Document of The World Bank Report No. 16363 LV STAFF APPRAISAL REPORT REPUBLIC OF LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT February 2, 1998 Environment and Rural Development Sector Latvia Country Unit Europe and Central Asia CURRENCY EQUIVALENTS (as of December 1997) Currency Unit = L.at Lat I = US$ 1.85 US $1 = 0.54 Lat WEIGHTS ANID MEASURES Metric System ha = hectare kg = kiilogram ton = metric ton MW = megawatts kWh = kilowatt hour LATVIAN FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS BDP - Business Development Plan CH4 - Methane EA - Environmental Assessment EBRD - European Bank for Reconstruction and Development ERR - Economic Rate of Return EU (Tacis) - European Union Technical Assistance Program for the FSU FAO - Food and Agriculture Organization of the United Nations FRR - Financial Rate of Return FSU - Former Soviet Union GDP - Gross Domestic Product GEF - Global Environment Facility GHG - Greenhouse Gases GLC - Getlini-2 Ltd. GLE - Getlini-Eco Ltd. GOL - Government of Latvia ICB - International Competitive Bidding IS - International Shopping LFG - Landfill Gas MOEPRD - Ministry of Environmental Protection and Regional Development MSDP - Municipal Services Development Project NCB - National Competitive Bidding NGO - Non-governmental Organization NPV - Net Present Value NRT - Natural Resource Tax NS - National Shopping PHRD - Japanese Policy and Human Resources Development Fund PPA - Power Purchase Agreement PPF - Project Preparation Facility PPU - Project Procurement Unit PSC - Project Steering Committee RCC - Riga City Council SAL - Structural Adjusment Loan SIDA - Swedish International Development Agency SOE - Statement of Expenditure SPC - Stopinu Pagast Council UNFCCC - United Nations Framework Convention on Climate Change VAT - Value Added Tax Vice President Johannes Linn, ECAVP Country Director Basil Kalvasky, ECCO9 Sector Director Kevin Cleaver Task Manager Anders Halldin REPUBLIC OF LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT TABLE OF CONTENTS Loan and Project Summary ...................i BACKGROUND I. . A. Country Context .I B. Sectoral Context .2 C. Bank Strategy and Experience .6 2. THE PROJECT ..9 A. Project Origin and Formulation .9 B. Project Rationale .10 C. Rational for Involvement of GEF and Other Donors .10 D. Project Objectives .1 E. Donor and Public Participation during Project Preparation .1 F. Project Components and Description .12 G. Project Costs .14 H. Project Financing Arrangements .15 I. Procurement .16 J. Disbursement .18 K. Environment Aspects .20 3; PROJECT IMPLEMENTATION . .23 A. Background .23 B. Implementation .23 C. Organization and Management .24 D. Project Implementation Schedule and Supervision .27 E. Reporting Requirements, Accounts and Audits .27 F. Monitoring and Evaluation .28 4. FINANCIAL ASPECTS ..29 A. Background .29 B. Tariff Levels and Affordability .29 C. Organization of and Financial Projections for Getlini-Eco .30 D. Past Financial Performance of Getlini-2 Ltd .31 E. Future Financial Performance .31 F. Organizational Issues .31 G. Financial Standing of Riga City .32 H. Financial Standing of Stopinu Pagast .33 5. PROJECT JUSTIFICATION - BENEFITS AND RISKS . .35 A. The Without Project Case .35 B. Project Benefits .36 C. Project Economic Costs .38 D. Economic Rate of Return. 38 E. Project Risks and Sensitivity Analysis .39 F. Financial Retums for the Project .41 6. AGREEMENTS TO BE REACHED AND RECOMMENDATION ...................... 43 A. Agreements Reached During Negotiations ................................................. 43 B. Condition of Effectiveness .................................. ... 44 C. Recommendations ................................................. 44 ANNEXES Annex 1 Description of the Physical Implementation of the Project Annex 2 Bank Group Investments in Latvia Annex 3 Financing Plan Annex 4.1 Procurement Plan Annex 4.2 Use of Funds for Different Procurement Packages Annex 4.3 Procurement Information Annex 5.1 Disbursements of Bank Loan and GE]F Grant Annex 5.2 Detailed Disbursement Schedule for Bank Loan Annex 6.1 Environmental Data Sheet Annex 6.2 Summary of Environmental Assessment Annex 7 Note on the Final Beneficiary - Getlini-Eco Ltd. Annex 8 Project Implementation Arrangements Annex 9.1 Supervision Plan Annex 9.2 Monitoring and Evaluation Annex 10 Financial Situation and Forecast - Riga City Annex 11 Budget Information for Stopinu Pagast Annex 12 Expenditure Accounts for Optional Investments Annex 13 Economic Costs and Benefits for Optional Investments Annex 14 Financial Returns of the Project RE1PUBLIC OF LATA MUlNCIPAL SOLID WASTE MANAGEMENT PROJECT Loan and Project Summary Borrower: Republic of Latvia Guarantor: Not Applicable Implementing Agency: Ministry of Finance Beneficiary: Government of Latvia, Riga City Council, and Getlini-Eco Ltd. Poverty: A poverty category is not applicable in this project Amount: US $7.95 million Terms: Payable in 17 years, including 4 years grace, at the standard IBRD interest rate for variable LIBOR-based US Dollar single- currency loans. Commitment Fee: At the rate of 0.75% on undisbursed loan balances, beginning 60 days after signing, less any waiver. Onlending Terms: It has been agreed with the Ministry of Finance that the Bank loan would be onlent under a subsidiary loan agreement to the Riga City Council, which in turn would pass these funds on to Getlini-Eco Ltd. under a separate onlending agreement. Terms would be similar to those obtained by Government of Latvia, except for a markup of about 0.7% to Government overheads / risks. Financing Plan: Loca1 Foreign Total ------------ US $ million -------------- IBRD (loan) 3.32 4.63 7.95 GEF (grant) 2.98 2.14 5.12 SIDA (grant) 0.34 1.16 1.50 Riga City Council 2.54 3.46 6.00 Getlini-Eco Ltd, 2.00 2.64 4.64 Total Financing Required 11.18 14.03 25.21 ii Project Objectives: The proposed Project would demonstrate self-sustaining modem waste management of municipal solid waste. This would be accomplished through maximum collection of generated methane, thereby reducing greenhouse gas emissions and creating a revenue stream to cover capital and operational costs of the improved landfill. Other objectives include: (a) simplifying the separation of recyclable material; (b) reducing environmental disturbances for neighbors of the disposal site; (c) demonstrating how outdated and obsolete disposal sites can be remediated and converted into sanitary landfills to enable continued operation; and (d) arresting the ongoing contamination of groundwater. The Project would also demonstrate the feasibility of developing the indigenous Latvian landfill gas as an energy resource. This technique would mitigate an otherwise constant emission of methane into the atmosphere, and at the same time, decrease the dependence on imported fossil fuel for electricity generation and/or heating purposes. Project Description: The Project involves the remediation and continued operation of the Getlini waste disposal site, comprising three integrated investment components and one technical assistance component. The Project would include: (a) the remediation of the existing disposal site; (b) technical and operational improvements to meet so-called sanitary landfill standards; (c) the establishment of a sorting line for separation of recyclable materials and arranging separate areas for storing of separated material as well as hazardous waste, which would be transported to another site; (d) the establishment of a modem waste management technology based on energy cells for enhanced degradation of easily biodegradable waste; (e) the collection of landfill gas containing about 50 percent methane, CH4; (f) the generation of electricity at the site by use of gas engines with direct delivery to the grid; and (g) technical and managerial assistance through twinning arrangements. These arrangements would enable disposal site staff to (a) efficiently operate the waste processing system and (b) achieve maximum revenues from the generated and separated by-products and (c) facilitate the future development of the company. Project Benefits: This Project would result in a number of environmental benefits. These benefits are: (a) remediation of the existing Getlini site, thereby postponing the establishment of a new site located at least at four times longer hauling distance; (b) collection of landfill gas from both already disposed waste and future waste generation, thereby reducing the emission of methane; (c) recirculation of leachate, thereby reducing treatment costs; and (d) demonstration of a technology that makes it possible to utilize other by-products from the decomposition of the waste, thereby prolonging the lifetime of the site and increasing the revenue stream. The Project would also cover its own costs, result in the cost-effective utilization of an indigenous energy resource, and result in foreign exchange savings when importing electricity or fossil fuel for heating purposes. Environmental Aspects: The environmental assessment results indicate that the Project would result in considerable environmental improvements by reducing: (a) groundwater pollution, (b) surface water pollution, (c) dust and air pollution caused by fires, (d) noise from site activities, and (e) odors from uncovered waste iii material. The project would also substantially improve the working conditions for individuals involved in the separation and recycling of waste material. Project preparation included a comprehensive environmental assessment consistent with the applicable procedures of the Government of Latvia and the provisions of World Bank Operational Directive 4.01, Environmental Assessment for a Category A project. Following this assessment, the project design was changed from opening of a new landfill site some 40 kilometers outside Riga to the rehabilitation and modernization of the existing site. Consequently, the environmental rating of the Project was changed from A to B. The Environmental Data Sheet is presented in Annex 6.1. Project Risks: The technology introduced by the Project is considered to be manageable without requiring highly specialized expertise. Owing to its comparatively recent development, practical applications are still limited, mostly to Western and Eastern Europe. The investment would also change the character of the existing operation in terms of commercial management. Managerial capacity therefore has to be considered a project risk. Other itechnical risks relate to the actual amount of waste, its composition and the resulting gas generation, and timely and acceptable payment for the electricity delivered. These risks will be mitigated through managerial and technical assistance provided under the project, through local regulations requiring that all the municipal waste generated by Riga City be delivered to Getlini, and by the signing of a power purchase agreement based on the current legislation for a period of at least 10 years. It is furthermore assumed that Riga's decline in population will be offset by increasing amounts of waste per capita. This will result in a constant, or even increasing, fraction of decomposable waste. During the final stage of project preparation, opposition to the project has been voiced by a small group which opposes any changes in the management of the Getlini site. This opposition has attempted to stir up fears among the public based on allegations of acceptance of hazardous waste at the site, reduction of the current labor force, increased disposal fees, and involuntary resettlement. The design of the project has taken all these issues into account: hazardous waste will not be accepted at the site, but in case of accidental delivery provision has been made for a facility for temporary storage; no reduction of the labor force is planned; there will be no increase in disposal fees as a result of the project; and no resettlement will take place as the project will be implemented within the borders of the existing site and does not require any additional land. The Ministry of Environmental Protection and Regional Development is taking the leading role in conducting a dialogue with this group and in conveying accurate information to the public at large. A comparatively small risk remains that the Project will not succeed in arresting the ongoing groundwater contamination. However, the groundwater flows and the geohydrological conditions have been examined extensively. Because the Project will change the character of the existing landfill operation, this risk is regarded as marginal. 1. BACKGROUND A. Country Context 1.1 Latvia, a small country of 2.6 million people in an area of 64,600 square kilometers, restored its independence in August 21, 1991. The country has a 500- kilometer coastline on the Baltic Sea, along which lie the ice-free seaports of Ventspils, Liepaja and Riga. Much of Latvia is a flat coastal plain. Nearly 43 percent of its surface area is covered with forest, interspersed with small rivers and lakes. Almost half the country is arable. The country has few natural resources and imports all of its natural gas and oil products and half of its electricity needs. 1.2 Following independence, Latvia launched a comprehensive reform program to transform its economy inte a market based system. Priced and foreign trade were liberalized and the country pursued an independent monetary policy and a prudent fiscal policy. As a result, the average inflation dropped from nearly 1000 percent in 1992 to 7.5 percent in 1997. Progress in structural reforms have also been significant. Privatization of small businesses, agricultural land, and banking institutions has been almost completed and privatization of apartments and large enterprises have shown remarkable progress after a slow start at the beginning. The pension system has been reformed and serious steps have been taken to reform health and education sectors. The fall in real GDP which began with the independence came to a halt in late 1995. Since then the GDP grow by 2.8 percent in 1996 and is estimated to have grown by 4.5 percent in 1997. 1.3 In 1995, the economy experienced serious difficulties as a result of a banking crises and the widening of the fiscal deficit to 3.3 percent of GDP. While the banking crises began with the failure of Latvia's largest commercial bank, due to its poor commercial practices, factors contributing to the rise in fiscal deficit included growing wage payments and rising tax arrears. The Government's response to the crises was impressive. The confidence in the banking system was restored through adopting a number of measures to strengthen the prudential regulations and the supervision of the banking system, including closure of banks not in compliance with laws and regulations. To reduce the fiscal deficit, the Government began to reduce expenditures. Despite these efforts the pressure on the budget continued, and to reduce this pressure on a sustainable basis, the Government began a medium term process to reform key expenditure programs and to strengthen the management of public resources. These measures which were also 2 Chapter ] supported by the Bank Structural Adjustment Loan allowed the Government to reduce the fiscal deficit to 1.3 percent of GDP in 1996 and to 1 percent in 1997. Fiscal deficit is expected to drop further in 1997. 1.4 Under the former Soviet regime, public administration and management in Latvia was highly centralized. Since independence, there has been substantial progress in the decentralization of authority to local governments. Until recently, there were three levels of local government: (a) rural districts and small towns (pagasts); (b) regions (rayons), which include rural districts and small towns on their borders; (c) and seven major cities, including Riga, which incorporate the functions of both pagasts and rayons. The GOL has decided simplifying the territorial administrative system to include only two levels of governments; the national government and the subnational government consisting of cities, towns, small municipalities, and rural pagsts. It has clarified expenditure responsibilities for the two levels of government. New laws provide for a stable and transparent system of revenue assignment. They formalize intergovernmental fiscal relations through allocations of tax revenues between the state and local governments, and allow for some revenue equalization among municipalities. The current legislative framework will adequately support the proposed project while allowing for longer term refirms and the development of the municipal sector. 1.5 Today, local governments are largely responsible for the provision of municipal services, including water, sewerage, and solid wastel collection and disposal. While service provision in most sectors is at a high level, investments are still required for rehabilitation of existing facilities, including improved environmental management in the solid waste sector. Despite progress in raising tariffs and moving toward cost recovery, local governments and associated service enterprises have insufficient funds to undertake such investments at present. Given fiscal constraints, the central government also lacks sufficient reserves to fund major investments from its state budget. The need for external financing to support public infrastructure services and mnunicipal governments has been determined to be a priority in both GOL's Public Investment Program and the Bank's Country Assistance Strategy. B. Sectoral Context 1.6 Latvia's Public Expenditure Review, prepared in 1994, highlighted the need to support priority investments in energy, transport and urban environmental services and to establish economic charges and financing mechanisms to fund such investments. Latvian authorities subsequently prepared a National Energy Strategy, which emphasizes use of indigenous energy resources and diversification of fuel choice and supply, as far as In this discussion, solid waste is a broad term covering municipal waste (largely household and public building), industrial and hospital waste, as well as hazardous waste. Background 3 possible. In 1995, the Ministry of Environmental Protection and Regional Development (MOEPRD) completed a National Environmental Policy Plan for Latvia, which was subsequently accepted by the Cabinet of Ministers. Improved waste management is cited in the Plan as one of the top five priorities for Latvia. Environmental Priorities 1.7 Over the last four years, the major environmental priority for the country has been the protection of drinking water supplies, largely supplied from surface waters. Latvia has long suffered from a low level of wastewater treatment and an overload of existing sewage treatment plants, particularly in the larger cities. Hence, attention has been directed to securing funding for investments to rehabilitate and improve the country's water/wastewater treatment plants. These efforts have been supported by a number of bilateral donors, which have participated in the Baltic Sea Environment Programme, as well as international financial institutions. Hand-in-hand with efforts to prepare investment projects has been technical assistance for municipal utility development, both operationally and financially, recognizing the decentralization of responsibility for urban infrastructure to municipalities. Fortunately, the major cities are now covered by ongoing or upcoming projects that address these problems: Riga (an EBRD commitment); Daugavpils (World Bank-financed Municipal Services Development Project); Liepaja (a Bank-financed Liepaja Environment Project); and Ventspils (self-financing from special hard currency payments for port use). The country therefore is now beginning to focus on other needs and problems. 1.8 Several themes emerged from the recent National Environmental Policy Plan: (i) continued encouragement and support to local authorities to mobilize resources for environmental services and improvements, particularly developing a self- financing capability within utilities; (ii) the need to develop environmental policy and policy instruments, considering the eventual harmonization with EU directives; (iii) concurrently, the need to build up the regulatory infrastructure and programs (including public information programs) and to train staff of the local environmental committees, which will have the bulk of responsibility for "on the ground" regulatory work in the future; and (iv) attention to the following priority problems: transboundary pollution, eutrophication of water courses, risks from growth of economic activities, waste management (both municipal and industrial), impact of agriculture, depletion of biodiversity and landscape degradation, inefficient use of natural resources, and low quality of drinking water. 1.9 MOEPRD has recently taken a number of steps to address these themes, including launching programs to support water/wastewater treatment and waste management 4 Chapter 1 services in small communities throughout the country. It is working with EU PHARE to develop a new Environment Fund (Latvia Environmental Investment Fund, or LEIF), through which some of the needed local investments could be financed. The country has recently passed a Natural Resource Taxation Law, which will provide some of the revenue for LEIF. For various aspects of institutional and regulatory development, it is supported by several bilateral donors as well as EU PHARE and the World Bank (the latter under an IDF program). 1.10 In 1995, the GOL ratified the Framework Convention on Climate Change and later prepared the National Communication of the Republic of Latvia under the UN Framework Convention on Climate Change (UNFCCC). The latter document presents an overview of the existing situation, characterizes a set of policies and activities to reduce greenhouse gases (GHG) emissions, and sets targets for the year 2000. Among the imrportant issues raised in the document, of particular relevance to this Project, are waste disposal sites -- one of the major sources of methane emissions in Latvia. The MOEPRD has declared that "reduction and collection of methane from the solid waste disposal sites is one of the Government's priorities for the reduction of greenhouse gases." Waste Management Needs 1.11 Currently, all municipal solid waste is disposed of at the nearly 500 disposal sites in various parts of the country, none of which is regarded as a well-designed sanitary landfill. Many of the existing disposal sites also pose a risk to local groundwater resources. The GOL has therefore started a program focusing specifically on upgrading or closing all existing disposal sites. To support this program institutionally, it is preparing a National Solid Waste Management Strategy, which is supported by Danish grant financing and is expected to be finished in December, 1997. 1.12 It is expected that the minimum requirement for upgrading existing disposal sites wouald be the implementation of mitigation measures to fulfill the environmental requirements for sanitary landfills, such as groundwater protection, leachate treatment, and. daily coverage of the waste. A draft law on Solid and Industrial Waste (December 3, 1996) also states two strategic goals: (a) recovery of waste material, recognizing the scope for the increased separation and use of recyclable materials; and (b) maximum utilization of the waste energy potential. At the enterprise level, greater operating and finamcial accountability is needed to achieve operational efficiencies and a self-financing capability. 1.13 Waste Management in Riga. The situation is most critical in Riga, which accounts for approximately one third of the country's total population of 2.5 million and for an estimated 40 percent or more of the nation's municipal and industrial waste. Data for the Riga Region suggests that a total of 450,000-500,000 tons of solid waste, or 430- 475 kilograms per inhabitant is generated each year, of which about 280,000 tons are municipal solid waste. While quite low compared with other European countries, it can be assumed that the lack of a waste registration system and, hence, inadequate data as Background 5 well as illegal dumping explain much of the difference with other European rates. Besides municipal solid waste, the Riga region generates the following amounts of waste each year: industrial waste (130,000 tons), hospital waste (3,000 tons), demolition waste (40,000 tons), and hazardous waste (44,000 tons). Although small amounts of hospital and hazardous wastes are incinerated, the bulk of all waste, irrespective of its hazardous nature, is dumped in disposal sites that are largely unmanaged. 1.14 Although there are some twenty smaller disposal sites in the Riga region, the largest by far is Getlini, situated southeast of the city within the boundaries of Stopinu Pagast, a village about 10 kilometers from the Riga City center. The Getlini site covers 87 hectares and is 25 years old. It receives a mixture of industrial and municipal solid waste, and has limited environment mitigation measures, such as groundwater protection. Getlini is inappropriately located due to its geology and high water table. The site does not have an effective natural barrier or artificial lining to protect the groundwater against percolating leachate. Through continuous leachate generation, the upper water table is contaminated, although the level is still manageable. If no measures are taken to reduce or eliminate the threat of further percolation of leachate, the lower aquifers, which are part of Riga City's water supply, are at serious and growing risk of becoming contaminated. 1.15 Recently, GOL declared this Project to be a national priority. The rationale is that it will provide an environmentally sound solution to nearly 40 percent of the municipal waste generated in Latvia. Furthermore, it will demonstrate state-of-the-art technology for improved waste management, and it will have a positive impact on the country's effort to reduce energy imports. Technical Background on Waste Management and Energy Utilization 1.16 Based on environmental concerns, all modern disposal sites must adhere to standards protecting the groundwater table and the treatment of leachate. There is also an increasing demand for the collection of LFG generated during waste decomposition. Such collection has been practiced since the 1 970s to reduce the risks for site fires and building explosions in the vicinity owing to gas migration and to utilize the LFG's energy content. 1.17 Modern technology for LFG collection is simple and easily implemented. It involves the placement of waste in small sealed cells, whereby the decomposition is controlled by maintaining a constant temperature and moisture content, and collection efficiency is maximized. The results of this improved technology, used since the end of the 1 980s, are an increased collection of LFG and a reduced decomposition period, that is from normally 20-25 years to less than 5 years. A detailed description of the technical aspects and physical implementation of the Project is provided in Annex 1. 1.18 The use of landfill gas (LFG), collected during the decomposition of municipal waste, can easily be utilized as a substitute for imported fossil fuels, required for either electricity generation or district heating. The overall use of LFG in Latvia would result in 6 Chapter 1 an additional capacity of 50 MWThela]. The energy generated from the LFG would cover about 1 percent of national heat demand or 2.4 percent of electricity consumption (1996 estimate). Technical coefficients based on the actual waste composition and waste volumes generated in Riga City show that the LFG is sufficient to feed a 20 MW boiler, or a 6 MW gas engine for electricity generation with methane captured under the proposed Project. 1.1]9 Utilization of the LFG would result in a revenue stream that would cover capital and operational costs. Thus, the proposed Project would create a technically, enlvironmentally sound and financially self-sustaining acceptable solution for the mumicipalities. It would be the first sanitary landfill in the Baltic States, and the first project in the Baltic States where LFG is captured and then utilized as fuel for energy production. 1.20 The optimal use of LFG entails connection with large energy suppliers, such as district heating systems, power plants, combined heat and power plants, or for production of electricity, delivered directly to the grid. The Project could serve as a demonstration project and reference point for further improvement of the waste management sector in the region. For instance, owing to the extensive use of dListrict heating systems in Eastern Europe and the former Soviet republics, future use of waste management technologies maximizing LFG collection is both attractive and feasible. C. Bank Strategy and Experience 1.21 The Bank's overall strategy in Latvia is to support the country's efforts to accelerate structural reforms leading to a full transitionr to market-based economy and, concurrently, to support efficient investments in high-priority sectors to facilitate economic growth. A list of Bank Group's investments in Latvia are provided in Annex 2. 1.22 The Bank's strategy concerning environmental issues is to support a limited number of priority investments that have significant impact in terms of achieving operating efficiencies and reducing pollution. The Bank seeks to develop projects which can also mobilize resources from other international financial institutions, bilateral donors, and nongovernmental organizations; it is also concerned with introduction of appropriate new technologies. The Bank strategy also recognizes the need to support policy and regulatory measures. In this regard, MOEPRD has received an IDF grant last year to revise air quality standards and related regulatory programs, considering in particular its interest in harmonizing with European Union (EU) environmental directives, and meeting other international commitments. This work will be coordinated closely with a Danish-supported program to build local capacity for "integrated pollution prevention and control" (IPPC), based on a new EU environmental directive. Background 7 1.23 With this proposed Project, the involvement of the Bank and the Global Environment Facility (GEF) would provide an opportunity to support Latvian efforts to: (a) find a sustainable solution for a cost-effective treatment of municipal solid waste; (b) reduce the emission of greenhouse gases and groundwater contamination; and (c) reduce the dependence on imported energy and fossil fuels for electricity and heating purposes. Project preparation has brought to Latvia new technologies to which it would otherwise not have had access. 1.24 Already, this involvement has resulted in the decision to establish a new company with the intention of adopting an entrepreneurial and commercial approach to the exploitation of the new technologies and expanding implementation to other sites. It has also resulted in the preparation of a business plan for the company's involvement in the further development of cost-effective waste management and generation of energy from municipal waste. The technology introduced under the Project allows for quick recuperation of its own costs, both capital costs and recurrent costs. Thus, private sector interest may develop in the future at similar sites elsewhere in the region. 2. THE PROJECT A. Project Origin and Formulation 2.1 The Municipal Solid Waste Management Project was originally a component of the Municipal Services Development Project (MSDP), but as the identification of a new disposal site would have delayed the finalization and implementation of the MSDP, it was delinked. The original project concept was based on the development of a new location for the future management of the Riga City waste, given preliminary indications that the groundwater was threatened by the leachate emanating from the Getlini disposal site. 2.2 However, there was also evidence that groundwater contamination was restricted to the most shallow aquifer, which was not a key water supply resource. A study3 financed by the Swedish government was made of the different aquifers underlying the disposal site and the potential for remaining at the Getlini site. 2.3 The study found that the contamination of the groundwater was limited to the most shallow Quaternary aquifer, while the more important and deeper aquifers, the Plavinas and Amata, used as resources for the water supply to Riga, had not yet been contaminated. The study also forecasted that the Plavinas aquifer would show signs of contamination about the year 2002, and the Amata aquifer about year 2020. The study concluded, however, that with the benefits from the Project, the water supply could be saved from further risks of leachate contamination. A more detailed description of the geohydrological conditions is presented in Annex 1. 2.4 The study also indicated that operation of the Getlini site could continue for an additional 50 years. With further utilization of by-products, the lifetime of the site would be 100-200 years. Finally, the study concluded that investments based on the collection of LFG to generate electricity would provide a cost-effective and sustainable solution to the current waste management problem for Riga City. 2 Loan No. 34584-LV. 3 Feasibility Study and preliminary Design of Remediation and Continued Operation of the Getlini Site, carried out by Sweco, during August 1996-January 1997. 10 Chapter 2 B. Project Rationale 2.5 In view of the large number of disposal sites that need to be either remediated and closed, or remediated for continued operation, Latvia has a large investment program ahead. Given that improved waste management normally results in a substantial increase of the disposal fee, the development of improved waste management will need to be phased in gradually to make the improvements affordable to consumers. 2.6 The proposed Project would provide a solution to meet western sanitary landfill standards without requiring a necessary increase in disposal fees, thereby demonstrating a replicable technology and reducing the current waste management problems in a cost- effective way. C. Rationale for Involvement of GEF and Other Donors 2.7 The involvement of the Bank/GEF in the proposed Project would provide an opportunity to support Latvian efforts to improve solid waste management, reduce dependence on imported energy, and improve global environmental quality through the reduction of GHG. In the absence of Bank/GEF involvement, it is unlikely that the country would be able to mobilize the technical assistance and financial resources required to implement a project of this nature. 2.8 The Project is consistent with the guidance for accessing the Climate Change short-term window of the GEF Operational Strategy, in that: (a) it is technically, environmentally, and socially sustainable; (b) it is a national priority in the National Climate Change Mitigation Plan (1995) as well as in the Environmental National Policy Plain; (c) it provides the means of abating GHG at a cost of US $3.41 per ton of carbon, which is below the maximum acceptable US $10 per ton carbon; (d) it includes an essential transfer of technology through twinning arrangements and managerial assistance during project implementation; and (e) it would develop the current emission of methane, a potent greenhouse gas, into an indigenous energy resource. 