Document of The World Bank Report No: ICR00001863 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IDA-P088030) ON A GRANT IN THE AMOUNT OF SDR 7.5 MILLION (US$ 11.3 MILLION EQUIVALENT) TO THE REPUBLIC OF GUYANA FOR A WATER SECTOR CONSOLIDATION PROJECT SEPTEMBER 22, 2011 Urban, Water and Disaster Risk Management Department Caribbean Country Management Unit Latin America and Caribbean Region CURRENCY EQUIVALENTS (Exchange Rate Effective 05-10-11) Currency Unit= 1.0 = US$ 0.0049 US$ 1.00 = GYD 206 FISCAL YEAR January1 – December 31 ABBREVIATIONS AND ACRONYMS CAS Country Assistance Strategy DFID Department for International Development (U.K.) GoG Government of Guyana GS&WC Georgetown Sewerage and Water Commissioners GUYWA Guyana Water Authority GWI Guyana Water Incorporated IDB Inter-American Development Bank IDA International Development Association MC Management Contract NRW Non Revenue Water O&M Operations and Maintenance PAD Project Appraisal Document PDO Project Development Objectives PIU Project Implementation Unit WTP Water Treatment Plant Vice President: Pamela Cox Country Director: Francoise Clottes Sector Manager: GuangZhe Chen Project Team Leader: Patricia Lopez ICR Team Leader: John Morton ii Guyana Water Sector Consolidation Project CONTENTS Data Sheet A. Basic Information....................................................................................................... v B. Key Dates ................................................................................................................... v C. Ratings Summary ....................................................................................................... v D. Sector and Theme Codes .......................................................................................... vi E. Bank Staff .................................................................................................................. vi F. Results Framework Analysis ..................................................................................... vi G. Ratings of Project Performance in ISRs ................................................................... ix H. Restructuring (if any) ................................................................................................ ix I. Disbursement Profile .................................................................................................. x 1. Project Context, Development Objectives and Design ............................................... 1 1.1 Context at Appraisal ......................................................................................... 1 1.2 Original Project Development Objectives (PDO) and Key Indicators ............. 2 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification............................................................................ 2 1.4 Main Beneficiaries ................................................................................................ 3 1.5 Original Components ............................................................................................ 3 1.6 Revised Components ............................................................................................ 3 1.7 Other significant changes ...................................................................................... 4 2. Key Factors Affecting Implementation and Outcomes .............................................. 4 2.1 Project Preparation, Design and Quality at Entry ................................................. 4 2.2 Implementation ..................................................................................................... 5 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization ...... 7 2.4 Safeguard and Fiduciary Compliance ................................................................... 8 2.5 Post-completion Operation/Next Phase ................................................................ 9 iii 3. Assessment of Outcomes .......................................................................................... 10 3.1 Relevance of Objectives, Design and Implementation ....................................... 10 3.2 Achievement of Project Development Objectives .............................................. 11 3.3 Efficiency ............................................................................................................ 12 3.4 Justification of Overall Outcome Rating ............................................................ 13 3.5 Overarching Themes, Other Outcomes and Impacts .......................................... 13 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops ... 16 4. Assessment of Risk to Development Outcome......................................................... 16 5. Assessment of Bank and Borrower Performance ..................................................... 17 5.1 Bank Performance ............................................................................................... 17 5.2 Borrower Performance ........................................................................................ 18 6. Lessons Learned ....................................................................................................... 19 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners .......... 20 Annex 1. Project Costs and Financing .......................................................................... 21 Annex 2. Outputs by Component ................................................................................. 22 Annex 3. Economic and Financial Analysis ................................................................. 23 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............ 28 Annex 5. Summary of Borrower's ICR and/or Comments on Draft ICR ..................... 30 Annex 6. Comments of Co financiers and Other Partners/Stakeholders ...................... 32 Annex 7. List of Supporting Documents ...................................................................... 33 Annex 8. Map ............................................................................................................... 34 iv A. Basic Information Guyana Water Sector Country: Guyana Project Name: Consolidation Project Project ID: P088030 L/C/TF Number(s): IDA-H1800 ICR Date: 09/29/2011 ICR Type: Core ICR GOVERNMENT OF Lending Instrument: SIL Borrower: GUYANA Original Total XDR 7.50M Disbursed Amount: XDR 7.50M Commitment: Revised Amount: XDR 7.50M Environmental Category: B Implementing Agencies: Guyana Water Inc. (GWI) Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 12/18/2003 Effectiveness: 01/25/2006 01/25/2006 Appraisal: 03/14/2005 Restructuring(s): 03/24/2010 Approval: 07/28/2005 Mid-term Review: 01/09/2008 02/01/2008 Closing: 03/31/2010 03/31/2011 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Satisfactory Risk to Development Outcome: Substantial Bank Performance: Satisfactory Borrower Performance: Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Implementing Quality of Supervision: Satisfactory Satisfactory Agency/Agencies: Overall Bank Overall Borrower Satisfactory Satisfactory Performance: Performance: v C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry Yes None at any time (Yes/No): (QEA): Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA): DO rating before Satisfactory Closing/Inactive status: D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Water supply 100 100 Theme Code (as % of total Bank financing) Administrative and civil service reform 33 33 Natural disaster management 17 17 Rural services and infrastructure 17 17 Urban services and housing for the poor 33 33 E. Bank Staff Positions At ICR At Approval Vice President: Pamela Cox Pamela Cox Country Director: Francoise Clottes Caroline D. Anstey Sector Manager: Guang Zhe Chen John Henry Stein Project Team Leader: Patricia Lopez Martinez Patricia Lopez Martinez ICR Team Leader: Patricia Lopez Martinez ICR Primary Author: John Morton F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The Project development objective is to support the achievement of sustainable universal access to safe and affordable water for the population of Guyana, especially the poor. This Project will also help to consolidate the water sector modernization and reform process supported by IDA and other donors in recent years. Specifically, the Project will: - Provide access to treated water to over 48,000 people through the development of treatment facilities in the coastal water supply systems in regions 2, 3 and 5. vi - Improve levels of service to low and medium income housing schemes already connected to the service. - Provide the technical assistance needed to allow for the sustainable development of water resources in Guyana, and support the modernization and financial sustainability of GWI. - Through the emergency component, provide funding to support recovery needs after the January 2005 floods. Revised Project Development Objectives (as approved by original approving authority) (a) PDO Indicator(s) Original Target Formally Actual Value Values (from Revised Achieved at Indicator Baseline Value approval Target Completion or documents) Values Target Years Provide water that meets national quality standards and an acceptable level of Indicator 1 : service to over 48,000 beneficiaries Value quantitative or 0 48,000 51,000 Qualitative) Date achieved 06/30/2005 03/30/2010 09/02/2011 Comments The water supply infrastructure was successfully built, servicing a population (incl. % greater than the initial estimate of 48,000 with a level of service that can be achievement) considered adequate in the context of Guyana. (b) Intermediate Outcome Indicator(s) Original Target Actual Value Formally Values (from Achieved at Indicator Baseline Value Revised approval Completion or Target Values documents) Target Years Indicator 1 : Pressure and continuity of water supply services for consumers in Project areas. Value continuity: 20-24 Continuity: 16-24 continuity: 0-12 hrs (quantitative hrs hours pressure: 4.15 m or Qualitative) pressure: > 7 m Pressure: 5-7 m Date achieved 06/30/2005 03/30/2010 09/02/2011 The investments provided a significant improvement in the hours of service per Comments day and pressure provided, at levels that can be considered adequate in the (incl. % context of Guyana and only slightly lower than the targets envisioned at achievement) appraisal. Indicator 2 : Reduction of non-revenue water in project areas Value (quantitative 65-70% 25% Not monitored or Qualitative) Date achieved 06/30/2005 03/30/2010 09/02/2011 vii Comments Not monitored systematically in the project area, System-wide estimates show a (incl. % reduction from 60-65% to 53%. achievement) Indicator 3 : Achieve universal metering in project area Value (quantitative 0 100% 100% or Qualitative) Date achieved 06/30/2005 03/30/2010 09/02/2011 Comments All meters under the project were installed and the project areas are currently (incl. % covered 100% by meters. achievement) Strengthen design and project management capacity within GWI asset Indicator 4 : management team Value (quantitative not completed completed completed or Qualitative) Date achieved 06/30/2005 09/01/2005 09/02/2011 Comments There has been improved capacity in contract management, and construction (incl. % supervision through works performed. achievement) Indicator 5 : Improve customer satisfaction as a result of operational improvements Compliant with Not compliant with Response to Value management management contract