Document of The World Bank Report No: ICR1780 IMPLEMENTATION COMPLETION AND RESULTS REPORT (IBRD-47830) ON A LOAN IN THE AMOUNT OF US$224 MILLION TO THE ISLAMIC REPUBLIC OF IRAN FOR THE NORTHERN CITIES WATER AND SANITATION PROJECT April 25, 2012 Sustainable Development Department Middle East and North Africa Region CURRENCY EQUIVALENTS (Exchange Rate Effective 00000000) Currency Unit = IRR IRR10,000 = US$0.882 US$1.00 = IRR11.335 FISCAL YEAR March 21 -- March 20 ABBREVIATIONS AND ACRONYMS Japan International Cooperation APL Adaptable Program Loan JICA Agency AM Aide-Memoire LAP Land Acquisition Plan BNR Biological Nutrient Removal M&E Monitoring and Evaluation 5 Day Biochemical Oxygen BOD5 Demand MOE Ministry of Energy Management and Planning CAP Compliance Action Plans MPO Organization CAS Country Assistance Strategy MTR Midterm Review Mazandaran Water and Wastewater CR Collection Ratio MWWC Company DO Dissolved Oxygen NCs Neighborhood Committees DOE Department of Environment NEC National Economic Council Environmental Impact National Water and Wastewater EIA Assessment NWWEC Engineering Co. Economic Internal Rate of EIRR Return O&M Operation and Maintenance Environmental Management EMP Plan PAD Project Appraisal Document ERR Economic Rate of Return PDO Project Development Objective ESO Environment & Safety Officer RAP Resettlement Action Plan EU European Union SA Special Account Food and Agriculture FAO Organization TA Technical Assistance FC Financial Controller TSU Technical Support Unit FDI Foreign Direct Investment UFW Unaccounted For Water Financial Internal Rate of FIRR Return WBI World Bank Institute FMR Financial Monitoring Report WHO World Health Organization FO Financial Officer WR Working Ratio FYDP Five Year Development Plan WS Water Supply GDP Gross Domestic Product WSS Water Supply and Sanitation GOI Government of Iran WTP Willingness to Pay Guilan Water and Wastewater GWWC Company WW Wastewater International Competitive ICB Bidding WWCs Water and Wastewater Companies Implementation Completion ICR Report WWCT Wastewater Collection and Treatment IR Iranian Rials WWMP Wastewater Management Plan ISR Implementation Status Report WWTP Wastewater Treatment Plant Vice President: Inger Andersen Country Director: Hedi Larbi Sector Manager: Francis Ato Brown Project Team Leader: Abdulhamid Azad ICR Team Leader: Abdulhamid Azad ISLAMIC REPUBLIC OF IRAN THE NORTHERN CITIES WATER SUPPLY AND SANITATION PROJECT CONTENTS Data Sheet A. Basic Information B. Key Dates C. Ratings Summary D. Sector and Theme Codes E. Bank Staff F. Results Framework Analysis G. Ratings of Project Performance in ISRs H. Restructuring I. Disbursement Graph 1. Project Context, Development Objectives and Design ................................................... 1 2. Key Factors Affecting Implementation and Outcomes ................................................... 7 3. Assessment of Outcomes............................................................................................... 16 4. Assessment of Risk to Development Outcome ............................................................. 20 5. Assessment of Bank and Borrower Performance .......................................................... 20 6. Lessons Learned ............................................................................................................ 23 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners ............... 24 Annex 1. Project Costs and Financing ............................................................................ 25 Annex 2. Outputs by Component .................................................................................... 27 Annex 3. Economic and Financial Analysis ................................................................... 32 Annex 4. Bank Lending and Implementation Support/Supervision Processes ............... 34 Annex 5. Beneficiary Survey Results.............................................................................. 35 Annex 6. Stakeholder Workshop Report and Results ..................................................... 36 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR........................ 37 Annex 8. Comments of Cofinanciers and Other Partners/Stakeholders ......................... 59 Annex 9. List of Supporting Documents ......................................................................... 60 Annex 10. Summary of Health Studies ............................................................................. 61 Annex 11. Summary of Sludge Study ............................................................................... 62 MAP IBRD 33958 A. Basic Information IR-NORTHERN CITIES WATER Iran, Islamic Republic Country: Project Name: SUPPLY & of SANITATION PROJECT Project ID: P076884 L/C/TF Number(s): IBRD-47830 ICR Date: 04/25/2012 ICR Type: Core ICR Lending Instrument: SIL Borrower: GOVERNMENT Original Total USD 224.00M Disbursed Amount: USD 196.69M Commitment: Revised Amount: USD 196.69M Environmental Category: A Implementing Agencies: NWWEC Mazandaran Water and Wastewater Co. Gilan Water and Wastewater Co. Cofinanciers and Other External Partners: B. Key Dates Revised / Actual Process Date Process Original Date Date(s) Concept Review: 11/23/2004 Effectiveness: 10/25/2005 10/25/2005 Appraisal: 03/14/2005 Restructuring(s): Approval: 05/26/2005 Mid-term Review: 10/20/2008 12/16/2008 Closing: 12/31/2010 12/31/2010 C. Ratings Summary C.1 Performance Rating by ICR Outcomes: Moderately Unsatisfactory Risk to Development Outcome: Substantial Bank Performance: Moderately Unsatisfactory Borrower Performance: Moderately Satisfactory C.2 Detailed Ratings of Bank and Borrower Performance (by ICR) Bank Ratings Borrower Ratings Quality at Entry: Moderately Satisfactory Government: Moderately Satisfactory Moderately Implementing Quality of Supervision: Moderately Satisfactory Unsatisfactory Agency/Agencies: Overall Bank Moderately Overall Borrower Moderately Satisfactory i Performance: Unsatisfactory Performance: C.3 Quality at Entry and Implementation Performance Indicators Implementation QAG Assessments Indicators Rating Performance (if any) Potential Problem Project Quality at Entry No None at any time (Yes/No): (QEA): Problem Project at any Quality of Yes None time (Yes/No): Supervision (QSA): DO rating before Moderately Closing/Inactive status: Unsatisfactory D. Sector and Theme Codes Original Actual Sector Code (as % of total Bank financing) Sewerage 70 70 Water supply 30 30 Theme Code (as % of total Bank financing) Other human development 13 13 Other urban development 24 24 Pollution management and environmental health 25 25 Urban services and housing for the poor 25 25 Water resource management 13 13 E. Bank Staff Positions At ICR At Approval Vice President: Inger Andersen Christiaan J. Poortman Country Director: Hedi Larbi Joseph P. Saba Sector Manager: Francis Ato Brown David J. Steel Project Team Leader: Abdulhamid Azad Mohammed Benouahi ICR Team Leader: Abdulhamid Azad ICR Primary Author: Shaheena Nisar Abdulhamid Azad F. Results Framework Analysis Project Development Objectives (from Project Appraisal Document) The main project development objectives are to: ii a) Enhance the quality of life in the four northern cities of Rasht, Anzali, Sari and Babol by: i. improving the reliability of the water supply systems through rehabilitation and extension of the water supply networks; ii. improving the health and urban environmental conditions by providing wastewater collection services and treatment facilities; and iii. contributing to the environmental protection of the natural resources of the provinces (especially the Anzali Lagoon, an internationally recognized wetland). b) To improve the operational efficiency and financial sustainability of the Water and Wastewater Companies (WWCs). Revised Project Development Objectives (as approved by original approving authority) The objectives were not revised (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 Indicator 1 : Working Ratio – WR Value Guilan: 1.15 Guilan: 0.75 Guilan: 1.98 quantitative or Mazandaran: 0.97 Mazandaran: 0.75 Mazandaran: 1.6 Qualitative) Date achieved 06/30/2004 12/31/2010 12/31/2010 Comments The Working Ratios have deteriorated because the expected tariff increase did (incl. % not materialize. Considering the recent changes in tariffs it is predicted that the achievement) working ratio will improve in the coming years. Indicator 2 : Unaccounted for Water – UFW (%) Value Guilan: 35% Guilan: 27% Guilan: 21 to 27% quantitative or Mazandaran: 33% Mazandaran: 27% Mazandaran: 28% Qualitative) Date achieved 03/21/2005 12/31/2010 12/31/2010 Comments In Rasht and Anzali the UFW rate are 27% and 21% respectively. Sari and (incl. % Babol the UFW is estimated to be 28%. It is expected that once all the works are achievement) completed the UFW rate indicator will be lower. Indicator 3 : Incidence of Water Borne Diseases Rasht: 10%(2010) Reduction in Value Anzali: 12% (2010) incidence of quantitative or Not available waterborne Qualitative) Sari: 8% (2009) diseases Babol: 10% (2009) Date achieved 03/21/2005 12/31/2010 12/31/2010 Based on a heath study conducted in 2009/2010. See the summary in annex 10. Comments According the EMP data in all four cities drinking water quality meets national (incl. % and WHO standards. achievement) Indicator 4 : Water Quality of Receiving Bodies iii Quality of receiving Value Improvement in water bodies has quantitative or Not available water quality of been slightly Qualitative) receiving bodies. improved Date achieved 03/21/2005 12/31/2010 12/31/2010 Continued monitoring of water quality parameters was done over the project's Comments lifetime. Because the WWTPs are not yet fully operational and sewerage (incl. % networks are not yet fully connected, water quality of water bodies has only achievement) slightly improved. See secti (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 Wastewater in Rasht, Anzali, Sari and Babol Indicator 1 : No. of wastewater connections (% of pop. Coverage) Sari: +16,000 Sari=13,000 (30%); (24.5%) Sari and Babol =0 Babol: +16,300 Babol=12,000 Value (25%) (18.4%) (quantitative Rasht traditional 84,717 Mazandaran = or Qualitative) Anzali Traditional 1,3801 Rasht: +70,400 25,000 Rasht= (40%); 20,000 (11%) Anzali: Anzali: 27,000 +27,000(65%); (65%). Date achieved 04/15/2005 12/31/2010 12/31/2010 The pumping stations and WWTPs of Sari and Babol are near completion. The Comments connections at Rasht and Anzali are partial. In Anzali about 10 percent of the (incl. % western area has been connected to the WWTP through traditional house achievement) connections. Indicator 2 : % of wastewater treated Babol: 14% Babol: 45% Value Sari: 35%, Sari: 14.8% (quantitative Zero of all cities Anzali: 65%; or Qualitative) Rasht: 45%, Anzali: 10% Rasht: 0% Date achieved 04/15/2005 12/31/2010 12/31/2010 Comments Treatment plants for Rasht and Sari are being completed and the ones for Anzali (incl. % and Babol have started to take in wastewater. The inflow at Babol WWTP is achievement) currently 50 liters per second and in Sari is 40 l/s. The inflow at Anzali is 23 l/s. Water Supply in Rasht, Anzali, Sari and Babol Indicator 3 : Increase in No. of water connections Value Rasht: 85,680 (>90%); Rasht: +28,950 Guilan: (quantitative Anzali: 18,100 (100%); Rasht: 16,449 or Qualitative) (>90%); Anzali: +7,690 (97.10%) iv (100%); Anzali: 4,027(95%) Sari: 40,000 (100%); households Babol: 32,000 (100%) Sari: +5,000 (100%); Babol: Mazandaran: +4,000 (100%) Sari:7,500 (100%) Babol:6,500 (100%) Date achieved 04/15/2005 12/31/2010 12/31/2010 Comments (incl. % achievement) Indicator 4 : Length of water pipes rehabilitated (km) Rasht: 460 km Anzali: 113 km Babol: 40 km Rasht: 440 km; Value Sari: 50 km Anzali: 95 km; (quantitative Zero for all cities 230 Sari: 50 km; or Qualitative) liters/person/day Babol: 40 km average from surface and ground water resources Date achieved 04/15/2005 12/31/2010 12/31/2010 In addition to: Rasht: 219 km allowing for 55,027 new connections Comments Anzali 98 km allowing for 8,500 new connections (incl. % Babol: 157 km allowing for 8,000 new connections achievement) Sari: 134 km allowing for 10,000 new connections G. Ratings of Project Performance in ISRs Actual Date ISR No. DO IP Disbursements Archived (USD millions) 1 06/30/2005 Satisfactory Satisfactory 0.00 2 11/04/2005 Satisfactory Satisfactory 1.12 3 05/30/2006 Satisfactory Satisfactory 5.12 4 11/03/2006 Satisfactory Satisfactory 9.90 5 06/28/2007 Satisfactory Satisfactory 31.38 6 12/05/2007 Satisfactory Satisfactory 48.17 7 06/09/2008 Satisfactory Satisfactory 73.51 8 07/31/2008 Satisfactory Satisfactory 75.97 9 05/21/2009 Moderately Satisfactory Moderately Satisfactory 104.51 Moderately Moderately 10 10/17/2009 115.17 Unsatisfactory Unsatisfactory Moderately 11 06/29/2010 Moderately Satisfactory 156.31 Unsatisfactory Moderately Moderately 12 06/15/2011 169.93 Unsatisfactory Unsatisfactory v H. Restructuring (if any) Not Applicable I. Disbursement Profile vi 1. Project Context, Development Objectives and Design 1.1 Context at Appraisal Main Sector Issues Identified at Appraisal The Bank‘s engagement with the water and sanitation sector in Iran started with the Tehran Drainage Project in the early 1990s. At appraisal (2005), 98% of the urban population had access to water, but the system suffered from inefficient water use and high water losses. Unaccounted-for water (UFW) averaged 35% nationally. Rapid urbanization (2.8% per year) and low tariff rates resulted in a consumption that was 70% higher than international standards. In contrast, most Iranian cities lacked sewerage systems. Antiquated urban household practices of sewage disposal and untreated waste water dumping into waterways impacted agricultural land and lagoons, causing major public health risks and environmental hazards. Sector Issues in Guilan Province The two cities in Guilan Province, Rasht and Anzali, both located about 320 km to the north of Tehran, have been grown rapidly. At appraisal, 85% of households in Rasht and Anzali were connected to the water distribution network. Rasht‘s aggregate demand at 124,000 m3 per day was expected to double in about 25 years due to increased urbanization. Anzali‘s aggregate demand at 27,000 m3 per day was also expected to more than double in 25 years. UFW in Guilan province was estimated at 35%. Chemical, physical and bacteriological analyses, conducted at various points showed that drinking water supply quality complied with national and WHO standards. One of the sector concerns was the lack of wastewater collection and treatment networks in the face of a growing population with a resulting increasing discharge of wastewater into the natural water bodies. Where groundwater level was high, the risk of groundwater contamination and waterborne infectious diseases was significant. In Rasht, discharge of raw wastewater had been severely polluting the Zarjoob and Goharood rivers which flow into the Anzali lagoon. Pollution was highest during low summer flows when the rivers were transformed into sewers with Biological Oxygen Demand (BOD5) levels in both rivers up to 30 mg/l. Dissolved Oxygen (DO) levels measured were as low as 10 mg/l. The Government had devised a wastewater management plan for Rasht such that the wastewater generated in the three drainage zones of the city (western, eastern, and central) would be collected and conveyed by gravity to a single wastewater treatment plant located 4 km to the north-east of the city. At appraisal, the wastewater collection system in Rasht was under construction, with priority given to the central drainage area which had the highest population density. In Anzali 70% of the population was connected to one waste water collection system. The combined wastewater and storm drainage collection network discharged into both the Anzali lagoon and into the Caspian Sea, through large sewer outfalls. There was a need to install separate wastewater treatment plants for each 1 drainage zone in Anzali whereby the effluent loads would be given secondary treatment since the discharge of all treatment plants would eventually reach the sensitive water body of the Anzali lagoon. The lagoon was (and is) the most prominent environmental feature in the project area and is listed as a ‗wetland of international importance‘ under the 1971 Ramsar Convention due to its importance as a natural wetland characteristic of the southern Caspian lowlands. It supports an extremely diverse wetland flora and fauna. Sector Issues in Mazandaran Province Sari, the capital city of the Mazandaran Province, and Babol, the second largest city, are both located to the north of Tehran and attract some 10 million tourists annually. In Sari, the average water demand at 52,000 m3 per day was expected to rise to 97,000 m3 per day by 2029 while that of Babol would rise to more than 78,000 m3 per day from 42,000 m3 per day. Groundwater has always been the major drinking water source and both cities had complete water coverage. The quality of water supplied meets the national water quality standards. The average losses in the systems at appraisal stood at around 32%. The inadequate drainage system in both Sari and Babol had been impacting the living conditions of the people who used percolation pits as a way to dispose of household waste. These pits have generally a 1 to 1.2 m diameter and a depth of 8 to 10 m require frequent cleaning. In Sari, total wastewater volume collected was projected to be 4,861 m3/day at the end of 2010 rising to 92,840 m3/day by the end of 2029. Due to the high water table and low soil permeability, the use of existing pits for wastewater and sludge was unsatisfactory, creating a high risk of groundwater contamination and promoting the incidence of waterborne infectious diseases. Water quality of the rivers had also deteriorated in the previous years because of industrial discharges and agriculture drainage. The waters of the Tajan river passing through Babol had been used for agriculture. Water quality measurements overall several months reported unsafe levels of coliform bacteria and BOD5. The Babolrood river received a great part of the wastewater of Babol city from open drainage channels that ran along the roads adjacent to the residential areas. Although the four