Docuiment of The World Bank FOR OFFICIAL USE ONLY / ~~I- AS bl--- CH- Report No.9384-CH STAFF APPRATSAL REPORT CHILE SECOND VALPARAISO .ATER SUPPLY AND SEWERAGE PROJECT April 26, 1991 Infrastructure and Energy Operations Division Country Department IV Latin America and the Caribbean Regional Office This document has a restricted distirbution and may be used by redpients onily in the performance of their offici'al duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS Currency Unit: Chilean Peso (Ch$) 1 US$ = 337.09 Ch$ (December 31, 1990) WEIGHTS AND MEASURES Metric system. FISCAL YEAR January 1 - December 31 ABBREVIATIONS AND ACRONYMS AIC Average Incremental Cost CAS Caracteristicas Socioecon6micas (Means Test for Social Benefits) Ch$ Chilean Pesos CORFO Corporaci6n de Fomento de la Producci6n EMOS Empresa Metropolitana de Obras Sanitarias S.A. ESVAL Empresa de Obras Sanitarias de Valparaiso S.A. GoCh Government of C ile IDB Inter-American Development Bank lcd liter per capita per day MCM/yr million cubic meter per year MOP Ministry of Public Works MIDEPLAN Ministry of Planning OECF Overseas Economic Cooperation Fund (Japan) RoCh Republic of Chile SENDOS Servicio Nacional de Obras Sanitarias BSS Superintendencia de Servicios Sanitarios VAT Value-Added Tax FOR OFFICIAL USE ONLY CHILE SECOND VALPARAISO WATER AND SEWERAGE PROJECT STAFF APPRAISAL REPORT' Table of Contmntg LOgN AND PROJECT SUMHARY . . . . . . . . . . . . . . . . . . . . . . . .i 1. THE SECTOR . . . . . . . . . ........... 1 Population and Service Levele................ 1 Water Contamination and Public Health ...99... 1 Sector Organization anization. . ........ 1 Sector Performance . *. . . . . o . . . o. . . . . . . . . 2 Pricing of Water Supply and Sewerage Services . . . . . . . . . . . 3 Affordability to the Lower-Income Population . . . . . . . . . . 4 Sector Investments and Financing . .. ...... . . 5 Sector objectivea and Policies . . . . . . . . . . . . . . . . . . S Bank Involvement in the Sector . . . ............ . . . 5 Lessons from Past Experience . . . . . . . . . . . . . . 6 2. THE FIFTH REGION AND THE BORROWER . . . . . . . . . . . . . . . . . . 7 Population and Health . . . ... . . . . . . . .. . . . .. 7 Water and Sewerage Demand and Supply . . . . . . . . . . . . . . . 7 Capital Inveetment Program .................... 7 Water and Sewerage Tariff . . . . . . . . . . 8 . . . . . . . . a Affordability to the Lower-Income Population . . . . . . . . . . . 8 Management, Organization and Personnel . . . . . . . . . . . . . . 9 Training . . .Tann . . . . . . . . . . 9 . . . . . . . . . 10 Operation anMaintenance ce.... *. . . . 11 Metering, Billing and Collection . 9 12 Insurance . . . . . . ... . . . . . . . . . . . . . . . . 12 Accounting and Auditing . . . . . . . . . . 9 9. . . 9 . 13 Past Financial Performance ......... ...*... 13 3. THE PROJECT . . . . . . . . . . . . . . . . . . . . . . . . 14 Project Origin .. . . . . *9 .9 . . * *.*. . . . . . . 14 Rationale for Bank Involvement . . . . . . . . . . . .. . . . 14 Project Objectives . . . . . . . . . . . . . . 14 Water Supply in the Greater Valparaiso Area . . . . . . . . . . . . 15 Sewage Collection/Disposal in the Greater Valparaiso Area . . . . . 16 Project Description . . . . . . . . . . . . . . . . . . . . . . . 17 Project Cost . . . . . . . . . . . . . . . . . . . . . . . 18 Project Financing Plan . . . . . . . . . .. . . 19 Project Implementation . . . .....* .. . ....... 20 Procurement *.** . . . . . . . . . * . . . . . . . . . . . . . . 21 Disbursements . . . . . . . . . . 9.* **. . 9 * * . . 23 'This report is based on the findings of an appraisal mission that visited Chile from November 27 to December 13, 1990. The mission was composed of Mr. Emanuel Idelovitch, Sr. Sanitary Engineer (Mission Leader), Mr. Franz Kriegler, Financial Analyst, and Me. Marta Molares, Lawyer. This document has a restricted distribution and may be used by recipients only in the performance | of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. - ii - 4. ZIMCIAL = Egg=OiMITIFICATIO ............ . . . . 24 FinancLal Evaluation . . @ . . . .. . . .. . . e.9 24 Project Justification and Beneffts . . . . # *. . . . . * . * . . 26 Environmental Impact . .................. * ........a...... 28 Social Impact . o . . o . . . . . . e . . . . . . & 0. . a * . . . 29 Risks and Safeguards ..*...... . oo....o. .. . 29 5. ?IR-EEHNTS RECE RECQ=NDAT1ONS . . . . . . . . . o . . . . o 30 LIST OF TABLES Table 1s ESTIMATED PROJECT COSTS . . . . . .o. . . . . . . . . . . . . . 19 Table 2: FINANCING PLAN . . . . . . . . . . . . . . . . . . . . . . . . . 19 Table 3: PROJECT COST BY PROCUREMENT METHOD . . . . . . . . . . . . . . . 22 LIST OF ANNEXES 1. Water and Sewerage Rates by Region . . . . . . . . . . . . . . .32 2. Targeted Subsidy for Water and Sewerage . . . . . . . . . . 33 3. Water Sector Investments, 1970-1990 . . . . . . . . . . . . . 35 4. Supply and Demand in ESVALs Service Area . . . . . o o . .... . . . 36 5. ESVAL's Capital Investment Program, 1991-2000 . . . . . . . . . . . 39 6. ESVAL's Tariff . . . . * . . . . * . . . . . . . . . . . . . . 40 7. ESVAL' Organizational Charts . . . . . . ... ... . . . ... . . 41 8. Institutional Assessment of ESVAL . . . . . . . . . . . .. . . 44 9. ESVAL's Training Program for 1991 . . . . . . . . . . . . . . 45 10. ESVAL's Collection Record . . . . . . . . . . . . . . . . . .46 11. Greater Valparaiso Water Demand and Supply * . . .. . . . .. . e . .47 12. Greater Valparaiso Sewerage System - Comparison of Alternatives . . . 50 13. Detailed Project Description ...................... * . 54 14. Detailed Project Cost Estimate . . . . . . . . . . . . . 56 15. Project Implementation Schedule. . . . . . . . . . . . . . . 58 16. Monitorng Indcatora . . o . . ... . . .... . . . . . . . . . 59 17. Limits on Types of Procurement and Prior Review Treshold . . . . . . 60 18. Allocation of Loan Proceeds . . . . . . . . . . . . . . . .. . . 61 19. Loan Disbursement Schedule .*................. 62 20. Financial Projections of ESVAL . . . . . .. . . . . . ... .63 21. Economic Evaluation of Project . . . . . .. . . . . .69 22. Environmental Assessment ....... . .......... .81 23. LLt of Documents and Data Available in Project FLles . . . . . . . . 85 MAPS IBRD 22903 .reater Valparai3o Proposed Sewage Disposal Scheme IBRD 22904 Greater Valparaiso Water Supply Scheme - 1ii - LO AND ReCT S= eS23sAdxUI Emprosa de obras Sanitarias de Valparaiso S.A. (ESVAL) Gusran&=8 The Republic of Chile. Amounts US$50.0 million, equivalent. Tormet Repayment in 17 years, including 5 years of grace, at the Bank's standard variable interest rate. Obiectiyts: The project has three major objectivest (a) to improve sanitary conditions in the Greater Valparaiso Area, mainly with respect to the water quality of public beaches; (b) to improve water supply conditions in the Greater Valparaiso Area, with respect to quantity, quality and service pressure; and (c) to restructure ESVAL by increasing its operational efficiency so that it would be able to carry out successfully its investment and development program resulting from the above objectives. Deowriojtion: The proposed project covers the bulk of ESVAL's investment program for the period 1991-97, and deals mainly with the urgent water supply and sewage disposal needs of the Greater Valparaiso Area. it includes four main components: (A) jyr4aae and pollution control (47%), including construction of secondary collectors, main collectors, pumping stations, and sewage treatment and disposal facilities; (B) Water suoolv (360), including construction of production facilities, a transmission main, water treatment facilities, distribution pipes and storage tan.s; (C) Institutional imProvements (9%), including acquiaition of 0o^" equipment and office equipment, a consumers' survey, the preparation of a development plan, technical cooperation and training; and (D) Consultina services (8%), including engineering and supervision, monitoring of the marine sewage dieposal system before and after project completion, feasibility studies and designs for water supply and sewerage systems of the northern and the southern coast of the Fifth Region. Bene-fi Al-a The project would yield economic, environmental and social benefits. Economic benefits include increased revenues from water and sewerage service sales, resulting mostly from increased rates as well as from additional connections, and decreased operational costs resulting from the optimization of the system and the reduction of losses. Environmental benefits will be achieved by alleviating the pollution of the area's streams, public beaches, and ocean. Social benefits Lnclude uniformiLatLon of the quallty of the water service, which will benefit the urban poor who suffer most from the present defLcLencies, public health improvements, and the provision of local employment during construction. - Iv - Riks aind gafRgurdst Two types of risks are foreseen. Th. first is relatAcI to the limited technical, managerial and oxecuting c4pacity of ZSVAL, which may result in delays and cost rverruns. To minimize this risk, agreement was reached during negotiations that 5VAL would: (a) submit to the Bank not latar than September 30, 1991, a detailed play of action and timetable for dealLng with the identified institutLonal limLtations, a.. implement such plan; (b) carry out its planned reorganigation not later than September 30, 1991; and (c) submit to the Bank noe later than November 30, 1991, a training program for its staff aimed at lnstitutional strengthening, and implement such plan. The second risk would be the limited availability of funds generated by BSVAL, if preoent legislation on water and sewerago tariffs is adversely altered or inadequately implemented. Agreements were reached during negotiations, that the present Government policy on tariffs would continue to be implemented, and that ESVAL would raise tariffs for its customers to the maximum stipulated by the present legislation. Estimated Project Costs (in US$ million)s component LeQ2L ETrfLa oLtal A. Sewerage and Pollution Control 18.3 19.6 37.9 S. Water Supply 13.3 15.4 28.7 C. Institutional Improvements 2.6 4.3 6.9 D. Consulting Services 4.2 2.4 6.6 BASE COST (December 1990) 38.3 413L 0A.0 Physical Contingencies (10%) 3.8 4.2 8.0 Price Contingencies 19.4 4.1 23.5 TOTAL PROJECT COST (not of duties & tax) 61.5 50 0 111.5 Import Duties and VAT 30.0 30.0 TOTAL PROJECT COST (incl. duties & tax) 91.S IQ A 5 FInancinO _lan (in US$ million): P r o j e c t Cos a t Duties Total Source Local orsn DtA, and TaX Coot World Bank 50.0 50.0 ---- 50.0 ESVAL 61.5 61.5 30.0 91.5 Total 1,1.5 M. 5 30I.0 141. 5 Estim&tes_ Bank Disbursemen (in USS million)t Bank FY 2994 21 96 U7 2A Annual 7.6 7.6 9.0 9.8 8.2 5.5 2.3 cumulative 7.6 15.2 24.2 34.0 42.2 47.7 50.0 Rate of Return: 14.6% 1. THE SECTOR Ponulation and Service_Levelsq 1.1 Chile' population, estimated at 12.7 million in 1988, ia projected to grow in the next decade at an annual rate of 1. 5%. The urban population accounts for approximately 84% of the total and is expected to grow at an annual rate of 1.73%. The rural population, of which only about 30% is concentrated in villages of 150 to 3000 inhabitants, is projected to decrease. 1.2 About half of the country's urban population lives in the Santiago Metropolitan Area, whereas the Greater Valparaiso Area is the third largest urban area of the country (the second is Concepci6n), with a current population of about 770,000. 1.3 In the last two decades Chile has made significant progress in the provision of water and sewerage services to its population. Chile's water and seweraga service coverage is among the highest in Latin America. In 1988 about 98% of the urban and 75% of the rural population had access to water through house connections, whereas about 81% of the urban population was connected to central sewerage systems. The rural population without house connections, which is mostly dispersed, is supplied by wells or central otandpipes serving several households. Water Contamination and Public Health 1.4 The remarkable achievements in service levels have been offset to a considerable degree by the water pollution problems caused by the discharge of large quantities of untreated sewage into natural water courses: rivers and irrigation canals in the Santiago Metropolitan Area, public beaches and the Pacific Ocean in the Greater Valparaiso Area. 1.5 Life expectancy in the last decade was 71.5 years. Infant mortality in 1987 was 18.5 per 1,000 live births, which is lower than in Chile's neighboring countries. Available data indicate that water-related diseases, such as enteritis and other diarrheal diseases, account for a relatively small percentage of the causes of mortality. However, typhoid fever and hepatitis are particularly prevalent, with high morbidity rates especially in the Santiago Metropolitan Area during the summer season. Sector Organization 1.6 The water and sewerage sector in Chile has undergone major changes in the last few years, and is now at the stage of completing the institutional changes and stabilizing the activity under the new setup. The two largest water companies--EMOS (Empresa Metropolitana de Obras Sanitarias) and ESVAL (Empresa de Obras Sanitarias de Valparaiso)--were converted in 1989 from public sector agencies under the MOP (Ministry of Public Works) to shareholding companies, whose main shareholders are CORFO (Corporaci6n db Fomento de la Producci6n) and the RoCh (Republic of Chile). In 1990, the 11 regional offices of SENDOS (servicio Nacional de Obras Sanitarias) were also transformed into corporations with an organization similar to that of EROS and ESVAL. As the RoCh is the main -2- shareholder, their operational and mapita1 investment budgets require the approval of the Miniotry of Finance, and MIDEPLAN (the Planning Ministry) reviews their investment programs. 1.7 A new entity created in January 1990, the Superintendencia de Servicios Sanitarios (555), has replaced SENDOS in ito supervisory and regulatory roles. The S88 is an autonomous, decentralized entity, with juridical personality and independent budget, supervised by the President of the RoCh through the MOP. Its main functions are: (a) the setting up of and control of compliance with norms and technical standards for the design, construction, and operation of water and sewerage services, as well as of industrial wastewater discharges, including the application of sanctions in case of non-compliance with standards; (b) the determination of tariffs for all water and sewerage companies and the control of their implementation; and (c) the granting of concessions for water supply and sewerage services. The above functions are carried out by three Departments: Regulation and Control, Tariffs, and Legal, respectively. 8SS has at present 45 employees, of which 33 are professionals (mostly ex-SENDOS engineers). The activity of this new entity is still in its infancy. It has an ambitious work program but, at the same time, no plans for increasing its personnel. Some of the major topics included in its present work plan are: the review and updating of existing water and sewerage norms and standards; the preparation of operational manuals for water and sewerage services as well as for industrial wastewater disposal facilities; the preparation of a study aimed at identifying sources of industrial wastewater that may contaminate the environment; the setting up of environmental requirements for all new industries; and training of personnel in subjects related to industrial wastewater discharge, which is relatively new in Chile. To help 8SS in its activity, the Bank plans to include in its Technical Assistance project for Environmental Institutional Development (now under preparation) the financing of foreign consultants who will assist SSS in carrying out some of its tasks and training activities. Sector Performanae 1.8 Chile has made significant progress in the last two decades in expanding its water supply and sewerage services. This is reflected in: very high water and high sewerage coverage levels (the highest in Latin America), low ratio of employees to water connections (among the lowest in Latin America), and the adoption of the first steps toward a sound tarl. X pollcy based on long-run average cost. Nevertheless, there are still two major problems to be addressed in the water sector: -3 (a) high rates of unaccounted-for water (40% to 45% in both the Santiago Hetropolitan Area and the Greater ValparaSso Area), which result in poor utilization of exioting resources and unreliable servicel and (b) aerious water contamination problems resulting from the discharge of large quantities of untreated sewage into natural water courses, particularly in the largest urban areas of the countrys Santiago, Concepci6n, and Greater Valparaiso. Pricing of Water SuviRpl and-SewerAge Servlice 1.9 Rates for water and sewerage in most parts of Chile have been quite low for many years. While in the Metropolitan and Valparaiso regions they covered operating costs, debt service and part of the capital investment coBts, in the other regions they were barely sufficient to cover the cost of operation. After many years of studies, in 1988 the approach of the GoCh (Government of Chile) to pricing of water supply and sewerage services underwent a radical change which brought the policy in this sector more in line with its overall policy of letting market forces establish prices of goods and services. A new general tariff system was established by Decree with Force-of-Law (Public Works) No. 70, whereas the details of the tariff system were regulated by Supreme Decree (Economy) No. 453. Rates are to be calculated by the SSS and approved by the Ministry of Economy for each of the coLipanies concerned on the basis of the replacement value of the existing installations, expected service levels, and a 15-year investment program, using a discount rate of at least 7%, with separate rates for water and sewerage and a seasonal surcharge during the summer months of December through March, where patterns of water consumption and availability are markedly different by season. Maximum rates are fixed in real terms for a period of five years and adjusted in nominal terms whenever inflation reaches more than three percentage points. Once the final level is reached, rates for consumption will be the same for all groups of customers, independent of their level of consumption, thus eliminating the presently high cross-subsidies for residential consumers with a monthly consumption below 20 m3. 1.10 To allow for a gradual adjustment of consumer expectations and behavior, the new system will be phaaed in during a transition period of four years. The new rates were calculated during 1990 using a 9.6% discount factor and introduced in March 1990 for EMOS and ESVAL, and in June 1990 for the other companies; further annual adjustments for June each year until 1994 are already defined and approved. Increases will range from 47% in Region VI to 137% in Region II. The overall adjustment will be 75% for all of CORFO's companies. Annex1_, contains the new average rates for all regions. 1.11 This pricing system, once fully implemented, will represent a considerable advance compared to the previous situation and to the policy applied in other countries of the region. However, these rates have been calculated on the basis of theoretical cost functions, investment programs, and efficiency levels. To obtain the formal concession by -4 July 1, 1991, the companies will have to prepare their actual investment programs, present them to the SSS, and receive its approval. If the volume of their investment programs differs considerably from the theoretical assumptions, future rates may be recalculated and modified. Loan processing was carried out u:- 'or the assumption that the system will be implemented as provided in the above mentioned legislation. During negotiations, an agreement was reached that changes to the tariff legislation (Decree with Force-of-Law No. 70 as modifled by Laws No. 18902 and 18986, and Supreme Decree No. 453) that materially and adversely affect ESVAL'o ability to carry out the Project would be considered an event of default. Affordability to the Lower-Income Ponulation 1.12 Together with the new tariff regulations, the GoCh has also adopted a new subsidy policy which would replace the previous cross subsidies for residential consumers. To eliminate their higher subsidies, rate increases for residential consumers have to be above thc.. for the rest. The GoCh is aware that the new final rates to be fully implemented in 1994 may not be affordable to the urban poor and has devised a mechanism of direct subsidies targeted to the lower-income groups, regulated by Decree with Force-of-Law No. 18778 and Supreme Decree (Finance) No. 786. The aim of the subsidy is to ensure that the water service remains affordable to the urban poor, but it is also a protective measure against financial deterioration of the water companies, which would occur if the increased water bills are not paid. The subsidies will be made available through the municipalities and financed by the budget of the Central Government. 1.13 To qualify for this oubsidy, potential beneficiaries must register with the municipality, their monthly water consumption must be below 20 nP, and their arrears to the water supply companies must be settled. Individual households most in need are then selected using the CAS system (Caracteristicas Socioecon6micas) a household-based socioeconomic means test already applied in other sectors (Annex 2), which has two distinguishing features: (a) qualification as a beneficiary requires the explicit request of the head of the household; and (b) eligibility is determined on the basis of an extensive questionnaire filled out by a social worker during a vioit to the household. So far only a limited number of people have presented their request and the number of those qualified remains well below the potential. 1.14 The GoCh is aware of the initial problems encountered in the application of the new subsidy and is monitoring carefully its implementation. A proposed modification to the present subsidy law, aimed at improving it, is expected to be approved by Congress in July 1991. An agreement was reached during negotiations that the GoCh will take all necessary measures to modify further the current system of direct water subsidies, whenever the results of the experience accumulated warrant it. An understanding was also reached that the GoCh would initiate a study on a comprehensive social subsidy system to integrate possibly all the subsidies presently applied, and would modify the present water subsidy system, if needed, in accordance with the recommendations of such study. - S *' 1.15 Sector investments in the last decade (1',80-90) ranged between US$27 million and US$55 million per year, totalling about US$460 million and averaging US$42 million per year. Theme investmento have been financed by Government funds, foreign loans from the World Bank and the IDB, and an increasing amount of internally generated funds in the case of EMOS and ESVAL. Funds disbursed irom foreign loans amounted to about US$160 million oluring the 10-year period 1979-88 or an average yearly amount of US$16 million, representing an average contribution of foreign loans of about one third of total investments. The investments in the water supply sector and in ESVAL's service area are shown in Ann2x 3. lector Obiectimes and Policies 1.16 The main objective of the water sector in the next decade (1991-2000) is to concentrate on alleviating the major pollution problems, particularly those occurring in the Santiago Metropolitan area, where irrigation with raw sewage of crops used for fresh human consumption is practiced on a large scale, and in the Greater Valparaiso area, where important natural and touristic resources such as beaches, water courses and the Pacific ocean, are contaminated by raw sewage discharges. To meet this objective, adequate sewage treatment and disposal facilities, combined with environmental control measures have to be implemented. 1.17 In addition to the above objective, which is related to sewage treatment and disposal, another important sector objective is to improve the performance of the urban water supply systems by optimizing the distribution networks and storage facilities and reducing the unaccounted- for water. Meeting this objective in the areas of Santiago and Valparaiso means, among other measures, launching major programs of water distribution system rehabilitation, includings pressure zoning, pipe replacement, and leak detection and control. 1.18 And finally, a more general objective of the sector is to further improvf the institutional performance of the water companies, so that they can meet the major challenges they will have to face in the next decaa-. Bank Involvment in the Secator 1.19 The %orld Bank has been involved in Chile's water and sewerage sector since 1977, when it. carried out the first Sector Study at the time the three main water entities (SENDOS, EMOS and ESVAL) were created. Shortly thereafter, the Bank granted ito first loan to SENDOS and EMOS in 1980 6Losn 1832-CH). This loan, which amounted to about US$32 million, financed a project with a total cost of US$76 million, consisting of facilities for the expansion and rehabilitation of water supply systeme in Santiago (EMOS) and in other cities, including Valparaiso (SENDOS). It also included the preparation of a Sewerage Master Plan for the Santiago Metropolitan Area that was completed in 1983. - 6 - 1.20 In 1986 the Bank granted a second loan to EMOS. This loan, for an amount of US$60 million, financed a project (total coat US$120 million) currently under implementation, which consioto of facilitiee for expansion and improvement of the water supply system, facilities for expansion of the sewage collection system, and the first stage of sewage disposal and treatment facilities, which would provide a partial solution to the water contamination problems of Greater Santiago. 