2.9 In addition, the Project would provide a mechanism for the GEF to support the development of a cost-effective waste management technology as a means of reducing greenhouse gas emissions. With successful implementation, the Project could serve as a paradigm for most of the municipalities in the Baltic Region, all of which face the requirement of improving the management of solid waste. The high potential for reducing greenhouse gases has lead the GEF Council to approve a grant equivalent of US $5.12 million. 2.10 The Swedish International Development Agency (SIDA) has declared its willingness to support the Project with a US $1.5 million investment grant. The rationale The Project 11 is that the Project would eliminate the ongoing discharge of untreated leachate and polluted runoff water from the Getlini site to River Daugava, a tributary to the Baltic Sea. Baltic Sea cleanup has become an environmental priority for Sweden. D. Project Objectives 2.11 The Project would introduce modem, self-sustaining management of municipal solid waste to Latvia. This would be accomplished by the maximum collection of generated methane, thereby reducing greenhouse gas emissions and creating a revenue stream to cover capital and operational costs of the improved landfill. Other objectives include: (a) simplifying the separation of recyclable material; (b) reducing environmental impact for neighbors of the disposal site; (c) demonstrating how outdated and obsolete disposal sites can be remediated and converted into sanitary landfills to enable continued operation; and (d) arresting the ongoing contamination of groundwater. The Project would develop the indigenous Latvian LFG into an energy resource, thereby mitigating an otherwise constant emission of methane into the atmosphere, and at the same time, decreasing the dependence on imported fossil fuel for electricity generation, heating purposes, or both. E. Donor and Public Participation during Project Preparation 2.12 The project has received broad media coverage because of its innovative aspects. A first public meeting was held on May 25, 1996. It was followed by another public meeting on October 26, 1996, and a third public meeting on December 14, 1996. In attendance were a wide range of stakeholders, including affected communities, local, regional, national, and international government project counterparts, the media, NGOs, and the currently operating solid waste management enterprise. The meetings were broadcast on television as well as national and local radio, and covered by major newspapers in Latvia. In addition, there have been several meetings with the inhabitants of neighboring communities to ensure that their concerns relating to the Project are addressed. 2.13 During the public meeting in December 1996, the results from the draft feasibility study and the draft environmental assessment were presented. The participants clearly expressed an interest in the implementation of the Project, because it would reduce noise, odor, and safeguard existing job opportunities for the regular staff at the site. Especially important to meeting participants is the arrest of the contamination of the most shallow aquifer, which is frequently used for irrigation purposes. The environmental assessment as well as the feasibility study were made available in several local public institutions to enable the local people to read the reports and provide comments to the Bank and RCC. SIDA representatives have participated both in public meetings and in Project preparation. 12 Chapter 2 The Project 13 F. Project Components and Description 2.14 The Project is directed toward the remediation and continued operation of the Getlini waste disposal site. The Project would finance the following activities: (a) remediation of the existing disposal site; (b) technical and operational improvements to meet western sanitary landfill standards; (c) establishment of a sorting line for separation of recyclable materials and arranging separate areas for the storage of separated material as well as hazardous waste, which would later be transported to another site; (d) establishment of a modern waste management technology based on energy cells for enhanced degradation of easily biodegradable waste; (e) collection of LFG containing about 50 percent methane, CH4; (f) site generation of electricity by use of gas engines with direct delivery to the grid; (g) technical assistance through twinning arrangements to enable the staff of the disposal site to efficiently operate the waste processing system and to achieve maximum revenues from the generated LFG and separated by- products: and (h) managerial assistance during the implementation period to facilitate the future development of the company. 2.15 The aforementioned activities would be grouped in three integrated investment components and one technical assistance component: (a) remediation of the existing site to meet environmental requirements in regard to leachate treatment and to avoidance of future groundwater contamination; (b) technical and operational improvements to meet western sanitary landfill standards, and arrangements for improving the separation of recyclable materials; (c) establishment of energy cells for enhanced degradation of easily biodegradable waste, collection of landfill, and generation of electricity; and (d) technical and managerial assistance through twinning arrangements. 14 Chapter 2 2.16 The proposed Project would remediate the existing waste pile covering about 35 hectares to arrest ongoing groundwater contamination. It would utilize the remaining area of about 52 hectares to establish special waste cells for enhanced decomposition of the future waste to be disposed at the site. The remediation will ensure that the current uncovered pile of waste will be totally covered and sealed against infiltration of rain water, thereby minimizing the future generation of leachate. The remaining area will be prepared to completely fulfill modem sanitary landfill requirements to avoid future neglative environmental impacts. Landfill gas will be extracted from both the existing waste pile and the new cells. A more detailed description of the necessary measures to be undertaken during the Project implementation is presented in Annex 1. To ensure that leachate is not reaching the groundwater, separate ditches around the waste pile will be established, and groundwater wells will be established downstream to control penetration of leachate into the groundwater. Energy cells for enhanced degradation of easily biodegradable organic content will be established within the remaining area (52 of 87 allocated hectares). After decomposition, the waste will be either further separated into a compost fraction or a fuel fraction, or disposed of on top of the existing waste pile. When this; pile has reached its final height (currently estimated at 45 meters), energy cells will be located on top of this pile, and the area initially occupied by the energy cells would then begin to be filled up. 2.17 Recyclable materials are currently separated by semiformal workers,4 who sift through the refuse as soon as it has been delivered to the waste site. Under this Project, this activity will be transformed to achieve less hazardous working conditions. The workers will be organized to remove recyclable materials5 from a conveyor belt at the waste receiving point, instead of working directly on top of delivered waste, with consequent reduction in accidents. After this separation, the remaining waste will be shredded and further transported on a conveyer belt to the energy cell area, thereby avoiding unnecessary traffic within the disposal site. The recyclables will be awaiting transport and sale to other companies. Hazardous waste might by mistake be transported to the site, and therefore the Project also includes a facility to enable temporary storage of that type of waste. 2.1 8 It is anticipated that the National Waste Management Strategy and new regulations will lead to an improved "quality" of the raw waste entering the site resulting in acceptable levels of heavy metals. To maximize the collection of LFG, about two or three cells will be established each year. The limited size and the short lives of the cells will allow the cells to be opened after about five years and the decomposed material to be moved to another facility for processing as compostable waste. At the site, it is presently These employees have been termed semiformal workers because they are not formally employed by GLC, the current management company. Current separation of recyclable materials includes paper and board, bottles, cans, aluminum, metal scrap, wood, tires, batteries, etc. The Project 15 possible to separate a fuel fraction from the decomposed waste, and use this in a boiler constructed for coal, wood chips, and peat briquettes. In the near- or long-term, it should be possible to utilize up to 80 percent of the original waste volume after compacting. Thereby, the lifetime of the Getlini site could be 200 years. In the Project scenario, these possibilities have not been included, and the lifetime has been calculated to about 50 years. G. Project Costs 2.19 The total cost of the Project is estimated to be US $25.21 million or Ls 13.61 million equivalent, including contingencies, recurring costs during project implementation, and interest during construction. The estimated costs for the project subcomponents is shown in Table 2.1. 2.20 The base investment cost is estimated at US $16.49 million and the base for recurrent costs at US $3.79 million, resulting in a total base cost of US $20.28 million. Physical contingencies are estimated at US $1.06 million. Price contingencies between January 1, 1997 and December 31, 2001 would amount to approximately US $2.65 million,6 or 12.4 percent of total base cost plus physical contingencies. Total contingencies represent 18.3 percent of the base cost. The foreign exchange component is estimated at approximately US $14.31 million, including contingencies and interest during construction, or 56 percent of the total project cost. 6 Assumptions Local inflation: 1997 = 9.8%; 1998 = 9.0%; 1999 = 7.0%; 2000 = 6.0%; 2001 = 6.0% International inflation: 1997 = 1.7%; 1998 = 2.2%; 1999 = 2.6%; 2000 = 2.8%; 2001 = 2.6% 16 Chapter 2 Table 2.1: Project Cost Summary by Project Sub-Component No. Description Lats '000 US $ '000 Local Foreign Total Local Foreign Total Main Financier I Material (incl. Transport Clay and Sand 569 142 711 1054 263 1,317 GEF 2 Earth Works/Remediation 232 58 289 429 107 536 GEF 3 Machinery/ Equipment/Building 22 18 39 40 33 73 IBRD 4 Groundwater ControltLeachate Treatment/Monitoring 123 366 489 227 678 905 SIDA 5 Detailed Design 68 270 338 125 500 625 IBRD 6 Civil Works/Buildings/Technical Improvements 339 277 616 628 513 1141 GEF 7 Earth Works/Improvements 859 215 1074 1591 398 1989 RCC 8 Weighbridge/Registration 9 34 43 16 63 79 IBRD 9 Sorting Unit/Shredder 181 724 905 335 1341 1676 IBRD 10 Container/Oil Tank 2 6 8 3 12 15 IBRD 11 Wheel/Track Loader 79 318 397 147 588 735 IBRD 12 Maintenance Bridge 1 5: 6 2 9 11 RCC 13 Earth Works/Gas 276 78 354 512 144 656 RCC 14 Gas Extraction Piping 52 43 95 97 79 176 IBRD 15 Civil Works/Leachate Water 262 214 476 485 397 882 RCC 16 Regulation Station 8 32 41 15 60 75 IBRD 17 Junction Manholes 0 2 2 0 3 4 IBRD 18 Collector Well/Pumping Boiler 60 241 302 112 447 559 IBRD 19 Electricity Generation Facility 410 1642 2052 760 3040 3800 GEF/IBRD 19A Local Staff Salary 197 0 197 365 0 365 RCC 20 International Procurement Specialist 16 146 162 30 270 300 IBRD 21 Twinning Arrangement 32 184 216 60 340 400 SIDA 22 Office Equipment 5 14 19 9 26 35 SIDA 22A 0 & M Project Support Unit 16 49 65 30 90 120 RCC 23 Vehicle 3 8 11 5 15 20 GEF Total Recurrent Cost 846 1199 2046 1567 2221 3788 Total Base Cost 4667 6285 10952 8642 11639 20,282 Physical Contingencies 316 256 572 586 473 1059 Price Contingencies 1056 375 1431 1956 694 2650 Total Project Cost 6039 6915 12955 11184 12806 23990 Bank-Financed Interest during Construction 659 659 1220 1220 Total Financing Required 6039 7574 13613 11184 14026 25210 H. Project Financing Arranigements 2.21 The proposed Bank loan of US $7.95 million would cover approximately 31.5 percent of total required financing, including interest during construction of US $1.22 million. The loan would finance both foreign and local costs, in the proportion described in para. 2.41. The loan would be made under the standard terms for a LIBOR-based single currency loan, and be repaid over a 17-year period, including 5 years of grace, at the standard IBRD variable interest rate and commitment fees. 2.22 Co-financing of the Project has been arranged, with grants from SIDA (US $1.5 million) and GEF (US $5.12 million) for a total of US $6.62 million (26.3 percent of project costs). These grants would be provided to GOL, which would pass them to the The Project 17 final beneficiary Getlini-Eco Ltd. (GLE) in grant form. RCC would contribute US $6 million equivalent, partly in equity and partly as a separate, interest-free, loan to GLE. The loan, US $4 million, would be repaid over 17 years after 5 years grace. The balance of US $4.64 million, (the recurrent costs during project implementation), would be financed by GLE from the cash flow generated by the Project. A more detailed description of the financing plan is provided in Annex 3. 2.23 It has been agreed with the Ministry of Finance that the Bank loan would be onlent under a subsidiary loan agreement to RCC, which in turn would pass these funds to GLE under a separate onlending agreement. Terms would be similar to those obtained by GOL, except for a markup of about 0.7 percent for the government. An interest rate of 8 percent has been used in the calculations. GLE would carry the foreign exchange risk associated with the Bank loan. 2.24 Execution of subsidiary loan agreement between GOL and RCC and GLE is a condition of loan effectiveness. I. Procurement 2.25 Table 2.2 summarizes the procurement arrangements. A more detailed presentation of procurement arrangements can be found in Annex 4.1, Procurement Plan, and in Annex 4.2, Use of funds for Different Procurement Packages over the Implementation Period, and in Annex 4.3, Procurement Information. The General Procurement Notice was published on March 31, 1997. During negotiations, agreement was reached that all the procurement funded by the Bank and GEF would be carried out in accordance with the Bank's Guidelines for Procurement under IBRD Loans and IDA Credits (January 1995, revised January and August 1996), and Guidelines for Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency (August 1981). 2.26 Procurement under parallel cofinancing arrangements would be carried out through tied procurement in accordance with the regulations of the Government of Sweden. 2.27 Contracts earmarked for financing from RCC funds would be procured following national procedures, which are acceptable to the Bank. 2.28 Procurement Management. Responsibility for procurement (and disbursement) will be with the Project Procurement Unit (PPU) to be set up under the RCC, and located at the offices of RCC (see Annex 8). This unit will be assisted by international consultants with experience in Bank procurement, disbursement and reporting requirements (for details see paras. 3.8 - 3.11). The project launch workshop is planned for July 1998. 18 Chapter 2 Table 2.2: Procurement Arrangements Project Element iCB NCB Other NBF Total Cost Civil Works 2101 4765 6866 145 145* 1607- 1607** Equipment 7381 1623 547 944 10495 5136* 498* 5634* 2117** 1375** 21* 3513** Consultant Services 314 1038 1352 314* 314* PPF - Design 637 637 637* 637* Total Procurement TOTAL 7381 3724 1184 6747 19350 Bank 5136* 145* 1135* 6730* GEF 2117** 2982 21** 5120** ICB = international competitive bidding; NCB = national competitive bidding; NBF' = not Bank financed * Bank Loan Financed Procurement GEF Financed Procurement NQtet: Consulting Services for project design (estimated to cost US $673 thousand) PPF funding, and advisory services (US $314 thousand) will be procured in accordance with Bank Guidelines for Use of Consultants (August 1981). International Shopping is estimated at US $400 thousand, and National Shopping is estimated at US $50 thousand. 2.29 Civil Works (US $1.8 million). All civil works would be procured through national competitive bidding (NCB). These civil works are mainly labor intensive, that is, earth works and construction. The Borrower would be using bidding documents for NCB contracts developed for the ECA region. 2.30 Goods and Material (US $9.2 million). All Bank-funded contracts (with the exception of the procurement of clay and sand) valued at more than US $300,000 would be procured under International Competitive Bidding (ICB). The borrower would use the Bank's Standard Bidding Documents for Goods. Procurement of sand and clay (estimated to cost US $1.6 million) would be done in accordance with NCB procedures. There are more than ten local suppliers able to provide clay and sand at competitive prices. The bidding documents would be based on the Standard Bidding Documents for Procurement of Commodities. International Shopping (IS), based on comparison of price quotations obtained from at least three suppliers from two eligible countries, will be used for procurement of small specialized equipment estimated to cost less than US $300,000 withl an aggregate amount of US $500,000. National Shopping (NS), based on the conmparison of price quotations from at least three eligible suppliers, will be used for The Project 19 procurement of office equipment and furniture estimated to cost less than US $50,000 with an aggregated amount of US $50,000. 2.31 Consultant Services These would consist of consultant contracts for detailed design (US $0.6 million) and for the consultant support for the PPU (US $0.3 million). Potential firms would be shortlisted and selected on the competitive basis according to Bank Guidelines. Given the circumstances that: (i) the shortlists and Terms of References for the consultant services were prepared and approved in the beginning of March; and (ii) the use of the new Guidelines for Procurement of Consultant Services in practice would delay the physical project implementation with one year and increase the project cost with about US $1 million, the Bank, in consultation with the Chief Procurement Advisor, agreed to exempt the Project from following the new guidelines. 2.32 Preference for domestic manufacturers will be granted in accordance with standard Bank procedures. 2.33 Procurement Review. All packages procured through ICB, the first two packages procured through NCB, and the first packages procured through IS would be subject to the Bank's prior review and approval. For consulting services, prior review is required for all contracts with individuals exceeding US $50,000, all contracts with consulting firms exceeding US $100,000; and terms of reference are required for all consultants' contracts irrespective of the contract value, and including the proposed twinning arrangement. Other procurement would be subject to the Bank's post review during supervision of the Project in accordance with the Bank's Procurement Guidelines. 2.34 Procurement Plan and Monitoring. Procurement data will be collected and recorded by PPU. The Borrower will prepare quarterly progress reports on the procurement of goods and services under the Project. J. Disbursements 2.35 The proposed Project is expected to be disbursed over a period of six Bank fiscal years (1998-2003) with an estimated closing date of July 31, 2003. Disbursements per Bank fiscal year are shown in Table 2.3. Table 2.4 shows the disbursement, for fiscal year, of all the financier's contributions for the project. Descriptions of all the Bank loan and GEF grant proceeds and forecasts of expenditure and disbursement for the proposed Project are shown in Annex 5.1. The disbursement schedule is shown in Annex 5.2. Table 2.3: Project Disbursement by Bank Fiscal Year (in Millions of US $) Year 1998 1999 2000 2001 2002 2003 Annual 0.2 5.68 9.06 4.36 3.84 2.07 Cumulative 0.2 5.88 14.93 19.30 23.14 25.21 Cumulative % 1 23 59 77 92 100 of Total 20 Chapter 2 Table 2.4: Financing Plan by Bank Fiscal Year (in Million US $) Financiers 1998 1999 2000 2001 2002 2003 Total Riga City 0 1.23 1.85 1.17 1.12 0.63 6.00 World Bank 0.20 1.56 2.74 1.73 1.12 0.60 7.95 GEF 0 2.44 2.57 0.10 0.00 0.00 5.12 SIDA 0 0.25 0.97 0.11 0.11 0.06 1.50 Getlini-Eco Ltd. 0 0.20 0.92 1.25 1.49 0.78 4.64 TOTAL 0.20 5.68 9.06 4.36 3.84 2.07 25.21 2.36 The pace of the estimated disbursement for the Project is somewhat advanced compared with the standard Bank disbursement schedules for the sector. The necessity of safeguarding the groundwater from further contamination and of enabling an early revenue stream to cover recurrent costs during implementation makes it crucial to implement heavy investments during the second year of the implementation period. Furthermore, the substantial technical assistance (through an international procurement specialist and through twinning arrangements) serves as a guarantee for timely implementation. 2.37 It is expected that first disbursements will be made against the SIDA and GEF grants. This sequence will minimize interest payments during construction. The RCC equity contribution of US $0.6 million will be paid over the five years, at US $0.12 million a year. The RCC equity will be disbursed over four years, from 1999 to 2003; in this way, the overall contribution of RCC will be spaced over time so as to avoid liquidity problems for the city administration. 2.38; Appendix 2 of Annex 7 shows the estimated disbursement schedule for the entire funcling package, including GLE's contribution from its own funds. The Bank loan will be disbursed starting in 1998, and the final disbursement is foreseen for the year 2002. 2.39 The disbursement schedule for RCCfinance and details on opening of bank account(s) were agreed upon during negotiations. A separate financing agreement betwteen RCC and GLE is a condition for loan effectiveness. 2.40 The proceeds of the Bank loan and the GEF grant would be disbursed against: (a) For goods: 100 percent of foreign expenditures, 100 percent of local ex- factory expenditures and 80 percent of local expenditures for other items procured locally; (b) For works: 100 percent of foreign expenditures and 82 percent of local expenditures; and The Project 21 (c) For consultancy services: 100 percent of expenditures for project design, technical assistance and training. The proceeds of the GEF grant would be used for 100 percent of all types of expenditures, except local taxes. All cofinancers would manage their own disbursements. 2.41 Disbursement requests would be prepared and submitted to the Bank by the PPU to be established with the RCC. It is expected that the PPU staff would attend disbursement training courses organized by the Bank (see para. 3.8 - 3.11). 2.42 Disbursement would be made against standard Bank documentation. The documentation to support these expenditures would be retained by the PPU for review by Bank supervision missions and verification by external audits. Disbursement requests would be fully documented except for expenditures under contracts for goods and equipment and consultant services valued at less than US $250,000 equivalent, where statements of expenditure (SOE) would be used. The minimum size of the application for direct payment from the loan account and issuance of a special commitment is 20 percent of the current deposit to the special account. 2.43 To facilitate Project implementation, the Borrower would establish a Special Account in one of the major foreign commercial banks on terms and conditions satisfactory to the Bank to cover the Bank's share of expenditures. The authorized allocation would be US $790,00, representing about four months of average expenditures made through the Special Account. During the early stages of the Project, the initial allocation to the Special Account would be limited to US $500,000. However, when the aggregate disbursement under the Bank loan has reached the level of US $2,000,000, the initial allocation may be increased to the authorized allocation of US $790,000 by submitting the relevant application for withdrawal. Applications for replenishment of the Special Account would be submitted monthly or when one third of the amount has been withdrawn, whichever occurs earlier. Documentation requirements for replenishment would follow the standard Bank procedure as described in Chapter 6 of the Disbursement Handbook. In addition, monthly bank statements of the Special Account, which have been reconciled by the Borrower, would accompany all replenishment requests. During negotiations, the terms and conditions of the establishment and operation of the Special Account were set forth. K. Environmental Aspects 2.44 The results from the environmental assessment indicates that the Project would result in considerable local environmental improvements by reducing: (a) groundwater pollution; (b) surface water pollution; (c) dust and air pollution caused by fires; (d) noise from activities on the site; and (e) odors from uncovered waste material. The Project would on the national level substitute either import of 6 MW power or fossil fuels imported to generate that capacity at domestic power plants, and it would on the global 22 Chapter 2 level contribute to a cost effective reduction of GHG; US $3.4/ton of carbon (see para 2.8). The Project would also substantially improve the working conditions for individuals involved in the separation and recycling of waste material. 2.45 Project preparation included a comprehensive environmental assessment consistent with the applicable procedures of GOL and the provisions of World Bank Operational Directive 4.01, Environmental Assessment (EA) for a Category A project. The EA also included a social assessment of the situation for neighbors, employees at GLIC, semiformal workers, and food- and waste pickers. Following this assessment, the design of the Project was changed from opening of a new landfill some 40 kilometers outside Riga to the rehabilitation and modernization of the existing site, and it was not until the feasibility study was finished it became clear that a B-rating for the Project better reflected the circumstances. The Environmental Data Sheet is presented in Annex 6.1. 2.46 The sole negative impacts associated with the Project consist of exclusion of semiformal workers and food- and waste pickers at the site. Semiformal workers receive pay3ment by the kilogram or volume of recovered recyclable materials, and in many cases, do not come to the site every day for work. This group is estimated to number approximately 220. Food- and waste pickers are defined as those individuals who visit the site illegally to gather food items and items of possible value. Exact numbers of this group are unknown and are very difficult to estimate, but current estimates range from 50 to 50D0. 2.47' Covering the existing waste pile and off-loading waste into a confined, controlled, and safe manner in keeping with modem waste management practices will exclude both of these groups. This impact is considered potentially significant given Latvia's transition economy. However, picking waste at a waste site is neither a safe nor healthy means of earning, or supplementing, an income. International practice universally recommends excluding all but management company employees from municipal waste disposal sites for reasons of health and safety. Considering human safety and health risks, the use of the Getlini site as a temporary remedy for social and employment problems is not appropriate. The national and municipal governments of Latvia have established a social safety net for the unemployed and destitute. A summary of the entire environmental assessment can be found in Annex 6.2. 2.48 Food- and wastepickers will be informed through a public information drive about the consequences of project implementation and the date from which there will be no furthier access to the site. A special office will be set up within RCC, where food- and waste-pickers will be provided guidance regarding existing social welfare provisions. The semiformal workers will be offered the opportunity to be employed on a contractual basis to continue to separate waste along a picking belt. The number ofjob opportunities for this purpose has not yet been defined, but is expected to be about 30-40. 3. PROJECT IMPLEMENTATION A. Background 3.1 Currently, the disposal site at Getlini, located in the Stopinu Pagast, is operated by Geltini-2 Ltd (GLC). GLC is jointly owned by the Riga City Council (RCC) (49 percent of the shares) and the Stopinu Pagast Council (SPC) (51 percent of shares). This company started operation on July 1, 1995. In order to implement the Project, RCC and SPC decided to establish a new company, Getlini-Eco Ltd. (GLE), in which RCC would have 60 percent of the shares and SPC would have 40 percent of the shares. Until the Bank loan is repaid, however, GOL through the Ministry of Environmental Protection and Regional Development (MOEPRD) would buy 5 percent of the shares from both RCC and SPC, resulting in an initial owner structure in which RCC owns 55 percent, SPC owns 35 percent, and GOL owns 10 percent. Initially, GLC was planned to be a wholly owned subsidiary of GLE in order to continue operating the site. However, during negotiations the parties declared that instead GLC would remain as an independent company and that the operation would be tendered on an open competitive basis. The company GLE was registered as a joint stock company on November 21, 1997. 3.2 In accordance with the Business Development Plan for GLE, it would be developed into a leading waste management entity in Latvia, and be involved in replicating the proposed technology at other sites. Furthermore, GLE is expected to expand its involvement into other waste management related activities. B. Implementation 3.3 RCC would have overall responsibility for project, through the already constituted Project Steering Committee (PSC). While RCC would supervise implementation, the actual realization of the investments would be delegated to the new company, GLE. The company would have a management structure that would facilitate the remediation efforts of the existing landfill and allow it to oversee the production of LFG. Proposals for management and technical assistance are contained in Annex 7. The actual operation of the landfill would be delegated to the external contractor through a management contract. A detailed schedule for activities up to the estimated start of the physical implementation is presented in Annex 8. The schedule for the physical project implementation is 24 Chapter 3 presented in Annex 4.1. Agreement on implementation schedules was reached during negotiations. 3.4 To assist with procurement and disbursements, a Project Procurement Unit (PPU) will be set up as a separate unit within RCC, under a unit head who reports directly to the chairman of the PSC. Furthermore, to assist the Steering Committee to supervise project implementation during the first two years, an international and a local Project Adviser will be employed. Their role will be to make sure that all necessary documents are prepared and permits required to maintain the project's implementation schedule. 3.5 The technical assistance required for the physical project implementation has been included under project costs, and will be provided through twinning arrangements under the SIDA grant. The proposed twinning agreement would provide expertise to both GLE and the contracted company for operation of the energy cells. The terms of reference for the twinning arrangements was discussed and agreed upon at negotiations. Several suitable counterparts have already been identified C. Organization and Management P-roject Steering Committe 3.6 The PSC consists of members of RCC, SPC, and the Ministries of Environmental Protection and Regional Development, Economy, and Finance, and Riga Region Environmental Board. The Managing Director of GLE is also a member of the comimittee. The PSC is chaired by a member of RCC, and the head of the PPU is its Secretary. During negotiations agreement was reached concerning the composition and responsibilities of the PSC, and that the RCC budget wouldfinance PSC activities. 3.7 The PSC is anticipated to meet at least once a month during the first 2 years of project implementation and thereafter every third month to maintain close monitoring of the Project and to help resolve any outstanding issues. In, particular, its functions would include: - ensuring that Project implementation is on schedule; - resolving any issues likely to delay realization of Project objectives; - liaising between representatives of GLE, PPU, GOL, RCC and SPC; - providing a focal point for the Bank and other donor agencies concerning the Project; and - assisting the PPU and GLE in any day-to-day issues that may arise during implementation of the Project. Project Implementation 25 Project Procurement Unit 3.8 The PPU would be created to be in charge of all procurement and disbursement under the Project. It would be a separate unit within RCC, and its staff would be hired under normal Government salary conditions, supplemented by a premium. The head of PPU, a Latvian national, would be appointed by RCC for the duration of project implementation. The Bank would be consulted before this appointment is made. 3.9 The responsibilities of the PPU would include: (a) preparation of a standard set of bidding documents (both for World Bank, other donor finance and locally financed contracts); (b) submission of bidding documents together with technical specifications to the Bank for no objection; (c) publication and dispatch of invitations to tender; (d) evaluation of bids and recommendation for award; (e) all procurement and disbursement related to the Project; and (f) maintenance of the Project accounts. The preparation of technical specifications for all contracts will be the responsibility of the consulting firm chosen for the detailed design. A Letter of Invitation has been submitted to short listed consultants for detailed design and preparation of tender documents, and the award of a contract for these tasks is planned for March 1998. The PPU would also be responsible, under the PSC, for maintaining relations with the Bank and other donors regarding all procurement and disbursement matters. 3.10 In addition to the unit head, PPU would have two local professionals, a procurement specialist and an accounting/disbursement officer, as well as one driver/messenger and one bilingual secretary. An external IBRD procurement specialist would be engaged (full-time for the initial year and part-time thereafter) to assist in preparing necessary procurement documentation, as mentioned in para 3.9 above, and to train staff in Bank procurement and disbursement procedures. The external specialist, hired under Bank Guidelines for Use of Consultant Services (1981), would also provide on-the-job training of local staff and organize, together with the Bank, a local seminar for all project staff concerned. 