ASIAN DEVELOPMENT BANK
PCR:PNG 23132
PROJECT COMPLETION REPORT
ON THE
THIRD URBAN WATER SUPPLY
(ADB Loan 1211-PNG)
(ICDF/CTB Loan 8144-PNG)
TA 1803-PNG: INSTITUTIONAL STRENGTHENING OF THE WATERBOARD
IN PAPUA NEW GUINEA
December 2003
CURRENCY EQUIVALENTS
Currency Unit
K1.00
$1.00
=
=
–
kina (K)
At Appraisal
(October 1996)
$1.03
K0.97
At Project Completion
(October 2003)
$0.30
K3.00
ABBREVIATIONS
ADB
AIDAB
BME
CTB
DSCR
EIRR
FIRR
ICDF
IDC
O&M
PMO
PNG
TA
WTP
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Asian Development Bank
Australian International Development Assistance Bureau
benefit monitoring and evaluation
Chiao Tung Bank
Debt service coverage ratio
economic internal rate of return
financial internal rate of return
International Cooperation and Development Fund
interest during construction
operation and maintenance
project management office
Papua New Guinea
technical assistance
water treatment plant
WEIGHTS AND MEASURES
m3
m3/day
kl
km
ha
mg/l
ml/day
–
–
–
–
–
–
–
cubic meter
cubic meters per day
kiloliters
kilometer
hectare
milligrams per liter
megaliters per day
NOTES
(i)
The fiscal year (FY) of the Government and its agencies ends on 31 December. FY
before a calendar year denotes the year in which the fiscal year ends, e.g., FY2000 ends
on 31 December 2000.
(ii)
In this report, "$" refers to US dollars.
CONTENTS
Page
BASIC DATA
ii
MAP
ix
I.
PROJECT DESCRIPTION
IX
II.
EVALUATION OF DESIGN AND IMPLEMENTATION
A.
Relevance of Design and Formulation
B.
Project Outputs
C.
Project Costs
D.
Disbursements
E.
Project Schedule
F.
Implementation Arrangements
G.
Conditions and Covenants
H.
Related Technical Assistance
I.
Consultant Recruitment and Procurement
J.
Performance of Consultants, Contractors, and Suppliers
K.
Performance of the Borrower and the Executing Agency
L.
Performance of ADB
III.
EVALUATION OF PERFORMANCE
A.
Relevance
B.
Efficacy in Achievement of Purpose
C.
Efficiency in Achievement of Outputs and Purpose
D.
Preliminary Assessment of Sustainability
E.
Environmental, Sociocultural, and Other Impacts
8
8
8
10
11
12
IV.
OVERALL ASSESSMENT AND RECOMMENDATIONS
A.
Overall Assessment
B.
Lessons Learned
C.
Recommendations
13
13
14
14
2
2
3
4
5
6
6
6
6
7
7
7
7
APPENDIXES
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Purpose, Targets, and Actual Achievements
Disbursements and Detailed Reallocations
Chronology of Events
Project Implementation Schedule
Status of Compliance with Project and Loan Covenants
Water Quality Analysis
Monitoring and Evaluation of Projected Benefits
Financial and Economic Evaluation
Cost Recovery Analysis
Project Performance Rating Assessment
SUPPLEMENTARY APPENDIX (available upon request)
A.
Detailed Water Quality Analysis
16
19
20
22
24
33
38
45
52
60
ii
BASIC DATA
A.
B.
Loan Identification
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Country
ADB Loan Number
ICDF/CTB Loan Number
TA Number
Project Title
TA Title
Borrower
Executing Agency
Amount of Loan
Amount of Co-financed Loan
Co-Financier
12.
Project Completion Report
Number
Loan Data
1.
Appraisal
– Date Started
– Date Completed
Papua New Guinea
1211-PNG
8144-PNG
1803-PNG
Third Urban Water Supply
Institutional Strengthening of the Waterboard
Independent State of Papua New Guinea
PNG Waterboard
$11.3 million
$6.7 million
International Cooperation and Development
Fund (Taipei,China)
PCR: PNG 754
ADB
8 Sep 1992
11 Sep 1992
ICDF/CTB
8 Sep 1992
11 Sep 1992
Loan Negotiations
– Date Started
– Date Completed
9 Nov 1992
13 Nov 1992
10 Dec 1992
11 Dec 1992
3.
Date of Board Approval
15 Dec 1992
14 Dec 1991
4.
Date of Loan Agreement
25 Jun 1993
16 Aug 1994
5.
Date of Loan Effectiveness
– In Loan Agreement
– Actual
– Number of Extensions
25 Sep 1993
7 Dec 1994
5
16 Aug 1994
16 Aug 1994
0
2.
6.
7.
Closing Date
– In Loan Agreement
– Actual
– Number of Extensions
Terms to the Borrower
– Commitment Charge
– Maturity (number of years)
– Grace Period (number of years)
ADB
ICDF/CTB
TA 1803
30 Nov 1996
9 Aug 2002
4
30 Aug 98
31 Dec 01
2
30 Nov 96
1 May 97
1
ADB
$1,416,091
25 years
4 years
ICDF/CTB
$207,373
25 years
4 years
iii
9.
Disbursements
a.
Dates
ADB
ICDF/CTB
Initial Disbursements
Final Disbursements
Time Interval
15 May 1995
9 Aug 2002
6.2 years
25 Apr 1996
29 Oct 2001
5.6 years
Effective Date
Original Closing Date
Time Interval
7 Dec 1994
30 Nov 1996
23.8 months
16 Aug 1994
30 Aug 1998
47.5 months
ADB = Asian Development Bank, CTB = Chiao Tung Bank, ICDF = International Cooperation
and Development Fund (Taipei,China), TA = technical assistance.
Source: ADB, GoPNG and CTB
b.
ADB Loan Amount ($)
Category
Number
01A
01B
02A
02B
03A
03B
03C
03D
04A
04B
05
06
07
First Revised
Original
Allocation
Allocation
Jul-95
340,000
4,600,000
3,330,000
770,000
1,430,000
830,000
Total 11,300,000
Source: ADB, CTB, and GoPNG
51,000
289,000
690,000
3,910,000
499,500
2,830,500
115,500
654,500
214,500
1,215,500
830,000
11,300,000
Last
Revised
Allocation
768,037
6,464,328
1,364,967
525,080
0
0
0
0
569,832
872,756
0
35,000
700,000
11,300,000
Amount
Undisbursed
Disbursed
Amount
768,037
6,412,138
1,364,967
632,971
0
0
0
0
779,352
636,739
0
4,195
701,601
11,300,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
iv
Cat. No.
c. ICDF/CTB Loan Amount
First Revised
Original
Allocation
Allocation
Jul-95
01
02
03A
03B
04
05
06
Total
500,000
1,030,000
2,340,000
180,000
1,380,000
840,000
430,000
6,700,000
Last Revised
Allocation
Dec-99
575,000
1,385,000
2,340,000
180,000
1,380,000
840,000
0
6,700,000
4,093,000
0
0
0
1,767,000
840,000
0
6,700,000
Amount
Disbursed
4,706,194
0
0
0
1,786,433
207,373
0
6,700,000
Undisbursed
Amount
0
0
0
0
0
0
0
0
CTB = Chiao Tung Bank , ICDF = International Cooperation and Development Fund.
Source: ADB, CTB, GoPNG
d. TA Amount ($)
Category
Allocation
Consultants
Equipment
Training
Contingency
Total
Commitment
Uncommitted
Disbursed
Undisbursed
Amount
316,700
43,300
0
40,000
283,048
21,703
14,760
0
33,651
21,597
(14,760)
40,000
283,050
21,703
14,760
0
33,650
21,597
(14,760)
40,000
400,000
319,510
80,488
319,512
80,488
Source: ADB, GoPNG and CTB
10.
Local Costs (Financed)
Amount ($ million)
Percent of Local Costs
Percent of Total Cost
ADB Loan
4.272
59%
19%
ICDF/CTB Loan
1.787
27%
8%
ADB = Asian Development Bank, CTB = Chiao Tung Bank, ICDF = International Cooperation and Development
Fund.
C.
Project Data
1.
Project Cost ($ million)
a. Foreign Exchange Cost
b. Local Currency Cost
Total Cost
ADB
7.20
4.10
11.30
Appraisal Estimate
ICDF/CTB Government
4.10
0.00
2.60
3.10
6.70
3.10
ADB
7.03
4.27
11.30
Actual
ICDF/CTB Government
4.91
0.00
1.79
5.95
6.70
5.95
ADB = Asian Development Bank, CTB = Chiao Tung Bank , ICDF = International Cooperation and Development
Source: ADB, GoPNG and CTB
v
2.
Financing Plan ($ million)
Appraisal ($ million)
Foreign Local
Total
Cost
Actual ($ million)
Local
Foreign
Total
Implementation Costs
Borrower-Financed
ADB-Financed
ICDF/CTB Financed
0.00
10.47
0.00
3.10
0.00
5.86
3.10
10.47
5.86
0
5,611,909
4,706,194
5,954,212
4,272,000
1,786,433
5,954,212
9,883,909
6,492,627
Total A
10.47
8.96
19.43
10,318,103
12,012,645
22,330,748
0.00
0.83
0.00
0.83
11.30
0.00
0.00
0.84
0.84
9.80
0.00
0.83
0.84
1.67
21.10
0
1,416,091
207,373
1,623,464
11,941,567
0
0
0
0
12,012,645
0
1,416,091
207,373
1,623,464
23,954,212
IDC Costs
Borrower-Financed
ADB-Financed
ICDF/CTB Financed
Total B
Total A and B
Source: ADB, GoPNG and CTB
3.
Cost Breakdown by Project Component
Appraisal ($ million)
Component
Foreign
Civil Works
Equipment
Consulting Services
Contingencies
PMO
Taxes and Duties
IDC
Total
Local
Actual ($ million)
Total
Foreign
Local
Total
0.800
5.600
1.400
1.200
0.000
0.000
2.300
4.600
0.800
1.000
1.400
0.000
2.000
0.000
5.400
6.400
2.400
2.600
0.000
2.000
2.300
7,858,561
1,753,746
705,796
0
0
0
1,623,464
8,242,142
244,193
1,786,433
0
1,739,877
0
0
16,100,703
1,997,939
2,492,229
0
1,739,877
0
1,623,464
11.300
9.800
21.100
11,941,567
12,012,645
23,954,212
IDC = interest during construction, PMO = project management office.
Source: ADB, GoPNG and CTB
4.
Project Schedule
Description
Consultants
Date of Contract
Commence Services
Completion of Services
Completion of Engineering Designs
Madang Water Supply
Rabaul Water Supply
Appraisal Estimate
Actual
November 1992
November 1992
November 1996
December 1993
September 1994
July 2002
June 1993
June 1993
July 1996
October 1996
vi
Kokopo Water Supply
Date of Award of Civil Works Contracts
Madang Water Supply
Rabaul Water Supply
Kokopo Water Supply
Completion of Civil Works Contracts
Madang Water Supply
Rabaul Water Supply
Kokopo Water Supply
Test Runs and Commissioning
Madang Water Supply
Rabaul Water Supply
Kokopo Water Supply
Commercial Operations
Madang Water Supply
Rabaul Water Supply
Kokopo Water Supply
5.
December 1998
June 1993
December 1993
September 1997
January 2000
September 1999
May 1996
May 1996
January 2000
September 2001
June 2002
May 1996
May 1996
February 2000
November 2001
October 2001
June 1996
June 1996
February 2000
November 2001
November 2001
Project Performance Report Ratings
Ratings
Implementation Period
Development
Objectives
Implementation
Progress
S
S
S
PS
July 1994 - Nov 2000
Dec 2000 - Dec 2002
D.
Data on Asian Development Bank Missions
Dates
Name of Mission
Fact-Finding Mission
Pre-Appraisal
Appraisal
Inception
Special Project Review 1
Review 1
Review 2
Review 3
Review 4
Special Project Review 2
Review 5
Review 6
Special Project Review 3
Number of
From
To
Persons
Number of
PersonDays
11 May 1992
19 Jul 1992
8 Sep 1992
15 Mar 1994
28 Mar 1995
30 Jul 1996
22 Sep 1997
31 Aug 1998
11 Oct 1999
12 Jun 2000
10 Jul 2000
5 Nov 2000
8 May 2001
21 May 1992
5 Aug 1992
11 Sep 1992
23 Mar 1994
11 Apr 1995
14 Aug 1996
2 Oct 1997
8 Sep 1997
18 Oct 1999
13 Jun 2000
17 Jul 2000
14 Nov 2000
9 May 2001
1
5
1
2
1
1
2
2
3
1
1
1
1
11
90
4
18
15
15
22
18
24
2
8
10
2
Specialization of
a
a, g, c, l (2)
a
a, m
a
a
a, m
a, m
a (2), m
a
a
a
n
Members a
vii
Special Project Review 4
Review 7
PCRb
Total Person-Days
5 Jun 2001
31 May 2002
6 Jun 2001
6 Jun 2002
1
2
2
16
n
a, m
16 Jul 2003
31 Jul 2003
3
45
a, m, l
302
PCR = Project Completion Review Mission
a
a - project specialist; b - financial analyst; c - counsel; d - economist; e - procurement/consultant specialist; f –
control officer; g - programs officer; h - education specialist; I - consultant; m - associate project analyst, n - national
officer.
b
Nancy Convard (mission leader/senior project specialist for water supply and urban development), Theresa
Villareal (staff consultant economist/financial specialist), and Cecilia Bantugon (associate project analyst).
ix
I.
PROJECT DESCRIPTION
1.
The Third Urban Water Supply Project covered two provincial urban centers of Papua
New Guinea (PNG): Madang, capital of Madang Province; and Rabaul, capital of East New
Britain Province. The Project continued the Asian Development Bank’s (ADB) support of the
Government’s efforts to improve water supply and sanitation services in its main provincial
centers.1 PNG’s rugged mountain ranges on the main island of New Guinea and widely
scattered islands form a unique population distribution. Most urban centers are small by
international standards. At the time of project appraisal only eight of the 79 urban centers had
populations over 10,000. Madang, population approximately 27,057, is the country’s third
largest city. Rabaul has a population of 17,022. Urban residents come from around the country,
some of them from the same province migrating for employment. These factors make it difficult
to develop water supply and sanitation facilities. Health indicators show a high incidence of
diseases such as diarrhea and typhoid that directly attributable to poor water supply, sanitation,
and hygiene.
2.
The project objective was to support government efforts to improve water supply
services to enhance living standards, support urban development, and improve environmental
sanitation.2 Specifically, the Project was to develop Madang’s existing water supply scheme and
address inadequate supply, reliability problems, and pressure irregularities. In Rabaul, the
Project was to address inadequate supply, poor water quality, and network coverage.
3.
The scope and anticipated outputs at appraisal for Madang included a new water
treatment plant (WTP) and associated intake and transmission facilities. For Rabaul, outputs
identified at appraisal included (i) development of new water sources (5 deep wells and 2
spring-fed creeks); (ii) retention of two existing deep wells to augment the new primary sources;
(iii) construction of additional distribution facilities, including a service reservoir and distribution
mains. This component was substantially modified as a result of devastating volcanic eruptions
that began in 1994 just before loan implementation. Minor eruptions continued for several years.
The Government identified the adjacent town of Kokopo as the replacement urban center for
East New Britain Province. The modified component included only minor works in Rabaul and
shifted major supply and distribution works to Kokopo. For the purpose of this report, this
component will be referred to as Rabaul/Kokopo. The scope of the associated technical
assistance included improving the legal and regulatory framework for the Waterboard and
improving operational and financial management of tariffs and nonrevenue water (NRW).
4.
External financing for the Project was provided by ADB and the International
Development and Cooperation Fund (ICDF), Taipei,China through the Chiao Tung Bank (CTB),
which provided (i) the foreign exchange cost and a portion of the local currency cost of the
Madang water supply component, (ii) foreign currency cost of the consulting services
component and (iii) interest during construction of the Madang water supply and consulting
service components. ADB administered the CTB/ICDF loan.
1
2
Previously, ADB has provided assistance to the sector through L0278-PNG Water Supply (ADB. 1976. Water
Supply. Manila.) for $13.5 million approved on 11 November 1976; and L0346-PNG (ADB. 1978. Second Water
Supply. Manila.) for $5.4 million approved on 25 July 1978.
A stated objective of the project performance appraisal report (ADB. 1992. Appraisal of the Third Urban Water
Supply Project in Papua New Guinea. Manila.) was improved sanitation, but the report noted that no sanitation
activities were included under the Project.
2
II.
A.
EVALUATION OF DESIGN AND IMPLEMENTATION
Relevance of Design and Formulation
5.
ADB’S country strategy for PNG at appraisal was (i) to support the Government’s
objectives of achieving income growth and employment, and (ii) to expand and diversify the
nonmining sectors of the economy, with special attention to improving sectoral policy and
supporting institutional development. Through this strategy, ADB supported the development of
social infrastructure, which directly improves living conditions and provides the necessary
infrastructure for commerce and production. The project cities are key urban centers in the
respective provinces and the country, as was articulated in the Government’s development
strategies, and the project design supported their development. The Project was and remains
highly relevant to ADB’s country operational strategy and thematic priorities—which now
emphasize supporting activities that improve social indicators—and the Government’s
development objectives and strategies. The project scope included improving water supply
systems in Madang and Rabaul/Kokopo though increased capacity, improved reliability,
improved water quality, and expanded distribution systems. An associated TA3 supported
institutional strengthening at the Waterboard.
6.
The Project, supported by the TA, included measures to ensure sustainability through
institutional strengthening and tariff reform, in line with ongoing sector reforms. Sector policies
at appraisal were based on Government-initiated tariff reform and were aimed at providing
autonomy and accountability at the enterprise level for financial and environmental
performance. Most sector policies prevailing at appraisal are still in effect, and some national
strategies and policies have been developed further. The Government continues to emphasize
improved water and sanitation services, and improvement of living conditions. Waterboard’s role
has been strengthened. The Waterboard no longer has jurisdiction in Port Moresby, which was
in some question at the time of project formulation, and is beginning to undertake more of its
statutory authorized roles, such as expanding services to district-level towns.
7.
The Project was formulated as a project loan and its components clearly established and
adequately assessed through the project preparatory TA.4 Policy dialogue at appraisal covered
strengthening the legal framework, as well as improving Waterboard’s financial management,
operational management, and planning processes. These were reflected in the project design
and closely monitored during implementation. The project scope was well defined. The original
project objectives and overall design remained unchanged throughout implementation, although
the Rabaul component was substantially changed to improve the water supply of Kokopo, the
new urban center for the Rabaul, as a result of the volcanic eruptions. Cost savings under the
revised scope that resulted from local currency devaluation allowed for considerable expansion
of the physical facilities constructed under the Project.
8.
The project design appropriately identified risks of (i) earthquakes and volcanic activity in
Rabaul, (ii) delays in implementation, (iii) overestimation of demand, and (iv) delays in adjusting
water and sewerage tariffs. The volcanic risk and its scale of impact were underestimated, but
the Project was adapted during implementation to achieve of the overall objective of developing
an urban center for East New Britain Province. Implementation delays associated with design
and procurement were effectively managed; however, delays associated with government legal
opinions and approvals for loan effectiveness had not been adequately considered. Demand
estimates based on the population were well-managed, but increased emphasis on connection,
3
4
ADB. 1992. Institutional Strengthening of the Waterboard. Manila
ADB. 1991. Third Urban Water Supply and Sewerage Project. Manila.
3
public awareness, and public relations would have greatly improved utilization of project
services. These are still needed to increase project efficacy. Tariffs have been appropriately
increased. The project design did not consider risk of electrical supply variability, but this issue
was effectively addressed by providing increased storage capacity in Madang and back-up
generators in Kokopo.
B.
Project Outputs
9.
The anticipated project outputs at appraisal were (i) new and expanded water system
facilities in Madang and Rabaul, and (ii) stronger operational and financial management of
Waterboard. Specifically, the project outputs were (i) to increase the average daily supply
capacity of the Madang water system from 4,650 m3/day to about 9,750 m3/day, adequate to
serve a population of 4,515 connections by the end of 2005; and (ii) to increase the daily
capacity of the Rabaul/Kokopo water supply system. The Project achieved all of its objectives,
although physical outputs of the Rabaul/Kokopo component were modified due to previously
noted volcanic eruptions. Kokopo targets supply capacity target of 2,800 m3/day to serve a
population of 6,500 with an estimated 1,050 residential and 130 commercial connections.5 Minor
restoration works for the Rabaul system were also achieved and included a capacity target of
1,400 m3/day to serve 2,500 persons. Appendix 1 compares targets and actual achievements.
