AFRICAN DEVELOPMENT BANK

MOROCCO

COMPLETION REPORT

FIFTH DRINKING WATER SUPPLY PROJECT

COUNTRY DEPARTMENT September 2003 NORTH REGION

TABLE OF CONTENTS

1 2

2.1 2.2 2.3 2.4

3

3.1 3.2 3.3 3.4 3.5 3.6

4

4.1 4.2 4.3 4.4 4.5 4.6

5

5.1 5.2

6

7.

7.1 7.2 7.3

8.

9.

9.1 9.2 9.3

Currency Equivalents, Acronyms and Abbreviations Executive Summary Basic Project Data Project Matrix INTRODUCTION PROJECT OBJECTIVES AND FORMULATION Objectives Description Origin Preparation, Appraisal, Negotiation and Approval PROJECT IMPLEMENTATION Effectiveness and Start-Up Modifications Implementation Schedule Reporting Contract Awards Sources of Financing and Disbursements PROJECT PERFORMANCE Overall Evaluation Operating Results Institutional Performance Financial Performance Economic Performance Performances of Consultants, Enterprises, Suppliers and Borrowers SOCIAL AND ENVIRONMENTAL IMPACT Social Impact Environmental Impact PROJECT VIABILITY PERFORMANCE OF THE BANK, THE BORROWER AND OTHER CO-FINANCIERS Performance of the Bank Performance of Borrowers Other Co-financiers OVERALL PERFORMANCE AND RATING CONCLUSIONS, LESSONS LEARNED AND RECOMMENDATIONS Conclusions Lessons Learned Recommendations

Page

i-iii iv-vi

vii-viii 1 1 1 1 2 2 2 2 3 3 4 4 4 5 5 6 7

12 15 16

17

17 17

18

18

18 19 20

20

20

20 21 21

This report has been prepared by Messrs. B. MOHLINGER, Consulting Engineer, and B. NIANG, Consulting Financial Analyst, in ONIN.2, following their mission to Morocco in January/February 2003. Mr. B. BEN SASSI, Hydraulic Engineer in ONIN.2, Project Task Manager, participated in the start-up of the mission and finalisation of the report. Any enquiries relating to this report may be referred to Mr. F.N. MATONDO, Division Manager, ONIN.2.

LIST OF ANNEXES

Annex TITLE Number of pages

1 Description of the sub-projects 2

2 Disbursement schedule by sources of financing 1

3 Summary table of project costs 1

4 ONEP financial statements 1

5 RADEEF financial statements 1

6 Internal rate of return calculation assumptions 2

7 Assumptions and calculation of the economic rate of return (ERR)

2

8 Implementation performance 1

9 Performance of the Bank 1

10 Evaluation of overall project performance 2

11 Matrix of recommendations and actions to be carried out 1

12 Data on Contracts. 8

13 List of documents consulted for the Completion Report 1

CURRENCY EQUIVALENTS, ACRONYMS AND ABBREVIATIONS

CURRENCY EQUIVALENTS

Currency Appraisal (4th Quarter 1991) Completion June 2003 1 Dirham (MAD) 1 Unit of account (UA)

100 centimes

11.9565 MAD

100 centimes

14.4494 MAD

UNITS OF MEASURE

km kilometre km2 square kilometre ha hectare m3 cubic metre m3/s cubic metre per second m3/h cubic metre per hour l/s litres per second inhab./ha inhabitants per hectare

ACRONYMS AND ABBREVIATIONS

APD = Avant- projet détaillé (Detailed design) DWS = Drinking Water Supply ADB = African Development Bank DGH = Direction générale de l’hydraulique (General Hydraulics Inspectorate) ND = Nominal diameter LPEE = Laboratoire public d’essai and d’étude (Government Laboratory for Testing and Research) MAD = Moroccan Dirham ONE = Office national de l'électricité (National Power Board) ONEP = Office national de l'eau potable (National Drinking Water Supply Board) RAID = Régie autonome intercommunale de distribution d’eau and d’electricite de Tangiers (Tangiers Autonomous Intercommunal Water and Power

Distribution Utility) RADEEF = Régie autonome de distribution d'eau and d'électricité de Fèz (Fèz

Autonomous Water and Electric LUMP = Land Use Master Plan IRR = Internal Rate of Return ERR = Economic Rate of Return

Financial Year: 1 January – 31 December

i

EXECUTIVE SUMMARY 1. The Fifth Drinking Water Supply Project is part of the Bank’s operational programme in the development of Morocco’s drinking water supply sector. While the first four projects concerned only one large town (Marrakech or Tangiers), the fifth project involves nine towns: Berkane, Oujda, Fèz, Meknès, Khémisset, Tiflet, Salé, Settat and Berrechid. Some of these towns (Fèz, Meknès, Oujda and Salé) are among the largest in the country, and the others are of average size. At appraisal, their total population amounted to about 2 100 000 inhabitants. 2. Two loans were allocated to finance the project; the first, for UA 56.8 million to the Office national de l'Eau potable (National Drinking Water Supply Board), and the second for UA 4.2 million to the Régie autonome de distribution d'Eau and d'Electricité de Fèz (Fèz Autonomous Water and Electric Power Distribution Utility). Each Borrower was the executing agency for its loan. The ONEP project component aimed at extending and upgrading the water production and transportation capacity for the nine towns, whereas the RADEEF component was intended to improve water distribution in the city of Fèz. 3. The project was implemented over a period of 9 years. The project started up in August 1992 with the launching of bids for the Berrechid Drinking Water Supply, and was completed in 2002 with the commissioning of the RADEEF Bab Hamra pumping station. At appraisal, project implementation was expected to last 2 years and 6 months, from January 1992 to June 1994. 4. There are several reasons for this substantial delay: i) a two and a half year time frame was not realistic; ii) bidding and contracting took longer than expected; iii) three years after the project commenced, the Bank approved the utilisation of savings made on the project for the implementation of three sub-projects, which was followed by a new cycle of bidding and works; iv) RADEEF delayed bidding for the Bab Hamra pumping station up to the time it became necessary for the network’s operation ; and v) contract closure required more time than anticipated. 5. Bidding began four months after the date scheduled at appraisal, and the initial works started in September 1993, that is to say one year behind schedule. Issuance of forty invitations to bid, required for the initial project, was spread over about a year and a half, whereas it was initially planned that all be launched at the same time. The time between the call for bids in the publication « Development Business » and the commencement of works was, on the average, 15 months, but was longer for some contracts. Aside from the (RADEEF) Baba Hamra pumping station, works for all the initial sub-projects were completed by January 1997. 6. There was never a call for bids for the Oujda sub-project. During the testing of pumping on the boreholes to serve the city, carried out after loan approval, the discharge was clearly below the feasibility study’s estimates and insufficient for implementation of the sub-project, which led to its abandon. For the preliminary treatment of water in Fèz, construction of the Ait Youb dam upstream of the waterworks intake implied a reduction of turbidity and an improvement of the quality of raw water, which was of such a nature as to make preliminary treatment structures unnecessary. At the Bank’s request, these structures were withdrawn from the initial bidding, while awaiting new water quality measures. The latter showed that the pre-treatment facilities could effectively be eliminated.

ii

7. The cost of the eliminated works, including physical contingencies and price escalation, was estimated at UA 12.67 million. Beginning 1995, ONEP requested, through a modification of the list of goods and services, authorisation to utilise the amount made available for implementation of sub-projects in the towns of Essaouira, Khouribga and Tétouan. The Bank approved the request in April 1995, and as the studies for the major structures were available, bids were invited immediately. The new sub-projects were completed in 1999. 8. Project identification/preparation was partially satisfactory in so far as an important sub-project had to be eliminated because the assumptions underlying its definition had not been verified and subsequently were proven to be false. 9. Aside from the 9-year implementation period, instead of the 30 months initially envisaged, project implementation was satisfactory. The problem of the very long implementation delay was attenuated by the fact that the delay envisaged at appraisal was too short and that a delay of 4 to 5 years would have been more realistic. Some of the sub-projects were implemented in less than three and a half years, and the initial project was almost completely implemented within 5 years. In 1995, ONEP, with the approval of the ADB, introduced new sub-projects to replace the structures eliminated in Oujda and Fèz. This decision was made prior to the Bank’s reorganisation, and the introduction of new regulations for the utilisation of projects’ savings. The implementation of new sub-projects in Essaouira, Khouribga and Tétouan also took 5 years. 10. As regards procurement, there were no problems except for the time required for the publication of two invitations for local competitive bidding, the Bank’s procedures were complied with. The engineering studies were satisfactory except for geo-technical investigations and for several minor problems. There were no major overruns and the total amount of the covenants for project works came to 2.5% of the total value of the contracts. These covenants concern in general supplementary works requested by ONEP, such as the renovation of buildings or rehabilitation of existing equipment in order for them to have the same standards as the project facilities. Three out of sixty-seven contracts signed within the context of project implementation contained more than 10% of covenants including that for technical assistance where the obvious cause is the substantial increase of the project implementation time. 11. The project’s total cost at completion, net of taxes, was UA 83.32 million, that is to say UA 19.26 million or 18.8% less than the estimate made at the appraisal. The Bank contributed UA 50.596 million to finance this cost, ONEP contributed UA 31.42 million and RADEEF UA 1.31 million. 12. The project’s financial internal rate of return (IRR) is 8.5% instead of 15% envisaged in the appraisal. The reason for this reduction in comparison to the Estimates in the appraisal is that the increased tariffs were lower than anticipated. Several other factors have influenced the internal rate of return. The reduced demand, subsequent to ONEP sensitisation campaigns saving water, has had a negative effect. The introduction of the towns of Tétouan, Essaouira and Khouribga on the other hand has permitted the volume of water sold to be substantially increased and has had a positive impact. Reduction of the cost of the project has also had a positive impact.

iii

13. If reduced water consumption, unforeseeable at the time of the project’s appraisal, had a negative impact on the rate of return, it pointed out the fact that project facilities will become saturated much latter than expected. It can be confirmed that the project will have helped ONEP to cover its medium-term production facility needs for major towns, and that the pace of investments could be reduced in coming years. 14. With an economic rate of return of 9%, the project seemed to be fully justified from the economic standpoint, although the output was far below appraisal estimates. Moreover, several un-quantifiable benefits should be taken into consideration, such as the improvement of populations’ sanitary conditions and comfort as well as benefits for the economy of the towns concerned. Another advantage is that in several towns (Fèz, Meknès, Khémisset, Tiflet, Salé, Khouribga and Essaouira), the project made it possible to double production facilities, so that in the event of an incident, the supply of water would continue with deteriorating performance 15. The project’s impact is considered satisfactory. For towns such as Settat and Berrechid, the project has ended chronic periods of water shortages, while for Berkane, Essaouira, Khémisset, Tiflet, Khouribga and especially Tétouan, the commissioning came about just before the saturation of existing facilities therefore making it possible to avoid water shortages. 16. In conclusion, the fifth drinking water supply project permitted ONEP to extend its water production facilities to the country’s major towns. Reduction of sales growth will enable the facilities to satisfy the water demand up to 2010 and even 2025 for some towns. As regards RADEEF, the project a hand, to supply the Sahrige Gnaoua neighbourhood where 8 000 households are now connected to the network.

iv

BASIC PROJECT DATA

1. Loan Numbers : P-MA-EAZ-001 P-MA-EA0-002 2. Borrowers : Office national de l'Eau potable (ONEP)

Régie autonome de Distribution d'Eau and d'Electricité de Fèz (RADEEF)

3. Guarantor Kingdom of Morocco 4. Beneficiaries : ONEP and RADEEF 4. Executing Agencies : ONEP and RADEEF A – LOAN

Estimate at Appraisal Actual 1 Amount (in M UA) ONEP

RADEEF 55.80 4.20

47.90 2. 69

2 Interest rate Variable variable 3 Repayment periods 16 years 16 years 4 Grace period 4 years 4 years 5 Date of loan negotiations 02/92 6 Date of loan approvals 20/01/92 23/03/92 7 Date of loan signature 31/03/92 13/05/92 8 Date of loan effectiveness 31/07/92 20/01/93 9 Date of first ONEP disbursement

Idem RADEEF 01/11/92 01/02/93

27/01/94 28/09/94

10 Date of last ONEP disbursement Idem RADEEF

31/12/94 31/12/94

22/08/01 24/09/02

11 Beginning of ONEP Implementation Idem RADEEF

01/09/92 02/01/93

12 Completion of ONEP implementation Idem RADEEF

30/06/94 30/06/94

13 Date of first repayment B – PROJET DATA 1. Total cost (in million UA)

Estimate at Appraisal Actual Gap Gap (%) F.E. 60.000 50.591 -9.409 -15.7% L.C. 42.580 32.726 -9.854 -23.1% Total 102.580 83.316 19.263 -18.8%

v

2. Financing Plan (in million UA)

Estimate at Appraisal Actual Gap Sources

L.C.. F.E. Total L.C. F.E. Total Value %

ADB (ONEP) 55.800 55.800 47.911 47.911 -9.409 -15.7% ADB 4.200 4.200 2.688 2.688 -9.409 -15.7% ONEP 40.120 40.120 31.420 31.420 RADEEF 2.460 2.460 1.310 1.310 Total 42.580 60.000 102.580 32.73 50.599 83.329 19.251 -18.8%

