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Implementation Completion Report (ICR) Review - Bielsko-biala Water


  
1. Project Data:   
ICR Review Date Posted:
01/13/2006   
PROJ ID:
P008595
Appraisal
Actual
Project Name:
Bielsko-biala Water
Project Costs(US $M)
 35.4  43.6
Country:
Poland
Loan/Credit (US $M)
 21.1  16.8
Sector, Major Sect.:
Water supply, Sewerage,
Water sanitation and flood protection; Water sanitation and flood protection
Cofinancing (US $M)
 0  0
L/C Number:
L4032      
   
Board Approval (FY)
  96
Partners involved
None 
Closing Date
06/30/2003 07/31/2005
         
Evaluator: Panel Reviewer: Division Manager: Division:  
Kavita Mathur
George T. K. Pitman Alain A. Barbu IEGSG

2. Project Objectives and Components:

a. Objectives
The overall objective of the project was to: strengthen the management and operation of AQUA (Municipal Company AQUA S.A. Bielsko-Biala), upgrade water supply and wastewater collection services, improve the living standard and protect the health of the people of Bielsko-Biala, and expand wastewater treatment to contribute to the clean up of the region’s water resources.

The specific objectives of the project were to:
a) Improve the safety, reliability and quality of water supply services of Bielsko-Biala by upgrading the functioning of water treatment plants and the water transmission and distribution networks;
b) Improve the efficiency of water production, transmission and distribution systems and lower operating costs through operational improvements, reduction of unaccounted for water, and demand management;
c) Improve the safety, reliability and efficiency of the wastewater collection system including pumping stations through works rehabilitation/replacement and inflow/infiltration reduction;
d) Reduce pollution of local surface water by reductions in combined wastewater overflows, and the Biala river by providing full biological treatment to all wastewater generated in the AQUA service area; and
e) Enhance the Borrower’s institutional capabilities.

b. Components (or Key Conditions in the case of Adjustment Loans):
A. Water Supply (appraisal cost US$9.5 million, actual cost US$12.3 million).

  • Expand/improve service to Zlote Lany area;
  • Upgrade existing Wapienica, Szczyrk and Sola (also referred to as Kobiernice) water treatment plants; and
  • Undertake a program of rehabilitating and improving efficiency of transmission-storage-distribution systems including leak detection.
B. Wastewater (appraisal cost US$19.8 million, actual cost US$26.0 million).
  • Expand Wapienica and Industrial wastewater collectors;
  • Expand Komorowice treatment plant capacity by 60,000 m3/day and complete Wapienica (capacity 8,000 m3/day) treatment plant including primary as well as secondary treatment; and
  • Undertake a program for improving the efficiency of the wastewater collection system including: rehabilitation and replacement, inflow/infiltration reduction, pumping station refurbishment and reduction of combined wastewater overflows.
C. Technical Assistance and Training (appraisal cost US$1.0 million, actual cost US$1.5 million).
Institutional strengthening through introduction/improvement of organizational structures, cost accounting systems, management information and control systems, tariff setting and management, demand management, commercial operations, personnel management, business planning and asset management.
D. Engineering Design and Construction Supervision (appraisal cost US$5.0 million, actual cost US$3.8 million).
  • Identification, design and implementation of cost effective programs for water and wastewater system rehabilitation and operations improvement; and
  • Preparation of studies, final designs, tender documents and supervision of construction for all investment components.

c. Comments on Project Cost, Financing, Borrower Contribution, and Dates
The actual total project costs are 23% higher than the appraisal estimate. This is because AQUA has financed more investments than were anticipated at project appraisal. Disbursements under the Bank Loan were lower because of AQUA's strong financial position (AQUA decided not to utilize all of Bank funds). The project closed after a two year delay. However, the ICR does not discuss the reasons for the delay.