10.
For the Madang component, the Project has exceeded the objectives and augmented
the source supply, headworks, water treatment capacity, and transmission main capacity to
meet the year 2012 planning targets instead of the original 2005 targets. The achieved capacity
was 15,600 m3/day versus the original target of 9,750 m3/day. This has effectively addressed
the problems of multiple sources and treatment facilities, low water pressure, poor service
reliability, water rationing, and non uniform water quality. Production has been centralized with
uniform water quality. The Project also provided additional infrastructure to the villages in the
area of the WTP and water intake, including water supply, electricity supply, telephone service,
and road access. The need to change the location of the WTP also resulted in longer
transmission lines, which were designed and constructed without an increase in cost.
11.
For the Rabaul/Kokopo component, the Project exceeded the revised physical
infrastructure objectives. Kokopo town and adjacent areas of Vunabakut, Kenabot, and Takubar
received new reticulated water supply. The affected landowners in Ulagunan and Palnakaur
also received a reticulated water supply. Seven deep wells were developed, with five wells
commissioned and one common chlorination and control building constructed. Headworks
capacity is 4,500 m3/day. Two reservoirs were constructed with service capacity of 2,800 m3.
This supply system is expected to meet anticipated demand in 2012.
12.
Waterboard staff at headquarters and the district level were trained through project
implementation and the TA. The Waterboard envisions staff trained in construction, operation
and maintenance (O&M) of water supply systems will train other staff. Various management and
operational and training manuals for the water supply production and treatment plants can be
prepared for the benefit of other districts. A total of about 15 employees from Waterboard
headquarters, as well as Madang and Rabaul branches, were trained through the TA and dayto-day knowledge transfer.
5
The water supply component for Kokopo once considered a surface water option; however this was abandoned
when the feasibility study also reviewed groundwater options, which were then determined to be feasible and less
cost.
4
13.
The Waterboard reformed water tariffs during implementation. Water tariffs have been
adjusted in 1995, 1997, 2000, and 2003. Waterboard management and its board of directors
have consistently pushed for tariff increases so that it can meet its required 10% rate of return.
The Waterboard has also modified the tariff structure to improve efficiency of implementation
and customer palatability. The current tariff includes a lifeline consumption block of 12 m3/month
to ensure provision of water to low-income households. The tariff is uniform in all districts, and
commercial and noncommercial customers have similar rates. Tariffs are adjusted every 3 years
to account for inflation. Financial and operational management of the Waterboard was
considerably improved through the TA, policy dialogue, and experience gained during
implementation. Corporate planning capabilities were also improved. Continued improvements,
particularly at the district level, remain an important need that should continue to command
attention. However, non-revenue water (NRW) has not been sustained in all districts and is
currently postdated by delays in management information system (MIS) data receipt at the
district level, and insufficient quantity of meter-testing equipment.
14.
Waterboard has demonstrated its increased institutional capacity through an ability to
recognize, analyze, and correct operational and management problems. Although it faced
implementation challenges, the Waterboard developed a centralized MIS system at its own
initiative and cost after ADB consultants for another project preparatory TA recommended it.6
Waterboard established a task force to identify and implement specific MIS corrective actions,
and headquarters directed district managers to improve raw data quality. It also hired NRW
consultants/trainers at its own expense, bought meter-reading equipment, and adhered to tariff
increases. Districts are mandated to undertake monthly monitoring of financial and operational
performance to ensure better O&M cost control, improve collection efficiency, and operate
commercially. The Waterboard will further strengthen its customer relations and strictly enforce
licensing and payment of compliance fees in all its districts to ensure more connections to the
system, as in the case of Madang and Rabaul/Kokopo systems.
C.
Project Costs
15.
The actual project cost was $23.95 million, it was projected at $21.1 million at appraisal.
This comprised $11.9 million in foreign exchange cost versus $11.3 million at appraisal, and
$12.0 million equivalent in local currency cost versus $9.8 million equivalent at appraisal.
Project cost increases resulted from a major change of scope approved in October 1996, to
increase counterpart funding of the Government to $6.3 million and expansion of certain
physical components, which increased the total project cost estimates to $27.4 million. The
change allowed funding of the shortfall on (i) Madang for $2.3 million, (ii) $1.0 million for project
management office (PMO), (iii) $0.4 million for land acquisition, (iv) $1.6 million for consultants,
and (v) $1.0 million for contingency. Currency devaluations and lower costs for the
Rabaul/Kokopo component allowed the project to be completed well below the revised cost
estimates and allowed the Government to increase project scope. The table below compares
actual and appraisal cost estimates.
6
ADB. 1999. Provincial Towns Water Supply and Sanitation. Manila.
5
Table 1: Comparison of Appraisal Cost Estimates and Actual Costs ($ million)
Component
Appraisal
Foreign Local Total
Revised
Foreign Local Total
Civil Works
0.80 4.60
5.40
0.80
6.00 6.80
Equipment
5.60 0.80
6.40
5.60
0.80 6.40
Consulting Services
1.40 1.00
2.40
1.40
3.90 5.30
Contingencies
1.20 1.40
2.60
1.20
1.40 2.60
Project Mgt. Office
0.00 0.00
0.00
0.00
0.00 0.00
Taxes and Duties
0.00 2.00
2.00
0.00
4.00 4.00
IDC
2.30 0.00
2.30
2.30
0.00 2.30
Total
11.30 9.80 21.10
11.30 16.10 27.40
IDC = interest during construction, mgt. = management.
Source: ADB, CTB and GoPNG
Foreign
Actual
Local Total
7.85
8.24 16.10
1.75
0.24 1.99
0.70
1.78 2.49
0
0
0
0.00
1.74 1.74
0
0
0
1.62
0 1.62
11.94 12.01 23.95
16.
Despite lower project costs, actual connections are lower than targets, resulting in lower
financial internal rates of return (FIRRs) and economic internal rates of return (EIRRs) for both
components. Overall FIRR is 5.4%, which is lower than the 6.6% at appraisal. Overall EIRR was
12.5%, compared with 13.3% at appraisal. (para. 49).
D.
Disbursements
17.
ADB approved the $11.3 million loan from its ordinary capital resources on 15 December
1992. The Government, relent the ADB loan proceeds and CTB/ICDF loan for the
Rabaul/Kokopo water supply component to Waterboard on the same terms and conditions as
the ADB loan. The Government also provided a total equity contribution of $5.94 million
equivalent comprising (i) the proceeds of the CTB/ICDF loan for consulting services, (ii)
counterpart funds for consulting services, and (iii) counterpart funds for land and contributions
for taxes and duties.
18.
Government approval procedures delayed loan effectivity. This in turn delayed start-up
and implementation, which delayed disbursements. It took 24 months—until 7 December
1994—for the loan to become effective, and the first disbursement was made on 15 May 1995.
Disbursement picked up significantly in 1998, reflecting major contract awards for civil works.
Loan proceeds from ADB and CTB/ICDF were fully utilized. The CTB imprest fund was used
effectively, except that $36,000 for value added tax was mistakenly charged against the
CTB/ICDF imprest account.7 No problems were encountered using the Statement of Expenditure
procedures. Appendix 2 shows various reallocation of loan proceeds, as well as disbursements
by category.
19.
All loan proceeds were disbursed. The devaluation of the kina resulted in loan savings
that allowed for the construction of additional water supply facilities in Madang and
Rabaul/Kokopo. Adequate counterpart funds were generally provided on time. There were some
delays associated with currency devaluation that affected availability of counterpart funds. This
was addressed by changes of scope in December 1999 that provided for ADB financing of
construction supervision and a major change in scope in May 2002 that increased the local
currency financing from $4.1 million to $6.6 million.
7
ADB, Government, and ICDF/CTB are currently discussing a resolution to this problem.
6
E.
Project Schedule
20.
Appendix 3 shows the main events during project implementation. The loan was
approved on 15 December 1992 and became effective on 7 December 1994. Loan
effectiveness was delayed because of unclear legal arrangements for ICDF financing and CTB
disbursement of funds to the Government. The Project also faced substantial delays as result of
the aforementioned volcanic eruptions. Late project effectiveness may even have prevented the
possible loss of consulting fees and destruction of infrastructure in the volcanic eruptions.
Implementation of the Madang component generally progressed satisfactorily once the Project
was effective; however, change in the WTP was necessary due to land elevation requirements
for gravity feed systems, site and caused a delay of several months. Implementation
progressed significantly faster from 1997 when the final resolution on the Rabaul/Kokopo
component was achieved, which resulted in the deletion of the original Rabaul component and
its replacement with minor water and sewerage facility restoration work and the new Kokopo
water supply system. The loan was extended by 22 months to accommodate the Kokopo water
supply system and construction of additional service reservoir in Madang. An additional project
extension of 10 months was granted to allow the use of loan savings to expand the Kokopo
system beyond the originally envisaged project area. Implementation took 96 months (Appendix
4).
F.
Implementation Arrangements
21.
The Project’s executing agency, the Waterboard, remains as at appraisal. The
Waterboard provided overall project coordination through its project management office (PMO),
which was established in 1992. The Waterboard, Government, consultants, and ADB
coordinated closely. The PMO effectively managed the Project through volcanic eruptions, land
acquisition problems, and currency fluctuations. Implementation was effective in facilitating the
transition to operations and management of the constructed facilities.
G.
Conditions and Covenants
22.
Loan effectivity was conditional on the execution of the Subsidiary Loan Agreement for
the ICDF/CTB financing, which was achieved on 16 August 1994 and resulted in loan
effectiveness on 7 December 1994. No covenants were modified, suspended, or waived during
implementation. Appendix 5 shows details of compliance with loan covenants. All covenants
relating to implementation arrangements, reporting, environmental protection, wastewater tariff
reforms, financial management, and benefit monitoring and evaluation (BME) were complied
with. Some covenants were partially complied with: (i) asset inventory and valuation for which
the Waterboard is currently sourcing external funding; (ii) overall assessment of existing legal
and institutional frameworks to support Waterboard operations; and (iii) tariff adjustments every
3 years (1997, 2000, and 2003) as opposed to annually to meet financial targets.
H.
Related Technical Assistance
23.
At appraisal, the Government requested that ADB provide an advisory TA to strengthen
the Waterboard’s financial and operational management and training. Specific outputs of the TA
were to include (i) training of selected staff, (ii) an NRW action plan and provision of equipment
to help manage NRW, and (iii) detailed proposals to improve the institutional and legal
framework of the Waterboard, revise existing tariffs, and establish a corporate planning unit
within the Waterboard. The TA was implemented in connection with the Project and was
completed in May 1997. Effective and relevant capacity building was achieved and much
7
sustained through policy dialogue and other project activities; however, the NRW program has
not been well sustained.
I.
Consultant Recruitment and Procurement
24.
Waterboard retained the services of a qualified engineering consulting firm to assist in
project implementation, including detailed design and construction supervision. The
Government financed these services through an equity investment (para. 17). As a result of
project scope changes— particularly the expansion of the Kokopo component to include an
extension of water distribution to the Takubar area—the original consulting services budget was
exceeded and Waterboard self-financed the remaining services, including civil works.
25.
Goods and services were procured from loan funds according to ADB’s Guidelines for
Procurement. Civil works, equipment, and materials were procured largely as appraised or as
modified in agreed changes in scope. All civil works contracts, equipment, and materials were
procured through international competitive bidding. No major problems were encountered in the
packaging of contracts, preparation of bidding documents, or evaluation of bids. There were no
disputes or contractual difficulties with any contracts.
J.
Performance of Consultants, Contractors, and Suppliers
26.
The performance of contractors and suppliers was generally satisfactory. Schedule and
budget changes were generally associated with the changes in project scope. The number of
variations could have been reduced through more advanced planning of construction activities.
The contractor of the Rabaul/Kokopo component experienced project management difficulties
and two project managers had to be replaced, but a third manager completed the contract
works in a very satisfactory manner. Language difficulties resulted from the contractor for the
Rabaul/Kokopo component being from a non-English speaking country without provision of
adequate number of, and technical language qualified interpreters. The physical facilities
completed under the project are of good quality, reflecting the satisfactory performance of
contractors and suppliers.
27.
The performance of the consultants was generally satisfactory. Performance could have
been improved through better management of key personnel, client relations, and more
detailed, accurate, and consistent reporting of data and information.
K.
Performance of the Borrower and the Executing Agency
28.
The performances of the Borrower and the Waterboard were satisfactory. Both met their
responsibilities and obligations in Project implementation. Although lengthy legal opinion
procedures related to the ICDF co-financing caused substantial initial delays and the volcanic
eruptions required changes to the project scope more than three years into Project
implementation, project activities picked up and the Project was completed on a reasonable
schedule.
L.
Performance of ADB
29.
ADB’s performance was satisfactory. ADB carried out 11 review missions to monitor
project progress and ensure timely resolution of implementation issues. ADB worked closely
with the Government and Waterboard to meet the challenges of volcanic eruptions, land
acquisition problems, and currency fluctuations. Application of higher physical contingencies to
8
subcomponents with greater uncertainty and closer attention to technical needs and details
would have helped to limit number of variations. Also, Kokopo’s revised scope and targets were
not clearly documented. Deletion of a surface water subcomponent on Kokopo also not clearly
documented.
III.
A.
EVALUATION OF PERFORMANCE
Relevance
30.
The design of the Third Urban Water Supply Project was highly relevant in meeting longterm and immediate project objectives. At appraisal, the Project aimed “to enhance living
standards, support urban development, and improve environmental sanitation for the residents
of Madang, Rabaul as well as communities close to Rabaul through the provision of improved
and additional water supply.8 Delays in implementation helped the Project considering that the
investments on the original project area would have been wasted when Rabaul was
devastated.9
31.
The TA10 to provide (i) a basic, district-level management information system (MIS) that
focused on producing fundamental operational performance indicators; (ii) guidance in NRW
management; and (iii) design of water and sewerage tariffs was highly relevant and addressed
critical areas for institutional strengthening of the Waterboard.
32.
The Project overall objectives remained unchanged despite the changes in the design of
the Rabaul/Kokopo component. The project fully supported policy reforms to establish water
treatment standards, tariff increases to achieve full cost recovery, and institutional strengthening
in water demand management. Key elements of Waterboard policy still in force include
expanded coverage of urban water supply, government funding for capital works, user tariff
reforms, and greater branch level autonomy and accountability for financial and operational
performance. New MIS will support these policy changes. This is to be supported by the new
centralized MIS system.
B.
Efficacy in Achievement of Purpose
33.
Project achieved its immediate objectives of improving water supply, living conditions,
and urban development. Water services to targeted beneficiaries comprising domestic,
commercial and industrial customers has improved in terms of water quantity, quality, and
reliability, as well as in utility management.
34.
New supply capacities and existing facilities were intended allow the Madang scheme to
serve about 4,520 connections and the Rabaul/Kokopo scheme to serve the 3,737 connections
in year 2005. The revised scope for the Rabaul/Kokopo component was envisaged to have
1,083 connections in the Kokopo area.11
8
The objective of the Madang project was to upgrade the town water supply headworks to meet the current demand
and projected demand of 15 ml/d in year 2012.
9
After the volcanic eruption in Rabaul in 1994, Kokopo was included in the scope of the Project, which was
considered an alternate site to Rabaul. Rabaul revised water supply scheme has 1,629 connection targets in 2008
and 3,570 m3/ day (11 April 1995).
10
ADB. 1992. Institutional Strengthening of the Waterboard. Manila (TA1803-PNG for $400,000, approved on 15
December 1992).
11
As of June 2003, there were 654 connections in Kokopo compared with 1995 baseline connections of about 380
connections.
9
35.
As of June 2003, Madang had 2,690 connections comprising 55.5% of the 4,851
potential total connections.12 This represents an increase of 840 connections compared with
appraisal, when there were 1,850 connections.
36.
Comparing Rabaul connections to targets is irrelevant because the component was
revised. Most of the residential population, who moved because of the volcanic eruptions, is
served under a separate water system.13 This system will eventually be connected to the
rehabilitated Rabaul or Kokopo network. In Kokopo, actual connections are 526 residential
connections, comprise 50% of 1,050 target household connections and 128
institutional/commercial connections.14 Additional connections are ongoing because the Kokopo
distribution system was completed in 2002.
37.
In Madang, many connected households, commercial establishments, and institutions
still use existing boreholes and rainwater tanks.15 The same situation occurs in Kokopo but to a
lesser extent since there is much new development. It is only during dry months that districts get
more customers connected because of shortages of rain and other water sources. Districts must
strictly enforce compliance and licensing fees to customers using alternative supplies and
promote timely payment of bills to prevent disconnection. Customer relations must also be
improved to reach the projected number of connections by 2005, particularly given the fact that
capacity increases were greater than originally planned.16
38.
The TA on institutional strengthening of the Waterboard achieved the objective of further
improving financial and operational performance.17 Significant improvements were made,
particularly to operational management, financial management, corporate planning, and NRW.
NRW improvements were not sustained to the extent desired. This is due to lack of
formalization and implementation of a NRW reduction program including meter testing and
replacement policy, illegal connection controls, and proactive leak detection program.
39.
ADB’s assistance to set up the systems for generating performance data on the district
branches had been effective for some time. In 2001, the Government undertook the initiative to
greatly expand the MIS to centralized information management. To-date the MIS has faced a
number of challenges in contributing to enabling the branches to optimize the use of
performance indicators, particularly for NRW, customer services, and commercializing
operations. At the time of the project completion review mission, the new MIS was being
improved to better meet the requirements of the district branches and Waterboard management.
12
These figures are based on the Waterboard MIS report, June 2003 report for Madang. The June 2003 figure is
lower than the January 2003 figure of 2,783 connections, indicating that there were about 93 disconnections from
January to June 2003. The branch office needs to connect households still using their own systems—1,815
potential connections—as well as the 253 disconnected households as of January 2003.
13
Actual connections at appraisal for Zones 1 to 8 in Rabaul district are 1,687. Only Zones 1 (part of Rabaul town), 7
(Nonga), and 9 (Kokopo) still remained after the volcanic eruption in 1994.
14
Based on actual 654 connections as of June 2003 compared with actual 122 connections in December 1999. The
difference is assumed to be new connections. The population of villages served—4,528 residents—is as estimated
in the Preliminary Feasibility Report Vol. 2 for Gazelle Peninsula.
15
The use of rainwater tanks as back-up source and as a means of water conservation should be supported, but this
needs to be balanced with needs of efficiently scaled community system.
16
A benefit monitoring and evaluation (BME) report for Madang indicated that there are proposed extensions.
17
In line with the study’s recommendations, Waterboard staff has been gradually reduced from over 500 in 1991 to
current level of 270. Further, Waterboard implemented recommended tariff increases in 1997, 2000, and 2003. A
standard operational monitoring system using monthly performance indicators has helped keep track of finances
and service deficiency. The Waterboard has set targets to reduce NRW levels to 20% for Lae, Madang, Wewak,
and Mt. Hagen and 30% for the other districts.
10
Training needs to focus on integrating technical and engineering aspects with financial
performance targets.
40.
Improved water quality and reliability of service was achieved and directly contributed to
living condition improvements. Residents of Madang and Kokopo now able to receive safe water
for 24 hours, meeting World Health Organization standards that have been adopted by PNG as
national standards. Prior to the Project, water services were unreliable; sometimes only several
hours a day. Before the Project, water quality varied because of service interruptions and
multiple sources. Sample water quality data is presented in Appendix 6. In Kokopo, the new
supply serves 532 new customers, including several villages with a total population of 4,528 that
relied on unreliable rainwater catchment. These villages save money and time because they no
longer have to travel long distances to purchase or collect water during dry periods. This leaves
more time for schooling and income-earning activities (paras. 54 and 55). Appendix 7 provides
specific examples of beneficiaries’ improved living conditions.
41.
The Project has supported urban development, particularly in Kokopo. Many new
businesses and commercial activities have developed in Kokopo, which has become the
administrative, commercial and social center for about 16,000 residents of Kokopo/Vunanami
and 13,364 of Ralauna.18 It has trade stores, supermarkets, and industrial and commercial
areas with reticulated water supply system serving Kokopo, Vunapope, and Takubar. The East
New Britain Provincial Administration is formulating a comprehensive development plan for
Kokopo, the Kokopo corridor from Kokopo to Tokua, satellite towns, and resettlement areas for
populations affected by volcanic activity.
C.
Efficiency in Achievement of Outputs and Purpose
42.
ADB’s internal processing of the Project was efficient and satisfactory. The organization
and management of the executing agency and the district branches were effective in ensuring
efficient project implementation, as well as timely and adequate availability of counterpart
funding. This has contributed to the anticipated outputs being achieved on schedule.