C – PERFORMANCE INDICATORS 1. Cost increase : -18.8% 2. Delay compared to schedule : +250 % 3. Implementation status : completed 4. Industrial Performance : satisfactory 5. Performance of consulting engineer : satisfactory 6. Performance of contractors : average to good depending on the bid

package 7. Performance of the executing agencies : satisfactory (ONEP) satisfactory (RADEEF) 8. Project profitability : satisfactory

Appraisal PCR Economic rate of return (%) 19% 9% Financial rate of return (%) 15% 8.5%

D – MISSIONS

Type Periods Number of people

Composition Staff/week

Identification 15/01-31/01/91 2 1 engineer 1 financial analyst

1.5*

Appraisal 09/11-30/11/91 2 1 consulting hydraulics engineer 1 financial analyst

6

Supervision 09/03-22/03/92 3 1 engineer 1 division manager 1 loans officer

0.2*

Supervision 14/11-01/12/93 2 1 engineer 1 financial analyst

0.5*

Supervision 29/05-11/06/94 2 1engineer 1 financial analyst

0.2*

Supervision 03/01-14/01/95 2 1 engineer 1 financial analyst

0.1*

Supervision 07/97 2 1 consulting engineer 1 financial analyst

2*

Supervision 22/11-03/12/99 1 1 engineer 0.5* Supervision 06/11-17/11/00 2 1 engineer 1.5* Supervision 07/12-22/12/00 2 1 engineer

1 consulting financial analyst

0.5*

vi

Type Periods Number of people

Composition Staff/week

Supervision 25/06-06/07/01 1 1 engineer 0.5* Supervision 07/10-20/10/01 1 1 engineer 0.5* Completion 18/01-08/02/03 2 1 consulting engineer

1 consulting financial analyst

3*

Total 19 * Missions covering several projects.

E – DISBURSEMENTS 1. By source of financing (in million UA)

Estimate at Appraisal Actual Gap Gap (%) F.E. 60.000 50.591 -9.409 -15.7% ONEP & RADEEF 42.580 32.726 -9.854 -23.1% Total 102.580 83.316 19.263 -18.8%

2. Disbursement by the ADB

Estimate at Appraisal Actual Percent Total disbursed 60.000 50.591 84.3% Cancelled ONEP 6.000 10% Cancelled RADEEF

1.300 2.2%

3. Disbursement Schedule

Years Sources of financing 92 93 94 95 96 97 98 99 2000 2001 2002 Total

ADB 6.000 36.000 17.990 60.000ONEP 8.750 2.940 10.430 39.000RADEEF 0.230 1.460 0.780 2.500Total 14.980 58.400 29.200 102.500

Projected at Appraisal

14.6% 57.0% 28.5% ONEP Loan 16.079 13.978 5.009 7.072 3.440 1.284 0.704 0.293 0.044 47.903 RADEEF Loan

0.150 0.940 0.856 0.268 0.000 0.199 0.000 0.225 0.051 2.688

ONEP 10.401 9.042 3.240 4.575 2.225 0.831 0.455 0.190 0.028 30.986RADEEF 0.097 0.608 0.554 0.173 0.000 0.129 0.000 0.146 0.033 1.739Total 26.727 24.568 9.659 12.088 5.665 2.442 1.159 0.853 0.156 83.316

Actual

33.9% 31.1% 12.2% 15.3% 7.2% 3.1% 1.5% 1.1% 0.2%

F – CONTRACTORS Information on the contracts, suppliers and consulting engineers are shown in Annex 12.

vii

PROJECT MATRIX Name of Project : MOROCCO – Fifth Drinking Water Supply Project Completion date : 2002 Design Team : B. Mohlinger – B. Niang – B. Ben Sassi

Hierarchy of objectives (HO)

Objectively Verifiable Indicators (OVI) Means of Verification Assumptions/Risks

Sectoral Goals At Appraisal Actual (Sectoral goal to super goal)

1 Improve the population’s water supply service

1.1 Access to drinking water and per capita consumption: in 1996, the service rate per connection was 77% in towns.

1.1 In 2002, the service rate per connection was 91% in towns.

1.2 National statistics on the sale and consumption of water.

Project Objectives (Project objectives to Sectoral Goal)

1 Increase the water piping transport capacity of Berrechid. Khémisset. Meknès. Oujda. Settat. Salé and Tiflet

1.1 Ensure continual water distribution in the towns of Berkane, Berrechid, Fèz, Khémisset, Meknès, Oujda, Settat, Salé, and Tiflet in 1997. The service rate per connection was 77% in these towns.

1.1 Water distribution is permanent in the towns of Berkane, Berrechid, Fèz, Khémisset, Meknès, Setta, Salé, and Tiflet, as well as Essaouira, Khouribga (and other towns of the province), and Tétouan; the problems of the town of Oujda were not solved; the average service rate per connection was 92% in these towns.

1.1 ONEP sales and production statistics.

1 Consumption forecasts are correct.

2 The increase of consumption is less than expected.

3 Resources are permanent.

For the town of Oujda the estimate of mobilised resources was erroneous.

2 Increase the production capacity of Berkane, Fèz, Khémisset, and Tiflet.

2.1 The production capacity doubled in treatment plants in Berkane, Fèz, Khémisset, and Tiflet

2.1 The production capacity for treatment plants in Berkane, Fèz, Khémisset, Tiflet went from 1 120 l/s to 2 350 l/s

2.1 ONEP statistics and activity reports.

3 Counterpart funds are available

Counterpart funds were available.

viii

Hierarchy of objectives (HO)

Objectively Verifiable Indicators (OVI) Means of Verification Assumptions/Risks

Outputs (Outputs to project objectives)

1 Production facilitiesstallations at Berkane, Berrechid, Fèz, Khémisset, Meknès, Oujda, Settat, Salé and Tiflet

1.1 220 km of piping, capacity of 3 processing stations doubled. 14 pumping stations, expansion of a water supply point, 5 reservoirs

259 km of piping, capacity of 3 treatment plants doubled, 14 pumping stations, extension of a water supply point, 10 reservoirs

1.1 Report on the acceptance of works, visit to the project site

1 Quality of the technical studies

aside from Oujda, the studies did not raise any problems

2 Enterprises’ capacity,

The enterprises had the capacity to implement the project

3 Capacity of the Executing Agency

The performance of the executing agency was satisfactory

2 Distribution installations at Fèz,

2.1 18 km of piping, extension of 2 pumping stations

2.1 37 km of piping, expansion of 1 pumping station

2.1 Reports on the implementation of these facilities

1 Quality of technical studies

aside from Oujda, the studies did not raise any problems

2 Enterprises’ capacity

Enterprises had the capacity to implement the project

3 The executing agency’s capacity

The performance of the executing agency was satisfactory

(Activities to outputs)

1.1 Bidding, contract award, construction

1.2 Training

1.3 Supplies

1 Resources ADB loans: UA 60

million ONEP and RADEEF

contribution: MAD 509 million

Implementation unit

engineer Enterprises

1 Resources ADB loans: UA 50.6

million ONEP and RADEEF

contribution: MAD 364 million

1.1Evaluation reports on bids, contracts, progress reports, site visits

1 The implementation schedule is realistic

The time allocated for implementation was too short 2 ONEP and RADEEF have the capacity to implement the project ONEP and RADEEF had the capacity to implement the project

Note: When the project was appraised, the project matrix was not required; the matrix was prepared in 1996. Data related to project implementation are in italics.

1 INTRODUCTION 1.1 Since the commencement of its operations in Morocco in 1970, the Bank has participated in the financing of seven (7) projects in the drinking water supply and sanitation sector, which covered most of the country’s major towns. Considering cancellations, the total amount of Bank investments for projects in the sector is UA 162.65 million. These projects have made it possible to improve supply and distribution systems in 20 Moroccan towns. The total population concerned by ADB Group projects is 6 million inhabitants, that is to say, about 40% of the urban population. 1.2 The first four Bank projects concerned the supply of water to one single town, whereas, the following three projects are complex including a series of sub-projects that have been grouped together, and involve one or two loans. 1.3 This completion report was prepared on the basis of information available at the Bank and data compiled from Moroccan government agencies during the project completion mission to Morocco from 18 January to 8 February 2003. The list of documents consulted for the preparation of this report is shown in Annex 13. 2 PROJECT OBJECTIVES AND FORMULATION 2.1 Objectives 2.1.1 In keeping with the water policy defined by the Moroccan Government, the project’s sectoral goal was to provide water to urban populations and to the country’s industries in satisfactory quantity and quality. 2.1.2 The project objective was to meet the drinking water requirements of nine towns, with deficits varying according to the demographic trend and waning output from existing facilities (boreholes, wells, sources). Requirements for these towns were to be met by 1998 for Oujda, Fèz and Meknès; 2000 for Salé, Khémisset, and Tiflet; 2003 for Berkane and 2005 for Settat and Berrechid. The project was also intended to satisfy the supply of water to douars (or villages) near water transmission mains. For the town of Fèz, the project also included the extension of water distribution to new neighbourhoods and increased pressure to the higher levels of the system. 2.1.3 Consumption estimates were based on exponential population estimates and a sustained consumption increase by the different types of consumers in the towns concerned. 2.2 Description 2.2.1 The project included a series of sub-projects: extension of treatment plants at Berkane and Fèz, implementation of a new supply system for the towns of Berrechid, Khémisset, Meknès, Oujda, Salé, Settat and Tiflet, a sub-project for distribution in the town of Fèz, a training component as well as technical assistance for project implementation. The sub-projects concerning water production were implemented by ONEP, and those for distribution in Fèz were implemented by RADEEF. Details of the sub-projects are in Annex 1.

2

2.3 Origin 2.3.1 Bank identification of the project coincided with the appraisal mission for the El Hachef dam construction project. During this mission, ONEP and RADEEF recommended the sub-projects to the Bank and subsequently available engineering documents were transmitted to the ADB. 2.4 Preparation, appraisal, negotiation and approval 2.4.1 Preparation was completely carried out by the Borrowers with the assistance of consulting engineering firms. No project preparation mission was made. 2.4.2 Project appraisal was effected by a consulting hydraulics engineer, and a financial analyst from the Bank. All the components proposed by the Borrowers were included without modification in the project. The conditions concerned mainly the financial balance of executing agencies and the impact on the project environment. The project was approved on 23 March 1992. 2.4.3 In the Appraisal Report, the sub-projects related to each of the towns were grouped in « homogeneous batches of the same nature so as to facilitate their implementation and their financial management ” These homogeneous batches correspond above all to the types of structures (mains, civil engineering, etc.) and subsequently project management was carried out by geographic areas. 3. PROJECT IMPLEMENTATION 3.1 Effectiveness and Start-Up 3.1.1 The loan agreement was signed on 13 May 1992 and became effective on 20 January 1993, that is to say 10 months after approval of the project and 8 and a half months after the signature. 3.1.2 The ONEP loan was subject to 6 conditions precedent to the first disbursement: i) establishment of the project implementation unit; ii) an undertaking to provide the land required for the project’s implementation; iii) signature of a plan to settle arrears due ONEP by Utilities and local administrations; iv) provision of the time table for the arrears settlement plan; v) an undertaking to continue actions to increase the distribution networks’ output in order to attain 80% by the end of 1995; and vi) an undertaking to transmit to the Bank, for its opinion, the performance contract to be signed by the Kingdom of Morocco and the ONEP. 3.1.3 The RADEEF loan was subject to 4 conditions precedent to first disbursement: i) establishment of the project implementation unit; ii) an undertaking to provide the land required for project implementation; iii) signature of an administrations arrears settlement plan in favour of RADEEF; and iv) an undertaking to pursue actions to enhance distribution networks’ output in order to attain 80% by the end of 1995. 3.1.4 Bidding commenced on 16 September 1992 with the publication, in « Development Business », of the general notice on contracting and the initial calls for bids.