cities had complete water coverage, the distribution network needed rehabilitation to improve efficiency. The network also needed to be extended because of the population increase. The degradation in environmental conditions needed to be arrested with improved sanitation. Lack of adequate wastewater collection systems coupled with rapid growth of population had prompted the Government to designate water supply and sanitation projects as high priority projects. Rationale for Bank assistance The current project was part of the sector investment plan prepared for the Third Five Year Development Plan (1999-2004) and Fourth Five Year Development Plan (2005-2010). Previous Bank assistance to the Iranian water and sanitation sector was fragmented and limited. The April 2001 Interim Strategy (2001-2004) facilitated the dialogue for a renewed and strategic 2 partnership between the Bank and Iran with a view to following a reform agenda for promoting environmentally and socially sustainable development. In 2002, the Bank prepared and disseminated a water and sanitation sector note providing recommendations for: (a) key institutional reforms such as clarification and demarcation of responsibilities of the institutions involved; (b) streamlining of financial policies and implementation of a tariff scheme consistent with cost recovery objectives; (c) optimization of investments and selection of appropriate least- cost technologies; (d) addressing environmental and health concerns; and (e) adopting and implementing integrated water resource management concepts. In 2003, the Government endorsed the note in the context of sector discussions within the Country Assistance Strategy. The Government approached the Bank to bridge the huge financing gap to address the infrastructure deficit and management of the water and sanitation sector. The Bank‘s assistance for water supply, sanitation and hygiene, irrigation and drainage, and water resource management was to be supported by the following four pillars: (i) recognizing that investment without reform is ineffective in reaching the goals of environmentally and socially sustainable development; (ii) people and institutions should be at the center of sustainable water resource development; (iii) delivering of water and other related services should be based on cost recovery principles; and (iv) safeguarding of water resources is a shared responsibility that involves tradeoffs. In view of these principles, investment in the water and sanitation sector was envisaged for six cities in Iran. The Government sought the Bank‘s assistance for both the Ahwaz and Shiraz Project (2004-2009) and for this Northern Cities Water and Sanitation Project (NCWSP), with further investment considered under an adaptable programme loan (APL). 1.2 Original Project Development Objectives (PDO) and Key Indicators The main project development objectives (PDO) were to: 1) Enhance the quality of life in the four northern cities of Rasht, Anzali, Sari and Babol by: (a) improving the reliability of the water supply systems through rehabilitation and extension of the water supply networks; (b) improving the health and urban environmental conditions by providing wastewater collection services and treatment facilities; and (c) contributing to the environmental protection of the natural resources of the provinces (especially the Anzali Lagoon, an internationally recognized wetland); and 2) Improve the operational efficiency and financial sustainability of the Water and Wastewater Companies (WWCs) in Guilan and Mazandaran. To measure project performance, four outcome indicators were chosen: 1. Availability of water in distribution network in each project city 2. Incidence of waterborne diseases in each project city 3. Quality of receiving bodies 3 4. Improved operational efficiency and financial sustainability: a. Unaccounted for water (UFW) b. Working ratio (WR) c. Collection ratio (CR) 1.3 Revised PDO (as approved by original approving authority) and Key Indicators, and reasons/ justification There has been no revision of the project objectives. 1.4 Main Beneficiaries With adequate water resources available in the country, the project would ensure quality and reliability of water supplies to the existing 1.1 million inhabitants and the growing population of the four northern cities Rasht and Anzali in Guilan and Sari and Babol in Mazandaran, Rasht accounting for half of the total population. By providing access to all, the project would particularly benefit poor communities which, otherwise, would have to bear the inconvenience and high cost of water purchases from vendors. Safe public supplies of water would reduce the threat of health hazards for the urban population. Furthermore, by establishing wastewater collection and treatment systems, the project expected to improve the living conditions of 40% of the residents in Rasht, 65% in Anzali, 30% in Sari, and 25% in Babol. The benefits of the improved waste disposal would be pecuniary and non- pecuniary. At the same time all residents would benefit from the overall improvement in environmental conditions brought about by the project collection, treatment and disposal of wastewater and sludge, which would reduce the incidence waterborne disease such as low-lying poor residential areas, where standing pools of sewage created an imminent public health hazard, especially during the summer months. This project therefore was expected to bring direct, tangible, inclusive and sustainable benefits for all, but particularly for the poor by improving dramatically the unacceptable conditions of environmental health and safety. Among other direct beneficiaries would be the tourists to the Anzali lagoon and the Mazandaran province where the ecological conditions were expected to improve with the completion of the project. Farmers would benefit from the availability of treated wastewater for irrigation on their farms. 1.5 Original Components Long-term development plans had been prepared for the extension of the water supply and wastewater collection and treatment systems in Rasht and Anzali (Guilan province), Sari and Babol (Mazandaran province) for the period 2004-2029. These plans were formulated to serve a population of about 1.0, 0.25, 0.4 and 0.3 million, respectively. They were to be implemented in four phases. The current project covered works proposed under Phase 1. The total project current cost was US$343 million. The Bank‘s share of financing was US$224 million. This included support to Guilan and Mazandaran water and wastewater companies. 4 A. Projects in Guilan Province Component 1: Rasht Wastewater Collection & Treatment - US$81.5 million This component aimed to extend and improve Rasht‘s collection network through 70,000 new house connections, construction of approximately 560 km of laterals, interceptors, and trunk mains, and 16 pump/lift stations in addition to collection works already being executed under on- going contracts. The project will also upgrade the wastewater treatment plant under construction with a biological nutrient removal unit, and measures to reduce the risk of discharge of untreated sewage in the event of temporary plant failure. There will also be a study and an investment program for septage management (to address the wastes from households not connected to the wastewater network). Component 2: Rasht Improvement of the Water Supply System (US$50.3 million) This component aimed at improving the service provision in Rasht through regulating the pressure and availability of water in the distribution network, as well as reduction in losses due to leakage. This will be achieved by rehabilitation and extension of some 700 km of primary and secondary distribution piping, additional ground storage (two tanks of 40,000 m3 each, in addition to a new reservoir at Lakan of 30,000 m3), and rehabilitation of two existing elevated storage tanks and associate pumping stations. There will also be a program to improve operational efficiency and reduce unaccounted-for water (including some instrumentation for automation, operation and maintenance equipment). Component 3: Anzali Wastewater Collection & Treatment (US$45.4 million) This component aimed to extend and improve Anzali‘s collection network through: (i) provision of 27,000 new house connections (ii) construction of approximately 250 km of laterals, interceptors, and trunk mains, and (iii) 14 pump/lift stations, in addition to collection works already being executed under on-going contracts. The Anzali wastewater treatment plant under construction will be improved through (i) upgrading it with a biological nutrient removal unit, and (ii) measures to eliminate the risk of discharge of untreated sewage in the event of temporary plant failure. The project was also include the construction of the first module of the Ghazian wastewater treatment plant (12,000 m3/day capacity), and an investment program and associated studies for management of septage from those households that would have not been connected to the wastewater network in the first phase. Component 4: Anzali Improvement of the Water Supply System (US$9.1 million) This component aimed to rehabilitate and extend Anzali‘s water distribution network with: (i) 155 km of primary and secondary distribution network, (ii) a new 30,000 m3 reservoir at Ghazian, and associate pumping stations. There was also be investment program to improve operational efficiency and reduce unaccounted-for water (including instrumentation for automation, operation and maintenance equipment). Component 5: Support to Guilan Water & Wastewater Company (US$ 20.9 million) Under this component the project aimed to provide technical assistance, training and consultant services for institutional development and environmental management plan, Technical Support Unit (TSU), engineering design and construction supervision. 5 B. Projects in Mazandaran Province Component 6: Sari Wastewater Collection & Treatment (US$40.3 million) This component included construction of a wastewater collection and treatment system in Sari through: (i) the provision of 16,000 new house connections, (ii) the construction of approximately 240 km of laterals, interceptors, and trunk mains, (iii) two pumping stations, and (iv) construction of the first module of the Sari wastewater treatment plant (23,200 m3/day). Component 7: Sari Improvement of the Water Supply System (US$4.8 million) This component aimed to extend and rehabilitate Sari‘s distribution network through: (i) replacement of 50 km of existing pipe, (ii) extension of the network with 65 km of pipe, and (iii) addition of 85 km of lateral pipes, and some 5,500 new water meters. The component also includes an investment program and studies to improve operational efficiency and reduce unaccounted-for water (including operation and maintenance equipment). Component 8: Babol Wastewater Collection &Treatment (US$30.3 million) The wastewater component included: (i) the provision of 16,300 new house connections, (ii) the construction of approximately 130 km of laterals, interceptors, and trunk mains, and (iii) six pumping and lift stations. The wastewater treatment plant currently under construction will be improved through the construction of a 4 km outfall main plus the provision of facilities to store wastewater in case of emergencies. Component 9: Babol Improvement of the Water Supply System (US$6.1 million) This component included: (i) the provision of pumping equipment for five existing wells and collection lines, (ii) the construction of a 20,000 m3 ground reservoir and pumping station, (iii) the replacement of 40 km of existing pipe mains, (iv) extension of the network with an additional 32 km of mains, and (v) some 125 km of lateral pipes and 4,500 water meters. There will also be an investment program (and associated studies) to improve operational efficiency and reduce unaccounted-for water (including operation and maintenance equipment). Component 10: Support to the Mazandaran Water & Wastewater Company (US$10.241 million) Under this component the project aimed to provide technical assistance, training and consultant services for institutional development, technical support, engineering design and construction supervision. 1.6 Revised Components The components were not revised. 1.7 Other significant changes Not applicable. 6 2. Key Factors Affecting Implementation and Outcomes 2.1 Project Preparation, Design and Quality at Entry The project prepared an Environment Impact Assessment (EIA) and Social Assessment by consultations with line ministries, city authorities, provincial departments of the environment, operating water and wastewater companies, local communities, NGOs and the public. The EIA determined the various sources of pollution and estimated the influence of the project on the effluent quality from the project area wastewater systems, discharging into rivers and the Anzali lagoon. The project was expected to have significant economical, social and public health benefits with long-term positive environmental impacts due to reduced pollution of natural resources. Positive environmental impacts would be assured by the enforcement of existing governmental regulations and standards along with continuous monitoring of the treated waters. Various stakeholders (design consultants, representatives of the city councils, municipalities, regional water boards and others) were consulted for financial, environmental and social issues associated with the project. Public meetings were held in Guilan and Mazandaran and the participants were made aware of the current state of water and wastewater services, project components, financial arrangements, and participation of the Bank and water and wastewater companies. During preparation, feasibility studies were conducted to determine the most suitable options with respect to technical, economical, environmental, health, and social factors. The project provided adequate design provisions for secondary treatment (through an activated sludge process) with installation of a Biological Nutrient Removal (BNR) system on each treatment plant to ensure treated effluent of acceptable quality for discharge in receiving water bodies and for agriculture. The proposed project was classified as Category ―A‖ because of the construction of wastewater treatment plants, the re-use of sludge and treated effluent and the potential impact on the Anzali lagoon. In the case of Guilan, the issue of the disposal of sludge from the new treatment plants had been under study. The water and wastewater company agreed to provide the Bank with an environmental impact assessment of the option eventually chosen, no later than one year from effectiveness date. The Social Safeguards Policy Framework approved for the Ahwaz and Shiraz project was considered applicable also to this project. The Bank mission reviewed all land expropriation needs to assess compliance with the Bank safeguard policy. On strategic grounds, the project design focused on improving the operational and financial capacities of existing water and wastewater companies so that they could function as autonomous entities. Improving their capacities in terms of understanding Bank procurement policies and working in strict compliance with Bank procedures was a major implementation challenge faced by the project. The project addressed this challenge by incorporating important lessons from the five year implementation of the Tehran Sewerage Project: (i) establishing a Technical Support Unit (TSU) to improve project management capacity; (ii) providing training on the Bank‘s procurement, financial management, and safeguard issues to address project delays; and (iii) encouraging the establishment of a tariff scheme that would ensure financial viability of the water and wastewater companies. Each TSU would be equipped with an engineer, 7 a financial management specialist, procurement and environment, and safety specialist. The Manager of the TSU, chosen from the staff of the company, would provide a critical link with staff. His or her functioning would be monitored by the national-level TSU in the National Water and Wastewater Engineering Company. Procurement and financial management training would build the TSUs‘ management capacities for smooth implementation of the Bank-financed project. At the time of appraisal, the project‘s first year procurement packages were at a final design stage and were expected to be completed by the third quarter of 2005. Project design was appropriate. However, more attention should have been paid to potential land acquisition, which became a major issue during project implementation. Government commitment has been strong throughout the project preparation, appraisal, implementation and operation. Risks were assessed and addressed at the time of appraisal assuming that satisfactory implementation of the project would require: (i) a competent TSU in each company; and (ii) timely provision of counterpart funds provided by the Management and Planning Organization (MPO) and the water companies. The PAD identified potential risks and mitigation measures deemed necessary at that time. Table 1 presents the ICR assessment of the risks and the ICR team concurs with the overall risk assessment of the project to be Substantial. 