1.21 At the same time (in 1986), the Bank also granted a first loan to ESVAL for US$6 million (US$12 million project), which included a major water treatment plant (Las Vegas) and some other water supply facilities, as well as consultants' studies for the preparation of the second loan (the subject of this report), which would deal with the water and sewerage systems of Greater Valparaiso Area. 1.22 In 1987 the World Bank completed a second sector study for Chile. This study made important recommendations for the restructuring of the water sector and the improvement of its operational efficiency. Lessons from Past Exoerience 1.23 The lessons learned from the Bank's past activities in Chile's water sector are very positive. Most of the recommendations made in the Bank's 1987 sector study (Report No. 6614-CH) have been implemented by the GoCh and the water companies. These include: (a) the adoption of a financial policy of full cost recovery; (b) the conversion of EMOS and ESVAL into shareholding corporations initially publicly held that could eventually be partially or fully sold off to private interests (a model similar to that implemented successfully in the electricity distribution sector)l (c) placing emphasis on rehabilitation of existing water installations and reduction of unaccounted-for water in order to reduce and postpone investments in developing additional water production capacity; and (d) the identification of suitable investment packages for sewage treatment and disposal in order to reduce serious pollution problems in the large Santiago and Valparaiso urban areas. 1.24 With the exception of initial delays in the implementation of ENOS' second loan, the performance of Chile borrowers in the water sector and their compliance with loan conditions has been excellent. ESVAL's performance in the execution of its first loan has been remarkables the project is virtually complete and the Bank loan is now almost fully disbursed. The first water supply project finsnced by the Bank (Loan 1832-CH) whose PCR was completed on September 14, 1990, and the first ESVAL project financed by the Bank (Loan 2652-CH) had important benefits for both EMOS and ESVAL, but fell short of achieving significant reductions in water losses, because of the limited funds available (ESVAL's loan was only US$6.0 million) and the lack of a clear diagnosis of the factors causing such losses. However, such a diagnosis was prepared for the Greater Valparaiso area within the framework of ESVAL's first project that included studies and designs, and has served as the basis for the proposed ESVAL loan. 7- 2. THE FIFTH R1EGIO MM. TI*I. DORBRWS Ponulation and Health 2.1 The Fifth Region covers an area of about 16,400 3a2 and has a total population of 1,400,000 of which about 91% is urban. It in divided into eight provinces that may be grouped into three main areas: Aconcagua (33% of the population) in the north, Greater Valparaiso (59%) in the coeter, and San Antonio (8%) in the south. The estimated population growth rate in this region in the next decade is lower than the national average: 1.29% and 1.34%, respectively, for the total and the urban population. 2.2 Infant mortality levels in 1987 in the Fifth Region and in the Greater Valparaiso Area were 17 and 16 per 1,000 live births, respectively, i.e., slightly lower than the national average. WaLter-and Seweraae Demand gnd Supolv 2.3 ESVAL is responsible for urban water supply and sewerage. In addition, the company recently has been given the responsibility to provide technical assistance for the operation of rural water supply systems. It took over from the former regional SENDOS office some of the people in charge of rural water supply. The capital investments in rural water supply are being financed directly by the GoCh. 2.4 In the last five years, in line with the stagnant economy of the city of Valparaiso, and also due to restrictions in supply that were overcome only in 1989, ESVAL's sales grew only modestly (2.1% annually) to 187 lcd. Service coverage in the area is a high 96.5% for water supply and a reasonable 82% for sewerage. Average consumption per month reaches 25 m3 for all connections and 20 m3 for residential connections. About 72% of residential users fall within the 20 m3/month category (the cutoff level for the direct income subsidy), their corresponding consumption amounts to 40% of the total for this user group. The peculiar characteristics of the market are: a high seasonal demand during the summer months due to the role of Vifia del Mar and surrounding communities as a national and international tourist center, and high rates of unaccounted-for water, which reach about 41% of the average net water production of 4.3 m3/s. 2.5 ESVAL expects the modest growth rate of water consumption to continue until it reaches 200 lcd by the year 2000, service coverage increases to be concentrated on sewerage where a level of 90% is forecast for the year 2000, losses to be reduced to 34%, and the average net water production to reach 4.9 m3/sec. Peak demand is to be curtailed by steep increases in rates during the summer months. This forecast for ESVAL's service area appears reasonable (Annex 4). Capital Investment ProgrOM 2.6 Capital investments in the Fifth Region had been neglected for many years, with only about US$0.5 million on average being invested annually between 1980 and 1985. This trend changed when the GoCh decided to -8- request Bank assistance for the First Water Supply Project in 1986. It alleviated the main problem of the Greater Valparaiso water supply system - the lack of sufficient water treatment capacity - and paved the way for future investments through a series of feasibility studies on both water supply and sewerage for the Greater Valparaiso Area. During the period 1987-90, the average annual investment reached US$4.0 million. 2.7 As a result of the studies carried out, an investment program of US$154 million for 1991-2000 was devised that covers the main requirements of the Fifth Region and is composed oft 40% for water supply, 45% for sewerage, and 15% for equipment, consulting services, institutional improvements, and acquisition of land (Annx S} Overall, due to the quality boost of water and sewerage services and the extension of water services into poorer areas with lower consumption, investment per connection will increase by 32% to US$862 in 1997. Theme investments were determined as the least-cost solution after detailed studies and analyses of various alternatives and are considered adequate. Water and Seweraae Tariff 2.8 ESVAL's tariff, by Supreme Decree (Economy) No. 35 of 1990, is based on the national framework described in para. 1.9. The present rates of 19.9 cents/i3 for water and 4.2 cents/r3 for sewerage were put into effect for the consumption from March 1990 onward and represent an average annual increase in real terms of 19.9%. Further annual hikes in real terms are planned for June of each year, to reach 31.1 cents/in for water and 13.8 cents/u3 for sewerage by 1995 corresponding to the long run average cost calculated at a discount rate of 9.6%. This represents an accumulated increase of 56% for water and 228% for sewerage. Nominal adjustments are to take place in accordance with the general legislation, i.e. whenever inflation reaches more than 3 percentage points. During negotiations, an agreement was reached that: (a) ESVAL would adjust its tariffs in real terms as provided in decree No. 35, and in nominal terms as provided in decree with force-of-law No. 70, to the maximum levels permitted by the legislation; and (b) the GoCh would enable ESVAL to make such adjustments. Annex 6 provides further details on the present and future tariffs. Affordability to the Lower-Income Ropulat_ion 2.9 Low-income water consumers in the service area of ESVAL will also benefit from the new nationwide direct income subsidy for the urban poor (see para. 1.14 and Annex 2). It is expected to affect about 23% of ESVAL's residential consumers. The new subsidy has already been applied starting with the bills for the month of December 1990. Success in promoting this subsidy in the Fifth region, however, has so far been limited (as on the national level). Only about 11% of the total number of assigned subsidies for the region have been utilized. The limited initial success can be attributed to the process of inscription which is somewhat cumbersome, the lack of clarity with respect to the authority of the municipality and ESVAL to disqualify potential beneficiaries, and the relatively small increase of the water tariff in 1991. In the coming months, ESVAL and the municipalities plan to increase their promotion -9- efforts to achieve the highest possible number of beneficiaries. During negotiations, an agreement was reached that ESVAL would review on September 30 each year, starting from 1992, the effectiveness of the direct income subsidy in its service area, and that it would adjust the system ao needed, in a manner satisfactory to the Bank, to incorporate the results of the experience accumulated. Manaaement. Organization and Personnel 2.10 ESVAL, which was established in 1977 as a public agency under the Ministry of Public Works, was transformed in June 1989 into a stock corporation with all shares held by the RoCh, either directly (35%) or indirectly through CORFO (65%). While the previouo government had intended to sell at least part of the company to private investors, the present government currently does not have such plans. 2.11 ESVAL's bylaws follow the general pattern of stock corporations in Chile. The Shareholders Assembly elects the seven members of the Board of Directors including the president and approves the company's financial statements. The major responsibilities of the Board are: approval of annual budgets, major capital investments, and credit and loan operations. The general manager, who is appointed by the Board, is in charge of managing the day-to-day operations of the company. He is assisted by a manager acting as his deputy, and five first-level line managers responsible for the areas of planning, engineering, adminiatration, finance and sales. Additionally, there are three advisory positions to the general manager and five regional managerial positions in charge of operations (Annex 7, page 1). 2.12 The company has some 900 employees. While the total number of staff (about 3.4 employees per water connection) seems reasonable, the staff composition is unbalanced, with an insufficient number of qualified middle-level managers and technical staff. ESVAL's organization has remained unchanged for many years and it is still basically supply driven. The additional personnel requirements are limited (about 35 employees at project completion) and mostly for strengthening the company's capacity to operate and maintain new and more complex water and sewerage facilities, but bigger efforts for training are required and are included in the proposed project to achieve an adequate staff balance. 2.13 An organizational study whose terms of reference had been discussed with the Bank has recently been completed. To make the company more responsive to user needs, the study recommends decentralizing most of the short term tasks while the central departments would be limited to defining policies, standards and objectives, and to controlling the achievement of agreed targets. In addition, the central departments would be in charge of larger investment projects, medium- and long-term planning, technical assistance, financing, and consolidation of results. Annex 7, page 2 shows the future organizational structure, which would be implemented within a couple of years and would go a long way in dealing with the over centralization of the company. In the first phase, a "transitional" organizational scheme would be adopted (Annex 7, page 3). - 10 - The implementation of this transition-stage schemo lo planned to etart in June 1991 and would be completed within a period of nine monthe. In the new organizational scheme, there will be five first-level managers and four regional managers, while the position of the manager is abolished. The existing Planning Department together with its External Credit Unit (previously IBRD Coordinating Unit) will operate under a new "Development Manager" (Gerente de Desarrollo), who will also be in charge of "systems and methods" and "data processing". In the transition phase, the four regional units will operate semi-independently under an "Operations Manager" (Garento de Operaciones), who will also be in charge of two central units (commercial and technical assistance). In the final phase, the regional units will report to the General Manager and achieve full independence, whereas the Operations Manager will be replaced by a "Technical Manager" who, among various other attributions, will act as advisor to the regional managers. 2.14 Despite its excellent performance in carrying out the first Bank loan, ESVAL needs to upgrade considerably its executing capacity before it can carry out successfully the proposed project, which implies quadrupling its annual investments as compared to previous years. Annex 8 contains an assessment of ESVAL's institutional problems in various areas and the improvements required. The main areas which need reinforcement are: management information, commercial operation, financial operation, and operation and maintenance. During negotiations, an agreement was reached that ESVAL would: (a) present not later than September 30, 1991 a plan of action acceptable to the Bank, for improving its operational and administrative efficiency that would include the tasks and schedules presented in Annex 8; (b) implement the above plan in a timely manner; and (o) implement not later than September 30, 1991 its planned reorganization, based on the conclusions of the organizational study carried out. Training 2.15 During project preparation, ESVAL's awareness has increased considerably with respect to the need for a bigger effort in the training of its personnel, in order to be able to comply efficiently with the major challenges that the company will have to face in the near future. The long-range training needs of ESVAL will be defined within the framework of the organizational study which is being carried out by consultants. In the meanwhile, the recently appointed administrative manager who is responsible for the company's training has prepared a training program of a relatively limited scope for 1991. This program, which covers all the areas of the company's operation (management, technical, commercial, financial and administrative), includes about 60 different training activities in a variety of subjects, with a total cumulative number of participants of more than 1,300 and a total cumulative duration of more than 3,400 hours. The estimated cost of this training program is approximately US$55,000 (Annex 9). This program represents a considerable increase in the training resources allocated by the company compared to the previous year (1990), and yet it should be considered a transitory phase until a more comprehensive training program is presented - 11 - by the consultants preparing the organizational study. During negotiations, an agreement was reached that ESVAL woulds (a) present not later than November 30, 1991 a comprehensive training plan acceptable to the Bank, aimed at strengthening its capacity to carry out the project efficientlyl and (b) implement the above program in a timely manner. Ooeration and-Maintenange 2.16 The operation and maintenance of the water supply and sewerage systems is carried out by operational units set up lin the Greater Valparaiso Metropolitan Area and in each of the remaining provinces of the Fifth region (San Antonio, Quillota, San Felipe and Petorca). The Greater Valparaiso unit, which is the largest, includes three subunits dealing with each of the three distinct geographic areas (Valparaiso, Villa del Mar, and Quilpu6-Villa Alemana). All the subunits generally carry out their task of satisfying on a continuous basis the water consumption requirements of their customers (with the exception of peak days in the summer season, when the system capacity is insufficient, especially in some coastal resort cities). However, the operation of the water supply systems is inefficient as a result of high water losses and other deficiencies described in para. 3.6. 2.17 The maintenance of the water supply systems is a difficult task under the conditions prevailing in the distribution networks, particularly in the Valparalso area. It requires continuous repair and excessive maintenance personnel. A maintenance team usually consists of at least six workers, led by a supervisor and transported to and from the repair site by a driver. The latter two are not involved directly in the repair work; the team must sometimes wait for the driver to return long after the repair is completed. No information system has been established on the repair needs and their priorities, with the consequent result that in many cases important repairs may be delayed for a relatively long time, thus creating customers' dissatisfaction with the service provided by the company. ESVAL's maintenance teams carry out only the routine repairs and identify any major repair that may be required. When the maintenance requirements exceed ESVAL's capacity to perform them, such as in the case of large-diameter pipes on valves, the maintenance services required are contracted out. This cru4tes a further delay in the completion of the repair work and the resumption of service in the affected area. 2.18 During the period 1987-90, considerable modernization of the maintenance systems was achieved with the implementation of the first ESVAL project (financed by Bank loan 2652-CH), when about US$4.3 million was invested in purchasing Operation and Maintenance (O&M) equipment. At the same time, a diagnosis of the main requirements for improving the O&M system was prepared by consultants, and detailed designs were prepared for improvements of the water supply system aimed at optimizing O&M. These recommendations will be carried out within the framework of the proposed project. To improve the efficiency of the maintenance teams two measures are being considered within the framework of the company's reorganization: - 12 - (a) reduce the size of a maintenance team to two workers, one of whom would also be designated as driver, thus eliminating the roles of the inspector and extra driver; and (b) aosign ESVAL's maintenance teams to major repairs, which affect a large number of customers and thus require immediate attention, and contract out only house connections and minor repairs. Such a change in approach would imply the need for adequate training of some of ESVAL's maintenance personnel. Metering. Billino and Collectio 2.19 ESVAL's metering, billing and collection procedures are generally well developed. They are highly computerized and make extensive use of outside contracting for meter reading, preparation and distribution of bills, and commercial banks for receiving payments. Customers in the Greater Valparaiso area are billed monthly, while those in the rest of the region receive their bills bimonthly. However, not all connections are known to ESVAL; moreover, there is no preventive maintenance of the meters and the work of the meter readers is not organized efficiently. ESVAL will contract a consumer survey as part of the planned institutional improvements to reduce unaccounted-for water, better define the service coverage, and reprogram the routes of meter readers. ESVAL will also change the format of the bill to make it more comprehensible to consumers. 2.20 On the average, ESVAL's arrears at end November 1990 stood at 18 days of average billings, while those of the public sector were 56 days (see Annex 10). Most of the public sector arrears corresponded to payments owed by the municipalities of Vifia del Mar and Valparaiso for the maintenance of street fire hydrants carried out by ESVAL. Although ESVAL's overall collection performance is quite good, the debt of the two municipalities needed to be addressed. on the other hand, ESVAL owed the two municipalities payments for municipal tax (a similar amount in the case of Valparaiso, and a smaller amount in the case of Vifia). In March 1991, ESVAL entered into agreements with the two municipalitles, whereby the mutual debt is compensated and the remaining debt (approximately 5% of the total debt in the case of Valparaiso and 35% in the case of Vifia) will be paid within one year. To ascertain whether overdue amounts for this service would accumulate again, an agreement was reached during negotiations that the collection time for payment by the municipalities of hydrants maintenance would be monitored separately from that for payment of the water and sewerage bills and would not exceed 60 days. Insurance 2.21 ESVAL's asset insurance covers only its vehicles and a few administrative buildings. The risks covered are: damage arising from accidents, and fire, storm, and explosions, respectively. The coverage for the assets is net book value. This arrangement does not provide sufficient coverage for all its assets and all the risks they are exposed to. Earthquake hazard for example is not included. A study by an external consulting firm that has recently oeen completed recommended - 13 - which assets should be insured against what type of risk and by what means, and what would constitute an adequate insurance polliy. Based on these recommendatLons, ESVAL submitted to the Bank at the end of February 1991 a prelimLnary incurance program on which the Bank made some comments and suggestions. During negotiations, an agreement was reached that BSVAL would contract insurance services to expand coverago, in terms and amounts acceptable to the Bank, by September 30, 1991. Accounting and-Audit 2.22 .SVAL's accounts are maintained in accordance wLth generally accepted accounting principles and reports are iosued on time, but improvements in the accounting and internal audlting procedures are required. The company needs to develop an integrated manw - .ant accounting system to increase awareness and responsibility for costs at the different management levels. For thL purpose, the borrower should introduce a budgeting system not just geared to the needs of the government, but for its own purpose, and cost accounting as well as medium and long-range financial planning. ESVAL also needs to establish rotating inventories of stocks and a polLcy on provisioning of obsolete stock. The internal auditing at ESVAL has been inoufficient because it did not carry out operational audits of technLcal areas (operation and maintenance) or commercial and financial areas (meter reading, accounting, etc.). The internal auditor's position has recently been filled by a profeseional who is in the process of establishing the procedures for reviewing compliance with management directives and internal controls standard in a company of this aize. 2.23 External audits of ESVAL's financial statements since 1986 have been timely performed by a private auditing company, with only minor qualifications. During negotiations, ESVAL's agreement was obtalned that it would continue using qualLfied private independent auditors to review yearly its financial statements, as well as the Special Account, the statement of expenditures, compliance with the covenants of the proposed project, to prepare a management letter, and make the audit report available to the Bank by April 30 of eiach year. Past Financial Performance 2.24 With an investment cost of US$611 per connection and a stagnant consumption of 26 m3 per connection, ESVAL's financial performance until 1989 has been unimpressive, losing 3% per year on average invested capital. Although the combined operating expenditures for water and sewerage of 22.6 cents/m3 were rather low, the GoCh had approved only an average combined rate for water and sewerage of 15.6 cents/r3, 31% below operating expenditures. Because of the almost complete absence of previous borrowing due to ESVAL's lack of creditworthiness, net internal cash generation in 1988 was positive but insufficient to cover even its short-term capital needs. In 1989, however, the company witnessed a turnaround of its financial fortunes. Due to a 26% real Lncrease of Lts average rate for water supply and sewerage, combined with lower operating costs per m3 resulting from the reduction in overall pumping after the 14 - incorporation of a now gravity production and treatment facility (Las Vegas), the rate of return became modestly positive (0.5%). As a result, the company was able to finance 56% of the capital Lnvestments front its own funds. During 1990, due to the tariff reform of March 1990, this positive trend has continued. For further details on ESVAL's financial performance see Annex-20. 3. THF: FRoECT 3.1 The proposed project would be the second ESVAL operation financed by the Bank and is the direct continuation of the first Valparaiso project, which was financed by Bank Loan 2652-CH. The bulk of that project consisted of the studies and designs required for the Greater Valparaiso water and sewerage systems. The proposed project includes most of ESVAL's investment program for the period 1991-97, which was approved by the Ministry of Finance, and concentrates mainly on the urgent water supply and sewage disposal needs of the Greater Valparaiso Area. The proposed project will help improve the precarious water supply system of the Greater Valparaiso Area, and will permit solving the pollution problems created by the discharge of untreated sewage from the Greater Valparaiso Area into the Pacific Ocean. Rationale for Bank Involvement 3.2 The proposed participation in the project stems from the Bank's overall strategy to support Chile's efforts to improve the financial and institutional performance of the major sector entities, and to increase the efficiency of resource useo The project would achieve: (a) optimization of investments in infrastructure by improved maintenance and rehabilitation; (b) increased efficiency in the delivery of public services; and (c) alleviation of environmental pollution problems that affect adversely public health and hinder economic development of the area. Prolect Obiectivey 3.3 The proposed project has three major objectives: (a) to improve sanitary conditions of water streams, public beaches and the marine environment in the Greater Valparaiso Area, which are important recreational facilities for the population of the area,. as well as valuable economic resources of the region for tourism and fishing; (b) to optimize the operation of the existing water supply system and improve water supply conditions in the Greater Valparaiso Area by reducing water losses, creating uniform service pressure, and improving the quality of the water supplied to the consumers; such optimization would also permit expanding - 15 - the supply area and preclude the large capital investments that would otherwise be required; and (c) to increase ESVALI operational efficiency and lts capacity to successfully implement the proposed investment and development program. Wtekr SM221v in the Great_er Valvaratso Are,a 3.4 The Greater Valparalso Area currently has a total populatlon of approximately 770,000 lnhabitants, representing about 65% of the total population of the Fifth Region. It includes four major urban centers: Valparaiso, Vifia del Mar, Quilpue and Villa Alemana, and two smaller urban zones (Refiaca and Conc6n), which have been included in the ViLfa del Mar urban area for the purpose of water supply system design. The water supply system of the Greater Valparaiso Area ia based on three interconnected subsystems (IBRD Map No. 22904): the Las Vegas and the Conc6n systems, both fed by the Aconcagua River, and the Peftuelas system fed by the Pefiuelas Reservoir. The total present capacity of the system (3.7 me/s) is not sufficlent to meet the peak daily demand, which ls estimated to reach 4.25 m3/s by 1995. 