3

3.2 Modifications 3.2.1 The major modifications made to the project concern the abandon of the Oujda component and the Fèz pre-treatment component as well as the introduction of three new sub-projects for the towns of Essaouira, Khouribga and Tétouan. 3.2.2 The sub-project for the town of Oujda was abandoned because tests on flows from the borehole field, which was intended to supply this town, generated an output clearly below expectations at the appraisal. This flow was inadequate to implement the sub-project, which was withdrawn from the project. 3.2.3 Subsequent to the construction of the Ait Youb dam upstream of the Fèz treatment plant, water’s reduced turbidity at the entrance to the plant could be expected. The Bank requested that the pre-treatment of water not be included in the bid for the plant’s extension. The measures carried out latter confirmed the improvement of the quality of crude water and the pre-treatment was withdrawn definitively from the project. 3.2.4 Abandon of the Fèz pre-treatment plant and the Oujda component accounted for a UA 12.67 million savings. Another savings stemmed from the fact that several contracts were signed for amounts far below estimates. At the end of 1994, the project was well advanced, and the final costs of all components were known with accuracy. At the beginning of 1995, ONEP asked to be able to use the savings to implement three new sub-projects intended to supply water to Essaouira. Khouribga and Tétouan. The Bank gave its consent in April 1995 and these sub projects have been fully implemented. 3.2.5 In 1998, when the final cost of the project was known, ONEP requested the cancellation of UA 6 million, and RADEEF requested the cancellation of UA 1.3 million. 3.3 Implementation Schedule 3.3.1 At the time of the appraisal in 1991, the projected implementation time was two and a half years, including three months for loan approval, nine months to call for bids and to award contracts, and 18 months for the implementation of works. According to this timetable, the works should have been completed by the end of June 1994. 3.3.2 Given the complexity and importance of the project, this time limit was much too short, and four and a half years would have been more appropriate. 3.3.3 Calls for bids were made as from 16 September 1992, and the choice of contractors and the award of contracts (including Bank agreements) took approximately 9 months. The implementation of works began in September 1993, and almost all of the initial project works were completed by 1996. 3.3.4 Introduction of three new sub-projects mentioned in paragraph 3.2.4 started a new cycle of bidding, the award of contracts and the implementation of works. Most of the three new sub-projects were completed by 1999. Afterwards, there were supplementary works for extension of the Sale and Essaouira sub-projects. However, the last component to be completed was the Bab Hamra pumping plant in Fèz for which RADEEF had delayed the call for bids because it was not yet required for operation of the system. Its implementation was hindered by the choice of contractor and by an incident that occurred at the site.

4

3.3.5 The very large difference between the time envisaged at the appraisal and the actual time stems mainly from the fact that the projected implementation period was highly under-estimated, and that three new sub-projects were introduced. 3.4 Reporting 3.4.1 The reports that the Borrower was expected to transmit were stipulated in the general conditions. The project quarterly status reports were transmitted regularly to the Bank up to the departure of the technical assistance in November 1999. These reports contained all the data set forth in the Bank format. For the audit reports, ONEP did the same as for the two preceding projects and first sent the audit reports that cover all its operations. When the Bank requested that separate reports be sent for the project, ONEP had its external auditor prepare reports in keeping with the prescribed format. 3.5 Contract Awards 3.5.1 Bank procedures for the procurement of goods and works and instructions for the utilisation of consultants were complied with and no contract gave rise to any claims by contractors or bidders’ consulting firms. Executing agencies, in a consistent manner, applied the bid evaluation criteria; there were no grounds for contention regarding contract awards. There were no changes of procedure for project bidding and the distribution between local and international bids was respected. The average duration between the publication of bids and the award of contracts was 13 months. However, in 1996 and 1997 the average duration was 22 months because of the time taken by the Bank to give its approval regarding contract awards. 3.5.2 Only the award of the contract for the Bab Hamra pumping station (RADEEF component) raised a few problems, which caused a delay in project completion. RADEEF had initially abandoned, for technical reasons, the two companies that were the best placed financially. After verification of bids by the Bank, they proved to be in conformity and the contract was signed with the company that had the lowest bid. 3.6 Sources of financing and disbursements 3.6.1 The Sources of financing provided for in the loan agreement are as follows: the Bank up to UA 60.00 million (58.5% of the total cost of the project) for the project’s foreign exchange costs, and ONEP, up to UA 40.12 million (39.1%) and RADEEF, UA 2.46 million (2.4%) to finance the local currency costs. At project completion, it was noted that ONEP had contributed UA 31.42 million (37.7%), RADEEF UA 1.31 million (1.6%), and ADB’s contribution was equal to the disbursement of UA 50.59 million (60.7%).

5

Comparison Between the Sources of Financing of the Project at Appraisal and at Completion.

In million UA

Estimate at Appraisal Actual Gap Sources

L.C. F.E. Total L.C. F.E. Total Value %

ADB (ONEP) 55.800 55.800 47.911 47.911 -9.409 -15.7% ADB (RADEEF) 4.200 4.200 2.688 2.688 -9.409 -15.7% ONEP 40.120 40.120 31.420 31.420 RADEEF 2.460 2.460 1.310 1.310 Total 42.580 60.000 102.580 32.73 50.599 83.329 19.251 -18.8% 3.6.2 The general breakdown of financing is not significantly different from what was envisaged at appraisal, which is logical because the types of structures implemented are the same. 3.6.3 As regards disbursements, contractors’ payments out of loan funds were delayed several months. However, part of this delay can be ascribed to delays between establishing balances and the transmission of disbursement claims to the Bank. Processing time at the Bank in general took a few weeks, however, longer delays, sometimes as much as eight months, were also noted. 3.6.4 During project implementation, and for the preparation of its completion report, ONEP had difficulty in following Bank disbursements. The disbursement slips were sometimes sent to the Ministry of Finance and not to ONEP and the Bank did not, or did so late, provide explanations when the amounts disbursed were different from the amounts requested. 3.6.5 For payments made by ONEP, the dates of disbursements were compared to the payment value dates, and it can be deduced that the average time required for payment was about 5 months. However, some payments exceeded one year (some even took two years). 3.6.6 ONEP did not keep separate accounts for the part of the finance plan for which it was responsible and the Bank could not be informed of the exact amount of ONEP’s participation in the project. 3.6.7 The comparative disbursements schedule by source of financing at appraisal and at completion is shown in Annex 2. This table shows that the disbursements envisaged at appraisal over four years (4) years (1994 to 1997), cover in fact eight (8) years (1994 to 2002). Cumulative disbursements on ADB financing are UA 50.599 M or 84.3% of the amount of the loan. Balances of UA 1.89 M for the ONEP loan and UA 0.22 M for the RADEEF loan have not yet been cancelled. 4 PROJECT PERFORMANCE 4.1 Overall Assessment 4.1.1 The ONEP loan was subject to five « other conditions ”: i) show evidence of having provided the necessary land by 31/12/92; ii) transmit to the Bank the master plans for sanitation in the nine towns involved in the project; iii) transmit the performance contract

6

concluded with the State by 31/12/92; iv) make the tariff changes provided for in the 1990 tariff study in agreement with the State and relevant Boards; and iv) limit the arrears situation at three months turnover starting in 1992 and transmit to the Bank the development of the arrears situation. 4.1.2 Data related to the land attribution were transmitted regularly in the project status reports. Master plans for the sanitation of the towns concerned were not transmitted to the Bank, but the progress of studies was indicated in the status reports. The performance contract was transmitted to the Bank right after signature. Regularly there were ONEP tariff increases but they were below projections in the tariff study. In order to limit arrears to three months turnover, ONEP signed agreements with Utilities establishing payment deadlines in keeping with their financial capacity. These agreements were accepted by the Bank and have, in general, been respected. Owing to these agreements, the average payment period is currently five months. 4.1.3 The RADEEF loan was subject to three « other conditions »: i) show evidence of having provided the necessary land by 31/12/92; ii) make the tariff adjustments planned for in the 1990 tariff study in consultation with the State and ONEP; and iii) limit the arrears situation at three months turnover commencing in 1992, and transmit the development of arrears to the Bank. 4.1.4 As for ONEP, data related to the land attributions were indicated in the project status reports and the regular tariff increases were still below the tariff study projections. As regards limiting arrears to three months turnover as from 1992, the situation initially improved; however, subsequently, the arrears accumulated again, to attain 9.6 months of turnover in 2001 of which more than two thirds were public sector debts.

4.2 Operating Results 4.2.1 Facilities implemented within the context of the project have the technical features planned for at appraisal. The first facilities were put into service in 1995 and are operating satisfactorily. Only the video management devices raise a few problems because they involve complicated technology in which ONEP only has recent experience. Training programmes in this technology will permit the difficulties encountered to be ironed out. 4.2.2 At the Appraisal, it was estimated that the saturation of facilities would be reached, depending on the town, between 1998 and 2005. Populations’ sensitisation campaigns carried out by ONEP to promote water conservation and tariff increases pushed water consumption far below projections made in the appraisal. Consequently, facilities expected to reach saturation by 1998 are still not operating at their full capacity and the saturation level for these facilities has been pushed back at least ten years. 4.2.3 At the appraisal, it was considered that by the end its execution, when all the facilities had entered into operation, the project would contribute an additional annual production of 129 455 280 m3 of water. The mission and ONEP having jointly determined for each centre of production having received project investments, the share of production to be ascribed to the project, the volumes sold, generated by the project amounted to 95 501 000 m3 in 2001, year the project could be considered fully operational. The volumes sold having represented, in 2001, about 51.30% (statistics from RADEEF), the additional volumes produced, for that year, owing to the project, can be estimated at 186 161 793 m3, that is to say 56 706 513 m3 or 43.8% more than appraisal projections. Those excellent operating results reflect the project’s highly satisfactory operational performance.

7

4.3 Institutional Performance A OFFICE NATIONAL DE L'EAU POTABLE, ONEP (NATIONAL DRINKING

WATER SUPPLY BOARD) 4.3.1 The project did not provided for any specific conditions intended for the Executing Agency’s institution building because ONEP is an older company with sound institutional capacity and the needed experience to implement the donor financed projects. However, a correctly implemented project always leads to institutional capacity building of the executing agency/Borrower, especially through improved management and organisation, staff training and refresher courses. B REGIE AUTONOME DE DISTRIBUTION D'EAU ET D'ELECTRICITE DE FÈZ,

RADEEF (FÈZ AUTONOMOUS WATER AND ELECTRIC POWER DISTRIBUTION UTILITY)

4.3.2 RADEEF was established on 23 June 1960 as a state-owned, commercial and industrial company enjoying an artificial personality with financial autonomy. RADEEF, which had experience in managing foreign borrowings, had, at appraisal, the institutional capacity necessary to implement the project, although it was the first loan allocated by the Bank. The project implementation unit was designed to enable it to profit from ONEP’s experience in the implementation of ADB financed projects. Of course, project implementation contributed to RADEEF institution building through the improvement of its management and its organisation, staff training and retraining as the following paragraphs show. Organisation and Management A OFFICE NATIONAL DE L'EAU POTABLE, ONEP (NATIONAL DRINKING

WATER SUPPLY BOARD) 4.3.3 Within the framework of the Government’s new orientations, the General Management of ONEP undertook the company’s reorganisation, based on three strategic objectives: i) generalise drinking water; ii) sustain and secure existing facilities; and iii) actively intervene in the area of liquid sanitation. In order to provide the Office’s organisation with the appropriate capacity to attain these objectives the reorganisation focused on the following themes: i) decentralisation of the organisational structure to ensure greater regional support; ii) boundary changes to better take into consideration the location of resources; iii) refocusing missions in order to clarify the roles and responsibilities of each department; iv) grouping duties according to three poles: strategic, operational and support; v) modernising, in particular, management in the areas of marketing, human resources, supply and planning. The two strategic focal points, which were the generalisation of access to drinking water and sanitation, were entrusted to departments with strengthened capacities.

8

B REGIE AUTONOME DE DISTRIBUTION D'EAU ET D’ELECTRICITE DE FÈZ,

RADEEF (FÈZ AUTONOMOUS WATER AND ELECTRIC POWER DISTRIBUTION UTILITY)

4.3.4 In April 2002, the RADEEF organisation chart was modified to adapt it to the company’s development and modernisation needs. Subsequently, an Assistant General Manager position was created; an internal audit unit was set up to strengthen controls; a communication service was established to improve the image of the Utility and the quality of customer relations; a sanitation division was created to meet public authorities’ new orientations. Also, units responsible for important areas of the company’s management were converted into divisions with a view to enhancing their capacities: that is to say the Administrative and Commercial Division; Accounting and Financial Division; General Services Division. Staff and Training A OFFICE NATIONAL DE L'EAU POTABLE, ONEP (NATIONAL DRINKING

WATER SUPPLY BOARD) Staff 4.3.5 At appraisal, ONEP overall staff strength totalled 4259 officers. This staff strength was made up of 8% senior managers, 30% of supervisors and 62 % of executing agents. At the end of 2001, ONEP comprised 6505 officers of whom 13.2% were senior managers, 28.0% were supervisory management and 58.8% of agents d’execution. It seems that overall staff strength increased by 52.8%, which is normal for such a company as ONEP, which has almost a monopoly in an ever-growing sector. It should be noted that the quantitative development of the staff coincided with the qualitative development with a supervisory ratio that climbed from 8% at the end of 1990 to 13.2% at the end of 2000. Training 4.3.6 The quality of the staff also improved through in-house training given to staff at the ONEP training Centre. Moreover, ONEP is celebrating this year the 25th anniversary of the Centre de Training aux Techniques de l’eau, CFTE (Training Centre in Water Techniques), which is its own staff training/retraining instrument. The Centre’s training courses concern the areas of drinking water and sanitation and treat the technical, administrative and behavioural aspects. The centre is an integral part of the ONEP complex of Bou Regreg in Rabat. It has a team of managers devoted to the trades treated in the training courses in the areas of drinking water and sanitation as well as training trainers and experienced proFèzsional lecturers from ONEP but also the industry, consultancy firms, the university and international organisations. The training facility is well equipped. For ONEP staff training, the CFTE organises, on a yearly average, 450 training sessions, representing 21000 trainee/days and involving 4000 participants. Each year an additional 500 to 600 participants from Moroccan institutions are trained in the area of water, such as Boards, water distribution companies, etc. Thanks to international aid, ONEP also trains managers from African and Middle Eastern countries.