3.11 Up to loan effectiveness, the operational and equipment costs of the PPU would be financed from a Japanese grant from the Policy and Human Resources Development Fund(PHRD), for which the agreements have been signed. Thereafter, transportation and operating expenses would be financed by the Project. The RCC would make available suitable office space and furniture. During negotiations all aspects (number of staff, salary levels, operating expenses, office space, etc.) relative to the PPU were agreed on. Getlini-Eco Ltd. (GLE) 3.12 The new company, GLE, to be established under the Project would be jointly owned by RCC, SPC, and GOL, see para 3.2. This company would be directly responsible for the implementation of the Project and its operation thereafter. The proposed key staffing is as follows: 26 Chapter 3 * Managing Director, a Latvian national of sufficient experience and stature to guide the new company, to supervise implementation of the Project and to control the operations of the wholly owned subsidiary, GLC. The Bank has been consulted on the appointment of the Managing Director of GLE. . Manager of Technical Department, a Latvian national with extensive industry experience, to oversee technical implementation and to supervise the project. All environmental matters would also be dealt with by the Technical Department. The manager would be assisted by an expatriate consultant engaged on a part-time basis. There would also be a junior engineer to assist the manager in the day-to-day tasks. . Manager of Finance Department, a Latvian national, who would be responsible for all financial and commercial aspects of the project and the accounting and budgeting of the company. The manager would be assisted by an accountant. 3.13 In addition, there would be one bilingual secretary and a driver/messenger. The GLE would have an office in Riga. The operational costs of this office, including staff, has not been included in the Project cost because this new company is an additional structure recommended by the GOL to ensure a smooth implementation of the Project. However, it is foreseen that the additional operational cost would be financed from Government's 30 percent share of the Natural Resource Tax.7 This would be confirmed during negotiations. After Project completion, all costs relative to the new company would be financed from its revenues. During negotiations, MOEPRD confirmed that GOL('s share of the National Resource Tax would remain at GLE to cover its administrative costs. 3.14 The proposed twinning arrangement would be made with GLE. This would be of great assistance to the new company and instrumental in getting the project off to a timely start. This arrangement is expected to be made with a waste management company in Sweden complemented by consultants with large experience in business management and practical implementation of waste management technologies. 3.15 Company revenues would be derived from the waste disposal fee and from the sale of recovered materials and of electricity generated from LFG. Operating Company Disposal of all waste requires the payment of a Natural Resource Tax (NRT), which will be shared by the national government (30 percent), the regional government (30 percent), and the municipality where the disposal site is located (40 percent). The NRT is anticipated to be used for environmental improvements, with specific emphasis on waste management. Project Implementation 27 3.16 Under the agreements between GOL, RCC, and SPC made on December 18, 1996 and January 7, 1997, the ownership of the existing GLC would be transferred to GLE, and GLC would become a wholly owned subsidiary of GLE. However, as previously mentioned, para. 3.1, this transfer will not take place, and instead the operation of the site will be contracted, and the operating company will be selected on an open competitive bidding for the operation of the new landfill (based on the energy cell concept) and gas extraction from the old landfill. As a condition for the successful realization of these tasks, the actual management would need to be strengthened. The details of this technical assistance would need to be worked out in the context of the proposed twinning arrangement agreed upon during negotiations. 3.17 GLE would enter into a contractual arrangement with the operating company, initially for a two-year period and to be reviewed annually thereafter. The contractor would be paid a fee for receiving and processing the waste, based on the quantity of household and industrial waste delivered to the site, estimated at a total of 250,000 tons per year. D. Project Implementation Schedule and Supervision 3.18 Preparation for Project implementation would start immediately upon negotiations, while the physical implementation of the project would be realized over four calendar years, starting early 1999 until the end of 2002, with an additional six months for the payment of financial obligations entered into prior to project completion. The PPU and the GLE will be assisted by international consultants to support preparation of technical specifications, bidding documents, and supervision of civil works and equipment installation. 3.19 The proposed Project would be supervised by the Bank from both headquarters and the Riga Regional Mission for the Baltic Countries. Representatives of SIDA would also participate in supervision missions. A proposed supervision plan is presented in Annex 9.1. 3.20 Recognizing that the proposed Project would be the first Bank project in the region involving establishment of innovative, revenue-generating waste management technology, it might require significant supervision (about 20 staff weeks a year). This supervision would be particularly intensive during the first two years when considerable input would be required for engineering and procurement aspects. A mid-term review is scheduled in August 2000. E. Reporting Requirements, Accounts and Audits 3.21 The PSC staff would have overall responsibility for monitoring project implementation. It would call on PPU and the new company GLE to complete the detailed schedules required by the Bank. During negotiations, an understanding was 28 Chapter 3 reached on the scope ofreporting financial, managerial and technical matters pertaining to GLE in general, and the Project in particular. In particular GLE is expected, with the support of the PSC, to submit to the Bank semi-annual progress reports on each Project subcomponent, estimated and revised costs, schedule, objective and activity. 3.22 To record project expenditures, separate accounlts would be kept by the PPU in accordance with international accounting rules. These accounts would be audited annually by a certified accounting firm acceptable to the Bank. 3.23 In addition, modem accounting methods would be introduced for the accounts of GLE. These accounts would also be audited by certified accountants acceptable to the Bank. 3.24 To monitor the financial performance of GLE, assurances were obtained during negotiations that: (a) it will submit on a semi-annual basis financial progress reports in which the actual results would be compared with the Budget's; and (b) it will appoint independent auditors satisfactory to the Bank to audit its accounts on an annual basis, and the audit reports will be submitted to the Bank within four months of the end of the fiscal year. GLE also agreed during negotiations to submit Progress Reports and Completion Report in accordance with Bank Guidelines. F. Monitoring and Evaluation 3.25 In order to enable monitoring of key development indicators throughout the project cycle some essential commercial, operational, financial, and environmental indicators have been developed. These are further explained in Annex 9.2. Agreement on these monitoring indicators was reached during negotiations. 4. FINANCIAL ASPECTS A. Background 4.1 RCC will be the subborrower of the Bank loan, through GOL, with proceeds to be onlent to GLE. In addition, RCC will make US $6 million available for the Project, part as equity and part as an interest-free loan. To ascertain whether RCC will be able to assume these financial charges, an analysis has been made of its present and future financial position. Details are in Annex 10. The analysis shows that RCC would be able to provide the US $6 million contribution from its own funds, spaced over five years, as well as to repay the Bank loan in the (unlikely) event that GLE would not be able to service that debt. 4.2 The final beneficiary of the project, as well as its primary implementing agent, will be the new enterprise, GLE, to be founded in 1997, when it will formally start its operations. To prepare the company for the project implementation, technical assistance is required. This assistance would be largely defined in the context of the Business Development Plan (BDP), to be formulated by Bank consultants by early 1997. It will most likely take the form of: * a twinning arrangement with an experienced foreign company; and * the constitution of a technical department with specialized staff (some short-term foreign staff). 4.3 The final BDP was presented in March 1997. It includes the Articles of Association, the Shareholder's Agreement, the slate of the Board of Directors, job descriptions, company strategic plans, as well as a draft Power Purchase Agreement (PPA) between GLE and Latvenergo. The BDP and modifications of proposed major documents included in the BDP were discussed during negotiations. Submission of a signed Power Purchase Agreement is a condition of loan effectiveness. B. Tariff Levels and Affordability 4.4 Charges for household waste collection are fixed by the RCC. The annual charge for each inhabitant is at present, Ls 2.35 per m3 (with the average waste per year calculated at 1.30 m3 per person for an annual charge of Ls 3.05). The charge is based on: (a) a disposal fee payable to GLE of Ls. 0.40/mi3; (b) collection and transportation fees of Ls 1.30/mr3; (c) replacement of containers Ls 0.40/m3; and (d) a Natural Resource Tax of 30 Chapter 4 Ls 0.25/m3 . The latter is distributed to GOL (30 percent), the Riga District (30 percent), and SPC (40 percent). Charges for industrial waste vary by type of waste, between Ls 0.85 and Ls 1.06 per m 3. 4.5 It is difficult to assess the affordability of the waste disposal fee because it is levied on the inhabitants as part of an overall charge that includes rent and utilities, i.e., water, heat and electricity. For the newly urban poor, elderly and unemployed persons, these charges are too high and arrears are substantial. However, for those with a steady income, the fee structure is quite affordable. Moreover, the financial analysis shows that the Project can be financed and implemented without an increase in disposal fees. C. Organization of and Financial Projections for Getlini-Eco 4.6 GLE would be incorporated in late 1997 as a limited liability company with three shareholders: RCC (55 percent), Stopinu Pagast (35 percent) and GOL (10 percent). GLE would be responsible for project implementation. Details are presented in Annex 7. 4.7 GLE would have a relatively small staff (its organization is discussed in para. 3.12), but its quality needs to be high in order to coordinate and supervise project implementation. For this reason, the managing director must be selected carefully and foreign expertise made available. The proposed twinning arrangement would be crucial in this; regard. GLE would be responsible for continued operation of the project and expansion of the company's activities as proposed in the BDP. 4.8 Prospects of the new company are good; the cash flow projections are favorable and with the acquisition of modem waste management technology, GLE is set to become the country's leader in this field (where much remains to be done). Future cooperation with other Baltic or other former Soviet Union states could also be developed. 4.9 The main revenues for the company are the disposal fee for the received amount of waste and the sale of electricity to Latvenergo. In addition, further improvements in waste separation would lead to additional revenues from the sale of compost and a fuel fraction based on the nondegraded organic waste material. The Project also guarantees a substantial amount of energy, heat not recovered during the generation of electricity, which can be sold to either a district heating company oI to industries. A separate study will be carried out under the Project to identify possible arrangements for using this resource. However, these arrangements will not be included in the Project. The sale of electricity to Latvenergo would be crucial to maintain a financially viable enterprise. The sale will be regulated through a PPA between GLE and Latvenergo, as mentioned in para. 4.3. A draft Power Purchase Agreement has been submitted and presents a purchase price acceptable to safeguard the financial sustainablity of GLE. 4.10 A detailed profit and loss statement and cash flow projections have been made for the company, both in constant terms and adjusted for inflation are presented in Appendix Financial Aspects 31 4.10 A detailed profit and loss statement and cash flow projections have been made for the company, both in constant terms and adjusted for inflation are presented in Appendix 3 to Annex 7. The assumptions are listed in Annex 7. The projection with "constant 1996 prices" indicates that cash flow during the years of project implementation is adequate to cover recurring costs as well as interest during construction (which in fact is earmarked for Bank financing). The cash flow, in the first year after project completion, rises from 28 percent of revenues to 50 percent toward the end of the loan repayment period. Cash flow is in fact more than adequate to cover loan repayments; the ratio of loan repayment over the cash flow (debt-service ratio). The debt service ratio is about 30 percent for the first 6 years, and then rises to 59 percent in the last repayment year, due to falling electricity production. Finally, the cumulative cash flow after loan repayment rises from US $5.4 million in the first year after project completion, to US $18.6 million in the year 2019. 4.11 The results for the "inflation adjusted" projection are more favorable--for example, the debt-service ratio is 27 percent in the first year of repayment (2004) and rises to 29 percent in the last year. The cumulative cash flow after loan repayment goes from US $6.7 million in 2003 to US $38.4 million in the last year of the projection. Furthermore, the debt-service ratio (cash flow after tax over interest and principal from the year the loan will start to be repaid, 2004) is above two. D. Past Financial Performance of Getlini-2 Ltd 4.12 GLC started operations in July 1996 and has therefore only a brief financial history, with audited accounts for 1995 and nine-month figures for 1996. These figures (presented in Appendix 4 of Annex 7) show that the company is profitable, indicating that the disposal tariff now in force (see para. 4.3), and set by Riga City, is adequate to cover the company's current expenditures and to provide a reasonable return on invested capital. The retained net profit during 1995 is 15.9 percent and from January to September 1996, 9.9 percent. The main sources of revenue are the disposal fee and income from the sale of recyclable materials. For details, see Annex 7. 4.13 The company's accounting system should be modernized by adopting internationally accepted accounting standards E. Future Financial Performance 4.14 Cash flow projections for GLE (Appendix 3 of Annex 7) indicate that the company would be able to cover loan repayments, while continuing to generate surpluses for future investment. The inflation-adjusted figures are even more favorable. For details, see Annex 7. 32 Chapter 4 4.1 5 For GLC, as an example of an operating company, cash flow projections have been presented in Appendix 6 of Annex 7, while the text of Annex 7 contains detailed comments. 4.16 The projections, based on nine-month figures for 1996, show that the company will be able to generate a solid cash flow (above 16 percent as a percent of net turnover and calculated on constant streams), part of which will be transferred to GLE. These calculations have been made using the present disposal tariffs; therefore, the implementation of the overall investment program does not require any tariff increases. F. Organizational Issues 4.17 There are three components to be considered: (a) organization and management of the new company GLE; (b) creation and staffing of the PPU within RCC; and (c) teclnical assistance to Getlini-2. The BDP Consultancy would propose detailed recommendations for points (a) and (c), respectively. These recommendations, once approved by RCC and SPC, would be incorporated into the onlending agreement between RC'C and GLE, and implemented at an early. PPU staffing is discussed in paras. 3.8 - 3.11, with details in Annex 8. G. Financial Standing of Riga City 4.18 Riga is Latvia's largest city with an estimated 826,000 inhabitants, as well as the country's capital, its major port and the principal commercial and cultural center. Since the decentralization introduced in 1991, local municipal government has become increasingly independent from central government, with the right to manage its affairs autonomously through local democratic representation. As a result, the municipal authorities have a responsibility, often shared with the central government, for providing inter alia territorial infrastructure, environmental protection and municipal services (water, heat, sewerage, waste collection and disposal). Municipal authorities are also responsible for the educational, cultural, health and social welfare needs of the inhabitants. This Project therefore falls under the responsibility of Riga City. 4.19 Local government finance is based on the concept of autonomy linked to accountability. To reinforce this link, collection of tax revenue from personal income -- but not the setting of rates -- has been delegated to the rnunicipal level. For Riga City, these taxes represented almost 80 percent of total revenues budgeted for 1996. Land and property taxes are set and collected by the state and then redistributed to the municipalities and the districts. Their share of revenues was about 18 percent in 1996. Government also contributes directly to the city's revenues, but with decentralization, these subsidies have become insignificant. Financial Aspects 33 4.20 Among the principal 1996 expenditure items for the Riga City are health care (about 30 percent); education (26 percent); housing and sanitation (13 percent); and welfare (9 percent). Capital expenditures, estimated at less that 5 percent of the 1996 budget, are included with recurrent expenditures. 4.21 The city's budget is prepared by its finance department, in close cooperation with the Ministry of Finance. Municipalities report monthly to the Ministry of Finance on the execution of their budgets, followed by a detailed annual report. These and other reporting requirements of the municipalities are regulated by laws on local government budgets and on budget and financial management. 4.22 The normal budget for 1996 shows net revenues of Ls 68.5 million; expenditures are budgeted at Ls 59.0 million, plus debt service of Ls 9.5 million. This leaves the budget balanced, which is a legal requirement. Any borrowing, local or foreign, has to be approved by Government. 4.23 The 1997 budget had not yet been prepared. To assess the ability of the city to contribute to the Municipal Solid Waste Management Project, as currently foreseen, a budget projection for the period 1997-2005 has been prepared. In fact, RCC is scheduled to fund US $6.0 million or almost 24 percent of investments, in addition to its other engagements under the Water Supply and Municipal Services projects.8 Furthermore, the city would be the borrower of IBRD's proposed US $7.95 million loan to the Municipal Solid Waste Management Project. These funds would be onlent, and hence repaid, by the final beneficiary, GLE, but Riga would be the guarantor for repayment in the event the company would not be able to do so. 4.24 The projections are presented in detail in Annex 10. They are based on assumptions made by the RCC forecast regarding revenue increases of 11 percent in 1997 and by 10 percent in 1998, with the increase tapering of to 5 percent by 2003 (basically in line with the inflation forecast) and expenditures (constant annual growth of 3.5 percent in real terms). The forecasts indicate that the city generate surpluses going from Ls 8.1 million (US $15.0 million) in 1997 to Ls 18.6m (US $34.4 million) in 2000, then decreasing thereafter to LS 9.5 million (US $17.6 million) by 2005. After taking account of Riga's aforementioned commitments (water supply and municipal services projects), the forecast confirms its ability (a) to make available US $6 million over the period 1998- 2001, as well as (b) to assume repayment of the Bank loan, for which it is the guarantor, in the event of default of the final beneficiary, GLE. 8 It has been assumed that the EIB and IBRD loans taken on by Riga city for respectively the Water Supply and Municipal Services projects will be onlent, and hence repaid, to the respective enterprises. Riga City would therefore only be the guarantor of these loans and for this reason their repayment has been excluded from the projections. 34 Chapter 4 H. Financial Standing of Stopinu Pagast 4.25 The Getlini site is located within the boundaries of Stopinu Pagast, a village at about 10 kilometers from the Riga City center. The mumicipality adjoins Riga City to the south; is lightly populated, with some 7,170 inhabitants by end-1996; and is largely forested and agricultural with little industry. 4.26 Budget information (see Annex 11) provided for 1995 (actuals) and 1996 confirm the small size of the municipality compared to Riga City. While SPC's 1995 revenues and expenditures amounted to Ls 630,000, those of Riga City were about Ls 60 million. The municipality has no loans outstanding. As for Riga, the main revenue categories are Income Tax (directly received by the municipality), Property and Land Taxes, and its share of the Natural Resource Tax. Expenditures consist primarily of Housing and Utilities; Social, Educational and Cultural Activities, and Public Administration. 4.27 From the above, it is clear that Stopinu Pagast lacks the monitary resources to contribute to the financing of the Project or to put up its share of the proposed US $1.0 million share capital of the new company GLE. For this reason, it has been decided to estimate the value of the land, occupied by the Getlini site to US $400,000 to equalize the part of Stopinu Pagast's contribution of GLE equity. 5. PROJECT JUSTIFICATION - BENEFITS AND RISKS 5.1 The Riga Solid Waste Management Project is aimed at establishing an environmentally safe and cost-effective system of waste disposal for Riga City, representing 45 percent of the waste volume generated in Latvia. The Project would: (a) remediate the existing waste disposal site at Getlini and arrest the ongoing contamination of groundwater and discharge of untreated wastewater, including leachate, to the river Daugava; (b) improve the technical and operational situation on the existing site also leading to an increased separation of recyclable materials; (c) use the LFG for energy generation purposes, thereby creating substantial financial revenues as well as environmental benefits by reducing the emission of methane, a potent greenhouse gas; and (d) assist in the structural and managerial development of the existing company in charge of the site to a profit-oriented enterprise. 5.2 The Project would result in the first sanitary landfill in Latvia and the entire Baltic region to reach international standards, The revenues generated by the use of the LFG would strengthen the financial replicability of the proposed Project and make investments in environmentally sound waste management more attractive and feasible. The Project would also demonstrate a cost-effective and affordable solution for meeting sanitary landfill standards, which are expected to be a mandatory requirement in the near future as a result of the National Waste Management Strategy, currently under preparation. A. The Without Project Case 5.3 Not taking any action in the current situation would lead to leachate contamination of the two aquifers (Plavinas and Amata) underneath the most shallow groundwater layer of quaternary sand. According to hydrogeological projections by Geo Konsultants Ltd., the involved consulting company, the upper part (Plavinas) and lower part (Amata) of the Dolomite aquifer would be affected by leachate from the landfill starting in 2002 (Plavinas) and 2020 (Amata), respectively. Because the contaminant plume would move to the river Daugava, the surface water quality of this river. Since rehabilitation of contaminated groundwater layers is usually connected with prohibitive costs, even if technically feasible, the contamination would have to be interpreted as irreversible. The GOL is currently investing in improving the water quality of the Daugava River, and under HELCOM, the quality of the Baltic Sea. Therefore, any additional sources of pollution would counteract the effects of the current efforts. 36 Chapter 5 5.4 Without the project, the remaining lifetime of the landfill would be about ten to fifteen years, depending upon the amounts of waste disposed of and the height of the waste pile. Another solution for Riga's solid waste would have to be found well ahead of the end of the lifetime of the landfill. This would make necessary the identification of a suitable site, with its inherent additional costs for investment, and in finding a publicly accepted solution. At the same time, the landfill would go on being a source of ground- and surface water contamination, which most likely would force the site to be cleared even earlier. No solution to the need for a regular landfill could also lead to illegal dumping of waste in potentially sensitive areas with the associated environmental costs. 5.5 Based on the groundwater problem mentioned in para. 5.3, the Project was originally designed to: (a) remediate and close the existing Getlini site, (b) identify and establish a new site in the Riga area, and (c) strengthen bridges and up-grade access roads to the new site. The investment cost for that project wEts estimated at US $30-35 million, and would have resulted in an increase of the disposal fee with about US $21 per ton, and an increase in the hauling cost with about 400 percent. The preparation of the Project shows that the operation at Getlini can continue, and that a much more cost-effective solution can be implemented. B. Project Benefits 5.6 For assessing the project's economic viability, four options will be compared. All of them are based on the continued use of the existing waste disposal site. Option I would include environmental remediation only, without technical and operational improvements. Option 2 consists of environmental remediation, technical and operational imjprovements, leading to a sanitary landfill in compliance with international standards. Options 3 and 4 comprise of environmental remediation, technical and operational improvements as well as LFG collection, but differ in the use of the gas (district heating for Option 3, and electricity generation for Option 4). In both of the last two options, managerial assistance would be provided to the company running the landfill (Table 5.1). Table 5.1: Options for Project Economic Viability Option 1 Option 2 Option 3 Option 4 Environmental Sanitary Landfill Gas for Heating Gas for Electricity Reniediation Continued Disposal Continued Disposal Continued Disposal Continued Disposal Leachate Control/ Leachate Control/ Leachate Control/ Leachate Control/ Treattment/ Remediation Treatment/ Remediation Treatment/' Remediation Treatment/ Remediation Technical/ Operational Technical/ Operational Technical/ Operational Improvements Improvements Improvements Gas Collection Gas Collection (conventional and energy (conventional and Energy cells) Cells) Managerial Assistance Managerial Assistance Project Justification - Benefits and Risks 37 5.7 Only parts of the project benefits can be readily quantified. These are revenues from gas collection, incremental revenues from improved waste sorting, and recycling and global environmental benefits from reduced emissions of methane. Gas collection revenues are calculated by using international prices for electricity (US $0.034 per kWh) and natural gas (US $107.41 per 1000 mi3). The projected gas amounts are the sum of the methane production of the existing waste plus the projected gas generation from an annual waste disposal of a conservatively estimated 200,000 tons. The waste amount is assumed to be constant over the project period of 25 years, a declining population of Riga is expected to compensate for increasing per capita amounts of waste in the course of economic development. For the calculation of the produced electricity, an efficiency factor of 35 percent is used for the gas engines transforming gas into electricity. The incremental revenues from sorting and recycling are estimates by the director of GLC. Values for the global environmental benefits are derived by using internationally accepted monetary values for carbon dioxide emissions and converted into methane equivalents by using a factor that reflects the respective impacts of the two as greenhouse gases. 5.8 Apart from the tangible benefits, substantial unquantified benefits are associated with all project options in terms of ground- and surface water protection, through occupational safety and health improvements for existing company staff as well as positive aesthetic and odor impacts through covering of the site for the residents living close to the landfill (Table 5.2). Table 5.2: Calculation of Project Benefits Option 1 Option 2 Option 3 Option 4 Economic Remediation Sanitary Gas for Heating Gas for Electricity Benefits Landfill Electricity Product of: Gas/ Conversion Factor Electricity/ Efficiency Factor/International Price Heating Product of: Gas (amount), int. Price, seasonal adjustment Recycling Incremental Incremental revenues Incremental revenues revenues Environment Product of: Product of: al Benefits Gas (amount), Gas (amount), (Global) Monetary value for Monetary value for methane emissions methane emissions 38 Chapter 5 C. Project Economic Costs 5.9 All investments as well as operating and maintenance costs were provided in a feasibility study by technical consultants (SWECC), Sweden) and processed under domestic costing. Adjustments were made for VAT (imported goods will be VAT exempt) and a social welfare tax for the salaries (Table 5.3). Table 5.3: Economic Cost for Project Options (in Thousands of US Dollars) Option 1 Option 2 Option 3 Option 4 Remediation Sanitary Landfill Gas for Heating Gas for Electricity Investment Cost 2,588 9,402 12,916 15,773 Recurrent Cost 619 1,978 3,435 3,854 Total 3,207 11,380 16,351 19,627 5.10 Total investment (in economic terms) for the four project option varies between US $3.2 million for Option 1 (Remediation only), US $11.4 million for Option 2 (Sanitary Landfill), US $16.4 million for Option 3 (gas for district heating) and US $19.6 million for Option 4 (gas for electricity generation). o Investment costs include physical contingencies and technical assistance (for Options 3 and 4). For a cost summary of the project components for the four options, see Annex 14. * Recurrent Costs include operation and maintenance as well as incremental salaries. D. Economic Rate of Reiturn 5.11 Table 5.4 compares the base case economic rates of return as well as net present values (NPV). These are based on the costs and benefits indicated in the previous tables. Annex 13 provides more detailed information. Table 5.4: Economic Rates of Return for Project Options (NPVIO in Thousands of US Dollars) Option 1 Option 2 Option 3 Option 4 Remediation Sanitary Landfill Gas for Heating Gas for Electricity NPV wl global NA NA 4,082 4,719 benefits NPV w/o global -3,627 -10,697 -5,820 -5,200 benefits EIRR w/ global NA NA 15 15 benefits EIRR w/o global NA NA 1 4 benefits Note: NPV2O Assumes a 10 percent discount rate. Project Justification - Benefits and Risks 39 5.12 Option 4 (use of collected LFG for electricity) shows slightly better rates than Option 3 (gas for heating), and Option 4 is the best of all four alternatives. As mutually exclusive options, the higher NPV is the crucial performance indicator. For both options, global environmental benefits have a strong impact on internal rates of return and NPV. As will be seen in the sensitivity analysis, the decisive factor for the electricity and the heating option are the prices for natural gas and electricity. For the gas, the European price for natural gas has been used plus 10 percent for transport and losses.9 The electricity price for the economic analysis was derived from the boarder price for electricity imports from Lithuania. 5.13 The remediation-only scenario produces only negative net benefits; therefore, no internal rate of return can be calculated. This option would have to be justified by the unquantified environmental benefits for ground- and surface water, odor aesthetics, and occupational safety and health improvements. The annual benefits after project implementation for these unquantified benefits would have to be in the range of US $495,000 to produce a zero NPV. The same is true for Option 2 (the sanitary landfill) with even higher required unquantified benefits of US $1.45 million annually for a zero NPV. E. Project Risks and Sensitivity Analysis 5.14 The technology introduced by the project is considered to be manageable without requiring specialized expertise. Owing to its comparatively recent development, practical applications are still limited, mostly to Western Europe and North America. The investment would also change the character of the existing operation in terms of commercial management. Managerial capacity therefore has to be considered a project risk. Other risks relate to the actual amount of waste, its composition and the resulting gas generation. Projections for natural gas predict stable prices, but rates for imported electricity are expected to increase. It is assumed that Riga's decline in population will be offset by increasing amounts of waste per capita with a constant fraction of decomposable waste. The groundwater flows have been examined extensively. 5.15 A comparatively small risk remains that the project will not succeed in stopping the contamination of further aquifers underneath the landfill. Because the project will change the character of the existing landfill operation, currently informally employed food and waste pickers on the site would only partly be able to stay working on the landf .ll under the changed operational conditions that would result from the project. 