Report No. 1686-KE FILE COPYKenyaAppraisal of theNairobi Water Supply Project 11January 25, 1978

Energy & Water Supply DivisionEastern Africa Regional Office

FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties. Its contents may nototherwise be disclosed without World Bank authorization.

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KENYA

APPRAISAL OF THE NA]iROBI WATER SUPPLY PROJECT II

CURRENCY EQUIVALENTS

Currency Unit = Kenyan Shilling (KSh)KSh 20 = Kenyan Pound (KE)*KE 1.00 - US$ 2.40US$ 1.Q0 = KSh 8.35KSh 1.00 = US$ 0.12KE 1 Atllion - US$ 2.4 millionUS$ 1 million = KE 417,000

*The KiE is-no longer used as a unit of currency but is usedin accounting, economics and reporting as a convenient unitof value or account.

WEIGHI'S AND MEASURES

kg kilogram (2.205 lbs)mm = millimeter (0.03937 inches)cm = centimeter (0.3937 inches)m - meterkm = kilometer (0.62 miles)cm2 = square centimeterkm2 = square kilometer (0.386 square miles)m3 = cubic meter (220 Imperial gallons

or 264 US gallons)1 = liter (0.220 Imperial gallons

or 0.264 US gallons)1/cd = liters per capita per day1/sec = liters per sec. (19,000 Imrerial

gallons per day)n3/sec = cubic meters per sec. (19.0 million

Imperial gallons per day or86,400 m3/day)

m3/day = cubic meters per dayIg = Imperial gallon (4.545 1)IMgd = million Imperial gallons per day

(4545 m3/day)KSh 1.00/1000 Ig = KSh 0.220/m3

KSh 1.00/m3 = KSh 4.545/1000 Ig

FOR OFFICIAL USE ONLYABBREVIATIONS AND ACRONYiMS

CPM = Critical Path Method

EAP&L = East African Power & Lighting Co. Ltd.

Government = Government of KenyaGDP Gross Domestic ProductGPT = Graduated Personal Tax

HHS = Howard Humphreys & Sons

IMF = International Monetary FundMOA = Ministry of Agriculture

MLG = Ministry for Local GovernmentMWD = Ministry of Water DevelopmentNCC = City Council of Nairobi

OPEC = OPEC Special FundSaudi Fund = Saudi Fund for Development

SIDA = Swedish International Development AuthorityUNICEF = United Nations Children's FundUNDP = United Nations Development ProgrammeWAB = Water Apportionment Board of MWDWD = Water Department of MWD

WHO - World Health OrganizationWSD - Water & Sewerage Department of NCC

FISCAL YEAR

January 1 - December 31

This document has a restricted distribution and may be used by recipients only :n the performanceof their official duties. Its contents may not otherwise be disclosed without World Bank authorization.

I

KENYAX

APPRAISAL OF THE NAIROBI WATER SUPPLY PROJECT II

,x4 JTABLE OF CONTENTS

Page No.

SUMMARY AND CONCLUSIONS ................................. i - ii

INTRODUCTION. 1

II. THE SECTOR. 1

General .....-.------------------------- ISector Legislation and Organization. 2Urban Water Supply .............................. 3Rural Water Supply. 3Sewerage Systems. 3Past Expenditures on Water Supplies & Sewerage 3Technical and Financial Assistance .4Development Constraints and Problem Areas. 4Future Sector Development. 5

III. THE PROJ..T............................................ 5

Description ........................................... 5Cost Estimates ....................................... 6Loani Amounts ..... .................................... 8Detail Design and Construction Supervision .8Procurement and Construction .9Project Expenditures, Loan Disbursements andClosinag Date .10

Land Acquisition and Rights-of-Way .11Urban Poor ........................................... 11Ecological Aspects ................................... 12

IV. JUSTIFICATION .................. 12

The Need for the Project ............................. 12Return on Investment ................................. 14

This report was prepared by Messrs. P. Callejas and N. Tin

Table of Contents (cont'd)

Page No.

V. THE BORROWER. ........... 15

The Borrower .15WSD - Organization, Management and Staff .16Personnel Development .......................... 17Accounting and Audit .......................... 17Billing and Collection ........................... ,,. 18Project Monitoring System ........................... ,,.18Risks ., 19

VI. FINANCIAL ASPECTS .19

Introduction .19Financial Condition of NCC .19Past Operating Results of WSD .21Present Financial Position of WSD .22Financing Plan .23Water and Sewerage Tariffs .................................. 24Future Operations and Financial Position of WSD .24

VII AGREEMENTS REACHED AND RECO MENDATIONS .25

ANNEXES

1. The Water Supply and Sewerage Sector2. Existing Water Supply and Sewerage Systems3. Water Production Requirements and Capacity4. Project Description5. Cost Estimates6. Project Construction Schedule7. Annual Project Expenditures and Expected Price Increases8. Proposed Allocation of Bank Loan Proceeds9. Estimated Schedule of Disbursements from Bank Loan10. Average Incremental Cost of Water Supply11. Return on Investment and Sensitivity Analysis12. Organization Charts13. Financial Condition of Nairobi City Council14. Actual Income Statements - Water & Sewerage Operations

1971 - 197615. Actual Fund Flow Statements - Water & Sewerage Operations

1971 - 197616. Actual Balance Sheets - Water & Sewerage Operations

1971 - 197617. Estimated Financing Plan for 1977 - 198118. Estimated Funds Flow Statements - Water & Sewerage Operations

1977 - 198519. Estimated Income Statements - Water & Sewerage Operations

1977 - 198520. Estimated Balance Sheets - Water & Sewerage Operations

1977 - 198521. Notes and Assumpticns on Financial Statements and

Projections22. Estimated Annual Rate of Return 1977 - 198523. Preser.t Water and Sewerage Tariffs24. Project Monitoring Indicators

MAPS

IBRD - 12981 - Nairobi Water Supply Project II:Water Sources, Treatment and Transmission Facilities

IBRD - 12982 - Nairobi Water Supply Project II:Distribution Zones

KENYA

APPRAISAL OF NAIROBI WATER SUPPLY PROJECT II

SUMMARY AND CONCLUSIONS

i. This report covers the appraisal of a water supply project forNairobi, Kenya, for which a Bank loan of US$30.0 million is proposed.Cofinancing by the Saudi Fund for Development (US$25.0 million equivalent)and by the OPEC Special Fund (US$5.5 million equivalent) has been arranged.

ii. The borrower would be the City Council of Nairobi (NCC) and theloan would be guaranteed by the Government of Kenya. The project wouldbe carried out by the Water and Sewerage Department (WSD) of NCC.

iii. Nairobi is in a continuing period of rapid population growth ofabout 7% per annum. The total 1976 population was about 790,000. The cityis the largest urban community in Kenya and the center of government,commerce, industry, education and tourism.

iv. Development of the water supply system of Nairobi has generally keptpace with the growth of demand. The most recent major expansion, substan-tially completed in 1976, was made with financial assistance from the Bank(Loan 714-KE). Existing water supply service is good in the portions ofthe city served by the WSD system although there are isolated exceptions.The present system covers somewhat less than half of the area within thecity boundary and serves approximately 82% (600,000) of the total population.

By 1980, existing capacity will be fully utilized and the facilities addedby the proposed project will be needed.

V. Upon completion in 1981, the project would increase water productionand transmission capacity about 80%. The project would include a four-yeartime slice of the distribution program necessary to utilize the increasedsupply effectively. This distribution work would continue until totalsupply capacity would be utilized fully in about 1988 when approximately900,000 additional people would be served.

vi. The estimated cost of the project is about KE 32.5 million(equivalent to about US$78 million) before interest and commitment chargesduring construction. The foreign exchange costs would be about US$ 45million equivalent (58%). The proposed Bank loan would finance about 38%of these project costs, and the OPEC and Saudi Fund contributions, about40%. The US$17.5 million balance of the project expenditures (22%) wouldbe provided by NCC from funds generated by WSD operations. Interest andother charges on the loans also would be met by NCC.

vii. The project would be carried out by WSD with the assistance ofengineering consultants. The arrangements for design, procurement,

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construction supervision, and overall project management are suitable.The project is technically sound and the estimated cost and time scheduleare realistic.

viii. All supply and construction contracts would be awarded on thebasis of international competitive bidding in accordance with proceduressatisfactory to the Bank. A preference of 15% or the applicable customsduty, whichever is lower, would be allowed on the bids of local manufacturersfor supply contracts financed by the Bank. Also a preference of 7-1/2%would be allowed on bids by local firms for construction contracts. However,some of the smaller pipes are the only goods manufactured locally which areapt to be provided through the supply contracts. Substantially all largeconstruction contracts are expected to be awarded to foreign firms withsubsidiaries in Kenya. Some of the subcontracts and contracts for distributionworks can be expected to go to bona fide local contractors.

ix. Despite continuous staffing problems, WSD's performance is satis-factory and shows a slow but steady rate of improvement. After a slow start,performance on the previously financed project has been good with theexception of timely preparation of audited financial reports. A trainingprogram incorporated in the new project should help to ease staff problems onboth the engineering and the financial sides. Technical assistance in theproject would improve the accounting and management information systems of WSD.

X. The financial results of WSD operations have been good with theexception of a period in 1973 and 1974 when the rate of return for watersupply operations fell below the 7.5% (of annually revalued gross-fixed assetsin operation) required in the 714-KE Loan Agreement. Tariff increases in1975 and again in 1976 corrected the situation; the rate of return for 1975 wasabout 7.5% and for 1976 about 8.7%. The return for combined water supply andsewerage operations for 1975 and 1976 was 7.5% and 8.6%, respectively.

xi. Another tariff increase is required about mid-1978 to bringcharges to the approximate level of the average incremental costs ofservice. With this increase, the internal rate of return of the proposedproject should be between 10% and 11%.

xii. NCC's overall financial position has deteriorated since 1974 whenits revenue base was cropped by government action repealing the graduatedpersonal tax (GPT). This situation threatens the financial security andintegrity of the water supply and sewerage operations since reservesrequired for operations and system extensions are exposed for tapping byNCC for other purposes. Therefore, a condition for lending is a commit-ment by NCC and the Government that revenues generated from WSD's operationswould be used solely for the operation, maintenance and development ofwater supply and sewerage services, except that NCC could borrow smallamounts for short terms. In addition, returns in excess of 7.5% would,under certain conditions, be available for transfer to other operationsof NCC.

xiii. The proposed project is suitable for a Bank loan of US$30.0million equivalent for a terni of 20 years including a grace period offive years.

KENYA

APPRAISAL OF NAIROBI WATER SUPPLY PROJECT II

I. INTRODUCTION

1.01 - The Government of Kenya has requested a loan from the Bank to theCity Council of Nairobi (NCC) to help finance a US$78 million project forincreasing the water production and transmission capacity of Nairobi's watersupply sytem and extending the distribution system. A "'ank loan of US$30.0million is proposed to be made to NCC. The Government has contracted with theSaudi Fund and the OPEC Special Fund to provide US$25.0 nlillion and US$ 5.5 millionequivalent respectively toward the cost of the project. The project would beimplemented by the Water and Sewerage Department (WSD) of NCC.

1.02 The project would be the second major implementation phase of along-range program to develop the Chania-Kimakia-Thika River system (MapIBRD-12981) for the purpose of meeting Nairobi's water supply requirements.The first phase, suDstantially completed in 1976, was assisted by a Bankloan (714-KE) made in December 1970. A small interim project (Chania IA),now underway, is intended to meet Nairobi's water requirements until theproposed project is completed in 1981. The proposed project would meetwater supply requirements until about the end of 1988. The developmentplan was prepared by Howard Humphreys and Sons (HHS), consulting engineers,U.K. and Kenya. For the most part, planning and studies for the projecthave been financed by NCC. However, UNDP financed a comprehensive ground-water study with WHO as the executing agency.

1.03 Bank participation in the project preparation, beginning in 1975,has been an extension of the supervision of the previous project. Becausethe proposed project initially included a large dam on the Chania River,the estimated initial costs were very high and it appeared that sufficientfinancing could not be obtained. This prompted a thorough reevaluation ofall feasible means of making a significant increase in Nairobi's watersupply capacity at the least cost. The result is an imasinative, butsound, scheme involving a change in the method of using existing storagecapacity in the watershed. This is the concept on which the project isbased.

1.04 Field appraisal of the project was carried out in March/April 1977.The Bank appraisal team comprised Mr. P. Callejas and Mr. N. Tin. A sub-stantial contribution to the appraisal was made by Mr. M. Cramer on the matterof water demand analyses and projection techniques. Time required for processingthe proposed loan included that required for cofinancing arrangements to besubstantially completed.

II. THE SECTOR

General

2.01 Kenya's per capita gross national product (GNP) in 1975 was US$227.The Kenyan economy is based largely on agriculture, wAhich provides about 30%of the gross domestic product (GDP). About 60% of the exports are eitherraw or processed agricultural products. Tourism is of growing importance and,since 1968, has earned more foreign exchange than any single export commodity.From 1968 to 1975, the number of tourists more than doubled to the order of350,000 annually.

2.02 Kenya has a population (1977) of about 14.2 millionl/. During thepast decade the population growth rate has ranged between 3.3% and 3.5% perannum. Urban population grew at an average rate of about 6% during that timeand totals about 12% (1.7 million) of the national population in 1977. Iherural population was about 12.5 million. The total population is expected toreach about 16 million in 1980, 22 million in 1990 and 29 million by the year2000, with gradually declining growth rates (3.5%/annum down to 2.8%).

2.03 Kenya's urban growth is largely synonymous with the metropolitanareas of Nairobi and Mombasa which in 1976 had populations of about 790,000 and315,000 and were growing annually at about 7% and 5% respectively. This growthis expected to continue at about these rates over the next two decades, therebymaintaining pressure on urban service systems.

2.04 Kenya's water supply and sewerage sector, including a brief statementon geography and climate, is described in Annex 1.

2.05 As a result of geography, climate, characteristics of the vegetationand eroded soils, Kenya has limited surface water resources relative to areaand population. Groundwater potential is more promising although considerablymore investigation is required to develop this source for maximum benefits.Unfortunately, in some areas groundwater is saline and in others, includingNairobi, it has excessive fluorides.

Sector Legislation and Organization

2.06 After 15 years of shifting titular responsibility from ministry toministry (Annex 1), the Government, by Presidential Decree but little priorplanning, established the Ministry of Water Development (MWD) in November 1974with responsibility for management of Kenya's water resources, includingcoordination of resource development and apportionment of water among users.The Water DeparEment (WD) is MWD's principal executing agency.

2.07 A number of other ministries and agencies also are involved in thewater sector: the National Irrigation Board, under the Ministry of Agriculture;the Ministry of Power and Communication, acting through the East African Powerand Lighting Co. Ltd. (EAP&L); and the Tana River Development Authority.Several hundreds of small rural water supply schemes are operated - thoughwith varying success - by county councils. The Kenya Railways, the Ministry ofLands and Settlement, the Ministry of Cooperatives and Social Services and theMinistry of Health all are iLnvolved in various aspects of sector developmentand operations. Finally, the Nairobi City Council is responsible for thedevelopment and operation of the city's water supply and sewerage systems.Five other municipalities and two county councils operate their urban watersupply systems under the direction of the Ministry of Local Government (MLG).

1/ Kenya Statistical Abstract updated by the Population Division, IBRD, tco1975 and projected at about 3.3%/annum to 1977.

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2.05 Overall responsibility for the operation and development of seweragesystemn is under MLG. The formal role of WD is only advisory. In some cases,WD acts as the agent for MLG in engaging and supervising the work of con-sultants on the planning, design and construction supervision of sewerage works.

Urban Water Supply

2.09 Almost all urbarn population either is served from piped water supplysystems or has access to public systems. Water is supplied lhrough meteredindividual connections and communal water points or kiosks.1 Water usage(sales) ranges from 70 1/cd to about 160 1/cd, which indicates little luxuryor wasteful use. Total sales of water in Nairobi average about 130 1/cdfor the population served (Annex 2). Many towns, including Mombasa, with fastpopulation growth have been unable to keep pace with water demand and areexperiencing periods of serious water shortages. A project is underway, withBank and KfW assistance, to correct the Mombasa situation. KfW also isassisting Kisumu with water supply and sewerage. Nairobi will be in a criticalwater supply position in a few years if it does not start a major project soon.

Rural Water Supply

2.10 The 1977 rural population is about 12.5 million, of which 1.5million has access to improved water sources or piped water supplies. Thebalance carries water over considerable distances (one to four km) fromnatural sources, often polluted, inadequate or, for several weeks each year,dry. Water usage ranges from 50 1/cd for individual connections, to about10 1/cd where water is carried to the dwelling unit. The level of mainten-ance of water supply schemes is generally low.

Sewerage Systems

2.11 There are about 22 public sewerage systems in Kenya serving about4% of the total population. Another 4% have septic tanks and 40% make useof pit latrines. More tl.ar. 50% of the population have no safe sanitationfacilities. Nairobi is in the midst of a long-range program to expand itssewerage. MLG and MWD are arranging for improvements in other municipalitiesand seven smaller towns. Operation and maintenance by local authorities,except for Nairobi, generally is of low standards.

Past Expenditures on Water SupDlies and Sewerage

2.12 Annual expenditures on water development by public authoritiesincreased more than five-fold between 1969/70 and 1973/74 (the most recentconsolidated figures available), to about KE 6.0 million. Expenditures onrural water supplies during this period grew much faster than those on urbansupplies. More could have been done except for constraints in implementationcapacity. Total sewerage development expenditures grew about five-fold to aboutKE 3.0 million annually.

1/ Water from communal water points is free or charged at a nominal feeper family. Supply from kiosks is charged for by volume.

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2.13 The Government established ambitious targets for the 1974-78 periodincluding: water supply services to two million additional people in ruralareas and 500,000 in urban communities; an accelerated sewerage program;completion of a water resources development plan; and training personnel tomeet sector needs. For the most part, these goals were overly optimistic andwill not be met. They do not appear to have been developed with due concernfor finances, particularly recurrent costs, the staff position of MWD and theother ministries and realistic time estimates.

Technical and Financial Assistance

2.14 The sector benefits substantially from technical aid given byvarious international agencies. For several years there have been up to 70expatriate engineers and specialists working in WD under bilateral and WHOtechnical assistance programs. WHO also carried out extensive water sectorstudies and, with UNDP financing, assisted NCC with a sewerage and drainagemaster plan, a groundwater study and an organization and management study ofWSD. UNICEF/WHO and SIDA participated in financing construction of hundreds ofrural water supplies. The Governments of Norway and the Federal Republic ofGermany participated in financing improvements to a number of water supplyand sewerage systems in towns.

2.15 The Bank has financed two urban water projects: Nairobi Water SupplyI (Loan 714-KE) (paragraph 1.02) and the Mombasa and Coastal Water Supply(Loan 1167-KE), cofinanced by KfW, which should be completed 1979/80. AnotherBank loan (1105-KE) and an IDA(Credit 543-KE) for the Nairobi Site and ServiceProject include funds for a substantial sewerage component, which is part of thesewerage master plan. Several other Bank Group financed projects include watersupply components: (i) Second Livestock (CR 477-KE); (ii) Bura IrrigationSettlement (Loan 1449-KE/Credit 722-KE); and (iii) Wildlife and Tourism (Loan

1304-KE). Proposed future Bank Group projects which would include water supply/wastewater components are: Rujral Water Supply (appraised April 1977);and the Second Urban Project (appraised September 1977).

Development Constraints and Problem Areas

2.16 Implementation capacity rather than financing appears to be theconstraint to the ambitious rural water supply and other programs carried outby MWD. The Government is having difficulty utilizing available developmentfunds effectively and the rural programs are behind schedule. The majorproblems with MWD are institutional: unsuitable organizational structure;ineffectual management; and shortage of qualified staff. Bureaucratic proce-dures of various Government agencies outside MWD also hinder such things asstaff promotions, transfers and recruitment. Shortages and mismanagement offunds for operation and maintenance seriously reduces the benefits obtainedfrom existing facilities in rural areas and small communities.

2.17 For municipalities, financing also threatens to be a prob2em in thatthe local governments generally are in critical financial positions because ofinadequate revenue bases allowed by the Government, and because of internalfinancial management shortcomings. Thus, water and sewerage revenues are"borrowed" to meet financial ,leficiencies in other municipal functions and arenot always available as needed for water and sewerage operations and development.This is a matter being considered seriously by the Government in consultationwith the Bank.

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2.18 WSD has much fewer problem areas. The principal one in Nairobi is achronic shortage of technical staff, although WSD has managed to cope withdevelopment programs and operations satisfactorily nonetheless. So far, waterand sewerage funds have not been depleted for other purposes.

Future Sector Development

2.19 The preparation of a master plan for utilization and control ofKenya's water resources was begun in 1976. The work is being undertaken byconsultants financed by SIDA, and will be an important contribution to futuredevelopment.

2.20 A prime requirement for sector developnent is to strengthen MWD andthis will be a key objective of the proposed rural water supply project (para-graph 2.15). Toward this end, provision for a comprehensive evaluation of allpast and ongoing rural water projects was included in the Mombasa Project toimprove preparation of future rural water programs. The work was completedduring the first part of 1977 with SIDA financing. A preliminary analysis ofthe MWD institution, made by a Bank consultant as part of the appraisal of therural water project, will be followed by an in-depth study and implementationassistance, by consultants to be engaged by MWD. Action to be spelled out in theloan agreement for the rural water supply project should gradually increase theefficiency and capacity of MWD in sector development.

2.21 As noted above, the lack of competent staff is a critical weaknessin the sector, particularly in MWD. A training component included in theMombasa project, although not yet implemented, is intended to assist not onlythe Coast Province Water Branch of WD specifically but WD generally. Thisproblem also will be addressed in the training provisions to be included inthe proposed rura'l water project. These training efforts, though important,do not get to the root of the problem, namely national education and trainingsystems inadequate to meet country-wide needs for administrators, engineers,accountants and technicians in the technical sectors.

2.22 Of the three major Kenyan urban centers - Nairobi, Mombasa and Kisumu -the last two have construction programs which should relieve their water supplyproblems for several years (paragraph 2.09). Nairobi, however, is faced witha critical water position within a few years unless the next phase of its watersupply development program is started soon. Further strengthening of the WSDinstitution also is required.

III. THE PROJECT

Description

3.01 The proposed Nairobi Water Supply Project II (often referred to asChania II) would be the second major stage of a program to meet Nairobi's watersupply requirements until about 1988 (paragraph 1.02 and Annex 3). It wouldresult in a net increase of about 23 IMgd (104,500 m3 /day) in the amount oftreated water delivered to Nairobi on an average daily basis. In addition totreatment and transmission facilities, the project would include trunk mains,

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pumping stations, a four-year program to improve existing distribution andlextend it into new areas, provisions for training and assistance with thedesign and implementation of improvements to the accounting and managementinformation systems for WSD.

3.02 The project is described in Annex 4 and the major elements are shownon Maps IBRD 12981 and 12982. The principal components are as follows:

(a) Modification of Sasumua Dam - minor modifications to the SasumuaDam for use as a river regulating reservoir permitting a contro]Lleddischarge of water into the Sasumua River and thence to the ChaniaRiver intakes;

(b) Raw Water Intake and Transmission Facilities - an intake structureon the Chania River about 10 km upstream from the existing Ngethuintake and a gravity raw water conduit about 9 km long to the NgethuWater Treatment plant;

(c) Water Treatment Plant - An increase of 23.0 IMgd (104,500 m3/day) inthe nominal capaci-tyof the existing Ngethu Water Treatment Plant;

(d) Treated Water Transmission Main - a transmission main about 1,000 mmdiameter and about 36 km long paralleling the existing main betweenNgethu and Gigiri;

(e) Distribution Reservoirs, Pumping Stations and Trunk Mains - threedistribution reservoirs, two distribution pumping stations and aLbout14 km of trunk mains from Kabete to Uthiru and to Dagoretti ForestL

(f) Distribution Mains - about 20 kms of secondary distribution mains450 mm diameter, and about 200 kms of tertiary mains 100 to 300 mmdiameter;

(g) Technical Assistance to WSD - (i) Consulting engineering servicesfor detailed design and construction supervision of (a)-(e);(ii) consulting services to assist with the improvement of theaccounting and management information systems for water supply andsewerage operations; and (iii) training of WSD commercial andtechnical staff.

Cost Estimates

3.03 The total cost of the project is estimated at about KL 32.5 million(US$78 million) including foreign exchange costs equivalent to about US$45million (58%), but before interest and commitment charges during construction.The estimated costs are summarized below and shown in detail in Annex 5.

/ Originally the project included a trunk main from Gigiri to Kabete as shownon map IBRD-12982, but ithis has now been postponed to a later constructionstage.

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K1E (millions)L/ US$ (millions)l/

2/ ~~~~~~~21Local-Y Foreign Total Local- Foreign Total

Raw Water Intake and Treat-ment Plant at Ngethu 2.3 4.9 7.2 5.6 11.8 17.4

Treated Water Transmission& Trunk Mains, PumpingStations & DistributionReservoirs 4.3 8.1 12.4 10.2 19.5 29.7

Sasumua Dam Modifications 0.1 0.1 0.2 0.4 0.1 0.5

Distribution System 2.3 1.6 3.9 5.5 3.8 9.3

Land Acquisition 0.4 - 0.4 1.0 - 1.0

Engineering & OtherTechnical Services, Account-ing, Consulting & Training 1.6 0.6 2.2 3.8 1.5 5.3

Subtotal 11.0 15.3 26.3 26.5 36.7 63.2

Contingencies: Physical 0.8 1.0 1.8 1.9 2.3 4.2Price 1.9 2.5 4.4 4.5 6.1 10.6

Subtotal 2.7 3.5 6.2 6.4 8.4 14.8

Total Cost of Project 13.7 18.8 32.5 32.9 45.1 78.0

Interest During Construc-tion on Bank Loan - 2.2 2.2 - 5.2 5.2

Interest DuringConstruction onOther Loans 0.2 2.6 2.8 0.5 6.4 6.9

TOTAL 13.9 23.6 37.5 33.4 56.7 90.1

3.04 The bases for the cost estimates are described in Annex 5. The distri-bution components have been estimated by WSD from preliminary layouts and costexperience with distribution system expansion now underway. Estimates of allother physical components of the project utilize quantity takeoffs from welladvanced designs by HHS. Unit prices are from the costs of recent works andquotations by suppliers.

17 January 1, 1978 base prices.2/ Local costs include allowances for local import duties and sales taxes.

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3.05 The local costs include allowances for local import duties and salestaxes, amounting to about KE 2.5 million (8% of the total project costs), sinceNCC is not exempt. The foreign exchange components of supply and constructioncontracts are based on assumed results of international competitive bidding andestimates of the imported conponents of any supplies and materials produced locally.

3.06 Allowances for phys,ical contingencies are 2.5% of base prices for supplyof pipe for lines at advanced stages of design, 10% for all other supply con-tracts and 10% for constructiLon contracts, except the raw water intake and tunnelwhere 15% is used. They total about 7% of all base costs, before engineering,and are adequate for the nature of this project and the stage of project prepa-ration.

3.07 The estimates are at January 1, 1978 base prices. From that base,price contingencies have been escalated using the factors given in Annex 5applied to the estimated schedule of payments under each contract. The pricecontingency factors used are in line with CPS guidelines dated January 31, 1977.Total price contingency allowances amount to about 16% of base costs plusphysical contingencies.

Loan Amounts

3.08 The proposed Bank loan of US$30.0 million would finance about 38.5%of the total project costsL/.The Government has contracted with the OPEC SpecialFund for a loan of US$3.0 million in foreign exchange and an allocation ofUS$2.5 million in local currency toward the cost of the project. The SaudiFund for Development has agreed to lend US$25.0 million equivalent. The ba:Lanceof the financing required, amounting to about US$17.5 million equivalent (22% ofthe total costs), would be provided by NCC. Interest and other charges on theloans also would be met by NCC. The OPEC, Saudi Fund and the proposed Bank loanswould be parallel. Submission of satisfactory evidence as to the availability ofthe other loans would be a condition of effectiveness of the Bank loan.