for complaints (quantitative contract for days days to respond to improved over the or Qualitative) to respond to compliants. time period. compliants. Date achieved 06/30/2005 03/30/2010 09/02/2011 The specific indicators in the PAD and Management Contract whish related to Comments GWIs response time to complaints and leaks were not monitored. However, (incl. % nearly equivalent targets covering the same issue, monitored under the achievement) Turnaround Plan, were largely met. Indicator 6 : Strengthen management, technical and monitoring capacity within GWI Development and Completed with Value execution of corresponding (quantitative NA training program improvements in or Qualitative) for GWI staff and technical capacity Board. and monitoring. Date achieved 06/30/2005 03/30/2010 09/02/2011 Comments The Project improved design and management capacity in GWI and established a (incl. % system of monitoring that is used by the staff and Board. achievement) viii G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 03/30/2006 Satisfactory Satisfactory 0.88 2 12/21/2006 Satisfactory Moderately Satisfactory 1.17 Moderately 3 06/13/2007 Satisfactory 1.34 Unsatisfactory Moderately 4 12/17/2007 Satisfactory 1.77 Unsatisfactory 5 04/18/2008 Moderately Satisfactory Moderately Satisfactory 2.13 6 11/30/2008 Moderately Satisfactory Moderately Satisfactory 4.24 Moderately Moderately 7 06/10/2009 5.57 Unsatisfactory Unsatisfactory Moderately Moderately 8 07/20/2009 7.15 Unsatisfactory Unsatisfactory 9 02/16/2010 Moderately Satisfactory Moderately Satisfactory 9.34 10 04/15/2010 Moderately Satisfactory Moderately Satisfactory 10.21 11 02/26/2011 Satisfactory Moderately Satisfactory 11.57 H. Restructuring (if any) ISR Ratings at Amount Board Restructuring Disbursed at Restructuring Reason for Restructuring & Approved Restructuring Date(s) Key Changes Made PDO Change DO IP in USD millions 03/24/2010 N MS MS 9.61 Extension of closing date. ix I. Disbursement Profile x 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal 1. The Guyana Water Sector Consolidation was initiated in response to a comprehensive Reform Program in the water sector, investment needs in the sector, and in the aftermath of severe flooding in the country. The core objective was to improve access and quality of water in three different urban and peri-urban areas of the country and support broader institutional strengthening activities. 2. Water Sector Reform: In 2000 Guyana embarked on a major and comprehensive Reform Program for the water and sanitation sector. Reforms were led by the GoG with the assistance of the donor community, with the goal of providing sustainable universal access to safe and affordable water for the population of Guyana. Reforms implemented before appraisal had facilitated a complete reorganization of the water and sanitation sector around three key principles and aspirations:  A modern, efficient and customer-oriented utility  Long-term financial sustainability  A governance and institutional framework characterized by independent regulatory functions and a clear division of responsibilities 3. Key achievements of the Reform Program at the time of appraisal in 2005 included: (i) The establishment of a modern legal, regulatory and institutional framework under the Water and Sewerage Act of 2002; (ii) The creation of Guyana Water Inc (GWI) through the merger of the two water utilities, GS&WC and GUYWA in 2002 and (iii) The award of a performance-based “Management Contract� for five years to an international operator - Severn Trent Water International (STWI) in January 2003. 4. At the time of appraisal, achieving financial sustainability at GWI was a big challenge primarily due to high electricity costs, insufficient tariff levels, and overall modest revenue growth. As a result, the GoG had to extend operating subsidies of over US $7.5 million in 2004 and 2005 to GWI. 5. Investment Plan to Address Service Deficiencies: At appraisal there were deficiencies in the quality and coverage of water supply services in Guyana. Major problems with the safety, continuity, and reliability of supply persisted both along the coastal strip (home to 90% of Guyana‟s population) and in the severely under-serviced Hinterland region (which comprises over 95% of the land area). The lack of source water treatment in some of the areas serviced by GWI posed risk of bacteriological contamination. Most parts of the serviced areas - both in Georgetown and outside the capital -experienced low water pressure and intermittent supply. There was also a need to improve the operations, management, and level of service. 1 6. To respond to these needs GWI developed a Ten Year Investment Program as part of the May 2005 GWI Strategic Plan. The GWI Ten Year Investment Program outlined a comprehensive investment program to substantially improve access to safe and reliable water. 7. Flooding in Guyana: Beginning in late December 2004, exceptionally heavy rainfall in Guyana resulted in severe flooding within the coastal administrative regions of West Demerara/Essequibo Islands, Demerara/Mahaica, and Mahaica/West Berbice. These areas are inhabited by 75 percent of Guyana‟s population and include the capital city, Georgetown. The flooding along the coast, between the Demerara and Mahaica rivers, had seriously inhibited GWI‟ s ability to supply potable water (approximately 164,000 people affected) and to dispose of wastewater in the affected areas. Immediately after the flooding occurred, IDA sent a team specialized in disaster management to conduct a preliminary needs assessment. 8. Water Sector Consolidation Project: The Water Consolidation Project was developed by taking advantage of IDA‟s experience in the water sector globally and in Guyana. The Water Consolidation Project was designed to respond to the need for further support of the sector reform, to develop GWI‟s capacity, and to provide funding for investment financing under the Ten Year Investment Program. Since the timing of the appraisal coincided with the 2005 floods, the Project design also incorporated adequate response to the associated impacts on water infrastructure. The Project was designed to provide $10.1 million (out of the $170 million needed in the Ten Year Investment Plan) of investments in water supply. Additionally, the Project would strategically leverage IDA engagement through the small institutional development component (US$0.3 million) to remain engaged in the larger Reform agenda being pursued by GoG with support of the donor community that included more significant financing for institutional strengthening from IDB and DfID. 1.2 Original Project Development Objectives (PDO) and Key Indicators 9. The Project Development Objective was to support the achievement of sustainable universal access to safe and affordable water for the population of Guyana, especially the poor. This Project would also help to consolidate the water sector modernization and reform process supported by IDA and other donors in recent years. Specifically, the Project would:  Provide access to treated water to over 48,000 people through the development of treatment facilities in the coastal water supply systems in regions 2, 3 and 5  Improve levels of service to low and medium income housing schemes already connected to the service  Provide the technical assistance needed for the sustainable development of water resources in Guyana, and support the modernization and financial sustainability of GWI  Through the emergency component, provide funding to support recovery needs after the January 2005 floods 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/justification 2 10. The PDO was not revised after appraisal. 1.4 Main Beneficiaries 11. The primary target group for the investment component comprised over 48,000 people living in urban and peri-urban areas in Regions 2, 3, and 5 that include low to middle income residents. Additional beneficiaries identified at appraisal included 164,000 people affected by the 2005 flood. GWI and its customers also would benefit from the institutional strengthening of the utility. 1.5 Original Components 12. The Project was designed to support the GoG‟s Program through a Specific Investment Grant to be implemented by GWI. GWI would have overall technical responsibility for the Project including procurement. The Grant would be divided into four components that included: 13. Component 1: Water Supply Infrastructure (US$9.1 million of IDA financing, US$1.0 of government counterpart financing): This component was designed to finance infrastructure works including upgrading of raw water source, installation of water treatment facilities, upgrading of water transmission systems, and rehabilitation of the distribution systems in Division 1, Division 2, and Division 4 of GWI‟s operating zones (in GoG‟s administrative Regions 2, 3, and 5 respectively). 14. Component 2: Design, Project Management. and Supervision (US$ 0.8 million of IDA financing, US$0.1 million of government counterpart financing): This component was designed to finance staff, consultant services and equipment to strengthen the capacity of GWI and its Asset Development Team to execute, supervise, and monitor the results of the Project. 15. Component 3: Institutional Strengthening Component (US$0.3 million of IDA financing, US$.03 million of government counterpart financing): The component was designed to finance technical assistance architecture around the Management Contract. This was necessary to bring the needed specialized skills and expertise to support GWI and its Board of Directors to turn the company into a modem and efficient utility. 16. Component 4: Emergency Component (US$ 1.1 million, 100% IDA financed given the Emergency nature of the intervention): Under this Component, the Project would finance the rehabilitation of water treatment plants, pumping stations (water and wastewater), and distribution systems damaged by the flooding. It would also finance minor capital works targeted at the distribution systems and small equipment repairs and replacements, household connection replacements, and other minor investments. 1.6 Revised Components 17. The components were not revised after appraisal of the project. 3 1.7 Other significant changes 18. The Project was restructured in order to extend the closing date from March 31, 2010 to March 31, 2011 to allow for extra time for completion of some of the outstanding works which could not be completed during the original project time period. This was caused by delays in the bidding process of the main treatment plant works and the termination of two other contracts (i.e. for well drilling and installation of pipes) due to underperformance by contractors and the subsequent need for re-contracting. 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry 19. The key project preparation and design considerations that impacted implementation and outcomes were: 20. Multi-donor commitment and long term strategic engagement with GoG and GWI: Given that GWI‟s Investment Program was designed to benefit from a multi-donor program, and the lack of donor coordination in the previous engagement was having an adverse impact on sector performance – donor commitment and cooperation was critical for the success of this Project. Thus this was an important element of the design as it provided strategic support to institutional change and capacity building at GWI and allowed the Project to have a more significant engagement with regard to GWI institutional strengthening that it otherwise would not have had under the very small (US$0.3 million) institutional strengthening component. 