Document of

The World Bank

FOR OFFICIAL USE ONLY

Report No. 4096a-YU

STAFF APPRAISAL REPORT

YUGOSLAVIA

TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT

December 9, 1982

Water Supply and Sewerage Division

Europe, Middle East and North Africa Region

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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CURRENCY EQUIVALENTS

Currency Unit - Dinar (Din.)

US$1.00 - Din. 64.30 /aDin. 100 - US$1.55 /a

MEASURES AND EQUIVALENTS

Kilometer (km) 2 - 0.62 milesSquare Kilometer (kmi) - 0.386 square milesHectare (ha) - 2.47 acresMillimeter (mm) - 0.03937 inchesCentimeter (cm) - 0.3937 inches

c Meter (m) - 39.37 inchesCubic Meter (m3) - 264.0 US gallonCubic Meters per second - 22.8 million US gallons per day(m3/sec)

Liter (1) - 0.264 US gallons

Liter per second (1/sec) - 22,800 US gallons per day

ABBREVIATIONS AND ACRONYMS

BiH - The Socialist Republic of Bosnia and HercegovinaBOAL - Basic Organization of Associated LaborKOMPRED - Regional Work Organization, Public Utilities, TuzlaSDK - Social Accounting ServiceSFRY - The Socialist Federal Republic of YugoslaviaUNDP - United Nations Development ProgramVODOVOD - Self-managed Water and Sewerage EnterpriseWHO - World Health OrganizationZAVOD - Municipal Institute for Construction-Tuzla

Fiscal Year

January 1-December 31

/a As of November 30, 1982.

FOR OFFICIAL USE ONLY

YUGOSLAVIA

TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT

STAFF APPRAISAL REPORT

Table of Contents

CHAPTER Page No.

I. SECTORAL CONTEXT. 1

A. General .1B. Sector Data. 1C. Bank Role in the Sector. 2D. Bank Strategy. 3

II. POPULATION, SECTOR SERVICES AND DEMAND IN PROJECT AREA ... 4

A. Project Area. 4B. Population Projections. 5C. Population Served and Standard of Services in Project

Area. 5D. Demand for Services. 8

III. THE PROJECT .10

A. Genesis .10B. Project Objectives .10C. Technological Aspects .11D. Project Composition and Description of Project

Components .14E. Cost Estimates .15F. Project Implementation .16G. Procurement .18H. Disbursements .18

IV. THE IMPLEMENTING AND OPERATING AGENCY .20

A. Background Data .20B. Organization and Management .20C. Staffing and Training .21D. Accounting, Billing and Collection .21E. Audit .22F. Insurance .22

This project was appraised in March/April 1982 and the report was prepared byMessrs. Lars Rasmusson and Charles Todd.

| This document has a restricted distribution and may be used by recipients only in the performance of |their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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Table of Contents (Cont'd.)

V. FINANCE .................................................. 23

A. Past Performance and Present Position .... ............ 23B. Tariffs ..................................... 24C. Financing Plan ...................................... 25D. Future Performance .................................. 27

VI. ECONOMIC ANALYSIS AND PROJECT JUSTIFICATION .... .......... 29

A. Socio-Economic Analysis .............................. 29B. Average Long-Term Incremental Costs .... .............. 29C. Internal Rate of Return .............................. 30D. Project Merits and Justification ..................... 31E. Project Risks ........................................ 31

VII. AGREEMENTS REACHED AND RECOMMENDATIONS .... .............. 32

ANNEXES

Annex 1 - Table 1: Data on Regional Water Supply System- Table 2: Data on Sewerage and Sewage Disposal and

Central Heating Systems- Table 3: Summary Cost Estimates- Table 4: Cost Estimates

- Table 5: Monitoring Indicators- Table 6: Cost Estimates, Contractwise- Table 7: Disbursement Schedule- Table 8: KOMPRED Consolidated Income Statements and

Source and Application of Funds (1979-1981)- Table 9: KOMPRED Consolidated Balance Sheets (1979-1981)- Table 10: Income Statement, Water Supply Component- Table 11: Income Statement, Sewerage Component- Table 12: Balance Sheet, Water Supply/Sewerage Component- Table 13: Source and Application of Fund Statement, Water

Supply/Sewerage Component- Table 14: Income Statement, Central Heating Component- Table 15: Balance Sheet, Central Heating Component- Table 16: Source and Application of Funds Statement,

Central Heating Component- Table 17: Incremental Long-run Marginal Cost, Water

Supply Component- Table 18: Internal Rate of Return Calculation, Central

Heating Component

Table of Contents (Cont'd.)

Annex 2 - Major Assumptions Used in Financial Projections

Annex 3 - Additional Information Available in Project File

CHARTS

Chart No. 1 - Implementation Schedule

Chart No. 2 - KOMPRED Organizational Structure

MAPS

IBRD No. 16531 (R) - Regional Water Supply SystemIBRD No. 16532 (R1) - Sewage Collection and Disposal and Central

Heating Systems

S

1. SECTORAL CONTEXT

A. General

1.01 The Socialist Republic of Bosnia and Hercegovina (BiH) is located inthe western part of the Socialist Federal Republic of Yugoslavia (SFRY) andhas common boundaries with the Socialist Republics of Serbia, Montenegro andCroatia. The population and the area of BiH is about 4.1 million (1981) and51,129 km2 or 18% of Yugoslavia's total population and 20% of Yugoslavia'stotal area. The capital of BiH is Sarajevo, and Tuzla is located some 100 kmnortheast of Sarajevo.

B. Sector Data

1.02 The Federal Commission for Water Management is responsible forestablishing the basic framework for the maintenance of water quality withinthe country. Commissions for Water Management in each Republic coordinatewater resource development and establish stream classification criteria.Water quality standards for drinking water are established by the Commissionof Health. The Republic of BiH issued regulations in 1967, 1968 and 1969concerning the "Protection of Waters, Classification of Waters, andCategorization of Streams." The regulations, which were updated in 1978,define measures to limit the release of harmful materials into the waterwaysand provide for construction of facilities to process wastewater and reducepollution. Four classes of waterways were established in accordance with thepurpose for which the water is intended. Class I and IV, at each end of thespectrum, represent clean, unpolluted water and highly polluted waterrespectively.

1.03 Increasing attention is being paid in Yugoslavia to the problem ofwater pollution and to the question of integrated development of waterresources. The authorities preserve and enhance the quality of their inlandand coastal waters by the construction of flow regulating and pollutioncontrol structures and wastewater treatment facilities.

1.04 Individual communes 1 are responsible for the provision of watersupply and sewerage services and for this purpose in the large urban centerslocal self-management enterprises have been established usually designated as"Vodovods." These financially autonomous enterprises operate underYugoslavia's self-management principles and their investment programs andtariffs are subject to control by the communes.

1/ The Commune or municipality in Yugoslavia is an administrative areanormally covering a town and its surrounding rural communities. It has anAssembly and an Executive Council.

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1.05 The financing of specific community water supply and sewerageprojects is mainly at the communal and Vodovod levels with considerabledependence upon voluntary contributions from the workers and the enterprises,and from water and sewerage tariffs. Republic funds are also made availablein varying amounts, as well as Federal funds at concessional terms to financeprojects in the less developed areas of Yugoslavia.

1.06 Growing urbanization and industrialization have, in some areas,caused severe air pollution problems and air pollution control has been givenincreased priority. Responsibility for preventive and corrective actionsrests with the Republics and the communes.

C. Bank Role in the Sector

1.07 Bank involvement in the water supply and sewerage and air pollutionsectors in Yugoslavia was initiated in 1971, and has continued through thefollowing projects:

Loan Amount Date ofNumber Title (US$ Million) Signing

777 Ibar Multipurpose Project 45.0 06/30/71

1066 Dubrovnik Water Supply and WastewaterProject 6.0 12/24/74

1262 Morava Region Development Project 20.0 06/14/761263 Sarajevo Water Supply and Sewerage

Project 45.0 06/08/76

1264 Sarajevo Air Pollution Control Project 38.0 02/03/771360 Metohija Multipurpose Project 54.0 02/03/77

1371 Macedonia Multipurpose Project 24.0 03/10/77

2055 Kosovo Water Supply Project 41.0 12/14/81

1.08 The Ibar, Metohija and Macedonia Projects include community watersupply, irrigation and power generating elements. The Morava Project coversmunicipal water supply and sewerage systems, and also includes comprehensivestudies on water quality, flood hazards and regional development. TheDubrovnik and Sarajevo Projects concentrate on the provision of communitywater supply and wastewater disposal facilities and on reduction of Sarajevoair pollution through construction of a gas-fired central heating system. TheKosovo Water Supply Project provides water to two communes through a newlydeveloped regional water authority. The Bank is also assisting in thepreparation of a pollution control project in the Titova Mitrovica area ofKosovo; the project includes water supply, sewerage, solid waste collection,

central heating and air pollution control. In addition to substantialfinancial participation in these projects, the Bank has actively assisted theBorrowers in project development and implementation as well as in theestablishment of new institutions and in the preparation of appropriatefinancial strategies. Previous experience from project execution hasgenerally been favorable.

D. Bank Strategy

1.09 Lending in the sector is in accordance with Bank country policy forYugoslavia and has primarily focussed on the less-developed republics. Indoing so, the Bank is able to assist SFRY in its policy of meeting basic needsthrough improving health and environmental conditions.

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II. POPULATION, SECTOR SERVICES AND DEMAND IN PROJECT AREA

A. Project Area

2.01 The project area covers the Tuzla region. The town of Tuzla islocated in the northeastern part of BiH where the southeastern slopes of theMajevica mountain descend into the fertile valley of the Spreca River. Tuzlaand its surroundings are among the most densely populated and heavilyindustrialized areas in Yugoslavia due, in part, to the availability of rawmaterials such as salt, lignite and limestone and also to the development ofthermal power. The Tuzla master plan area regarding water supply covers thetown of Tuzla and the following six surrounding municipalities!/ Lukavac,Banovici, Zivinice, Lopare, Srebrenik and Kalesija (Map IBRD 16531).

2.02 Because of excessive salt solution mining, the center of Tuzla issubsiding (Map IBRD 16532), which in some areas has reached up to 10 m andmost buildings and infrastructural works have been damaged or destroyed. Tenthousand people have already been relocated, and an additional 15,000 will berelocated over the next five years. The Tuzla area is also facing increasingenvironmental problems of water shortages and river pollution, aggravated bysignificant industrial effluents, and of air pollution mainly caused by thelarge number of lignite-burning facilities used for heating purposes.

2.03 In order to address the subsiding phenomenon, a master plan for therehabilitation and development of the Tuzla municipality has been prepared. Afirst stage program to be executed during 1981-1986 includes the followingcomponents. (i) development of an. area of about 50 ha for the relocation ofabout 15,000 inhabitants on the western side of Tuzla, including the provisionof infrastructure and public utilities; (ii) re-development of the centralpart of Tuzla (the subsided area) into a civic and cultural center; and (iii)construction of a central heating system to serve new and subsequent housingdevelopments. The salt solution mining will gradually be phased out, andgeological stability will be restored.

2.04 The Jala river, which flows through Tuzla and is a tributary of theSpreca river, is heavily polluted by domestic and industrial wastes. The flowis characterized by significant fluctuations and a low flow rate (Q 95%) ofonly about 90 l/sec.2/ A UNDP/WHO study (Phase I) entitled "Investigation

1/ These are subsequently referred to as "the six municipalities."

2/ This indicates that such a flow or lower prevails 5% of the time.

into the Reduction of the Jala River Pollution" was completed in 1980, and wasfollowed by a Phase II study "Reduction of the Water Pollution in the SprecaRiver Basin" completed in 1982.

2.05 The Phase I Study defined the problems resulting from the dischargeof municipal and industrial wastewaters into the Jala river and establishedalternative methods for pollution reduction. The Phase II study providedspecific advice on pre-treatment requirements for industrial effluents and ontreatment for domestic and industrial wastes for Tuzla. A review was alsomade of minimum flow requirements (para. 2.11) in the Spreca river formaintaining an acceptable water quality standard with regard to downstreamuses of water.

B. Population Projections

2.06 Population projections as prepared by the Tuzla Institute ofEconomics through the year 2020 are as follows:

Tuzla SixYear Municipality Municipalities I/

1971 107,293 212,4941981 121,455 236,3431985 129,247 247,1521990 138,292 260,3551995 148,339 273,5682005 166,371 298,7902020 194,225 333,093

1/ Population projections for individual municipalities are shown in Annex 1,Table 1.

The population data have been projected in the light of master plans for urbandevelopment and regional statistical analysis, taking into account factorssuch as growth potential, land availability and industrial developments.

C. Population Served and Standard of Services in Project Area

2.07 Population presently served (1981) by water supply and seweragefacilities as shown in Annex 1, Table 2 is summarized below:

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Water Supply Waste DisposalPublic Private Public Other

Connections Suppliesl/ Connections Means2/

Tuzla- Nos. 96,314 25,141 45,550 75,905- % of Total Population 79 21 38 62

Six Municipalities- Nos. 85,177 151,166 33,988 202,355- % of Total Population 36 64 14 86

1/ This refers mainly to private wells or boreholes.2/ This refers mainly to septic or holding tanks.

2.08 The major features or components of existing public water supply andsewerage systems are as follows;

Tuzla Six

Municipality Municipalities

Water Supply

- Water Production (m3/day)l/ 30,672 12,528- Transmissions Mains (km) 86 32- Service Reservoirs:

- Nos. 4 6- M3 11,200 3,250

- Distribution Mains (km) 204 71- Pumping stations 2 6- Connections (Nos.) 6,983 6,100

Sewerage

- Connections (Nos.) 4,780 2,060- Laterals (km) 50 34- Interceptors (km) 10 14

1/ Data for individual municipalities are shown in Annex 1, Table 1.

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2.09 The Tuzla water supply is based on: (i) three wells with a combinedproduction capacity of 21,600 m3/day located in the area of StuSari; and(ii) four wells with a combined production capacity of 17,280 m /day locatedin the area of Toplica (Map IBRD 16531). The water from the Toplica source isallocated to Tuzla, Lukovac and Zivinice in the quantities 9,072 m3/day

(53%), 4,320 m3/day (25%), and 3,888 m3/day (22%) respectively. In thearea of Spreca Polje, four wells have recently been constructed with acombined yield of about 11,300 m3/day but these have so far not beendeveloped since the water contains excessive iron and manganese. There is nopotential for any further ground water development in the area. Water supplyavailable for the Tuzla municipality totals 30,672 m3/day which isdistributed as follows: domestic consumption (39%), industrial/commercialconsumption (30%), and unaccounted-for (31%)1/.

2.10 The existing water supplies in the six municipalities are all basedon spring or ground water. The maximum per capita water availability forTuzla (about 126 l/d) and the six municipalities (average about 90 l/d) isgenerally very low and, particularly during the summer season, below theactual demand which has resulted in intermittent supply.

2.11 The water supply for major industries depends on the Modracreservoir, located some 18 km from Tuzla. The available flow rate from theModrac reservoir is 7 m3/sec, of which 4.7 m3/sec is allocated fordownstream users and for maintaining acceptable water quality in the Sprecariver; and the remaining 2.3 m3/sec (198,720 m3/day) is allocated toindustrial water supply. This flow rate is sufficient for the time being, butwould have to be increased to meet the demand from ongoing industrialdevelopment including a proposed second thermal power plant to be located inthe neighborhood of Zivinice about 20 km from Tuzla.

2.12 The sewage system mainly covers high density areas with holding andseptic tanks more prevalent in fringe areas. The system is combined forsanitary sewage and storm water, and only recently have separate sanitarysewers started to be laid. The domestic and industrial effluents aredischarged into the Jala river at a number of outfall points, whichparticularly during low flows (para. 2.04) create a severe pollutionsituation. The objectives for the Jala and the Spreca rivers are to reducethe pollution levels to at least initially satisfy the characteristics of aCategory III river (para. 1.02).

2.13 The air pollution in the Tuzla area is basically caused bylignite-burning heating boilers, and the lack of flue cleaning devices.During the winter season air inversion also often occurs. The air pollutionfrequently exceeds acceptable levels, causing a high incidence of respiratorydiseases (para. 6.03).

1/ Unaccounted-for water is the difference between water produced and watersold. It includes inaccuracies in water metering, non-metered water usedat public hydrants and leakages.

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2.14 In Tuzla town (excluding suburban areas), there are at present about110 boiler houses and a large number of individual coal burning facilitiesserving 79% of the total population; the remaining 21% are served throughelectric heating (Annex 1, Table 2). The lignite presently used as fuel isbeing depleted in the area and would gradually have to be replaced by alignite with an even higher sulphur content, which would, if no actions weretaken, further deteriorate the air quality.

D. Demand for Services

2.15 The water supply demand (average day), in the Tuzia Region throughthe year 2020, with major industries accounted-for separately (para. 2.11),has been projected as follows (Annex 1, Table 1, shows more comprehensivedata):

Tuzla Six Sub- MajorYear Municipality Municipalities Total Industries Total

…_- …------------…--------m /day--------------------------------

1985 35,326 22,614 57,940 212,544 270,4841990 39,666 29,939 69,605 303,264 372,8691995 44,009 36,886 80,895 378,648 459,5432005 53,099 53,706 106,805 493,560 600,3652020 68,833 79,673 148,506 N/A N/A

The domestic consumption has been based on an assumed average per capitademand by 2020 of 150 l/d in Tuzla and 110 l/d in the six municipalities. Theprojected (2005) respective shares of domestic, industrial/commercial andunaccounted-for water requirements in the total water used are 42%, 33%, and25% for Tuzla municipality and 47%, 33% and 20% for the six municipalities.

2.16 For Tuzla and the six municipalities the projected average daywater demand by 1985 (excluding major industries) exceeds the presentproduction capacity by 34%; the corresponding percentage for major industriesis 7%. Any delay in the extension of water production and distributionfacilities would impede the development of the Tuzla region.

2.17 The population served by sewer connections in Tuzla and the sixmunicipalities are projected to increase as follows:

Population ServedTuzla Municipality Six Municipalities

Year Nos. % of Total Nos. % of Total

1985 55,420 43 27,960 121990 67,840 49 52,100 202005 105,000 63 60,400 20

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2.18 If no action is taken on sewage disposal, water pollution willgradually get worse because of increased population and industrialdevelopment, which would make it increasingly difficult to maintain reasonableand generally accepted environmental standards.