Detail Design and Construction Supervision

3.09 Project implementation would be the responsibility of WSD. Theengineering consultants, HHS, have been given the responsibility for detaileddesign, the preparation of tender documents, the evaluation of tenders andconstruction supervision of the major project elements described above inparagraph 3.02 (a)-(e). Preliminary design of all of the project elementsassigned to HHS has been substantially completed and detailed design of most:major components is well underway. Topographical surveys and site investi-gations for all construction contracts, including sub--surface explorations, werecompleted in 1977.

3.10 HHS has been employed by NCC under a contract which dated back severalyears but which has recently bee2n updated. The terms and conditions of the con-tract are acceptable to the Banki' and the performance of HHS on this projecthas been good. It has been agreed that consultants acceptable to the Bank wouldcontinue to be engaged to assist WSD in carrying out the project.

l/ about 42% of the total cost net of taxes.2/ the average cost per man-month of consulting engineering is US$3,875

equivalent.

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3.11 The distribution components of the project are being designed byWSD's own engineering staff based on an overall master plan prepared by HHS.The distribution facilities included in the project comprise a four-yeartime slice (1978-1981) of the distribution program required to meet waterdemand as it increases based on estimates of where and when the increasestake place. Design and implementation by WSD will be done on a year-to-yearbasis. WSD appears competent to do this work satisfactorily provided thatit can develop its organization according to plan. In the event that thedistribution work begins to fall behind schedule, WSD would have to resortto additional consulting engineering assistance.

3.12 It has been agreed that NCC would establish for WSD a projectimplementation unit to maintain records and accounts, deal with payment anddisbursement matters and coordinate project activities. Experience with thefirst Nairobi Water Supply Project (paragraph 1.02), demonstrated that sucha unit, with clear-cut terms of reference and job descriptions, and a reason-able degree of insulation from staff diversions to other day-to-day functions,would have greatly benefited project coordination and administration. Thiswould be even more important for the much larger new project, particularlywith WSD's history of continuing staff changes; among other things, such anarrangement would make the transfer of activities to new staff much easierand less liable to resu'lt in errors and omissions. Preferably the team wouldtake care of other WSD projects as well. Confirmation that a project imple-mentation unit, acceptable to the Bank, has been established and key postsfilled, would be a condition of effectiveness of the proposed Bank loan.NCC does not anticipate any difficulties in meeting this requirement.

Procurement and Construction

3.13 A schedule for implementation of the project including desjyn,procurement and construction, beginning in 1977, is given in Annex 6- . Theschedule does not include the timetables for the distribution works designedby WSD; those will be developed and revised annually as the project progresses.For the major works (paragraph 3.02 a-e) there would be about five supply (orsupply and installation) contracts and about six construction contracts. Manyof the contracts would be subdivided in a way to permit tenders and awards forall or part of the work.

3.14 A notice giving general information about the project, the variouscontracts and the approximate expected dates when tenders would be invitedwas advertized internationally in November 1977. The first invitations fortenders are now scheduled to be advertized in March 1978 and the first contractawards could be made about September 1978. The last contract award would bemade about mid-1979. The project would be completed by about the end of1981 when the water treatment plant expansion would be finished. However,some project elements would go into service at earlier dates as they arecompleted or are partially completed.

1/ This~ however is out-of-date. As noted in Annex 6, the tendering for mostcontracts has been postponed six months to provide adequate Lime to con-clude cofinancing arrangements and have OPEC and the Saudi Fund reviewthe tender documents. Although the new diagram was not available in timefor the publication of this report, all relevant dates and calculations inthe report reflect the new timetable.

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3.15 The project implementation schedule is realistic. It has beenagreed that at least quarterly the schedule will be analyzed by HHS and WSDusing the critical-path method (CPM) to refine the optimum timing of variousactivities and reflect new developments.

3.16 Electric power connections for the new pumping station, treatmentplant and subsidiary electrical services would be installed by EAP&L under anegotiated contract. NCC will make a capital contribution to EAP&L for theconnections which will be financed from funds generated by WSD.

3.17 All supply and construction contracts for the major project componentswould be awarded on the basis of international competitive bidding in accordLancewith procedures satisfactory to the Bank. For Bank financed contracts, a pre-ference of 15% or the applica'ble customs duty, whichever is lower, would beallowed on the bids of local manufacturers for supply contracts. Also, apreference of 7-1/2% would be allowed on bids by local firms for constructioncontracts and for which prequalification would be required.

3.18 All contracts for the supply of equipment and of pipe above 300 Endiameter probably would be awarded to foreign suppliers since none of theseitems are manufactured in Kenya. Pipe 300 mm diameter and smaller, suitablefor use in the distribution system, is manufactured locally at competitiveprices. Substantially all construction contracts are expected to be awardedto foreign firms with subsidiaries in Kenya. However, some of the smallercivil works contracts would probably go to bonafide local contractors. Sub-stantial amounts of material and supplies such as cement, would be obtainedlocally by the contractors. Practically all required labor, with the possibleexception of some specialized skills, is available locally, and can be expectedto be utilized by the contractors because of cost advantages.

Project Expenditures, Loan Disbursements and Closing Date

3.19 A forecast of annual project expenditures is given in Annex 7. Thiisforecast has been derived from the latest construction schedule and the consul-tants' and WSD's assumptions cf the progress payment to be made under the variouscontracts. As the work progresses, the consultants and WSD would prepare improvedpayment curves on a contract-by-contract basis according to the payment con-ditions agreed for each contract.

3.20 The proposed allocation of the proceeds of the Bank loan is given inAnnex 8. The allocation results from: (i) the selection by OPEC and the SaudiFund of the types of contracts they wish to finance(supply contracts rather thancivil works); (ii) the amounts they have allocated to the project and the localcost financing acceptable to them; (iii) the mutual desire to avoid joint financing(except with NCC) of any contract; (iv) the expectation that OPEC would agree tofinance retroactively (consulting engineering) and (v) the understanding that,like the Bank, neither OPEC nor the Saudi Fund would finance local import dutiesand sales taxes.

3.21 The result is that OP'EC would make a contribution of US$3.0 million forthe foreign exchange costs of water treatment, transformers and switchgear andUS$2.5 million equivalent toward the local costs of consulting engineering services.

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The Saudi Fund loan (US$25 million equivalent) would finance the major supplycontracts and some distribution pipe, including about US$3 million equivalentin local currency. The Bank would finance 90% of the total costs (beforeduties and taxes) of civil works and pipeline construction contracts (exceptfor distribution mains), the bulk of the pipe supply for distribution and foreigncosts of accounting consultant and training. Bank financing would include aboutUS$12.4 million of local costs.

3.22 The estimated quarterly disbursement from the proposed Bank loan aregiven in Annex 9. These are based on assumptions about delays between the timethat obligations are incurred and the dates when withdrawals from the loanaccount actually would be made.

3.23 The proposed Closing Date would be December 31, 1982, allowing about12 months beyond the expected completion date for making final contract pay-ments and for slippage..

3.24 Should project costs fall below estimates, resulting in disbursementsless than the amount of the proposed loan, the balance of the loan could beapplied to additional training and to the purchase of pipe required for the1982 distribution construction program, provided that NCC and the Bank agreethat circumstances justify such additions. Otherwise the balance would becancelled.

Land Acquisition and Rights-of-Way

3.25 Land acquisition and easements are required for construction of twoof the three new distribution reservoirs, the gravity raw water main and por-tions of the trunk mains. The existing easement for the treated watertransmission main between Ngethu and Gigiri requires widening. Surveys foracquisition procedures began in June 1977 and the land is expected to be readyfor occupancy by contractors at various times as needed. No particularproblems are foreseen provided that NCC proceeds with the necessary diligence.

Urban Poor

3.26 Although the elements of the project providing service exclusivelyto the poor are limited, the project is expected to have a material impact onthe quality and convenience of service to the poor. It is estimated that about30% of the persons who will obtain water from the project are in the urbanpoor category.

3.27 Most of the urban poor areas in Nairobi lie within the zones served byWSD water mains. Many of these residents have access to community water supplyat communal water points or kiosks (paragraph 2.09), usually operated by privateindividuals who sell water (often at usurious prices) but sometimes operated byNCC or other public agencies. As distribution is extended by the project, smallbut important pockets of urban poor would gain access to the system. Thisadditional service would be from new kiosks and a large number of connectionsto upgraded or site and service plots provided under urban development projects.The proposed Second Kenya Urban Project alone (paragraph 2.15) would includealmost 14,000 such plots.

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3.28 Perhaps the most significant project impact on the poor would comefrom a change in NCC policy towards providing an adequate level of service.NCC practice does not include the provision of individual service connec-tions for substandard or unlicensed dwellings of the types found in theurban poor areas. NCC has no objection to providing service in the formof kiosks. This approach is reasonable and acceptable to the Bank.However, NCC as a whole and WSD specifically appear not to have taken anactive role in assuring that there are enough kiosks (in terms of the popu--lation served by each and the distance travelled by the water user), or thatthey are pioperly operated or that charges for water are fair and reasonable.Therefore, as part of the proposed project it has been agreed that NCC wouldby December 31, 1978, adopt, and thereafter implement, a policy, acceptable tothe Bank, with respect to low income urban dwellers, the implementation ofwhich would ensure the provision of service of appropriate quality, quantityand cost, under administrative measures necessary to support such services..In this respect, NCC intends to license kiosk operators, provide kiosks atappropriate locations, and regulate their operation.

3.29 Although a substantial increase in water tariffs will be required(paragraphs 4.15 and 6.15), it is important to ensure that water is suppliedat a cost affordable by the poor. Therefore it has been agreed that watercharges to kiosk operators would be reduced 50% (to KSh 1.32/m3) and thattheir charges to customers would not exceed KSh 0.10 per debe (4Ig container)which would represent a reduction in present charges of about two-thirds.Also, for customers with individual service connections, the present levelof charges (KSh 2.64/m3) would not be increased for the first 9 m3 of metereduse per month, a quantity ample to meet basic household needs.

Ecological Aspects

3.30 The project would improve the quality and extent of water serviceto people who do not have adequate amounts of safe water conveniently avail-able from the present systems. The need to satisfy water requirements fromunsafe water sources will be substantially reduced as will be the risk ofdiseases attributable to the lack of adequate amounts of good quality water.

3.31 The project would result in an increase in the amount of wastewater.However, Nairobi's continuing program for developing its sewerage system isexpected to gradually increase the percentage of the total population servedby suitable wastewater disposal systems (Annex 2). The project would haveno detrimental effects on the environment.

IV. JUSTIFICATION OF THE PROJECT

The Need for the Project

4.01 The present and expected future water supply requirements of Nairobiare described in Annex 3. At presen% annual average water production is about23.0 IMgd (104,500 m3/day) and reaches a maximum of about 26 IMgd (117,000 m3/day) during several consecutive days in the dry season. These flows would be

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higher if there were not certain constraints in the distribution system whichpresently does not extend to areas of the city occupied by about 18% (140,000)of the estimated total 1976 population.

4.02 The water demand projections are based on a sophisticated fore-casting procedure (Annex 3), developed by WSD in consultation with the Bank,and what are considered to be the most likely values of variables whichdetermine the growth of demand. The critical inputs for the WSD forecastingmodel are Nairobi's GDP, population growth, income distribution, the housingsituation and the accessibility of water for occupants of unserved sub-standard housing. The results, referred to in Annex 3 as "design basis",provide a sound basis for planning development of the water supply systemuntil about 1985 at least, and possibly until about 1990. The design basisrelies mostly on the reasonable assumption of a slow but steady evolutiontoward a satisfactory economic recovery for Nairobi, a normal housing marketand a moderate in-migration rate.

4.03 Annex 3 also shows upper and lower bound projections which areobtained by combining the extreme effects of the variables so as to yieldmaximum deviations. By 1985 the upper bound projection is about 13%(25,000 mi/day) above the design basis and the lower bound projection isabout 25% below. However, the lower bound projection assumes severalpessimistic and unlikely conditions occurring at the same time. It impliesalmost total stagnation in Nairobi's economic development and this is anunsuitable basis for planning infrastructure.

4.04 It has been agreed that forecasts of water demand would be updatedat intervals not greater than two years. It is intended that the forecastswould use the WSD model or revisions thereof, as new data becomes available,particularly on GDP, the housing situation, actual demand and any evidence ofprice elasticity.

4.05 Nairobi's importance as the largest urban community and the centerof government, education, commerce, industry and tourism requires maintenanceof capacity to provide reasonable levels of essential services, such as watersupplies. Therefore this project is accorded high priority by NCC and thisview is shared by the Government and the Bank.

4.06 Nairobi's existing water supply system can meet annual averagedaily water requirements until early 1980 if demand follows the design forecast.Considering the lead time required to implement new water supply facilities,they should be started as soon as possible. The proposed project would go ontoward the end of 1981. During the year prior to project completion, watersupply capacity could be below requirements. However, some of the treatedwater transmission capacity would be put into service prior to completion,so that overall water requirements could be met for reasonable Deriodsby overloading existing facilities.

4.07 With the project, supply capacity would total about 50.5 IMgd(230,000 m3/day) and should be adequate to meet Nairobi's requirements untilnear the end of 1988 (paragraph 3.01 and Annex 4), about seven years afterproject completion. This represents a reasonable design period. When the

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project is completed, NCC would have about three years for analyses of watersupply requirements and system capacity before the latest date (mid-1984)that major new additions would have to be started.

4.08 The population served when the project is completed (1981) wouldbe about 1,070,000 and when it is fully utilized (1988),, about 1,500,000people. This would represent increases in population served by about 470,000and 900,000 respectively compared to the present, due to a combination ofpopulation growth and considerable expansion of the service area (map IBRD--12982).

4.09 If Nairobi's water production requirements increase at the rate of theupper bound projection (Annex 3), major new facilities would be required by aboutthe end of 1986, or two years earlier. Should demand follow the trajectorv ofthe lower bound forecast, the major part of the project would be adequate untilabout 1994 or about six years later than forecast. However, as noted in para-graph 4.03 the lower bound projectory is considered unrealistically pessimiLstic.

4.10 The project is the best technical and economic solution to meetingNairobi's water requirements. A number of alternatives were considered ancdfound less favorable. Among these were further development of groundwaterresources, the immediate construction of a large dam on the Chania River or-the Kimakia River, and the construction of smaller dams on various otherstreams tributary to the Chania-Kimakia-Thika River system.

4.11 A comprehensive study of groundwater potential was financed by UNDPand supervised by WHO. This showed very little potential for groundwater ofsuitable quality in the immediate vicinity. Until the end of 1976, the preferredsolution included construction of the Chania Dam. However, reevaluation of thewhole problem resulted in an imaginative concept permitting postponement of thetime when the Chania Dam would be required by seven years at least (paragraph1.03 and Annex 4). The saving in initial costs is about Kenyan E 11 million(US$26 million). The proposed project is more favorable than if the ChaniaDam were included at all discount rates.

Return on Investment

4.12 The return on investment is taken to be the discount rate at whichthe present worth of all capital and operating and maintenance costs (excludingcustom duties and taxes) equals the present worth of all revenues attributableto the investment over its economic life. With benefits measured at thepresent water rate of KSh 2.64/m3 (KSh 12.0/1000 Ig) and if foreign exchange isshadow-priced at 1.32 (i.e., KSh 11.0 = US$1.0), the return on the proposedproject would be 7.6% (Annexes 10 and 11). This low rate of return, althoughpartially reflecting the facit that it has not been possible to adequatelyquantify benefits relating to health and other environmental and social factors,indicates that the present tariff is inadequate.

4.13 In connection with the water supply project for Mombasa (paragraph2.15), the Government made a policy decision to raise tariffs to reflect thelong run marginal cost of water in that region in an attempt to ensure efficientuse of resources. It is appropriate, therefore, that this policy be appliedalso to Nairobi.

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4.14 For all practical purposes, the long-run marginal cost of wateriir Nairobi approximates the average incremental cost of water to be suppliedfrom the proposed project. The calculations in Annex 10 indicate that, withopportunity cost of capital of 11% assumed for Kenya, the average incremen-tal cost of water would amount to KSh 3.75/m3 (KSh 17.05/1000 Ig) in January1978 prices. Therefore, it has been agreed that water tariff would beincreased to KSh 3.75/m3 (expected to be effective by July 1, 1978) forwater supplied to metered consumers over and above 18 m3 (about 4,000 Ig) permonth, below which lower rates would be charged, as further elaboratedin paragraph 6.15. Thereafter, a minimum annual rate of return would berequired (paragraph 6.15).

4.15 If benefits are taken to be water revenues valued at the tariffsmentioned before (paragraph 4.14), the return on the proposed project wouldbe between 10% and 11% (Annex 11). This return does not represent thefull economic rate of return which would undoubtedly be higher due to healthand other benefits (paragraph 4.12) not reflected by tariffs. The sensitivityanalysis shown in Annex 11 indicates that, for each 10% increase in projectcosts, the return would be reduced by about 0.8 percentage point, and that,for each 10% increase or decrease in water revenues, the return would beincreased or decreased correspondingly by about 1.0 percentage point.

V. THE BORROWER

The Borrower

5.01 The Nairobi City Council (NCC) would be the borrower. NCC was theborrower of Loan 714-KE in 1970 for the first Nairobi Water Supply Projectand demonstrated satisfactory administrative capacity in completing thatproject successfully.

5.02 The City was incorporated in 1950. Under local government regula-tions, the Ministry of Local Government (MLG) has broad control powers overNCC, including approval of budgets, of appointment and dismissal of seniorofficers and of awards of contracts to other than the lowest bidders.

5.03 The City Council has 43 members, of whom 40 are elected by popularvote. The Council elects a Mayor and a Deputy Mayor and appoints committeesof Council members to administer the various services provided by the city.NCC has presently 11 standing committees, which have many functions includingreview of annual capital and operating budgets before adoption by the fullCouncil. NCC's activities are handled by eight departments, of which theWater and Sewerage Department (WSD) is responsible for development andoperation of water supply and sewerage services. An organization chart ofNCC is shown in Annex 12.

5.04 The Town Clerk is the chief executive and administrative officerof NCC. Senior officers are selected by the various committees and appoint-ments are made by the Council with MLG approval. Junior officers areselected by department heads and appointed by the Council. NCC's seniorstaff is competent.

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WSD - Organization, Management and Staff

5.05 WSD was established in 1970 as a precondition for Loan 714-KE.Previous to that, water supply and sewerage were the responsibility ofseparate divisions of the City Engineering Department. It is headed bya General Manager, who is assisted by two Deputy General Managers - onefor engineering and the other for financial and commercial matters. Aseparate small unit under the General Manager is in charge of administration.The Deptity General Manager/Engineering controls three sections whose respon-sibilities are divided on a functional basis. Two sections deal with watersupply systems; one responsible for operations and maintenance and the otherfor planning, design and construction. The third section is concerned withthe operation and deve'lopmenit of sewerage systems. The Deputy General Manager/Commercial is assisted by an Assistant General Manager in supervising acommercial section and an accounting section. A separate stores operationfor WSD, which was established in 1975, also reports to the Deputy GeneralManager/Commercial. An organization chart of WSD is shown in Annex 12. Aspreviously required under Loan 714-KE, NCC has agreed that it will notmaterially change the organizational and administrative structure of WSDwithout prior Bank agreement.

5.06 Ever since its establishment, WSD has experienced serious difficultyin recruiting qualified personnel to staff its organization. As of October1974, after about four years,, over 40% of its approved professional positionswere vacant and at least 50% of the professional staff in service wereexpatriates. As of October 1976, nearly 80% of approximately 125 seniorstaff positions were filled, of which about 20% were expatriates on contract.The General Manager and both deputies are Kenyan. This represents a substan-tial improvement in staffing, most notably in the management and accountingareas. WSD has had less success in its efforts to recruit local engineersbecause of the non-competitiveness of the salary offered by NCCand the short supply of local engineers. Therefore, it is expected to continueto employ expatriate engineers in the foreseeable future although responsibilityis being gradually shifted to the local counterparts. WSD has been able so farto cope with the staffing isEue and carry out its activities without seriousproblems. Satisfactory operations are expected to continue.

5.07 As part of the UNDE-financed Nairobi Sewerage and Groundwater Surveycarried out during 1972/74, SWECO, the responsible consultant, submitted areport dated June 1974 on the subject of strengthening WSD. This report notedtwo important problems which were hampering operations, namely the slowdecision-making process of the Council's committee system, particularly in thearea of budget approval and tendering, and the staffing situation. It proposedthat staff salaries be increased and that, with regard to the legal and organi-zational framework of WSD, this department should be either overseen by a singleWater and Sewerage Commission to be established within NCC, with full authorityover all matters relating to the water and sewerage services, or reconstitutedinto an independent statutory board separated from NCC.

5.08 Under Bank Loan 1105-KE and IDA Credit 543-KE (paragraph 2.15),NCC agreed in principle to strengthen WSD as part of NCC and to submit a re--organization plan based on SWECO's recommendations. While NCC has since backed

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away from establishing the proposed Water and Sewerage Commission, it has,inter alia, set up a Tender Committee which succeeded in expediting thecontract tendering and award processes and holds a joint-committee meetingfollowed by a full Council meeting on the same day to obtain urgent actionswhen required. NCC also raised staff salaries in 1975, althoughthey are still some-what below government levels. In addition, NCC has obtained MLG approval forWSD to increase its professional staff positions by some 30% effective 1977.Some of the new positions will be filled by promotion of qualified staff; theproblem will be to recruit for the other posts. The above actions clearlyameliorated the operation of WSD. The establishment of the project implementationunit for WSD (paragraph 3.12) should further improve operations.

Personnel Development

5.09 Much of WSD's staff development efforts have centered on middle andjunior staff in both technical and financial fields and the results have beengenerally commendable. Most of the training has been provided on the jobalthough some accountants have been sent to formal courses to qualify forcertificates. WSD's establishment also provides for a number of trainees'positions in engineering, drafting and accounting, of which the engineeringpositions have been difficult to fill.

5.10 The Bank has played some role in the development of WSD staff; infact, the present General Manager has participated in one of the EDI's watersupply courses, a Bank-financed expert was sent to Nairobi in 1976 to givea series of lectures on water treatment, and the Deputy General Manager/Engineering attended the EDI Project Management Course in August/September 1977.

5.11 The proposed project would support the continuing training effortsof WSD. The accounting specialist to be provided under the proposed project(paragraph 3.02 g) would also be responsible for training accounting staff.WSD has completed a schedule of training requirements and is working out thedetailed plan of action with NCC's Director of Personnel. Part of the costswould be financed from the proposed loan.

Accounting and Audit

5.12 NCC's accounts are computerized and maintained by the City Treasurer'sDepartment. All water supply and sewerage accounts have been separated from therest of NCC's accounts since 1970. NCC previously maintained one bank accountfor the deposit of cash generated by its various departments; however, WSD hasbeen allowed to keep a separate bank account since July 1974. The presentaccounting system does provide information necessary for WSD to produce annualfinancial statements. Nevertheless, the accounts have not been publishedpromptly and financial control and reporting have been inadequate. NCC hasrecognized the need to revamp WSD's accounting system, including the introduc-tion of depreciation accounting, and financial reporting and control procedures.The proposed project provides for art accounLing cousultait:L to caity out this taskand to assist WSD in implementing the recommended systems and procedures. Asstated in a supplementary letter to the Loan Agreement, NCC has made arrangementsto engage an accounting consultant, whose experience and qualifications areacceptable to the Bank to: (a) review existing accounting arrangements and to

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recommend methods of converting them into a commercial accounting system andto assist in establishing accounting procedures (manuals, forms, etc.) whichwould cover, among others, fixed assets accounting, depreciation accounting,internal control and reporting, inventory control and budgetary preparation;(b) suggest improvements in billing and collection, including procedures forthe recovery of consumer accounts arrears; (c) review and suggest improvementson the procurement and stores operations of WSD; (d) review and recommendimprovements in the organization and staff establishment of the commercialwing of WSD; and (e) assist the WSD in the implementation of any modifiedsystems and procedures adopted and in the training of the staff of its com-mercial wing.

5.13 Audit responsibility rests with the Auditor General who normallycontracts private auditing firms, currently Githongo and Associates ofNairobi, to audit the accounts of the entire NCC, including those of WSD.Because of the delays in closing the accounts for various known reasons,NCC has not been able to meet the requirements under Loan 714-KE of submittingto the Bank audited annual accounts within six months after the close of thefiscal year, although the situation has steadily improved. It has been agreedthat the unaudited annual accounts of NCC and WSD would be submitted to theBank within six months after the close of the year and that the audited accountswould be submitted to the Bank, together with the auditors' report, within ninemonths after the close of the year.

Billing and Collection

5.14 Meter readings are done monthly and sent to the computer section ofthe City Treasurer's Department for processing of bills. Bills are normallydispatched within about one week of the meter reading. Payments of bills havreso far been made at the three cash offices of NCC and subsequently credited toWSD's account. In order to further expedite the collection process and to havebetter control of the daily cash position, WSD is currently setting up its owncash offices alongside those of NCC.

5.15 WSD's billing is up-to-date. Its collection record has shown sub-stantial improvement particularly during the past two years; its total accountsreceivable has been reduced steadily from an equivalent of about 135 averageday's billings during 1971/72 to about 93 average day's billings in 1976 and isexpected to improve further.

Project Monitoring System

5.16 The most important monitoring aspect would be the cost of the projectand the progress of construction. The latter would be analyzed by the criticalpath method (paragraph 3.15), updated at least quarterly. The key variables onwhich water demand forecasts are based (paragraphs 4.02 - 4.04) would be monitoredalso. Other suitable indicators for monitoring project implementation and formeasuring perforlmarnce against project goals with regard to technical and financialoperations, management, staffing and training of WSD have been discussed duringnegotiations. Proposed guidelines for a project monitoring system are given inAnnex 24.

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Risks

5.17 No major risks have so far been identified with respect to thephysical execution of the proposed project. However, there are a numberof minor risks as follows:

(a) water demand could grow more slowly than predicted with the resultthat: (i) elements of the water treatment plant with a cost ofabout KIE 0.7 million would prove to be premature by about threeyears (paragraph 15, Annex 4); and (ii) the return on the proposedproject would be reduced to about 8% (paragraph 4.15);

(b) the Chania Dam would never be built with the result that the rawwater transmission facilities (paragraph 3.02-b) would be left withexcess capacity at a cost of about KE 0.4 to 0.5 million(paragraph 14, Annex 4);

(c) WSD staff would prove to be unable to maintain a suitable schedulefor engineering of the distribution system and additional consultingexpenses would have to be obtained at a cost of up to KE 0.2 million(paragraph 3.11); and

(d) WSD's staff position would deteriorate despite recruitment and trainingefforts (paragraphs 5.08 and 5.11) with adverse effects on operations,impossible to express in monetary terms.

VI. FINANCIAL ASPECTS

Introduction

6.01 While this chapter is devoted mainly to examination of the financesof WSD, which is to contribute toward the financing of the proposed project, abrief review of NCC's financial condition is also made in the following sub-section as NCC's general fund account- has borrowed surplus funds from WSD'swater and sewerage fund account to meet some of its deficits in recent years.The financial projections presented in this report have been based on WSDestimates and should be updated as the project develops.

Financial Condition of NCC

6.02 NCC's general fund account was in good financial condition through1973, but began to deteriorate rapidly from 1974 when the Government decidedto abolish NCC's right to levy Graduated Personal Taxes (GPT) and compensatedNCC for the lost revenues. CPT was a form of income tax and accounted for 41%of the total general fund revenues during the four-year period from 1970 through1973. The operating results of the general fund operations during 1970/76 aredetailed in Annex 13 and summarized below:

1/ NCC's budget has two special fund accounts, one for water and sewerageoperations and the other for some housing operations, and a general fundaccount for all other activities covering health, education, public works,other housing and social services.