21. Government Commitment: The long term engagement as part of the Reform Program emphasized that institutional strengthening and reform are key to not just improving water supply in Guyana but also for the investments to be successful and sustained. The Government was committed to the Ten Year Investment Program which was evident by the funds it was able to mobilize for a large portion of the medium term investments (US$64 million of the required US$74 million for the first 3 years) necessary for the Reform Program. The GoG was also committed to provide the required counterpart funding for this Project. This was important to the design as it demonstrated Government commitment and ownership. 22. Relationship to the Management Contract: At appraisal, the legal basis for infrastructure and institutional performance was the recently issued Management Contract and GWI‟s operating license. Some of the institutional and operational/infrastructure performance targets were therefore made consistent with the goals of the management contract. However the realism of these targets was questioned at appraisal and acknowledged as a risk that eventually affected the Project outcomes as measured by the indicators agreed at appraisal. 4 23. Planning, targeting, and design of investments: The needs of the sector and the targeted districts were thoroughly researched as part of the upstream work on the investment plan. This was done through community consultations and by identifying specific works under the Project. As a result the Project included investments that were anticipated to increase access to safe water in communities that needed it. 2.2 Implementation 24. The only formal restructuring undertaken for the Project resulted in a one-year extension on the closing date from March 2010 to March 2011. 25. In GWI‟s view, implementation delays, particularly early on in Project implementation, were attributed to extensive periods in the procurement processes, termination of some contracts and retendering. In addition, there were periods when construction materials were scarce or unavailable locally, which resulted in delay in construction completion; 26. However, there were series of important actions taken during the initial stages of implementation in response to challenges that were severely impeding the implementation of the project. In addition to issues inherent to implementing public works projects in Guyana (including time to complete procurement, quality of contractors and availability of construction materials), there were challenges related to capacity development and learning in financial and procurement management, and ongoing institutional issues within GWI that were causing. delays and resulting in under-disbursement. Some of the issues in particular were:  Weaknesses in the financial management system that included internal control problems related to contract management, failure of the accounting system, and understaffing in the Finance Department at GWI. Key management positions in GWI were left vacant for extended periods of one year or more, delaying decisions on contracts. The high turnover of staff in GWI also limited their capacity  Agreed operating procedures of the Board and changes in its composition were slow to implement  The 2006 election period affected the pace of decisions on contracts  GWI‟s day to day operations were disrupted after the decision to terminate the Management Contract was taken 27. The actions taken in response to these issues were implemented over a period of several years in response to institutional and political changes by GoG and GWI, taking advantage of the institutional strengthening component already designed in the Project, recommendations during World Bank supervision missions, and strong donor coordination. 5 Fig 1: Key Events and Actions Taken to Increase Disbursement 28. From the onset GoG and GWI sought to address the delays, with support from the project supervision and the institutional strengthening components and in coordination with other donors. In January 2007 the GoG decided to terminate GWI‟s 5-year Management Contract with Severn Trent Water International due to slow progress in achieving the contractual goals. After contract termination, GWI began managing the utility directly and in parallel, began its reorganization. Subsequently the engagement focused on GoG‟s and GWI‟s development through a coordinated engagement with the donor community and a “Turnaround Plan� that would define a vision for the future at GWI. The Turnaround Plan, eventually approved by the GoG by the end of 2007 was “broadly satisfactory to the Bank,� and targeted many of the issues that affected the satisfactory progress of the Project. 6 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization 29. The original project design contained a series of outcome indicators to track the achievement of the Project Development Objective which was to provide the population, in the areas served by the investments, water supply that meets national water quality standards at an acceptable level of service. The indicators included targets for water quality, efficiency and continuity of the supply, non revenue water reduction, universal metering and improved customer satisfaction as a result of the Project infrastructure investments. It also included indicators for institutional development at GWI, project management for investments, overall management, and technical and monitoring capacity. 30. Several issues affected the application and measurement of these indicators during implementation: 31. Addition of Core Indicators: As part of the Multi-Donor Managing for Development Results agenda, a set of core indicators were established and applied to all water supply and sanitation projects. This resulted in the addition of 2 indicators to the Project (related to the number of water utilities supported and the piped household connections benefitting from rehabilitation). 32. Performance Indicators in the Changing Context of GWI Management: The specific target values for many of the Project indicators were adopted based on the criteria and performance required under the GWI Management Contract and Operating License which was the applicable legal and contractual arrangement at the time of appraisal. With the development of the Turnaround Plan an additional set of indicators were developed and accepted by the core donors (World Bank, IDB, and DFID) as a basis for continued sector support. The initial set of indicators were based on aspirations of the performance of the private sector Management Contract which were not realized, while the Turnaround Plan indicators were a more realistic consensus of the potential improvements GWI could make under the circumstances. The project indicators were however not formally changed. The indicators used in the ICR evaluation of the outcomes (Section 3.2) are the original project indicators. The Turnaround Plan indicators were discussed in the ICR (under the institutional strengthening section under “overarching themes, other outcomes and impacts�, section 3.5b) in light of the broader institutional strengthening achieved during this period as part of the multi-donor engagement. 33. Quality of Data and Capacity to Monitor: At the onset, the need to build monitoring capacity at GWI was acknowledged. Thus capacity building for this purpose was incorporated as part of the Project. In the first few years of the Project, data collection for the performance indicators was a fundamental issue. However significant progress was made on the quality and quantity of data collected on GWI performance in the last few years. Annual monitoring reports were produced and used as a reliable source of management information and regular internal management reporting at Board meetings. Although data quality has improved it remains to be a challenge, needing corrections, estimations and assumptions in certain cases to make effective 7 use of raw data and, basic data having limited accuracy. Non-revenue water in particular is not measured systematically and while estimates could be made at the system level, no accurate estimates or measurements were able to be made in the project areas. 2.4 Safeguard and Fiduciary Compliance 34. Safeguards Safeguard compliance was rated “satisfactory� throughout project implementation. Operational Policy 4.01 (Environmental Assessment) was the only safeguard triggered and the Project was classified as a “category B.� To that end, GWI, with support from the World Bank, completed “Environmental Guidelines for Construction Projects and Environmental Assessment� that established clear guidelines to protect the environment before, during, and after construction of proposed water projects. Consistent with these guidelines, Environmental Impact Assessments, which included consultations with key stakeholders and public disclosure, were completed in 2004 for the three water upgrade projects funded by the Bank. The overall Project created substantial positive environmental impact, and did not face any unusual environmental risks. 35. Procurement: The major contracts under the loan were a series of works associated with the design and construction of the treatment plants, well borings, transmission system, pumping stations, and repairs to the distribution system. Procurement suffered from delays partly due to difficulties in complying with World Bank procedures which was a result of the lack of familiarity and human resources constraints at GWI. Procurement was also delayed due to an investigation carried out after a protest was lodged by one of the losing bidders which after delays was not validated. Other procurement issues that were less directly related to compliance but contributed to delays include the termination of two contracts, late sub-contracting and technical, non-performance, cash flow and liquidity issues on the contractor‟s end. 36. Although no major compliance concerns (that would prevent disbursements) were raised by the Independent Procurement Review conducted in 2009, the rating for procurement compliance was placed at “Moderately Satisfactory� at the time. This rating remained such until the end of the Project. 37. Financial Management: At the beginning of the project, financial management compliance was rated “Moderately Satisfactory�. This was due to GWI‟s financial management systems having several structural gaps including weaknesses in internal control related to contract management oversight, accounting of customer payments, human resource capacity, and the incapability of GWI‟s accounting and operating system to adapt to changes in accounting software. 38. A review by DFID‟s Internal Audit Section in 2007 had reported internal weaknesses in GWI financial and management systems, and a list of recommended improvements and redirection of some funds to support these improvements. The list of measures to be applied was included in the Turnaround Plan adopted at the end of 2007. 