2.19 In order to reduce the health hazard in connection with high airpollution levels, the Tuzla municipality has decided to gradually replace theexisting heating boilers with a central heating system based on thecirculation of hot water generated at the thermal power station located about4 km from Tuzla and using lignite as fuel. The central heating system wouldinitially cover (i) areas presently under development mainly for absorbingrelocated people from subsided areas (Sjenjak 1); (ii) areas served by localboiler stations (Sjenjak 2, Stupine and Usce); and (iii) scattered areasserved by boiler stations or individual facilities (Novi Grad and SkolskiCenter) (Map IBRD 16532). The corresponding energy demand for these areas isestimated at 140 MW, and another 160 MW would be required for subsequentextensions.

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III. ThE PROJECT

A. Genesis

3.01 The master plan for the rehabilitation and the development of theTuzla municipality (para. 2.03) identified future infrastructurerequirements. The UNDP/WHO studies (Phase I) provided the groundwork for theestablishment of pollution control standards within the Spreca River CatchmentArea. On the above basis, World Bank missions explored possible alternativesfor Bank assistance and agreed with BiH and Tuzla officials that the Bankwould concentrate its support on regional water supply development andenvironmental rehabilitation.

3.02 During the preparation of the project the following studies wereundertaken:

(a) feasibility study for the development of a regional water supplysystem for Tuzla and its six surrounding municipalities (preparedby Energoinvest, local consultant);

(b) UNDP/WHO Phase II study, including a complete feasibility reportfor Tuzla wastewater disposal, with preparation of tenderdocuments for the sewage treatment works (prepared by DHV, Dutchconsultant);

(c) engineering study on central heating system with preparation oftender documents for major facilities (prepared by Janko Lisjak,local consultant); and

(d) studies on air pollution and related health impact (prepared byKOMPRED, the project entity).

During the preparation of the regional water supply system, it was, however,decided, because of financial constraints, to phase its implementation withonly a minor portion to be constructed in a first phase. The second phase(Phase II) would then be executed during 1986-1989 (Map IBRD 16531)

B. Project Objectives

3.03 The project would cover about 73% of the projected water supply,sewerage and sewage disposal and central heating combined investments duringthe project implementation period 1982-1987; the remaining 27% representinginvestments for the second phase of the regional water supply system. Itsobjectives would be:

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(a) to reduce present and expected water shortages by the extensionof a first phase of the regional water supply system, thusenabling the community and industrial development to proceed asenvisaged;

(b) to improve the environmental conditions in the Spreca river basinthrough provision of primary and secondary treatment for domesticand industrial effluents for the Tuzla municipality;

(c) to reduce the health hazards through the reduction of airpollution;

(d) to improve the institutional capacity in project preparation andimplementation, works operation and maintenance, and financialmanagement by the development of existing organizations; and

(e) to assure financial self-sufficiency through adequate watersupply, sewerage and central heating charges.

3.04 The project would constitute a first phase in the development of theregional water supply system in the Tuzla area, in the pollution reduction andcontrol in the Spreca river basin and in the creation of a healthier livingenvironment.

C. Technological Aspects

3.05 For the regional water supply development two potential water sourceshave been investigated, the Modrac reservoir (para. 2.11) and the Krivajariver (Map IBRD 16531). The capacity of the Modrac reservoir could beextended by an additional 216,000 m3/day (2.5 m3/sec) by raising theoverflow weir, which would bring the total quantity available for water supplypurposes to 414,720 m3/day (4.8 m3/sec). This would approximatelycorrespond to the projected industrial water demand by the year 2000 (para.2.15). The catchment area for the Modrac impoundment which cannot readily beprotected, is subject to domestic, industrial and agricultural pollution.This would, however, be of less concern for industrial water supply, requiringlower water standards than for domestic use. An economic/technical evaluationhas concluded that the Modrac reservoir, and its possible future extensionshould continue to be used for major industrial water supply while the Krivajariver should be developed mainly for municipal water supply.

3.06 The development of the Krivaja river, (Phase II), would requireregulation through an impoundment in order to maintain minimum flowrequirements for downstream users. Alternatives have been evaluated for allproject components such as location of dam, treatment works and storage tanksand alignments for tunnel and transmission mains. The water would initiallyflow by gravity to Tuzla, and pumping would only be required at a later stagewith increasing water demand.

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3.07 The implementation of the proposed regional water supply system willbe deferred (para. 3.02), but in order to relieve the immediate watershortages, the Spreca Polje ground water source (para. 2.09) will be developedon a temporary basis with a treatment plant to be installed for iron andmanganese removal. The water from this source will be conveyed to theexisting Spreca pumping station for further pumping to Tuzia and possibly alsoto Lukavac and Zivinice, by using existing, or under the regional water supplysystem, proposed transmission mains and storage tanks. The bulk of the worksto be executed will then form an integrated part of the future regional watersupply system.

3.08 Studies for the sewage interceptors have considered alternativearrangeme ts such as separate mains or a combined main for industriall/ anddomestic2/ flows and operation of the mains under gravity (pumping attreatment works) or pressure (no pumping at treatment works) conditions.Separate mains and mains under pressure have been found to be mosteconomical. Effluent standards for industrial wastes have been established,and industries, where required, will provide their own pretreatment facilities.

3.09 Comparative studies, taking into account economic as well asoperational reliability and flexibility aspects, have been carried out on (i)separate or combined secondary treatment for industrial and domestic sewage;(ii) extended aeration or activated sludge processes; and (iii) aerobic oranaerobic sludge mineralization. The most feasible solution has been found tobe combined treatment with the activated sludge process for secondarytreatment, and with the surplus sludge being oxidized through extendedaeration.

3.10 Possible alternatives for heating systems would be (i) to maintainthe existing system of lignite-burning boilers; (ii) to convert these tooil or to extend electric heating; and (iii) to utilize the hot wateravailable at the thermal power plant. The use of oil, which is imported, isfor this purpose prohibited by law, and the overall available electricitywould not be sufficient on a long-term basis. Neither would it be acceptableto maintain and expand the present system wihich does not meet the objectivesof improved health and living conditions. Polluted air also has a corrosiveand deteriorating effect on building materials and metal surfaces. Theupgrading of existing systems, with the installation of high stacks and fluecleaning devices, would be neither practical nor economical.

1/ Chemical industries only.2/ Includes industrial effluents except those from the chemical industries.

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3.11 The thermal power plant, which at present has a capacity of 830 MW,will be extended by one 100 MW unit to be commissioned by about 1990. Two ofthe existing units (100 MW and 200 MW) will be adapted to produce steam andhot water for industrial and heating purposes as will the future unit. Theultimate hot water requirement would correspond to an energy output of about300 MW. The hot water from the power station will be circulated through aprimary pipeline system, and the heat will be transferred at substationsthrough heat exchangers to water circulated in secondary pipeline systemswhich will serve groups of apartments and houses. Different solutions havebeen evaluated with regard to temperature levels, kinds of pipe material andthe number and location of substations. In particular the water temperaturein the primary distribution system would be 150°C with 900C in the returnmain; corresponding temperatures in the secondary system would be 900C and700C respectively.

3.12 The phasing and design data for the various project components may besummarized as follows:

(a) the master plan for the regional water suppli system wouldinitially call for a capacity of about 1.6 m /sec, whichtogether with existing production capacity, would be sufficientfor the projected water demand by the year 2010. The proposedimmediate extension of the water supply system would, regardingthe water source and treatment works, have a capacity of 0.13m3/sec. which would enable coverage of projected average waterdemand of Tuzla, Lukavac and Zivinice to about the year 1987.

(b) the sewage interceptor is designed for four times the average dryweather flow (ADWF) or 1.2 m3/sec, which would be sufficientfor the flow projected by 2005; this would imply only limitedoverflows to the Jala river during periods of rain;

(c) the sewage treatment works will ultimately have a capacity of 1.3m3/sec (primary treatment) and 0.8 m3/sec (secondarytreatment), which would take care of the flow projected by 2005.Construction of certain components will be phased to mid-1990; and

(d) the primary pipeline system for central heating is designed for ademand equivalent of 300 MW, which would be sufficient through2005, while the secondary pipeline system and substations wouldbe extended under the sub-project to cover only a heating demandequivalent of 140 MW.

3.13 Alternatives selected and various project components recommended forimplementation represent the most feasible least cost solutions at discountrates of 10 and 12%. The proposed phasing of the various project componentsand the design criteria used are appropriate.

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D. Project Composition and Description of Project Components

3.14 Tne project would include the following major components:

(a) development of the first stage of a regional water supply systemwhich ultimately would cover Tuzla, and its six surroundingmunicipalities (paras. 2.01 and 3.12(a));

(b) development of an existing ground water source with provision ofa treatment plant;

(c) extension of sewage collection and sewage disposal works for theTuzla municipality;

(d) development of a central heating system for the Tuzlamunicipality;

(e) operation and maintenance equipment for the water supply,sewerage and central heating systems, and for a sanitary landfill;

(f) consultant assistance for project management and constructionsupervision, and for the next stage water supply systemdevelopment; and

(g) tariff study and training.

The extension of water distribution and sewage networks systems of Tuzla forms

a part of the development program but is only partly included in the project;the remaining part will be financed by developers, consumers and throughinternal cash generation (para. 5.15).

3.15 The water supply component would consist of: (a) ground waterpumping plant; (b) treatment plant for iron and manganese removal; (c) treatedwater pumping plant to be located in the existing Spreca pumping station; (d)transmission mains to Tuzla (total length 15 km) and extension of thedistribution systems; (e) tunnel (length 0.5 km); and (f) balancing reservoirat Si Selo (capacity 4,000 m3 ).

3.16 The sewerage and sewage disposal component would be composed of: (a)interceptors 5.0 km and extension of the sewerage systems; (b) sewagetreatment works for secondary treatment; and (c) outfall main 0.2 km.

3.17 The domestic (max. 4,255 m3/hr by 2005) and industrial (chemicalindustries only) (max. 350 m3/hr by 2005) effluents would be treatedseparately at the primary treatment stage, which would include aerated gritchambers and settling tanks. The industrial effluent would also be partlydecarbonated because of its excessive lime content. The domestic effluentwould be subject to primary treatment for four times average dry weather flow(ADWF) and for secondary treatment for 1.5 times ADWF while the total

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industrial effluent would be subject to secondary treatment. The combinedflow, domestic (max. 2,688 m3/hr) and industrial (max. 350 m3/hr), wouldthen be biologically treated in activated sludge tanks followed by secondary

settling tanks. The sludge, after extended aeration, would be disposed oftogether with the ash slurry from the thermal power station to a landfill sitefor industrial waste. The treated effluent, which has to comply with astandard of BOD (Biological Oxygen Demand).! of less than 20 mg/l and SS(Suspended Solids) of less than 30 mg/l, would then be discharged into theJala river.

3.18 The central heating system would be composed of: (a) primary mains(length 10 km); (b) equipment for about 90 substations for which the civilworks are not included in the sub-project because they are executed bybuilding developers or where structures already exist, these are being used;(c) secondary mains (length 23 km); and (d) a hot water pumping plant to belocated within the thermal-power station compound. The Tuzla municipality hasrecently provided for a new landfill site, and as a supplement to existingequipment a new compactor will be procured.

E. Cost Estimates

3.19 Tables 3 and 4, Annex 1, show a breakdown of the project costestimate, which is summarized below:

Local Foreign Total Local Foreign Total-rDinar Million --- US Million--------

Base Costs- Water Supply System 373.0 284.6 657.6 5.60 4.27 9.87

- Sewage Collection and Disposal

Systems 416.9 392.0 808.9 6.26 5.88 12.14

- Central Heating System 755.1 522.7 1,277.8 11.34 7.85 19.19

- Solid Waste 5.3 16.9 22.2 0.08 0.25 0.33

Sub-Total 1,550.3 1,216.2 2,766.5 23.28 18.25 41.53

Contingencies

- Physical 163.8 132.5 296.3 2.46 1.99 4.45

- Price 599.7 470.4 1,070.1 3.61 2.94 6.55

Sub-Total 763.5 602.9 1,366.4 6.07 4.93 11.00

Project Management and Construction

Supervision 69.4 54.3 123.7 1.04 0.52 1.56

Other Consultant Services and Training 211.9 134.8 346.7 2.75 1.75 4.50

GRAND TOTAL 2,595.1 2,008.2 4X603.3 33.14 25.45 58.59

Interest during construction 101.5 322.3 423.8 1.25 4.05 5.30

Front-End Fee - 30.9 30.9 _ 0.50 0.50

Total Financing Required _,696 2.361.4 5.058.0 34.39 30.00 64.39

1/ This indicates the prevalence of organic pollution requiring oxygen for itsmineralization.

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3.20 The cost estimates are mainly based on (i) for the water supplycomponent, preliminary engineering; (ii) for the sewerage component, detailedengineering; (iii) for the sewage treatment works component, preliminaryengineering; and (iv) for the central heating component contract prices forthe primary main and for the remainder, preliminary engineering. The basecosts are at December 1982 price levels. Physical contingencies have beenassumed to vary between 8 and 15% for various components with an average ofabout 11%. From preliminary to final engineering no major modifications areexpected in the design and related cost estimates of the project components.

3.21 The price contingencies for both civil works and material andequipment when calculated in US Dollars have been estimated assuming annualprice increases of 7.5% for 1983-85 and 6% thereafter, and correspondinglywhen calculated in Dinars, 20% for 1983, 15% for 1984 and 13% thereafter.

3.22 The costs for project management and construction supervision and forsubsequent stage of engineering for water supply development (para. 3.28) are

estimated at about US$6.1 million equivalent and would cover about 800 and 130man-months for local and foreign consultants respectively. These estimatesare based on average total cost per man-month of US$2,000 equivalent forlocal, and US$10,000 equivalent for foreign consultants (1982 price level)including subsistence allowances.

3.23 The foreign exchange component is estimated at US$25.45 millionequivalent. This reflects assumptions made regarding goods to be imported,civil works contracts to be awarded to foreign and local contractors and theaverage foreign cost component of locally manufactured material andequipment. The Bank loan would cover the foreign exchange requirements,amounting to US$30.00 million, including interest during construction and thefront-end fee.

F. Project Implementation

3.24 KOMPRED (para. 4.03) would be responsible for project implementation

and for operation and maintenance of the water supply, sewerage, sewagedisposal and central heating systems. The water distribution and the sewagenetwork systems in the six municipalities would be the responsibility of therespective municipalities.

3.25 The present status of project preparation can be summarized asfollows: (a) final engineering design is being prepared for the water supplycomponent which together with remaining geophysical and soil surveys would becompleted by early 1983; (b) final engineering design and tender documentshave been prepared for the interceptors; (c) engineering design and tenderdocuments for equipment supply and civil works have been prepared for thesewage treatment works; and (d) final engineering design and tender documentshave been prepared for the main part of the central heating system.

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3.26 For the sewage treatment works separate contracts would be awardedfor civil works and equipment supplies, and the design for the civil workswould be finalized after a decision has been made on the equipment supplycontracts.

3.27 During project implementation, KOMPRED would be assisted byengineering consultants for (i) tender evaluation and preparation of contractdocuments; (ii) review of contractors drawings; (iii) finalization of detaildesign for water supply and sewage treatment works; and (iv) supervision ofconstruction works and material and equipment supply and installation. Theconsulting services would be provided by (i) ZAVOD (para. 4.02) for thecentral heating component with subcontracting to the Institute for SteelConstruction and Material for equipment quality control; and (ii) localconsultant with foreign consultant assistance for the water supply and sewagedisposal components. KOMPRED's own staff would supervise the constructionworks for the interceptors. For the central heating component the consultanthas already been appointed, while for the water supply and sewage disposalcomponents, a contract would be entered into under terms of referenceacceptable to the Bank (Chart 1). Assurances to this effect were obtainedfrom KOMPRED at loan negotiations.

3.28 KOMPRED would appoint a local consultant with foreign consultantassistance (Chart 1) for subsequent stage water supply development under termsof reference acceptable to the Bank. This consultant and the one proposedunder para. 3.27 will be employed in accordance with the Bank "Guidelines forthe Use of Consultants" (August 1981). The consultant work which will bereviewed by the Bank, would include (i) elaboration of a master plan forindustrial water supply in the Tuzla area; (ii) updating of the master planfor the Krivaja river water source development; and (iii) final engineeringwith preparation of tender documents with related field investigations forproposed regional water supply system. Assurances to this effect wereobtained from KO4PRED at loan negotiations.

3.29 A master bar chart for project implementation has been completed anddetailed CPM networks for individual contracts will be prepared by respectivecontractors. An outline project implementation schedule is shown on Chart 2.A project monitoring and reporting system including selected financialperformance indicators (Annex 1, Table 5) as well as the timing for itsimplementation was discussed and agreed upon during project appraisal.

3.30 Land acquisition and right-of-ways have been completed for thesewerage and central heating components and are expected to be finalized byearly 1983 for the water supply component, for which no difficulties areforeseen.

3.31 During negotiations assurances were obtained from KOMPRED that withinsix months following the closing date of the loan it will prepare and submitto the Bank a project completion report covering the planned objectives andachievements of the project including the costs and benefits and performanceof all entities associated with project execution and the operation of thesystems.

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G. Procurement

3.32 Proposed contracts and their respective cost estimates are shown inAnnex 1, Table 6. Equipment supply contracts estimated to cost more thanUS$350,000 and civil works contracts estimated to cost more than US$1,000,000will be procured through international competitive bidding in accordance withBank Group guidelines. Other equipment supply and civil works contracts withan aggregate cost not exceeding US$2,500,000 and US$6,000,000 respectivelywould be awarded on the basis of local competitive bidding procedures, whichare satisfactory. Contracts to be subject to ICB would represent about 85% oftotal project costs. For material and equipment procured under ICB a domesticpreference of 15% or the import duty, whichever is lower would be used forpurposes of bid evaluation. The Bank would review all documents for thosecontracts to be subject to ICB.