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KE ThousandYear Ending December 31 1970 1971 1972 1973 1974 1975L/ 197 I/

Current Revenues 5,291 7,879 6,957 7,616 8,109 9,199 10,676(of which:

GPT/GPT Grant) (1,693) (3,750) (2,762) (3,178) (2,514) (2,909) (3,346)Current Expenditures 4,796 5,385 6,672 7,208 8,869 9,494 10,844

Surplus (Deficit) 495 2,494 285 408 (760) (295) (169)

1/ E,stimates.The above deficits have been financed by drawing down the reserves which thegeneral fund operations were able to accumulate during the early years and byborrowing on short-term basis from the surplus of the water and sewerage fundaccount.

6.03 In connection with ILoan 1105-KE and IDA credit 543-KE (paragraph 2.15),the Government agreed, inter alia, to carry out a study with assistance of theIMF on means of restoring financial viability to all municipalities throughoutKenya, including NCC, and to implement the recommendations based on such studyby January 1, 1977. To ensure the financial viability of NCC in the short run,the Government also agreed to provide the City with funds to meet its reasonableneeds until such date as reform measures based on the IMF study or alternativereforms have been implemented.

6.04 The IMF report, which was not completed until December 1976, estimatedthat the deficit of NCC's general fund account would grow increasingly fromKE 0.78 million in 1977 to KE 3.62 million in 1981 (page 4 of Annex 13) evenafter an assumed annual grant of KE 3.35 million in lieu of GPT. To overcomesuch deficits, the IMF report proposed a set of measures relating to institu-tional and administrative reforms; increasing financial assistance from theCentral Government; and strengthening property tax revenues. These proposalsare currently being considered by the Government. Agreement on specificmeasures and their implementation would be reached with Government and NCC inconnection with the forthcoming Second Urban Project.

6.05 As regards the proposed project, it has been agreed that the integrityof the water and sewerage fund will be observed, meaning that revenues generatedfrom WSD's water and sewerage operations will be used solely for the operation,maintenance and development oiE the water supply and sewerage services of theCity. Agreement has also been reached that, unless the Bank shall otherwiseagree, NCC's borrowings from W4SD's water and sewerage fund account for itsshort-term needs, if any, wou:Ld be subjected to the availability of idle surplusfunds in that account and wou:Ld not exceed KE 400,000 outstanding at any time andshould be limited to terms of not more than six months. Furthermore, to theextent that WSD earns a rate of return exceeding 7.5% on both its gross fixedwater supply and sewerage assets in operation (paragraphs 6.15 and 6.16) respect-ively, it has been agreed that such excess amounts may be transferred permanentlyto NCC's other operations so Long as they will not be needed for the operation,maintenance and development of the water supply and sewerage services of Nairobi.

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Past Operating Results of WSD

6.06 WSD's income statements for separate and consolidated water supplyand sewerage operations for the years 1971 to 1976 are given in Annex 14 andsummarized below:

KE ThousandYear Ending December 31 1971 1972 1973 1974 1975 1976

Water Supply OperationsOperating Revenues 1,257 1,789 1,746 1,848 2,663 3,769Operating ExpensesBefore Depreciation 369 512 564 740 921 967

Operating Income BeforeDepreciation & Interest 888 1,277 1,182 1,108 1,742 2,802

Rate of Return_/ 5.7% 7.6% 6.8% 5.6% 7.5% 8.7%

Sewerage OperationsOperating Revenues 621 734 630 735 979 1,215Operating ExpensesBefore Depreciation 288 302 285 236 344 374

Operating Income BeforeDepreciation & Interest 333 432 345 499 635 841

Rate of Return!/ 4.8% 6.1% 4.9% 6.7% 7.3% 8.3%

Consolidated OperationsOperating Revenues 1,868 2,523 2,376 2,583 3,642 4,984Operating ExpensesBefore Depreciation 657 814 849 976 1,265 1,341

Operating Income BeforeDepreciation & Interest 1,221 1,709 1,527 1,607 2,377 3,643

Rate of Return.!! 5.4% 7.2% 6.2% 5.9% 7.5% 8.6%

1/ Defined as net operating income(before depreciation and interest) dividedby gross fixed assets in service at beginning of year revalued annuallyusing Government indices.

6.07 The above table indicates that WSD has generally achieved good operatingresults during the past six years. With regard to the water supply operations,the rate of return, which declined from 7.6% in 1972 to 5.6% in 1974, improvedto 7.5% in 1975 and 8.7% in 1976, thanks to increases in water tariff fromKSh 1.43/m3 (KSh 6.5/1000 Ig) to KSh 1.76/m3 (KSh 8.0/1000 Ig) effective April1975 and to KSh 2.64/m3 (KSh 12.0/1000 Ig) effective January 1976. Section 5.11(a) of the Loan Agreement for Loan 714-KE requires a minimum annuial return of7.5% for 1972 onward from WSD's water supply operations.

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6.08 Insofar as the severage operations are concerned, Section 5.12 (a) ofthe Loan Agreement for Loan 714-KE requires merely that WSD generate sufficientsewerage revenues to cover operating expenses for its sewerage and waste dis-posal services and to meet debt service on long-term loans incurred for suchservices. WSD has amply metl this requirement; in fact, the rate of return fromits sewerage operations, if defined on a similar basis as for the water opera-tions (paragraph 6.07) reached an estimated 8.3% in 1976. thanks to increasesin sewerage tariff from KSh 0.77/m3 (KSh 3.5/1000 Ig) to KSh 0.88/m3 (KSh 4.0/1000 Ig) effective April 1975 and to KSh 1.10/m3 (KSh 5.0/1000 Ig) effectiveJanuary 1976.

6.09 WSD's cash flow statements for 1971 to 1976, given in Annex 15, showthat its consolidated net internal cash generation accounted for 66% of thetotal financing required during this six-year period. It should be noted thatthe consolidated gross fixed assets increased by close to 50% in real termsover the same period. With respect to the water supply operations, internallygenerated funds met 63% of the financing requirement during 1971-1976 and wereequivalent to 96% of the expenditures on capital works.

Present Financial Position of WSD

6.10 WSD's balance sheets for separate and consolidated water supply iandsewerage operations for 1971 to 1976 are shown in Annex 16. The financialposition at December 31, 1976 is summarized as follows:

Sumnary Balance Sheets at December 31, 1976KE Thousand

Water Sewerage ConsolidatedASSETS 1/Fixed Assets-Gross Plant in Operation 14,283 4,589 18,872Less: Accumulated Depreciation 3,864 1,447 5,311Net Plant in Operation 10,419 3,142 13,571Work in Progress - 94 94Total Fixed Assets 10,419 3,236 13,655Current AssetsCash and Investments 2,598 1,394 3,992Other Current Assets 1,320 571 1,891Total Current Assets 3,918 1,965 5,883Other Assets 904 - 904TOTAL ASSETS 15,241 5,201 20,442EQUITY AND LIABILITIESEquity 7,514 3,291 10,805Reserve for Employee Benefits 15 15 30Long-Term Debt 6,941 1,837 8,7Current Liabilities 771 58 829TOTAL EQUITY AND LIABILITIES 15,241 5,201 20,442Debt/Equity 48/52 36/64 45/55

1/ Valued at historical costs.

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6.11 WSP's consolidated debt-equity ratio of 45/55 as of December 31,

1976 indicat,-, a satisfactory capital structure. WSD maintained at the samedate a strong ciirrent position as evidenced by a consolidated current ratio

of 7.1 and a li.1uidity balance (including cash and investments) totallingKE 4.0 million, of which KE 2.6 million had been accumulated from water supplyoperations and KI 1.4 million from sewerage operations.

Financing Plan

6.12 The financing plans for separate and consolidated water supply andsewerage operations for the five-year period 1977 through 1981 are shown inAnnex 17 and have been extracted from the detailed cash flow projectionsgiven in Annex 18. The financing plan for the water supply operations is

as follows:1977-1981

If Thousand US$ Million %Application of Funds 1/Proposed Project 32,472- 77.9 75-5On-Going Work 3,553 8.5 8.2

36,025 86.4 83.7Interest During Construction 4.0702/ 9.8 9.5Total Construction Expenditures 40,095 96.2 93.2Increase in Working Capital 2,899 7.0 68.0

Total Application of Funds 42,994 103.2 100.0

Sources of FundsInternal Cash Generation 21,871 52.5 50.9Less: Debt Service (4,086) (9.8) (9.5)Net Internal Cash Generation 17,785 42.7 41.4Proposed IBRD Loan 12,500 30.0 29.1Proposed Saudi Fund Loan3/ 10,417 25.0 24.2Proposed OPEC Loan4/ 2,292 5.5 5.3Total Borrowings 25,209 60.5 58.6Total Sources of Funds 42,994 103.2 100.0

6.13 The proposed Bank Loan of US$30.0 million equivalent would provide29.1% of the financing required. The proposed Saudi Fund loan of US$25.0 millionequivalent and OPEC loan of US$5.5 million equivalent (including an "OPEC SpecialFund Loan" of US$3.0 million and an "OPEC Special Fund Allocation" of US$2.5 million)would finance, respectively, 24.2% and 5.3% of the requirement. The balance oLthe financing required, which amounts to US$42.7 million equivalent or 41.4%, wouldbe provided from the net internal cash generation. This financing plan would besatisfactory. Fulfillment of all conditions to the initial disbursement of theSaudi Fund and OPEC Special Fund loans and establishment of the OPEC SpecialFund Allocation would be conditions of effectiveness of the proposed Bank loan.

1/ Including KE 0.36 million spent in 1982.2/ All related to the proposed project.3/ of 88,250,000 Saudi Arabian rials.4/ including an "OPEC Special Fund Loan" of US$3.0 million and an "OPEC Special

Fund Allocation" of US$2.5 million.

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6.14 The financing plan has also been based on tariff increases elaboratedin the following sub-section. It has been assumed that the proposed Bank Loanwould carry an interest rate of 7.45% per annum for 20 years including a graceperiod of 5 years, and that the proposed Saudi Fund and OPEC loans to the Govern-ment would be on-lent to NCC at 7.45% interest per annum over a similar amortiza-tion period.

Water and Sewerage Tariffs

6.l5 The present water and sewerage tariff structures, which are summarizedin Annex 23, are acceptable. With regard to the water tariff level, which is aflat rate of KSh 2.64/m3 at present, NCC has agreed to implement (expected to beeffective by July 1, 1978) new tariffs of KSh 2.64/m3 for the first 9m3 suppliedto metered consumers per month, KSh 3.30/m3 for the next 9m3 and KSh 3.75/m3for any additional water supplied in the same month. For social reasons, thecharge to water kiosk operators will be reduced from KSh 2.64/m3 at present toKSh 1.32/m3 for the benefit of the kiosk users. This new water tariff structurewould yield an estimated average of KSh 3.50/m3. It has been agreed that, f'rom1979 onward, water tariffs would be adjusted from time to time, if necessary,for WSD to earn a cash flow returni/ of at least 7.5% on annually revaluedgross water supply assets in service as previously agreed under Loan 714-KE..

6.16 It has also been agreed that the sewerage tariff would be raised fromthe present KSh 1.10/m3 to KSh 1.40/m3 (expected to be effective bv Julv 1,1978), and that, from 1979 onward, sewerage tariffs would be adjusted from t:imeto time for WSD to earn a cash flow return of at least 7.5% on annually revaluedgross sewerage assets in operation. Implementation of the aforementioned waterand sewerage tariffs would be a condition of effectiveness of the proposed loan.

6.17 Revaluation of the water supply and sewerage assets would be basedon changes in the Nairobi Consumer Price Indices (for wage earners, middleincome and upper income), which are published on a current basis by the Government.

Future Operations and Financial Position of WSD

6.18 The projected Income Statements and Balance Sheets for separate andconsolidated water supply and sewerage operations for 1977 through 1985 are shownin Annexes 19 and 20. The notes and assumptions for these financial projectionsare detailed in Annex 21. It should be pointed out that fixed assets have beenrevalued annually based on the price indices mentioned in paragraph 6.17, whichhave been estimated to increase by 10% each year from 1977 through 1981. There-after, constant 1981 price terms have been assumed.

6.19 The income projections in Annex 19 indicate that, with future nominalincreases in water and sewerage tariffs of about 17% and 25% respectively, inmid-1981 (mainly to offset projected inflation), WSD would earn cash flow returnson revalued gross fixed assets between 6.7% and 9.1% from its water supply opera-tions and between 6.5% and 8.0% from its sewerage operations during 1977-1985(Annex 22). The consolidated cash flow return would vary between 6.8% and 8.7%during the same period. The cash generated internally by WSD's water supply

1/ defined similarly as under Loan 714-KE: net operating income before depreciationand interest divided by gross-fixed assets in service at the beginning ofthe year.

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operations would increase from KE 2.8 million in 1977 to KU 5.7 million in 1981when the entire project is scheduled to come onstream, which should be adequatefor WSD to meet its financing contribution stated in paragraph 6.13.

6.20 During 1977-1985, debt service coverage would vary between 1.9 and3.8 for water supply operations, between 2.3 and 3.4 for sewerage operations,and between 2.1 and 3.3 for consolidated operations. Nevertheless, to ensurethat future borrowings on behalf of WSD are commensurate with its capacity toservice debt, it has been agreed that WSD would not incur any debts otherthan those included in the financing plans unless internal cash generation isat least 1.5 times future debt service including proposed new borrowings. Thisdebt limitation would be applied to water supply and sewerage operationsindividually.

VII. AGREEMENTS REACHED AND RECOMMENDATIONS

7.01 Agreements have been reached with NCC and the Government on thefollowing principal points:

(a) engineering consultants acceptable to the Bank would continue tobe employed for detailed design and construction supervision(paragraph 3.10);

(b) WSD would establish a Project Implementation Unit (paragraph 3.12);

(c) by December 31, 1978, NCC would adopt and implement a policy acceptableto the Bank, for providing water of appropriate quality, quantity andcost to the urban poor (paragraph 3.28);

(d) water tariffs would be increased to not less than KSh 3.75/m3 forwater supplied to metered consumers in excess of 18 m3 per month,below which level of use, lower rates would be charged(paragraphs 4.14 and 6.15);

(e) NCC will not materially change the organizational and administrativestructure of WSD without prior Bank approval (paragraph 5.05);

(f) NCC would engage an accounting consultant to review WSD accountingsystems, recommend improvements and assist with their implementation(paragraph 5.12);

(g) WSD's and NCC's unaudited and audited accounts would be submitted tothe Bank within six and nine months,respectively, after the close of theyear (paragraph 5.13);

(h) revenues generated from WSD's water and sewerage operations would beused solely for the operation, maintenance and development of thewater supply and sewerage services of Nairobi; NCC's borrowings fromWSD's water and sewerage fund account for its short term needs, if any,would not exceed KE 400,000 outstanding at any time and would be limitedto terms of not more than six months;and to the extent that WSD earnsa rate of return exceeding 7.5% on both its gross fixed water supplyand sewerage assets in operation, such excess amounts may be transferredpermanently to NCC's other operations as long as they will not be needed

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for the operation, maintenance and development of the water supplyand sewerage services of Nairobi (paragraph 6.05);

(i) from 1979 onward, water tariffs would be adjusted from time to time forWSD to earn a cash flow return of at least 7.5% on annually revaluedgross water supply assets in operation (paragraph 6.15);

Cj) sewerage tariffs would be increased to KSh 1.40/m3 and, from1979 onward, sewerage tariffs would be adjusted from time to timefor WSD to earn a cash flow return of at least 7.5% onannuallv revaluedl gross sewerage assets in operation(paragraph 6.16).

7.02 The following would be conditions of effectiveness:

(a) all conditions to the initial disbursement of the OPEC Special FundLoan and the Saudi Fund Loan, except for the effectiveness of theproposed Bank Loan, have been fulfilled (paragraph 6.13);

(b) the OPEC Special Fund Allocation has been made and all actions necessaryto enable the funds to be used for the project have been taken (para-graph 6.13);

(c) the project implementation unit for WSD has been established(paragraph 3.12); and

(d) NCC has implement,ed the water and sewer service tariffs (paragraphs6.15 and 6.16).

7.03 With the above agreements,the project is suitable for a Bank loan ofUS$30.0 million equivalent for a term of 20 years including a grace period offive years.

January 25, 1977

ANNEX 1Page 1 of 6

KENYA

NAIROBI WATER SUPPLY PROJECT II

The Water Supply and Sewerage Sector

Geography and Climate

1. The Republic of Kenya, 2stretching inland from the Indian Ocean toLake Victoria, covers 583,000 km . Lying in equatorial latitudes, the countryexperiences wide differences in climate caused mainly by variations in alti-tude. Along the Indian Ocean coastline lies a narrow tropical belt, behindwhich an arid plain extends to the north. Towards the north-west, the landrises to a high plateau, the Kenya Highlands, at about 1,500 m with atemperate climate and subtropical vegetation in which 85% of the populationand the majority of economic enterprise are concentrated. The Highlands arebisected from north to south by the Rift Valley.

2. Average rainfall is about 450 mm per annum but the actual distri-bution results in vast areas receiving less than 250 mm while hill massesmay receive up to 2,500 mm or more. In four years out of five only about 20%of the country has a rainfall equal to or in excess of 750 mm per annum.East of the Rift Valley there are two distinct rainy seasons, from Marchto May and from October to December. In the western and Lake Victoriaareas there is effectively no dry season.

3. The 750 mm isohyet is significant, as it forms the boundary betweenthe lands of high and medium agricultural potential - covering about 20%of the total area - and the remaining arid and semiarid areas. Above the750 mm isohyet, the country is generally hilly, with springs and streamsfeeding perennial rivers. Below the 750 mm isohyet the country is flatter,drier and much hotter.

Water Resources

4. Evaporation and transpiration greatly reduce the amount of rainfallwhich eventually serves the water resource system of Kenya. Furthermore, thecharacteristics of the vegetation and eroded soils severely limit capacity toabsorb and retain rainfall. As a result, Kenya has limited surface waterresources relative to area and population. Perennial rivers are concentratedin the central area (including Nairobi) and the coastal areas. Groundwaterpotential is more promising although considerable more investigations arerequired to develop this source for maximum benefit. The quality of groundwaterin most parts of the country is generally satisfactory. However, in some areasit is saline and in others, including Nairobi, the water has excessive fluorides.

5. The first stage of preparation of a master plan for development ofKenya's water resources was begun irn 1976; the work is being undertaken byconsultants financed by SIDA.

ANNEX 1Page 2 of 6

Population

l/6. Kenya has a population (1977) of about 14.2 million- . Theoverall population density is about 23Ikm2 During the past decade thepopulation growth rate has ranged between 3.3% and 3.5% per annum. Urbanpopulation grew at an average rate of about 6% during that time and totalsabout 12 % (1.7 million) of the national population in 1977. The totalpopulation is expected to reach about 16 million in 1980, 22 million in1990 and 29 million by the year 2000, with gradually declining growth rates(3.5%/annum down to 2.8%).

7. Kenya's urban growth is largely synonymous with the metropolitanareas of Nairobi and Mombasa which in 1976 had populations of about 790,000and 315,000 and were growing annually at about 7% and 5% respectively. Astrong rural to urban migration is predicted for the next two or threedecades, especially after 1980 as limited agricultural land becomes agreater factor.

Sector Legislation

8. The Water Act, revised in 1968, together with its subsidiary legi-slation, covers the broad fie'ld of conservation, control, apportionment anduse of water resources. The control of and the right to use all water isthrough the Minister of Water Development. According to the Act, he isadvised by the Water Resources Authority, but the Authority became dormantin 1968 and its functions were taken over by the Water Department (WD).The Minister's powers to issue permits for the use of water, and controlof abstraction and pollution, is exercised by the Water Apportionment Board(WAB). Subsidiary legislation provides a code for procedures and functionsof the Water Resources Authority and WAB, defines a Water Works code forall water undertakers, and deals with water charges; it states that theMinister has power to fix or vary the water charges or method of charging.

9. Complementary of the Water Act is the Public Health Act, whichincludes many provisions relaiting to water and sewerage from the. health pointof view; the Local Government Regulations 1963, give power to local authoritiesin urban areas to undertake water supply, sewerage and drainage works, tomaintain waterworks and to make appropriate by-laws.

Sector Organization

10. Over the past 15 years, the principal responsibility for watersupplies has changed from the Ministry of Works to the Ministry of NaturalResources to the Ministry of Agriculture (MOA) and finally to the Ministry ofWater Development (MWD), established in 1974 by Presidential Decree, but littleprior planning. WD is MWD's principal executing agency. Special

1/ Kenya Statistical Abstract: updated by the Population Division, IBRD.

ANNEX 1Page 3 of 6

assignments are carried out by statutory boards such as: WAB (paragraph 8);the Tana River Development Authority, which is responsible for planning andcoordination of water resources programs in the Tana River catchment; andthe Mombasa Pipeline Board, which is responsible for bulk water supply tothe coastal area from Mzima Springs. Major irrigation developments are theresponsibility of the National Irrigation Board, under the Ministry ofAgriculture (MOA). The development of hydroelectric power is concentratedin the Ministry of Power and Communication acting through EAP&L.

11. While MWD is the principal government agency in community watersupplies!/, several other ministries and agencies are involved. The NairobiCity Council (NCC) is responsible for the development and operation of watersupply and sewerage systems of Nairobi. Five municipalities and two-countycouncils operate their urban water supply systems under the direction of theMinistry of Local Government (MLG). Several hundreds of small rural watersupply schemes are operated - though with varying success - by county councils;the Kenya Railways operates about a hundred water schemes supplying staffhouses and adjacent villages. The Ministry of Lands and Settlement plansand budgets water supply for new settlement areas, usually with WD as executingagency. The Ministry of Cooperatives and Social Services administers governmentgrants to all "self-help" schemes in rural areas (with limited technical assis-tance by WD). Finally the Ministry of Health is responsible for potablewater quality surveillance from the community health point of view and alsohas been engaged in a demonstrative program for rural water development.

12. Overall responsibility for the operation and development of seweragesystems is under MLG. The formal role of WD is only advisory. In some cases,WD acts as the agent for MLG in engaging and supervising consultants on theplanning,-design and construction supervision of sewerage works.

Urban Water Supply

13. Most of the urban population, either is served from piped water supplysystems or has reasonable access to public systems. The quality of supplygenerally is better in larger towns. Water is supplied through metered indi-vidual connections and communal water points or kiosks. 2 Water usage (sales)ranges from 70 1/cd to about 160 1/cd. Total sales of water in Nairobi averageabout 130 1/cd for the population served. Some towns, including Mombasa, withfast population growth have been unable to keep pace with water demand and arenow experiencing periods of serious water shortages.

1/ It presently owns and operates water supplies in Mombasa, four municipalities,110 urban centers and 90 systems in rural areas.

2/ Water from communal water points is free or charged at a nominal fee perfamily. Supply from kiosks is charged for by volume.

ANNEX 1Page 4 of 6

Rural Water Supply

14. The 1977 rural population is about 12.5 million, of which 1.5 millionpresently has access to improved water sources or piped water supplies. Thebalance carries water over considerable distances from natural sources, oftenpolluted, inadequate or, for several weeks each year, dry. About one-thirdof the rural population presently served has individual connections to theirplots or farms, and the balance draws water from communal water points, kiosks,or from protected springs or wells. Water usage ranges from 50 1/cd forindividual connections, to about 10 1/cd where water is carried to the dwellingunit. Walking distances range from l.to 4 km. The level of maintenance ofwater supply schemes is generally low, causing frequent disruptions of service.A substantial portion of them are completely inoperative.

Sewerage Systems

15. There are about 22 public sewerage systems in Kenya serving only about4% of the total population. Another 4% have septic tanks and 40% make use ofpit latrines. More than 50% of the population have no safe sanitation faci-lities. Nairobi is in the midst of a long-range program to expand its seweragesystem. MLG is arranging for improvements in four municipalities. MWD hasprepared the construction of 7 systems in smaller towns. Sewerage systems areusually separated from storm water drainage. Both are operated and maintainedby local authorities, but, except for Nairobi, to very low standards.

Past Expenditures on Water Supplies and Sewerage

16. Annual expenditures on water development by public authorities increasedmore than five-fold between 1969/70 and 1973/74 (the most recent consolidatedfigures available), to about KE six million. Approximately half was handledthrough WD; the remiainder was channeled through various other agencies, primarilylocal government authorities. Expenditures on rural water supplies during thisperiod grew much faster than those on urban supplies. More could have been doneexcept for constraints in implementation capacity. Total sewerage developmentexpenditures also grew about five-fold to about Kl three million annually.

Development Program

17. Within the framework of its long-term program for bringing thebenefits of safe and reliable water supply and disposal facilities to the wholepopulation, the Government established ambitious targets for the 1974-78 periodincluding: water supply service to two million additional people in rural areasand 500,000 in urban communites; an accelerated sewerage program to bring waste-water disposal capacity more in line with water supply capacity; completion ofa national water plan; and to train adequate numbers of technical personnel.

18. For the most part, the above goals were overly optimistic. They donot appear to have been developed with due concern for finances (both developmentand recurrent costs), the stafEf positicn and realistic time estimates. Thereis no national program for development over the next five-year period; a planfor 1980-84 is to be prepared during 1979. Hopefully, this will take due accountof current evaluations of past efforts and specific Dlans for imDrovement ofimplementation capacity.

ANNEX 1Page 5 of 6

Technical and Financial Assistance

19. The sector is benefitting substantially from technical aid given byvarious international agencies. In the course of several recent years therehave been about 60 to 70 expatriate engineers and other specialists workingpermanently in WD within the framework of technical assistance. WHO assistedWD in staffing its Sewerage Division for several years; in addition, it carriedout extensive water sector studies and, with UNDP financing, assited NCC inpreparing a sewerage and drainage master plan and making a groundwater study.

20. UNICEF/WHO participated in financing about 800 water suppliesconstructed in small rural settlements. The Swedish Government has been finan-cing a considerable part of about 100 rural water supplies constructed duringthe last seven years. The Governments of Norway and the Federal Republic ofGermany participated in financing improvements of water supply and seweragesystems in towns.

21. The Bank has financed two urban water projects; Nairobi Water Supply I(Loan 714-KE) which was completed satisfactorily in 1976 and the Mombasa andCoastal Water Supply Project (Loan 1167-KE) which should be completed in 1979 torelieve a critical water shortage (paragraph 13). Another Bank loan (1105-KE)and an IDA Credit (543-KE) for the Nairobi Site and Service Project include asubstantial sewerage component, which is part of the sewerage master plan. TheNairobi projects are the responsibility of NCC, while the Mombasa project isbeing implemented by WD. Several other Bank Group financed projects also includewater supply components: (i) Second Livestock (Cr 477-KE); (ii) Bura IrriRation

Settlement (Loan 1449/Credit 722); (iii) Wildlife and Tourism (Loan 1304); and(iv) Diani Beach Tourism (under preparation). For these four projects, WD is oris expected to implement the water supply components. The Bank also has appraiseda rural water supply project (April 1977) which would be implemented by WD andUrban II (September 1977).

Development Constraints and Problem Areas

22. Implementation capacity rather than financing appears to be theconstraint to the ambitious rural water supply program and other projectscarried out by MWD. The Government is having difficulty utilizing availabledevelopment funds effectively and the rural program is behind schedule. Themajor problems with MWD are institutional; unsuitable organizationalstructure, ineffectual management and the shortage of qualified staff. Overlybureaucratic procedures presently followed by various Government agencies out-side MWD also hinder such things as staff promotion, transfers and recruitment.A shortage of funds for operation and maintenance seriously reduces the benefiLtsobtained from existing facilities in small communities and rural areas.

23. For muncipalities and other larger urban areas, financing threatensto be a problem. The revenue bases of these communities have been restrictedby the Government and, together with internal financial management shortcomingsin some cases, this has resulted in critical financial positions for the localgovernments. Consequently, water and sewerage revenues are being diverted tomeet the needs of other municipal functions and are not always available asneeded for water and sewerage operations and development. This is a matterbeing seriously considered by the Government in co-nsultation with the Bank.

ANNEX 1Page 6 of 6

24. The Water and Sewerage Department (WSD) of NCC has much fewerproblem areas. The principal one is a chronic shortage of technical staff,although WSD has managed to cope with development programs and operationssatisfactorily nonetheless. So far, the City Treasurer has managed to leavewater and sewerage funds alone except for short term internal loans to meettemporary cash shortages.