9

4.3.7 The quality of continuous ONEP training, helps provide the Board with qualified staff to manage, with effectiveness and efficiency, the equipment acquired within the context of the project, to improve work production and to reduce labour costs. It facilitates the retraining of staff as well as their redeployment, for example towards sanitation. It permits the Board’s outsourcing of some duties by training officers in these duties and by helping them, afterwards to create their own company in order to work as service providers for ONEP. Thus, to connect subscribers, search for leaks, and manage stations, young ONEP staff have been selected, trained and helped to set up their own businesses, and provided with an advance, a tool chest and orders over a 2 to 3 year period. This formula permitted a four-fold reduction of connection time in addition to the fact that these young workers were creating jobs. B REGIE AUTONOME DE DISTRIBUTION D'EAU AND D'ELECTRICITE DE

FÈZ, RADEEF (FÈZ AUTONOMOUS WATER AND ELECTRIC POWER DISTRIBUTION UTILITY)

Staff 4.3.8 At appraisal, RADEEF overall staff strength totalled 680 permanent staff members including 7.6% managers, 22.9% supervisory managers and 69.5% executing agents. In January 2003, there were 1023 staff members, with 10.9% managers, 27.3% supervisory managers and 61.8% executing agents. It would appear that the overall staff increased by 50.4%, which reflects the development of RADEEF. The improvement of supervision should also be noted. Training 4.3.9 The quality of staff also improved owing to the training given on a permanent basis to employees. This training is in several forms: i) security training campaigns; ii) training courses abroad and in Morocco, in particular at the ONEP training Centre; iii) seminars in Morocco and abroad; staff training for better client reception. Within this context, since July 2002, a private services company has undertaken to give courses to 400 employees, 6400 hours of reception techniques, telephone reception and communication, for enhanced internal and external services. The quality permanent RADEEF staff training, contributes to providing the utility with qualified staff for management, with efficiency and effectiveness, the equipment procured within the context of the project and to improve work productivity. Accounting and Auditing of Accounts A OFFICE NATIONAL DE L'EAU POTABLE, ONEP (NATIONAL DRINKING

WATER SUPPLY BOARD) 4.3.10 The ONEP kept commercial accounting in compliance with the Moroccan accounting plan. The accounting was computerised, which permitted financial statements (balance sheets, general operating accounts, profit and loss accounts) to be available within the time prescribed by law. Those financial statements were submitted for internal and external audit prior to presentation to the Board of Directors. Thus, the current organisation of ONEP’s general accounting is efficient and accurate; ONEP, also kept cost accounting that gave precise and detailed information on the structure of its manufacturing costs by profit centre. The ongoing reorganisation comprises a cost accounting project to make management control

10

a true pilot system able to facilitate decision-making and to improve the quality of management. In this regard, it is envisaged, in particular to dissociate general accounting and cost accounting and to introduce estimated cost accounting. The project, which comprises several actions to be carried out, will be implemented in phases. Its implementation has begun and should be completed by the end of 2002. However, it should be pointed out that ONEP had no separate accounting for Bank financed projects, or, it would appear, for other co-financers. This made it difficult to compile information related to the disbursements schedule in foreign exchange and local currency. However, because of the organisation and technical and human resources for its accounting, an efficient accounting system for ONEP projects could easily be introduced within the context of the new accounting organisation being studied. B REGIE AUTONOME DE DISTRIBUTION D'EAU ET D'ELECTRICITE DE FÈZ,

RADEEF (FÈZ AUTONOMOUS WATER AND ELECTRIC POWER DISTRIBUTION UTILITY)

4.3.11 RADEEF kept commercial accounting in compliance with the Moroccan accounting plan. Accounting was computerised, which permitted financial statements (balance sheets, general operating accounts, profit and loss accounts) to be made available within the lime limit prescribed by law. These financial statements were submitted for internal and external audit prior to presentation to the Board of Directors. Thus, the current organisation of the RADEEF is efficient and accurate. RADEEF also kept cost accounting, which gave, precise and detailed information on the structure of its manufacturing costs by profit centre. Client management is being computerised owing to commercial management software that will permit subscribers to pay their bill at any RADEEF branch. Pricing A OFFICE NATIONAL DE L'EAU POTABLE, ONEP (NATIONAL DRINKING

WATER SUPPLY BOARD) 4.3.12 One of the loan conditions stipulated application of the annual tariff changes as planned in the 1990 tariff study in consultation with the State and utilities. It is in that context that ONEP and the State envisaged signing, in 1992, a performance contract to clarify relations between the two parties by defining the reciprocal commitments, including regular tariff revisions at a level apt to ensure ONEP financial balance. Owing to the sector’s strong social sensitivity, it was not possible for the Government to authorise regular tariff increases at a level needed to cover all the Board’s production costs. However, efforts were made to gradually recover costs. Thus, from 1993 to 2000, the average weighted tariff increased on an average of 7%. The 2000-2004 performance contract also provided for, commencing 1 January of each year of the contract, an 8% tariff rate increase at production. However, those measures were not applied. It should be noted that ONEP obtained, in November 2000, a 6.75% tariff increase and in April 2003, a new increase of 4.5%.

11

B REGIE AUTONOME DE DISTRIBUTION D'EAU ET D'ELECTRICITE DE FÈZ,

RADEEF (FÈZ AUTONOMOUS WATER AND ELECTRIC POWER DISTRIBUTION UTILITY)

4.3.13 One of the loan conditions stipulated that the Borrower should apply the tariff adjustment programme envisaged in the 1990 tariff study in consultation with the State and ONEP. Likewise, one of the loan conditions required a guarantee undertaking to ensure application of the tariff adjustments recommended by the 1990 tariff study. Owing to the sector’s strong social sensitivity, it was not possible for the Government to authorise strict application of the recommendations of the study on the tariff scale. Thus, the tariffs were not at levels permitting recovery of RADEEF costs. There were 4 tariffs corresponding to 4 tranches of consumption to which can be added a tariff for industrialists and a tariff for preferential clients. According to available information at the Utility, from January to November 2002, the first and second tranches account for 60.28% and 29. 22% respectively, that is to say 89.50% of the cumulated volumes sold. However, in November 2000, RADEEF purchased the m3 of water at 2.9 MAD for an authorised tariff for the first tranche of 1.51 MAD. Such administered prices explain the continual negative results. It should be pointed out that RADEEF received, in April 2003, a 4.5% tariff increase. Recovery of Debts and Arrears A OFFICE NATIONAL DE L'EAU POTABLE, ONEP (NATIONAL DRINKING

WATER SUPPLY BOARD) 4.3.14 The recovery of arrears and their limitation to a maximum of 3 months’ turnover beginning in 1992 was made one of the loan conditions. Recovery improved substantially compared to the situation prevailing in 1992. At that date, arrears reached 12 months’ income. In August 2002, the total amount of debts was MAD 992.3 million (6 months’ turnover) including MAD 350.7 million payable according to agreements established with clients, that is to say, 2 months’ turnover. It should be noted that of the payable debts in the month of August 2002, 74% were due by three former utilities (RAD, RDE, RAID) and were inherited by the urban communities of Casablanca, Tétouan and Tangiers subsequent to the transfer of drinking water distribution services and liquid sanitation in these three towns to private operators. The urban community of Casablanca inherited a debt of MAD 566 of which MAD 408 was recovered, or 72%. A balance of MAD 158 remains to be recovered. The urban communities of Tangiers and Tetouan owed MAD 98.5 (billing for 13.5 months) and MAD 1.7 (billing for a 0.2 month period). Contacts were being pursued with the “DRSC” to recover all outstanding debts. Furthermore, out of concern for improving recovery and having a more comfortable cash flow level, the ONEP Board of Directors in December 2001, decided to gradually reduce clients’ bill payment deadline to 3 months for all the utilities. Discussions were underway with the “DRSC” to concretise this decision. 4.3.15 As regards local governments and public administrations, since the introduction in 1993 of a system of payment by stamp, the recovery rate went from 50% in 1992 to 98% on the average for the period 1992-2001 for administrations and from 40% to 93% for local governments. In 1999, the Government introduce follow-up committees to ensure the system’s sustainability. These committees were chaired by ONEP and include representatives from the Ministry of Finance, the Ministry of the Interior and distributor agencies.

12

B REGIE AUTONOME DE DISTRIBUTION D'EAU ET D'ELECTRICITE DE FÈZ, RADEEF (FÈZ AUTONOMOUS WATER AND ELECTRIC POWER DISTRIBUTION UTILITY)

4.3.16 The recovery of arrears and their limitation to a maximum of 3 months’ turnover beginning in 1992, was made one of the loan conditions. Recovery improved substantially in comparison to the situation prevailing in 1992. At that time, arrears had reached 19 months’ income. According to audited financial statements, approved by the RADEEF Board of Directors, in 2001, the turnover related to water sales increased to MAD 193 362 551.11, that is to say an average monthly turnover of MAD 16 113 545.92. Debts from consumption by administrations and individuals were MAD 109 563 751.85 and MAD 44 521 233.59 respectively, or a total of MAD 154 084 985.44 representing outstanding bills equivalent to 9.6 months’ turnover. Administrations and local governments had arrears representing 6.8 months turnover and individuals, 2.8 months. The difficulty in recovering bills from public clients was confirmed in a document transmitted to the mission establishing the situation of public clients’ outstanding bills as at 27-01-2003. At that date, public sector outstanding sums totalled MAD 119 095 139.35 with 21 138 214.22, dating from 1992 and previous years, and the remainder spread over the period 1992-2002. As regards individuals, they received monthly bills payable 15 days after reception. In the event of the failure to pay on time, notification of suspension within eight days is sent to them by registered mail. Should service be suspended, restoring the supply is subject to charges. With such a system, strictly enforced, the recovery of debts on individuals became satisfactory, which is not yet the case for public clients. The fiscal stamp system, introduced to facilitate the payment of administrations’ bills, is considered efficient by RADEEF but it seems to have contributed to the settlement of the oldest outstanding bills. 4.4 Financial Performance Operating Analysis A OFFICE NATIONAL DE L'EAU POTABLE, ONEP (NATIONAL DRINKING

WATER SUPPLY BOARD) 4.4.1 At appraisal, an operating account forecast was established for the period from 1990 to 1997. The table in Annex 4 compares the projected and actual ONEP operating accounts in 1997 for the major operating parameters. The comparison concerned 1997 because it was essential to make an overall evaluation of the actual impact of the project in comparison to appraisal projections. The table provides the following major information: i) actual turnover figures were 19% below projections. That gap was due mainly to the fact that the projections were based on a yearly tariff increase of 10%. However, over the period, the average weighted tariff was only 11%; ii) total costs increased more than expected, that is to say by 10.3%; iii) the shortfall of income and the surplus of costs combined to give a highly negative output, 131% below the appraisal’s projected output (a net negative result of MAD 124.931 compared to a projected positive net result of MAD 400.968). The negative gaps between outputs at completion and projections at appraisal were clearly expressed by the turnover rate of return ratio, which was –8.2%, compared to a 21.1% forecast.

13

B REGIE AUTONOME DE DISTRIBUTION D'EAU ET D'ELECTRICITE DE FÈZ,

RADEEF (FÈZ AUTONOMOUS WATER AND ELECTRIC POWER DISTRIBUTION UTILITY)

4.4.2 At the evaluation, an estimated operational account was established for the period from 1990 to 1997. The Table in Annex 4 compares the estimates and the actual ONEP operational accounts in 1997 for the major operational parameters. The table provides the following major information: i) the turnover is less than projections by 5.8%. The gap was due mainly to the fact that the forecasts were based on optimistic assumptions of an annual tariff increase of 10% along with regular increase in the volumes sold. Tariff increase constraints have already been expressed. As regards the volumes produced and sold, they developed irregularly with a trend that was stronger downward than upward. Therefore, in 1991, RADEEF total production was 75 410 835 m3 of water including its own of 20 612 893 m3 and procurement of 54 797 942 m3 from ONEP. Of this production, RADEEF only sold 40 425 480 m3. In 1997, it had a total of 67 631 722 m3 (21 178 773 m3 from its own production and 46 452 949 m3 of procurements from ONEP) and it only sold 35 925 031 m3, that is to say 4 500 449 m3 or 11% less. The decline in water consumption was due mainly, on the one hand, to the reduced consumption by administrations as a result of the reduction of 150 water points between 1990 and 2002, suspension of water in schools during summer holidays and efforts made to rehabilitate internal networks, and on the other hand, a substantial decline in consumption by individual subscribers because of the effect of tariffs which promote the lowest levels of consumption, sensitisation to water conservation and the utilisation of wells in local administrations where the ground water table is shallow; i) total costs increased by 57.11% in comparison to projections; iii) the income deficit and the significant increase of costs produced a highly negative impact, 111% below the income estimated at the appraisal (a net income deficit of MAD 91.802 compared to a projected positive net income of MAD 19.509). The negative gaps between outputs at completion and projections at appraisal were well reflected in the rate of return of the turnover which was -50.15 % compared to a projection of 10.03%. Analysis of Balance Sheets A OFFICE NATIONAL DE L'EAU POTABLE, ONEP (NATIONAL DRINKING

WATER SUPPLY BOARD)

4.4.3 The Table in Annex 4 compares estimated and actual ONEP balance sheets in 1997. It shows, for the entire period, a total balance sheet increase by more than 65% of the appraisal estimates. That substantial gap can be explained by the very modest estimated increase of the main balance sheet total. Thus, net fixed assets, according to estimates, were expected to decline slightly from MAD 4263.801 in 1990 to 4212.998 MAD in 1997. However, they increased actually by 121%. This strong increase of fixed assets, due to a considerable volume of new investments, was financed owing to a 57% increase of equity which, according to projection assumptions, would remain stable throughout the period and also a 65% increase of long and medium term debts, compared to a projected increase of only 15%. The liquidity ratio attained 1.04 against a forecast of 2.8. The financial structure shows a very tight balance.