8 Table 1: Risk Assessment and Mitigation Measures Risk Risk Mitigation Measures ICR Assessment of the Risks Rating Planned at Appraisal (i) The water and S (i) Agreement has been reached (i) Measures are taken by the two wastewater with Government on key companies to reduce costs and improve companies will not indicators including financial operational efficiency yet the risk persists. generate sufficient ones. Government‘s revenues and build commitment will ensure up capacity to pay for adequate tariff increases. their O&M. (ii) An adequate tariff S (ii) The Government and the (ii) In December 2010, the Government scheme will not be Bank have agreed on a policy announced increase in water tariffs from implemented. reform package that would be average 8 cents/ m3 to 28 cents/m3. If implemented in parallel with the implemented, the WWC would cover O&M project. The Bank‘s current and costs leading to low level of financial risk. future involvement in the sector is based on the fulfillment of the content of this agreement. (iii) An efficient M (iii) A competent TSU will be (iii) This risk should have been substantial. project management selected in each water and capacity is not wastewater company. established; and that contracts are not awarded to appropriately qualified contractors. (iv) Procurement of S (iv) Bank and the Government (iv) The risk has been properly addressed by works, goods and have begun to implement an providing hands on training. The risk has services is delayed. agreement on the use of standard been reduced to low level, but much time documents acceptable to both has been lost during the implementation sides. After a slow period when period. all parties are used to this documentation, it is expected that procurement will be speeded up. Moreover, it was agreed that a special procurement specialist will assist both companies in the first phase in launching the first year packages. (v) The local sources M (v) Local funding being modest, (v) Delay in counterpart funding was one of financing will not the Government is committed to factor that caused delays. At present be made available as significantly contribute to counterpart funding is expected to be needed and that financing the investment provided by the Government that holds the connection fees will program of the project, investments of the water sector in a high not be collected/paid especially the wastewater priority. Connection fees are still an issue. for as projected. component. Overall Risk S Rating S = Substantial; M = Moderate 9 2.2 Implementation The project was approved in May 2005 became effective five months after the Board approval. The project closed with an overall disbursement of about 87.8% of the total loan amount of US$224 million. An amount of US$27.315 million was cancelled from the loan. The Mazandaran water and wastewater company took local loans to pay its contractors when difficulties were experienced in the flow of funds in order to accelerate the implementation of works during the remaining few months up to the project closing date. Some of the key components such as, wastewater treatment plants and pumping stations would only be finished more than two years after project closing date. External Factors The main external factors responsible for slow project implementation were:  Imposition of UN sanctions on Iran in 2007 caused delays in disbursements and implementation, because Project Special Accounts (PSA) denominated in US dollars had to be converted to Euros. Delays were also incurred in the transfers of funds. These delays and uncertainties impacted the pace of implementation of the works as contractors were hesitant to accelerate their activities under such uncertain conditions.  In connection with the UN sanctions the selection of equipment to be purchased by the project contributed to delays from the very beginning. Specifications had to be reviewed against the list of prohibited items and entities identified by the relevant UN Resolutions.  Travel restrictions. There were no Bank supervision missions between January 2009 and May 2010.  The Government expected that the Bank would agree to extend the closing date of the project. However the Bank did not grant the extension of the closing date. The task team encouraged the Government to carry out a revision of the procurement plans for each city reflecting prioritizing of sub-projects to be completed with existing Bank funds and/or else seek counterpart funds from the Government.  Because of cost-overruns due to increased construction and material costs, and underestimation of project costs at appraisal, the project faced a significant shortfall in project financing. In order to fulfill the minimum objectives stated at appraisal, more funding was required from the government to finance the project. Factors Subject to Government and Implementing Agencies Control Internal Implementation delays were caused by municipality and traffic police permit requirements, and delays in receiving counterpart funding. Some issues arose on account of land acquisition resulting in delays in the construction of critical components such as the construction of pumping stations and wastewater treatment plants. 10 An important aspect of the project design was the establishment of a TSU responsible for the planning, design and execution of the project while ensuring compliance with Bank‘s procedures. In the first two years of implementation, staffing of TSUs and staff turnover especially in the case of Guilan caused a lot of concern and consequential delays to the project. At the beginning, the procurement process was mostly driven by consultants in charge of the design and preparation of bidding documents. There was a long delay in appointing an engineer for Guilan TSU. A fully staffed and competent TSU, with full support of the top management, was in place only two or three years after the start of the project. The Mazandaran TSU performed better by replacing the external staff with company staff. The Bank assessed improvements in the overall aspects of procurement and contract management and advised the TSU in Guilan to work closely with the technical department of the company. Mid-term review (MTR) The MTR report (December 2008) indicated that the observed cost overruns were not only due to increases in market rates of construction materials, but also due to increases in service areas/ population numbers over and above what had been estimated at the time of appraisal. Severe cost overruns in the engineering designs of the components in Mazandaran were due to significant discrepancies in planned, revised and actual costs. The MTR assessed that project objectives were relevant and did not require any revision, albeit their fulfillment would require timely availability of more funds from the Government. Despite procurement picking up, the MTR assessed that major construction works for wastewater treatment plants and pumping stations especially those in Anzali and Sari, would require more time to complete i.e. beyond the project closing date. Following the MTR discussions, the TSUs prioritized packages that were essential to achieving project objectives and which fitted within the loan and government allocations already made. Procurement and financial plans were constantly revised to ensure that project objectives would still be achieved. While more counterpart funds were required to complete priority contracts, the less critical activities could be funded by the water and wastewater companies under their own implementation plans. Regarding financial health of water and wastewater companies Reforms anticipated at the beginning of the project did not materialize during the implementation period causing slipping of the project objectives. The higher working ratio than the baseline values established at the beginning of the project had been a clear reflection of this issue. It was only in late 2010 that the Government announced the lifting of subsidies in many sectors, including water and sanitation. At project closing the impact on the water tariff of the new policy was not yet clear in the cases of Mazandaran and Guilan. 11 2.3 Monitoring and Evaluation (M&E) Design, Implementation and Utilization M&E Design The project‘s four intermediate indicators reflected the physical outputs of the project and could be easily measured and targeted: (i) number of wastewater connections (%) of population coverage, and (ii) % of wastewater treated. Indicators measuring progress in water components were (iii) increase in the number of water connections; and (iv) the length of water pipes rehabilitated. One of the outcome indicators, availability of water in the distribution system was not monitored during the implementation period for lack of data being reported by the utility. Social and environmental benefits of the project were supposed to be reflected by the indicators (3) reduced incidence of waterborne diseases and (4) improvement in water quality of receiving bodies. WR and UFW indicators were specified with baselines at the start of the project and target values were specified. The project provided for the UFW study for each water and wastewater company for better assessments and measurements. During the implementation of the project, several studies were financed to establish baseline data for project outcome indicators (3) and (4). M&E Implementation The supervision of the project, including the management of the Environmental Monitoring Plan (EMP), was entrusted to the TSU to ensure that physical implementation resulted in satisfactory outcomes of the project‘s intermediate indicators and hence would lead to achievement of the PDOs. Measures identified by the EMP were expected to be executed by the construction contractor (during the construction phase) and by the treatment plant operators (operation phase); both to be overseen by the Environment and Safety Officer (ESO) of the TSUs. However, on account of difficult country conditions and an initial period of non-familiarity with the Bank‘s procedures and guidelines, much time was spent in handling issues related to procurement and financial management. M&E utilization Data on the progress of selected indicators was maintained by the TSUs. TSUs maintained data on procurement and contract management and monitored the progress of project components. To address funding shortfall, based on these data some activities were recommended to be financed by the government only. Reliable outcomes and impacts could only realistically determined some years after commissioning of wastewater treatment plants and would not be easily determined during project implementation. 12 2.4 Safeguard and Fiduciary Compliance Safeguards: The findings of the EIA in the two provinces formed the basis of the Environmental Management Plan (EMP) with mitigation measures to allow achievement of the PDOs. The Environment and Safety Officer (ESO) within each TSU was assigned to oversee the implementation of the EMP in conformity with the Environmental Assessment (OD 4.01) and the Resettlement Policy (OP 4.12).  The ESO monitored the work of contractors during the construction stage. Construction safety remained a high priority for the two implementing agencies.  Land acquisition was necessary in order to provide for 1) WWTPs 2) pumping stations and 3) drainage outfall channels. Lack of timely counterpart funding to purchase land caused some project delays. Two reports on the progress of land acquisition and resettlement covering Rasht and Anzali were prepared in November 2007 and July 2008 respectively.  To ensure safety of sludge for re-use by farmers as soil conditioner or fertilizer, the adopted treatment processes, the one year storage period, and the control of industrial discharges to the sewage system had to comply with the WHO nematode standard and EU and FAO guidelines. It was expected that an ―activated‖ sludge process with nutrient control by the Biological Nutrient Removal system would be an option for the three WWTPs. The Anzali lagoon would thus be protected.  Mazandaran (Sari and Babol) and Guilan (Rasht and Anzali) Septage Management Studies which addressed the wastes from households not connected to the wastewater network were considered useful by the water companies.  The Emergency Operation Plan for the Sari and Babol was completed and approved, while for Rasht and Anzali the final draft is available in Farsi. In addition public awareness and safety workshops were conducted. Fiduciary The financial management arrangements in both Guilan and Mazandaran have been satisfactory during the implementation period. Initial delays in issuing FMRs were addressed by installing the Bank accounting software that was customized and configured for the project. An accountant provided hands-on training to the TSU Financial Officer (FO) on system functionality. The TSU FO in each company posted data on commitments, disbursements, projections and overall financial status and generated quarterly reports for project management reviews and decision making. The Bank‘s advice on strengthening the financial management was followed. After installation of the new software and training, the financial management aspects continued to meet the requirements of the project in a satisfactory manner. The quarterly FMRs were generated through the system and remitted on a timely basis to the Bank. The project budgets and disbursement projections have been updated periodically. The project SAs were reconciled periodically with the banks‘ statements and the Bank‘s client connection and withdrawal applications were issued 13 on a timely basis with minor deductions being applied to them by the Bank. All payments were backed by signed contract or purchase orders. The Financial Officer in each TSU followed due diligence procedures and maintained good relations with the Financial Controller in the Management and Planning Organization. Both implementing agencies submitted audit reports and audited financial statements in accordance with the legal agreement. Audits included project and entity audits that were received by the Bank and the audit findings which in general were all acceptable to the Bank with minor qualifications that were addressed by the TSUs. Procurement Based on the Bank‘s ex-post procurement review, the procurement process followed by the Government was satisfactory, albeit initially quite slow, and the procurement risk for the project was rated as moderate. Filing was available and well kept; time allowed for submission of bids was generally sufficient and bids were being opened in public at stipulated time right after bid submission. Minutes of bid opening and records of bid security were maintained. In connection with the UN sanctions technical specifications had to be reviewed against the list of prohibited items identified by the relevant the U.N. Security Council Resolutions. All the requirements were in compliance. The Bank addressed issues of procurement by emphasizing the need to establish competent technical staff in TSUs. It arranged extensive training and hired a consultant expert on Bank procurement procedures for 18 months to assist in the preparation of bidding documents. The MWWC hired a procurement consultant to prepare bidding documents as the Bank suggested that a suitable contract management arrangement should be made since several packages especially under Sari and Babol water works experienced severe cost overruns. 2.5 Post-Completion Operation/Next Phase  Completion of ongoing works through Government funding by 2013 i. All the obligations related to signed contracts as well as the required funds to complete unfinished civil works contracts and installation of the BNRs units in Anzali will be financed by the Government. Cost estimates are summarized in the following table: 14 Description Cost in US$ million Guilan-Water 22.67 Guilan Wastewater 95.96 Mazandaran-Water 3 Mazandaran 15 Wastewater  Operation phase: the two utilities have prepared their O&M plans and the objective is to privatize the operation and maintenance services of the infrastructure including the treatment plants and the network.  Tariffs: the government subsidies are being removed; therefore the tariff structure is being changed to cover the full O&M cost. This will lead to a reduction in the working ratio. Worldwide experience points to the fact that a full cost recovery in the provision of wastewater treatment services is not a feasible goal and that investments are highly subsidized given the public good nature of this service.  The water quality will be monitored through established stations and laboratories. The project should follow the recommendations made by the EMP. A study was done to establish waterborne diseases incidence for all four cities and this study should be repeated after the project completion. The sludge study in Guilan shows that co- composting and land application are the optimum options. It is assumed that the existing composting factory in the city of Rasht can receive the sludge from wastewater treatment plants. It should be noted that for this option, organizational participation between GWWC and the Rasht municipality is necessary. In the Guilan province the coverage of the wastewater collection system was planned to be 40% during the first implementation phase covered by this project. It will probably take another ten years before the wastewater collection system reaches an acceptable level of population coverage. The estimated funds required for completion of water and wastewater works amount to US$500 million and this has been budgeted for in the Government‘s sector investment plans. In the Mazandaran province the estimated coverage of the wastewater collection system was planned to be 30% during the first implementation phase (covered by this project). It will probably take another ten years before the wastewater collection system reaches an acceptable level of population coverage. The estimated funds required for completion of water and wastewater works amount to US$400 million, and this has also been budgeted for in the Government‘s sector investment plans. 15 3. Assessment of Outcomes 3.1 Relevance of Objectives, Design and Implementation Establishing modern wastewater and sanitation infrastructure along with efficient water supply systems to meet the growing demand for services in the Northern cities were relevant objectives designed in line with the Government‘s aim to improve the quality of life for its citizens. Moreover the project‘s PDOs of improving services, and generating health and environmental benefits and improving the efficiency, sustainability and financial autonomy of the WWCs remain still highly relevant for Iran‘s continued economic and social development, particularly the improvement in living standards of the poorest section of the urban population. Project design was generally appropriate for the achievement of the PDOs, although the scope of the activities to be achieved within the five year implementation period would have been optimistic even under normal conditions. With the disruption during implementation as a result of application of sanctions it became impossible for the project to be completed within the original timeframe. 