Sector Development

25. A prime requirement for sector development is to strengthen MWD andthis will be a key objective of the proposed rural water supply project(paragraph 21). Toward this end, -,rovision for a comprehensive evaluationof all past and ongoing rural water projects was included in the Moinbasa andCoastal Water Supply Project ('Loan 1167-KE) to provide a much better basis forrural water investments. The work was completed during the first part of 1977with SIDA financing. A preliminary analysis of the management and organizationof MWD has been made by a Bank consultant as part of the appraisal of the ruralwater supply project. This wiLl be followed up by an in-depth study andimplementation assistance by consultants to be engaged by MWD. Action to bespelled out in the loan agreement for the rural water supply project shouldgradually increase the efficiency and capacity of MWD in sector development.

26. As noted above, the lack of competent staff is a critical weaknessin the sector, particularly in MWD. A training component was included in theMombasa and Coastal Water SuppLy Project. Although not yet fully implemented,that training is intended to assist the Coast Province Water Branch of WDspecifically and WD generally. Training for WD also would be included in theproposed rural water project and the Nairobi Water Supply Project II wouldinclude something for WSD training.

27. Although significant, these training efforts do not go to the rootof the long-term staff problem. The education facilities of Kenya are notadequate to satisfy the needs of this and other sectors and something needsto be done to strengthen and expand capacity greatly if the gap in Kenyanengineers, technicians and others required for the sector is ever to be filled.

ANNEX 2Page 1 of 7

KENYA

NAIROBI WATER SUPPLY PROJECT II

Existing Water Supply and Sewerage Systems

GENERAL

1. Thie water supply to Nairobi is derived from Kikuyu Springs,impounding reservoirs on the Ruiru and Sasumua Rivers, and a run-of-the-river abstraction from the middle reaches of the Chania River at Ngethu(Map IBRD - 12981).

2. Certain industries, Government institutions, private individualsand estates have their own supplies derived from licensed tubewells. Insome cases these supplies are augmented by a supply from the WSD system.

3. Tubewell water generally has a high fluoride content, in mostcases well above the WHO limits. WSD does not use tubewells, except inisolated cases, because of this fact, and also because it is not possible

to abstract enough groundwater to be economic. These conclusions weresupported by a UNDP/WHO study in 1975.

4. Nairobi has sewerage facilities serving much of the more populatedareas. Wastewater is treated at two large and one small treatment works atthe lower level, eastern side of the city.

HISTORY

5. The first water supply to Nairobi was a railway service. The sourceof potable water was Kikuyu Springs. In 1921, the water undertaking was boughtby NCC from the railway authorities at a cost of E20,000.

6. In 1939, an intake on the upper reaches of the Ruiru River withpipeline and treatment works at Kabete were constructed. This source wasprogressively developed up to 1950 by adding a dam and two further pipelines.

7. Between 1952 and 1956 the Sasumua River was developed by buildinga dam, treatment works, pipeline, etc., and this was further extended between1960 and 1969 by raising the dam, diverting the flow from other rivers intothe reservoir (including flood flows from the Chania River), and extendingthe treatment works twice.

8. It was apparent in the early sixties that additional sources wouldbe required and investigations were carried out culminating in work startingin 1972 on the first phase of the Chania-Kimakia-Thika Project. This com-prised a diversion weir across the Chania River, pumping station, treatmentworks and pipelines and was financed in part by IBRD Loan 714-KE. The waterintake, treatment and transmission works were commissioned in 1974, althoughdistribution facilities were not substantially completed until 1976. A 50%increase in the capacity of the treatment works has now been authorized(Chania IA) and contracts, programmed for completion in 1978, have beenawarded.

ANNEX 2Page 2 of 7

KIKUYU SPRINGS

9. West of Nairobi there are two individual springs and a thirdgroup at the reservoir site with a combined yield of approximately 1.0IMgd (4,545 m3 /day). The water quality is satisfactory and treatmentconsists of micro-straining and chlorination. This treatment is appliedto the bulk of the source, one isolated source being blended with thetreated water at a point downstream of the main works.

10. Water from Kikuyu Springs is transported through three mains,10 to 11 km long, built in 1910 and 1920, all of which terminate at theKabete Treatment Works. Progressive increases in demand between thesprings and Kabete have resiulted in the full capacity being utilized enrouteby customers in Dagoretti and vicinity so the mains have been shut off atKabete.

RUIRU

11. The dam on the RuJiru River is 60 feet (18.3 m) high mass-concrete andimpounds 656 IMg (3 million m3). The estimated safe yield was originallycalculated as 3.3 IMgd (15,000 m3/day) but a reassessment of the hydrology in1970 led to this being revised to 4.7 IMgd (21,000 m3 /day).

12. The water was originally partly treated at the source with sodiumcarbonate and chlorine for corrosion control but this has been discountinuedas iron and manganese were being precipitated in the transmission mains. Nowthe water is carried to the treatment works at Kabete in three bitumen-linedsteel mains, 18 miles (29 kin) long. The mains were installed in 1938, 1946and 1949 and their combined capacity by gravity flow is 4.3 IMgd (14,500 m3/day).With the recent installation of booster pumping the total capacity of thesystem has been increased to 5.1 IMgd (23,200 mi/day).

KABETE WATER TREATMENT WORKS AND DISTRIBUTION RESERVOIRS

13. The original plant was constructed in 1936 to treat water fromKikuyu Springs and was extended in 1945-47 and 1949-50 to cope with theadditional water from Ruiru. Improvements in filter capacity were made in1959 and in the chemical treatment in 1964. The capacity is considered to be4.75 IMgd (21,600 m3/day) but with rehabilitation of the works, now underway,this will be raised to 5.1 IMgd (23,200 m3/day). Treatment consists ofpH correction, coagulation, settlement, filtration and disinfection. Testsare being carried out now to find suitable means of removing iron and manganese.

14. At Kabete there are three ground-level reinforced concrete reservoirswith a total capacity of 13 IMg (59,100 m3) from which treated water fromKabete and Sasumta is distributed.

SASUMIUA

15. The Sasumua Dam, completed in 1956, was 110 feet (33.5 m) high. It isof rolled earth fill with substantial rock toes and rock blanket at the upstreamface. Between 1963 and 1969, the crest was raised 26 feet (8m) to impound atotal of 3,500 IMg (15.9 million m3). In 1964 diversion dams on the two mainbranches of the Kiburu River and the upper Chania were completed with the flow

ANNEX 2Page 3 of 7

from them led through acqueducts to discharge into the Sasumua system. Twominor tributaries were also diverted. With this extended catchment area andraised dam the safe yield is considered to be about 12.5 IMgd (56,800 m3/day).

16. The raw wa er is carried by two steel pipelines with a total capacityof 18 IMgd (81,800 m /day) to the treatment works near the dam. The treatmentcomprises: coagulation, settlement, filtration, disinfection and pH correction.The nominal capacity of the works is 12.5 Imgd. The treated water is carriedabout 63 km to Kabete by gravity through a pipe system that has a designcapacity of 14 IMgd (63,600 m3/day).

CHANIA

17. From a concrete weir and a pumping station on the middle reaches ofthe Chania River, raw water is pumped to the Ngethu Treatment Works through a700 mm diameter steel pipeline 1.5 km long. (Abstraction rights are describedin Annex 4). The capacity of the raw water line is 20 IMgd (91,000 m3/day).The raw water pumping station has an installed capacity of 15 IMgd (68,200m3/day), suitable for continuous operation at 10.3 IMgd (46,800 m3/day).Additional equipment is being added under the Chania IA project, now underway,to bring installed capacity to 20 IMgd and permit continuous operation atabout 14'IMgd (63,600 m3/day).

18. Treatment comprises pre-chlorination, coagulation and sedimentation,rapid filtration, post-chlorination and pH correction. The rated capacity ofthe treatment works is 8 IMgd (36,400 m3/day) but performance, depending onthe raw water quality, indicates a sustainable capacity of 9 IMgd (40,900 m3 /day),or about 12.5% overload. Hydraulic capacity, ignoring the chemical, biologicaland physical aspects of treatment, is about 13.2 IMgd (60,000 m3/day). Fromthe time of commissioning in 1974, production averaged 3.6 IMgd in 1974, 4.3IMgd in 1975 and 6.2 IMgd in 1976 (16,500, 19,500 and 28,000 m3/day respectively).

19. The Chania TA expansion of the treatment works will bring sustainabletreatment capacity at 12.5% overload to about 13.5 IMgd (61,400 m3/day).

20. Treated water flows by gravity from the Ngethu Treatment Works todistribution reservoirs at Gigiri (Map IBRD-12981). The 700 mm diameter trans-mission main has proved to have a capacity of about 10.0 IMgd (45,500 m3/day)l/and is about 36 km long.

TOTAL CAPACITY

21. The total capacity of the existing raw water, treatment and trans-mission facilities of the WSD system, including Chania IA but excludingtubewells., is summarized in the table below and should be adequate to meetNairobi's requirements until mid-1980. Continued use of tubewells to theextent of about 9,000 m-3/day would add about one year to this time horizon.

1/ Various sources have reported 9.8, 10.3, 10.9 and 11.8 IMgd.

ANNEX 2Page 4 of 7

Normal Operations Short Term PeaksINgd ma/day IMgd m3/day

(000) (000)Kikuyu Springs 0.8 3.6 1.0 4.5Ruiru/Kabete 4.7 21.4 5.0 22.7Sasumua 12.5 56.8 14.0.a! 63.6Chania 10.0 45.5 11.ob/ 50.0

28.0 127.3 31.0 140.8

DISTRIBUTION RESERVOIRS

22. Total existing distribution storage capacity is 20.5 IMg (93,200 mi3).Most of this is at Kabete with 13 IMg (paragraph 14). The balance is atGigiri, taking treated water from the Ngethu Treatment Works, and Hilltop,which is really a secondary reservoir, taking water from Kabete. Additionalstorage capacity totalling 4.2 IMg (19,100 m3) is being built. Upon comple-tion, the total capacity of primary distribution storage (taking treated waterfrom the various sources) wi:Ll be 18.5 IMg (84,100 m3). Secondary storagecapacity (taking water which already has passed through primary reservoirs)will be 6.2 IMg (28,200 m3) at five locations. Thus, primary distributionstorage will be about 80% of 1977 average daily water production and totalprimary plus secondary storage will be about 110%. This amount of storage isreasonable for the Nairobi system.

DISTRIBUTION NETWORK

23. The extent of the existing distribution system is indicated onMap IBRD-12982. However, this does not indicate that some of the area shownserved, the Dagoretti area in the west for example, has totally inadequateservice.

24. Distribution is divided roughly into three zones according to elevationand sources of water with poorly defined boundaries. The low zone is a rapidlyexpanding new one on the eastern side of the city and is supplied from theprimary distribution reservoirs at Gigiri (Chania River water). The centralzone, which incorporates the city center (the original city) is supplied fromKabete primary reservoirs (Ruiru and Sasumua water). The high zone on thewest is supplied from Kikuyu Springs, taps from the Sasum.ua transmissionpipelines and various tubewells.

25. The existing distribution is designed generally for maximum pressuresof 300 feet of water (9.14 kg/cm2) and minimums of 60 feet of water (1.83 kg/cm2).Pipelines are of bitumen-lined steel pipes, cast or spun iron, some asbestos-

a/ With improvements now underway.b/ Limited by transmission capacity after Chania IA is comDleted: otherwise

about 13.5 IMgd (61,400 m3/day).

ANNEX 2

Page 5 of 7

cement, galvanized steel, and in the last few years, UPVC pipes (unplasti-cized polyvinyl chloride). The bulk of the distribution is either 6 inch or4 inch diameter (150 to 100 mm) with some 3 inch (75 mm), but this size isbeing discontinued. The total length is about 450 miles (725 km). Firehydrants are provided with particular emphasis on the low-cost, highdensity areas where the risk is greatest.

26. The pressures are generally adequate although difficulties areexperienced in some sensitive areas. The main exception is Dagoretti, on thewestern side of the city, where the available water is totally inadequate andthe existing reticulation is in poor condition and badly sited for furtherdevelopment of the area.

OTHER WATER SUPPLIES

27. Within the city area there are ten private and several institutionalsupplies. They derive their water from tubewells and in some cases supplementthem with a connection from the WSD supply. The Government run undertakingsare:

(i) Nairobi Airport - daily consumption 211,000 Ig (960 m ), of whichabout 70% is taken from WSD;

(ii) Kenyatta College and Kahawa Garrison - daily consumption 350,000 Ig(1600 m 3 );

(iii) Kamiti Prison - daily consumption 170,000 Ig (770 m 3), all fromtubewells;

(iv) Kabete Government Area - daily consumption 300,000 Ig (1360 m 3),

most of which comes from WSD mains; and

(v) Karen - run by MWD until WSD can take over, daily consumption is425,000 Ig (1900 m3) from springs and tubewells.

SERVICE CONNECTIONS AND METERING

28. There were a total of about 47,400 service connections on the WSDsystem in mid-1976 and all were metered, incliuding about 200 communal waterpoints - also called standposts or kiosks. The metering system - installa-tions, maintenance and meter reading - is good as demonstrated by theunaccounted-for-water of only about 17% of production which is commendableperformance for a water system in a developing country. 1 he distribution ofservice connections by categories of use was as follows:J

Domestic 40,000 84%Commercial 4,600 10%Industrial 600 1%Government 800 2%NCC/other 1,400 3%

47,400 100%

1/ The approximately 200 public street hydrants are scattered through theGovernment, Domestic and NCC accounts.

ANNEX 2Page 6 of 7

EXMZNT AND QUALITY OF WATER SERVICE

29. Map IBRD-12982 shows the approximate limits of WSD's distributionsystem as operated in 1976/1977. This covers the most populated third ofthe total area within the city boundary. Water service in the central areasand the adjoining strip of the eastern area is reasonably good. The bulk ofthe western and northwestern areas, most notably Dagoretti, have inadequateor no service from WSD and, for the most part, the population must rely onsprings and private tubewells for its limited supplies.

30. WSD's analysis of 1975 water production and use, which was the basefor the water demand projections (Annex 3), and which separates domestic wateruse previously buried in other categories (such as Government or industrialstaff housing), shows the following:

% of total water % of totalused (sold) production

Domestic 60.1% 50.0%Commercial 17.8% 14.8%Industrial 11.7% 9.7%Public (Government and NCC) 10.4% 8.7%

Total Use 100% 83.2%Unaccounted-for - 16.8%Total Production - 100%

31. Of the estimated total population of Nairobi of about 733,000 in1975, about 82%, or 604,000, were served by the WSD water supply system. Thebalance of the population obtained their water from tubewells (private oroperated by other government agencies), springs or polluted sources such asstreams and rivers. The urban poor population of Nairobi, with incomes ofKSh 200/month and occupying unserviced substandard housing, were variouslyestimated to total 10% to 15% of the total population, or 80,000 to 110,000people. Of these about 60,000 - 70,000 had access to WSD water sold at kiosksor given free at public hydrants operated by other government agencies.Access to kiosks and public hydrants appears to range from barely adequate toample and the charges for the water sold by kiosk operators is often excessive.

SEWERAGE SYSTEM

32. By the end of 1974 about 420,000 people were served by the Nairobisewerage system. A master plan for further development was prepared under aUNDP financed project with WHO as the executing agency. A substantial partof the first increment of this master plan is being implemented with financialassistance under IDA Credit 543-KE and IBRD Loan 1105-KE, the Nairobi Site andService Project. These works should be completed by mid-1978. Other worksfinanced entirely by NCC are also underway. By 1979 the population served isexpected to be about 670,000.

Il ver.,-' Gcmept4c (or residential) water use in 1975 ranged from about 18 1/cdto abu. 7'2 1C, depe.nding or inccne, and averaged 80 1/cd for thepopulation served.

ANNEX 2Page 7 of 7

33. Upon completion of the present sewerage works, WSD intends toproceed with other facilities identified in the master plan. However, areview of sewage flows and characteristics should be made about the timethe ongoing works are completed as a basis for supporting or revisingthe functional design criteria.

34. While WSD's intentions about proceeding with the sewerage programare good, the work necessarily depends upon the availability of fundsgenerated from operations and secured through short-term local borrowing.Thus it may be that WSD will have to proceed somewhat more slowly thancalled for in the master plan. Nevertheless a steady but slow gain on thepercentage of population served by WSD sewers and on the amount of waste-water disposed of satisfactorily is expected.

35. Residents in the areas not served by WSD sewers, which forthe most part are scantily populated, will continue to use septic tanks,conservancy tanks, cesspools, bucket latrines and pit latrines. A fewsmall communities and some factories will continue to have individualtreatment facilities, usually in the form of small waste stabilization ponds.

ANNEX 3Pg. 1 of 5

KENYANAIROBI WATER SUPPLY PROJECT 11

Water Production Requirements and Capacity

40q_

3501

Upper Bound Projection r'

3001 / /Design Basis Om

Lower Bound Projection.

- 2501

o Capacity withMProject |f

2001 4 i0

-o_

150

Capacity with Chania I

' ExisigCpct

Forecast from Appraisal of10 Nairobi Water Supply I (Loan 714-KE

AaA a I*a A k S A Ak k A A a -A A a t11 I a I I1965 1970 1975' 1980' 1985 1990 1995

CALENDAR YEAR

VWorld Bank-17852

ANNEX 3Page 2 of 5

KENYA

NAIROBI WATER SUPPLY PROJECT II

Water Production Reqirements and Capacity

1. Because of the large capital expenditures required to augmentNairobi's existing water supply capacity, and the shortage of availablefunds, the predictions for Nairobi's future water requirements were theobject of extensive analyses and cross examination during 1976. To someextent this was instigated by the Bank because of a lack of evidence tosupport previous forecasts of water supply requirements and the capacityof facilities needed to meet those requirements.

2. The result of this work is shown on the accompanying graph,(Page 1 of this Annex) and in the tabulation at the end of this Annex.The study which provided the forecasts was done by WSD. It employs morecomplex and innovative projection techniques than usually applied in waterdemand projections and reflects a valu7 ble effort to cope with the difficultproblems of water demand forecasting.1

3. WSD's first report on this study, "A Review of the Basis andMethods of Water Demand Forecasting in Na robi" is dated June 1976. Thiswas reviewed extensively within the Bank2 and some important shortcomings inthe projection methods used were disclosed. A revised model was elaboratedand new forecasts were ruade by WSD taking due account of the Bank's commentsand using some improved data, particularly with respect to the housing situa-tion and commercial demand. The results as shown in this annex have beenaccepted by the appraisal team as an appropriate basis for planning Nairobi'swater supply development program. A final report by WSD on its forecastingprocedures is being prepared.

4. The WSD model for forecasting water demand uses the critical inputsof GDP, population growth, income distribution, the housing situation and theshare of GDP devoted to housing, non-domestic demand with respect to GDP, andthe accessibility of water for occupants of unserviced substandard housing.Base year (1975) and historical information was collected from a ground anddata survey in the spring of 1976. The forecasts were tested for sensitivityto changes in the variables and the striking feature is the dominant effectof GDP variations and the relative insensitivity of the forecasts to popu-

1/ It should be noted that the figures given in this Annex are for waterproduction by WSD's facilities. They do not include the 10% portionof the total demand for water now met from publicly and privatelv operatedtubewells (Annex 2). The use of groundwater will be gradually reduced toabout 1.0 IMgd in 1985.

2/ by representatives of the Eastern Africa Projects Department, the concernedCountry Programs Department, the Office of the Chief Economist of theEastern Africa Regional Office, the EWT Department of Central Projectsand the Urban and Regional Economics Division of the Development EconomicsDepartment.

ANNEX 3Page 3 of 5

lation changes. The growth of incomes and the housing stock appear to havemuch more impact on water demand than the growth of population. In fact,when GDP and housing creation stagnate, a higher population growth may yieldno real increase in future water demand.

5. The GDP figures used in the forecasts for Nairobi (110% of thenational average) are based on government and Bank analyses of Kenya's economyin 1976. The growth rate of Nairobi's GDP used in the most likely demandforecasts are 4% per annum between 1975 and 1979 and increasing thereafterso that the average growth between 1975 and 1985 is 6% per annum, and between1975 and the year 2000, 7.5% per annum. The figures used ate considered byWSD to be conservatively low.

6. The population forecasts are by Nairobi's Urban Study Group; theyare proving to be r,liable at the present time and are accepted by WSD andthe Bank as the basis for water demand forecasts.

7. Price elasticity of water demand in Nairobi does not appear to bea particularly significant f'actor in projecting total demand over the perioduntil the project is fully utilized, although this important factor has notbeen ignored. Some research conducted for Nairobill using 1974 and 1975 waterconsumption data before and after a tariff change indicates the possibility ofa moderate response of residential water use to price changes. Water andsewer service tariffs were increased on April 1, 1975 and again on January 1,1976. Together these raised tariffs by 85%. Taking account of approximaterates of inflation and changes in average income over a one-year periodinclup,ive of the dates the tariffs were changed, the effective real increasein tariffs was about 58%. However, actual. total water demand in 1976 does notappear to have been influenced in any identifiable way by the price changes.

8. There are a number of probable reasons for the apparent discrepancybetween the research work and actual performance. Only about one-third oftotal production is considerted potentially responsive to price changes. Thisproduction is for residentia:L use by customers who pay their own bills. Othersin the higher-income categories have their accounts paid by employers orbusinesses. About one-half of the present low-income residential consumptionis bulk metered and paid for indirectly as part of the rent or included inemployment benefits. Industrial, commercial and public users do not appearto react quickly or substantially to price changes. Another possible reasonis that up to now demand for residential water has been constrained by thehousing situation (paragraph 4) and distribution limitations and unsatisfieddemand probably is not sensitive to price changes. The net result of thesefactors has led WSD to conclude that the overall price elasticity for waterproduction in Nairobi is presently very low (coefficient of -0.05 or less)

1/ Part of a larger research project financed by the Bank under RPO 671-18,Pricing and Financing of 'Urban Services.

ANNEX 3Page 4 of 5

and is likely to remain so for the next several years.

9. The appraisal of the average incremental cost of water and thefinancial requirements of WSD indicates the need for a tariff increase ofonly about 30% in real terms and that this increase would be applied onlyto the higher levels of water use. Therefore it is felt that, comparedto other factors, price elasticity would have only a minor effect on totalwater production requirements and the sizing and timing of the proposedproject components. Nevertheless, WSD should be alert continuously for anyindications of price elasticity and should take this factor into accountin future demand projections.

10. The demand projection used for project planning is derived bysetting the five key variables at their most likely values. It reliesmostly on the reasonable assumption of a slow but steady evolution towards:(i) a satisfactory economic recovery; (ii) a normal housing market; and(iii) a moderate in-migration rate. By contrast, the lower and upperprojections are obtained by combining the extreme effects of the variablesso as to yield the maximum deviations. Therefore, the lower trajectory inparticular should be viewed as an ultimate bound which could only resultif several pessimistic and unlikely conditions were to occur at the sametime.

11. Forecasts of water demand beyond about 1990 are not significantfor the purposes of project planning; they merely provide some general ideaof the long-range target which WSD may be required to meet.

12. Periodic updating of the forecasts about every two years should bedone by WSD using the model, and perhaps revising the model, as new data -particularly on GDP, the housing situation, actual demand and any evidenceof price elasticity - become available.

13. It is notable with respect to past forecasting, that in spite ofthe lack of much supporting background data, or any attempts to develop moresophisticated procedures, the water demand forecasts made in 1969 at the timeof the appraisal of the first Nairobi Water Supply Project have proven to bevery close tc actual production dur-ing 1975 and 1976. TLhe actuals were lessthat 2% below the forecasts for 1975 and about 4% below the estimates for1976 when there were some distribution constraints which are being removedin 1977. At the end of 1973 and the early part of 1974 constraints in watertreatment and transmission capacity caused a period of water shortages andrationing. These constraints were removed when the treatment and transmissionfacilities financed under Loan 714-KE went into operation.

ANNEX 3Page 5 of 5

ANNUAL AVERAGE DAILY WATER PRODUCTION:1970 - 1976

Calendar Year 1969 Appraisal Forecast-: ActualIMgd m3/day IMgd mE/day

(000) (000)

1970 15.1 68.4 15.33 69.71971 16.1 73.3 16.24 73.81972 17.2 78.3 16.71 75.91973 18.6 84.3 17.75 80.71974 19.6 89.1 18.87 85.81975 20.9 94.9 20.64 93.81976 22.2 101.0 21.30 96.8

FORECAST OF ANNUAL AVERAGE ])AILY WATER DEMAND (PRODUCTION): 1977 - 2000'DeignBas_ b Uper Boune

Calendar Year Lower Bound b/ Design-Base- b/

IMgd n3/d<uy IMgd m3/day IMgd m3/day(OOO) (000) (000)

1977 - - 23.0 105 - -

1978 - - 25.5 116 - -1979 24.4 111 26.9 122 28.5 1301980 25.3 115 28.9 131 31.0 141

1981 26.3 120 31.1 141 33.7 1531982 27.3 124 33.4 152 36.6 1661983 28.4 129 36.0 164 39.8 1811984 29.5 134 38.7 176 43.2 1971985 30.6 139 41.6 189 47.0 214

1990 40 183 60 270 70 324

1995 53 242 85 385 110 490

2000 70 320 120 550 165 750

Notes:a/ from IBRD Report PU-40a, Appraisal of the Nairobi Water Supply Project,

Kenya, October 26, 1970, based on a field appraisal made in October 1969.

b/ equivalent compounded rate of growth:1979-1985 1985-2000

Lower Bound 3.85% 5.67%Design Base 7.53% 7.37%Upper Bound 8.7% 8.7Z

ANNEX 4Page 1 of 6

KENYA

NAIROBI WATER SUPPLY PROJECT II

Project Description

1. The project is designed to add about 23.7 IMgd (107,700 m3/day)net to the total average daily water treatment and transmission capacity ofthe Nairobi water supply system. With this addition the total averagedaily capacity of the system would be about 50.5 IMgd (230,000 m3/day)which is expected to be adequate to meet Nairobi's requirements until nearthe end of 1988 (Annex 3) with 90% reliability (possible failure to meet dryweather requirements in one out of 10 years, depending on hydrologicalconditions).

2. This increase in net capacity would include a reduction of 2.5 IMgdin direct average sustainable year-round daily yield from the existing SasumuaReservoir because part of the reservoir storage capacity would be reservedfor discharges back into the Sasumua River and thence into the Chania River(Map IBRD-12981)during the three-month dry period when Nairobi's wateruse is highest and minimum water requirements downstream of Nairobi's waterintake at Ngethu must be met also.

3. The differences in the hydrological patterns between the Susumuawatershed and the much larger Chania catchment above the site of Nairobi'swater intake enhance by more than 100% this exchange of 2.5 IMgd directyear-round withdrawal from Susumua for increased withdrawal of about 26 IMlgdduring the dry season at the Chania intake. However there is a cost; about900 IMg annually of Susumua water which now flows by gravity to the higherelevations of Nairobi will have to be pumped until such time as the ChaniaDam is built. The benefit of postponing the Chania Dam by about seven years(at least) makes this exchange worthwhile.

4. The concept of using part of the Sasumua Reservoir capacity toregulate flows in the Chania River was developed recently by HHS afteralmost ten years of assuming that the Chania Dam would have to be includedin this stage of developing water resources for Nairobi. The SasumuaReservoir was enlarged by about 100% in 1969/70 and a connection to takeflood water from the upper reaches of the Chania was included in that Droiect.Late in 1976 an examination of the performance of the Sasumua Reservoir

system during an extended period of subnorrial iainfall led to the conclusionthat the reservoir might be beneficial for regulation as well as for directabstraction. HHS proceeded with a more comprehensive analysis using twoyears of flow records at the Ngethu weir - construction of which was financedunder Loan 714-KE and completed in 1974 - and at other relatively newgauging stations on the Chania, about four years data from the SasumuaReservoir and 46 years of records at a long-term river gauge. Flows atSasumua and Ngethu and various other points on the Chania were simulated fora 46-year period. Standard statistical techniques were used by HSS to

ANNEX 4Page 2 of 6

estimate safe combinations of direct draw-offs and dry weather releases fromSasumua Reservoir. It is on this basis that the proposed project is designed.This analysis has been extended to include the effects of possible future damson the Chania and Kimakia Rivers for the purposes of longer term planning.