14

B REGIE AUTONOME DE DISTRIBUTION D'EAU ET D'ELECTRICITE DE FÈZ,

RADEEF (FÈZ AUTONOMOUS WATER AND ELECTRIC POWER DISTRIBUTION)

4.4.4 The Table in Annex 5 compares RADEEF projected and actual statements for 1997. The Table shows, for the entire period, an increase of more than 66.8% of the total balance sheet against appraisal projections. This substantial difference can be explained by projections of very modest increases of main balance sheet totals. Thus, net fixed assets were to increase, according to forecasts, from MAD 177.124 MAD in 1990 to MAD 197.490 in 1997, that is to say a slight increase. However, they increased, actually by 132%. This strong increase of fixed assets, which reflects a considerable volume of new RADEEF investments, was financed, not from equity, which was 31.3% below projections, but by a considerable increase of long and, in particular, short-term debt. Hence the 0.58 liquidity ratio for a nominal minimum of 1. The financial structure of RADEEF water activity is quite imbalanced. Conditions and Financial Covenants A OFFICE NATIONAL DE L'EAU POTABLE, ONEP (NATIONAL DRINKING

WATER SUPPLY BOARD) 4.4.5 At appraisal, two conditions for loan effectiveness and two other conditions related to financial aspects were laid down: i) provide evidence of the administration’s having signed an arrears settlement plan covering the period 1987-1990 in respect of ONEP; ii) undertake to transmit a time-table, covering the project period, for arrears accumulated by the end of 1990 due to ONEP, by utilities and local governments respectively; iii) apply tariff adjustments planned for in the 1990 tariff study in consultation with the State and utilities; iv) limit arrears to a maximum of three months turnover commencing in 1992 and transmit to the Bank the situation of those arrears and the actions undertaken to settle them. 4.4.6 The two conditions for effectiveness were fulfilled by the Borrower. The other two conditions, which were intended to strengthen financial sustainability by an upward revision of the tariff scale and by reducing outstanding sums, were not completely fulfilled because of the social constraints related to drinking water tariffs. As already indicated above, considerable efforts were made to recovery arrears while little progress was made regarding tariff adjustments; in this area efforts need to be accelerated. Although they were not entirely satisfactory, these conditions were coherent in relation to the volume of the administration’s outstanding sums and to a tariff policy that was unable to ensure the recovery of costs and, as a result of continually being imposed by the co-financers they will eventually attain the anticipated results. B REGIE AUTONOME DE DISTRIBUTION D'EAU ET D'ELECTRICITE DE FÈZ,

RADEEF (FÈZ AUTONOMOUS WATER AND ELECTRIC POWER DISTRIBUTION UTILITY)

4.4.7 Two loan conditions stipulated the application of the tariff adjustment programme planned in the 1990 tariff study in consultation with the State and ONEP. Due to the sector’s strong sensitivity, it was not possible for the Government to authorise strict application of the study’s recommendations on the 1990 tariff scale. The recovery of arrears and limiting them

15

to a maximum of three months turnover commencing in 1992 were also imposed as loan conditions. The recovery of the administration’s arrears improved considerably although the condition whereby arrears were limited to three months turnover was not satisfied. As regards the debts of individuals, the condition was fulfilled because currently these debts are under three months turnover. Project Financial Rate of Return 4.4.8 A financial internal rate of return was calculated at appraisal for the entire project. The calculation assumptions as well as the results at completion are shown in Annex 6. The financial internal rate of return stood at 8.5%, compared to 15 % at appraisal. This difference confirms the shortfall in attaining appraisal projections as analysed in the preceding paragraphs. However, as regards a drinking water project, an IRR of 8.5% is satisfactory, above all if compared to the cost of the credit. Therefore, project financial performance is moderately satisfactory. Three sensitivity tests were carried out at appraisal: i) a 10% cost increase. Under this assumption, the financial internal rate of return would be nil; ii) a 10% income reduction. The FIRR would also be nil; iii) likewise, the third sensitivity test consisting in associating simultaneously the first two would show a nil for the FIRR. In addition to these three sensitivity tests, a fourth test, closer to actual ONEP and RADEEF operations development, was carried out. It consisted in increasing operation costs by 5% and income by 3%; this would result in a FIRR of 8%. Thus, the project financial rate of return is sensitive to a gradual adjustment of the tariff scale and to the monitoring of the development of enterprises’ expenses. 4.5 Economic Performance 4.5.1 At appraisal, two major socio-economic benefits were expected of the project: i) the drinking water deficit was beginning to prompt populations living on the outskirts of large towns and in rural areas to return to traditional wells. As this practice was a major constraint for women and children, the project aimed at sufficient quantities of water to free women and children from this chore for other household tasks; ii) wells are often poorly maintained and in addition, mains under low pressure situations due to a lack of water often causes pollution through infiltration. Hence the risk of serious water-borne diseases affecting, in particular, children. Through the promotion of water production, the project thus contributed to improving the quality of populations’ lives, especially as regards women and children as well as public health in Morocco. However, studies and surveys were not carried out in order to quantify those benefits. 4.5.2 The project had other economic benefits that were not quantified. That was the case of all the effects produced by project investments in terms of value added for ONEP, RADEEF and their various suppliers. 4.5.3 An economic rate of return had been calculated at appraisal for the entire project. The calculation assumptions as well as the results at completion are shown in Annex 6. The economic rate of return is 9% against 15 % at appraisal. The difference confirmed the failure to attain appraisal projections as analysed in the previous paragraphs. Therefore, the project economic performance, from the standpoint of the ERR, is satisfactory. Three sensitivity tests were carried out at appraisal: i) 10% cost increase. Under this assumption the ERR would be nil; ii) 10% income reduction. An ERR of nil would also be produced; iii) likewise, the third sensitivity test consisting of simultaneously associating the first two would produce an ERR of

16

nil. In addition to those three sensitivity tests, a fourth test, closer to actual ONEP and RADEEF operation’s development, was carried out. It consisted in a 5% operating cost increase and a 3% income increase resulting in an ERR of 12.6%. Thus the project’s economic sustainability is sensitive to a gradual tariff scale adjustment and to the monitoring of the development of enterprise’s costs. 4.6 Performance of Consultants, Enterprises, Suppliers and Borrowers 4.6.1 The performance of consultants responsible for project preparation was satisfactory, and the failure to implement the Oujda pumping stations’ tests before the engineering studies was rather the responsibility of ONEP. Technical assistance for project implementation was satisfactory. Project monitoring was satisfactory and quarterly project progress reports prepared by the technical assistance were relevant, thorough and submitted on time. 4.6.2 Aside from a few incidents at the site, the performance of enterprises that participated in the project’s implementation, in general, was satisfactory. Regarding the implementation of the Sahrige Gnaoua reservoir in Fèz, the support of form works was unsatisfactory and during the concrete works, there was about a twenty-centimetre deformity. The company demolished the defective structures and rebuilt them. 4.6.3 The performance of the Borrower with regard to technical and administrative management of contracts should be judged in the light of decisions taken during project implementation and management. 4.6.4 Aside from the Oujda sub-project, the project’s engineering studies were satisfactory and the site problems were limited; those that did crop up in general were corrected by ONEP and RADEEF technical and administrative services. 4.6.5 As regards the RADEEF component, an incident occurred during the implementation of the Bab Hamra pumping station. One of the large motors was toppled over when being installed and was slightly damaged. Initially RADEEF demanded that it be purely and simply replaced, which seemed excessive and which blocked the site for several months. Finally RADEEF agreed to have the motor examined by one of the manufacturer’s experts and the motor was found to in good condition. During supervision missions, the Bank recommended having a cross check made in the presence of an independent expert. 4.6.6 Relations with the consultants and the contractors in general were good; the only problems pertained to the above-mentioned incident and the delayed payment of balances due to rather long administrative procedures. 4.6.7 On the whole therefore, as regards the management of contracts and relations with the consultants, suppliers and contractors, the performance of executing agencies was satisfactory.

17

5 SOCIAL AND ENVIRONMENTAL IMPACT 5.1 Social Impact 5.1.1 The project’s social impact comes from the extension of water production, which occurred at the time when the installations in Berkane, Essaouira, Khémisset, Tiflet, Khouribga and above all Tétouan were about to become saturated. Increased production made it possible to extend service to some outlying neighbourhoods or, in some cases, to reduce the distance between accommodations and standpipes. The supply of water from standpipes causes substantial losses of time for women and children and the price of water from peddlers is up to twenty times more than water from the network. The project made it possible to increase the population’s network connections or to reduce water-related chores by bringing water points closer to the population. The project also contributed to reducing poverty because it made it possible to extend water services to the poorest segments of the population who, in general, were the last to be connected. The households served by the new standpipes will no longer be obliged to use water peddlers whose prices are usually much higher than ONEP tariffs. This is clearly illustrated in the Sahrige Gnaoua neighbourhood in Fèz where the project permitted the network to be extended to 60 000 people who were serviced by a few standpipes and water sellers prior to the project. The number of subscribers in this neighbourhood currently exceeds 8,000. 5.2 Environmental Impact 5.2.1 The project received no environmental classification at the Bank because this was not required at the time of the appraisal or the impact study. 5.2.2 The major impact of the water supply project was the increase of wastewater, which is an environmental threat, if not cleansed before disposal. None of the project towns had a treatment plant, and the loan was subject to a condition related to regular communication with the Bank on the status of the sanitation master plan studies for the towns concerned by the project. This condition aimed at preparation for the installation of sewer networks and the necessary sewerage treatment plants. The Government should continue implementation of the recommendations of the above-mentioned master plan by programming the installation of the structures planned for in the studies. 5.2.3 The other components that have had an Environmental Impact are the DWS of Meknès, Khouribga and Essaouira, which were supplied by boreholes that were implemented by the Direction Générale de l'Hydraulique (General Hydraulics Inspectorate). The study on the impact of sampling shows that they can be taken continually without perceptibly disturbing other users. The boreholes used for the DWS of Khouribga were located near the irrigated areas of Tadla, where the nitrate content has increased over the last twenty years, which implies that regular monitoring is necessary and that in the medium term protective measures will have to be taken. 5.2.4 The intake structure on the El Kansera dam used for the DWS of Khémisset-Tiflet is for agricultural purposes which does not permit the tapping of a specific water segment, which raises problems regarding the quality of raw water. Constructing a separate water intake structure for ONEP within the context of the sixth drinking water supply project has made it possible to correct this problem.

18

5.2.5 Other negative effects of the project have been disturbances for the populations caused by dust, the slowing down of traffic and visible impacts during the implementation of works. These effects have been attenuated by the precautions taken at the sites by dampening fill-in soil and the fact that the trenches were not left open beyond the time required to lay the mains and to do testing. 6 PROJECT VIABILITY 6.1 Project viability depends considerably on the technical and management capacities of agencies which will ensure its operation and on their possibilities to mobilise necessary financial resources. ONEP and RADEEF had the technical capacity required and they operated other installations of the same type. They are part of the institutional and operational structures put in charge, long ago, of supplying populations with drinking water. They have the human and technical resources as well as the experience needed for appropriate management and maintenance of project installations. Owing to the social nature of drinking water, they don’t have the liberty to impose sales prices that ensure them, if not a profit, at least cost recovery and the balance of accounts. However the essential role entrusted to them gives them the capacity to mobilise financial resources required for the maintenance and upkeep of their installations, with the assistance of the Moroccan Government, whenever the need arises. Also, evidence of growing determination on the part of the Government to adopt a tariff policy taking into account the demands for the financial balance of operators in the sector. As regards RADEEF, the project’s viability will be strengthened by the fact that it also has the monopoly of electricity distribution whose operation, which is more profitable, sustains that of water. 7. PERFORMANCE OF THE BANK, THE BORROWER, AND OTHER CO-FINANCIERS 7.1 Performance of the Bank 7.1.1 The Bank did not participate in project preparation, and was limited to an ad hoc identification and an appraisal mission. There was no project start-up mission and only two supervision missions were carried out between 1994 and 1999. Furthermore, those two missions covered several projects and the time devoted to this vast project was largely insufficient. As from 1999, the supervision missions became more regular with an average of one supervision every eight (8) months. Agreements on contract awards were given within a reasonable time, but in 1996 the Projects Department strengthened internal controls by auditing contract award proposals from other departments. That created additional delays and was subsequently abandoned. The Borrower raised the problem with Executive Directors of the Bank during one of their visits to Morocco in March 2001. 7.1.2 The monitoring of project disbursements created problems because of the contract records. Some companies obtained several contracts for the project’s implementation, which led to overlapping of charges between contracts. One contract was even introduced into the Bank’s computer system twice. Disbursement extracts were not sent to the Borrower and to the executing agency with the desired regularity, and when the disbursed amounts did not correspond to the amounts claimed, the Bank did not always provide the required explanations. This raised problems for the Borrower to complete or correct its payment claims and even hindered ONEP, because of its internal audit, to pay companies out of their equity. Most of these problems however were settled by the completion of project implementation.