3.5 The studies carried out have identified the minimal and most economic additional sources of water that should be developed to ensure the safe supply of water to the area until at least the year 2000. These include: (a) 00timization of supply from existing sources, including: the rehabilitation and expansion of Conc6n treatment facilities, the reallocation of existing water resources between the various urban centers, and the construction of a transmission main from the exLiting Aromos Reservoir to Conc6n, which would safeguard the existing supply in years of low flows in the Aconcagua River. The latter also would lmprove the raw water quality at Conc6n, save energy, and provide an 1'1.-.:tant safety factor in the case of failure of the main Las Vegas aqueduct (e.g., because of an earthquake). (b) minor surfAce and groundwater sources, including the Poza Azul Reservoir and wells in Limache and Calera. 3.6 In addltion to the urgent need for developing additlonal water production and treatment capacity, the Greater Valparaiso water distributLon system suffers from serious deficiencies and high water losses as a result of: (a) lack of pressure zones in a eity whose elevations extend from sea level to more than 500 m above sea level, which may create excessively high pressure in certain zones and LnsuffLcient pressure in other zones; - 16 - (b) irrational allocation of water aources among the various distribution zoneo; (c) bottlenecks in the distribution system layout (relatively short sections of pipes of smaller diameter than needed); (d) direct connection of various zones to the Las Vegas main tranemission line; (e) leakage from old distribution pipes, some of which have been adversely affected by the frequent earthquakes occurring in the area; and (f) insufficient capacity of the storage reservoirs; 3.7 The studies and designs carried out by consultants (with funds made available by the first Bank loan to ESVAL) have identified the works and measures needed to improve the operational efficiency of the Greater Valparaiso water supply system. The proposed project includes the first stage of these improvements, which are both the most urgent and the ones that would provide the highest economic return. The project would bring about an improvement in the water service to all four urban centers of the Greater Valparaiso area, and would thus facilitate the expected increase in the water rates charged by ESVAL. 3.8 The optimization and rehabilitation of the existing distribution system would reduce the unaccounted-for water from 46% at present to about 36% in the year 2000: and would reduce the operation and maintenance costs by decreasing the amount of pumping energy and pipe repairs required. The accuracy of water meter. will be increased as a result of the improvement in water quality resulting from water treatment. After the improvements of the existing system are carried out and the new sources are developed as part of the proposed project, the capacity of the Greater Valparaiso water system would reach 4.7 3/s, which should be sufficient until beyond the year 2000 if combined with the measures to be undertaken for reducing the percentage of unaccounted-for water (Annx 11). Sewaae CollectionLDisogoal in the Greater Valgaralso Area 3.9 The wastewater generated in the six urban centers of the Greater Valparaiso Area (Valparaiso, Vifia del Mar, QuilpuG, Villa Alemana, Reftaca and Conc6n) is discharged into the Pacific Ocean without any prior treatment, either directly via short sea outfalls or indirectly via two creeks crossing the area. Consequently, most of the beaches of the area, which represent a national and international touristic resource, are contaminated by domestic swage. The only exception is a small portion of wastewater from the city of Valparaiso, which is discharged into the Pacific Ocean through the Bustamante tunnel at the southwestern end of the area, out of the main bay and far from the main beaches. 3.10 The studies and designs carried out with funds made available by the first Bank loan to ESVAL have identified and analyzed a series of 17 - alternative solutions for improving and expanding the sewage collection and disposal oystem of the area, which would alleviate the sewage contamination problems, and have recommended the most attractive solution from a technical and economic point of view (Annex 12). 3.11 The recommended scheme (IBRD Map No. 22903) consists of conveying the wautewater from all the urban centers of the area (except Conc6n) to the south and then to the west, via a system consibting of gravity collectors, pumping stations, and short sections of pressure mains, and diacharging it into the ocean through the exiating Bustamante tunnel, after preliminary (mechanical) treatment. Wastewater from the Conc6n urban area would be conveyed to the north and diacharged into the ocean by means of a short local sea outfall, after preliminary (mechanical) treatment. The sewage treatment provided prior to ocean dispoaal at each of the two sites consist of: bar screens, grit and grease removal chambers. This treatment produces only small amounts of solid sludge (objects and coarse solids) that would be disposed of together with the municipal refuse. The recommended scheme was evaluated by the consultants from point of view of its impact on the be&ahes and the marine ecosystem of the area, and was found to be acceptable erom an environmental point of view by ESVAL and by the Bank. Proiect Descrintion 3.12 The proposed project, which would be carried out during a 6.5-year period between mid-1991 and end of 1997, includes four main components. The first two are related to Greater Valparaiso, while the remaining two are related to the Fifth Region and ESVAL in general (Annex 13) : A. SEWERAGE AnD POLLUTION 1O OQ_0L - 47% of project cost, includings 1. Installton of secondary sewaoe collect (1%) of a diameter smaller than 400 mm and a total length of about 10 km, in Greater Valparaiso and in the city of Limache; 2. Installation of main _ewaae collectors (19%) in Greater Valparaiso, of a diameter varying between 400 and 2000 mm and a total length of about S0 km, plus three rectangular cections with a total length of about 6 kmi 3. Consrutionof- four sewagq Duinn statin (14%) in Greater Valparaiso, including their respective pressure pipes; and 4. Construction of sawage treatmant and disoosal facilities (13%) consisting of two mechanical treatment plants at Bustamante and Conc6n, plus a 560 mm, 800 m long sea outfall at Conc6n. B. _ATR VAPRISQ WTR_SUPPL - 36% of project cost, including: 1. Construcion-of prodUction facilities (4%) consisting of wells in Calera and Limache, and intake works for supplying water from the Poza Azul surface reservoir; - 18 - 2. Xnuamlse n-nmo (5%) of t dirneter varying from 1200 to 800 mm and a length of 11 km; 3. Construction of water treatment facilities (6%) including the rehabilitation of two existing plants (Conc6n and Pefiluelas) and a new plant in Conc6an and 4. Intallation of distribution oices and constructlon-of ptorace tankn (21%). The diameter of the pipes vrary from 75 to 1000 mm and their total length is about 13 km. There will be 15 storage tanks with a volume varying between 500 and 5,000 nm each. C. INSTITUTIONAL IMPROVEMENTS - 9% of project coot, including the strengthening of the Borrower through: 1. Acquisition of O&M and office equipment; 2. Carrying out a consumers' survey; 3. Technical cooperation with other companies on various topics, including quantification and reduction of unaccounted-for water; 4. Training of its staff; and 5. Preparation of a development plan for the company; and D. COSULZING SERVICES - 8% of project cost, including: 1. Engineering and supervision of the water and sewerage facilities included in Componento A and B of the Project described above; 2. Monitoring of the Greater Valparaiso marine sewage disposal system before and after project completion; and 3. Feasibility studies and designs of water supply and sewerage systems for the northern and southern coast of the Fifth Region. Proiect cost 3.13 The total project cost is estimated at US$111.5 million equivalent, including physical and price contingencies, net of duties and taxes. The proposed Bank loan of US$50.0 million corresponds to the foreign exchange cost of the Project (excluding Interest on the Bank loan), and represents 45% of the total project cost. A summary of project costs is presented in Table 1, and a detailed cost estimate is given in Annex 14. 3.14 Project base costs for components A and B (83% of total project cost), are based on detailed designs prepared within the framework of the first Bank loan to ESVAL. Physical contingencies (10%) were added to all project components. Price contingencies were calculated for a project execution period of 6.5 years, at a local annual inflation rate of 18% and current projected international inflation rates as shown in Annex 20. - 19 - (in US$ million) Comn2o.ent Woc-al FOXR. TDa,L I A. Sewerage and Pollution Control 18.3 19.6 37.9 52% B. Water Supply 13.3 15.4 28.7 54% C. Institutional Improvemento 2.6 4.3 6.9 62% D. Consulting Services 4.2 2.4 6.6 36% BASE COST (December 1990) 38.3 80. 0Q! 52% Physical Contingencies (10%) 3.8 4.2 8.0 52% Price Contingencies 19.4 4.1 23.5 17% TOTAL PROJECT COST 61.5 50.0 111.5 4Sl (net of duties and taxes) Import Duties and VAT 30.0 30.0 0% TOTAL PROJECT COST 50.P 14;. 35% (including duties and taxes) Pr-olect Fitnancnag Plan, 3.15 The project's financing scheme is presented in Table 2 below. The proposed Bank loan of US$50 million, which corresponds to the foreign exchange cost of the project, represents 45% of the project cost (net of duties and taxes) and 35% of the total project cost. ESVAL's internal fund generation will be sufficient to cover the balance, provided its rates are increased to the maximum provided by the present legislation. Table 2: FINA1IC LgZIMi (in US$ million) %of %of P r o j e c t C o s t Duties Total Project Total Source Local ZriEQE Total and Tax Cost Cost Cot World Bank 50.0 50.0 ---- 50.0 45 35 ESVAL 61.5 ---- 61.5 30.0 91.5 55 65 Total . 1115 300 141.5 100 3.16 Out of the proposed loan, a maximnum amount of US$3 million (6% of the total loan) will be used for retroactive financing of the new Conc6n water treatment plant and some sections of the main sewage collection 20 - system (collectors and pumping station.). The Conc6n treatment plant is needed urgently in order to permit satisfying the maximum daily demand in the Greater Valparaiso Metropolitan Area in the summer season; the sewage main collectors and pumping stationo are in the critical path of the Greater Valparaiso sewage disposal system whose early completion is required in order to alleviate the serious environmental problems caused by sewage contamination of public beaches and the ocean. All retroactive financing will be for civil works and goods contracted in accordance with procurement acceptable to the Bank after January 1, 1991 and within a maximum period of 12 months prior to the date of loan signing. 3.17 The Government of Chile has recently requested the Government of Japan to consider the cofinancing of this project, as part of a package of several other investment projects. if this operation materializes, an OECF loan of about US$40 million would be granted to ESVAL. In such an event, the Bank loan amount: would remain unchanged, but the total external financing would increase from 45% to 80% of project cost (net of duties and taxes). OECF board approval is contingent upon Bank approval of the loan. Taking into account the fact that ESVAL is a revenue generating utility, an agreement was reached during negotiations that, in case an OECF loan or any other funds were made available for the financing of the Project, ESVAL would finance with funds from internal sources at least 20% of project cost (net of duties and taxes). An understanding was reached during the appraisal mission with the GoCh, ESVAL, and OECF observers, on the possible cost sharing of the project in case of cofinancing, based on sound technical criteria, and is available in the project files. Project Imlelf.intat ion 3.18 Project preparation is well advanced. Detailed designs are available for most of the items included in the two main project components (Greater Valparaiso water supply systoiT, and Greater Valparaiso sewerage system). Designs for a small number of zcamaining items are in an advanced state of preparation. 3.19 The overall coordination and superviqion of the project implementation would be carried out by the Exte nal Credit Unit set up within the existing Planning Department, and rej-.ing to the Planning Director. This Unit, which has absorbed the sta'-'i¶ that participated in the execution of the first Bank-financed project, i.-11 eventually report to the Development Manager, after the new org.a.t!zational scheme is implemented. The day-to-day tctivities under the ync-posed project would be carried out by ESVAL's existing departments. Durling negotiations, the modus operandi of the Project Coordinating Unit was discussed and an agreement was reached that ESVAL woulds (a) maintain such unit with powers, responsibilities and staffing satisfactory to the Bank and (b) allocate funds and other resources as required for its adequate operation during the project execution period. 3.20 The construction of the main sewage collection and disposal system--the most cophisticated project component from a technological point of view, which incorporates works in which ESVAL in particular and - 21 - Chile in general have no experience, will have to be supervised at least partly by foreign consultants. The water supply component of the project will be supervised by local consultants in joint venture with foreign consultants, as in the first project financed by the Bank. The monitoring of the marine sewage disposal system would be carried out by a joint venture of local specialized entities (including the three universities of the Region), local consulting firms, and foreign consultante. The identification of the components of the unaccou ted-for water and their relative weight, as well as the identification and implementation of measures to reduce the losses by improving commercial practices, would be included under the technical cooperation component as specific topics of work with an efficient foreign water company, and under training. The development plan to be prepared for ESVAL under the institutional improvements component would include the exploration of various models of utility financing involving the private sector. The project implementation schedule for each main component is shown in Annex 15. 3.21 A set of operational and financial targets or indicators that present reasonable achievement goals has been established to monitor the performance of the Borrower during the project execution period in the whole area serviced by ESVAL (Annex 1fi). The operational indicators include such parameters as: volumes of water produced and sold, number of water connections, water and sewerage service coverage, number of employees per 1,000 connections, percentage of consumers with direct income subsidy, and percentage of unaccounted-for water. Similar operational indicators would be monitored in the Greater Valparaiso Area, which is ESVAL's largest service area where most of the project facilities are concentrated (Annex 11). During negotiations, an agreement was reached that ESVAL would take all action necessary to meet such performance indicators, all to be calculated in a manner satisfactory to the Bank. It was also agreed that, in addition to the routine review of project implementation, an in-depth mid-term review would be carried out by ESVAL and the Bank by September 30, 1994, to exchange views on progress achieved in the execution of the project, including, inter alia. developments in the supply and demand for water and sewerage services, the overall investment program, and its financing. Prior to such exchange of views, ESVAL will furnish to the Bank a report on the progress achieved in the project implementation. Procurement 3.22 Procurement under the proposed project would be in accordance with the Bank Guidelines for Procurement of Goods and Works (May 1985). ESVAL r mitted to the Bank the first drafts of general bidding documents for works and goods, to be used for all ICB procurement, which were prepared in accordance with Bank Sample Bidding Documents. The Bank carrLed out a preliminary review of these documents and found them generally acceptable. A second version incorporating the Bank comments, which is being reviewed by the Bank, will be finalized prior to the first bid issued by ESVAL. 3.23 Consulting services would be contracted in accordance with Bank Guidelines for Use of Consultants (August 1981). ESVAL submitted to the - 22 a Bank the first draft of a sample document for invitation of consultants' proposals, including criteria for evaluation of proposals and a sample consultant contract. The Bank reviewed this document and found it acceptable, with the exception of the criteria to be used for evaluation of consultants' proposals, which did not follow fully the Bank's guidelines. ESVAL proposed an evaluation formula based on the MOP criteria it used in the past, which takes into acccsxnt technical quality and price. The Bank suggested that the selection be made on the basis of technical quality only, and the price negotiated with the winning firm. Since ESVAL is no longer constrained by the procurement regulations of MOP, it agreed to adopt the Bank's suggestion to award on basis of technical quality only, for large and significant consulting contracts, where technical quality is important. It was also agreed that a formula combining quality and price (the latter with no more than 30% weight) would be used for minor routine consulting contracts. 3.24 The civil works and the goods for the project will be procured by International Competitive Bidding (ICB), Local Competitive Bidding (LCB), and Shopping, as described in the next paragraph. A breakdown of project costs and loan amounts by procurement method is given in Table 3. Table 3: PRO_JCT COST BY PROCUREMENT METHOD (in USS million) Proiect Element Procurement Method Total ICB LCB other Cost 1. Civil Works: Sewerage 13.0 9.4 1.2 23.6 (3.9) (2.8) (0.4) (7.1) Water Supply 4.7 10.2 0.8 15.7 (1.4) (3.1) (0.2) (4.7) StolMtpL (1 17.7 19.7 2.0 39.3 (5.3) (5.9) (0.6) (11.8) 2. EgUipment: Sewerage 17.2 11.7 0.3 29.2 (9.4) (6.4) (0.2) (15.9) Water Supply 7.3 16.7 0.2 24.2 (4.0) (9.1) (0.1) (13.2) Institutional Improvements 4.1 3.7 0.4 8.2 (2.2) (2.0) (0.2) (4.5) Subtotal (2! 28.6 32.1 0.9 61.6 (15.6) (17.5) (0.5) (33.6) 3. Consulting Services and Training: 10.6 10.6 (4.6) (4.6) TOTAL 46.3 51.7 13.5 111.5 (20.9) (23.4) (5.7) (50.0) Note: Figures in brackets are the amounts financed by the Bank. 23 - 3.25 Contracts for civil works estimated to cost US$3.0 million or more and equLpment purchases of US$250,000 or more would be procured through international competltlve bLdding (ICB) . Contracts for cLvll works estimated to cost between US$200,000 and US$3.0 million, and equipment purchases estimated to cost between US$50,000 and US$250,000, would be awarded on the basis of LCB (local competitlve bLdding) procedures acceptable to the Bank, subject to an aggregate limit of US$20.0 million for works and US$32.0 million for equLpment and materials. contracts for less than the above LCB limits would be procured on the basis of a minimum of three quotations from quallfied suppliers, subject to an aggregate limit of US$2.0 milllon for works and US$1.0 milllon for equipment and materials. The threshold established for International Competitive Bidding (ICB) would ensure that contracts awarded through ICB would account for about 42% of the estimated project cost. The limit. of contract values by type of procurement is shown in Annex 17. 3.26 The Bank's prior review of procurement documentation for clvil works and goods will cover all major procurement steps (bidding documents, evaluation report, award recommendation and contract) and would apply to: (a) all contracts procured under ICB,i.e., all contracts for civil works exceeding US$3.0 million and all contracts for goods and/or materials exceeding US$250,000; and (b) the first two contracts procured under LCD each year. ESVAL will ensure that all contracts to be financed under the loan would be procured Ln accordance with procedures satisfactory to the Bank, and thus eligible for dLsbureement. It was agreed with ESVAL that, wherever feasible, works and goods would be combined into larger biddlng packages to simplify Bank review procedures and accelerate execution. 3.27 The Bank will review all documentation (terms of reference, evaluation of proposals, award recommendation, and contract) for all the consulting services Lncluded in the project, i.e., feasibility studies and designs, supervision of construction, monitoring of sewage disposal, and technical cooperation for institutional improvements. 3.28 The limits established for prior Bank review of procurement decisions (works, goods and consulting services) will result in a coverage of at least 55% of the estimated project cost. Disbursements 3.29 The proceeds of the proposed loan are expected to be disbursed in accordance with the allocation by categories shown in Annex 18, o-er a period of 6.5 years, which is longer than the Bank's average country profile for Chile (5.5 years), but shorter than the water sector profile for Latin America (7 years). The disbursement period was determined after taking into account the advanced status of the project designs, ESVAL's execution capacity, and the yearly budget availability approved by the Ministry of Finance. Investments in the heavy sewerage components of the - 24 - project (main collectors and pumping stations), as wall as in the new Concon water treatment plant - whlch is urgently requLred to ensure water availabLlity durlng peak-day consumptLon in summer - will start in 1991, and are concentrated ln the firat years of the project. Investments ln the other water supply components as well as Ln sewage treatment facilities are scheduled for construction in the latter years of the project. The proposed loan would be dlcbursed agaLnts (a) ExpendLtures for clvil works: M of local and foreLgnu (b) Expenditures for equLpment and materLalrs 4& of local and j of foreignu and (c) Expenditure. for consultLng services, technLcal cooperation, traLning, and supervision of works: 50 of local and foreign; 3.30 For civil works contracts valued at less than US$500,000 equivalent and for goods contracts valued at less than US$150,000 equivalent (foreign expenditures), disbureements would be made agaLnst statements of expenditures (SOEs). Non-contract expenditures such as trainLng would also be made against SOEs. Documentation for these expenditures would not be submitted to the Bank, but would be retained by ESVAL for periodLc inspection by Bank staff and for audit purposes. All other disburements would be made agaLnst full documentation. To expedite disbursements, a SpecLal Account would be opened in the Central Bank, or in a commercial bank satisfactory to the Bank, with an initLal deposit of up to US$3.0 million to cover four months of average disbursements. The closing date for disbursements would be June 30, 1998, i.e., six months after the estimated completion of project execution (December 31, 1997). The detailed dLibursement schedule is shown in Annex 12. 4. FINANCIAL AND ECONIMZC JUSTIFICATION Financial Evaluation 4.1 The outlook for ESVAL's finances is encouraging. A summary of the company's projected sources and uses of funds from 1991 to 1997 without coflnancing is ohown below: CHS Million current orices Sources Net consumer-based fundlng 49,997 64.5 World Bank loan 27,546 35.5 TOTAL 77,543 100.0 Usaes Investment program 72,183 93.0 Working capital requirements 3,546 4.7 Cash surplus 1,814 2.3 TOTAL 11vEA2 100 - 25 - The financial rate of return is expected to increase gradually and to reach 5.6% by 1997. The envisaged funding mix will be adequate, with indebtedness remaining within prudent limits. Agreements were reached during negotiations that the Borrower woulds (a) Submit to the Bank for review its financial and operational projections for the next five years by September 30 of each year. During that review, the Bank would monitor ESVAL'l past and expected compliance with financial covenants and performance indicators; (b) Generate funds from net internal sources equivalent to not less than 55% for 1991-94 and 70% for 1995-97, of its average annual capital investment for that year and the next one; (c) Maintain a ratio of debt to equity not greater than 60:40; (d) Take all necessary measures to meet a series of financial and operational targets, in addition to the financial covenants mentioned above (para. 3.21); and (e) Finance at least 20% of project cost net of duties and taxes, in the event that funds other than the Bank loan are made available for the financing of the Project (para. 3.17). Assurances were also obtained during negotiations that the GoCh, in its capacity as uhareholder of BSVAL, shall enter into a "Shareholders' Agreement" catisfactory to the Bank, with CORFO, the other shareholder of ESVAL, whereby any payment of cash dividends or distribution of share capital would be made only after ESVAL has met the requirements for net internal cash generation and debt-equity ratio. To safeguard the financial soundness of the use of ESVAL's funds in the event that funds (other than the Bank loan) are made available for the financing of the Project, it was also agreed that any funds from internal sources that are not needed for complying with requirement (e) above would be used to either pay dividends to the shareholders or make investments acceptable to the Bank, in addition to those included in the Project. No agreements were sought on an adequate rate of return (except as a financial monitoring indicator), since the proposed operation provides for a water and sewerage pricing system based on average long run costs to be implemented within the present legal framework (para. 1.9). 