3. Relevance of Objectives & Design:

The project objectives were consistent with the Country Assistance Strategy (CAS) dated October 20, 1994. The CAS listed environmental improvement as a major challenge for Poland. According to the CAS, the water supply and waste water management project would be instrumental in achieving improved quality of water supply and would help reduce the amounts of pollutants introduced into the rivers downstream. The project objectives remained relevant throughout the life of the project. The November 13, 2002 CAS notes that while much progress has been made in terms of upgrading waste water treatment and management systems, solid waste treatment and management is still not planned or managed in a comprehensive way in many smaller gniinas. Moreover, water supply and waste water systems are important infrastructure needs for quality of life of the population at large and for business development. The overall project objective "improve the living standard and protect the health of the people of Bielsko-Bialawas" was too general and the project design included no data to support these broad claims. The specific objectives were too detailed, each with several sub-objectives, which are more appropriate as project performance indicators. The projects cost benefit analysis, institutional risk analysis, and poverty analysis was inadequate.

4. Achievement of Objectives (Efficacy) :

The project achieved its overall objective of strengthening the management and operation of AQUA, upgrading the water supply and wastewater collection services, protecting the health of the people of Bielsko-Biala, and expanding the wastewater treatment to contribute to the clean up of the region’s water resources (see details below). Regarding the sub-objective of improving the living standards of the people of Bielsko-Biala, the ICR provides no evidence.
Improve the safety, reliability and quality of water supply services of Bielsko-Biala by upgrading the functioning of water treatment plants and the water transmission and distribution networks.

Achievement was High. During the period 1995-2005, the quality of water supplied has improved significantly. Turbidity has decreased from 5 to 1 Nephelometric Turbidity Units (NTU); color from 20 to 15 true color units; iron from 0.5 to 0.2 mg/l; and manganese from 0.1 to 0.05 mg/l. At project closing, AQUA's drinking water quality met all WHO guidelines.

The reliability of water supply has also been improved through organizational changes, training of staff and provision of additional equipment for repairing breakages. In 1995 the incidence of interruptions was 2970 in 1298 km pipeline (or 2.29 interruptions per km) compared to 2004 when 2287 interruptions occurred in 1784 km pipeline (or 1.28 interruptions per km).

Improve the efficiency of water production, transmission and distribution systems and lower operating costs through operational improvements, reduction of unaccounted for water, and demand management.

Achievement was Modest. Operational improvements were achieved through increased automation and introduction of better control systems. The number of employees were reduced from 2.9 per 1000 people served in 1996 to 1.4 in 2002, compared to 2.5 as projected at appraisal.

The projected reduction in unaccounted for water has not been achieved despite significant investments in distribution system rehabilitation which, particularly, has focused on replacement of old unprotected steel pipes. At project closing, unaccounted for water remained high at 47% compared to 35% estimated at the beginning of the project in 1996. The major reasons for AQUA's high unaccounted for water are the very low quality of distribution mains (unprotected steel and cast iron pipes) laid in the past and improved pressure conditions in the distribution networks and the addition of 145 km of poor quality water mains in the system.

The per capita water demand has decreased by about 60 percent or from about 180 to about 105 liters per day during the period 1996-2002 because of the decline in industrial consumption and also because increased domestic water and wastewater tariffs reduced consumption (water tariffs increased by 50% and wastewater tariffs increased by 65% above appraisal targets). Thus even though proportion of unaccounted for water has increased, there has been an overall saving of 25%.

Improve the safety, reliability and efficiency of the wastewater collection system including pumping stations through works rehabilitation/replacement and inflow/infiltration reduction.

Achievement was High. Wastewater collection coverage, in percentage of population served, has increased from 83% to 89% in 2002 in the original service area. AQUA's service area has expanded as the company has secured new customers in outlying low density areas, where on-site sanitation facilities currently predominate including the larger area. The overall wastewater service coverage is 82%. Inflow/infiltration, as percentage of total flow, has been reduced from about 74% in 1998 to about 47% in 2003 as concluded through measurement of incoming flows to the wastewater treatment works.

Reduce pollution of local surface water by reductions in combined wastewater overflows, and the Biala river by providing full biological treatment to all wastewater generated in the AQUA service area.

Achievement was High. The annual occurrence of combined wastewater overflows has been reduced from over 20 to less than 10 (according to the current regulations). This has been made possible through reductions in inflow/infiltration but also through improved operation and design/structural changes of overflow chambers.

