 and was sufficient to finance theCompany's operations, debt service and a considerable portion of its invest-ment program. With the effects of inflation and based on a new approachlinking action on tariffs to a self-financing ratio of its investments program(paras. 5.08, 5.09), it became necessary for SONEDE to adopt increases intariffs in 1982. A two-step tariff increase in 1982 had been approved bySONEDE and the Government: the first increase went into effect in February1982 and the second one is scheduled for July 1, 1982. With the implementa-tion of these two increases the average tariff would be about D 0.175/m3

during 1982 implying thus an increase over 1981 average tariff by about 45%.A comparison of both the current and planned tariff structures with the formerone is as follows:

Old Ist increase 2nd increaseConsumption Structure (February 1982) (July 1982)

…D/m 3-------D/mJ per quarter…--------------

Domestic first 20m3 ? 0.068 0.068 0.068Commercialf second 20m3 0.075 0.085andIndustrial) next 3Om3 0.110 0.130 0.150

any excess 0.150 0.220 0.250

Public and Standpipes 0.110 0.130 0.150

Tourism 0.220 0.300 0.300

5.06 The new tariff structure maintains progressive rates for all types ofconsumption other than public and tourism, and reduces the first block of pro-gressive rate from 40m3 to 20m3 per quarter which is more in line withbasic needs threshold. The rate for this block is maintained at its previouslevel while the new block corresponding to the second 20m3 per quarter wasestablished at a rate 10% higher than the basic tariff. All other tariffshave been increased at rates that vary between 20% for consumption in thelower brackets and about 47% for consumption which exceeds 70m3 per quar-ter. Tariffs for this bracket, as well as for tourism, were established on

- 25 -

the basis of economic cost of water with the objective to induce largeconsumers to restrict their water usage, which in turn would help to reduceSONEDE's capital outlays. The tariff structure shows that tariffs for thesehighest brackets approximate the long run average incremental cost of watersupply in the country based on 10% discount factor (D 0.275/m3).

5.07 While consumers who consume less than 20m3 per quarter will sufferno increase in their water bîlls under the new structure, low income consumerswho on average do not consume more than 40m3 per quarter would bear a slightincrease of about 5% in their bills but will maintain the share of theirspending on water consumption to their revenues within the affordability mar-gin (para. 6.05). The tariff structure takes into account the high cost ofmeeting peak demands of tourism and industrial facilities. The impact of thenew tariff on the average hotel operating cost per bed per night, will be veryslight (0.1%). With regard to industrial use, the increase will be easilyabsorbed as the cost of water represents between 0.5% to 1.4% of the totalcost of purchase of materials for industrial process.

5.08 SONEDE was requested by the Bank under the Fifth Water Supply Project(1702-TUN) to undertake a review of its financial policies and objectives toensure the continuing rapid development and self-financing of the sector. Thereview was prepared simultaneously with the preparation of SONEDE'S investmentplan for 1982-86, which is part of the Sixth National Development Plan cover-ing the same period. The concept of financial equilibrium was introduced bySONEDE, in concurrence with the Government, with the aim to ensure that a sub-stantial portion of SONEDE'S capital requirements be financed by its owninternal cash generation. Tariffs should be established accordingly on thebasis of economic criteria and affordability in the case of low incomecustomers. A similar review will be made systematically within the prepara-tion of future five year plans and tariffs should be revised on an annualbasis or as required during the plan period to compensate for inflation and toensure the achievement of the self-financing ratio.

5.09 SONEDE'S approach is sound as it links action on tariffs in thefuture to its self-financing ratio of its capital requirements. Furthermore,the proposed objectives, which would also ensure an acceptable rate of return(Para 5.16) would assist in obtaining the Government's understanding andendorsement for a timely action on tariffs, and, hence, in ensuring SONEDE'Sfinancial viability.

5.10 Thus, and based on the understanding established under the FifthWater Supply Project (Loan 1702-TUN)î/ where it was concluded that a changein financial objectives should be considered once the review of the NationalWater Supply Plan is completed, it was agreed during negotiations to replacethe rate of return covenant in the existing Loan Agreements (Loans 1445-TUNand 1702-TUN) with a cash generation covenant whereby SONEDE is required tocover about 20% of its investments through net internal cash generation.

1/ See SAR No. 2393a-TUN, para. 5.10 (i)

- 26 -

Existing Loan Agreements for the Fourth and Fifth Water Supply Projects (Loans1445 and 1702-TUN) have, therefore, been amended by the following covenants,which were agreed upon with SONEDE and the Government during negotiations:

(i) SONEDE is required to generate for each of its fiscal years, startingin 1982, funds from internal sources sufficient to cover, in additionto operating expenses (excluding depreciation), debt service andincrease in working capital other than cash, not less than 20% of theaverage estimated capital expenditures to be incurred during eachsuch fiscal year and the following two fiscal years.

(ii) Before November 30 of each fiscal year, starting in 1982, SONEDEsehall, on the basis of forecasts prepared to the satisfaction of theBank, review the adequacy of its tariffs in order to adjust itstariffs to meet the requirements set forth in 5.10 (i) above, andshall provide the Bank with a copy of such review report and the pro-posed rates adjustments.

5.11 Furthermore, the Bank reached an understanding with SONEDE and theGovernment during negotiations that SONEDE will take all necessary measures tofinance from its revenues plus customers' contributions not less than 40% ofits estimated investments to be incurred during its fiscal years 1982-86 andduring each subsequent Development Plan period or time period as shall beagreed upon between the Bank and SONEDE.

5.12 Under its financing plan for 1982-86 (para 5.13) SONEDE'S objectiveis to have about 20% of its capital requirements financed by its net internalcash generation. To achieve this, SONEDE has finalized a tariff study and hasalready implemented a first tariff increase in February 1982 and receivedGovernment approval to apply another increase in July 1982 (para. 5.05). Ac-cordingly, the average tariff will pass from D 0.120 in 1981 to D 0.175/m 3

in 1982. Other increases are envisaged later in the plan period, in order tomaintain the self-financing ratio, and to offset the forecasted annual infla-tion. Based on these objectives, projections show that average tariffs,expressed in current prices, should be increased annually to reach aboutD 0.225m 3 in 1986. During negotiations SONEDE and the Government confirmedthat the Government had agreed in principle to revise tariffs on an annualbasis to meet the financial objectives. This, in fact, constitutes adeparture from previous practices where tariff adjustments took place atalmost three year intervals.

Financing Plan and Future Financial Performance

5.13 The following sets out SONEDE's estimated total funds requirementsfor the period 1982-1986 and the sources from which they would be met. Thefinancing plan assumes that tariffs would be increased as mentioned inpara. 5.12.

- 27 -

Financing Plan (1982-1986)D US$ %----- Millions ----

Requirements

Capital Investments 264.6 529.2 99.5Long Term Advances (2.9) (5.8) (1.1)Increase in Working Capital 4.1 8.2 1.6

Total Requirements 265.8 531.6 100.0

Sources

Internal Cash Generation 134.0 268.0 50.4Less: Debt Service 69.0 138.0 26.0

Net Internal Cash Generation 65.0 130.0 24.4Customers' Contributions 52.6 105.2 19.8

Total Self-Financing 117.6 235.2 44.2

Proposed Bank Loan 15.3 30.5 5.8other Existing Long Term Loans 35.9 71.8 13.5Expected Long Term Loans 51.3 102.7 19.3

Total Borrowings 102.5 205.0 38.6

Government Equity 45.7 91.4 17.2

Total Sources 265.8 531.6 100.0

5.14 SONEDE's proposed financing plan for 1982-1986 which is based on aself-financing ratio is adequately conceived, as almost 83% of its capitalrequirements are to be fully supported by SONEDE through its net internal cashgeneration (44% - including consumers' contributions), and borrowings (39%).About 17% will be financed by Goverment equity. At this stage of SONEDE'sdevelopment, the proposed level of self-financing appears to be more thanadequate.

5.15 Other than the proposed Bank loan of US$ 30.5 million, the sources offunds include borrowings of US$ 9.0 million, which are proceeds of the twoexisting Bank loans (Loans 1445-TUN and 1702-TUN) to be used during the period1982-1984. Other long term borrowings would come from international lendersunder existing loans (US$ 62.7 million) and others which are currently being

- 28 -

considered and expected to be finalized soon (US$ 81.4 million). Borrowingoinclude also about US$ 21.3 million expected to come from unidentified donorsand those relate to projecte expected to start in 1984. The Government con-tribution of US$ 91.4 million while identical in current value to that of theFifth Plan (1977-1981) is smaller in real terme and represents about 17% ofSONEDE's total capital requirements, whereas for financing SONEDE'S Fifth Plan

it represented about 28% of total capital requirements. These contributionsrepresent less than the taxes and duties accruing to Government from watersales, procurement and execution of the works under the Plan.