4.2 The development of ESVAL's finances depends mainly on the size of its capital investment program and its financing, the growth of sales and the applicable rates, and the efforts to increase efficiency, thereby keeping operating costs low. The proposed 1991-97 total capital investment program of ESVAL amounting to about US$150 million marks a departure from the stagnation of the eighties and amounts to a 60% increase in gross fixed assets. Due to the quality boost in sewerage services, investment per connection will increase by 25% to US$862 - 26 (para. 2.7). Sales growth will be only modest (paras. 2.4 and 2.5). The scope for efficiency gains is essentially limited to a reduction of losses, as most of the services suitable for outoourcing have already been contracted (para. 2.19). The rate increasee will have the highest impact on the improvements of the company's finances (para. 2.8). Further details on ESVAL's financial projections are presented in Ax20. Pr_oiect Justification and Benefits 4.3 The proposed water and sewerage schemes for the Greater Valpara1eo Metropolitan Area were selected as the least-cost solutions after compreheneive feasibility studies were carried out involving a thorough technical comparison of several alternatives. In the selection of the water oupply system components, particular importance was assigned to the staging of investments in accordance with priorities. 4.4 The proposed project is expected to generate important tangible, as well as intangible, benefits. The benefits of the water supply component will be derived from productivity gains resulting from the optimization and rehabilitation of the system, and from increased water sales. The sewerage component of the project is expected to yield important environmental and public health benefits by eliminating sewage contamination from public beaches and water courses throughout the area. It would also improve the quality of fish, shellfish, and other marine species used for human consumption, and increase the region's attractiveness for tourism. 4.5 In justifying the project, the approach adopted was to carry out a modified financial analysis of the Greater Valparafso Water Supply and Sewerage Project (the main component of the proposed project), as a proxy for the minimum levels of costs and benefits which would be expected from the project. Incremental costs and revenues were calculated as the difference between "with-project" and "without-project" values. Revenues from consumer charges based on the recent tariff legislation were used as a minimum measure of the project's economic benefits. The main conclusion that can be drawn from this type of analysis is the appropriateness of tariff levels expected to be levied during the project period. No attempt was made to calculate consumer surplus, or to quantify the health and other environmental benefits expected to be generated by the project. As such, the estimated internal rates of return (IRR) presented below substantially underestimate the expected economic return from the project. 4.6 The overall IRR of the Greater Valparaiso water supply and sewerage project is estimated at 14.6%, which is above the opportunity cost of capital in Chile (approx. 10%) - Annex 21. This indicates that the combined water and sewerage rates for ESVAL's service area are acceptable as they cover the long-run average cost of the proposed project. 4.7 The average incremental cost (AIC) of the Greater ValparaLso water supply and sewerage project, which was calculated as the ratio between the present value of the project incremental cost and the present value of the volume of water supplied to the consumers or the number of inhabitants 27 - served, at a 10% discount rats, is 7.5 cont/me or US$10.1 per inhabitant served (Annex 21). These figures are low and below those obtained in similar projects elsewhere and are therefore considered attractive. 4.8 Sensitivity tests carried out (Annex 21) have shown that the project is significantly sensitive to reduction in water and sewerage rates (revenues), moderately sensitive to increases in capital costs, and only elightly sensitive to changes in system efficiency (water losses). While it is unlikely to assume that the capital costs could be much higher than the estimated costs which were based on detailed designs plus 10% physical contingencies, these results stress the importance of ensuring that no adverse changes in the pricing system for water and sewerage services would occur. 4.9 water SuTolv. The IRR of the water supply project component alone is estimated at 27.4% (Annex 21). The water supply project would enable ESVAL to improve the quality of the water supplied to the consumers and the reliability of the service. The gradual reduction of the percentage of unaccounted-for water would be the main overall indicator of the success of the proposed program. If this project were not undertaken, the water supply service to the Greater Valparaiso Area would deteriorate and operational costs and water losses would gradually increase, with the consequent need for larger, unjustified investments in the future. The average incremental cost (AIC) of the water supply component of the project, calculated as the ratio between the present value of the incremental cost of the water supply system and the present value of the volume of water supplied to the consumers or the number of inhabitants served, at a 10% discount rate, li 2.5 cent/t3 or US$3.1 per inhabitant (Annex 21). 4.10 Sewerage. The IRR of the sewerage project component alone is 7.0%. This does not include any of the important health and other environmental benefits of the projects (already mentioned elsewhere) that cannot be accurately quantified. The average incremental cost (AIC) of the sewerage component of the project, calculated as the ratio between the present value of the incremental cost of the sewerage system and the present value of the volume of water supplied to the consumers or the number of inhabitants served, at a 10% discount rate, is 5.0 cent/m3 or US$6.6 per inhabitant - see Annex 21. 4.11 The water supply component of the project has a higher estimated rate of return than the sewerage component, because capital investments involved in water supply, which are mostly for improvement of an existing system, are lower than those involved in sewerage which are mostly for construction of a new collection and disposal system. The results obtained seem to indicate that, while the combined water and sewerage rate is satisfactory, the sewerage rate itself is too low (despite its high proportional increase planned for the next few years), and it is "subsidized" by the high water rate. The main explanation of this result is that most of the intangible benefits of the project, which are difficult to quantify and were not included in the economic evaluation, pertain to the sewerage component. Moreover, this has no major practical - 28 - relevance considering that moot users in the Greater Valparaiso Metropolitan Area are connected to both water and sewerage (water coverage is about 95% and sewerage coverage is 85%). Environmental Impact 4.12 The Pacific Ocean coast from Playa Ancha in the south to the Aconcagua River in the north, as well as the Quilpud-Vlfia creek, which flows through the center of Vifta del Mar, are at present contaminated by direct or indirect untreated sewage discharges. The main evidence of sewage contamination is the high concentration of fecal coliforms that originate from domestic sewage, indicating the possible presence of pathogenic microorganisms that may constitute a direct or indirect public health hazard. About 70% of the coastline investigated (30 km) was found to contain fecal coliforms in higher concentrations than the permissible limit according to international and Chilean standards for bathing waters (l,O00/lOOml). Along half the coastline investigated, the concentration of fecal coliform bacteria exceeded 10,OO0/lOOml in the summer season, i.e., one order of magnitude higher than the permissible limit. 4.13 A considerable improvsament in the quality of bathing water in the Vifia del Mar bay, where a large number of public beaches are located, is expected to occur after the completion of the project. On the other hand, the increased amount of wastewater discharged through the existing Bustamante tunnel, from about 0.5 mW/s at present to 4.5 m3/s in the year 2000 and 6.25 m3/s in the year 2020, will have no adverse effect of practical significance, but the radius of the area affected by fecal bacteria concentrations higher than permissible (1,000/lOOml) would increase from 200 to 300 m at present to about 1,000 m south and west of the tunnel outlet (Anneg 22). No fishing would be allowed in the area located in the vicinity of the Bustamante tunnel; this is an area of rocks and strong waves that does not present favorable fishing condltions. 4.14 The small amount of sewage that would be discharged through the Concon marine outfall should not present any problem. of much more concern is the contamination caused in the same area by the discharge of the Aconcagua River, which contains some industrial contaminants. This is being dealt with by other entities, separately from this project. Agreement was reached during negotLations that the GoCh will carry out not later than June 30, 1993 an environmental study of the municipal and industrial pollution sources of the Aconcagua River, based on Terms of Reference acceptable to the Bank, and propose criteria for industrial effluent diacharge into the Aconcagua River and the Pacific Ocean coast. An understanding was also reached that, based on this study and other studies, CONAMA (Comision Nacional para el Medio Ambiente) would be set up industrial effluent criteria for the Aconcagua River and the Pacific Ocean, within the framework of the Environmental Institutions Technical Assistance Loan. 4.15 A comprehensive environmental monitoring program is ineluded in the project to ascertain whether the sewage disposal solution adopted will provide the expected environmental results, and to3 determine whether any - 29 - additional measures need to be taken at a later stage. An agreement was reached during negotiations that ESVAL woulds (a) furnish to the Bank not later than December 31, 1991 a comprehensive environmontal monitoring program satisfactory to the Bank; (b) carry out such program before, during and after the construction of the sewage dliposal system; (c) submit to the Bank its results twice a year (April and October) for review; and (d) adjust such program to incorporate suggestions made by the Bank. Social Impact 4.16 During the construction period, the project would provide a significant amount of local employment. The project will bring about an increase in the population served by house connections by about 12,000 inhabitants per year in the Greater Valparaiso area. A large part of these new connections will serve poor urban beneficiaries. The improvements in the water supply service included in the project, such as creating uniform water pressure, increasing the storage capacity, and strengthening parts of the distribution system, will eliminate discrimination in service quality, and benefit mostly the urban poor, whose level of service is generally lower. Improvements in the sanitary conditions of the area resulting from the adequate sewage disposal system to be constructed would benefit the whole population by reducing pollution and health risks. Risks and Safecuards 4.17 No major risks are foreseen for the implementation of this project. Two foreseen risks relate to: (a) the capacity of ESVAL to carry out adequately and in a timely manner a project of this magnitude; and (b) the implementation of the tariff policies that would ensure the availability of the counterpart funds that have to be generated by ESVAL. Despite ESVAL's excellent performance in the execution of the first Bank loan and the fact that most of the final designs for the project have already been completed, the proposed project is a major undertaking for ESVAL, of a magnitude much greater than its past activities, that would require the strengthening of all the company's systems. This will be met by means of a comprehensive reorganization already under way, and an action plan to improve ESVAL's operational and administrative efficiency, both of which have been agreed during negotiations. The Government's policy on water tariffs has paved the way for ESVAL and the other water companies to increase rates in line with the long-run average cost. An agreement that the present tariff policies would indeed be implemented was reached during negotiations. - 30 - 5 -o'E@SL0GgM1.NRRRB2W1^GIE 5.1 During negotiatione, assurances were obtained flm the oggCh that it would: (a) Not make changes to the water oupply legislation or the tariff legislation that would materially and adversely affect ESVAL'l ability to carry out the Project (paras. 1.11 and 2.8)1 (b) Review yearly the system of direct income subeLdLes for water and adjust lt as needed, ln a manner satisfactory to the Bank, to reflect the results of the experienoe accumulated (paras. 1.14 and 2.9)t (c) Enter into a Shareholders Agreement with CORFO allowings (i) dletributlon of cash dividends only from the amounts avallable after compliance with ESVAL's self-financing and debt-equLty ratlo requirements (para. 4.1)t and (ii) the use of any net additional lnternal funds (becoming avallable as a result of cofinancing of the project) for either dividends or capltal Lnvestments, only after ESVAL has financed wlth internal funds at least 20% of project cost net of duties and taxeo (para. 3.17 and 4.1); (d) Carry out not later than June 30, 1993 an envLronmental study of the Aconcagua River and propose crlteria for Lndustrial effluent dLscharge into the Aconcagua River and the PacLfic Ocean coast (para. 4.14); 5.2 During negotiations, assurances were obtained from ESLAL that it would: (a) Continue to increase water and sewerage tariffs in Lts service area to the maximum provided by the current tariff legislation (para. 2.8); (b) Submit to the Bank not later than September 30, 1991, a plan of action to improve its operational and administrative efficiency and carry out changes in its organizational structure, and implement such plan (para. 2.14); (c) Submlt to the Bank not later than November 30, 1991, a training program for its staff, and implement such plan (para. 2.15); (d) Contract insurance services to expand coverage in terms and amounts acceptable to the Bank, by September 30, 1991 (para. 2.21); 31 (a) Use qualified private independent auditors acceptable to the Bank, and make the audit report available to the Bank by April 30 of each year (para. 2.23); (f) Finance at least 20% of project cost net of duties and taxes with funds from net internal sources, in case of cofinancing of the project with additional funds other than the Bank loan (para. 3.17); (g) Provide aufficient personnel, funds and other resources to ensure the adequate functioning of the Project Coordinating Unit (para. 3.19); (h) Carry out together with the Bank an in-depth mid-term review of the project by September 30, 1994 (para. 3.21); (i) Submit to the Bank for review its financial and operational projections for the next five years by September 30 of each year (para. 4.1...(a); (j) Generate funds from net internal sources equivalent to not less than 55% for fiscal yeara 1991 through 1994 and 70% for fiscal years 1995 though 1997, of the average capital investment program for that fiscal year and the next (para. 4.1...(b); (k) Maintain a ratio of debt to equity not greater than 60:40 (para. 4.1...(c); (1) Take all measures necessary to meet a series of operational and financial targets each year (paras. 3X21 and 4.1..(. d); (i) Carry out a comprehensive environmental monitoring program, satisfactory to the Bank, before, during and after the construction of the Project's sewage dispo-~.a. system (para. 4.15). 5.3 During negotiations, an agreement was reached that the signing of the Shareholders' Agreement would be a condition of loan effectiveness (para. 4.1). CHILE SECOND VALPARAISO ATER SUPPLY AND AE MJECI ates for later ad Severage Cabined hy bRinm I AWAL SALES REVENES AND AVERE RATES FOR ATER AND SEMBE LON9NFD 'I OSAE TO PREVIOS EA IN REAL TERMS: I tAIES BefhE SATES AER RATES AFTER RATES AF1ER RITEs AFiER RATES AFTER I RATES AFTER RATES AFTER RATES AFlER RATES AFTER RATEs AFT TOTAL FRmi I I 1 06101t990 06;0119 01J01/191" 0710511992 0701113 01/0111994 I 06i0111t0 07/01119/1 07101/192m 07101f3 07D/1'94 0513511990D I t : t TO 0I1011J9"41 t-A A e RMEl t MN3JCSIAtl T CD199O0PEDSO - I -1- S * t -I I ESION I 1 109 131 145 I62 184 22 1 20.2 10.7 11.7 13.4 9.9 6LS I ES6ION II I 1I 544 179 218 259 211 1 23.1 24.3 21.8 59.8 t.9 134.8 1 I RESII III 1 65 100 10 II9 133 IS0 1 17.b 6.0 10.2 15.6 12.8 74.5 1 I liESIII IV I 92 97 10 I10 115 1 20.6 19.3 9.3 3.6 4.5 U9.l : w I ECsil I(EALI S 5 I8 72 19 e n? 1121 28.C 9.7 1. 52.35 1i3. 100.0 I I KEIMIlU EBIM Ml 42' 47 52 8 66 64 1 II.9 10.6 1i.5 I3.s 0.0 57.1 S RESClIVI I 51 6 68 70 72 75: 17.6 13.3 2.9 2.9 4.2 47.1 5 S REGiON VII I 52 63 75 B0 82 9 1 21.2 19.0 6.1 2.5 4.9 65.4: I RS11i5 VIII I 43 53 65 *. 13 3 97 1 23.3 22.6 12.3 13.7 4.8 I02.3; I RESIN 11 I .55 60 4 eBS 93 971 23.6 23.5 6.0 4.5 4.3 76.4 1 I lECIIII I 56 61 14 19 93 90G 59.6 10.4 5.4 C.4 3.4 60.1 1 I SESION D I 69 99 103 tlS 133 139 1 30.9 15.7 15.5 15.8 4.5 104.4 t I RESIGN Ii S * 68 92 I 1 132 135 1 20.6 19.5 59.4 52.8 2. 98.3 5 SI OTAL UFIIW UIES - 52 hi, 70 71 37 95 117.3 14.3 11.4 11.5 4.6 1.0 I I I S 3NLIVIA. L P 1. Un I L.34 0. 3 0.37 0.39 0.40 0.421 I I 93*1t1 Cliba 19 " 5O 1 0.19 1) I I II I ll 11931 on) I 0.20 1) I tEIICII "I5rrw W59I7 l6^ 1 0.30 11 S Ut tevimI 19 115117 1 0.39 0.39 0.39 0.38 0.39 0.39 s , -4u n. - IS year 931 Edaa nat 511990 01-1 216.N1U15-1 1.0 5~~~~t - 33 - Page I of 2 CHILE SECOND VALPARAISO WATER SUPPLY AND SEWERAGE PROJECT Targeted Subsidy for Water and Sewerage The CAS System in General The targeting of major family income transfers/subsidies through the CAS system (CAaracteristicas Socioeconomicas) in Chile has two distinguishing features: (i) qualification as a beneficiary requires the explicit request of the head of the household; and (ii) eligibility is determined on the basis of an extensive questionnaire filled out by a social worker during a visit to the household. Through the questionnaire a wide variety of socioeconomic data are being collected, which are related to housing conditions, family size, health, education, employment, income, and subsidies received. Information that cannot b.e checked through inspection is self-reported. Points are given and a weight attached to each category resulting in a total score which determines the degree of need. Analysis of information collected via the CAS survey serves as the basis for allocating various cash benefits (the Subsidio Unico Familiar and Pensiones Asistenciales) and housing subsidies. The Proposed Subsidy for Water and Sewerage The procedure for qualifying for this subsidy has some specifics related to the public service concerned, but otherwise is similar to the one just described. Potential beneficiaries first have to present a request to the municipality showing they do not consume more than 20 m3 per month and are up to date with water bill payments. If this first test is positive, social workers of the municipality then visit potential beneficlaries to determine socioeconomic level applying the CAS system. Individuals are then ranked according to score and should receive the subsidy if their position is within the total number of slots made available to the municipality by the Intendencia. The classification is valid for a period of 3 years. The subsidy covers both the fixed and the variable (consumption) related part of the rate. It is first calculated for the variable part of the rate; the subsidy is applied only to the first 10 mi3, a consumption of a maximum of 2.25 m3 per permanent household member, or the actual consumption, whichever is lower. The percentage resulting from this calculation is then also applied to the part of the bill that is independent of the amount consumed. The total subsidy can reach between 252 and 75% of the total billing. Ti- water company bills the consumer for the amount to be paid by him and the municipality for the amount of the subsidy. Both are then expected to pay the water company. - 34 - Annex 2. pane 2 of 2 Potential problems with this system beyond the normal difficulties in putting something new in place and making it work might result from the following features. The exclusion by the municipality of those customers who are in arrears restricts the number of potential beneficiaries in an unnecessary way. It would improve the performance if this distinction would not be made for the general qualification but only by the water company at the time of monthly billing. The same could be said for the limit on the monthly water consumption of a maximum of 20 m3 because thl.a may vary according to the season. The role of the municipality would therefore be limited to determining the number of potential beneficiaries on the basis of their socioeconomic criteria. Restricting the subsidized consumption to a household of 4 persons with a maximum use of 2.25 m3 penalizes larger families. For potential beneficiaries it is difficult to understand the requirement stipulited in the decree that in order to qualify for the water subsidy they have to provide the same information about their socioeconomic status the municipality has already required during previous investigations for other subsidies. The legislation allows the municipality to use 85% of the unallocated funds for the financing of water supply and sewerage projects for low-income consumers. This provision may limit the full implementation of the subsidy, since it might be politically more attractive to construct new facilities than to provide a continuous payment for water consumption. - 35 - CHILE SECOND VALPARAISO WATER SUPPLY AND SEWERAGE PROJECT Water Sector Investments, 1980-1990 (in current US$) YEAR EMOS ESVAL SENDOS TOTAL 1980 3.9 0.2 23.4 27.5 1981 5.7 0.2 29.2 35.1 1982 11.2 0.6 27.2 39.0 1983 '28.6 0.1 16.2 44.9 1984 20.2 0.7 35.0 55.9 1985 7.3 1.0 37.3 45.7 1986 10.1 1.1 34.7 45.9 1987 8.2 2.1 34.9 45.1 1988 7.4 3.6 35.7 46.6 1989 12.7 6.5 36.4 55.6 1990 16.8 3.9 (1) 20.8 TOTAL 1980 131.9 20.0 310.0 462.0 Average v12.0 1.8 28.2 42.0 Minimum 3.9 0.1 16.2 27.5 Maximum '28.6 6.5 37.3 55.9 (1) Data for the various regional water companries which have replaced SENDOS in 1990 are not available. (2) Totals for 1990 and for 1980-1990 do not include SENDOS investments in 1990. EMOS (28.6X) \S ()VAL (4zr.) SENDOS (67.1X) . sewu vvmm miii u'H. N3m sit man UIJIY Ai KN3 FM 88 MU H 31336 1313 E231912.113I2E AREA n1u I29 1m 297 nss 199 190 299 22 2993 I99 25 1996 29 7 193 9 2000 4 - actual '-.---------------Atha)- Prenrt Fastrat halt kta Wi. Fupslatim 2040 21,96.3 1,165.0 1,125.6 1,i39.S 1,157.V 1,177.5 1,185.4 1,207.1 1,230.2 1,253.0 1,271.2 1,299.3 1,31.t ,1.0 1,37.1 ,3114 I,3.5 Pirple per mater aor 4.72 4.1 4.U 4.13 4.60 4. 4 4.46 4.43 .0 4.37 4.34 4.31 4.28 4.25 4.22 49 4.21 tPimle per mawap cmsctIa 5M2 4.99 4.U6 4.93 4.9 4.87 4.84 4.31 4.1J 4.75 4.72 4.9 4.66 4.63 4.60 4.57 4.54 Service t mvnp eater ageple 1 92.4 91.6 93.4 4.3 4.9 9.0 9.6 9;.I 91.0 97.2 9.1 97.4 91.9 9.3 91.7 99.0 .4 Seic cerae agel a. N.e. 15.3 78.3 1M.6 9.1 32.0 12.1 33.4 84.3 15.2 5.6 U.7 87.1 S8.5 39.4 9. leuimtu IutI 13.3 252.4 £41.0 1461.5 149.2 252. 144.6 144.1 142.0 138.4 132. 1230.2 130.7 131.1 131.6, 132.1 132.1 htmlae Ilili 236.2 131.2 1833. I 28 t. 2q.Z 2I:J 2,1j.j '0: 2Rj. Iq: I: 2IM 1 IM: I 04100.tb£ Th? Al u:i 211:6 211 2 , .0 2 .5 2 2: 2 4.1 21 22 270:4 2n.i Weccalsi-lr matr M1 .41. 46. 46.3I 44.9 43.8 1. 40.3 40.5 40.2 39.8 3.3. 37.2 36.5 35.9 35.2 34.5 33.9 lamriae2emter truatnt eIucp 4.4 4.3 4.4 4.4 4.5 4.4 4.3 4.4 4.5 4.5 4.4 4.4 4.5 4.6 4.1 4.3 4.9 hatd fatterT 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 30.0 Pgred al: mte tatmut eIdml 5.7 5.6 5.1 5.7 5.8 5.8 5.6 5.L 5.3 5. 5.7 L.1 5.6 6.0 6.1 6.2 6.4 Trat ater t ruI ct1 Ell adth ISIml . 5LE 5. 5 LI 5.9 . 6.3 1.3 6.4 L. L. 6.1 7.2 7.2 7.2 7.2 7.2 TrtMe aplma latagel IeIaK 0.1 0.2 0.1 0.2 0.1 0.5 0.7 0.6 0.6 2.0 1.2 2.0 1.4 2.3 1.1 1.0 0.9 ater ra sw pe is i I ts 11.5 . 9.5 10.7 21.2 14.1 19.3 21.6 25.4 23.4 32.2 35.4 3.3 31.4 40.0 41.3 42.3 Eater Semplo a lati 226,367 224,64 2,225 233,946 251,933 256,426 213,621 270,93 2738,353 285,832 23,524 3012,21 309125 32?,I2 325,257 3,490 1swwatr. 9 309M925 941 966 9 9 99 ,02 206 ,1 ,00 202 ,3 61033 ,045 ,052 1,058 uow cial l3,465 13,32 12,243 23,014 3,404 14,00 14 ,2 1 3 24,3 74X17 15,75 5,481 151,121 ,1902 11,25 £6,149 21013 17,412 Iltc 2,51 2,s 2,236 2,056 2,022 1,010 I,010 2,00 993 In4 915 965 -956 94 931 92 911 hUI Stapp 130 111 11 fie0 is 34 90 96 102 I00 114 122 126 133 13 146 Fro d new In~~~23 244 252 200 292 198 202 201 221 215 220 225 229 234 239 244 249 p ws450 392 2,145 I,09 2,6 1,4 232 ,4 154 ,6 273 ,0 2.019 2,240 2,262 2,387 2,531 mtau 223,005 2312,6 240,420 24,535 255,690 2661.44 274,'336 2811941 239,670 297,510 35,468 3113,45 321,743 330,064 338,5210 341,M23 355,78 radi 112,3 231,025 185,123 194,95S 200,865 207,321 214,742 m,446 230,452 237,173 245,331 253,130 261,174 269,414 278,067 Idalrial 156 711 181 19 333 842 351 36 071 m81 b9S 901 911 122 933 cas ciml 20.352 10,994 21,319 t2,760 12,001 12,214 12,530 12,898 133229 13,532 13,343 4, 4,41 24,1 125,195 Paibc 993 894 874 966 19? M3 M3 113 166 160 153 11 740 133 72 Palle U0611" ~ ~ ~~~~~2 I 0 0 0 0 0 0 0 0 0 0 0 0 0 Ph'iof 11t IIp 139 141 ISO 142 143 245 141 149 150 152 1n3 155 157 159 rs 32 46 66 m 28n 932 2049 1272 2, m ,42 1,5317 2,:1 17 2,921 2,058 134,371 194,326 299,562 209,321 215,461 22,297 I 23,27 4676 2804 S*Wdl11t7 s,2 S,52 it31 254 , 230 1U7 230 297 2U W7 U ZU517 262,5N1 2tO,7S7 279,207 2,01t 297,117 laalduatlai 56,33U 55,2B4 55,151 56,561 59,023 62,029 9,601 ,642 61,005 6O,64 59,407 59,407 10,763 627 ,3 63,52 64,938 66,36 Imimatrinl 2,u64 2,331 2,192 2,394 3,261 3,21 3,5M8 3,184 3,958 4,239 4,327 4,524 4,723 4,941 5,163 5,394 5,634 Ceoeirci a 5.141 5,97 6,532 7,456 10,539 10,8S5 10,823 22,492 12,200 J2,945 13,723 14,553 15,420 16,331 1,290 I 28,29 19,357 lIc 3,0n2 9,002 9,M 6,080 6,276 ,W40 6,449 6,750 7,03B 7,339 1,653 1',s3 3,32 8,8 9,065 9,460 9,812 ilic Staplpa H8 t7 92 85 107 III 121 275 130 233 131 141 145 149 152 155 159 FM of Clarge 234 2U 272 32 31 342 275 M92 309 327 34 36 381 409 at 455 419 ftlrs 10 0 264 66 68 75 54 39 29 21 15 11 9 J 4 3 Sittl 73,410 73,093 15,201 15,78 79,503 82,191 30,931 83,123 34,619 35,515 05,20 U,3 ",11 92,662 9,65 9,703 202,31 hdtial 44,055 47,000 43,a6l 30,23 4,m 35,34 52,4 52,59 s5,9 49,39 51,3U 52,39 54,459 56,31 57,145 lCmtrial 2,254 2,021 2,176 2,244 2,459 2,U0 2,113 2,924 3,084 3,241 3,413 3,591 3,7i S,90 4,187 Coeswcial ~~~~~~~~~5,244 1,385 3,151 ,406 30,002 3,553 922 9,634 2U 0,541 £1,12 I20 2,3 13,3 164,52 2,5 hPil l 7,2166 5,20 5,321 5433 4,959 C 4,-29 5,10 5,276 5,456 ,652 5,8 6,069 6 288 ,5125 &,748 Pbic St.dplpe I I 0 0 .0 0 0 0 0 0 0 0 0 0 0 Fre d Dvp 214 m 231 290 m 275 2M 291 30 321 33 341 361 375 3o Other 16 20 1 I 4 5 6I 6 I 1 1 I I I I itetad 3,9510, 61,191 6,544 66,563 65,416 6,201 63,116 69,93 19 70,3 73,013 75,744 1358 21,54 5 4,423 SEa WAmAISo wm Tsm AD mUM MEC SmW NO KM FOIR 1 S _E 11 Ml 1 EE3S 1E1 i.e 3934 1915 J1m I3 lm m m I mo IaI 1992 IT13 M ms t"b 1997 19M 19 2000 t - - Xprn"ta FKait enideb1 aM44,39 85282 97,461 1 ,M,8 1,552,12,12 3 2,283 4 4,0,128 5,696,594 7,432,296 9,,365 t2,164,1 14,612,145 17,716,5 21,M7,854 2,7n,791 31,M,271 I.gutrial 26,400 31,29 56,59 11,36 97,281 155,343 2, 91I 325,99 442,190 01,506 843,471 1,109,756 1,311,119 1,687,770 2,010,73 2,565,432 3 112,263 C*ted V 0 te e3 0 2l Na 3 T,75120 91,19 136,814 245,711 327,509 495,4975,0It 059,21 1,461,213 2,034,240 2,864,95 3,82,293 4,77,92 5,9,59 7,461,303 9,311,505 11n631,M PAlic %~~~~~~9,539 140,4I0 191,909 319,fi9 185,199 211,6 420,35 "". 