3.33 It is anticipated that foreign suppliers will be awarded thecontracts for the water supply and sewage treatment plants. For other projectcomponents experience has shown that Yugoslav suppliers and contractors areextremely competitive and may win most of the contracts.

H. Disbursements

3.34 Statistical evidence in the Bank shows that disbursements for thewater supply sector in the EMENA region extend over an eight year period whilecountrywide disbursements extend over seven and a half years. Overallcompletion of the proposed project is scheduled for December 31, 1987 andtaking into account the status of project preparation and the relativeefficiency of the implementing agency it is reasonable to assume that the loanwill be fully disbursed one year after completion of the project, i.e., byDecember 31, 1988. A forecast of disbursements is shown in Annex 1, Table 7.

3.35 The proposed Bank loan of US$30.0 million would be disbursed asfollows;

Amount % ofUS$ Million Expenditures

Category Description Equivalent to be Financed

1 Mechanical, electrical and other 13.70 100% of foreignequipment, supplies and expenditures andinstallation 70% of local

expenditures

2 Civil Works 5.75 100% of foreignexpenditures and30% of localexpenditures.

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3 Consultant Services and Training 3.50 100% of foreignexpenditures and40% of localexpenditures.

4 Unallocated 2.56

Sub-Total 25.51

5 Interest during construction 4.05

6 Front-End Fee 0.44 Amount due.

Total 30.00

3.36 The central heating system is urgently required for the 1983/84heating season, and advance contracting has been made for the primary mains(civil works and equipment) and substations (equipment only). Tenderdocuments and evaluation reports have been reviewed by the Bank.Advertisement was made in the Development Forum and bids were invitedaccording to ICB and the Bank procurement procedures. Retroactive financingwould be provided for an amount of up to US$3.0 million equivalent which couldalso include consultant services for an amount less than US$50,000equivalent. Disbursements would be fully documented.

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IV. THE IMPLEMENTING AND OPERATING AGENCY

A. Background Data

4.01 The "Work Organization of Water Management of Bosnia and Hercegovina"is responsible for the coordination of water sources development and waterpollution control in BiH, with its "Basic Organization of Associated Labor(BOAL) of Water Management, 'Spreca' Tuzla" in charge of the Spreca rivercatchment area to be extended to also include the Krivaja river. The latterorganization has constructed and presently operates the Modrac reservoir(para. 3.05).

4.02 In the Tuzla municipal structure, the Town Assembly is the centralauthority with delegates elected from various activities in the society. TheExecutive Council is the executive arm of the Town Assembly, while theMunicipal Institute for Construction-Tuzla (ZAVOD) is responsible for thecoordination of all development activities in the municipality.

4.03 "KOMPRED," the proposed borrower for the Tuzla project, is anumbrella organization functioning as an autonomous entity and is composed ofone administrative entity and seven financially and functionally independentoperating entities called Basic Organizations of Associated Labour (BOALS)(Para. 4.06). In September 1981 KOMPRED's BOALS for water supply/sewerage andcentral heating requested KOMPRED to borrow funds from the Bank and otherlenders in order to carry out the proposed project and stated that they (theBOALS) would provide debt service coverage. KOMPRED accepted the BOALS'request and copies of these documents have been received by the Bank. KOMPREDreports to the Executive Council and its budget and tariffs are approved bythe Town Assembly. Also located in Tuzla is the "Work Organization, Researchand Education in Chemical and Process Industry," which through its "Instituteof Chemical Engineering" is involved in pollution control and in specifyingquality standards for industrial effluents and related pre-treatmentrequirements.

4.04 Tuzla and the six municipalities have for the development of aregional water supply system entered into a social agreement signed April 14,1977 by the Presidents of the respective Town Assemblies. This agreementrefers mostly to the second stage of construction, but the detailedengineering for its execution will be provided under this project.

B. Organization and Management

4.05 The highest decision-making body for KOMPRED is the Workers' Council,which is elected by the Assembly of Workers. This Council elects theExecutive Board and appoints the General Manager who is responsible for theday-to-day operation of the enterprise. The General Manager serves for aperiod of four years and may be reappointed for one additional four-year term.

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4.06 The KOMPRED organizational structure, as established on January 1,1978 is shown on Chart 2. The administrative entity and the BOALS are dealingwith: (i) water supply and sewerage; (ii) central heating; (iii)construction; (iv) community services; (v) insect and rodent control; (vi)street cleaning and solid waste; and (vii) parks and public places. BOALS (i)and (ii) have units for project planning and design, works operation andmaintenance and revenue collection. BOAL (iii) handles minor constructionworks for KOMPRED and also for third parties. BOAL (iv) operates the waterdistribution system in Zivinice, which may be extended to othermunicipalities. The function of sewage disposal would be integrated underBOAL (i). The administrative entity handles such matters as personnel,payroll, billing and legal matters for all of the BOALS.

4.07 For project implementation a special Working Community Developmentand Investments-Tuzla for project management has been established withinKOMPRED containing separate units for water supply, sewage disposal andcentral heating. The major functions of this Working Community would be, withconsultant assistance, to review tender documents, enter into contracts, andto coordinate and manage the construction supervision and equipment supply andinstallation.

4.08 The "Water Management (BOAL) Spreca Tuzla" will closely coordinatethe development of the Krivaja water source. KOPRED will be assisted by the"Institute of Chemical Engineering (BOAL)" in matters regarding waterpollution control and the execution of the sewage treatment works.

C. Staffing and Training

4.09 KOMPRED's present staff consists of 824 employees of which 190 are inthe BOAL for Water Supply and Sewerage (about 8.5 employees/1,000 waterconnections) and 98 in the BOAL for central heating. All positions are filledand for the time being no additional staff would be required. Upon completionof the project KOMPRED envisages assigning about 35 staff members for theoperation and maintenance of the water and sewage treatment works andtransmission mains. The existing staff is well qualified; staff morale ishigh, and turnover is negligible.

4.10 Training under the project would concentrate on strengthening theoperational capacity particularly for water and sewage treatment works andcentral heating systems. Training would be provided by the equipmentsuppliers who would conduct pertinent training courses for selected staffmembers. Staff would also participate in equipment installation and obtainon-the-job training during the commissioning periods.

D. Accounting, Billing and Collection

4.11 KOMPRED uses the standard Yugoslav chart of accounts and financialstatement formats. While differences do exist between certain accountingtreatment under the Yugoslav system and that commonly accepted in

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international circles, transformation of the financial data to the format usedby the Bank for public utility analysis is relatively straightforward.KOMPRED has computerized all accounting activities and maintains separateinternal accounts to segregate revenues and expenditures between its sevenoperating BOALS, and a basis for distributing the common administrative costs,which is satisfactory to the Bank. KOMPRED has already established separateaccounts to segregate the project expenditures from those incurred byKOMPRED's other BOALS. Agreement was obtained at negotiations that KOMPREDwill maintain its accounts in sufficient detail and will keep separate itsaccounts for project activities.

4.12 Domestic water and sewerage customers are billed monthly by KOMPREDbased upon an estimate of their annual water consumption; settlement betweenestimated billing and actual consumption is based upon an annual meterreading. KOMPRED's industrial, commercial and institutional water and sewerageconsumers have their meters read monthly. Central heating billings are madeonly during the heating season, October through March, and are based on amonthly charge/m2 of area heated. Outstanding receivables for water supplyand sewerage represent less than one month's equivalent sales which isconsidered very satisfactory. Receivables for central heating during December1981, the middle of the heating season, represented less than 3% of theprevious season's billing, which is also considered satisfactory.

E. Audit

4.13 KOMPRED's financial statements are subject to the standard audit bythe Social Accounting Service (SDK). KOMPRED requested the special auditinggroup of the SDK during February 1982 to be included in its special auditprogram from 1982 onward. The audit under this program is performed inaccordance with internationally accepted standards. Assurances were obtainedat negotiations that (i) KOMPRED will, beginning in FY82, prepare annualstatements in the accepted public utilities format for its consolidatedoperations and for the water supply/sewerage and central heating BOALS, andwill have these statements audited by SDK; and (ii) the audited statementswill be submitted to the Bank within six months of the close of each fiscalyear.

G. Insurance

4.14 KOMPRED insures buildings, equipment and warehouse stocks against thenormal risks of fire and theft and carries third party liability coverage onall vehicles. Employee accident insurance is provided under the nationalplan. In addition, KOMPRED will insure against damage caused by accidentalrupture of the heating pipeline system. KOMPRED's insurance program isadequate.

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V. FINANCE

A. Past Performance and Present Position

5.01 KOMPRED's seven operating departments (BOALS) (para. 4.06) areself-contained units. The accounting system adequately segregates the assetsand liabilities and costs and revenues of each to measure individualperformance.

5.02 Five of the seven operating BOALS are not affected by the project:(i) construction which generates 60-80% of its revenues from contracts withthird parties and 20-40% of its revenues from services to other BOALS;(ii)street cleaning and solid waste collection and disposal which generates50-70% of its revenues from tariffs, and 30-50% from town budget sources;(iii) insect and rodent control which generates all its revenues from servicesto third parties; (iv) cemeteries/parks/gardens which generate 70-90% of itsrevenues from services to third parties and 10-30% from town budget sources;and (v) the BOAL responsible for the operation of the water supply system inZivinice derives its revenues from tariffs.

5.03 The BOALS described above, have relatively minor long-term debt,their projected capital expenditures' budgets are under US$1.0 millionequivalent per year, and all have been profitable during the three-year period1979-1981. KOMPRED's consolidated financial statements for the years1979-1981 are shown in Annex 1, Tables 8 and 9.

5.04 KOMPRED's two BOALS for Water Supply/Sewerage and Central Heatingderive their revenues primarilyl/ from tariffs which are authorized by theTown Assembly. Water supply and sewerage revenues are based on metered waterusage. The meters are owned by KOMPRED and connection costs are charged tothe consumers. Heating service is not metered and revenues are based on boththe square meters of surface to be heated and the height of the ceiling (aboveand below three meters), with connection costs to be paid separately. Thelocal law requires connection to the public system if one exists.

1/ The BOAL for Water Supply and Sewerage has historically generated from30-40% of its total revenues from installation, repair, and cleaningservices provided to system customers; the BOAL for Central Heatinggenerates from 10-20% of its revenues in a similar fashion.

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5.05 KOMPRED's past tariff and charge increases in project relatedoperating BOALS have been related to the unit cost of providing the service orto the financial needs of the service. KOMPRED has had little difficulty inraising loans in the past for its expansion programs, the largest of which wasa loan of Din. 120.0 million (US$1.8 million equivalent) for the Toplice watersupply development. Water Supply/Sewerage internal cash generation was 3.7times debt service in 1980 and 3.9 times debt service in 1981, while CentralHeating was ten times in 1980 and also in 1981.

B. Tariffs

5.06 KOMPRED's requests for tariff adjustments for water supply, sewerage

and central heating form a part of its annual budget process, which whenapproved by the Worker's Council are forwarded to the Town Assembly for reviewand approval. Tariff increases for all services are routinely approved inOctober of each year; such increases have averaged 25% per year since 1976which has exceeded internal inflation. Exceptionally, water tariffs wereincreased by 80% in 1980 when the debt service associated with the Toplicawater source (para. 5.05) began. Additional tariff increases, and/or othercharges were implemented in October 1981 which will meet the conditions of therevenue covenant (para. 5.15) for 1983.

5.07 KOMPRED's existing tariff schedule is as follows:

DinarsWater SupplyDomestic 6.01 /m3

Commercial/Industrial/Public Institutions 18.15 /m3

Bulk Water Supply (Zivinice) 5.53 /m3

Bulk Water Supply (Lukavac) 5.53 /m3

SewerageDomestic 1.85 /m3 of water

supplied

Commercial/Industrial/Public Institutions 5.58 /m3 of watersupplied

Heating"Domestic" (ceilings under 3 m) 25.18 /m2 of floor

space

"Commercial/Industrial/Public Institution(ceilings over 3 m) 50.36 /m2 of floor

space

5.08 Tariffs for the three services projected in current prices arepresented in the following tablet

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% Growth1982-1988

1982 1984 1986 1988 Nominal _/ Real-- In Dinars--------

Water Supply Din/m3 (Average) 11.63 29.48 47.72 58.27 401.0 71.3Sewerage Din/m3 (Average) 4.29 14.14 27.46 31.31 629.8 128.9Central Heating Din/m2/(Average) 45.35 87.75 118.72 130.33 187.4 (10.0)

1/ Based on inflation rates of 30% (1982), 20% (1983), 15% (1984) and 13%thereafter.

5.09 The above table demonstrates that there will be growth to all tariffsin nominal terms; such growth is required to meet the expanded operating costsand debt service which result from both expanded volume of operations and tofinancing required for the construction program being undertaken. Whenconsidered in real terms, the required growth in tariffs reflects primarilythe need for internal financing. The projected tariff rates are within thepaying capacity of a low income family.

5.10 Tuzla's present tariff structure (para. 5.07) indicates a certainamount of cross-subsidization. However, because all tariffs are fixedirrespective of the quantities used, a block tariff structure should beconsidered to induce water conservation. For this purpose a tariff study tobe carried out in accordance with terms of reference acceptable to the Bankwill commence by March 1, 1984 with recommendations to be implemented byJanuary 1, 1985. Assurances to this effect were obtained from KOMPRED at loannegotiations.

C. Financing Plan

5.11 A forecast of the sources and applications of funds for the project

related BOALS (para. 5.04) for the period 1979 through 1989 is in Annex 1,Tables 10-16, which for the project construction period (1982/1987) issummarized below:

Dinar % of(Million) Total

SOURCES

ProjectInternal Cash Generation 2,032.1 28.8Grants and Contributions 2,144.2 30.4IBRD Proposed Loan 2,325.2 33.0Local Bank Loans and Advances 548.3 7.8

Total 7,049.8 100.0

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Phase II - Regional Water SupplyInternal Cash Generation 1,577.4 58.6Local Bank Loans 1,115.9 41.4

Total 2,693.3 100.0

APPLICATIONS

ProjectProposed Project Cost 4,636.0 65.8Other Investments 288.1 4.1Capitalized Interest 423.8 6.0Debt Service 1,444.2 20.5Working Capital & Investment 257.7 3.6

Total 7,049.8 100.0

Phase II - Regional Water SupplyProposed Project Cost 2,693.3 100.0

5.12 For the project, the proposed Bank loan of US$30.0 million (Dinar2,325.2 million), including front-end fee, and interest and charges during thegrace period would provide about 33% of the total financing required, and100% of the estimated foreign exchange cost. The period of the loan would be15 years final maturity including three years of grace at the standardvariable interest rate.

5.13 The balance of the proposed project financing plan consists of: (a)internal cash generation (29% of total requirements) which the municipalassembly has approved and which also provides substantial funding for thePhase II water supply program; (b) grants and contributions (30.4% of totalrequirements) which have been confirmed, and are contained in the 1981-1985Five-Year Plan which has been approved by the BiH Republic Assembly and inseparate agreements which have been provided to the Bank; and (c) local bankloans and advances (8% of total requirements) whose terms have been projectedto provide 12 years final maturity, three years of grace during which interestis capitalized, carry an interest rate of 12% per annum, and are repaid underthe annuity (constant total payment) system. Privredna Banka has agreed to:(a) provide KOMPRED with the local borrowings foreseen in the projectfinancing plan; (b) provide for cost overruns; and (c) provide for anyadditional borrowings that might be required in the event that approved tariffincreases might be delayed due to Government price containment programs.Regarding Phase II Regional Water Supply Project, final design forms part ofthe proposed project (para. 3.14(f)), but construction execution (1986/1989)is not. Financing for Phase II has not yet been identified and has beenprojected on the basis of KOMPRED's assumption that 60% of financingrequirements would be generated through water surcharges and contributions,and the remaining 40% through bank loans. Implementation of Phase II would besubject to confirmation of appropriate resources (para. 5.16).

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D. Future Performance

5.14 The financial statements for 1979 through 1989 for the watersupply/sewerage BOAL, and the central heating BOAL are in Annex 1, Tables 10through 16 and the assumptions on which they were based are in Annex 2.

5.15 The projected changes in water supply/sewerage and central heating,in current prices are illustrated in the following table:

Water Supply 1I Sewerage 1, Central Heating 2/1981 1989 Increase 1981 1989 Increase 1981 1989 Increase

Volume sold 10 /m /Year and 10 /m /Year 8.9 13.0 46.1 5.17 9.01 74.3 355.0 995.7 180.4

Operating Cost Dinarm 3

3/ 6.48 15.63 141.2 2.71 14.18 423.4 185.10 516.02 178.8

Debt Service Dinar/m 3

2.06 17.72 760.0 0.00 18.87 Infinite 0.00 232.80 Infinite

Average Tariff Dinar/m3

11.30 61.06 440.4 3.52 32.45 822.0 272.11 809.68 197.6

I/ Value data is per cubic meter of water supplied.Value data is per square meter of heated surface.

E/ £xciudes depreciation.

The projected increase in water supply volume by 1989 reflects only theincrease due to the proposed project; Phase II comes on stream in 1990.Sewage volume reflects the addition to the system of the chemical industryeffluent when the treatment plant is completed in 1987. Central heatingvolume in 1981 refers to the three existing plants while by 1989 it wouldrepresent 50% of the capacity of the new system plus one of the three originalplants which will be taken out of service in 1990. The other two originalplants would be abandoned in 1985 and 1988. The increase in operating costper unit sold - in water supply and central heating - is less than theprojected cumulative internal inflation during the same period (230%). Thisis achieved in water supply through a program to reduce unaccounted-for water,while it is achieved in central heating by the new facilities which operate ata lower unit cost than the existing ones. The substantial increase tosewerage operating costs results from the introduction of a secondary sewagetreatment plant. Debt service fluctuates with the debt/equity financing ofthe project elements: (i) 62% loans/38% equity for water supply; (ii) 50%loans/50% of equity for sewerage; and (iii) 42% loans/58% equity for centralheating. The projected tariffs and other charges would provide adequate fundsfor the two project related BOALS to meet all their obligations. Duringnegotiations, agreement was obtained that beginning FY83, KOMPRED willimplement tariffs and other charges to provide the water supply/sewerage andcentral heating BOALS with adequate funds to cover: (i) all expenses ofoperations, including employee compensation, administration and overheadcosts, maintenance, and taxes and other contributions required by law, but

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excluding depreciation; (ii) all interest and other charges on debt and principalrepayments or depreciation, whichever is higher; (iii) all increases requiredfor adequate levels of working capital; and (iv) adequate financing for

subsequent year's investments in the Project. This financial discipline wouldbe monitored through annual reviews. During negotiations, agreement wasobtained from KOMPRED that the two project related BOALS will, three monthsbefore the beginning of each fiscal year, provide the Bank with copies oftheir proposed budget for such fiscal year and financial projections for thefollowing two years as well as their proposed tariff actions. In addition, inorder to ensure that KOMPRED's non-project related BOALS financial performancewill be satisfactory, agreement was obtained from KOMPRED during negotiationsthat the financial operations of the non-project related BOALS will not beallowed to affect the financial viability of the two project related BOALS.