19

7.1.3 It can be confirmed that the performance of the Bank was satisfactory with a rating of 2.5 over 4 (see Annex 9) and that there was room for improvement. 7.2 Performance of Borrowers 7.2.1 The performance of Borrowers should be judged in the light of the project’s preparation, decisions taken during implementation and project management. 7.2.2 The Office national de l'eau potable, ONEP (National Drinking Water Supply Board) and the Régie autonome de distribution d'eau et d'électricité de Fèz, RADEEF (Fèz Autonomous Water and Electric Power Distribution Utility) were the Borrowers, the executing agencies and the beneficiaries of the project, while the Ministry of the Economy and Finance was the guarantor of the loans. 7.2.3 Project preparation, on the whole, was good except for the Oujda sub-project, for which they should have waited for results of pumping tests on the boreholes before deciding to go ahead with its implementation. The engineering studies of other sub-projects did not raise any major projects. 7.2.4 Project implementation was satisfactory, and units responsible for project implementation were able to identify the problems raised and to propose the appropriate solutions. Utilisation of savings for the implementation of three new sub-projects certainly had a negative impact on the time required for implementation, however, it also permitted drinking water service to be provided to an additional 750 000 people. 7.2.5 Cost control was adequate and the total amount of the covenants represents 2.5% of the amount of all the contracts, against a 10% allowance for contingencies estimated at appraisal. 7.2.6 Quarterly project progress reports were complete and also contained all necessary information related to fulfilment of the loan conditions. Subsequent to the departure of technical assistance, ONEP and RADEEF did not prepare any more quarterly project progress reports. Prior to departure, the technical assistance had prepared the project completion report, which was to be completed and finalised by ONEP and RADEEF, but this last action has not yet been completed. 7.2.7 As regards disbursements management, payments from ADB loan funds and those in local currency from ONEP were not managed by the same accounting entity. Disbursement claims for the loan were managed by an external financing unit, whereas disbursements on ONEP financing were managed by the accounting service. That did not raise a problem when making payments, but as the ONEP payments were not made from a separate budget, there was a lack of clarity in respect of project payments. The fact that the ONEP did not keep accounting separate from its own payments created problems for the determination of project costs. 7.2.8 Operation of the installations constructed within the framework of the project was carried out under good conditions and their upkeep for ONEP as well as for RADEEF is excellent.

20

7.2.9 In view of the preceding, except for some problems encountered including the absence of separate bookkeeping for ONEP’s participation in the project’s financing, and the interruption in the transmission of quarterly progress reports after the departure of the technical assistance, it can be affirmed that ONEP and RADEEF performances were satisfactory with a rating of 2.6 over 4 (see Annex 8). 7.3 Other Co-financiers 7.3.1 No other donor participated in this project. 8. OVERALL PERFORMANCE AND RATING 8.1 Aside from the facilities for the town of Oujda and the pre-treatment station in Fèz, which had become redundant, the structures and facilities planned within the context of the project were constructed and are currently in operation. The savings made within the context of the project also permitted three additional sub-projects to be financed which together service a population of 750 000 inhabitants. This enabled the volumes sold to be increased in comparison to the appraisal projections despite a development of demand far below projections. Reduction of the growth rate of demand will also make it possible to keep the facilities constructed from reaching saturation before about ten years. 8.2 Project operational results were very satisfactory with a rating of 3.1 over 4 (see Annex 10). The overall additional quantities produced, projected at appraisal, were exceeded and the facilities constructed within the context of the project, will permit the supply of water to the towns concerned to be ensured until 2007 for some and 2015 for others. 9. CONCLUSIONS, LESSONS LEARNED AND RECOMMENDATIONS

9.1 Conclusions 9.1.1 The fifth drinking water supply project was completed seven years later than projected. This delay can be ascribed mainly to the underestimation of the time required for implementation at project appraisal and the introduction of three new sub-projects in 1995, financed with the savings made within the context of the initial project. The two and a half year period, including the time for project approval by the Bank Board of Directors was very inadequate, and for such a complex and important project, a four to four and a half year time frame would have been more suitable. The utilisation, in mid 1995, of the savings made on this project for implementation of three new sub-projects, as complex as the initial project, should have pushed back the new projected completion date to end 1999. 9.1.2 Projected saturation dates for the new facilities were between 1998 and 2005. As the growth of demand was substantially below projections, those dates will now be pushed back by about ten years so that ONEP and RADEEF could postpone the extension of project facilities by the same number of years. Increased output on distribution networks will permit the postponement of new extensions of distribution facilities. 9.1.3 From the financial standpoint, project costs at completion were reduced by 18.8%. This difference is attributed to overestimation of costs at appraisal and also to strict cost control during project implementation. Having abandoned some elements had no impact on the cost of the project they were replaced by sub-projects estimated to be more costly. However, the replacements increased the number of people affected by the project to an estimated 350 000 inhabitants.

21

9.1.4 The project’s only important environmental impact was the increase of wastewater generated by the extension of water production and distribution. The social impact was considered positive. 9.2 Lessons Learned 9.2.1 The lessons to learn from the implementation of this project pertain in particular to the preparation of projects, technical assistance to the project implementation units, the projects’ supervision missions, bookkeeping for the projects and the exchange of data regarding disbursements. Therefore:

(i) The Bank’s failure to prepare the projects made it impossible to assess the relevance of the studies of the project components, one of the sub-projects was inadequately prepared and subsequently was abandoned.

(ii) During most of the project implementation period, the Bank’s supervision

was insufficient in number of missions as well as in their duration. (iii) The departure of technical assistance one and a half years prior to the

project’s completion created problems for the preparation of project status reports and the Borrower’s completion report.

(iv) Disbursement slips were not sent to the Borrower as regularly as

expected, and when the disbursed amounts were lower than the claims, the necessary explanations were not always provided.

(v) ONEP did not keep separate accounting as regards the payments made

within the context of its participation in the project’s financing. 9.3 Recommendations To the Bank:

- The Bank should be more attentive in preparing projects, particularly in verifying studies that were consulted for their preparation.

- The Bank should regularly carry out project supervision missions in order

to prevent problems, rather than intervene when they have already developed.

- The Bank should see that data on disbursements is transmitted regularly

to the Borrowers and implementation agencies.

22

To the Government:

- Implement the recommendations of the studies on sanitation master plans for the towns concerned by the project.

- Regularly increase water tariffs in order to permit financial balance of the

sector’s institutions. To ONEP:

- Establish separate accounting systems permitting project costs to be established and monitored.

- Finalise the project completion report. - Keep its internal post evaluation service operational. - Closure of all project contracts.

To RADEEF:

- Prepare the project completion report. - Closure of all project contracts

Annex 1

KINGDOM OF MOROCCO FIFTH DRINKING WATER SUPPLY PROJECT

Details of Sub-Projects

Berkane

- Double the treatment capacity (pumping, desilting, oil removal, flocculating basin, clarifier, reagent dose and dispensing, filters, treated water pumping.

Berrechid

- Supply of 29.8 km. - Two pumping stations. - Power line.

Fèz

- Double pre-treatment capacity (scrubbers). - Double the treatment capacity (pumping, desilting, oil removal, flocculating basin, settling

tank, reagent dose and distribution, filters. Treated water pumping). Khémisset-Tiflet

- Supply of 33.3 km. - Double the treatment capacity (pumping, desilting, oil removal, flocculating basin, settling

tank, reagent dose and distribution, filters, treated water pumping). - Renovating structures and existing buildings.

Meknès

- Supply of 54.8 km. - A reservoir. - Pumping equipment on boreholes. - Access roads. - Power lines.

Oujda

- Supply of 40 km. - Four pumping stations - Two reservoirs. - Pumping equipment on boreholes and chlorination. - Power lines - Access roads.

Salé

- Supply of 13.9 km. - Sidi Bouknadel branch, 4 km.

2

Settat

- Supply of 45 km. - Two pumping stations - Two reservoirs. - Power line.

Radeef

- 16 km major network - Secondary and tertiary network 31 km. - A reservoir.

Training Works supervision and inspection

Annex 2

KINGDOM OF MOROCCO

FIFTH DRINKING WATER SUPPLY PROJECT

Disbursement Schedule by Source of Financing In million Units of Account

Years Source of financing 92 93 94 95 96 97 98 99 2000 2001 2002 Total

ADB 6.000 36.000 17.990 60.000ONEP 8.750 2.940 10.430 39.000RADEEF 0.230 1.460 0.780 2.500Total 14.980 58.400 29.200 102.500

Envisaged at Appraisal

14.6% 57.0% 28.5% ONEP loan 16.079 13.978 5.009 7.072 3.440 1.284 0.704 0.293 0.044 47.903RADEEF loan 0.150 0.940 0.856 0.268 0.000 0.199 0.000 0.225 0.051 2.688ONEP 10.401 9.042 3.240 4.575 2.225 0.831 0.455 0.190 0.028 30.986RADEEF 0.097 0.608 0.554 0.173 0.000 0.129 0.000 0.146 0.033 1.739Total 26.727 24.568 9.659 12.088 5.665 2.442 1.159 0.853 0.156 83.316

Implemented

33.9% 31.1% 12.2% 15.3% 7.2% 3.1% 1.5% 1.1% 0.2%

Annex 3

KINGDOM OF MOROCCO

FIFTH DRINKING WATER SUPPLY PROJECT

Summary Table of Project Costs (in million UA)

Estimates at Appraisal

Costs at Implementation

Gaps Components

L.C. F.E. Total L.C. F.E. Total Value In % Settat 5.12 6.66 11.78 4.12 6.24 10.36 -1.42 -12.1%Berrechid 2.87 2.94 5.81 1.49 2.21 3.70 -2.11 -36.2%Salé 2.88 3.11 5.99 3.98 5.09 9.08 3.09 51.5%Fèz 3.59 7.62 11.21 1.48 5.02 6.51 -4.70 -41.9%Meknès 4.95 6.17 11.12 4.19 5.79 9.98 -1.14 -10.2%Khémisset-Tiflet 5.56 8.40 13.96 3.37 7.97 11.35 -2.61 -18.7%Oujda 5.57 6.90 12.47 -12.47 -100.0%Berkane 0.90 1.92 2.82 0.53 1.99 2.52 -0.30 -10.5%Fèz RADEEF 1.91 3.35 5.26 1.74 2.69 4.43 -0.83 -15.8%Training 0.02 0.08 0.10 0.00 0.03 0.03 -0.07 -72.3%Supervision 0.33 1.67 2.00 0.27 0.93 1.20 -0.80 -40.0% Essaouira 1.73 1.65 3.38 3.38 100.0%Khouribga 5.55 7.09 12.65 12.65 100.0%Tetouan 4.25 3.88 8.13 8.13 100.0% Total 33.70 48.82 82.52 32.73 50.59 83.32 0.80 1.0% Note: 1) technical contingencies and price escalation are not included in this table 2) Costs at implementation were calculated by applying the average exchange rate between the Dirham

and the unit of account for the project period.