192,05 1,083.150 1,500,B10 1,970,22 2,425,253 2,995,117 3,111,0M 4,526,526 5,514.182 Mli S 20 2,642 1,531 1, 2 1 , 11,121 15,031 20,545 21,564 32,158 38,884 46,965 51,616 60,314 Fj'lt of tkwp ~ ~ 0 0 6 0 0 0 0 0 0 0 0 0 0 0 ett 7 0 0 10,030 21,69 34,048 52,383 49',9M $7,110 44,811 43,054 39t,15 33,23 29,293 24,009 20,349 11,230 Subt$ta 83,464 1,131,95 1,314,315 1,110,956 2,181,99 3,090,214 4,114,219 6,381,II5 9,450,912 11,217,540 14,938,223 tt19,3?,19 23,220,501 28,429,901 34,663,112 42,261,262 51,543,403 k > sn0155,59 14s,9 252,011 359,932 591,49 163,J131,294,53 1,943,76 13,206,39 4,115,1 5,603,104. 6,813,439 8,211,428 10,051,644 12,222,214 [A idl 9,529 9,574 12,112 19,844 31,243 41,338 13,943 111,141 205,481 318,424 395,307 490,90 609,455 756,561 939,129 labstftal 23,115 35,13 48,541 1, 21 111,15 119,251 284,323 451,02 8114 1,284,646 1,617,863 2,036, 70 2,5 3,037 3,224,218 4,054,649 ghic 30,230 23,649 30,12 44,29 13,42 103,515 15.2518 245,503 423,615 645,793 189,739 915.4 180,649 1,443,318 1,164153 MIcS5ta16pIs 4 1'2' 1g2 1e1 5O0 t6§3 Ue2 *t. 7§sI 0 0 0 0 0 0 0 0 0 0 00 b . ibg 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 StIkW6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 S1.lal 213,474 253,03 344,047 4U , 319,5 1,1129 1,3 2,17 ,413 4,652,035 81,431 3 ,410, t0J36,12i 12,131,59t15,412,147 11 143 kw aupI p .. oahel to3 hU;"ti2 2.13 21.6 21.0 20.6 20.9 20.8 39.7 19.4 19.5 184 17.5 11.1 11.0 17.0 16.9 11.3 11.1 lhihstiai 215.9 I 241.4 1-7. 251.4 215.4 290.8 303.1 315. 329.3 311.3 354.1 362.6 313.0 391.8 413.1 428.9 445.3 ameuial 46.3 46.9 41.2 63. 65.3 . 13.6 16.4 19.0 73.8 14.1 11.6 80.A 83.1 36.9 90.2 93.5 -A' e 311.2 311.3 491 442.1 507.4 532.2 52.0 59.3 538.3 11g9 651.4 185. 112. 171.0 102.1 45T.7 2 M.0 Mdlii s1u1ps 389.5 115.5 85. 10.8 136.I 125.0 124.5 120.3 11.4 112. 10.4 10S.2 102.2 100.4 91.1 95.2 92.8 Fro 1o CIw, 144.1 154.3 153.2 11.2 14S.3 146.2 114.5 313.9 123.4 32.0 132.6 197.3 142.1 141.0 152.0 157.1 162.3 am" 8.9 0.6 3.3 12.2 5.1 4.9 4.9 3.3 2.2 1.5 1.0 0.7 0.5 0.3 0.2 0.1 0.1 G*total 27.A 21.3 26.5 25.3 26.3 21.2 24.o 24.9 24.? 24.3 23.? 23.4 21.6 2313 23.8 'N4.0 24.2 Inibdid ~~~~~~~~22.4 22.2 22.2 22.0 21.0 20.7 20.3 If.7 ILI3 17.3 31.7 11.1 17.6 31.1 17.1 I16owtrl 241.5 219.7 231.9 235.3 251.3 251.1 213.0 284.1 29.1 303.9 321.5 334.5 347.9 561.9 376.1I C.wmrial 42.2 57.1 60.1 I 0.5 5.3 53.1 11.5 14.3 61.2 10.2 13.2 11.4 19.1 82.9 66.3 Mlii 603.4 451.2 501.2 525.2 493.5 520.5 542.8 516.1 590. 6111. 645.0 614.3 105.1 737.5 773.6 Fdlic staolpips ~~~~~42.1 55.6 0.0 0.0 0. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Froli StuOm* 151.4 219.2 l13. 11. 051. 10.3 064.9 1019. 114.5 279. 111.5 119.7 195.0 200.4 206.0 Free.4 4.1 2.1. 0.1 0.2 0.4 0.4 0.5 0.5 0.5 0.4 0.4 0. 0.4 0.4 0. hetoWal 21.6 21.2 21.3 2.1. 25.1 25.1 25.3 24.9 24.2- 23. 23.5 23. 23.3 24.0 24.1 late Me MIO hsl.alIaI 22~~~~~1.44 15.43 17.19 22.50 26.31 34.35 55.31 11.90 93.31 122.52 162.70 204.11 241.13 25.32 33644 W.0 461.4 IobtrilI 12.19 16.4 20.34 24.66 30.73 46.92 16.03 361.4 HIM.3 146.11 194.92 245.33 29948 341.59 403.01 415.63 561.24 Iguorcial 11.45 16.31 20.95 25.45 31.06 45.41 10.69 92.22 119.17 151. 15 26.19t 262.65 309.92 365.71 431.54 509.22 600.88 hMii 20.93 I5.30 19.13 21.11 29.30 42.14 16.43 31.1 112.55 14.16 M9.09 246.8 291.23 343.65 405.50 413.50 564.62 FMlii Stuolpn 22.94 L05.2 16.10 15.34 21.5 56.02 50.69 U 16.2 15.8 112.67 149.15 238.32 222.21 .21.2 309.42 265.11 430.83 free of bago 0.80 LO 0.0 0 0.00 0. OO 0.00 0.00 0.00 L0. O 0.3 0.0 0.00 0.00 0.O 0.00 0.00 0.00 0.00 Stbes 0.OG 0.00 0.00 61.11 329.16 500.71 70.11 9)9.31 1,194.4 1,567.42 2,661.49 2,639.14 3,091.30 3,647.13 4,304.32 5,079.10 5,993.32 hetata 11.31 21.49 3L41 23.31 21.52 31.60 S."5.9 16.5 99.11o 133.418 l1.41u 219.95 259.15 301.1 362,45 429.22 505.97 gnihdid ~~~~~~~~~3.53 3.3 L.13 7.2511 .99 11.60 25.37 31.17 12.3 92.52 109.11 121.12 152.01 I1.37 221.46 Isbetrial 4.23 4.11 5.314 1.40 12.11 18.12 26.61 39.92 16.13 3.04 215.19 336.51 111.03 190.08 224.29 Cagrijal 4.41 4.83 5.96 9.4 24.11 20.95 33.00 46.41 11.46 113.93 134.49 158.70 211.21 220.91 26.175 MA6g 4.22 4.63 5.18 9.38 14.11 22.90 31.01 46.53 17.3 114.27 334.84 159.11 181.15 221.55 261.42 M2IIC sta4lpoe 2.00 2.00 0.00 0.00 0.00 0.00 0.00 0.00 0.80 0.O0 0.38 0.00 6.80 0.80 0.00 Free @1 Darge, 0.00 0.38 0.0 0.00 0.0O.D 0.00 0.80L 0.8 .00LOO 0.00 6.00 0.00 0.80 0.6 Stes 08 0.00LO 0.00 0.00 0.OO L.0 0.00 0.00 6.6O 3.8.00 0O .00 0.00 0.00 0.80 S*Mtta 3.71 4.10 5.33 7.43 22.52 11.11 21.34 39.50 61o0 91.52 115.20 136.07 23.1 2199.11 224.21 - 38 - Eata -3 of CHILE SECOND VALPARAISO WATER SUPPLY AND SEWERAGE PROJECT Histogram of Household Clients for Water Supply January - December 1990 monthiy Annual Annual ...Annual Average Average Averaae Aver. Cons. Consumption Consumption Consumption Consumption Clients Clients Clients s3/conn./nonth Range f3 m3 Cumul S3 Cusul. Number Curul. * Cuaul.l 0 0 0 0.0 18,909 19,808 7.5 0 1- 10 5,470,955 5,470,855 10.2 74,091 92,9889 37.1 6 11 - 20 15,626,266 21,097,121 39.5 86,761 179,650 71.9 15 21 - 30 11,284,213 32,381,334 60.6 38,079 217,729 97.1 25 31 - 40 6,662,326 39,043,660 73.0 15,901 233,630 93.4 35 41 - 50 3,716,132 42,759,792 80.0 6,907 240,537 96.2 45 51 - 60 2,263,336 45,C23,128 84.2 3,435 243,972 97.6 55 61 and more 8,446,243 53,469,371 100.0 6,117 250,089 100.0 115 Total 53,469,371 250,099 18 CHILE SECOND VALPARISO WATER AMD SEWERAGE PROJECT ESVAL* Ceapitatl Investment Prwrm ............. ................................... .................................. . (End 1990 ISS illtion) Total Total 1991 1992 1993 1994 1995 1996 197 1996 1949 2000 1991-2000 1 19911997 X ........... .................... .....................................................................o* 1. PHYSICAL INVESTNENtS 1.1 Vater Supply 1.1.1 Gran Valparaiso 2.19 3.50 0.55 10.74 8.68 3.01 0.00 3.00 2.00 2.30 35.97 33.81 28.67 33.1X Production and Transaission 0.25 0.65 0.48 3.16 2.74 0.00 0.00 7.29 6.91 7.29 8.41 Treatment 1.16 1.48 0.00 1.23 1.14 0.00 0.00 5.01 4.7X 5.01 5.BX Distribution 0.77 1.37 0.07 6.35 4.80 3.01 0.00 3.00 2.00 2.30 23.67 22.3X 16.37 18.91 1.1.2 San Antonio (Southern Coast) 0.07 0.07 0.07 0.07 0.07 0.14 0.14 0.14 0.14 0.14 1.05 1.01 0.63 0.7X 1.1.3 Acwncagu (Northern Coast) 0.14 0.14 0.14 0.21 0.14 0.21 0.14 0.21 0.14 0.21 1.68 1.1 1.12 1.31 1.1.4 Aconcagua River Valtey 0.28 0.07 0.14 0.07 0.14 0.07 0.14 0.07 0.14 0.07 1.19 1.11 0.91 1,11 Subtotal Vater Supply (1.1) 2.68 3.78 0.90 11.09 9.03 3.43 0.42 3.42 2.42 2.72 39.89 37.51 31.33 36.Z2 1.2 Sewerase 1.2.1 Gran Vatperalso 4.54 7.24 12.27 2.04 4.19 3.62 3.97 1.10 1.20 1.40 41.57 39.1I 37.67 43.81 Collection 2.59 4.32 6.32 0.89 1.63 0.50 0.00 1.10 1.20 1.40 19.96 18.81 16.26 18.81 PuLping 1.95 2.92 5.95 0.00 0.07 0.00 0.00 10.08 10.21 10.88 12.6X Treatment and Disposel 0.00 0.00 0.00 1.15 2.49 3.12 3.97 10.73 10.11 10.73 12.41 1.1.2 San Antonio (Southern Coant) 0.07 0.11 0.11 0.14 0.14 0.17 0.17 0.21 0.21 0.28 1.61 1.5X 0.91 1.1X 1.1.3 Aconcagum (Northern Coast) -0.03 0.03 0.04 0.04 0.06 0.06 0.07 0.07 0.09 0.09 0.57 0.51 0.33 0.46 1.1.4 Aconcagua River Valley 0.04 0.04 0.06 0.06 0.08 0.08 0.11 0.11 0.12 0.12. 0.82 0.81 0.47 0.5S Subtotal Sewerae (1.2) 4.68 7.42 12.48 2.28 4.47 3.93 4.32 1.49 1.62 1.89 64.57 41.9Z 39.58 45.71 1.3 Other .0.21 0.14 0.18 0.18 0.21 0.21 0.21 0.21 0.21 0.21 1.96 1.81 1.33 1.52 Sd,tottl.Ptyslra Investments (1) .7.57 11.34 13.56 13.55 13.71 7.57 4.95 5.12 4.25 4.82 86.42 81.21 72.24 83.51 2. EOJiIIT ACi6SITIOiI 0.28 0.33 0.30 1.29 1.08 1.25 1.28 1.20 1.30 1.30 9.69 9.1X 5.89 6.8J 3. CONSULTING SERVICES Institutiaml Developaent 0.35 0.05 0.11 0.16 0.16 0.13 0.06 0.15 0.10 0.15 1.40 1.3S 1.00 1.2X Envircnnental Nonitoring 0.21 0.32 0.32 0.32 0.31 0.31 0.34 0.32 0.32 0.32 3.06 2.91 2.11 2.41 Southern Coast 0.26 0.00 0.00 0.10 0.21 0.22 0.00 0.79 o.71 0.79 0.9x Northern Coast . 0.00 0.00 0.00 0.00 0.10 0.37 0.33 0.80 0.7X 0.80 0.9S Supervision 0.29 O.4 0.55 O.SS 0.56 0.29 0.17 0.00 0.00 0.00 2.87 2.71 2.87 3.31 sibtotal Consulting Service (3) 1.11 0.83 0.97 1.12 1.33 1.32 0.90 0.47 0.42 0.47 8.92 8.41 7.58 8.8X 4. AND ACOlSISTION 0.09 0.11 0.11 0.11 0.14 0.14 0.14 0.14 0.18 O.18 1.33 1.31 0.84 1.01 TOTAL BASE COST (Deceber 1990) 9.05 12.61 1S.02 16.07 16.25 10.28 7.26 6.92 6.14 6.76 106.37 100.01 86.55 100.01 Physical Contingencies (101) 0.91 1.26 1.50 1.61 1.63 1.03 0.73 0.69 0.61 0.68 10.64 10.0X 8.65 1O.01 Total ease Cost plus Physical Conting. 9.96 13.87 16.53 17.68 17.88 11.31 7.99 7.61 6.75 7.44 117.01 110.0X 95.20 110.01 ..................................................................................................................................................... IMport Duties (and Consuttant Taxes) 0.80 1.19 1.50 1.69 1.81 1.21 0.90 0.73 0.64 0.7t 11.17 10.51 9.09 10.51 TOTAL PROJECT COST with Import Duties 10.75 15.06 18.03 t9.37 19.68 12.51 8.89 8.34 7.40 8.15 128.11 120.5X 104.29 120.51 Value Added Tax (VAT) 1.84 2.90 3.64 4.10 4.37 2.78 1.96 1.50 1.33 1.47 25.88 24.31 21.58 24.9Z YOTAL COST with import Duties an VAT 12.59 17.96 21.66 23.47 24.05 15.29 10.85 9.84 8.73 9.61 154.06 1t.81 125.88 145.41 ................................................................................... .................................................................................................................... Price ContingencIes-Local 0.39 1.60 2.95 4.12 5.12 3.83 3.11 3.50 3.66 4.76 33.04 31.11 21.12 24.41 Price Contingencies-Foreign 0.23 0.40 0.44 0.63 1.01 0.90 0.86 0.85 0.78 0.89 6.99 6.6X 4.48 5.2X Price Contingencies-Total 0.62 2.00 3.40 4.75 6.13 4.73 3.98 4.35 4.44 5.64 40.03 37.61 25.60 29.61 ............................................................................................................................................ TOTAL INVESTIIENTS 13.20 19.96 25.06 28.22 30.18 20.02 14.83 14.19 13.17 15.26 194.09 182.51 151.4 175.01 ......................................................................................................................................... TOTAL INVESItEUTS V/0 PRICE CONTING. 12.59 17.96 21.66 23.47 24.05 15.29 10.85 9.84 8.73 9.61 154.06 125.88 TOTAL INVESTNENTS W/O VAT 11.37 17.06 21.42 24.12 25.81 17.24 12.87 12.69 11.84 13.79 160.21 129.90 40 - CHILE SECOND VALPARAISO ATER SUPPLY AND SEWERAGE PROJECT ESVAL's Tariff 1. The localities in ESVAL's concession area are divided in four groups with specific rates for each according to their characteristics of water production and population density. 2. In each group, all users are in principle charged the same rates, regardless of whether they are private households, manufacturing or commercial enterprises, or public entities. There is a fixed charge both for water and sewerage with a distinction made according to 12 different diameters of house connections, a fixed charge for the connection of both water and sewerage, and a variable charge both for water and sewerage according to water consumption. In addition, during the summer months (December to March) there is also a surcharge for water (and one for sewerage) for any consumption over 30M3 per connection per month in Greater Valparaiso and 40m3 in other areas. The switch to the new tariff system took place for consumption after March 1, 1990, although at a much lower level. The final level will be reached in June 1994, vith increases scheduled for June each year. For private household consumers whose connection has a diameter of 15mm or less and monthly consumption is 20m3 or less, the increases are steeper because their service has been more heavily subsidized in the past. s 3. A private household customer in the area of Greater Valparaiso with a connection of 13mm diameter (about 40% of residential customers), after full implementation of the new rate scheme in June 1994 at March 1990 prices, would be charged as follows: Fixed Fixed Fixed Variable Var1abte Rate Rate Rate Rate Rate ,ConsuqPtion Water Sewerage Connection Water Sewe mo ChS ChS ChS ChS/mj3 ChS/me 1. Without consumo- tion 209 77 204 - 2. With consumo- ,tion: 2.1 Off season No. of 3 209 77 204 73 x No m3 23 x No n 2.1 In season * 30 m3 209 77 204 73 x No m3 23 x No m3 30 m3 209 77 204 73 x 30 23 x No m3 +151 x exce,s No m' Exchange Rate 3/90: CHS296.74 * USS 1 41 - Page I of 3 CHILE SECOfL)Y VALPARAISO WATER SUPPLY AND SEWERAGE PROJECT ESVAL - EMPRESA DE OBRAS SANITARIAS DE VALPARAISO Current Organizational Chart as of January 1991 .710N] kL~~~ INTORONACI f I SECRErARIA I l~~~~GREN iA INGENIERIAL FI IN MERCA SUSGEREN=CI:R-;5GERECI |~~~ ~SSEFN J N ENIERI tA PRVNCA JEATR ZONAL f~~~~~VLAAS E3LLT ANE PETORC - 42 - CHILE SECOND VALPARAISO- WATER SUPPLY AM SEWERAGE PROJECT ESVAL - EMPRESA DE OBRAS SANITARIAS DE VALPARAISO Proposed Organizational Chart Final Stage OIRECTORlO OERENCIA GENERAL rASESORI RELACO1NES JURIDIC PUSUCAS OESAROU..O ADMINISTRA- RECURSOS INGENIERIA EO G~R~NCIA GERENCIA GGERENf ZONAt. ZONAL.ZOA SAN FUE SAN ANTONIO VAPRAS UILL _ - - 43 - Page 3 of 3 CHILE SECOND VALPARAISO WATER SUPPLY AND SEWERE PROJECT ESVAL - EMPRESA DE OBRAS SANITARIAS DE VALPARAISO Proposed Organizational Chart Transition Stage DIRECTORIO O2R2NCIA GENEM INTERNAENCI RJURIOICAGNtRI SU8GERENCIA SU ERENCIA SUGERENCIA SUREN ENGIA SI ENC GERENCIA ZONAL ZONALf ZONAL ZONAL ASISCIA COMERCIAL VALFARAJSO CUILLOTA SAN ANTONIO SAN PEUPE TECNICA - 44 - CHILE SECOND VALPARAISO WATER SUPPLY AND SEWERAG PROJECT Institutional Assessment of ESVAL Implementation Area Improvements Reguired Action Reguired Begin End G e n e r a l Filling new positions as Internal selection and 05/91 09/91 Management r e q u i r e d b y training. reorganization. O r g a n i z - Implementation of Changes in organizational 05/91 04/92 ation conclusions o f structure including organization study. decentralization. Metering, Clandestine connections; User survey. 06191 12Iq1 Billing and Inadequate routes of Rerouting. 01/92 06i92 Collection readers; Inadequate billing New Format. 07/91 09/91 format; Arrears of public Cash payment and payment 03/91 12/91 sector. agreement. Insurance Insufficient coverage. Policy statement and Before loan contracting. negotiations. Accounting Limited management Amplify by regional and 01/91 09/91 accounting. functional cost centers. Finances Lack of long-term Introduce additional 03/91 09191 planning. planning systems. No budgeting at cost Introduce additional 01/92 12/92 center level. budgeting systems. Computing Updating of equipment Contract services of 02/91 09/91 and introduction of new computing firm. New data software. processing dept. Employ qualified personnel. Personnel Lack of adequate job Develop systems. 01191 12/91 descriptions, selection system, job and performance evaluation, salary system, career stream. Training Lack of comprehensive, Finalize and implement 01/91 12/91 long-term plan. training plan. - 45 - CHILE SECOND VALPARAISa KATER& SURPLY AMM OSEW_E_G_E RLO_JIreCT ESVAL's Train-ink Program fo 199 YEAR 199Ls Number No. of Number Cost Cost of jPartici- of (1000 (in Area Courses pan.ts Hours CH$) US$) Management 6 120 146 2,500 7,418 Technical/Operations 15 345 2,783 5,500 16,320 Information/Computer 7 130 306 3,400 10,089 Commercial 9 260 91 1,000 2,967 Financial* 5 100 lO 1,500 4,451 Administrative** 20 407 16 4,813 14,282 Total 62 1.362 3.442 18.713 55.528 COMPARISON BETWEEN TRAINING IN 1990 AND 1991: Y e_ a r 1991 Y e a r 1990 Increase 1991/1990 Number No. of Number No. of Number No. of of Partici- of Partici- of Partici- Area Courses pants Courses pants Courses pants Management 6 120 9 8S -33Z 41% Technical/Operations 15 345 9 30 67X 1050% Information/Computer 7 130 2 44 2502 195Z Commercial 9 260 0 0 N/A N/A Financial* 5 100 6 8 -172 11502 Administrative** 20 407 15 69 332 4902 Total 62 1.362 Al- 236 2 4772 * Including Accounting and Audit ** Including Work Safety - 46 SECOND VALPARAISO HaTER SUPPL PN EWfACE FRL=C S^f ~~~~~~~121S1/1969 8011111990 3,mbste 2 1... 1000 * U,b.we X Jbcos 1000 X U to ;0 days 133 090 598 247 ,31 57 126,546 65.6 451,052 6.1 up to 60 days 3,067 24 32,984 7.7 8.024 5.5 4 1,34 6 1 Upto6 dy 2,276 * 1.5 143A 3. 3 1.703 1.2 15,94 2.4 tp eo10 day 1.837 1.3 768 s 1. 1,750 1 2 11.131 U p to 120 da3 0.7 10,473 2.4 42 0.3 $,169 0.5 Op to SO day 729 ;.:o. 5°02 1.2 969 0.7 7,903 1.2 Up to 180 ~~~~~~~~~~ AU42 0.31. 271 0. 3676 0.6 Up to 210 dais 5.~~~~~~~~3767 3.6 07.566 15.0 5.405 S3 130.636 1. bcoc^L reidour;al OUJ%a"eXS t 3 707 t 0 6 t°3 ^4 ~~100 °Os ° as 970 9 lo ICO. ha2 148.2143 10. 100.0 10.014,11 100.0 6170,995 100.0 Subtotal bbilln durt ye r 2519jS , ,169 44 AoGounts r..lvabl a 6 .ests (days)* AS.3 a TIdusetrtal 0p to 40 dyo 555 69.2 15.761 s9.1 48 55.4 20,r35 79.1 Up to 60 day. 23 3.7 347 2.0 29 E.l 294 1.1 Op to 90 day. 9 ~~~~ ~~~~ ~~ ~~1.4 333 1. 6 1.1 333 2.0 Up to 120 day' 0.6 308 1l7 1a 2.1 133 0.3 Op to 130 day. 5 0.5 40 7°l3 0 s. ..1 Up to 180 day. ~~ ~~~~ ~ ~~~2 0.3 71 10.4 S 0.19 3176 1.21 Op to 210 dayi 6 1.0 37 0.2 a 0.4 3 0.1 Hot. than 210 days 1l 2.9 791 4.3 26 4.6 4,099 13.7 &uut2 toutv aZ ustosets 622 100.0 17,706 100.0 369 100.0 26,0190 100.0 Subtotal b tisg duag year 149,612 36. 68 Aocouots receivable In estr.rr (dayr)' 4.1 Cooseactll up to 30 days 7,910 6 3 72.6 7,673 6. 79,429 it.? teo 60 days336 3.6 5,33 7.2 487.3 7,9 3.3 Up to 80 days 137 1.3 2,49 2.9 69 1.0 1 435 1.3 up to 120 day' 96 1.1 1,086 1.3 11e 1.3 1,640 1.3 up a1 11s cv to "r 10 d73 0.8 1,653 2.3 36 0.4 Up to 10 days 47 0.5 193 1.6 69 1.0 ,9 1.4 Up o 150 days 4 0.3 493 0.7 33 0.4 1,436 1.3 Hot than 210 days 236i Subtco.l .,_ .al 6,683 100.0 74,332 100.0 5,96 100.0 110,794 100.0. Al comwraial austausca ~~~~~~~~~~~~~~~~~~~.0300~2!2 Subcocal b ijig durttg year 347,792 Accounts receivabLe in arreSrs (days)' 13.6 Public ...... 2,843 67.0 38,561 33.1 573 . up to 60 days 92 2.3 8,113 7.0 IL I. 5 . Op to 90 days 4~ ~ ~~~~ ~~~~3 1.1 1,015 0.9 13 0.6 2.723 1.6 Up to 120 days 1 0.4 9lt 0.5 16 0.8 1914 0.1 Up to 150 days 13 . 3 . . 53 0.0 Up to 150 days ~~~~13 0.3 40y 0.0 I4 0.44 . Op to 180 days ~~~ ~~~~ ~~17 0.4 281 0.3 37 1.93579 3.4 apo to 110 day 1,9a82 6731 3. 1,256 63.3 69,380 38.0 ot..ta 210 days 9 to 673L 3. 3.4 00 SktbtotALJ public custcmrsr 4.245 100. 116,341 100.0 1.940 100.0 13,8 10. 9SUst 346 OV sO 4&34 Subtotal b-W..4 during yst 34 767 Ad4oogts reGeivable Lu arrears Wdy)MA.65. Total Up to 30 days 144,398 59.1 335,864 53.7 137,S60 67.7 611,907 63.7 up to 60 days 5,318 3,4 46,761 7.3 8:,364 3.5 44,434 4.6 up to 90 days 2,467 1.3 17,838 2.8 1,610 1.2 10,635 3.1 Up to 120 days 1,933 1.2 10,210 1.6 1.903 1. 13,1t6 1.4 up to 130 days 1,106 0.7 11,492 3.0 324 0.3 4,037 0.4 up to 180 days 619 0.5 .360 L.0 1,07 0.7 10.202 A.1 Up to 210 days 490 0.3 5,149 0. 343 0.2 ,926 0.9 nots than 210 days 5.240 3.2 184,066 216.6 .063 3.2 244,502 25. Toa utosses 161.993 100.0 636.730 100.0 156,566 100.0 960,063 100. SuTotal albilln durLng year348,1 7,207,7 Accounts ,ecstvble La attests CdAYSP' 30.217, CHILE SECOID VALPARAISO %ATER SUPPLY AN SEUEUGE PR1JECT Greater Valperaiso Netropolitan Area Water Demand versus Production Capacity ........................................ Year 1987 19M 1919 1990 199t 1992 1993 1994 1995 1996 1997 1991 1999 2000 Poputation 738 000 748 84 759 857 n71 027 781 513 792 141 802 914 813 834 824 902 835 791 846 823 858 001 869 327 880 802 Service Coverae, X 94.5 94.9 45.3 95.7 96.1 6.5 4.9 47.7 48.5 48.6 Y8.7 48.8 Y8.9 9. o Population Served 697,410 710,657 724.143 737,872 751,034 764,416 778,024 795,116 812,52 824,090 835,814 847.705 859,764 871,994 go. of Cawections 162 188 165 269 168 405 171 598 174 659 177 171 180,936 184 911 188 960 191 649 194 375 197 141 199 945 202 789 ConsuEttion, mliten .3/yr CN/yr) 5b.91 51.8a 5.86 5W.86 58.3 W5.8o 56.80 56.04 54.31 66.16 61.01 61.88 6a.76 61.66 Systm 1tfficleny X 52.0 52.5 53.0 53.5 54.0 54.5 55.0 57.0 59.0 60.0 61.0 62.0 63.0 64.0 Deand, llion ;miyr (NW/VV) 97.9 98.8 99.7 100.7 101.5 102.4 103.3 101.8 100.5 100.3 100.0 99.8 99.6 99.5 Demad-Avrage Day ldP 268.235 270,727 273,262 275,840 278,161 280.520 282,918 278,988 275,433 274,697 274,038 273.453 272,941 272,498 Demand-Peak Day, mi/d 348,705 351,945 355,240 356,592 361, 364,676 367,793 362,684 358,063 357,106 456,249 355,489 354,823 354,248 Production, a3d 320,000 320,080 320,000 320,000 320,000 328,640 367,520 367,520 354,560 397,760 397.760 397,768 397,760 397,760 Prnductlqn teficit (Surplus), Ml/d 28 705 31 945 35 240 38 592 41 609 36 036 23 (4,836) 3,503 (40 654) (41 511) (42 271) (42 937) (43 512) Production Deficit (Surplus), NCItJr l.5 11.7 12.9 14.1 15.2 13.2 0.1 (1.8) 1.3 (14.8) (15.2) (15.4) (15.7) (15.9) Rtapired Pred tion Incmes 9X 10t 112 122 13X 11t 0t -1X 1X * -lX -102 -112 -112 -112 ..................... . ................... ........................................................................................................................ .............. ......................... .............. ........ ... ....__.._ Capacity of Ptohictlon Sorces: Existing Sarces. a3J/ 3.7 3.7 3.7 3.7 3.7 3.70 3.55 3.55 3.25 3.75 3.75 3.75 3.75 3.75 Las Vegas 2.65 2.65 2.65 2.65 2.65 2.65 2.65 2.65 2.65 2.65 2.65 2.65 2.65 2.65 Conce (1) 0.65 0.65 0.6S 0.6S O.6S 0.6s 0.50 0.50 0.00 0.50 8.50 0.50 0.50 0.50 Pteseles 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.40 0.60 0.60 0.60 0.60 0.60 0.60 idditioma Sorces, :US 0.10 0.70 0.70 O.8S 0.85 0.85 0.85 0.85 0.85 Calera wells ' 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 Limchue wels 0.10 0.10 0.10 0.10 0.10 0.10 0.10 0.10 Poza Alul reevoir 0.15 0.15 0.15 0.15 O.1S 0.15 Neu canco plant . 0.50 0.50 0.50 0.50 0.50 0.50 Total Existing nd mewm es 3.70 3.70 3.70 3.70 3.70 3,80 4.25 4.25 4.10 4.60 4.60 4.60 4.60 4.60 Additiall Proctiaon, sl/d 8,640 47,520 47,520 34,560 7t7,- 77,760 17,760 17,760 17,760 ...... ............... ....... ..................... ........................................ ;0.................................. ................... ...................... (1) Inetuies rehabilitaticn of existino trtmnt plant saic Data: ........... ~~~~~~~~~~~~~~~Prolectiorns ~~~~~~~~~~~~~~~~~~~~~........... ....P°s. Tear . 198 Population 735 000 Popultation Growth Rate (fIa) 1.471 (19571990) Initiat cwarege 94.7X 1.36X (191-1995) Population enity 4.3 fab/tconection 1.32S (1996-2000) (S.3 Icaib/rsidentitl conecticn) tint Cenmption 200 t/d per person Loverge Increare (per year) 0.40 ('1990-1993) 26 *3/mnth per coimectlon O.802 (1994-1995) utemated-for Voter 4 4 * 0.10K (1996-2000) System Efficilncy 522 Present Proction Cpacity 320,000 6i/d Syefex Elfllnlemy Increase 0.50 (1987-1993) 3.7 3/s (per year) 2.002 (1994-1995) Peak Day CoefficIent 1,30 1.002 (1996-2000) Demand versus Production m3/day 500 490 480 470 460 450- \. 440 - E 430 c,;. 420 - lL a 9 Z;, 410 *,,s 400 . 390 _ 38& o 370 350 340 330 320 -, -a a a 310 300 - , . 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Years 0 Production + 'Ieak Daily Demand Unaccounted-for Water 60- 5a 56 - 54 - 52 - 50 48 * 42-t6 :.. 44 - 42- * ~40- 38- 36- 34 - 32 - 30- 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Years - so - Annex 12 Paae l of-4 SECOND VALPARAISO WATER SUPPLY AND SEWERAGE PROJECT Greater Valparaiso Sewerage System Comparison of Alternatives Introduction The main problem related to the discharge of untreated sewage from the Greater ValparaLso Metropolitan Area inuto the Pacific Ocean is the contamination of public beaches, which represent an important national, as well as international, tourist resource. The main objective of the alternatives studied for the treatment and di3posal of sewage generated in the Greater Valparaiso Metropolitan Area is to reduce the bacterial and organic contamination of public beaches. The alternatives studied consist essentially of combinations of various degrees of sewage treatment and ocean discharge sites for the five urban areas incorporated in the project limits, as detailed below. Urban Area Main Geooraihic Location Valparaiso Southern Zone Vihia del Mar Central Zone Quilpu6 Central gone Villa Alemana Central Zone Refiaca Central Zone Conc6n Northern Zor,e The design flows and population equivalents taken into account for the comparison of various alternatives were as follows: Design Horizon - Year 2020 Zone AVR, flow Max. Flow PonuLation nouzivalent (mS/u) (m3/s) (inhab) Valparaiso 0.97 1.23 363,311. Vifia del Mar 2.27 3.14 569,007 Reftaca-Conc6n 0.62 0.93 208,220 Quilpu6-V. Alemana 1.07 1.23 303,353 …---------------------------- ------------- ------------ --------…_-- Total 4.93 6.53 1,443,891 - 51 - Two basic treatment and disposal concepts were analyzed and studied: a. Disposal into the ocean, after some type of wastewater treatment ranging from "preliminary" to "tertiary"; and b. Reuse in acriculture, after suitable treatment. Preliminary analyses and evaluation have indicated that the reuse concept, although attractive, is not feasible in this case because of the need to pump the water from below sea level to higher elevations where the potential agricultural lands are located, and the availability of cheaper irrigation water sources such as the Aconcagua River or sewage from higher-lying urban areas. Alternatives Studied Three main disposal schemes and at least three alternative subschemes for each scheme have been studied, which differ mainly with respect to the solution for the disposal of sewage from the urban areas located in the Central Zone of the Greater Valparaiso Metropolitan Area: Vifia-Reftaca and Quilpu6-Villa Alemana. In all alternatives, the sewage from Valparalso is discharged through the existing Bustamante Tunnel, and that from Conc6n through a local sea outfall. Alternatively, the possibility of treatment and disposal of the Conc6n sewage by means of a stabilization pond was also studied. Al 1. Southern-Central Scheme (Vina-Refiaca sewage to a sea outfall in Vina) This scheme is based on the idea that sewage is discharged, to the extent possible, at a site located in the zone where it is produced. 