43.
Under policy reform, the Waterboard has increased water tariffs in stages to ensure
financial viability of operations. Physical investments under the Project included design and
installation of production and treatment facilities for Madang and Rabaul to address the
problems of short supply and poor water quality. All the facilities were completed within a
reasonable schedule given the volcanic eruptions and additional works completed with loan
savings. All facilities are in full operation. A total of 15 Waterboard staff members were directly
trained with many others indirectly trained through contact time with consultants, contractors,
and coworkers.
44.
The EIRR is above 12% and the FIRR exceeded the weighted average cost of capital.
The Project is rated efficient.
1.
Economic Internal Rate of Return
45.
The EIRRs of the Madang and Rabaul/Kokopo components have been recalculated and
compared with the estimates at appraisal and revised project scope. The EIRRs are higher than
those under revised project scope because of a drop in project cost compared. Overall EIRR is
18
Water supply systems for residential areas were primarily provided through other funding sources and the Rabaul
Redevelopment Authority.
11
12.4%, compared with 13.3% at appraisal and 10.0% under revised project scope. The EIRR for
Madang was 12.5%—compared with 17.3% at appraisal and 10.2% when project scope was
revised—and 12.1% for Rabaul/Kokopo compared with 11.2% at appraisal and 9.9% with
revised project scope. Sensitivity analyses indicate that the EIRRs of project components are
more susceptible to reductions in project benefits than they are to reductions in costs. This is
the same as anticipated during appraisal. Appendix 8 presents a more detailed analysis on
economic reevaluation.
2.
Financial Internal Rate of Return
46.
The FIRRs of the two components have been recalculated based on actual project cost,
financing, and revenue data. The FIRRs for Madang and Rabaul/Kokopo are 5.9% and 4.8 %
respectively, lower than the 8.8% and 5.4% estimated at appraisal and 10.7% and 4.2% under
revised project scope. The overall FIRR is 5.4%, compared with 6.6% at appraisal and 6.4% at
revised project scope. Sensitivity analyses indicate that the FIRRs of both components are more
vulnerable to decreases in revenues than they are to increases in O&M costs, as projected
during appraisal. Appendix 6 provides a detailed financial analysis.
D.
Preliminary Assessment of Sustainability
47.
The Project is rated sustainable with the physical outputs being technically sound with
trained personnel for O&M. Appropriate O&M manuals were provided, together with operator
training. Waterboard O&M capabilities and procedures are satisfactory. Currently, O&M is
generally reactive. The Waterboard recognizes that a more proactive approach is necessary
and is currently seeking assistance to develop an asset inventory, revaluation, and
management program. Waterboard also recognizes the lack of trained district-level staff for
electrical and electronic equipment O&M and is now sharing staff between districts, outsourcing
and training more staff to meet O&M staffing needs.
48.
Although there is an adequate potential demand for the project services, the Waterboard
still has to connect more households by improving its customer relations with commercial
businesses and institutions to be more commercially viable. One area of concern is keeping its
existing customer base and ensuring higher collection efficiency of current water bills and
arrears. The Waterboard has to prioritize efforts at improving customer relations and billing
efficiencies, as evidenced by the Waterboard having headquarters managers review district
data and advise districts on how to improve.
49.
Financial sustainability is ensured by setting water tariffs based on a market price
mechanism with an eye toward full cost recovery. The Waterboard’s current policy to recover
arrears from large government institutions and commercial businesses helped generate enough
cash to cover O&M and debt service. Periodic increases in tariffs will not guarantee commercial
viability, but obtaining revenues in a timely manner and becoming more cost-efficient will further
enhance profitability and liquidity.19 The Waterboard would continue to conduct community
awareness campaigns and public consultations to ensure utilization of water services capacity,
and that it would also encourage potential customers to connect to the system or pay much
higher standby fees for nonconnection. Appendix 9 provides a cost recovery analysis.
50.
Relevant project performance indicators were developed but these financial indicators
and operating targets are currently not well monitored due to implementation problems of the
new MIS, but the Waterboard is working to address these and has an ongoing task force to
19
Only Lae operations are profitable, and they are subsidizing the other districts, including Madang and Rabaul. Cost
recovery has improved in 2003 as a result of increases in water and sewerage tariffs.
12
correct deficiencies. This appears to be in part because of data inconsistencies and delays in
transmitting billing information to district managers. Raw data quality and information generated
by the MIS should be reviewed and checked for consistency and reasonableness.20 Integrated
financial planning —which provides required tariff revenues vis-à-vis projected O&M costs—
must be a priority. Management is reviewing districts’ financial plans to ensure that collected
tariffs can at least cover O&M budgets.
51.
The Waterboard has implemented cost-efficiency measures, including preventive
maintenance, meter reading/testing, reducing NRW, and reducing fixed overheads since
production and treatment plants are not operating at full capacity.21 The Waterboard will
continue to monitor results of these measures and provide ADB with performance indicators that
reflect financial sustainability of project facilities.
E.
Environmental, Sociocultural, and Other Impacts
1.
Environmental Impact
52.
As anticipated at appraisal, the Project’s environmental impacts have been minimal.
During implementation there were early incidents of environmental concern associated with the
backwashing of the rapid sand filters and chlorination system testing of the Madang WTP.
These resulted in sediment-laden backwash water—and, in one case, chlorinated water—being
discharged into a nearby stream. The one time incident involving chlorinated water resulted in a
minor fish deaths in the immediate area of the discharge. These incidents were quickly
addressed and a settling pond constructed to prevent release of sediment-laden water. There
have been no new complaints since the settling pond was constructed. The Project apparently
did not contribute to an increased problem of septage disposal which was a concern at Board
consideration.
53.
The settling pond that discharges its effluent to a grass-lined channel reduces
suspended solids. There are no industrial facilities discharging into the raw water supply, so no
toxic or hazardous substances would be expected in the backwash water. Sludge from the
lagoon is spread on-site or on nearby land with permission of the landowner. This system
effectively protects the environment, but the Waterboard plans to develop a more permanent
settling and sludge drying system.
2.
Social Impact
54.
At appraisal, the Project was anticipated to benefit 49,510 people: 27,090 in Madang
and 22,420 in Rabaul. At completion, beneficiaries of the water supply system include 16,250 in
Madang and 5,560 in Rabaul and Nonga and 5,141 in Kokopo (based on service area
population).22 The project benefits have not yet been fully realized since full service connection
capacity has not been achieved (para. 49).
20
Raw data review may be an appropriate role for the district manager as well as review of MIS data. Additional MIS
staff may allow more internal checking and more timely return of key information to district managers. Contracting
out was to address MIS system deficiencies may facilitate baseline data validation and the effectiveness of the
system.
21
Higher volumes of water treated to conform with design capacity will lower unit operating costs and enable the
treatment plants to become cost efficient. Madang will be expanding the network to distribute water to more
communities.
22
The Kokopo water supply presently serves an estimated population of 5,141, which is projected to increase to
9,284 by 2020. The remaining 53,204 of population of the Kokopo district projected to reach 96,086 in 2020 will
continue to obtain water from water tanks, shallow wells, underground springs and creeks, according to the East
New Britain Provincial Administration. Interviews with the provincial government revealed that the project water
supply system can serve communities in the urban periphery.
13
55.
The Project’s social benefits include (i) women and children save time for economic
activities such as planting, harvesting, and selling agricultural crops; (ii) long-term employment
for Waterboard staff for plant operation and O&M, as well as for villagers cleaning the grounds
of water supply treatment facilities; (iii) improving people’s health, particularly children who
suffer from waterborne diseases from rainwater tanks and creeks; (iv) short-term employment
particularly the locals who gained construction experience and are now employed as semi
skilled labor; (v) improved business activities for commercial establishments such as hotels and
restaurants; (vi) more time for women to do household chores and care for children, (vii)
reduced visits to hospitals and clinics due to illness; (viii) roads constructed under the Project
provided access to villagers and workers; (ix) schools no longer have classes disrupted when
water supply is interrupted; (x) electricity is provided to the project area as a result of new
headworks and (xi) sale of land by the landowners provided capital for small businesses
(Appendix 9).
3.
Other Impacts
56.
The Project has further strengthened the Waterboard and assisted in identifying
opportunities to undertake more of its statutory mandates, including advisory assistance to
various levels of Government and developing small town and rural water systems. One
significant project benefit is experience in design and operation of water supply production and
treatment facilities that can benefit other districts in the province. The East New Britain
Provincial Administration Office has engaged the Waterboard at Rabaul to undertake a
feasibility and detailed engineering study, design and documentation, tendering and
construction supervision, and maintenance management of the rural water supply.23 The
Waterboard at Rabaul will help the provincial government execute physical works for and
maintain water supply services.
IV.
A.
OVERALL ASSESSMENT AND RECOMMENDATIONS
Overall Assessment
57.
The objectives of the Project and associated TA were achieved. Physical infrastructure
considerably exceeded objectives set at Appraisal and the revised scope for the Rabaul/Kokopo
component, generally meeting anticipated 2012 needs versus the anticipated 2005 needs.
58.
In terms of scope, the Madang component facilities were built as at appraisal; however,
the capacity of the WTP treatment plant was increased to 15,600 m3. Also, treated water
storage was increased through the addition of two 3,100-m3 storage reservoirs. The completed
facilities are operated and maintained well. O&M funding is sufficient. Tariffs have been raised
to achieve the statutory required rate of return.
59.
The Rabaul/Kokopo component was substantially changed as a result of the volcanic
eruptions, but the primary objectives of improving water supply, improving living conditions, and
supporting urban development for the main urban center of East New Britain Province have
been achieved. This component developed the new Kokopo water supply system that has an
overall capacity of 4,500 m3/day with storage facilities of 5,600 m3/day.
23
The project is the East New Britain Rural Water Supply Network, comprising a demographic study, demand
assessment, water source identification, concept design, and preliminary costing for 16 target areas.
14
60.
The Waterboard is significantly strengthened and management continues to identify
strategic planning needs and address areas for operational improvement.
61.
Overall, the Project is rated successful. It is relevant, efficacious, and efficient, and is
likely to be sustainable, with significant impacts on living conditions and socioeconomic
conditions and moderate impacts in other areas (Appendix 10). All anticipated outputs were
achieved.
B.
Lessons Learned
62.
The review of the Project identified several lessons learned that should be applied to
future water sector projects. These include lessons applicable to the Project’s success, its
implementation delays, and sustainability considerations.
(i)
(ii)
(iii)
(iv)
(v)
(vi)
C.
Recommendations
1.
63.
Readiness of essential cofinancing should be confirmed at project appraisal or
loan negotiation to avoid implementation delays.
Land acquisition remains difficult and should be avoided or minimized. Where
land acquisition is required, the acquisition process—including compulsory
action—should be initiated as early as possible.
There should be a clear requirement for either competent official-language site
supervisors and project managers, or an equivalent number of technical
language interpreters for each nonspeaker of the official language.
Comprehensive water connection programs should be developed and should
include poorly served areas, businesses, and poor households. The program
need maintenance, compliance and enforcement. An associated community
education and awareness program should be conducted to improve community
understanding of the benefits, availability of lifeline block supplies, value in
understandable terms to them (e.g. a day’s fishing or sales at the market),
payment methods, and penalties on illegal connection.
The Government’s initiative in developing a comprehensive MIS will help
continue to improve the Waterboard’s operations and management. To achieve
its potential and ensure its positive effect, however, the MIS needs to ensure that
operational data and performance indicators are accurate and available in a
timely manner to allow district managers to make necessary adjustments in
O&M, connection programs, and local administration.
A strong PMO and active involvement of Waterboard management was key to
the project’s success and should be incorporated into future projects.
Project-Related
The following activities require follow-up:
(i)
(ii)
Remove submerged pumps from existing deep wells and maintain in ready
condition in the event the supplemental sources are needed.
MIS should be fine tuned in terms of reconciling accounts with districts to avoid
billing problems, timely generation of reports on connection status, aging of
arrears, and consolidation on a monthly basis to show variances. Districts must
be able to access their customer base (at least on a read-only basis) to ensure
consistency and accuracy to enable branch managers to readily check on
operational and customer payment data to take appropriate action.
15
(iii)
(iv)
(v)
(vi)
(vii)
2.
Establishment of a formal NRW control program, including leak detection, meter
testing and replacement, and illegal connection detection and resolution.
The Waterboard should develop and implement a comprehensive connection
program accompanied by a community awareness/education to improve
connection rate and collection efficiency.
The Waterboard’s customer services, corporate relations, finance, and technical
services must work closely towards achieving more commercial operations
through better customer relations, collection efficiency of current billing and
arrears, becoming more cost-efficient, and reducing NRW.
The Waterboard should further evaluate and quantify project benefits such as
health improvements, job creation, and cost savings. Findings should be
incorporated into BME reports to be submitted to ADB annually until 2005.
The project performance audit review could be undertaken in 2004 or 2005 when
data on fully operating project facilities is available.
General
64.
Based on key lessons learned from the review of the Project, the following general
recommendations are made for future ADB projects in the water sector:
(i)
(ii)
(iii)
(iv)
(v)
(vi)
24
Project design should emphasize identifying specific physical infrastructure
targets, and specific targets to improve living conditions.24
Specific and comprehensive connection programs should accompany project
design changes that involve increasing the capacity of water supply works.
ADB should undertake greater technical review of the projects throughout
implementation to allow timely identification and response to potential scope
changes or construction variations. This review should include regular detailed
updating of technical component progress to facilitate project completion reviews.
More guidance should be provided to the implementing agencies in viable
monitoring methodologies and developing meaningful, measurable performance
indicators early—preferably before loan negotiations—to establish baselines on
economic and social aspects.
The Government’s readiness to complete loan effectiveness procedures in a
timely manner should be carefully assessed.
The relationship of water services provision to other utility requirements, e.g.
electrical supply, should be considered and included in project cost estimates.
Time-bound, targeted outputs are now required of project frameworks.
16
Appendix 1
PURPOSE, TARGETS, AND ACTUAL ACHIEVEMENTS
Purpose/Scope
Targets
A. Madang Water Supply
Improve Water Supply New water intake with capacity
of 14,000 cubic meters/day
capacity and
(m3/day) and water treatment
reliability
plant (WTP) with capacity of
9,750 m3/daya
a
Actual Outputs and Outcomes
New intake and WTP, both with capacity of
15,600 m3/day
1.1 kilometer (km) pressure
trunk main, diameter of 450
millimeters (mm)
2.5 km trunk main, diameter of 375 mm
4,700 m3 storage reservoir
4,700 m3 storage reservoir
1,600 m clear water mains,
diameter of 450 mm
1,600 m clear water mains, diameter of 450
mm
Access road to new WTP and
new intake (1.9 km)
Access road to new WTP and new intake
(1.9 km)
Staff housing (6 units)
Staff housing (6 units)
Power supply to WTP and intake
facility
Power supply to WTP and intake facility
passes through the surrounding villages.
Soldeb, Medumbamig (where existing tank
is), Baig, Bangonnu (where TP is), Watu, and
Egumul. None of the villages have power
supply because an expensive transformer is
needed.
Retain 2 existing deep wells as
supplementary sources
2 existing deep wells retained as
supplementary sources but pumping facilities
not well maintained. Need for additional
supply not seen in the long term.
Integration of 2 independent
water systems into Waterboard
system
Systems integrated
No specific targets for reliability,
distribution pressure, water
quality
Water service reliably provided 24 hours per
day with good pressure and quality that
meets World Health Organization Guidelines
Conventional water treatment plant, consisting of flocculation tanks, 2 rectangular sedimentation tanks, 4 rapids
sand filters, and backwash and chlorination facilities.
Appendix 1
17
Purpose/Scope
Targets
Actual Outputs and Outcomes
Reliably serve total
existing and 2005
demand
100% of total demand estimated
at
Capacity for 2012 demand achieved (15,600
m3/day vs. 9,750 m3/day)
(i)
Appraisal: 1,850
connections or 3,700
m3/day
At completion:
Total estimated:
connections: 2,690 connections
consumption:5,380 m3/day
(ii)
2005: 4,515 connections,
9,032 m3/day
Improve living conditions
No specific targets
Support urban
development
No specific targets
B. Rabaul/Kokopo
Water Supply
Improve water supply
capacity, reliability, and
extend distribution
system in Rabaul
Minor repairs and
restoration of water
supply and sewerage
facilities in Rabaul
Minor expansion of
Rabaul water supply
system
Raw water sources from 2
springs and 5 deep wells, with
total capacity of 8,800 m3/day;
trunk mains, secondary mains
and reticulation networks
including balance tank,
clearwater reservoir, and service
connections
Materials, equipment, supplies,
and manpower to restore water
supply and sewerage services in
Rabaul and Nonga
One storage tank (500 m3), trunk
main (4000 m, 200 mm in
diameter)
New water supply system
in Kokopo
2,800 m3/day capacity system to
serve 6,500 population
(Note: A surface water system
with an intake and water
treatment plant of up to 6,600
m3/day capacity was considered
but was replaced by the lowercost groundwater system)
b
Capacity achieved but total available demand
not served.
Additional population of 16,482 provided with
piped water supply.b
Supply exists to support urban development
Component deleted because of volcanic
eruptions
Restoration of agreed water supply services;
restoration of sewerage deleted with
agreement of Asian Development Bank
(ADB) in July 2000.
Storage tank deleted and transferred to the
Gazelle Restoration Authority for financing
Pipeline completed
Groundwater used instead of surface water.
New infrastructure provided, including: seven
wells, five of them placed into service;
chlorination facilities; a rising main; two
2,800-m3 storage reservoirs; distribution
mains and reticulation to Kokopo (5,540 m of
rising mains, a 5,245-m trunk main, 8,180-m
reticulation); booster pumps and water
storage tower to Kenabot (2,970 m of rising
main, 11,980 m of reticulation); reticulation to
Vunapope (5,548 m); extension and
distribution to Takubar (7,320 m);
Waterboard office constructed; telemetry and
control systems provided.
As of June 2003, there were 2,354 domestic piped water supply connections.
18
Appendix 1
Purpose/Scope
Targets
Improve living
conditions
1050 residential connections
130 commercial connections
Support urban
development
No specific targets
c
Actual Outputs and Outcomes
Additional 10,654 population provided a
piped water supply, resulting in reduced
water costs and time savings. Health
indicators suggest a decline in waterborne
diseases and detailed study necessary to
confirm correlation.c
Kokopo has been designated as the urban
center for New Britain province. Significant
numbers of commercial activities have
relocated from Rabaul to Kokopo.
There were 1,522 domestic connections as of June 2003. (Waterboard MIS Report).
19
Appendix 2
DISBURSEMENTS AND DETAILED REALLOCATIONS ($)
Category
Category Name
Total Funding Disbursed
Number
ADB
ICDF
Government
Total
(i) Madang Water Supply
01A
768,037
4,706,194
2,056,051
7,530,282
(ii) Rabaul/Kokopo Water
01B
6,412,138
0
2,042,442
8,454,580
(i) Madang Water Supply
02A
1,364,967
0
0
1,364,967
(ii) Rabaul/Kokopo Water
02B
632,971
0
0
632,971
1,786,433
0
1,786,433
Civil Works
Supply
Equipment and Materials
Supply
Construction Supervision (ICDF)
04
IDC - Part A (ADB)
04A
779,352
0
0
779,352
IDC - Part B (ADB)
04B
636,739
0
0
636,739
207,373
0
207,373
IDC (ICDF)
05
Unallocated - Part A (ADB)
05A
0
0
0
0
Unallocated - Part B (ADB)
05B
0
0
0
0
Auditing of Project Accounts
06
4,195
0
0
4,195
Consultant (Kokopo Supervision)
07
701,601
0
0
701,601
Project Management Office
0
0
1,739,877
1,739,877
Land Acquisition/Crop
Compensation
0
0
115,842
115,842
11,300,000
6,700,000
5,954,212
23,954,212
Total
ADB = Asian Development Bank, ICDF = International Cooperation and Development Fund, IDC = interest during
construction.
Source: ADB, CTB, GoPNG
20
Appendix 3
CHRONOLOGY OF EVENTS
29 Dec 1993
Award of consultant’s contract.
September
1994
October 1994
Two volcanoes erupted in Rabaul, one of the two major project sites.
7 Jul 1995
11 Oct 1996
2 Sep 1997
29 Sep 1997
The Government suspended the Project in Rabaul due to volcanic eruptions and
worked towards changing the scope of the Project.