5.16 SONEDE's forecast financial statements from 1982 through 1987 aregiven in Annexes 13, 14 and 15. The assumptions made in preparing thesestatements are shown in Annex 16. SONEDE's financial performance is expectedto continue improving. With SONEDE's proposed objective to ensure a 20% self-financing ratio, the rate of return on net fixed assets after deduction of

customers' contributions and estimated value of assets at rural centers ofless than 2,000 inhabitants (para 5.01), will average about 7.5% over theperiod 1982-1986. The Company will maintain a debt:equity ratio of about34:66 on the average and the current assets/liabilities ratio including shortterm maturities of long and medium term debte will remain around 1.1. Theoperating ratio would fluctuate slightly over the period, but would remain onthe average around 67%.

5.17 Internal cash generation should cover debt service adequately. Debtservice coverage is projected not to fall below 1.7 times. Under the existingBank agreements SONEDE is committed not to incur any long term debt (exceptfor the projecte covered by the Agreements) without the Bank Group's concur-rence, unlesa its net revenues at the time of incurrence of the debt, beforedepreciation and interest are at least 1.5 times the maximum future annualdebt service on the proposed Loan and existing debts. During negotiationsagreement was reached to maintain the said committment in legal documents per-

taining to the subject loan.

- 29 -

VI. JUSTIFICATION

Least Cost Solution

6.01 The proposed Bank project covers a slice of SONEDE's investment pro-gram for the Sixth Development Plan (1982-86) and includes the house connec-tions program and the activities in the rural areas for a three and a halfyear period (1982-84). SONEDE's investment program aims at satisfying thereasonable objectives the Government has set for the Sixth Plan period (seepara 1.15). The designs of the proposed systems included in the Plan, as wellas those included in the Bank project, are in accordance with sound engineer-ing principles. The overall designs of the major projects, as well as theadopted design criteria for future studies, were reviewed by the mission and

found acceptable. All projects represent least cost solutions based on dis-count rates from 8% to 12% for providing an increased percentage of the

Tunisian population with safe water.

6.02 For sub-projects in the sector loan component SONEDE will carry out acomparison of feasible alternatives to determine the least cost solutions ineach case. The calculation of the marginal cost of water and hence its eligi-

bility for financing under the Bank loan would be made for the least costalternative. Criteria used in the design of the sub-projects were reviewed by

the appraisal mission and found acceptable.

Institution Building

6.03 Although SONEDE has already proven to be a relatively efficientorganization, it will be further strengthened by the project, in particularits financial aspect by the introduction of a new long term financial policybased on a self-financing ratio for its investment programs. This policy,which is better understood by the Government than the former rate of returnobjective, will enhance more frequent tariff adjustments to satisfy the newobjective, and at the same time assures a reasonable rate of return. The pro-posed project will further strengthen SONEDE's capability to develop andmanage sector type loans.

Beneficiaries

6.04 The beneficiaries of the proposed project will be the 80,000 familiesor nearly 480,000 people that, thanks to the project's bouse connection com-ponent, will be able to obtain piped water supply in their dwellings. Inaddition to this, about 150,000 people in the rural areas will, for the firsttime, have access to safe potable water supply through public standpipes. Allof the beneficiaries of new house connections will be in the lower incomebrackets, consuming less than 40 m3 water per quarter, while one-third ofthem are estimated to be at or below the urban poverty threshold of D 121 perperson per year. In the rural project area all the rural poor, estimated at

- 30 -

15% of the rural population, and having revenues below the rural povertythreshold of D 58 per person per year, will benefit from the project. Theabove quoted poverty thresholds are in 1980 values.

Affordability

6.05 Water drawn at public standpipes is free to the consumer, the munici-pality bearing the cost. Water drawn through private connections is to bepaid for, and consumers are invoiced quarterly by SONEDE. The average con-sumption of the low income group, consuming less than 40 m3 per quarter is18 m3 per quarter. The charge, together with meter rent, maintenance feesand taxes amounts to D 2.840 per quarter in 1982. This is less than 2% of therevenue of a family living at the urban poverty threshold, or the minimum pay(SMIG), and is considered to be easily affordable. Low income consumers whohave obtained (or will obtain) a loan to pay for their water connection haveto pay in addition for the servicing of their loan, which will be aboutD 6.430 per quarter. Their total monthly cost for water and connectionamounts to an average D 3.100 or about 4% of the revenue of those living atthe urban poverty threshold, which is still considered affordable. Futuretariff adjustments will not change this picture as no increases in real termsare expected.

Economic Justification

6.06 The overriding justification for the proposed Bank project, as wellas for SONEDE's five year investment program, is the universally recognizedfact that the provision of an adequate quantity of safe water is a basicnecessity for the maintenance of good health and productivity and for economicdevelopment. The economic justification of the investments of the watersector included in the Sixth Development Plan is indicated by the fact thatthe highest bracket of the 1982 tariff would be nearly equal to the averagelong run incremental cost of water based on a 10% opportunity cost of capitalwhich is considered adequate for Tunisia. This is reasonably efficient interms of cost recovery and resource allocations. Consumers using quantitiesof water in excess of 70 m3 per quarter in this highest tariff bracket havedemonstrated their willingness to pay for the cost of providing additionalwater at the 1981 water rates and are expected to continue to do so at theprojected rates.

Environmental and Health Aspects

6.07 Neither the proposed project, nor the totality of projects includedin SONEDE's Sixth Development Plan (1982-86) are expected to have an adverseeffect on the environment. All urban areas are partially sewered and therecently established sewerage authority (ONAS) is working hard to catch up onthe backlog. By 1990 most of the urban dwellers will be connected to the

- 31 -

sewer system. Also by then, considerable progress is expected to be made inthe treatment of sewage before discharge. In the rural areas water consump-tion and population density are so low that individual disposal systems, as inuse at the moment (septic tanks and seepage pits), will be more than adequateto absorb the limited quantities of waste water. The general health situationis expected to improve considerably, as people will no longer depend on pol-luted sources for their drinking water, especially in rural areas where water-borne diseases are endemic and mainly caused by contaminated water supplies.

Risks

6.08 The risk of not achieving the project objectives are small. Thehouse connections component is an ongoing activity where SONEDE has greatexperience, and the target of 35,000 new connections per year is consideredconservative. The sub-projects in the rural areas are generally small andsimple and SONEDE has demonstrated during the Fifth Water Supply Project thatit is capable of implementing this type of project. Equally, the risk of notachieving the objectives of the Sixth Development Plan (1982-86) are low.SONEDE bas the capability of implementing this Plan, as demonstrated by theirimplementation of the Fifth Development Plan (1977-81), which is only about 8%smaller in physical volume. The tariff increases are not expected to have asignificant influence on water consumption because of the low elasticitybetween price and consumption, and because most of the increases will bepassed on to the more affluent population group, consuming more than 70 m3

per quarter at the highest tariff bracket.

- 32 -

VII. AGREEMENTS REACHED AND RECOMMENDATIONS

7.01 During negotiations, agreement was reached that:

(i) SONEDE will continue to observe the covenant on audit as described inthe Loan Agreement, Section 5.02, for the Fifth Water Supply Pro-ject. (3.08)

(ii) SONEDE and the Government will continue to honor the covenant onpayments for water and related charges by Government agencies andmunicipalities as described in the guarantee agreement, Section 3.02,for the Fourth Water Supply Project. (3.09)

(iii) SONEDE will follow the selection criteria as described in para. 4.12,and prepare and forward to the Bank the feasibility studies andappraisal reports as described in para. 4.13. (4.14)

(iv) SONEDE's credit facilities for financing house connections will bebased on a redemption period of five years, and an interest ratewhich will be the average between the rate for local medium termcredits available to SONEDE and the Bank rate. (4.15)

(v) SONEDE will report quarterly to the Bank on the progress of the pro-ject components and on the evolution of the relevant monitoringindicators. (4.26 (i))

(vi) SONEDE will take any reasonable remedial action discussed with theBank, should this become desirable, for the proper execution of,theproject or the efficient management of the institution, or meetingthe targets as set by the monitoring indicators. (4.26 (ii))

(vii) Within six months following the closing date of the loan, SONEDE willprepare and submit to the Bank a completion report on the executionand the initial operation of the project components, the costs andthe benefits derived or to be derived thereof, the performance andthe fulfilment by SONEDE of its obligations under the Loan Agree-ment, and the accomplishment of the objectives of the Bank loan.(4.27)

(viii) SONEDE shall generate for each of its fiscal years, starting in 1982,funds from internal sources, sufficient to cover, in addition tooperating expenses (excluding depreciation), debt service andincrease in working capital other than cash, not less than 20% of theaverage estimated capital expenditures to be incurred during thatyear and the two following fiscal years. This will replace the rateof return covenant of previous agreements (Fourth and Fifth WaterSupply Projects, Loans 1445 and 1702-TUN) (5.10 and 5.10 (i))

- 33 -

(ix) Before November 30 in each of its fiscal years, starting in 1982,SONEDE shall, on the basis of forecasts which are to be satisfactoryto the Bank, review the adequacy of its tariffs to meet the require-ment set forth in 7.01 (viii), and shall provide the Bank with a copyof such a review report and the proposed rate adjustments.(5.10 (ii))

(x) SONEDE will not incur any long term debt (except for the projectscovered by the Agreements) without the Bank Group's concurrence,unless its net revenues at the time of incurrence of the debt, beforedepreciation and interest, are at least 1.5 times the maximum futureannual debt service on the proposed loan and existing debts. (5.17)

7.02 Agreement having been reached on the matters outlined above, theproposed project is suitable for a Bank loan of US$ 30.5 million to theSociété Nationale d'Exploitation et de Distribution des Eaux (SONEDE), for aterm of 17 years including 4 years of grace.