'The sewage from Valparaiso is discharged into the ocean through the existing Bustamante Tunnel, and that from Vifia and Refiaca through a sea outfall in Vifia, located between Muelle Vergara and Las Salinas beach. The sewage from Conc6n is discharged through a small local outfall. With respect to the sewage from Quilpu& and Villa Alemana, which are not located along the seashore, several alternatives were studied: Alg,rnative lA: The raw sewage from Quilpu6 and Villa Alemana is discharged through the sea outfall in Vifha. Alternative 18: Same as 1A, but the sewage from Quilpu6 and Villa Alemana is treated at a site located in Quilpu6, and is then discharged through. the sea outfall in ViRa, thus reducing the load on this outfall. AlternativeSlC: The sewage from QuilpuG and Villa Alemana Ls discharged through the Bustamante Tunnel in Valparaiso, after being conveyed there either through the ViLa-Valparalso coastal collector or through a new tunnel (Recreo). - 52 - AnnqZ _U -acae 3 ofi 2. Southern Scheme eViha-Refaca sewage to Bustamante Tunnel) This scheme is based oa the idea that the existing Bustamante Tunnel would be utilized to the maximuLl possible extent. The sewage from Valparaiso, Viffa, Refiaca, Quilpu6, and Villa Alemana is discharged through the Bustamante Tunnel, whereas that from Conc6n is either treated in stabilization ponds or discharged through a small local sea outfall. Alternative 2A: The sewage from Refiaca, Vifia, Quilpu6 and Villa Alemana is conveyed to the Bustamante Tunnel by means of a large coastal collector, whereas the sewage from Conc6n is treated and disposed of by means of a stabilization pond. Alternative 2B: Same as 2A, but the sewage from Reflaca, Vifia, Quilpu6 and Villa Alemana is conveyed to the Bustamante Tunnel by means of a new tunnel (Recreo). Alternative-2C: Same as 2B, but the sewage from Quilpue and Villa Alemana is treated at a site located near QuilpuO, and is then conveyed through a new tunnel (Recreo) to Valparaiso where it is discharged to the sea through the Bustamante Tunnel, thus reducing the organic load at the tunnel outlet. Alternative 2_ (Proposedl: Same as 2A, but the sewage from Oonc6n is discharged to the sea via a small local outfall. 3. Southern-Northern Scheme (Vifia-Reflaca sewage to Conc6n outfall) The sewage from Vifia, Refhaca, Quilpu6, Villa Alemana, and Conc6n is discharged to the north, through a sea outfall located in Conc6n, whereas the sew.ge from Valparalso is discharged through the Bustamante Tunnel. Alternative 3A: The raw sewage from Vifia, Reftaca, Quilpu6, Villa Alemana, and Conc6n is discharged through a sea outfall in Conc6n. Alternative 3B: Same as 3A, but the sewage from Quilpu6 and Villa Alemana is treated at a site near Quilpu6 and then discharged through the sea outfall in Conc6n, thus reducing the organic load on the outfall. AlternatLve 3Cs Only the sewage from Reftaca is conveyed to the north and discharged together with the sewage from Conc6n via a sea outfall in Conc6n, whereas the sewage from Vihta, Quilpu6 and Villa Alemana is conveyed to Valparalso and is discharged through the Bustamante Tunnel together with the sewage from Valparalso. - 53 - Annex 12 pAge 4-gf 4 Dealion Princi2les for Sewage Discharce-into :the- Sea The discharge of either raw or partially treated sewage into the sea is based on the dispersion and dilution effects, which depend on a variety of factors such as: sewage amount and concentration, distance from shore and public beaches, depth and morphology of sea bottom, marine currents, etc. Where conditions are suitable, the sewage discharge into the sea may be considered a special type of treatment ("marine treatment"), which, in combination with some pre-treatment, can assure an acceptable solution from an environmental polnt of view. In all the alternatives studied, the discharge to the sea through the Bustamante Tunnel remains the same as it is at present, i.e., superficial, since the morphology of the sea bottom and the dynamics of the marine currents (as determined by an oceanographic study) are considered favorable for rapid dispersion, dilution, and degradation of organic substances. As for the sea outfalls included in some alternatives, they ware deslgned in accordance with engineering practice, taking into account that the maximum ocean depth at which a pipe can be laid is 75 m. Comwarison of Alternatives An economic comparison of the various alternatives studied was carried out to determine the least-cost solution. The comparison was based on the values of AIC (Average Incremental Cost), which was calculated as the ratio between the present value of the cost flow and the present value of the number of inhabitants served. Since the number of inhabitants served is virtually the same in all the alternatives, the comparison is essentially between total costs. The cost flow includes: Lnvestments as well as operation and maintenance costs. The investment includes: initial structures and equipment, future expansions needed, and renovations. The maLn items included are: collectors, pumping stations, treatment plants, and sea outfalls. The operation and maintenance costs include: materials, personnel, and energy. In general, the alternatives that include treatment are much more expensive than the others, since the cost of treatment is not offset by savings in the diameter or length of the collectors or sea outfalls. The most economic alternative recommended Ls 2 P, which consists oft' (a) A major collectLon system (large pipes and pumping statLons) conveying the sewage from Vifta, Reftaca, Quilpu&, Villa Alemana, and Valparaiso to the existing Bustamanto Tunnel and a preliminary treatment plant prLor to discharging the effluent to the sea; and (b) A small collection system, pumping station, and local sea outfall for the sewage of Conc5n. - 54 - Annex 13 Page I of 2 CHILE SECOND VALPARAISO WATER SUPPLY AND SEWERAGE PROJECT Detailed Proiect Description The proposed project, which would be carried out during a 6.5-year period between mid-1991 and end of 1997, includes four main components: two (sewerage and water supply) related specifically to the Greater Valparaiso Area, and two (institutional improvements and consulting services) related to the Fifth Region and ESVAL in general. The following is a description of the items included ind the project. A. SEWERAGE AND POLLUTION CONTROL - 472 of project cost, consisting of: 1. Secondarv sewage collectors of a diameter smaller than 400 mm and a total length of about 10 km. in the Greater Valparaiso Area and in the city of Limache; 2. Main sewage collectors in the Greater Valparaiso Area, including the following gravity collectors: Quilpu6-Vifta del Mar, Vifia del Mar-Valparaiso, Reflaca-Vifia del Mar, Playa Ancha, Alvarez, Conc6n, and Casino, of a diameter varying between 400 and 2000 mm and a total length of about 50 km, plus three rectangular sections 2xl.2m, 2x 1.5m, and 2.Ix1.5m, with a total length of about 6km; 3. Sewage pumping stations in the Greater Valparaiso Area: Vifia del Mar, Valparaiso, Conc6n, and Higuerillas pumping stations, including the respective short-section pressure pipes of a diameter varying between 300 mm (Conc6n) and 1800 mm. (Vifta and Valparaiso) and a total length of 1700 m. 4. Sewage treatment and disposal facilities consisting of treatment facilities at two sites in the Greater Valparaiso Area: Bustamante (near the existing Bustamante tunnel in Valparaiso) and Higuer#llas (in Conc6n), and a 560mm, 800m long sea outfall in Conc6n. The treatment facilities at each of the two sites consist of primary (mechanical) treatment processes including: bar screens, grit and grease removal units. - 55 Annex 13 Paae 2 of 2 B. WATER SUPPLY FACILITIES - 36% of project cost, consisting of: 1. Production works including: Calera and Limache wells and Poza Azul Reservoir; 2. Transmission main from Los Aromos reservoir to Conc6n treatment plant, of a diameter varying between 1200 and 800mm and a total length of about llkm; 3. Water treatment facilities including: the rehabilitation of the existing Conc6n plant, a new Conc6n plant, and the improvement of the Pefuelas plant; 4. Distribution lipes and storage tanks for the expansion of existing systems and the construction of new systems in areas presently supplied directly from the Las Vegas aqueduct in Vitfa del Mar and in Quilpu6-Villa Alemana, as well as for the improvement of existing systems in Vifta del Mar, Valparaiso and Quilpu6-Villa Alemana. The distribution pipes vary in diameter from 75mm to 1000mm (3-inch to 40-inch) and have a total length of about 13km. There are 15 storage tanks included in the project with a volume varying between 500 and 5,000m3 each and an aggregate volume of about 35,000m3L C. INSTITUTIONAL IMPROVEMENTS - 9% of project cost, consisting of: O&M equipment, office equipment, consumers' survey, technical cooperation and training in various topics (including identification and reduction of water losses), preparation of a development and training plan for the company; and D. CONSULTING SERVICES - 8Z of project cost, including: engineering and supervision of the water supply and sewerage facilities included in the project, monitoring of the marine sewage disposal system before and after project completion, feasibility studies and designs of water supply and sewerage systems in the northern and the southern coast of the Fifth Region. CHILE SECOND VALPARAISO hATER AND SEWERAE PROJECT Project Cost Estimte Z of 2 C.mont/Subc_nponat Total Total Local Foreign foreign 1991 1992 1993 1994 1995. 1996 1997 .... .....___._....___..____..____........... .__............................................................. A. SEEAE AND POLLUTION CONTROL 1. Secradery Collectors 1.1 Grn Valperslso 453 453 1.2 Liache 363 363 Subtotat Secandry tuttectors (1) 816 12 522 294 362 453 363 2. Mafn Sewage Collectors 2.1 ullpue-Vina del Moar 1 1364 2.2 Vine del Har-Valparaiso 9467 1231 4118 4118 2.3 Renac-Vfne del Mar 2203 2203 2.4 Play. Ancha 917 917 2.5 Alvarez 435 435 2.6 Concon 851 349 502 2.7 Casino 202 202 Stb-total Main Colleetos (2) 15440 19X 10113 5327 352 2595 4320 6321 435 1266 502 3. Sewage Puping Stations 3.1 Vins del Mar 5298 954 1483 2861 3.2 Valper,iso 5515 993 1434 3089 ;.3 poncon 70 . 70 S*i-total Puping Stations (3) 10883 14 4407 6475 602 1946 2917 5949 7T 4. Sewage Teeatent and Disposal 11 ,1 Sustamente treatment works 372 141S 230 4.2 ghIguerillas plant^ 4056 690 1704 1663 4.2 Limache treatment plant 2955 1153 1803 Sik-total Sewage Treatment (4) 10734 13X 3220 7514 702 1153 2492 3118 3971 TOTAl SEWERAGE (A) 3?872 47X 1263 19609 52X 4541 7238 12270 2041 4191 3620 3971 ...................... .................................................... 0..............,............._..... B. VATER StPPLY - SGAN VALFPAISO 1. Prock tion 1.1 Calera welts 253 253 1.2 Limche Vett1 652 652 1.3 Poza Azul Reservoir 602 602 1.4 Los Aromaos Intake Vorks 1388 583 805 Sib-total Proic tion (1) .289 4X 1390 1505 522 253 652 1185 805 2. Tramission 2.1 Los Aramos-Concon Iain 4396 48 1978 1934 Sub-total Tranmission (2) 4396 5X 2593 1802 41X 484 1978 1934 3. Treatmet 3.1 NRw Concon Ptant 2642 1162 1479 3.2 Rehabilitation of Old Concon Plant 2105 969 1137 3.3 Improvement of Pemetas Plant 263 263 Sub-total Water Treatent (3) 5010 6X 2255 2756 552 1162 1479 1232 1137 4. Storage and Distribution 4.1 Expion of Existing Syste 4.1.1 Vine del Mtar , 2144 m 1372 4.1.2 luiLpue-Villa Atlemna 972 972 Sib-total Expansion (4.1) 3115 4X 1340 1776 57X 7 1372 972 4.2 New System" . 4.2.1 Vine det Mar 1597 4.2.2 Quilpue-ViLla Alemmn 4544 Sub-total New Systems (4.2) 2050 3X 82 1169 57X 2050 4.3 twrovment of Existlng Systems 4.3.1 Vina del Mar 4968 894 3279 795 4.3.2 Valparalbo 3360 67 302 773 2218 4.3.3 Quilpue-ViIs Ameeam 2874 2127 747 Sub-total lmprovement (4.3) 11203 14X 4817 6386 57X 67 3324 4799 3013 Sub-totat Distribution/Storage (4) 16369 20X 7038 9330 57X 772 1372 67 6346 4799 3013 TOTAL WATER SUPPLY (C) 28669 362 13276 15393 54X 2187 3503 551 10741 8675 3013 C. INSTITUTIN.L. IIPROVEMENTS 1. Preparation of Development Plan 53 26 26 50X 26 26 2. Technneal Cooperation and Training 633 253 380 60X 50 105 155 155 105 63 3. Cornsuers Survey 320 320 0 02 320 4. 0 & i EquIpmnt 4333 1437 2897 702 173 217 260 997 780 953 953 S. Office Equipment 1561 517 1043 70X 109 109 125 297 297 297 328 TOTAL INSTITUTIONAL IMPOVENENTS CC) 6899 9X 2553 4346 632 628 376 490 1448 1232 1381 134 ............................... .................................................................... ^ .,,,,,,,,,,,,,,,,, ,,................................................................................. , ,,.. D. CONSULTING SERVICES 0 1. Mnitoring of Marine Sewage Oisposal 2112 1056 1056 502 210 315 31S 315 310 310 337 2. 9ater Suply Designs-Southern Coast 265 185 79 30X 265 3. Mater Suppty Designs-Northern Coast 265 t85 79 30X 160 105 4. Studies/Oesigns-Seterage South Coast 530 371 159 30X 100 210 220 5. Studies/Designs-Sewerage North Coast 530 371 159 30X 100 210 220 6. Engineering and Supervision 2872 2010 862 302 290 464 553 552 555 286 171 TOTAL CONSULTING SERVICES (D) 6574 82 4179 2395 362 765 779 868 967 1175 t186 833 TOTAL BASE COST (Deceber 1990) 80014 1002 38271 41743 522 8122 11896 14179 15196 15273 9200 6149 Physical Contingencies (102) 8001 3827 4174 522 812 1190 1418 1520 1527 920 615 Total Base Cost plus Centingencies 88016 42098 45918 522 8934 13085 15597 16716 16800 10120 6764 Price ConaingenCies-Local 19413 348 1511 2787 3900 4o08 3425 2634 Price contfngencies-Foreign 4086 205 379 417 594 952 808 731 Price Contingencies-ortag 23499 19413 4086 172 553 1890 3205 U94 5761 4233 3365 ...... ..E....--... ................................. ............... .15.1 ------...0.0.. -------.5.Z ... ..8.6..1.9......1.8..0, _---..1.0.9. -- ... ,. ---_. __ _ * .__ _2-9- TOTAL PROJECT COST t111515 61511 50004 45X 9486 14975 18802 21209 22561 14353 10129 iMort Duties (and Consuttant Taxes) 8391 8391 714 1127 1415 1596 1698 1080 762 TOTAL PROJECT COST with lmport Duties 119906 69902 50004 422 10200 16102 20216 22805 242S8 15433 10891 Value Added Tax (VAT) 21583 21583 1836 2898 3639 4105 4366 2778 1960 TOTAL COST with lmport Dutiew and VAT 141489 91485 50004 352 12036 19001 23855 26910 28625 18211 12851 ................ ................................. ......... .................. _0.. ............ ..................... ... .... ..................... ......................... _....... .. ..............__.. Yearlty Cost (2) 1002 9X 132 172 19X 202 132 9X Notes: * Nigueritias plant Includess treatment plant pung station and sea outfall. " New systems for areas previously supplied d recty frm moin Las Vegas transmission line. dI - 58 ° SECOND VALPXRAISOWATER SUPLY AND SEWERWA RRQj Proiect Imolamentation Schedu-le Coponent 1991 M1 1992 1 19931 1941 1995 1 1961 19971 A. SEWERAGE AND POLLUTION CONTROL I I I I I I I I 1. Secondary Cottectors 1.1 Gran Valparalso .. . I I- . .. 1.2 Limache . I I 1 1 I 2. Main Cotlectors I I I I I I 2.1 Cuitpue-Vina del Mar ... - . 2.2 Vine det har-Vatparufso ...... ...-...- 2.3 Renaca-Vina del Nar . . ... .. 2.4 Playa Ancha I I....... 2.S Alvarez I - ...... I I 2.6 Concon . . ...------- 2.7 Casino . ... . 3. Pwping Stations I I I I I I I I 3.1 Vina del Mar .. ..... I..-------I I | 3.2 Valparaiso .----- . ... .. I ....- 3.3 Concon I I i------- 4. Sewage Treatment 4.1 Bustamante treatment works ...... . ----- 4.2 Higueritlas plant* . . . .----.---I . .... 4.3 Limache treatment plant -------. .. 8. WATER SUPPLY * Gran Valparaiso I I I I | | | 1. Productlon 1.1 Calera weats .------- 1.2 Limache Weals . ... . . 1.3 Poza Azul Reservoir . . . .... 1.4 Los Aromas tntake works . .... -.---- 2. Transmission I I I I I I I I 2.1 Los Aromos-Concon Maln . . ... - -------------- 3. Water Treatment I I I I I I 3.1 New Concon PLant .. I............ 3.2 Rehabilitation of Old Concon . . .. ------- 3.3 Improvement of PenueLas I I I .------- 4. Distribution/storage 4.1 Expansfon of 3xisting Systems .. ............ ....... 4.2 New Systems | | I .------- 4.3 Improvement of Existing Systems --.----- . ....... . ------------- C. INSTITUTIONAL IMPROVEMENTS | I I I I t 1. Preparation of Devetopment Plan ... ........... I 2. Technical Cooperation and Training I.. ... - ... .. ... -------....I....------- 3. Consumers Survey ........II | I 4. 0 & M Equipment .--.-----.-------.. ....------- ....... 5. Office Equfipent I.I.-...I..-.I I I i I I I I I 0. CONSULTING SERVICES 1. Monitorlng of Marine Sewage Disposal -. ..... I-------. . .............- -. . ..... ....... 2. Water Supply Designs-Southern Coast . I I I I I I 3. Water Suppty Designs-Northern Coast . I I I .I... 4. Studles/Oesigns-Sewerage South Coast ........I. I.. .. 5. Studies/Oesigns-Sewerage North Coast . . .. .... ..........- 1) Bars show imptementatfon periods from contract signing to completion. 2) The bidding process would start between 3 ard 12 months prior to contract signing, SECOND VALPARISO HATER SUPPLY N SEVERASE PROJECT IIflNITOhINS INDICATORS tsr 1997 199 1999 1990 1991 1992 19S3 1994 1995 196 199 IM 19 2000 Atteal Present Forecast OPERTIOI X Mater produced 113 sillion) 137.5 141.5 139.9 136.7 139.6 141.5 142.1 139.1 130.4 141.3 144.4 147.5 150.6 154.0 Hater sold (113 si1l1o,) 75.9 79.5 82.2 90.9 93.1 94.6 15.5 95.6 86.9 99.7 92.6 55.6 99.6 101.9 Bewerage sold (113 eillion) 61.9 64.5 66.6 65.5 67.3 68.9 70.1 70.6 70.6 73.2 76.0 78.3 81.8 84.9 Unaccounted for water (1) 44.9 43.9 41.2 40. 40.5 40.2 39.9 38.5 37.2 36.5 35.9 35.2 34.5 33.9 Vater sold per connection (13 oer month) 25.9 26.3 26.2 24.9 24.9 24.7 24.3 23.6 23.4 23.5 13.1 Hater connections year end (1000) 248.5 255.9 266.4 274.3 291.9 289.7 297.5 305.5 313.5 321.7 33.1 & 1 471 355. Service coerage water, () 92.1 92.7 95.3 95.7 95.9 9LI 96.4 96.6 96.9 97.4 99.0 98.6 99.3 99.9 Sewrage connections year end (10001 194.3 199.6 209.3 215.5 222.3 230.1 238.3 246.9 254.5 262.5 270.8 279.3 28.0 291.1I Service coverage, sewerage, (d1 78.3 7.6 81.5 82.2 92.8 93.3 83.9 84.5 85.1 86.0 96.9 87.9 88.7 99.1 letered water connKctionsliater connections (1) 9S.3 W.3 99.3 S9.3 9.3 99.3 99.3 99.3 99.3 S9.3 99.3 99.3 99.3 99.3 Working meterslaeters ) 99S. 99. 99. I 9.1 99.1 99.I 99.1 99.1 9.I S.I 99.1 99.1 .I 99.1 Emlloyeessleoo water connections 3.6 3.5 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4 3.4 Consumrs with direct income subsidy (1n n.e. n.a. n.e. A.A. 15 20 23 23 23 23 23 23 23 23 FINANCIAL Average Investmnt I connection (constant 1990 US-S) 637.5 610. 636.3 647.4 676.5 699.0 731.7 754.4 791.1 B29.7 961.7 992.1 996.4 891.9 Average Revenuel l3 sild (constant end 1990 US-Centsl 13.0 14.1 17.7 24.1 25.5 29.3 33.6 40.2 44.9 45.0 45.0 45.1 45.1 45.2 aNagng2 ater RatelN3 sold (constant end 1990 US-Cents)'. 11.0 11.8 14.9 19.9 20.7 23.2 25,9 29.1 31.1 31.2 31.2 31.2 31.3 31.3 Average Sewerage Ratefl3 sold (constant end 199 US-Cents) 1.9 2.3 2.9 4.2 4.8 6.1 7.9 11.0 13.8 13.8 13.9 3. 13.9 13.9 Average Cast/fl3 sold (constant end 1990 US-Cents) - 19.5 20.4 -19.1 24.3 -24.5- 26.2 27.7 30.0 32.7 33.9 34.3 35.2 36.0 36.7 Average Personnel Costla3 sold (constant end 1990 US-Cents) 4.6 5.1 5.3 B.3 7.0 7.3 7.6 7.9 9.2 8.2 J.3 8.4 9.4 9.5 Working Ratio 96.6 99.1 69.2 5.6 63.9 59.9 55.9 51.5 51.1 52.6 53.1 54.6 56.1 57.5 Operating Ratio 131.4 129.1 96.4 9B.5 96.6 81.3 75.9 69.5 69.4 70.6 71.8 73.7 75.4 76.9 btlOeb tEquity) 7 0.7 2.7 5.1 d.1 6.0 9.3 13.2 16.5 18.9 19.2 16.9 16.9 16.6 16.6 Debt Serice Corage (tims) 6.8 3.4 7.1 ;'.7 5.4 7.3 6.9 6.9 6.1 2.7 2.5 2.0 2.0 2.0 Contribution to nvestmn . (n 55.9 121.9) 55.5 141.4 47.1 53.8 52.8 61.0 62.9 68.7 81.5 52.6 57.4 52.6 Collection Ratio (day1s Hater and Sewaerae IO 65 '1 82 U 61 61 61 60 0 0 60 60 Hydrats Naintenance 75 60 60 60 60 60 60 60 60 60 Rates of Return (I) On aveage net assets in operation 12.5) 12.7) 0.5 1.5 2.0 3.1 4.3 6.1 6.7 6.0 5.6 5.2 4.9 4.7 On equity (3.4) (3.4) 10.5) 2.3 1.9 2.2 3.1 5.3 5.7 5.2 5.3 4.7 4.5 4.2 Dividelsiyield n.a. n.a. n.a. 0.0 I.3 0.0 0.0 0.0 0.0 0.0 1.5 3.7 3.8 3.7 - 60 - SECOND VALAASO WEMIR SIMPLY An SEWERE PROECT Limits on-TvOes of Procurement And Prior Review Threph2ld (USS 1,000) Prior Review Contract Aggregate Type of Description Llmlt Kalue Limit Pr2umept CIVIL All > 3,000 ----- ICB WORKS$ First two 200 to 3,000 ----- LCB contracts each year None c 200 4,000 Price quotations from at least three local bidders GOODS: All > 250 ----- ICe First two 50 to 250 ----- LCB contracts each year None c 50 4,000 Price quotations from at least three local bidders - 61 - flSQEVALPARAISO WATER SUPPLY AND SEWERAGE PROJECT AlIocation gf Loan Proceeds The proposed diabursement categories, the allocation of loan funds, and the disbuzaement percentages are as follows: Amount of Loan % Expenditures Cateaorv fUSS millioni to be Financed 1. Civil Works 27.0 45% 2. Equipment & Materials 18.0 45% of local expenditures and 65% of foreign expenditures 3. Consultants, training, supervision of works, technical assistance 5.0 50% TOTAL 50.0 …------------------------------------------------------------------------------ - 62 - SECOND- VALARISO WATER SUPPLY MND SEWERAG-E PLO-JEC Loan Disbursemvent Schedule Bank Fiscal Year Quarterly Disbursement CumulatLve Diabursement and Quarter Ending (US$ million) (US$ million) % of Total September 30, 1991 2.1 2.1 4.3% December 31, 1991 2.1 4.3 8.5% March 30, 1992 1.7 5.9 11.9% June 30, 1992 1.7 7.6 15.2% FY 1993 September 30, 1992 1.7 9.3 18.6% December 31, 1992 1.7 11.0 21.9% March 30, 1993 2.1 13.1 26.2% June 30, 1993 2.1 15.2 30.4% FY 1994 September 30, 1993 2.1 17.3 34.6% December 31, 1993 2.1 19.4 38.8% March 30, 1994 2.4 21.8 43.6% June 30, 1994 2.4 24.2 48.3% FY 1995 September 30, 1994 2.4 26.5 53.1% December 31, 1994 2.4 28.9 57.8% March 30, 1995 2.5 31.4 62.9% June 30, 1995 2.5 34.0 67.9% FY 1996 September 30, 1995 2.5 36.5 73.0% December 31, 1995 2.5 39.0 78.1% March 30, 1996 1.6 40.6 81.3% June 30, 1996 1.6 42.2 84.5% FY 1997 September 30, 1996 1.6 43.9 87.7% December 31, 1996 1.6 45.5 90.9% March 30, 1997 1.1 46.6 93.2% June 30, 1997 1.1 47.7 95.4% FY 1998 September 30, 1997 0.7 48.4 96.8% December 31, 1997 0.7 49.1 98.2% March 30, 1998 0.5 49.6 99.2% June 30, 1998 0.4 50.0 100.0% EOMD VA12911198 31A1 UIPVt AN MEW319 PROECT .193 11111 (99 1910. 119) 11 1193 1994 Ills 1991 19971 1113 19119 20 flperatIqOnaues .001kw . ~- 4 :1 2-! 3ff! 2~t Icier lauwes . 3~~~~~~~~~~.0 3.3 11o1 14.2 1ILl 17.2 19.4 21.9 23.7 24.5 25.3 26.2 27.0 27.9 Sna Revean I.1 1.4 1.9 2.4 2.8 3.1 4.8 6.8 8.6 8.9 9.2 9.6 10.0 10.3 Dpi, (3~~~~~~~~~~ ~~~~~.0) (3.4 (3.8) (5.3) 14.6) 14.91 15.2) (5.4) (5.6) 45.9) (6.)) (6.4) (6.7) 17.0) £ham(calm ~~~~~~~~~~~~(0.1) 10.6) 10.6) 40.51 10.5) (0.5) (0.5) (0.5) (0,5) (0.5) (0.5) (0.5) (0.31 10.5) Povar, (~~~~~~~~~~~~~~1.21 (1.1) 11.61 11.71 (2.01 12.0) (2.0) 12.21 12.9) I3.0 (3.01 13.1) 13.21 43.3) (1.71 10.9) *0.91 -* 10.6) (0.6) (0.2) (0.) (0,1) (0,7) (0,9) (0.8) (0.8) (0.9) (0.8) Pli4aIe coatratlars (0,51 (116) 41.4) (1.8) I1.!1 11.9) 42.0) 12.0) (2.11 (2.1) M2.2 (2.3) (2.31 12.4) PrawlsaI Recelvabiss (0.11 (03) (0.5) (0.5) (0.91 ((.0) (1.2) (1.0) 11.6) (1.1) (1.41 (1.4) (1.5) 11.5) UAIlasstriI. (I I) 1 112) I.11 13.1) 11.4) (1.9) 12.4) (2.9) 13.4) 14.1) (4.1) I5.M 16.2) 11.0) hpreciali.a (4.4) (4.2) (LI)1 (4,21 (4.3) (4.6) (5.0) (5.3) 45,1) 41.11 (6.6) (7.0) .1. 11.3)(.) Totad Opertall Eiapau 112.81 (13.8) (13.91 (15.7) ((6.21 (117.7 ((8,9) (20.5) 422.6) (24.1) 125.4) (27.01 ('2.5) (M.0 fjrliglou"t (3.1) (7,0) 0.5 .- -.9 2.5 4.3 6.0 9.0 10.5 10.1 10.0 .9.6 1. 9.: FluKiact Reugus 0.3 0.) 0.0 0.7 0.6 40.0) (0.1) (0.0) 0.2 0.4 0.3 (.2 1.2 (.1 G Eilmsalal [somasu (0.1) (0.1) (0.4) 40.4) (0.5) 40.8) (1.2) (1.1) (2.2) (2.4) (2.41 12.3) (2.3) (2.4) oa-ooerat(o (sato Inet) (0.21 40.3) (0.)) 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.3 tiled of Pric (Cha LU as baamn" am Epiti (22.5) (111.2) (20.9) 429.5) ((9.5) (19.9) (21.4) (22.81 (24.3) (25.9) (26.9) (28.2) 128.4) (28.1) lilac) of Pritt Chuag" am assets mi l iaItin 21.1 11.0 20.3 29.0 (8.0 19.2 20.6 22.5 24.6 26,8 21.9 28.3 29.6 28.1 ~seealglutes. 1 0.6) (0,5) (41.0) 0.9 (0.2 41.3) (1.9) ((.8) 11.4)1 (0.9) (0.3) (0.8) 40.7) (1.0) ltacos 1,1w. Tainu 13.7) (3.5) (0.5) 2.3 2.3 2.9 4.1 '7.2 9 I 9.2 V.7 8.8 8.6 8.1 tacoe us, Wa, 03) (0.3) 0.0 0.0 0.0 0.0 0.0 0.0 (0.8) (1.1) (1.01) .0) 11.0) (1.) lit lame altar Tn.m (4.0) (3.9) (0,5) 2.9 2.3 2.8 4.4 7.2 9,3 LI1 8.6 7.6 7.6 1.1 Cabh UIwldaaE . o, 0.O 0.0 0.0 2.2 0.0 0.0 0.0 0.0 0.0 2.5 6.2 1.( 6.3 IkRtlm latla I 11.1 99.1 10.2 13.6 63.8 59,9 53.9 31.5 31. 1 52.6 53.) 54.6 51.1 57.5 Dpuratlaq RatIo! . ~~~~~~~~131.4 120,1 91. 89.5 86.6 81.3 75.9 69.5 61,4 10.1 71.81 73.7 75.4 .76.8 bit el twr I (2. 7) 0.5 1.5 2.0 Li 4.3 6.1 6.7 6.0 5.6 5.2 4.9 4.7 K~M3 VILPMISO VATER OIPt AND SUEMEE PROECT mALt¶ MM AS M EF FIM flEd 1990 US-I llBimla IuN m 1 988 19 1990 1 .9!m (3 994 19N 5 (M 1997 I9 199 2000 .- khal Prest Fuucast me SuatIq Im!oa (l.1 13.0m 0.5 I.9 2.5 4.1 6.0 9.0 10.5 10.1 10. 9. 9.3 9.1 fr ldatis cad Irthatiu 4g. 41 4: 1 4.2 35L kla-seatm (susan (oat) *.} 10.2) 0.2 0. 9* - 0., @ . 1 0 - 1.1 1:5 1.5 1:i at es d iimds (0.31 (0.3) 0.0 0.0 12.21 0.0 0.0 0.0 (0.91 11.1) (3.) 17.21 17.41 17.3) gross atlnal k as emratlum 1.1 0.1 4.9 7.0 5.1 8.9 11.1 14.5 15.8 55.8 14.l 30.8 10.7 10.7 lss" hsaIi:atie (.0 10.00) (0.31 40.5 (0.51 10.41 (0.41 10.41 10.41 (3.51 (.43 13.2) 13.1) 13.0) Imarmst EIpasss (0.1) 10.3) 10.41 10.41 (0.51 (0.91 (3.21 11.71 12.21 (2.43 (2.43 (2.33 (2.31 12.41 lot h(eleal Cask Buf atim (.0 0.5 4.1 . 4.4 7.7 9.5 12.4 13.2 9.8 8.4 5.3 5.3 5.3 Martil Waial beds 0.6 (0.11 (0.9) 10.9) 0.1 10.41 (0.5) 0.8) 10.71 11.01 (0.93 (0.71 (0.11 10.61 Olte lssmio ad Liabilities Ids (0.31 (1.21 0.4 40.0) (0.0)- 10.0) (0.03 (0.03 (0.03 10.03 (0.03. (0.0) 4o.03 (0.0) ltermat Clltibatloa to Imveslnt 1.2 (0.8) 3d. 5.2 4.5 ' 7.3 9.0 it.? 12.5 303 7.5 4.6 4.5 4.1 I utnest Cat, l3tIIC(ie project 1.9 2.1 5.6 0.8 8. 12.9 1.l 28.1 13.3 11.4 7.3 L.o 0.0 0.0 Othr works 0.3 (.0 0.-. 2.1-- 1.0 - 0.8 1.0 1.0 1.2 1.4 1.4 8.7 7.9 8.8 stutibtd lnluta 3.4 4.91 9.8 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 Enlat.) ItoutuCots 5.0 3.4 14.2 3.7 9.B 13.9 11.3 19.4 20.2 13.1 9.4 6.9 3.1 9.1 Capitalized Intuest 0.0 0.1 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 1e1( luntmt cost 5.3 8.7 16.3 3.? 9.6 13.9 17.3 19.4 20.2 13.1 9.4 L. 3.1 9.1 3,b,1rd Flaaos -. - - 4.6 9.5 12.7 Il.SI - 5.3 4. 3.3 7.7 7.7 4.3 1.9 4.4 3.5 4.4 IswseWOas In lou 0.2 2.0 2.4 0.5 3.3 5.2 4.6 7.4 7.6 5.0 3.3 0.4 0.0 0.0 Siroumls, CeoFlacter Ism 0.0 0.0 0.0 0.0 0,0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 llskvs.mts, future Lous 0. 0.0 0.0 0.0 0o. 0.0 0.0 0.0 0.0 0.0 0.0 4.1 3.7 4.1 Tal Lans 0.2 2.0 2.4 6.5 3.3 5.2 6.4 1.4 7.0 5.0 3.3 4. 