3.2 Achievement of Project Development Objectives Rating: Moderately Unsatisfactory PDO 1: Enhance the quality of life (a) By improving the reliability of water supply systems through rehabilitation and extension Rasht & Anzali water supply systems in Guilan: In Rasht, the target was achieved. In Anzali the target was also achieved and more: 30% above target for rehabilitation and 66% above target for extension. The progress in household connections was only 52% of the target. In Anzali, the Ghazian reservoir (30,000 m3) and pumping stations have been completed. In Rasht, the Lankan reservoir (30,000 m3) and two small reservoirs (2*40,000m3) were delayed by 18 months. The bidding for UFW analysis and equipment occurred five months prior to project closing. Sari & Babol water supply systems in Mazandaran: The most important achievement has been that all targets for household connections were met, whereas the works for rehabilitation of distribution piping and the extension of the distribution network advanced by 84% and 94%, respectively. A reservoir (20,000 m3 capacity) was completed in Babol and five existing wells were connected to the distribution network. For both Sari and Babol, the UFW analysis was 50% complete. The most important achievement of the project has been the rehabilitation of distribution piping and the laying of extension pipes in the four cities in Guilan and Mazandaran. Sari and Anzali cities have almost completed the water distribution systems. In the city of Anzali, the distribution works have been overachieved. 16 The UFW rates for Rasht and Anzali are 27% and 21% respectively. In Sari and Babol the UFW is estimated at 28%. It is expected that once all the works are completed the UFW rate will be lower. (b) By improving health and urban environmental conditions by providing wastewater collection and treatment facilities Rasht & Anzali Wastewater: Construction of trunk mains, laterals, interceptors was about 50% achieved. The wastewater treatment plant in Anzali has been completed and is operational. The construction of the Ghazian wastewater treatment plant was 30% complete and is expected to be completed using Government funds over next two to three years. The 24 hour emergency reservoir for Rasht will also be covered by the Government funds. The intermediate outcome indicators could not be fully met at the time of project closing. Sari & Babol Wastewater: The wastewater treatment plant in Babol has been completed. The wastewater treatment plant in Sari was 97% completed by project closing date. The quality of construction is highly satisfactory (see pictures in Annex 2). In Sari two pumping stations have been completed and in Babol three pumping stations are under construction. The completion of house connections had progressed together with the construction of collection network, pumping stations and wastewater treatment plants. The septage management study has been completed. (c) By contributing to environmental protection of natural resources (especially the Anzali lagoon) Because the wastewater treatment plants are not yet fully operational and the sewerage networks are not yet fully connected, the water quality of the receiving water bodies, such as the Anzali lagoon, has improved only slightly so far. A study was done to establish the baseline for waterborne diseases for all four cities and should be repeated after project completion. Current water quality parameters are listed in Annex 2. Sludge management and discharge by the treatment plants in Anzali and Rasht has been an overriding concern since both cities are responsible for 83% of urban waste discharged into the Anzali lagoon. Design provisions were made for the installation of a BNR unit on each wastewater treatment plant to ensure effluent of acceptable quality for discharge into receiving water bodies. As agreed with the Government (at the time of the MTR in 2008) these packages will be taken up by the water and wastewater company using their own resources. The emergency reservoir in Rasht, expected to provide a further mitigation measure for the Anzali lagoon in case of malfunction of the treatment process, will also be financed by the water and wastewater company. Active sludge management will also ensure improvement in the quality of water bodies. 17 PDO: (2) Improvement in the operational efficiency and financial sustainability of WWCs  Financial sustainability: The working ratio for Guilan was 1.98 and for Mazandaran 1.6 reflecting deterioration of the financial performance of both companies over the implementation period. Considering the recent changes in tariffs it is assumed that the working ratio will improve in the coming years.  Operational efficiency: During implementation, measures to promote operational efficiencies were also undertaken by the water and wastewater companies, such as improve collection efficiency and reduce expenses. The Government is promoting private sector participation in performance-based operation and maintenance contracts for the wastewater and water supply schemes  Improvements in technical and environment capacities: The technical and managerial capacities of both the Guilan and Mazandaran water and wastewater companies have improved. 3.3 Efficiency See Annex 3. No economic or financial analysis of the project has been attempted since the physical works were not completed. It was not feasible to do an economic and financial analysis and compare the target values with the actual values at the end of the project. 3.4 Justification of Overall Outcome Rating Rating: Moderately Unsatisfactory At the time of project closing the water supply components of the four cities were satisfactory. However, the implementation of household connections under all four wastewater treatment components was not fully completed. As such the protection of the Anzali lagoon remains a high priority, and this is recognized by the Government who is committed to completing the household connections and installing BNR units over the next two to three years using Government funds. 3.5 Overarching Themes, Other Outcomes and Impacts (a) Poverty Impacts, Gender Aspects, and Social Development During the construction phase of the project, a significant number of temporary jobs had been created. In addition, several permanent jobs have also been created for the facilities‘ operation and maintenance, and more jobs will be created after project completion. Bank missions confirmed the dire physical state of sanitation and its impacts especially in the low-lying poor residential areas. The poorest sections of the population in the project areas are hardest hit by the absence of water supply and sanitation services and will benefit most once the works are fully completed as planned. 18 The social and gender impact of the project is particularly important for women, since they have traditional roles in water procurement, child care and caring for sick family members. (b) Institutional Change/ Strengthening The staff of the National Water and Wastewater Company (NWWC), including the Guilan and Mazandaran water and wastewater companies including other provincial WWCs benefited from the project‘s institutional strengthening aspects, transfer of technical know-how and high-level capacity building through the various consultancies that have been contracted. The capacity of national and local consulting engineers and contractors has also been strengthened because of the experience gained from the project. Workshops conducted on asset management, use of a condominial approach as a low-cost technical solution, sewerage systems and other relevant topics have succeeded in creating awareness on the possibilities of improving operational efficiency of WWCs through non-conventional low-cost approaches. In the public education context, a public awareness program was implemented through mass media, distribution of brochures and similar methods. Twelve training workshops were organized in the province of Guilan for contractors, consultants and the experts of the Guilan water and wastewater company on safety and environment. In addition the World Bank Institute has assisted the government in preparing several workshops related to institutional strengthening and sanitation strategy. The workshops were held at the national level. To assist all local water and wastewater companies, the National Water and Wastewater Company (NWWC) has documented the results and achievements of the health and environmental studies undertaken under the project. Training materials are available on the NWWC‘s website. (c) Other Unintended Outcomes and Impacts (positive or negative) The Bank introduced a new way of doing business in the water and sanitation sector in Iran. Issues raised during project implementation with respect to short-term environmental safety aspects and land acquisition have taught water and wastewater companies that in order to maximize gains from investment, it is important to align sector objectives with the will and support of the intended beneficiaries. Responsiveness to social issues will gain communities‘ confidence and promote their wastewater treatment services, benefiting long term financial sustainability of companies. This approach represents a sharp contrast to past project interventions where the government focused almost entirely on ‗hardware‘ components and beneficiary participation was seen as less important. The transition to more participatory approaches will necessarily be a longer term undertaking, but the project is an important step in this direction. 3.6 Summary of Findings of Beneficiary Survey and/or Stakeholder Workshops Not applicable. 19 4. Assessment of Risk to Development Outcome Rating: Substantial (a) The risk level depends on the government‘s priorities for allocating resources to timely completion of the project works. See Government ICR letter in Annex 7. (b) Interviews indicated that despite the general perception of the population (86%) that the sewerage system is useful, 40% of the population surveyed indicated that the price was too high compared to the service provided and 38% believed that paying for a sewerage system was an imposed cost. 5. Assessment of Bank and Borrower Performance 5.1 Bank Performance (a) Bank Performance in Ensuring Quality at Entry Rating: Moderately satisfactory The preparation of the current project started in parallel with the Ahwaz and Shiraz project. It took a year longer to complete the appraisal in order to ensure adequate technical, financial, economic and institutional aspects. It was a project highly relevant for the country and in coherence with the major concerns expressed by the Government and public. The project intended to find solutions to the deteriorating state of the environment caused by lack of sanitation and wastewater treatment plants. Physical infrastructure was well defined with clear outputs and outcomes. Adequacy, reliability and safety of water supplies to the growing urban population and ensuring 100% coverage of the growing population in the four northern cities was another important social dimension supported by the project. The Bank considered ‗delays in implementation capacity‘ as one of the major risks and addressed it by providing extensive training. Other reasons were delays in municipality and police permits. During preparation, the project recognized that a lack of coordination among sector entities was an important risk factor. Delays in project implementation and funding shortfalls led to postponement or cancellation of some elements of project components. The project design was based on the expectation of full cost recovery by WWCs. The PDO rested on an expectation of a 20% tariff increase without considering the short project implementation period. (b) Quality of Supervision Rating: Moderately unsatisfactory The Bank planned two supervision missions a year during the first half of project implementation. Due to travel restriction between January 2009 and May 2010 missions were not carried out for 14 months. Accumulated delays and cost overruns added pressures to 20 procurement and contract management issues. Nonetheless, the Bank missions provided expert advice regarding procurement and financial management matters, thereby enhancing the financial management skills of TSUs, and also on safeguard issues connected with land acquisition and construction safety, such that the overall compliance of safeguard policy 4.1 was promoted. The Bank financial management exercises provided projections for the budget shortfalls and facilitated the prioritization of procurement packages with the government. The Bank encouraged tariff increases to reduce GWWC and MWWC‘s financial uncertainty and improve their long term financial sustainability. The Bank drew attention to the fact that tariff increases would also help alleviate the burden of budgetary support that would otherwise need to be provided by the government in case of funding shortfalls. The government approved a ―targeted subsidies law‖ towards the end of the project, and this should support the eventual achievement of this aspect of the PDO. (c) Justification of Rating for Overall Bank Performance Rating: Moderately Unsatisfactory Delays in the transfer of funds (both from the Bank and from Government) and associated uncertainties impacted the pace of implementation of the works as contractors were hesitant to accelerate their activities under such uncertain conditions. As such, it was not feasible for the project objectives to be fully completed within the original time frame, yet no project extension was provided. 5.2 Borrower Performance (a) Government Performance Rating: Moderately Satisfactory During project preparation, the Borrower‘s commitment and ownership were reflected through: (i) the government giving high priority to the sector, particularly to WW in its long-term planning and its request to the Bank for continued support to the sector; (ii) MOE financing from its own budget the background studies and its WTP for detailed engineering and preparation of tenders for the project; (iii) WWCs taking initiatives to respond quickly to the Bank's requirements and formally agreeing on the proposed strategy in the sector and future collaboration with the Bank; and (iv) willingness of the government to fund urgent operations (construction of network, wastewater treatment plants, etc.) in many cities prior to the project implementation. The Government had established a strong National Water & Wastewater Company (NWWEC) within the MOE, reporting directly to the Vice Minister for Water. NWWEC through its own TSU staffed with a competent manager and national consultants was very committed and supportive of the project and extended full cooperation to the task team during implementation. It was instrumental in keeping the project moving forward. 21 However, the government‘s commitment fluctuated during project implementation. Not only were tariff reforms allowed to lag way behind the inflationary pressures experienced by the water and wastewater companies, the government also delayed the timely availability of counterpart funds needed for project execution. The Government committed funds to continue with the implementation of ongoing packages for the execution of the project after project closing. (b) Implementing Agency or Agencies Performance Rating: Moderately Satisfactory The performance of the Guilan water and wastewater company (GWWC) responsible for the execution of projects in Rasht and Anzali was moderately satisfactory. The performance of the Mazandaran water and wastewater company (MWWC) responsible for the execution of projects in Sari and Babol was moderately satisfactory. With the satisfactory performance of NWWEC TSU providing oversight and technical advice to the companies TSUs, the overall performance of the implementing agencies has been rated moderately satisfactory. Project management: The project closed with delays in the implementation of wastewater treatment components. Procurement and project management had been more of an issue in the case of GWWC than MWWC. Much time was lost in addition to the delays on account of fund transfer issues. Due to the large size and complexity of the wastewater treatment components, GWWC could not complete the critical elements like wastewater treatment plant and pumping stations. In Mazandaran, the key elements of the sewerage system (including wastewater treatment plants and pumping stations in Sari and Babol) have been largely completed, underscoring the fact the project in Guilan being twice the size of that in Mazandaran made it difficult for GWWC to manage all challenges within a given period of time. (c) Justification of Rating for Overall Borrower Performance Rating: Moderately Satisfactory In view of challenges and issues that could have been avoided the overall Borrower performance has been rated moderately satisfactory. Although tariff reforms were not implemented during the physical execution of the project, understanding the issue of subsidized tariffs at the high political level brings hope for the future financial autonomy of GWWC and MWWC. The issue of financial performance of water and wastewater companies is expected to be resolved once the Government starts implementing its policy of removing all price subsidies from water tariffs. The recent campaigns for the project are a reflection of understanding that reaching out to communities is a way to promote sustainability of the project. 22 6. Lessons Learned 1- Realism in project design is improved and risk to project development outcomes reduced when project preparation is adequate. Realism in project design should be reflected by the project‘s complete assessment of all the local realities on the ground during project preparation. In the case of the current project, this should have translated into evidence of adequate completion of preparation work for land acquisition and detailed estimates of engineering designs; preparation of bidding documents for the first year prepared by the borrower. The construction of wastewater treatment facilities cannot be fully implemented in five years. 