TUNISIANATIONAL RURAL WATER SUPPLY PROJECT

MILLION POPULATION DISTRIBUTION

8 _ ~~~~~~~~~~~~~~~~~~IOTA L POPU LAT ION

7 _ / | ~~~~~~~~~~~~~~~~POPULA1 ION SERVED BY GENIE RUA

6

0 | ~DISPFRSED RURUPPLTO

AGGL-OMERATED4 RLURAL POPULATION

3

2~~SM - RA OUA O POPULATION SERVED BY SONEDE

2

URBAN POPULATION (>20,000)

1975 1980 1985 1990 1995 2000

World Bank 23434

TUNI SIANATIONAL RURAL VIATER SUPPLY PROJECTSONEDE's Sixth Development Plan (1982/1986)

Implementation Schedule

1981 1982 1983 1984 1985 1986 1987 1988 1990ITEM Date 12 2 3 4 2 41 4124123 4 342 41 2

GREATER TUNIS

Water Production, lst Phase W

WVater Production, 2nd Phiase 2000 ... ........-

Water Distribution, lst Phase W v _W

Water Distribution, 2nd Phase 1990 t B t W

Upgradinc Southern Production System S..... ............. B W I

Idern, 2nd Phase 2000 .SIr

Cap Bon 2000 ...... ...

Sahei, Supply from the North, lst Phase W

Idem 2nd Phase 2000 B. w . - -

Central and Southern Sahel lst Phase S B W

Idem 2nd Phase 2000 S . .. B __'W -

Stax, Supply from the North 2000 S , B W

Sfax, Provisionai Supply 1986 . S . .. B .2 W -Sfax, Distribution 1990 S . L B . _

Bîzerte, Supply from Joumîne 2000 . .. B _ W

Bizerte, Distribution 1990 ..... -

Southern Tunisia 1990 B W

Fxtreme South 2000 ......... ...... .. L . L W_

Gabes, Industrial Zone 1990 T

Ganeral Expansion Programr S + B + W

Ruiral Centers S + B + W

Bank Project S B + W

- Studies Change of Activity- Bîdding Procedure v - Completion

W _ Wo rk s Worid Bank-23468

- 36 - ANNEX 3

Page 1

TUNISIA

NATIONAL RURAL WATER SUPPLY PROJECT

SONEDE's Five-Year Investment Program

(in thousands of current Dinars)

(October 81)

C A T E C O R Y 1982 1983 1984 1985 1986 TOTAL82-86

1. INVESTMENTS FOR RENEWALS AND UPGRADING ................... 8,000 8,010 8,515 9,065 9,850 43,440

Acquisitions and Renewals ..... 1,450 1,630 1,720 1,855 2,040 8,695

Upgrading ........... ,, , , ,550 530 565 600 650 2,895

Extensions .............. ,... ... ,...5,500 5,300 5,650 6,000 6,500 28,950

Water Meters .500 550 580 610 660 2,900

11. PROJECTS" .......................................... 43,785 57,645 52,060 37,970 40,245 231,705

Sfax Distribution (IDB) .1,500 1,975 1,715 - - 5,190

Sfax, new resources .......................... ............ 1,000 6,630 11,500 10,000 9,870 39,000

lunis, Cap-Bon (4th P. IBRD) .............. 4,300 965 - - - 5,265

Tunis Repartition .............. 1,400 2,100 - - - 3,500

Sahel, water from the North (SFD) .............. 10,000 10,200 6,600 - - 26,800

Industrial zone: Gabès (ADB) .............. 675 - - - - 675

Irîdustrial zone: Gabès (AFESD) .............. 660 340 - - - 1,000

South Tunisia (KfW) .............. 5,700 250 - - - 5,950

Ghomrassen - Tataouine (KfW) .............. 550 265 - - - 815

Bizerte, Joumine dai .............. 1,000 9,000 7,000 2,000 800 19,800

Soutn Bizerte (KfW) .............. 430 370 - - - 800

Extreme South, Prospection .............. 2,000 1,300 400 - 3,700

Rural centers (USAID 1st project) ............... ,. 200 - - - - 200

Extreme South, Studies and works ........... - 1,000 1,000 10,000 15,000 27,000

Tunis Cap-Bon, Follow-up project ......................... - - - - 3,000 3,000

Tunis Repartition, Follow-up project .1,000 1,500 1,000 1,000 600 5,100

Cap Bon water production .100 - 400 1,500 3,000 5,000

Renewal of southern production .100 - 900 1,000 - 2,000

Central Sahel and Southern Sahel projects .100 2,420 6,390 2,920 - 11,830

Master Plans (ADB) ....................................... 1,000 1,575 470 500 - 3,545

Master Plans (5th P. IBRD) ... 1,600 1,400 - - - 3,000

Centers to be imiproved (ADB) ............................. 1,000 4,600 4,400 - - 10,000

Kerkennah (Sth P. IBRD) ... 1,100 300 - - - 1,400

Master Plans (KfW) ....................................... 500 1,770 1,700 - - 3,970

Centers to be improved (KfW) ... - - 730 1,070 850 2,650

Rural centers (bth P. IBRD) ... 1,360 2,000 2,000 1,000 1,000 7,360

Master Plans SONEDE ................................. ,.,.2,200 1,500 1,500 2,000 1,500 8,700

Centers to be improved SONEDE ............................ 1,640 1,000 745 400 - 3,785

Infrastructure .................................. ,,.... 1,000 2,000 850 580 920 5,350

Rural centers (KfW) ...................................... 400 400 180 - - 980

Centers to be improved (6th IBRD) ........................ 1,270 1,285 1,220 500 305 4,580

Rural centres SONEDE ... - 1,500 1,360 3,500 3,500 9,860

TOTAL 51,785 65,655 60,575 47,035 50,095 275,145

*References in parentheses indicate source of international financing where available.

ANNEX 3

Page 2

TUNISIA

NATIONAL RURAL WATER SUPPLY PROJECT

SONEDE's Five-Year Investment Prograis

(in thousands of constant Dinars of March 1982))

C A T E G O R Y 1982 1983 1984 1985 1986 TOTAL82-86

I. INVESTMENTS FOR RENEWALS AND UPGRADINC ................... 7,842 7,271 7,158 7,056 7,098 36,425

Acquisitions and Renewals ............................... 1,421 1,480 1,446 1,444 1,470 7,261

Upgrading ............................... 539 481 475 467 468 2,430

Extensions ............................... 5,392 4,811 4,749 4,670 4,684 24,306

Water Meters ............................... 490 499 488 475 476 2,428

Il. PROJECTS* ............................... 42,918 52,331 43,758 29,558 29,073 197,638

Sfax Distribution (IDB) ............................... 1,470 1,793 1,442 - - 4,705

Sfax, new resources ............................... 980 6,019 9,666 7,783 7,112 31,560

Tanis, Cap-Bon (4th P. IBRD) ............................. 4,216 876 - - - 5,092

Tunis Repartition .................................... 1,373 1,906 - - - 3,279

Sahel, water from the North (SFD) ....................... 9,800 9,259 5,547 - - 24,606

Industrial zone: Gabès (ADB) ............................. 662 - - - - 662

Industrial zone: Gabès (AFESD) ........................... 647 309 - - - 956

South Tunisia (KfW) .................................... 5,588 227 - - - 5,815

Ghomrassen - Tataouine (KfW) ............................. 539 241 - - - 780

Bizerte, Joumine dam .................................... 980 8,170 5,884 1,557 577 17,168

South Bizerte (KfW) .................................... 422 336 - - - 758

Extreme South, Prospection ............................... 1,961 1,180 336 - - 3,477

Rural centers (USAID Ist project). .. 196 - - - - 196

Extreme South, Studies and works ......................... - 908 841 7,780 10,809 20,338

Tunis Cap-Bon, Follow-up project ......................... - - - - 2,162 2,162

Tunis Repartition, Foilow-up project ..................... 980 1,362 841 778 432 4,393

Cap Bon water production ................................. 98 - 336 1,167 2,162 3,763

Renewal of southern production ........................... 98 - 757 778 - 1,633

Central Sahel and Southern Sahel projects ................ 98 2,197 5,371 2,273 - 9,939

Master Plans (ADB) ....................................... 980 1,430 395 389 - 3,194

Master Plans (Sth P. IBRD) ............................... 1,567 1,271 - - - 2,838

Centers to be improved (ADB) ............................. 980 4,176 3,698 - - 8,854

Kerkennah (Sth P. IBRD) .................................. 1,078 272 - - - 1,350

Master Plans (KfW) ....................................... 490 1,607 1,429 - - 3,526

Centers to be improved (KfW) ............................. - - 614 833 613 2,060

Rural centers (6th P. IBRD) .............................. 1,333 1,816 1,681 788 721 6,339

Master Plans SONEDE ...................................... 2,157 1,362 1,261 1,557 1,081 7,418

Centers to be improved SONEDE ........ ..................... 1,608 908 626 311 - 3,453

Infrastructure ........................................... 980 1,816 714 451 663 4,624

Rural centers (KfW) ...................................... 392 363 151 - - 906

Centers to be improved (6th IBRD) ........................ 1,245 1,166 1,025 389 219 4,044

Rural centres SONEDE ..................................... - 1,361 1,143 2,724 2,522 7,750

TOTAL 50,760 59,602 50,916 36,614 36,171 234,063

` Reterences in parentheses indicate source of international financing where available.