5.16 The debt equity ratios of the project related BOALS peak in 1984 forboth Central Heating and Water Supply/Sewerage. The early peaking in CentralHeating results from 51.5% of the project cost being completed in 1983, thusrequiring debt financing early on in the project cycle. The early peaking inWater Supply/Sewerage is of similar orgin. Debt service however, peaks in1988, and coverage is forecast to be 1.9 for the water supply/sewerage BOALand 1.3 for the central heating BOAL. Agreement was obtained from KOMPRED atnegotiations that the project related BOALs will not, during the projectimplementation period, incur any medium or long-term debt (other than forcarrying out the project) without the Bank's prior agreement.

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VI. ECONOMIC ANALYSIS AND PROJECT JUSTIFICATION

A. Socio-Economic Analysis

6.01 The benefits accruing from the proposed sewage collection anddisposal system in the Tuzla region would be substantial but cannot bemeaningfully quantified. In assessing these benefits, the reduction of theincidence of waterborne infectious diseases and of the pollution of watersused for various purposes, improvements in the general aesthetic conditionsand in the quality of life, and the enhancement of opportunities for economicdevelopment are all important factors.

6.02 The decision to develop a central heating system in Tuzla to replacelocal lignite-burning facilities was primarily based on air pollution andrelated health hazard considerations. Alternative energy sources wereevaluated but were not found to be feasible (para. 3.10). The degree of airpollution with regard to sulphur dioxide, soot, dust and sediment wasmeasured in Tuzla during the period February 10-June 10, 1981. The resultingreport (para. 3.02(d)) indicates that on average the maximum allowableconcentration 1/ of sulphur dioxide was exceeded about 4% of the timeperiod; and in the case of soot about 56%. Furthermore as the survey periodcovered less than half of the heating season, the results would be far moreunfavorable if the measuring had been done during the heating season only.

6.03 An analysis was also undertaken on the occurrence of respiratorydiseases directly related to prevailing air pollution during the period1961-1980. The results may be summarized as follows: (i) respiratorydiseases have a typical seasonal characteristic with most cases occurringduring the winter; (ii) the number of respiratory diseases per 1,000inhabitants in Tuzla has increased by 50% (1961-1980); and (iii) the incidenceof mortality from respiratory diseases is about 10% higher in Tuzla than theaverage in BiH. The health benefits to be achieved from a reduction of theair pollution level cannot be quantified but would be significant.

B. Average Long-Term Incremental Costs

6.04 The average long-term incremental costs in 1982 prices have beencalculated separately for water supply and sewerage and for central heating byusing a discount rate of 10%, which is appropriate for Yugoslavia.

1/ Based on WHO standards.

- 30 -

6.05 The calculation for the water supply and sewerage collection anddisposal systems which take into account production, distribution, collectionand disposal facilities through 2010 shows that beginning in 1987, averagerevenues would be about 71% of the average long term incremental costs, andcommercial/industrial average revenues about 124% of the average long termincremental cost. This, however, does not take into account the substantialvoluntary contributions which both the citizens and the enterprises will bemaking towards project financing. The tariff study to be carried out underthe project (para. 5.10) will inter alia result in the adoption of progressivetariffs. The higher block of the new tariff schedule would be at least equalto the average long term incremental cost.

6.06 Upon completion of the project, the approved tariffs for centralheating would be about 46% higher than the average long-term incremental costwhile the commercial/industrial tariff would exceed it by about 133% (Annex 1,Table 18). The high tariffs for central heating are meant to generate fundsfor future investments.

C. Internal Rate of Return

6.07 The internal rate of return for the water supply and central heatingcomponents have been calculated in constant prices using revenues andcontributions as a minimum measure of the economic benefits, a process whichexcludes the additional obvious social, health and economic benefits to bederived from the project.

6.08 For the water supply component, the minimum measure of the rate ofreturn is expected to be 10.9%. An increase in construction costs of 10% anda reduction in demand of 10% would reduce the rate to about 8.8%. The minimummeasure of the central heating component rate of return is expected to be13.1%. Since this component has major elements under contract, thesensitivity analysis used was a 5% increase in construction costs with a 10%decrease in demand, resulting in a rate of return of 9.2%. The sensitivityanalysis indicates that the project components are moderately sensitive toprice changes.

- 31 -

D. Project Merits and Justification

6.09 The merits and justification of the project may be summarized asfollows: (i) the project will, in the Tuzla Municipality alleviate thepresent shortage of water supply and enable industrial development to proceedas planned; (ii) the project constitutes a first step in the reduction of theriver pollution which is commensurate with overall objectives in environmentalimprovements; (iii) the project will improve the health standard throughreduced air pollution and consequently contribute to better living conditions;(iv) the project and its components are feasible first phase extensions ofrespective master plans and are technically and economically least costsolutions; (v) the investment costs per capita in current terms calculated forthe 1987 population are US$88 equivalent for water supply, US$129 for sewerageand sewage disposal, and US$171 for central heating; these costs arereasonable; (vi) the project will contribute to strengthening theimplementing agency and its cost recovery procedures; and (vii) the projectwill during the construction period, provide about 2,500 man-years of localemployment.

E. Project Risks

6.10 A major project risk would relate to the possibilities of delays inproject implementation and for cost overruns which are normally associatedwith any large civil works undertaking.

6.11 All necessary actions have been or will be taken for the timelycompletion of the project such as thorough project preparation with soilinvestigations, the establishment of project monitoring and coordinatingfunctions and the appointment of qualified staff or consultants for projectmanagement and construction supervision. Therefore the risk of not achievingthe organizational, technical and financial objectives of the project would beminor.

- 32 -

VII. AGREEMENTS REACHED AND RECOMMENDATIONS

7.01 Agreement having been reached on the issues referred to in ChaptersIII through VI of this report, the proposed project is suitable for a Bankloan of US$30.0 million to KOMPRED for a term of 15 years including athree-year grace period, at the standard variable interest rate.

Annex 1Table 1Page I

Yugoslavia

Tuzls Region Water Supply and Environmental Project

TUZLA-Water Supply Data

1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1995 2005 2020

1. POPULATION

-Toola 121,455 123,403 125,351 127,299 129,247 131,056 132,862 134,624 136,483 138,292 148,339 166,371 194,225

-Lukavac 54,617 55,065 55,513 55,961 56,410 56,810 57,211 57,612 58,013 58,414 60,417 63,854 68,155

-Banovici 23,759 24,037 24,315 24,593 24,872 25,114 25,356 25,598 25,840 26,082 27,291 29,275 31,605

-Zivinice 48,632 49,448 50,264 51,080 51,896 52,698 53,500 54,302 55,104 55,906 59,919 67,798 79,335

-Lopare 33,707 33,817 33,930 34,043 34,157 34,323 34,490 34,657 34,824 34,991 35,829 36,923 38,410

-Srebrenik 38,051 38,559 39,068 39,576 40,086 40,598 41,111 41,623 42,134 42,646 45,211 50,384 58,218

-1(aleoija 37,580 38,118 38,655 39,193 39,731 40,248 40,765 41,282 41,799 42,316 44,901 49,956 57,368

Total 357,798 362,447 367,096 371,745 376,399 380,847 385,297 389,748 394,197 398,647 421,907 465,161 527,318

2. WATER CONSUMPTION -'

-Tuzla:cl/d 263 266 268 271 273 276 279 282 284 287 297 319 354

domestic (m /day) 12,138 12,787 13,117 13,792 14,130 14,839 15,195 15,931 16,295 16,659 18,484 22,301 28,910

industrial/

commercial (m /day) 9,583 9,836 10,426 10,689 11,304 11,582 12,230 12,517 12,803 13,089 14,523 17,523 22,715

un-accoocted for (m Iday) 10,221 10,164 10,090 9,999 9,891 9,772 9,636 9,482 9,699 9,916 11,002 13,275 17,208

Sun-Total (m /day)average day 31,942 32,788 33,634 34,480 35,326 36,194 37,062 37,930 38,798 39,666 44,009 53,099 68,833

.ax day 46,411 47,648 48,885 50,122 51,359 52,635 53,911 55,187 56,463 57,739 64,118 77,607 95,821

-Lukavac:l/cd 109 111 113 116 118 121 124 128 132 136 157 199 257

domestic (m /day) 2,383 2,453 2,588 2,660 2,733 2,850 3,039 3,158 3,355 3,477 4,088 5,462 7,899

industrial/

commercial (m /day) 1,787 1,841 1,894 1,947 2,067 2,155 2,243 2,331 2,419 2,588 3,042 4,319 6,144

un-accounted for (m /day) 1,787 1,841 1,830 1,882 1,867 1,946 1,953 2,030 2,029 2,022 2,187 2,667 3,511

Sub-Tutal (m /day) average day 5,958 6,135 6,312 6,489 6,667 6,951 7,235 7,519 7,803 8,087 9,317 12,702 17,555

.ao day 9,877 10,094 10,311 10,528 10,744 11,208 11,672 12,136 12,600 13,064 15,387 20,636 28,609

-Banovici:l/cd 127 130 134 137 141 144 148 151 154 158 175 211 267

dome-tic (L /day) 1,295 1,348 1,402 1,456 1,509 1,564 1,620 1,675 1,730 1,786 2,063 2,661 3,635

industrial/

commercial (m /day) 1,114 1,160 1,206 1,253 1,299 1,346 1,394 1,442 1,482 1,537 1,775 2,290 3,128

on-accounted for (m /day) 602 627 652 677 702 728 753 779 805 831 959 1,238 1,6913~~~~~~~~~~~~~~~~~

Sub-Total (I /day) average day 3,011 3,136 3,261 3,386 3,510 3,638 3,767 3,896 4,024 4,153 4,797 6,189 8,453

.ax day 4,955 5,161 5,367 5,573 5,780 5,993 6,206 6,419 6,632 6,846 7,914 9,901 13,584

-Zuvcnoce:l!cd 94 98 103 108 113 117 122 126 131 136 159 204 260

dumestic (m /day) 2,435 2,609 2,783 3,068 3,189 3,447 3,645 3,844 4,043 4,241 5,236 7,602 11,323

industrial/

commercial (m /day) 1,148 1,231 1,312 1,395 1,536 1,629 1,789 1,887 2,059 2,236 2,761 4,146 6,176

un-acconted for (m 3/day) 1,010 1,083 1,155 1,171 1,181 1 191 1,193 1,258 1,249 1,234 1,428 2,073 3,088

Sub-Total (I /day) average day 4,594 4,922 5,250 5,578 5,906 6,267 6,628 6,989 7,350 7,711 9,425 13,821 20,588

max day 7,619 8,096 8,573 9,050 9,528 10,109 10,691 11,272 11,853 12,435 15,343 21,630 32,514

-Lopare:l/cd 21 25 28 31 35 40 46 51 57 63 91 143 209

domestic (m /day) 311 365 418 471 525 613 701 789 877 964 1,404 2,270 3,448

industrial/

commercial Cm /day) 267 314 360 406 452 527 603 678 754 830 1,208 1,953 2,967

un-accounted for (m /day) 145 170 194 219 144 285 326 367 408 449 653 1,056 1,604

Sub-Total (m /day) average day 722 848 972 1,096 1,221 1,425 1,630 1,834 2,039 2,243 3,265 5,279 8,018

ma. day 1,248 1,467 1,686 1,905 2,125 2,481 2,837 3,193 3,549 3,905 5,685 9,192 13,745

-Srebre-ik:l/cd 47 53 59 65 71 74 77 81 85 91 114 160 218

domestic (m 3day) 784 896 1,008 1,119 1,232 1,331 1,430 1,529 1,627 1,726 2,221 3,473 5,453

ndustrial!

commercial (m /day) 675 771 867 963 1,060 1,145 1,230 1,315 1,400 1,486 1,910 2,990 4,692

un-accounted for (m /day) 365 417 469 521 573 619 665 711 757 803 1,032 1,615 2,536

Sob-Total (C /day) average day 1,824 2,084 2,344 2,603 2,865 3,095 3,325 3,555 3,785 4,015 5,163 8,077 12,681

max day 3,120 3,567 4,013 4,458 4,907 5,288 5,668 6,049 6,430 6,810 8,713 13,711 21,641

- 34 -Annex 1Table 1

Page 2

Yugoslavia

Tuzla Region Water SupplY and Enviroment-l Project

TlZIA-Water Supply Data

1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1995 2005 2020

-ICalesija 1/cd 39 45 52 58 64 69 73 78 82 87 110 158 215

domestic (u /day) 641 755 868 982 1,095 1,197 1,299 1,205 1,503 1,604 2,115 3,393 5,322

industrial/

commercial (o /day) 552 649 747 845 942 1,030 1,118 1,205 1,293 1,381 1,820 2,920 4,580

un-accounted for 3/day) 298 351 404 457 509 557 604 652 699 746 984 1,578 2,476

Sub-Total (m 3/dy) average day 1,491 1,755 2,019 2,283 2,547 2,784 3,021 3,258 3,495 3,732 4,919 7,891 12,378

max day 2,555 3,009 3,463 3,916 4,370 4,765 5,159 5,553 5,947 6,342 8,317 13,420 21,161

-Total domestic (C3/day) 19,987 21,213 22,184 23,548 24,413 25,841 26,929 28,131 29,430 30,457 35,611 47,162 65,990

industrisl/

cos0ercial (m I/dy) 15,122 15,802 16,812 17,498 18,660 19,414 20,607 21,375 22,210 23,147 27,039 36,141 50,402

n-accounted for m /day) 14,428 14,483 14,794 14,926 14,867 15,098 15,130 15,279 15,646 16,001 18,245 23,502 32,114

Total (m /day) average day 49,543 51,498 53,790 55,972 57,940 60,353 62,668 64,785 67,286 69,605 80,895 106,805 148,506

.ax day 75,785 79,042 82,298 85,555 88,812 92,478 96,144 99,809 103,474 107,141 125,477 166,097 227,075

3. WATER PRODUCTION CAPACITY (C /day)

-Tuzla

Water production 30,672 30,672 30,672 30,672 41,904 41,904 41,904 41,904 41,904

Projected demand (Cax day) 46,411 47,648 48,885 50,122 51,358 52,634 53,911 55,187 56,463

Difference -15,739 -16,976 -18,213 -19,450 -9,454 -10,730 -12,007 -13,283 -14,559

-Lukavac

Water production 4,320 4,320 4,320 4,320 4,320 4,320

Projected demand Cmxx doy) 9,877 10,094 10,310 10,527 10,744 11,208

Difference -5,557 -5,774 -5,990 -6,207 -6,424 -6,888

-Banovic i

Water production 2,592 2,592 2,592 2,592 2,592 2,592

Projected demand Coax day) 4,955 5,161 5,367 5,573 5,780 5,993

Difference -2,363 -2,569 -2,775 -2,981 -3,199 -3,401

-Zivinice

Water prndnction 3,888 3,888 3,888 3,888 3,888 3,888

Projected demand Coax day) 7,619 8,096 8,573 9,050 9,528 10,109

Difference -3,731 -4,208 -4,685 -5,162 -5,640 -6,221

-Lopare

Water production 173 173 173 173 173 173

Projected demand (m.x day) 1,248 1,467 1,686 1,905 2,125 2,480

Difference -1,075 -1,294 -1,513 -1,732 -1,952 -2,307

-Srebrenik

Water production 611 691 691 691 691 691

Projected demand (Cax day) 3,120 3,567 4,014 4,461 4,907 5,288

Difference -2,429 -2,876 -3,323 -3,770 -4,216 -4,597

-Kiksi ja

Water production 864 864 864 864 864 864

Projected demand (Cax day) 2,555 3,009 3,463 3,917 4,370 4,766

Difference -1,691 -2,145 -2,599 -3,053 -3,506 -3,902

Total

Water production 43,200 43,200 43,200 43,200 54,432 54,432 54,432 54,432 54,432 192,672 192,672 192,672 250,000

Prnjected demand (Cax day) 75,785 79,042 82,298 85,555 88,812 92,478 96,144 99,809 103,474 107,141 125,477 166,097 227,075

Difference -32,585 -35,842 -39,098 -42,355 -34,380 -38,046 -41,712 -45,377 -49,042 +85,531 .67,195 .26,575 +22,925

1/ L/cd refer to specific consumption, water production divided with population served.