Chief, Office of Pacific Operations (OPO) approved the following in April 1995:
(i)
Madang - Water treatment plant (WTP) site relocated, and capacity of the raw
water pumping facilities and WTP expanded from 9,750 cubic meters per day
(cu m/day) to 15,000 cu m/day. Madang WTP relocated and expanded
because the groundwater source could not be relied upon as a long-term
supply source;
(ii)
Rabaul - Funding approved for minor repairs and restoration of selected parts
of existing water supply and sewerage systems because of the effect of
volcanic eruptions.
(iii)
Kokopo - A water supply system developed for the new provincial capital
because Rabaul was destroyed.
(iv)
Loan closing date extended by 18 months to 31 May 1998.
There was no change to the financing plan. Loan proceeds from the Rabaul
component were reallocated to fund the shortfall of the revised Madang component.
The Asian Development Bank (ADB) to jointly finance the Madang component with
Chiao Tung Bank (CTB).
Vice President (VP) (East) approved the change in project cost from $21.1 million to
$27.4 million, with the Government to provide additional funding of $6.3 million.
VP (East) approved the following:
(i) Rabaul - Expansion of the water supply system cancelled because of continuing
volcanic eruptions. Funding has been limited to restoring the town's water supply
and sewerage system in safe areas.
(ii) Madang - Reallocation of $735,000 savings from Rabaul to Madang.
(iii) Implementation arrangements - Change contract packaging and mode of
procurement from international competitive bidding (ICB) to local competitive
bidding (LCB)/Force Account for Rabaul restoration works.
Contract signed for the construction of Madang water supply.
11 Dec 1997
Director OPO approved the following:
(i) Extension of ADB and CTB loan closing dates to 31 Dec. 1999;
(ii) Change in scope to include cost of audit of project accounts. $35,000 reallocated
to new category 06.
28 May 1998
Director OPO approved:
Reallocation of loan proceeds ($912,000) to finance the additional requirement of the
Madang water supply
7 Oct 1998
OIC, OPO approved the following:
(i) Minor change in scope for the construction of two staff houses in Kokopo, and
(ii) Reallocation of loan proceeds ($501,690) to finance additional requirements of the
Madang water supply and IDC.
Reallocation of loan proceeds for the Madang water supply were made in May and
Appendix 3
21
October 1998 because of changes in the drawdown sequence between ADB and CTB.
10 Oct 1998
VP (East) approved:
A change in implementation arrangements to construct two staff houses under force
account, works that had been originally included in the ICB package.
18 Oct 1999
Date of contract for the construction of Kokopo water supply.
7 Dec 1999
Director OPO approved:
Extension of ADB loan closing date to 31 October 2001and ICDF loan to 30 June 2000
to accommodate construction of the Kokopo water supply and additional works in
Madang, respectively.
22 Dec 1999
VP (East) approved:
(i) Scope changed to include additional works in Madang and ADB funding for
Kokopo construction supervision because ICDF was unable to finance
construction supervision under its domestic fund requirement,
(ii) Reallocation of loan proceeds as a result of changes in item (i), and
(iii) Change in implementation arrangements because ADB funding of construction
supervision was not originally its responsibility.
January 2000
Construction of Madang water supply completed.
February 2000
Commencement of commercial operation in Madang water supply.
22 May 2000
Director, OPO approved:
Minor change in scope to delete the funding of the construction of the new water tank
in Rabaul from ADB and transfer it to Gazette Restoration Authority (GRA).
6 Dec 2000
Director OPO approved:
Change in scope to fund construction of a new pipeline in Rabaul (estimated cost of
$250,000).
13 Aug 2001
Director OPO approved:
Minor change in scope and reallocation of loan proceeds ($850,000) to fund the
Variation in the Kokopo water supply contract.
October 2001
Kokopo water supply begins commercial operations.
18 Oct 2001
Director OPO approved:
(i) Extension of loan closing date from 31 Oct 2001 to 31 July 2002,
(ii) Change in scope to include (a) additional reservoir in Kokopo and (b) extension of
Kokopo water supply to Takubar subdivision, and
(iii) reallocation of loan proceeds to finance water supply to Takubar subdivision.
VP Operations 2 approved:
Change in implementation arrangement, increasing local currency financing from $4.1
million to $6.6 million
Kokopo water supply system extended, including extended scope.
Consultants’ completion of services.
Completion of the defects liability period of Kokopo and Takubar water supply.
14 May 2002
30 June 2002
30 July 2002
30 July 2002
22
Appendix 4
Appendix 4
23
24
Appendix 5
STATUS OF COMPLIANCE WITH PROJECT
AND LOAN COVENANTS
Covenant
Waterboard shall carry out the Project with due
diligence and efficiency, and in conformity with
sound administrative, financial, engineering,
environmental, and public utility practices.
Reference
ADB/CTB
PA, Art. II
2.01(a)
LA, Art. IV
4.01(a)
Status
Waterboard shall make available, promptly as
needed, the funds, facilities, services, equipment,
land, and other resources required, in addition to the
proceeds of the Loan, to carry out the Project.
PA, Art. II
2.02
LA, Art. IV
4.02
Complied with
In the carrying out of the Project, Waterboard shall
employ competent and qualified consultants and
contractors, whose services are financed under the
Loan, acceptable to the Asian Development Bank
(ADB) and Chiao Tung Bank (CTB), to an extent
and upon terms and conditions satisfactory to ADB
and CTB.
PA, Art. II
2.03(a)
Complied with:
ADB Guidelines for recruiting consultants
& contractors used.
Consultancy supervision contract
signed on 30 September 1994.
Contract with contractor of Madang
Water Supply was signed on 29
September 1997.
Contract with contractor of Kokopo
Water Supply was signed on 5
October 1999.
Except as the ADB and CTB may otherwise agree,
all goods and services financed out of the proceeds
of the Loan shall be procured according to the
provisions of Schedule 4 and Schedule 5 to the
Loan Agreement. ADB and CTB may refuse to
finance a contract where goods or services have not
been procured under procedures substantially in
accordance with those agreed between the
Borrower, ADB, and CTB or where the terms and
conditions of the contract are not satisfactory to ADB
and CTB.
PA, Art. II
2.03(b)
Complied with
The Waterboard shall carry out the Project
according to plans, design standards, specifications,
work schedules, and construction methods
acceptable to ADB. The Waterboard shall furnish, or
cause to be furnished to ADB, promptly after their
preparation, such plans, design standards,
specifications, and work schedules, and any
material modifications subsequently made therein, in
such detail as the ADB shall reasonably request.
PA, Art. II
2.04
Complied with
The Waterboard shall take out and maintain with
responsible insurers, or make other arrangements
satisfactory to ADB for, insurance of project facilities
to such extent and against such risks and in such
amounts as shall be consistent with sound practice.
PA, Art. II
2.05 (a)
Complied with
Covered in Madang Water Supply
contract documents.
Covered in Kokopo Water Supply
contract documents
Complied with
Appendix 5
Covenant
Without limiting the generality of the foregoing, the
Waterboard undertakes to insure, or cause to be
insured, the goods to be imported for the Project
and to be financed out of the proceeds of the Loan
against hazards incident to the acquisition,
transportation, and delivery thereof to the place of
use or installation, and for such insurance any
indemnity shall be payable in a currency freely
usable to replace or repair such goods.
Reference
ADB/CTB
PA, Art. II
2.05 (b)
25
Status
Complied with
Covered in Madang Water Supply
contract documents.
Covered in Kokopo Water Supply
contract documents
The Waterboard shall maintain, or cause to be
maintained, records and accounts adequate to
identify the goods and services and other items of
expenditure financed out of the proceeds of the
Loan, to disclose the use thereof in the Project, to
record the progress of the Project (including cost
thereof) and to reflect, in accordance with
consistently maintained sound accounting principles,
its operations and financial condition.
PA, Art. II
2.06
Complied with
ADB, CTB, and the Waterboard shall cooperate fully
to ensure that the purposes of the Loan will be
accomplished.
PA, Art. II
2.07(a)
Complied with
The Waterboard shall promptly inform ADB and CTB
of any condition which interferes with, or threatens
to interfere with, the progress of the Project, the
performance of its obligations under this Project
Agreement or the Subsidiary Loan Agreement, or
the accomplishment of the purposes of the Loan.
PA, Art. II
2.07(b)
Complied with. The Waterboard informed
ADB and CTB on its privatization plans,
which have currently been shelved.
The Waterboard shall furnish to ADB all such
reports and information as ADB shall reasonably
request concerning (i) the Loan and the expenditure
of the proceeds thereof; (ii) the goods and services
and other items of expenditure financed out of
proceeds; (iii) the Project; (iv) the administration,
operation and financial condition of Waterboard; and
(v) any other matters relating to the purposes of the
Loan.
PA, Art. II
2.08(a)
LA, Art. IV
4.04
Complied with. Progress reports from the
Waterboard have been received on time.
Without limiting the generality of the foregoing,
Waterboard shall furnish to ADB quarterly reports on
the execution of the Projects and on the operation
and management of the project facilities. Such
reports shall be submitted within 15 days after the
end of each quarter and in such form and in such
detail as ADB shall reasonably request, and shall
indicate, among other things, progress made and
problems encountered during the quarter under
review, steps taken or proposed to be taken to
remedy these problems, and proposed programs of
activities and the expected progress during the
following quarter.
PA, Art. II
2.08(b)
Being complied with:
Quarterly progress report has all been
submitted on time.
26
Appendix 5
Covenant
Promptly after physical completion of the Project,
but in any event no later than 3 months thereafter or
such later date as ADB may agree for this purpose,
Waterboard shall prepare and furnish to ADB a
report, in such form and in such detail as ADB shall
reasonably request, on the execution and initial
operation of the Project, including its cost, the
performance by the Waterboard of its obligations
under this Project Agreement, and the
accomplishment of the purposes of the Loan.
Reference
ADB/CTB
Status
PA, Art. II
2.08 (c)
Complied with. The report format did not
conform with ADB’s request, however.
PA, Art. II 2.09
(a)
Complied with
The Waterboard shall
(i) Maintain separate accounts for the Project and
its overall operation;
Complied with
(ii) have such accounts and related financial
statements (balance sheet, statement of income
and expenses, and related statements) audited
annually, in accordance with sound auditing
standards by the Waterboard’s auditors
acceptable to ADB;
(iii) furnish to ADB, promptly after their preparation
but in any event not later than six (6) months
after the close of the fiscal year to which they
relate, unaudited copies of such accounts and
financial statements, and not later than nine (9)
months after the close of the fiscal year to which
they relate, certified copies of such audited
accounts and financial statements and the
report of the auditors relating thereto, all in the
English language. The Waterboard shall furnish
to ADB such further information concerning
such accounts and financial statements and the
audit thereof as the Bank shall from time to time
reasonably request.
Being complied with, but delayed.
The Waterboard shall enable ADB’s representative
to inspect the Project, the goods financed out of the
proceeds of the Loan, all other plants, sites, works,
properties, and equipment of the Waterboard and
any relevant records and documents.
PA, Art. II
2.10
Complied with
The Waterboard shall, promptly as required, take all
action within its powers to maintain its corporate
existence, to carry on its operations, and to acquire,
maintain, and renew all rights, properties, powers,
privileges, and franchises necessary in carrying out
the Project or conducting its business.
PA, Art. II 2.11
(a)
Complied with
The Waterboard shall at all times conduct its
business in accordance with sound administrative,
PA, Art. II
2.11 (b)
Complied with
Appendix 5
Covenant
Reference
ADB/CTB
27
Status
financial, environmental, and public utility practice,
and under the supervision of competent and
experienced management and personnel.
The Waterboard shall at all times operate and
maintain its plants, equipment, and other property,
and from time to time, promptly as needed, make all
necessary repairs and renewals thereof, all in
accordance with sound administrative, financial,
engineering, environmental, public utility, and
maintenance and operational practices.
PA, Art. II
2.11 (c)
Complied with
Except as ADB and CTB may otherwise agree, the
Waterboard shall not sell, lease, or otherwise
dispose of any assets required to efficiently carry on
its operations or the disposal of which may prejudice
its ability to perform satisfactorily any of its
obligations under this project agreement.
PA, Art. II
2.12
Complied with
Except as ADB and CTB may otherwise agree, the
Waterboard shall duly perform all its obligations
under the Subsidiary Loan Agreement, and shall not
take, or concur in, any action which would have the
effect of assigning, amending, abrogating, or
waiving any rights or obligations of the parties under
the Subsidiary Loan Agreement.
PA, Art. II
2.14
Complied with
The Waterboard shall promptly notify ADB of any
proposal to amend suspend or repeal any provision
of the Act and shall afford ADB adequate
opportunity to comment on such proposal prior to
taking any action thereon.
PA, Art. II
2.15
Complied with
Within 1 month of the effective date, the Waterboard
shall establish a project management office (PMO)
under its engineering division to manage the
implementation of the Project, and appoint a
construction manager to head the PMO. The
construction manager shall be the project manager
responsible for overall supervision and coordination
of project implementation, under the guidance and
supervision of the manager of Waterboard’s
engineering division.
LA, Sch. 6
Clause 1
Complied with:
• PMO established 7 Nov 1994
• Project manager employed 7 Oct
1993
• The Waterboard appointed project
manager on 1 July 1999 to succeed
the first project manager, who had
resigned.
Waterboard shall ensure that the PMO is adequately
staffed and equipped at all times for efficient
functioning. PMO staff shall include a full-time
project administration officer (PAO), two full-time
project engineers (PE), and part-time personnel to
perform tasks including project accounting and
procurement.
LA, Sch. 6
Clause 2
Complied with:
• PAO commenced 27 Feb 1995
• Project secretary on 28 Feb 1995
• PE (Madang) assigned 15 May 1995
• PE (Rabaul) assigned 6 Mar 1996
• Senior PE assigned 12 Feb 97
Managers of the Madang Water District and Rabaul
LA, Sch. 6
Complied with
28
Appendix 5
Covenant
Water Districts shall be the project coordinators for
Parts A and B respectively.
Reference
ADB/CTB
Clause 3
Status
Complied with.
The Waterboard shall take all appropriate measures
to acquire all land, rights in land, and other rights
and privileges required for construction of project
facilities. The Waterboard shall ensure that all land
to be provided for the Project is free and clear of any
encumbrances.
LA, Sch. 6
Clause 4
Complied with:
• Building Board approval for Madang
Water Supply obtained on 11 Feb
1997
• Land for Madang Water Supply
acquired on 11 Sep 1997 and
licences obtained on 11 Dec 1997
• Building Board approval for two staff
houses at Kokopo obtained on 29
Sep 1999.
• Licence of Occupancy for Portion 864
for Kokopo water supply obtained on
28 Oct 1999. Licence No. ENB 99/11.
• Licence of Occupancy for Kenabot
water supply obtained on 3 Nov 1999.
Licence No. 99/13.
The Waterboard shall on a timely basis obtain
permits from the concerned authorities for (i)
abstraction of surface water from the Gum River and
the Rarongo and Kabaira Creeks in Rabaul, and (ii)
abstraction of groundwater in Rabaul.
LA, Sch. 6
Clause 5
Complied with:
• Permits for water abstraction and
wastewater discharge for Madang
received on 9 Feb 1996.
• Water Investigation Permit for
Kokopo was issued on 24 Sep 1995.
• Water abstraction permit for Kokopo
Water Supply was obtained from
Department of Environment and
Conservation (DEC).
Upon project completion, the Madang and Rabaul
Water Districts shall be responsible for operation
and maintenance (O&M) of the project facilities,
which shall be integrated into the existing systems.
For this purpose, the Waterboard shall on a timely
basis provide to the Madang and Rabaul water
districts additional personnel and make available
through budgetary appropriation necessary funds as
may be required for adequate O&M of all water
supply facilities under the said water districts.
LA, Sch. 6
Clause 6
Complied with:
• Madang Water Supply completed 19
Jan 2000.
• Rabaul Water Supply under various
minor contracts had different
completion dates. The latest was the
tank funded by GRA and completed
on 17 Feb 2002.
• Kokopo Water Supply was completed
on 25 Oct 2001.
The Waterboard shall obtain environmental
clearance of the Project from DEC or any other
appropriate authority before beginning any civil
works construction under the Project.
LA, Sch. 6
Clause 7
The Waterboard shall require contractors under the
Project to adopt sound construction management
practices when building project facilities so as to
avoid causing public nuisance, and to ensure proper
waste disposal. The Waterboard shall also require
LA, Sch. 6
Clause 8
Complied with:
• Clearance for Madang and Rabaul
received from DEC on 26 Jul 1995.
• Clearance for Kokopo received from
DEC on 8 Apr 1997.
Complied with:
• Appropriate clause included in the
Madang water supply contract
documents.
• Appropriate clause included in the
Appendix 5
Covenant
Reference
ADB/CTB
contractors to restore immediately and adequately
road surfaces damaged by such construction.
29
Status
Kokopo water supply contract
documents.
The Waterboard shall conduct benefit monitoring
and evaluation (BME) for the project as part of its
management information system and shall include
the BME results in the annual performance report.
LA, Sch. 6
Clause 9
Complied with. PNG Waterboard began
preparing onsite BME reports on 26 June
2001. A final report was forwarded to
ADB on 12 Jun 2002.
In additional to the quarterly report referred to in
Section 2.8 (b) of the Project Agreement, the
Waterboard shall furnish to ADB annual
performance reports within 9 months of the end of
each related fiscal year, commencing from fiscal
year 1993. Waterboard shall continue to furnish to
ADB these reports thereafter, upon ADB’s request.
LA, Sch. 6
Clause 10
Being complied with
Reports for 1992, 1993, and 1994
submitted on 18 Mar 1998.
Reports for 1995 are complete.
Reports for 1996, 1997, and 1998 are
finalized.
Report for 1999 underway.
The Borrower and the Waterboard shall review with
ADB the outcome of the tariff study to be carried out
under the Technical Assistance. Thereafter, the
Borrower by 31 December 1993 shall revise the
Waterboard’s existing tariff policy and introduce a
new tariff policy to be applied as from 1 Jul 1994,
unless otherwise agreed upon by ADB.
LA, Sch. 6
Clause 12 (a)
Being complied with.
The new tariff policy was effective as of 1
Apr 2003.
The Borrower shall ensure that pursuant to the new
tariff policy, the water and sewerage tariffs are set at
levels which will enable Waterboard to meet the
financial performance targets agreed upon by the
Borrower, Waterboard, and ADB. The Borrower
shall approve the required annual tariff adjustments
by 30 June of each year. The Borrower shall, in
consultation with ADB, determine the annual tariff
adjustments based on the projected financial
performance of Waterboard for the following year.
LA, Sch. 6
Clause 12 (b)
Being complied with, although the tariff
adjustments have not been set on an
annual basis but every 3 years (1997,
2000, and 2003). The increase in water
and sewerage tariffs is sufficient to meet
financial performance targets.
To assist the Borrower in determining the annual
tariff adjustments, the Waterboard shall during the
first quarter of each fiscal year starting from 1993,
update its capital investment plan and financial
projections, and determine the adjustment in water
and sewerage tariffs required for the following year,
so as to ensure its achievement of the financial
performance targets agreed upon by the Borrower,
the Waterboard, and ADB and which are
enumerated in paragraph 14 below. The Waterboard
shall obtain ADB’s comments on its draft tariff
proposal before submitting to the Borrower.
LA, Sch. 6
Clause 12(c)
Being complied with but delayed. The
Waterboard makes an annual financial
projections based on capital investments
required, debt service, depreciation and
O&M requirements to determine the
necessary adjustments on the water and
sewerage tariffs.
In line with the Borrower’s current financial policies
applied to the Waterboard, the Borrower and the
Waterboard shall take measures to achieve the
following financial performance targets for
LA, Sch. 6
Clause 13
30
Appendix 5
Covenant
Reference
ADB/CTB
Status
Waterboard:
i)
The Waterboard’s revenue shall be
adequate to (a) cover all operating
expenses and full depreciation or debt
services, whichever is greater; and (b)
generate a surplus to yield a positive rate of
return on net revalued assets, as opposed
to acquisition cost of fixed assets, in
operation by 31 Dec 2000; and
Partially complied with. In 2000 and
2001, the Waterboard has net surplus of
K2 million but in 2002, it incurred a deficit
of K1.84 million. For 2003, the projected
surplus or net income is K4.7 million.
ii)
The Waterboard shall not incur new debts
unless its internal cash generation is at least
1.5 times the projected debt-service
requirement on all long-term debt in each
fiscal year.
Being complied with. The Waterboard
maintains a cash generation of about 1.5
times the debt service requirement on
long-term debt.