5. While the above analyses are sound and a suitable basis for projectplanning, it must be noted that the projected yields are based on periods ofsynthetic records which in some cases are two steps removed from historicalrecords. Thus, there is the risk that actual performance would be belowexpectations and that consitruction of the Chania Dam would have to be advanced.Even this possible unfavorable outcome, however, would not have an adverseeffect on the economic sizing of the proposed project components, except thegravity raw water intake p:ipeline (paragraph 13) which might prove to beoversized somewhat.

6. Detailed studies of the hydrology of the Chania-Kimakia-Thika River watershed and of watpr ihRtrnet;on allocations versus actualdownstream requirements are about to be undertaken by MWD in consul-tation with NCC and should be completed during 1978. A review of waterrights, including an economic evaluation of the comparative value of existingand possible future water uses, is one of the principal objectives. Improvedcollection and analysis of records of stream flows and abstractions in thewatershed should be a continuing process after completion of the initialstudies to strengthen the data base for planning development and operations.Detailed reviews of the yields of the Sasumua Reservoir (as well as thesmaller existing Ruiru Reservoir) also should be made regularly every few years.

7. The results of the initial studies could lead to a change in theamount of water Nairobi is allowed to take from the Chania during dry weatherwithout providing a new regulating reservoir. Based on old estimates of dryweather flow and downstream water rights, NCC presently has a permanent allo-cation of 10 IMgd maximum during dry weather without river regulation. Twoadditional temporary licenses, totalling 8 IMgd, have been granted to NCC byt'e Water Apportionment Board (WAB). The most recent of these was made earlyin 1977 with the condition ithat NCC complete regulatory storage facilitiesby the end of 1982 unless the MWD studies show that storage provisions can befurther postponed. Since these temporary licenses were granted prior to thechange in plans for use of Susumua Reservoir (paragraph 2-4) NCC has appliedfor revision of the licenses to take this into account.

8. The preliminary indicatinns from the study are encouraging. Dryweather flows appear higher than estimated earlier. At the same time,abstractions by others appear to have been substantially higher than theamounts they are licensed to withdraw (17 IMgd) and for less important purposes.Should this be borne out, there could be an increase in the abstraction allowed

1oi N.airobi during dry weather without additional regulatory storage being

ANNEX 4Page 3 of 6

provided by NCC. In that case the next stage of expansion following thisproject would not necessarily include the Chania Dam. At present, however,it is assumed that the Chania Dam would be required near the end of 1988and that its construction would have to begin about mid-1984.

9. Project design is based on the assumption that peak daily waterproduction requirements are about 112% of annual average daily demands andthat water production and transmission capacity is to be adequate to meetthese peaks which occur during the period October through March. Thisassumption is supported by an analysis of 1975 and 1976 production records.Average daily production requirements for the maximum month are onlyslightly less than the peak daily demands, about 110% of annual average dailydemands. Minimum daily production requirements, which occur during the rainyseasons, are about 85% of annual average daily production demands. This patternof demand is fairly level, plus or minus 12% to 15%, indicating reasonablylow levels of "luxury" use of water.

10. Unaccounted-for (non-revenue) water has averaged about 17% ofproduction during 1975 and 1976. This represents relatively good performancefor a water supply system and is expected to continue. Water losses throughthe treatment works at Ngethu (with settled solids and from filter washing)are estimated at 4.0% of the raw-water intake, based on present performance.

31. Tubewells presently supplying about 2.0 IMgd of Nairobi's -private and publicly operated - water systems (Annex 2) are to be phasedout gradually because of excessive fluoride content of the water. About1.9 IMgd are expected to be used from these sources in 1979 and about 1.0IMgd in 198' as the distribution system is expanded into new areas.

12. The proposed project includes a new raw water intake on the ChaniaRiver about 10 km upstream from the existing intake and a new conduit tobring water to the Ngethu Water Treatment Plant by gravity (Map IBRD 12981).A branch to this pipeline and a new gravity intake on the Kimakia River wouldbe added in about 1988. Upon completion of this project the existing pumpingstation would be required only periodically for topping off the supply whenthe flow at the new Chania intake is inadequate. Upon completion of theKimakia intake, the pumping station may not be required at all. The gravityraw water system has teen selected over a continuation and expansion of theexisting system of pumping raw water from the Ngethu intake. Although theinitial capital costs of the gravity scheme are higher by about Kt 2.3 millionthan the costs of expanding the pumping system, the reduction of the highoperating and maintenance costs of the pumping systems puts its total dis-counted present value (at a 11% discount rate) above that of the gravity system.This ignores expected future increases in energy costs of pumping and the bene-fits of increased reliability with the gravity system.

13. The gravity raw w,4ter main is designed to carry flows availableupon full development of the Chania-Kimakia-Thika River system assuming thatthe Chania Dam and the gravity intake on the Kimakia River are built eventually.

ANNEX 4Page 4 of 6

Thus the capacity of the gravity raw water conduit is 51 IMgd (232,000

m3/day)I/ on a sustained basis during dry weather but it could carry flowsof up to 57 IMgd (112% of 51. IMgd) on peak demand days. These capacitiesinclude about 10 IMgd (about 25%) in excess of what would be required if theChania Dam were never to be built and thus there is a risk that the excesscapacity would never be used.

14. Consideration was given to building the pipeline portion of the rawwater conduit without excess capacity and paralleling it later if a dam is built.However, the difficult terrain to be traversed by the gravity main could makea future parallel main physically impracticable. Given the relatively lowincremental cost of the excess capacity (6% to 8% increase in the cost of thepipeline) compared to the future cost of a parallel main, NCC decidedto take the reasonable risk of modest overinvestment now.

15. Consideration has been given to reducing the initial capital outlayby constructing the water trieatment plant in two stages. Under that procedurethe central administration and storage areas would be constructed to suit theultimate capacity but some of the treatment components would be deferred. If50% of the treatment capacity was postponed at an initial saving of about Kf 0.7million (33% of the cost of t-he full plant) new works would have to bestarted within a year or two of the completion of this project. Furthermore,there would be a need to purchase the balance of the equipment from thesupplier of the first stage equipment. The price in such a non-competitivesituation probably would be higher than necessary as experienced by NCC in theprocurement for the Chania I--A project (paragraph 8 , Annex 2). Finally, thesmaller civil engineering contract for the next stage would be likely to resultin higher unit costs. For the practical reason of avoiding the inconvenienceof almost continuous construction works and because of the probability ofincreased costs in the long run, WSD has made the reasonable decision toconstruct the treatment works to full capacity in this project.

16. The distribution system is to be expanded into populated areas ofthe city which presently are not served or poorly served by the existing WSDsystem (IBRD Map 12982). The distribution system also is to be realigned andsubdivided into 13 zones (coumpared to seven at present) to improve the efficiencyand quality of service. The low-lying eastern and central zores would be servedfrom the Gigiri terminal reservoirs by gravitv. The 4igher central zones seorled

be served from the Kabete water treatment, storage and pumping complex and thehighest western zones would be served from the Dagoretti Forest, Uthiru andHilltop Reservoirs as well as from existing sources of water at Kikuyu Springsand Sasumua. About 45% (75,000) of the 1976 population in the Dagoretti areas

1/ With regulation at Sasumua Reservoir and the assumed future Chania Reservoir,49.5 IMgd has been calculated as the maximum sustainable dry weatherabstraction from the Chania and Kimakia Rivers at the sites of the gravityintakes. However, the 4% process water used at Ngethu is returned to theriver system, thus allowinag abstraction of 51 IMgd (1.04 x 49.5 IMgd).

ANNEX 4Page 5 Of 6

to the west (zones 1-3 and 5) and in the easternmost areas (zones 11-13)where distribution is to be extended or vastly improved - are among the 40Olowest income group in the city.

17. Other physical elements of the project are fairly routine. Sizesand capacities of all components are shown in the tabulation which follows.

Project Element Description

M1od4fication of Sasumua Dam A number of minor modifications to thevalve tower, discharge culvert and tunneland the measuring weir to permit controlleddischarge of water to the Sasumua River andthence to the Chania River.

Raw Water Intake A low concrete gravity weir acrossthe Chania River at Mwagu (about 10 kmupstream of the existing Ngethu intake)with a side outlet protected by trashracks and leading to a gravity flow raw-water transmission main.

Gravity Flow Raw Water 6 km long, 1300 mm diameter pipeline andTransmission Main a 2-1/2 m x 2-1/4 m tunnel between the intake

and the Ngethu Water Treatment Plant, suitablefor a maximum working pressure of 16 kg/c 2 _V.Peak capacity would be 57 IMgd (259,000 m /day).F'ow control would be by valve at Ngethu. Themain would include provisions for a futurebran-h and gravity intake on the Kimakia River.

Water Treatment Plant New components to increase treatmentAddition at Ngethu eapacity by 23 IMgd (104,500 m3/day) and

peak capacity by about 26 IMgd (118,000 m3!

day). The works would include about 4 newclarifiers, 8 new rapid sand filters, anew chemical house and equipment and atreated water reservoir with a capacity ofabout 1.1 IMg (5000 m3). Treatment compon-ents would be similar in design to theexisting works except normal loadings wouldbe 12-1/2% higher.

1/ Ilcluding an allowance for surge pressure.

ANNEX 4Page 6 of 6

Project Element Description

Treated Water Transmission Main A 36.2 km long, 1000 mm diameter mainparalleling the existing main between Ngethuand Gigiri. The design working pressurewould be 23 kg/cm2 and Reak capacity wouldbe 28.4 IMgd (129,000 m /day). Valve crossconnections to the existing main would beincluded.

Gigiri Treated Water Reservoir A new 10 IMg (45,000 m3) tank addedto the two smaller reservoirs at Gigiri toserve the lower level distribution zones(7, 8 and 9 and eastwards). The tank wouldbe of conventional rectangular reinforcedconcrete design using the cantilevered wallprinciple.

Kabete Pumping Station The Kabete pumping station wouldtransfer water from the existing reservoirsat Kabete to new high zone reservoirs at Uthiruand Dagoretti Forest. Ultimate capacity wouldbe 16 IMgd (73,000 m3/day). Intial installa-tion would comprise two sets of three pumps each(one set for Uthiru, the other for DagorettiForest), including standby units, of nominalcapacity of 2.25 IMgd (10,000 m3/day). Pro-visions for adding two additional pumps toeach set would be included.

Kabete-Uthiru Trunk Main A 500 mm diameter, 4.0 km long main tocarry water from Kabete to a new high zonefed from a new reservoir at Uthiru. The mainwould have a peak capacity of 4.5 IMgd(20,500 m3 /day). Working pressure would be12.6 kg/cm2.

Kabete-Dagoretti Forest Trunk Main This main would also be about 500 mmdiameter with a peak capacity of 4.5 IMgd tothe Dagoretti Forest Reservoir which wouldserve another high zone. However, workingpressure would be 24.0 kg/cm2 and lengthwould be about 10 km.

Uthiru & Dagoretti Forest Reservoirs Each of these reservoirs would be ofabout 2.5 IMg (11,400 m3) capacity of the samedesign as the Gigiri Reservoir. Allowanceswould be included for a future reservoir of thesame size at each site.

ANNEX 5KENYA Page 1 of 3

NAIROBI WATER SUPPLY PROJECT II

Cost Estimates - January 1, 1978 Base

DESCRIPTION Kenyan Pounds (thousands) US$ (thousands)Lccal Foreign Local ForeignCurrency Exchange Total Currency Exchange Total

Supply Contracts

Pumping Equipment! a 90 300 390 210 720 930Water Treatment Equipment-S 390 1,060 1,450 940 2,540 3,480Raw Water Pipeline 430 1,390 1,82Q 1,030 3,340 4,370Treated Water Transmission andTrunk Mains 1,650 5,600 7,250 3,960 13,440 17,400

Valves , 80 270 350 190 650 840Ti-ansformers & Switchgear- 10 40 50 30 90 120

Subtotal 2,650 8,660 11,310 6,360 20,7.80 27,140

Construction Contracts

Pumping Stations & Reservoirs 1,310 100 1,410 3,130 250 3,380Water Treatment Plant 320 900 1,220 760 2,170 2,930Raw Water Intake & Gravity Pipeline 1,180 1,580 2,760 2,830 3,800 6,630Treated Water Transmission and

Trunk Mains 1,120 1,800 2,920 2,710 4,310 7,020Sasumua Dam Modifications 160 40 200 380 90 470

Subtotal 4,090 4,420 8,510 9.810 10,620 20,430

Electric Power SupPly Facilities -" 20 - 20 40 - 40

Distribution System-/ 2,310 1,570 3,880 5,550 3,760 9,310

Land Acquisition 400 - 400 960 / - 960

Contingencies

Physical 780 970 1,750 1,8.70 2,330 4,200Price 1,880 2,520 4,400 4,520 6,040 120,56

Subtotal 2,660 3,490 6,150 6,390 8,370 14,760

Engineering & Other Technical Services

Site Investigationsb/ / 50 - 50 120 - 120Consulting Engineeryng, 980 570 1,550. 2,360 1,370 3,730Engineering by WSDg- 500 - 500 1,200 - 1,200

Subtotal 1,530 570 2,100 3,680 1,370 5,050

Accounting Consulting & Training 30 70 100 70 170 240

TOTAL PROJECT 18,780 32 470 45,070 7,930

Notes: a/ Supply and Installation Contract.b/ All work completed in 1977.

cl Includes work completed in 1977.

December 1977

ANNEX 5Page 2 of 3

KENYA

NAIROBI WATER SUPPLY PROJECT II

Cost Estimates

1. Exchange Rate KE = US$2.40

2. Base Date for Estimates January 1, 1978

3. Base Cost Estimates:

(i) Supply and construction costs, except the raw water intake and conduit,are based on quantity takeoffs from advanced preliminary designs andsome detailed designs by the consulting engineers. The unit pricesare based on costs of recent works and suppliers' quotations as ofDecember 1976. These have been increased to January 1, 1978 prices byprice contingency factors of 7.5% for supply contracts and 9.0% forconstruction contracts. Additionally, foreign costs have been in-creased by 0.6% to reflect a change in the nominal rate of Kenyancurrency per US$ between 1976 and late 1977.

(ii) The estimated costs of the raw water intake and conduit are basedon preliminary designs and topographical surveys and site investiga-tions completed during 1977. The base cost estimate is consideredto be conservatively high. Increases to January 1, 1978 base costshave been made along the lines described in 3(i) above.

(iii) The cost of the Electric Power Supply Facilities is based on aquotation by EAP&L at December 1976, increased to January 1978prices by a factor of 9%.

(iv) The estimates of distribution system costs are by WSD based onrecent experience at December 1976 prices. They assume pipe300 mm diameter and smaller will be manufactured locally and thatlarger pipe would be imported. The prices are escalated to January1978 prices using a factor of 9%.

(v) Land acquisition costs are based on preliminary surveys and landvalue estimates made by WSD in mid-1977.

(vi) Consulting engineering costs are for detailed design and constructionsupervision, except for distribution. They were based on an existingconsulting agreement escalated to January 1978 costs.

(vii) The cost of WSD engineering for distribution works is assumed at about10% of distribution costs, including physical contingencies, at Jan-uary 1978 costs. These costs would be included in the staff andestablishment expenses of WSD.

ANNEX 5Page 3 of 3

4. Physical Contingencies:

(i) major pipe supply contracts = 2.5%(ii) equipment supply contracts = 10%

(iii) raw water intake and tunnel = 15%(iv) all other construction contracts = 10%(v) distribution system (supply and construct) = 10%

5. Price Contingencies after January 1, 19781/:

(i) Supply Contracts: 7.5%/year through 19797.0% year thereafter

(ii) Construction contracts: 9.0%/year through 19798.0% year thereafter

(iii) Distribution System andElectric Power Supply: 9.0%/year through 1979

8.0% year thereafter(iv) Consulting Engineering- 7.5%/year through 1979

7.0%/year thereafter

6. Local currency costs of supply and distribution system contracts includeidentifiable local import duties and sales taxes on direct imports totalling aboutKt 2.5 million. Local taxes on imported equipment and materials required for theconstruction contracts are not isolated but are estimated to be about KE 0.6million (10% of the foreign exchange cost of those contracts). Therefore, totallocal import duties and taxes are estimated at about KX 3.1 million.

7. Duties on imported equipment and major pipe average 10% of C.I.F. value.This assumes that steel pipe, with a duty of 30% of C.I.F., will not be competitivefor the major pipelines. Duties for distribution pipe were calculated by WSD fora blend of ductile iron, steel and uPVC pipe and average about 12.5% of C.I.F.

8. Sales taxes on contracts for the supply of imported equipment and pipeare calculated at 10% of foreign costs plus duties.

1/ According to CPS Guidelines on expected price increases, January 31, 1977,for equipment and civil works contracts. Item (iii) is assumed to followthe pattern of civil works contracts, while item (iv) is assumed to increaseas supply contracts do.

K E N Y A

N T R E B I W A T E R S U P P L Y P R O J E C T II ANNEX 6

i I J I A I 5 I OLNI D - _T_ A IM IJ J JA ~ ~ ~ ~ ~ A RE I ATID

_~~~~~~~~~~~~JII LE E j = SJIIOOIINJ F||AMJ IFIISOIIDIM1E _AIIJMJAJ JNI JIFM|IMJ J AI|ONI _

SITE INVEST16ATION L

CONTRACT S 100 PUMPS OD IP Et Cg DD- DeailD Drsign

KABETE- UTHIRU Wi R I RP-Review and Print

KABETE-OA60REITI _LL ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~B - BidsCONTRACT S 1014 ELECTRICS DD I t m E - Evaluate Bids

A,l | ; 1 I I l | l R - Review Evaluation

A -Award

0 D B ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~M -ManufactureCONTRACT C 101 A ai iDU- Deliver

KABETE - UTNIRU Wait Et- ErectKABETE PUMPING STATION C - Construction

NOTE: BIDDING, AWARD AND COMPLETION PC- Partial Construction

P&L ELE \ RICITV OF ALL CONTRACTS RESCHEDULED CC- CompTeteConstructio

SIX MONTHS LATER THAN SHOWN Q - QuotationCONTRACT S102 PIPES DD I ROrg- DrawingsCONTRACT S103 VALVES ON THTS DIAGRAtM. Dg- Drilling

RAW WATER GRAVITY g I TestingNGETHU -Ill IIRI S&AqSurvey and AcquireKABETE- UTRIRU FCg - Commssioning

KABETE-OAG0RErTI FOREST M I\I . IIIDISTRIBUTION I. Water into Supply -iU\|,I

CONTRACT C 102 2DD ;IrIo I U t i Supply - Ug,Ir IRAW WATER FIFE I , | \ \ ! s C i | i | 3 Waler ulotapply-Oagaret3t Fous I

} NGETHU-CGICIRI l LL x CC I TNS'C It C NewIlistribut ionPrdmssianrdNGETHU- GIG[Rl ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~Area 7. ,N &I ABETE-OAG0RETTI FORES \ I 5 I I

CONTRACT C 103 tO B. Addilional waler ova,ir lNAle air ,I NTA KE

RAW WATER TUNNEL

CONTRACT C 1104 .DISTRIBUTION

CONTRACT S lTAN T DO I M TDr L A

CONTRACT C 100 NGETHU 11 PROJECT CONSTRUCTION

CONTRACT C 105 RESERVOIRS - - P I SCHEDULE CGR! 3IITHIRIIC

OAGORETTI FORESTCONTRAC C 10 SASUMUA I D /- i R A |

LAiD A ON u[' ELINE WCINTAKE A E RiT

LAND ACaIUISITION "tEl,u rEE sr;ut T& D.lELE

KENYA ANNEX 7NAIROBI WATER SUPPLY PROJECT II

Annual Project Expenditures and Expected Price Increases(Kenyan Pounds, thousands)

CALENDAR AND FISCAL YEAR 1977 1978 1979 1980 1981 1982 TOTAL

SUPPLY CONTRACTSLocal Costs: Base Costs - 410 1,760 340 130 10 2,650

Physical Contingencies - 10 70 20 10 0 110Price Contingencies - 20 210 70 40 0 340

Subtotal - 440 2,040 430 180 '10 3,100

Foreign Costs: Base Costs - 1,340 5,660 980 630 50 8,660Physical Contingencies - 40 190 70 30 10 340Price Contingencies - 60 650 210 160 20 1,100

Subtotal - 1,440 6,500 1,260 820 80 10,100

CONSTRUCTION CONTRACTSLocal Costs: Base Costs 40 1,450 1,980 560 60 4,090

Physical Contingencies - - 160 220 50 10 440Price Contingencies - - 220 520 210 30 980

Subtotal - 40 1,830 2,720 820 100 5,510

Foreign Costs: Base Costs - - 1,300 2,490 570 60 4,420Physical Contingencies - - 140 270 50 10 470Price Contingencies _ - 200 650 210 30 1,090

Slobtutal - - 1,640 3,410 830 100 5,980

ELECTMIC POWER SUPPLY FACILITIESLocal Costs: Base Costs - - 20 - - - 20

DISTRIBLUTION SYSTEMLocal Costs: Base Costs - 220 1,070 780 240 - 2,310

Physical Contingencies - 20 110 80 20 230Price Contingencies - 10 160 200 90 - 460

Subtotal - 250 1,340 1,060 350 - 3,000

Foreiga Costs: Base Costs - 150 700 .540 180 - 1,570Physical Contingencies - 10 70 60 20 - 160Price Contingencies - - 110 140 60 - 310

Subtotal - 160 880 740 260 - 2,040

LAND ACQUISITIONLocal Costs: - 200 200 - - - 400

ENGINEERING & OTHER TECMNICAl SERVICESLocal Costs: Base Costs 270 270 510 270 140 70 1,530

Physical Contingencies - - - - - - -Price Contingencies - - 50 30 10 10 100

Subtotal 3270 270 56 00 150 80 1,630

Foreign Costs: Base Costs 380 110 60 10 10 - 570Physical Contingencies - - - - - - -Price Contingencies - - 10 10 - - 20

Subtotal 380 110 70 20 10 - 590

ACCOUNTING CONSULTING & TRAININGLocal Costs: Base Costs - 10 10 10 - - 30Foreign Costs: Base Costs - 20 30 10 10 - 70

TOTAL COSTSLocal Costs: Base Costs 270 1,150 5,020 3,380 1,070 140 11,030

Physical Contingencies - 30 340 320 80 10 780Price Contingencies - 30 640 820 350 40 1,880

Subtotal 270 1,210 6,000 4,520 1,500 190 13,690

Foreign Costs: Base Costs 380 1,620 7,750 4,330 1,400 110 15,290Physical Contingencies - 50 400 400 100 20 970Price Contingencies - 60 970 1,010 430 50 2,520

Subtotal 380 1,730 9,120 5,440 1,930 180 18,780

TOTAL: Base Costs 650 2,770 12,770 7,410 2,470 250 26,320Physical Contingencies - 80 740 720 180 30 1,750Price Contingencies - 90 1,610 1,83 780 90 4,400

TOTAL 650 21,940 1512

0 9 960 3430 370 32,470

December 1977

ANNEX 8

KFRYYA

NAIROBI WATER SUPPLY PROJECT Ii

Proposed Allocation of Bank Loan Proceeds

AmLount of theLoan Allocated Percent of(Expressed in Expenditures

Category Dollar Equivalent) to be Financed

(1) Civil works and pipe- 24,500,000 90%line constructionexcept distributionmains

(2) Pipe materials and 4,500,000 100% of foreignsupplies for expenditures anddistribution 100% of local

expenditures ex-factory

(3) Consulting services 200,000 100% of foreignexpenditures and25% of localexpenditures

(4) Unallocated 800,000

30,000,000

ANNEX 9

KENYA

NAIROBI WATER SUPPLY PROJECT II

Estimated Schedule of Disbursements from Bank Loan

Bank Fiscal Year Cumulative % ofand Quarter Ending Disbursements Total

1978March 31, 1978 0 0June 30, 1978 0 0

1979September 30, 1978 0 0December 31, 1978 0.1 0March 31, 1979 0.7 2June 30, 1979 2.0 7

1980September 30, 1979 3.5 12December 31, 1979 5.0 17March 31, 1980 7.5 25June 30, 1980 10.0 33

1981September 30, 1980 12.5 42December 31, 1980 15.0 50March 31, 1981 18.5 62June 30, 1981 21.0 70

1982September 30, 1981 23.5 78December 31, 1981 25.0 83March 31, 1982 26.7 89June 30, 1982 28.0 93

1983September 30, 1982 29.0 97December 31, 1982 30.0 100

January 1978

ANNEX 10Page 1 of 4

KENYA

NAIROBI WATER SUPPLY PROJECT II

Average Incremental Cost of Water Supply

Notes and Assumptions

1. The average incremental cost (AIC) of water is computed by dividingthe "present worth" of the water volume stream accrued from the proposedproject into the present worth of the cost stream, the latter includes capitalcosts as well as operating and maintenance costs. The discount rate shouldequal the opportunity cost of capital; nevertheless, other rates have alsobeen used for comparison purpose.

2. The economic life of the proposed project has been assumed to be40 years. All cost figures have been expressed in January 1978 prices.Furthermore, foreign exchange costs have been shadow-priced at 1.32, i.e.,K Sh 11.0 per US$1.0.

3. The water volume stream, given below, represents the amount ofwater consumed and supplied from the proposed project. Unaccounted-forwater has been assumed, based on past records, to be 17% of production.

Year Ending Water Volume Produced Water Volume ConsumedDecember 31 (Thousand m3) (Thousand m 3)

1977-1979 0 01980 3,152 2,6161981 6,802 5,6461982 10,617 8,8121983 14,930 12,3921984 19,409 16,1091985 24,220 20,1031986 29,363 24,3711987 34,837 28,915

1988-2021 38,985 32,358

4. The cost stream is shown on page 2 of this Annex. The capital costsinclude expenditures during 1982/87 for further extensions of the distributionsystem to fully utilize project capacity. Annual maintenance costs have beenassessed at 1.25% of the capital costs, of which 20% would be foreign exchange.Operating costs have been assessed to be K Sh 0.385/m3 (K Sh 1.75/1000 Ig)including K Sh 0.110/m3 in foreign exchange through 1980 and K Sh 0.275/m3(K Sh 1.25/1000 Ig), including K Sh 0.099/ml in foreign exchange thereafter.The savings reflect the fact that the present pumping of raw water from ChaniaRiver to the treatment plant at Ngethu would not be necessary after 1981. Allcosts are net of custom duties and taxes.

5. Results of the calculations of the AIC of water are shown on pages3 and 4 of this Annex.

ANNEX 10

KENYA Page 2 of 4

NAIROBI WATER SUPPLY PROJECT II

Average Incremental Cost of Water Supply

Cost Stream(KE Thousand @ January 1978 Prices)

Capital Cost Operating Maintenance TotalYear Ending Foreign Local Foreign Local Foreign Local Foreign Local TotalDecember 31 (1) (2) (3) (4) (5) (6) (7)1/ (8)2/ (9)3/

1977 310 230 - - - - 310 230 540

1978 4,060 1,710 - - - - 4,060 1,710 5,770

1979 6,360 3,230 - - - - 6,360 3,230 9,590

1980 2,540 2,620 16 42 40 159 2,596 2,821 5,417

1981 930 830 33 59 52 210 1,015 1,099 2,114

1982 280 290 52 93 57 228 389 611 1,000

1983 200 250 74 131 58 234 332 615 947

1984 220 270 96 170 59 238 375 678 1,053

1985 230 290 119 211 60 243 409 744 1,153

1986 250 310 145 257 62 248 457 815 1,272

1987 270 330 173 306 63 254 506 890 1,396

1988-2021 - - 193 342 65 259 258 601 859

I/ (7)= (1) + (3) + (5)2/ (8)= (2) - (4) + (6)3/ (9) = (7) + (8)

IBRD

July, 1977

ANNEX 10Page 3 of 4

KENYA

NAIROBI WATER SUPPLY PROJECT II

Average Incremental Cost of Water Supply(@ January 1978 Prices)

Present Value Present Value Average IncrementalDiscount Rate Of Cost Streaml/ of Water Volume Stream Cost

(%) (Kt Thousand) (Thousand m 3) KSh/m3 (KSh/1000 :[9

6.0 37,216 335,498 2.22 (10.1)

8.0 33,150 239,543 2.77 (12.6)

10.0 30,175 177,287 3.40 (15.4)

12.0 27,882 135,211 4.12 (18.7)

14.0 26,041 105,731 4.92 (22.3)

1/ All costs are exclusive of custom duties and taxes. Forthermore, shadowprice factor of 1.32 has been assumed for foreign exchange costs(i.e., KSh 11.0 = US$1.0).