9World Bank Quarterly, Commodity Markets and the Developing Countries, Nov. 1996 40 Chapter 5 Table 5.5: Sensitivity Analysis: Net Present Values for Different Scenarios With and Without Global Environmental Benefits (in Thousands of US Dollars) Option 1 Option 2 Option 3 Option 4 Remediation Sanitary Landfill Gas for Heating Gas for Electricity NPV w/o NPV w/ NPV w/o NPV NPV w/o NPV NPV w/o NPV GEB GEB GEB w/ GEB w/ GEB w/ GEB GEB GEB Basic Model NA NA -5,820 4,082 -5,200 4,719 Price: NA NA -6,944 2,959 -6,724 3,195 Gas/ Electricity- 10% Price: NA NA -4697 5,206 -3,677 6,210 Gas/ Eliectricity +10% Gas Amount NA NA -6,382 3,521 -5,863 3,621 -5% Gais Amount NA NA -6,944 2,959 -6,525 2,540 -1(% Investment Cost +10 % NA NA -7,078 2,816 -6,641 3,261 Intestment Cost +20 % NA NA -8,353 1,549 -8,082 1,821 Gas Revenue: NA NA Delayed by 1 year NA NA -6,568 2,676 -6,214 3,030 Delayed by 2 years NA NA -7,508 908 -7,488 927 Note: Assumes a discount rate of 10 p,ercent. Table 5.6: Sensitivity Analysis: Rates of Returm for Different Scenarios With and Without Global Environmental Benefits (in Thousands of US Dollars) Option 1 Option 2 Option 3 Option 3 Remediation Sanitary Landrill Gas for Heating Gas for Electricity IRR w/o IRR IRR w/o IRR IRR w/o IRR IRR w/o IRR GEB w/ GEB w/ GEB w/ GEB w/ GEB GEB GEB GEB Basic Model NA NA 1 15 4 15 Price: NA NA -1 14 1 13 Gasl Electricity -10% Gas/ NA NA 3 16 6 16 Electricity + 10% Gas Amount: NA NA 0 14 3 14 -51% Gas Amount: NA NA -1 14 2 13 -10% Investment Cost + 10 % NA NA 0 13 2 13 Investment Cost +20 % NA NA -1 12 1 12 Gas Revenue: Delayed by 1 year NA NA 1 13 3 13 Delayed by 2 years NA NA 0 11 2 11 Note: Assumes a discount rate of 10%. Project Justification - Benefits and Risks 41 5.16 Scenarios for the sensitivity analysis have been derived from discussions with experts from the Riga City Council, SWECO (the consulting company responsible for the feasibility study), the local authorities and the current management of the landfill, to be as close to reality as possible. As in the base case, Options 1 and 2 (only remediating and modernizing the landfill) do not produce positive benefit streams in any project year without taking into account the unquantified environmental benefits. Because methane emissions are assumed to be only reduced by negligible amounts, no global environmental benefits would occur. 5.17 Option 3 produces positive NPVs under all scenarios with global environmental benefits included. Without the global environmental benefits, the gas use for heating is consistently producing negative NPVs and rates of return of I percent for the base case going down to -1 percent for gas use reduced by 10 percent or Investment Costs up by 20 percent. Option 4 results in positive NPVs for all sensitivity scenarios including the global environmental benefits. Rates of return are ranging from 15 percent in the base scenario down to 11 percent in case of a delay in gas use by two years for electricity with global environmental benefits. For the base case, Option 4 produces a better NPV than Option 3 but is more sensitive to cost increases and revenue decreases. Without the global environmental benefits from the methane not emitted, the benefits resulting from the groundwater protection efforts of the project have to be taken into account to justify it from a national perspective (like all other project options). Under both Options 3 and 4, the Project is clearly sensitive to cost increases and delays in creating revenues. These are Project risks that have to be taken into account during implementation. F. Financial Returns for the Project 5.18 From a sustainable perspective, Option 4 (generation of electricity) has been regarded as the most attractive. The reason is that there would not be any disruption in the energy generated to the grid. In the case of delivery of gas for heat generation, the project would be dependent on the operating capability of the receiving boiler house, which has to be closed down for maintenance and repair several months a year. Furthermore, it was clearly expressed by the receiving company, Latvenergo, that electricity was the preferred option. Finally, according to current legislation, small electricity producers (below 12 MWE) are currently given an attractive tariff for the sale of electricity. 5.19 Based on the investment costs calculated by the Sweco consultants adjusted for physical contingencies, and recurrent costs during project implementation, costs for the Project Procurement Unit, Technical Assistance provided under Twinning Arrangements, and projected revenues from the sale of electricity and recyclable materials, the Project receives an FIRR of almost 10 percent, which should be regarded as very satisfactory for 42 Chapter 5 an environmental protection project without including any increase of the disposal fee or the waste management tariff. 5.20 A sensitivity analyses shows that in the worst case scenario, a reduction in electricity sales by 15 percent and a delay of revenues for one-year yields an FIRR of 5.34 percent, which still should be regarded as acceptable for a municipal services project. However, in such a case, an increase of the disposal fee would be considered to protect the company's cash flow. A more detailed description of the financial return calculations and the sensitivity analyses is provided in Annex 14. 6. AGREEMENTS REACHED AND RECOMMENDATION A. Agreements Reached During Negotiations 6.1 The following agreements were reached during negotiations: (a) All procurement funded by the Bank and GEF would be carried out in accordance with the Bank Guidelines for Procurement under IBRD loans and IDA Credits (January 1995, revised January and August 1996), and Guidelines for Use of Consultants by World Bank Borrowers and by the World Bank as Executing Agency (January 1981), (para. 2.25); (b) The disbursement schedule for RCC finance and details on opening of bank account(s), (para. 2.39); (c) The terms and conditions of the establishment of and operation of a special account, (para. 2.43); (d) Agreement on implementation schedules, (para. 3.3); (e) The terms of reference for the twinning arrangements, (para. 3.5); (f) Composition and responsibilities of the Project Steering Committee, (para. 3.6); (g) Financing of PSC activities from the RCC budget, (para. 3.6); (h) All aspects relative to the PPU (number of staff, salary levels, operating expenses, office space, etc.), (para. 3.11); (i) GOL's share of the National Resource Tax would remain at GLE to cover its administrative costs, (para. 3.13;. (j) Details of technical assistance in the context of the proposed GLE twinning arrangement, (para. 3.16); (k) The scope of reporting financial, managerial, and technical matters pertaining to GLE in general, and the Project in particular, (para. 3.21); 44 Chapter 6 (l) Monitoring of the financial performance of GLE will be provided through: (i) submittance on semi-annual financial progress reports in which the actual results would be compared with the budgets; and (ii) audit of GLE's accounts on an annual basis by independent auditors satisfactory to the Bank, and submittance of the audit reports to the Bank within six months of the end of the fiscal year. GLE will also submit progress reports and a Completion Report in accordance with Bank Guidelines, (para. 3.24); and (ni) Key monitoring indicators, (para. 3.25). B. Condition of Effectiveness 6.2 Conditions of Loan Effectiveness would include: (a) Execution of a subsidiary loan agreement between GOL and RCC and GLE, (para. 2.24). (b) Execution of a separate financing agreement between RCC and GLE (para. 2.39). (c) Submission of Power Purchase Agreement signed by GLE and Latvenergo (para. 4.3). C. Recommendation 6.21 With the above agreements and conditions, the proposed Project would be suitable for a Bank loan of US $7.95 million equivalent to the standard variable interest rate with a maturity of 17 years, including 5 years grace period. The Borrower would be the Republic of Latvia. LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEXES February 2, 1998 Annex 1 Description of the Physical Implementation of the Project Annex 2 Bank Group Investments in Latvia Annex 3 Financing Plan Annex 4.1 Procurement Plan Annex 4.2 Use of Funds for Different Procurement Packages Annex 4.3 Procurement Information Annex 5.1 Disbursements of Bank Loan and GEF Grant Annex 5.2 Detailed Disbursement Schedule for Bank Loan Annex 6.1 Environmental Data Sheet Annex 6.2 Summary of Environmental Assessment Annex 7 Note on the Final Beneficiary - Getlini-Eco Ltd. Annex 8 Project Implementation Arrangements Annex 9.1 Supervision Plan Annex 9.2 Monitoring and Evaluation Annex 10 Financial Situation and Forecast - Riga City Annex 11 Budget Information for Stopinu Pagast Annex 12 Expenditure Accounts for Optional Investments Annex 13 Economic Costs and Benefits for Optional Investments Annex 14 Financial Returns of the Project LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 1 PROPOSED TECHNOLOGY AND DESCRIPTION OF THE PHYSICAL PROJECT IMPLEMENTATION ANNEX 1 PROPOSED TECHNOLOGY AND DESCRIPTION OF THE PHYSICAL PROJECT IMPLEMENTATION Different technologies for landfill gas extraction The basic technique used for gas extraction is to cover the waste body area with a number of gas wells. The wells are equipped with pumping devices, which create a sub-pressure in the waste body, andenable collection of the generated landfill gas. There are different conditions and techniques of implementation of gas generation and extraction systems. The general techniques presentedbelow are gas extraction system from existing landfills and/or from new constructed landfills, and gas extraction from new constructed landfills with energy cells (enhanced anaerobic digestion). Landfill gas extraction systems in existing landfills and new constructed landfills In existing landfills, gas wells are drilled vertically into the landfill body. The well is constructed with perforated pipes with a total length which is almost the same as the depth of the waste pile. If the landfill is under construction, the gas wells or horizontal gas drains can also be constructed during disposal of waste. Each gas well is connected to a gas regulation station where the gas from each well can be regulated and condensate removed. The regulation station is connected to a central pumping station by main pipes which provides a sub-pressure in the landfill body and recover the generated landfill gas. Landfill Gas Extraction System Using Energy Cells General The degradation process which is presented in the previous section can, by implementation of appropriate technology equipment, be enhanced. Instead of traditional disposal in a huge landfill body, the waste is disposed in separate cells, called energy cells. In the energy cell, the decomposition is performed under enhanced anaerobic conditions. In order to accelerate the anaerobic decomposition process suitable conditions for bacteria growth are created. By control of, among other things, waste particle size, humidity, acidity, temperature and possible relation between coal/nitrogen the forming of methane gas and the decomposition of refuse is accelerated. The aim is to reduce the decomposition period from normally 20-25 years to about 5 years in an energy cell. Annex I Page 2 of 19 The process which we include in the expression energy cell can shortly be described as follows: - the refuse is shredded and placed in a closed space, the energy cell - where free supply of oxygen is prevented - the generated gas, is extracted continuously - the leachate collected is reinjected into the cells in order to stabilise the humidity of the waste at a high level, about 70%, enhancing the degradation process - the energy cell is supplied with heat via a leachate water system to receive an optimum temperature in the refuse, about 37°. The energy for this is acquired by eg heat exchanging from the gas pumping station and/or an internal gas engine using extracted gas for electricity generation the cell is excavated after completed decomposition and the residues are sieved in two or three fractions. At this stage the residues can be divicded into the following rest products: * extracted gas 20% of weight * soil 30-35% of weight * combustible materials 30-35% of weight * inert material 10-20% of weight Technique An energy cell can be laid on natural ground or filled up ground, in the same way as ordinary refuse deposits. The bottom is levelled, slightly sloping towards a low point and sealed with a layer of fine earth compacted with a roller or a sleigh. In the low point, a plastic drainage pipe is laid in a shallow, open trench. The heating system is a closed circuit and designed for supplying enough energy to keep the inner part of the cell at a temperature of about 37°C. The refuise must be fragmented, particularly the domestic refuse, before being disposed at the finished bottom layer. This is best achieved by a shredder. The shredded refuse is carefully spread in layers on the finished bottom surface. Further compaction besides that of moving vehicles is not needled. The cell should be covered by a imperneable layer. This layer will be established during construction of the cell. An example of layer design is a loose layer of second-rate peat about 0,3 Annex 1 Page 3 of 19 m with an additional top layer of about 0,3 m with rather impermeable earth (such as fine till). The peat layer will, apart from reducing the infiltration together with the top layer, have an important function of insulation of the cell. The surface is slightly compacted. Pipes (perforated steel pipes) for gas extraction and leachate water injection are installed in the cell from its surface and each type of pipe is connected with flexible plastic tubes and a connection pipe to the gas pumping station and the leachate collection pond respectively. From the gas pumping station the gas is sucked from the cell with a slight sub-pressure. In order to reach a maximum rate of decomposition in an energy cell during anaerobic conditions it is necessary that * the refuse is shredded * the relation between available carbon and nitrogen is about 60/1 or less * the refuse moisture is high * the pH value is about 7 * heat is added for control of the cell temperature, normally 37°C. Summary of conditions at Getlini Gas pumping tests Gas pumping tests carried out during September and October in 1996, shows that the gas generation follows the extraction estimated from theoretical calculations. Waste amounts and composition Each year, approximately 205 000 tonnes of municipal waste is received at Getlini. In addition, about 45 000 tonnes of industrial waste is also delivered at the site. The dry substance content in municipal waste is estimated to be 62%. The corresponding organic content is estimated to 39% of the total waste (or 63% of dry substance). Of the organic content, 62% is considered to be biodegradable (or 24% of total weight). The potential landfill gas production from industrial waste is basically related to the content of paper. The paper is estimated to have a dry substance content of 95% and a corresponding organic content of 90% of total amount (ie 95% of dry substance content). Biodegradable part is estimated to be 72% of total amount (ie 80% of organic content). Annex 1 Page 4 of 19 Lifetime of the site An important information for the decision of the waste management method to use is the lifetime of the site, and to what extent different systems affect the total duration of the operation at the specific location. The lifetime of a site depends of various factors as operation methods, local regulations, etc. Below, the lifetime of the site for some different alternatives has been simulated. The motives for these figures are not to show an exact figure for the lifetime of the Getlini site but do illustrate how significant the choice of operation method is for the lifetime of the site. Regulatory factors Today there are no local regulations that limit the height of a landfill. The current highest point of the landfill is about +38 metres above sea level. Thus, it has been assumed that future alternatives for the rnaximum height is +45, 50 or +55 metres above sea level. The physical maximum height equals 4-62 m above sea level. The available volumes that can be disposed at the landfill in accordance with the regulation factors presented above, have been calculated for different landfill altitudes are presented below: Maximum height Available volumes for disposal (in (above sea level) million ml) +45 m 8.5 +50 m 9.6 +55m 10.4 +62 m 11.3 The precondition used for the estimate of available volumes is that the landfill slope is 1:3. Simulated alternatives Two main alternatives has been investigated: Annex 1 Page 5 of l9 - Alternative A, where the current operation continues without any changes in general disposal technique - Alternative B, where the general disposal technique is changed to energy cell technique Overall conditions, such as incoming amounts of waste etc. is assumed to in accordance with results presented in section 3. For alternative A, 10 % of incoming waste is assumed to be sorted out as recovered material before disposed in the landfill. For alternative B, the full operation of new disposal technique is assumed to be implemented after 2 years. Until then the conditions are the same as for alternative A. After full implementation 20 % of incoming waste is assumed to be sorted out. During the decomposition 20% of the material is converted into landfill gas which is extracted. After 5 years, the energy cells is considered to be excavated. The fraction of the remaining cell residue that will be disposed in the landfill can vary from 20% (best case) - 80% (worst case) depending of the recovery possibilities. Results Below, the comparable results from the simulations are presented in a matrix form. The alternatives +40 metres and +62 metres above sea level has not been further simulated. Regulated Lifetime Lifetime Lifetime maximum height. altemative A (no alternative B - altemative B - (m above sea change of current worst case (energy best case (energy level) conditions) cell + 80% cell + 20% disposed at disposed at landfill) landfill) +45 22 years 50 years 180 years +50 24 years 56 years 206 years The results give the following conclusions: * current operation practise results in a shorter lifetime of the landfill Annex 1 Page 6 of 19 * the energy cell technique makes it possible to extend the life time of the site for at least another 50 years It should again be emphasised that these figures just show an example in order to indicate the difference in life time using different techniques. Implernentation of the recommended system at Getlini Existing landfill The proposed concept assumes that the existing landfill pile will be penetrated by gas extraction wells. Thus, the proposed landfill gas extraction system may comprise up to 200 gas extraction wells. However, areas where the waste pile is less than 5 m deep and in areas which today are paved and used for other operation activities will not be included in the extraction system. The landfill gas system will be constructed integrated with the covering activities. The we]lls are drilled vertically into the landfill. Each well has an estimated circular reception area of about 1250 m2, which equals a radial distance of about 20 m from the gas well. The gas extraction well is constructed of perforated steel pipes with a total length of the waste pile's thickness. The gas well is connected to a gas lateral-pipe which conveys the gas to a control station, where the gas flow from each well can be controlled and condensate removed. All pipes will be laid in common pipe trenches. A main gas pipe is leading to the gas pumping station. In general, collected leachate water is injected into the pile in order to enhance the degradation of waste. UJnder the existing circumstances where the ground water table is located a few metres above the waste bottom, the moisture content in the waste is normally sufficient and a leachate water injection system is not necessary. Energy cells Each cell includes waste generated from about half a year, ie two cells are constructed each year. The estimated volume of domestic waste (depending on the sorting results) is 105 000-120 000 m3 (with a compaction level of about 800 kg/m3) each 6 months. Annex 1 Page 7 of 19 The height of each cell is about 12 m and the area is 95 - 180 m, including earth walls and covering. The cell is sloping 1:7 from the top meeting the cell walls which are sloping 1:2. The natural ground is levelled and compacted and a sealing layer of clay is applied. The thickness of the bottom layer will vary from 0.2 to 0.4 metres when the permeability of the sealing material varies from 10-11 m/s to 10-'rm/s. The bottom is sloping towards one corner. When the cell is filled to the top it will be covered with a soil layer. This layer shall be 0.3 m thick and comprise of soils with a permeability of I0O- rn/s or less. The surface is lightly compacted by a tracked vehicle. Gas is extracted via perforated steel pipes driven into the waste pile and connected via a pipe system with gas pumping station. In the gas pumping station a compressor sucks gas from the cell with a slight under-pressure. Leachate water from energy cells Leachate water is proposed to be circulated through the cells to maintain the moisture content and keep temperature at a suitable level of 37 °C in the decomposing waste. Recirculation of leachate water also prevents loss of organic substances. The circulation system is closed outside the cells also to prevent uncontrolled pollution of other waters. Pipes for leachate water injection are installed in the cell from its surface. The leachate water is collected in the energy cell watertight bottom at the sloping by a perforated drainage pipe. The drainage pipe discharges by gravity into a watertight concrete well containing a heat coil. The leachate water is heated up to some 42°C. It is then pumped back to the cells for injection at the top of the cell. The water is trickling through the waste to the bottom to start another circulation cycle. The water temperature would then be some 32°C. The total quantity of circulating leachate water is decided by the energy that is required to keep a cell at 37°C. The heat required for heating of the leachate water is generated with an internal heat coil with the extracted gas as fuel. If the main gas boiler or power station utilises all extracted gas, the leachate can be heated by the surplus heat from these facilities. When the digestion is completed in a cell the gas extraction and leachate water circulation is ended. The pipe and well system of the cell will be removed. The cell will then be excavated and its content can be sieved to separate soil from non digested waste. Annex 1 Page 8 of 19 Benefits from chosen system From the general technique used, the site can be in operation for many years in the future. As indicated in section 6.3, the lifetime of the site is, at worst case, limited to about 50 years but is most likely significantly longer than that due to two reasons: * the disposal area can be extended another few hectares and still be within the borders of the site (how much is to be discussed in the future) the residues from the excavated cells will at least into some extent, most likely be possible to use for other purposes that to be disposed at the lanidfill Both these reasons makes it most likely that the operation of the site can continue for another many years, probably 50 - 70 years. During the operation, gas will also be extracted. In figure 6.2 below, the accumulated extracted energy content in extracted gas from now and in the future are presented, assuming a continuous extraction. Esdmated accumulated gas extraction in UWh 5000 4oo 4000 3500 3000 2000 1500 1000 50 XO/~~ ~ ~~~~~~~~~~~~~~~~~~~ I '. 0 ' :, o~~~~~~~~~~~~~Yu Y ar 'Figure 6i.2 Accumulated landill gas production in GWh for suggested system until year 2025. Annex 1 Page 9 of 19 Basic conditions for future activities The proposal for future operation of at Getlini is based on the following: the environmental impacts from the landfill will be minimized. The main measures undertaken is covering of the existing landfill area, implementation of gas extraction system, collection and treatment of polluted leachate water and establishment of a hydrological barrier in the groundwater aquifer to control the infiltrated leachate and future infiltration of leachate into the aquifers * the site will be equipped with an efficient biogas extraction system both in the existing landfill and in the future extended area. Landfill gas extraction will reduce the environmental impacts from the site and generate revenues to the operation of the landfill * no unsorted waste is supposed to be disposed at the landfill. Thus, central sorting activities will be implemented. These activities will extend the life span of the site (since less material is disposed), generate revenues to the operation of the landfill, and will decrease the environmental impacts from the landfill the operation has to be monitored from different points of view. Of special interest is groundwater quality monitoring programme quality of surface runoff and treated leachate water discharged into River Daugava registration of delivered waste with respect to content, classification and amount the operation of the landfill should be possible to extend for a many years in the future,through all activities and measures undertaken for years to come landfilling will be restricted to wastes which cause minimal harm to environment. Municipal wastes will, after sorting, be digested in energy cells for approximately 5 years. After fulfilled digestion, the cell will be excavated and a new cell be constructed on the samne base. The residue can be separated by sieving and separated into 3 fractions. The rest fraction could be sold or stored as inert waste at the landfill area. The compost fraction can be used as covering material on site or sold as compost while the fuel fraction can be used as fuel for eg district heating. the site will not accept any hazardous waste mixed with other wastes. At the site, temporarily storage, but no treatment, of sorted hazardous waste is available. However, the site is not designed for treatment or storage of special hazardous waste such as radio active wastes, toxic wastes or hospital waste (sharp and sticking materials, infectious wastes etc). These types of wastes should Annex 1 Page 10 of 19 insteacd be sorted at source and be directed to assigned plants for appropriate treatment. Overview of area and the daily operation The fuiture operation of the landfill site to be implemented is hereafter briefly presented. In the presentation, each activity refers to different areas at the site. The proposed location of different activities are shown in Attachment I (with area notation A to H). For specific systems chosen, detailed discussions and analyses are presented in previous sections on remediation activities, sorting facilities, and gas extraction systems. The proposed operation at the landfill can shortly be described as follows: incoming waste is weighted and registered (area A), municipal waste is unloaded at a central sorting area where recyclables is sorted out both by mechanical sorting devices and manually by hand (area B), industrial waste is unloaded at a sorting area where the waste is sorted, mainly by mechanical sorting devices (area C), * other sorted material (such as filling, compost etc.) is directed to separate areas where the material is used or treated for future use such as composting, covering, access roads etc (area D&H), * recycled material is stored in separate areas awaiting delivery to consumer/recycling facility. Other materials sorted out, such as hazardous waste, are also stored for future delivery to treatme:nt or recycling facilities (area D), * gas extraction system is constructed both in the existing landfill as well as in the new extended energy cell area (area F &G), * sorted domestic waste is shredded and disposed in energy cells. The energy cells are constructed aiming at a forced degradation and maximised landfill gas production under controlled circumstances (area F). After the degradation is finished, the cell is excavated and the material is sieved and utilized and/or disposed at the landfill, sorted industrial waste is considered to be mainly inert and is disposed at the existing landfill, used for filling or construction of track roads (area G), Annex 1 Page 11 of 19 to collect water generated at the site, new ditches are constructed and old ones are restored. Leachate from landfill is collected, stored, and treated in leachate ponds within the area (area H). Leachate from the energy cell area is collected separately, heated and reinjected into the energy cells to enhance the biogas production. Non polluted surface runoff water is collected and passing settling ponds before discharged into surface ditches, connected to Daugava River, surrounding the site * the existing landfill and energy cells are covered with suitable material (such as clay or sandy clay) in order to minimise the infiltration of precipitation and to enhance the gas generation and extraction conditions (area F & G), the whole area is fenced. Implementation program General discussion A major demand for the implementation and construction works is that the daily operation of Getlini must be possible to continue. The implementation of all proposed activities is proposed in different phases so that daily operation may continue with minimal disturbance. Therefore, the construction of different activities and facilities will require a relatively long time. As a rough estimate the new systems can be in full operation in 2003. It is assumed that the implementation of the proposed technologies and facilities will start as soon as possible. Hence, the following time schedule is estimated as basis for the proposals: Construction year 0 - Executive implementation decisions In 1998 - Detailed design Completed end of 1998 Construction year 1 - Tender activities Beginning of 1999 - Construction works, 1st implementation phase During 1999 Construction year 2 - Start of new Operation System Beginning of 2000 Construction year 3 - 6 Annex 1 Page 12 of 19 - Implementation of additional facilities Year 2001 - 2004 and e]lements of the proposed system and development of the operation Implementation activities In this section, activities suggested for each year of implementation are presented. In the implementation layout, which is presented in reduced scale in Attachment 2, activities undertaken each year are summarized in a drawing. Construction year 0 This year will be assigned for executive implementation decisions and detailed design of the activities and facilities proposed for Getlini Waste Disposal Site. Municipal wastes are continued to be disposed at the existing landfill. It is important that these disposal activities is in line with the future operation activities. Thus, the design iteam and Getlini 2 Ltd should have a frequent contact also during the design period in order to reach an efficient waste disposal. Construction year 1 During this year the construction works will start and the remediation of the existing landfill will be completed. * Municipal wastes are continued to be disposed at assigned areas at the existing landfill. * The landfill gas system will be constructed simultaneously with the covering of the existing landfill. The time estimated for this work is about one year. These activities include; - provision of materials as gas wells, injection water wells, hoses and valves etc, - installation of wells, - assembling and laying of pipe system, - ftransportation of covering material, - grading and compaction of waste and cover material Annex I Page 13 of 19 * At the end of the year, the paved area for the gas plant is prepared. The prefabricated gas pumping station will be provided and installed. 