The Waterboard shall strengthen its billing and
collection operations to ensure that its gross
accounts receivable (including provision for bad
debts) is less than the equivalent of 4 months billing
by 31 Dec 1993.
LA, Sch. 6
Clause 14(a)
The Waterboard shall review the existing level and
standard of services, design criteria for water
supply, and sewerage to ensure cost effective
investment. For this purpose, the Waterboard shall
provide ADB with the results of such review by 31
Dec 1993.
LA, Sch. 6
Clause 14(b)
Except as ADB may otherwise agree, the
Waterboard shall strengthen its nonrevenue water
(NRW) management to reduce an overall average
NRW to not higher than 28% by 31 December 2000.
LA, Sch. 6
Clause 14 (c)
Except as ADB may otherwise agree, the
Waterboard shall reduce the ratio of the number of
employees per 1,000 connections to not more than
20, 18, and 15 by 31 Dec 1996, 31 Dec 1998, and
31 Dec 2000, respectively.
LA, Sch. 6
Clause 14 (d)
Waterboard by 31 December 1993 shall review and
revise as appropriate the existing connection fees
for water supply and sewerage to ensure that the
fees collected reflect actual costs.
LA, Sch. 6
Clause 14 (e)
In order to strengthen its financial accounting
operations, the Waterboard shall review the
valuation of its fixed assets and provide the results
to ADB by 31 Dec 1994.
LA, Sch. 6
Clause 15 (a)
Complied with. The Waterboard has
undertaken a centralized billing system
and currently validating and reconciling
customer accounts in Lae to ensure
more efficient collection of its customer
receivables. The same will be
undertaken in other districts.
Being complied with but delayed. In
recent years, by undertaking the Project,
the technical services division had been
undertaking a review of existing level
and standard of services, and ensuring
cost effective investments in the different
districts, which forms part of their
recommendations to the management of
the Waterboard periodically.
Being complied with but delayed. In
2001, the overall NRW was 32.7% and in
2002, NRW was estimated to be about
31%. For 2003, the Waterboard is
projecting an overall NRW of 28%.
Complied with.
Delayed compliance. Connection fees
have been waived for customers within
26 meters (m) of the nearest main. Only
customers located beyond 26 m are
paying connection at actual cost.
Not complied with. In 2002, the
Waterboard had planned to undertake its
asset inventory and valuation for all
districts and is sourcing external funding
Appendix 5
Covenant
Reference
ADB/CTB
31
Status
for this activity.
Delayed compliance. An internal auditor
was appointed on 11 June 1996.
In order to strengthen its financial control systems
and procedures, the Waterboard shall appoint an
internal auditor by 30 Jun 1993.
LA, Sch. 6
Clause 15 (b)
Pursuant to the outcome of the organizational study
of the Waterboard to be carried out under the
Technical Assistance, Waterboard shall submit to
ADB its reorganization.
LA, Sch. 6
Clause 16
Complied with.
The Borrower shall carry out an overall assessment
of the adequacy of the existing legal and institutional
frameworks to support the Waterboard’s operations
and such assessment shall include the following
matters:
LA, Sch. 6
Clause 17
Being complied with. For some districts,
the Waterboard has been making
progress.
The Borrower by 31 Dec 1994 shall prepare and
submit to ADB for review and comments an overall
investment and financing plan for the urban water
supply and sewerage sector, setting out strategies
for the rational development of urban water supply
and sanitation over an appropriate time frame
including plans for expanding the Waterboard’s
operation, prior to its formal adoption.
LA, Sch. 6
Clause 18
Being complied but delayed. The
Waterboard in its Corporate Plan and
Strategies (2001-2005) has outlined its
corporate responsibility in extending
water and sewerage services to all urban
centers. In view of this, the technical
services division had outlined an overall
investment and financing plan for urban
water supply and sewerage sector and it
has been undertaking projects in line
with the investment plan.
The Borrower shall provide the Waterboard as
equity contribution the proceeds of the CTB loan for
the entire foreign exchange cost of Part C of the
Project; the Borrower’s counterpart funds for the
entire local currency cost of Part C, including taxes
and duties; and the Borrower’s counterpart funds for
the land acquisition cost, duties, and taxes under
Parts A and B of the Project.
LA, Sch. 6
Clause 19
Complied with.
(i)
(ii)
(iii)
appropriate arrangements for the
Waterboard to take over water supply and
sewerage operations from town
commissions;
authority of the Waterboard to take over
individual sewerage and sewage treatment
schemes; and
official representation of the Waterboard in
town planning committees of the various
towns currently served by the Waterboard
and of towns to be served by the
Waterboard.
The Borrower by 31 Dec 1993 shall submit to ADB
the results of such assessment and the proposed
action to be taken.
32
Appendix 5
Covenant
To enable Waterboard to have a clear direction and
plan its future development rationally, the Borrower
by 30 Jun 1993 shall take a decision on the
management of the National Capital District (NCD)
water supply and sewerage systems and inform
ADB of its decision.
Reference
ADB/CTB
LA, Sch. 6
Clause 20
Status
Management of NCD was given to Eda
Ranu.
Appendix 6
33
WATER QUALITY ANALYSIS
1. a) Kokopo Raw Water Quality Analysis Results
b) Kokopo Treated Water Quality Analysis Results
2. Madang Raw and Treated Water Quality Analysis Results
Analysis
BH1
BH2
BH3
BH4
BH5
BH6
BH7
Guideline
Value*
pH
Conductivity (uS/cm)
TDS (mg/L)
Total Alkalinity (mg/L)
Bicarbonate (mg/L)
Carbonate (mg/L)
Chloride (mg/L)
Sulphate (mg/L)
Sodium (mg/L)
Potassium (mg/L)
Calcium (mg/L)
Magnesium (mg/L)
Silicon (mg/L)
Nitrate (mg/L)
Manganese (mg/L)
Iron (mg/L)
Fluoride (mg/L)
Cadmium (mg/L)
Arsenic (mg/L)
Lead (mg/L)
7.6
217
280
100
100
4.5
7.0
36.0
4.9
1.9
0.8
-
7.6
210
270
100
101
<1
3.0
2.9
29
5.8
11
3
51
2.2
<0.02
<0.05
0.43
<0.01
0.0004
<0.002
7.9
250
300
140
140
<1
2.5
3.4
24
5.4
22
4
49
2.0
<0.02
0.07
0.37
<0.01
0.004
<0.002
7.0
190
250
95
95
<1
2.8
2.9
29
5.6
6
3
49
1.4
<0.02
0.06
0.40
<0.01
0.003
<0.002
7.0
200
270
100
100
<1
3.3
2.8
28
6.2
8
4
52
3.4
<0.02
<0.05
0.38
<0.01
0.004
<0.002
7.4
180
220
83
83
<1
2.2
1.7
26
5.3
6.5
3.0
105
2.2
0.02
0.02
0.50
<0.01
0.002
<0.002
7.2
200
210
100
100
<1
3.0
3.4
26
5.9
6.7
4.2
44
5.4
<0.02
<0.02
0.46
<0.01
<0.001
<0.002
6.5-8.5
1000
250
400
200
-
0.011
<0.005
<0.011
<0.005
<0.01
<0.01
0.1
Cyanide (mg/L)
Source: Guidelines for Drinking Water Quality, World Health Organization 1984
10.0
0.1
0.3
1.5
0.005
0.005
0.05
34
Appendix 6
KOKOPO WATER SUPPLY
BACTERIOLOGICAL AND CHEMICAL ANALYSIS RESULTS
Date: 25 November 2003
For the 12 samples analyzed “as received” by this laboratory on 14 November 2003, the
following is supplied:
Client Sample Label
1. Kokopo Town Treated
2. Kokopo Town Treated 5:12pm
3. Kokopo Town Raw 5:40pm
4. Nonga Raw Bore 39
5. Nonga Bore Treated
6. Nonga Bore 39 Treated 8:12am
7. Rabaul Town Raw 8:30am
8. Rabaul Town Treated 8:40am
9. Blanche 853 Treated 8:55am
NAL Ref
5232/03
5232/03
5233/03
5233/03
5234/03
5234/03
5235/03
5235/03
5236/03
5236/03
5237/03
5237/03
5238/03
5238/03
5239/03
5239/03
5240/03
5240/03
Analysis
Coliforms, Faecal
Coliforms, Total
Coliforms, Faecal
Coliforms, Total
Coliforms, Faecal
Coliforms, Total
Coliforms, Faecal
Coliforms, Total
Coliforms, Faecal
Coliforms, Total
Coliforms, Faecal
Coliforms, Total
Coliforms, Faecal
Coliforms, Total
Coliforms, Faecal
Coliforms, Total
Coliforms, Faecal
Coliforms, Total
Analysis Results
0 colonies/100 ml
0 colonies/100 ml
0 colonies/100 ml
0 colonies/100 ml
0 colonies/100 ml
80 colonies/100 ml
0 colonies/100 ml
0 colonies/100 ml
0 colonies/100 ml
0 colonies/100 ml
0 colonies/100 ml
0 colonies/100 ml
0 colonies/100 ml
0 colonies/100 ml
0 colonies/100 ml
0 colonies/100 ml
0 colonies/100 ml
0 colonies/100 ml
Method
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
Date: 4 July 2001
For the 9 samples analyzed “as received” by this laboratory on 2 July 2001, the following is
supplied:
Client Sample Label
Kokopo Treated Water #1
Kokopo Treated Water #1
Kokopo Town Raw Water
NAL Ref
3781/01
3781/01
3782/01
3782/01
3783/01
3783/01
Analysis
Coliforms, Faecal
Coliforms, Total
Coliforms, Faecal
Coliforms, Total
Coliforms, Faecal
Coliforms, Total
Analysis Results
0 colonies/100 ml
0 colonies/100 ml
0 colonies/100 ml
0 colonies/100 ml
0 colonies/100 ml
80 colonies/100 ml
Method
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
35
Appendix 6
WATER ANALYSIS RESULTS
MADANG
Date: 2 May 2002
Client Sample Label
1. Gem Raw Water Intake
2. Panim W/T Plant
3. DCA Bore Raw Water
4. DCA Bore Raw Water
5. B85 Bore Raw Water
6. CIS Treated Water
7. Madang Resort Hotel
8. DCA Treated Water
9. New Town
NAL Ref
2607/02
2607/02
2608/02
2608/02
2609/02
2609/02
2610/02
2611/02
2612/02
2612/02
2613/02
2613/02
2614/02
2614/02
2615/02
2615/02
2616/02
2616/02
Analysis
Coliforms, Faecal
Coliforms, Total
Coliforms, Faecal
Coliforms, Total
Coliforms, Faecal
Coliforms, Total
Coliforms, Faecal
Coliforms, Total
Coliforms, Faecal
Coliforms, Total
Coliforms, Faecal
Coliforms, Total
Coliforms, Faecal
Coliforms, Total
Coliforms, Faecal
Coliforms, Total
Coliforms, Faecal
Coliforms, Total
Analysis Results
150 colonies/100 mL
260 colonies/100 mL
0 colonies/100 mL
0 colonies/100 mL
0 colonies/100 mL
0 colonies/100 mL
0 colonies/100 mL
0 colonies/100 mL
0 colonies/100 mL
0 colonies/100 mL
0 colonies/100 mL
0 colonies/100 mL
0 colonies/100 mL
0 colonies/100 mL
0 colonies/100 mL
0 colonies/100 mL
0 colonies/100 mL
0 colonies/100 mL
Method
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
NAL/WL33
Date: 18 April 2001
Client Sample Label
NAL Ref
Panim Treatment Plant
2144/01
2144/01
2144/01
2144/01
2144/01
2144/01
2144/01
2144/01
2144/01
2144/01
2144/01
2144/01
Analysis
Aluminum
Bicarbonate
Calcium
Carbonate
Chlorine, Residual
Coliforms, Faecal
Coliforms, Total
Cyanide, Total
Hardness (Calculation)
Hydroxide
Magnesium
Manganese
Analysis Results
0.15 mg/L
62 mg/L as CaCO3
17 mg/L
<1 mg/L s CaCO3
0.02 mg/L
0 colonies/100 mL
0 colonies/100 mL
<0.01 mg/L
63 mg/L as CaCO3
<1 mg/L as CaCO3
4.9 mg/L
0.0007 mg/L
Method
NAL/WL2
NAL/WL25
NAL/WL2
NAL/WL30
NAL/WL33
NAL/WL33
NAL/WL14
NAL/WL8
NAL/WL2
NAL/WL25
NAL/WL27
36
Appendix 6
INDICATIVE WATER QUALITY ANALYSIS
MADANG
January 1, 2003
Raw water pH: 7.9 Turbidity: 3.40 NTU
Treat, Water pH: 7.7 Turbidity: 0.00 NTU
Plant Chlorine Residual: FAC 1.2g/m3 TAC 1.2g/m3
Taste and Odor: Unobjectable
February 4, 2003
Raw Water pH: 7.8 Turbidity: 20.58 NTU
Treat. Water pH: 7.4 Turbidity: 0.00 NTU Color: 50 H
Plant Chlorine Residual: FAC 1.5g/m3 TAC 1.5g/m3
Taste and Odor: Unobjectable
February 20, 2003
Raw water pH: 7.9 Turbidity: 9.06 NTU
Treat. Water pH: 7.6 Turbidity: 0.00 NTU Color: 50 H
Plant chlorine Residual: FAC 1.5g/m3 TAC 1.5g/m3
Towu analysis – Kalibobo FAC: 1.0g/m3 Turbidity: 0.00 NTU pH: 7.6
Newtown FAC: 0.8g/m3 Turbidity: 0.00 NTU pH: 7.6
4- Mile FAC 0.2g/m3 Turbidity: 0.00 NTU pH:7.2
Color: 50H at all testing points
Taste and Odor: Unobjectable
March 6, 2003
Raw water pH: 7.9 Turbidity: 4.17 NTU
Treat Water pH: 7.5 Turbidity: 0.00 NTU Color: 50H
Plant Chlorine Residuals: FAC 1.5g/m3 TAC 1.5g/m3
Town Analysis – Madang Resort FAC 0.8g/m3 pH: 7.6 Turbidity: 0.00 NTU
Newtown FAC 0.6g/m3 pH: 7.2 Turbidity: 0.00 NTU
4-Mile FAC 0.4g/m3 pH: 7.6 Turbidity: 0.00 NTU
Color: 50H at testing points
Taste and Odor: Unobjectable
March 20, 2003
Raw water pH: 7.8 Raw water Turbidity: 2.25 NTU
Treat. Water pH: 7.7 Turbidity: 0.00 NTU Color: 50H
Plant Chlorine Residual: FAC 1.2g/m3 TAC 1.2g/m3
Taste/Odor: Unobjectable
April 7, 2003
Raw water pH: 7.9 Turbidity: 2.31 NTU
Treat, water pH: 7.7 Turbidity 0.00 NTU Color: 50H
Plant Chlorine Residuals: FAC 1.5g/m3 TAC 1.5g/m3
Taste/Odor: Unobjectable
Appendix 6
April 27, 2003
Raw water pH: 7.9
Treat water pH: 7.5
Plant chlorine residual: FAC 1.5g/m3 TAC 1.5g/m3
Taste/Odor: Unobjectable
May 15, 2003
Raw water pH: 8.0 Turbidity: 2.10 NTU
Treat, Water pH: 8.0 Turbidity: 0.00 NTU
Plant Chlorine Residual: FAC 1.2g/m3 TAC 1.2g/m3
Taste/Odor: Unobjectable
May 27, 2003
Raw water pH: 7.7 Turbidity: 20.19 NTU
Treat. Water pH: 7.3 Turbidity: 0.00 NTU
Plant chlorine residual: FAC 1.5g/m3 TAC 1.5g/m3
Taste/Odor: Unobjectable
June 12, 2003
Raw water pH: 8.0 Turbidity: 43.48 NTU
Treat. Water pH: 8.0 Turbidity: 0.09 NTU
Plant chlorine residual: FAC 1.5g/m3 TAC 1.5g/m3
Taste/Odor: Unobjectable
June 25, 2003
Raw water pH: 8.0 Turbidity: 5.69 NTU
Treat water pH: 7.7 Turbidity: 0.00 NTU
Taste/Odor: Unobjectable
July 13, 2003
Raw Water pH: 8.2 Turbidity: 1.04 NTU
Treat water pH: 8.0 Turbidity: 0.00 NTU Color: 50H
Taste/Odor: Unobjectable Plant chlorine Residuals: FAC 1.2g/m3
TAC 1.2g/m3 Color: 50H
July 24, 2003
Raw water pH: 7.8 Turbidity: 0.73 NTU
Treat, water pH: 7.8 Turbidity: 0.00 NTU Color: 50H
Plant residuals: FAC 1.5g/m3 TAC 1.5g/m3
Taste/Odor: Unobjectable
37
38
Appendix 7
MONITORING AND EVALUATION OF PROJECTED BENEFITS
1.
Monitoring of the Project’s impact on beneficiary households and other users of the new
project facilities is one of the measures to evaluate project sustainability. Under the Loan
Agreement, the Waterboard is required to provide the Asian Development Bank (ADB) with a
project benefit monitoring and evaluation (BME) report after commissioning project facilities
every year until 2012. The Waterboard has submitted their first BME report for Madang in June
2002 and still undertaking the BME report for Rabaul/Kokopo.
A.
Performance Indicators
2.
The Project aimed to improve water supply in Madang and Rabaul/Kokopo in terms of
supply capacity and quality. BME indicators that relate to improving water supply services
include comprehensive indicators on production, distribution, consumption, O&M,
administration, billing, and collection performance. The Waterboard’s customer services division
obtains monthly performance indicators from all districts for BME purposes. Such information is
processed and consolidated in the management information system (MIS).1
3.
The Waterboard intends to develop a comprehensive BME system whereby the benefits
to Madang and Rabaul/Kokopo target beneficiaries are easily monitored and evaluated. This will
help management evaluate project performance in Madang and Rabaul/Kokopo, and will also
help monitor districts’ financial and operational sustainability. Although districts provide a
comprehensive list of indicators, data completeness, accuracy and timely reporting remain a
concern, particularly in the aspects of nonrevenue water2 (NRW), collection efficiency, arrears
collection, and customers to be disconnected3. The customer services must consolidate these
indicators to enable the Management to provide feedback to districts in meeting connection
targets, increasing collection efficiency, and reducing NRW.
4.
A comprehensive set of indicators in the BME report is shown in Table A9.1 and may
serve as a management tool to evaluate project performance and identify appropriate measures
to solve illegal connections, inaccurate meter reading, and poor collection of bills and arrears.4
5.
The districts’ BME system can help the Health Department monitor water-related
diseases and help the Waterboard with public awareness campaigns on the health impact of
using unsafe alternative water supplies. Madang and Rabaul/Kokopo should closely coordinate
with the provincial health inspectors to assess compliance conditions of households’ rainwater
tanks and assess the need to extend services to nonconnected households.5
1
The new management information system (MIS) is expected to be finished by end of 2003. Problems related to the
billing module are now being addressed with test runs in Lae. A job costing model is also being formulated.
2
Madang has installed four of seven zone meters. When the last three are connected, Madang will be able to detect
troubled areas for UFW sources. As of October 2002, NRW in Madang is 35% (projected is 29%) and 34% in
Rabaul/Kokopo (projected is 20%). Based on the data provided to the Mission, NRW results are erratic because
production and consumption are not accurately recorded.
3
The Madang Provincial Government is enforcing disconnection of illegal settlers.
4
A metering laboratory is required to test, recalibrate, and repair functional meters. Proper records of meters should
be kept.
5
See the Benefit Monitoring and Evaluation Report of PNG Waterboard for Madang (June 2002).
Appendix 7
Table A9.1 Benefit Monitoring Indicators
Indicator
1.
Production
1.1 Raw water intake
1.2 Treated water at treatment plant
O&M Cost for Production
1.3 Power consumption (raw water)
1.4 Power consumption (treated water)
1.5 Total power consumption
1.6 Total staff
1.7 Staff on training
1.8 Staff on leave
1.9 Total staff, salaries, and wages
1.10 Total consumption (disinfectant)
1.11 Total consumption (coagulant)
1.12 Other utility costs
1.13 Total production costs
2.
Distribution and Consumption
2.1 Active domestic connections
2.2 Active institutional connections
2.3 Active industrial connections
2.4 Total active connections
2.5 Bulk distribution
2.6 Consumption (domestic)
2.7 Consumption (institutional)
2.8 Consumption (commercial)
2.9 Consumption (industrial)
2.10 Total consumption
2.11 Availability of water per day
2.12 Bacteriological tests taken
2.13 Bacteriological test failures
2.14 Leak repairs
2.15 Meters repaired/replaced
2.16 Customer complaints
2.17 Public relations expenditure
2.18 Clients disconnected because of nonpayment
2.19 Clients disconnected because of customer change
2.20 Clients disconnected because of bill settlement
2.21 Reconnections due to customer change
2.22 Applicants for new service
2.23 Outstanding applications for new service
2.24 Illegal customers (total)
2.25 Illegal customers (disconnected)
3.