-38 - ANNEX 3Page 3

TUNISIA

NATIONAL RURAL WATER SUPPLY PROJECT

SONEDE's Five-Year Investment Program

(in thousands of current Dinarsas expected to be realized)

C A T E G O R Y 1982 1983 1984 1985 1986 TOTAL82-86

1. INVESTMENTS FOR RENEWALS AND UPGRADING ................... 8,000 8,010 8,515 9,065 9,850 43,440

Acquisitions and Renewals ............................... 1,450 1,630 1,720 1,855 2,040 8,695

Upgrading ............... . .,.,,,. 550 530 565 600 650 2,895

Extensions ., 5,500 5,300 5,650 6,000 6,500 28,950

Water Meters .500 550 580 610 666 2,900

II. PROJECTS* ............ , 39,403 52,398 50,676 41,343 37,072 220,892

Sfax Di.tribut_cn (18) .1,326 1,432 1,547 1,034 - 5,339

Sfax, n w resources ................. ............... 1,000 6,059 10,113 8,994 9,714 35,880

Tunis, Cap-Bon (4th P. IBRD) ................... .......... 4,080 1,203 - - - 5,283

Tunis Repartition .1,224 1,652 689 - - 3,565

Sahel, water from the North (SFD) .9,180 9,914 7,859 - - 26,953

Industrial zone; Gabès (ADB) ............................. 675 - - - - 675

Industrial zone: Gabès (AFESD) .660 340 - - - 1,000

South Tunisia (KfW) .5,100 900 - - - 6,000

Gnomrassen - Tataouine (KfW) .550 265 - - - 815

Bizerte, Joumine dam ............................. ,.,.,.,. 918 7,711 5,949 2,570 2,315 19,463

South Bizerte (KfW)., 430 370 - - - 800

Extreme South, Prospection ............................... 1,836 1,102 805 - - 3,743

Rural centers (USAID Ist projec) .200 - - - - 200

Extreme South, Studies and work .- 1,000 1,000 8,994 11,102 22,096

Tunis Cap-Bon, Follow-up project - - - - 2,775 2,775

Tunis Repartition, Follow-up project . . ... 1,000 1,500 1,000 1,000 600 5,100

Cap Bon water production ................................. , 100 - 400 1,285 2,775 4,560

Renewal of southern product-ion ., 100 - 900 1,000 - 2,000

Central Sahel and Southern Sahel projects .100 2,203 5,949 3,650 - 11,902

Master Plans (ADB) .................... 1,000 1,575 470 500 - 3,545

Master Plans (5th P. IBR) .1,530 1,322 164 - - 3,016

Centers to be improved (AD) .1,000 3,856 3,569 1,765 - 10,190

Kerkennah (5th P. IBR). 1,100 300 - - - 1,400

Master Plans (KfW) ................................. , 480 1,652 1,190 804 - 4,126

Centers to be improved (KfW) .- - 730 1,070 850 2,650

Rural centers (6th P. IBRD) .1,020 1,652 1,785 1,927 1,165 7,549

Master Plans SONEDE .1,530 1,652 1,785 1,927 1,968 8,862

Centers to be improved SONEDE .1,020 1,102 1,190 582 - 3,894

Infrastructure..., ................................,., . 918 1,102 838 643 694 4,195

Rural centers (KfW). 306 ................. 330 364 - - 1,000

Centres to be improved (6th IBR) .1,020 1,102 1,190 1,028 339 4,679

Rural centers SONEDE .- 1,102 1,190 2,570 2,775 7,637

TOTAL 47,403 60,408 59,191 50,408 46,922 264,332

*References in parentheses indicate source of international financing where available.

-39- ANNEX 3

TUNISIA

NATIONAL RURAL WATER SUPPLY PROJECT

SONEDE's Five-Year Investment Program

(in thousands of constant Dinars of March 1982as expected to be realized)

C A T E G O R Y 1982 1983 1984 1985 1986 TOTAL82-8F,

I. INVESTMENTS FOR RENEWALS AND UPGRADING ................... 7,842 7,271 7,158 7,056 7,098 36,425

Acquisitions and Renewals ............................... 1,421 1,480 1,446 1,444 1,470 7,261

Upgrading .............................................. 539 481 475 467 468 2,430

Extensions ............... , 5,392 4,811 4,749 4,670 4,684 24,306

Water Meters ............... 490 499 488 475 476 2,428

Il. PROJECTS* ............... 38.558 47,565 42,590 32,677 26,814 188,204

Sfax Distribution (IDB) ................ , 1,300 1,300 1,300 805 - 4,705

Sfax, new resources ............... 980 5,500 8,500 7,000 7,000 28,980

Tunis, Cap-Bon (4th P. IBRD) ............................. 4,000 1,092 - - 5,092

Tunis Repartition .............................. 1,200 1,500 579 - - 3,279

Sahel, water from the North (SFD) ....................... 9,000 9,000 6,606 - - 24,606

Industrial zone: Gabès (ADB) ............................. 662 - - - - 662

Industrial zone: Gabès (AFESD) ........................... 647 309 - - - 956

South Tunisia (KfW) ...................................... 5,000 815 - - - 5,815

Ghomrassen - Tataouine (KfW) ............................. 539 241 - - - 780

Bizerte, Joumiine dam ..................................... 900 7,000 5,000 2,500 1,768 17,168

South Bizerte (KfW) ...................................... 422 336 - - - 758

Extreme South, Prospection ............................... 1,800 1,000 677 - 3,477

Rural centers (USAID Ist project) ........................ 196 - - - - 196

Extreme South, Studies and works ......................... - 908 841 7,000 8,000 16,749

Tunis Cap-Bon, Follow-up project ......................... - - - - 2,000 2,000

Tunis Repartition, Follow-up project ........... .......... 980 1,362 841 778 432 4,393

Cap Bon water production ................................. 98 - 336 1,000 2,000 3,434

Renewal of southern production ........................... 98 - 757 778 - 1,633

Central Sahel and Southern Sahel projects ................ 98 2,000 5,000 2,841 - 9,939

Master Plans (ADB) ....................................... 980 1,430 395 389 - 3,194

Master Plans (Sth P. IBRD) ............................... 1,500 1,200 138 - - 2,838

Centers ta be improved (ADB) ............................. 980 3,500 3,000 1,374 - 8,854

Kerkennah (Sth P. IBRD) .................................. 1,078 272 - - - 1,350

Master Plans (KfW) ......................................., 400 1,500 1,000 626 - 3,526

Centers to be improved (KfW) ............................. - - 614 833 613 2,060

Rural centers (6th P. IBRD) .............................. 1,000 1,500 1,500 1,500 839 6,339

Master Plans SONEDE .................................... 1,500 1,500 1,500 1,500 1,418 7,418

Centers to be improved SONEDE ............................ 1,000 1,000 1,000 453 - 3,453

Infrastructure .. ........... -- ......... .... 900 1,000 700 500 500 3,600

Rural centers (KfW .300 300 306 - - 906

Centres to be improved (6th IBRD) .1,000 1,000 1,000 800 244 4,044

Rural centers SONEDE .- 1,000 1,000 2,000 2,000 6,000

TOTAL 46,400 54,836 49,748 39,733 33,912 224,629

*References in parentheses indicate source of international financing when available.