4 blowing machines will be installed. Installation of gas boiler or power generation station. * The existing landfill must be slightly shaped since slopes are 1:2. To secure the future landfill slopes, a recommended general slope is 1:3. These slopes should be shaped before the covering and gas extraction works start. * Construction of the ground water control system. * The leachate water pond will be constructed and treatment equipment installed. The bottom will be sealed by clay or sandy clay with a pernmeability of <1 0-9 mis. Some of the pumping equipment will be installed. These activities include; - stripping of top soil - grading excavation, - lining/sealing of bottom and walls. * Relatively large amounts of site materials, mainly sand, will be redistributed among different areas at site. Surplus soil from excavation works needed for the leachate water pond will be used as filling material for existing ditches and pools. Preparation of bottom for cell IA and IB will be carried out during this year so that municipal waste could be disposed in energy cells from the very beginning of construction year 2. This activity includes; stripping, grading, compaction and sealing. * Laying of energy cell main pipe system, gas pipes, and leachate water injection- and drainage pipes in trenches. This activity include; - provision of material, - excavation, preparation of pipe beds, - backfilling and compaction. Installation of junction manholes (area F) for the energy cell gas pipe system. In these, pipes are connected (the gas pipes, water injection pipes and drainage pipes) and the gas controlled. This activity include; - provision and installation, - excavation, - preparation of bed, Annex 1 Page 14 of 19 backfilling and compaction of prefabricated concrete rings, assembly of wells and valves. * Installation of prefabricated gas control stations for the landfill gas system. This activity include assembly and connection of pipes. * The area for unloading, sorting and shredding municipal waste will be prepared. Includes; preparation of surface, excavation, levelling and paving of natural ground, p:rovision of roof and walls, rinstallation of conveyor belts to cell I A+B. * Surface runoff water ditches around the site is excavated ancl the water is directed to the existing ditch outside the site area for fturther transportation to the Daugava River. * The entrance area with weighbridges, gates and fence are prepared to be able to start weighing and registration of waste from construction year 2. A new administration building and a parking area will be built near the entrance. The surface will not be paved but compacted. * Provision and installation of a prefabricated septic tank. This activity includes; excavation, preparation of foundation, backfilling. * A smaller section (about 25%) of the total area intended for temporary storage and treatment of recoverable wastes is prepared. The surface will be compacted, containers for glass provided and an access road built. Preparation of storage area for metals. The surface will not be paved but compacted. Foundation for hazardous waste area will be prepared. A roofed storage building for hazardous waste will be constructed. Maintenance bridge is provided to the workshop building. Pressurised fresh water is connected. The fence including gates will be constructed. Total area that will be paved year 1 is 31 000 rn2. Total area that will be compacted year I is 19 000 in2. Equipment that will be provided year I are presented in Table 1 below. Annex 1 Page 15 of 19 Table J; Equipment andfacilities provided during construction year I Equipment Nos of units * Weighbridge and registration utilities 2 Shredder 2 * Wheel loader, front 1 * Mobile excavator with gripping device 1 * Track loader 1 * Belt conveyors 1 Maintenance bridge 1 Regulation station 3 * Junction manholes 3 * Gas pumping station 1 * Blowing machines 4 In addition to the equipment presented in Table 1, a number of containers for transport and storage of waste is required. Construction Year 2 * The construction of energy cells by disposal of sorted municipal waste will start. Within five years the energy cell is expected to give the designed amount of landfill gas. * Two energy cells will be constructed during this year and gas extraction will start both from energy cells and existing landfill. Starting this extraction requires the following main activities during construction year 2: provision of materials as gas wells, injection water wells, valves, installation of wells, and assembling and laying of pipe system for the energy cells. * Modernizing of workshop building and provision of adequate machinery. * The old registration building and weighbridges will be demolished (and reused as much as possible) A system for leachate water recirculation will be constructed in form of a collector well with heating coil. This activity includes; concrete well cast in situ. Excavation, installation and backfilling. Provision and installation of the leachate water pump and prefabricated heating coil. Annex 1 Page 16 of 19 * The bottom of cell II A+B will be prepared. The area for sorting of industrial waste will be prepared and paved. The preparation of the area for sorting of municipal waste will be completed by installation of a picking belt facility, including the sorting device together with feeders, containers, and picking and transportation belt, The area for treatment and storage of recoverable wastes as glass, plastics, papers tyres and wood will be extended as much as needed along with a track road. So0ne sorting of garden waste will start as well at the assigned area where the natural ground is levelled and compacted. * The staff building will be modernized and extended. Total area that will be paved year 2 is 9 000 m2. Total area that will be compacted year 2 is 6 000 min. Equipment that will be provided year 2 are presented in Table 2 below. Table 2; Equipment andfacilities provided during construction year 2 Equipment Nos of units Containers (nos to be decided) Wheel loader, front : *Sortinl3 unit 2 Mobile excavator with gripping device 2 Track loader 1 Gas boiler Construction year 3 * Dismounting and mobilization of the mobile part of the conveyor belt so that sorted municipal waste can be transported to the cells II A and B. Two cells, II A+B, will be built up during the year and the bottom of cell III A+B prepared. * The area for treatment and storage of recoverable wastes as glass, plastics, papers, tyres, and wood will be extended in accordance with the needs. An access road to the areas are also included. Annex I Page 17 of 19 * The area for garden waste will be extended if needed. Total area that will be compacted year 3 is estimated to 7 000 m2. Construction year 4 * Dismounting and mobilization of the mobile part of the conveyor belt so that sorted municipal waste can be transported to the cells III A and B. Two cells, III A+B, will be built up during the year and the bottom of cell IV A+B prepared. * Installation of another 2 blowing machines in the gas pumping station. * The area for treatment and storage of recoverable wastes as glass, plastics, paper, tyres, and wood (as well as the access road) will be extended in accordance with the expected requirements. - The area for garden waste will be extended in accordance with the expected requirements. - A recovery station for public use will be built near the entrance and visible from the administration building. The area will be fenced in to prevent unauthorized vehicles to enter the site. Height of fence about 3 m and length about 200 m. Total area that will be compacted year 4 is estimated as 4 000 m2. Construction year 5 - Only the stationary part of the conveyor belt is needed to transport sorted municipal waste to the cells IV A and B. Two cells, IV A+B, will be built up during the year and the bottom of cell V A+B prepared. * The area for treatment and storage of recoverable wastes as glass, plastics, papers, tyres, and wood as well as composting of garden waste will be developed in accordance with the required needs (including access road). Construction year 6 * Only the stationary part of the conveyor belt is needed to transport sorted municipal waste to the cells V A and B. The two cells V A+B will be built up during this year and the bottom of a new cell prepared. Annex I Page 18 of 19 After year 6, the first energy cell can be excavated. Thus, if considered as required (economically feasible), the sieve can be purchased and installed. Groundwater contamination Type znd intensity The groundwater investigation confirms that groundwater in the quatemary aquifer is seriously contamainated. In the core of the contaminant plume dry residue reaches 11 g/l due to NaCI content. Concentrations of the remaining components exceed the background concentrations hundreds of times. The major contaminants and contamination indicators are: chloride, Na, Total N, ammonia, COD-Cr, BOD and Cr. Hydro chemical and geophysical information confirms a wide-spread contamination ofthe Quatemary aquifer in the area. The contaminated area is 1.5 km2 and the groundwater volurne within the contour of the contaminant plume is about 4.5 million rn3. The contamination is highest in the lower part of the Quaternary aquifer. There is a dilution of the plume mainly due to infiltration from above. The uppermost layer in the Quatemary aquifer is practically unpolluted close to the edge of the plume and the real volume of contaminated water is about 3 million rn3, rather that 4.5 million ni3 as earlier stated. It can also be concluded from the results of the hydrogeological modelling, that an important influx of contaminated water into the Quatemary aquifer is due to the dleepened channels at the landfill site. These channels, especially the one south of the pond, have been the source for gravel/sand excavation and in this a direct contact with more permeable layers within the Quatemary aquifer have been established. Contaminant distribution in the Plavinas aquifer The conitaminant distribution in the Plavinas aquifer is, compared to Quatemary aquifer, much less known. Limited contamination ofthe Plavinas aquifer (groundwater samples) was found in two wells: No 7b and No 2. The contamination may, however, be explained by problems with the casing during drilling. These two walls were established in 1995. Annex 1 Page 19 of 19 Contaminant distribution in the Amata and Gauja aquifers It is unlikely, that the Amata aquifer is contaminated by the leachate from the site, because the lower part ofthe Plavinas- and the upper part of the Amata formations (found in all wells in the area) consist of low permeable sediments. Even less likely is contamination of the Gauja aquifer - the main aquifer, situated more that 100 m below surface, used for water supply. The two wells producing from this aquifer (well Nos. 5814 and 6632) never show any sign of contamination. The last sampling took place in March 1996 within the Latvian - Danish project. Historical extent of the contaminant plume Contamination of groundwater was determined already in 1978 when the first monitoring wells were drilled. The extent of the plume was small, and the front was less than 400 m from the edge of the waste disposal area. Monitoring data showed, that the contaminant plume was moving towards SW along the main direction of groundwater flow with average velocity of 50-60 rn/year. Concentrations of the different contaminants in the centre of the plume increased until end of 1980s. From this time the concentrations stabilised. It is possible, that there is a kind of equilibrium between the flux of contaminant from the waste disposal site and dilution/degradation processes in the core of contaminant plume. Prediction of the future extent of the contaminant plume One ofthe tasks performed within this investigation was hydrogeological modelling of the Getlini site, inclusive simplified simulation of a future behaviour of the contaminant plume. Under the assumption that the input of leachate continues without stop in the future several scenarios were calculated and the results can be summarised as follows, see Attachment 3: * Year 1996: contaminant plume occupies large part of the Quatemary aquifer and infiltration of contaminant to the low penneable layer gQ has began * Year 2002: contaminant infiltrates into the upper part of the Devonian aquifer sequence and reaches river Daugava * Year 2020: massive contamination of the upper part of the Devonian aquifer sequence sporadic intrusion of contaminant into the low permeable layer D3pl21 -el H*IMq I__ ^., eBe>>~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~1 -4 set,eIg sas~~~~~~ < Zo' p am e~~~~~ad - -' AAWfltN ~ ~ ~ ~ ~ ~ ~ ~ NWm 215 VA '1W '-4 SlID AOWU UX-VI~~~~awlIW I , < _ I . . I ._ E 11 IL ~ ~ ~ ~ L, -1--~~~~~~~~~~V :. .. - .j , ~~~~~~~~~~~~~~~~~~~~~~~~~IC-. 1996 2002 2020 2050 P.,~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ VERTICAL70 PLAN VIEW / ii __~~~~~~~~~~~~~~~~~~~~~~~~~~ 2 rlt 0 0.5 1 1.5 2 km Legend rt 1 2 landfill -Quatemay aquifer D -a d D3pl,43 aquiwe;, D2D3p½. l aquifer Figure 4.9 Simulated progression of the contaminant plume in the three affected aquifer; 1996 - 2050 I LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 2 BANK GROUP INVESTMENTS IN LATVIA Annex 2: Bank Group Investments Page I of 1 MUNICIPAL SOLID WASTE MANAGEMENT PROJECT STATUS OF BANK GROUP OPERATIONS, IBRD LOANS, AND IDA CREDITS IN THE OPERATIONS PORTFOLIO IBRD in Difference between million USS expected Project Loan or Fiscal and actual ID Credit No. Year Borrower Purpose Original Undisbursed disbursements' LV-PE-35807 L41540 1997 REPUBLIC OF LATVIA WELFARE REFORM 18.10 17.11 2.70 LV-PE-44123 L41260 1997 REPUBLIC OF LATVIA SAL 60.00 34.00 42.24 LV-PE4532 L41450 1197 REPUBLIC OF LATVIA HIGHWAY 20;00 17.89 1.69 LV-PE-345S4 L39640 1996 REPUBLIC OF LATVIA MUNICIPAL SERVICES 27.30 17.94 10.04 LV-PE-8526 L38900 1995 REPUBLIC OF LATVIA JELGAVA DIST. HEAT 14.00 6.18 .80 LV-PE4533 L38140 1995 GOVT OF LATVIA LIEPAJA ENVIRONMENT 4.00 .55 -.30 LV-PE4529 L37961 1995 GOVT OF LATVIA ENTERP. FINANC. SECT 5.00 .86 13.20 LV-PE-8529 L37960 1995 GOVT OF LATVIA ENTERP. FINANC. SECT 10.00 5.90 13.20 LV-PE-8529 L37950 1995 GOVT OF LATVIA ENTERP. FINANC. SECT 20.00 6.29 13.20 TOTAL 178.40 106.72 96.77 Active Loans Closed Loans Total Total disbursed' 62.32 66.86 129.18 (IBRD and IDA) of which repaid 0.00 0.00 0.00 Total now held by 178.40 66.86 245.26 IBRD and IDA Amount sold 0.00 0.00 0.00 of which repaid Total undisbursed 106.72 'intended disbursements to-date, minus actual disbursements to-date as projected at appraisal. Not: Disbursement data are updated at the end of the first week of the month. STATUS OF IFC OPERATIONS Committed Disbursed IFC IFC FYApproval Copany Loan Equity Quasi Partic Loan Equity Quasi Partic 0/95 Lartelekom SIA 5.39 13.67 0.00 0.00 2.86 13.55 0.00 0.00 1996 Vereinsbank Riga 0.00 6.05 0.00 0.00 0.00 6.05 0.00 0.00 1996 Vika Wood 4.00 0.00 0.00 0.00 4.00 0.00 0.00 0.00 TOTAL PORTFOLIO 9.39 19.72 0.00 0.00 6.86 19.60 0.00 0.00 Approvals Pending Commitment Loan Equity Quasi Panic 1996 HEBEDA - LATVIA 0.00 0.00 2.00 0.00 TOTAL PENDING 0.00 0.00 2.00 0.00 COMMITMENT LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 3 FINANCING PLAN ANNEX 3 FINANCING PLAN 1. Project costs of US $23,990.00 as presented in the COSTAB tables comprise: a) design and technical assistance; b) capital investment; c) capitalized recurrent costs; to which are added, d) physical contingencies, followed by, e) price contingencies. To these costs have to be added Interest during Construction, estimated at US $1,220,000 in Annex 7, Appendix 2. 2. The total costs so calculated amount to US $25.21 million (Ls 13.61 million) as shown below, together with the Financing Plan. PROJECT COSTS FINANCING PLAN usd m % usd m usd m % Basic investment 16.49 65.4 Grants 6.62 26.3 Recurrent costs 3.79 15.0 -- SIDA 1.50 (6.0) sub-total 20.28 80.4 -- GEF 5.12 (20.3) Physical contingencies 1.06 4.2 Eciuitv (RCC) 2.00 2.4 Price contingencies 2.65 10.5 Loans 11.95 52.9 sub-total 23.99 95.2 -- RCC 5.40 (21.4) IBRD 7.95 (31.5) Interest during 1.22 4.8 Getlini-Eco own 4.64 18.4 construction funds TOTALS 25.21 100.0 TOTALS 25.21 100.0 3. The Finance Plan consists of: - Grants: earmarked by SIDA, US $1.5 million and by GEF, US $5.12 million, for a total of US $6.62 million; this source covers 26.3% of total costs. These funds would be shown on the balance sheet of Getlini-Eco Ltd. as quasi-equity. Equity : the creation of Getlini-Eco's share capital of the equivalent of US $1.0 million, would be financed by RCC from the US $6 million earmarked for the Project. The equity injection represents 2.4% of totalI costs. Loans: there will be two loans, one from RCC and one from IBRD, for a total of US $13.35 million or 52.9% of project costs. The RCC loan would amount to US $4 million; it would be an interest free loan, lent to Getlini-Eco, 5 years grace and 12 years repayment. The loan from IBRD would be signed with Government, which would onlend the proceeds to RCC, which in turn would onlend the funds to Getlini-Eco. The interest rate payable by Getlini- Annex 3: Financing Plan Page 2 of 2 Eco would be 8%, including a guarantee fee of 0.7% for Government. Repayment would be over 12 years, after a 5 year grace period. Getlini-Eco's own funds: The cash flow generated as a result of the Project would enable the company to contribute to the finance plan; it would cover both recurrent expenditures, as well as the interest payable during the construction period. The total contribution would be US $4.64 million equivalent to 18.4% of project cost. LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 4.1 PROCUREMENT PLAN Procurement Plan: Latvia - Municipal Solid Waste Management Project 1 2 3 4 5 6 Estmated Schedule No.slices/items/ Estimated Procurement Document Invitation to Contract Contract Description' Type2 subpackages3 Cost4 Methods Preparation Bid Signing Completion fNVRONMENTAL REMEDtATIn mateal, Inrl Trar CMy and Sand S1,623 NCB^ Oct-98 Nov-98 FeF99 Oct-oo Earth WAslRemediatiDn S4 66 NG Oc9 Nov-98 Feb-9c0 Ma-hineiy equ print uilding - 1 'S7 ot-s8 NOV-98 Dec-96 eW9 Groundoater Cono W159 NBF Nov-98 Jan-99 Mar;99 Jul-99 Leacha_e- TramUMnoIng ~ = 1 - 614 Nov-98 Jan-99 Mar-99 May-99 Transrdssion of surlac Water ' SF Nov-98 Jan-99 Mar-99 M TECHIAOERTOA IMPROVEMENTS__ Fenng, gal, sep tank construcon 2 -487 NCB Nov-99 Jan-o Mar-99 un0 tiuildings, Tecnical improvements 8267 NCB- Jan-99 Mar-99 Jun-99 Mar4 Earth Works, improvements I ------' ----M y F M ar 99 Mar-02 Weigjhbridge and Registration G 1 - $88 I Jan-99 Jan-99 Mar-99 May-99 siof,ing UnitUShreder S,742 IB S ep-9 Nov-99 Oec-9 9 Apr-00 Container,Oill Tank ~~' G $1 1 - 7 NS Jan-99 Jan- gg M ar-99 May-99 WMheevTrack Loader ~ G 2 --r32 IC Nov-98 Jan-99 7 Mar-99 May-93 3elt Conveyor - G 147 I Jan-99 Jan-99 Mar-99 ia- uaTrinenance Brid(e S -n012 F Jan-99 -9 9Mar-99 M ay-99 GAS GENERATION AND ENERGY PROOUCTIO Earth VWMrks for Gas Uzaiar-99 Ju Mar-02 Civil Works Leachabe Water $FMar99m May99 J Mar-02 Gas Extraction Piping Energy Cells U1 NBF SMar-99 May-99 J u -9 Mar-02 ias ELxraction Piping, Landfill I1 I i8 I Mar-99 May-99 JiWul- Mar-02 Regulation Stabion I is 1_ 8 _Jan-99 Jan-99 Mar-99 May-99 Juncion Manholes 5 i -5 NS Jan-00 Jan-oo Mar-99 May-00 Col tor Well, Pumping Boiler -1 S650 IC Novg-997 Jan-0o Mar-99 JuT-00 citry Gernration Fa ciliy f S4,157 ICtM'-9 Ju Mar- 02 MANAGeRLAkL IMPROVEMe-NTS Ja_9 Ja_9 -V-- a- Labort y Equipemnent f S129 NBF Jan- 9 9 Jan-99 Mar-99 May- 99 Salary Local Stan O 1 NF ntem. Prourement Spealist 314 SLF Sep-98 - Nov-98 Jun-00 rwinning Arrangement S4 4 2 N _44 iice Equ',pment _ 1 _S3B F ' Oct-98 - Nocv-98 Nov-98 & M_PIU -S13 9 NB F _- VehiCe ---___ - 098 R~ Oct-98 Nov-98 Dec-98 tailed Design' 1 5637 S L eXF ' Mar-98 Ar- 99 Oct-98 TOTAL Investnt COST S19,350 Total Reccusrent Cost S4,640 Intest During Construction 1,220 TOTAL PROJECT COST $25,210 NoTES: Funded by GEF Funded by GEF and VWorld Bank 'Name of Packege 2lndicate CW (for civil works); S&I (for supply and install); TK (for tumkey); CF (for consultant firms): Cl (for Individual consultants); TR (for training). The type Is related to the use of the relevant standard bidding documents. "If known, Indicate number of slices, major items or subpackages In the package 'Expressed In US$1000 'Indicate ICB, LUB, NCB, IS, NS, DC (for direct contracting), FA (for Force Account), MW(for Minor works), SLF (for short-listing of consultant firms); SLI (for short-listing of Individual consultants); SSF (for Sole sourcing of consulbnt firms); SSI (for sole sourdng of individual consultants) Other (for recurrent costs procured on the basis of administrative proceduresbased on a schedule and budget acceptable to the Bank); LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 4.2 USE OF FUNDS FOR DIFFERENT PROCUREMENT PACKAGES Pmcuremnent: Environmental Remediaton Toals Inluding Contingecies CW) Prec. Pack. Unit UrCost 1998 19992000 2001 2002 Total Procedure No. R I G S R G S R I G S R I G S R G S B E I I B E I B E I I B E I i B E I G R F D G R F D G R F D G R F D G R F D A D _A A D A D D A A D A A D A investment Coats A. Soil MaterialII II Material, ind. Transport Clay and Sand m3 8 =248 1,375 =1623 NCB B. Eartb Works Coveng of Landflll m2 4 38 71 74 . 183 Excavation and prep. for leachate pond m2 5 29 160 . 189 Ditches for surface run-off water m 4 16 . . 16 Dams and Ponds /a Lumpsum 42 230 . 272 Subtobl Earth Works 125 71 464 I 660 NCB 2 C. Buildings- - - _-_ _ _ _ _ Machinery equipment building/b m2 290 - = = = 13 74 8;' IS 0. ConstrucUon 39 Groundwater Control/pumps Number 16,100 39 39 Groundwater Control/wells Number 14,700 35 35 Groundwater Controlpipes m 17 40 40 Groundwater ControlTextile m 4 11 11 Groundwater Control/Soil m3 4 10 . 10 Groundwater ControlRegulation Lumpsum 16 16 Groundwater Control/installation Wels Number 3,300 8 8 _ _ ___ Subtotal Consmuction 159 _ _ 159 NBF 4 E. Equipmt _ Transmission of Surface Wter/wells Number 7,300 16 16 Transmission of Surface Water/pipes m 4 2 2 Transmission of Surface Water/installation Number 7.300 16 16 Transmission of Surface Water/pumps Number 6,700 1 - 15 _ Subtotal 49 49 NSF 4 Heating of leachate water for treatment lumpsum 177 - _ 177 SBR Aeration/c Number 22,100 48 48 SBR Blowing Equip. Number 14,700 48 48 SBR Decant Equip. Lumpsum 24 24 SBR Instrument Equip. Lumpsum 24 24 SBR Dosing Equip./Chemicals Lumpsum 24 24 SBR Motor valves Lumpsum 36 36 SBR Shutters Lumpsum 36 36 Electricity/Regulation /d Lumpsum 140 140 Heating, Water and Sanitation /e Lumpsum 40 40 Transmission pumps If Number 7,400 40 40 Compacted area /g m2 15 8 8 Installation well /h Lumpsum 16 16 Installation well /i Lumpsum 8 8 Groundwater Monitoring Well Number 700 5 5- Groundwater Monitoring Equipment Lumpsum…………6 9 8 N 4 Subtotal Equipnent 684 =__ = =6 NBF 4 F. Design…………1_ _i_B_ Detailed Design lumpsum 141 141 ICB . Total Investnrit Costs =145 1,39 843 49 - 3,403 Procurement: Technical/Operational Improvements Latvia Rip. Solid Wase Management Pro)ect Dealiled Costs ILJ~~~~at ____________________ ~~~~~~~~~~~~Totals Including Contingencies Co00 ___c_Pack Unit Unit Coa 1998 1999 2000 2001 2002 Total Procedure No. R I G s R G S R I G S R I G s R I G S I B E I I B E I I B E I I B E I 1 B E I G R F D G R F D G R F D G R F D G R F D A D0A I0 A D AAD A A D0 Investment costs A. Civil Works Fence m 23 -107 7 114 Entrance Gate Number 7,400 a 8 8 Fresh water pplng Lumpsum -26 26 External ilhtnings and power outlets Lumfpsum -168 168 Septic tank Numiber 17,700 -20 20 Foundation oil tank m2 7 -50 50 Roofed Storage m2 15 -- - -101 - 0NO1 Subtotal Civil Wolrks 1731 407 7 487 NCB S. Eainth Works Compacted areas, bitunmenus m2 22 -838 262 1,100 Comipacted Areas m2 15 -344 232 265 494 1,336 Invternal roads, bitumenus m2 22 -20 44 15 16 96 Intemal roads,city sand m2 15 14 29 10 I11 64 Open storage areas m2 2 0 0 0 01 Subtotal Eaith Works - - - 216, 56-- 291… 211 2,594 NBF7 Administration building m2 551 2371 237 StaffBuMiding m2 588 -351 - 3511 Wfrkshop, rehabilitation -n 221 -- 2441 244 Hazardous waste storage building m2 290 -35 -35 Subtotal B3uildIngs 95, 528 362 208…867NCB6 0. Equlpnien Welghbridge and registration /a Number 39,700 68 - - - 88 is Roollng/Sheltetirig Sorting unit mn2 177 - -213 213 General Installations Sorting Ungt lumpsum - -- 35 35 Picidng Bets Wd. staff working bridge number 60,900 - 28 158 1e6 Shredder Number 588,200 -1,307 - - 1,307 Beltcowveyor m 220 -147 -- - 147 _____ Subtotal: SorlIng UnitlShredder 1,454 -28 406…1,889_B 91 Cont`a-iner,oil tank Lurnpsum 17 -- lN 10 ~Meel loader Number 220,600 45-254 Trackloader Number 147,100 -163 169…33____ Subtotal: Wheel/Track Loader4 02 332OBT Maintenance bridge Lumpsum I I 1 12 ~ l - : -- - 12 NBF T 12 Subtotal EquIpment .J j12 1982 830- 2,838* LDesaignosg upu - 3 9 -- 5 DealdDesign LumpsumJ- - -- 39O Total Investmet costs 3 139 30 98 ~ - ~ ¶ 2 ~ Procurement: Gas Generation and Energy Production tvia ga Solid vVade Management Projed tailed Costs S$) Totals Including Contingencies (000) Proc. Pack. Unit Unit Cost 1998 1999 2000 2001 2002 Total Procedure No. R I G S R I G S R I G S R l G 8 R I G S I B E I I B E I I B E I I B E I i B E I G R F D G R F D G R F D G R F D G R F D A D A A D A A D A A D A A D A Irmestnent Costs A. Earth Works m2 Excavation and Prep. of Energy Cells Lumpsum 5 139 148 157 165 609 Redistribution of filling material m2 9 - 9 Soil Covering Energy Cells 2 85 90 94 269 Subtotsl Earth Works 148 234 = 246 = 259 886 NBF 13 I. Civil Works lumpsum Gas extraction piping, landfill m2 47 . 28 15t _ .……186 ICB 14 Gas extraction piping energy cells m - 33 _ _ 33 Leachate injection water piping m 10 7 7 Leachate water main drainage pipe n 15 11 11 Leachate water perforated pipe Number 18 - 8 8 8 24 Manufacture and instal gas wells, landfill m 882 211 - 211 Establishment or energy cell gas wells m2 6 - 222 232 242 696 Establishment of injection wells, energy cells 2 56 59 61 1,7 NBF 1_ 262 1286 299 1 111 1,158 NBF 15, Subtotal Civil Works No. I I I I C Regulation station Number 25,000 83 …83 1S 16 Junction manholes Lumpsum 1,470 = = - == 3 NS 17 Collector wel with pump and heating coil Lpsum _ 33 33 Gas pumping station Lumpsum 322 108 431 Gas boiler with heat exchanger lumpsum _ 187 _ - 187 _ Subtobl: Collector Wll. pum ping, boiler 83 459 _ 17 91 650 ICB 18 Electricity Generation Facility la _ _ - 2.117 _ 658 680 702 4,15'IB 19 =____________________________ _. _. _ = 83 2,117 - _ 1,205 680- 810 4,895 _ SubtotalEquipment lumpsum 17 D Detailed Design b 1 = 157 -- - 15' IB _ = = = 437 nii 2,117 = 6~~-60 1,122 ==60==587 ==7,28 = Tobal t a TurnKey, kiluding design I b Excluding Design for Electricity Generation Facility X c 50% d fuel consumption X d 50% of Electric Power Corsumption Procurement: Managerial Improvements Latvi Rig ab 8Wtad Managemet Prfeet Do'd Cost (USS) ________________ Totals IncluTding Contingesnciess 0 ee_ proe. Pack. Unit unit Cost 1999 19M9 20D0 2001 2002 Total Procedure No. R I G S R I G s R I G s R I G S R I G S I B E I I B E I I E I I E I I a E I G R F o G R F 0 G R F D G R F D G R F D A D A~A D A A D -A A D AA D A A. ___uidpare_t AAS Number 50.000 e 58 58 Auto litator Number 20.000 . . . . 23 23 ph-Meter Number 5,000 6 6 Potable Laboratoty Number 7,000 8 8 Hood Number 10,000 12 12 Glas Vqmres Lumpsum 12 12 Chemicals Lumpsum . . 12 12 Stiota Equiprment…29129 NBF 41 IL Project suppot Unit Satafycost ocal staff USS 49 83 96 108- _ 120 _ -F Intern. procurement specialist month 25,000 76 -157 81 31' 5BCS 20 Twinning Arranrement /a LumPsum … - 9 112 116 442 NBF 21 Office equipment Lumpsum …… 37 37 NBF 22 0& MPSU Lumpsum 26 27 28 3 NBF Vehicle (4-wheel-dnve) Lumpsum 21 2 21 IS Tdasl 7 1 = 124 81 2 13 = 112 150 |___ 1,53! la InxluI 12 parson months of technical supervision (at US$25,000) and training Sunay nTable RanudlatJol *141 - 386 145 1.839 843 - - 49 - - - - - - 3,403 Tecdal" Invmpnr 0 339 0 01396 1968 935 0 630 830 208 0 291 0 0 0 528 0 0 0 7125 GOasc 11clonandElectr. Generation 0 157 0 0 437 241 2117 0 603 1122 0 0 545 680 0 0 587 793 0 o 7282 MImgaaeinlprovements 75 76 21 37 110 157 105 124 81 238 137 - - 112 150 - - 116 1,539 19,350 Total Le of Fdas for In_estments Target RGA 75 2,330 1,357 973 1.265 6000 6000 ISM) 713 2.511 2,033 680 793 6730 6730 GEF 21 4.891 208 5120 5120 Sida 37 949 287 112 116 1500 1500 19350 19350 LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 4.3 PROCUREMENT INFORMATION Latvia: Municipal Solid Waste Procurement Information Section 1: Procurement Review Element (Goods/Works) ICB NCB IS NS Other methods 1. Procurement method thresholds goods $300,000 works $1,000,000 < $300,000 < $50,000 prior approval of annual works n.a. goods clay&sand budget for recurrent costs 2. Prior Review all ICB first two packages first package first package yes Element (Consultant Services) QBCS QBS Sole Sourcing Minor Contracts Other methods 3. Procurement method thresholds $200,000 n.a. n.a. n.a. n.a. 4. Prior Review yes yes yes yes yes 5. Ex-post Review: contracts not subject to Explain briefly the ex-post review mechanism: Ex-post review will be done in accordance with Appendix I of the the prior review Guidelines for Procuremet under IBRD Loans and IDA Credits Section 2. Capacity of the Implementing Agency in Procurement and Technical Assistance requirements 6. Brief statement: Primary responsibility for overseeing implementation of procurement procedures will rest with the staff of the PIU. Its capacity will be strengthen by procuremnt consultant. 7. Country Procurement Assessment Report or Country Procurement Strategy Paper status: 8 Are the bidding documents for the procurement actions of Country Procurement Strategy Paper was finalized in July 1995. the first year ready by negotiations? Yes - ~~~~~~Section 3. Training, Information and Development on Procurement 9. Estimated date of Project Launch 10. Estimated date of 1 1. Indicate if contracts are subject 12. Domestic 13. Domestic Preference Workshop: Jul. 1998 General Procurement Notice to mandatory SPN in Development Preference for for Consultant Services: publication May 1997 Business: Yes (every Goods/Works:Yes/No Yes consultant assignement above $200,000) 14. Retroactive financing No 115. Advanced Procurement No 16. Explain briefly the Procurement Monitoring System and Information System: In addition, the PIU will develop a monitoring/reporting system for timely implementation of procureemnt. The reports will be submitted to the Bank montly. Section 4. Procurement Stafring 17 Indicate nane of Procurement Staff as part of Project Team: Sector Unit: ECSRE Ext. 32182 Snezana Mitrovic, Procurement Analyst, x32182, with back-up from Sergei Popov, Consultant I8. Explain briefly the expected role of the Field Office in Procurement: Field Office will provide back-up on procurement issues to project team. 19. Procurement Audit Planned: NO LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 5.1 DISBURSEMENTS OF BANK LOAN AND GEF GRANT ciob. VWB-GEP I I M~~~~~~~~*ISBURSMENT OF WRDANK4.LA1Y AND GEF4RNT FOR INVERTUE I 20 M~- - Y" 2~~~~hg 1l ~ L 01~002 TOTAL j FIN'ANCIERPS SewttF_ Fw Secaond FWnt Secon Firs Second_ Fkvt I_ Second Fwt Seeo d v % GEF % Riga - -- -…- - - - - + total itotal total total total ,total _____ total ~~~~~~~~~~~~~~~~~totaltotl____ - cvlWorks and --'w - -- 35 8 - ESIUl ~~~~~ ~ ~ ~~~Local df 1?4l] 24-- -2 E__ __ -aI,ow-*dWd-o-Forei 330 371115' 464 9. _____ ~~~~~~~Local - a ~--125 CiiWorselwl4*I19a Te Iwd mp oren Forig 8-480 47 63 82 12 1122 2 10 - 7 4 1 143 2.3 Local is -~ 07. 6;;t-4unWShm- Fredgn727 n727 772727. 1 08 27 208 - _ __ 1'860 27.6 _ ______________ Local r- 14 1~~ ~ ~~~~~~~~~~~~4- -_ _ _ 28 - _____ log 771~~~~~~~~~~~~~~~~~~~~~~~~~~0 40 1221 2i 2.2 832_12_ Is W~H, otvlj~N E!R~r Lorae 271 230:2711 22v -.5 8 4 45 . 550 8.2 4i :~j 42~ 81 ] 9~ . le Ee8lctGnroFaII - Fri8159 ...9 II". . 06 32 329' 329 329830 30 4 4 381 351' 9 351' 2040 30.3 2117 --41.1 3 MacIm-yeq---~.ntbtII6n~ib - Fo!eign 85 - 8- I-874 1 .1 Local .8 - -~1 6 Woighb~~. and Regletrateon Foreign 8 as eel - as 68 1.3 14 -i_ 74 ;1 - -- -I----- --- ___ Foreign ~ ~ ~ ~ ~ ~ 1__ __8 -----83 _1.22 Local - - -8-- 17 J.mclion-Manholas For~~~t?eign 2 5 21 0.1 -Cenovit.n Services 4o37 -2>.2 - :--~ D_______Design _____20C 3767 .5_ o.taaedDeugn -.~~~~~"Ig - 20 tnte.n.PmaiwroanA 'eilat __ oeg 6 7_7 9 97 41 41 41 4 _ 3`14 47_ - LOCal I -- I - - -- -- ~~~~~~~~~~~ ~~~~~~~~~ ~~~~~~~~~~~~~~~~~Total 6730 100 51201 11. 78t DIM MFEN-f W0UDANK LOAPIY _- - ____-r - -- _______ I~~~~nvestmnl _ 2001 513 90'- 1522 10191 1013 340i 340 - 3971 39 673- - -- intere1t~~~~~~~~~Min9constludiOn i 39 7~~~~~"--O ,r __ 1 N 0 19 22'14---Il5 208- 122- Total 0 200 0 1029'I 0 1601 0 -Tiil1 117M 5 596 71 -- - -- DRtYWoeldBonk(tndlnterest) -- ~~~~ ~~200 528 - 02 1601 1138 11I53545260I911 -- -- 28 - 242l1:' 24- li4 1041 I120 _____ Page I LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 5.2 DETAILED DISBURSEMENT SCHEDULE FOR BANK LOAN I Annex 5.2 Page 1 of 1 DETAILED DISBURSEMENT SCHEDULE FOR BANK LOAN Estimated Schedule for Disbursement __j (US $ million) ! Loan Disbursement Disbursement Profiles Quarter; :This Cumulative 'Cumulative All Regions All Regions tAll Regions ECA Region ECA Region Since Approval; Semester Total % Invest. Loan Sector Sector jSector Sector FY 1999 December, 1998! 0.73i 0.73 ; 9% 0 0 0 0: 0 June, 1999 1.03 1.761 22% 3 3' 3! 3i 3 FY2000 December, 1999, 1.6 3.36 42% 6 o 10 6 10 June, 20001 1.14 i 4.5 57% 10I 10 18: 6 18 FY2001 December,2000! 1.17, i 5.67 71% 18 18' 26, 14i 26 ' June,20011 0.56 i 6.23. 78% 26 261 42 18. 46 FY 2002 December, 2001' I 0.52 6.75' i 85% 381 38 i 541 26' 54 'I~ I . - , . June, 2002i 0.59 I 7.34 ' 92% S0; 50 66j 30' 70 FY2003 December, 2002i ! 0.6: 7.951 100% 62 58 ! 781 50 ; 90 June, 20031 ' , ! 70 66 86! 58' 94 LoanClosingDatej I I July31 2003 i ! ASubsector Set - Environmental Control I i !_ __!_ I -SubsectorSet-Energy j_|_._ __ __ __ __ ___i__ __ __ LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 6.1 ENVIRONMENTAL DATA SHEET . ENVIRONMENTAL DATA SHEET FOR PROJECTS in the IBRD/IDA Lending Program Country: LATVIA Project ID No: LV-PA-40533 Project Name: Municipal Solid Waste Total Project Cost: $25.1 million Management Project Appraisal Date: March, 1997 Task Manager: Anders Halldin Board Date: May, 1997 Sector: Environment and Energy Managing Division: EC4NR Status: Preparation Lending Instruments: IBRD Date Assigned: February 10, 1997 Date (est) for receipt of EA by Bank: January, 1997 EA Category (A/B/C): B Date Sheet Prepared/Updated February 10, 1997 (Please do not leave any items blank: use *N/A' or 'To be developed' when appropriate) Major Projed Components: (presents description of project components) The project would consist of: (a) remediation of the existing disposal site; (b) technical and managerial improvements in order to increase separation of recyclable materials; (c) establishonent of energy cells for enforced degradateon of easily biodegradable waste; (d) collection of landfill gas (L vG) containing about 50% methane (CH4); (e) co-generation of electricity aGd heat based on the collected LFG thereby replacing other fossil fuels; (f) technical assistance through twinning arrangements to enable staff to operate the waste processing system efficiently and achieve rnaximum revenues from the generated and separated by-products: and (g) managerial assistance during the implementation period to facilitate the future development of the cornpany. Major Environtnental Issues: (describes miajor envirounmental issues identified or suspected in project) Major positive environmnental results would be obtained through: (a) efficient remediation of the existing Gelliri Disposal site; (b) rneasures to safe guard the aquifers from future addifional conamnimadon from percolating leachate; (c) treatrnent of polluted surface water before its discharge to River Daugava; and (d) reduction of greenhouse gases through the collection of LPG. Other Environmental Issues: (describes environmental issues of lesser scope associated with project) Posiive: (a) Improved management and separation of recyclable material; (b) utilization of by-products as a result of the waste processing technology; and (c) substantially prolonged lifetime of the disposal site at Gedini. Negative: Currently, there are a number of serni-formal workers involved in recycling activities and food-pickers looking for food wastes and cloths. The implementation of the project would not allow the food-pickers to be inside the area at all, and would also result in a reduced number of semi-formal workers. Local Consultation and Beneficiar Participation: A strong participatory approach has been adopted from the early beginning of project preparation. due to the sensitive socio-political nature of a landfill project. Three public meetings have been held (on May 25, October 26, and December 14, 1996), with the participation of all major key stakeholders in the project, including affected communities, garden societies and inhabitants close to the Getlini site, mass media, Riga City Council, Stopinu Pagasts Council, regional and natioral government officials, NGOs, and the operating waste management enterprise. The meetings as well as the development of the project during the preparation phase have been widely recorded in TV, radio, and newspapers. Major concern among the affected parties has been to assure that the groundwater would be improved and possible to use for irrigadon purposes. In order to evaluate the actual problem the Bank has initiated a separate investigation of all private wells in the area, which results are expected to be available before end of March 1997. Proposed Actions: (describes actions proposed to mitigate environmental issues described in project) Based on the technical feasibility study and the environmental assessment, it is evident that the project would result in a number of beneficial measures. However, the social impact mentioned above would be mitigated through creation of new job opportunities for some of the semi-formal workers. The food-pickers would be informed, well in advance, that their access to the site would cease. There is, however, a social safety net in place which would require food-pickers be registered. A Monitring Plan would be created in agreement with the environmental authorities - Ministry of Environmental Protection and Regional Development and Riga Region Environmnental Board - in order to provide all stakeholders continued information about the project Justification/Rationale for Envirornental Category: (reasons for enviromnental category selected & explanation of any changes from inital The proposed project would present a state-of-the-art solution for more than 40% of the municipal solid waste generated in Latvia, and would continue to use a site which would otherwise be forced to shut down, causing considerable extra expense. Originally, the project was supposed to identify and establish a new disposal site, and include the means for closure of the existing site. However, the feasibility study including comprehensive groundwater investigadons show that the actual groundwater contamination can be arrested and the opeFation can be continued through investments in modern waste management technology. TIh imnplementation of the project would result in a number of positive environmental impacts: (a) elimination of groundwater contamination; (b) reduction of surface water contamination; (c) improved living conditions for the neighbors through reduction of noise and odor; (d) reduction of greenhouse gas emissions through collection of the landfill; and (e) reduction of imported fuel and other greenhouse enissions through utilizing the landfill gas for electricity generation and heat production. Status of Category A Erivironmental Assessment: (presents EA start-up date, EA first draft, and current status) An environmental assessment in accordance with OD 4.01 has been carried out and presented to the Bank in January 1997. Complete government approved EA: February, 1997. Remarks: (gives status of any other environmental studies, lists local groups and local NGOs