- 35 -

Annex 1Table 2

YUGOSLAVIA

TUZLA REGIOI WATER SUPPLY AND ENVIRONMENTAL PROJECT

TUZLA-Data on Sewerage and Sewage Di.po.al and Central Keating Systema

1981 1982 1983 1984 1985 1986 1987 1990 1995 2005 2020

A. Population 64,992 66,838 68,684 70,530 72,377 74,129 75,881 81,138 89,898 106,166 128,318

B. Sewerage and Sewage Disposal System

1. Poplation Served

by Connections

- nos 45,500 47,980 50,460 52,940 55,420 57,920 60,400 67,840 80,009 105,000 128,318

- 7 of 'A' 70 72 73 75 77 78 80 84 89 99 100

by other means

- nos 19,492 18,858 18,224 17,590 16,957 16,209 15,481 13,298 9,889 1,166 -

- of 'A' 30 28 27 25 23 22 20 16 11 1 -

2. Total Sewage Flows (, /day)

- dry weather flow 11,375 11,995 12,615 13,235 13,855 14,480 15,100 16,960 20,057 26,250 32,079

- wet weather flow - - - - 57,920 60,400 67,840 80,227 105,000 128,318

3. proposed Extensions

- Secondary Sewage System (km) - 3.0 3.0 3.0 3.0 3.0 3.0 - - - -

- Interceptors (km) - - 2.5 2.5 - - - - - - -

- Treatment Works Capacity (D /day) - - - - 74,880 74,880 112,320 112,320 112,320

C. Central deating System

1. Population Served and

corresponding m, heated area

- by local boilers Nos 51,312 53,158 45,504 45,350 44,317 43,709 44,141 30,138 28,198 23,166 29,778

8 of 'A' 79 79 66 65 61 59 58 37 31 22 23

m2 769,680 797,370 682,560 680,250 664,755 655,635 662,115 452,070 422,970 347,490 446,670

- by central heating Nos - - 9,500 11,500 14,660 17,700 19,700 41,000 51,700 73,000 88,540

Z of 'A' - - 14 16 20 24 26 51 58 69 69

m2 142,500 172,500 219,900 265,500 295,500 615,000 775,500 1,095,000 1,328,100

- by electrical heating Nos 13,680 13,680 13,680 13,680 13,400 12,720 12,040 10,000 10,000 10,000 10,000

l of 'A' 21 21 20 19 19 17 16 12 11 9 8

m2 205,200 205,200 205,200 205,200 201,000 190,800 180,600 150,000 150,000 150,000 150,000

2. Local boilers Nos 111 111 110 110 109 80 61 48 18 18

3. Works Components Central

Heatong system

- primary mains (ki) - - 10 10 10 10 10 10 10 10 10

- sob-stations (Non) - - 37 44 57 78 91 160 205 300 300

- secondary mains (km) - - 5 8 13 18 23 34 36 40 40

- Refer to Tuzla town area only and does not include surrounding suburbs.

-36Annex 1Table 3

YUGOSLAVIA

Tuzla Region Water Supply and Environental Project

Sumary Cost Estimatea

Total asTotal Local Foreign Total Local Foreign t of

-------------- Dinar Million…------------- ---------------- US Million Equivalent----------Grand Total

BASE COSTS

WATER SUPPLY

-Wells, Treatnent Works and Pumping Plant 126.6 63.9 62.7 1.90 0.96 0.94 3

-Transmission and Distribution Mains 335.7 201.1 134.6 5.04 3.02 2.02 9

-Tunnel 65.2 39.3 25.9 0.98 0.59 0.39 2

-Storage Tank 38.2 29.3 8.9 0.57 0.44 0.13 1

-Operational Equipment 80.5 28.0 52.5 1.21 0.42 0.79 2

-Land Acquisition 11.4 11.4 - 0.17 0.17 - -

Sub-Total 657.6 373.0 284.6 9.87 5.60 4.27 17

SEWEGE COLLECTION AND DISPOSAL SYSTEMS

-Iterceptors and Sewerage Systems 83.1 63.9 19.2 1.25 0.96 0.29 2

-Sewage Treatment Works 641.0 320.3 320.7 9.62 4.81 4.81 16

-Operational Equipment 80.7 28.6 52.1 1.21 0.43 0.78 2

-Land Acquisition 4.1 4.1 - 0.06 0.06 - -

Sub-Total 808.9 416.9 392.0 12.14 6.26 5.88 20

CENTRAL HEATING SYSTEM

-Priary Mains 501.3 273.7 227.6 7.53 4.11 3.42 13

-Sub-stations 162.3 89.2 73.1 2.44 1.34 1.10 4

-Secondary Mains 477.9 328.3 149.6 7.17 4.93 2.24 12

-Pumping Plant 43.1 11.3 31.8 0.65 0.17 0.48 1

-Operational Equipment 63.0 22.6 40.4 0.95 0.34 0.61 2

-Land Acquisition 30.2 30.0 - 0.45 0.45 - I

Sub-Total 1,277.8 755.1 522.5 19.19 11.34 7.85 33

SOLID WASTE

-Operational Equipment 22.2 5.3 16.9 0.33 0.08 0.25 -

Sub-Total "Base Costs" 2,766.5 1,550.3 1,216.0 41.53 23.28 18.25 70

CONTINGENCIES

-Physical 296.3 163.8 132.5 4.45 2.46 1.99 8

-Price 1,070.1 599.7 470.4 6.55 3.61 2.94 11

Sub-Total 1,366.4 763.5 602.9 11.00 6.07 4.93 19

PROJECT MANAGEMENT AND CONSTRUCTION

SUPERVISION 123.7 69.4 54.3 1.56 1.04 0.52 3

CONSULTANT ASSISTANCE AND TRAINING 346.7 211.9 134.8 4.50 2.75 1.75 8

GRAND TOTAL ~4,603.3 2,5_951 2,0_080 58.59 33.14 25.45 100

-37 A- Annex 1Table 4

Page L

YUGOSLAVIA

Tuzla Region Water Supply and Environmental Project

Cost Estimates

1982 1983 1984 1985 1986 1987 Total 1982 1983 1984 1985 1986 1987 Total___________--_--------------Dinar '000 000…------------- --------------------------…US$ 'O0-----------------------

A. BASE COSTS

Al. WATER SUPPLY

1. Wells, Treatment Works and

Pumping Plant

-Civil Works - 18.6 40.5 - - - 59.1 - 279 608 - - - 887

-Equipment - - 67.5 - - - 67.5 - - 1,013 - - - 1,013

2. Transmission and

Distribution Mains - 96.0 239.7 - - - 335.7 - 1,441 3,599 - - - 5,040

3. Tunnel - 14.1 51.1 - - - 65.2 - 211 768 - - - 979

4. Storage Tank - 7.2 31.0 - - - 38.2 - 108 466 - - - 574

5. Operational Equipment - 20.1 60.4 - - - 80.5 - 302 907 - - - 1,209

6. Land Acquisition - 11.4 - -- z 11.4 S 171 . 171

Sob-Total Al - 167.4 490.2 - - - 657.6 - 2,512 7,361 - - - 9,873

A2. SEWAGE COLLECTION AND

DISPOSAL WORKS

1. Interceptors and

Sewerage Systems - 41.5 41.6 - - - 83.1 - 623 624 - - - 1,247

2. Sewage Treatment Works

-Civll works - - - 154.2 154.2 77.0 385.4 - - - 2,315 2,315 1,156 5,786

-Equipment - - - - 187.1 68.5 255.6 - - - - 2,810 1,028 3,838

3. Operational Equipment - 40.3 40.4 - - - 80.7 - 605 607 - - - 1,212

4. Land Acquisition - 4.1 - - - - 4.1 - 62 - - - 62

Sub-Total A2 - 85.9 82.0 154.2 341.3 145.5 808.9 - 1,290 1,231 2,315 5,125 2,184 12,145

A3. CENTRAL HEATING SYSTEM

1. Primacy Mains

-Civil Works 63.8 74.3 - - - - 138.1 958 1,115 - - - - 2,073

-Equipment 175.7 184.4 3.1 - - - 363.2 2,638 2,769 46 - - - 5,453

2. Sub-Stations

-Equipment 13.8 29.7 29.7 29.7 29.7 29.7 162.3 207 446 446 446 446 446 2,437

3. Secondary Mains

-Civil Works 15.1 37.0 37.0 37.0 37.0 37.0 200.1 226 556 556 556 556 556 3,006

-Equip-ent 15.3 52.5 52.5 52.5 52.5 52.5 277.8 229 788 788 788 788 788 4,169

4. Pumping Plant - 43.1 - - - - 43.1 - 647 - - - - 647

5. Operational Equipment - 42.9 20.1 - - - 63.0 - 644 302 - - - 946

6. Land Acqoisition 30.2 - - - - - 30.2 453 - - _ - - 453

Sub-Total A3 313.9 463.9 142.4 119.2 119.2 119.2 1,277.8 4,711 6,965 2,138 1,790 1,790 1,790 19,184

A4. SOLID WASTE

1. Operational Equipment - - 22.2 - - - 22.2 - - 334 - - - 334

Sob-Total Al to A4 313.9 717.2 736.8 273.4 460.5 264.7 2,766.5 4,711 10,767 11,064 4,105 6,915 3,974 41,536

-38- ~Annex I

Table 4Page 2

YUGOSLAVIA

Tuzla Region Water Supply and Environmental Project

Cost Estimates

1982 1983 1984 1985 1986 1987 Total 1982 1983 1984 1985 1986 1987 Total--------------- Dinar '000 000'---------------------- -------------------------- US 'OOO-----------------------

B. PHYSICAL CONTINGENCIES

1. Water Supply - 14.4 46.8 - - - 61.2 - 216 703 - - - 919

2. Sewage Collection and

Disposal Systems .- 9.0 9.1 23.1 51.2 21.8 114.2 - 136 136 347 769 327 1,715

3, Central Heating System 28.4 42.2 14.3 12.0 12.0 12.0 120.9 427 633 215 180 180 180 1,815

4. Solid Waste - - - - - - - - - -

Sub-Total B 28.4 65.6 70.2 35.1 63.2 33.8 296.3 427 985 1,054 527 949 507 4,449

C. PRICE LONTINGENCIE£

1. Water Supply - 17.0 157.1 - - - 174.1 - 95 929 - - - 1,024

2. Sewage Collection and

Disposal Systems - 9.1 26.6 84.0 261.0 147.5 528.2 - 51 158 530 1,650 896 3,285

3. Central Heating System - 50.6 45.8 62.1 87.2 115.6 361.3 - 285 272 393 551 702 2,203

4. Solid Waste - 65 - 6.5 - - 39 - - - 39

Sob-Total C - 76.7 236.0 146.1 348.2 263.1 1,070.1 - 431 1,398 923 2,201 1,598 6,551

D. TOTAL AB+-C

1. Water Supply - 198.8 694.1 - - - 892.9 - 2,823 8,993 - - - 11,816

2. Sewage Collection and

Disposal Systens - 104.0 117.7 261.3 653.5 314.8 1,451.3 - 1,477 1,525 3,192 7,544 3,407 17,145

3. Central Heating Systen 342.3 556.7 202.5 193.3 218.4 246.8 1,760.0 5,138 7,883 2,625 2,363 2,521 2,672 23,202

4. Solid Waste - - 28.7 - - - 28.7 - - 373 - - 373

Total D 342.3 859.5 1,043.0 454.6 871.9 561.6 4,132.9 5,138 12,183 13,516 5,555 10,065 6,079 52,536

E. PROJECT MANAGEMENT AND

CONSTRUCTION SUPERVISION 10.2 25.8 31.2 13.6 26.1 16.8 123.7 140 359 405 167 302 182 1,555

F. CONSULTANT ASSISTANCE

AND TRAINING

-Bane Costs - 86.6 80.6 99.9 - - 267.1 - 1,300 1,210 1,500 - - 4,010

-Price Contingencies - 8.7 23.6 47.3 - _ 79.6 - 50 140 300 - _ 490

Sub-Total - 95.3 104.2 147.2 - - 346.7 - 1,350 1,350 1,800 - - 4,500

G. GRAND TOTAL D+E+F 352.5 980.6 1,178.4 615.4 898.0 578.4 4,603.3 5,278 13,892 15,271 7,522 10,367 6,261 58,591

Y of Grand Total - - - - - - - 9 24 26 13 17 11 100

39 Annex I

Table 5

YUGUSI1AVIA

TUZLA REGION WASTER SUPPLY AND ENVIRONMENTAL PROJECT

TUZLA - Monitoring Indicators for ROMPRED

1983 1984 1985 1986 1987 1988

Projected Actual Projected Actual Projected Actual Projected Actual Projected Actual Projected Actual

I. POPULATION SERVED

i.Ui SEWESAGE

Population nerved

- Son 50,460. 52,940 55,420 57,920 60,400 63,000

- X 73 75 77 78 80 81

1.02 CENTRAL HEATING

Population served

- nos 9,500 11,500 14,660 17,700 19,700 26,000

- 7. 14 16 20 24 26 33

2. WATER PRODUCTION

- Water produced

million a /year 12,200 12,500 15,100 15,300 15,675 16,000

- Water .ole

nillion c /year 9,300 10,100 11,000 11,900 13,000 13,000

- Unaccounted for 26% 24% 23% 22% 21% 20%

3. FINANCE

3.01 TARIFFS (average)

Water SuppLy (Din/a ) 16.53 26.29 31.18 42.90 48.18 52.92

Sewerage (Din/n ) 11.47 14.13 19.18 27.46 31.31 32.28

Heating (Din/n /yr.) 414.70 526.50 633.55 712.31 754.94 781.99

3.02 TOTAL REVENUES AND

E XPENDITUREzS

(MilLion Din/year)

Revenuen

- Water Supply 153.8 265.5 343.0 510.5 626.4 688.0

- Sewerage 63.2 80.3 112.2 166.4 232.6 284.1

- Central Heating 198.1 328.8 426.0 546.2 664.2 740.0

Expenditures

(excl. interest)

- Water Sopply 117.2 135.4 182.0 200.8 219.1 239.8

- Sewerage 18.5 30.9 42.6 45.3 119.6 176.3

- Central Heating 175.1 257.4 321.4 398.0 492.3 562.2

3.03 RATIOS

OperatLng Ratio (Z)

- Water nupply 67.3 45.5 47.4 35.4 31.8 31.8

- Sewerage 29.3 38.5 38.0 27.2 51.4 62.1

- Central Heating 88.4 78.3 75.4 72.9 74.1 76.0

a Rate of Return (5)

- Water Supply and

Sewerage 14.3 15.8 13.8 25.7 23.3 20.0

- Central Heating 2.8 5.1 7.1 8.7 9.0 8.4

* Current Ratio

- Water Supply and

Sewerage 1.1 0.6 1.7 1.9 0.8 0.7

- Central Heating 0.7 1.9 3.0 3.3 2.5 3.6

Debt/Equity

- Water Supply and

Sewerage 30/70 49/51 46/56 43/57 46/54 47/53

- Central Heating 40/60 43/57 43/57 41/59 39/61 38/62

Annex 1Table 6Page I

YUGOSLAVIA

TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT

Project Cost Estimate Contractwise(USS '000 Equivalent)

Foreign Currency Expenditures1982 1983 1984 1985 1986 1987 Total Z Amount

I. WATER SUPPLYWells, Treatment Worksand Pumping Plant

.()1 CIVIL WORKS

A. Base Costs - 279 608 - - - 887

B. Physical Contingencies (10%) - 28 61 - - - 89

Sub-Total A + B - 307 669 - - - 976

C. Price Contingencies - 12 77 - - _ 89 _ -

Total A + B + C _ 319 746 _ _ _ 1,065 23 248

_.02 MECHANICAL AND ELECTRICALEQUIPMENT

A. Base Costs - - 1,013 - - - 1,013 -B. Physical Contingencies (10%) - - 101 - - - 101 -

Sub-Total A + B - - 1,114 - - - 1,114 -C. Price Contingencies - - 128 - - - 128 -

Total A + B + C - 1 1,242 - 1,242 73 917

-.U- Transmission asd Distribution Mains

A. Base Costs - 1,441 3,599 5,040 - -

B. Physical Contingencies (8%) - 115 288 - - - 403 -

Sub-lotal A + B - 1,556 3,887 - - - 5,443 - -

C. Price Contingencies - 58 448 - - - 506 -

Total A + B + C - 1,614 4,335 - _ 5,949 40 2,353

.04 Tunne l

A. Base Costs - 211 768 - - - 979 - -

B. Physical Contingencies (15%) - 32 115 - _ - 147

Sub-Total A + B - 243 883 - - - 1,126

C. Price Contingencies - 9 102 - - 111 -

Total A + B + C - 252 985 - - - 1,237 40 489

.U5 Storage Tank

A. Base Costs - 108 466 - - - 574 - -

B. Physical Contingencies (10%) - 11 47 - - - 58 -

Sob-Total A - B - 119 513 - - - 632 -

C. Price Contingencies - 4 59 - - - 63 - -

Total A + B + C - 123 572 - _ _ 695 23 162

.J6 System Operational Equipment

A. Base Costs - 302 907 - - - 1,209 - -

B. Physical Contingencies (10%) - 30 91 - - 121 - -

bsb-Total A + B - 332 998 - - - 1,330 - -

C. Price Contingencies - 12 115 - - - 127 - -

Total A + B + C - 344 1,113 - - 1,457 65 942

- 41- Annex ITable 6

Page 2

YUGOSLAVIA

TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT

Project Cost Estimate Cont-sotnise(0U0 '000 Eqivalen-)

Foreign CTaeosoy Espenditares1982 1983 1984 1985 1986 1987 Total Z Anooot

11. SEWAGE COLLECTION ANDDISPOSAL SYSTEMS

2.01 It-eropLtors Onwd raga Syotcas

A. B..a Costs - 623 624 - - - 1,247 - -B. Phys-oal Cos-isg-noi-t (12%) - 75 75 - - - 150

a Sub-Total A I B - 698 699 - - - 1,397 - -C. Proce Cout-tgesciot _ 26 81 - - - 107 -

Totol A a b e C 7 224 780 - - - 1,504 23 350

Sewage Tr-atment Works

2.02 CIVIL WORS

A. ss Coats - - - 2,315 2,315 1,156 5,706 - -B. Physiosi Coonssge-cies (15%) - - - 347 347 173 867 - -

Sub-Tosts A t - - - 2,662 2,662 1,329 6,653 - -C. Prtc_ Coettogesotes - - - 530 745 474 1,749 - -

Total A B5 C 3,192 3,407 1

_803 8,402 34 2,877

2.03 MECHANICAL AbD ELECTRICALEyu IPMEbT

A. Date Costa - - - - 2,810 1,028 3,838 - -B. Phyoijal contltge--sas (1SY. - - - - 422 154 576

stu-lotaL A -B _ - - 3,232 1,182 4,414C. Ptic Coatisgeoies- 905 422 1,327 - -

-otol A a B t - _ _ 4,137 1_604 5,741 74 4,245

-.34 State- Opor-tionlI Equ-psomt

A. Baso Clots - 605 607 -1,12 - -B. Phyoscl- Cottingensie- (102) - 61 61 - - - 122

Sob-Total A 5 B - 666 668 - - - 1,334c. Pesco Coottegenti-s - 25 77 - - - 102

Cotsl A C B . C - 691 745 - -_ ,436 64 926

Il1. CENTRAL hEATlNG SYSTEMPra-ry MIcts

3.1 cLIVIL WObKS

A. Bate costs 956 1,115 - - - - 2,073 - -B. Phy-c-l Coosiagoacies (10%) 96 112 208 - -

out-Tots. A I B 1,054 1,227 - - - - 2,281 -i. -tict Coo togrootot - 46 - - - - 46 - -

