Armenia’s Water Sector Reform Experience:

Access to water and sanitation

Yerevan, Armenia2011

Area: 29,800 sq. km Capital city -Yerevan

Population: 3,235,000 (July 2009 est.)

Official language: Armenian

Terrain: High plateau with mountains, little forest land.

Climate: Highland continental, hot summers, cold winters.

Provinces: ten provinces, 915 communities, of which 49 are considered urban and 866 are considered rural

Armenia’s Water Sector Reform Experience

WATER SUPPLY IN SOVIET UNION TIMES• Water systems were managed by centralized-planning system

• The construction of these systems was carried out with violations of engineering norms, low quality materials and technologies

• The water supply of almost all the settlements fed from centralized systems was limited to schedule hours

• There was no such concept as “tariff”

• Payment was done according to calculation by 1inhabiant per sq/m

Armenia’s Water Sector Reform Experience

WATER SUPPLY IN POST-SOVIET UNION TIMES • As of independence of Republic of Armenia, intensive rehabilitation reforms

started in water systems management

• Linked with development programs, the “Water Code” was created in early 2000

• Water-metering concept has started, tariffs were established

• Investment projects started everywhere in Armenia through international donor funds

• International operators were invited for management of water systems, first in Yerevan than for Armenian Water Company (2005)

• Parallel to water systems management reforms, development programs started in sewerage treatment systems

Armenia’s Water Sector Reform Experience

Number of water supply hours

6 hours(average)

Electricity/Income ratio72 %

Installed water meters

30%

NEED FOR INVESTMENT 1 billion USD

SITUATION BEFORE MANAGEMENT CONTRACT

Armenia’s Water Sector Reform Experience

SOLUTION:

-The step of management before lease contract

-Creating a sufficient company level attractive to a private

operator

WHY MANAGEMENT CONTRACT ?

Armenia’s Water Sector Reform Experience

FIXED FEE- 10 million USD for 6 years

PIC - 1,3 million USD from year 2 to year 6

CRITERIA FOR SELECTING AN OPERATOR

Armenia’s Water Sector Reform Experience

• International Tender where SAUR was interested• 70% technical score• 30% financial score• After technical score two participants were chosen: SAUR and

German company

SAUR had the best technical score and a cheaper offer

MC was signed with SAUR for 4 years with 2 years possible extension

WHY SAUR ?

Armenia’s Water Sector Reform Experience

Armenian Water and Sewerage CJSC Management contract

Operator: Saur, France

The term of management: 2005-2008, extended till 2011 Service area: 37 urban and 280 rural settlements

Number of population under the service area: Investment projects:

620 thousand people

Armenia’s Water Sector Reform Experience

FINANCIAL RESOURCES AVAILABLE TO SAUR

Armenia’s Water Sector Reform Experience

0,3

0,4

0,5

0,0

0,1

0,2

0,3

0,4

0,5

0,6

2004 2005 2006 2007 2008 2009 2010 2011

Tariff (USD)

* 1 USD= 363,44 AMD(as of Dec. 31, 2010 rate)

FINANCIAL RESOURCES AVAILABLE TO SAUR

Armenia’s Water Sector Reform Experience

3760 3801 3801

3339

2376 2233 2233

1000

1500

2000

2500

3000

3500

4000

2005 2006 2007 2008 2009 2010 2011

Subsidy (USD)

* 1 USD= 363,44 AMD(as of Dec. 31, 2010 rate)

FINANCIAL RESOURCES AVAILABLE TO SAURWB FIRST PHASE

Armenia’s Water Sector Reform Experience

5,38 4,78

6,38 6,41

0,47

0,15

0,26

0,22

0,260,40

0,880,81

0,05

0,040,06

0,06

0,00

1,00

2,00

3,00

4,00

5,00

6,00

7,00

8,00

2005 2006 2007 2008 2009

Operational Expenses

Gov't co-financing

Operational Expenses

WB

* 1 USD= 363,44 AMD(as of Dec. 31, 2010 rate)

FINANCIAL RESOURCES AVAILABLE TO SAURWB SECOND PHASE

Armenia’s Water Sector Reform Experience

2,92

7,899,18

0,86

2,74

3,19

0,00

2,00

4,00

6,00

8,00

10,00

12,00

14,00

2009 2010 2011

Gov't co-financing

WB

* 1 USD= 363,44 AMD(as of Dec. 31, 2010 rate)