O&M Costs for Distribution and Consumption
3.1
Total staff
3.2
Staff on training
3.3
Staff on leave
3.4
Staff salaries and wages
3.5
Vehicle maintenance
3.6
Fuel cost
3.7
Electricity
3.8
Telephone
3.9
Stores consumables
3.10 Water and sewerage
3.11 Other costs
3.12 Total expenses
Basis
kiloliters
kiloliters
kWh/kina
kWh/kina
kWh/kina
number
number
number
kina
kg/kina
kg/kina
kina
kina
number
number
number
number
kiloliter
kiloliter
kiloliter
kiloliter
kiloliter
kiloliter
hours
number
number
number
number
number
kina
number
number
number
number
number
number
number
number
number
number
number
kina
kina
kina
kina
kina
kina
kina
kina
kina
39
40
Appendix 7
Indicator
4.
Administration and Billing
4.1
Amount billed (domestic)
4.2
Amount billed (institutional)
4.3
Total billings (all users)
4.4
Amount collected (domestic)
4.5
Amount collected (institutional)
4.6
Amount collected (commercial)
4.7
Amount collected (industrial)
4.8
Total collections (all users)
4.9
Accounts receivable (total)
Aging of accounts receivable:a
31-60 days
61-120 days
121-180 days
>180 days
4.10 Reconnection fees
4.11 New connection fees
5.
O&M Costs for Administration and Billing
5.1 Total staff
5.2 Staff on training
5.3 Staff on leave
5.4 Staff salaries and wages
5.5 Fuel cost
5.6 Vehicle maintenance
5.7 Electricity
5.8 Water and sewerage
5.9 Other costs
5.10 Total expenses
5.11 Grand total O&M costs
6.
Performance Ratios
6.1
Population served by domestic connections
= No. of household connections x persons/household
6.2
Daily water production
= Volume of treated water/no. of days in the month
6.3
Daily water distribution
= Volume of bulk distribution/no. of days in a month
6.4
Consumption per capita per day
= Consumption house connections/(population x days)
6.5
Average tariff (domestic) = domestic billings/domestic consumption
6.6 Average tariff (institutional) = institutional billings/institutional consumption
6.7 Average tariff (commercial) = commercial billings/commercial consumption
6.8
Total average tariff = total billings/total consumption
6.9
Unit production cost = total production cost/ treated volume
6.10 Unit distribution cost = total distribution cost/distributed volume
6.11 Unit administration cost = total administration cost/billed volume
6.12 Accounted water = bulk distribution/treated water
6.13 Unaccounted-for water
= 100% - accounted water (%)
= treated volume - bulk distribution
6.14 Nonrevenue water
= (bulk distribution - billed volume)/bulk distribution
= bulk distribution - billed volume
6.15 Production cost of NRW = unit cost production x volume of NRW
6.16 Distribution cost of NRW = Unit cost distribution x volume of NRW
6.17 Administration cost of NRW = unit cost administration x volume of NRW
Basis
kina
kina
kina
kina
kina
kina
kina
kina
kina
kina
kina
number
number
number
kina
kina
kina
kina
kina
kina
kina
kina
number
kiloliter
kiloliter
liters
kina/kiloliter
kina/kiloliter
kina/kiloliter
kina/kiloliter
kina/kiloliter
kina/kiloliter
kina/kiloliter
%
%
kiloliter
%
kiloliter
kina
kina
kina
Appendix 7
Indicator
6.18 Production cost of UAW = unit cost production x volume of UAW
6.19 Opportunity cost of NRW = total average tariff x volume of NRW
6.20 Domestic water use = domestic use/bulk distribution
6.21 Institutional water use = institutional use/bulk distribution
6.22 Commercial water use = commercial use/bulk distribution
6.23 Industrial water use = industrial use/bulk distribution
6.24 Other water use = other uses/bulk distribution
6.25 Water lost (balance) = 100% - (All consumption/raw water)
6.26 Accounts receivable = accounts receivable/ Average day sales
6.27 Operating ratio = total O&M costs/billings for all users
6.28 Collection efficiency = collections for all users/(billings all for users +
accounts receivable) at opening balance
6.29 Staff/1,000 connections = [1,000 x No. of staff]/ No. of connections
41
Basis
kina
kina
%
%
%
%
%
%
days
%
%
number
a
Monthly reports on aging of debts (accounts receivables) are generated by the management information system
(MIS).
Source: Benefit Monitoring and Evaluation Report for Madang, June 2002.
6.
Customer satisfaction must be consistently monitored at the district level by a customer
relations staff. This should form a part of the BME to ensure regular payment of water bills and
unpaid accounts.6 The Waterboard is now coordinating with the Government to collect huge
arrears of large government institutions to improve its cash flow and enhance long-term financial
sustainability of district-level Waterboard operations.
7.
The Waterboard needs to strictly enforce compliance of nonconnected customers,
payment of compliance fees must be closely monitored, charges increased to discourage use of
alternative supplies and ensure connection to the system. Currently, compliance fees are
minimal; insufficient even to cover the staff cost of ensuring compliance of nonconnected
households/establishments.
8.
The Waterboard provides its respective districts with information on operational
efficiency,7 water quality, operational costs, annual budgets, income sources, water tariffs,
collection efficiencies, and new connection fees. This information is not transmitted on a regular
basis, however. Timely transmission of relevant information would greatly enhance efficiency of
district staff in addressing customers’ concerns.
9.
At the village level, household members experienced significant benefits from regular
water supply: (i) fewer delays in getting children to school and getting ready for work; (ii) tap
water that is safer than river or well water;8 (iii) convenience of constant supply; and (iv) less
diarrhea and skin diseases.
6
7
8
Large customers such as government institutions and commercial establishments have accumulated arrears, as
have household customers. The Waterboard has obtained government support to ensure public offices to pay
arrears and current bills.
Some of the districts have higher UFW because of system aging. Production managers must ensure regular
maintenance schedules for pumps and gensets to ensure efficient operations.
The benefit monitoring and evaluation (BME) report (p. 22) says residents near the Meiro River still use river water
for washing.
42
Appendix 7
B.
Institutional Development
10.
One significant project benefit is experience in design and operation of water supply
production and treatment facilities that is being used to train other districts in the province. The
East New Britain Provincial Administration Office noted that the provincial government has
engaged the Rabaul water district to undertake a feasibility and detailed engineering study,
design, documentation, tendering, construction supervision, and maintenance management of a
rural water supply project.9
11.
The Waterboard envisions that project staff trained in construction and O&M of water
supply systems can train staff in other districts. Various management and operation training
manuals for water supply production and treatment plants, prepared under the Project, will be
used in districts with similar systems. About 15 employees from Waterboard headquarters, as
well as Madang and Rabaul branches, benefited from the technical assistance.10
12.
A comprehensive management (MIS) system is being developed and its deficiencies
being addressed by a task force. These include validating customer information through field
surveys and account reconciliation between the MIS, customer services, and the districts.11
13.
Through the institutional strengthening, the Waterboard gained knowledge and practical
experience in improving the management of project facilities by establishing (i) a production and
distribution monitoring system to detect leakage, (ii) a data collection system in pumping
stations for operational flow control, (iii) a control and monitoring system for the water supply
treatment plant, and (iv) an archive system. It further strengthened its corporate planning
capabilities to become more cost efficient.12
9
The project is the East New Britain Rural Water Supply Network. A Preliminary Feasibility Study was conducted
which consists of demographic study, demand assessment, water source identification, concept design, and
preliminary costing for 16 target areas: Raluana (Kokopo) to Navunaram, Navunaram to Vunadidir, Navunaram to
Rakunai, Rakunai to Ramalmal, Kokopo to Vunadidir, Vunadidir to Kerevat, Vunadidir (Bitakapuk) to VIviran,
Rabaul to Ratung and Nonga, Warangoi township, Baliora to Gelagela, Gelagela to Ralubang, Takubar to Ulaveo
Industrial, Ulaveo Industrial to Ralubang, DOY local government, Watom local government, and Palmalmal
township.
10
Madang has 29 staff and Rabaul 13.
11
The Waterboard is addressing weaknesses in (i) finance – budget/monitoring, credit control/debt collection, cost
control, risk management, insurance, stores and procurement, asset inventory, systems and information
management, and reconciliations; (ii) customer services - customer relations, promotion, education and
awareness, plant operations, UFW, metering, water management, and plant maintenance; (iii) corporate relations –
business development, public relations, legal affairs, compliance, and licensing; (iv) administrative and human
resources – organization and policy, employee relations, land management, and human resource management;
and (v) technical – standards, planning, rural water supply services, and CAPEX implementation. (Corporate
Board Dec 2002).
12
Corporate objectives include (i) finance – to achieve 5% return on investment (ROI), to reduce outstanding
customer receivables to 60 days for nongovernment debt and to reduce outstanding days sales to 180 days for
government debt; (ii) corporate responsibility – to increase the number of connections by at least 3%, to license no
less than 20 private water supply and sewerage systems; (iii) marketing – to increase water sales by 3%; (iv)
system optimization – to improve operational effectiveness by reducing UFW from 31% to 28%, to undertake
systems audit to establish energy use, losses, and operational efficiency of pumps and motors, and to undertake
system audit of distribution network and meters to improve delivery and minimize water losses; (v) human resource
– to have a well trained, highly motivated, and competent workforce, to manage the level of the general workforce
within the approved ceiling of 305 employees; and (vi) customer focus – to have more than 80% satisfaction in
customer service.
Appendix 7
C.
43
Economic
14.
Major economic benefits from the Project include (i) lower costs for installing rainwater
tanks because of 24-hour water supply; (ii) lowers cost of water bought and transported from
private providers; (iii) cost savings in treating waterborne ailments such as diarrhea and skin
diseases, more common among children; (iv) lower cost to commercial establishments and
institutions; (v) willingness to pay for improved water supply services and water quality; and (vi)
economic gains to business, health, and education sectors. The Waterboard will continue to
monitor these benefits and ensure their sustainability with the support of the respective Health
Departments and beneficiary communities.
15.
The Waterboard will collect relevant data to measure and monitor the Project’s economic
benefits as part of the annual benefit monitoring and evaluation report to be submitted to ADB.
Data would include (i) cost comparison of water tariffs of connected households with the cost of
alternative water supplies in the service area; (ii) production and distribution cost of districts; (iii)
amount that households are willing to pay for water tariffs and if these are in line with household
incomes; (iv) number of households and commercial establishments that will benefit from
extension of the distribution network; (v) employment created and construction gains with
network expansion; (vi) increased tourism benefits in terms of food sales/business receipts,
particularly in Madang and Kokopo; (vii) health indicators, particularly waterborne diseases; and
(viii) indirect benefits such as increase in the number of commercial and industrial
establishments and employment.
D.
Social
16.
Other unquantifiable social benefits include: (i) benefits to women and children in terms
of time saved for economic activities such as planting, harvesting and selling agricultural crops
as in the case of villagers in Kokopo; (ii) long-term employment for PNGWB staff for plant
operation, maintenance and operation as well as villagers in cleaning the grounds of water
supply treatment facilities in Rabaul/Kokopo; (iii) improvement of people’s health particularly the
villagers’ children who suffer from water borne diseases as a result of drinking water from
unprotected sources such as rainwater tanks and creeks;13 (iv) short-term employment during
project construction particularly the locals who gained experience in project construction and are
now employed as semi-skilled labor;14 (v) improvement in business activities of commercial
establishments such as hotels and restaurants; (vi) other social benefits such as more time for
women to do household chores and rearing children and reduced visits to hospitals and clinics
due to children illness; (vii) roads constructed under the Project in Madang benefited the people
within the project site and provided access to villagers and workers; (viii) positive impact on
education sector where schools no longer experience disruption of classes due to water
interruptions; (ix) provision of electricity to the project area as a result of new head works
benefited the landowners, small businesses and village people; (x) sale of property by the land
owners enabled them to have capital for small-scale businesses; (xi) improved personal hygiene
such as washing hands; and (xii) improved safety of food preparation for public consumption.
13
Diarrhea is a common waterborne disease is diarrhea. Health data from Madang Public Health Office showed a
decrease in the number of diarrhea cases by 9% treated at Jomba clinic and Madang town clinic in 1998, which
was 1,130 cases compared with 1,024 cases in year 2000. No available data on typhoid, cholera and others. In
Rabaul, health statistics indicate a decline in diarrhea cases within the project area (Batuin and Vunapope) from
3,209 in 200` to 2,336 in 2002 or 27% decline in morbidity rate.
14
Same locals who worked under the Project and gained construction skills have been employed by Downer PNG
Ltd. and other local construction companies In Madang, Kimbe, and Kokopo.
44
Appendix 7
17.
The Waterboard has conducted a number of public information campaigns on the
importance of using project services in Madang and Rabaul/Kokopo, as well as the need for
them to connect and pay appropriate water tariffs. However, most residents are willing to
connect and pay regularly during summer months because of shortages from other sources.
18.
In the past, poor enforcement in the payment of water bills resulted to huge arrears.
Recently, the Waterboard’s policy to disconnect nonpaying customers and enforcement of
reconnection fees proved an effective deterrent. Increasing the compliance fee will discourage
institutions, businesses, and households from using alternative supplies. Standby and
compliance fees are not high enough to discourage private boreholes and rainwater tanks.
E.
Resettlement
19.
The water supply treatment plants are constructed on land the Waterboard had already
acquired. A few households were relocated adjacent to the site and provided with safe water
and better living conditions.
Appendix 8
45
FINANCIAL AND ECONOMIC EVALUATION
A.
Financial Evaluation
1.
Scope and Methodology
1.
The financial evaluation recalculates the financial internal rates of return (FIRR) of
Madang and Rabaul/Kokopo water supply components and the results are compared with the
appraisal and revised scope estimates. Project costs, financing plan, and revenues are revised
based on information provided during the project completion review (PCR) mission. The
financial analysis was conducted using at constant 2003 prices.
2.
Project Cost and Revenues
2.
Capital costs were revised based on actual expenditures at project completion1. The
Waterboard provided the costs of operations and maintenance (O&M) for 2002, and this figure
was divided by the estimated volumes of water treated to calculate O&M per cubic meter (m3).
Projections of O&M costs for succeeding years are based on 2003 prices.2 The incremental
operating costs are based on the 2003 average cost of kina per cubic meter (m3) of water
treated for Madang and Rabaul/Kokopo.
3.
At appraisal, the planned output was (i) increase average daily supply capacity of the
Madang water supply system from 4,650 m3/day to about 9,750 m3/day, adequate to serve a
population WITH 4,515 connections by the end of 2005. The achieved capacity was 15,600
m3/day, versus the original target of 9,750 m3/day. This has effectively addressed problems of
multiple sources and treatment facilities, low water pressure, poor service reliability, water
rationing, and non uniform water quality. Revised project scope increased the daily capacity of
the Rabaul/Kokopo water supply system from 3,200 m3/day to about 8,250 m3 /day, adequate to
serve 3,737 connections anticipated by 2005. Total population to be served is 49,500 people:
27,090 in Madang and 22,422 in Rabaul and Kokopo.3 Actual volumes as of June 2003 indicate
that the supply capacities of Madang and Rabaul/Kokopo are 7,202 m3/day and 2,755 m3/day,
respectively.4
1
2
3
4
The Third Urban Water Supply project was financed by loans from Asian Development Bank and Chiao Tung Bank
Co. Ltd., and as well as government grants that are treated as government equity.
The Waterboard provided O&M data for 2002 and 2003 and were adjusted to reflect actual operating conditions.
O&M is estimated as follows: (i) labor cost for operation, preventive maintenance, and minor repairs is K0.16 per
kilogram (kg) sold; (ii) electricity cost is K0.12 per kg sold; (iii) chemical cost is K0.01 per kiloliter (kl) sold; (iv)
reticulation system maintenance is about 0.5% of capital cost; and (v) mechanical and electrical plant maintenance
is 3% of capital cost.
During the time of project revision in 1995, Kokopo had three independent, and unconnected urban water supply
systems, one for the high and primary schools, one for the township, and one for the Vunapope mission. These are
augmented by water tanks that rely on rainwater roof run-off. Prior to volcanic eruption, Kokopo had 3,500 people
and estimated population in 1995 was 10,000, a number projected to reach 20,000 people in 2016. For Rabaul, the
original scheme was based on a 2005 population of 27,000. After volcanic eruptions in 1994, the population fell to
12,500 people. Only minor improvements to Rabaul system have been proposed. The Rabaul water supply
scheme has 1,629 connection targets in 2008 and 3,570 m3/day (11 Apr 1995).
The Kokopo water supply supplies water to urban residents in Kokopo, Vunapope, and Takubar. It can also supply
the fringe villages of Vunamami, Takubar, Palnakaur, and Ulagunan. It can supply water to 5,141 people, a number
projected to rise 9,284 in 2020. Rabaul water supply is limited to Zones 1 and 2 with no provision for peri-urban
areas or fringe villages such as Matupit and Malaguna. Rabaul and Nonga systems will serve the estimated 2020
population of 5,560 people and there is no provision to supply water to the fringe villages along the north coast.
(Preliminary Feasibility Study Vol. 2 Gazelle Peninsula).
46
Appendix 8
4.
Average water tariff at appraisal was K0.522 /m3 and K0.632 /m3 at project revision, a
figure estimated to rise to K1.41/ m3 in 2003 with tariff increase.5 Uniform tariffs are applied to all
water supply customers for all levels of consumption.6 Water tariffs have been projected to
generate sufficient revenues to cover the O&M costs, interest charges, and depreciation related
to the project facilities.
5.
The district revenues are derived from (i) water supply and sewerage operations, (ii)
external services, (iii) connection/disconnection fees and compliance service fees, (iii) interest,
and (iv) miscellaneous income. The management and the price committee allowed tariffs to
increase in January 2003 by 29% for water and 34.7% for sewerage. The lifeline block is 12
kiloliters, with a minimum charge of K4.20; above 12 kiloliters it costs K1.65 per kiloliter. For
sewerage, the minimum charge is K5.59 for up to 12 kiloliters, and for more than 12 kiloliters,
the charge is K0.50 per kiloliter. Tariffs are projected to increase by a real rate 3-4% annually
during the projection period.7
6.
Operating expenses include administrative salaries wages and benefits, operational
supplies (electricity, chemicals, etc.), professional services, repairs and maintenance,
depreciation, sundry costs, stationery, communications, insurance, financing charges, and
administrative charges. These are based on constant 2003 prices. Fixed assets and
investments are recorded in the balance sheet at their historical costs, showing cumulative
depreciation.8 Annual increases are required to ensure that the Waterboard can cover its
operating expenses, depreciation, and financing costs, as well as raising its rate of return to at
least 5%.
3.
Waterboard
7.
Water revenues are generated by 14 branches or water districts but only the towns of
Lae and Wewak are earning and cross-subsidizing the majority of the districts.9 Total water
revenues in 2002, the largest single revenue source, are estimated at K21.4 million, an increase
of 2% over 2001’s level of K17.8 million. These revenues are projected to increase by 10% to
K23.5 million in 2003.10 Income from new connection fees was based on the average rates and
the projected number of new water connections. Income from reconnection fees is relatively
small. To calculate the volume of water sold, the NRW is projected to decrease from the current
35% for Madang and 34% for Rabaul/Kokopo to around 30% by 2005. Collection efficiency of
billed water is relatively low in all districts and data on aging of accounts receivables indicate
that the Waterboard has accumulated huge arrears from households, businesses, and
institutions.11 The Waterboard is focusing on collecting outstanding arrears that would
substantially improve liquidity and profitability.
5
Based on the income and expenses for 2001, average water tariff for Madang and Rabaul is K1.017/m3 (Source:
Finance Division).
6
Customers are categorized into: settlement metered, domestic private metered low cost, domestic high covenant,
industrial, institutional, and commercial metered.
7
This is based on the historical increase of 10% per annum (tariff revision is every 3 years) minus inflation of 5%.
For evaluation purposes, a 4% real rate of increase is used.
8
Depreciation of fixed assets is estimated based on 2.5% per annum for civil works, buildings, staff houses, 15% for
office equipment, and 20% per annum for mechanical, electrical, and general plant.
9
Lae’s revenues comprise 50% of total Waterboard revenues in 2001.