consulted, tells whether borrower has given permission to Active NGOs: Environmental Protection Club, Latvia Grerns Partial list of prior studies: (i) Riga Regioil Solid Waste Plan, Carl Bro 1993 and 1994; (ii) Landfill Siting Study, Carl Bro Sept. 1994; (iii) Hydrogeological Sna 'on Getlini, Bal 1994 and 1995; (iv) Closure and Remediation Options for Getlini, Baltec, 1995; (v) Preliminary EA for two proposed sites, C Bro Sept. I99'4. Signed : / Signed by: ,,z5e1frey Fox, Chic, C4NR 7-vT-7 Anand Seth (EMTEN), Regional E9tornent Division Chief LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 6.2 SUMMARY OF ENVIRONMENTAL ASSESSMENT ANNEX 6.2 SUMMARY OF ENVIRONMENTAL ASSESSMENT Introduction Environmental Resources Management (ERM) was commissioned by the World Bank to prepare an Environmental Assessment (EA) report of the proposed remediation extended operation of the Getlini waste disposal site, Riga, Latvia. The project has been classified as Category A and a full EA is required in accordance with World Bank OD 4.01 and applicable Latvian legislation (eg the Law on State Ecological Expertise). The EA work was carried out in parallel with a technical feasibility study, conducted under a separate Terms of Reference (ToR) by SWECO of Sweden. The EA project commenced on 26 August 1996, and was carried out over a period of approximately four months, with a Final Report in January, 1997. The Setting The Getlini waste disposal site is located approximately 12 kilometres south-east of the centre of Riga City in Stopini Pagast (1). Getlini is situated in the Daugava River basin approximately 1.7 km north of the river on the right bank. The site is located in a level plain where sandy, glacial sediments form a sandy surface aquifer. This unconfined surface aquifer is not locally imnportant for drinking water supply, because its water quality is affected by a large peat bog and ground-water pollution from the Getlini disposal site; however, there are a number of shallow wells in the vicinity used primarily for irrigation purposes. Underlying the surface aquifer are deeper aquifers which represent an important, regional water resource. Contamination has not yet reached the deeper aquifers, but hydrogeologic modelling indicates that it eventually will unless remedial measures are carried out. Adjacent to the waste disposal site territory are 54 permanent households with a resident population of 117 people of which 14 households are in close proximity to the site. The dominant land use in the area has for centuries been agriculture and to a lesser extent forestry. The surrounding landscape consists of a matrix of agricultural fields, pasture, forest, and bogs or other wetlands. The local population consists mainly of unskilled labourers and pensioners who supplement their income with agricultural produce from garden plots. Also there are groupings of small garden plots which are essentially the gardens of Riga residents and are a source of food for many city households and additional income for many families. Getlini Bog borders the site to the north and east. There are narrow belts of forest along the western and southern edges which block the waste pile from view. Larger ") A Pagau is local municipal district. Annex 6.2 Page 2 of 6 tracts of forest border the eastern and northern edges of Getlini bog and block view of the site from these directions. The Getlini Waste Disposal Site The Getlini Waste Disposal Site is a Soviet era municipal waste dump serving Riga City and the surrounding area. The site has been in use since 1973 without benefit of modern sanitary landfilling practices. Conditions in the recent past were quite poor, with continual open fires and poorly controlled access. In mid 1995, a new company, Getlini-2, jointly owned by the local municipality and Riga City, took over daily management of the site. Getlini-2 has significantly improved management at the site, reduced some of the minor, negative environmental impacts such as fires and uncontrolled dumping, and instituted a manual materials recovery program at the tipping face. However, contamination of the surface aquifer by leachate from the waste pile is ongoing and no effective measures have been implemented to abate this problem. Moreover, while the landfilling operations are better controlled, they consist simply of waste tipping on a large waste pile without benefit of datily covering or compaction. Landfill gas is not collected or managed in any way. The site is 87 hectares in area of which approximately 36 hectares have been covered with deposited waste. The waste pile is approximately 24 metres in height at its highest point with an estimated total volume of waste of 3.7 million m3. The site presently receives approximately 205,000 tonnes of municipal waste per year and 45,000 tonnes of industrial waste for a total of 250,000 tonnes/year. The bulk of the industrial waste consists of concrete rubble and other inert materials. Project Description The project proposes to remediate environmental pollution and modernize the Getlini site to intemational good practice standards. The resulting environmental benefits include abatement of ongoing ground and surface water contamination which will result in improved ground and surface water quality, improved site management and control to assure receipt and handling of appropriate waste only, general improvement in site appearance, and management and control of landfill gas and utilisation for energy production. The project will meet these objectives through the following proposed works on the original site area: capping or covering of the existing waste pile with a layer of soil material to significantly reduce the infiltration of precipitation and therefore leachate generation; ENVIRONMENTAL RESOuRCEs MANAGEMENT WORLD BANK Annex 6.2 Page 3 of 6 removing contaminated water by installing wells to capture leachate and contaminated ground water, and construction of a surface drainage control system to capture surface runoff; * construction of water treatment facilities to treat the contaminated waters prior to release to the River Daugava; establishing an efficient management and waste control system at the site in line with good international practice; and * construction of gas collection and pumping facilities to control and utilise landfill gas for energy production. Public Consultation Consultation was carried out in accordance with World Bank policy and guidelines. Furthermore, stakeholders were identified during the course of a social assessment to identify in particular those members of the general public whose environrnental or social situation might be materially affected by the project. Key consultation activities included: meetings with public authorities, key NGOs, current site management and other institutional stakeholders; * public meetings at which stakeholders were brought together and encouraged to discuss issues in general session facilitated by a member of the Environmental Assessment team; and a series of interviews with randomly selected members of the local community, site workers, and informal waste/food pickers (scavengers) at the site. In addition, information has been made available to the Latvian media throughout the development of the project and will continue to be disseminated during the construction and operation phases. In response to the findings of the consultation, chemical analyses of soil from surrounding agricultural lands were carried out to determine if there had been pollution caused by previous landfill activity, and operational improvements have been recommended for the future management of Getlini-2. Measures to address the remaining minor concerns of stakeholders were also developed and incorporated into the site Environmental Management Plan (EMP). ENVIRONMENTAL RESOURCES MANAGEMENT WORLD BANK Annex 6.2 Page 4 of 6 Potential Impacts E.RM conducted a preliminary assessment of potential impacts of the proposed project and the likely significance of the impacts, and recommended measures to manage and monitor envirornental effects. As the project proposes to remedy past environmental degradation, the predicted impacts are overwhelmingly positive in terms of the local environment. However, all engineering projects also have the potential for adverse effects on local and social conditions. The EA indicates the types of impacts expected and the types of mitigation measures likely to be necessary and presents these in an outline Environmental Management Plan (EMP). After the detailed engineering design is; completed, a revised EMP should be produced containing a timetable and costed proposals for implementation. Issues/impacts known to occur in landfill development and of most concern to stakeholders were identified during an August-September 1]996 scoping exercise and fell into eight areas: social, socio-economic and cultural; hydrogeology, hydrology and water quality; health and safety; air quality; noise; * ecology; off-site traffic; and visual/landscape. Most significant of these were social impacts, including the loss of income for the semi- formal waste workers and the loss of access to the waste for the informal waste/food pickers. In both cases the impact is associated with the economic difficulties of the transition economy, and may dissipate if the Latvian economy improves. Semi-formal workers are those who benefited from the manual materials recovery/recycling program initiated by Getlini-2. Effects on this group may be mitigated by phasing the modernisation of the materials recovery operation such that there are continued, if decreasing, collection and recycling opportunities over the next one to three years. The informal waste/food pickers' practice of scavenging food from the waste pile poses health and safety risks and is clearly undesirable. The only feasible measure to reduce the impact of the opportunity loss is to make sure that the affected people are wamed in advance about the coming management changes and the implications. The exclusion of this group is an inevitable consequence of capping the existing waste pile which is a key EDMRONMENTAL RE5OURCES MANAGEMENT WORLD BANK Annex 6.2 Page 5 of 6 component of the ground-water remediation program, and which will have long term environmental benefits for the locality and region. Discharge of the treated effluent is unlikely to have an adverse impact on the water quality of the Daugava and the Gulf of Riga. However, there is some concern that local effluent standards may be inappropriately stringent, as they were intended to apply to domestic wastewater and not landfill leachate. Agreement on appropriate treatment levels for the landfill effluent, and hence quality standards, must be reached between Latvian environmental authorities, the World Bank, and the project design engineers. Mitigation and Environmental Management The benefits of the project will be fully achieved only if the landfill is operated properly. The necessary engineering measures and operational practice will be built into the design of the project. Additional measures to ensure the findings of the EA are implemented are summarized in the following table. ENVIRoNMENTAL RESOURCEs MANAGEMEN WORLD BANK ...............................-............'-..............-...........................................'.............-.....-. ..............................-...................... I..........-...................-.. Q~~~~~~~~~~~~~~~ 0 o Ap 3 b bO'c*.D . bl)- .......... .............................. ...................................... 4-o ~~~ ~,r 0~~~~~~~~ |- |ccEe =o-e°° *m . 5 . @5 . , < f H~~ . . . . . . . . . . . . . . . . . . . . . . . . .. . . . .......... .......................... .. . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . .. . . .. . . .. . . . ..... ... LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 7 NOTES ON THE FINAL BENEFICIARY: GETLINI-ECO LTD. ANNEX 7 NOTE ON THE FINAL BENEFICIARY: GETLINI-ECO LTD. A. GENERAL BACKGROUND 1. Following the agreement signed in December 1996 between Government, Riga City Council and the Council of Stopinu Pagasts, a new company - Getlini-Eco Ltd. - would be established to implement and operate the project, at least until final repayment of all loans. The existing Getlini-2 company would become a fully-owned subsidiary of the new company; it would be responsible for the reception and processing of household and industrial waste at the Getlini site, operating as a contractor for Getlini-Eco Ltd.. 2. This annex will cover, firstly, the proposed organisation, staffing and financial structure of the new company Getlini-Eco Ltd.; in addition, a financial cash flow projection has been made over a 20-year period. In addition, details of the currently operating company, Getlini-2 Ltd. will be presented as an example of the expenses of an operator. B. GETLINI ECO LTD Identity 3. Getlini-Eco Ltd. would be a "municipality" enterprise under Latvian law, to be incorporated as a limited liability company. It would remain operational at least until final repayment of all loans, after which the company could be wound-up and the shares restituted to the present owners MOEPRD, Riga City Council, and Stopinu Pagasts. Capital and Shareholders 4. Getlini-Eco Ltd.'s share capital is proposed to be set at US $1 million (LVL 540,000), which is to be paid up over four years. Capital will be held for 55% by Riga City Council; for 35% by the Council of Stopinu Pagasts; and for 10% by Government (Ministry of Environmental Protection and Regional Development - MOEPRD). Activities 5. The company would be responsible for implementation of the Project and supervision of the continued operation of the landfill (with new technology), including more extensive selection and sale of recoverable waste. Physical management of the landfill and the new energy cells would be carned out by an external contractor under a management contract. Annex 7 Page 2 of 9 Staff 6. The organigramme and staffing of the new company would be as follows: - Managing Director, a Latvian national of sufficient experience and stature to guide the new company, to supervise implementation of the project and to control the landfill operations carried out by the contracted company. - Head of Technical Department, also a Latvian national with extensive experience in industry; responsible for the technical implementation and supervision of the project. In addition, all environmental matters; would be covered by this department. The Head would be assisted by an expatriate consultant engaged on a part-time basis. There would also be a junior engineer to assist the Technical Director in the day-to-day tasks. - Head of Finance Department, a Latvian national, who would be responsible for all financial and commercial aspects of the project, and for the accounting and budgeting of the company. He would be assisited by an accountant. In addition, there would be one bi-lingual secretary and a driver/messenger. Getlini-Eco Ltd. would have an office in Riga Part of the operating expenses of the new company are included under the Managerial Improvements under project Costs, including the Twinning Agreement. In addition, Govenmnent has proposed that its share of the Natural Resources Tax (see para. 10) over the project implementation period would be earmarked for covering the operational expenses of the new company. Management 7. The company's management would consist of the M[anaging Director and the Heads of the Technical and Finance Departments. Under the Project it would be necessary to extend technical assistance, in particular regarding the new technology being introduced, management of a multi-million enterprise and accounting. The proposed twinning arrangement could fulfil all of these requirements. Position in the Sector 8. The Getlini landfill is the only major disposal site in the County of Riga (and in the country); it receives close to 40% of all domestic waste generated in the country, as well as an unknown share of' the country's industrial waste (of which part is toxic). With the introduction of new waste processing technology, Getlini-Eco Ltd. could well become the country's leading waste processor, in part by attracting more waste to the Getlini site, in part by taking over for management other disposal sites in the country. Annex 7 Page 3 of 9 Operations and Revenues Volume of Waste 9. Total waste received at the site has been estimated at over 1.3 million m3 per annum', equivalent to around 250.000 ton. Of this quantity about 80% is household waste, with the remainder industrial waste. No hazardous waste is accepted or stored permanently at the site. Tariffs 10. For household waste collection the charge per year and per inhabitant is at present Ls 2.35 per m3 (with the average waste per year calculated at 1.30 m3 per person for an annual charge of Ls 3.05); charges are fixed by the RCC. The charge is based on: (a) a disposal fee payable to Getlini-Eco Ltd. of Ls 0.40/m3; (b) collection and transportation of Ls 1.30/m3; (c) replacement of containers at Ls 0.40/m3; and, (d) the Natural Resource Tax of Ls 0.25/m3. The latter is distributed to Government (30%), Riga District (30%) and the Stopinu Pagasts (40%). Charges for industrial waste vary by type of waste, between Ls 0.85 and Ls 1.06 per m3. Revenues 11. In addition to the disposal fee, the new company would also receive sales proceeds from recovered waste materials and electricity sales to Latvenergo. Details are in the cash flow projections (see Appendix 3). Financial Structure Balance Sheets 12. Appendix 1 illustrates the future financial structure of the company after project implementation, at the end of 2002. Assets would consist of: a) intangibles (design, supervision, consultants) for US $1.85 million (9% of the balance sheet); b) buildings, machinery and equipment, valued at US $17.50 million (81% of balance sheet totals); and current assets, estimated at 10% of the balance sheet. On the liabilities side, Net Worth, or shareholders' equity, consists of US $1 million share capital and US $6.62 million of grants, shown here as quasi-equity; total Net Worth is around 40% of the balance sheet. Long term debts represent lending from the World Bank and Riga City Council, for a total of US $11.95 million or around 55% of the balance sheet, while current liabilities have been estimated at 5% of the balance sheet. The preliminary figure for 1996 is 1,227 thousand m3. Annex 7 Page 4 of 9 Prospects Forecalst Operating Results 13. The 20-year projection consists of two parts; the first in constant terms, based on revenue projections and estimates of recurrent costs prepared by the Consultants. The second projection incorporates an inflation correction; recurrent costs have been increased with the projected GDP deflator, while the same deflator has been applied to revenues, but lagged by one year. Revenues include sale of electricity and of incremental recovery of waste materials. The disposal fee has not been incorporated in the analysis, as it will basically be used to compensate the contractor for its operations on the site. 14. Recurrent or operational costs include provisions for maintenance and replacement of spare parts; in addition, depreciation has been added, equivalent to 5% of the total investment, including conting;encies (physical only for the projection in constant terms). Interest charges have been derived from the projected inflows of the World bank loan, as the RCC loan has been taken as interest free, but repayable over 12 years (see Appendix 2). After deduction of :25% company tax the retained earnings, together with depreciation, constitute the Project's cash flow available for coverage of recurrent costs during project implementation (the company's contribution to the project's finance plan) and of loan repayment. Application of the GDP deflator at 100% on costs, amd lagged by one year on revenues and depreciation, improves the generated cash flows substantially. The results are shown in Appendix 3. 15. The projection without inflation correction indicates that the cash flow after loan repayment remains positive throughout the period, and that the company is able to cover recurrent costs during project implementation. The cumulative cash flow shows substantial positive balances, at around US $4.2 million by 2003, rising to US $15.1 million by the year 2019. This surplus would be available for dividend payments to shareholders and/or the financing of further investments. 16. The inflation corrected cash flows are even more favourable. 17. A ratio-analysis has also been carried out (see Appendix 3). In the projection in constant terms, the cash flow as a percentage of revenues rises from 28% after project implementation to around 42% after 5 years, to reach 50% towards the end of the projection. The Cash flow after loan repayment, as a percent of revenues, amounts to 17% in the first year of loan repayment, rises to 26% in 2005 to then drop gradually to 12% in the last year of loan repayment. The debt-service ratio, taken as a ratio of loan repayment over cash flow after interest payment rises from 49% in the first year of loan repayment to 72% in the last year, 2015. These ratios indicate that the company/project is able to meet its debt repayment obligations comfortably. The results of the inflation corrected analysis are even more favourable. Tariff Adjustments Annex 7 Page 5 of 9 16. The cash flow projections discussed above indicate that the Project is financially attractive. For this reason there is no need for tariff increases. Long-Term Perspectives 17. As shown in the previous sections, the outlook for the company for the next 15 years is quite good, with cash flows accumulating rapidly after loan repayment has been completed. As the Project would increase the economic life of the site considerably, by up to 100 years, without additional investments, the long term perspectives of Getlini-Eco Ltd. appear excellent. Risks Managerial 18. The new management would need technical assistance in order to supervise project implementation, as well as the efficient operation of a modem, multi-million landfill operation. This technical assistance would be provided in the context of a twinning arrangement with an experienced Swedish company. If the proposed twinning arrangement does not work out, there would be a risk of sub-optimal returns, and hence a shortfall in the cash flows to repay the loans. Technical 19. The new technology has only been tried out in a limited number of landfill operations in Sweden. There is therefore a risk in its efficient application in Latvia, where the business environment is quite different. Technical assistance in this area would be important for the correct implementation of the new technology and the financial success of the Project. C. GETLINI- 2 COMPANY LTD. Identity 20. "Getlini - 2" Ltd. (GLC) is a "municipality" enterprise under Latvian law, incorporated in 1994 as a limited liability company. Capital and Shareholders Annex 7 Page 6 of 9 21. GLC's share capital was initially fixed at Ls 100, but was increased in 1996 to LVL 2000. It is held for 51% by the Stopinu Pagasts Council and for 49% by the Riga City Council. Under the agreement signed in December 1996 between Government, Riga City Council and Stopimu Pagasts Council, the shares would be transferred to the new Getlini-Eco Ltd., and Getlini-2 would thus become a wholly owned subsidiary. Activities 22. The company was set up in 1994 to take over the landfill activities at the Getlini site from one of the major waste collection companies in Riga, which had been responsible for managing the site since its inception in 1973. However, this take-over became effective only in July 1995. 23. Present activities include receiving waste, overseeing its deposit on the landfill, as well as selection and sale of recoverable waste. Physical management of tlhe fill is also an important activity and includes construction of access roads to the top of the landfill, some 30 m above the surrounding area. The company has provided for a minimum of protection against pollution from the waste pile, primarily by digging drainage ditches around the site. 24. Under the new arrangement, GLC or another company will be hired under a management contract to continue operate the site, as well as implement the new energy cell technology on the site, under supervision of Getlini-Eco Ltd.. This operation should be formalised in a contract, initially for 2 years and to be renegotiated regularly thereafter. Staff 25. At present some 85 staff are on the company's payroll, of whom 13 in administration. In addition, between 250 to 400 persons work on an irregular basis and informally employed on the landfill as scavengers, engaged in waste selection for sale to the company. The informal workers will, however, no longer be allowed on the site once the new technology has been implemented; a limited number may well be engaged to work on the waste recovery line. Management 26. The company's management consists of the managing-director, who is very dynamic, and a deputy with poorly defined tasks and few obvious responsibilities. The director has been able to transform a poorly organised waste dump into a well-run landfill operation. While he is a good organiser, he is also autocratic and reluctant to take advice. Under the Project it would be necessary to extend technical assistance, in particular regarding the new technology being introduced, management of a mulli-million enterprise and accounting. The proposed twirming arrangement could fulfill all of these requirements. Annex 7 Page 7 of 9 Operations and Revenues Volume of Waste 27. Total waste received at the site has been estimated at over 1.3 million m3 per annum, equivalent to an estimated 250.000 tons, of which over 80% household waste. Revenues 28. Accounts indicate that for 1995 revenues of Ls 347,723 consisted of Ls 310,317 (89.2%) in disposal fees. The sale of selected waste materials, which started only when the new management took over in mid-1995, accounted for Ls 35,332 (10.2%), while sale of firewood and other represented the final 0.6%. For the first 9 months of 1996 overall revenues were Ls 501,670, of which Ls 87,564 (or 17.5%) represented the sale of selected waste materials. 29. In future, the contractor would no longer receive the disposal fee from waste haulage companies, but would be paid a fee by Getlini-Eco Ltd.. The sale proceeds from recovered waste materials would also accrue directly to Getlini-Eco Ltd.. Profitability Cash Flow 30. Appendix 4 shows the Profit and Loss accounts for 1995 and the first 9 months of 1996. The data indicate that the cash flow for 1995 amnounted to Ls 60,643, equivalent to 17.4% of net revenues. For the first 9 months of 1996 the approximate cash flow is Ls 49,700, or only 9.9% of net revenues; the reasons for this decline are not clear. As the time series is short and the data is rather limited, there seems little point in calculating ratios. Comments 31. The accounts have been audited by a recognised local firm. However, accounting methods at GLC are not entirely clear and would need to be improved. For example, depreciation are included under operational expenditure; overheads have not been indicated separately, and "social" expenses have been classified as production costs. Financial Structure Balance Sheets 32. Appendix 5 illustrates the financial structure of the company at the end of 1995, as well as after the first 9 months of 1996. For 1995 net fixed assets consist of land, buildings and equipment, valued at Ls 47,339 (32.2% of the balance sheet totals). Current assets of Ls 99,662 (67.8%) consisted Annex 7 Page 8 of 9 primarily of cash and debtors. On the liabilities side, there are no long term debts, but creditors of Ls 86,259 represented 59% of the balance sheet. Net worth, or shareholders' equity of Ls 60,742 accounted for 41%. 33. The 9 months figures for 1996 show a substantial increase in the balance sheet totals (+59.30/4), reflecting a build-up of assets, primarily current assets, and on the liability side an increase in Net Worth and in the creditors position. Sources and Uses 34. The company derives its financial revenues solely from collection of disposal fees and sale of selected waste materials. For 1995 it is impossible to discuss sources and uses, as the comparative balance sheet for 1 994 is not available. For the first 9 months of 1.996 the cash flow amounted to around Ls 50,000, reflected in the increase of net worth, to which should be added the rise in creditors for total additional resources of around Ls 87,000. 35. Regarding uses, a list of investment items approved for expenditure during 1996 of around Ls 500,'000 had been signed by only one of the shareholders, while its financing was left unclear. However, the provisional balance sheet for the first 9 months of 1996 indicates that only a modest amount of fixed asset formation has so far taken place (Ls 14,802 in fixed assets and in current equipment), with the balance retained primarily under "cash and banks." The increase in debtors accounts for the balance of uses. Comments 36. The accounts indicate that GLC has a solid financial base, with net worth representing at the end of the first nine months of 1996 over 47% of the balance sheet, against 41% at end-1995. Accounting methods need to be improved. Prospects Forecast Operating Results 37. A projection of future cash flows has been made, assuming that revenues would be maintained at the 1996 level. The results are shown in Appendix 6 in constant 1996 Lats. 38. The projection, based on the 9-months' figures of 1996, assumes a stationary situation, which is a conservative hypothesis because there are possibilities for increased revenues through better waste selection (estimated at Ls 100,000 net per year by management) and for reduced costs, primarily by cutting back on staff (it is estimated that a similar landfill operation in Sweden would require only half the present staff). The annual cash flow in constant Lats would be around Ls 115,000, or 16.3% of net revenues. Application of the GDP deflator at 100% on costs, and lagged by one year on revenues and depreciation, would improve the generated cash flows substantially; this has however not been calculated. Annex 7 Page 9 of 9 Tariff Adjustments 39. The cash flow projection discussed above indicates that GLC is financially viable and that there is no need for tariff increases. Risks Managerial 40. Present management, while dynamic, is not well prepared to operate a modem, multi- million landfill operation. If the new arrangement with Getlini-Eco Ltd. and/or the proposed twinning arrangement do not work out, there would be a risk of sub-optimal returns, and hence a shortfall in the cash flows to repay the loans. Technical 41. As was already mentioned under the section on Getlini-Eco Ltd., the new technology has only been tried out in a limited number of landfill operations in Poland and Sweden. There is therefore a risk in its efficient application in Latvia, where the business environment is quite different. Technical assistance in this area would be important for the correct implementation of the new technology and the financial success of the Project. Annex 7 - Appendix I Page 1 of I Getlini-Eco Future Balance Sheet ASSETS LIABILITIES ________________________ (US $'000) _ °/e__ (US $'000) | _% Intangible assets (1) 1 850 9 Share capital 2 000 9 Quasi equity (grants) 6 620 31 Fixed assets (2) 17 500 81 Shareholders' funds 8 620 40 Current assets (3) 2 150 10 World Bank 7 950 37 (cash, spare parts, debtors) Riga City Council 4 000 18 Long term loans 11 950 55 Current liabilities 930 5 TOTALS 21 500 100 TOTALS 21 500| 100 (1) intangibles include detailed design and supervision (US $637,000), national (US $457,000) and international consultants (US $756,000). (2) fixed assets are total project costs, minus intangibles and capitalised recurrent costs (23,990 - (1,850+4,645) = US $17,495,000. (3) estimated at around US $2,150,000 I Annex 7 - Appendix 2 Page I of 2 Schedule of Interest and Loan Payments (US $O000) |Assumptions: Project costs, including physical and price contingencies is US $23.99m; interest during construction is estimated at US $1.22 million. Grants and loans will cover US $19.35 million, while Getlini-Eco will contribute US $4.64 million, which represents capitalised recurrent costs. Interest during construction on the WB loan of US $1.22 million would be covered from the IBRD loan.. Source Financing Purpose and Terms Getlini-Eco 4640 To cover recurrent costs during project implementation, capitalised under the Project. Grant - GEF 5120 To be used for Remediation, Technical Improvement and Electricity Generation. Disburse first if possible Grant - Sida 1500 To be used for Environmental Remediation and Managerial Improvements. RCC 6000 To be used for creation of share capital of Getlini-Eco of US $2 million, including shares of Stopinu Pagasts and Govemment. The balance of US $6 million - $2 million = US $4 million will be an interest free loan, 5 years grace, 12 years repayment IBRD 7950 For imports and Interest during Construction. Terms 7.3% IBRD + 0.7% GoL = 8%. Grace period 5 years, repayment 12 years TOTAL COST 25210 1998 1999 2000 2001 2002 cumulative Required funding Project costs (rounded) 850 11150 5150 3150 3690 23990 Interest during Consl 0 0 250 440 530 1220 Total costs/finance 850 11150 5400 3590 4220 25210 cumulative 850 12000 17400 20990 25210 Drawdown Getlini-Eco 0 450 1270 1390 1530 4640 Grant - GEF 20 4850 240 0 10 5120 Grant-Sida 40 950 280 110 120 1500 RCC - equity 75 150 150 150 75 600 RCC-loan 0 2350 1060 820 1170 5400 IBRD - project 715 2400 2150 680 785 6730 IBRD - interest(rounded) 0 0 250 440 530 1220 sub-total IBRD 715 2400 2400 1120 1315 7950 Total disbursed annual 850 11150 5400 3590 4220 25210 cumulative 850 12000 17400 20990 25210 Annex 7 - Appendix 2 Page 2 of 2 Schedule of Interest and Loan Payments (US$'000) 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 RCC loan drawdown 0 2350 1060 820 1170 cumulative 0 2350 3410 4230 5400 5400 (pm item) annuity 12 yrs/10% not used in the calculation 793 793 793 793 793 793 793 793 793 793 793 793 actual repayment 12 years 0 0 0 0 0 0 450 450 450 450 450 450 450 450 450 450 450 450 loan outstanding 0 2350 3410 4230 5400 5400 4950 4500 4050 3600 3150 2700 2250 1800 1350 900 450 0! interest payrnent (0%) 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 IBRD loan drawdown 715 2400 2400 1120 1315 7950 cumulative 715 3115 5515 6635 7950 annuity 12 yrs/8% 893 893 893 893 893 893 893 893 893 893 893 893 repayment 12 years 0 0 0 0 0 0 257 278 300 324 350 378 408 441 476 514 555 599 loan outstanding 0 3115 5515 6635 7950 7950 7693 7415 7116 6792 6442 6064 5657 5216 4740 4226 3671 3072 interest payment (8%) 0 0 249 441 531 636 636 615 593 569 543 515 485 453 417 379 338 294 Interest payment IBRD 0 0 249 441 531 636 636 615 593 569 543 515 485 453 417 379 338 294 Loan repayment sum RCC and IBRD 0 0 0 0 0 0 707 728 750 774 800 828 858 891 926 964 1005 1049 Total debt service 0 0 249 441 531 636 1343 1343 1343 1343 1343 1343 1343 1343 1343 1343 1343 1343 Annex 7 - Appendix 3 Page 1 of 4 Getlini-Eco Ltd. - Projected Profit & Loss, and Cash Flow Statements (US$OOO) 1999 2000 2001 2002 2003 2004 2005 2006 2007 CASE A: constant streams, no Inflation correction Profit & Loss Statement Revenues, incremental (1) electr @ USD 0.048148/kWh+waste separati 0 2023 2796 3224 3468 3608 3690 3575 3474 Operational Costs capitalised during the project period (2) 0 0 0 0 -1453 -1453 -1453 -1453 -1453 Gross Operating