2- Improved coordination should be an important aspect of institutional strengthening Institutional strengthening has focused on capacity building and training which was very important for the project. However, although sector coordination was recognized as a possible problem area at the time of project preparation/appraisal, it was not given due consideration. Coordination among the various stakeholders should be seen as an aspect of institutional development and an important determinant for project results. 3- Despite individual and team efforts to implement a project in a professional manner, there are factors outside government and bank control that can have a major impact The UN sanctions constituted an impediment to the smooth implementation of the project since they impacted the transfer of funds for project activities. In addition, the inability of the Bank team to travel to Iran for a period of eighteen months created a strained relationship. Without proper and continuous supervision and the financial resources required for this task, it is evident that implementation gets delayed and capacities diminish. 4- Avoid unrealistic expectations in terms of tariff adjustment. Projects should be designed within the realm of realistic estimates and assumptions. There is also a need to identify indicators that can monitor variables that can be directly attributed to the project. The working ratio is not always the most appropriate indicator for financial sustainability as there are many external factors that affect it such as cost of materials (steel, cement and others) and energy. A utility could be improving certain efficiencies but strong increases in market prices will affect the expenses considerably. 23 7. Comments on Issues Raised by Borrower/Implementing Agencies/Partners (a) Borrower/implementing agencies The TSUs in Guilan and Mazandaran and the Central Project Support unit reviewed a draft copy of the ICR and provided comments which were incorporated into the final version of the ICR. Government‘s own ICR which document the implementation experience and lessons learned can be found in Annex 7. (b) Co-financiers Not applicable. (c) Other partners and stakeholders Not applicable. 24 Annex 1 Project Costs and Financing Appraisal Estimate Actual/Latest Components (USD Estimate (USD % of millions) millions) Appraisal 1 Rasht - Wastewater Collection and Treatment 81.502 78.4 96 2 Rasht - Water Supply Rehabilitation 50.285 65.7 131 Anzali - Wastewater Collection and 3 Treatment 45.424 52.3 115 4 Anzali - Water Supply Rehabilitation 9.03 15 166 5 Guilan - Project Support (below) 17.7 Environmental Management Plan 2.517 Detailed Design and Supervision 16.336 Institutional Support 2 6 Sari - Wastewater Collection and Treatment 40.313 46.3 115 7 Sari - Water Supply Rehabilitation 4.848 7 144 8 Babol - Wastewater Collection and Treatment 30.335 58.4 193 9 Babol - Water Supply Rehabilitation 6.066 3.5 58 10 Mazandaran - Project Support (below) 0.063 Environmental Management Plan 1.116 Detailed Design and Supervision 7.125 Institutional Support 2 Total Base Cost 298.897 Physical Contingencies 26.66 Price Contingencies 16.775 Total Project Costs 342.332 344.363 101 Front-end fee IBRD 1.12 1.12 Total Financing 343.452 345.483 25 (b) Financing Appraisal Actual/Latest Estimate Estimate Percentage (USD (USD of Source of Funds millions) millions) Appraisal Borrower 58.7 140.22 239 International Bank for Reconstruction and Development 224 196.685 88 Beneficiaries and WWC 60.8 8.83 15 Total 343.5 345.735 Canceled amount: 27.3 US$ million 26 Annex 2. Outputs by Component TABLE A: Status of Guilan wastewater treatment components Rasht and Anzali Waste Water Works Planned Status at Project Closing Rasht: 20,000 connections and Anzali 27,000 connections. Construction of house Rasht: 70,400 connections Anzali: 27,000 Although most wastewater pipes have been laid down no connections were made yet to enable wastewater flow through the pipes. Construction of trunk mains, Rasht: 360 km Rasht: 170 km laterals and interceptors Anzali: 253 km Anzali: 130 km Completion of ongoing Rasht: 100.3 km collection system network Anzali: 25.2 km Rasht: 16 Rasht: 4 under construction Pumping stations Anzali: 14 Anzali: 11 under construction Construction of 24 hr Emergency Reservoir To be constructed and financed by GWWC WW Treatment Plants in construction of Ghazaian 1st Ongoing construction of WWTP in Anzali Anzali module is 100% complete; the construction of Ghazaian WWTP is 40% complete WWTP upgrade to BNR 2 To be completed and financed by GWWC Septage Management Study Completed The consultant submitted the report. TABLE B: Status of Guilan water supply components Rasht and Anzali Water Works Planned Status at Project Closing Construction of house Works to connect households to water connections—water (W) Rasht = 28,950; services is underway. So far, Guilan: Anzali = 7,690 +5,000 households (14%) Rasht : 440 km/261 km Rasht:460 km have been rehabilitated and Rehabilitation of distribution Rasht:Lankan Main = 15 km 220 km extended piping/ and extension of In Anzali = 113 km/99 km distribution network Anzali: 96 km/ 59km Rasht: Lakan (30,000 m3) 62% &ground reservoirs 87.5% Construction of reservoirs (2*40,000 m3) and related facilities Anzali –Ghazian ground Ghazian ground reservoir is 100% reservoir and pump station complete and operating (30,000 m3) Control & Instrumentation/ Rasht UFW Analysis and Anzali Equipment 27 STATUS OF PROJECTS IN MAZANDARAN TABLE C: Status of Mazandaran wastewater treatment components Sari and Babol Waste Water Works Planned Status at Project Closing Sari = 10,600, Babol=8,700. Although most wastewater pipes have been laid down, because of lack of pumps and Construction of house Sari = 16,000 wastewater treatment plant, no connections connections Babol = 16,300 were made yet to enable wastewater flow through the pipes. Construction of trunk mains, Sari = 240 km Sari = 369 km laterals and interceptors Babol = 127.5 km Babol = 20 km Sari: 2 completed Pumping stations Babol: 6 3 under construction Sari = 1 (23,240 m3/d) Sari = 97% complete WW Treatment Plants Babol =1 Babol = completed Construction of outfalls & 5km outfall; 2 sludge storage sludge tanks tanks 100% Completed Septage Management Study Two studies Completed TABLE D: Status of Mazandaran water supply components Sari and Babol Water Works Planned Status at Project Closing Construction of house Sari = 5,500 Guilan = 5,000 households (14%) connections—water (W) Babol= 4,500 Rehabilitation of distribution Sari = 200 km Sari =184km piping/ and extension of Babol = 197.5 km Babol – 195 km distribution network Reservoir and pump stations Babol = 20, 000 m3 Completed Control & Instrumentation/ The study is 50% complete Sari UFW Analysis and Babol Equipment Water Quality: Location No. of BOD5 DO NO3 PO4 E.Coli stations mg/l mg/l per 100ml Mazandaran 2009-10 Tajan river 5 18.8 - 8.3 1.6 1.3xE7MPN Babolroud river 3 7.3 - 7.1 0.44 9.1xE4MPN Shazderoud river 3 9.4 - 4.2 0.45 3.1xE5MPN Guilan 2010-11 Goharroud river 2 9.4 3.5 - - 1.2xE7MPN ZarJoob river 2 18.6 4.3 - - 6.2xE6MPN Anzali Lagoon 6 25.3 4.6 - - - Rougas 28 Mazandaran – Babol wastewater treatment plant and house connections – July 2011 29 Mazandaran – Sari wastewater treatment plant and pumping station under construction – July 2011 30 Performance Ratings – ISR (2005-2010) Number 1 2 3 4 5 6 7 8 9 10 11 12 Year 2005 2006 2007 2008 2009 2010 Month May Nov June Dec June July May Oct. June Dec Achievement of PDO S S S S S S S MS MU MU MU Implementation Progress S S S S S S S S MS MU MS MU Other Ratings Financial Management S S S S S S S S S MS S S Project Management S S S S S S S S MS MU MS MS Counterpart Funding S S S S MS MS MS MS MS MU MS S Procurement S S S MS MS S S S MS MU MS S Monitoring and Evaluation S S S S S S S S MS MU MU MS Project Component Ratings 1. Rasht WW Collection & Treatment S S S S MS MS MS MS MS MU MU MS 2. Rasht W Supply Rehabilitation S S S S MS MS MS MS MS MU MS MS 3. Anzali WW Collection & Treatment S S S S MS MS MS MS MS MU MU MU 4. Anzali W Supply Rehabilitation S S S S MS MS MS MS MS MS MS S 5. Guilan TA S MS S MS MS MS MS MS MU MS MS 6. Sari WW Collection & Treatment S S S S S S S S S MS MS MS 7 Sari W Supply Rehabilitation S S S S S S S S S S MS MS 8. Babol WW Collection & Treatment S S S S S S S S S MS MS MS 9. Babol W Supply Rehabilitation S S S S S S S S S MS MS 10. Mazandaran TA S S S S S S S S MS MS S Overall Safeguard Compliance Environmental Assessment (OD 4.01) S S MS MS MS MS S S MS MS MS Involuntary Resettlement (OP 4.12) S S S MS MS MS MS S S MS MS MS Projects in International Waters (OP 7.50) S S S S S S S S MS MS MS 31 Annex 3. Economic and Financial Analysis Detailed economic and cost-benefit analysis of the project was conducted at appraisal. The net benefits were derived for the period 2005 to 2009 in parallel with Iran‘s WS and WW development programs. The main benefit of the water supply component would be realized by the additional population who receive connections. The benefit was determined by estimating the cost of alternative means of meeting water demand if piped water was not provided. This would be the cost of water purchased from vendors estimated to be US$0.75-US$0.85 per m3. Added to this cost was the households‘ cost of installation and O&M of storage tanks. Higher access and availability of clean water would result in higher demand from households. This was estimated as another benefit of the project. These benefits represented the minimum value of the true benefits since benefits derived from hygiene, quality and commodity advantages of access to potable pipe water were not accounted for. The water sub-projects were largely justified based on the estimated rates of EIRR between 15% for Babol and 46% for Anzali. Sensitivity analysis was conducted by reducing benefits and increasing costs by 10%. The results indicated that IRRs remained higher than the cost of capital assumed at 10%. In case of the water supply components, the project was expected to generate pecuniary and non pecuniary benefits for each city. The main cost avoided and dominant benefit of the project was the: (i) avoidance of the cost of absorption wells and their maintenance. Other expected benefits were:- (ii) reduction in water-borne diseases and associated costs of hospitalization, medication, loss of workdays and school days; (iii) reuse of treated WW in irrigation with associated increase in agricultural value-added; (iv) increase in tourism activity in a highly popular summer resort in Anzali; and (v) general improvements in the conditions of immediate neighborhoods and the environment in general with the associated improvement in the quality of life. Most information for benefits (ii), (iii) and (iv) was taken from estimates presented by feasibility studies, social assessments and local health departments. The benefit reflected by (v) was not accounted for on account of difficulties in estimations. The base case scenario yielded EIRR between 2% for Sari and 11% for Anzali with a return of 6-7% for Babol and Rasht. The returns were low as expected given that the four cities had started almost from scratch in WW services whereby initial investments were large while population coverage would be gradual due to technical and managerial constraints. Realization of qualitative benefits, such as improvements in environmental conditions and quality of life justified the investments in wastewater components. Detailed Financial analysis for each water and wastewater was conducted at appraisal by considering benefits of increased (i) water sales and wastewater disposal services, (ii) increased revenue from subscription fees, (iii) increased income from connection fees, and (iv) savings from reduced UFW. The FIRR for MWWC was at 22.4% and GWWC at 11.8%. An important assumption behind FIRR calculations was the high tariff increases that would fully cover O&M expenses. In reality, tariffs moved up marginally (5% for some categories) against the expectation of tariff reforms. Although financial analysis has not been conducted for this review, 32 it is evident that the PDO target of attaining financial sustainability would remain at a substantial risk as long as tariffs do not go up to cost recovery levels. Also, the companies would have to focus on implementing connections especially in case of wastewater components. By comparing working ratios, MWWC reflects better financial performance than GWWC. Future financial situation of GWWC and MWWC rests on the following: (a) with the completion of investments supported by the current loan, they have to incur additional financial burden of the repayment of debt; (b) the loan obligation for GWWC is twice that of MWWC, and (c) new investments have to be operated and maintained even while household connections are not materialized. In December 2010 the Government announced a policy of eliminating subsidies to the various utilities and replaces them with targeted subsidies to low-income beneficiaries. This would imply that average tariffs would rise from 8 cents/m3 to 28 cents/m3. The implementation of such reforms would ease cost recovery for WWCs and promote financial sustainability. Nevertheless, the tariff structure is needlessly complex and there is a need for comprehensive reforms. Historically, sewage charges were based on 70% of the water bills. With the development of wastewater facilities, costs of sanitation services should be assessed separately from water so as to evaluate the appropriateness of the existing tariff structure. Since most urban households were already connected to the water network and only a few were connected to a sewerage network that was yet to be constructed in most cases, the issues of willingness to pay and affordability of connection rights was expected to arise in the future although the Government decided to provide bank credit to facilitate connections including the required works inside homes. 33 Annex 4. Bank Lending and Implementation Support/Supervision Processes (a) Task Team members Responsibility/ Names Title Unit Specialty Lending Supervision/ICR Abdulhamid Azad Senior Irrigation Engineer MENSWA TTL Alexander E. Bakalian Lead Water Resource Specialist TTL Mohammed Benouahi Consultant MNSSD Robert Bou Jaoude Program Coordinator SACPK Bekele Debele Negewo Water Resources Spec. MNSWA Sepehr Fotovat Ahmadi Senior Procurement Specialist MNAPR Lizmara Kirchner Water & Sanitation Specialist LCSUW Peter J. Kolsky Sr Water & Sanitation Spec. LCSUW Ehsan Mahmoudkalayeh Consultant MNAPR Knut Opsal Sr Social Scientist MNSSO Parviz Piran Consultant MNSSD Dilip Kumar Prusty Chinari Finance Analyst CTRDM Satoru Ueda Lead Water Resources Specialist AFTWR (b) Staff Time and Cost Staff Time and Cost (Bank Budget Only) Stage of Project Cycle USD Thousands (including travel No. of staff weeks and consultant costs) Lending FY04 0.83 2.2 FY05 43.42 305.6 FY06 0.05 0.04 FY07 6.8 FY08 0.00 Total: 44.3 314.58 Supervision/ICR FY04 0 0.00 FY05 0 2.5 FY06 24.79 141.2 FY07 25.51 115.3 FY08 32.05 148.9 FY09 27.49 147.3 FY10 22.2 133.4 Total: 132 688.6 34 Annex 5. Beneficiary Survey Results (if any) Not applicable. 35 Annex 6 Stakeholder Workshop Report and Results (if any) Not applicable. 36 Annex 7. Summary of Borrower's ICR and/or Comments on Draft ICR Summary of Borrower’s ICR Comments by National water and wastewater company (NWWEC) WB's performance The experience of close cooperation with the WB team on the northern cities water and sanitation project since the stages of project preparation and the feasibility studies can be divided into the following two periods: 1- The feasibility studies and implementation: At the beginning of this period, the WB's team underwent changes in structure of its technical staff, while the TTL was changed on three occasions during the implementation phase up to loan closing date. Fortunately, these changes enhanced the capacities and qualifications of the task team to the extent that at final stages of the implementation and before the closing date, the project benefitted form the presence of a very qualified TTL and his team of experts. Under the supervision of this team, in addition to appropriate guidance for enhancing the quality of executive works and proposing practical ideas to Iranian experts in their project implementation tasks, many training and capacity building workshops and courses were also organized. Therefore, if the task team's performance during this period is to be evaluated according to WB standards, it would definitely be rated as satisfactory. 