IBRD

July 1977

ANNEX I _

Page 4 of 4

KENYA

NAIROBI WATER SUPPLY PROJECT II

Average Incremental Cost of Water Supply'(@ January 1978 Prices)

5

-20

4

r= 3.75 °

-15

3~~~~~~~~~ Present Tariff

2.64 -12 P Tari

_s~~~~~~~~~~~~~ I

6 8 10 11 12 14

Discount Rate (%)

1/ Foreign exchange shadow-priced at 1.32 (i.e., KSh 11.0 US$1.0).

IBRD

July 1977

ANNEX 11Page 1 of 4

KENYA

NAIROBI WATER SUPPLY PROJECT II

Return on Investment and Sensitivity Analysis

Notes and Assumptions

1. The return on investment (ROI) is taken to be the discount rateat which the present worth of the estimated capital and operating andmaintenance costs of the proposed project over its economic life equals thepresent worth of the benefits attributable to it.

2. Capital costs of the proposed project, together with relatedincremental operating and maintenance costs, are given on page 3 of Annex 10The capital costs also include provisions for further extensions of thedistribution system during 1982/87, which would be required to fully utilizethe capacity of the proposed project. It should be noted that all costs areexclusive of custom duties and taxes and that foreign exchange costs havebeen shadow-priced at 1.32 (i.e., K Sh 11.0 = US$1.0).

3. Benefits have been taken to be the amount of water consumed andsupplied from the proposed projert and valued, firstly, at the present waterrate of K Sh 2.64/m3 (K Sh 12.0/1000 Ig) and, secondly, at the proposedincreased rate of K Sh 3.75/m3 (K Sh 17.0/1000 Ig) expected to be effectiveby July 1, 1978. These two benefit streams are given on page 2 of this Annex.

4. The ROI of the proposed project would be 7.6% if benefits arevalued at the present water rate of K Sh 2.64/m3. When benefits are valuedat the increased rate of K Sh 3.75/m3, the ROI would be about llZo

5. The sensitivity of the ROI with respect to changes in costs andbenefits is summarized in the table on page 3 and shown in graph on page 4of this Annex. These results indicate that the ROI would be lowered byapproximately 0.8% on the average for each 10% increase in costs andthat,for each 10% increase or decrease in benefits, the ROI would be increasedor decreased correspondingly by about 1.0%.

IBRD

ANNEX 11Page 2 of 4

KENYA

NAIROBI WATER SUPPLY PROJECT II

Return on Investment and Sensitivity Analysis

Benefits Stream(KE Thousand @ January 1978 Prices)

Year Ending Water Volume Consumed-/ Benefits BenefitsDecember 31 Thousand m3 Valued @ KSh 2.64/m32- Valued @ KSh 3.75/m3_

1977 0 0 0

1978 0 0 0

1979 0 0 0

1980 2,616 345 490

1981 5,646 745 1,059

1982 8,812 1,163 1,652

1983 12,392 1,636 25324

1984 16,109 2,126 3,020

1985 20,103 2,654 3,769

1986 24,371 3,217 4,570

1987 28,915 3,817 5,422

1988-2021 32,358 4,271 6,607

1/ From page 1 of Annex 10.

2/ Present water rate.

3/ Proposed increased water rate expected to be effective by July 1, 1978.

IBRD

ANNEX 11

Page 3 of 4

KENYA

NAIROBI WATER SUPPLY PROJECT II

Return on Investmenti/ and Sensitivity Analysis

Sensitivity of ROI

Changes in CostsChanges in Benefits 0% +10% +20% +30%

-30% 7.7% 6.8% 6.1% 5.4%

-20% 8.9% 8.0% 7.2% 6.5%

-10% 10.0% 9.1% 8.3% 7.6%

0% 11.0% 10.1% 9.3% 8.5%

+10% 12.0% 11.0% 10.2% 9.4%

31/ Foreign exchange shadow--priced at 1.32 and benefits valued at KSh 3.75/mr

IBRD

ANNEX 11Page 4 of 4

KENYA

NAIROBI WATER SUPPLY PROJECT II

Return on Investment-/ and Sensitivity Analysis

+10%

4.4

0%

0)

~.-10%

C)

-1OZ | X No change in Costs

$4 -20% - Costs increased by 10%0

+ / / / / - Costs increased by 90

C)

a 30Z h / / / / ~ - Costs increased by 30%U 30%

_,~~~~~~~~~~ I I I I I,

5 6 7 8 9 10 11 12

ROI (%)

1/ Foreign exchange shadow-priced at 1.32 and benefits valued at KSh 3.75/m 3

IBRD

July 1977

ANNEX :L2Pg. 1 C)f 2

KENYANAIROBI WNATER SUPPLY PROJECT 11

Nairobi City Council - Organization Chart

CITY COUNI

Generaitterpses l Town Clerk's DepartmentCommittee

Finance Committee _ TDepartment

Tender Committee _. __ ~~~~~~~~Department

Staf Comte _ Water and Sewerage XStaff Committee _ _

Works and TownPlanning Committee Public Health Department l

Water and Sewerage L 2 Social Services and| Committee r 7 Housing Department

Public Health Committee Education Department

Social Services and Develommun itHousing Committee Department

[ Education Committee

Dandora Community Development ProjectCommittee

| Umoia Housing ProjecCommittee

World Bank -17850

ANNEX 12Og. 2 of 2

KENYANAIROBI WATER SUPPLY PROJECT 11

Water and Sewerage Department - Organization Chart

GENERAL MANAGER

DEPUTY GENERAL MANAGER ADMINISTRATION DEPUTY GENERAL MANAGER(Engineering) ; .(Commercial)

ASSISTANT GENERALMANAGER

(Commercial)

Chief Asst. Chief Asst. Chief Asst. Accounting CommercialEngineer Engineer Engineer Section Section

Water Supply Water Supply Sewerage Meter ReadingPlanning Operations Operations BillingDesign Maintenance CollectionConstruction I Customer

Relations

Operations | PlanningMain-.ten-Ia nc f LDesign Sores

Construction

World Bank - 17851

ANNEX 13P'age 1 of 4

KENYA

NAIROBI WATER SUPPLY PROJECT II

Financial Condition of Nairobi City Council

1. The general fund account1/ budgetary position of NCC, which hadbeen generally sound through 1973, began to deteriorate rapidly from 1974when the Government abolished NCC's right to levy Graduated Personal Taxes(GPT) and compensated NCC for the lost revenues. GPT had been one importantsource of revenues of the general fund account; in fact, GPT accounted forabout 41% of total revenues during 1970-1973. The financial position ofNCC's general fund account, as shown on page 3 of this Annex, was in deficitevery year since 1974 and NCC began to draw down the reserves which it hadbeen able to accumulate during previous years to meet these deficits.

2. Attempts have been, made to restore the financial viability of NCC.In 1975, in connection with a Bank loan and an IDA credit-2 for a Site andService Project for Nairobi, the Government agreed, inter alia, to carry outa study with assistance of the International Monetary Fund (IMF) on ways andmeans of restoring the financial viability of all municipalities throughout:the country, including NCC, and to implement the recommendations based onsuch study by January 1, 1.977. The Government also agreed to provide NCCwith funds adequate to meet its reasonable needs in the interim or untilany later date when alternative proposals which would adequatel.y ensure thefinancial viability of the local authorities, including NCC, have beenimplemented.

3. The IMF study was commenced in mid-1975. In the final report whichwas dated December 8, 1976, it was projecrtd, as shown on page 4 of this Annex,that the deficit of the general fund account would grow increasingly fromabout Kf 0.78 million in 1977 to about Kt 3.62 million in 1981, assuming thatthe GPT grant would remain at its 1976 level of about KE 3.35 million incurrent terms. This serious deficit problem is also common to other majorlocal authorities in Kenya.

4. In order for the major local authorities, including NCC, to overcomethe aforementioned financial difficulty, the report proposed a reform programconsisting of (i) institutional reforms designed to reduce expendituresgrowth and improve management: and control capabilities; (ii) administrativereforms, primarily in the areas of accounting and budgeting, to improveplanning and control capabili-ties; (iii) increased financial assistance fromcentral government; and (iv) strengthening local authority revenues by moreaggressive usc of revaluation and percentag-e rate adjustments on the propert:ytax, and by supplementing property rates in Nairobi and Mombasa with a taxon the rental value of commercial property located in prime areas.

1/ The budget consists of a general account and two special accounts --one for water and sewerage, the other for housing.

2! Loan 1105-KE of $8.0 million, and Credit 543-KE of $8.0 million, bothdated May 6, 1975.

ANNEX 13Page 2 of 4

5. The IMF proposals are being considered by the Government.Agreemerit on specific measures and their implementation would be reachedwith th: Government and NCC in connection with the forthcoming second UrbanProject for Nairobi, Mombasa and Kisumu.

IBRD

June 1977

ANNEX 13Page 3 of 4

KENYA

NAIROBI' WATER SUPPLY PROJECT II

NCC - General Flund Financial Position 1970-1976(KE Thousand)

1970 1971 1972 1973 1974 1975 1/ 1976 2/

Currert revenues 5,291 7,879 6,957 7,616 8,109 9,199 10,67SRates 2,130 2,539 2,530 2,55 3,2-7 3, 950 4,630GPT/GPT grant 1,693 3,750 2,762 3,178 2,5141 2,909 3,346Fees/charges/licenses 1,468 1,590 1,665 1,893 2,055 2,185 2,510 3/Edu.cation granL - - - 251 4/ 155 190

Currernt expenditures 4,796 5,385 6,672 7,208 3.S69 9,4949 10,Q34Administration 450 SO1 734 58L , i8l S/ 968Health 1,462 1,637 2,166 2,323 3,273 3,:,7 3,713Education 1,423 1,657- 1,979 2,185 2, 537 2, 8 37 3,368Public works 912 1,027 1,090 1,331 ',-'5 1,525 1,796City properties 135 163 163 138 -'9 217 233Housing (except pooled) 92 65 77 82 37 63 70Social services 322 335 463 46' S21 DSS 591

General accounit surplusdeficit (-) 495 2,494 285 408 -7SfJ -295 -159

Uncollected (-) over-

collected rates 204 -588 -488 -264 -51 -203 -78 6.'

Cash surplus, deficit (-) 699 1,906 -203 144 -- ; -555 -447

Capital expenditures 745 2,867 2,922 1,90: '^ : - 936 7:

Overall deficit to be financed 46 961 3,125 1,757 1,A-lI 555 1,4333

F inanc ingLonr- tert borro-ing 963 1,044 1,747 760 -. : -- ;50Grants, oc ner -- -- - - 36Drat.-ings, build-up (-)

of assets -917 -83 1,378 997 1,731 555

Sources: Abstracts of Acconts, 197,-73; 5, 4 oer Erimotej, . i974-6 an_ 'ata suaDoied by ':0Cofficials.

1/ Revised estimates.2/ Budget estistates (see text).3/ Includes interest and dividends.4/ Includes both teacher salary arrears and school fees grant.5/ Training costs are allocated to administrajion.6/. Escimated at 6 per cent of total rates due.7/ Includes only that amount for 6bi:h financing can be identified. An addi.ionaI Kil,797,000

is budgeted for 1976, without specification of financing source.

ANNEX 13

Page 4 of 4

KENYA

NAIROBI WATER SUPPLY PROJECT II

NCC - Forecast of Current Budget Position of General Fund 1977-1981

(KE Thousand)

Year Ending December 31 1977 1978 1979 1980 1981

Current Revenues

Rates 4,851 5,578 6,415 6,498 6,583

GPT 3,346 3,346 3,346 3,346 3,346

Fees and Charges 2,761 3,037 3,341 3,675 4,042

Education Grant 190 190 190 190 190

Total Current Revenues 11,148 12,151 13,292 13,709 14,161

Current Expenditures!/

Administration 1,071 1,186 1,314 1,457 1,617

Health 4,101 4,534 5,018 5,560 6,166

Education 3,790 4,273 4,825 5,456 6,179

Public Works 1,921 2,057 2,204 2,365 2,540

Social Services,Properties and Housing 1,049 1,102 1,159 1,219 1,282

Total Current Expenditures 11,933 13,152 14,520 16,057 17,785

Deficit -784 -1,001 -1,228 -2,347 -3,624

Sources: Abstracts of Accounts 1970-1973; Budget Estimates 1974-1976;

and data supplied by NCC officials.

1/ Including debt services.

IBRD

June 1977

ANNEX 14

Page 1 of 3

KENYA

NAIROBI CITY COUNCIL

WATER AND SEWERAGE DEPARTMENT

NAIROBI WATER SUPPLY PROJECT II

Actual Income Statements - Water Supply Operations 1971-1976

Year Ending December 31 1971 1972 1973 1974 1975 1976.1

Water Production - IMG 5,851 6,290 6,478 6,883 7,533 7,840

Water Sold - IMG 5,022 5,152 5,401 5,569 6,231 6,402

Unaccounted-for-Water - % 15% 18% 16% 19% 17% 18%

Number of Connections 34,976 37,602 39,486 40,160 43,344 48,456

Average Rate - K Sh/1000 IG 5.00 6.50 6.50 6.50 8.00 2/ 12.00

REVENUES (KE Thousand)

Water Billings 1,217 1,658 1,637 1,708 2,536 3,669

Others 40 131 109 140 127 100

Total Revenues 1,257 1,789 1,746 1,848 2,663 3,769

OPERATING COSTS

Power and Fuel 1 2 3 37 57 70

Chemicals 37 31 34 66 98 121

Labor 46 36 47 49 56 84

Supplies 44 62 58 88 98 126

Meter Expenses 4 50 18 27 34 10

Salaries 114 68 82 50 135 167

Administration 89 170 258 327 368 341

Connections & Work 34 93 64 96 75 48

Total Operating Costs 369 512 564 740 921 967

INCOME BEFORE DEPRECIATIONAND INTEREST 888 1,277 1,182 1,108 1,742 2,802

Depreciation 118 279 201 193 253 332

Income Before Interest 770 998 981 915 1,489 2,470

Interest 354 192 288 197 216 467

Inoome After Interest 416 806 693 718 1,273 2,003

Non-Operating Income 3 17 69 72 124 212

NET INCOME 419 823 762 790 1,397 2,215

Rate of Return-/ 5.7% 7.6% 6.8% 5.6% 7.5% 8.7%

1/ Pre-audited2/ Effective April 19753/ Defined as income before depreciation and interest divided by gross fixed assets

in service at beginning of year revalued annually by Government indices.

IBRD

November 1977

ANNEX 14Page 2 of 3

KENYA

NAIROBI CITY COUNCIL

WATER AND SEWERAGE DEPARTMENT

NAIROBI WATER SUPPLY PROJECT II

Actual Income Statements - Sewerage Operations 1971-1976(KE Thousand)

Year Ending December 31 1971 1972 1973 1974 1975 19761

Average Rate - K Sh/1000 IG 3.50 3.5 3.5 3.5 4.012 5.0

REVENUES

Sewerage Billings 608 731 615 718 971 1,195Others 13 3 15 17 8 20

Total Revenues 621 734 630 735 979 1,215

OPERATING COSTS

Power and Fuel 10 9 12 9 8 10Chemicals - - -

Labor 35 47 52 40 44 69Supplies 13 18 28 17 23 36Meter Expenses - - -

Salaries 83 71 84 67 138 112Administration 146 155 108 101 129 142Connections and Work 1 2 1 2 2 5

Total Operating Costs 288 302 285 236 344 374

INCOME BEFORE DEPRECIATIONAND INTEREST 333 432 345 499 635 841

Depreciation 43 84 88 93 100 103Income Before Interest 290 348 257 406 535 738Interest 141 109 121 151 102 129Income After Interest 149 239 136 255 433 609Non-Operating Income _ - 21 30 72 80

NET INCOME 149 239 157 285 505 689

Rate of Return 3/ 4.8% 6.1% 4.9% 6.7% 7.3% 8.3%

1/ Pre-audited2/ Effective April 197531 Defined as income before depreciation and interest divided by gross fixed assets

in service at beginning of year revalued annually by Government indices.

IBRD

November, 1977

ANNEX 14Page 3 of 3

KENYA

NAIROBI CITY COUNCIL

WATER AND SEWERAGE DEPARTMENT

NAIROBI. WATER SUPPLY PROJECT II

AtLual Income Statements - Consolidated Operations 1971-1976(KE Thousand)

Year Ending December 31 1971 1972 1973 1974 1975 1976.1/

REVENUES

Water and Sewerage Billings 1,825 2,389 2,252 2,426 3,507 4,864Others 43 134 124 157 135 12:0

Total Revenues 1,868 2,523 2,376 2,583 3,642 4,984

OPERATING COSTS

Power and Fuel 11 11 15 46 65 80Chemicals 37 31 34 66 98 121Labor 81 83 99 89 100 153Supplies 57 80 86 105 121 162Meter Expenses 4 50 18 27 34 10Salaries ,197 139 166 117 273 279Administration 235 325 366 428 497 483Connections and Work 35 95 65 98 77 53

Total Operating Costs 657 814 849 976 1,265 1,341

INCOME BEFORE DEPRECIATIONAND INTEREST 1,221 1,709 1,527 1,607 2,377 3,643

Depreciation 1.61 363 289 286 353 435Income Before Interest 1,060 1,346 1,238 1,321 2,024 3,208Interest 495 301 409 348 318 596Income After Interest 565 1,045 829 973 1,706 2,61:2Non-Operating Income 3 17 90 102 196 292

NET INCOME 568 1,062 919 1,075 1,902 2,904

Rate of Return 2/ 5.4% 7.2% 6.2% 5.9% 7.5% 8.6,%

1| Pre-audited2| Defined as income before depreciation and interest divided by gross fixed assets

in service at beginning of year revalued annually bv Government indices.

IBRDNovember 1977

ANNEX 15Page 1 of 3

KENYA

NAIROBI CITY COUNCIL

WATER AND SEWERAGE DEPARTMENT

NAIROBI WATER SUPPLY PROJECT II

Actual Funds Flow Statements - Water Supply Operations 1971-1976(KE Thousand)

Six-Year

Year Ending December 31 1971 1972 1973 1974 1975 1976.1/ Summary x

SOURCES OF FUNDS

Income Before Depreciationand Interest 888 1,277 1,182 1,108 1,742 2,802 8,999 89

Non-Operating Income 3 17 69 72 124 212 497 5

Internal Cash Generation 891 1,294 1,251 1,180 1,866 3,014 9,496 94

Less: Debt Service 523 471 489 390 468 799 3.140 31

Net Internal Cash Generation 368 823 762 790 1,398 2,215 6,356 63

Long-Term Borrowings 168 1,322 381 284' 635 889 3,679 37

Total 536 2,145 1,143 1,074 2,033 3,114 10,045 100

APPLICATION OF FUNDS

Capital Works 141 1,052 1,635 654 654 2,431 6,567 66

Increase (Decrease) in WorkingCapital and Others 395 1,093 (492) 420 1,379 683 3,478_ 34

Total 536 2,145 1,143 1,074 2,033 3,114 10,045 100

1/ Preaudited_/ Of which about KIE 1.4 million are increases in cash and investments.

IBRDNovemon.r 1Q77

ANNEX 15KENYA. Pge 2of 3

NAIROBI CITY COUNCIL

WATER AND SEWERAGE DEPARTMENT

NAIROBI WATER SUPPLY PROJECT II

Actual Funds Flow Statements - Sewerage Operations 1971-1976(KE Thousand)

Six-YearYear Ending December 31 1971 1972 1973 1974 1975 197611 Summary _

SOURCES OF FUNDS

Income Before Depreciationand Interest 333 432 345 499 635 841 3,085 118

Non-Operating Income - - 21 30 72 80 203 8

Internal Cash Generation 333 432 366 529 707 921 3,288 126

Less: Debt Service 221 193 209 244 202 232 1:L301 50

Net Internal Cash Generation 112 239 157 285 505 689 1,987 76

Long-Term Borrowings 80 128 153 124 - 127 612 24

Total 192 367 310 409 505 816 2,599 100

APPLICATION OF FUNDS

Capital Works 109 223 274 175 209 516 1,506 58

Increase (Decrease) in WorkingCapital and Others 83 144 36 234 296 300 1,093 42

Total 192 367 310 409 505 816 2,599 100

1/ Preaudited2/ Of which about KE 1.3 million are increases in cash and investments.

IBRDNovember 1977

ANNEX 15

KENYA Page 3 of 3

NAIROBI CITY COUNCIL

WATER AND SEWERAGE DEPARTMENT

NAIROBI WATER SUPPLY PROJECT II

Actual Funds Flow Statements - Consolidated Operations 1971-1976(KE Thousand)

Six-YearYear Ending December 31 1971 1972 1973 1974 1975 19761/ Summary _

SOURCES OF FUNDS

Income Before Depreciationand Interest 1,221 1,709 1,527 1,607 2,377 3,643 12,804 96

Non-Operating Income 3 17 90 102 196 292 700 _5

Internal Cash Generation 1,224 1,726 1,617 1,709 2,573 3,935 12,784 101

Less: Debt Service 744 664 698 634 670 1,031 4,441 35

Net Internal Cash Generation 480 1,062 919 1,075 1,903 2,904 8,343 66

Long-Term Borrowings 248 1,450 534 408 635 1.026 430 34

Total 728 2,512 1,453 1,483 2,538 3,930 12,644 100

APPLICATION OF FUNDS

Capital Works 250 1,275 1,909 829 863 2,947 8,073 64

Increase (Decrease) in WorkingCapital and Others 478 1,237 (456) 654 1,675 983 4,571 36

Total 728 2,512 1,453 1,483 2,538 3,930 12,644 100

1/ Preaudited2/ Of which about Kt 2.7 million are increase in cash and investments.

IBRD

November 1977

ANNEX 16Page 1 of 3

KENYA

NAIROBI CITY COUNCIL

WATER AND SEWERAGE DEPARTMENT

NAIROBI WATER SUPPLY PROJECT II

Actual Balance Sheets - Water Supply Operations 1971-1976(Kt Thousand)

Year ing December 31 1971 1972 1973 1974 1975 19761/

ASSETS

Fixed Assets 2/Plant in Operation 7,908 8,951 10,576 11,271 11,852 14,283Less: Depreciation 2,717 2, 981 3,288 3,532 3,864Net Plant 5,191 6,058 7,595 7,983 8,320 10,419Work-in-Progress 55 54 64 23 96 -Total Fixed Assets 5,246 6,112 7,659 8,006 8,416 10,419

Current AssetsCash 650 1,136 - 113 68 42Investments 555 836 1,318 1,798 2,478 2,556Accounts Receivable 336 589 505 740 688 913Inventories 125 110 147 107 173 407Total Current Assets 1,666 2,671 1,970 2,758 3,407 3,918

Deferred Charges 380 441 563 730 911 904

TOTAL ASSETS 7,292 9,224 10,192 11,494 12,734 15,241

EQUITY AND LIABILITIES

Equity 2,200 3,032 3,703 4,434 5,373 7,514Reserve for EmployeeBenefits 22 22 18 13 15 15

Long-Term Debt 4,707 750 5,930 6,021 6,404 6,941Current LiabilitiesAccounts Payable 15 96 47 672 203 216Rechargeable Works Deposits - 1 1 1 150 171Customers' Deposits 348 323 349 353 299 384Cash Overdrawn - - 144 - 290 -Total Current Liabilities 363 420 541 1,026 942 771

TOTAL EQUITY ANDLIABILITIES 7,292 9,224 10,192 11,494 12,734 15,241

Debt/Equity 67/33 65/35 62/38 57/43 53/47 48'52

1/ Preaudited 2/ Valued at historical costs.

IBRDNovember 1977

ANNEX 16

Page 2 of 3

KENYA

NAIROBI CITY COUNCIL

WATER AND SEVWRAGE DEPARTMENT

NAIROBI WATER SUPPLY PROJECT II

Actual Balance Sheets - Sewerage Operations 1971-1976(Kf Thousand)

Year Ending December 31 1971 1972 1973 1974 1975 19761'

ASSETS

Fixed Assets 2/

Plant in Operation 3,351 3,562 3,776 3,947 4,064 4,589

Less: Depreciation 988 1,066 1,268 1,245 1,344 1,447

Net Plant 2,363 2,496 2,508 2,702 2,720 3,142

Work-in-Progress 8 20 81 85 177 94

Total Fixed Assets 2,371 2,516 2,589 2,787 2,897 3,236

Current AssetsCash 124 56 6 40 31 14

Investments - 300 600 875 1,150 1,380

Accounts Receivable 342 299 187 147 270 369

Inventories 2 3 3 78 161 202

Total Current Assets 468 658 796 1,140 1,612 1,965

Deferred Charges 4 - - 147 228 -

TOTAL ASSETS 2,843 3,174 3,385 4,074 4,737 5,201

EQUITY AND LIABILITIES

Equity 1,036 1,315 1,483 1,933 2,622 3,291

Reserve for EmployeeBenefits 3 5 4 13 15 15

Long-Term Debt 1,772 1,816 1,881 1,912 1,813 1,837

Current LiabilitiesAccounts Payable 25 30 9 208 101 50

Rechargeable Works Deposits 7 8 8 8 8 8

Customers' Deposits - ---Cash Overdrawn - - - - 178 -

Total Current Liabilities 32 38 17 _216 287 58

TOTAL EQUITY ANDLIABILITIES 2,843 3,174 3,385 4,074 4,737 5,201

Debt/Equity 63/37 58/42 55/45 49/51 41/59 36/64

1/ Preaudited 2/ Valued at historical costs.

IBRD

November 1977

ANNEX 16Page 3 of 3

KENYA

NAIROBI CITY COUNCIL

WATER AND SEWERAGE DEPARTMENT

NAIROBI WATER SUPPLY PROJECT II

Actual Balance Sheets - Consolidated Operations 1971-1976(Kl Thousand)

Year Ending December 31 1971 1972 1973 1974 1975 19761'

ASSETS

Fixed Assets2/Plant in Operation 11,259 12,513 14,352 15,218 15,916 18,872Less: Depreciation -3705 3,959 4,249 4,533 4,876 5,311Net Plant 7,554 8,554 10,103 10,685 11,040 .[3,571Work-in-Progress 63 74 145 108 273 94Total Fixed Assets 7,617 8,628 10,248 10,793 11,313 13,655

Current AssetsCash 774 1,192 6 153 99 56Investments 555 1,136 1,918 2,673 3,628 3.936Accounts Receivable 678 888 692 887 958 1,282Inventories 127 113 150 185 334 609Total Currenit Assets 2,134 3,329 2,766 3,898 5,019 5,883

Deferred Charges 384 441 563 _ 877 1,130 904

TOTAL ASSETS 10,135 12,398 13,577 15,568 17,471 20,442

EQUITY AND LIABILITIES

Equity 3,236 4,347 5,186 6,367 7,995 10,805Reserve for EmployeeBenefits 25 27 22 26 30 30Long-Term Debt 6,479 7,566 7,811 7,933 8,217 8,778Current LiabilitiesAccounts Payable 40 126 56 880 304 266Rechargeable Works Deposits 7 9 9 9 158 174Customers' Deposits 348 323 349 353 299 384Cash Overdrawn - - 144 - 468 -Total Current Liabilities 395 458 558 1,242 1,229 _ 829

TOTAL EQUITY ANDLIABILITIES 10,135 12,398 13,577 15,568 17,471 20,442

Debt/Equity 66/34 63/37 60/40 55/45 51/49 45/55

1/ Preaudited 2/ Valued at historical costs.