FINANCIAL RESOURCES AVAILABLE TO SAUROTHER DONORS: ADB (USD)

Armenia’s Water Sector Reform Experience

0,59

11,36 12,12

7,65

0,45

2,91 3,67

1,98

-

2,00

4,00

6,00

8,00

10,00

12,00

14,00

16,00

18,00

2008 2009 2010 2011

Gov't co-financing

ADB Funds

* 1 USD= 363,44 AMD(as of Dec. 31, 2010 rate)

FINANCIAL RESOURCES AVAILABLE TO SAUROTHER DONORS: EBRD (EUR)

Armenia’s Water Sector Reform Experience

0,92

4,28

6,80

0,10

0,95

0,71

-

1,00

2,00

3,00

4,00

5,00

6,00

7,00

8,00

2009 2010 2011

Gov't co-financing

EBRD funds

PRIORITIES OF INVESTMENTS

More spread out settlements in the service area instead of 3-4 settlementsWHY? - Situation was catastrophic in many settlements

- Objective to raise the level of service in the service area at the same time - Show population that the investments are on the way

CRITERIA USED:-Electricity expenses-Lower time of supply-Lack of equipment- Expectation of financial income

Armenia’s Water Sector Reform Experience

18

19

21

REVIEW OF ACHIEVMENTS

Armenia’s Water Sector Reform Experience

24

2004 2010

DAILY HOURS FOR SERVICE

(Annual average)

Armenia’s Water Sector Reform Experience

DREAMS COME TRUE

People caring water in buckets for decades

WATER IN PRIVATE TAPS-Finally

ELECTRICITY CONSUMPTION

2004 2010

Armenia’s Water Sector Reform Experience

MASIS PUMPING STATION

OLD

NEW

% OF WATER DISINFECTED

Armenia’s Water Sector Reform Experience

2004 2010

DILIJAN DRINKING WATER TREATMENT PLANT

Alum and Lime Injection

Liquid Chlorine Injection

2004 2010Billing Payments

Number of Payments(170 000 customers receiving service)

Subscribers with water meters

4.4 mln USD

35 000

40%

10,5 mln USD

140 000

88%

Armenia’s Water Sector Reform Experience

33

Magnet used to slow meter down

PUBLIC RELATIONS

Drawing of Lots

Armenia’s Water Sector Reform Experience

0

10 000

20 000

30 000

40 000

50 000

60 000

70 000

80 000

90 000

100 000

1st withdraw 2nd withdraw 3rd withdraw 4th withdraw 5th withdraw 6th withdraw 7th withdraw

38 64546 853 48 947

66 73776 000

88 80099 000

Cust

omet

s

WB INDICATORS

22 Indicators are used All are making progress

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Armenia’s Water Sector Reform Experience

Armenia’s Water Sector Reform Experience

Armenia Water and Sewerage

2010 20122011 2013 20152014 2016 2017 2018 2019

Management Contract

Lease ?

FUTURE PLAN

Armenia’s Water Sector Reform Experience

TECHNICAL

• 18 hours of water supply

• Reduction of electricity expenses from 40 mln kwt o 20mln kwt

• Reduction of losses from 80% to 60%

NEED FOR INVESTMENT 100 million USD

FUTURE PLAN

Armenia’s Water Sector Reform Experience

FINANCIAL

• Future level of tariff should cover AWSC obligations, including debt service

• If no tariff increasing the Government subsidy should be increased to compensate the lack of income to cover all expenses

FUTURE PLAN

Armenia’s Water Sector Reform Experience

INCOME

Subsidies

Tariff

Grants

COST OF SERVICE

“To be sustainable: Tariffs+ Subsidies = Total Cost of Service”

FUTURE PLAN

Armenia’s Water Sector Reform Experience

• LEASE CONTRACT (How to choose the leaser?)

-tender

-direct negotiation

FUTURE PLAN

Armenia’s Water Sector Reform Experience

• FOR FUTURE OPERATOR (Leaser):-No respect of terms of contract

- Financial crisis (decreased income)-Political changes

-Geopolitical situation

• FOR COUNTRY (Client): - NOT adequate operator(case of tender)

-No investment means (international funds)

RISK FOR THE FUTURE

CONCLUSION

Armenia’s Water Sector Reform Experience

THE SUCCESS OF THIS PROJECT is linked with:

Professionalism and competency

Respect of local values

Government & Local

Authorities OPERATOR DONORS

Supportive approach

Respectful to the spirit of operator

Assistance to country

Support to operator

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