2- The project's closing stages and problems related to the transfer of funds: Given the lessons learned from previous loans, the GWWC and MWWC's performance as far as disbursement is concerned showed an improvement both in quality and the speed of action. However, at different sections a number of problems were imposed on the project by the Bank. Delays of up to six months in payment of invoices caused by the non-replenishment of Special Accounts, increased bureaucracy in the Financial procedures and the imposition of greater than necessary documentation as a pre-requisite for PAR Code to ensure the proper expenditure of funds in the targeted projects as well as other problems during the loan period had a negative impact and undermined the speed of loan disbursement. Throughout the loan period, GWWC and MWWC fully complied with the WB guidelines and regulations and tried to improve the processes according to schedules mentioned in PAD and the recommendations of the WB task and monitoring teams. The different Aide Memoires bear witness to the successful performance of the companies in this regard. It was expected that the World Bank would agree with a request for loan extension to ensure the completion of ongoing and critical packages, but unfortunately, this request was rejected. In the meantime, to ensure the project's continuity during the default of payment by the WB, the companies paid the contractors on account basis from their own internal resources. Project Management As mentioned in the Institutional and Implementation arrangement of the PAD, the project management has a significant role in the progress and ensuring the quality and quantity of the project. According to PAD, the project management was to be carried out by the water and wastewater companies with the assistance and support of the TSUs. However, the issue at stake in this regard relates to the performances of the said TSUs, as, for all practical purposes, the role 37 of these units in the project implementation was much greater that the one traced out in the PAD. This is proven in the ICR prepared for the cities of Ahwaz and Shiraz, which states that the projects were implemented mainly by the TSUs. The experiences of TSUs in Guilan and Mazandaran can be described as follows: 1- Guilan TSU: GWWC established this unit from the beginning and according to PAD recommendation by assigning a project manager from the Company. The unit's condition for the initial two years of the project can be described as follows: - The manager selected for TSU lacked the capacity and expertise necessary for the task. - The expert consultants, who were to form the core of the Unit, were selected by the mentioned manager alone and for this reason the selected individuals also lacked the necessary potentials, expertise and qualification to carry out the assignment. - The Company's management showed no inclination towards employment of qualified consultants at adequate fees. Therefore experienced specialists were not interested in collaboration. - In Guilan, the Environment Safeguard Officer (ESO) was initially an expert from outside the company's body. Despite a high academic background (University Professor on environmental engineering) and a full time cooperation contract, his actual involvement was unfortunately on part time basis and kept to a minimum, which created a number of difficulties for the environmental studies and other relevant functions, with some consequences such as the use of inexperienced consultants and delays in the start and completion of the projects continuing on until the closing date of the project. After about three years and the follow ups by the NWWEC's Technical Support Unit, he was finally replaced by one independent consultant and an expert from within the Company. This led to considerable improvement and progress of the environmental and safety studies of the projects. The second consultant's cooperation lasted for a year, after which the Company's expert took over, showing satisfactory performance. After about two years and observing the poor performance of the projects in Guilan, on the insistence of the NWWEC TSU, which had an oversight and coordination role in the projects, and the agreement of the NWWEC management, the GWWC TSU underwent changes to benefit a suitable management and better qualified staff and was subsequently able to better assist the projects by steering it on the right path. It can safely be claimed that, had the initial selection of TSU management and staff been undertaken with greater care, the GWWC's performance would have been much better than today and this project could have even been considered as among the successful endeavors of the Bank. 2- Like in Guilan, the Mazandaran Water and Wastewater Company selected a TSU Manager from its staff and engaged individual consultants for the different expertise requirements. However, due to their poor performance, all the said consultants were replaced after one year with experts from within the Company's body. The main reason for the poor performance of the selected experts can be related to the limited vision of the MWWC management in paying appropriate fees to engage experienced specialist. 38 In Mazandaran an environmental expert from within the MWWC was assigned for the task on full time basis. Nearly all the environmental projects of the Mazandaran Province were completed on time and at an appropriate quality. The performance of the Mazandaran ESO is therefore rated as satisfactory. 3- In summary, it can be concluded that: - The initial selection of a competent TSU manager is of great importance. - The Unit's team of experts must be competent too, and in particular they should have a good working command of the English language, without which their expertise might prove to be futile. - Limiting fees and salaries must not be the prime criteria in selection of qualified and experienced specialists. - Experts chosen from the Company's staff must have the necessary qualifications for the task and the incentives for greater activity must be created through higher scale of salaries and wages. - Although the idea of establishing a TSU instead of PMU for optimal use of the technical capacities of the water and wastewater companies is quite constructive, but the experiences of northern cities TSUs and before them the Shiraz and Ahwaz TSUs have shown them to be interested in affairs beyond their defined assignments and their interference in and interactions with executive departments in the Company undermine the trend of project implementation. - The comparison between the experiences gained in the Provinces of Guilan and Mazandaran underlines the need to revise the structure of these companies' Technical Support Units. On this basis, it is recommended to separate the safety and environmental sections and these functions be referred to either relevant units or to experienced experts in the companies. For instance, in recent years work safety bureaus have been established in the companies. Given their mandates and subject to necessary trainings, they could easily take over the ESO on safety issues. - Different actions such as organizing training workshops throughout the country (in the fame of the WB loan to the cities of Ahwaz an Shiraz) as well as periodical forums of ESOs from project in different cities and provision of scientific and technical support by NWWEC TSU were taken to build capacity on environment and safety issues. Despite this, these actions are evaluated as inadequate as far as the number of individuals trained and the number of environmental and safety subjects taught. It is recommended that there would be a greater number of persons from the loan recipient companies participating in the training sessions, and the subject matters and the training procedures would be arranged in such a manner as to ensure that all the experts have passed the necessary trainings before the start of the projects. In most cases, this procedure would ensure the necessary capacity building in the companies and would eliminate the need to engage independent environmental and safety consultant from the province. - Although the Bank's experts have provided scientific and technical guidance and recommendations upon request, it was expected that the World Bank would have organized specialized training workshops on environmental and social issues to transfer 39 the global experiences on the subject, as it has done for other issues related to the projects. - The experience shows that a great amount of time has been spent on preparing the TOR and obtaining the relevant No Objection from the Bank. Whereas if these TORs would have been prepared at the beginning of the projects with the assistance of WB experts and standardized for all provinces, they would have made a significant impact on timely start and completion of the environmental studies. - Moreover, the availability of guidelines and forms for the studies, particularly in the environmental and health monitoring section, in such a manner as to meet the ICR requirements, would have assisted in the execution of these studies. It should be mentioned that the Ministry of Energy has in recent years prepared guidelines for monitoring the quality of surface and ground water resources, but there still is a need for similar guidelines for health and other environmental studies, report generation and documentation. - The experiences of EOP and Septage studies in Guilan have shown that the selection of inappropriate consultant can lead to undesirable consequences for projects (at least in the form of elongation of the projects' duration). Although a part of the problems is related to the performance of the initial ESO in the Province, but a revision of processes (for instance NWWEC involvement in the consultant selection process) can be instrumental. - A part of the problems undermining the environmental projects, especially the procurement of lab equipment for GWWC is related to the delays in obtaining the WB no objection and subsequently the problems of the transfer of funds. - To build capacity and to apply the experiences gained from the environmental and safety aspects of the WB financed projects, NWWEC in collaboration with the experts involved in these projects has documented and published the results and the lessons learnt. So far in this context, the Guidelines on Safety for Execution of Water and Wastewater Projects and the Standards for Auditing the Safety Status of the Companies have been prepared and have been notified to all the water and wastewater companies by the NWWEC Managing Director. Moreover a book titled Septage Management – Lessons Learned from the Experience of WB Projects is under compilation and will be published shortly. Plans have also been prepared for other books on environmental studies. - Given the plans to ensure funds from domestic and international financial institutions, particularly the Islamic Development Bank, and the latter's insistence on undertaking environmental studies based on WB model; the experiences gained from WB financed projects have had a positive impact on the time and quality of the requested environmental studies. - Given completion of the ongoing project in near future, the quality of life and environment in the covered area is expected to improve significantly. To assess this impact, it would be necessary to continue the EMP and to repeat the health studies. - The safety conditions of the projects show that despite efforts made by TSU –ESO of the provinces, there is a considerable gap with the ideal situation. Given the recent initiatives taken by NWWEC on the basis of the WB projects' experiences, the safety conditions of the projects are expected to improve considerably in near future. 40 Summary of ICR prepared by the Guilan Water and Wastewater Company (GWWC) 1. Introduction 1.1 Project Description Islamic Republic of Iran has developed a program for water supply and wastewater collection system to be executed with financial assistance (as loan) from the World Bank. The program was planned in three phases to cover to about 2027. Phase I: Execution of the water and sanitation investment projects for the two cities of Ahwaz and Shiraz (2004-2009) and preparation and initiation of sector reforms, including supporting the Gal with TA programs and studies covering the following areas: demand management, customer education, institutional reforms, the regulatory framework, tariffs and cost recovery, technology and investment priorities, sanitation strategy and integrated water conservation. A new tariff policy was planned to be drafted during this phase with WBI assistance. Phase II: Execution of the water and sanitation investment projects for the four cities of Rasht, Anzali, Sari and Babol (2005-2010), launching of the studies prepared in phase I, and implementation of the new tariff scheme initiated and prepared in phase I. Phase III: Implementation of reforms prepared under the first two phases. Investment projects were planned to be prepared for other new cities under an adaptable program loan. For phase II covering through 2005 and 2010, and a population of thousands; water supply and distribution networks and wastewater collection systems would be implemented and wastewater treatment works would be constructed in the Rasht and Anzali. The sub-project included the rehabilitation, improvement and expansion of water and wastewater systems and facilities for the city of Rasht and Anzali. The project further included operation and maintenance equipments and technical assistance training /consultant services for institutional development and project management, engineering design and construction supervision. The GWWC received a Loan from the World Bank in amount of USD 148.6 million toward a part of the cost of the project 1.2 Project Development objectives The Main objectives are to: The main development objectives of the Project are to: (i) enhance the quality of life in the Borrower‘s two northern cities of Rasht, Anzali, by: (a) improving the reliability of the water supply systems through rehabilitation and extension of the water supply networks; (b) improving the health and urban environmental conditions by providing wastewater collection services and treatment facilities; (c) contributing to the environmental protection of the natural resources of the provinces (especially the Anzali Lagoon, an internationally recognized wetland); and (ii) improve the operational efficiency and financial sustainability of the Water and Wastewater Companies. 41 1.3 Project Description: The Project consists of the following parts, subject to such modifications thereof as the Borrower and the Bank may agree upon from time to time to achieve such objective: Part A: Rasht Wastewater Collection and Treatment 1. Extending and improving Rasht‘s Wastewater collection network through approximately 70,400 new house connections, the construction of approximately 558 km of laterals, interceptors, and trunk mains, and 16 pump and lift stations in addition to collection works. 2. Upgrading a wastewater treatment plant under construction with a biological nutrient-removal unit, including other measures to reduce the risk of discharge of untreated sewage in the event of temporary plant failure. 3. Undertaking a study and an investment program for septage management (to address waste from households not connected to the wastewater collection system). Part B: Rasht Water Supply System Improving service provision in Rasht through regulating the pressure and availability of water in the distribution network, as well as reduction in losses due to leakage through various measures, including rehabilitation and extension of primary and secondary distribution piping, additional ground storage, and rehabilitation of two existing elevated storage tanks and associated pump stations (this component was removed from WB project as it was implemented by Guilan Regional Water Company though local budget). Part C: Anzali Wastewater Collection and Treatment 1. Extending and improving Anzali‘s Wastewater collection network through: (i) provision of approximately 27000 new house connections; (ii) construction of approximately 253 km of laterals, interceptors, and trunk mains; and (iii) additional pump and lift stations. 2. Improving Anzali‘s Wastewater treatment plant by upgrading it with a biological nutrient- removal unit, and including measures to eliminate the risk of discharge of untreated sewage in the event of temporary plant failure. 3. Constructing the first module of the Ghazian Wastewater treatment plant. 4. Carrying out an investment program and associated studies for management of septage from households that would have not been connected to the wastewater collection system network in the first phase. Part D: Anzali Water Supply System 1. Rehabilitating and extending Anzali‘s water distribution network with approximately 155 km of distribution network. 2. Carrying out an investment program to improve operational efficiency and reduce unaccounted-for water (including instrumentation for automation, operation and maintenance equipment). 42 Part E: Support to the Guilan Water and Wastewater Company For provision of technical assistance to enable the Guilan water and wastewater company to carry out its obligations under this project. 2. Project cost and financing plan Total project cost (Phase 1) was estimated at about US$237 million, with US$148.6 million in loan. The proposed Bank loan of US$148.6 million financed about 66.3 percent of the project cost. The rest of the cost (US$75.5 million) was to be financed by the borrower. 3. The project components: The project will include the following components: 3.1 Civil work 3.1.1. Rasht Wastewater Wastewater Collection Network The proposed first phase extension (2005 to 2010) of the wastewater collection system includes: - Construction of 70400 house connections - A collection network 558 km This component comprised of executing 558 km GRP and poly ethylene pipes. In detail design total length of all packages was estimated to amount to 280 kilometers, out of which 169 km have been completed. The remaining works are ongoing. Wastewater treatment - The Rasht wastewater treatment plant had been under construction before the WB loan. The addition of a biological nutrient removal unit was foreseen in this project. - The reservoir tank to store wastewater for 24 in the treatment plant was added in this project. In the midterm review both the above projects were removed from the implementation plan. According to agreement these will be completed through local budget. Trunk mains This component involved two contracts for construction of Wastewater collection Main Trunk of about 13691 meters in length, consisting of 5597 meter using pipes of 600 mm in diameter, 1500 meter with diameter 800 mm, 1500 meter with diameter 1000 mm and a further 5094 meter using pipes of 1400 mm in diameter made out of polycrete material. These packages are under implementation. 43 Pump and lift stations This component involved the construction of 16 pump and lift stations, out of which four are under construction. 3.1.2. Rasht Water Supply System This component aims at improving the service provision in Rasht through regulating the pressure and availability of water in the distribution network, as well as reduction in losses due to leakage. This will be achieved by rehabilitation and extension of some 701 km of piping, out of which 641 km were completed, and ground storage tanks. One storage tank of 30,000 m(3) (with a physical progress rate of 56 percent) and two 40,000 m(3) (with a physical progress of about 90 percent). There will also be a program to improve operational efficiency and to reduce unaccounted for water (including some instrumentation for automation, operation and maintenance equipment which were not realized due to transfer problem in the World Bank). Saravan- Lakan transmission main line (1,250 mm) which was removed from the World Bank project and is now under construction through local budget. 