IBRD

Novemtber, 1977

ANNEX 17

KENYA

NAIROBI WATER SUPPLY PROJECT II

WATER AND SEWERAGE DEPARTMENT

Estimated Financing Plan for 1977-1981-

Water Operations Sewerage Operations Consolidated OperationsKE Thousand % KfE Thousand %_ KE Thousand _

APPLICATION OF FUNDS

Proposed Project 32,472 75.5 - - 32,4721/ 62.3

On-Going Works 3,553 8.2 4,023 44.0 7,576 14.5Future Works - - 3,789 41.4 3,789 7.3

36,025 83.7 7,812 85.4 43,837 84.1

Interest During Construction 4,070 9.5 572 6.2 4,642 8.9Total Construction Expenditures 40,095 93.2 8,384 91.6 48,479 93.0Increase in Working Capital 2,899 6.8 764 8.4 3,663 7.0

Total Application of Funds 42,994 100.0 9,148 100.0 52,142 100.0

SOURCES OF FUNDS

Internal Cash Generation 21,871 50.9 6,947 75.9 28,818 55.3Less: Debt Service (4,086) (9.5) (2,399) (26.2) (6,485) (12.5)Net Internal Cash Generation 17,785 41.4 4,548 49.7 22,333 42.8

Proposed IBRD Loan/Chania II 12,500 29.1 - - 12,5003/ 24.0Proposed Saudi Fund Loan/Chania II 10,417 24.2 - _ 10,417 20.0Proposed Loan/Chania II 2,292 5.3 - - 2,292 4.4Existing Loans - - 3,606 39.4 3,606 6.9Other Borrowings - - 390 4.3 390 0.7Total Borrowings 25,209 58.6 3,996 43.7 29,205 56.0

Consumer Contribution - - 604 6.6 604 1.2

Total Sources of Funds 42,994 100.0 9,148 100.0 52,142 100.0

1/ Extracted from Annex 18.2/ Including KE 360 thousand spent in 1982.3/ Including disbursements of KE 168 thousand in 1982.

January, 1978

ANNEX 18Page 1 of 3

KENYA

NAIROBI WATER SUPPLY PROJECT II

WATER AND SEWERAGE DEPARTMENT

ESTIMATED FUNDS FLOW STATEMENTS - WATER SUPPLY OPERATIONS - 1977-1985(Kit TNOUSAND)

1977YEAR ENDING DECEMBER 31 1977 1978 1979 1990 1981 1991 1982 1983 1984 1985

TOTAL

SOURCE AND USESOF FUNDS

INTERNAL SOURCES-NET INCOME BEF IN 1811 2614 3331 3237 3513 14506 4260 4768 5316 5874-DEPRECIATION _ __l031 --l1126 .__ 1322 -..-_.1635 ..-.._21 24 __._Z365 .___2554 __.-.2582 ..._ 2608 ._._._2663

TOTAL 2842 3790 4660 4872 5707 21871 6814 7357 7924 8537

OPERATIONAL RE-QUIREMENTS

-WORKING CAPITAL -234 166 144 37 157 270 178 82 86 99-DEBT SERVICE 796 1000 1562 2218 2580 8156 2681 3490 4232 4101OTHER CHG 0 - _ _ _ 1Q 2___.2 __121 __._.132 ._ ._.552 ___145 _161 __126 __124

TOTAL _ ___652 .___1266 ___.1815 -.....2326 .. 2862 ._ _8228 . 34 __..3233 _-___424 -_94324NET AVAILABLEFROM OPERATIONS 2190 2524 2845 2496 2838 12893 3810 3624 3430 4143

CONSTRUCTIONREQUIREMENTS

-ONGOING WORKS 2152 1223 159 5 14 3553 0 0 0 0-PROPOSED PROECT 477 3154 15106 9943 3432 32112 360 0 0 0-FUTURE PROJECT -- 0___ _ ------ _0 --…0 - _ ----___0 -- _3Z00 __.38QQ --_.5000 __.5000

TOTAL _ __2622 -- 4322 __15265 _.._ 2248 ___3446 __35665 ___4060 .... -- -38Q0 ---5000 __._5Q0

BALANCE TO FINANCE 439 1853 12420 7452 608 22772 250 176 1570 857

FINANCED BY:IBRD/CHANIA 2 0 61 3754 6623 1894 12332 168 0 0 0SAUDI FUND/CRANIA 2 0 1803 7449 666 499 10417 0 0 0 0OPEC/CRANIA 2 ------ Q0 ___326 ____.282 _---852 __ _._222 0

TOTAL 0 2240 11992 8146 2663 25041 168 0 0 0

SURPLUS(DEFICIT)OF FUNDS -439 387 -428 694 2055 2269 -82 -176 -1570 -857ACCUMULATED 2159 2546 2118 2812 4867 4867 4785 4609 3039 2182

DEBT SERVICE COVER 3.6 3.8 3.0 2.2 2.2 2.7 2.5 2.1 1.9 2.1

JAUAEtY 1978

ANNEX 18Page 2 of 3

KENYA

NAIROBI WATER SUPPLY PROJECT II

WATER AND SEWERAGE DEPARTMENT

ESTIMATED FUNDS FLOW STATEMENTS - SEWERAGE OPERATIONS - 1977-1985

(Kt THOUSAND)

1977

YEAR ENDING DECE 31 1977 1975 1979 1980 1981 1981 1982 1983 1984 1985

TOTAL

SOURCE AND USESOF FUND

INTERNAL SOURCES-NET INCOME BEF IN 591 779 926 897 t115 4308 1431 t5613 1708 1852

-DEPRECIATION 350 422 525 626 716 2639 755 79( 828 876

-CONSUMER CONTRIB … _ ___62 __1Q8 140 __145 .6 1 42 ...604 _ . 12 .... 12 6 __....231

TOTAL 1003 1309 1591 1668 1980 7551 . 2279 2485 2732 2959

OPERATIONAL RE-QUIREMENTS

-WORKING CAPITAL -109 77 72 47 92 179 97 68 71. 76

-DEBT SERVICE 372 558 653 695 693 2971 727 793 847 876

OTHER CHO _ _ 18.. ____2Q __. 22 _._ __24 ---.....4-. 263 . .. .. 26 .... .... 3S

TOTAL ___._442 ____653 ____245 _Z64 ___B2 __3413 _._850 8 .. ... 242-NET AVAILABLE

FROM OPERATIONS 561 656 846 904 1171 4138 1429 t595 1783 1972

CONSTRUCTIONREQUIREMENTS

-ONGOING WORKS 2347 1430 241 5 0 4023 0 0 0 0

APPROVED PROJECT 460 619 919 746 260 3004 0 0 0 0

-FUTURE PROJECT … 0… 0 ._. Z .--- .-----... __ 6 __Z Q 02 __2026 _....1266 .._1802

TOTAL ---2802 ---2042 ___1230 __ 252 .---.._262 ___Z812 _. _2102 .-....2Q26 ...._1266 __.1802

BALANCE TO FINANCE 2246 1393 384 -147 -202 3674 673 481 183 -163

FINANCED BY:IBRD/DANDORA LOAN 1098 670 106 0 0 1874 0 0 0

GOVT/DANDORA LOAN 1014 620 98 0 0 1.732 0 0 0 0

OTHER LOAN ------ 0 ____ _20- 25 __._.__25 ___200 __32D ___ ._2Q . . - 6 .... .... 200TOTAL 2112 1360 299 25 200 3996 900 800 600 200

SURPLUS(DEFICIT)OF FUNDS -134 -33 -85 172 402 322 227 319 417 363

ACCU4ULATED 1260 1227 1142 1314 1716 1716 1943 2262 2679 3042

DEBT SERVICE COVER 2.7 2.3 2.4 2.4 2.9 2.5 3.1 3.1 3.2 3.4

JANUARY 1978

ANNEX 18Page 3 cf 3

KENYA.

NAIROEI WATER SUPPLY PROJECT II

WATER AND SEWERAGE DEPARTMENT

ESTIMATED FUNDS FLOW STATEMENTS - CONSOLIDATED OPERATIONS - 1977-1985(Kt THOUSAND)

1977

YEAR ENDING DECEMBER 31 1977 1970 1979 1980 1981 1981 1982 1983 1984 1985TOTAL

SOURCE AND USESOF FUNDS

INTERNAL SOURCES-NET INCOME BEF IN 2402 :3393 4257 41:34 4628 18814 5691 6336 7024 7726

DEPRECIATION 1381 1590 1854 2261 29:10 1(004 3309 3379 3436 3539-CONSUMER CONTRIP ... 62 . .. .14Q. 145 .-. .... 14 2 . 64 ..._3-.12i __ 126 . . 231

TOTAL 3845 5099' 6251 6540 76t7 29422 909:3 9842 10656 J11.496

OFE:RATIONAL RE-0UIREMENT'S

--WORKING CAPI'TAL -343 243 216 84 249 449 275 150 157 1.75-DEBT SERVICE :1168 1558 2215 291.3 3273 :11.127 3408 4203 5079 4977OTHER CHG __262 ... ........ _3 .... 122 ... 143 . 156 .. f15 ...... 121 2. 22 2_

TOTAL .. _1024 ... ... .... 2560 ... 3140 ... 3672 .... 1239t1 3E 5 .......... .4623 ... 5443 .. _5381NET AVAIL-ABL E

FROM OPERATIONS 2751 3:1.8() ;369:1 3400 4009 1.703:1. 5239 52:19 52 13 61 : 5

CONSTRUCTIONREQUIREMENTS

*-ONGOING WORKS 4499 2653 400 10 :1.4 7576 0 ( 0 0-PROPOSED PROECt /APP SEW937 3773 1.6025 :10689 3692 35:116 360 0 0 0-FUTURE FROJEC'T . .. 0 ..- 20 .... 6 __..-20 .25 ._ .2.5826 .... 6 26 - ----- 680.9

TOTAL _ '36 .. 642 . 16425 10205 ... 4 ....... .415 .4342 ....... 162 .5826 . 62?66 ._,6802

BAL-ANCE TO frINANCE 26BS 3246 1.2804 7305 406 26446 923 657 i753 694

FINANCED BY:IBRD/CHANIA 1 /DNDORA. 1098 670 106 0 0 1874 0 0 0 0NCC/ /CLF WATER/DADORA 101.4 620 98 0 0 1.732 0 0 0 0IBRD/CHANIA 2 /OTlER SEW LN 0 :131 3849 6648 2094 12722 :1068 800 600 200SADDI FOD/CHANIA 2 0 1803 7449 6f66 499 10417 0 0 0 0OPEC/CHANIA 2 __ 326-._ E.52.. 220 ....85.2.2222 0 _ _ ........ ... _ 0 0

TOTAL 2112 3600 12291 8171 2863 29037 1068 800 600 200

tSURPLUS(DEFICIT)OF FUNDS -573 354 -513 866 2457 2591 145 143 -1153 -494ACCUMULATED 3419 3773 3260 4l26 6583 6583 6728 6871 5718 5224

WIT BEAVICE COVER 3.3 3'3 2.8 2.2 2.3 2.6 2.7 2.3 2.1 2.3

JANARY 1978

ANN4EX 19Pa* T-;f 3

KENYA

NAIROBI WATER SUPPLY PROJECT II

WATER AND SEWERAGE DEPARTMENT

ESTIMATED INCOME STATEMENTS - WATER SUPPLY OPERATIONS - 1977-1985

(Kt TWOUSMD)

YEM nINs DECEMIR 31 1977 197E 1979 1910 1961 1932 193 1984 1985

NET VOL SALES ('00043) 30718 34056 35926 3859B 41536 4460B 48080 5:1.687 55560

AVE1AZ PRICU KSR/N3 2.63 3.07 3.50 3.50 3.80 4.40 4.10 4.10 4.10

OPERATING REVENUES

WATER REVE1US 4039 5228 6287 6755 7892 9145 9856 10596 11390

OTHER _258 -- 284 -313 _34_328 416 -_......8 5El__504 .____554

TOTAL __._4228 ___5512 ___.6600 __20292 ... _8220 _29561 _10314. 11100 __11244

OPERATING EXPENSES

POWER & FUEL 118 143 165 193 227 244 263 282 303

CHEMICALS 212 256 296 347 408 438 472 507 545

LABOR 65 75 83 93 105 1:13 122 131 140

SUPPLIES 236 285 329 387 455 488 525 565 607

METER EXPENSES 78 94 109 128 150 161 174 1137 200

SALARIES 286 332 366 411 463 497 535 575 618

DEPRECIATION 1031 1176 1329 1635 2194 2554 2589 2608 2663

ADMINISTRATION 398 461 509 572 645 692 745 80:1 860CONNECTION & WORK .- .-- 125 ____145 .. _160 _._18Q . ... _.212 ___ 234 252 .. _220

TOTAL. ......... 2551 __.2268 ....-.. 3346 . ..... 3242 .A 85 0. 540 ._4 _......5652 . ..... 520a ___62QZOPERATING INCOME 1747 2544 3254 3152 3420 4157 4655 5192 5737OTHER INCOME NET __-64._2Q _2 ..- - 2 3 _._1Q3 0 .___113 . 124 . 3Z

NET INCOME BEF INT t8el 2614 3331 3237 3513 4260 4768 5316 5874INT CHARGED OP .___.4 . __5 9 ._431 __402 329 .1281 ._ .. 2160 . _233. 182 4

NET INCOME 1371 2160 2900 2835 3139 2979 2608 3283 4000

OPERATING RATIO X 59 54 51 56 59 57 55 53 52

DEPREC/GROSS PLANT 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50

JANUARY 1978

AtiL19Paoe 2 of 3

KlNYA

NAIROBI WATER SUPPLY PROJECT II

WATER AND SEWERAGE DEPARTMENT

ESTTAATED INCOME STATETi -__.Tf ERATIN - 1977-1985(Kk TNOUIAND)

YEAR ENDING DECEMBR 31 1977 1976 1979 i .o 195 1 1962 1963 1914 1995

IN VOLUME BILLED('O001) 2 4 8 8 1 27245 28740 30978 32398 33902 36540 39282 42225AVE PRICE KSH/M3 1.10 1.25 1.40 1.40 1.58 1.75 1.75 1.75 1.75

OPERATING REVENUES________________

SEWERAGE REVENUES 1368 17D3 2012 2161 2559 29.66 3197 3437 3695OTHER 8-8 .a .1 - __2 . 4 .15 . 1Z

TOTAL _ __1326 ___1l.t11 __2Q21 ___2122 ___25ZI __22Z2 __3211 A___3452. 3Z 11

OPERATING EXPENKS__________________

POWER S FUEL 25 ; 30 35 41 48 52 56 60 64LABOR 80 93 102 115 129 139 150 161 173SUPPLIES 81 98 113 133 1.56 167 180 194 208SALARIES 115 1;34 147 166 187 200 2:16 232 249DEPRECIATION 350 422 525 626 716 755 790 828 a 876ADMINISTRATIONS 146 169 1.86 209 236 253 272 293 314CONNECTION I WOt …… - - _13 _ _19 - _ _ 16 - -Z _12 _2Q _

TOTAL ----E02 __256 ..- 1122 __ _1304 ..48 . _....1583.._682 ... ... .... 128. 1206OPERATING INCOME 569 755 899 868 1083 1396 1529 1665 :1805OTHER INCOME NET ____ 22 _ ___24 _. _ .__22 ..- _2_32 _____35 … 32 _ 43 ___ . 42NET INCOME BEF INT 591 779 926 897 1115 3.431 1568 1708 1852INT CHARGED OP _ _1Q2 123 - 25 422 ___._22 _42 ___451 .. ..... ._508 . __552 . 5Z1NET INCOME 489 656 651 468 688 980 1060 11.56 1281

OPERATINO RATIO X- 59 56 56 60 58 53 52 52 51

DEPC/SOit0g PLMi 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50

JAWUARY 1978

ANNEX 19Fiage of 3

NAIROBI WATER SUPPLY PROJECT II

WATER AND SEWERAGE DEPARTMENT

ESTIMATED_INCOME STATEMENTS - CONSOLIDATED OPERATIONS --1977-1985

(Kk THOSAD)

YEAR ENDING DECENS 31 1977 1978 1979 1980 1981 1982 1983 1984 1985

OPERATING REVENUES________________

WAT & SEW REVENUES 5408 6930 8299 89:16 10451 1.2111 133054 14033 :15084

OTHER ____266 __ __223 ____322 -_354 .......32 . .... 2. 51. 52 1

TOTAL ---. 5674 ___2223 _82 I '.2221 -10841 .-..-12540 i..3525 . 14552.

OPERATING EXPENKS__________________

POWER S FUEL 143 173 200 234 275 296 318 342 368

CHEMICALS 212 256 296 347 408 4313 472 507 545

LABOR 145 168 185 208 235 252 271 292 3:13

SUPPLIES 317 383 442 519 611 655 706 758 8:15

METER EXPENSES 78 94 109 1.29 150 161 174 187 200

SALARIES 402 465 513 577 650 697 751 807 867

DEPRECIATION 1381 1598 1854 2261 2910 3309 3379 3436 3539

ADMINISTRATION 544 630 695 782 880 944 1017 1093 11.74

CONNECTION I WORK ____135 ____156 .1Z3 _ 124 __"212 _. __235 _253 2 222- ..222

TOTAL _.-.3358 ._3224 ._4468 _ .5251 -... 6282 .. . 23_1 Z-2695 . .8113

OPERATING INCOME 2316 3299 4153 4020 4503 5553 6184 6857 7542

OTHER INCOME NET . . ___..__4 -- 114 _-- 125. 138 __- 152 .... 167 .. 184

NET INCOME BEF INT 2402 3393 4257 4134 4628 5691 6336 7024 7726

INT CHARGED OP _ ___542 ____522 .__Z06 .- .831 .. 801 _ .._1232 .... 2668 ..2585 2....42g45

NET INCOME 1860 2816 3551 3303 3827 3959 3668 4439 5281

OcMMATIN RATIO 1 59 54 52 57 58 56 54 53 52

DEPREC/GROSS PLANT 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50 2.50

JANUARY 1978

t Nr' 20iige 1 of 3

KENYA

NAIROBI WATER SUPPLY PROJECT II

WATER AND SEWERAGE DEPARTMENT

ESTIMATED BALANCE SHEETS - WATER SUPPLY OPERATIONS - 1977-1985

YEAR ENDING DECEMBER 31 1976 1977 1978 1979 1980 19B1 1982 1983 1984 1985

BALANCE SHEETS

ASSETS/I

PLANT IN OF'ERATION 38257/1 44235 49881 56408 74431 101095 103217 103917 104717 108317LESS: DEPRECIATION __10350 _.12A16 --14834 _12646 ._21Q46 -.. 253A5 -. 2Z822 _.30488 _33Q96 .. 35252NET PLANT 27907 /1 31819 35047 38762 53385 75750 75318 73429 71621 72558

WORK IN PROGRESS 0 477 3801 18262 17227 3218 6092 9192 13392 14792

CURRENT ASSETS-CASH AND BANKS

2598 2159 2546 2118 2812 4867 4785 4609 3039 2182

-ACCOUNTS REC 913 727 941 1132 1216 1421 1646 1774 1907 2050-INVENTORIES ---- Q402 ___448 ____922 ___592 __.__526 .-.-__.655 _21 . .__223 ___ B22 _.___260

TOTAL 3918 3334 3979 3792 4624 6943 7152 7176 5818 5192

DEFERRED CRARGES - 2 22Q4 __1024 _ 1203 -_.1324 .--.-1456 ..__1601 -_ ...1Z62 __1238 ___2132

TOTAL 32729 36624 43921 62019 76560 87367 90163 91559 92769 94674

LIABILITIES

EQUITY-RETAINED EARNINGS 7514 8885 11045 13945 16780 19919 22898 25506 28789 32789-OTHER - RESERVE 15 15 15 15 15 15 15 15 15 15

-REVALUATION RESER _.1Z488 __2022 __23453 _26258 __30834 _ 36122 __361Z2 _36122 -- 36172 __36122TOTAL 25017 29172 34513 40918 47629 56106 59085 61693 64976 68976

LONG TERM DEBT 6941 6592 8456 20052 27781 30004 29708 28378 26179 23952

CUR'NT LIABILITIES-ACCOUNTS PAYABLE 216 238 261 287 316 348 383 421 463 509-RECHARGEAGLE WORKS DEPOS 171 188 207 228 250 275 303 333 367 403

-CUSTOMER DEPOSITS ___38 4 _44 _ __.__534 _58A ._Z684 _ 284 - 834TOTAL 771 860 952 1049 1150 t257 1370 1488 1614 1746

TOTAL 32729 36624 43921 62019 76560 87367 90163 91559 92769 94674

DEBT/DEBT g EQUITY 22 18 20 33 37 35 33 32 29 26

CURRENT RATIO 5.1 3.9 4.2 3.6 4.0 5.5 5.2 4.8 3.6 3.0

RECEIVABLES/REV % 22 18 18 18 18 18 18 18 18 18

/1 fRevetued *t 1776 prices.

JANUARY 1978

AN4NEX 20jee2 ;f 3

KENYA

NAIROBI WATER SUPPLY PROJECT II

WATER AND SEWERAGE DEPARTMENT

ESTIMATED BALANCE SHEETS - SEWERAGE OPERATIONS - 1977-1985(Kk TH(US _ __)

YEAR ENDING DECEMBER 31 1976 1977 1978 1979 1980 :1981 1982 1983 1984 1985

BALANCE SHEETS

ASSETS/1

PLANT IN OPERATION 13266/f 14756 18972 22998 27109 30152 30214 32967 33299 36742LESS: DEPRECIATION ---92Q3/j__5243 ___6232 ___Z238 -- 2358 1010 .1265 -... 12555. 13383 ._14252NET PLANT 8363 - 9013 12233 15060 17751 19142 18449 20412 19916 22483

WORK IN PROGRESS 94 2874 2447 1713 666 1303 3343 2666 4300 2666

CURRENT ASSETS-CASH AND BANKS

1394 1260 1227 1142 1314 1716 1943 2262 2679 3042-ACCOUNTS REC 369 246 307 362 389 461 534 576 619 665-INVENTORIES _ ___202 ___222 .____244 .- _.__269 .____226 325 _358 ___._324 .__ _433 __426

TOTAL 1965 1728 1778 1773 1999 2502 2835 3232 3731 4183

DEFERRED CHARGES __ .... 122 - - .122 2___.217. _ 232 . 263 -..- 2 9. -31 8 .342 .. 384TOTAL 10422 13794 16655 18763 20655 23210 24916 26628 28296 29716

LIABILITIES

LQUITY-RETAINED EARNINGS 3291 3780 4436 5087 5555 6243 7223 8283 9439 10220-OTHER RESERVE 15 15 15 15 15 15 15 15 15 15-REVALUATION RESER ___5221 __5822 ...__6281 .__8O04 _251 _11285 _11285 -11285 _ 11285 11285

TOTAL 8527 9674 11232 13106 15080 17543 18523 19583 20739 22020

LONG TERM DEBT 1837 3994 5183 5269 5035 4969 5593 61080 6413 6308

CUR'NT LIABILITIES-ACCOUNTS PAYABLE 50 55 60 67 73 81 89 97 107 118-RECHARGEABLE WKS DEPOS __-___ ._ _ .. _ 10 _ _11 -12 .._13 _ ._4 .. 16.__12

TOTAL 58 64 70 78 85 94 103 113 124 137

CONSUMER CUNTRIBUT ------ t ----- 62 ____120 --31 -455 __64 -_..622 _ 82 ___102 __.1251TOTAL 10422 1374 16655 18763 20655 23210 24916 26628 28296 29716

=~==S=== 2;=r=== ==sn=g _-esZ ======W==== =:a:ms s=2= ===_

DEBT/DEBT I EQUITY 18 29 32 29 25 22 23 24 24 22

IETWU1W/R'JZ X 27 18 1e 18 18 18 l8 18 i8 18

L1 Revatued at 1°76 prices.

JANUARY 1970

ANNEX 20Page 3 of 3

KENYA

NAIROBI WATER SUPPLY PROJECT II

WAITER_AND_SEWERAGE DEPARTMENT

9STIMATED BALANCE SHEETS - CONSOLIDATED OPERATIONS - 1977-1965

YEAR ENDING DECEMBER 3t 1974 1977 1979 197? 1980 1981 1982 1"3 1984 1985

BALANCE SHEETS

ASSETS_ _ _ _ _ _ ~~/1

PLANT IN OPERATION S1523/1 5j8991 68853 79406 101540 13:L247 133431 136884 1.38016 145059LESS: DEPRECIATION __152S3/j1A8152 __21523 __25594 __304DA _ 36355 -- 32664 __A3043 ._._46422 .._5018NET PLANT 36270 - 40832 47280 53822 71136 94892 93767 93841 91537 95041

WORK IN PROGRESS 94 3351 6248 19975 17893 4521 9435 11858 17692 17458

i CURRENT ASSETS-CASH AND BANKS

TEMPORARY SURP 3992 3419 3773 3260 4126 6583 6728 6871 5718 5224-ACCOUNTS REC 1282 973 1:248 1494 1605 1882 2180 2350 2526 2715-INVENTORIES _ ___602 ____62Z ____:Z36 - .__ 811 ____822 ---- 9280 __1022 ._._118Z2 .. 1305 _._._1436

TOTAL 5883 5062 5757 5565 6623 9445 9987 10408 9549 9375

DEFERRED CHARGES .____2Q4 ___1123 ___1:221 12Q 1563 _.__1l12 -._.182Q ._2f _ __228Z ....-2282 ... _2516TOTAL 43151 50418 60576 80782 97215 110577 115079 118187 121065 124390

LIABILITIES

EQU IT Y-RETAINED EARNINGS 10805 12665 15481 19032 22335 26162 30121 33789 38228 43509-OT1M RESERVE 30 30 30 30 30 30 30 30 30 30-REVALUATION RESER _22709 26151 _30234 __34262 __4Q344 __42452 __42452 __4245Z __92452 _4245Z

TOTAL 335U 38846 45745 54024 62709 73649 77608 81276 85715 90996

LONG TERM DEBT 8778 10586 13639 25321 32816 34973 35301 34486 32592 30260

CUR'NT LIABILITIES* -ACCOUNTS PAYABLE 266 293 :521 354 389 429 472 518 570 627, -RECHARGEABLE WU DP0 179 197 217 239 262 288 317 349 384 422

-CUSTOMER DEPOSITS __..384 ____434 ____484 .534 ___584 __634 ____684 ._34 ___._284 .__834TOTAL 829 924 1022 1127 1.235 1351. 1473 l1SOl 1.738 1883

CONSUMER CONTRIBUT ------- _ ____62 -2- .31Q _455 604 __.__622 _.___824 102 ... 1251TOTAL 43151 50418 60576 80782 97215 110577 115079 118187 121065 124390

DEBT/DEBT I EQUITY 21 21 23 32 34 32 31 30 28 25

CURRENT RATIO - 7.1 5.5 5.6 4.i 5.4 7.0 6.8 6.5 5.5 5.0. RECEIVABLES/REV X 24 18 18 8 1 18 _ 18 18 18 18

n leatued at 1 , prices.

JANIIUARY 1978

ANNEX 21

Page 1 of 9

KENYA

NAIROBI WATER SUPPLY PROJECT II

WATER AND SEWERAGE DEPARTMENT

Notes and Assumptions on Financial Statements and Projections

A. Water Supply Operations

Balance Sheets

Revaluation of Assets and Depreciations

1. WSD's gross water supply fixed assets and accumulated depreciationas of December 31, 1976, as shown on page 1 of Annex 20, have been expressedin 1976 prices. Fixed assets in operation and depreciations have also beenrevalued annually from 1977 onward with increases of 10% each year through1981. After 1981, assets and depreciations are at 1981 prices.