8 39. Audits in 2008 raised concerns about GWI‟s ongoing financial management weaknesses and the slow pace of implementation of measures to rectify deficiencies and implement the actions outlined in the Turnaround Plan. In addition to these concerns allegations of corruption surfaced in early 2009, which prompted swift action from the GWI Board of Directors and led to termination of several staff contracts. An investigation report prepared by GWI‟s Board and GoG confirmed that no World Bank funds were affected by any of the alleged malpractices. GWI‟s inability to address these issues in a timely manner resulted in the “Moderately Unsatisfactory� rating for Financial Management. 40. Subsequently, IDB funded activities to build capacity in financial management at GWI. Subsequent supervision missions concluded that while ongoing weaknesses remained, the progress made by GWI in addressing the issues was acceptable and that the deficiencies identified dealt primarily with issues of efficiency rather than compliance. With the significant progress made in GWI to resolve the weaknesses, the financial management rating was raised to "Moderately Satisfactory" in 2010, a rating that remained until the end of the project. 2.5 Post-completion Operation/Next Phase 41. Sustainability of the works will depend upon the system of operations and maintenance which is currently in place and being continuously improved on at GWI. Additional capacity is likely to be built as part of the continued investments in the sector through IDB and GWI funding. The sustainability of the institutional strengthening will depend on continued commitment by GoG and GWI to the Reform Program. The key principles of reform in the sector (modern, efficient and customer oriented utility, financial sustainability, clear responsibilities and regulatory independence) and the associated institutional strengthening goals for GWI have remained consistent throughout implementation. The Turnaround Plan has expired but will be replaced by a strategic plan currently being developed through IDB funding which is expected to follow the same basic principles outlined in the Reform Program. Additional investments are also planned through GWI funding and two projects funded by the IDB. One project will fund the construction of a water treatment and distribution plant in Linden to service over 50,000 people in the region. The other project will fund the renewal of sewers and sewage pumping stations in Georgetown. 9 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation 42. The Project was closely aligned to Guyana’s Poverty Reduction Strategy and the Bank’s Country Assistance Strategy for Guyana: This Project was initiated by the Government of Guyana as part of the water sector Reform Program. The GoG requested the World Bank support in 2004 to help Guyana reach its Millennium Development Goals and meet its Poverty Reduction Strategy targets. The Project was in line with the Country Assistance Strategy (CAS) for FY03-FY05 which focused on IDA‟s assistance to Guyana through a series of planned Poverty Reduction Support Credits, accompanied by a Public Sector Technical Assistance Credit. The January 2005 Emergency due to severe flooding that affected 75% of Guyana‟s population also exposed vulnerabilities in GWI‟s emergency response capability and required IDA‟s intervention in disaster management. 43. A shift in IDA’s strategy in Guyana resulted in more selectivity in interventions: The Bank decided to assist Guyana in addressing its development challenges through a new CAS in 2009 with two main pillars: (i) strengthening environmental resilience and sustainability; and (ii) improving education quality and social safety nets. In addition to the alignment with Guyana‟s Poverty Reduction Strategy Paper the two pillars were chosen based on: (i) the GoG‟s request for Bank assistance in Forestry, Education, and Social Protection, and its emphasis and commitment to addressing the issues related to those sectors; (ii) ongoing engagement with the GoG on environmental resilience and education; and (iii) past achievements that would be sustained and continued during this CAS. Since this new strategy is highly selective, investments in water supply sector related projects were not considered a CAS priority going ahead. 44. GoG and GWI are focused on continuing support for the water and sanitation sector: The continued support to the water sector by the Government of Guyana is outlined in the Guyana's Ministry of Housing and Water 10-year strategy. The Strategy provides support to the development of water services through GWI. It specifically targets the improvement in access to safe water to 90% of the country's population and is also focused on reducing the disparity that exists in access to water in the coastal and hinterland regions. As part of this strategy GWI will continue its commitment to implementation of the goals of the Turnaround Plan to improve the quality and coverage of service, improve its financial sustainability, and implement a Hinterland Water Strategy to improve the access of safe water sources and sanitation to hinterland communities. IDB is funding two projects to increase coverage of the services across the country. 45. As a result of the close alignment of the PDO with Guyana‟s Reform Program, IDA‟s CAS at the time of Project appraisal, and the continued commitment of the GoG in the sector and project institutional goals, the ICR rates the relevance of the Project as “High�. 10 3.2 Achievement of Project Development Objectives 46. The Project provided an important contribution to the goal of sustainable universal access to safe and affordable water for the population of Guyana. The Project had a significant impact with respect to the specific goals of increasing access in the Project area and supporting the recovery needs of the January 2005 floods. It achieved moderate impacts related to levels of service and the modernization and financial sustainability of GWI, having only met a portion of the targets for these goals. 47. Provide access to treated water to over 48,000 people through the development of treatment facilities: The water supply infrastructure was successfully built, servicing a population of 50,901 (11,718 piped household connections) which is greater than the initial estimate of 48,000. The facilities are operating and providing adequate water quality to these beneficiaries, none of which had access to piped treated water before the project. As in the process of upgrading the system a small number of new consumers were connected to the network, new connections to piped water was provided as part of the project to a small portion of the beneficiary population. 48. Improved levels of service: Some improvements in levels of service were achieved both in and out of the project areas. In the project areas, in addition to the water quality improvements, there is 100% metering and the investments provided a significant improvement in the hours of service per day and pressure provided, at levels that can be considered adequate in the context of Guyana and only slightly lower than the targets envisioned at appraisal. Outside the project area, the broader efforts by GWI supported by the project and other donors improved the quality, continuity, and pressure of the water supply significantly. 49. Assist in the sustainable development of water resources in Guyana and support modernization and financial sustainability of GWI: The Project assistance was designed to provide some targeted assistance to support the broader goal of turning the company into a modem and efficient utility. In accordance with the targets set in the PAD, the Project was able to strengthen design and project management capacity and enhance the utility‟s ability to implement investments, monitor and manage assets as evidenced by the realization of the investments and the establishment of a monitoring system. The training programs, the knowledge gained from the contractual consultants, and the hands on learning as a result of GWI management and design of the project works improved staff qualification and the knowledge of Board members. The Project also funded 3 engineers from GWI for a Master‟s program in Project Management in the University of Guyana, some of whom are currently working in senior management positions in GWI. Additionally, significant improvements in customer satisfaction (measured as responses to complaints) were observed during the implementation as a result of operational improvements under the Project. 50. Support Recovery needs after the January 2005 flood. The planned works for emergency recovery were completed and helped increase the overall quality of service in the affected areas. The Emergency Component was used to address the short term loss of water supply and sanitation to the affected population by primarily funding repairs and replacement of equipment damaged due to the floods. This included spare parts for over 20 sewage pumps, 11 piping, submersible water well pumps, and electrical and mechanical components. The funds were also used to cover repairs to backhoe assigned to GWI‟s operations department, construction of flood protection walls at all bore well locations in GWI‟s Division 3 service area, and to carry out structural rehabilitations works in some of the regions serviced by GWI. 51. The Project was able to substantially achieve the primary objective of the project which were related to the increase in access to treated water. It also was able to respond successfully to the flood emergency and made significant progress in meeting the intermediate targets set out at appraisal for levels of service and institutional modernization. Considering these outcomes and the relative emphasis the project put on the development outcome related to access to treated water, the achievement of Project Development Objective is rated as “Substantial�. 3.3 Efficiency 52. Efficiency was assessed using a similar financial analysis done at appraisal, and updated to the conditions found at the end of project. Due to the challenges faced by GWI in terms of low tariffs and fee collection and the availability of donor funds for investments, in the medium term investments were envisioned to be funded partially or totally through grants. In this context, the analysis in the PAD assessed different combinations of grants provided for investments (% of grant funding) and levels of tariff increases as scenarios for potential financial outcomes (see table below). At appraisal, it was concluded that in order to make the project financially viable, there would be a need to be an additional increase in tariffs or a grant to partially finance investment. Estimated Project Returns at Appraisal Scenario Estimated NPV at appraisal A. No tariff change and no grant for investment. -US$6.28 million B. No tariff change and 100% grant for investment US$2.07 million C. 47% tariff increase and no grant for investment. -US$5.12 million 53. When looking at conditions at the end of the project the actual tariff increases (5% for metered customers, 10% for unmetered customers) and grant funding (100% through the IDA grant) ended up close to scenario B. Under these end of project conditions including the grant financing, a positive net present value was found. However, when considering the works as a grant equity investment (no grant financing assumed), the return on the investment is lower than the opportunity cost of capital, resulting in a negative net present value and an internal rate of return of 2%. Project Returns at End of Project Indicator Value NPV (100% grant) US$4.36 million NPV (no grant) -US$5.45 million IRR (no grant) 2% Revenues and operational costs based on assumptions provided in Annex 3, Depreciation of 3.5% percent and 30 year operational life was used based on values of similar works. 