3.1.3. Anzali Wastewater Wastewater Collection system - Construction of 27000 house connections - A collection network of 253 km This component comprised of executing 253 km GRP and poly ethylene pipes. In the detail design the total length of all packages was estimated to amount to 160 kilometer, out of which 130 km have been completed. The remaining works are under construction and they will be completed shortly. This component also included provision of 27,400 new house connections. Wastewater Treatment - This component comprised of Civil detail design, construction, operation and maintenance of ANZALI Wastewater Treatment Plant-Eastern Zone (Based on available Treatment Process Design) with nominal capacity of 12000 m(3) / day, which will greatly improve the quality of the existing water bodies. In addition, a better water quality will be provided for the agricultural use or for direct flow to the Caspian Sea. - Upgrading of treatment plant to BNR and emergency basin. - Completion of ongoing collection system works. In the midterm review upgrading of exist wastewater treatment plant to BNR and its emergency basins had been removed from WB loan implementation program. 44 Pump and lift Stations 14 lift and pump stations are planned in this project. 3.1.4. Anzali Water Supply Systems This component will rehabilitate and extend Anzali‘s water distribution network with 155 km of primary and secondary distribution network. However, during the detail design, the total length of all estimated packages was increased to 211 kilometers. This component is completed. 3.2. Laboratory and operation equipment After receiving the World Bank‘s no objection on bidding documents for four packages on lab equipment the NCB procedure were followed: - RG9: Procurement of video camera for well inspection. - RG10: procurement of wastewater and laboratories equipment (HLPC and TIC analyzer). - RG11: procurement of wastewater and laboratories equipment(Microscope and Camera) - RG12: procurement of wastewater and laboratories equipment (General and Spectrometer). - RG13: Computer Hardware and UPS. The evaluation reports for these packages were submitted to the World Bank and approved. However, due to problems related to transfer of funds, these packages are still pending. 3.3. Supports to the Guilan Water and Wastewater Company Under this component the project will provide technical assistance, training and consultant services for Institutional development and environmental management plan, Technical Support Unit (TSU), engineering design and construction supervision. 3.3.1. Services To enhance the capacity of GWWC, the staffs for TSU were chosen from private sectors. They included: - TSU Manager (one full time GWWC staff) - TSU Procurement Officer (one full time Individual Consultant) - TSU Water and Wastewater Engineer (one full time Individual Consultant until year 4 of the project the after replaced by one full time GWWC staff) - TSU Environmental Officer (one full time Individual Consultant until year 4 of the project, thereafter replaced by one full time GWWC staff) - TSU Financial Officer (one full time Individual Consultant until year 4 of the project, thereafter replaced by one full time GWWC staff). 45 - Procurement experts (one full time GWWC staff and one part time Individual Consultant - For capacity building and transfer of experience of individual consultant to staffs of GWWC employed to same above position staffs from GWWC. Feasibility study and detailed design To undertake the feasibility studies and to prepare the detailed design for the extension and rehabilitation of water distribution as well as the wastewater works including the collection system, the wastewater treatment plant and the pumping stations, qualified consultants were selected through local procedure for Rasht and Anzali. Construction Supervision for water and waste water work in Rasht For supervision of construction contracts for execution of the water supply and distribution system, and reservoir, as well as the wastewater collection system and relevant pump stations in Rasht and Anzali; qualified consultants were selected through World Bank ICB procedure. Environmental Studies - Furthermore, the environmental studies such as EMP and the Water Borne Diseases (Health) studies, which indicate the level of PSO achievement, were new experiences for the Company. It is interested to continue the trend and to assess the impacts of the water and sanitation projects on the quality of life and environment. - The ongoing CAP studies are expected to address and resolve the important issue of industrial discharges to the sewage system. - Despite being addressed by the design consultant, the issue of sludge management, as raised in the PAD, became a major challenge and concern for GWWC, especially from its environmental and social aspects. The studies have been able to remove a number of ambiguities and provide answers to some questions. Although there remains many works to be done before reaching a viable solution, but through GWWC's pursuance and the application of the consultant's recommendations, one of the proposed solutions will be finalized and the relevant executive operations will be launched in a very near future. - The septage management project addressed an outstanding issue of wastewater and environment particularly in the northern provinces. There is a little experience in the country in this field and therefore finding a competent consultant was very difficult. Despite the efforts and some noticeable results, the selected consultant has unfortunately not been up to the task, although after the numerous meetings and instructions given these studies are expected to be completed soon. Since the problem of septage is common to other cities in the province, the Company looks forward to apply the outcomes of the studies to help in finding suitable solutions in other cities as well. - The studies for Emergency Operation Plan (EOP) were also a new experience for the Company. In recent years the Province of Guilan and particularly the city of Rasht have experienced crises such as earthquakes and heavy snowfalls and the extraordinary water and wastewater problems related to these disasters. Following the events, a number of studies were undertaken to increase the safety of installations and to enhance the passive defense procedures. Nevertheless, there were no specific and comprehensive studies related to Emergency Operation Plan. The unfamiliarity of the subject for the consultant and the lack of experience in the field led to the lengthening of the studies, which are expected to conclude shortly, thereby enabling the Company to apply the outcomes to 46 prepare practical procedures during emergencies. In this context, it will be necessary for the Company to undertake the necessary planning and capacity building on the basis of the consultant's recommendations. 3.4. Conclusions Rasht - 678 km water supply and distribution pipes have been executed. - 2 water storage tanks at a total volume of 80,000 m(3) (RW13 with 91.64 % physical progress and RW14 with 83.38 percent) and one water storage tank at a volume of 40000 m(3) (with 61.72 percent physical progress) have been constructed. - 170 km wastewater collection pipes have been executed. - 4 main wastewater pumping stations have are under construction. Anzali - 211 km water supply and distribution pipes have been completed. - 130 km wastewater collection pipe have been executed. - 4 main wastewater pumping stations and 7 lift stations are under construction. - Ghazian wastewater treatment plant is under construction with a physical progress rate of 40.21 percent. 3.5.Performance indicator - The baseline for the working ratio at the beginning of the project was 1.15, while the PAD had set a target of 0.75. However, due to a halt in tariffs increase during the project, this ratio was equal to 1.98 at closing date. Nevertheless, given the government's new plan for targeted subsidies, these tariffs are expected to increase rapidly in the coming years, thereby reducing the working ratio to an acceptable level. In the meantime the company has started a drive to optimize operations and to reduce costs. - Unaccounted for water was targeted to reach to 27 percent by 2009/10. This indicator was measured as 22.7% by the end of Mar 2011. - The target period for bill collections by GWWC according to PAD was four months by 2009/10. This has reached to 137 days. Lessons Learned - Given the problems experienced in the transfer of funds, we believe the World Bank should find a safe and infallible way to transfer funds to the projects. - The borrower should foresee emergency funds for critical situations such as those experienced over the last 10 months. 47 - To ensure the best progress rate in the project, the borrower should prepare the bidding documents for selection of consultants and contractors before the effectiveness of the loan. - Establishment of a local WB office in the borrower country can be of great help in the project procurement process. - Discrepancies between WB guidelines and local laws have given rise to many questions asked by supervision offices from GWWC. - PAR Code was a limitation for timely payment of contractors/consultants invoices, especially when the Iranian holidays do not coincide with those in other parts of the world. - The application of international bidding documents especially FIDIC documents proved to be beneficial and a good experience for GWWC's staff. - The experience of handling issues related to safety and environment in an independent manner was quite new in GWWC. It should however be noted that in recent years, the Company had launched its Bureau for Work Safety and Protection to follow up on safety issues in all the Company's projects and departments. - A main concern in the execution of the projects is related to the safety of the labor force and the citizens. A number of challenges such as the reluctance of workers to use individual safety equipment, the negligence of safety issues by some contractors, inefficient supervision among others led to accidents particularly at the beginning of the projects. The insistence of NWWEC, GWWC management and the WB on safety issues coupled with the numerous meetings with supervision consultants, contractors and other stakeholders, provision of necessary trainings, and constant inspections and controls of the construction sites had a positive impact on improving the conditions. Nevertheless, the achievement of ideal situation requires planning and full cooperation among the different actors in future. Following a notification by NWWEC, the Bureau for Work Safety and Protection has been established in GWWC, and on the strength of experiences gained through WB projects, the safety conditions of the Company's different aspects and projects are expected to improve. - Before the project, GWWC and its Public Relations had limited experience on public awareness programs. The extend of executive works in the frame of WB loan and the Bank's insistence on information dissemination, especially on increasing public awareness of the advantages and the disadvantages of the projects and the need for collaboration with the executives, required greater activity and closer contact with the public. The use of mass media such as local papers and radio and TV, the distribution of brochures and pamphlets, the use of tracts and display boards coupled with direct dialogues and meetings with people living within the limits of the project sites were among procedures used for the purpose. The Company has evaluated the actions as beneficial and deems it necessary to continue the trend, particularly after the launch of operations of the wastewater system with the aim of informing the public on the proper use of facilities and encouraging the subscribers to pay the relevant fees. - Despite the problems, which were mainly due to the novelty of the experience, GWWC considers the WB projects, particularly the environmental studies as beneficial experiences, and plans to apply the outcomes in future projects. 48 Thanks We would like to express our thanks to WB and NWWC teams for the cooperation shown to the GWWC staff during the project. 49 Summary of ICR prepared by the Mazandaran Water and Wastewater Company (MWWC) 1. Introduction 1.1. Project description Mazandaran Water & Wastewater Company (MWWC) implemented the Sari & Babol water and wastewater Sub-project. The sub-project included the rehabilitation, improvement and expansion of water and wastewater systems and facilities for the cities of Sari & Babol. The development was proposed to take place in 4 phases to cover the period to about 2029. Phase 1 covered the years 2006 through 2010 and a population of 200000 persons. Water supply and distribution networks and wastewater collection systems would be implemented and wastewater treatment works would be constructed. The MWWC received a loan from the World Bank in amount of USD 75.4 million as a part of the cost of the project. 1.2. Project development objectives A: Enhance the quality of life in the two cities of Sari & Babol by (I) improving the reliability of the water supply systems through rehabilitation and extension of the water supply networks, (II) Improving the health and urban environmental conditions by providing wastewater collection services and treatment facilities, (III) Contributing to the environmental protection of the natural resources of the provinces. B: to improve the operational efficiency and financial sustainability of the water and wastewater companies. 1.2.1. Project components The detailed description and components of the project are as follow: Sari wastewater collection and treatment: This component includes construction of a wastewater collection and treatment system in Sari through the: I) Provision of 16000 new house connections II) The construction of approximately 240km of laterals, interceptors, trunk mains and outfall- 2 pump stations and the construction of the first module of the Sari wastewater treatment plant (23240 m3/day) Sari improvement of the water supply system This component will extend and rehabilitate Sari's distribution network through: I) replacement of 50 km of existing pipe. 50 II) Extension of the network with 65 km of pipe. III) Addition of 85km of lateral pipes and some 5500 new water meters the component also includes an investment program and studies to improve operational efficiency and reduce Unaccounted For Water (including operation and maintenance equipment). Babol-wastewater collection and treatment the wastewater component will include: I) The provision of 16,300 new house connection. II) The construction of approximately 130km of lateral, interceptors, and trunk mains. III) Six pump and lift stations. The Wastewater Treatment Plant currently under construction will be improved through the construction of 4 km Outfall main plus the provision of facilities to store wastewater in case of emergencies Babol-Improvement of the water supply network This component includes: I) The construction of 20000m3 ground reservoir and pumping station II) The replacement of 40 km of existing pipes mains III) Extension of the network with an additional 32km of mains and IV) Some 125km of lateral pipe and 4500 water meters there will also be an investment program land associated studies to improve operational efficiency and reduce Unaccounted for Water (including operation and maintenance equipment). 2. Project costs and financing plan Total project cost (phase 1) was estimated at about US $105.24 million with US$75.4 million in foreign exchange and the civil works portion amounting to about 95.4% the cost. The proposed bank loan of US $75.4 million financed about 71.64 percent of the project cost and would meet nearly all the foreign exchange component. The rest of the cost (29.84 million) was being financed by the borrower. 3. Civil works 3.1. Sari water works Rehabilitation distribution network 50 km of distribution network has been rehabilitated. Extension main 49.5 km of extension mains was implemented. 51 Extension of laterals 85 km of extension laterals was implemented and 5500 units of new water meters were installed. 3.2. Babol Water Works Network rehabilitation 40 km of distribution network was rehabilitated. Extension mains 30 km of extension main was implemented. Extension of laterals 125 km of extension laterals was implemented and 4500 units of new water meter were installed. The first steps of Unaccounted for Water study in Sari & Babol were completed. 3.3. Sari wastewater works House connections 13000 house connections were installed in Sari. Main & interceptors 108 km of main and interceptors were implemented. Trunk sewers 1.25 km of trunk sewer was implemented. Pump station One unit of main pump station was implemented. Treatment works One module of treatment works was implemented (23240 m3/day). Outfall 1 km Outfall was implemented. Laterals 128 km of laterals were implemented. Septage management and environmental study has been completed. 52 3.4. Babol wastewater works House connections 12000 house connection were made in Babol. Main & interceptors 38 km of main and interceptor were implemented. Laterals 90 km of laterals were implemented. Pump station Three unit pump stations were implemented. Completion of wastewater treatment plant One module of wastewater treatment plant works was constructed (100000 person). Outfall 4.5 km of outfall was implemented. 4. Services 4.1. Consulting services Technical Support Unit (TSU) To strengthen the capacity of (MWWC), the TSU staff was chosen from among the Company's personnel for the following posts: 1) TSU Manager 2) Procurement officer 3) Engineering officer (2 persons) 4) Environmental officer 5) Financial officer (2 persons) 6) Administrative officer Supervision of water and wastewater project To ensure that contracts are executed according to specifications and to keep the MWWC informed on progress made and on issues encountered, two consultants were selected for supervision of water and wastewater projects. 