10
These are based on finance division data on water sales and budget figures for 2001-2003.
11
The head office is in charge of collecting from government institutions and large businesses. As of December 2002,
Madang had outstanding collectibles of K960,857 and K353,199. In Madang and Rabaul, 79% of these arrears are
91 to 360+ days old. Current billing as of December 2002 is equivalent to 13% of outstanding arrears.
Appendix 8
4.
47
Financial Re-evaluation
8.
Financial internal rates of return were recalculated for Madang and Rabaul/Kokopo
physical components, as well as for the Project as a whole based on actual project cost,
financing, and revenue data.12 The financial reevaluation of the components was carried out on
an incremental basis (with and without the Project) using 2003 constant prices in kina. The
economic life of the water treatment plants (WTP) is 30 years. Capacity utilization of Madang in
2003 is an estimated 46%, increasing to about 56% in 2005 and about 90% in 2012 and
beyond, when the water supply network is extended and the number of connections increased.
In Rabaul and Kokopo, the capacity utilization is about 35% in 2003 and is projected to increase
to about 45% in 2005 to about 91% in 2012, assuming that connection targets are met in
residential, commercial, and industrial expansion areas.13
9.
The FIRRs for Madang and Rabaul/Kokopo are 5.9% and 4.8% respectively, lower than
the 8.8% and 5.4% estimated at appraisal and 10.7% and 4.2% under revised project scope
because a lower number of households connected and NRW rose. Overall FIRR is 5.1% as
compared with 6.6% at appraisal and 6.4% with revised project scope.14 The results of financial
re-evaluation indicate operations are financially viable, assuming that the projected number of
connections is met until 2012.15 Sensitivity analyses were undertaken, and they indicate that the
FIRRs of both components are more vulnerable to decreases in revenues than increases in
O&M costs, as projected during appraisal. Results are indicated in Table A6.2. It The FIRR is
more sensitive to decreases in revenues arising from decreases in water tariff collections.
Tables A6.3 to A6.5 present the FIRR calculation for Madang and Rabaul/Kokopo components
and the overall Project.
10.
The Waterboard needs to make several improvements to financial operations: (i) for
billing and collection, the Waterboard needs to follow-up with defaulting customers on the first
month to avoid disconnection on the third month and to discourage deliberate nonpayment of
bills; (ii) for NRW reduction, it needs to test, recalibrate, and replace meters; (iii) timely
reporting of performance indicators, as well as consolidated monthly and quarterly reporting.
12
Weighted average cost of capital is 4.8% based on project financing (ADB 51%, Chiao Tung Bank 30%, and
Waterboard 19%). The interest rate on the CTB loan is 3.5% per annum from 15 May 1997 to 15 Nov 2017, with
payments made semiannually. The exchange rate was K1.39 = $1.00 at revised project scope in 1997, and K2.5 =
$1.00 at project completion in 2002.
13
In the consulting firm’s Final Design Report, the 2.8 ml/day would serve a population of 6,500 with 15% for
commercial use. The Waterboard committed available funding to increase reservoir capacity to 5.6 ml/day to meet
the demand of the extended system, which includes light industrial and residential areas in Takubar. This additional
capacity would also meet the proposed commercial activities in the area between GelaGela Road and Takubar.
Average per-capita gross demand is estimated at 225 lcd.
14
There has been a major change in project scope and change in project area from Rabaul to Kokopo as a result of
volcanic eruption in 1994. Prior to volcanic eruption, Rabaul had reticulated water supply throughout the town. After
the eruption, all reservoirs, pumps, and treatment houses were destroyed and the reticulated water supply has only
been restored to Zone 1. Before 1994, Kokopo town did not have a centralized water supply system and most
residents obtained water from water tanks and bores. As a result of the Third Urban Water Supply Project, Kokopo
water system serves an estimated population of 5,141, which is targeted to reach 9,284 in 2020. The remaining
population of 53,204 in Kokopo District is projected to reach 96,086 people in 2020, and these people will continue
to obtain water from water tanks, shallow wells, underground springs, and creeks. Provincial government officials
said more villages would connect to the system since Waterboard water is safe to drink.
15
Specifically, cash flow generated by this component is sufficient to meet all the operating costs, depreciation, and
debt-service requirements under the loan agreement.
48
Appendix 8
Table A6.1: FIRR and Sensitivity Analysis
Item
1. Overall Project: Base Case
(i) Capital Cost Increase by 10%
(ii) Revenues Decrease by 10%
(iii) O&M Increase by 10%
(iv) Combination of (i) and (ii)
(v) Combination of (i) and (iii)
(vi) Combination of (ii) and (iii)
(vii) 20% Decrease in Collection Efficiency
(viii) 30% Decrease in Water Sales
2. Madang Component: Base Case
(i) Revenues Decrease by 10%
(ii) O&M Increase by 10%
(iii) Combination of (i) and (ii)
(vii) 20% Decrease in Collection Efficiency
(viii) 30% Decrease in Water Sales
3. Rabaul/Kokopo Component: Base Case
(i) Revenues Decrease by 10%
(ii) O&M Increase by 10%
(iii) Combination of (i) and (ii)
(vii) 20% Decrease in Collection Efficiency
(viii) 30% Decrease in Water Sales
At
Appraisal
(%)
Revised
Scope
(%)
At Project
Completion
(%)
6.6
5.8
5.0
5.9
4.5
5.1
4.2
6.4
8.8
10.7
5.4
4.2
5.1
n.a.
4.3
4.9
n.a.
n.a.
4.0
3.3
2.3
5.9
5.0
5.6
4.7
4.0
2.9
4.8
4.1
4.7
3.9
3.2
2.3
Note: No sensitivity analyses were undertaken for Madang and Rabaul in the appraisal report and or the financial reEvaluation undertaken in April 1995.
FIRR = financial internal rate of return, n.a. = not applicable, O&M = operation and maintenance.
Source: Completion review mission estimates.
B.
Economic Evaluation
1.
Scope and Methodology
11.
The economic analysis recalculates the economic internal rates of return (EIRR) of the
two components and the results are compared with the appraisal and revised project scope
estimates. Project costs and benefits are reassessed based on information provided by the
project management office during the project completion review mission and field interviews
with beneficiaries. The EIRRs are compared with the economic opportunity cost of capital
(EOCC) for the components, which was assumed to be 12%.
2.
Project Cost and Benefits
12.
The updated financial costs were converted to economic costs to reflect the true cost
and value to the economy of goods and services. This calculation uses the domestic price
numeraire (benefits are nontradable) and is undertaken in constant 2003 prices.16 The analysis
16
ADB. 1997. Guidelines for the Economic Analysis of Projects. Manila. The standard exchange rate factor is used
to convert local prices into their border price equivalents based on standard conversion factor of 0.9 for Papua New
Guinea.
Appendix 8
49
describes the economic rationale and target beneficiaries and sets out the without-project
scenario. The analysis compares the calculated EIRR for the two components to the EOCC,
which is assumed to be 12%. Standard and project-specific sensitivity tests were undertaken to
assess the robustness of the EIRR.
13.
The major quantifiable benefits of the water supply project17 are (i) nonincremental
benefits in terms of cost savings on installing water tanks18 purchase of additional water; (ii)
incremental benefits to commercial/industrial and institutional users calculated as the revenues
earned from selling water to new consumers; and revenues collected from existing customers
based on the present water tariff, representing the consumers’ minimum willingness to pay.19
3.
Results
14.
The results of the economic evaluation show that the Project is economically viable with
EIRR estimated at 12.4%, higher than the EIRR of 10% at revised project scope but still below
the appraisal estimate of 13%. EIRRs for Madang and Rabaul/Kokopo are higher than revised
estimates of 12.5% and 12.1%, respectively, because of lower project cost and community
supplies. Sensitivity analyses show that the Project is most sensitive to decreases in benefits.
The results are presented in Table A6.6 below. Tables A6.7 to A6.9 in Supplementary Appendix
present the detailed calculation of benefits, EIRR, and sensitivity analyses.
17
The Madang component exceeded objectives and augmented the source supply, headworks, water treatment
capacity, and transmission main capacity to meet 2012 targets. The original design only intended to meet 2005
treatment and transmission capacity. The achieved capacity was 15,600 m3/day, versus the original target of 9,750
m3/day, effectively addressing the problems of multiple sources and treatment facilities, low water pressure, poor
service reliability, water rationing, and nonuniform water quality. The Project also provided additional infrastructure
to villages near the water treatment plant (WTP) and water intake facilities, including water supply, electricity
supply, telephone service, and road access.
18
Water service was only available for 4 to 6 hours a day in Madang. In Rabaul, villagers had to buy water from the
town center and spend money on transport, or obtain water from unsafe sources such as creeks and rivers. At
appraisal, the cost of a water tank, including installation, was K800. Based on the survey of suppliers of water
tanks in Port Moresby, a water tank of 9,000 liters costs K3,200 (exclusive of value-added tax) or K3,520 (inclusive
of value-added tax). For 4,500 liters, the price is K2,500 inclusive of value-added tax. There is no installation cost
charged.
19
Households not served by piped water supply rely on rainwater collected from roofs and stored in tanks made of
galvanized steel. Most households have 2,000-gallon tanks or two or three smaller tanks. Stored rainwater is not
adequate to cope with consumption during the 4- to 5-month dry season. Many households have to purchase
water, particularly in Kokopo. Households that cannot afford to buy water have to rely on creeks, rivers, shallow
water wells, or relatives and neighbors that have larger storage tanks or piped water supply. In a village in Kokopo,
people living far from the roadside who cannot afford to pay a connection fee obtain water from connected
households for K2 for a 10-liter bucket.
50
Appendix 8
Table A6.2: EIRR and Sensitivity Analyses
Item
At Appraisal
(%)
Revised Scope
(%)
1. Overall Project: Base Case
13.3
(i) Capital Cost Increase by 10%
12.2
(ii) Benefits Decrease by 10%
11.7
(iii) O&M Increase by 10%
13.0
(iv) Combination of (i) and (ii)
10.7
(v) Combination of (i) and (iii)
11.9
(vi) Combination of (ii) and (iii)
11.4
(vii) Decrease in WTP by 30%
(viii) Decrease in Cost Savings by 30%
10.0
2. Madang Component: Base Case 17.3
(i) Benefits Decrease by 10%
(ii) O&M Increase by 10%
(iii) Combination of (i) and (ii)
(iv) Decrease in WTP by 30%
(v) Decrease in Cost Savings by 30%
10.2
-
3. Rabaul/Kokopo Component: Base Case
(i) Benefits Decrease by 10%
(ii) O&M Increase by 10%
(iii) Combination of (i) and (ii)
(iv) Decrease in WTP by 30%
(v) Decrease in Cost Savings by 30%
At Project Completion
(%)
12.4
n.a.
11.1
12.3
n.a.
n.a.
10.9
11.2
9.6
11.2
9.9
-
12.5
11.1
12.3
10.9
11.4
9.5
12.1
10.9
12.0
10.8
10.8
9.8
Note: No sensitivity analysis was undertaken for Madang and Rabaul in the Appraisal Report and in the Economic
Re-Evaluation undertaken in April 1995.
EIRR=economic internal rate of return, O&M=operation and maintenance, WTP=water treatment plant.
Source: ADB, CTB, GoPNG
15.
There are other unquantifiable project benefits, including: (i) reticulated water supply for
the volcanic affected landowners in Jahil Village and Beon CIS in Madang and in Kokopo, (ii)
complete internal reticulation for Vunapope Mission area to replace existing well bores, old pipe,
and reticulated water supply for affected landowners at Ulagunana and Palnakaur villages; (iii)
women and children saved time for economic activities such as planting, harvesting, and selling
agricultural crops; (iv) long-term employment for Waterboard staff for plant operation,
maintenance and operation as well as local residents/villagers in maintaining the grounds of
watersupply facilities;20 (v) employment of contractors and suppliers;21 (vi) improvement of
people’s health particularly the villagers’ children who suffer from water borne diseases as a
result of drinking water from unprotected sources such as rainwater tanks and creeks;22 (vii)
short-term employment during project construction particularly the locals who gained experience
20
Waterboard staff were trained in water supply investigation and design, construction supervision, landowner
consultation and negotiation process and O&M of completed systems. Employment and training of local residents
with the construction contractor on carpentry, form-setting, concrete works, steel fabrication, pipe-laying,
earthworks, building construction and security operations.
21
Local contractors and suppliers include electricians, earthmovers, hardware, steel fabricators, plumbers,
restaurants and accommodation, etc.
22
A common waterborne disease is diarrhea. Health data from Madang Public Health Office showed a decrease in
the number of diarrhea cases treated at Jomba clinic and Madang town clinic from 1,130 cases in 1998 to 1,124
cases in 2000. There were no available data on typhoid, cholera, or other waterborne diseases. In Rabaul, health
statistics indicate a decline in diarrhea cases within the project area (Batuin and Vunapope) from 3,209 in 2000 to
2,336 in 2002, with a 27% decline in morbidity.
Appendix 8
51
in project construction and are now employed as semi-skilled labor;23 (viii) improvement in
business activities of commercial establishments such as hotels and restaurants; (ix) other
social benefits such as more time for women to do household chores and rearing children and
reduced visits to hospitals and clinics due to children illness; (x) roads constructed under the
Project in Madang benefited the people within the project site and provided access to villagers
and workers;24 (xi) provision of electrical and telephone infrastructure in the area of new water
supply works made available to local residents;25 (xii) positive impact on education sector where
schools no longer experience disruption of classes due to water interruptions; (xiii) provision of
electricity to the project area as a result of new head works benefited the landowners, small
businesses and village people; and (xiv) sale of property by the land owners enabled them to
have capital for small-scale businesses.
23
Same locals who worked under the Project and gained skills in construction have been employed with the
consulting firm and other local construction companies In Madang, Kimbe, and Kokopo.
24
Roads constructed included: (i) upgrading of existing sealed road in Madang from Sissiak to Beon, improving
drainage, filling potholes, patching edges, and resealing; (ii) upgrading road from Elcome Substation to Beon CIS
turnoff with drainage improvements, potholes filled, edges patched, and complete resealing with assistance from
Australian Agency of International Development and Madang Department of Works; (iii) construction of gravel
access road in Kokopo, including a concrete floodway from the chlorination building to reservoirs, for local
residents as well as Waterboard operation and maintenance staff; and (iv) upgrading of Adima St. in Kokopo
District to double-coat bitumen seal, with kerb, channel, and storm drainage.
25
In Kokopo, 11 Kv electrical infrastructure provided at borefield and made available for extension to residents along
GelaGela Road.
52
Appendix 9
COST RECOVERY ANALYSIS
A.
Scope and Methodology
1.
There are two major means to achieving full cost recovery that the Waterboard should
follow: financial viability of its water supply investments and the financial sustainability of its
operations, including the Madang and Rabaul/Kokopo systems. Water tariffs must be set
considering affordability to customers; charges should be transparent and equitable; and tariff
collection should be easy to administer.1 Water tariffs should be set at a level to cover the
operating and maintenance (O&M) costs (including depreciation) of the water supply systems,
as well as debt service and a reasonable profit margin of about 10% return on investment.2
2.
The Waterboard provides the overall policy guidance on tariff setting for its 14 water
districts and has adopted a uniform tariff.3 A minimum fee of K4.80 is charged for a lifeline block
consumption of 0-12 kiloliter and a concessional rate for less than 30 kiloliters’ consumption4.
The Waterboard raised tariffs in 1997, 2000, and 2003, with government approval, to achieve
profitability.5 As part of the Loan Agreement, the Waterboard has assured that water tariffs
would be increased over 5 years to enable full recovery of O&M; and capital costs, including
depreciation; and a 5% return on investment.
3.
In April 2003, the Government approved a 29% increase in water tariffs and 34%
increase in sewerage tariffs.6 The increase will enable the Waterboard to generate additional
income of K5.7 million in 2003. All metered customers—comprising of domestic low- and highcovenant, commercial, and industrial customers—were charged uniform tariffs starting 2000.
Table A7.1 presents the 1995, 1997, 2000, and 2003 tariffs.
4.
To contribute to full cost recovery, the project recommended charging fees for standard
new connection (connection of 15 millimeters’ [mm] diameter and not more than 26 meters [m]
from the nearest main), a policy that took effect in 1995. Beginning 2000, however, this fee was
waived as an incentive to connect to the system. Other fees include (i) a reconnection fee of
K25 for services that were disconnected; (ii) a meter rental fee;7 (iii) compliance and licensing
fees for nonconnected households taking water from any source (K50 per annum minimum fee
for domestic and K150 per annum or nondomestic plus surcharge of K.005/kilo liter and nondomestic K0.025/kilo liter); and (iv) standby fees for customers in service coverage areas at
1
2
3
4
5
6
7
Consumers pay water tariffs directly to districts, which remit collections to head office daily. Customers must pay
the billed amounts within 30 days of account delivery. Failure to pay within the stipulated period will lead to service
being disconnected and recovery action from the branch manager. The Waterboard does not employ bill collectors
because of security problems.
In recent years, the Waterboard’s tariff increase is projected to provide a 5% return on investment.
The districts are Alotau, Arawa, Daru, Kavieng, Kimber, Kundiawa, Lae, Madang, Mt. Hagen, Popondetta, Rabaul,
and Wewak.
In 1995, the lifeline block was 0-15 kiloliters (kl) and there were unmetered connections comprising of private
connections and public standpipes (shared). The lifeline block has been reduced to 12 kl.
Asian Development Bank has recommended introducing a regional tariff structure reflecting the cost of water
supply in each location, but this has not been implemented as it would price water beyond affordability in small
locations. Special Evaluation Study on ADB Capacity Building Assistance for Managing Water Supply and
Sanitation to Fiji Islands, Kiribati, Papua New Guinea and Republic of the Marshall Islands, March 2003. p.16)
Approved by the price controller based on Management review results of a 37% increase in operating costs, 26%
devaluation of kina, and price increases that affected working capital requirements.
Water meter rental amounts to K50 per annum for pipes up to 15 millimeters (mm) in diameters, K100 per year for
connections greater than 15mm diameter piping, and K150 per year for effluent meters. The Waterboard charges
an inspection fee of K70 per hour for water supply and sewerage service connection. Starting 2000, customers are
also charged a meter testing fee of K20 (15mm-20mm pipes), K40 (25mm-50mm) or K50 (more than 50mm).
Starting 2003, there is also a water testing fee of K35. Sewerage outfall tests cost K35.
Appendix 9
53
K0.532/kilo liter for metered customers and K0.393/kilo liter for sewerage. The project
completion review mission noted that poor enforcement and minimal fees meant that connected
and nonconnected users still obtained water from alternative sources.8 It a top management
priority to increase and enforce payment of compliance fees; to strengthen customer services to
maintain those connected; and to connect more customers, particularly businesses and
institutions.
Table A7.1 Water and Sewerage Tariffs, Waterboard
Item
1995
1997
March 2000
April 2003
9
1. Water Supply - Domestic and Non-Domestic (Metered Monthly Charges in Kina)
<12 kl
13-30 kl
>30 kl
K3.50 min. charge
NA
NA
<15 kl
K3.50 min. charge
K4.05 min. charge
15-30 kl
K0.50 per kiloliter
K0.58/kl
>30 kl
K0.85 per kiloliter
K0.98/kl
Unmetered (per month)
Private connection
K3.50/house
K4.05/house
Public standpipe (shared)
K3.00/house
K3.50/house
Noncommercial, Government Institutions, and Related Occupancy:
Metered (per month)
K0.62/kl
K0.72/kl (min. charge
of K20.00)
Unmetered (per month)
Connection:
NA
Up to 15 mm
K16.40/connection
Up to 25 mm
K54.60/connection
Up to 50 mm
K164.30/connection
Up to 80 mm
K545.90/connection
Up to 100 mm
K1,092/connection
Greater than 100 mm
K0.109/charging unit
Commercial/Industrial Occupancy (including Hydrants and Shipping, etc.)
Metered (per month)
K0.65/kl
K0.75/kl (K20 min.
charge)
Unmetered (per month) – Nominal Diameter of Water Supply
Connection:
<15 mm
K17.50/ connection
15-25 mm
K60/ connection
25-50 mm
K180.20/ connection
NA
50-80 mm
K600/ connection
80-100 mm
K1,200/ connection
>100 mm
K0.120 per charging
unit
Water Tankers
<10 kl
K5.50 min. charge
K7.50 min. charge
>10 kl
K0.60/kl
K0.75/kl
Sewerage Services – Domestic Water Meter Base (Monthly Charge in Kina)
8
9
K0.64/kl
K1.050/kl (flat) for
domestic
K1.50/kl (flat) for
non-domestic
K4.80 min.
charge
K1.150/kl
K1.950/kl
NA
NA
NA
NA
NA
K15/tanker
K1.50/kl
Where a public water supply is available to supply any person or entity and they choose to disconnect or connect to
the public supply, a water system standby fee shall apply based upon water taken from any source provided
approval is given by the Waterboard and the source proves with regular testing to be better or equal to the public
supply. Similarly, where a public sewerage service is able to service any person or entity and they choose to
disconnect from the public water supply or not connect to the public sewerage service, a standby fee shall apply
that covers the unsubsidized cost of providing sewerage services.