12 54. Overall financial performance of the project using the grant financing mechanism therefore had a favorable return. However, true gains in efficiency of the investment would have relied upon increases in tariffs combined with the reduction of non-revenue water, both of which showed only limited progress under the project. 55. Considering the above and taking into account the additional economic benefits that were not valued (e.g., health, time and money saved) and its contribution to poverty reduction goals and improved living conditions through increased access to basic services, the rating for efficiency considered “Modest�. 3.4 Justification of Overall Outcome Rating (combining relevance, achievement of PDOs, and efficiency) 56. Rating: Satisfactory. 57. The ICR rates the overall outcome of the Project as “Satisfactory� based on a “High� rating for relevance, “Substantial� rating for efficacy and “Modest� rating for efficiency. The Project supported a sector that was and still is important to the GoG during a challenging time in its evolution. It provided targeted investments that improved water quality, continuity and pressure to over 50,000 people in underserved areas that, with the grant financing, is resulting in a financial benefit to GWI and providing broader economic benefits to the serviced population. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development 58. The Project was designed to ensure the supply of water, improve flow rates and pressures, and improve the quality of water to over 50,000 people in the target communities which included predominantly low to middle income groups. At the time of appraisal none of the target communities received treated water and as a result faced health risks associated with the use of untreated sources or spent time and money boiling or purchasing water of unknown quality from vendors. The project thus was able to reduce the health risks and time and money used for obtaining water. The emergency recovery component also helped restore service in the aftermath of the floods which affected the poor significantly. (b) Institutional Change/Strengthening 59. The broader sector strengthening and reform of GoG and GWI were supported to some extent by the small activities financed under the project‟s institutional strengthening component but more substantively by the dialogue through a joint effort with the other donors who had more significant financing targeted at sector reform and strengthening. This engagement was developed during preparation and designed into the project as a means of providing coordinated and sustained support for these themes. During this time GWI has been able to realize significant improvements with regard to institutional strengthening and levels of service (see table below) and some improvements in its financial situation. 13 60. When benchmarking the improvements against the targets set in the Turnaround Plan (provided in Annex 5), GWI has been able to meet or nearly meet those related to water quality, customer satisfaction and financial ratios. Other targets related to accounting, operations, human resources and non revenue water reduction have not been met, although significant improvements have been achieved. Progress Current Status Institutional Strengthening Meter management Installed meters have doubled since 2001. 60,000 (35%) metered connections 45,000 registered and used for billing (25% of active customers). Rejections/tampering: 15% Meter readings used for billing: 27% Customer relations Significant improvements with regard to Challenge related to complaints on billing response to complaints and monitoring of estimates persist. repairs. Asset management Capital Investment and Planning Procurement and contract management Department is staffed with committed remains a difficult issue in Guyana. professionals. Operational repairs and maintenance take There has been improved capacity in firefighting approach with little preventive contract management, and construction maintenance. supervision through works performed. Human resources Moved from unstable management with Much of management group largely in place many unfilled positions and high turnover since Turnaround Plan was agreed. of staff to a more stable management Unfilled vacancies remain high. group. Turnover of staff in operations and the low Staff numbers have increased since 2005. remuneration remain issues. Monitoring Moved from a situation with little or no Full set of operational, customer, billing, data or system to collect and use it to metering data still not regularly available and regular collection of data with monthly rely on estimations. Non revenue water monitoring reports used by the Board. measurements are not systematically undertaken. Service Levels Water Pressure and Investments in infrastructure have Pressure: 51% of population > 7 meters Continuity increased water pressure from the baseline Continuity: 94% of population > 16 hours. of 2m average and 0-12 hours per day for a significant portion of the population. Water quality Major treatment works have been 17 of 110 sources and 55% of water implemented under the IDB, World Bank, produced undergo treatment that meet or JICA, and GoG funding increasing close to meeting national standards with quantity of treated water. adequate residual chlorine present. Infiltration of contaminated surface water through leaks when pipes not pressurized remains a problem Financial Status Non Revenue Reduced from 60-65% to 53% since 2005 System wide non-revenue water: 53% water (not measured systematically rather Physical losses: 40%. numbers based on estimations). Billings: 70%. (not measured systematically rather numbers based on estimations). Billings and Total billings has doubled in monetary Modern billing system in place. Collection terms since 2005 and tripled since 2001. Collection ratio is at 70% and total billings Domestic sector billings and collections cover 170,000 customers. have expanded significantly. 14 Progress Current Status % collection has remained constant Costs and revenues Since 2001 revenues have gone up 5 fold Billings have reached a level almost with improvements in billing coverage. equivalent to operating costs which are higher than customer revenues requiring a continued reliance on GoG subsidies. 61. Among the many goals of institutional strengthening, the achievement of financial sustainability independent of government subsidies was part of the policy dialogue, Reform Program and was a large area of focus for IDB and DFID related projects. Revenues have increased significantly primarily through increased billing coverage and efficiency but less than anticipated due to the fact that tariff increases were not realized. At the same time costs have increased primarily due to the related costs of providing the improved level and coverage of service including new housing schemes that were not anticipated and a significant increase in electricity prices. To reach financial sustainability it is anticipated that both further improvements in non-revenue water (leakage reduction, reducing illegal connections and improved billing and collections) and significant tariff increases will be needed. (c) Other Unintended Outcomes and Impacts (positive or negative) 62. On the positive side the Bank was able to provide and finance specialized advice to GWI during the supervision of the construction of the Water Treatment Plants. The contract used for the construction, which was designed as a turnkey contract (allowing for alternative designs to be proposed by bidders and the consideration of expected O&M costs of the infrastructure as part of the bid evaluation) was very innovative in the context of Guyana and allowed for the provision of adequate technology characterized by relatively simple and non-expensive operation. 15 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops (optional for Core ICR, required for ILI, details in annexes) 4. Assessment of Risk to Development Outcome 63. Rating: Significant1 64. Provide Access to treated water to over 48,000 people through the development of treatment facilities: The risk of the investments not being able to continue providing water of adequate quality to the targeted population depends on the proper operation and maintenance of the facilities and the acceptance by the population and operation of the metering system. GWI is challenged by lack of easy access to spare parts and high turnover of operators and acceptance of the use of the meters by the population. Systems are however in place to respond to deficiencies in operation and metering performance. Thus the risk of the investments not being able to continue providing the desirable water quality to the targeted population is considered low to moderate. 65. Improved levels of service: As part of its corporate strategy GWI intends to ensure that the levels of service throughout their entire system that have been achieved are not just maintained but also increased. The risk to ensuring this continuous improvement at the corporate level relate to being able to expand infrastructure investments and surmount the technical, administrative and financial challenges associated with the operation of the investments. While the systems are in place and institutional commitment for the improvements continue, the technical challenges of ensuring system wide improvements combined with the institutional and financial challenges described below makes the risk to the outcome of improved levels of service moderate to significant. 66. Support to the modernization and financial sustainability of GWI: The risk to the goal of GWI being a modern and efficient organization that is independent of government subsidies are considered significant due to the still high political intervention in GWI management and tariff setting and institutional challenges associated with the modernization program and the fact that without tariff increases and non revenue water reduction, it is likely that GWI will continue to be dependent on GoG subsidies. 67. Modernization of GWI: The risks associated with the modernization of GWI relate to its continued role as a water company under the current arrangements and the risk that the capacity gains cannot be sustained. Since the consolidation of water companies and the formation of GWI, the major institutional change has been the termination of the Management Contract by GoG. Since that time there has been continued commitment to the basic institutional model and goals of the reform. However, with the upcoming need to develop a new strategic plan to replace the Turnaround Plan and renew GWI‟s license, the upcoming national elections, and the 1 The risks were considered as a composite of the likelihood of the risk and the impact of the risk if it was realized. 16 continued dependence of GWI on GoG financially, there is a significant risk to the operation of GWI as a water company as envisioned under the Reform Program. The challenges of retention of qualified staff and the long term vacancies in appointed positions persist and represent another risk to this outcome. 