Margin Project 0 2023 2796 3224 2015 2155 2237 2122 2021 Depreciation see footnote (3) below 0 -556 -785 -918 -1067 -1067 -1067 -1067 -1067 Net Operating Margin Project 0 1467 2011 2306 948 1088 1170 1055 954 Interest on IBRD Loan see Appendix 2 of Annex 7 (4) 0 0 0 0 -636 -636 -615 -593 -569 Contribution to profits from Getlini-2 100 100 100 115 120 120 120 120 120 Profit before Company Taxes 100 1567 2111 2421 432 572 675 582 505 Company Taxes 25%; tax holiday on Project for 5 years 0 0 0 0 0 -143 -169 -145 -126 Retained Profit for loan repaymentUdividends/investments 100 1567 2111 2421 432 429 506 436 379 Cash Flow Adiustments Depreciation see above 0 556 785 918 1067 1067 1067 1067 1067 Cashflow from Project, in constant terms 100 2123 2896 3339 1499 1496 1573 1504 1446 Contribution to investments 0 0 0 0 -544 -373 0 0 0 Contribution to project costs recurrent costs (total USD 3.963m) (2) -100 -1000 -1400 -1463 0 0 0 0 0 Loan Repayment see Appendix 2 of Annex 7 0 0 0 0 0 -707 -728 -750 -774 Cashflow after Loan Repayment available for investments or dividends 0 1123 1496 1876 955 416 845 754 672 Cumulative Cashflow after Loan Repayment 0 1123 2619 4495 5449 5866 6711 7464 8137 RATIOS 1 - cash flow as percentage of revenues n.a. n.a. n.a. n.a. 43% 41% 43% 42% 42% 2 - cash flow after loan repayment, as percentage of revenues n.a. n.a. n.a. n.a. 28% 12% 23% 21% 19% 3 - debt service ratios, gross operating margin over sum of interest cost and loan repayment cost 3.17 1.50 1.54 1.47 1.41 3 (a) - interest payment over cash flow, before debt service payments n.a. n.a. n.a. n.a. 30% 30% 28% 28% 28% 3 (b) - loan repayment over cash flow, before debt service payments n.a. n.a. n.a. n.a. 0% 33% 33% 36% 38% 4 - depreciation as percentage of cash flow n.a. n.a. n.a. n.a. 71% 71% 68% 71% 74% 5 - gross margin as percentage of revenues n.a. n.a. n.a. n.a. 58% 60% 61% 59% 58% 6 - working ratio, operating costs over revenue 42% 40% 39% 41% 42% 7 - operating ratio, operating costs + depreciation + interest over revenues 91% 87% 85% 87% 89% (1) Electricity producton taken from Halidin, plus 15% for the base case, valued at Latvenergos purchase price. (2) Incremental recurrent costs, including physical conbingencies only. (3) Depreciabon has been included under recurrent costs, in the form of a percentage on investments for high-level maintenance. In addition. a seperate depreciation allowance has been introduced in this cash flow at 5% of the overall investment, including physical contingencies only (4) Interest during Construcion would be covered by the IBRD loan. Annex 7 - Appendix 3 Page 2 of 4 Getlini-Eco Ltd. - Projected Cash Flows (US$'OOO) 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 3386 3308 3240 3179 3125 3077 3034 2995 2960 2929 2901 2875 -1453 -1453 -1453 -1453 -1453 -1453 -1453 -1453 -1453 -1453 -1453 -1453 1933 1855 1787 1726 1672 1624 1581 1542 1507 1476 1448 1422 -1067 -1067 -1067 -1067 -1067 -1067 -1067 -1067 -1067 -1067 -1067 -1067 866 788 720 659 605 557 514 475 440 409 381 355 -543 -515 -485 -453 -417 -379 -338 -294 0 0 0 0 120 120 120 120 120 120 120 120 120 120 120 120 443 393 355 326 308 298 296 301 560 529 501 475 -111 -98 -89 -81 -77 -74 -74 -75 -140 -132 -125 -119 332 295 266 244 231 223 222 226 420 397 376 356 1067 1067 1067 1067 1067 1067 1067 1067 1067 1067 1067 1067 1399 1362 1333 1312 1298 1290 1289 1293 1487 1464 1443 1423 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -800 -828 -858 -891 -926 -964 -1005 -1050 0 0 0 0 599 534 475 421 372 326 284 243 1487 1464 1443 1423 8736 9270 9745 10166 10538 10864 11148 11391 12878 14342 15784 17208 41% 41% 41% 41% 42% 42% 42% 43% 50% 50% 50% 50% 18% 16% 15% 13% 12% 11% 9% 8% 50% 50% 50% 50% 1.36 1.31 1.26 1.22 1.19 1.15 1.12 1.09 n.a n.a n.a n.a 28% 27% 27% 26% 24% 23% 21% 19% 0% 0% 0% 0% 41% 44% 47% 50% 54% 58% 62% 66% 0% 0% 0% 0% 76% 78% 80% 81% 82% 83% 83% 83% 72% 73% 74% 75% 57% 56% 55% 54% 54% 53% 52% 51% 51% 50% 50% 49% 43% 44% 45% 46% 46% 47% 48% 49% 49% 50% 50% 90% 92% 93% 94% 94% 94% 94% 94% 85% 86% 87% Annex 7 - Appendix 3 Page 3 of 4 Getlini-Eco Ltd. - Projected Profit & Loss, and Cash Flow Statements (US$'000) WITH PROJECT 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 CASE B - with inflation correction GDP deflator as % 9.8 9 7 6 6 5 5 5 5 5 Inflation corrector, cumulative see GDP deflator above 1.11 1.18 1.26 1.33 1.40 1.47 1.54 1.62 1.70 Profit & Loss Statement Revenues 10% inflation corrected, 1 year lag 0 2239 3311 4048 4614 5041 5413 5507 5620 Operating Costs 100% inflation corrected, same year 0 0 0 0 -2030 -2132 -2238 -2350 -2468 Gross Operating Margin, Project 0 2239 3311 4048 2584 2910 3175 3157 3152 Depreciation from above with one-year lagged inflation 0 -615 -929 -1152 -1420 -1491 -1565 -1644 -1726 Net Operating Margin 0 1624 2382 2895 1164 1419 1610 1513 1426 Interest on Project Loans see Appendix 2 of Annex 7 0 0 0 0 -636 -636 -615 -593 -569 Contribution from Getlini-2 increase by 5000 each year after 2000 100 100 110 115 120 125 130 135 140 Profit before Taxes 100 1724 2492 3010 648 908 1125 1055 997 Company Tax 25%; 5 year tax holiday 0 0 0 0 0 -227 -281 -264 -249 Retained profits for loan repayment/dividends/investments 100 1724 2492 3010 648 681 844 791 748 Cash Flow Adiustments Depreciation from above 0 615 929 1152 1420 1491 1565 1644 1726 Cashflow from Project inflation corrected 100 2339 3421 4163 2068 2172 2409 2435 2474 Contribution to investments inflation corrected 0 0 0 0 -760 -547 0 0 0 Contribution to Project Costs recurrent expend, incl price contingencies -100 -1500 -1500 -1544 0 0 0 0 0 Loan Repayment see Appendix 2 of Annex 7 0 0 0 0 0 -707 -728 -750 -774 Cashflow after Loan Repayment for dividends/investments 0 839 1921 2619 1308 918 1681 1685 1700 Cumulative Cashflow after loan repayment, inflation corrected 0 839 2760 5379 6687 7604 9285 10970 12670 RATIOS 1 - cash flow as percentage of revenues n.a. 104% 103% 103% 45% 43% 45% 44% 44% 2- cash flow after loan repayment, as percentage of revenues n.a. 37% 58% 65% 28% 18% 31% 31% 30% 3 -debt service ratios, gross operating margin over sum of interest cost and loan repayment cost 4.06 2.00 2.15 2.15 2.16 3 (a) - interest payments over cash flow, before debt service n.a. n.a. n.a. n.a. 24% 23% 20% 20% 19% 3 (b) - loan repayment over cash flow, before debt service n.a. n.a. n.a. n.a. 0% 33% 30% 31% 31% 4 - depreciation as percentage of cash flow 0% 26% 27% 28% 69% 69% 65% 68% 70% 5 - gross operating margin, as percent of revenues n.a. n.a. n.a. n.a. 56% 58% 59% 57% 56% 6 - working ratio, operating costs over revenue 44% 42% 41% 43% 44% 7 - operating ratio, operating costs + depreciation + interest over revenues 89% 84% 82% 83% 85% (1) The Bank loan is at variable interest rate; however, variations cannot be projected and the payment has been kept constant for this reason. Annex 7 - Appendix 3 Page 4 of 4 Getlini-Eco Ltd. - Projected Cash Flows (US$'OO0) 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 4 4 4 4 4 3 3 3 3 3 3 1.77 1.84 1.91 1.99 2.07 2.13 2.19 2.26 2.33 2.40 2.47 5751 5844 5951 6073 6209 6357 6456 6565 6684 6812 6948 -2566 -2669 -2776 -2887 -3002 -3092 -3185 -3281 -3379 -3480 -3585 3185 3175 3175 3186 3206 3265 3271 3285 3305 3331 3364 -1812 -1885 -1960 -2038 -2120 -2205 -2271 -2339 -2409 -2482 -2556 1372 1290 1215 1148 1086 1060 1000 946 896 850 808 -543 -515 -485 -453 417 -379 -338 -294 0 0 0 145 150 155 160 165 170 175 180 185 190 195 974 925 885 855 834 851 837 832 1081 1040 1003 -244 -231 -221 -214 -209 -213 -209 -208 -270 -260 -251 731 694 664 641 626 638 628 624 811 780 752 1812 1885 1960 2038 2120 2205 2271 2339 2409 2482 2556 2543 2578 2624 2680 2746 2843 2899 2963 3220 3261 3308 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 -800 -828 -858 -891 -926 -964 -1005 -1050 0 0 0 1743 1750 1766 1789 1820 1879 1894 1913 3220 3261 3308 14413 16163 17930 19718 21538 23417 25311 27224 30444 33705 37013 44% 44% 44% 44% 44% 45% 45% 45% 48% 48% 48% 30% 30% 30% 29% 29% 30% 29% 29% 48% 48% 48% 2.19 2.19 2.20 2.21 2.23 2.27 2.28 2.29 n.a n.a. n.a. 18% 17% 16% 14% 13% 12% 10% 9% 0% 0% 0% 31% 32% 33% 33% 34% 34% 35% 32% 0% 0% 0% 71% 73% 75% 76% 77% 78% 78% 79% 75% 76% 77% 55% 54% 53% 52% 52% 51% 51% 50% 49% 49% 48% 45% 46% 47% 48% 48% 49% 49% 50% 51% 51% 52% 86% 87% 88% 89% 89% 89% 90% 90% 87% 88% 88% Annex 7 - Appendix 4 Page 1 of I GLC - Profit and Loss Accounts For the year 1995 and first 9 months of 1996 ( in LVL rounded) 1995 as % 9 months 1996 as % Net turnover 347723 100.00% 501670 100.00% Production costs (1) - (2) -265427 -76.33% -430241 -85.76% Gross Operating Margin 82296 23.67% 71429 14.24% Depreciation -5404 -1.55% n.a. n.a. Net Operating Margin 76892 22.11% 71429 14.24% Interest income 2074 0.60% 160 0.03% Extraordinary income 1780 0.51% 0 0.00% Social expenses -7401 -2.13% -4982 -0.99% Other taxes -1693 -0.49% -297 -0.06% Profit before Income Tax 71652 20.61% 66310 13.22% Income taxes -16413 -4.72% -16652 -3.32% Net profit retained (3) 55239 15.89% 49658 9.90% Depreciation 5404 1.55% n.a. n.a. Cash flow for the period 60643 17.44% 49 658 9 90% (1) - the "production costs" shown by the company include: i) all administrative overheads, as well as ii) depreciation and iii) so-called social expenditures. (2) - the increase in these costs in 1996 reflects increased buying of selected waste from scavengers. (3) - net profit retained on the balance sheet is shown as LVL 57577. Annex 7 - Appendix 5 Page I of I GLC - Balance Sheet By end-1 995 and by 30.09.96 ( in LVL rounded) ASSETS end - 1995 30.09. 1996 LIABILITIES end - 1995 30.09. 1996 Fixed assets (net) Equty land and buildings 5985 5985 share capital 100 2000(2) plant and machinery 41354 50506 legal reserves 33 667 sub-total 47339 56491 other reserves 3032 4990 32.20% 0.00% 24.17% retained profits (3) 57577 102218 Current assets sub-total 60742 109875 cash and banks 48295 78229 41.32% 46.93% debtors (1) 36223 80028 raw materials 1815 0 Lonq term debt 0 0 0 0 fixtures, equipment 13329 18979 sub-total 99662 177236 Current liabilities 385 397 67.80% 75.83% creditors, goods 14195 1950 income taxes due 71679 121905 Intangible asets 0 0 400 400 other creditors (4) 0.00% 0.00% sub-total 85874 123855 58.57% 52.99% TOTALS 147001 233727 TOTALS 146616 233730 (1) debtors includes large outstanding amounts due by Hoetica, (2) the increase of share capital was finance through a transfer from retained one of the larger waste collecting firms in Riga. earnings of 1995. (3) retained profits shown in the P&L accounts is LVL 55240. (4) creditors includes a large amount due as Natural Resource Tax. Annex 7 - Appendix 6 Page I of I GLC - Projected Cash Flows in '000 LVL OBSERVATIONS Constant streams. no inflation correction 1995 1996 1997 1998 1999 2000 to 2017 (actuals) (9 months) (estimate) % Nt tumn-over dump fees; sale of recovered waste 347.72 501.67 702.34 100.00 705.00 Production costs (1) ind office overheads, purchase waste 265.43 430.24 542.10 77.19 545.00 Gross Operating Margin (2) 23.67%of1995netturover 82.29 71.43 160.24 22.81 160.00 160.00 16000 160.00 Depreciaton based on 1995 figure -5.40 -5.50 -6.00 -0.85 -6.00 Net Operating Margin 23.18% of 1995 net tumover 76.89 65.93 154.24 21.96 154.00 154.00 154.00 154.00 Interest and other income inci extraordinary income 1996 3.85 0.16 1.75 Social expenses for employees, community -7.40 4.98 -10.00 -8.65 Miscellaneous taxes -1.69 -0.30 -1.50 1 Proft before company taxes 71.65 60.81 144.49 20.57 145.35 Company taxes 22.9% rate paid in 1996; 25% in future -16.41 -16.65 -36.12 -5.14 -36.35 Net profit retained 55.24 44.16 108.36 15.43 109.00 109.00 109.00 109.00 Depreciation from above 5.40 5.50 6.00 0.85 6.00 Cash low available for investment in constant terms 60.64 49.66 114.36 16.28 115.00 115.00 115.00 115.00 as % of net tum-over 17.44 9.90 16.28 16.28 16.31 16.31 16.31 16.31 (1) The accounts provided by Getlini-2 Ltd do not allow seperation of direct productive expenditures from administrative overheads. (2) Forhis projecion the Gross Operating Margin has been assumed fixed at the 1997 level. This is a conservative assumpton as there are opportunities to increase revenues (better waste selecton) and in particular to reduce operating costs, eg by cutling back on staff. LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 8 PROJECT IMPLEMENTATION ARRANGEMENTS ANNEX 8 PROJECT IMPLEMENTATION ARRANGEMENTS A. PROJECT IMPLEMENTATION Background 1. The Project would be realised over 5 years, from 1998 to 2002, with preparation of implementation to start immediately after negotiations. Remediation of the existing landfill will start early 1999 and extraction of landfill gas from the existing landfill is expected to commence towards the end of 1999. The establishment of the first two energy cells would be initiated already during 1998, after which the old landfill will be definitively closed and sealing completed. It is envisaged to establish two energy cells per year for 5 years in order to reach a steady state production level of landfill gas. Installation of the gas turbines for electricity production is planned for the second half of the year 1999, so that generation could commence in the year 2000. 2. Overall responsibility for Project implementation would lie with the Riga City Council (RCC), and more particularly with its Environmental Protection Board; for this purpose a Project Steering Committee (PSC) has already been established, chaired by RCC. In addition, a Project Procurement Unit (PPU) would be created, within RCC, to be responsible for all procurement under the project, as well as disbursement and project cost accounting. Actual physical implementation of the Project would be the responsibility of the new company, the Getlini-Eco Ltd. Ltd. Project Steering Committee (PSC) 3. The PSC consists of members of Riga City Council, Stopinu Pagasts, Ministries of Economy, Environmental Protection & Regional Development and Finance, and Riga Region Environmental Protection Board; the Managing Director of Getlini-Eco Ltd. would also be a member of the committee. The PSC is chaired by a member of RCC; the Head of the PPU would be its Secretary. 4. The PSC would meet at least once a month at RCC offices to maintain close monitoring of the Project and to help resolve any outstanding issues. Its functions would include in particular: - ensure that Project implementation is on schedule; - resolve any issues likely to delay realisation of Project objectives; Annex 8 Page 2 of 5 liaise between Getlini-Eco Ltd., PPU and representatives of Government, RCC and SP; provide a focal point for World Bank and olher donor agencies concerning the Project; and assist PPU and GETLINI-ECO LTD. in any day-to-day issues that may arise during implementation of the Project. Project Procurement Unit (PPU) 5. A PPU would be created to be in charge of all procurement and disbursement under the Project; it would be a separate unit within RCC and its staff would be hired under normal Government salary conditions, supplemented by a premium. The Head of PPU, a Latvian national, would be appointed by RCC for the duration of project implementation. The World Bank would be consulted before making this appointment. 6. The responsibilities of the PPU would include: i) preparation of a standard set of bidding documents (both for World Bank, other donor finance and loc,ally financed contracts); ii) issue of bidding documents together with technical specifications to WB for" no objection"; iii) publication and dispatch of invitations to tender; iv) valuation of bids and recommendation for award; v) all procurement and disbursement related to the project; and vi) maintaining the Project accounts. However, the preparation of technical specifications for all contracts would be completed by outside consultants who would start their work in March/April 1998.The PPU would also be responsible, under the PSC, for maintaining relations with the World Bank and other donors regarding all procurement and disbursement matters. 7. In addition to the Head of the Unit, PPU would have two local professionals, a Procurement Specialist and an Accounting/Disbursement Officer, and one bi-lingual secretary. In order to train staff in World Bank procurement and disbursement procedures an external IBRD procurement specialist (International Supervisor) would be engaged, for the initial year and part-time thereafter, to prepare necessary procurement documentation, as mentioned above. He would also provide on-the-job training of local staff and organise, together with WB, a local seminar for all project staff concerned. To reduce the costs of this international consultancy an effort will be made to attract the procurement specialist from neighbouring countries in the former Soviet UInion. The World Bank would be consulted before making this appointment. 8. Up to loan effectiveness the operational and equipment costs of the PPU would be financed from a Japanese grant (PHRD), for which the agreements have been signed. Thereafter, transportation and operating expenses would be financed by the Project. The RCC would make available suitable office space and office furniture. Annex 8 Page 3 of 5 GETLINI-ECO LTD. 9. The new company to be established under the project would be jointly owned by Riga City (55%), Stopinu Pagasts (35%) and Government (MOEPRD for 10%). This company would be directly responsible for the implementation of the project and its staff would therefore need to be qualified to carry out this task. The proposed organigramme and staffing is as follows: - Managing Director, a Latvian national of sufficient experience and stature to guide the new company, to supervise implementation of the project and to control the operations of the wholly-owned subsidiary, the Getlini-2 Company. - Head of Technical Department, also a Latvian national with extensive experience in iisdustry; responsible for the technical implementation and supervision of the project. He would be assisted by an expatriate consultant engaged on a part-time basis. There would also be a junior engineer to assist the Technical Director in the day-to-day tasks. - Head of Finance Department, a Latvian national, who would be responsible for all financial and commercial aspects of the project, and for the accounting and budgeting of the company. He would be assisted by an accountant. In addition, there would be one bi-lingual secretary and a driver/messenger. The Getlini-Eco Ltd. would have an office in Riga, but not located within the RCC complex to underline the private sector orientation of the new company. The operational costs of this office would be borne by the project until 2001, and by the company thereafter. 10. The proposed twinning arrangement would be made with GETLINI-ECO LTD.; this would be of great assistance to the new company and instrumental in getting the project off to a timely start. The World Bank would be consulted before making the appointment of the Managing Director of Getlini-Eco Ltd. 11. Revenues of the company would consist of the waste disposal fee, sale of recovered materials and of electricity generated from landfill gas. A major expenditure item for the new company would be the waste processing fee payable to the contracted operating company, on the basis of tonnage of waste received on site. B. Implementation schedule 12. Preparation of project implementation would start immediately after negotiations, while the physical implementation of the project would be realised over 4 years, starting early - 1999 until Annex 8 Page 4 of 5 of 2002, with an additional 6 months for the payment of financial obligations entered into prior to project completion. The PPU would submit a Procurement and Disbursement Report by the middle of 2003. The Getlini-Eco Ltd. would submit an Implementation Comipletion Report by the end of 2003. A detailed P'roject Implementation Schedule is attached. C. Project Reporting 13. The PSC staff would monitor project implementation; it would call on the PPU and the new comjpany Getlini-Eco Ltd. to complete the detailed schedules required by the World Bank. Semi- annual reports would also have to be submitted to World Bank and other donors. A mid-term review by World Bank staff would take place no later than June2000. D. Project Supervision 14. In addition to above mentioned reporting, World Bank staff would be closely following the Project's progress through regular supervision missions. A plan for such supervision is included in the attached Project Implementation Plan. Annex 8 Page 5 of 5 Detailed Implementation Schedule to start of Project, January 1998 1-PROJECT PROCESSING AGENCIES TARGET DATES negotiations WB/GovernmentJRCC/Getlini-Eco November1997 Ltd. loan/grant approval WB/GEF/SIDA February 1998 govermment approval Council of Ministers March 1998 establishment PPU by RCC RCC Jan 1998 establishment of GETLINI-ECO LTD. RCC/Stopinu Pagasts/Govt November 1997 loan/grant effectiveness WB/GEF/SIDA March 1997 2 - PROJECT LAUNCH JULY 1998 3 - PROJECT IMPLEMENTATION detailed design preparation by consultants from early 1998 onwards bidding documents idem idem twinning/techn assistance Swedish company/consultants August 1998 onwards training staff, start of consultants September 1998 start of tendering consultants/PPU Nov. 1998 4-START OF CONSTRUCTION EARLY 1999 LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 9.1 SUPERVISION PLAN Sheetl Supervision Plan during Implementation of the Municipal Solid Waste Management Project, Approx. Activity Organization Involved Specialist- Staff Weeks Total Date TM Fin. Anal Econom Waste Spec Energy Spec Proc. Spec Disb Spec F Jul-98 Supervision 1 Head Quarter 2 1 1 1 5 Y Project Launch Res. Mission 1 1 9 Sida 1 9 Oct-98 Supervision 2 Head Quarter 3 1 1 1 5 Res. Mission ._____. i 0 Dec-98 Supervision 3 Head Quarter 2 i : _ ! 2 Res. Mission I 1 1 _ 2 Sida 1 i _ I 1 . I ! j~~~~~. I i_ _i Apr-98 Supervision 4 Head Quarter 2 1 1 1 5 Res. Mission Sida _ 1 F Aug-99 Supervision 5 Head Quarter 3 : 1 1 5 Y - Res. Mission I _ 1 1 O I I 0 Dec-99 Supervision 6 Head Quarter 3 j __; _ 3 Res. Mission _ :_ _ 1 j 1 _ _, _ i Sids ._ _ 1 i 1 Apr-99 Supervision 7 ;Head Quarter 3 41 T __ _ 4 -Res. Mission i F Aug-00 Supervision 8 Head Quarter 4 2 1 2 2 2 2 i 1 15 Y jMid-Term Review,Res. Mission _ i 1 j _ 1 o Side : _ 1 . _ I 1 1 1_ _ _ I_ _ _ i_I_i_;_ Dec-00 Supervision 9 Head Quarter 2 1 i _ _ i 2 _ Res. Mission _ __ i _ |_ 1 ! 1 May-01 Supervision 10 !Head Quarter 2 __ ! _ _ 1 3 Res. Mission 1 F Sep-01 Supervision 11 HeadQuarter 2 i 1 : , , 1 1 1 5 Y Res. Mission I 2 Jan-02 iSupervision 12 Head Quarter 2 ! i _ ' _ 2 Res. Mission 1 I 1 FJul-02 Supervision 13 'Head Quarter 2 1 1 1 1 6 Y Res. Mission 1 1 O j , . 0 . 3 Dec-03 Supervision 14 Head Quarter 2 1 1 1 I1 6 'Res. Mission 1 1 * Sida - *Impl. Completion Feb-03 ,Report Prep. Head Quarter 4 2 2 1 1 1 11 'rRes. Mission I I i 1 Sida i 11 . 1 Page 1 LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 9.2 MONITORING AND EVALUATION ANNEX 9.2 MONITORING AND EVALUATION A. Actions to Monitor Development Objectives 1. Project monitoring indicators were developed during appraisal in order to enable tracking of Project inputs on key development objectives throughout the Project cycle. At the mid-term review, the need to fine-tune or restructure the Project design will be based on the data received from these indicators. B. Project Indicators 2. Given the essential role of the program monitoring and evaluation play in determining the impact of a given intervention on development objectives, a number of indicators will be used to monitor and evaluate progress during the implementation of the Municipal Solid Waste Management Project. However, the progress of these indicators would be evaluated in relative, not absolute terms. During supervision, a selected number of commercial, operational, financial and environmental indicators would be monitored in accordance with project objectives. (a) Commercial and Operational indicators - JGeneration of LFG from both the existing waste pile and the new energy cells are crucial for project sustainability, and has been conservatively estimated. The amount of collected LFG from both gas streams will be monitored and recorded as both streams will have a clear impact on the sale of electricity. The quantity LFG from the existing waste pile will decline over time, while the LFG quantity from the energy cells would reach a steady state after 5 years. The expected LFG amounts from the two streams are shown in Table 1. - The quantity of waste received at the disposal site/month divided in different types of waste. The ratio of extracted gas/ton of waste is essential for evaluating the efficiency in gas collection as well as in regard to gas production. At a steady state, reached after approximately five years, this production should be at least 175 m3/ton. - The quantity of LFG from the two streams should be monitored automatically in the gas pumping station, and the content of methane should be analyzed on a monthly basis. The methane content should be in the range of 45-55%, and the amount of collected LFG should not be less than 26 million m3/year after year 2001. Annex 9.2: Monitoring and Evaluation Page 2 of 3 - The amount electricity produced should not be less than 39 GWh/year after year 2001. (b) Financial indicator. In addition to the internal rate of return calculations the following standard financial indicator would be monitored: * A Debt Service Coverage Ratio (the extent to which the intemal cash generation covers total debt services) not to fall below 1.5; (c) Environmental indicators - Amount of methane captured, which should not be less than 13 million Nm3/year after year 2001. The amount of methane should be converted into carbon dioxide by use of conversion factor of 21. - Quality of groundwater should be monitored on a yearly basis, and the results compared to the results reflecting the current situation in order to evaluate if the remediation measures have had expected effect on arresting the ongoing groundwater contamination. - Monthly recording of separated waste, temporarily stored hazardous waste, and expected trends. Annex 9.2: Monitoring and Evaluation Page 3 of 3 Table 1: Expected Amounts of Landfill Gas Landfill Energy Cells Total Gas Production nm 3 nm3 nm3 2000 20876174 0 20876174 2001 18450355 10402326 28852681 2002 16361191 16914071 33275262 2003 14556383 21229482 35785865 2004 12992314 24244972 37237286 2005 11632545 26448190 38080735 2006 10446592 26448190 36894782 2007 9408905 26448190 35857095 2008 8498033 26448190 34946223 2009 7695935 26448190 34144125 2010 6987398 26448190 33435588 2011 6359576 26448190 32807766 2012 5801594 26448190 32249784 2013 5304221 26448190 31752411 2014 4859606 26448190 31307796 2015 4461055 26448190 30909245 2016 4102842 26448190 30551032 2017 3780059 26448190 30228249 2018 3488487 26448190 29936677 2019 3224489 26448190 29672679 2020 0 26448190 26448190 2021 0 26448190 26448190 2022 0 26448190 26448190 2023 0 26448190 26448190 2024 0 26448190 26448190 2025 0 26448190 26448190 2026 0 26448190 26448190 LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 10 FINANCIAL SITUATION AND FORECASTS - RIGA CITY ANNEX 10 FINANCIAL SITUATION AND FORECASTS - RIGA CITY A. BACKGROUND 1. Riga is Latvia's largest city with an estimated 826,000 inhabitants (down from 912,000 in 1990); it is the country's capital, as well as one of its major port and the principal industrial/cultural centre. Trading therefore is well-developed, while industry includes ship building, manufacturing of electrical equipment and pharmaceuticals, processing of food and wood products. The services sector is well represented with a number of quality hotels and restaurants, a symphony orchestra, an opera and several theatres, as well as museums. The city is also the seat of the University and the Latvian Academy of Sciences. Finally, the restored mediaeval city centre and its fine 19th century architecture are beginning to attract increasing numbers of tourists. 2. Government in Latvia consists of three levels: central, regional and municipal. Since 1991 local government has become increasingly independent from Central Government, with the right to manage their affairs autonomously through local democratic representation. As a result, the municipal authorities have power to form municipal enterprises, take part in joint stock companies, acquire and dispose of assets, as well as to introduce local duties and taxes. Tax collection has also been decentralised and municipal budgets are independent of Central Government; however, by law these municipal budgets must be balanced. 3. Municipalities have a responsibility, often shared with Central Government, for providing: a) municipal services (water, heat, sewerage, waste collection and disposal); b) territorial infrastructure (roads, public lighting, cemeteries, industrial waste collection and disposal); c) environmental protection; d) education and culture; e) health care; f) social welfare; g) social housing; h) public order and various less important tasks. It is intended that health care will pass entirely to the Central Government in 1997, with the municipalities continuing to contribute to this budget, but the modalities of this change have not yet been worked out. B. RIGA CITY COUNCIL 4. The present City Council or Dome was elected in 1994 and consists of 60 councillors, who elect a Chairman (equivalent to a mayor) and Deputy-Chairman. Total staff of the Council and its constituent departments numbered 1331 at the end of 1996, excluding the municipal institutions and enterprises. 5. The Dome has among its duties the approval of the budget, imposition of local taxes and setting of fees for services, as well as managing the municipal institutions and enterprises. The municipal institutions do not generate income and need to be financed from the budget; they include Annex 10 Page 2 of 4 schocils, libraries, museums and hospitals. On the other hand, the municipal enterprises are expected to be self-financing, and perhaps even to contribute to RCC's revenues; among them are the tram and trolley-bus, the water and the sewerage companies, other enterprises, primarily in the services sector, may in future be privatised. In addition, the RCC has entered into a number of joint ventures with private entrepreneurs; however, it is the intention to dispose of these share holdings in future. C. The Budget 6. The City's budget is prepared by its finance department, in close co-operation with the Minisitry of Finance, and is submitted to the Dome for approval, normally in November for the following year's budget. At the end of 1996, however, the draft budget for 1997 had not yet been prepared. Municipalities report monthly to the Ministry of Finance on the execution of their budgets, followed by a detailed annual report; this allows for close supervision by the Ministry of Finance. These and other reporting requirements of the municipalities are regulated by law (On Local Government Budgets and On Budget and Financial Management). 7. The normal budget for 1996 shows gross revenues of Ls 89.7 m and net revenues of Ls 68.5m after deduction of Riga's contribution to the Tax Equalisation Fund. Expenditures are budgeted at Ls 59.0m, plus debt service of Ls 9.5m; this leaves the budget balanced, However, it appears that tax collection is running below budget and expenditures will have to be adjusted accordingly. 8. In addition to the normal budget, each City Department prepares a Special Budget, which consists of minor, department-related income and expenditures. These budgets are not part of the normal budget exercise and for this reason the Special Budget does not appear in the table; the total amount: of this Special Budget is estimated at Ls 3.5m for 1996. D. Revenues 9. Local government finance is based on the concept of local autonomy linked to local accountability. To reinforce this link, collection of tax revenue from personal income - but not the setting of rates - has been delegated to the municipal level. Riga city, which has above average levels of wages and employment, contributes a share of its revenues from income taxes to an Equalisation Fund, which benefits poorer municipalities. In 1996 the City's contribution was 28.7%, while a figure of 30% appears likely for 1997 and beyond. For 1996 net income tax revenues represented 77.8% of budgeted overall revenues. There appears to be room for increasing the tax base through more stringent tax collection, in particular of the independently employed, and this source is therefor likely to remain the dominant income item for the foreseeable future. 10. Land and property taxes accounted for 17.4% in the 1996 budget; these are set and collected by the State and redistributed to the municipalities and districts. There is scope for increasing these revenues, as properties are being revalued from previous very low levels as part of privatisation; restoration would also increase these real estate values. Government contributes Annex 10 Page 3 of 4 directly to the City's revenues, with Ls 2.4m or 3.5% of 1996 revenues, while remaining tax categories added 1.3% to budgeted revenues for 1996. E. Expenditures l1. Among the principal expenditure items for 1996 are health care (29.4%); education (25.6%); housing and sanitation (13.4%); and welfare (9.4%). Capital expenditures, estimated at less that LS 3m in 1996, are included with recurrent expenditures in the budget. 12. There is also a capital budget, but this does not form part of the main budget. It is primarily a shopping list of investments likely to be realised only as funds become available. F. Budget 13. In the absence of any forecast prepared by the City, the mission has made a budget projection for the period 1997 to 2005. This exercise is primarily intended to assess the ability of the City to contribute to the Solid Waste Management Project as currently foreseen (almost 23% of investments or USD 6.0m), in addition to its other engagements under the Water Supply and Municipal Services projects'. Furthermore, the City would be the borrower of IBRD's proposed USD 9.Om contribution to the Solid Waste Management Project. These funds would be onlent, and hence repaid, by the final beneficiary, Riga District Waste Processing Company Ltd., but Riga would be the guarantor for repayment in the event the company would not be able to do so. 14. The attached 2-page table shows the 1995 actual figures, the 1996 budget, as well as the projections for 1997-2005 using assumptions detailed below. G. Revenues Personal Income Tax 15. There appears to be scope to enlarge the tax base through more stringent tax collection and inclusion of independently employed not now covered by this tax2. Also, wages and salaries are likely to go up with inflation, even though lagged and perhaps not to the full extent. A negative factor is the slow decrease of the City's population. All in all it has been assumed that revenues would go up It has been assumed that the EIB and IBRD loans taken on by Riga city for respectively the Water Supply and Municipal Services projects will be onlent, and hence repaid, to the respective enterprises. Riga city would therefore only be the guarantor of these loans and for this reason their repayment has been excluded from the projections. 2 Progressive inclusion of the "shadow economy", estimated at between 10% and 15% of GDP, would also increase receipts from personal income tax. Annex 10 Page 4 of 4 by 11% in 1997 (the RCC forecast), and by 10% in 1998; the increase would then taper of to 5% by 2003. 