1ot-l A I a - C 1,054 1_273 2,327 23 540

J.1z MELHAlICAL AND ELSCTRICAL

A. Base costs 2,o38 2,769 46 - - - 5,453B. PtysraI Cootagoaotei (10%) 264 277 5 - - - 546

Sob-lotal A 0 B 2,902 3,046 51 - - - 5,999C. Price Cost--g--osns - 114 - _ - 120 - -

-ot,l A a B I C 2,902 3,160 57 - - - 6,119 54 3,306

Sub-Stat toot

,.0o .ECHANICAL AND ELECIRICALEQUIPMEN I

A. base Costt 207 446 446 446 446 446 2,437 - -B. Phy-si Castisgeattet (10) 21 45 45 45 45 45 246 - -

oul-Totol A a B 228 491 491 491 491 491 2,683C. PrsooCoaetag--ojea - 18 57 98 137 175 485

Tutal A a B a C 226 509 540 589 628 666 3,168 45 1,414

S-ond-ry MOsto

3.04 CIVIL 66040

A. Sass cotst 226 556 556 556 556 556 3,006B. Phyatos_ CoosCngeacios (10%) 23 56 56 56 56 56 303

Sub-Total A I 0 249 612 612 612 612 612 3,309 - -C. Price CoosCagasosos - 23 71 122 171 218 605 - -

Tosal A a b 0 C 249 635 683 734 783 830 3,914 12 468

3.05 EQEIPMENT

A. B.se Cosas 229 788 788 788 788 788 4,169 - -B. Physical Caetiog-nnies (10%) 23 79 79 79 79 79 418

Sab-Total A a B 252 667 867 867 867 867 4,587 _ _C. Price Constagasoses - 33 100 173 243 309 858

Total A a B C 252 900 967 1,040 1,10 L,176 5,445 45 2,441

- 42 - Annex 1Table 6

Page 3

YUGOSLAVIA

TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT

Project Cost Estimate Contractwise(uiSt '000 Equivalent)

Foreign currency expenditures1982 1983 1984 1985 1986 1987 Total Amount

3.Ob PUMPING PLANT

A. Base costs - 647 - - - - 647 -

b. Paysicai Contingencies - - -

Sub-Totai A+ - 647 647C. Price Contingencies - 24 - - - _ 24

lotal s + B + C - 671 - _ _ _ 671 74 497

*.ui SYS1EM OPERATIONAL EQUIPMENT

A. Base Costs - 644 302 - - - 946 -

s. Poysical Contingencies (10%) - 64 30 - - - 94

Sub-Total A + E - 708 332 - - 1,040

C. Price Contingencies _ 27 38 - - - 65

lotal A I B + C - 735 370 - - _ 1,105 65 728

IV. SOLiD WASTE

.01 SANITARY LANDFILL EQUIPMENT

A. Base Costs - - 334 - - 334

B. Physical Contingencies - -

Sub-Total A B - - 334 - - _ 334

C. Price Contingencies _ _ 39 - - - 39

lotal A I B + C - - 373 _ _ - 373 74 275

a

Annex I- 3- Table 6

Page 4

YUGOSLAVIA

TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT

Pro3ect Cost Estimate Contractwise(US$ '000 Equivalent)

Fo,reign Currency Expenditures

1982 1983 1984 1985 1986 1987 Total Foreign Amount

V. TOIAL

.ui WA'LEAR bLPPLY

p A. bass Losts - 2,341 7,361 - - - 9,702 -

b. Physical Contingencles _ 216 703 - - - 919 -

sut-Total A + - 2,557 8,064 - - - 10,621 -

l Price Contingencies - 95 929 - - - 1,024 -

lotal A I B + C 2,652 8,993 - _ - 11,645 44 5,111

c. U bLWAGE COCLECTI1lNAND DISPOSAL

A. suse -osts - 1,228 1,231 2,315 5,125 2,184 12,083 - -

b. Physical Cootingencies 136 136 347 769 327 1,715

-,b-lotai A + B 1,3b4 1,367 2,662 5,894 2,511 13,798 -

C. Price Contingencies - 51 158 530 1,650 896 3,285 -

iotaL A + B C - 1,415 1,525 3,192 7,544 3,407 17,083 49 8,398

S.u. LENtiRAL IHATING

A. Bass ou5ts 4,258 b,9b5 2,1138 1,790 1,790 1,790 18,731 -l. Phyical Contingencles 427 tL33 215 180 1 180 180 1,815 -

cub-Iotal A I B 4,685 7,598 2,353 1,970 1,970 1,970 20,546 - -

C. Pr-ce Contlngencies 285 272 393 551 702 2,203 -

lotal ,, + b + c. 4,685 7,883 2,625 2,363 2,521 2,672 22,749 40 9,394

j.U, SOL5LL WAbSE

A. bsou Costs - - 334 - - - 33- -

B. Psysicau Cont-nge-cies - -

buo-IotL,L A + B - - 334 - - - 334 _ _

L. Price Contingencies - - 39 - 39 - -

io.tl A + B * C - - 373 _ - _ 373 74 275

5.OD TOTAL 5.ol to 5.04

A. luse Costs 4,258 10,534 11,064 4,105 6,915 3,974 40,850B. Physical Contingencies 427 985 1,054 527 949 507 4,449

bsb-Tutal A + B 4,i65 11,519 12,118 4,632 7,864 4,481 45,299 -

C,. Price Contingencies - 431 1,398 923 2 201 1,598 6,551 -

local A + C I G 4,685 11,950 13,516 5,555 10,065 6,079 51,850 44 23,178

Vl. PROJECT MANAGEMtINl AND

uON'IRUCLT1ON SLPEIRV1SION 140 359 405 167 302 182 1,555 33 521

VLl. CONNULIANI ASSLSIANCE

AND TRA1N1iNG - 1,350 1,350 1,800 - - 4,500 39 1,750

VIl. GRAND TOTAL 4,825 13,659 15,271 7,52 2 10,367 6Z261 57,905 25,449

- 44 - Annex 1Table 7

YUGOSLAVIA

TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT

ESTIMATED SCHEDULE OF DISBURSEMENTS

(US$ Millions Equivalent)

Bank Fiscal Year Tuzlaand Semester Semester Cummulative

FY 1983

2nd Semester 3.4 3-4

FY 1984

1st Semester 4.3 7.72nd Semester 3.9 11.6

FY 1985

1st Semester 3.9 15.52nd Semester 2.9 18.4

FY 1986

1st Semester 2.9 21.32nd Semester 2.4 23.7

FY 1987

1st Semester 2.2 25.92nd Semester 1.7 27.6

FY 1988

1st Semester 1.7 29.32nd Semester 0.7 30.0

- 45 - Annex 1

Table 8YUGOSLAVIA

TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT

WORKS ORGANIZATION - KOMPRED (CONSOLIDATED)

INCOME STATEMENTS AND SOURCES AND APPLICATION OF FUNDS ( 1979-1981)

(Prepared by SDK Special Audit Staff)

1979 1980 1981------ In Dinar Millions ----

Revenues 232.6 319.2 446.8

Operating Costs, excluding depreciation 165.7 211.8 322.8Administrative Costs 19.0 26.8 35.6Obligatory Contributions 9.6 11.9 13.3

Total Costs 194.3 250.5 371.7

Working Income 38.3 68.7 75.1Depreciation 16.2 22.3 26.9

Income before interest 22.1 46.4 48.2Other Income 2.5 5.9 16.8Interest Expense (0.7) (9.7) (12.0)

Net Income 23.9 42.6 53.0

Operating Ratio - % 90.5 85.5 89.2

Source & Application of Funds

Sources

Net Income before interest 22.1 46.4 48.2Other Income 2.5 5.9 16.8Depreciation 16.2 22.3 26.9

Internal Funds Generated 40.8 74.6 91.9Long Term Loans 60.3 56.9 65.8Other 2.0 2.0 1.0Sundry (principally Revaluation) 67.7 130.6 15.3

Total Sources 170.8 264.1 174.0

4 Applications

Fixed Assets 113.7 236.7 97.1Debt Service 4.7 12.8 28.6Appropriation to;

Reserve Fund 2.6 3.6 4.9Collective Consumption 13.7 23.3 28.9

Increase in Investments 35.1 4.3 10.0Increase (Decrease) in Working Capital 1.0 (16.6) 4.5

Total Applications 170.8 264.1 174.0

- 46 -

Annex 1Table 9

YUGOSLAVIA

TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT

WORKS ORGANIZATION - KOMPRED (CONSOLIDATED)

BALANCE SHEETS

(Prepared by SDK Special Audit Staff)

1979 1980 1981---- In Dinar Millions -----

Assets

Current Assets

Cash & Banks 55.0 37.1 39.0Accounts Receivable 34.8 49.3 46.6Other Receivables 7.8 3.6 5.9Advance Payments 4.2 6.8 10.6Inventories 24.2 28.0 37.4

Total Current Assets 126.0 124.8 139.5

Fixed Assets

Cost Plus Revaluation 609.9 826.8 1,131.4Less; Accumulated Depreciation (230.3) (296.7) (425.0)Net Operating Assets 379.6 530.1 706.4

Work-in-Progress 181.6 308.6 375.0

Net Fixed Assets 561.2 838.7 1,081.4

Investments 55.9 70.9 75.1Long-Term Receivables 15.0 23.0 30.9Intangible Assets 3.0 2.9 0.2

Total Assets 761.1 1,060.3 1,327.1

Liabilities & Equity

Current Liabilities

Trade Payables 20.0 17.8 15.4Customer Deposits 20.9 12.3 20.6Short-Term Loans 22.0 4.5 -Deferred Sales 8.0 18.7 26.0Other 35.4 59.1 61.1

Total CXurrent Liabilities 106.3 112.4 123.1

Long-Term Loans 123.9 179.2 241.9Deferred Payables 1.5 2.0 4.5

Total Long-Term 125.4 181.2 246.4

Business Fund (Equity) 521.0 754.7 957.6Other Funds (Adjustments) 8.4 12.0 -

Total Liability & Equity 761.1 1,060.3 1,327.1

Working Capital 1.2 1.1 1.1Debt/Equity Ratio 19/81 19/81 20/80Rate of Return N.F.A. - % 4.9 6.5 6.2

- 47 -

Annex 1YUGOSLAVIA Table 10

TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT

WATER SUPPLY COMPONENT

INCOME STATEMENT

Historical Projected1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

Volume Producen (m3

x 106)

Existing System 9.3 10.8 12.1 12.2 12.2 12.2 12.2 12.2 12.2 12.2 12.2New System - 0.9 1.9 2.8 4.1 4.1 4.1

Total Produced 9.3 10.8 12.1 12.2 12.2 13.1 14.1 15.0 16.3 16.3 16.3

Volume Sold (mJ x 100)

Domestic - - 4.1 4.1 4.1 4.5 5.0 5.5 6.0 6.0 6.0Other - 3.2 3.2 3.2 3.6 3.9 4.2 4.8 4.8 4.8

Total Distribution - Tuzia 6.9 7.2 7.3 7.3 7.3 8.1 8.9 9.7 10.8 10.8 10.8

Zivinice 0.5 0.5 0.9 0.7 0.7 0.7 0.8 0.9 0.9 0.9 0.9Lukavac - - 0.7 1.0 1.3 1.3 1.3 1.3 1.3 1.3 1.3Banovici - - - - - - - - -

Total Bulk Sales 0.5 0.5 1.6 1.7 2.0 2.0 2.1 2.2 2.2 2.2 2.2

Unaccounted-For Water - %

Lxisting System - Distribution 35% 33% 32% 26% 24% 23% 22% 21% 20% 20% 20%New System - Prod. Only - - - - - - - - - - -

------------------------------------------------------------------------- __--__--------------------------------------------------------

Taritfs

Distribution - Domestic - m3 - - 4.41 6.01 10.10 16.10 19.35 26.10 28.70 31.60 33.20nistribution - Comi/Ind - m

3- - 13.31 18.15 30.40 48.70 58.40 78.80 86.70 95.40 100.10

Bulk - Zivinice - m3

- - 1.44 5.53 10.10 16.10 19.35 26.10 28.70 31.60 33.20

BulK - Lukavac - mJ - - 3.35 5.53 10.10 16.10 19.35 26.10 28.70 31.60 33.20

…-----------------S---------------------------------------- In Dinar (Millions) --------------------------------------------------------

Revenues

Domestic - Tuzla 7.5 11.1 13.6 24.7 41.4 72.5 96.8 143.6 172.2 189.6 199.2ComlIInd - Tuzla 19.6 38.7 47.3 58.1 97.3 175.3 227.8 331.0 416.2 457.9 480.5

Other - Tuzla 11.8 18.4 36.9 12.5 15.1 17.7 18.4 35.9 38.0 40.5 41.0

Sub-Total Distribution 38.9 68.2 97.8 95.3 153.8 265.5 343.0 510.5 626.4 688.0 720.7

Bulk - Zivinice 0.6 0.7 0.7 3.9 7.1 11.3 15.5 23.5 25.8 28.4 29.9Bulk - Lukavac - - 2.1 5.5 13.1 20.9 25.2 33.9 37.3 41.1 43.2

Sub-Total Bulk Sales 0.6 0.7 2.8 9.4 20.2 32.2 40.7 57.4 63.1 69.5 73.1

Total Revenues 39.5 68.9 100.6 104.7 174.0 297.7 383.7 567.9 689.5 757.5 793.8

Operating Costs

Salaries 13.8 17.5 24.9 28.0 34.2 34.2 37.6 43.8 50.8 58.7 67.6e Energy 2.8 3.9 8.5 9.6 21.0 22.7 23.1 27.0 29.3 31.8 34.6

Maint. & Materials 3.3 1.2 3.7 4.2 5.1 13.0 16.0 18.1 20.4 23.1 26.1Cnemicals - - - - - - 1.8 2.1 2.3 2.7 3.0

Administration & Taxes 5.3 8.3 15.3 17.2 21.1 28.1 34.3 38.8 43.9 49.5 56.0

Other 2.4 5.1 5.3 6.0 7.3 8.5 9.7 11.0 12.4 14.0 15.9

Total Operating Costs 27.6 36.0 57.7 65.0 88.7 106.5 122.5 140.8 159.1 179.8 203.2

Income before Depreciation 11.9 32.9 42.9 39.7 85.3 191.2 261.2 427.1 530.4 577.7 590.6

Depreciationi 6.6 8.9 10.4 13.5 28.5 28.9 59.5 60.0 60.0 60.0 60.8

Income before Interest 5.3 24.0 32.5 26.2 56.8 162.3 201.7 367.1 470.4 517.7 529.8

Interest 0.2 8.8 11.0 18.4 20.5 19.5 17.2 97.2 132.6 126.2 119.0

Net Income 5.1 15.2 21.5 7.8 36.3 142.8 184.5 269.9 337.8 391.5 410.8

Operating Ratio excluding surchargefor Phase II 86.6 65.1 67.7 75.0 67.3 45.5 47.4 35.4 31.8 31.7 33.3

YUGOSLAVIA

TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT

SEWERAGE COMPONENT

INCOME STATEMENT

1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

Volume Billed - Domestic m3

x 106 - 2.74 2.87 3.01 3.14 3.28 3.41 3.58 3.75 3.91 4.08

Volume Billea - Other m3

x 106 - 2.26 2.30 2.33 2.37 2.40 2.44 2.48 2.51 2.55 2.59Volume Billed - New Industrial m

3x 106 - - - - - - - - 1.17 2.34 2.34

Tariff - Domestic - m3

1.00 1.30 1.69 1.85 5.65 6.90 9.65 14.10 14.80 14.80 14.80

'Tariff - Other - m3

3.00 3.90 5.07 5.58 16.65 20.30 28.40 41.50 43.60 43.60 43.60lariff - New Industries - m

3- - - - - - - - 43.60 43.60 43.60

Revenues

Domestic 2.4 3.5 3.8 5.6 17.7 22.6 32.9 50.5 55.5 57.9 60.4Comi/Pub Bldg/Present Ind. 6.9 8.6 14.0 13.0 39.5 48.7 69.3 102.9 109.4 111.2 112.9New Industrial - - - - - - - - 51.0 102.0 102.0

Other (Principally Cleaning) 4.4 5.0 0.4 4.3 6.0 9.0 10.0 13.0 16.7 13.0 17.1 X

Total Revenues 13.7 17.1 18.2 22.9 63.2 80.3 112.2 166.4 232.6 284.1 292.4

Operating Costs

Salaries 2.4 4.4 4.4 5.0 5.2 7.4 8.5 9.5 25.3 28.6 32.4Electric Energy - 1.0 1.5 1.8 1.8 2.7 3.1 3.7 13.6 19.4 22.8Chlemicals - - - - - - - - 10.6 16.4 18.9

Maintenance 3.0 4.0 3.9 5.3 5.5 7.9 9.4 11.0 17.4 24.9 28.8Administration 1.0 1.2 1.3 1.5 1.6 2.3 2.6 2.9 5.2 7.4 8.4I'axes & Legal Contributions 1.1 0.9 1.4 1.6 1.6 2.4 2.9 3.3 8.4 11.4 13.2

All Other 1.2 1.3 1.5 1.0 1.0 6.4 8.3 7.1 2.6 2.9 3.3

'Total Operating Costs 8.7 12.8 14.0 16.2 16.7 29.1 34.8 37.5 83.1 111.0 127.8

Profilt Before Depreciation & Interest 5.0 4.3 4.2 6.7 46.5 51.2 77.4 128.9 149.5 173.1 164.6Depreciation 2.8 2.2 1.8 1.8 1.8 1.8 7.8 7.8 36.5 65.3 67.0

Profit Before Interest 2.2 2.1 2.4 4.9 44.7 49.4 69.6 121.1 113.0 107.8 97.6Interest to Operations - - - - - - - 59.5 81.6 89.0 85.0