Full biological treatment has been extended from 38% to 100% of wastewater collected in the service area. The performance of the treatment works complies with relevant specifications and requirements for treated wastewater as prescribed under EU regulations and stipulated in a water permit.

The quality of the Biala river water has improved, BOD5 has decreased from about 50 mg/l in 1994 to about 4.2 mg/l in 2004 (after completion of wastewater treatment works extensions).

Enhance the Borrower’s institutional capabilities.

Achievement was Substantial. New accounting and management systems and procedures have been introduced. Moreover, customer services regarding applications, service agreements and complaints has been computerized. Annual business planning was introduced in 2000 and has become AQUA's overall planning tool for identification and scheduling of activities to be implemented.


5. Efficiency:

No ERRs were estimated at appraisal or completion for this project. The Financial Rate of Return (FRR) at appraisal was estimated at 23%. The ex-post FRR shows a much higher FRR of 36%.
6. M&E Design, Implementation, & Utilization:

The project design included adequate output and performance monitoring indicators such the reduction of unaccounted for water, increase of wastewater treatment capacity, and reduction of the employees per thousand population served and targets were set to monitor the achievement of these indicators. Targets were also set for residential and industrial water and wastewater tariffs and working ratio. These indicators were monitored during project implementation and presented in the ICR. The monitoring of water quality has been improved through extended laboratory capacity (EU certification is expected) and introduction of a SCADA (Supervisory Conrol and Data Acquisition) system as well as of a system indicating raw water parameters.
7. Other (Safeguards, Fiduciary, Unintended Impacts--Positive & Negative):

No safeguard impacts were noted in the ICR.
Unintended impacts - although private sector involvement had not been envisaged when the project was
appraised, in 1999 United Utilities (then with International Water) became a strategic investor in
AQUA. Since January 1998, AQUA has been a public company quoted in Poland's secondary trading market.

8. Ratings:
ICR
ICR Review
Reason for Disagreement/Comments
Outcome: 
Highly SatisfactorySatisfactory"Sat." rather than "Highly Sat." because the projected reduction in unaccounted for water has not been achieved despite significant investments in distribution system rehabilitation which, particularly, has focused on replacement of old unprotected steel pipes. At project closing, unaccounted for water remained high at 47% compared to 35% estimated at the beginning of the project in 1996.
Institutional Dev.: 
HighHigh
Sustainability: 
Highly LikelyHighly Likely
Bank Perf.: 
SatisfactorySatisfactory
Borrower Perf.: 
Highly SatisfactoryHighly Satisfactory
Quality of ICR: 
Satisfactory

NOTES:
- When insufficient information is provided by the Bank for IEG to arrive at a clear rating, IEG will downgrade the relevant ratings as warranted beginning July 1, 2006.
- ICR rating values flagged with ' * ' don't comply with OP/BP 13.55, but are listed for completeness.

9. Lessons:

Twinning with established private sector water utilities was effective in raising managerial and service standards.Public-private partnerships can be a good model for building successful water utilities. AQUA created a sound financial basis and took advantage of the knowledge and experience of international firms to strengthen the utility and prioritize and design its investment program.
  • Quality engineering is cost effective.A "Soviet bloc" legacy of unprotected steel water pipes requires expensive, long-term replacement. The past practice of using unprotected steel pipes (even small sizes were not galvanized) has resulted in badly corroded water distribution networks with high levels of physical water losses, higher than necessary pumping costs and loss of revenue. Correcting this problem is costly and requires replacement of major portions of the water networks.

10. Assessment Recommended?  Yes

          Why?  For two reasons: (i) to verify project ratings, and (ii) high unaccounted for water is clearly an area of concern and the field assessment would look at whether the initial level was underestimated or perhaps different/higher standards were applied under the new management.

11. Comments on Quality of ICR:

This is a satisfactory ICR overall, but it has a few shortcomings. The discussion on quality at entry could have been strengthened. The ICR does not discuss the reasons for the two year delay in project closing. And it provides no evidence regarding the achievement of the sub-objective of improving the living standards of the people of Bielsko-Biala.

(ES-Rev4B-Dec/05)
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