TUNISIA

NATIONAL RURAL WATER SUPPLY PROJECT

Forecast Number of Connections

Number of Connections Repartition of Connections per Category (Global)Year

Urban Rural Total Domestic Industrial Touristic Public PublicFountains

1975 166,559 75,707 242,266 226,401 1,985 437 10,833 1,7401976 185,511 91,597 281,108 264,303 2,201 468 11,564 1,6041977 209,264 106,484 315,748 298,168 2,352 459 12,234 1,5061978 229,356 119,863 349,219 331,109 2,493 470 12,777 1,4031979 251,685 132,327 384,012 365,210 2,597 483 13,425 1,382 o1980 283,464 139,404 422,868 403,455 2,702 489 13,984 1,3071981 312,000 153,000 465,000 445,082 2,809 496 14,321 1,290

1982 332,000 168,000 500,000 479,223 2,917 503 14,953 1,2021983 357,000 183,000 535,000 513,328 3,012 517 15,964 1,1291984 380,000 195,000 570,000 546,850 3,165 529 17,048 1,1001985 400,000 210,000 605,000 579,658 3,252 538 18,193 1,0641986 423,000 222,000 640,000 614,018 3,401 549 19,421 1,0111987 448,000 232,000 680,000 652,473 3,529 561 20,751 9831988 474,000 247,000 721,000 691,530 3,632 576 22,447 9761989 501,000 259,000 760,000 729,250 3,743 590 23,639 9691990 529,000 270,000 799,000 765,623 3,875 606 25,235 956

1995 699,000 340,000 1,039,000 995,036 4,321 679 35,229 832

2000 849,000 425,000 1,274,000 1,215,284 4,982 732 48,532 765 >4

AN',N x

TUN ISIANATIONAL RURAL WATER SUPPLY PROJECT

REPARTITION OF WATER CONSUMPTION

WATER CONSUMED

100

90

80

70

60DIAGONAL OF EQUAL REPARTITION

50

40

30 DOMESTIC USE

20

10 ALL USES

10 20 30 40 50 60 70 80 90 100%

CONSUM ERS

Worid Bank - 23435

'tSNISi A

NA I)ONAI. RURAL WAIER SUPPI.Y PRO.JE(`'T

ForeCrst Water PrfDcltCtioll and C(onsnumptlon

Water lProductioio Water CoIlsimpt ion Repurtition of the consomption per cat egorv

LJrbal Ru ral Total UrbaLn Rural ToDtasl UElficiency Dome stic Industrial 'oIl ristic Public Pub lni c

---- …-------… tru /yr ----------- ------------ 1()3

/y…yr------------- % ------------------ 103m

3/yr --------- - - --- - - ---

1975 lot,919(1 2S,307 141,997 75,374 17,102 93,47(6 66 44,256 11,S94 6,80 9 22,127 5,48319/n 118,029 2 ,'426 145,455 79 ,52 18,(094 97,746 64 46,309 13,437 6,999 22,732 4,863IY77 i27, 52,+ 30,778 158,302 88,900 20,927 109,827 65 54,329 15,662 7,324 25,584 4,510

'978 1 31 ,92'9 3b ,727 1t97, t56 92,37 5 23,294 115,699 69 58,334 16,329 7,614 26,869 4,073l979 139,595 40,554 1 7,05 9 97,214 25,750 122,964 70 62,994 17,753 8,311 27,381 ,120) 419`8 146,415 46,429 192,844 104,619J 28,074 132,693 69 68,170 21,439 8,7741 28,124 4,2231981 150,200 50,100 20(0,300 111,419 28,581 140,000 7(1 70,753 23,600 9,200 31,280 4,140

1982 157,2()0 53,40() 210,60)0 118,100 31,400 149,500 71 73,369 27,300 10,100 33,600 4,0201983 lb6,600 55,100 221,70() 125,190 34,410 159,600 72 78,902 31,200 11,200 37,200 3,970)I984 175,500 57,90(1 233,400 132,700 37,700 1-) (,400 73 80,110 33,600 12,500 38,400 3,8901985 187,400 61,800 249,200 140,660 41,240 181,900 73 83,589 36,900 14,200 41,600 3,8s(198t 202,800 b6,900 269,700) 148,68(0 45,520 194,200 72 86,340 42,100 15,300 44,9(00 3,7601987 208,000 58,600 276,601) 157,150 50,250 207,400 75 90,329 46,200 17,000 48,150 3,71(11988 228,050 75,200 303,250 166,110 58,290 224,400 74 97,368 51,300 18,300 51,960 3,6501989 24,15L0 79,20U 319,350 175,580 60,720 236,300 74 102,259 54,000 19,700 54,720 3,6001990 253,000 83,400 336,400 185,590 b6,710 252,300 75 108,530 58,600 21,000 58,520 3,540

199S 341,8()0 112,800 454,600 242,559 107,441 350,000 77 159,221 75,000 27,200 81,00(1 3,36()

20U( 456,O1) 150,500 606,600 309,574 175,726 485,300 80 238,783 93,000 34,000 112,200 3,120 >

TIlNISIA

NATIONAL RURAL WATER SIJPPLY PROJECT

Annual Project Investments

D millions - base March 1982

-------- 1982--------- -------- 1983--------- -------- 1984--------- -------- 1985--------- -------- TOTAL--------Local Foreigo Total Local Foreign Total Local Foreign Total Local Foreign Total Local Foreign Total

Rural centers 0.44 0.48 0.92 0.90 0.97 1.87 0.90 0.97 1.87 0.76 0.81 1.57 2.99 3.24 6.23Physlcal contingencies I54 0.07 0.07 0.14 0.13 0.15 0. 28 0.13 0.15 0.28 0.11 0.12 0.23 0.45 0.48 0.93

buo-iotal 0.51 0.55 1.()6 1.03 1.12 2.15 1.03 1.12 2.15 0.87 0.93 1.80 3.44 3.72 7.16

semi-urbarn centers 0.68 (.73 1.41 0.78 0.85 1.63 0.78 0.85 1.63 0.36 0.40 0.76 2.61 2.82 5.43Pnysical contingencies 15% 0.10 0.11 0.21 0.12 0.13 0.25 0.12 0.13 0.25 0.06 0.06 0.12 0.39 0.44 0.83

suD-Yotaî 0.78 0.S4 1.62 0.90 (.98 1.88 0.90 0.98 1.88 0.42 0.46 0.88 3.00 3.26 6.26

,til centers 1.12 1.21 2.33 1.67 1.83 3.50 1.67 1.83 3.50 1.12 1.21 2.33 5.60 6.06 11.66Plhysical contingencies 157. 0.17 0.18 U.35 0.26 0.27 0.53 0.26 0.27 0.53 0.17 0.18 0.35 0.84 0.92 1.76

Sub-Tota1 1.29 1.39 2.68 1.93 2.10 4.03 1.93 2.10 4.03 1.29 1.39 2.68 6.44 6.98 13.42

Price contingencies 0.03 0.03 0.06 0).19 0.21 0.40 0.37 0.39 0.76 0.36 0.39 0.75 0.95 1.02 1.97

LO'T'AL CENTLRS 1.32 1.42 2.74 2.12 2.31 4.43 2.30 2.49 4.79 1.65 1.78 3.43 7.39 8.00 15.39

hnginieeriisg 0.14 - 0.14 0.20 - 0.20 0.20 - 0.20) 0.14 - 0.14 0.68 - 0.68Price contingenicies - - 0.02 - 0.02 0.04 - 0.04 0.03 - 0.03 0.09 - 0.09

'L'TAI ENGINEERING 0.14 - 0.14 0.22 - 0.22 0.24 - 0.24 0.17 - 0.17 0.77 - 0.77

T'OTAL CLNTERS & ENGINEERING 1.46 1.42 2.88 2.34 2.31 4.65 2.54 2.49 5.03 1.82 1.78 3.60 8.16 8.00 16.16

Water meters 0.19 0.30 0.49 0.19 0.30 0.49 0.19 0.30 0.49 - - 0.56 0.91 1.47('rice contingenicies 0.00 0.01 ().01 0.02 0.03 0.05 0.03 0.06 0.09 - - - 0.06 0.09 0.15

'IOIAL WATEK METERS (bio Bank tinancing) 0.19 0.31 0.50 0.21 0.33 0.54 0.22 0.36 0.58 - - - 0.62 1.00 1.62

nouse conitiections 1.85 1.85 3.70 1.99 1.99 3.98 2.16 2.16 4.32 1.00 1.0O 2.00 7.00 7.0n 14.0(1

TOTAL PKOJECT COST 3.50 3.58 7..08 4.54 4.63 9.17 4.92 5.01 9.93 2.82 2.78 5.60 15.78 16.00 31.78

Front end tee - 0.25 0.25 - - - - - - - - - - 0.25 <).21

Required iilancing 3.50 3.83 7.33 4.54 4.63 9.17 4.92 5.01 9.93 2.82 2.78 5.60 15 78 16.25 32.03

ANNEX 8- 44 - Page 1

TUNISIA

NATIONAL RURAL WATER SUPPLY PROJECT

Selection Criteria for Rural Water Supply Projects

1. The proposed Bank project includes the upgrading and expansion ofexisting rural water supply systems and the construction of new rural watersupply systems, covering a three year slice of SONEDE's Sixth Development Planfor the five year period 1982-86. In order to maximize the benefits of theproject, only carefully selected centers will be eligible for Bank financing.The selection method is based on five criteria:

(i) the marginal cost of water for the village under consideration has tobe less than US$ 1.50 equivalent per m3 in 1981 values;

(ii) the total estimated sub-project cost per village should not exceed

the US$ 1.5 million equivalent in 1981 values;

(iii) the proposed sub-project should be the "least cost solution" based on

the life cycle of the project;

(iv) sufficient water resources to satisfy the demand for the life cycleof the sub-project should be identified;

(v) local cost financing should be secured through inscription of theproject in SONEDE's approved investment budget.