53 Non Revenue Water One consultant was selected for the non revenue water study (Rahdane Sama consultant) Environmental Studies 1- Studies related to health, Emergency Operations Plan (EOP) and the Public Awareness studies were defined on the basis of the project's EIA and a consultant was selected for the purpose. All the three studies were undertaken for the first time in Mazandaran, and their outcomes were both considerable and beneficial for MWWC. a- The results of the water borne disease (health) show the impacts of the water and sanitation projects on the quality of life and underline their importance. They can constitute a valid indicator for evaluating the project's efficiency and the achievement of PDO. The Company is pursuing the studies with interest and intends to repeat the process after the completion of the works to assess their impact. b- The public awareness studies were the first experience of its kind for MWWC and even the entire water and wastewater companies in the country. They resulted in compilation of strategy for information dissemination and public participation for MWWC. The results were distributed among the company's Public Relation and management. Despite the numerous programs such as distribution of hand outs and brochures and interviews with local radio and TV to attract public participation in the projects and to encouraging the public to purchase subscriptions, use the services and pay for the fees, etc, the Company is expected to enhance the quality and effectiveness of the public training and awareness campaigns through application of the results and expansion of cooperation with other stakeholders such as the Department of Environment and the Province's Health Organization. c- Although the cities of Sari and Babol have not met with an emergency situation in recent years, their geographical location from the point of view of earthquake and flooding is such that makes the availability of an EOP a necessity. This experience was quite new for the Company and can supplement other studies related to safety of installations and passive defense. The lack of similar studies in the country and the unfamiliarity of the subject for the consultants resulted in the lengthening of the studies. Nevertheless, the final report was of good quality and its results were both significant and beneficial. The Company must prepare its plans and capacity building programs according to the results of the study and the consultant's recommendations. 2- Septage management project is among the important environmental studies on a critical problem of the Mazandaran Province, implemented in the frame of the WB loan. Before this, there was a limited experience in the field of septage treatment in the Jooybar WWTP in Mazandaran, which was unfortunately a failure. The selected consultant has fortunately undertaken extensive quality study in this field. The results have shed a light on may obscure and ambiguous issues related to septage in the cities of Sari and Babol. Given the geographic situation, the climatic conditions and the touristic nature of Mazandaran, the problem is prevalent in all regions of the Province and MWWC plans to compile a suitable strategy based on the study's results and to find a solution for septage management in other cities as well. 54 Strengthening of MWWC The project has contributed to the following Strengthening and Capacity Building. Establishing the TSU to support the project technically and to undertake the procurement and financial activities according to the World Bank procedures. This group consisting of eight persons, is now well trained and experienced in managing similar projects benefiting from the World Bank loan and is considered as a valuable capacity for the country. Training a number of the company's staff to enhance their capacity in managing big scale projects efficiently Strengthening national and local consulting engineers and contractors (four consultants and 24 contractors), especially the trained and skilled local contractors who are a great wealth for the province. 5. Project management report (PMR) Based on the World Bank regulation the Mazandaran Water & Wastewater Company agreed to follow the loan administrative change initiative (LACI) of the Bank. 6. Conclusion 6.1. Project assessment A- physical Sari wastewater 13000 new house connections were installed (81% of the plan). All 238 km of mains, interceptor, laterals, outfall and trunk mains have been executed (100% completion). One unit of main pump station has been constructed (100% completion). One module of wastewater treatment plant has been constructed (97% completion). Sari water 184 km of water supply and distribution pipes have been executed (92%). Babol wastewater 132.5 km of mains, interceptors, laterals and outfall have been executed (100%). Three units of pump stations were constructed. One module of wastewater treatment plant has been constructed (100% completion). 55 Babol water 195 km of water supply and distribution pipes have been executed (99% completion). Following Table shows the disbursement status of the project‘s packages Bank financed contracts according to procurement method Procurement Method Number of Contract Total Amount US Million $ International Competitive Building ICB 2 19.317 National Competitive Building (NCB) 29 74.791 Quality and Cost Based Selection (QCB) 5 4.086 Total 36 98.194 B- Performance Indicators According to PAD the total household connections in wastewater, which were to be established for Sari and Babol were 16000 and 16300 respectively. But up to now the total number of connections in Sari and Babol in order stands at 13000 and 12000. Based on our plan by end of year 2011, the total number of household connections which will be established in Sari will be 9,000 and in Babol 10,000. These will be implemented through local budget, and in terms of population coverage it would mean that 105000 persons in Sari and 100000 persons in Babol will benefit from this wastewater disposal services. The Mazandaran Water & Wastewater Company reduced the Unaccounted for Water from 33% to 28% through its water network rehabilitation. After the completion of Unaccounted for Water studies, this will be further reduced to less than 27% by the end of 2011. Meanwhile the Company will implement the remaining works until the end of 2011 through local funding. With rehabilitation & extension 184 km of water network in Sari and 195 km in Babol and 10,000 consumers in Sari and 8,000 in Babol benefitted from better quality of portable water services. The commissioning period for Sari & Babol wastewater project is 8 months, after which the operation and maintenance of the facilities will be outsourced to selected contractors. The halt in the transfer of funds from July 26th, 2010 to date caused great difficulties for ongoing packages. Another problem in the project concerns its closing date (31 Dec 2010). However, the supervising consultants must continue their task of revising and approving all the final statements during the grace period, at a time when the WB will no longer pay their fees. Another problem experienced in the project was that on first year the borrower had to prepare the bidding documents and select contractors to start the work. These processes took at least six months, which should be added to the closing date. 56 - The Mazandaran Water and Wastewater Company assigned a staff expert as the ESO of the Technical Support Unit. This had the positive result of better coordination with other departments in the Company. Beyond this, the environmental and safety studies were a new experience for MWWC. - The projects initially experienced many safety related difficulties at the work sites. The insistence of NWWEC and WB on safety issues and the constant inspections and controls of the construction sites, coupled with mandating the contractors to comply with safety measures had a great impact on improving the conditions. However, there is still work to be done to achieve the ideal situation. Following a notification by NWWEC, the Bureau for Work Safety and Protection has been established in MWWC, and on the strength of experiences gained through WB projects, the safety conditions of the Company's different aspects and projects are expected to improve. - The plan for monitoring the quality of surface and ground waters was prepared by the ESO of the TSU with the assistance of WB and NWWEC experts and implemented by MWWC. This plan, which assesses the impact of raw wastewater discharge to the environment and provides a baseline data, was a new experience for the Company. Although the Department of Environment (DOE) did not cooperate as expected, the Company is still interested to continue the work and to assess the impact of the water and sanitation project on the quality of life and environment. 7- Next steps The completion of water and sanitary works in the cities of Sari and Babol can be addressed as two following steps: 1) Completion of the remaining works defined for this implementation phase and benefiting from WB loan by the end of 2011. According to the PAD total household connections in wastewater to be established for Sari and Babol were 16000 and 16300 respectively. However to date the total number of connections realized in Sari is 13000 and in Babol 12000. Based on our plan, by the end of 2011, the total number of household connections which will be established in Sari and Babol will be 9,000 and 10,000 respectively, i.e., 105,000 persons in Sari and 100,000 persons in Babol will benefit by this wastewater disposal services. To achieve this, MWWC requires the amounts mentioned in the following table (USD 18 million) The government has allocated the amount of USD18M as shown in table below: Item Description Cost in USD million 1 Mazandaran-Water 3 2 Mazandaran Wastewater 15 Total 18 2) Operation phase: MWWC has prepared its O&M plans and the future plan is to privatize the operation of the infrastructure including the treatment plants and the network. 3) Tariffs: The government subsidies are being removed; therefore the tariff structure is being changed to cover the cost leading to a reduction in the working ratio. 57 4) Next phase: The estimated coverage of the wastewater collection system was planned to be 30% during the first implementation phase. This will be achieved following the completion of remaining works mentioned above. An acceptable level of population coverage by wastewater collection in Sari and Babol requires a minimum of 10 years of construction period. The estimated funds required for completion of water and wastewater works amounts to USD 400 million. However, given the trend of allocations by the local government, this might take a longer period. Therefore, ensuring funds from sources other than the Government from such institutions as WB, IDB, etc would accelerate the achievement of the goals. 58 Annex 8. Comments of Co-financiers and Other Partners/Stakeholders Not applicable. 59 Annex 9. List of Supporting Documents  Project Appraisal Document (Report Number 31984-IR). Northern Cities Water Supply and Sanitation Project (April 28, 2005)  Loan Agreement - Loan number 4783-IRN – June 27, 2005  Supervision Missions‘ Aide Memoires from 2005 to 2010  Implementation Status Report 1 to 12  Mid Term Review Report, December 2008  Sector Note: Cost Assessment of Environmental Degradation, Jun 30, 2005 60 Annex 10. Summary of Health Studies Guilan: In Rasht, the average annual incidence of acute diarrhea in children under five years old was 10.4% (9% in the intervention group and 11% in the control group). Considering the arrangement by season, in May the average incidence of acute diarrhea was 10% (9% in the intervention group and 12% in the control group), in August 12.5% (11.5% in the intervention group and 13.4% in the control group), in November 9.3% (8.1% in the intervention group and 10.5% in the control group), and in February 9% (8.5% in the intervention group and 9.8% in the control group). In Anzali, the average annual incidence of acute diarrhea in children under five years old was 12% (11% in the intervention group and 13% in the control group). Considering the arrangement by season, in May the average of incidence of acute diarrhea was 13% (11.8% in the intervention group and 13.5% in the control group), in August 13.3 (12% in the intervention group and 14% in the control group), in November 11% (10% in the intervention group and 13.1% in the control group), and February 10 % (9% in the intervention group and 11 % in the control group). The highest incidence of acute Diarrhea in both cities was seen in children from 2 to 5 years of age. In brief, the incidence of Diarrhea in the Anzali was higher than in the Rasht and in the both cities is moderate. It is expected to decrease with the initiation of the sewerage system program. Mazandaran: Overall 9% of the children in Sari (8% in the intervention and 10 % in the control group) had experienced an episode of acute diarrhea. In Babol, this figure was 10.4% (10% in the intervention and 10%.6 in the control group). In other words, on average, each child aged between 6 to 60 months living in Sari is inflicted with acute diarrhea, 2.4 times a year, and in Babol, 2.7 times a year. The incidence of acute diarrhea in children between 6 months to 2 years was twice as high as those over 2 years of age. In brief, the incidence of diarrhea in both Sari and Babol is intermediate. It is expected that the wastewater management program will reduce the incidence of diarrhea. 61 Annex 11. Summary of Sludge Study The sludge study shows that all disposal options will have many positive impacts on environment in comparison with the lack of sanitary disposal and also in comparison with each other, there are many advantages and disadvantages. Different options have different impacts on environmental components, for example, composting has the least negative effect on physical- chemical component and therefore composting is the best option from physical-chemical component point of view. Incineration is the optimum option from biological component point of view and from social and economical points of view co-composting and land application are the optimum options respectively. Therefore, the opinion of Guilan Water & Wastewater Company regarding the priority of component will be very important for selection of options, but generally analysis of matrix shows that co-composting is the optimum selection. It must be noted that in this study it is assumed that available composting factory in the city of Rasht can receive sludge from wastewater treatment plants and extra-organizational participation which is in good condition. It should be noted that for conduction of this option, the extra organizational participation is necessary and independent management of sludge by GWWC will not be possible. Land application in undesired grass lands of Guilan province as the second priority will increase the costs of sludge transportation. This option has positive effects on physical-chemical components but it should be considered that social and organizational resistance against this option will be a limiting factor. It should be noted that for conduction of this option, the extra organizational participation is necessary and independent management of sludge by GWWC will not be possible same as co-composting option. Considering the level of ground water in Guilan province, the probability of ground water pollution or costs of ground water pollution control in landfill option will increase. It is recommended by international guidelines that the distance between landfill and wastewater treatment plant should be more than 2 km, and out of residential areas, therefore sludge transportation costs will increase in this option too. Landfill has the third priority and the sludge composting is the fourth priority. The main causes of that are social impacts, specially the lack of public acceptance for the use of produced compost due to high fixed and current costs of this option. With regard to assessment matrix, incineration of sludge is the last priority and the main reason for that is economical component. Cost analysis shows that incineration is the most expensive option. Incineration has the most positive impacts on environmental components and without considering the economical components, it will be the second priority. With regard to technical potential of GWWC, if there was a proper management system for air pollution control, sludge incineration could be a proper option. In the other hand if the incineration is selected as final disposal option, a stable and independent management of sludge will be possible. 62 MAP 63 64 40° To Ankara 45° AZERBAIJAN 50° 55° 60° ARMENIA UZBEKISTAN TURKEY AZARBAY as -- Ar Khvoy - - - - Caspian To Turkmenbashy - JAN-E AZARBAYJAN-E - SHARQI - - Ardebil T U R K M E N I S TA N - Sea - Tabriz AR ISLAMIC REP. Atr DA - - OF IRAN ek Orumiyeh ak Anzali Atr To Ashgabat - BIL GHA Bojnurd - Rasht - - - GILAN GOLESTAN RBI - - - - Sari Gorgan - Mahabad - Zanjan Babol Mashhad Sarakhs - - Qazvin - - ZANJAN - MAZANDARAN - - KORDESTAN - Shahrud - Sabzevar QAZVIN TEHRAN - Sanandaj TEHRAN SEMNAN - - Kavir-e 35° HAMADAN - Semnan 35° Namak IRAQ - - KERMANSHAH - Hamedan - - Taybad To Baghdad - - Kermanshah - MARKAZI Qom Dasht-e-Kavir ISLAMIC REPUBLIC OF IRAN (salt desert) - - Gonabad To Herat NORTHERN CITIES - Arak - - Kashan -- - Ilam LORESTAN - - - KHORASAN WATER SUPPLY AND - - E S FA H A N To Baghdad Khorramabad - AFGHANISTAN SANITATION PROJECT - Birjand Esfahan Shahr-e Kord YA Z D To Delaram Tig - - Babol PROJECT CITIES CHAHAR MAHALL Yazd ris - - -- KHUZESTAN VA-BAKHTIARI - Bafq SELECTED CITIES ph Eu r at - Ahvaz es - PROVINCE (OSTAN) CAPTIALS Zabol - - KOHGILUYEH VA NATIONAL CAPITAL - - BUYER AHMADI - - Yasuj H el m a n d MAIN ROADS 30° - Kerman 30° RAILROADS - - - PROVINCE (OSTAN) BOUNDARIES KUWAIT - - - FA R S - - KERMAN Zahedan INTERNATIONAL BOUNDARIES Shiraz Sirjan - PAKISTAN Bam To Quetta - Bushehr To Unayzah - - - BUSHEHR SISTAN VA - - BALUCHESTAN Bandar-e - - Kangan HORMOZGAN - - Iranshahr 0 100 200 Kilometers To Bela - Bandar 'Abbas 0 50 100 150 200 Miles BAHRAIN Bandar-e To Bela SAUDI Langeh This map was produced by the ARABIA - Jask - - 25° Map Design Unit of The World Bank. 25° Chabahar The boundaries, colors, denominations QATAR and any other information shown on this map do not imply, on the part of Gulf of Oman S Arabian IBRD 33958 The World Bank Group, any judgment TE A IR on the legal status of any territory, or APRIL 2005 EM Sea any endorsement or acceptance of AB 45° 50° UNIT ED AR 55° OMAN 60° such boundaries.