Annex 4

KINGDOM OF MOROCCO

FIFTH DRINKING WATER SUPPLY PROJECT

ONEP Comparative Table of Estimate and Actual Operating Statements in 1997

(in thousand MAD)

DESCRIPTION Actual 1990 Estimates 1997

Actual 1997 Gap Estimates/ actual over the period

Gap in %

Income 775.122 1897.461 1525.263 -372.198 -19.6%Total charges 812.824 1496.493 1650.193 153.700 10.3%Labour costs 150.134 257.303 337.073 -79.770 -31%Net Result -37.702 400.968 -124.931 -525.899 -131%Result /income -4.8% 21.1% -8.2%

ONEP Comparative Table of Estimate and Actual ONEP Balance Sheet in 1997

(in thousand MAD)

DESCRIPTION Actual 1990 Estimates 1997

Actual 1997 Gap Estimates/ actual over the period

Gap in %

Fixed Assets 4826.091 4777.288 10567.422 5790.134 121%Current Assets 1452.798 3056.217 2406.276 -649.941 -21%Total Assets 6280.889 7833.505 12973.698 5140.193 65%Equity 3862.367 5220.351 8188.929 2968.578 57%L and M term debts 1313.556 1508.188 2487.884 979.696 65%S term debts 1104.966 1104.966 2296.885 1191.919 108%Total liabilities 6280.889 7833.505 12973.698 5140.193 65%Liquidity ratio 1.3 2.8 1.05 Leverage ratio 25.3% 22% 23%

Annex 5,

KINGDOM OF MOROCCO FIFTH DRINKING WATER SUPPLY PROJECT

RADEEF

Comparative Table of Projected and Actual Operating Costs in 1997 (in thousand MAD )

DESCRIPTION Actual 1990 Estimates

1997 Actual 1997 Gap

Estimates/ actual over the period

Gap in %

Income 67.121 194.444 183.039 -11.405 -5.8% ONEP procurements 48.203 119.979 110.044 -9.935 -8.3% Other charges 38.559 54.956 164.797 109.641 199% Total charges 86.762 174.935 274.841 99.906 57.11% Net Result -30.177 19.509 -91.802 -111.311 -570% Net Result/ Income

-4.8% 10.03% -50.15%

RADEEF

Comparative Table of Projected and Actual Balance Sheets in 1997 (in thousand MAD )

DESCRIPTIONS Actual 1990 Projections

1997 Actual 1997

Gap

projections/ actual over the

period

Gap in %

Fixed assets 177.124 197.49 458.836 261.346 132.3%Current assets 106.959 217.843 234.081 16.236 7.4%Total assets 284.083 415.333 692.917 277.584 66.8%Equity 203.809 271.84 186.634 -85.206 -31.3%L and M term debts 28.012 69.173 105.949 36.776 53.2%S term debts 52.262 74.32 400.334 326.014 438.6%Total liabilities 284.083 415.333 692.917 277.584 66.8%Liquidity ratio 2.04 2.931 0.58 Debt Ratio 12.08% 20.28% 36.21%

Annex 6 Page 1 of 2

KINGDOM OF MOROCCO FIFTH DRINKING WATER SUPPLY PROJECT

Internal Rate of Return Calculation Assumptions

1 ONEP and RADEEF

(i) The rate was calculated at appraisal for the period 1992-2025, corresponding to the estimated duration of investments service life. In the interest of a coherent procedure, the completion rate was calculated for the same period 1992-2025.

(ii) To calculate the net annual cash-flow from 1994 to 2002, the actual figures were

retained by the Bank and the Government) and for the gross results recreated by the mission and ONEP annually for each centre of production having benefited from the project, with a share in the production allocated to the project. Shares by centre are shown below:

Name of the centre Share of production allocated to the project -Meknès 70% -Salé 20% -Berkane 50% -Sidi Allal Bahraoui 100% -Settat 50% -Berrechid 50% -Khouribga 30% -Tétouan 30% -Essaouira 50% -Khemisset/Tiflet 50% -Fèz 30%

(iii) Considering the stability of the project’s additional production, the insignificant

amount of the tariff increases on the whole compensated by those of costs, a stable cash-flow scenario was retained for the period 2002-2025, following the estimates at appraisal.

(iv) Considering the service life of project investments, every 15 years, a new

investment is planned representing 10% of the initial investment, for the partial renewal and upgrading of facilities.

Annex 6 Page 2 of 2

KINGDOM OF MOROCCO FIFTH DRINKING WATER SUPPLY PROJECT

IRR CALCULATION TABLE OF THE ADB FIFTH DRINKING WATER

SUPPLY PROJECT Base Assumption :constant cost and income

In million MAD

Years Investment

cost . Total

Income Operating

Costs. Cash Flow 1992 1993 1994 339.70 -339.7 1995 179.50 -296.4 1996 63.40 126.8 75.7 -13.0 1997 92.30 132.4 86.5 -89.0 1998 44.70 150.5 100.6 24.8 1999 16.80 168.2 105.8 58.1 2000 9.80 183.7 114.2 63.2 2001 4.30 230.3 132.3 91.8 2002 0.60 230.3 132.3 97.4 2003 230.3 132.3 98.0 2004 230.3 132.3 98.0 2005 230.3 132.3 98.0 2006 230.3 132.3 98.0 2007 230.3 132.3 98.0 2008 230.3 132.3 98.0 2009 230.3 132.3 98.0 2010 230.3 132.3 98.0 2011 230.3 132.3 98.0 2012 230.3 132.3 98.0 2013 230.3 132.3 98.0 2014 230.3 132.3 98.0 2015 62.19 230.3 132.3 35.8 2016 230.3 132.3 98.0 2017 230.3 132.3 98.0 2018 230.3 132.3 98.0 2019 230.3 132.3 98.0 2020 230.3 132.3 98.0 2021 230.3 132.3 98.0 2022 230.3 132.3 98.0 2023 230.3 132.3 98.0 2024 230.3 132.3 98.0 2025 230.3 132.3 98.0 Internal rate of return 8.5%

Basic assumption Rate IRR Increase of costs 8.5% Increase of income

Sensitivity analysis: Rate IRR 1 – Increase of operating costs 10% 2 – Reduction of Income 10% 3 – The two simultaneous events 4 – Increase of costs 5% 8.0%

Increase of income 3%

Annex 7 Page 1 of 2

KINGDOM OF MOROCCO

FIFTH DRINKING WATER SUPPLY PROJECT

Economic Rate of Return Calculation Assumptions

1.1 Investment cost

The investment cost is equal to the real cost. The financial costs were corrected, as in the appraisal, by the following conversion factors : Local investments 0.9 Other items 1.0

1.2 Operating and maintenance costs

This item represents cumulative costs to be supported by ONEP and RADEEF. 1.3 Benefits of the project

Earnings are estimated on the basis of the project’s additional sales. They are the same as for the financial internal rate of return calculation. Considering the stability of the project’s additional production, the virtual compensation for tariff increases, by those of costs, stable cash-flow scenarios for the period 2003-2025, following the appraisal estimates. Considering the service life of project investments, every 15 years a new investment is planned representing 10% of the amount of the initial investment, for partial renewal and upgrading of facilities.

Annex 7 Page 2 of 2

KINGDOM OF MOROCCO

FIFTH DRINKING WATER SUPPLY PROJECT

TABLE OF ERR CALCULATION FOR THE ADB FIFTH DRINKING WATER SUPPLY PROJECT

Base Assumption : constant cost and income In million MAD

Years Local

Investment ADB

investment Total incomeOperating

Costs. Cash Flow 1993 1994 98.22 230.60 -328.8 1995 88.98 197.48 -286.5 1996 49.24 9.33 126.8 75.7 -7.5 1997 38.37 92.31 132.4 86.5 -84.8 1998 22.63 0.01 150.5 100.6 27.3 1999 4.27 1.52 168.2 105.8 56.6 2000 5.64 0.03 183.7 114.2 63.8 2001 1.75 230.3 132.3 96.3 2002 0.18 230.3 132.3 97.8 2003 230.3 132.3 98.0 2004 230.3 132.3 98.0 2005 230.3 132.3 98.0 2006 230.3 132.3 98.0 2007 230.3 132.3 98.0 2008 230.3 132.3 98.0 2009 230.3 132.3 98.0 2010 230.3 132.3 98.0 2011 230.3 132.3 98.0 2012 230.3 132.3 98.0 2013 230.3 132.3 98.0 2014 230.3 132.3 98.0 2015 30.92 53.12 230.3 132.3 14.0 2016 230.3 132.3 98.0 2017 230.3 132.3 98.0 2018 230.3 132.3 98.0 2019 230.3 132.3 98.0 2020 230.3 132.3 98.0 2021 230.3 132.3 98.0 2022 230.3 132.3 98.0 2023 230.3 132.3 98.0 2024 230.3 132.3 98.0 2025 230.3 132.3 98.0

Economic rate of return 9.0% Sensitivity analysis: Rate ERR

1 –Increase of operating costs 10% 2 – Reduced income 10% 3 – The two events simultaneously 4 – Increase of costs 5% 12.6%

Increase of income 3%

Annex 8

KINGDOM OF MOROCCO FIFTH DRINKING WATER SUPPLY PROJECT

IMPLEMENTATION PERFORMANCE

Indicators Rating (1 to 4)

Observations

1. Compliance with the implementation schedule

1 Overrun by nine months, but due partly to the utilisation of the saving made.

2. Compliance with costs 3 Good cost control for the components implemented

3. Compliance with the loan conditions 2 Conditions related to tariff adjustments and to the reduction of arrears were only partially fulfilled.

4. Balance between appraisal monitoring and quarterly progress reports

2 Excellent progress reports, which were no longer, sent after the departure of the technical assistance.

5. Satisfactory operation (should the need arise.

4 Satisfactory operation and excellent maintenance of facilities.

TOTAL 12 Overall implementation performance evaluation

2.4 Satisfactory

Annex 9

KINGDOM OF MOROCCO FIFTH DRINKING WATER SUPPLY PROJECT

PERFORMANCE OF THE BANK

Indicators Rating (1 to 4)

Observations

1. At identification 4 The project was part of the country’s priorities and fit in the Bank policy.

2. At project preparation 1 The Bank did not carry out any preparation missions and few actions or measures were taken by the Bank before appraisal.

3. At appraisal 3 Project appraisal was satisfactory and loan conditions relevant.

4. At supervision 2 The number of missions was insufficient and document processing was sometimes long, communication regarding disbursements was not always adequate.

TOTAL 10 Overall Performance Evaluation of the Bank

2.5 Satisfactory

Annex 10 Page 1 of 2

KINGDOM OF MOROCCO FIFTH DRINKING WATER SUPPLY PROJECT

OVERALL PERFORMANCE

N° INDICATORS RATING (1 to 4)

OBSERVATIONS

Relevance and

achievement of objectives

i) Macroeconomic policy 3 Reform programmes of the macroeconomic framework attained their objectives.

ii) Sectoral policy 3.5 The sector’s overall policy was initiated by the Government. iii) Material component

(including production) 4 The facilities have the required technical features, and the

project’s production exceeds projections. iv) Financial component 2 The anticipated operational output was not obtained. ONEP’s

financial structure is scarcely balanced and that of RADEEF is very unbalanced.

v) Poverty reduction , social aspect and women in development

3.5 The project’s socio-economic effects are positive and highly perceptible with regard to the improvement of the quality of life for women and children and public health.

vi) Environment 2.5 The positive effects of the project were attained, but the actions to attenuate negative impacts were not carried out.

vii) Private sector promotion 3.5 The increase of water production strengthened private sector activity. Reorganisation of ONEP led to outsourcing some of its duties and to promote the creation of micro-enterprises intended to ensure these duties on its behalf.

vii) Others (specify) 2 Institution Building The institutional framework developed favourably (very

satisfactory). i) Institutional context

(including reorganisation) 3.5 The organisation of executing agencies was adapted to the project

and positively developed its capacity building ii) Financial and integrated

management systems including audit systems

3.5 Financial management systems relied on clear and reliable procedures and a transparent computer tool. These systems will be improved by the ongoing reorganisation at ONEP. Projects were audited regularly. Project accounts were accurately kept however, it would be beneficial if all the essential data could be transmitted in real time, in particular as regards disbursements in local currency.

iii) Transfer of technology 3.5 Training in the use of the equipment procured within the framework of the project made it possible to have qualified and efficient staff.

iv) Allocation of qualified staff (including rotation), training and counterpart staff

3.5 The different services were equipped and provided with highly qualified staff. Training was optimal.

3 Sustainability i) Continuous commitment of

the Borrower 3.5 Morocco has made drinking water supply an absolute and

permanent priority. ii) Environmental environment 2 An environmental policy has been introduced but its application

has been delayed. iii) Institutional Framework 3.5 The operation structures have an institutional context with an

appropriate institutional capacity, which is continually being strengthened.

iv) Technical reliability and staff allocation

3.5 Staff retraining was ensured and appropriate technical equipment was made available.

Annex 10 Page 2 of 2

N° INDICATORS RATING

(1 to 4) OBSERVATIONS

v) Financial sustainability and

cost recovery mechanism. 2 The growth of income was insignificant because of the virtual

stagnation of the quantities sold and tariffs not ensuring the recovery of costs. Costs increasing at the normal pace of inflation, financial reliability cannot be ensured only on the basis of operating results.

vi) Economic Sustainability 3.5 Project economic sustainability was ensured. vii) Environmental

sustainability 2 Environmental sustainability was dependent on investments to

be made in the sanitation sub-sector, and in particular for construction of treatment plants.

viii) Operation mechanism and maintenance (availability of funds to cover recurrent costs, foreign exchange, spare parts, maintenance of workshop)

2 Operation structures had the financial resources capable of ensuring the sustainability of structures and equipment. However, their cash situation was tight and made them susceptible to short-term, heavy and costly debt. .

4 Internal Rate of Return 3 TOTAL 61.0 GLOBAL EVALUATION

OF RESULTS 3.1 Highly satisfactory

Annex 11

KINGDOM OF MOROCCO FIFTH DRINKING WATER SUPPLY PROJECT

MATRIX OF RECOMMENDATIONS AND ACTIONS TO BE CARRIED OUT

n°

Designation Recommendations and actions

1 Institutional Aspects 1.1 Government

Regularly tariff increases to permit ONEP to maintain financial balance Implement the recommendations of the sanitation master plan studies for the towns concerned by the project.