68. Financial Viability of GWI: The financial viability of GWI was one of the key sector issues that was highlighted at appraisal and continues to be a challenge. GWI is still financially dependent on government subsidies due to increases in power prices and the continued high non revenue water due to gaps in metering and leakage. GWI has continued to be committed to reaching financial viability through efforts to improve metering and billing and reduce non- revenue water. To reach this stage in the medium term, the program on non revenue water and metering needs to be accelerated and/or tariffs need to be increased. While GWI is going in the right direction, considering the level of the technical and administrative challenges and the need for unpopular tariff increases, the risk to this development outcome is considered high. 69. Support Recovery needs after the January 2005 flood: As these are works designed as a short term measure to rehabilitate the water infrastructure to the levels of operation that existed before the flooding and that goal was achieved, there is negligible risk to this outcome. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry 70. The ICR rates Bank performance during preparation as “Moderately Satisfactory�. The Project design took advantage of the experience from a previous World Bank investment project and was developed to support a pre-existing a Reform Program and Ten Year Development Plan. Therefore it was a thoroughly prepared project with strong Government ownership that was able to identify the critical risks. It developed mitigation measures, taking advantage of targeted technical assistance and institutional building components. The design incorporated adequate flexibility with solid donor coordination which proved to be essential in reacting to challenges during implementation. 71. The shortcomings relate to the overstated targets for GWI operational indicators, an optimistic approach to the likelihood of identified risks materializing, and underestimation of the effect of capacity issues on the project schedule. These can be considered moderate due to the impact on the project outcomes and delay in implementation. (b) Quality of Supervision 72. The ICR rates Quality of Supervision as “Satisfactory�. The Project began with a series of challenges related to implementation pace, procurement, financial management and broader institutional issues. Strong supervision during this time was crucial to assisting both the Project 17 and more broadly the institutional development of GWI. Minor shortcomings relate to the limited formal supervision in later years at a time when the Project was largely on track to completion within the extended time period and when arrangements for specialized consultant advisory and supervision support were used to more directly assist the construction and operation process. 73. The fact that the target values for the indicators associated with intermediate objectives were not changed during implementation represents a missed opportunity to have a formal restructuring of the project to reflect the target values that were being pursued by GWI through their turnaround plan. Although such a modification may have enabled the Project to better meet the institutional indicators, these shortcomings are considered to be mostly formal and its impact in the project outcomes is negligible. For these reasons, overall quality of supervision is considered satisfactory. (c) Justification of Rating for Overall Bank Performance 74. The ICR rates the overall Bank performance as “Satisfactory� given that Bank performance during preparation has been rated “Moderately Satisfactory� and during implementation has been rated as “Satisfactory�. 5.2 Borrower Performance (a) Government Performance 75. The ICR rates the overall Government performance as “Moderately Satisfactory�. At appraisal, GoG was committed to the water and sanitation sector Reform Program and had taken key steps towards its implementation which included creation of GWI, awarding of the Management Contract, and securing funding under the Ten Year Investment Program. The GoG also took proactive steps to develop a new direction for GWI subsequent to the termination of the Management Contract. The key shortcomings were related to the inability to maintain continuity in appointments in GWI and its Board, and delays in contractual decisions during the national elections. These can be considered moderate due to the project delays and the impacts on the institutional development goals of the project. (b) Implementing Agency or Agencies Performance 76. The ICR rates the overall Implementing Agency performance as “Satisfactory�. GWI performance under the Project was clearly split into two distinct phases. During the first part of implementation, the Project faced significant delays and inefficiencies related to contract management and oversight, accounting systems, human resource capacity and prolonged vacancies, among other issues. In the later stage of implementation, as a result of a series of proactive actions on project specific issues and the development of the Turnaround Plan to help address more systematic issues, GWI was able to overcome many of the challenges and complete the Project with only one year delay. Minor shortcomings relate to the delays, lack of pro activity in pursuing tariff increases and lingering issues related to financial management and procurement compliance. 18 (c) Justification of Rating for Overall Borrower Performance 77. The ICR rates the overall Borrower performance as “Satisfactory� taking into account the proactive response to challenges in the project and the relative importance of the above shortcomings in achieving the development objectives. 6. Lessons Learned 78. Donor coordination proved instrumental in the policy reform and institutional strengthening agenda: The Project benefited from the coordination of several donors. There was a consensus on the policy Reform Program and institutional strengthening agenda. The effectiveness of the coordination is particularly noteworthy during the early stages of the Project. The combination of a consistent message and complementary efforts on the same issues were instrumental in, supporting the Turnaround Plan, and in addressing procurement and financial management capacity constraints. 79. Early and thorough engagement is important to successful sector reform programs: Reform programs such as this that are crucial to the performance of investments, require long term engagement. The Project benefited from a more than 10 year Bank engagement in the sector through the previous investment project and the extended period of engagement in developing the reform agenda. This ensured a well designed project grounded on well developed institutional and regulatory reform. 80. Government ownership was key to sustaining sector reform and improvements within GWI: The long term and productive involvement of the government on the water sector reform also enabled high government and ownership at the time of appraisal which was able to be sustained during implementation. Even if the Government decided to give the Management Contract an early termination, it remained engaged in dialogue with the main donors and GWI and there was high support at the highest levels for the agreed turnaround plan which proved invaluable to sustaining the improvements achieved and maintaining the principles of the reforms throughout this crucial time in the development of the sector, even if the management contract tool for GWI was discarded by the Government at the time. 81. Targets should be based on realistic expectations rather than aspirations: The targets set at the beginning of the Project mirrored the Management Contract and GWI license obligations which had been approved fairly recently and that had been developed based on assumptions on what, through the involvement of a private contractor, was thought to be possible. This resulted in institutional, financial and non-revenue water reduction targets that ultimately were overstated when considered the technical and operational reality on the ground and the structural overarching institutional obstacles. The indicators and goals of similar projects can benefit from a more realistic assessment of the impact of the level of maturity of a water company in reaching financial and institutional development targets. For non-revenue water reduction, there are significant technical and administrative challenges to undertake a program of leakage reduction; installation, operation and maintenance of meters; and improved billing and 19 collection. Thus targets should realistically reflect the context and cultures of a particular country, the condition of its infrastructure and administrative capabilities of the water utility. 82. Continuity and quality of human resources in Guyana should be addressed as part of design in projects in Guyana: Implementation was affected by challenges in recruiting and maintaining quality staff experienced by GWI during the Project hampered the continuity in the Project team and management. As this challenge in the medium term may be expected in Guyana more generally, in future projects in the country, a system should be in place to ensure institutional memory is maintained and succession plans or backup arrangements are in place for key positions vacated. 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies The comments are provided in Annex 5 and were considered in the finalization of the document. (b) Cofinanciers The comments are provided in Annex 6 and were considered in the finalization of the document. (c) Other partners and stakeholders (e.g. NGOs/private sector/civil society) The comments are provided in Annex 6 and were considered in the finalization of the document. 20 Annex 1. Project Costs and Financing (a) Project Cost by Component (in USD Million equivalent) Actual/Latest Appraisal Estimate Percentage of Components Estimate (USD (USD millions) Appraisal millions) Component 1: Water Supply 9.10 9.10 100 Infrastructure Component 2: Design, Project 0.80 0.80 100 Management, and Supervision Component 3: Institutional 0.30 0.30 100 Strengthening Component Component 4: Emergency 1.10 1.10 100 Component Total Baseline Cost 11.30 11.30 100 Physical Contingencies - - - Price Contingencies - - - Total Project Costs 11.30 11.30 100 Total Financing Required 11.30 11.30 100 (b) Financing Appraisal Actual/Latest Type of Estimate Estimate Percentage of Source of Funds Cofinancing (USD (USD Appraisal millions) millions) Borrower Government 1.10 1.10 100 IDA Grant 11.30 11.30 100 21 Annex 2. Outputs by Component Indicator Baseline Target Actual Project Development Objective Indicators Provide water that meets 0 48,000 50,901 people national quality standards benefitted from the and an acceptable level of interventions with service to approximately improvements in 48,000 beneficiaries quality of service. Intermediate Results Indicators Pressure and continuity of Continuity: 0- Continuity: 20-24 Continuity: water supply services for 12 hours hours 16-24 hours consumers in Project areas Pressure:4.15m Pressure: >7 m Pressure: 5-7 m as an indicator of pressure improved level of service Reduction of non-revenue 60-65% 25% Data not available at water in Project areas level project area (53% for entire system) Number of water utilities 0 1 1 that the Project is supporting Piped household water 0 12,000 11,718 connections that are benefiting from rehabilitation works undertaken by the Project Achieve universal 0 100% 100% metering in the Project area. Strengthen design and NA ADT is adequately Completed for Project management staffed to perform CIPD (unit that capacity within GWIs its functions replaced ADT unit). Asset Development Team Improve customer NA Compliance with Response to satisfaction as a result of MC targets for days complaints has operational improvements. to respond to improved complaints. significantly. Strengthen management, NA Development and Completed with technical and monitoring execution of a corresponding capacity within GWI. training program for improvements in GWI staff and technical capacity Board and monitoring. 