3.7 4.1 Cuou Cotrlrlit s 3 4.9 9.8 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0,2 0.2 L2 Tdal Esteoal Finutioq 3.8 LI 12.2 0.7 3.5 5.4 4. 7.7 8.0 5.2 3.4 4.7 3.t 4.4 chant la Cask (0.73 12.11 (0.51 2.2 1(.3! 11.1) (1.5) 10.01 0.3 1.0 1.1 0.3 0.3 M0.D hOt lorres Emuit (tine) 63 .4 . L 7,3: 4.9 6.9 1.1 2.1 2.5 2.0 2.0 2.0 Stadad mtrhiotigm to lowestmest I - 55.8 (21.-1 55.5 4.4 - 4.1.3 53L. 52.3 41.0 642.8 4.1 31.5 52.6 51.4 52.6 Coweste C.trlbtlim to loeulut I 51.0 53.2 51.1 61.9 45.1 14.0 47.4 54.9 5U.- 52.4 5m VLUISII IllATEO S API ND SEI5EW E PMECT ESI10' AUIIE O51we lEad 1190 I3-S mlilii.) Year eding keaber 31 591 1939 M199 19S0 I"5 gm 193 1994 1995 m996 19917 1 19q9 2N kiul Prevent fEtrKist * - ( ) filed uuts 6res Plat Is Service 141.2 139.1 151.4 138.3 170.6 181*4 196.0 209.3 224.7 242.4 253.9 272.6 281.S 291.2 ktuallAted ielation 129.0) 131.01 132.11 135.5) 141.5) 141.31 (51.51 151.01 163.0) 169.4) 176.31 (83.6) 191.21 (99.1) Di Pliead In SIrvI 1132 100.1 I1.6 123.0 12?.1 135.1 144.5 151.3 161,7 173.0 192.6 199.0 190.3 192.1 kar Is trogress 1.4 2.3 5.0 2.2 2.1 5.8 9.3 17.2 21.9 17.9 11.2 6.8 6.4 6.2 i flied lImts , 114.5 110.3 123.7 125.2 131.2 140.9 153.1 169.5 183.6 IS0.8 m3.e 195f. 196.6 193.3 imit kilts Cash ad Shrt tirm luvesaet 0.2 0.2 0.e 2.9 0.5 10.3) 12.21 n1.n) (1.2) 10.01 1.7 1.3 1.3 1.5 kcmts eteIvdable WAt9 2.1 2.6 - .3 -'-4.0 3 3,2 3.6 4.2 4.9 5 .5 S.i :.m 6.0 6.2 6.4 blerlals and hptliu 1.0 1.1 0.7 0.9 1.3 1.3 1.4 1.4 1.5 1.6 1.7' I 1.1 9.3 1.9 Obtr 1.5 0.6 0.4 0.3 '0.4 0.4 0.4 0.4 0.5 0.5 0.5 0.6 0.6 0.7 letl urret Assets 5.3 4.5 5.3 1.9 5.3 4.A 3.8 4.? 6.3 7.7 i.7 JO.1 10.4 10.4 th hsit6 1.0 2.2 0.1 0.1 0.5 0.1 0.1 0.1 0.1 0.0 0.0 0.0 0.0 0.0 a hitll 120. 117.0 129.0 133.3 136.7 145.6 157.7 113.5 139.9 199.6 203.5 20M.9 207.1 201.T LI3JLII5F A D El 301 I!t tU 4. 45.3 106.7 U.3 74.0 65.9 60.4 59.0 59.9 59.6 56.3 49.1 43.6 39.1 Ibetar c ctu 15.9 62 3.3 -3.9 52.0 65.3 73.4 82. 91.6 100.6 101.5 113.1 125.7 132.3 mug Iva. I.ablllus Lug farm sbt 0 2.1 5.5 4.6 7.5 12.3 19.9 2. 30.3 31.3 29.9 30.3 29.9 30.2 other 0.0 0.01 0.0 --.0."'10.0 0.0 0.0 0.0 t.0 0.0 0.0 0.0 0.0 0.0 Totl Lag Tar UabllItIes 0.7 2.1 5.5 . .4.6. 7.5 12.8 19.9 21.5 30.8 31.3 29.? 30.3 29.1. 30.2 mts Ulabilitin knauts payable 2.0 1.4 0.? 1.2 1.3 1.7 2.0 2.3 2.5 2.0 1.3 1.9 1.9 2.1 Lutit Pull. Teo r ebt 0.1 0.4 0.9 0.7 0.5 0.5 0.5 0.5 4.3 4.1 4.0 3.3 3.7 3. Shwit lit Loas 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 Other CUn reat UsbIlItles5.2 I.1 - .2 1.2 '-U 1.3 1.4 1.5 1.7 1.3 2.0 2.1 2.2 2.3 2.5 Told EMnt Liabilities 3.3 2., 3.0 3.1 3.2 3.6 4.0 4.4 8. 1 7.9 7.9 7.9 3., Total 120.? 117.0 129.0 133.3 136.7 145.6 157.1 173.5 189.t 1911.6 203.5 5.9 201.1 20M.e UebtllDeltifgsIt,9 W ..1 2.7 5o9 4.1 0 9.3 13.2 I6 11.9 13.2 IIo t 16.9 16.6 lk Ctwat tllt 1.6 I lA 5.8 2.5-1.1 -..I 1.3 0.? 1.1 0.7 5.0 1.2 1.3 1.3 1.3 I;ECND VII0RI MITER1 TS uPPn UND SEETRk6E PROJECT 17 IM IM I9M 1a9l IM IVY3 1994 1995 1996 197 19 1999 2000 kimal Wi~~~~~~Prset Fouucast Aims lmwZstmt I comsttla troastiat It" 115-l 63.5 £10.9 631.3 647.4 1. 6".0 731.7 154.4 791.1 o2.7 911.7 992.1 596.4 391.9 kws E 1e1ueI3 sold kcstaut ad It9 A-Ctnusl 13.0 14.1 17.7 24.1 25.5 29.3 33.6 40.2 44.9 45.0 45.0 45.1 45.1 45.2 Avr4e sttra l aatei sol5 ita.. i u a tsl ' . 3 29 11 2b:1 21:1 21:1 flT 1 Bi i1:. I1: i1:§ i Aw rC ost / tII3d cestd t ad t1" 90-St 19.t 20 4 19.1 24.3 24.5 26.2 27.7 30.0 32.7 33.9 34.3 35.2 36.0 36.1 Iver a wesouael COstl*3 old Itmosat ad 1"9 tSCiots) 4.6 5.1 5.3 9.3 7.0 7.3 1.6 7.9 8.2 8.2 9.3 9.4 9.4 9.5 MoXrik 91.6 89.1 19.2 65.6 63.8 59.9 55.9 51.5 S1.1 52.6 53.1 54.6 56.1 57.5 Upratll Ral 131.4 123.1 96.4 f9.5 96.6 E1.3 75.8 69.J 68.4 70.6 71.8 73.7 75.4 16.8 eb t Senls C rl (tissN) 1. 34 , l1 7 5.4 7.3 6.9 0.9 6.1 2.7 2.5 2.0 2.0 2,0 oebIi eIEoI I 0.7 2.7 5.1 1.1 6.0 9.3 13.2 10.5 18.9 18.2 16.9 .16.9 16.6 16.6 Coatr IstIoc to Imwl ut 1:: 55.9 121.91 55.5 149.4 47.1 53.8 52.0 61.0 62.9 69.7 u1.S 52.6 57.4 52.0 kAcoels Rssivahlelmaqspauifiy sanS 3.1 -. 2.7 _- 2.7.... - -2.7 - 1.9 . 119 1.9 1.9 1.9 1.9 1.9 1.9 1.9 Imwslsmets other tha Pioject (csstat Iffl Ws mllion) 4.1 6.3 10.6 2.9 1.4 1.1 1.4 1.4 1.6 1. '.8 10.0 9.0 10.1 Rkaser ci paid-is shares fflai"le *.a. a.a. 2,506.6 2,506.6 2o50.6 2,50.6 2,506.6 2,506.6 2,506.6 2,506.6 2,506.6 2,506.6 2,506.6 2,506.6 hot na slars (coastat 1990 9-catsl a.A. u.a. l .81- 5.01 5.03 5.15 5.34 5.65 6.00 6.35 : 6.62 6.69 6.75 6.80 Slurs price at 50. stack sekqe a.a. A.. D. B. ma, .. ... ".a. .a. $.a. a.a. a a.. ma. s.a. D.a. Iwlvidua per share Icaustaat 1990 IlS-nts) n.a. m.a. 0.0 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.1 0.2 0.3 0.3 Pric-En.lus Dlti. * a.a. e.a. N.a. 45.0 55.0 46.1 32.4 19.6 18.2 19.7 19.4 21.5 22.3 21.0 Price ta-Ci ilo 3.11. * a a.. Ma. 19.2 ,17.8 15.1 13.4 11.0 10.4 11.0 10.9 10.7 10.9 10.9 pilste-look Daias '. . - -- a..- -. a. .--m.a. .- a--m.a. m,a. n.a. a... o.a. a.a. mom. a,. A .a. s.A. hissd ofIrare II) BIe totl assets £3.11 flat) t0.1I 2.4 2.1 2.5 L5 5.4 5.7 5.4 5.4 4.9 4.9 4.1 b asverg met asstts to asprat1. U2.51 12.71 - 0.5 - 1.5 2.0 3.1 4.3 6.1 6.7 6.0 5.6 5.2 4.9 4.7 b"I ally13.43 13.41 (0.5) 2.3 1.8 2.2 3.1 5.3 . 5.7 5.2 5.3 4.7 4.5 4.2 Oivii yeldsi t*. S. -..e . -..__ 0.0 1.8 0.o 0.0 . o0.0 0.0 . 0.0 1.5 3.7 3.9 3.7 * 'ada bos vae t&1 £611 l3 Oll 1C31 all0 - 011 41 14131 fall till 141i 00 III 5O1 141 111 360 AOIiItU£8 to16 Its SfIfCOf Olf I of us11 tri casll0 111111 411011 Wo01 t 6N1.1 fr 06110 UU6ISW MM13 so all' I aOIif'fI is-toI1 601f'0 3*ol3t ~ 5f55it 5f*995 (1.f.5j 5fil51g tol sosi t3.f "It4 4451 t.0611ssnUUI 51l fv'i&3 £5*OtL'L #111'01 ulf'05sL ;10'11 LILI41 let40 cr45611 " 11100' 0£ 15014' 15118t 01611 04114'S 5.00855 Smiml513153 583 a oo~~~~~0'e 0010 00P 001 ' r 051 80.0 00* fel ore eel tos 661u 0la Mill06 33@35 15133 6153 OtRO 9 f1 6,8i 1 10 £1 1 0 l IS 6* U .1103Sflf 930 33 1155*&111 IiaU111 00le Co0o Dole ea's 00,0 Col 0010 0-0 golf *1f 101. Wi II 311 U21I1141U~ 3515v 'U1132 N62II£ 6110 f191 Sf1o We1 Sf1 111o ff10 111 Sfl 0 911 lit lfPIl 911 WI III 13U2vlvi10133 'UuI Uh 00CI OCt0 0CI "IS 001. Dole WI 0010 "I 1(1e all t5i ltlt & I 55135313053ooow 316J3li folo~~~~ ~~~ 101 10.0 W e tl oo t: a# 01 tiI III fill Ulf556W~~36 a ~~~~~~~iia uu to" 41:ti, 193,, U'L fil4t itf gf*9j u'lij L1'h8 t ill f.5tl M l 35,.i - 1~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~.111103 Mostz 61105 SPluO 5)-155 irtaf W41- i s-i Will 1011 60'oifi 0I erii l WIC #14,11 Ulu 1.1153 1 lan N if 613316 fI'0 0181 ZI0 I1II 801o for? It'll fiCil RISC 11 01 SIll oro 141 I1155111 ]3m1336313 ireo 0OO l00 We? Wre We1 sf'0 01.0 We1 ICa Ilo Ulf HIi IIIt ill 131 5 3 S iII Bill MlI Bill ll fill 6)1i (I 6I 501 si 9 I5*I149 fllI fll'£ 1019 6111 fil 1101 10t6 Wti l fiL08 016 6011 14'91 ItIll fill1 Sf166 Win". 1131 316 50 AIM' ff,01 ffli 911i i sit 16*et 4111 05.0i 051if II' Itgii 11.0t WM* 55'0f I1'" 111011 0561303 1c: 1E01 6511 It's ff,1 5 ItI '51 0811 6419 tile 8519 16'15 tile5 051 INISM31 011113 Oliva 3 ml 438133 141to fo8l 9651t W£1 1.8U ¶it elt 11% al'oi 61518 £06 WOt'll 6£*41ntt tti -it'l 1.0836. ME1 It a 1335 it t'l. 5111a q1%1 09'1l W1'f 0'If WS6f ti'81 111 45061 04'01 61111 £tl' 1618t 61"1.4'UJI 11 3 - I Iliasu Jo emica es '161 SPI 81 80111t 60111 I£'o6l 00'061 H515 (POi 11111e 68181t WM 'I l 88101 04146 5MUM1 IIW Is 1 51 '3556 101315 361303 181411 s0'64 W 1166 SOIC il 11101 L1'S 43111i of,St £816t of lug 10'itL IPIGIt Sf141 0161 'M8UM0 1 Is63 01518 INSIIUaS 56113310 101 It We We' 41'1 66 II' SI'S sell 60? sill 5C4i 011s 51isi GolWU0 Is an '3m31 SSIIO OCfff 60'18f (Paitl gri CL Pll 116 111 118 6S 11 8.5 15 f 1,053 I3333 'ilam '51113j35 Otl'£ 0If'S CS'St 06f't 0lt'6 ISO' 561lo 680' 1WI8 i5Iel 4io'I fOi 611s sill t.8II 3 'A BOO "31 'SD113883M6 11.5S II'Si II'Si SI'St piC?i KIM'S lo IsII" 11119 00' fIt lilt WM' 401'S 1S'0l MiS 93 SS IfdI3i 15 fil uw'rmomila 96l'8 Isle8' 016'l 11115 a4t's SZ'S1 90S0 I ?'b0lol 4110 &(Il 40111 *f'(41 orlol WeI1 Elts 'A05 so3 1 '55 355 65111'I 6S'6l0'l lS'S0& 41'81L 41106 01'911 ~fil'81£ O0'S I (P4 81:141 811 .pil 51'191 10101il i1111 *. will 3635 61'35 11 Sf'OL fO')1 Sf'81 It'ft 68'Il 4110 5511IM lcl 1511 111 ItO 00.00 Sf111 b'6S8 ti 118sli 8f'5ll 10'£6?1 lia 1'iic 16OOO H191f "598C6 Sl'f 01 45106i 801118 If'801 'lt 6511t 141 111 I Sulu3]'1113633 it'811 to-it5 8081 0110 1161tli W01I 155 K 181(1 111 C3 1L'0lI iI'f01 8413 I0'31 12411 81651153 w'~ allI' Oasm 0sI'8 081os 01ISS Wel 61 l Sl'I M 9:8 et1 -ft -'t o.II it-ll %-ll trI lll111_1115U 63 131853 OI'l II'so 61113 WM' S8'8i S2't SPTI ti It 11'l tl'8i SIu 18'1o Isla CIM CaJl Tot~ 15 64 35 515 fill1 9sfil sillf fi'll' fl'lI Sfill of06 51'CI l 0 S11 0110gil1il 10.94 61'14 9111 f8181ull633 31SI 163 UI 01116 16'968 10111 00121 11186 01'~iLII 018 4181-l it16 01ell 0O'001 0816 It-is 11-41 (4818 1316356j635351'381385 wal W 5'1 ('W1l CO i'St tli 61 Ill Will0 8ott 1 01 101 H110 1'11 SItl 1AMI Tali 163 1563151 00'0 890'01 00.0 GO'S 600131 000 600'01 00.0 00/0 81it 102/118 61,("1: 5&'fu'8 14'l'It 51V3 3316I 0001 110 1141 1411 144l £48si8 14ll 8ii ti 61 161 0448 404 6 84861 ju 1540Is 31.190 U 533351 5.1A3 so6311 viva DISVEI loarouId a5viamas uIw1 KIdafis R1HVim osiVmIVJVA Q1NODHS - 68 - Page 6 of 6 Notes to the Financial proiections General 1. In addition to the assumptions specified on page 5 of this Annex and in Annex 16 - Monitoring Indicators, the projected financial statements for 1991-2000 are based on the parameters specified below. Because of Chile's high rate of inflation, the figures are expreased in constant end-1990 USdollars. A second version in current Chilean pesos is available in project files. Income Statement 2. Water and Sewerace -evenues. The sales and sales revenues (net of VAT) forecast is taken from Annex 4 - Supply and Demand in ESVAL's Service Area. 3. Personnel. Projected to increase in line with the number of water connections combined with efficiency improvements and a 2% p.a. rise in remuneration. 4. Chemicals and Electricity. Changes are a function of treatment and pumping of water and sewage quantities. 5. Provision ReceLvables. 5% of annual billing is considered uncollectible. Sources and Uses of Fund 6. Proiegt Cost. Project expenditures are input according to the investment profile shown in Annex 14 - Detailed Project Cost Estimate, net of VAT. 7. OthLerworks_. Outlays are to be made as shown in Annex 5, ESVAL's Capital Investment Program, without VAT, after deducting project expenditures. S. Accounts Receivable. Projected a ratio of 26 days of average total annual sales revenues in line with recent experience (Annex 10). 9. -,ntorv. Equivalent to 7.0% of gross fixed assets plus one month stock ..,Counts naafble. Payments to suppliers and contractors equivalent to one _ operating expenditures (other than personnel and depreciation) plus one ht of capital investment expenditures. Dividends. Dividend distribution is based on net income net of monetary correction, restricted by requirements for self-financing of capital investment program and mLnimum cash requirement defined as 5 of cash operating expenditures plus one month debt service. - 69 SECOND VALPARaISO WATER SUPPLY MND SEWERAGE PROJECT Economic Analysis An economic analysis was carried out for the Greater Valparaiso Water Supply and Sewerage Project--the main component of the proposed project, where the bulk of the project investments are made and most of the project benefits would accrue. The analysis made is a modified financial analysis which compares costs and revenues with and without project. In the without-project case, it was assumed that system efficiency (water billed as percentage of water produced) would gradually be reduced over time, maintenance costs would increase because of system deterioration, water coverage would not increase, and production capacity would increase only slightly. It was also assumed that even without the project present tariffs would increase by 45% in 1992 in order to cover amortization and operation costs of the existing installations. In the with-project case, increases in water coverage, system efficiency, and production capacity were projected as shown in Annex 11. Tariffs with the project are those expected to be implemented by ESVAL in accordance with the stipulation of the current legislation; they would gradually increase starting from 1991 and would reach constant real values in 1995 that represent an increase of 56% for water and 228% for sewerage. The increments in tariff calculated as indicated above are attributed to the proposed investment program that served as the basis for determining the Government's proposed new tariffs. The IRR (internal rate of return) and the AIC (average incremental cost) of the project were calculated for the period 1991-2020 based on the following assumptions: 1. Jncremental costs and benefits were obtained by deducting the "without project" values from the "with-project" values. The costs consist of: capital costs and operation and maintenance (0&) costs. The benefits consist of revenues accrued from water and sewerage service sales due to the increase in tariffs as well as the increase in sales volume. 2. Cap_tal costs include: initial investments and replacement costs for equipment whose lifetime is shorter than 30 years. Initial investments include the bulk of the project costs, which are attributable to the Greater Valparalso area (see Annex 14), i.e.: all the sewerage facilities (part A), all the water supply facilities (part B), part of the institutional improvements (70% of part C), monitoring of the marine sewage disposal and supervision of constructton (Items 1 and 6 of part D). It was asoumed that the investments in institutional improvements (part C) are proportional to the number of connections and population served (Greater Valparaiso represants 70% of the whole company). Items 2, 3, 4, and 5 of part D (Consulting services) were excluded since they are related to areas other than Greater Valparaiso. * 70 - Anne2 21 REpl.| costs were taken into account (about 12 years on the average after project completion) for all the equipment included in the project, which represents about 55% of the total project cost. 3. O&M costs include: personnel, chemicals for water treatment, energy for water and sewage pumping, and equipment and materials for maintenance of water and sewerage facilities. Personnel costa were calculated using an average remuneration of US$6,230/yr in 1990 and an increase of 2% per year. Of the total number of employees (920), 439 employees who work in the Valparalso zone plus a similar proportion of the central personnel were considered attributable to the Greater Valparaiso Area. A total of 558 employees (representing about 60% of the total), which were attributed to the Greater Valparaiso Project, were taken into account for the "without project" and the "with project" situations in the first years (prior to 1994). The additional personnel estimated to be required for the operation of the water and sewerage components of the project is shown below. Personnel Recuired for Project Ogeration Period Additional Personnel Total Personnel Water Sewerage 1990-93 558 1994 4 562 1995-97 4 10 576 1998-2020 6 10 592 Chemical costs for water treatment were taken at USO.45 cent per m3 of water produced for the "without project" situation, as well as for the "with project" situation prior to 1995, and USO.49 cent per m3 for the "with project" situation after 1995. These figures are based on ESVAL's data and on the consultants estimates carried out in connection with the design of the Greater Valparaiso water supply system. Enerav costs for water pumping were taken at US$6.53 per m3 of water produced (without project and with project prior to 1994) and US$6.39 per m3 of water produced (with project after 1994). The reduction in unit energy cost is a result of the optimization of the water supply system by the creation of pressure zones. Energy costs for sewage pumping without project and with project prior to 1995 were based on ESVAL's 1990 annual costs. Energy costs for sewage pumping and treatment after 1995 (with project) were based on the estimates carried out by the consultants in connection with the design of the Greater Valparaiso sewerage system. Maintenance coots including spare parts and materials such as oil, fuel, etc. were taken as followas - 71 - AnnaexZ Pg3of12 Water supply. Without project: US$11.42 per water connection and a yearly increaoe of 1% due to system deterioration. With projects US$11.42 per water connection until 1994; a yearly 1 decrease between 1995-2000 because of system improvements, and US$10.75 per water connection between 2000-2020. Sewerage: US$2.85 equivalent per water connection (without project and with project prior to 1995). The additional annual coots with-project after 1995 were based on the estimates carried out by the consultants in connection with the design of the Greater Valparaiso sewerage system. 4. Revenues from water and sewerage service sales (with project) were calculated with reference to future water and sewerage tariffs as stipulated by law (see Table below). Without project revenues were calculated in accordance with a theoretical tariff, corresponding to the present tariff increased by 45%, which would have been necessary even if the project were not carried out to cover the amortization and operation costs of the existing installations; it was also assumed that this increase would gradually be introduced within two years (25% increase in 1991 and 45% in 1992). Water and Sewerage Tariffs {with 2roiect) WR SR Water Rate Sewerage Rate SR, as Year (UScents/m3) (UScents/m3) 1 o£lR 1990 19.9 4.2 0.21 1991 20.7 4.8 0.23 1992 23.2 6.1 0.26 1993 25.8 7.8 0.30 1994 29.1 11.0 0.38 1995 31.1 13.8 0.44 5. Water Production. System Efficiency and Number of Connections. The yearly volumes of water produced and the number of water connections used in the economic evaluation are shown in Annex 11, for the "with project" situation. For the "without project" situation, similar projections were carried out using the following assumptions: (a) no increase in water coverage (sales); (b) no major increase in water production capacity (only minor additional sources that can be developed at low cost); and (c) gradual reduction of system efficiency (water billed as % of water produced) from 53% in 1990 to 44% by 2000 and 40% by 2020. 72 - nnex 21 6. Discount Rate. Ths discount rate used for the AC calculation is 10%, which is similar to the rate used by Chile'. Ministry of Economy for determining the future water and sewerage rates (9.6%). The IRR and AIC calculations are shown on the following pageu of this Annex for the whole project (water supply and sewerage), as well as for the water supply and sewerage components separately. A summary of the results obtained is given below. IRR for the entire project: 14.6% IRR for the water component onlys 27.4% IRR for the sewerage component only: 7.0% UScentLm9 USS oeg 2erson AIC for the entire project: 7.5 10.1 AIC for the water components 2.5 3.1 AIC for the sewerage component: 5.0 6.6 Sensitivity Tegtp. 1. Caoital Costg. This test was carried out by increasing the estimated capital costs of the project (initial investment and replacement costs) by up to 25%. The IRR results indicate that the Project is moderately sensitive to capital cost increases. Considering that for most project components the cost estimates were based on detailed designs plus 10% physical contingencies, it is unlikely to assume that the capital costs could be higher than 10-20% above the estimated costs, in which case the IRR would still be acceptable (above 10%). Capital Investment Factor IRR 1.0 14.6% 1.05 13.5% 1.1 12.5% 1.15 11.6% 1.2 10.7% 1.25 9.8% 2. Water and Seweraae Rates. This test was carried out by reducing the water and/or sewerage rates to a minimum of 75% of the scheduled rates. The IRR results indicate that the Project is significantly sensitive to rate reductions (see Diagram on the last page of this Annex). This stresses the need for ensuring that no adverse changes in the pricing system for water and sewerage services would occur. 73 - &nngz 2 Faste 5 o Water and/or Internal R atel ofRturna 1IRRl Sewerage Rate Water Sewerage Both Water Factotr PlI Onvi 1.0 14.6% 14iiA 14,Ak 0.95 12.4% 13.8% 11.6% 0.9 10.3% 13.0% 8.7% 0.85 8.2% 12.2% 5.9% 0.8 6.2% 11.4% 2.8% 0.75 4.1% 10.6% -0.5% 3. System Efficiency. In the basic economic analysis carried out, it was assumed that the with-project efficiency would increase from 54% at present to 64% in the year 2000, whereas the without-project efficiency would decrease to 44% in the year 2000 and 40% in the year 2020. In this sensitivity test the with-project efficiency in the year 2000 was taken at 55% (pesimistic assumption) and 75% (optimistic assumption), while the without-project efficiency was left constant (54%). The TRR result. obtained indicate that the project is only very slightly sensitive to this factor. System Efficiency with-proiect (vear 2000_ W i t h o u t - p r c j ec t Reduced to 40-45% Constant f54%) 55% 14.4% 14.2% 64% 14.6% 14.4% 75% 14.8% 14.6% A comparison between the system efficiency (unaccounted-for water) with and without project is shown in a Diagram on the last page of this Annex. The other Diagram on the same page shows the significant effect of the water and sewerage rates on the internal rate of return of the project. VATERt SUPPLY AND SEWERAGE - ncremental Vatues (in IIS) initIat Reptace- Capital E n e r g y aIn t e na n ce Total Total R e v e n u e Totat Net Cash Year Investment mset Costs Personnel Chemicals Mater Sewiage Mater Seweerage 0 & H Costs Mater Sewlage Revenues Flowe …-- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 1991 8435,000 0 8435,000 0 (6,624) (9,698) 0 (11.557) 0 (27,880) 8,407,120 1,248,377 590.687 1,839,064 (6,568,056) 1912961,000 0 12,961,000 0 (17,990) (26,338) 0 (23,630) 0 (67,957) 12,893,043 1,070,238 976,471 2,046,708 (10,846,335) 1993 15,436,000 0 15,436,000 0 (29,976) (43,886) 0 (36,234) 0 (110,097) 15,325,903 2,615,875 1,881,132 4.497,007 (10,828,896) 1994 16,128,000 0 16,128,000 26,443 (52,992) (77,583) 0 (40,746) 0 (144,878) 15,983,122 4,689,506 3,617,916 8.307,422 (7,675,700) 1995 16,053,000 0 16,053,000 121,373 (32,205) (126,171) 910,277 (67,162) 201,545 1,007,657 17,.060,657 6,139,077' 5,206,395 11,345,472 (5,715,185) 1996 9,015,000 0 9,015,000 123,800 (50,203) (154,239) 937,234 (109,830) 201,545 948,306 9.963,306 6,239,149 5,307,018 11,546,167 1,582,861 1997 5,963,000 0 5,963,000 126,276 (71,559) (153,387) 965,103 (153,665) 201,545 88,314 6,847,314 6,340,793 5,409,411 11,750,203 4,902,890 1998 0 0 0 243,292 (88,404) (207,882) 1,037,915 (198,693) 280,554 1,066,783 1,066,783 6,444,033 5,513,603 11,957,636 10,89,853 1999 0 0 0 248,158 (89, 320) (209,075) 1,069,071 (244,943) 280,554 1,054,445 1,054,445 6,548,894 5,619,625 12,168,519 11,114,074 * 2000 0 0 0 253,121 (90,111) (210,10) 1,101,309 (292,444) 349,854 1,111,620 1,111,620 6,655,401 5,727,507 12,382,907 11,27`1,287 2001 0 0 0 258,183 (83,778) (201,852) 1,120,181 (321,288) 349,854 1,121,300 1,121,300 6,741,921 5,833,669 12,575,590 11,454,290 2002 0 0 0 263,347 (77,363) (193,489) 1,139,346 (351,08) 349,854 1,130,609 1,130,609 6,82,566-5,M09507 12,739,072 11,608,463 * 2003 0 0 0 268,614 (70,864) (185,017) 1,158,865 (381,863) 349,854 1,139,589 1,139,589 6,918,350 5,986,330 12,904,680 11,765,092 2004 0 0 0 273,986 (64,281) (176,436) 1,178,747 (413,648) 349,854 1,148,223 1,148,223 7,008,289 6,064,153 13,072,441 11.924.218 2005 0 0 0 279,466 (57,612) (167,742) 1,198,998 (446,465) 349,854 1,156,498 1,156,498 7,099,396 6,142,987 13,242,383 12,085,884 2006 0 0 0 285,055 (50,856) (158,936) 1,219,625 (480,344) 349,854 1,164,398 1,164,398 7,191,689 6,222,845 13,414,534 12,250,136 * 2007 0 0 0 290,756 (44,013) (150,015) 1,240,637 (515,313) 349,854 1,171,906 1,171,906 7,285,180 6,303,742 13,588,923 12,417,017 2008 0 46,402,203 46,402,203 296,571 (37,081) (140,978) 1,262,040 (551,401) 349,854 1,179,006 47,581,208 7,379,888 6,385,691 13,765,579 (33,815,630) 2009 0 0 0 302,503 (30,058) (131,824) 1,283,843 (588,638) 349,854 1,185,680 1,185,680 7,475,826 6,468,705 13,944,531 12,758,851 2010 0 0 0 308,553 (22,944) (122,551) 1,306,054 (627,054) 349,854 1,191,911 1,191,911 7,573,012 6,552,798 14,125,810 12,933,899 - 2011 0 0 0 314,724 (15,738) (113,157) 1,328,680 (666,682) 349,854 1,197,681 1,197,681 7,671,461 6,637,985 14,309,446 13,111,765 2012 0 0 0 321,018 (8,438) (103,641) 1,351,730 (707,552) 349,854 1,202,971 1,202,971 7,771,190 6,724,278 14,.495,469 13.292,497 2013 0 0 0 327,439 (1,043) (94,001) 1,375,213 (749,699) 349,854 1,207,762 1,207,762 7,872,216 6,811,694 14,683,910 13,476,147 2014 0 0 0 333,988 6,448 (84,236) 1,399,137 (793,156) 349,854 1,212,035 1,212,035 7,974,555 6,900,246 14,874 800 13.662.766 2015 0 0 0 340,667 14,036 (74,344) 1,423,512 (837,957) 349,854 1.215,768 1,215,768 8,078,224 6,989,949 15,068:173 13:852:405 2016 0 0 0 347,481 21,723 (64,324) 1,448,345 (884,139) 349,854 1,218,941 1,218,941 8,183,241 7,080818 15,264,059 14,045,118 2017 0 0 0 354,430 29,510 (54,17) 1,473,648 (931,737) 349,854 1,221,532 1,221,532 8,289,623 7,172,869 15,462,492 14,240,960 2018 0 0 0 361,519 37,398 (43,890) 1499,428 (980,789) 349,854 1,223,520 1,223,520 8,397,388 7,266,116 15,663,504 14,439,98 2019 0 0 0 368,749 ~~~~~~45,389 (3,43 1,2,9 (,333)349,854 1,224,882 1,224,882 8,506,554 7,360,576 15,867,130 14,642,248 2020 0 0 0 376,124 53,483 (22,922) 1,552,462 (1,083,408) 349,854 1,225,593 1,225,593 8,617,139 7,456,263 16,073,403 14,847,809 IRR 14.6X 09 - 75 - BnnLV '-ge 7 of 12 WATER SUPPLY ONLY Incrementat Values (In USS) ................ ................................ Rejtace- Totat Energy Hafntenance Totat Totalt Revenues Net Cash Year Investment *ment InvestmeMt Personnelt Chemicals Water Water 0 & N Costs Water Ftow 1091 2,658,000 0 2,658,000 0 (6,624) (9,698) (11,557) (27,880) 2,630,120 1,248,377? (1,381,743) 1992 4,107,000 0 4,107,000 0 (17,990) (26,338) (23,630) (67,957) 4,039,043 1,070,238 (2,968,806) 1993 647,000 0 647,000 0 (29,976) (43,886) (36,234) (110,097) 536,903 2,615,875 2,078,971 1994 13 227,000 0 13,227,000 21,154 . (52,992) (77,583) (40,746) (150,167) 13,076,833 4,689,506 (8,387.327) 1995 10,569,000 0 10,569,000 97,098 (32,205)(126,171) (67,162) (128,440) 10,440,560 6,139,077 (4,301,483) 1996 3,912,000 0 3,912,000 99,040 (51,521)(154,239) (109,830) (216,550) 3,695,450 6,239,149 2,543,69 1997 0 0 0 101,021 (71,559)(183,387) (153,665) (307,589) (307,589) 6,340,793 6,648,382 1998 0 0 0 194,633 (88,404)(207,882) (198,693) (300,345) (300,345) 6,444,033 6,744,378 1929 0 0 0 198,526 (89,320)(209,075) (244,943) (344,812) (344,812) 6,548,894 6,893,706 2000 0 0 0 202,497 (90,111)(210,108) (292,444) (390,166) (390,166) 6,655,401 7,045,567 2001 0 0 0 206,547 (83,778)(201,852) (321,288) (400,371) (400 371) 6,741,921 7,142,292 2002 0 0 0 210,677 (77,363)(193,489) (351,086) (411,260) (411,260) 6,829,566 7,240,826 2003 0 0 0 214,691 (70,8664)(15,017) (381,863) (422,854) (422,854Y 6,918,350 7,341,204 2004 0 0 0 219,189 C64,281)(176,436) (413,648) (435,175) *(435,17S) 7,008,269 7,443,464 2005 0 0 0 223,573 (57,612)(167,742) (446,465) (448,247) (448,247) 7,099,396 7,547,643 2006 0 0 0 228,044 (50,856)(158,936) (480,344) (462,093) (462,093) 7,191,689 7,653,781 2007 0 0 0 232,605 (44,013)(150,015) (C15,313) (476,736) (476,736) 7,285,180 7,761,917 2008 0 19.402,619 19,402,619 237,257 (37,081)(140,978) (551,401) (492,203) 18,910,416 7,379,888 (11,530,528) 2009 0 0 0 242,002 (30,058)(131,824) (588,638) (508,518) (508,518) 7,475,826 7,98U344 2010 0 0 0 246,842 (22,944)(122,55t) (627,054) (S25,707) (525,707) 7,573,012 8,098,-19 2011 0 0 0 251,779 (15,738)(113,157) (666,682) (543,797) (343,797) 7,671,461 8,215,259 2012 0 0 0 256,815 (8,438)(103,641) (707,552) (562,817) (562,817) 7,771,190 8,334,007 2013 0 0 0 261,951 (1,043) (94,001) (749,699) (582,792) (582,792) 7,872,216 8,455,008 2014 0 0 0 267,190 6,448 (84,236) (793,156) (603,754) (603,754) 7,974,55S 8,578,309 2015 0 0 0 272,534 14,036 (74,344) (837,957) (625,731) (625,731) 8,078,224 8,703 95S 2016 0 0 0 277,984 21,723 (64,324) (8864,139) (648,755) (648,755) 8,183,241 8,831,995 2017 0 0 0 283, 44 29,510 (54 173) (931,737) (672,856) C672,856) 8,289,623 8,962,478 2018 0 0 0 289 15 37,398 (43,890) (980,789) (698 066) (698 066) 8 397,388 9,095,454 2019 0 0 0 294,999 45,389 (33,47) (1,031,333) (724, 418) 18) 8,506,554 9 230,972 2020 0 0 0 303,899 53,483 (22,922) (1,081,408) C731,947) (7541,9A7) 8,617,139 9,369,086 ............................................................................................................... ................... IRR IJneer 2 14X . . . . . .. . ~~~~~~~~~~~~~~~.. .. ... . . . . . . 76 A Page 8 of 12 SEUERAGE ONLY - Incremental Values (In USS) ........................................... Reptace- Total Energy Maintenance Total Total Revenues Net Cash Year Investment ment Investment Personnel Sewage Sewerage 0 & M Costs Sewerage Flow 1991 5,776,000 0 5,776,000 0 0 0 0 5,776,000 590,687 C5,185,313) 1992 8,854,000 0 8,854,000 0 0 0 0 8,854,000 976,471 (7,877,529) 1993 14,788,000 0 14,788,000 0 0 . 0 0 14,788,000 1,881,132 (12,906,86) 1994 2,901,000 0 2,901,000 5,289 0 0 5,289 2,906,289 3,617,916 711,627 1995 5,483,000 0 5,483,000 24,275 910,277 201,545 1,136,097 6,619,097 5,206,395 (1,412,701) 1996 5,103,000 0 5,103,000 . 24,760 937,234 201,545 1,163,539 6,266,539 5,307,018 (959,521) 1997 5,963,000 0 5,963,000 25,255 965,103 201,545 1,191,903 ?,154,903 5,409,411 (1,745,492) 1998 0 0 0 48,658 1,037,915 280,554 1,367,128 1,367,128 5,513,603 4,146,475 1999 0 0 0 49,632 1,069,071 280,554 1,399,256 1,399,256 5,619,625 4,220,369 2000 0 0 0 50,624 1,101,309 349,854 1,501,787 1,501,787 5,727,507 4,225,720 2001 0 0 0 51,637 1,120,181 349,854 1,521,672 1,521,672 5,833,669 4,311,997 2002 0 0 0 52,669 1,139,346 349,854 1.541,869 1,541,869 5,909,507 4,367,638 2003 0 0 0 53,723 1,158,865 349,854 1,562,442 1,562,442 5,986,330 4,423,888 2004 0 0 0 54,797 1,178,747 349,854 1,583,398 1,583,398 6,064,153 4,480,754 2005 0 0 0 55,893 1,198,998 349,854 1,604,745 1,604,745 6,142,987 4,538,241 2006 0 0 0 57,011 1,219,625 349,854 1,626,491 1,626,491 6,222,845 4,596,355 2007 0 0 0 58,151 1,240,637 349,854 1,648,642 1 8,642 6,303,742 4,655,100 2008 0 26,997,926 26,97,926 59,314 1,262,040 349,854 1,671,209 28,669,135 6,385,691 (22,283,444) 2009 0 0 0 60,501 1,283,843 349,854 1,694,198 1,694,198 6,468,705 4,774,507 2010 0 0 0 61,711 1,306,054 349,a54 1,717. ;18 1,717,618 6,552,798 4,835,180 2011 0 0 0 62,945 1,328,680 349,854 1,74i,479 1,741,479 6,637,985 4,896,506 2012 0 0 0 64,204 351,730 349,854 1,765,788 1,765,788 6,724,278 4,958,490 2013 0 0 0 65,488 1,375,213 349,854 1,790,555 1,790,555 6,811,694 5,021,139 2014 0 0 0 66,798 1,399,137 349,854 1,815,789 1,815,789 6,900,246 5,084,457 2015 0 0 0 68,133 1,423,512 349,854 1,841,49 1,841,499 6,989,949 5,148,450 2016 0 0 0 69,496 1,448,345 349,854 1,867,696 1,867,696 7,080,818 5,213,123 2017 0 0 0 70,886 1,473,648 349,854 1,894,388 1,894,388 7,172,86; 5,278,481 2018 0 0 0 72,304 1,499,428 349,854 1,s21,586 1,921,586 , 7,266,116 5,344,531 2019 0 0 0 73 ,50 1,525,696 349,854 1 049,300 1,949,300 ;,360,576 5,411,27E 2020 0 0 0 75,225 1,552,462 349,854 1,977,541 1,977,541 7,456,263 5,478,723 .......................................................................................................................... IRR . 7.0% . . ~~~~~~. .. . . .. ... .. -77- Page 9 of 12 AIC - Average Incremental Cost * Water Supply and Sewerage ............................................................... C a p I t a l C ot s 0 & H C o s t s Total Water Initfal Replace- without with Increme- Incremental Supply Population Year' Investment atent Total Project Project ntal Cost (MCM/yr) Served ......................................7.................................................................... 1991 8,435,000 0 8,435,000 7,230,703 7,202,824 (27,880) 8,407,120 101.S 751,034 1992 12,961,000 0 12,961,000 7,395,493 7,327,536 (67,957) 12,893,043 102.4 764,416 1993 15,436,000 0 15,436,000 7,564,757 7,454,661 (110,097) 15,325,903 103.3 778,024 1994 16,128,000 0 16,128,000 7,738,671 7,593,793 (144,878) 15,983,122 101.8 795,116 1995 16,053,000 0 16,053,000 7,917,419 8,925,076 1,007,657 17,060,657 100.5 812,528 1996 9,015,000 0 9,015,000 8,998,299 9,045,287 946,989 9,961,989 100.3 824,090 1997 5,963,000 0 5,963,000 8,284,316 9,168,629 884,314 6,847,314 100.0 835,814 1998 0 0 0 8,465,890 9,532,673 1,066,783 1,066,783 99.8 847,705 1999 0 0 0 8,611,708 9,666,153 1,054,445 1,054,445 99.6 859,764 2000 0 0 0 8,760,792 9,872,412 1,111,620 1,111,620 99.5 871,994 2001 0 0 0 8,908,304 10,029,604 1,121,300 1,121,300 100.8 883,330 2002 0 0 0 9,058,894 10,189,503 1,130,609 1,130,609 102.1 894,813 2003 0 0 0 9,212,627 10,352,216 1,139,589 1,139,589 103.4 906,446 2004 0 0 0 9,369,571 10,517,794 1,148,223 1,148,223 104.7 918,229 2005 0 0 0 9,529,792 10,686,290 1,156,498 1,156,498 106.1 930,166 2006 0 0 0 9,693,359 10,857,757 1,164,398 1,164,398 107.5 942,259 2007 0 0 0 9,860,345 11,032,251 1,171,906 1,171,906 108.9 954,508 2008 0 46,402,203 46,402,203 10,030,820 11,209,826 1,179,006 47,581,208 110.3 966,917 2009 0 0 0 10,204,860 11,390,540 1,185,680 1,185,680 111.? 979,487 2010 0 0 0 10,382,538 11,574,449 1,191,911 1,191,911 113.2 992,220 2011 0 0 0 10,563,933 11,761,614 1,197,681 1,197,681 114.6 1,005,119 2012 0 0 0 10,749,122 11,9S2,094 1,202,971 1,202,971 116.1 1,018,185 2013 0 0 0 10,938,187 12,14S,950 1,207,762 1,207,762 117.6 1,031,422 2014 0 0 0 11,131,210 12,343,244 1,212,035 1,212,035 119.2 1,044,830 2015 0 0 0 11,328,273 12,544,041 1,215,768 1,215,768 120.7 1,058,413 2016 0 0 0 11,529,463 12,748,404 1,218,941 1,218,941 122.3 1,072,172 2017 0 0 0 11,734,867 12,956,400 1,221,532 1,221,S32 123.9 1,086,111 2018 0 0 0 11,944,575 13,168,095 1,223,520 1,223,520 125.5 1,100,230 2019 0 0 0 12,158,678 13,383,559 1,224,882 1,224,882 127.1 1,114,533 2020 0 0 0 12,377,268 13,602,862 1,225,593 1,225,593 128.8 1,129,022 ,._ ........................................................................................... Total NPV 74,017,587 982 T,361,932 NPV, UScent/m3 7.5 NPV, USS per person 10.1 78 -a Page 10 of 12 AIC - Average Incremental Cost - Water Suppty only ............ ,O_"..................................................... .. C a p i t a l C o t s O & M C o ts Total Water Initial Replace- wIthout with Inereme- Incremenital SuppLy Population Year Investment ment Total Project Project ntal Cost (MCC/yr) Served ........................................................................................ 1991 2,658,000 0 2,658,000 5,917,788 5,889,909 (27,880) 2,630,120 101.5 751,034 1992 4,107,000 0 4,107,000 6,058,461 5,990,504 (67,957) 4,039,043 102.4 764,416 1993 647,000 0 647,000 6,203,061 6,092,965 (110,097) 536,903 103.3 778,024 1994 13,227,000 0 13,227,000 6,351,745 6,201,578 (150,167) 13,076,833 101.8 795,116 1995 10,569,000 0 10,569,000 6,504,673 6,376,233 C128,440) 10,460,560 100.5 812,528 1996 3,912,000 0 3,912,000 6,660,602 6,444,052 (216,550) 3,695,450 100.3 824,090 1997 0 0 0 6,821,056 6,513,467 (307,589) (307,589) 100.0 835,814 1998 0 0 0 6,976,427 6,676,083 (300,345) (300,345) 99.8 847,705 1999 0 0 0 7,095,373 6,750,561 (344,812) (344,812) 99.6 859,764 2000 0 0 0 7,216,88' 6,826,715 (390,166) (390,166) 99.5 871,994 2001 0 0 0 7,340,508 6,940,136 (400,371) (400,371) 100.8 883,330 2002 0 0 0 7,466,786 7,055,526 (411,260) (411,260) 102.1 894,813 2003 0 0 0 7,595,772 7,172,919 (422,854) (422,854) 103.4 906,446 2004 0 0 0 7,727,526 7,292,351 (435,175) (435,175) 104 7 918 229 2005 0 0 0 7,862,107 7,413,860 t448,247) (448,247) 106.1 930,166 2006 0 0 0 7,999,575 7,537,483 (462,093) (462,093) 107.5 942,259 2007 0 0 0 8,139,994 7,663,257 (476,736) (476,736) 108.9 954,508 2008 0 19,402,619 19,402,619 8,283,426 7,791,223 (492,203) 18,910,416 110.3 966,917 2009 0 0 0 8,429,936 7,921,418 (508,518) (508,518) 111.7 979,487 2010 0 0 0 8,579,592 8,053,885 (525,707) (525,707) 113.2 992,220 2011 0 0 0 8,732,461 8,188,663 (543,797) (543,797) 114.6 1,005,119 2012 0 0 0 8,888,612 8,325,795 (562,817) (562,817) 116.1 1,018,185 2013 0 0 0 9,048,116 8,465,324 (582,792) (582,792) 117.6 1,031,422 2014 0 0 0 9,211,046 8,607,292 (603,754) (603,754) 119.2 1,044,830 2015 0 0 0 9,377,475 8,751,744 (625,731) (625,731) 120.7 1,0S8,413 2016 0 0 0 9,547,480 8,898,725 (648,755) (648,755) 122.3 1,072,172 2017 0 0 0 9,721,136 9,048,281 (672,856) (672,856) 123.9 1,086,111 2018 0 0 0 9,898,524 9,200,458 (698,066) (698,066) 125.5 1,100,230 2019 0 0 0 10,079,724 9,355,305 (724,418) (724,418) 127;.1 1,114,533 2020 0 0 0 10,264,818 9,512,870 (751,947) (751,947) 128.8 1,129,022 ................ ................................ ._................ .............. Total NPV 24,897,837 982 8,098,125 NPV, UScent/m3 2.5 NPV, USS per person 3.t -79- brar Page 11 of 12 AIC - Average Incremental Cost - Sewerage only ......... ................ .......... .................... _.. .. *C a p i t a l C o sts 0 & M C o s t s Total Yater Population Population Initial Replace- without with Increme- Incremental Supply Connected to Connected to Year Investment rment Totat Project Project ntal Cost (14CM/yr) Sewerage Water 1991 5,776,000 0 5,776,000 1,312,915 1,312,915 0 5,776,000 101.5 679,916 751,034 1992 8,854,000 0 8,854,000 1,337,032 1,337,C32 0 8,854,000 102.4 693,123 764,416 1993 14,788,000 0 14,788,000 1,361,696 1,361,696 0 14,788,000 103.3 706,565 778,024 1994 2,901,000 0 2,901,000 1,386,927 1,392,215 5,289 2,906,289 101.8 720,243 795,116 199S 5,483,000 a 5,483,000 1,412,746 2,548,843 1,136,097 6,619,097 100.5 734,163 812,528 1996 5,103,000 0 5,103,000 1,437,697 2,601,236 1,163,539 6,266,539 100.3 748,033 824,090 1997 5,963,000 0 5,963,000 1,463,259 2,655,162 1,191,903 7,154,903 100.0 762,141 835,814 1998 0 0 0 1,489,462 2,856,590 1,367,128 1,367,128 99.8 776,491 847,705 1999 0 0 0 1,516,335 2,915,591 1,399,256 1,399,256 99.6 791,087 859,764 2000 0 0 0 1,543,911 3,045,698 1,501,787 1,501,787 99.5 805,934 871,994 2001 0 0 0 1,567,796 3,089,468 1,521,672 1,521,672 100.8 820,872 883,330 2002 0 0 0 1,592,108 3,133,977 1,541,869 1,541,869 102.1 831,544 894,813 2003 a 0 0 1,616,855 3,179,297 1,562,442 1,562,442 103.4 842,354 906,446 2004 0 0 0 1,642,044 3,225,443 1'563,98 1,583,398 104.7 853,304 918,229 2005 0 0 0 1,667,685 3,272,430 1,604,745 1,604,745 106.1 864,397 930,166 2006 0 0 0 1,693,784 3,320,275 1,626,491 1,626,491 107.5 875,634 942,259 2007 0 0 0 1,720,351 3,368,994 1,648,642 1,648,642 108.9 887,018 954,508 2008 0 26,997,926 26,997,926 1,747,395 3,418,603 1,671,209 28,669,135 110.3 898,549 966,917 2009 0 0 0 1,774,923 3,469,121 1,694,198 1,694,198 111.7 910,230 979,487 2010 0 0 0 1,802,946 3,520,56$ 1,717,618 1,717,618 113.2 922,063 992,220 2011 0 0 0 1,831,472 3,572,951 1,741,479 1,741,479 114.6 934,050 1,005,119 2012 0 0 0 1,860,511 3,626 299 1,765,788 1,765,788 116.1 946,192 1,018,185 2013 0 0 0 1,890,071 3,680,626 1,790,555 1,790,555 117.6 958,493 1,031,422 2014 0 0 0 1,920,164 3,735,953 1,815,789 1,815,789 11'9.2 970,953 1,044,830 2015 0 'J 0 1,950,798 3,792,297 1,841,499 1,841,499 120.7 983,576 1,058,413 2016 0 0 0 1,981,983 3,849,679 1,867,696 1,867,696 122.3 996,362 1,072,172 2017 0 0 0 2,013,731 3,908,119 1,894,388 1,894,388 123.9 1,009,315 1,086,111 2018 0 0 0 2,046,051 3,967,637 1,921,586 1,921,586 125.5 1,022,436 1,100,230 2019 0 0 0 2,078,954 4,028,254 1,949,300 1,949,300 127.1 .1,035,728 1,114,533 2020 0 0 0 2,112,451 4,089,991 1,977,541 1,977,541 128.8 1,049,192 1,129,022 ...... ......... __.. ................... .................................. .............. ............................. . . ....... ........... ................................ . Total NPV 49,117,171 982. 7,428,°97 7,361,932 NPV, UScent/M3 5.0 NPV, USS per person served 6.6 6.7 -so - 2A1.. Page 12 of 12 SYSTEM EFFICIENCY with and without Projet 90 _ so , a 70- S 60 400 530 40 1990 1599 1992 1993 1994 1996 1996I 1997 1998 1999 2W0 Years 0 With Peffc O Without Pmpjat SENSITIVITY TESTS Water & SeweWo Rat= 14.0 - 135.0K- 10.0,\ ' X7.GX - j ~~~~~~4.OX \ .34.Q -_ 7.0w. . 1.Q0K 1.00 0.9B 0.90 0.95 0.80 0.75 Water/seawarago Factor a wtte< + Saw roge Bo fut & 9 Rae - 81 - Annex 22 PIe .1 of 4 CHILE SECOND VALPARAISO WATER SUPPLY AND SEWERAGE PROJECT Environmental Assessment The study carried out by the consultants of the Greater Valparaiso sewage collection and disposal included an evaluation of the environmental impact of the various alternatives studied, and a detailed analysis of the environmental implications of the recommended solution, which essentially consists of conveying the sewage generated in vbrious urban zones to two convenient locations, where it would be discharged into the Ocean, after preliminary mechanical treatment. An oceanographic study, which was undertaken in 19£8 to study the hydrodynamic behavior of the maritime zone that would be affected by sewage discharges, has provided the basis for the selection of the most attractive alternative. The area covered by the oceanographic study was about 80 km2, extending from the Bustamante tunnel in the south to the Aconcagua River in the north. Measurements of various parameters such as waves, winds, marine currents, and sea bottom topography, as well as sampling of sea water for physico-chemical analyses and tracer studies, were carried out during two distinct seasons of the year: summer (January-March) and winter (June-August). The sampling was carried out in three areas: Bustamante, Vergara, and Concon, which correspond to the three possible sewage discharge locations in the various alternatives studied, i.e., in the south, center, and north of the area, respectively. The main conclusions of the oceanographic study were as follows: 1. The marine currents in the Vifia bay are of small magnitude; this creates unfavorable conditions for the discharge of sewage flows into the bay, since the interchange of water between the bay and the ocean would take place only at very long intervals. Consequently, any sewag, particles discharged in the area of Vifia-Reflaca would remain in the bay for long p2riods of time. 2. The marine currents in the vicinity of the Bustamante tunnel, combined with the high wave amplitudes, the predominant wind effect and the ocean bottom topography, have high capacity for assimilation of organic matter, and thus provide favorable conditions for sewage discharge ln this area. This conclusion is supported by the tracer studies carried out, which have shown that che present sewage discharges through the Bustamante tunnel have only a limited, local effect. A sampling and analysis program of the wastewater generated in the area and of various receiving water bodies was also carried out to asseos the flow variation, the strength of the wastewater and its composition, on the one hand, and the present contamination conditions, on the other. The analyses carried out included the most relevant physico-chemical and bacteriological parameters, such as: BODS, COD, suspended and dissolved solids, chlorides, oil and grease, nitrogen and phosphorus, temperature and pH, and total and fecal coliforms. 82 - Annex 22 page 2 of4 An industrial survey was also carried out to determine the flows and loads of various industries located in the Greater Valparaiso metropolitan area, which discharge some type of industrial wastewater to the municipal network or to the sea. A total number of 443 industries were identified, out of which 220 industries are considered to be large water consumers (more than 1,000 m3/month). The industries cover a wide variety of commercial activities such as: food, chemical, iron and steel, paper and pulp, textile, petroleum, leather and wood. Two water-quallty parameters are of particular importance in analyzing the suitability of the ocean water for its intended uses in these areas: (a) bacterial contamination, which may affect adversely the use of the coastal waters for recreation, as well as for fishing; and (b) chemical contamination by certain heavy metals, which may accumulate to toxic levels in certain aquatic species that may be consumed as raw seafood. While bacteria are found in domestic sewage in high concentrations, heavy metals usually originate in industrial wastewater. As expected, it was found that the Ocean along the whole area from Playa Ancha in the south to the Aconcagua River in the north, as well as the Quilpu6-Vifia creek that flows through the center of Vifia del Mar are contaminated by direct or indirect sewage discharges. The main evidence of the sewage contamination is the high concentration of fecal coliforms originating from domestic sewage, indicating the possible presence of pathogenic microorganisms that may present a direct or indirect public health hazard. About 70% of a total coast length investigated of 30 km. was found to contain fecal coliforms in higher concentrations than the permissible limit of the international and Chilean standards for bathing waters (1,000 per 100 ml). Along almost half of the coastline investigated, the concentration of fecal coliform bacteria exceeded 10,000 per ml. in the summer season, i.e., one order of magnitude higher than the standard. The favorable marine conditions in the vicinity of the Bustamante tunnel were confirmed by the findings of four water sampling and analysis campaigns carried out in 1987 and 1988. The fecal coliform concentrations, which average 10,000,000 per ml. (7 logs) in raw sewage were rapidly reduced to less than 1,000 per ml (3 logo), i.e., by at least four orders of magnitude, within a distance of 200-300 m. from the tunnel outlet in both north and south directions. The great capacity of the ocean to degrade and assimilate high organic loads in the area of the Bustamante tunnel, which was also confirmed by the BOD analyses, is presumably due to the energy created by marine currents and waves, the high dilution effect, and the great depth of the sea a short distance from shore. All these factors affect the behavior of sewage after mixture with sea water, in addition to the salinity of the sea twater, which is an important factor in reducing the concentration and variety of microorganisms present in sewage. -83 Relatively high concentrations of copper, lead, and cadmium were detected only near the discharge of the Aconcagua River into the ocean and near the discharge of the industrial zone of ViCa into the ocean. The selection of the recommended solution for the disposal of sewage from the Greater Valparaiso metropolitan area was based on the following findings and considerations: (a) The construction of wastewater treatment plants in the Greater Valparaiso metropolitan area would be extremely difficult because of the unfavorable topography, the dense and rapid urbanization, and the intensive land use for activities related to tourism. Wherever land is available and conditions suitable for construction of treatment plants, their cost would be prohibitively high. (b) The reuse of wastewater for irrigation or industrial uses requiring a lower-quality effluent, which might have provided an attractive solution, had to be discarded because it was found unattractive from an economic point of view. (c) The alternatives involving sewage disposal through a sea outfall in Vifia del Mar have a higher cost than the ones using the Bustamante tunnel. Any solution involving the construction of a sea outfall within the Vifia bay also presents two major problems: (i) an outfall pipe would be subjected to permanent traffic of commercial, military and fishing boats, which may endanger it; and (ii) any failure of the outfall would create a major contamination hazard for a large number of public beaches. (d) The site near the Bustamante tunnel outlet, which is presently used for discharging into the ocean part of the Valparaiso sewage (about 500 l/e), presents the most favorable conditions for sewage disposal into the sea. It is far from the main public beaches located within the Vifia del Mar bay, the topography is adequate (100 m. depth at only 500 m. from the shore), the wave energy is considerable (4 kw/m for a wave height of 1 m; 22 kw/m for a wave height of 2 m); the marine currents and the winds provide good conditions for sewage mixing and dispersion, and for rapid degradation of organic matter. (e) Because of its favorable geomorphologic and maritime conditions, on the one han4. and its limited accessibility for public bathing or fishing activities, on the other hand, the area of the Bustamante tunnel was selected ae the most appropriate for the discharge into the ocean of the bulk of sewage generated in the metropolitan area (95%) after preliminary (mechanical) treatment. (f) No effect whatsoever is foreseen in the Laguna Verde zone, which iu located farther south of the Bustamante tunnel. 84 - ZA0DEL;2L Fsge 4 ofe (g) A second discharge point selected is Concon at the northern extreme of the metropolitan zone, where relatively small amounts of sewage originating in the Concon urban area (5% of the total) will be discharged into the ocean through a small outfall after preliminary (mechanical) treatment. (h) A major improvement of the quality of water in the area of the Vinia bay, where a large number of public beaches are located, is expected to occur after the completlon of the project. It has been estimated that by increasing the amount of wastewater discharged through the Bustamante tunnel from about 0.5 m3/s at present to 4.5 m3/o in the year 2000 and 6.25 m3/s in 2020, no adverse effect of practical importance will be created, although the area affected by fecal bacteria concentrations higher than permissible (1,000 per ml) would increase to about 1,000 m south and west of the tunnel. (i) A compre2iensive monitoring program is included in the project, whose purpose is to ensure that the solution adopted will provide the anticipated results. In the contrary case, which is very unlikely to occur in the near future, additional treatment and/or other measures will have to be undertaken at a later stage. - 85 - mm~~~An SECON 3aM.P"160S WATER SUPPL AN SEWEAG PROJECT Lint of DocuMents and Data Available Ln Project Jie 1. Licitaci6n Privada para Conoultoria Estudi oOrganizacional, ESVAL, July 1990. 2. Diseflo de Ingenieria para e1 Mejoramiento del Servicio do Agua Potable de Gran Valparaiso - Anteproyecto, HIDROSAN-AGBAR-SAPEGE, June 1989. 3. Disefto de ingenieria para e1 Mejoramiento del Servicio de Agua Potable do Gran Valparaiso - Avance del Disefto, H!DROSAN-AGBAR-SAPEGE, May 16, 1990. 4. Disetio de ingenieria para e1 Mejoramiento del Servicio de Agua Potable de Gran Valparaiso - Avance del Disefto, HIDROSAN-AGBAR-SAPEGE, (undated). S. Proyecto de Alcantarillado de Gran Valparaiso, ESVAL, June 1990. 6. Proyecto do Alcantarillado do Gran Valparaiso, informe Final, GKW Consult, April 1990. 7. Proyecto do Alcantarillado do Gran Valparaiso, Planif icaci6n General del Sistema - Volumen 1: Informe, GKW Consult, July 1989. 8. Proyecto do Alcantarillado do Gran Valparaiso, Planif icaci6n General del Sistema - Volumen 2: AnAlisis del Impacto Ambiental y Ecol6gico, GKW Consult, July 1989. 9. Disefto do Ingenieria Nuevas Fuentes para Agua Potable del Gran Valparaiso - Estudio y Seleccifn do Alternativas, CADE-IDEPE, May 1989. 10. Dioefto de Ingenieria Nuevas Fuentes para. Aqua Potable del Gran Valparaiso - Estudio y Selecci6n do Alternativas - Anwxos, CADE-IDEPE, May 1989. 11. *Nuevas Fuentee do Aqua Potable del Gran Valparaiso (Drawings): Wells and Los Aromos-Conc6n Transmission, CADE-IDEPE, 1989. 12. Mejoramniento del Alcantarillado Rio Aconcagua - Diagnostico - informs Gerencial, ICSA Ltda., 1989. 13. Audit Reporto FY 1988, 1989, ESVAL. 14. Current Legislation. 15. Detailed Tarif f Schedule, ESVAL. 16. Detailed Financial Projections 1991-2000, NSVAL. 17. Estudio sobre seguros para, los bienes de NSVAL S.A., Informs Final, Deloitte, Haskins and Sells, Diciembre 1990. 18. The Project with OECF Cof inancing, Document prepared following appraisal mission, Washington D.C., April 1991 (Annex 15 in the Green Cover SAR). MAP SECTION I l IBRD 22903 SEA OUTFALL Concon ' Ion 0=560 mm < Ac=n_a L-=800m ga") I/ ~ Higuerillas-/~~ Concon 0 5 10 KILOMETERS PA1 C/IIC OCEAN Renaca Renaca LOS AROMOS RESER VOIR I~~~~~~~~~~~~~~~~~~~~~~~~~~~I V ha D el-_ _ _ _ _ __,_ _ _ d Viina Del Mar Valparaisu qf TURUGUIpAra ARGENTI ~ ~ ~ ~ ~ ~ ~ TI Bustamante 'runnel ,, S ECO ND VALPARAI SO AllhoQ>rl*a>hcidodh Oshocr./ AiNl I WATER SUPPLY AND SEWERAGE PROJECT. : ° Proposed Sewage Disposal Scheme Villa Alemana /etorrJaC9 .!' PROJECT EXISTINC Vina Del Mar RE PA , hoIC @3 0111 Pumping Stations Are ETEM;f/gs nlgOfA '^j roS0 sO El Treatment Plantsf_. .- . ~ Rivers and Creeks SAT IAGO,po.,o hdj, I . Urban Areas PCAC//,« SNIr0 WALrz IAIA5)lsz CHILE.h In iorolFh,oon. Coe,ogo5 On s d rie5 3oo of any FIG- f / S C ll =800 mm f-lE / / \1;;; L. =2,7 Km ............. dJ co <>o J .; Renaca V~~~~~L.= 1.8 Km >RSROR.* o 0 oca Km~~~~~~~~daJeaa Peoc SE I SECOND VALPARAISO QUe REGIIA B <, \,,q,* 4 1 [ ~~~~~~ ~ ~~ ~~~~~~~REGION;( g WATER SUPPLY AND SEWERAGE PR~~~OJEC VaZparaiaopaCIF ROECT EXISTING il/etaIR SANT =~~~~ Main Water Aqueducts~~~~~~~~~~~~~~~~~~~~~~~ITh Wl A nStrE a T ACI ATIANTIC Concon Major Existing WaEer Sources ~~~~~~~~~~~~OCEAN MLNI SECOND VALPARAISO ^ipe RG,N3 I WATER SUPPLY AND SEWERAGE PROJECT Vlais i PACtFIvC *Q Proposed Water Supply Scheme-Province Bounde a I ( e fEtEM -' PROJECT EXISTING llti/a Lr i's* Main Intake and Treatment Plants - m ' 7 55 ( - Main Water Arqueducts s. 1 *.e.:- Minor Water Sources (Wells) ))*f-_p o * Main Storage Tanks PA'C/'F/ [gC SANTIAGO FAKN so 'X V;4DrIND5 Coco |Major Existing Water Sources c E (AM/ @2;' lHVINAS) Dam -PSF/rovince Bund arie, | 0 sUISIf3sgT-WA -tIAdr Uivrband A treas ms -Region Boundaries r .ssCSN7 r -.- Urban Areas 1 _ International Boundaries W, 7D° MARCH 1991