Net lncomie 2.2 2.1 2.4 4.9 44.7 49.4 69.6 61.6 31.4 18.8 12.6 v

Operating Ratio: 83.9 87.7 86.8 78.6 29.3 38.5 38.0 27.2 51.4 62.1 72.8

YUGOSLAVIA

TUZLA REGION WAIER SUPPLY AND ENVIRONMENTAL PROJECT

WAI'ER SUPPLY AND SEWERAGE COMPONENT

BALANCE SHEET AS AT DECEMBER 31

In Dinar (Millions)

Historical Projected1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

ASSETS

Cash 30.J 7.3 9.1 31.2 34.8 0.9 20.0 50.0 20.0 50.0 50.0Accounts Receivable - C.sto.ers 14.8 17.5 18.4 19.5 35.6 58.3 79.3 149.9 187.5 223.4 242.5lnventorses 12.9 16.3 19.1 6.7 8.2 14.8 19.3 22.2 36.0 47.6 54.5Other Current Assets 4.0 3.9 4.1 4.1 4.1 2.1 2.1 2.1 2.1 2.1 2.1

Total Courrent Assets 62.0 45.0 50.7 61.5 82.7 76.1 120.7 224.2 245.6 323.1 349.1

FPxeu Assets - Operating 444.7 527.8 694.3 1,039.3 1,053.1 2,372.5 2,390.9 2,390.9 3,769.8 3,843.7 15,278.4Reserve ior Depreciation (18-.1) (227.3) (312.5) (327.8) (358.1) (388.8) (456.1) (523.9) (620.4) (745.7) (873.7)

Net Operating Assets 261.6 300.5 381.8 711.5 695.0 1,983.7 1,934.8 1,867.0 3,149.4 3,098.0 14,404.7WorK-in-Progress 151.6 278.6 345.0 - 451.6 199.3 765.4 1,840.6 3,267.1 7,540.0 _

Net FPxes Assets 413.2 579.1 726.8 711.5 1,146.6 2,183.0 2,700.2 3,707.6 6,416.5 10,638.0 14,404.7

Investments 91.4 84.2 91.9 98.3 16.5 12.2 176.1 307.8 - - -

Other Assets 20.1 21.9 39.4 39.4 39.4 39.4 39.4 39.4 39.4 39.4 39.4

T'OTAL ASSETS 58b.7 710.2 908.8 910.7 1,285.2 2,310.7 3,036.4 4,279.0 6,701.5 11,000.5 14,793.2

LlABILITIES _ EQUITY

Advances - Subsicitig Fund - - - - - 82.5 - - - - -Accounts Payable - Trade 8.4 2.9 3.4 7.3 11.9 14.1 19.6 22.3 30.7 36.8 41.8Accounts Payable - Investment 2.4 17.b 0.9 - 44.1 99.7 46.5 95.9 272.0 424.6 378.0Short-Term Loans 22.0 - - - - - - - - - -Current Mat.ritses - Long-Term Deut - - 15.2 21.3 23.1 25.1 158.8 177.1 186.1 196.3 521.3Other Liabilsties 10.8 18.9 26.8 21.8 16.8 11.8 6,8 1.8 - - -

Total Current LlabiliLes 43.6 39.4 46.3 50.4 95.9 233.2 231.7 297.1 488.8 657.7 941.1

Esisting Debt 116.t 173.0 221.6 200.3 177.2 152.1 124.6 101.5 79.6 59.8 42.0IBRD - - - 162.5 601.4 822.9 1,070.5 1,231.5 1,207.0 1,125.1Export Credit Financing - - - - - - - - - 321.9 445.2Local bankss - - - - - 244.0 273.3 447.1 1,425.6 3,195.1 4,685.2

Total Long-Term Debt 116.6 173.0 221.6 200.3 339.7 997.5 1,220.8 1,619.1 2,736.7 4,783.8 6,297.5

busi-ess Fund 426.4 517.8 640.9 660.0 849.6 1,080.0 1,583.9 2,362.8 3,476.0 5,559.0 7,554.7

Total Eqolty 426.4 517.8 640.9 660.0 849.6 1,080.0 1, 583 .9 2 ,362.8 3 ,476.0 5,559.0 7,554. 7

IOIAL L1AblLI'llLS 4 LQOIJY 586.6 730.2 908.8 910.7 1,285.2 2,310.7 3,036.4 4,279.0 6,701.5 11,000.5 147,93.3

Work-sg Lapital Ratio 1/ 1.4 1.1 1 .1 2. 1 1.1 0.6 1.7 1.9 0.8 0.7 0.8 t DDebt/Eqoisty Ratio 2/ 21/79 25/75 26/74 25/75 30/70 49/51 44/56 43/57 46/54 47/53 47/53Same ot keturn N/A 9.3 10.2 5.7 14.3 15.8 13.8 25.7 23.3 2'LO 7.2lebt Service Coverage - Year 9.3 3.6 2.b 1.4 3.2 5.7 3.7 1.8 1.7 1.9 1.9 s

1/ oclsdes torrenL matsriti-s .f long-tern debt.1 ,,cludes csrre,,L oat flles oL long-term debt.

-50-

YUGOSLAVIA

Annext 1TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT TAble 13

WATER SUPPLY AND SEWERAGE COMPONENTS

SOURC0 AND APPLICATION OP FUNDS

Is liner (lNillioce)

Historical Projected

1979 1980 1981 1982 1983 19N4 1985 1986 1987 1988 1989

SOURCES OF FUNDS

(stereoS Foods Ococcated

Water Sapply 11.9 32.9 42.9 39.7 85.3 191.2 261.2 427.1 530.4 577.7 590.6

S--erag. 5.0 4.3 4.2 6.7 46.5 51.2 77.4 128.9 149.5 173.1 164.6

Total Is-cocaI Fuoda 16.9 37.2 47.1 46.4 131.8 242.4 338.6 556.0 679.9 750.8 755.2

levcstscot Ioncoc - - - 6.4 - - 7.8 29.0 - - -

0ev Loos Foods

Advooce - Sabtidiog Fond - - - - - 82.5 - - -

WatocIBED - - - - 103.4 331.6 200.5 15.1 - - -

Ilport Credit - - - - - - - 311.9 162.3Local Sacks 59.9 56.4 63.9 2 _ 44.0 29.3 154.8 993.9 1,786.8 1,758.4

Sob-Tocal - Wocec 59.9 56.4 63.9 - 103.4 658.1 229.8 169.9 993.9 2,098.7 1,920.7

200.7 - - - - 51.0 82.8 114.8 301.6 224.9 44.9 -

Local.Loans _ - - - - - - - I

Sob-Total - Sacg_ __ 51.0 62.8 114.8 301.6 224.9 44.9

total Loan Foods 59.9 56.4 63.9 _ 154.4 740.9 344.6 471.5 1,218.S 2,143.6 1,920.7

L quity_G-an.

ScIf-lopoo-d Too (1981/85) - - - - - 100.0 - - - -

Sobsbioig Fond (1981/85) - - - - 71.0 - - 100.0 - - -To Sc dofincd - - - - - - - - 562.0 1,656.8 1,554.3

Seco.dary Netoock - Cii.e.s - -_ _ - 8.3 9.7 11.0 __ 15.9 18.0

Sub-Total - Waccc 98.1 89.4 105.5 _ 79.3 9.7 111.0 100.0 562.0 1,672.7 1,572.3

Sccera 5 zLocal lo-os-cics _ _ - _ 29.0 28.5 138.8 347.5 181.9 - -

Sob-Tot-l - Secrage _ _ - _ 29.0 28.5 138.8 347.5 181.9-

local Equiry Gcacts 98.1 89.4 105.5 - 108.3 38.2 249.8 447.5 743.9 1,672.7 1,572.3

TOTAL SOURCES OF FUNDS 174.9 183.0 216.5 52.8 394.5 1,021.5 940.8 1,504.0 ,64_26

4.567.1 4

AFPLICATION OF FUNDS

To Blast

Woter SplProjeot - - - - 318.3 860.4 239.9 32.8 -

th-er Works 134.2 177.0 159.9 - 13.8 16.1 18.4 296.1 2,397.2 4,246.6 3,780.3

Sob-Tocol - Wartc Sopply 134.2 177.0 159.9 _ 332.1 876.5 258.3 328.9 2,397.2 4,246.6 3,780.3

Projct 1 _ _ _ 124.9 166.1 296.5 671.5 323.2

Sob-Total - Scerage _ _ 124-9 166.1 296-5 671-5 323-2 - -

Tocal Plast 134.2 177.0 159.9 _ 457.0 1,042.6 554.8 1,000.4 2,720.4 4,246.6 3,780.3

To Ocbt kecocce

noteocost

Wa te r Sn2Y LGoistiog Debt 0.2 4.4 11.0 18.4 20.5 19.5 17.2 14.7 12.0 9.9 7.9IBRD - - - - - - - 82.5 80.4 77.7 74.4Local Laoos _ _ - _ - _ - _ 40.2 38.6 36.7

Sob-Total - Watcr Supply 0.0 4.4 11.0 18.4 20.5 19.5 17.2 97.2 132.6 126.2 119.0

ScncOaoo100D - - - - - - - 59.5 81.6 89.0 89.0LocoaL Loans - - - - _ - - _ _ - -

Sob-Total - soverogc _ _ - _ - - _ 59.5 81.6 89.0 85.0

Total Isscrcct 0 .2 4.4 11.0 18.4 20.5 19.5 17.2 156.7 214.2 215.2 204.0

A doaoce - Soblidiog Ford - - - - - - 82.5 - - - -

Roisciog Dcbt 1.4 5.0 7.3 15.2 21.3 23.1 29.1 27.5 25.2 21.8 19.01IBRD - - 61.2 65.3 69.6 74.2L.ocal Loans - - -_ _ - - 13.0 15 .4 17. 3

Sob-Total - darer Supply 1.6 5.0 7.3 15.2 21.3 23.1 107.6 88.7 102.3 106.8 111.3

1BRO - - - -_ _- 70.1 74.83 79.7 85.0

Sob-Total - Severage - - - - - - - 79.1 74.8 79.7 85.0

TosaL A=ortiratios 1.4 5.8 7.3 15.2 21.3 23.1 107.8 150.0 177.1 1N6.5 196.3

Total Orbs Scroice 1.0 10.2 18.3 33.6 41.8 42.6 124.8 315.5 391.3 401.7 400.3

Other:

Inocrase (Decrease) - Itocscscscts 52.5 17.27 7.7 4.4 (81.0) (4.59 163.9 131.7 (307.85) Cliscllascocs 5.5 15.9 14.5 - - -- -- -Iscrease (Decreasse Workiog Capital 2.9 112.91 14.1 12.8 122.57 (59.4) 97.3 56.4 (161.3) (01.2) 67.6

TOTAL APPLICATION OF FOODS 174.9 183.0 214.5 52.0 594.5 1,021.5 940.8 1,504.0 2,642.6 4,6. 4,248.2_

T. _ _ __ _ _ __ _ _ _ __ _ _ _ _ _ _ _ __f 5 7 1 , 4 .

YUGOSLAVIA

TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT

CENTRAL HEATING COMPONENT

INCOME STATEMENT

Historical Data Projected

1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

Billing Volumes:

M2

Heated - 3M Ceiling 228.9 247.1 257.7 257.7 257.7 479.1 518.4 564.4 686.2 765.9 809.8- - - - 479.1 518.4 564.4 686.2 765.9 809.8 868.4

M2

Heated - 3M Ceiling - - - - 97.3 121.9 129.6 132.4 150.6 156.9 160.0

66.8 93.3 97.3 97.3 121.9 129.6 132.4 150.6 156.9 160.0 153.2

Volumes: End of Year

M2

Heated - Old system 295.7 340.4 355.0 355.0 355.0 355.0 316.8 316.8 316.8 316.8 215.6M2

Heated - New system - - - - 246.0 293.0 380.0 520.0 606.0 653.0 806.0

Tariff per M2

per month - Domestic 11.00 14.65 19.37 30.22 49.65 67.00 80.40 92.45 99.85 104.85 110.10

Tariff per M2

per month - Other 22.00 29.30 38.74 60.43 99.30 134.00 160.80 184.90 199.70 209.70 220.20

--------------------------------------------------------------- __------------__--------------------------------------------------------------__------------

…----------------------------------------------------------------------- In Millions of Dinars -----------------------------------------------------------

Revenues

Domestic Heating (3M) 17.6 24.5 35.3 46.7 109.7 200.5 261.2 346.9 435.0 495.6 554.3

All Other Heating (3M) 10.2 18.5 22.0 35.3 65.3 101.1 126.4 157.0 184.2 199.4 206.9

Miscellaneous (Internal Maint.) 7.0 8.5 14.6 14.6 23.1 27.2 38.4 42.3 45.0 45.0 45.0

Total Revenues 34.8 51.5 71.9 96.6 198.1 328.8 426.0 546.2 664.2 740.0 806.2

Operating Costs

Salaries 8.4 9.8 14.0 15.8 22.6 26.8 30.3 34.7 41.5 49.0 53.0Purchased Heat 5.4 - - - 16.2 41.8 59.5 90.1 127.4 160.6 210.6

Coal 7.6 19.4 22.5 25.3 30.9 36.3 39.1 41.7 47.2 53.3 50.6Transportation (Coal) 1.8 3.8 6.3 7.0 8.7 10.2 11.0 11.6 13.1 14.8 14.0

Energy 1.2 2.6 4.2 4.7 5.8 6.8 7.3 7.7 8.7 9.8 9.3

Mat'ls., Maint. & Control Services 4.3 5.5 11.3 12.7 19.5 28.5 34.4 43.2 55.1 69.2 77.6

Taxes & Contributions 1.3 1.6 2.1 3.3 5.1 7.6 9.2 12.2 15.0 17.8 20.7

Administration 1.5 2.0 2.3 2.6 4.0 5.8 7.0 9.2 11.3 13.3 15.3

Other 1.0 1.3 3.0 3.4 16.1 14.1 36.6 37.4 46.2 29.4 28.7

Provision Bad Debts - - - 4.4 6.5 11.6 12.0 22.2 25.5 30.4 34.0

Total Operating Cost 32.5 46.0 65.7 79.2 135.4 189.5 246.4 310.0 391.0 447.6 513.8

Income Before Depreciation 2.3 5.5 6.2 17.4 62.7 139.3 179.6 236.2 273.2 292.4 292.4

Depreciation 1.5 4.3 5.3 8.3 39.7 67.9 75.0 88.0 101.3 114.6 127.0

Income Before Interest 0.8 1.2 0.9 9.1 23.0 71.4 104.6 148.2 171.9 177.8 165.4

Interest - 0.5 0.2 0.2 0.2 0.2 15.0 118.9 123.7 123.6 117.7

Net Income 0.8 0.7 0.7 8.9 22.8 71.2 89.6 29.3 48.2 54.2 47.7 (

Operating Ratio 97.7 97.7 98.7 90.6 88.4 78.3 75.4 72.9 74.1 76.0 79.5

YUGOSLAVIA

TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT

CENTRAL HEATING COMPONENT

BALANCE SHEETS AS AT DECEMBER 31, 1979-1989

In Millions of Dinars

Historical Projected1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

ASSETS:

Cash 2.8 5.5 5.1 7.1 8.3 2.5 10.0 10.0 20.0 20.0 25.0Accounts Receivable 7.0 12.3 17.8 24.1 49.5 82.2 106.5 136.5 166.1 185.0 201.6Inventories 1.6 3.9 8.0 9.0 13.8 20.2 24.4 30.7 39.1 49.1 55.1Other 3.7 1.8 1.2 1.2 1.2 1.3 1.3 1.4 1.4 1.5 1.5

Total Current Assets 15.1 23.5 32.1 41.4 72.8 106.2 142.2 178.6 226.6 255.6 283.2

Fixed Assets in Operation 57.1 183.6 258.2 258.2 1,510.2 1,509.7 1,798.8 2,109.7 2,389.7 2,762.3 2,747.0Less: Res. for Depreciation (17.0) (25.7) (41.8) (50.1) (89.8) (157.2) (206.6) (294.6) (395.9) (510.5) (596.3)

Net Fixed Assets in Operation 40.1 157.9 216.4 208.1 1,420.4 1,352.5 1,592.2 1,815.1 1,993.8 2,251.8 2,150.7

Work-in-Progress _ - - 480.9 - 316.9 310.9 280.0 312.4 - -

Total Net Fixed Assets 40.1 .157.9 216.4 689.0 1,420.4 1,669.4 1,903.1 2,095.1 2,306.2 2,251.8 2,150.7

Investments - - 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5Other Assets 6.4 12.7 10.3 10.3 2.1 67.6 207.5 202.6 211.0 248.1 311.5

TOTAL ASSETS 61.6 194.1 259.3 741.2 1,495.8 1,843.7 2,253.3 2,476.8 2,744.3 2,756.0 2,745.9

LIABILITIES & EQUITY

Accounts Payable - Operations 3.1 4.0 7.7 9.5 16.2 22.7 29.6 37.2 46.9 53.7 61.7Current Maturities Long-Term Debt - - - - 1.0 6.1 94.2 100.6 107.4 114.1 122.0Accounts Payable - Project - - - 48.1 75.0 16.1 - - 25.3 - -Other Accounts Payable 5.4 13.1 17.1 17.1 17.1 17.1 17.1 17.1 17.1 17.1 17.1

Short-term Adv.-Self-Imp. Tax - - - 35.2 67.0 - - - - - -

Total Current Liabilities 8.5 17.1 24.8 109.9 176.3 62.0 140.9 154.9 196.7 184.9 200.8

Long-Term Debt - Existing 4.8 4.8 4.8 4.8 3.8 2.8 1.8 0.8 - - -Long-Term Debt - IBRD - - - - 413.8 642.5 741.1 779.4 824.7 802.2 747.6Long-Term Debt - Other - - _ 51.5 111.8 120.1 114.3 107.9 100.7 92.5 83.4

Total Long-Term Debt 4.8 4.8 4.8 56.3 529.4 765.4 857.2 888.1 925.4 894.7 831.0

Business Fund 48.2 172.5 229.9 575.0 790.1 1,016.3 1,255.2 4

38 1 2 1,676.4 1,714.1

Total Equity 48.2 172.5 229.9 575.0 790.1 1,016.3 1,255.2 1,433.8 1,622.2 1,676.4 1,714.1

TOTAL LIABILITIES & EQUITY 61.5 194.4 259.5 741.2 1,495.8 1,843.7 2,253.3 2,476.8 2,744.3 2,756.0 2,745.9

Rate-of-Return NA 1.5 0.5 4.3 2.8 5.1 7.1 8.7 9.0 8.4 7.5 Current Ratio I/ 1.8 1.4 1.3 0.6 0.7 1.9 3.0 3.3 2.5 3.6 3.6 oDebt/Equity Ratio 2/ 9/91 3/97 2/98 9/91 40/60 43/57 43/57 41/59 39/61 38/62 36/64 X

Debt Service Coverage - Year 4.6 11.0 31.0 87.0 373.5 2.0 8.5 1.1 1.2 1.3 1.3

1/ Excludes current maturities of long-term debt.2/ Includes current maturities of long-term debt.