22 Annex 3. Economic and Financial Analysis This section takes as basis the financial analysis presented in the PAD, which considered the proposed investment under several possible extremes of scenario as seen at the time of the PAD. A review of the assumptions and other PAD data was carried out in the light of the scenarios considered at appraisal and the actual scenario that was realized at the time of project closure. ASSUMPTIONS Population: Data from the 2002 census was used in the PAD, with projections to 2024 which were 117.8% of 2002 figures. No new census data is available, but it is known that trends for the 3 Regions of the project are for continued growth, and for the purposes of this report, current populations are estimated as 108% of 2002 census data. The new plants serve sections of 3 out of the 5 operating Divisions of GWI. Total current population served is estimated at 51,000, 23% of the total population of the 3 Regions/Divisions. Average household size: This was estimated as the total population divided by the number of recorded customers of GW1. GWI has 173,850 recorded customers (March 2011 mgt. report). It is suggested by staff that some of these are still „ghost‟ accounts and the real figure may be taken as 170,000. The 2011 population of the coastal strip of Guyana is estimated based on the assumptions above as 725,000. Average household size (persons served per GWI connection is estimated at 725,000/170,000 = Division 1 Division 2 Division 4 Total (Region 2) (Region 3) (Region 5) Estimated 2010 population 52,238 110,073 56,506 218,817 Beneficiary population 15,888 18,978 12,265 47,131 2002 Estimated 2010 beneficiary 17,159 20,496 13,246 50,901 population (%) (32.8%) (18.6%) (23.4%) (23.3%) Estimated number of 2010 beneficiary connections 4,028 4,811 3,109 11,718 (hhlds). NB all are metered. 23 Item PAD assumption End of Project Investment Include final designs, project preparation, physical Actual costs US$ Million Costs contingencies and supervision. “With� and (ref FMR) “without� project scenarios included connection PPF 0.244 costs generated from population growth, but only Works 9.306 the “with� project scenario included the connection Consultants 0.913 costs generated from larger coverage, when (design/Supervision) applicable. The “with� project scenario also TOTAL 10.46 included all project costs plus replacement costs of meters and electromechanical equipment. Operation Includes the cost of labor, chemicals, power, and 2010 Operational costs – labor, and all administrative costs. O&M costs for the chemicals, power, admin. were maintenance “without� project scenario were based on current G$3.29bn ($16.4M) (O&M): unit costs. O&M costs for the “with� project scenario included all the operating costs generated Water produced across all GWI was with the Project and efficiency gains that were approx. 110Mm3 expected to be achieved. Labor costs were calculated as the number o f employees per 1,000 Overall unit cost $0.15/m3 water connections (labor productivity) times the number of connections times the average cost per Unit costs of treatment at works in employee. Chemical and energy costs were client tests: calculated based on projected volume of water Lima G$11.34 produced and unit costs. Other costs were ($0.057) calculated as percentage of direct costs. Vergenoegen G$12.12 ($0.061) Cotton Tree G$12.61 ($0.63) Opportunity Assumed equal to zero. Assumed equal to zero. costs of raw water Per capita Calculated as the weighted average of the current Monitoring and sampling done since water consumption of metered and non-metered 2005 suggest much higher rates of consumption households. GWI estimated the consumption for usage, especially in Divisions 2 and each division in the “without� and “with� project 4, where it is estimated to be in the situation. In Division 1 the consumption per capita range 225 – 250 litres/cap/day per day was 59 liters in the “without� project, and 120 l/cap/d in the “with� project situation. In Division 2 and 4 the consumption was estimated as 120 l/cap/day in both situations. Water billed Calculated as the volume of water billed times the Non-metered customers tariff is for metered tariffs. For non-metered customers it i s calculated G$8,900/yr = G$741 ($3.70) customers as number of connections times the flat fee charged to these customers. Current tariff for metered Estimated Project area Metered customers i s G$ 37 (US$ 0.20/m3), and for non- Billings 2010 metered customers the monthly fixed bill i s G$428 Division 1 67,002,000 (US$2.39). ($335,000) Division 2 86,997,466 ($434,987) Division 3 67,709,950 ($338,549) Total ($1,108,536) Collected Billed revenue times billing rate, times collection Billing Rate >90% Revenue of billing rate. The targets to be reached in each (estimated) subproject are: billing rate of at least 90% (up from Collection rate 0.75 current 60% in Division 1, and 68% in Division 4) and collection of billing rate 90% (up from 85% in Collected revenue Division 1, 35% in Division 2, and 73% in Division Division 1 24 4). Division 2 Division 3 Non-revenue Defined as volume of water not billed over volume NRW was estimated at 75% in 2005 water of water supplied is projected according to targets Halcrow review. TAP target for on the Project. NRW was projected to reach 25% in 2011 was 50%. Estimated as 53% in all areas of the Project, from current values of 2010. Due to 100% metering, around 59%. distribution system improvements at project areas NRW is very probably 45% or lower, Metering is 100% in project areas. Billings and Collections: While there is data on running costs broken down by Division and by pumping station/treatment plant, the billings and collections are only broken down by Division. For the purposes of this report, comparison is made of data for 2005 and 2010, being the years immediately prior to start of project and the last complete year to date, during which the new plants have been in full operation since about July, and in partial operation during the previous 6 months. Billings and collections have both increased significantly since 2005. For GWI as a whole the data are: Year 2005 (ref. Halcrow 2010 (ref GWI Dec. 2010 Audit) management report) Billings (G$) 1,804,710,625 3,710,748,527 Collection (G$) 1,475,345,198 2,841,801,082 Collection ratio 81.7% 76.6% NB Collection ratios are approximate due to collection lagging behind respective billings, and subject to adjustments. The long term collection ratio has been of the order of 75 – 82 % throughout the last 10 years. Since the beginning of the project there was a 10% increase in tariff for unmetered consumers and a 5% increase for metered consumers, which was implemented in July 2005. The overall actual tariff increase since 2005 has been approximately 8%. The principal reason for the improved figures of both billing and collection is most probably the introduction of a new billing system in 2007. The increase in numbers of metered accounts from about 25% to the present figure of 39% has also been a significant factor. 25 Division 1 Division 2 Division 4 No. „active‟ Metered Accounts 7,038 7,232 4.811 (Dec 2010 Mgt. Report draft) Collection 2010 213,445,844 292,945,984 189,550,197 2010 Metered a/c billings 131,152,507 139,671,443 135,578,995 (Dec 2010 Mgt Report) Annual Revenue/metered a/c 17,309 20,192 40,338 Estimate of Metered accounts in 4,028 4,811 3,109 project area Project area Population/4.26 Estimated Revenue G$ 67,002,000 97,143,712 125,410,842 Revenue/metered a/c x no. ($335,000) ($485,718) ($627,054) accts. NB1. Due to removal of meters by some customers, 2011 numbers are in some cases lower than in 2010, eg Division 4 has seen a drop in metered accounts of 1,328 in the past 12 months. NB2It is not currently possible to disaggregate collections from metered and unmetered customers. The range of revenue per metered account considers the fact that many Division 1 customers make significant use of rain water harvesting to reduce their GWI water consumption and charges, whereas in Division 4 there is (currently) considerable use made of GWI water for small scale farming. This also is the reason why many meters have been removed by customers. Financial Analysis: The Financial viability of each of the projects was appraised by measuring its flows of costs and benefits in market prices, which focus the evaluation on the subgroup of the population directly affected by the Project. Benefits are assumed equal to the estimated flow of financial revenues. That is, financial benefits are defined as equal to tariffs times estimated consumption, times collection rate. The PAD considered 2 extreme scenarios and one „base‟ scenario which was expected to be close to the end of project scenario. A. No tariff change and no grant for investment. B. No tariff change and 100% grant for investments. C. 47% tariff increase and 100% grant for investments (base case) Estimated Project Returns at Appraisal Scenario Estimated NPV at appraisal A. -US$6.28 million B. US$2.07 million C. -US$5.12 million The end of project scenario is much closer to scenario B than to the base case, as the tariff has increased by only a small amount (5% for metered customers, 10% for unmetered customers). 26 The annual financial benefit derived from the customers served by the 3 plants can be estimated in several ways, with results as under based on 2010 performance, based on the actual revenue collections from metered customers in the project service areas of each Division. Division 1 G$67,002,000 $335,000 Division 2 G$97,143,712 $485,718 Division 4 G$125,410,842 $627,054 Total $1,447,772 3 Operating costs are $0.15/m , and current consumption is averaged at 235l/c/d by 50,900 persons, so annual costs of supply to the target population is $654,892 per year. Net revenues of $792,880 per year are generated. Considering the project investments as a grant (100% grant financed investments using the IDA grant) with a project life of 30 years and depreciation of 3.5% (based on values for similar water treatment investments) it had a positive net present value. However, when considered as an equity investment (no grant financing), the return on the investment is lower than the opportunity cost of capital, resulting in a negative net present value and an internal rate of return of 2%. Project Returns at End of Project Indicator value NPV (100% grant) US$4.36 million NPV (no grant) -US$5.45 million IRR (no grant) 2% 27 Annex 4. Bank Lending and Implementation Support/Supervision Processes Task Team members Responsibility/ Names Title Unit Specialty Lending Task Team Patricia Lopez Martinez Senior Infrastructure Specialist LCSFW Leader TaimurSamad Urban Specialist LCSFU Bill Peacock Engineer (consultant) Project Engineer Financial Emmanuel Njomo Financial Management Specialist LCOAA Management Guido Paolucci Procurement Specialist LCOPR Procurement Judith Morroy Procurement Analyst LCOPR Procurement Patricia E. Macgowan Sr. Procurement Specialist