1.2 ONEP

Strengthen the services responsible for project preparation. Keep operational the service responsible for projects’ post evaluation.

2 Technical Aspects 2.1 ONEP

More attentive project preparation. Give greater importance to project completion reports.

2.3 Bank

Give greater importance to project preparation Supervise projects regularly. Regularly transmit data regarding disbursements to the Borrower and to the executing agencies.

3 Financial Aspects 3.1 Government Regularly increase water tariffs so as to ensure the sector’s

balance.

3.2 ONEP

Keep separate accounting for its participation in projects financed by co-financers.

3.3 Bank

Improve loan disbursement record keeping.

4 Environmental Impact 4.1 Government Do everything possible to catch up with the accumulated

delays in the sanitation sector, in particular with regard to provincial towns

Annex 12 Page 1 of 8

KINGDOM OF MOROCCO FIFTH DRINKING WATER SUPPLY PROJECT

Data on Contracts

SETTAT Batch B1 Mains Name Groupement Bonna - OMCE (France - MOROCCO) Responsibility Supply Mains Batch 1 Amount of the contract 36 835 824.30 MAD Batch B2 Mains Name Groupement Bonna - OMCE (France - MOROCCO) Responsibility Supply Mains. Batch 2 Amount of the contract 42 582 172.00 MAD Batch D Civil engineering Name Robio (MOROCCO) Responsibility Reservoirs Amount of the contract 2 574 075.00 MAD Batch ED Pumping stations Name Cegelec-Bergeron Rateau Responsibility Civil engineering and equipment for two pumping stations Amount of the contract 26 061 634.85 MAD Batch F Power lines Name Office national de l'Electricité (MOROCCO) Responsibility Study and Inspection of Power lines Amount of the contract 1 706 866.68 MAD Batch F Power lines Name GEPROD (MOROCCO) Responsibility Installation of Power lines Amount of the contract 4 710 637.85 MAD Batch I Laboratory Testing Name Laboratory of Public Testing and Studies (MOROCCO) Responsibility Testing of Soil and Materials Amount of the contract 648 000.00 MAD

Annex 12 Page 2 of 8

BERRECHID Batch BD Mains and reservoirs Name Société nationale de Mains d'eau (MOROCCO) Responsibility Supply mains and reservoirs Amount of the contract 28 102 859.84 MAD Batch ED Pumping station Name Elecam – Protec (MOROCCO – MOROCCO) Responsibility Civil engineering and equipment for the pumping station Amount of the contract 8 600 527.31 MAD Batch F Power lines Name Office national de l'Electricité (MOROCCO) Responsibility Study and Installation of Power lines Amount of the contract 4 375 950.00 MAD Batch I Laboratory Testing Name Laboratoire public d'Essais et d'Etudes (MOROCCO) Responsibility Testing of Soil and Materials Amount of the contract 648 000.00 MAD Batch Topographical Surveying Name Cotrabas Responsibility Drawing up compartmental plans Amount of the contract 331 000.00 MAD SALE (including Sidi Allal Bahraoui) Batch B1 Mains Name Groupement Bonna - OMCE (France - MOROCCO) Responsibility Supply Mains. Batch 1 Amount of the contract 74 111 016.00 MAD Amount of covenant 3 770 104.98 MAD Batch B2 Mains Name Groupement SAHEG - Dolbeau (MOROCCO-MOROCCO) Responsibility Supply Mains. Batch 2 Amount of the contract 702 712.00 MAD Contract cancelled Batch B1 Mains SAB Name Mitrav (MOROCCO) Responsibility Sidi Allal Bahraoui distribution mains Amount of the contract 11 024 350.78 MAD Covenant 197 500.00 MAD

Annex 12 Page 3 of 8

Batch D Civil engineering Name Cota (MOROCCO) Responsibility Reservoir and Civil engineering pumping station Amount of the contract 958 567.00 MAD Amount of covenant 175 245.00 MAD Batch E Equipment Name Standard Electric (MOROCCO) Responsibility Equipment pumping station Amount of the contract 919 965.00 MAD Covenant 134 522.00 MAD Batch F Power line Name REDAL (MOROCCO) Responsibility Study and installing a power line Amount of the contract Batch I Laboratory Testing Name Laboratoire public d'Essais et d'Etudes (MOROCCO) Responsibility Testing soil and equipment Amount of the contract 648 000.00 MAD Khémisset -Tiflet Batch B1 Mains Name SOGEA (MOROCCO) Responsibility Supply Mains. Batch 1 Amount of the contract 39 913 987.19 MAD Amount of covenant 790 195.61 MAD Batch B2 Mains Name SAHEG (MOROCCO) Responsibility Supply Mains. Batch 2 Amount of the contract 12 215 532.31 MAD Batch C Treatment Station Name FCC -Sotrafric (Spain - MOROCCO) Responsibility Treatment station and two pumping stations Amount of the contract 50 184 258.00 MAD Batch C Treatment Station Renovation Name FCC (Spain) Responsibility Existing treatment station renovation Amount of the contract 10 931 151.00 MAD

Annex 12 Page 4 of 8

Batch D Civil engineering Name Atner (MOROCCO) Responsibility Reservoirs and buildings Amount of the contract 2 594 970.00 MAD Batch D2 Civil engineering Name Chibar (MOROCCO) Responsibility Renovation of 9 housing accommodations Amount of the contract 696 662.20 MAD Batch I Laboratory Testing Name Laboratoire public d'Essais et d'Etudes (MOROCCO) Responsibility Testing soil and materials Amount of the contract 648 000.00 MAD MEKNES Batch B1 Mains Name Mitrav (MOROCCO) Responsibility Supply Mains. Batch 1 Amount of the contract 28 860 759.63 MAD Amount of covenant 95 653.14 MAD Batch B2 Mains Name Groupement Bonna - OMCE (France - MOROCCO) Responsibility Supply Mains. Batch 2 Amount of the contract 44 700 238.75 MAD Amount of covenant 408 820.00 MAD Batch D Civil engineering Name Ghriss travaux (MOROCCO) Responsibility Reservoirs Amount of the contract 10 884 213.00 MAD Batch E Pumping stations Name Zinelec Zinco (MOROCCO – MOROCCO) Responsibility Pumping stations on boreholes and equipment Annexes Amount of the contract 15 838 019.88 MAD Amount of covenant 1 199 220.00 MAD Batch F1 Power lines Name Office national de l'Electricité (MOROCCO) Responsibility Installation of power lines Amount of the contract 1 905 744.22 MAD

Annex 12 Page 5 of 8

Batch F2 Power lines Name Office national de l'Electricité (MOROCCO) Responsibility Installation of power lines Amount of the contract 226 970.00 MAD Batch F3 Power lines Name Office national de l'Electricité (MOROCCO) Responsibility Installation of power lines Amount of the contract 2 895 000.00 MAD Batch G Access roads Name Ghriss Travaux (MOROCCO) Responsibility Access roads Amount of the contract 2 792 700.00 MAD Batch I Laboratory Testing Name Laboratoire public d'Essais et d'Etudes (MOROCCO) Responsibility Testing soil and materials Amount of the contract 648 000.00 MAD FÈZ Batch C Treatment Station Name SOGEA – GTGC - ETCD (MOROCCO – MOROCCO) Responsibility Treatment station Amount of the contract 51 706 984.04 MAD Covenant 5 128 628.97 MAD Batch C Renovation Treatment Station Name PROTEC (MOROCCO) Responsibility Pumping station at Ain Nokbi Amount of the contract 4 586 334.00 MAD Batch I Laboratory Testing Name Laboratoire public d'Essais et d'Etudes (MOROCCO) Responsibility Testing of soil and inspection of equipment Amount of the contract 648 000.00 MAD TETOUAN and SA COASTAL AREA Batch B1 Mains Name SOGEA (MOROCCO) Responsibility Supply Mains Amount of the contract 41 223 593.70 MAD

Annex 12 Page 6 of 8

Batch ED Pumping station Name SEHI (MOROCCO) Responsibility Civil engineering et equipment for the pumping station Amount of the contract 6 524 172.56 MAD Batch D Civil engineering Name Dumez MOROCCO – Froly Bat (MOROCCO -MOROCCO) Responsibility Reservoir of 15 000 m3 Amount of the contract 14 420 447.55 MAD Batch D Civil engineering Name SOGEA – GTGC (MOROCCO – MOROCCO) Responsibility Reservoir of 25 000 m3 Amount of the contract 20 382 042.00 MAD Covenant n° 1 921 096.40 MAD Covenant n° 2 1 228 070.18 MAD Batch F Power lines Name RDE (MOROCCO) Responsibility Study and Installation of power lines Amount of the contract 2 065 694.47 MAD BERKANE Batch C Treatment Station Name Bamag – Pianimpianti - Zinelec (FRG - Italy - MOROCCO) Responsibility Treatment Station Amount of the contract 21 712 563.36 MAD Covenant 4 391 405.00 MAD Batch C Renovating filtration floors Name FCC – Sotrafric (Spain - MOROCCO) Responsibility Renovation of filtration floors Amount of the contract 942 886.00 MAD Batch F Power Line Name Office national de l'Electricité (MOROCCO) Responsibility Study and installation of power lines Amount of the contract 629 640.00 MAD KHOURIBGA and MINING CENTRES Batch B1 Mains Name SMATRA (MOROCCO) Responsibility Mains Amount of the contract 19 825 489.00 MAD

Annex 12 Page 7 of 8

Batch B2 Mains Name SOGEA (MOROCCO) Responsibility Mains Amount of the contract 28 127 648.00 MAD Batch B3 Mains Name OMCE - Sogetrama (MOROCCO - MOROCCO) Responsibility Mains Amount of the contract 35 309 064.00 MAD Amount of covenant 411 664.80 MAD Batch B4 Mains Name SMATRA (MOROCCO) Responsibility Mains Amount of the contract 23 318 170.00 MAD Covenant 991 160.00 MAD Batch D1 Civil engineering Name Encetam - Boufares (MOROCCO - MOROCCO) Responsibility Civil engineering Amount of the contract 2 491 137.50 MAD Batch D2 Civil engineering Name SNEE (MOROCCO) Responsibility Civil engineering Amount of the contract 11 984 507.85 MAD Batch E1 Equipment Name PROTEC (MOROCCO) Responsibility Equipment Amount of the contract 8 439 367.00 MAD Batch E2 Equipment Name Zinelec - Zinco (MOROCCO - MOROCCO) Responsibility Equipment Amount of the contract 11 540 904.75 MAD Covenant 525 850.00 MAD Batch F Power lines Name Office national de l'Electricité (MOROCCO) Responsibility Power lines Amount of the contract 1 819 237.40 MAD Batch I Testing soil and materials Name Laboratoire public d'Essais et d'Etudes (MOROCCO) Responsibility Testing soil and materials Amount of the contract 550 800.00 MAD

Annex 12 Page 8 of 8

ESSAOUIRA Batch B1 Mains Name SAHEG (MOROCCO) Responsibility Mains Amount of the contract 16 013 620.48 MAD Batch B2 Mains Name Ibnou Zahir - Capep (MOROCCO) Responsibility Mains Amount of the contract 8 713 835.75 MAD Batch D1 Civil engineering Name Ghriss Travaux (MOROCCO) Responsibility Civil engineering Amount of the contract 13 220 605.00 MAD Covenant 246 323.00 MAD Batch D2 Civil engineering Name SNEE (MOROCCO) Responsibility Civil engineering Amount of the contract 11 984 507.85 MAD TECHNICAL ASSISTANCE Batch F Training Name Nancie eau (France) Responsibility Training Amount of the contract 553 420.45 FRF Batch AT Assistance technique Name SOGREAH – SCET MOROCCO (France - MOROCCO) Responsibility Technical assistance Amount of the contract 12 088 096.46 MAD Covenant n° 1 300 590.44 MAD Covenant n° 2 3 933 718.33 MAD Covenant n° 3 Change of dates of implementation Covenant n° 4 1 104 000.00 MAD

Annex 13

KINGDOM OF MOROCCO FIFTH DRINKING WATER SUPPLY PROJECT

List of Documents Consulted for the PCR

1. ADB Project Appraisal Report.

2. Interim versions of the completion reports for the fifth and sixth drinking water supply

projects

3. ONEP and RADEEF organisation charts.

4. A table showing the distribution of ONEP and RADEEF staff.

5. Balance sheets and result for water distribution from 1992 to 2001.

6. The performance contract between the State and ONEP covering the period 2000 – 2004.

7. The annual situation of outstanding debt 1992 to 2001.

8. The status of payments made by ONEP for the various contracts signed for project implementation (partial).

9. The last statements prepared for project contracts.

10. The last quarterly progress reports for the two projects.

11. The allocation of laboratory equipment procured within the context of the projects.

12. Descriptive briefs on the quality of water in the towns concerned by the projects.

13. A table showing the trend of water sales tariffs.

14. Project audit reports for 1999 and 2000.

15. A brochure on the ONEP water quality monitoring practice.