4h Ar YUGOSLAVIA c

TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT

CENTRAL HEATING COMPONENT

SOURCE 4 APPLICATION OF FUNDS STATEMENT

In Millions of Dinars

Historical Projected1979 1980 1981 1982 1983 1984 1985 1986 1987 1988 1989

SOURCES OP PUNDS

Net Profit 0.8 0.7 0.7 8.9 22.8 71.2 89.6 29.3 48.2 54.2 47.7Interest Paid - 0.5 0.2 0.2 0.2 0.2 15.0 118.9 123.7 123.6 117.7Depreciation 1.5 4.3 5.3 8.3 39.7 67.9 75.0 88.0 101.3 114.6 127.0

Internal Cash Generation 2.3 5.5 6.2 17.4 62.7 139.3 179.6 236.2 273.2 292.4 292.4

Short-term Adv.-Self Imp. Tax - - - 35.2 31.8 - - - - - -

Long-Tern Loana

IBRD - - - - 393.1 194.2 150.5 75.7 85.8 23.2 _Local Loan _ - _ 51.5 60.3 13.4 - -_

Total Long-Ter Loans - - _ 51.5 453.4 207.6 150.5 75.7 85.8 23.2

Equity - City of Tuols 7.3 124.3 57.4 - - - - - - -Equity - Subsiding Fund - - - 80.0 60.0 110.0 100.5 104.3 95.2Equity - Land Use Tax _ - - 256.2 132.3 45.0 45.0 45.0 45.0

Sub-Total - Equity 7.3 124.3 57.4 336.2 192.3 155.0 145.5 149.3 140.2 - -

Sale of Assets . _ - - - - 6.0 - 22.4

TOTAL SOURCES OF FUNDS 9.6 129.8 63.6 440.3 740.2 501.9 481.6 461.2 499.2 313.6 314.8

APPLICATION OF FUNDS

To; Plant

Project - - - 355.4 636.1 282.4 275.4 224.2 253.5Non-Project 8.7 126.5 74.6 125.5 114.3 - -

Total Fixed assets 8.7 126.5 74.6 480.9 750.4 282.4 275.4 224.2 253.5

To: Debt Service

Short-term Adv.-Self Imp. Tax - - - - - 67.0 - - -

Aaorti.ation

Existing Loans 0.5 - - - - 1.0 1.0 1.0 1.0 0.8 -IB8D - - - - - - - 87.4 93.2 99.4 105.9Local Loan - - _ _ _ - 5.1 5.8 6.4 7.2 8.2

Slb-Total Aa-ortization 0.5 - _ _ - 1.0 6.1 94.2 100.6 107.4 114.1

Interest

Existing Loans - 0.5 0.2 0.2 0.2 0.2 0.1 0.1 0.1 - -IBRD - - - - - - - 104.6 110.0 110.8 105.9Local Loan . . . - - - 14.9 14.2 13.6 12.8 11.8

Slb-Total Interest _ 0.5 0.2 0.2 0.2 0.2 15.0 118.9 123.7 123.6 117.7

Total Debt Service 0.5 0.5 0.2 0.2 0.2 68.2 21.1 213.1 224.3 231.0 231.8

Other:

Increase (Decrease) Investments 0.3 6.3 (1.9) - (8.2) 65.5 139.9 (4.9) 8.4 37.1 63.4Incre1 se (Decrease) Working Capital 1.3 (0.2) 0.9 (40.6) (2.2) 85.8 45.2 28.8 13.0 47.5 19.6 o M..cell.neo.u (1.2) (3.3) (10.2) (0.2) - - - F

TOTAL APPLICATION OF FUNDS 9.6 129.8 63.6 440.3 740.2 501.9 481.6 461.2 499.2 315.6 314.8 ,

YUGOSLAViA

TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT

INTERNAL RATE OF RETURN

WATER SUPPLY & SEWERAGE COMPONENTS

Rate-of-Return Incremental Cost Incremental CostWater Supply Project Water Supply Sewerage

Volume All Cost Benefits Volume All Costs CostsYear M3 x 106 D x 106 (D x 106) (M3 x 106) (D x 106) Volume Treatment

1982 - 160.5 - - 241.4 0.2 0.3

1983 0.3 470.3 5.9 0.3 551.2 0.3 88.31984 1.1 3.6 21.9 1.1 110.9 0.5 106.51985 2.0 6.6 39.9 2.0 163.9 0.7 167.71986 2.9 9.6 57.9 2.9 1,131.3 3.7 336.8

1987 4.0 13.2 79.8 4.0 1,680.3 7.4 165.61988 4.0 13.2 79.8 4.0 1,256.7 8.8 23.51989 4.0 13.2 79.8 7.8 1.1 9.0 23.8

1990 4.0 13.2 79.8 8.1 1.6 9.2 24.11991 4.0 13.2 79.8 8.5 772.1 9.5 24.41992 4.0 13.2 79.8 9.1 772.6 9.7 48.4

1993 4.0 13.2 79.8 9.6 4.3 10.0 75.41994 4.0 13.2 79.8 13.9 4.6 10.2 46.9

1995 4.0 13.2 79.8 14.6 5.1 10.5 25.6

1996 4.0 13.2 79.8 15.4 22.5 10.8 25.9 11997 4.0 13.2 79.8 16.1 24.1 11.1 26.21998 4.0 13.2 79.8 16.9 24.7 11.4 26.51999 4.0 13.2 79.8 17.7 31.7 11.7 26.82000 4.0 13.2 79.8 18.1 32.7 12.0 27.12001 4.0 13.2 79.8 19.0 34.8 12.4 27.42002 4.0 13.2 79.8 19.6 35.7 12.7 27.72003 4.0 13.2 79.8 20.5 36.8 13.1 28.02004 4.0 13.2 79.8 21.1 46.5 13.5 28.32005 4.0 13.2 79.8 22.3 48.6 13.9 28.62006 4.0 13.2 79.8 23.2 49.5 14.3 28.92007 4.0 13.2 79.8 24.0 50.6 14.7 29.22008 4.0 13.2 79.8 24.9 51.6 15.2 29.52009 4.0 13.2 79.8 25.7 53.0 15.7 29.82010 4.0 13.2 79.8 26.4 54.0 16.2 30.12011 4.0 13.2 79.8 27.1 55.1 16.7 30.42012 4.0 13.2 79.8 27.8 55.9 17.2 30.72013 4.0 13.2 79.8 28.5 56.7 17.7 31.0

2014 4.0 13.2 79.8 29.2 57.8 18.3 31.32015 4.0 13.2 79.8 29.9 58.7 18.9 31.6

2016 4.0 13.2 79.8 30.6 59.6 19.3 31.9

2017 4.0 13.2 79.8 31.4 60.5 19.9 32.22018 4.0 13.2 79.8 32.2 61.4 20.4 32.5 2019 4.0 13.2 79.8 33.0 62.3 21.0 32.8 I "2020 4.0 13.2 79.8 33.8 63.2 21.5 33.1 4

2021 4.0 13.2 79.8 34.6 64.1 22.0 33.4

Rate-of-Return Water Supply Project - 10.9%

Average Incremental Cost - Water Supply - Din. 45.59/1M3

Average Incremental Cost - Sewerage (both) - Din. 10.63/M3

YUGOSLAVIA

TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT

CENTRAL HEATING COMPONENT

DATA FOR INCREMENTAL RATE OF RETURN AND AVERAGE INCREMENTAL COST

Investment Operating Costs BenefitsSubstitution

Incremental Project Other Total New of Existing Net Sale of Self-imposedYear Volumes Cost Investment Investment System System Operational Revenues Plant Tax

1982 - 280.9 104.2 385.1 - - - 220.01983 246.0 457.1 93.4 550.5 18.2 - 18.2 65.4 - 50.3

1984 293.0 140.0 - 141.0 40.3 - 40.3 86.2 - 50.31985 341.8 117.8 5.6 123.4 49.1 (3.5) 45.6 106.8 3.0 50.3

1986 481.8 117.8 - 117.8 71.3 (7.0) 64.3 149.8 - 50.3

1987 567.8 117.8 - 117.8 83.3 (7.0) 76.3 203.9 - 50.31988 614.8 - - - 90.1 (7.0) 83.1 204.8 - 50.3

1989 66b.6 - 27.5 27.5 108.6 (16.6) 92.0 206.0 22.4 50.3

1990 713.3 - 69.5 69.5 143.6 (46.3) 97.3 219.7 - 50.31991 793.3 - 61.6 61.6 154.4 (66.5) 87.9 243.2 - 50.3

1992 867.3 - 68.5 68.5 164.4 (66.5) 97.9 264.9 - 50.31993 993.3 56.9 56.9 181.4 - 181.4 292.0 - -1994 1,060.3 - 45.3 45.3 190.4 - 190.4 311.8 - -

1995 1,127.3 - 44.1 44.1 199.4 - 199.4 331.4 - -

1996 1,187.3 - 41.8 41.8 207.5 - 207.5 349.1 - -

1997 1,253.3 - 36.0 36.0 216.4 - 216.4 368.4 - -1998 1,300.3 - 32.5 32.5 222.7 - 222.7 382.2 - -1999 1,347.3 - 32.5 32.5 229.1 - 229.1 396.1 - -2000 1,393.3 - 32.5 32.5 235.3 - 235.3 417.6 - -2001 1,440.3 - 32.5 32.5 241.6 - 241.6 423.4 - -

2002 1,487.3 - 32.5 32.5 247.9 - 247.9 437.3 - -2003 1,533.3 - 36.0 36.0 254.1 - 254.1 450.7 - -

2004 1,580.3 - 31.3 31.3 260.4 - 260.4 464.5 - -2005 1,647.3 - 11.6 11.6 269.5 - 269.5 484.3 - -2006 1,647.3 - - - 269.5 - 269.5 484.3 - -2007 1,647.3 - - - 269.5 - 269.5 484.3 - -2008 1,647.3 - - - 269.5 - 269.5 484.3 - -2009 1,647.3 - - - 269.5 - 269.5 484.3 - -2010 1,647.3 - - - 269.5 - 269.5 484.3 - -2011 1,647.3 - - - 269.5 - 269.5 484.3 - -2012 1,647.3 - - - 269.5 - 269.5 484.3 - -

2013 1,647.3 - - - 269.5 - 269.5 484.3 - -2014 1,647.3 - - - 269.5 - 269.5 484.3 - -2015 1,647.3 - - - 269.5 - 269.5 484.3 - -2016 1,647.3 - - - 269.5 - 269.5 484.3 - -2017 1,647.3 - - - 269.5 - 269.5 484.3 - -2018 1,647.3 - - - 269.5 - 269.5 484.3 - -2019 1,647.3 - - - 269.5 - 269.5 484.3 - -

2020 1,647.3 - - - 269.5 - 269.5 484.3 - -

2021 1,647.3 - - - 269.5 - 269.5 484.3 - -

Rate of Return 13.1%Average Incremental Cost Din. 33.40/m

2/month

- 56 - Annex 2Page 1 of 2

YUGOSLAVIA

TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT

Assumptions for Financial Forecasts

A. Rates of Inflation

1. All the financial projections are in current dinars. The same ratesof inflation as used for capital investment costs (para. 3.21) have also beenused in estimating the operational and maintenance costs.

B. Income Statement

2. Tariffs are consistent with the revenue covenant and were devised tocover operating costs, the greater of debt service or depreciation, andappropriate increases to working capital.

3. Revenues generated from other service related functions such asmaintenance of the internal plumbing systems (water supply and centralheating), and the cleaning of internal sewerage systems have been forecast togrow at one-half the rate of the increase in the volume supplied, collected orheated.

4. Projections of the costs of operation of each project component weredeveloped as follows:

(a) Water Supply: Additional staffing requirements, chemical, energyand maintenance costs for the project component were developed byKOMPRED staff. Existing unit production costs were held constant(in real terms) while distribution costs varied with increasedvolume. All costs have been adjusted for forecast internalinflation.

(b) Sewerage: Costs were projected separately for the collectionsystem, and for the project treatment plant. The costs forsalaries, chemicals and maintenance have been forecast toincrease in accordance with volume, adjusted for internalinflation. For the treatment plant, salaries, chemical )

costs, and electric energy were developed from data in thefeasibility reports, and adjusted for internal inflation. Othercosts were forecast by Kompred personnel based upon engineeringand financial data.

Annex 2Page 2 of 2

(c) Central Heating: Again, costs were developed for the new projectsystem and separately for the existing systems. New personnelwere added for maintenance of the new system, as well asmaterials for that purpose. The cost of heated water to besupplied by the thermoelectric power plant was taken from theApril 1982 contract for that service. Since the existing systemswere operating at full capacity in 1981, the costs for fuel,transport of ashes, personnel and maintenance were simplyadjusted for internal inflation until 1985, when the cost ofoperating the existing 5MW system was eliminated because theboiler house was substituted by the new system; the remaining twoexisting units were operated until 1989 (15MW system) and 1990(32MW system) at which dates both cease operations. Other costswere developed by Kompred personnel.

(d) Depreciation: Depreciation costs were developed on the basis ofglobal rates for existing systems and separately for the newproject systems as follows:

Water Supply Sewerage Central Heating

Existing Systems 3.5%/Year 2.0%/Year 4.5%/YearNew System 3.0%/Year 4.2%/Year 4.5%/YearSecondary Network 3.0%/Year 2.0%/Year

C. Balance Sheet

5. Fixed assets in Yugoslavia are revalued from time to time as directedby the Federal Government. Interest has been capitalized during theconstruction period.

6. Inventories were related to chemical and maintenance material costs,and represent approximately two months supply.

7. Receivables. Customers accounts were allowed to increase to twomonths billing (water supply/sewerage) and one and one-half months billing(central heating) and were then held at that level.

8. Accounts Payable. These were segregated into: (a) normal operatingpayables (1 1/2 months of annual operating costs excluding depreciation); (b)project related payables - one months construction costs - and retentionmonies; and (c) payables specifically related to finance which were based uponthe terms of financing involved.

9. Long-term debt. In addition to the basic terms of the financing, theforeign debt (IBRD and supplier credits) funds used were revalued inaccordance with the relationship between foreign and local inflation.

- 58 - Annex 3

Page 1 of 2

YUGOSLVAIA

TUZLA REGION WATER SUPPLY AND ENVIRONMENTAL PROJECT

Additional Information Available in Project File

A. LEGAL DOCUMENTS

A-1: Statutes of KOMPRED

A-2:A Agreement between the Thermo-power Station and KOMPRED covering:(a) long-term supply of hot water; and (b) the cost per squaremeter of heated surface of that water.

A-3: Approval by the Republic Executive Council of Allocations from theSubsiding Fund for the Central Heating, Sewerage and Water SupplyPrograms.

A-4: Agreement of the Parties to Appropriate the Land Tax for theCentral Heating Project.

A-5: Self-management Agreement, Regulating the Proportional Distributionof Costs of Investments and Operations between KOMPRED and theIndustrial Users of the Sewage Treatment Works. Protocol andPreliminary Investment Cost Distribution.

A-6: Bank Guarantee for Cost Overruns on all Project Components.

A-7: Self-management Agreement between the Municipalities Who WillParticipate in the Regional Water Supply Component.

B. STUDIES

B-1: UNDP/WHO, Water Supply and Water Quality Protection Studies, byPaul W. Eastman, (October 20-27, 1980).

B-2: UNDP/WHO, Water Supply and Reduction of Water Pollution in theSpreca River Basin, June 27, 1980.

B-3: UNDP/WHO, Reduction of Water Pollution in the Spreca River Basin inBosnia and Herzegovina, January 1981.

- 59 - Annex 3Page 2 of 2

B-4: KOMPRED, Analysis of Specific Parameters of Health in the Populationin the Region of Tuzla, September 1981.

B-5: KOMPRED, Report on Measuring Air Pollution in the Region of Tuzla,July 1981.

B-6: Reports on Central Heating System:

- Rapport Technique sur le Projet de Chauffage Urbain de Tuzla enYugoslavie (February 1981).

- Rapport Technique sur le Projet de Chauffage Urbain de Tuzla enYugoslavie (September 1981).

- Operational Plan of the Central Heating System Construction in Tuzla(September 1981).

- Analysis of the Possibility for Tuzla Town Heating with ElectricEnergy and the Republic Energy Balance Review (November 1981).

- Plan of Buildings connecting to the Central Heating System in Tuzla(January 1982).

B-7: UNDP/WHO, Reduction of Water Pollution in the Spreca River Basin inBosnia and Hercegovina, prepared by DHV, February 1982.

B-8: Review of Elaborations in the Study Comparison of Variants, WaterSupply, prepared by Energoinvest, January 1982.

B-9: Water Supply for Association of Tuzla Region Communes, FeasibilityReport, prepared by Energoinvest, May 1982.

B-10t Memo on the Design of Dam and Tunnel for Tuzla Water Supply, preparedby Mr. Werner, consultant (July 1982).

B-ll: Contract for Project Management and Construction Supervision.

B-12: TOR for Tariff Study.

C. SELECTED WORKING PAPERS AND OTHER DOCUMENTS

C-1: Consultant Agreement for Detailed Engineering, Water Supply.

C-2: Consultant Agreement for Construction Supervision, Central HeatingSystem.

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