LCOPR Procurement Catherine Abreu Rojas Procurement Analyst LCOPR Procurement Enzo de Laurentis Sr. Procurement Specialist LCOPR Procurement Alejandro Deeb Safeguards Specialist LCSEN Safeguards Judith Lisasnky Social Specialst LCSEO Social issues FabiolaAltimari Legal Specialist LEGLA Lawyer Edward Daoud Senior Disbursement Officer LOAG1 Disbursement HilarionBruneau Senior Disbursement Officer LOAG1 Disbursement Economic and Financial Economic and Luz Gonzalez Cons Specialist Financial analysis Lead Water and Sanitation Alain Locussol SASEI Peer Reviewer Specialist Judy Baker Senior Economist TUDDR Peer Reviewer Lead Water and Sanitation Water and Ventura Bengoechea LCSFW Specialist Sanitation John Stein Sector Manager LCSFW Sector Manager Charles Feinstein Sector Leader LCSFP Sector Leader Supervision/ICR Patricia Lopez Senior Infrastructure Specialist LCSUW Task Team Leader Patricia H. de Baquero Senior Procurement Specialist MNAPR Procurement Greg J. Browder Lead Water and Sanitation Spec LCSUW Technical MNSW Philippe Huc Sr Water & Sanitation Spec. Technical A Financial SamanKarunaratne Finance Analyst CTRDM Management Financial Emmanuel N. Njomo Consultant AFTFM Management 28 Technical/project Navid Rahimi Junior Professional Associate LCSUW management Luis Tineo Senior Infrastructure Specialist GPOBA Technical Evelyn Villatoro Senior Procurement Specialist EAPPR Procurement Project Tamara Amoroso Whalen Operations Analyst LCCGY Management Yao Wottor Senior Procurement Specialist LCSPT Procurement Senior Urban Environment John Morton LCSUW ICR Specialist Valerie Santos Senior Urban Specialist LCSUW ICR Chiropriya Dasgupta Consultant LCSUW ICR Technical/ Peter Smith Engineer (Consultant) Institutional (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) USD Thousands Stage of Project Cycle No. of staff weeks (including travel and consultant costs) Lending FY04 83.11 FY05 151.53 FY06 15.87 FY07 0.00 FY08 0.00 Total: 250.51 Supervision/ICR FY04 0.00 FY05 0.00 FY06 97.67 FY07 76.27 FY08 94.09 Total: 268.03 29 Annex 5. Summary of Borrower's ICR and/or Comments on Draft ICR 1. A draft ICR was shared with GWI and Permanent Secretary of Ministry of Housing and Water and discussed with them in Georgetown on September 7, 2011. Further comments were received from GWI in writing. The main comments received are the following:  In GWI‟s view, implementation delays, particularly early on in Project implementation, were attributed to extensive periods in the procurement processes, termination of some contracts and retendering. In addition, there were periods when construction materials were scarce or unavailable locally, which resulted in delay in construction completion;  The project was initiated very well by the respective parties and there are some lessons learnt that have benefitted GWI which are as follow. (i) Close coordination with the Bank, GOG, GWI and the consultants resulted in the successful completion of the Project (ii) It was a good approach for the GWI to employ individual consultants under the Project, which resulted in significant cost savings. In addition, this approach resulted in strengthening of GWI Institutional capacity, which is presently benefitting the organization. Presently, there are several persons at GWI that received training that are working in senior management positions within the organization.  In GWI‟s view, lack of financial sustainability at GWI should be attributed to the expansion in GWI‟s service areas and the improved service provided which has resulted in an increase in operating costs; Increase in electricity costs and machinery usage to meet demands has also contributed to greater operating costs. It is acknowledged that collection rates need to be improved and NRW needs to be reduced;  GWI acknowledges that the targets set out in the Management Contract and specifically for this Project were ambitious. The unanticipated demands due to new housing schemes played a major role in not meeting the expected operational targets;  The Government recently released the progress report on the MDG goals. Water related targets have not just been met but have also played a critical role towards the Health and Education goals, something which should be considered in the discussion and rating of the PDO related to efficiency;  GWI has anticipated the risks to maintaining current levels of service and has a system in place and commitment to improving levels of service;  GWI acknowledged the benefits received from having an external consultant engaged by the Bank to help supervise works and operations in the later part of the project. The training provided by the consultant played an important role in institutional strengthening and capacity building. Thus the limited formal presence of Bank supervision during the later period of the Project was not considered to be inadequate by GWI; 30  Tariff reviews should be initiated by GWI and approved by PUC and should not be considered a GoG shortcoming;  Collaboration between consultants, GoG, GWI, and donors led to contractual consultants being employed full time at GWI which helped build capacity of the teams.  GWI acknowledged the Project contribution in building capacity and expertise to produce its infrastructure designs in house which also helps in cost reduction. GWI Self-Assessment Data of the Turnaround Plan Indicators, December 2010 2008 2009 2010 Measured Description Target Actual Target Actual Target Actual Parameter % treated water samples with residual 80% 24% 80% 80% 80% 82% chlorine % treated water Water Quality samples negative for 100% 88% 100% 85% 100% 93% coliform % of required samples 90% 85% 90% 93% 95% 93% collected Number of accounts Accounts physically verified under 155,891 152,497 NRW % accounts metered 25% 28.5% 40.7% 34.5% 51.4% 35.0% Number of Metered Customers 47,113 67,553 58,033 86,780 59,593 Un-metered accounts Billings 100 77.51% 100 72.50% 100% 83.0% billed Volumetric bills issued 60% 41% 60% 27% 60% N/A (based on readings) Collections (Monthly Collections 167M 135.5 256M 184.9 228.1 236.0 Avg.) Large leaks Leak repairs repaired/Large leaks 75.00% 42.38% 85.0% 96.9% 90% 97.8% reported Queries per 1000 Queries/problem customers (only 0.25 0.26 0.25 0.20 0.25 2.12 resolution OP3,OP4,OP5 queries from Hi Affinity) Energy Consumed / Electricity Use 0.306 0.344 0.300 0.347 Water Produced Current Ratio [current Liquidity assets divided by 2 3.7 2 2.8 2 1.9 current liabilities] Accounts payable GYD Activity (excluding GPL & 200 267 200 419 200 909 taxes) Number of Employees Human 71 64 - 68 Departed Resources Number of Employees 65 92 23 59 Recruited 31 Annex 6. Comments of Co financiers and Other Partners/Stakeholders A draft ICR was shared with representatives of JICA, IDB, DfiD and the European Commission and presented in a meeting in Georgetown on September 6, 2011. The following comments were received.  IDB has further engagements in the water sector in Guyana and is concerned about the absence of donor coordination going ahead: As the donor involvement is decreasing in this sector, the donor leverage is also decreasing which is proving to be a challenge for existing donors in Guyana.IDB has two water sector infrastructure projects in the pipeline and TA for corporate governance and is concerned about the lack of involvement of multiple donors with GWI going ahead since it proved to be critical to the success of this Project and other donor funded projects.  Further Bank engagement with GWI: IDB plans to support climate change related projects at GWI and would like the Bank to explore similar projects at GWI since it is related to the Bank‟s CAS for Guyana and also technical assistance, advisory or regional training opportunities for GWI.  GWI needs a new strategic direction since the Turnaround Plan ended in 2010: A key concern to sustainability is the lack of a replacement to the Turnaround plan. IDB is funding the study to develop a strategic plan that hopes to fill this gap.  2011 elections could set back the progress achieved: With the elections being scheduled for later this year, political influence has increased which is limiting GWI and can hamper the progress made on institutional strengthening and financial sustainability.  Financial sustainability and human resource constraints are the two key challenges observed by JICA in the water sector in Guyana: Having supported the construction of two water treatment plants in Guyana, JICA has observed that financial sustainability and high turnover of staff at GWI are challenges that need to be addressed to ensure sustainability of investments. 32 Annex 7. List of Supporting Documents Bank Staff Assessments  World Bank (2005), Project Appraisal Document on a Proposed Grant in the Amount of US $11.3 million to the Republic of Guyana for a Water Sector Consolidation Project  World Bank (to 2011), Implementation Status and Results (ISR) Reports Other  Monitoring and Evaluation of GWI‟s performance measured against the Turnaround Plan Indicators, World Bank and IDB Benchmarks (2010)  GWI Turnaround Plan (2007) 33 IBRD 34109 60°W 58°W GUYANA 56°W WATER SECTOR ATLANTIC OCEAN CONSOLIDATION Morawhanna PROJECT Mabaruma MAIN PROJECT SITES a r ak u 8°N Am 8°N SELECTED CITIES AND TOWNS POMEROON- R. B . D E WA B A R I M A - WA I N I SUPENAAM REGION CAPITALS Port Port Kaituma V E N E Z U E LA ain i NATIONAL CAPITAL Matthews W ESSEQUIBO Ridge RIVERS Charity SLANDS- Anna Regina WEST MAIN ROADS Region 2 Subproject DEMERARA RAILROADS REGION BOUNDARIES Cuy u GEORGETOWN n i Parika INTERNATIONAL BOUNDARIES Region 3 Subproject Vreed Vreed Paradise en Hoop Arimu Mine DEMERARA- Bartica Bartica CUYUNI-MAZARUNI Fort Wellington MAHAICA Rosignol Peters Mine Region 5 Subproject New Amsterdam M MAHAICA-BERBICE er er um ni 6°N e M a zaru Rockstone Linden Mara 6°N Mt Corriverton Corriverton s. Imbaimadai Demer ara Issano equibo Ituni Ess Paka Takama Takama Mt. Roraima rai ma SURIN AM E (2772 m) M UPPER Mahdia DEMERARA- o un tlyne BERBICE uran ta Co in P O TA R O - n n s Orinduik S I PA R U N I BRAZIL Kurupukari TOWNS INCLUDED IN THE SUBPROJECT GUYANA REGION 2 REGION 3 Surama Walton Hall (cont.) 4°N Devonshire Castle Bortenstein Apoteri Hampton Court Sparta Good Hope Be Windsor Castle Mora rb Cape Batave Salem i ice i Esse Es Es Sparta Naamryck UPPER quib Fear Not Look Out u u o Danielstown Grove Coffee Grove Hyde Park Lethem TA K U T U - C C o ur a C Lima Parika UPPER Ka N ew La Belle Alliance Hydronie a a uk ESSEQUIBO ntlyne n n n tly tly w w Richmond Bushy Park u M Henrietta Orangestein ts. Anna Regina Le Destin Dadanawa Bush Lot Farm Reliance Ruby Raad Mainstay Good Hope Oronoquekamp Land of Plenty Greenwich Park Three Friends Barnwell EAST Aberdeen Columbia Philadelphia Vergenoegen Isherton Isherton BERBICE- Affiance Tuschen de Vrieden CORENTYNE Taymouth Manor Zeelugt Alliance De Kinderen 2°N 2°N Westfield Mocha REGION 5 Isherton Isherton Queenstown Inverness Ka Degeraad Willemstad mo Bel Air a M 0 20 40 60 80 100 Kilometers REGION 3 ountains Zee Lust St. Lawrence or Big Sands Edderton 0 20 40 60 Miles Hubu Mon Choisi Unity Zee Zight This map was produced by the Map Design Unit of The World Bank. Johanna Cornelia or Kakatiri Cotton Tree The boundaries, colors, denominations and any other information Twee Gebroeders Blake D'Edward Rosignol BRA ZIL shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any Roden Rust Shieldstown 60°W 58°W endorsement or acceptance of such boundaries. 56°W JUNE 2005