Depreciation2. Depreciations for the years 1971 through 1976, as shown in Annexes14 and 15, represented actual repayments of :Loans incurred towards financingof capital assets. For 1977 and onward, depreciation has been calculatedon a straight-line basis at an average annual rate of 2.5% per annum.

CaptLal Expenditures Program

3. Capital expenditures program for the years 1977-1985 is givenon page 5 of this Annex.

Work in Progress

4. Work in progress has been transferred to assets in operation inthe year of completion.

Inventories

5. Inventories have been assumed to increase by about 10% per annum.

Cash and Banks

6. It is expected that WSD would maintain at all times a cashbalance equivalent to about one month's revenues for oppr tionrl requirement;

cash surplus, if any, would be invested on short-term basis.

Accounts Receivable

7. Accounts receivable have been estimated at 18% of annual billings.

ANNEX 21Page 2 of 9

Accotunts Payable

8. Accounts payable have been assumed to increase by about 10%annually.

Customer Deposits

9. Customer deposits have been estimated to increase by about KE 50thousand per annum.

Borrowings

lO. Details of annual drawings and debt service for all existing andproposed loans are given on page 7 of this Annex. It has been assumed thatthe proposed Bank Loan of US$30 million equivalent (KE 12.5 million equivalent)would bear an interest rate of 7.4% per annum for a period of 20 years including5-year grace and repayable through equal semi-annual payments of principalcommencing in the second half of 1983. The proposed Saudi Fund and OPEC loansto the Government of US$25 million and US$5.5 million, respectively have beenassumed to be onlent to NCC on similar Bank terms.

Income Statements

Operating Revenues

11. Water consumption projections are given on page 7 of this Annex.Uncollectib,les have been assumed to be 3% of gross consumption. It has beenassumed that the following water tariff structure would be effective by July 1,1978: KSh 1.32/m3 for water kiosk operators; KSh 2 64/m3 for the firat 9 msupplied to metered consumers per month; KSh 3.30/mi for the next 9 m- andKSh 3.75/m' for any additional water supplied to metered consumers in the samemonth. The average tariff has been estimated to increase from KSh 2.64/m3 atpresent to KSh 3.50/m 3 from July l, 1978. The average tariff has been assumedto further increase to KSh 4.l0/m3 effective July, 1981 to reflect largely theprice escalations detailed in paragraph 12.

Operating Expenses

12. All expenses for 1977 are b,ased on WSD's current estimates. For1978 and onward, expenses for power and fuel, chemicals, supplies and meterexpenses have been increased to fullv reflect projected water production growth

ANNEX 21Page 3 of 9

as well as price escalations. As shown in Annex 3, water production has beenprojected to increase by 10.8% in 1978, 5.4% in 1979, 7.4% in 1980, 7.6% in1981, 7.3% in 1982, 7.7% in 1983, 7.5% in 1984 and 7.4% in 1985. Priceescalations have been assumed to be 10% each year during 1977 through 1981.From 1982 onward, prices have been assumed to remain at 1981 price terms.

13. Expenses for labor, salaries, administration and connections andworks have been increased to reflect projected water production growth andhalf of the price escalations in paragraph 13.

B. Sewerage Operations

Balance Sheets

Revaluation of Assets and Depreciations

14. WSD's gross sewerage fixed assets and accumulated depreciation asof December 31, 1976, as shown on page 2 of Annex 20, have been expressed in1976 prices. Fixed assets in operation and depreciations have also beenrevalued annually from 1977 onward with increases of 10% each year through1981. After 1981, assets and depreciations are at 1981 prices.

Depreciation

15. Same as paragraph 2 above.

Capital Expenditures Program

16. Constructinn program for the years 1977-1985 is given on page 5 of

this Annex. The program is divided into on-going works, which comprise mainlythe Dondora sewerage component of the Nairobi Site and Service Project X

financed by the Bank Group; schemes already approved by NCC but constructionnot yet started; and future schemes.

Work in Progress, Inventories, Cash and Banks, Accounts Receivable,Accounts Payable

17. Same as paragraphs 4, 5, 6, 7 and 8, respectively.

Customer Contributions

18. It has been assumed that expenditures for reticulation systems wouldbe fully recovered directly from the customers. WSD normally offers thecustomers the choice of paying such amounts either immediately or over aperiod of ten years plus an 8% interest. It has been assumed, based on pastexperience, that 40% of the customers would elect to pay immediately their

shares.

Borrowings

19. Details of estimated annual drawings and debt service for allexisting loans are given on page 8 of this Annex. WSD's consolidated debtstatements are given on page 9 of this Annex.

ANNEX 21Page 4 of 9

Income Statements

Operating Revenues

20. Billings have been calculated on the assumption that seweragetarift would be increased from the present rate of K Sh 1.10 per m3 toK Sh 1.40 per m3 of sewerage collection volume effective by July 1, 1978This tariff has been assumed to further increase to K Sh 1.75/m3 effectiveJuly 1, 1981 to reflect largely the price escalations detailed inparagraph 12.

Operating Expenses

Same assumptions as in paragraphs 12 and 13.

IBRD

December, 1977

ANNEX 21

KENYA Page 5 of 9

NAIROBI WATER SUPPLY PROJECT II

Water and Sewerage Department

1/Capital Expenditures Program

(RE Thousand)

Five Year

Year Ending December 31 1977 1978 1979 1980 1981 Summary 19E2 1983 1984 1985

A. Water Operations

1. On-going WorksChania I 1,564 320 100 - - 1,984 - - - -

Chania IA 97 566 25 - - 688 - - - -

Others 491 337 34 5 14 881 - - - -

Sub-Total 2.152 1 222 159 5 14 3 553 - - -

2. Proposed Project 477 3,154 15,106 9,943. 3,432 32,112i/ 360 -

3. Future Works- -- - - 3,700 3,800 5,000 5,000

Total-Water Operations 2 - __ 9 3,800 5,000 5,0O~

B. Sewerage Operations

1. On-going WorksTrunk Sewers 117 55 9 - - 181 - - - -

Reticulation 118 85 28 5 - 236 - - - _

Dandora 2,112 1,290 204 - - 6- -

Sub-Total 2.347 1,430 21 5 - 02- - -

2. Schemes Approval-Not Yet Started

Trunk Sewers 295 280 419 213 90 1,297 - - - _

Retidulation 45 142 172 233 150 742 - - - -

Treatment Works 120 97 13 - - 230 - - - -

Dandora Expansion - 100 315 300 20 735 - - - -

Sub-Total 460 619 919 746 260 3 - - - -

3. Future SchemesTrunk Sewers - - - - 637 637 1,540 1,494 1,634 1,494

Reticulation - - 70 6 72 148 62 132 272 315

Treatment Works - - - - - 500 450 60 -

Sub-Total - - 70 6 709 785 1,102 1 076 966 809

Total Sewerage Operations 2,807 23049 757 969 7812 260,22076 9 1

C. Total Water and SewerageOperations 5,436 6,426 16,495 10,705 4,415 43,477 6,162 5,876 6,966 6,809

1/ Transposed to Annex 18.

2/ Not including expenditures in 1982 of proposed project,

IBRD

December, 1977

ANNEX 21Page 6 of 9

KENYA

NAIROBI WATER SUPPLY PROJECT II

Water Consumption Forecast(thousand m3)

1/ New VolumeYear Ending December 31 Gross Consumption Less: Uncollectibles Sales

1977 31,668 950 30,7181978 35,110 1,054 34,056

1979 37,038 1,112 35,9261980 39,792 1,144 38,5981981 42,821 1,285 41,5361982 45,988 1,380 44,6081983 .9,568 1,488 48,o801984 53,286 1,599 51,6871985 57,279 1,719 55,560

1/ Assumed to be above 3% of gross consumption

IBRD

June 1977

ANNEX 21Pa9e 7 of 9

KENYA

NAIROBI WATER SUPPLY PROJECT II

WATER AND SEWERAGE DEPARTMENT

ESTIMATED DEBT STATEMENTS WATER SUPPLY OPERATIONS - 1977-1985(Kt THOUSAND)

1977

YEAR ENDING DECEMBER 31 1977 l978 1979 1950 1961 1951 1982 1953 198a 1985TO7AL

DEBT STATEMENT

IBRD/CHANIA 1-AMORTIZAIION 141 153 164 :176 189 823 202 218 235 25?

-BALANCE 3097 2944 2780 2604 2415 0 2213 1995 1.7h6 K3R08

INTERESI 236 226 214 202 189 :1067 175 160 144 .1_'

NCC/CuN.LOAN FUJND-AMORTIZATION 215 223 232 241 251 1162 262 271 283-BALANCE 3495 3272 3040 2799 2548 0 2286 2015 .1732 fA38

INTEREiST 204 229 217 200 185 1035 170 153 :1 36 :1. 1 9

IBRD/CHANIA 2-BORROWINGS 0 61 3754 6623 1894 :1.2332 168 0 0 0-AMORTIZATION 0 0 0 0 0 0 0 417 834 834

-BALANCE 0 61 381.5 10438 12332 0 12500 32083 1:1.249 i.04:1.'.5

-INTEREST 0 2 144 531 848 1526 925 916 P369 807

-COMMITMENT CHOE 0 47 79 32 0 158 0 0 0 0-IDC-% 0 100 100 100 100 0 C50 0-IDIC 0 49 223 563 848 1.684 462 0 0 0

SAUDI/CHANIA2-BORROWINGS 0 1803 7449 666 499 :10417 0 0-AMORTIZATION 0 0 0 0 0 0 0 347 h69 '

-BALANCE 0 1803 9252 9918 10417 0 :10417 L0070 9376-INTEREST 0 67 412 714 757 1951 776 763 724-COMMITMENT CHGE 0 32 32 0 0 65 0 0 °)-IDC-% 0 100 100 1000 0 0 0 50 0 0 0-IEIC 0 99 444 714 757 2015 388 0 0 0

OFPEC/CHANIA2-BORROWINGS 0 376 789 857 270 2292 0 0 C 0

-AMORTIZATION O0 0 0 ) 0 0 77 1Ir3-BALANCE 0 376 1165 2022 2292 0 2292 2215 2062 :1509-INTEREST 0 14 57 119 161. 351 171 168 159 1461-COMMITMENT CHGE 0 7 10 3 0 20 0 0 0

-IDC-% 0 100 100 100 100 0 50 0 0

-IDC 0 21 67 122 161 371 05 O

DEBT SUMMARY-BORROWINGS 0 2240 11992 8146 2663 25041 168 0 0 0

-REPAYMENTS 356 376 396 417 440 1985 464 1330 2199 22.27-BALANCE 6592 8456 20052 27781 30004 30004 29708 28378 26t79'-COMMITMENT FEES 0 86 121 35 0 243 0 0 0 0-INTEREST 440 538 1045 1766 2140 5929 2217 2160 2033 lb/4-INTEREST I CF 440 624 1:166 1801 2140 6171 22:17 2160 2033 P104-DEBT SERVICE 796 1000 1562 2218 2580 8156 2681 3490 4232 410i

-IDC 0 170 735 :1399 1766 4070 936 0 0

JAN1OARY 1978

ANNEX 21Piag_e-_f 9

KENYA

NAIROBI WATER SUPPLY PROJECT II

WATER AND SEWERAGE DEPARTMENT

ESTIMATED DEBT STATEMENTS - SEWERAGE OPERATIONS - 1977-1985(Kt THOUSAND)

1977YEAR ENDING DECEMBER 31 Jq77 197e 1979 1980 1981 1981 1982 1983 l9t4 1985

TOTAL

11::1lit T'1 [ E ME.N N

k1:1 RO WI N (iS :10(98 670 :106 0 0 :1874 0 0 0 .!fAM C00I I Z N 0 0 24 45 48 :1.17 53 5Z 62 2

-DA L .ANtCE: I1496 2:1.66 2248 2203 21.55 0 2102 204' :! 903 91::NE.IIET rT0 :tSh 1.88 :l.l' 185 798 [.91 1':6 :1 '7:1. .I.I :1:1:II:' :'.: :1.00 :[00 50 0 0 0 0 )II'' 80 : d 94 0 05 3.30

JOViJC IVTANDIOCRA LOAN--Bl:) R Rl:)W:LNl:;S 1.0:14 620 98 0 0 1.732 0 1 0

A MOK)R I 7ZAT IC ON 35 67 E8:1 833 83 349 83 113 i3 tl;3BALA NCE :1.346 :1.E99 191 16 1833 :1.750 0 :1.667 .54 : ' I II8INTEI '5 56 1.0, :124 1.22 I1:1.6 523 :11.3. :106 1 (0:1:111. 100 0(( 50 0 0 0 0 0DC11 56 I1 62 0 0 223 0

EXI:SI: NG E i:: 1. N' I.[ N-AMORT 1'TIZAT6I ON 99 104 1.08 J3112 11L6 539 :1.2I :I6 1.3:1 .1.36

* BsALA!lNCEL L 152 :1.048 940 828 712 0 9 I AI 3:34 :1 Y3:1NTI1NTE:ES 13 02 :213 1:9 ' ) L 2 :1.04 9560 t N' IP 96

OE'THE R LOAN-BORROWIN(iS 0 /70 95 200 390 900 1300 500 '20i-AMORT'RIZAT'ION 0 19 19 38 :1.9 9 I9 :1.91-BALANCE 0 70 :1.65 .71. /.352 0 31.2; 3 .:14 I'91 976

INT'ER EEST 0 3 9 1 21 4Z7 ,3 1:0 L 04 2:1' I D 3 C - z () L () () 3 () 0 :1.00 100 J 0( 0 0 00I D . 0 3 9 7 0 O1 . 0 O 0

DEBI SUMMARY--BORROWINGS 21 1.2 :1.360 299 25 200 3996 900 800 600 :00-RERA4YMENTS 134 13771 2:13 259 266 1043 276 2835 295 305

BALANCE 3994 5:1.83 52.69 5035 4969 4969 5L5'9i3 61:0 6413. 6308IN'I'IT :RE:S 'T' 238E . 387 440 436 427 1928 451. 5Q3 552 5'1 SI NITE:RES'T' S CF 238 387 440 436 427 :1. 928 451 508 552 '.i7DEBT SERVICF: 372 558 653 695 693 2971 727 793 $.347 i76I DC 1236 264 :1.65 7 0 572 0 0 0 0

JANUARY 1978

ANNEX 21

KENYA Page 9 of 9

NAIROBI WATER SUPPLY PROJECT II

WATER AND SEWERAGE DEPARTMENT

ESTIMATED DEBT STATEMENTS - CONSOLIDATED OPERATIONS - 1977-1985(Kt THOUSAND)

1977YEAR ENDING DECEMBER 31 1977 197 b 1C7q 1980 1981 3981 1982 1983 19?4 1985

TOTAL

!li F'l/CHONANIA I /DANDORA111301:W 1; 1.O98 67() tO6 0 ° 18 74 0 0-AN MRC ] R llAl.ON 14:1. :53 1013' 921 24(0 .155 ,77 21 3 I* iLNt.l-: 4593 5:1.? 4l.0.; 4 00 4570 3 II S 00 ('-33 2;NI 17:FF?. 3 :i 6 31.12 40 ! q31 3' 4 1.045 :356 "I;I I~'> 1. 00 1.00 5( 0 o 0 0 .*1.0: 80 .1.56 94 0 0 330

N C'l''C 0 N L)OON iFU.ND:l WATER/DANDORA-O)F?RI:k0IW'l.NOS :1.014 620 83 i Q 1 : 0"-) M . 'OTIZ AlT ON 25( 2;O .. 13 :124 33:4 1I li 3.113 . 4 !.6 .{I..ANI::I:C 4041 5 ?71. 4956 4632 428 0 3i?53 3:: 9C.11 211%INTE[31RE T 260 334 341. :32 2 30:1 -15. 2LI :.6 i 4

1D.C ;b6 105 b2 0 0 ?.3 0 O

EXISTING SEW CLF LOAN-BAL A N. : 11. .52 :1.04tl 94(1 0213 1. l ;5"[13 J ''0-:N rES RE:T :1.02 1L23 1:. 9 :1.1.2 :1.04 5h9 9 J6 :.

1BROl/CHONIO 2 /OTHER SEW LOAN-1:10:;RtW) 113!i 0 :13:L 3(349 664t. 2094 1 2772 1 fL01 10 * :'00A M R T::ZATI10N 0 ( 3 0 1 .1.9 31 1. 3 1 8POL ANCEE 0 :1.31 391E( 1. 0609 L2,814 0 :1:.3:23 .1 14 ' 1311 1 I'INTIUIF:R.:CiI 0 5 1.54 544 069 :5^2 28:3J 1)46 1013 1.2'C:OtMMT:lME.NIT CHliE 47 79 32 0 1.5 0 0 O

It C o 52 233 5:0 834S1 :1 :'03 46:2 0 V

'AJU D T/ C:0-IAN IA230 tR 10 TN1835 0 :1.803 7449 666 4';99 1.04:1.7 0 0 0* 0M3()1:T1I Z AT:UI N (3 0 0 (1 (1 1) 47 ''-' 4 '`4*-1160.ANCL- 0 :1.803 9'25 2 991 8 1.041.7 0 1 0417 1 0070 9. 376 . J 5 ;-INTE:RES:T 0 67 412 714 7J7 17S1 776 763 724 5'3-Ct:)MMlTMI--NT CHGE 0 32 3 65 0 0

-ID E x 0 :100 100 :10 100 0 50 ( l-r DC 0 99 444 714 717 20:1.15 388 0 0 0

OPEC:/CHANIA2--BORROWINGS 0 37e6 789 857 27'0 292 0 0 0 0

AMORTIZATION 0 0 0 0 00 7 3 1.3:3-BALA\NCE: 0 376 1 165 2022 229O 0 2292 2211. 2062 :1.909--INTEREST 0 14 57 1:19 16:1. 351 1L71 :168 :1.59 :1.48*--COMMITMENT 0CHGE 0 7 10 3 0 20 0 0 0 0

0 100 100 1L00 1.00 0 530 0 0 0IDC 0 21 67 :122 16:1. 371. 3 0 0 0

DEBT- SUMMARY-BORROJWINGS 2112 3600 :12291. E117:1. 2863 29037 :1068 800 600 200REPAYMENIS 490 547 609 6/6 706 3028 740 1.6:15 2.494 2.532--BAL.ANCE 10586 13639 25321 3?c81. 6 34973 34973 35303. 34486 32592 30260COMMITMENT FEES 0 86 121 35 0 243 0 0 0 0-INTEREST 678 925 1485 2202 21367 7857 26668 2660 .?25813 2445

-INTEREST I CF 678 10:1 1 1606 2;:37 256,.7 10''99 2668 2668 2513'35 2445--DEBT SERVICE 1168 1558 22:1.5 29:1.3 3273 1I:11.27 3408 42fJ33 50/( 49 77

0IDC i36 433 900 1406 1.766 4642 936 0 0 0

JANUARY 1978

ANNEX 22

KENYA

NAIROBI WATER SUPPLY PROJECT II

Water and Sewerage Department

Estimated Annual Rate of Return 1I 1977-1985

Return on Water Suprly Return on Sewerage Return on ConsolidatedOperations Operations Operations

Year Ending Cash2 Cash 3/ Cash2 /December 31 Flow-' Conventional3/ F1owO/ Conventional- Flow- Conventionall/

1977 7.3% 5.9% 6.9% 6.5% 7.2% 6.o%1978 8.4% 7.6% 8.0% 7.1% 8.3% 7.5%1979 9.1% 8.8% 7.5% 6.6% 8.7% 8.2%1980 8.4% 6.8% 6.5% 5.3% 7.9% 6.4%1981 7.5% 5.3% 6.7% 5.9% 7.3% 5.4%1982 6.7% 5.5% 7.1$ 7.4% 6.8% 5.9%1983 7.0% 6.3% 7.5% 7.9% 7.2% 6.6%1984 7.5% 7.2% 7.6% 8.3% 7.5% 7.4%1985 8.o% 8.0% 8.o% 8.5% 8.0% 8.0%

1/ Calculated from Annexes 19 and 20.

2/ Defined as income before depreciation and interest divided by annually revaluedgross fixed assets in operation at beginning of the year.

3/ Shown for comparison purpose and defined as income after depreciation butbefore interest divided by average annually revalued net fixed assets inoperation during the year.

IBRDJanuary, 1978

ANNEX 23Page 1 of 2

KENYA

NAIROBI WATER SUPPLY PROJECT II

Present Water and Sewerage Tariffs

Water Tariffs

1. In addition to paying the full cost of connecting to the water system,consumers pay for the water consumed and meter rentals and are also requiredto post a deposit to the Water and Sewerage Department (WSD), as follows:

(a) monthly charge based on meter reading at the rate of K Sh 2.64/m3(K Sh 12.0/1000 Ig) with a minimum of K Sh 8.0;

(b) meter rentals vary according to size:

Meter Size (inches) Monthly Rent (K Sh)

Up to 1/2 2.0From 1/2 to 3/4 3.0From 3/4 to 1 4.0From 1 to 1-1/2 8.0From 1-1/2 to 2 11.0From 2 to 4 20.0From 4 to 6 35.0Over 6 By Agreement

(c) deposits of KSh 50 to KSh 200 in respect of domestic consumers;KSh 300 to KSh 500 and KSh 500 to KSh 2,000 in respect ofcommercial and industrial consumers respectively. Bulk connectionspay deposits equivalent to two months' billings.

2. WSD also charges K Sh 30 for reconnection.

Sewerage Tariffs

3. WSD charges a one-time charge for sewerage service to new users anda used charge based on water consumption.

4. The sewerage service charge is charged to the plot owner and isin two parts:

(a) A charge to recover part of the cost of constructing servicetrunk and reticulation sewers to serve the plot. The formula atpresent used by NCC is that the cost of all sewers of diameters230 mm (9 inches) and below which are within the area underdevelopment are entirely borne by the plot holders. For sewerslarger than 230 mm, the plot holders pay only the cost of anequivalent 230 mm sewer and NCC bears the rest of the cost.

ANNEX 23Page 2 of 2

Appointment of cost to plot holders is based on plot size. Sewerageservice charges are due upon notification by NCC after apportionment,and can be paid either in a lump sum or in equal installments overa period of not exceeding 10 years at 8% interest on outstandingbalance.

(b) A connection fee of K Sh 50 for a normal domestic user. Connectionfees for larger users are based on actual cost.

5. Sewerage use charge is based on water consumption, and is billed 3together with the water charges. The present sewerage use rate is K Sh 1.10/m(K Sh 5.0/1000 Ig) of water consumed with a minimum charge of K Sh 8.50 per month.

IBRD

June 1977

ANNEX 24

KENYA

NAIROBI WATER SUIPPLY PROJECT I1

Project Monitoring Indicators

Indicators for monitoring project implementation, WSD operations,NCC finances and developments pertinent to water supply and sewerage opera-tions, along the lines outlined below, would be discussed during negotiationsand included in the requirements for WSD's periodic reports to the Bank.

I - Critical Inputs for WSD Water Demand Forecasting Model (Annually)

(a) Estimated population of Nairobi;(b) Estimated GDP for Nairobi;(c) Income distribution;(d) Housing statistics including share of Nairobi GDP devoted

to housing; and(e) Water production and sales by category of use

(see II-a and II-b below).

II - System Operations (Quarterly and Annually)

(a) Volume of water produced from various sources and total by months;(b) Volume of water sold by customer category and total by months,

including public standpipes and kiosks;(c) Number of service connections by customer category and total by

months, including public standpipes and kiosks;(d) volume of wastewater processed at each sewage treatment plant and

total by months; and(e) Total length of distribution mains in service.

III - Financial Indicators (Annually)

(a) Nairobi Consumer Price Indices for Wage Earners, Middle Incomeand Upper Income;

(b) Fund flow statements, income statements and balance sheetsalong the lines of Annexes 18, 19 and 20;

(c) Current schedule of water and sewerage tariffs;(d) Accounts receivable by months;(e) Status of NCC borrowing of WSD funds.

IV - Project Implementation (Quarterly)

(a) Revised CPM; and(b) Revised estimates of project costs and contract payment schedules.

V - Surface Water Resources

(a) Average daily flows, by months, at Ngethu Weir plus water ahstrectedfor Ngethu Water Treatment Plant (quarterly and annually); and

(b) Review of Sasumua and Ruiru Reservoir systems and revise estimatesof capacity (every two years).

VI - Staff Position (quarterly and Annually)

(a) List of posts, staff and vacancies in all sections of WSD; and(b) Status of training program.

IBRDJuly 1977

IBRD 12981T.o.l,l 5 A R A' A ' E JULY 1977

i M L N , A R N $ KENYA To Embu

FORTC ANIAXJ / ' SECOND NAIROBI HALL

DIVERO ON POSSIBLEFUJTURE WATER SUPPLY PROJECT'THIKA DIVERSION

Propos-d FcltesUnder Vt, < . >Exseoog Frolec Loo 714 KE

1 SUSUMU-AS-t \ POSSiBL- Pipelines

To DRATMEN\ 3FUTURE * Reservoirs

Nsoto TREATENKIMAKIAPLAT DAM SITE *U Treatment Plonts

PLANT 0- - \\ \L DAM S TE 0 | t * Pumping Stalions

Main Roads *0

,-.---.---+'-. Railways

POSSIBLE LI~~~~~~~~~~~~~~ Built-up AreasCH AI FITUAE Municipal Boundary

'eDAM l-E National Park

Rivers

N5EoG STATION,

To i T~~~~~~~~~~~~~~~REATMlENTz\, X\iT.lcnc,^ PLANTW t

To '

DAM T. G- Tko r

LIMURU

\& - ~~~~~KIAMBUtX< ~

j TL¾,iNIr / . X t E-SEFv0R X~~~~~~~~~~~~~~/ ' 5Sv

ESE V~~~~~~~~~~~~~~~~~~~~~~~~~S

KIKUYUS -- _RSR0RJ'R.p-

, tx)YL OzR R~~~pESIE YIR <s 41s /tTo To

NGONG N A I R O B IW G4Ti4iDPPN A T I 0 N A L s

S " K D AfflL _gENY tl | O f: tA _ i i$- * _ \f _ P A R KENYA

X -2 K E N Y A 0 X o 2 4 6 a 10 12 14 16KiOM' E

-p+_ ,., , V > j ~~~~~~K LOMETERS ;

~'T41NZ,RiA; 5 ,o todseT. soound: oon ,~ I IDdo 0.0r ItO

' ._._|ssgeorPW sI >.?;omboso 00,0 Odl1 0000 To Mombaa nTo Mombos-

IBRD 12982

K E N Y A W .\ThIO UA

SECOND NAIROBI WATER SUPPLY ,PROJECT ,

KEN Y Ap -

TaC 0 9N. .,h. '~~~K IOOOETERS 19

XKAREN~~~~~~~

-- _ WNA =IRPOKIS! ew\ ltiuinSsema prtg17/7

TAZ IA p

ToK.-, R.is

KAREN ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~~- 3Dsr,oinZnsDistrbuti,n Systmo- Op-rti,,g 1976/ 77,1 Dagorotti Wes PRAOS CIuG TIES

2 DagretTi Eas-t PISTING PRrCJECT UtTER LOAN 014-KE3 Kabete Ga-r. - - - Pipelne-s

\< <\ A I R ! ~~~~~~~~~~~ \ \ 9^\+>9< 6 Hl Tank~~~~~~~~~~~~~ Treatmen PaTNA i~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~APnpn

ttoX \ \ _ _ \ X t\/ 4 z -0<>~~~~~~~ 7 City Cewte Mu ad

/>^ \ -'= *05 . ~-- ,9 4 \ 9 Industrial Area -- Municipal Bouncer,-<~~~-~~~ t i7- __ t t \<\~~~~~~~~~~ 10 Ridgewcyps Gcrden s_ National ParkR-.kc ~ ~ ~ - Ri~ser

' To 9\ 12 U-toje Doonholm --- International Boundaries= -' Momb=soT 13 Airport