2. The marginal cost as mentioned in criterium (i) will be the averageincremental cost (AIC) of water and is based on the economic cost of supplyingadditional water to meet the growth of the demand over the next 5 to 10years. The AIC is used as an approximation of the long run incremental cost.The AIC is calculated by dividing the present value of all incremental capi-tal, operating and other costs, in economic terms, by the present value of theincremental consumption, made possible by the added facilities. The presentvalue for both numerator and denominator will be determined, using the oppor-tunity cost of capital at a discount rate of 10%. AIC is defined as:

- 45 - ANNEX 8Page 2

NCn - S

AIC = 0 (T+r ' (l+r)YNiE Qno (I+r)n

Cn incremental expenditure in year(n) for capital, operation, main-tenance, etc., in economic terms, i.e. excluding taxes and customsduties estimated at 20%.

S = salvage value.

Qn = incremental volume of water consumed in year(n) as a result of theproject.

N = lifespan of project = 40 years.

r = the opportunity cost of capital discount rate of 10%.

n = runs from O to N.

- 46 - ANNEX 9Pag< 1

TUNISIA

NATIONAL RURAL WATER SUPPLY PROJECT

Outline for Sub-Project Appraisal Reports

1. For each sub-project SONEDE will prepare an appraisal report whichwill cover the following aspects:

- The physical and economic characteristics of the center or rural

village where the sub-project will be implemented, the populationsrecorded in past censuses and the forecast of future populations inthe sub-project area.

- The condition of the existing water supply facilities, the estimationof per capita consumption, water consumed and number of connectionsin previous years, and the quality of the services.

- The volumes of water consumed for various types of usage (domestic,industrial, commercial, public, tourism), a comparison of thesevolumes with similar ones in other parts of the country.

- The determination of the maximum day demand and the maximum hour con-sumption.

- An estimate of the volume of water unaccounted for in the trans-mission pipelines and the distribution network, the proposed measuresto reduce water losses and any consumption judged to be excessive.

- The forecast of future consumption and number of connections; theevaluation of the percentage of population served per house connec-tion and per public standpipe.

- The conditions of the production facilities, the physical, chemicaland biologic characteristics of the waters, the future demands thatcan be covered by the existing resources and the measures required tomeet the demand in the year 2000.

- Discussion of the feasible alternatives to supply the sub-projectarea with water, and ways of improving and expanding the distributionnetwork.

ANNEX 9- 417 -

Page 2

Calculation of the estimated costs of the selected alternatives, andeconomic comparison of these alternatives.

Selection and justification of the proposed scheme, preparation ofdetailed cost estimates and programmation of the investments.

Calculation of future operating expenses, including depreciation offixed assets and interest payment on debts, evaluation of staffneeds, management system and relations with regional offices andheadquarterse

- Forecast of water sales, related revenues and other revenues.

- Calculation of the marginal cost of water for the sub-project.

- Comparison of the sub-project data with the selection criteria.

- Conclusions and recommendations.

2. For any sub-project whose investment cost is estimated to exceedUS$ 1 million, or not meeting one or more of the other selection criteria,SONEDE will submit this appraisal report together with any existing feasi-bility report on the sub-project, and an additional justification to the Bankfor ex ante review and the Bank's approval to have the sub-project included inthe Bank project for financing.

3. For sub-projects meeting all selection criteria, the appraisal reportwill be forwarded to the Bank before bids are invited for ex post review.

sfATEMENF OF ALLOCATkD CREDIIS FOR HOL'SE _ONNECTIONSLOAN _____ ID DatePbRIOD FROM _ ro_ _ Request No

No ol Lt.catLon (redit Allocated Out of which for Out of whlicth for Materials Payroll Overhead Taxes RFMARKsLonsullmer (DLstrict) (Amouat in D) Gonnection (D) Cootribution to (D) (D) D)(D)uont rud.t Extension of Dis-