Approved by the price controller under the Prices Regulation Act and took effect on 16 April 2003.
54
Appendix 9
Item
1995
1997
<12 kl
March 2000
April 2003
K4.86 min. charge
NA
NA
13-30 kl
K0.143/kl
>30 kl
K0.143/kl
<15 kl
K3.50 min. charge
K4.05 min. charge
15-30 kl
K0.09/kl
K0.11/kl
NA
>30 kl
K0.09/kl
K0.11/kl
For customers
K3.50 (per 9,000-liter K4.05 (per 9,000-liter
with rainwater tanks
tank or part thereof)
tank or part thereof)
Unmetered (per month)
Private connection
K6.00/house
K7.00/house
NA
Public standpipe (shared)
NA
NA
For customers
K3.20 (per 9,000-liter
K4.05 (per 9,000-liter
with rainwater tanks
tank or part thereof)
tank or part thereof)
2. Sewerage Services – Nondomestic Water Meter Base (Monthly Charge in Kina)
<12 kl
K4.86 min. charge
13-30 kl
>30 kl
Sludge Tankers
<10 kl
NA
NA
K4.420/tanker
>10 kl
Noncommercial, Government Institutions, and Related Occupancy:
Metered (per month)
K13.80 min. charge plus K0.20/kl and K15.00
0.17/kl above 15 kl
min. charge
Unmetered (per month)
Connection:
<15 mm
K11.80/connection
K16.40/connection
15-25 mm
K11.80/connection
K54.60/connection
25-50 mm
K18.00/connection
K164.30/connection
50-80 mm
K132.50/connection
K545.90/connection
80-100 mm
K260/connection
K1,092/connection
>100 mm
K0.028/charging unit
K0.109/charging unit
Commercial/Industrial Occupancy (including hydrants, shipping, etc.)
Metered (per month)
K13.00 minimum, plus K0.65/kl
K0.17/kl above 15 kl
Unmetered (per month) – Nominal Diameter of Water Supply
Connection:
<15 mm
K11.80/connection
K17.50/connection
15-25 mm
K11.80/connection
K60/ connection
25-50 mm
K43.70/connection
K180.20/connection
50-80 mm
K153.70/connection
K600/connection
80-100 mm
K302.10/connection
K1,200/connection
>100 mm
K0.032
K0.120
per charging unit
per charging unit
Connection/Junction Fees
11
New Water Connections
K50.00/connection and K60.00/ connection
K20 supervision fee
New
Connections
10
11
K0.442/kl
K0.442/kl
Sewerage
K550/connection
and
K50 supervision fee
K550/ junction
10
K5.590 min.
charge
K0.400/kl
K0.500/kl
K5.590 min.
charge
K0.400/kl
K0.500/kl
K5.590 min.
charge
K0.500kl/
K.442/kl (flat)
NA
NA
NA
NA
No fee for standard new connection
of 15 mm measurement and not more
than 26m from the nearest main.
Beyond this distance connection fee
is at cost.
No fee for standard new connection
of 15 mm measurement and not more
than 26m from the nearest main.
Beyond this distance connection fee
is at cost.
Approved by the price controller under the Prices Regulation Act and took effect on 16 April 2003.
For 15 millimeter (mm) water and 100-mm sewer pipes up to 26 meters long to 1 meter inside the property line.
Connections exceeding this charged at cost. The customer is responsible for the cost of connecting to the building
from the property boundary.
Appendix 9
Item
1995
Reconnection where
service has been
disconnected (change of
tenancy)
Where service
disconnected and water
meter removed
Temporary connection
1997
March 2000
K20.00
K25.00
K25.00
K20.00
K50/connection plus
commercial meter reading
K25.00
K25.00
NA
55
April 2003
12
Source: Finance Division, Waterboard.
K = kina, kl = kiloliter, mm = millimeter, min = minimum
5.
Water tariff collections are based on 100% of the metered water consumption shown in
the monthly invoice generated by the management information system’s billing and collection
section. Tariffs are increased based on revenue requirements and annual costs. Waterboard
tariffs for consumption of up to 100 kl are much lower than Eda Ranu tariffs in Port Moresby,
shown in Figure A7.1,13 which indicate that Waterboard water is more affordable to consumers.
Figure A7.1
Water Charges - Comparison with Eda Ranu
450
400
350
300
Eda Ranu Low Dom.
250
Eda Ranu High Dom.
200
Eda Ranu Non-Dom.
WB Dom./Non-Dom.
150
100
50
-
Consumption (Kl/month)
12
13
Approved by the price controller under the Prices Regulation Act and took effect on 16 April 2003.
Waterboard tariffs are much lower than Eda Ranu’s for 0-10 kiloliters consumption for domestic: K4.80 per month
compared with K7.50 and K10 for low- and high-covenant users. Charging affordable rates in smaller towns
encourages households to connect to the system. Similarly for nondomestic customers, the Waterboard rate of
K4.80 is only 10% of Eda Ranu charge of K50 for 0-10 kl per month. Both utilities charge progressive tariffs, but
minimum consumption for commercial customers is up to 20 kl/month for Eda Rannu or K2.5/kl at K50/month and
12 kl/month for Waterboard which is only K4.80/month or K0.24/kl.
56
Appendix 9
B.
Water Tariffs and Connections
6.
In accordance with the Waterboard’s and ADB’s policy of full cost recovery, water tariffs
have been estimated to cover O&M, depreciation, and debt service. The Waterboard estimates
average cost for water in 2003 to be K1.40/kl and average price at K1.51/kl. For sewerage,
average cost is K0.47 per kl and average price is K0.50 per kl. These costs have been
assessed for 2001 and 2003, years for which data is available. In future, tariff increases are
needed to cover costs of the Project. Currently, Madang and Rabaul districts can adequately
provide O&M budget and debt service from tariffs collected based on billed volumes.
7.
The assessment calculates the average required tariff by dividing the required income by
water volume sold for all customers. Tables A7.2 and 7.3 and Figures A7.2 and A7.3 show the
number of connections for Madang and Rabaul/Kokopo by zone. Kokopo’s connections
comprise 43.6% of total Rabaul/Kokopo connections. The greater the number of connections,
and the larger the volume sold will ensure that unit operating costs are lower.14 If water volumes
still fall short of design capacity, then unit operating costs will rise, particularly the fixed
overheads such as depreciation and debt service.
Table A7.2: Number of Connections, Madang
Type
1997
1998
1999
2000
2001
Settlement Metered
Domestic Private Metered Low cost
Domestic High Covenant
Subtotal
Industrial Metered
2002
2003
478
426
1,225
1,219
790
761
2,169
1,679
1,826
2,041
2,376
2,493
2,406
170
161
170
192
218
206
200
Commercial
Institutional Meter
1
70
75
76
77
Total
2,409
1,915
2,072
2,310
Source: Madang, Customer Services, Waterboard MIS Report. 2003 data is up to June.
14
85
83
80
2,679
2,782
2,687
Nonrevenue water (NRW) is a concern in both Madang and Rabaul, where there is no consistent monthly
information on water production and consumption. In December 2002, Kokopo NRW was reported at 57% (62,000
kiloliters [kl] water produced less 26,639 kl sold), a much higher figure compared with the March 2003 NRW of 26%
(47,884kl water produced less 34,965 kl water sold). The same problem exists in Madang and Rabaul.
57
Appendix 9
Table A7.3: Number of Connections, Rabaul by Zone
Item
1997
1998
1999
2000
2001
2002
2003
(as of
November)
Zone 1 - Rabaul Town
Settlement Metered
82
62
65
68
68
73
60
Domestic Private Metered Low cost
54
57
69
101
117
138
137
252
160
180
207
266
250
234
388
279
314
376
451
461
431
74
63
74
81
91
71
67
2
5
12
10
12
12
13
13
12
474
352
400
469
555
547
515
33
30
130
119
Domestic High Covenant
Subtotal
Industrial Metered
Commercial
Institutional Meter
Total
Zone 7 – Nonga
Settlement Metered
Domestic Private Metered Low cost
Domestic High Covenant
Subtotal
93
91
173
154
189
217
253
256
240
2
2
2
2
2
2
2
Industrial Metered
Commercial
Institutional Meter
Total
7
6
6
6
6
5
5
182
162
197
225
261
263
247
Zone 9 – Kokopo
Settlement Metered
1
26
36
Domestic Private Metered Low cost
5
1
2
5
13
172
207
62
38
48
64
142
258
306
Domestic High Covenant
Subtotal
Industrial Metered
68
39
50
69
155
456
549
62
54
63
70
78
89
108
7
13
9
8
9
9
10
25
28
139
101
122
148
243
577
698
Commercial
Institutional Meter
Total
a
Total
Settlement Metered
132
120
Domestic Private Metered Low cost
444
432
Domestic High Covenant
604
584
Subtotal
Industrial Metered
629
472
553
662
859
1,180
1,136
138
119
139
153
171
162
160
10
16
Commercial
Institutional Meter
a
Total
28
24
27
27
29
44
41
795
615
719
842
1,059
1,396
1,353
Based on data from Rabaul district and provincial government.
Source: Waterboard MIS and Performance Indicators Report, 1997 to 2003.
C.
Tariffs and Cost Recovery
8.
Full cost-recovery tariffs assume that projected volumes will reach design capacity levels
by 2012 for Madang and Rabaul/Kokopo.15 Annual water volumes were projected based on
15
Madang water supply system was originally designed to provide 4,650 m3/day to about 9,750 m3/day, adequate to
3
serve a population of 4,515 connections by the end of 2005; and Rabaul water supply system from 3,200 m /day to
3
about 8,250 m /day, adequate to serve the 3,737 connections anticipated by 2005. The achieved capacity of
58
Appendix 9
water supply requirements of all users. Projected billed water volume in 2003 is about 1.5
million kl for Madang and 659,300 kl for Rabaul/Kokopo, estimated to increase at least 5%
annually. These volumes are projected to increase conservatively to design capacity in 2006 of
9,750 kl/day—about 3.5 million kl for Madang—and 8,250 kl/day or 2.97 million kl for
Rabaul/Kokopo in 2014. Connections are expected to increase when the network expands.
9.
Based on 2003 budget figures,16 unit operating revenue on projected billed volume is
estimated to be K1.25/ kl for Madang17 sufficient to cover average cost of K1.24/kl, which
includes O&M,18 depreciation, and debt service but excludes head office administration
charges.19 Rabaul’s average revenue of K1.15/kl is adequate to cover average cost of K1.14/kl.
To sustain full cost recovery, in anticipation of increases in O&M, billed volumes and costumer
connections will need to increase, NRW decrease, and connected customers not to resort to
alternative supplies. Connection targets must be realized in 2005 until 2012 to sustain viability of
Madang and Rabaul/Kokopo water supply systems. At the same time, tariffs need to rise by at
least 5% annually to cover O&M cost increases. It is projected that even with an increase in
overall costs of around 10% in 2005, increased volumes billed, increased tariffs, and cost
efficiency measures will ensure full cost recovery and financial sustainability. The Waterboard
has managed to lower fixed overhead by cutting the number of staff. Refer to Figure A7.4 for
comparison of average tariffs required for 2003, 2005, and 2012.
F ig u re A 7 .4 C o s t R e c o v e r y T a riffs , 2 0 0 3 -2 0 0 5
3 .5 0
3 .0 0
2003 R ev
2 .5 0
2003 C ost
K in a /
2 .0 0
Kl
2005 R ev
1 .5 0
2005 C ost
1 .0 0
2012 R ev
0 .5 0
2012 C ost
M adang
R abaul
WB
10.
The project completion review (PCR) mission noted that the Waterboard must revalue its
assets in 2004 to determine actual coverage with additional 2003 connections. This will
determine preventive maintenance requirements for the project equipment, distribution network,
Madang was 15,600 m3/day versus the original target of 9,750 m3/day. For the Rabaul component, headworks
3
3
capacity is 4,500 m /day. Two 2,800m capacity service reservoirs were constructed. This system is expected to
meet 2012 anticipated demand.
16
Calculations were based on 2001 figures: (i) Madang income of K1.57 million was not sufficient to cover the
operation and maintenance (O&M) cost (including sundry and insurance) of K1.58 million, depreciation of
K272,250, and debt service of K6,486; (ii) Rabaul income of K625,330 was not enough to cover O&M cost of
K554,928, depreciation of K80,301, and debt service of K11,419. Billed volumes were 1.515 million and 600,000
for Madang and Rabaul, respectively. The Waterboard charges these districts additional administration charges
and sundry costs.
17
Based on estimated revenues of K1.9 million and billed volume of 1,522,100 kiloliters (kl) for Madang in 2003; for
Rabaul, estimated revenues of K756,650 and billed volume of 659,306kl. Figures do not include administration
charges and recoveries, which are substantial.
18
O&M includes the variable costs of salaries, wages, labor incidentals, contracted services, operational supplies,
repairs, maintenance, professional services, stationery, communications, insurance, and other sundry costs.
19
The head office administration charges are about 15% of district costs.
Appendix 9
59
and facilities. O&M will increase by at least 10% on average per year with an expanded
distribution network. Water tariffs need to rise in 2005 to an average rate of K1.75/ kl and K3.25/
kl in 2012 to cover projected O&M cost, depreciation, and debt service.
11.
The Waterboard is targeting to increase average water tariff to at least K1.75/kl by 2005.
This means that water tariffs will increase to at least K0.5/kl for the minimum block consumption
from the existing K0.4/kl. The average tariff needs to rise to K1.5/kl for Madang and K1.4/kl for
Rabaul to maintain full cost recovery in 2005. The Waterboard must also enforce compliance,
licensing, and standby fees to ensure that customers do not use alternative supplies.
D.
Tariffs and Affordability
12.
Based on household income data and interviews with villages in the project area,20 tariffs
are affordable to low-income households (K10 per month, about 2% of a household income of
K500).21 The problem with nonrevenue water is willingness to pay rather than affordability, since
districts do not follow up water bills to avoid arrears.22 Waterboard headquarters has assumed
the responsibility of collecting huge arrears from government institutions.
13.
Households willing to pay included those near Waterboard offices in Madang who had
experienced short supply and rationing before the project, as well as villagers who had to pay
extra obtain water from town (comprises of K2 per 10-liter bucket, or K20 for a 200 liter drum in
addition to K20 transport cost). The billed volumes normally decrease during rainy months,
since connected customers with rainwater tanks opt to use this water for domestic purposes.
During summer the same customers are willing to pay to be reconnected since they lack
alternative water sources. Districts must use higher compliance and standby fees to ensure that
existing users stay connected, and connect more customers by discouraging use of alternative
water sources.
20
Households mainly earn money through wages (weekly), small business, cocoa, copra, timber, vegetables, fruit,
and rent. Wage earners earn K560-K1,600 per month. Copra sellers earn about K100-K650 per month.
Households can earn up to K1,250 per month from semisubsistence farming, and those selling cocoa earn about
K506 per month. Household expenditures average about K100 per week, K30 for electricity and K30 for kerosene.
(Preliminary Feasibility Study Gazelle Peninsula Vol.2).
21
Estimated at K20 per day for 25 days, K500 per day for selling fruits and vegetables.
22
As of June 2003, Madang water district had total accounts receivable of K702,490. Rabaul had K453,960. This is
as much as six times their current monthly billing. A respective 32% and 27.7% of these arrears are more than 360
days old for Madang and Rabaul. Some 20.2% (Madang) and 6.6% (Rabaul) are 181-361 days old.
60
Appendix 10
PROJECT PERFORMANCE RATING ASSESSMENT
Table A10.1: Evaluation of Performance
Item
Relevance
Project preparation is relevant to project output at the time of approval
Project output is relevant to achieving project goals and objectives at
the time of approval
High priority of the Project in the context of the country’s development
strategy at the time of approval
High priority of the Project in the context of the operational strategy of
Asian Development Bank (ADB) for the country at the time of approval
High priority of the Project in the context of the country’s development
strategy at the time of evaluation
High priority of the Project in the context of one or more ADB’s
strategic objectives at the time of evaluation
Percentage of subcriteria that met assessment
Evaluation rating
Results/Remarks
Highly relevant
Yes
Yes
Yes
Yes
Yes
100%
2.2
Efficacy
Most project physical outcomes achieveda
Most project intangible outcomes (e.g. technical assistance) achieved
Project outcomes leading to project goals
Percentage of subcriteria that met assessment
Evaluation rating
Yes
Yes
Yes
100%
1.8
Efficiency
Efficient and satisfactory ADB’s internal processing of the Project
Effective organization and management of the executing agency and
implementing agencies
Effective project management
Efficient in recruitment of consultants and other procurement
Timely and adequate availability of counterpart funding
Percentage of subcriteria that met assessment
Evaluation rating
Yes
Yes
Yes
Yes
Yes
100%
2.0
Sustainability
Adequate demand for project servicesb
Effective operating and financial performance of the utilities and ability
to recover costsc
Existence of appropriate maintenance policy and proceduresd
Available funds (cash flow) for continued operations, maintenance, and
growth requirements
Adequate skills to continue project operation
Availability of appropriate technology and equipment to operate the
Project
Yes
Yes
Yes
Yes
Yes
Yes
Appendix 10
Item
Availability of enabling environment (subsidies, tariffs, prices,
competitiveness, and political development) in which the Project is
operating at the time of evaluatione
Strong ownership and commitment of the Government to the Project
61
Results/Remarks
Yes
Yes
Operation of the project facilities has significant impact on the
environment and renewable resources
Adequate community participation and beneficiary incentives to
maintain the project facilities
Percentage of subcriteria that met assessment
Evaluation rating
Not applicable
Yes
100%
2
Institutional Development and Other Impacts
Formal laws, regulations, and procedures being established at the
national and district levels
Informal norms and practices are appropriate
Strong institutional/organization arrangements to maintain operation of
the project facilities
Adequate institutional skills and capacitiesf
Active participation of the public
Macroeconomic or sector policy framework in place
Positive impact on poverty reduction
Positive impact on the environment
Positive impact on social organizationg
Positive impact on political developmenth
a
Percentage of subcriteria that met assessment
Evaluation rating
Yes
Not applicable
Yes
Yes
Partly
Yes
Yes
Not applicable
Yes
Yes
80%
2
Natural disasters delayed implementation and changed the Project’s scope and area, but the Project’s
achieved capacity has exceeded targets.
b
Intentionally designed to meet 2012 targets vs. originally planned 2005 targets; nevertheless, achieved capacity
exceeds current demand. The project will meet 2005 targets for connections and customer relations.
c
Cost-efficiency measures have been implemented, and centralized district-level billing and collection are improving.
d
Operation and maintenance O&M manuals and procedures were instituted, and the Waterboard will undertake an
asset revaluation and management study to further improve and provide adequate budgets for O&M.
e
The Government supports tariff increases to sustain viable operations.
f
Institutional capacity in technical aspects is adequate. Measures are now underway to further strengthen the
Waterboard’s financial management and management information systems (MIS), linking district and central office
operations.
g
Some communities are helping the Waterboard maintain water supply facilities. Districts will undertake activities
geared towards more community organization and better integration of villages with the water supply system.
h
The provincial government in East New Britain has been closely working with the Rabaul water district to develop
water supply systems in rural and newly developed areas.
62
Appendix 10
Table A10.2: Assessment of Project Overall Performance
Criteria
(a)
Relevance
Efficacy
Efficiency
Sustainability
Institutional Development
and Other Impacts
Overall rating
a
Weights
(%)
(b)
Assessment
(c)
Rating Value
(d)
Weighted
Ratinga
(b x d)
20
25
20
20
15
Highly relevant
Efficacious
Efficient
Sustainable
Moderate
2.2
1.8
2.2
2.0
2.0
0.44
0.45
0.40
0.40
0.30
2.1
(Successful)
Highly successful = overall weighted average (OWA) > 2.5, and no criteria less than 2; successful = OWA 1.6-2.5,
and no criteria less than 1; less than successful = OWA 0.6-1.6, and not less than 2 criteria less than 1;
unsuccessful = OWA < 0.6.
Source: Staff estimates.