Water Sector Reform Programme – Phase II

1. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II Water Sector Reform Programme – Phase II Agreed Reform Benchmarks, Performance Indicators Baseline Data and Means of Verification Ahmed BADR, PhD Water and Energy Programme Manager Delegation of the European Union to Egypt

2. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II INTRODUCTION Water DPG - 20 December 2011 • Impact of 25th January 2011 Revolution • Dramatic decrease in the collected bills • EGP 500 million (=approx. € 60 million) add-up on the financial burden of HCWW • Decrease in annual average of the Government production subsidy to sector by more than 40% • Decrease in the Government budget to the capital investment budget to the sector (approx. percent of reduction is not yet defined • Lack of, and vagueness in policy dialogue, especially regarding future plans and strategies

3. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II INTRODUCTION Water DPG - 20 December 2011 • Total grant amount is € 120 Million: • € 110 million as budget support over three tranches • First fixed tranche: € 22 million • Second & third fixed tranches are variable equal:€ 44 million • Technical Assistance: € 10 million • Programme duration:4 Yrs + 2 Yrs as phase-out period • Modus-Operandi: • General eligibility criteria that have to be verified by the Commission for the release of each tranche; plus • Specific reform benchmarks that have to be verified by the Commission for individually and severally for the release of the second and third tranches. They are 12(instead of 13)*2 outputs in 4 results areas

4. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II Eligibility Criteria Water DPG - 20 December 2011

5. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II Indicators and Means of Verification • The Annual Information Return Reports (AIRs) and EWRA Annual reports • Performance monitoring system by the Holding Company for Water and Waste Water (HCWW) for its subsidiary companies. • Indicators related to the National Water Resources Plan (NWRP) 2005-2017. ( a) economic development, b) social objectives , c) basic water supply and demand data and d) health and environment. • Monitoring indicators related to the National Water Supply and Wastewater Sector Development Policy. Water DPG - 20 December 2011

6. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II Specific Areas of Support and Related Reform Benchmarks Area No. A: 2 Reform Benchmarks Fostering General PFM Reform ________________________________________________________________________________________________________ Area No. B: 2 Reform Benchmarks Strengthening and Enforcement of Water Sector Policies ________________________________________________________________________________________________________ Area No. C: 5-instead of 6-Reform Benchmarks Improving Quality and Strengthening Sustainability of Operation of Service Providers ________________________________________________________________________________________________________ Area No. D: 3 Reform Benchmarks Supporting implementation of IWRM to Egypt’s Water Strengthening & Enforcing Water Sector Policy Resources ___________________________________________________________________________________________________ Water DPG - 20 December 2011

7. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II First Fixed Tranche - € 22 Million Water DPG - 20 December 2011

8. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II 2nd & 3rd Variable Tranches – Each of € 44 million Area No. A : Fostering General PFM Reform OUTPUTS A1: Improving financial transparency of HCWW & Affiliated drinking water and wastewater companies BENCHMARKS 1st tranche • Annual public disclosure for FY 2012/13 audited financial statements on MOF and/or HCWW internet site(s) 2nd tranche • Annual public disclosure for FY 2014/15 audited financial statements on MOF and/or HCWW internet site(s) Water DPG - 20 December 2011

9. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II 2nd & 3rd Variable Tranches OUTPUTS A2: Improving budget planning for sector reform process BENCHMARKS 1st tranche • Publication of the sector Water Public Expenditure Report (PER) on MOF internet site 2nd tranche • Satisfactorily progress report transmitted by MOF on the implementation of the conclusions and recommendations of the Water PER Water DPG - 20 December 2011

10. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II 2nd & 3rd Variable Tranches Area No. B: Strengthening and Enforcement of Water Sector Policies OUTPUTS B1: Promote decentralized implementation of new WSS capital investment by HCWW Affiliated Companies (ACs) BENCHMARKS 1st tranche • ACs extend their direct implementation of new capital investment showing for FY 2012/13, an increase of at least 100% in value compared to the baseline 2nd tranche • ACs extend their direct implementation of new capital investment showing for FY 2014/15, an increase of at least 200% in value compared to the baseline BASELINE The total amount of new capital investments directly implemented by HCWW’s ACs amounted to EGP 175.4 million (approx.=Euro 22 million as Euro 1 = 8.0 EGP) (EGP 324 Million (= Euro 40 million as Euro 1 = 8.0 EGP) in the FY 2010/11 (FY 2009/10) (EWRA Annual Report 2010/11-Draft ) (FY 2009/10-Final) . Water DPG - 20 December 2011

11. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II 2nd & 3rd Variable Tranches Strengthening and Enforcing Water Sector Policy THIS REFORM BENCHMARK IS DELETED RESULT 2: Strengthened WSS Policy + better enforcement OUTPUTS 4/13: Increase Public Private Partnership (PPP) by implementing the PPP policy of the Government of Egypt BENCHMARKS 1st tranche • The accomplishment of at least 2 new PPP transactions in WSS sector and the related signature of contracts with private parties. Focus years: 2011-2012. 2nd tranche • Technical and financial studies including due diligence for the implementation of additional PPP greenfield projects are completed for at least another PPP transaction in addition to the 2 mentioned in 4.1. BASELINE MHUDD official list of planned PPP projects in WSS sector 2010 – 2014 Water DPG - 20 December 2011

12. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II Area B OUTPUTS B2: Preparation of a National Water Resources Strategy (NWRS) to 2050 horizon BENCHMARKS 1st tranche • Draft NWRS 2050 is issued for circulation among relevant Ministries and relevant stakeholders 2nd tranche • NWRS 2050 has received the consent by the Cabinet of Ministries as the basis for the update of the National Water Resources Plan 2005/2017 BASELINE Official Notification by MWRI that the elaboration of the National Water Resources Strategy at Horizon 2050 has been initiated. MWRI Report including objectives and contents of NWRS (2050 horizon) Water DPG - 20 December 2011

13. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II Area B OUTPUTS B3 : Support MWRI in its efforts for the development of a shared vision to IWRM at Nile Basin level. BENCHMARKS 1st tranche • Before end of 2013: (i) MWRI holds at least two workshops on adaptation measures on CC at Nile Basin Level; (ii) MWRI awards at least 7 short term scholarships, 2 MSc scholarships and 1 PhD scholarships for students from Nile Basin Countries. 2nd tranche • Before 30 June 2015, at least 30 technical staff of Ministries of Water Resources and Research Centers of Nile riparian countries as trained on MWRI’s model on regional climate change. • BASELINE • MWRI documents describing: • Proposed scholarships curriculum; • Proposed workshops on Climate Change (CC) • General description of the regional model on CC impact • Proposed training course on regional CC model Water DPG - 20 December 2011

14. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II 2nd & 3rd Variable Tranches Area No. C: Improving Quality and Strengthening Sustainability of Operation of Service Providers OUTPUTS C1: Expand access to safe drinking water at country-wide level BENCHMARKS 1st tranche • Increase by at least 100,000 billing points for drinking water uses at national level for FY 2012/13 2nd tranche • Increase by at least 200,000 billing points for drinking water uses at national level for FY 2014/15 BASELINE The total number of billion points at national level for drinking water supply for FY 2010/11 is equal to 10,909,320. 1 billion point = av. family of 5 persons. The total number of people served by HCWW ACs with safe access to drinking water amounted to 72,115,734, representing 98.8% of the total population (source: EWRA Annual Report 2009/2010). 200K-2nd tranche , then 650K-3rd tranche Water DPG - 20 December 2011

15. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II Area C OUTPUTS C2: Extend the coverage of rural and urban sanitation services country-wide BENCHMARKS 1st tranche • Increase by at least 100,000 billing points for drinking water uses at national level for FY 2012/13 2nd tranche • Increase by at least 200,000 billing points for drinking water uses at national level for FY 2014/15 BASELINE The total number of billion points at national level for drinking water supply for FY 2010/11 is equal to 5,410,884. 1 billion point = av. family of 5 persons. The total number of people served with sanitation services by HCWW ACs amounted to 57.4 million in 2009/2010 (source: EWRA Annual Report 2009/2010). 2.0 million-2nd tranche, 4.0 million-3rd tranche Water DPG - 20 December 2011

16. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II Area C OUTPUTS C3: Improve wastewater treatment at national level BENCHMARKS 1st tranche • Increase the volume of sewage processed with secondary (biological) treatment by at least 0.1 million m3/day at national level for the FY 2012/11 2nd tranche • Increase the volume of sewage processed with secondary (biological) treatment by at least 0.2 million m3/day at national level for the FY 2014/15 BASELINE The volume of sewage processed with secondary (biological) treatment at national level amounted to 6.8 MCM/day for FY 2010/11 (6.3 MCM/day-FY 2009/10). Targets: same as before 25th January 2011 revolution Water DPG - 20 December 2011

17. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II Area C OUTPUTS C4: Improve monitoring capacities regarding water quality for drinking water BENCHMARKS 1st tranche • Achieve before 30 June 2011, at least 1 new accreditation for central water quality laboratory of HCWW Affiliated Company compared to the baseline. 2nd tranche • Achieve before 30 June 2015, at least 2 new accreditation for central water quality laboratories of HCWW Affiliated Company compared to the baseline. • BASELINE • The number of central accredited laboratories as of 30 June is equal to 5 for FY 2010/11(2 Central Lab. for FY 2009/10). Accreditation will be based on ISO 17025. • 2 Central Lab. – 2nd tranche • 2 Central Lab. – 3rd Tranche Water DPG - 20 December 2011

18. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II Area C OUTPUTS C5: Support service providers in the process of achieving cost recovery BENCHMARKS 1st tranche • Restore for FY 2012/13 aggregated sectoral cost recovery ratio “R” to be at least 0.84 2nd tranche • Restore for FY 2014/15 aggregated sectoral cost recovery ratio “R” to be at least 0.89 • BASELINE • Aggregated cost recovery ratio “R” for FY 2010/11 is equal to 0.77. The baseline figures on cost recovery for the selected HCWW ACs are: • Cairo Water Company: 87.70% • Beheira Water Company: 75.18% • Damietta Water Company: 75.93% • 90% cost recovery – 2nd tranche • 100% cost recovery – 3rd tranche Water DPG - 20 December 2011

19. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II Area C – Reform Benchmark C5 …continued… The consolidated ratio "R" is to aggregate the F4 and F20 ratios monitored by EWRA. F4 and F20 include – as per EWRA’s AIR – respectively for water and for sanitation services, with a calculation for each AC and for the consolidated 23 ACs: As numerator, the revenue billed, exclusive of non-recurrent revenues and of subsidies. As denominator, the operation and maintenance costs, excluding depreciation, amortization and all other costs (provisions).

20. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II 2nd & 3rd Variable Tranches Area No. D: Improving the Use of Existing Water Resources OUTPUTS D1: Increase the efficiency of water pumping stations BENCHMARKS 1st tranche • Detailed design for the rehabilitation / reconstruction of at least 2 high priority pumping stations described in the baseline is completed before mid 2013. 2nd tranche • By 30 June 2015, achievement of at least 10% reduction of average energy consumption from the baseline figures in at least 2 pumping stations responding to the conditions of 2nd variable tranche. BASELINE 1st Variable Tranche: Initial design data and actual operational performances as of 30 June 2011 for two priority pumping stations to be rehabilitated in 2012/14 (same as before 25th January 2011) 2nd Variable Tranche: Average energy consumption as of 30 June 2011 of two pumping stations selected for rehabilitation under first fixed tranche. (same as before 25th January 2011) Water DPG - 20 December 2011

21. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II Area D OUTPUTS D2 : Implement water conservation practices for reducing Non-Revenue Water (NRW) in water networks BENCHMARKS 1st tranche • Calculation of NRW is improved from desk estimates to actual measurements in at least one (two) new ACs by 30 June 2013 compared to the baseline. 2nd tranche • The ratio (Rn) of NRW towards total water input measured in the water districts where measurements of NRW is implemented in (at least 2 ACs) is decreased, for the reference year 2015, by at least 1% from the Rn measured in the baseline year of 2013. • BASELINE • Number of ACs implementing actual measurement of non revenue water as of 30 June 2011 equal to ZERO. • 1st tranche: 2 ACs • 2nd tranche: 2% Water DPG - 20 December 2011

22. EUROPEAN UNION EGYPT-WATER SECTOR REFORM PROGRAMME–Phase II Thanks for Your Attentions …….. Questions…..!!!!!! Water DPG - 20 December 2011