tribution System(D)

~~~~~__ _______ __ _ __ . ___ _ . )

tUlaL D) Eligible for Bank financLng 50% = D

We hereby certity that the above mentioned loans have been accorded for the proper execution of the Project activities with the termsand conultions contained in Loan Agreement TUN All the authenticatîng details related to the expendîtures incurred, togetherwtth suppurting documnentation, are avaitable for review at

(Name of accounting or other department where the supporting documentationis filed)

No reimbursement of taxes under Bank loan

oRepresentative Of . .. Authorized Representative..........C

TUNISIA

NATIONAL RURAL WATER SUPPLY PROJECT

Monitoring Indicators

Indicators 1980 1981 1982 1983 1984 1985 1986 1987

1. STAFFING

T`otal staff 3749 3839 3916 3994 4074 4156 4239 4323Staff per 1,000 connections 8.9 8.3 7.8 7.5 7.1 6.7 6.6 6.4

2. SYSTEM OPERATIONS

Water produced 10 m3 /year 192.8 200.3 210.6 221.7 233.4 249.2 269.7 276.6Water sold, lOU m3 /year 132.7 140.0 149.5 159.6 170.4 181.9 194.2 207.4Unaccounted-for water, % 31.0 30.0 29.0 28.0 27.0 27.0 26.0 25.0Number of Connections, 103 423 465 500 535 570 605 640 680

3. FINANCE

Rate of Return f 8.1 3.6 8.5 8.0 7.2 6.7 7.0 7.1Operating ratio, E!I/ 76 85 67 66 66 68 67 67Debt equity ratio 26:74 34:66 34:66 35:65 36:64 34:66 32:68 31:69Debt service coverage 3.2 1.7 2.3 2.0 1.9 1.9 1.8 1.7Average revenue in D per m3 produced 0.133 0.126 0.172 0.186 0.199 0.219 0.218 0.230Operating expenses in D per m3 sold 0.148 0.154 0.161 0.170 0.181 0.192 0.198 0.204Average rate in D per m3 sold 0.118 0.120 0.175 0.191 0.205 0.215 0.225 0.236Collection period (Day)2/ 65 70 55 55 55 55 55 55Self-financing ratio:(a) through net internal generation E 31 (4) 24 21 20 25 28 29(b) consumer contribution % 13 il 15 13 14 28 34 36(c) total 2 44 7 39 34 34 53 62 65

1/ Total operating expenses divided by total revenues x 100.2/ Accounts receivable at a given date divided by daily average of billing in preceding year.

This checkîng will take place on June 30 and December 31 every year for each category ofconsumers. Results of this checking would be sent to the Bank within one month followingaforementioned dates at tne latest.

TUNISIANATIONAL RURAL WATER SUPPLY PROJECT

SOCIETE NATIONALE D'EXPLOITATION ET DE DISTRIBUTIONDES EAUX -SONEDEORGANIZATION CHART - 1981

BOARD OF DIRECTORS

GENERAL MA E

7 I ~~~ORGANIZATION|OPERAT IONA LCONTRO L

IOPERATION FINAC AND ENGINEERING IIOFERATIONIGRA T1 NEW WORKS I|ADMINISTRATION ITDE INTERIOR

PRODUCTION |DISTRIBUTION PROGRAMMIN FINANCE A DMNSRAON NORTHERN CENTRAL SOUTHERN

REPAIRS AND LEALSRVRKDSTIUTOMAINTENANCE S 4 A A | DISTRIBUTION L PRODUCTION |PRODUCTIONr

NORTHERN CUSTOMERS SATTKS1SI COST REPAIRS AND REPAIRS ANDI S ITRUNKLINES METERS SECTIONS 13I ACCOUNTINC MAINTENANCE MAINTENANCE DISTRIBuTIoN

SOUTHERN DISTRICT WORKSN IEPIRSANTRUNKLINES SECTIONS 6) SECTONS 3 TREASURY HYDROLOGY PROCUREMENT PROCUREMENT RMAINTENANCE

I UORKS IV II DATA LIDSRC

7 SECTION (31 I I PROCESSING r } SECTIONS 17) r I DISTRIBUTION PROCUREMENT

ITUD ES L |DISTRICT DISTRICTI IT. I IS ISECTIONS (5) SECTIONS (6)

STUDIES STUDIES FI

De.e be, 1981 3

Wo,ld Ba.k 23433

-51 - ANNEX 13

TUNISIA

NATIONAL RURAL WATER SUPPLY PROJECT

SONEDE - Income Statements - Actual 1/ (1978 - 1981) and Projected (1982 - 1987)

(D Thousands)

Fiscal Year Ending ----------- ACTUAL 1/ ------------- ------------------------ PROJECTED ------------------------

December 31 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987

Water Sold (Million m3) 115.7 122.9 132.5 140.0 147.7 159.0 169.8 180.4 190.8 201.3

Number of Connections at year end ('000s) 349.2 384.0 422.9 465.0 500.0 535.0 570.0 605.0 640.0 675.0

Average Tarirf (D/m3

) 0.088 0.120 0.118 0.120 0.183 0.183 0.220 0.220 0.245 0.245

Operating Revenues

Water Sales 10,039 14,762 15,580 16,800 27,029 29,097 37,356 39,688 46,746 49,319

Meter Rental & Maintenance 1,246 2,273 2,621 2,874 3,266 3,504 3,741 3,977 4,214 4,464

New Connection Charges 3,328 3,295 4,121 2,724 2,745 2,930 3,127 3,339 3,567 3,810

Water Sales Taxes 6 Others 788 1,041 1,162 1,472 2,064 2,212 2,631 2,803 3,189 3,432

Miscellaneous 1,458 1,807 2,498 1,732 1,967 2,113 2,280 2,513 2,798 3,019

Les6: Bad Debt Provision (593) (374) (350) (300) (400) (450) (560) (595) (700) (740)

Total Revenues 16,266 22,804 25,632 25,302 36,671 39,406 48,575 51,725 59,814 63,304

Operating Expenses

Personnel 5,750 6,682 8,308 9,350 10,580 11,670 12,860 14,180 15,640 17,238

Fuels 1,002 1,160 1,522 1,600 1,820 2,069 2,354 2,677 3,045 3,464

Chemicals 461 487 695 620 709 812 934 1,078 1,230 1,402

Materials 3,163 4,102 5,057 5,101 5,910 6,333 6,795 7,294 7,838 8,419

Water Sales Taxes 6 Others 935 1,245 1,519 1,743 2,364 2,529 2,966 3,157 3,561 3,739

Water PFrchases 63 78 86 80 40 - - - - -

Admainistrative Expenses 6 Others 1,868 1,994 3,139 1,889 1,951 2,106 2,273 2,457 2,652 2,913

Less: Capital Expenses (5,597) (6,191) (6,595) (5,176) (6,940) (7,473) (7,934) (8,436) (9,106) (9,829)

Sub-Total 7,645 9,557 13,731 15,207 16,434 18,046 20,248 22,407 24,860 27,346

Depreciation 3,614 4,710 5,830 6,309 7,917 9,601 11,619 13,708 14,922 16,224

Total Operating Expenses 11,259 14,267 19,561 21,516 24,351 27,647 31,867 36,115 39,782 43,570

Net Operating Income 5,007 8,537 6,071 3,786 12,320 11,759 16,708 15,610 20,032 19,734

Incerest 1,965 2,608 2,772 4,108 5,154 6,139 7,289 8,291 8,442 8,802

Net Operating Income before Taxes 3,042 5,929 3,299 (322) 7,166 5,620 9,419 7,319 11590 10,932

Net Income 3,042 5,929 3,299 (322) 7,166 5,620 8,585 6,432 10,651 10,932

Operating Ratio 69 63 76 85 66 70 66 70 67 69

Rate of Return on AverageNet Fixed Assets 7.7 10.9 6.9 3.4 8.4 6.5 7.5 6.1 7.3 6.6

Average Net Fixed Assets in Service 2/ 65.90 78.35 88.55 111.40 145.95 181.65 224.00 256.75 275.85 298.75

1/ 1981 results are prelirninary.2/ After deduction of custoners' contributions and assets in rural centers nf less than 2000 inhbitants.

- 52 -ANNEX 14

TUNISIA

NATIONAL RURAL WATER SUPPLY PROJECT

SONEDE - Table of Sources and Uses of Funds - Actual (1979 - 1980) and Projected 11981 - 1987)

(D Thousands)

------------ ACTUAL 1/ ------------ ------------------------ PROJECTED ------------------------1978 1979 198o 1981 1982 1983 1984 1985 1986 1987

I. Uses ot Funds

Capital Investments (5) 20,120 27,287 41,322 53,704 47,653 60,408 59,191 50,408 46,922 62,100

lncrease (Decrease) in Long-Term Advances (5) 1,869 1,029 853 (328) (976) (1,136) (806) (54) 115 509

Increase (Decrease) in workiig Capitalother than Cash (4) 1,879 (2,381) (4,830) 6,659 39 (951) 1,121 1,922 1,436 (2,562)

Debt Service;

intorest charged ta Operations 1,965 2,608 2,773 4,108 5,154 6,139 7,289 8,291 8,442 8,802

A.ortisation of Loans 780 1,158 950 1,757 3,560 ,83 6,904 7,336 10,044 12,653

Total Debt Service (4) 2,745 3,766 3,723 5,865 8,714 11,992 14,193 15,627 18,486 21,455

Total Uses of Funds 26,613 29,701 41,068 65,900 55,430 70,313 73,699 67,903 66,959 81,502

11. Sources of Funds

Operatihg Income before Depreciation (4) 8,621 13,247 11,901 10,095 19,858 23,617 27,148 30,061 33,268 36,764

Borrowings:

IBRD/IDA 2,490 659 4,246 9,490 3,060 1,370 90 - - -

Other Loans - Kaisting 550 1,960 8,894 18,162 11,760 10,260 7,270 1,570 470 -

Proposed Bank Lboa - - - - 1,980 4,810 4,880 2,980 600 -

Other Loans - Proposed - - - - 1,500 11,000 13,200 9,100 6,700 6,600

Other Loans - Usidentified - - - - - 1,400 3,100 5,400 14,000

Total Long Term Loans 3,040 2,619 13,140 27,652 18,300 27,440 26,840 16,750 13,170 20,600

Medise Ter- Laoas 1,980 - - 10,000- - -

Total Borrowings 5,020 2,619 13,140 37,652 18,300 27,440 26,840 16,750 13,170 20,600

Customer Contributions 7,457 8,433 5,589 6,200 6,820 7,670 8,170 14,000 15,900 22,500

GCoverncent Contributions 5,900 5,000 10,000 12,000 10,500 11,600 11,600 7,200 4,800 1,700

Total Sources of Fonds 26,998 29,299 40,630 65,947 55,478 70,327 73,758 68,011 67,138 81,564

Cash Increase (Decrease) for Year 385 (402) (438) 47 48 14 59 108 179 62

Cash at Beginning of Year 1,222 1,607 1,205 767 814 862 876 935 1,043 1,222

Cash at End of Year 1,607 1,205 767 814 862 876 935 1,043 1,222 1,284

De-t Service Coverage (tines) 3.1 3.5 3.2 1.7 2.3 2.0 1.9 1.9 1.8 1,7

IDternal Financing ai Investments 2/ 18 42 31 (4) 24 21 20 25 28 29

1/ 1981 Results are preliminary2/ Lines (4) as percentage of lines (5)

ANNEX 15- 53 -

TUNI SIA

NATIONAL RURAL WATER SUPPLY PROJECT

SONEDE - Salance Sheets - Actuel (1978 - 1981) and Projected (1982 - 1987)

(D Thousands)

Fiscal Yer Ending ----------------- ACTUAL 1/ --------------- ----------------------------- PROJECTED… -----------------------------

Deceamber 31 1978 1979 1980 1981 1982 1983 1984 1985 1986 1987

ASSETS

F-xed Assets

Gross Fixed Assets 128,334 150,776 169,767 218,471 264,874 319,739 384,909 428,547 472,337 532,437

Les-: Accu.ulatedDepreciation 38,778 43,987 49,685 55,994 63,911 73,512 85,131 98,839 113,761 129,985

Net Fixed Assets 89,556 106,789 120,082 162,477 200,963 246,227 299,778 329,708 358,576 402,452

Work in Progress 25,627 31,419 53,550 58,550 59,800 65,343 59,364 66,134 69,266 71,266

Total Fixed Assets 115,183 138,208 173,632 221,027 260,763 311,570 359,142 395,842 427,842 473,718

Long-Ter= Advances 11,598 12,147 12,700 11,102 10,126 8,990 8,184 8,130 8,245 8,754

Sab-Total 126,781 150,355 186,332 232,129 270,889 320,560 367,326 403,972 436,087 482,472

Current Assets

Cash and Equivalent 1,607 1,205 767 814 862 876 935 1,043 1,222 1,284

Receivables 3,804 4,909 6,302 7,200 7,560 8,535 9,395 10,597 11,546 12,570

Otùer Debit Accounts 9,487 15,411 17,698 19,270 19,158 19,523 19,016 18,298 18,405 18,629

Stocks 3,1 2,520 2,663 3,100 2,990 3,240 3,510 3,810 4,100 4,500

Total Current Assets 18,035 24,045 27,430 30,384 30,570 32,174 32,856 33,748 35,273 36,983

TOTAL ASSETS 144.86 174,400 213,762 262,513 301,459 352,734 400,182 437,720 471,360 519,455