16. These revenues are gross, that is, the City's contribution to the Tax Equalisation Fund needs to be subtracted. The % contribution in 1996 was fixed at 28.7%, while the prognosis for 1997 is 30%; this figure has been used throughout the projection. Property and Land Taxes 17. There is good potential for a strong increase in these taxes, which are to be combined in a single real estate tax. The reason is the current low historical value of properties, which would be increatsed to more realistic levels with privatisation and restoration. It has been assumed that after the 11% increase budgeted for 1997 these tax revenues would go up by 15% in 1997, 20% in 1998 and to decrease thereafter to 5% by 2005. Other Taxes and Intergovernmental Revenues 18. To these revenue categories the WB GDP deflator forecast for 1997-2001 has been applied, for want of another indicator; it has been assumed that inflation would decrease to 5% thereafter. These revenues would thus be fixed in real terms. Expenditures 19. The assumption is a simple one: constant growth of 3.5% pa real terms. This implies that the WB's GDP deflator forecast has been used up to 2001, with an inflation of 5% thereafter, plus a 3.5% increase. H. Conclusion 20. The figures appear to indicate that the City would be able to generate surpluses going from Ls 8.1m in 1997 to Ls 18.6m in 2000, decreasing thereafter to LS 9.5m by 2005. After taking account of Riga's earlier mentioned commitments under already signed projects (Water Supply and Municipal Services), as well as the Solid Waste project, the forecast confirms its ability to assume repayment of loans for which it is the guarantor, in the event of default of the final beneficiaries. IATV4A: U kW _ r. A_ ID. P r * Fi_ t - i Si.w d rs .mu AlGA City Council 1995 1996 1997 1998 1999 2000 Page 2~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~P*e RIGA Ciii COn - 1995 19S6 1997 1998 1W9 2000 2001 2002 2003 2004 2005 Assumotions FinancW forecasts (in 000 LVL) actual budget projectons >>>>> >>>>> >> > > REVENUES Gwth asUpon Pesnal ncm Tax (-) na 32% 1t% 10% 9% 8% 7% 6% 5% 5% 5% improved collecion; growth of ncews deckining population Idem-PropwtyandLandTaxesa() na 11% 15% 20% 20% 15% 10% 8% 7% 6% 5% revauationotproperty Idem - AN Mur taxesrlevesn(%) na 18% 10% 8% 7% 6% 6% 5% 5% 5% 5% follow WS GDP deflator rates Personal ime tax 56666 74741 82963 91259 99472 107430 114950 121847 127939 134336 141053 apply growth assumption above Proprty andland taxes 10415 11928 13717 16461 19753 22716 24987 26986 28875 30808 32138 apply growth assumpton above Olher taxes 407 431 474 512 548 581 616 646 679 713 748 apply WB inflabon assumption Intergovrnmental reveues 1760 2400 2640 2851 3051 3234 3428 3599 3779 3968 4167 apply WS inflabon assunption Miscelaneous 452 223 200 200 20 200 20Q0 M 200 200 200 PM item sub-totals 69700 89723 99994 111283 123023 134160 144181 153279 161472 169825 178306 Deduct Tax Equaisation Fund 926.5 21243 24 2 2 2942 32229 34485 36554 33I2 40301 42316 (% of personal income tax) 16.40% 28.69% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% 30.00% Total rwt revenue 60435 68480 75105 83905 93182 101931 109696 116725 123091 129524 135990 (nraseoverprevlousyear) n.a. 13.31% 9.67% 1t72% 11.06% 9.39% 7.62% 6.41% 5.45% 5.23% 4.99% EXPENDITURES (recutrent and capital (1)) Apply AB GP deflator rates (%) 10.00% 9.00% 7.00% 6.00% 6.00% 5.00% 5.00% 5.00% 5.00% WB GOP deRator forecast Add 1% rut growth of expenditures 3.50% 3.50% 3.50% 3.50% 350% 350% 3.50% 3.50% 3.50% real orowth rate total % owthi of expenditures 13.50% 1250% 10.5D% 9.50% 9.50% 8.50% 8.50% 8.50% 8.50% total increase of expenditures General government (RCC) 3838 4835 Heatth care 17706 17354 Education 14304 15116 Housing and saniWon 9575 7899 Wefar 5223 5531 Ctul 2507 2407 Transportation 2151 1508 PLlicsa fty 1337 1381 Environental Prolecion 1016 707 Otr expenditure 1191 2272 Total Expenditure 58848 59010 976 L5u4g 76140 83373 91293 99053 107473 116608 126520 apply WB GOP deflator 3,5% real growth in expenditures sueh6 Cwref 3uda 1587 9470 S129 887 17142 85588 18402 17672 15S1t 12916 9471 Currnt surplus as % of revenues 2.63% 13.83% 10.82% 10.20% 18.29% 18.21% 16.78% 15.14% 12.69% 9.97% 6.96% Fkancial COMMnens *) Ddt rspnaynt posstloans 0 9462 0 0 0 0 0 0 0 0 0 b) Water SW*pE FtI RCCcontrbution. LVL10.5rmoverSyrs 0 0 1500 2500 3500 2000 1000 0 -1050 -1050 -1050 negativefigure denotesrepaymenttoRCC c) Muridpe Serde Deveopent RCC celttUin (USD I.9mLVL 1.O5m) 0 50 250 350 300 100 0 -105 -105 -105 -105 kdem d) SolideV s Management Project ROC eolbuAon (30% of LVt 10.7mx3.2m) 0 0 0 1000 1500 700 0 -300 -300 -300 -300 idem ToI CA" Conrto RrCC 2 9512 175n 3850 S300 2eo0 10 40s5 Aj455 14555 A55 idur SURPLUS ale cital conttbufton 2t 1587 -42 6379 471r 11742 15768 17402 1877 17073 14371 10926 surplus after capital Contrlbiitions Accumulasted mipIus 1587 154 7924 12638 24373 40131 67533 76610 S2643 107084 117980 cumulative surplus Footote 1: capial expenditures included in the Wget afounted to less than LVL 3m in 1996. Footnote 2: aespue or deficts am accounted for in a reserve fund LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 11 BUDGET INFORMATION FOR STOPINU PAGAST I Stopinu Pagasts Municipality- (in '000 LVL) 1995 199 REVENUES actual budget Individual income tax 376.0 445.3 Natural resource tax 110.1 156.5 Tax Equalisation Fund (1) 52.0 -125.9 Property & Land taxes 45.6 113.0 Other duties and revenues 1 73.8 sub-total 594.6 662.7 Balance at start of year 515.2 Total Resources 645.9 677.9 EXPENDITURES Housing and Utilities (2) 292.4 299.1 Social, Education, Cultural 256.8 214.0 Public administration 74.1 105.0 Other miscellaneous 714 17.9 Total expenditures 630.7 636.0 Balance end of year 15.2 41.9 (1)In 1995 SP received a subsidy to this fund, reflecting the large (2) Under Housing & Utilities are drainage ditches -- which have LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 12 EXPENDITURE ACCOUNTS FOR OPTIMAL INVESTMENTS Annex 12 Page 1 of 4 Latvia Riga Solid Waste Management Project Expenditure Accounts by Years -Totals Including Contingencies Economic Costs (US$ '000) Option 1: Economic Costs Remediation 1998 1999 2000 2001 2002 Total I. Investment Costs A. Civil works Earth works - 483 - - - 483 Construction - 211 - - - 211 Design and Supervision 138 - - - - 138 Subtotal Civil works 138 694 - - - 832 B. Equipment - 531 38 - - 569 C. Covering Material - 1,188 - - - 1,188 Total Investment Costs 138 2,412 38 - - 2,588 II. Recurrent Costs A Salaries - 8 8 8 8 33 B. Operation and Maintenance civil works - 23 37 40 42 142 equipment - - 146 149 149 444 Total Recurrent Costs - 31 191 197 199 619 Total PROJECT COSTS 138 2,444 229 197 199 3,207 Annex 12 Page 2 of 4 Latvia Riga Solid Waste Management Project Expenditure Accounts by Years - Totals Including Contingencies Economic Costs (US$ '000) Optioni 2 Econotnic Costs Sanitairy Landfill 1998 1999 2000 2001 2002 Total I. Investment Costs A. Civil works Earth works - 1,378 388 189 322 2,277 Construction - 1,042 402 - 4 1,449 Design and Supervision 471 - - - 471 Subtotal Civil works 471 2,420 790 189 326 4,197 B. Eqiuipment 76 2,427 737 25 25 3,290 C. Covering Material - 1,188 - - - 1,188 D. Specialist Services Inteirnational Consultants 75 200 125 50 50 500 National Consultants 29 45 48 51 54 228 Subtotal Specialist Services 104 245 173 101 104 728 Total Investment Costs 651 6,280 1,700 315 455 9,402 11. Recuirrent Costs A Salaries - 21 29 29 29 107 B. Operation and Maintenance civil works - 23 55 58 60 196 equipment - 179 497 500 500 1,675 Total Recurrent Costs - 222 580 587 589 1,978 Total PROJECT COSTS 651 6,502 2,281 902 1,044 11,380 Annex 12 Page 3 of 4 Latvia Riga Solid Waste Management Project Expenditure Accounts by Years -Totals Including Contingencies Economic Costs (USS '000) Option 3 Economic Costs Gas for Electricity 1998 1999 2000 2001 2002 Total 1. Investment Costs A. Clvil works Earth works - 1,486 550 350 483 2,869 Construction - 1,380 608 206 210 2,403 Design and Supervision 625 - - - - 625 Subtotal Civil works 625 2,866 1,157 556 693 5,897 B. Equipment 76 3,619 1,066 25 118 4,903 C. Covering Material - 1,188 - - - 1,188 0. Specialist Services Intemational Consultants 75 250 175 100 100 700 National Consultants 29 45 48 51 54 228 Subtotal Specialist Services 104 295 223 151 154 928 Total Investment Costs 805 7,968 2,446 732 964 12,916 II. Recurrent Costs A. Salaries - 33 50 50 50 182 B. Operation and Maintenance civil works - 23 61 67 71 222 equipment - 357 889 893 893 3,031 Total Recurrent Costs - 413 1,000 1,009 1,013 3,435 Total PROJECT COSTS 805 8,381 3,446 1,741 1,977 16,351 Page 1 Annex 12 Page 4 of 4 Latvia Riga Solid Waste Management Project Expenditure Accounts by Years - Totals Including Contingencies Economic Costs (US$ '000) Option 4 Economic Costs Gas for Electricity 1998 1999 2000 2001 2002 Total I. lnvestmnent Costs A. Civil works Earth works - 1,486 550 350 483 2,869 Construction - 1,380 608 206 210 2,403 Design and Supervision 625 - - - - 625 Subtotal Civil works 625 2,866 1,157 556 693 5,897 B. Equipment 76 4,506 1,836 625 718 7,760 C. Covering Material - 1,188 - - - 1,188 D. Specialist Services International Consultants 75 250 175 100 100 700 National Consultants 29 45 48 51 54 228 Subtotail Specialist Services 104 295 223 _ 151 154 928 Total Investment Costs 805 8,855 3,216 1,332 1,564 15,773 II. Recurrbnt Costs A Salaries - 33 50 50 50 182 B. Operation and Maintenance civil works - 23 61 67 71 222 equiprnent - 357 979 1,032 1,083 3,450 Total Recurrent Costs - 413 1,089 1,148 1,203 3,854 Total PROJECT COSTS 805 9,268 4,306 2,481 2,767 19,627 LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 13 ECONOMIC COSTS AND BENEFITS FOR OPTIMAL INVESTMENTS Annex 13 Ria Solid Waste Management Project Page I of 8 Option 1: Renedbation only Economk Costs and Benefts Economic Costs (US$ 000) 1998 1999 2000 2001 2002 2003 2004 2006 2006 2007 2008 2009 2010 LlnvesbtmenCosts 138 2412 38 0 0 U. Recurrent Costs A. Salaries 0 8 8 8 8 8 8 8 8 8 8 8 8 B. Operation and Maintenance clil works 0 23 37 40 42 42 42 42 42 42 42 42 42 equipment 0 0 146 149 149 149 149 149 149 149 149 149 149 TotalRecurrentCosts 0 31 191 197 199 199 199 199 199 199 199 199 199 TOTAL ECONOMiC COSTS 138 2444 229 197 199 199 199 199 199 199 199 199 199 Economic Beneffts 4US$ W00) Economic Benefits 1998 1999 2000 2001 2002 2003 2004 2006 2006 2007 2008 2009 2009 1. Electricity II. Heating Iil. Recyding IV. Environmental Benefits (Global) TOTAL ECONOMIC BENEFiTS NET BENEFITS -138 -2444 -229 -197 -199 -199 -199 -199 -199 -199 -199 -199 -199 Disconted Benefits -125 -2020 -172 -135 -124 -112 -102 -93 -84 -77 -70 -63 -58 necessary annual env. benefits sating 1999 for 0 NPV 495 Paraneters Natural Gas (mro. cub. metres) Elecicy Revenue Heaing Revenue Recycli Revenue Environmental Benefit (Methane not emitted) hi US$ per 1000 m3 Convesion Energy Content GJil 000 m3 MWh1000nm3 Natural Gas 34 9.4452 LandAU Gas (Methane 50%) 17 4.7226 Effkency Factors Boiler House (Heatng) 90% Gas Enghe (Eectrity) 35% Market Prices Natural Gas ($11000m3) 94.73 Ekdlricity ($lkvWh) 0.034 Annex 13 Page 2 of 8 20m1 2012 2013 2014 2015 2015 2016 2017 2018 2019 2020 2021 B 8 8 8 8 8 8 8 8 8 8 8 42 42 42 42 42 42 42 42 42 42 42 42 149 149 149 149 149 149 149 149 149 149 149 149 199 199 199 199 199 199 199 199 199 199 199 199 199 199 199 199 199 199 199 199 199 199 199 199 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 -199 -199 -199 -199 -199 -199 -199 -199 -199 -199 -199 -199 -52 -48 -43 -39 -36 -33 -30 -27 -24 -22 -20 -18 Annex 13 Latvia Page 3 of 8 Rigs SoUdWse Msgn Projet Option 2: Sanilary LandAiU Economic Cost and Benefits Econonic Costs C000 US Dolars) 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2008 L lnvmslmnt Costs 651 6280 1700 315 455 IL Recurrnt Costs A. Salaries 0 21 29 29 29 29 29 29 29 29 29 29 29 B. Operation and Maintenance chvl works 0 23 55 58 60 60 60 60 60 60 60 60 60 equipment 0 179 497 500 500 0 500 500 500 500 500 500 500 Total Recurrent Costs 0 222 580 587 589 589 589 589 589 589 589 589 589 TOTAL ECONOMIC COSTS 651 6502 2281 902 1044 589 589 589 589 589 589 589 589 Economic Benelits (US$ '000) Economic Benefits 1997 1999 2800 2001 2002 2003 2004 2006 2006 2007 2008 2009 2010 I. Eericy 11. Heating Ill. Recycling 100 150 200 200 200 200 200 200 200 200 200 IV. Environmental Benefits (Global) TOTAL ECONOMC BENEFITS 100 150 200 200 200 200 200 200 200 200 200 NETBENEFITS -651 -6502 -2181 -752 -844 -389 -389 -389 -389 -389 -389 -389 -389 Discounted menefs -592 -5374 -1638 -514 .524 -219 -199 -181 -165 -150 -136 -124 -113 Discount Rate 10% necessamy anna env. beefis sitig 1iN for 0 NPV 1,450 P s Nal Ga (nle. ctb. meies) Eecdi Reveu ting Reveu Recychi Revenu 100 150 200 200 200 2 200 200 200 200 200 Ewne lNO Bew (Mebthn not entd h US, per 1000 m3 Enwg Coeiu GJI1000m3 WVi 000m3 Naturl Ga 34 9.4462 Land Gas (MeOtne 50%) 17 4.7225 Efficncy Factors Bohr House (Heading) 90% Gas Engie (Electricity) 35% Market Pices Nabal Gas ($11000m3) 94.73 Electricity (ShWh) 0.034 Annex 13 Page 4 of 8 2690 2011 2012 2013 2014 2016 2016 2017 2018 2019 2020 2021 29 29 29 29 29 29 29 29 29 29 29 29 60 60 O0 60 60 60 60 60 60 60 60 60 500 500 500 500 500 500 500 500 500 500 500 500 589 589 589 589 589 589 589 589 589 589 58 589 5we 59 5W9 589 589 8 58 SW 589 589 589 589 2011 2012 2013 2014 2016 2016 2017 2018 2019 2020 2021 2022 200 2D0 200 200 200 200 200 200 200 200 20 200 200 200 200 200 200 200 20 200 20D 200 200 20D 489 488 3B9 3B9 489 489 469 389 B9 -369 389 -39 .102 83 .85 -77 -70 .64 -58 -53 48 -43 439 -W36 210 200 200 200 200 200 200 200 200 200 200 200 Latvia Annex 13 Riga Solid Waste Management Project Page 5 of 8 Option 3: Gas for Heaffng Econonic Costs and Benefits Economic Costs (US$ 000) 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 L Investment Costs 805 7968 2446 732 964 435 287 II. Recurrent Costs A. Salaries 0 33 50 50 50 50 50 50 50 50 50 50 B. Operation and Maintenance civil works 0 23 61 67 71 71 71 71 71 71 71 71 equipment 0 357 889 893 893 893 893 893 893 893 893 893 TotalRecurrentCosts 0 413 1000 1009 1013 1013 1013 1013 1013 1013 1013 1013 TOTAL ECONOMIC COSTS 805 8381 3446 1741 1977 1,448 1,300 1,013 1,013 1,013 1,013 1,013 Ec .oiomic Benefits (US$ '000) Economic Benefits 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 I. Electricity 11. Heating 995 1,375 1,586 1,705 1,775 1,815 1,759 1,709 1,665 1,627 Ill. Recyding 100 150 200 200 200 200 200 200 200 200 IV. Environmental Benefits 668 923 1064 1144 1191 1218 1180 1147 1117 1092 TOTAL ECONOMIC BENEFITS 1,763 2,448 2,850 3,049 3,166 3,233 3,139 3,056 2,983 2,919 NET BENEFITS -805.37 8381 -1684 707 873 1601 1866 2219 2126 2043 1969 1906 Discounted Benefits -732.15 -6926 -1265 483 542 904 957 1035 901 788 690 607 Discount Rate 10% Parameters Landfill Gas replacement of Natural Gas (mio. m3, total) min. case 10.44 14.43 16.64 17.89 18.62 19.04 18.45 17.93 17.47 17.07 Natural Gas (mio. m3, otal) basecase 12.01 16.59 19.14 20.57 21.41 21.90 21.22 20.62 20.09 19.63 Natural Gas (mio. m3, total) max. case 13.57 18.76 21.63 23.26 24.21 24.75 23.99 23.31 22.71 22.19 available for heating (seasonal shutdown) 10.51 14.52 16.74 18.00 18.74 19.16 18.57 18.04 17.58 17.18 (mio. cub. metres, 87.5 % of base case) Electricity Revenue Gas*CFElectricity efficiency*Price Heating Revenue Recycling Revenue 100 150 200 200 200 200 200 200 200 200 Env. Benefit (Methane not emitted) 55.61 in US$ per 1000 m3 derived from C02 value:CO2/ton (USD2.72,-)'Conversion Factor CH4/CO2 (21)*Conversion Factor Cubic Metres Conversion Energy Content GJ/1 000 m3 MWh/1000m3 Natural Gas 34 9.4452 Landfill Gas (Methane 50%) 17 4.7226 Efflciency Factors Boiler House (Heating) 90% Gas marketable for Heating 88% Gas Engine (Electricity) 35% Market Prices Natural Gas ($1I 000m3)* 94.73 Electricity ($/kWh)- 0.034 Annex 13 rage 6 (if 8o 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 50 50 so 50 S0 50 5Q 50 50 50 50 50 50 71 71 71 71 71 71 71 71 71 71 71 71 71 893 893 893 893 893 893 893 893 893 893 893 _893 893 - 1013 1013 1013 1013 1013 1013 1013 1013 1013 1013 1013 1013 1013 1,013 1,013 1,013 1,013 1,013 1,013 1,013 1,013 1,013 1,013 1,013 1,013 1,013 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 1,594 1,563 1,537 1,514 1,492 1,473 1,457 1,440 1,427 1,415 1,260 1,260 1,260 200 200 200 200 200 200 200 200 200 200 200 200 200 1069 1049 1031 1016 1001 988 977 966 957 949 845 845 845 2,863 2,812 2,767 2,729 2,693 2,661 2,634 2,607 2,584 2,564 2,306 2,306 2,306 1850 1799 1754 1716 1680 1648 1621 1594 1571 1551 1293 1293 1293 536 474 420 373 332 296 265 237 212 190 144 131 119 16.72 16.4 16.12 15.88 15.65 15.45 15.28 15.11 14.97 14.84 13.22 13.22 13.22 19.23 18.86 18.54 18.26 18.00 17.77 17.57 17.38 17.22 17.07 15.20 15.20 15.20 21.74 21.32 20.96 20.64 20.35 20.09 19.86 19.64 19.46 19.29 17.19 17.19 17.19 16.82 16.50 16.22 15.98 15.75 15.55 15.38 15.20 15.06 14.93 13.30 13.30 13.30 200 200 200 200 200 200 200 200 200 200 200 200 200 Annex 13 Latvia- Riga Solid Waste Management Project Page 7 of 8 Optlon 4: Gas for Electricity Economnic Costs and Benefits Economic Costs (USS '000) 1998 1999 2000 2001 2002 2003 2004 2006 2006 2007 2008 2009 2010 1. Investment Costs 805 8855 3216 1332 1564 435 287 II. Recurrent Costs A. Salaries 0 33 50 50 50 50 50 50 50 50 50 s0 50 B. Operation and Maintenance civil works 0 23 61 67 71 71 71 71 71 71 71 71 71 equipment 0 357 979 1032 1083 1083 1083 1083 1083 1083 1083 1083 1083 Total Recurrent Costs 0 413 1089 1148 1203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 TOTAL ECONOMIC COSTS 805 9268 4306 2481 2767 1,638 1,490 1,203 1,203 1,203 1,203 1,203 1,203 Economic Benerits (USS '00) Period 1 2 3 4 6 6 7 8 9 10 11 12 13 1997 1999 2000 2001 2002 2003 2004 3006 2006 2007 2008 2009 2010 1. Electricity 1,349 1,865 2,151 2,312 2,407 2,461 2.385 2,318 2,258 2,206 2,161 11. Heating Ill. Recycling 100 150 200 200 200 200 200 200 200 200 200 IV. Environmental Benefits (Global) 668 923 1064 1144 1191 1218 1180 1147 1117 1092 1069 TOTAL ECONOMIC BENEFITS 2,117 2,938 3,415 3,657 3,798 3,879 3,765 3,664 3,575 3,498 3,430 NET BENEFITS -805 -9,268 -2,189 457 648 2,018 2,307 2,676 2,562 2,461 2,372 2,295 2,227 Discounted Benefits -732 -7,659 -1,644 312 402 1,139 1,184 1,248 1,086 949 831 731 645 Discount Rate 10% Parameters Landfil Gas equivalent to Natural Gas (mio. m3, total) min.case 10.44 14.43 16.64 17.89 18.62 19.04 18.45 17.93 17.47 17.07 16.72 Natural Gas (mio. m3, total) base case 12.01 16.59 19.14 20.57 21.41 21.90 21.22 20.62 20.09 19.63 19.23 Natural Gas (mio. m3, total) max. case 13.57 18.76 21.63 23.26 24.21 24.75 23.99 23.31 22.71 22.19 21.74 Electricity Revenue GasCFElectricity'efficiency*Price Heating Revenue Recycling Revenue 100 150 200 200 200 200 200 200 200 200 200 Environmental Benefit (Methane not emitted) 55.61 in USS per 1 000 m3 C02/ton (USD2.72,-)-Conversion Factor CH4/CO2 (21 )Conversion Factor Cubic Metres Conversion Energy Content GJ/1000 m3 MWfh1000m3 Natural Gas 34 9.4452 Landfill Gas (Methane 50%) 17 4.7226 Efficiency Factors Boiler House (Heafing) 90% Gas Engine (Electricity) 35% Market Prices Natural Gas ($/1 000m3) 94.73 Electricity (S/kWh) 0.034 Annex 13 Page 8 of 8 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 50 50 50 50 50 50 50 50 50 50 50 50 71 71 71 71 71 71 71 71 71 71 71 71 1083 1083 1083 1083 1083 1083 1083 1083 1083 1083 1083 1083 1,203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 1,203 14 16 16 17 18 19 20 21 22 23 24 25 2011 2012 2013 2014 2015 2016 2017 2018 2019 202 2021 2022 2,120 2,084 2,053 2,023 1,997 1,975 1,953 1,935 1,918 1,709 1,709 1,709 200 200 200 200 200 200 200 200 200 200 200 200 1049 1031 1016 1001 988 977 966 957 949 845 845 845 3,369 3,315 3,268 3,224 3,185 3,152 3,119 3,092 3,067 2,754 2,754 2,754 2,165 2,111 2,065 2,021 1,982 1,949 1,916 1,889 1,864 1,551 1,551 1,551 570 505 449 400 356 319 285 255 229 173 157 143 16.4 16.12 15.88 15.65 15.45 15.28 15.11 14.97 14.84 13.22 13.22 13.?2 18.86 18.54 18.26 18.00 17.77 17.57 17.38 17.22 17.07 15.20 15.20 15.20 21.32 20.96 20.64 20.35 20.09 19.86 19.64 19.46 19.29 17.19 17.19 17.19 200 200 200 200 200 200 200 200 200 200 200 200 LATVIA MUNICIPAL SOLID WASTE MANAGEMENT PROJECT ANNEX 14 FINANCIAL RETURNS OF THE PROJECT ANNEX 14 FINANCIAL RETURNS OF THE PROJECT A. COSTS 1. Total project costs have been derived from estimates made by SWECO Consultants responsible for the preparation of the Project; they consist of investment costs, capitalised recurrent costs during implementation, as well as the cost of detailed design and managerial improvements, including the twinning arrangement. Costs for a separate Procurement and Disbursement Unit have also been included. Subsequently, physical contingencies have been applied, in consultation with the Engineer, followed by price contingencies, calculated on base costs plus physical contingencies. Price contingencies are projected GDP inflation rates as indicated by the Country Economist. 2. Recurrent costs have also been calculated by the Consultants; however, their estimate of labour costs has been reduced, as the actual staffing of the Getlini company already far exceeds normal levels. The details of investments, recurrent costs and contingencies are presented in Annex 4.2 and in Table 2.1 see para 2.19 in the Staff Appraisal Report. B. REVENUES 3. The Project's revenues consist of the sale of electricity, generated from the recovered landfill gas, and incremental sales of recovered waste materials; the latter has been entered as a modest amount of US $200,000 at full production, which may well be an underestimate of the true potential. The disposal fee payable to the landfill operator has been excluded from the revenue stream, as it is expected that the volume of waste delivered to the site would not increase over time. 4. Electricity sales have been calculated on the basis of estimated landfill gas production, converted into electricity using standard conversion factors. This production has been valued at the current rate per kWh paid by Latvenergo, the national electricity company; the rate of US $0.048148/kWh is 34.15% above the import price of US $0.035889/kWh.. 5. Finally, the residual or salvage value of the investment has been taken at 15% of the investment, including contingencies. This percentage is justified in that substantial provisions for maintena-ce and replacement for machinery and equipment have been included under the recurrent costs. 6. The attached 3-page table summarises the cost and benefit data, shows net cost-benefit streams and indicates the results of the two rate of return calculations. Annex 14 Page 2 of 4 C. THE FINANCIAL RATE OF RETURN (FIRR) CALCULATION 7. The FIRR calculation for the Project follows the standard procedure of confronting outflows, consisting of total Project costs and post-implementation recurrent expenditures, with inflows consisting of revenues and, at the end of the Project's life, any residual or salvage value of the investment. The resulting net cost-benefit flows, when discounted to zero, give the interest rate at which outflows equal inflows. 8. The results of the analysis for the base-case scenario show a FIRR of almost 10%, which is quite satisfactorily, considering that this is an environmental protection project and that no increase in tariffs or disposal fees is required to achieve this return. 9. A sensitivity analysis has been carried out to test the robustness of the Project against variations in costs and benefits; the results are summarised in the table below. Table 1. FIRR Calculation ..................................................... REVENUE ................... COSTS Revenues- 15% Base Case Revenues + 15% Investment +10% 5.61% 8.46% 11.66% Recurrent: costs + 10% 5.88% 9.08% 12.64% Base Case 6.84% 9.92% 13.38% Revenues delayed t year 5.34% 7.91% 10.73% 10. In the base-case scenario the delay in electricity revenues by one year has the biggest impact on the FIRR, reducing it from 9.92% to 7.91% (-2.01%, equivalent to a drop of 20.3%). The 10% increase in costs, respectively of recurrent costs and investments, has a much smaller impact at respectively -0.84% and -1.46%, equivalent to a reduction relative to the base-case of respectively 8.5% and 14.7 %. 11. The worst scenario, a combination of electricity revenues delayed by one year and a 15% drop in overall electricity sales, results in a reduction of the FIRR to only 5.34%. This may still acceptable for an environmental project of this type, but an increase in disposal rates would then have to be considered, so as to protect the company's cash flow. However, the probability of this event occurring is considered to be low. Annex 14 Page 3 of 4 12. The best scenario is that of base-case costs and a 15% increase in electricity sales, an event which is considered to have a reasonable probability; the FIRR in this case would be 13.38%. D. THE NET PRESENT VALUE (NPV) 13. The NPV is the present value of future cash flows from the Project, minus the initial investments. It represents the contribution of an investment to the value of the firm and the NPV is considered the primary decision making tool of financial management in the private sector. For this reason its calculation has been included in the analysis. 14. The cash flows and the investments have to be discounted; for an enterprise this discount rate equals its required rate of retum, or the cost of its capital. For development projects the discount rate normally used is the Opportunity Cost of Capital (OCC), which has been estimated at 10% for Latvia. 15. Applying this d.scounting procedure to the cost-benefit flows presented in the attached tables shows a near break-even situation for the base-case. This indicates that at discount rate of 10% the investment would yield a zero Net Worth (actually the NPV is -81). 16. A sensitivity analysis similar to that carried out for the FIRR has also been applied for the NPV; the results are summarised in the table below. Table 2. NPV Calculation I .REVENUES. COSTS Revenues-15% Base Case Revenues +15% Investment +10% -4670 -1691 1884 Recurrent costs + 10% -3878 -899 2676 Base Case -3060 -81 3494 Revenues delayed I year -5052 -2372 448 17. All the results in bold figures are above the OCC of 10%. These results for the NPV confirn the FIRR findings, in that the scenario of base-case costs, coupled with a 15% increase in electricity sales, would give the best return. The worst scenario would be the one-year delay in electricity revenues, coupled with a 15% drop in electricity sales. In the base case the NPV is at break-even, which means that the contribution to the company's Net Worth would zero; all other scenarios of cost increases or a delay in electricity sales would result in a negative NPV at the I0% discount. In this case, project implementation would result in a decrease of Annex 14 Page 4 of 4 the company's Net Worth. A positive contribution to the company's Net Worth would materialise only in the event electricity sales (or the sales price) would increase by 15%. The NPV for these four cases would vary from US $0.45 million to US $3.49 million. E. CONCLUSION 18. The FIRR and the NPV analyses of the Project indicate both that in the base-case scenario the Project would yield a satisfactory rate of return of 10%, which is good for this type of environmental protection project, but below what could be expected from a nonnal industrial investment. 19. The sensitivity analysis, incorporating increases in costs and reductions in benefits, indicates that the Project is particularly sensitive to a one-year delay in electricity revenues after the initial investments have been made'. During the implementation particular care must therefore be taken to prevent this occurrence from happening. 20. An increase of investment costs by 10% would also have a strong negative impact on the returns fiom the Project. This assumption is however less likely to be realised, as relatively high physical contingencies have already been incorporated in the cost estimates. 21. The 15% decrease of electricity sales, which would have a large negative impact on the rates of return, is also considered of low probability. 22. All in all, the set of returns calculated in the sensitivity analysis shows a range of results from 13.38% in the best scenario (and a NPV of US $3.49m) to the worst scenario with a FIRR of 5.34% (and a negative NPV of US $5.05m). During the planning and implementation of the Project particular emphasis must be placed on the timely execution of productive investments, so that benefits could be realised without delay. Of course, a delay in both investment and benefits would have a much smaller impact on the rates of return. LAIVfA: Riga Solid Waste Management Project Annex 14: Financial Retums of the Ploject Financial Rate of Retum and NPV Calculation 125 years) (at Lalvenergo purchase price for electricity) Page 1 A - Capbtal investments, in '000 USD YEAR Environ Remediation Tech & Ops Improvements Gas Gen & Energy Prod Managerial Impreovements TOTAL INVESTMENT Electricity price assumptions base cost inci all cont base cost incl all cont base cost incl all cont base cost inci all cont base cost only phys cont a) import pricelkWh 0.035889 1998 138 141 333 339 154 157 201 210 826 830 b) Latvenergo price 0.048148 1999 2709 3242 3905 4520 2759 3010 347 373 9720 10290 2000 231 273 1745 2124 1980 2315 388 442 4344 4577 2001 193 240 594 766 1555 1901 206 249 2548 2663 2002 195 253 746 1022 1693 2147 210 266 2544 2981 Totals 3466 4149 7323 8771 8141 9530 1352 1540 20282 21341 incl1059ofphvsical contingencies only TOTAL PROJECT COSTS 20282 21341 excl interest during construction B - Recurrent expenditures, in '000 USD C - Benefits, in 000 USD electricity output incremental value electricity production o & m staff energy cells totals(2+3+4) GWh per year waste selection base - 15% base case base + 15% 1998 0 0 0 0 (recurrentcost 0 0 0 0 0 1999 380 53 0 ((433)) incl. phys cont, 0 0 0 0 0 2000 1040 79 0 ((1119)) capita/ised 36.53 100 1759 2023 2339 2001 1099 79 0 ((1178)) from 1997 to 50.49 150 2431 2796 3233 2002 1154 79 0 ((1233)) 2001) 58.23 200 2804 3224 3729 2003 1154 79 764 1997 62.63 200 3015 3468 4010 2004 1154 79 593 1826 65.17 200 3138 3608 4173 2005 1154 79 220 1453 66.64 200 3209 3690 4267 2006 1154 79 220 1453 64.57 200 3109 3575 4135 2007 1154 79 220 1453 62.75 200 3021 3474 4018 2008 1154 79 220 1453 61.16 200 2945 3386 3916 2009 1154 79 220 1453 59.75 200 2877 3308 3826 2010 1154 79 220 1453 58.51 200 2817 3240 3747 2011 1154 79 220 1453 57.41 200 2764 3179 3677 2012 1154 79 220 1453 56.44 200 2717 3125 3614 2013 1154 79 220 1453 55.57 200 2675 3077 3558 2014 1154 79 220 1453 54.79 200 2638 3034 3508 2015 1154 79 220 1453 54.09 200 2604 2995 3464 2016 1154 79 220 1453 53.46 200 2574 2960 3424 2017 1154 79 220 1453 52.90 200 2547 2929 3388 2018 1154 79 220 1453 52.39 200 2522 2901 3355 2019 1154 79 220 1453 51.93 200 2500 2875 3325 2020 1154 79 220 1453 46.28 200 2228 2563 2964 2021 1154 79 220 1453 46.28 200 2228 2563 2964 2022 1154 79 220 1453 46.28 200 2228 2563 2964 2022 RESIDUAL VALUE of the ORIGINAL INVESTMENT, assumed at 15% of investment incl. physical contingencies 3201 3201 3201 LATVIA: Rigs Solid Waste Marogement Projet AMex 14: Financial Returies of the Project Financial Rate of Retum and NPV Calculation (25 years) Page 2 D - Rate of Retum Calculation, base case TOTAL INVESTMENT Recurnent Costs GROSS BENEFITS NET COSTS & BENEFITS STREAM base cost phys cont only base - 15% base case base + 15% base - 15% base case base + 15% 1998 826 830 ((O)) recunrent 0 0 0 -830 -830 -830 1999 9720 10290 ((433)) costs 0 0 0 -10290 -10290 -10290 2000 4344 4577 ((1119)) capitalsed 1859 2123 2439 -2718 -2454 -2138 2001 2548 2663 ((1178)) durng years 2581 2946 3383 -82 283 720 2002 2844 2981 21341 ((1233)) 1998-2001 3004 3424 3929 23 443 948 2003 ((20282)) ((21341)) ((total)) 1997 3215 3668 4210 1219 1671 2214 2004 1826 3338 3808 4373 1511 1982 2547 2005 1453 3409 3890 4467 1956 2437 3014 2006 1453 3309 3775 4335 1856 2322 2882 2007 1453 3221 3674 4218 1768 2221 2765 2008 1453 3145 3586 4116 1692 2133 2663 2009 1453 3077 3508 4026 1624 2055 2573 2010 1453 3017 3440 3947 1564 1987 2494 2011 1453 2964 3379 3877 1511 1926 2424 2012 1453 2917 3325 3814 1464 1872 2361 2013 1453 2875 3277 3758 1422 1824 2305 2014 1453 2838 3234 3708 1385 1781 2255 2015 1453 2804 3195 3664 1351 1742 2211 2016 1453 2774 3160 3624 1321 1707 2171 2017 1453 2747 3129 3588 1294 1676 2135 2018 1453 2722 3101 3555 1269 1648 2102 2019 1453 2700 3075 3525 1247 1622 2072 2020 1453 2428 2763 3164 975 1310 1711 2021 1453 2428 2763 3164 975 1310 1711 2022 1453 2428 2763 3164 975 1310 1711 2023 Residual value taken as 15% of the investment, including physical contingencie 3201 3201 3201 3201 3201 3201 Note: base minus 15% is te IRR 6.84% 9.92% 13.38% 1.00 case cakulatedbyAH NPV (10%) .3060 41 3494 LATVIA: Rigs Solid Waste Management Project Anna 14: Finanial Returs of tle Project Financial Rate of Return and NPV Calculation (25 years) Page 3 E - Sensitivity Analysis i) all investments 10% higher i) Investments Plus 10% il) Recurrent costs plus 10% iii) Electricity sales delayed one year Net Costs Benefits Net Costs Benefits Net Costs Benefits base - 15% base case base + 15% base - 15% base case base + 15% base - 15%b base case base + 15% 1998 -913 -913 -913 -830 -830 -830 -830 -830 -830 1999 -11319 -11319 -11319 -10290 -10290 -10290 -10290 -10290 -10290 2000 -3176 -2912 -2595 -2718 -2454 -2138 -4477 -4477 -4477 2001 -348 16 454 -82 283 720 -754 -490 -754 2002 -275 145 650 23 443 948 -350 15 452 2003 1219 1671 2214 1019 1471 2014 1007 1428 1932 2004 1511 1982 2547 1329 1800 2364 1389 1841 2384 2005 1956 2437 3014 1810 2292 2869 1885 2355 2920 2006 1856 2322 2882 1710 2177 2736 1956 2437 3014 2007 1768 2221 2765 1623 2076 2620 1856 2322 2882 2008 1692 2133 2663 1546 1988 2518 1768 2221 2765 2009 1624 2055 2573 1479 1910 2428 1692 2133 2663 2010 1564 1987 2494 1419 1842 2349 1624 2055 2573 2011 1511 1926 2424 1366 1781 2278 1564 1987 2494 2012 1464 1872 2361 1319 1727 2216 1511 1926 2424 2013 1422 1824 2305 1277 1678 2160 1464 1872 2361 2014 1385 1781 2255 1240 1635 2110 1422 1824 2305 2015 1351 1742 2211 1206 1597 2066 1385 1781 2255 2016 1321 1707 2171 1176 1562 2025 1351 1742 2211 2017 1294 1676 2135 11-49 1531 1989 1321 1707 2171 2018 1269 1648 2102 1124 1502 1957 1294 1676 2135 2019 1247 1622 2072 1102 1477 1927 1269 1648 2102 2020 975 1310 1711 830 1164 1566 1247 1622 2072 2021 975 1310 1711 830 1164 1566 975 1310 1711 2022 975 1310 1711 830 1164 1566 975 1310 1711 2023 3521 3521 3521 3201 3201 3201 3201 3201 3201 Residual value, 15% of investment, including physical contingencies only. IRR 5.61% 8.46% 11.66% 6.88% 9.08% 12.64% 5.34% 7.91% 10.37% NPV(10%) -4670 -1691 1884 -3878 -899 2676 -6052 -2372 448 7 t > _ FINLAN , , This matp -s prodecdri 24by 27 SW,E~N~ < 0 ctodc the Map Design Ueit of A WorkdR8tk. The bo-ala,-' LATVIA Baltic ESTONIA (' ony otherineformationsho- MUNICIPAL SOLID WASTE MANAGEMENT PROJECT -' 50~~~this .o do not' otI ESTONIA ~~~~he por, ol The Worl Rok j. / srt RUSSIAN Group, any judmset on the IY FED. h9oI sts of any tnertory, GETLINI DISPOSAL SITE MAIN ROADS or any endorsement or / - 1Ro9Q 5 Lacc,eptance of such 0 SELECTED CITIES - RAILROADS | LATVIA ho.-doniee, * NATIONAL CAPITAL ~ - RIVERS PORTS -*-* INTERNATIONAL BOUNDARIES o L IITHUANIA ( Kihnuf) / T0 Lel RUSSIAN ) r To Lelle S t8> BELARUS 580 / 0 POLAND ,--. Ru2 nu RLjien To Tartu 'I / Saart' - i_ 21° a \ Aloia e -13tr / t > > , | gmbazi Xalmiera ~~~~~~~~~~~~~~ ' > ~~~~9 R U S S I A N Ventspiis, A< 0 , ,,AtJsne9 _ F E D. 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