EQOUITY AND LIABILITIES

Equity

Gocernne.t Contributi.o. 37,449 47,449 57,449 69,449 79,949 91,549 103,149 110,349 115,149 116,849

Cuato-sers Contributions 23,961 32,394 37,983 44,183 51,003 58,673 66,843 80,843 96,743 119,243

Earned Surplus 31,265 37,533 40,964 40,642 47,429 55,306 63,546 71,608 81,512 93,250

Total Equity 92,675 117,376 136,396 154,274 178,381 205,528 233,538 262,800 293,404 329,342

Long Terrs Debt

Previous IBRD/IDA Lending 17,882 17,826 20,680 28,870 30,466 29,518 27,248 24,838 22,383 19,909

Proposed IBRD Loan - - - - 1,980 6,790 11,670 14,070 13,510 12,350

Other Existing Loans 12,908 14,396 22,922 40,379 49,178 56,280 60,057 57,111 53,061 48,541

Other Proposed Loans - - - - 1,500 11,700 24,900 32,835 36,945 37,855

Unidentified Loans.- - - 800 2,200 5,300 10,200 26.800

Total Long Ters Debt 30,790 32,222 43,602 69,249 83,124 105,088 126,075 134,154 136,099 145,455

Mediom Tera Debts _6,084 5,251 3,968 8,572 7,144 5,716 4,288 2,860 1,432 -

Total Long b Mediur

Tersa Debts 36,874 37,473 47,570 77,821 90,268 110,804 130,363 137,014 137,531 145,455

C-rrent Liatilities

Castoner. Deposits 1,318 1,317 1,555 1,715 1,957 2,198 2,480 2,762 3,102 3,442

Contracts Retention 2,285 2,816 4,221 3,630 3,200 4,100 3,950 3,400 3,170 4,190

Sappliers 2,230 5,585 10,634 9,980 9,100 11,300 11,270 9,900 9,500 12,150

Accaunts Payable 8,389 8,759 11,502 11,533 12,700 10,900 11,300 11,800 12,000 12,200

Carrent Maturities ofLong b Mediurn Tersa Debt 1,045 1,074 1,884 3,560 5,853 6,904 7,281 10,044 12,653 12,676

Total CarrentLiabilities 15,267 19,551 29,796 30,418 32,810 36,402 36,281 37,906 40,425 44,658

TOTAL EQUITY ANDLIABEILTIES 144,816 174,400 213,762 262,513 301,459 352,734 400,182 437,720 471,360 519,455

Debt Equity Ratio 28:72 24:76 26:74 34:66 34:66 35:65 36:64 34:66 32:68 31:69

1/ 1981 Resalts are prelisainary.

- 54 - ANNEX 16Page L

TUNISIA

NATIONAL RURAL WATER SUPPLY PROJECT

Assumptions for Financial Projections

Projections of Water Sales

1. Future water sales were estimated on the basis of analysis of pastand current consumption in the largest metropolitan area of Tunis, and in theremainder of the country for major consumers' categorles. Projection offuture consumption was based on this analysis and on population growth, sourcelevels and unît consumption. It is estimated that SONEDE should executeannually about 35,000 house connections to achieve the projected sales.

Revenues

2. Based on the approved tarîff increases for 1982, the proposedfinancial objectives and financing plans for the period 1982-1986 the averagetariff is projected to increase from its 1981 level of 0.120 D/m asfollows;

Year 1982 1983 1984 1985 1986 1987

Average Tariff (D/m 3 ) 0.175 0.191 0.205 0.215 0.225 0.236

Income Statement

3. The following summarizes the assumption for items of the Income StatementProjections, other than water sales.

(î) Meter Rentals and Maintenance: Included hereunder are meterrentals and maintenance charges levied on all connections.The average fee incudes a D 3.860 for meter rental andD 2.900 for maintenance, plus a service tax of 7.52%. Thefee is calculated on the mid-year average number ofconnections.

(ii) New Connections. Connections are the property of thecustomers. They are installed by SONEDE and their cost isbilled to the customers. The 1981 average cost of aconnection of D 95 is based on available data for materialsused and time of manpower needed to install it, plus overheadexpenses amounting to 15% of the total cost. A service taxof 7.52% is levied on the labour and overhead expenses for aconnection. Annual increase in cost starting from 1982includes 8% on the cost of materials and 5% on the cost oflabor.

ANNEX 16- 55 - Page 2

(iii) Water Sales Taxes and Other: Calculated in detail. Theyinclude taxes on water sales (4.3%) and are shown as arevenue and expense.

(iv) Miscellaneous: Includes other revenues and interest oncredit facilities accorded to customers for houseconnections. Interest is calculated on credits for repaymentin five years at a rate of 10% per annum.

Operating Expenses

(a) Personnel: Personnel expenses are projected to increase byan annual average of 8% to cover expected increases instaffing, normal salary increases and adjustments forinflation.

(b) Fuels: Vehicle fuel is projected to increase in quantity by3% per year and power consumption for pumping by 6% per yearover 1981 levels. Prices are forecast to increase annuallyby 8%.

(c) Chemicals: Quantities of chemicals are projected toincrease, on the basis of evolution of production, by 6% peryear. Prices are forecast to increase at 8% annually.

(d) Materials: Quantities are based on estimated number of newconnections (35,000 a year), lengths of main extensions andcurrent maintenance programs (350 km/year). The average cost(in 1981 prices) of materials for house connections isestimated to be D 37.0 and that for an extension at D 5.500per meter unit costs are projected to increase to 8% per year.

(e) Administrative Expenese and Others: Calculated according totheir nature and are projected with provision of costincrease of about 8% per year.

(f) Taxes: Calculated according to their nature: a tax of 4.3%is levied on water sales and 7.52% on services rendered.

(g) Capital Expanses: This represents the cost of extensions(material, labor, overhead and taxes) included in theforegoing items which are constructed by SONEDE andtransferred to assets.

(h) Depreciation: Calculated at straight-line rates based on theestimated service lives of major asset components. Annualaverage depreciation rate approximates 3% through theprojection period.

ANNEX 16- 56- Page 3

Cash Flow Statements and Balance Sheets

Customers' Contributions

5. These include a fixed fee of D 1.500 per meter of property frontageof up to 100 meters per extension and the estimated costs of all the extensionrequired beyond the first 100 meter per one extension which are to becontributed by SONEDE customers. Projections are calculated on basis ofaverage frontage fee to be paid by each new customer and on the past averagefor an extension (diameter, length and labor) adjusted for inflation, (8% formaterials and 5% for labor). Contributions are paid by homeowners,industries, tourism facilities and other concerned enterprises.

Long Term Advances

6. These represent mainly SONEDE credit facilities accorded to lowincome consumers for house connections and related cost of extension ofdistribution network. Five percent of the cost is paid in advance and theremainder in five years with interest charged at commercial rates. Data onthe operation of this financing in the past was used to determine the amountof new credits to be accorded during the projection period and repayment ofthese credits.

Accounts Receivable

7. Clients' outstanding balances for consumption of water are assumed tobe one month of sales for private customers, and four months of sales forpublic and municipal customers. Other receivables will vary slightly over theprojection period. Bad debts are projected to be around 1% of total sales.Cash is maintained at levels required for SONEDE's normal operations.

Stocks

8. Stocks represent in 1981 about six months of consumption ofmaterials, fuel and chemicals. As from 1982 onwards they are projected to beat an average of five months.

Accounts Payable

9. Accounts payable are projected as follows:

(i) Suppliers - two months of total capital expenditure andpurchase of materials.

(ii) Retention Money - 6.75% of annual investments.

5 7 ANNEX 16Page 4

(iii) Customers' Deposits - D 4.600 per new customer in 1982 andthereafter adjusted in accordance with projected tariffincreases in the following years.

Long Term Loans

10. Other than the proposed Bank loan (US$ 30.5 million) projected to berepayable in 17 years (including a grace period of four years) at interest of12% per annum, borrowings include:

(i) Existing Bank Group lending and borrowing from otherinternational lenders under existing loans were calculated onthe basis of expected disbursements and terms of repayment.

(ii) Proposed loans from various international lenders. These arecurrently being processed and disbursements on some of theseare expected to start in 1982. Repayment of these loanswould vary between 15-20 years with grace periods of 4-5years, and interest would vary between 4% and 8.5% per annum.

(iii) Expected borrowings from unidentified sources for projects

which will start in 1984 and later. It is assumed that theseborrowings will be subject to interest of about 6% to 7% andhave to be repaid in 19 years including a four year graceperiod.

- 58- ANNEX 17

TUNISIA

NATIONAL RURAL WATER SUPPLY PROJECT

Selected Documents in Project File

AI Bilan des ressources en EauA2 Aspects of Technical Cooperation, UNDPA3 Extract from the "Etude de la Demande de Logements Sociaux dans les

Gouvernorats du Nord"

B1 Plan National de l'eau, SONEDE, October 1981B2 Etude de tarification, SONEDE, October 1981B3 L'Eau Potable dans le Plan de Développement (1982-86), SONEDE,

September 1981B4 Feasibility study, Cap Bon projectB5 Feasibility study, Ettiaira projectB6 SONEDE's appraisal report, BejaB7 SONEDE's appraisal report, MoularèsB8 Note sur l'exploitation et la présentation des données de baseB9 Comptes prévisionnels 1982, SONEDEB10 Etude de faisabilité des possibilités d'économie de l'eau potable dans

les centres touristiques, SONEDEBll Formation du Personnel, SONEDEB12 Rapport de la Statistique - SONEDE

Cl Detailed disbursement scbeduleC2 Financial working papersC3 Marginal cost calculationC4 Rural water supplies - Analysis of sampleC5 Draft water conservation plan (consultant)C6 L'Eau Potable dans le Sixième Plan de Développement

8. TUNISIA 9

NATIONAL RURAL WATER SUPPLY PROJECTMAJOR WATER SUPPLY SYSTEMS

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