Fs Orhei Final

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Water Supply and Sanitation Project Implementation Unit
FEASIBILITY STUDIES FOR SELECTED TOWNS FOR SECOND SMALL TOWN WATER SUPPLY AND SANITATION PROJECT IN MOLDOVA
FEASIBILITY STUDY REPORT
ORHEI FINAL REPORT Stockholm 9 November 2007 SWECO International AB Water and Environment
Project No. 1989 161 000
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S WE C O INT ER N AT ION AL Gjrwellsgatan 22 P.O. Box 34044 SE-100 26 Stockholm, Sweden Telephone +46 8 695 65 00 Fax +46 8 695 65 10
P:\ 1080\01 Uppdrag\1989161000 FS 15 Towns Moldova
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Table of Content
1 Executive Summary.......................................................................1 2 Introduction....................................................................................8 3 General about Orhei....................................................................11 4 Institutional Aspects...................................................................13 5 Socio-economic Aspects............................................................38 6 Financial Aspects........................................................................48 7 Technical Aspects.......................................................................64 8 Outline Design............................................................................70 Drawing Drawing No. 1 1989161-WS-001 2 1989161-WS-002 3 4 1898161-S-001 1989161-S-002 Description: Water Supply Network Present Situation, year 2006 Short-Term Investment Needs Within Water Supply Network Sewerage Network Present Situation, year 2006 Short-Term Investment Needs Within Sewerage Network
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Abbreviations and Acronyms

BOD COD DSCR GIS GDP Ha IAS JSC km kWh LAN l/cap/d MDL mg/l MIS m2 m3 n/a NGO NRW p PFS PS SCADA UNDP USD VAT WB WWPS WTP WWTP Biological Oxygen Demand Chemical Oxygen Demand debt service coverage ratio Geographical Information System Gross Development Product hectare International Accounting Standard Joint Stock Company kilometre kilo Watt hour Local Area Network litre per capita per day the currency in Moldova, Moldavian lei milligram per litre Management Information System square metre cubic metre not available Non-governmental Organization Non Revenue Water person Pre-Feasibility Study pumping station Supervisory, Control and Data Acquisition United Nations Development Programme US dollar Value Added Tax World Bank Wastewater Pumping Station Water Treatment Plant Wastewater Treatment Plant
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Water Supply and Sanitation Implementation Unit 09 November 2007 FINAL Feasibility Study Report for Orhei I
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Feasibility Studies for Selected Towns for Second Small Town Water Supply and Sanitation Project in Moldova
FEASIBILITY STUDY REPORT ORHEI
1
1.1
Executive Summary
General
Orhei town is located in the centre of Republic of Moldova, on the left bank of Raut River, 35 km north of the capital on the road between Chiinu and Bli. Emigration has reduced to number of inhabitants from 47,000 to estimated 34,000. This feasibility study is prepared as a project within the frames of a Moldovan plan up to year 2015 for rehabilitation of the water and sewerage systems in the country. The project is called The second small town water supply and sanitation project in Moldova and is considered for financing by the World Bank.
Orhei near Chiinu, has some 34,000 inhabitants
This study is part of a Moldovan plan for the water sector
The project was divided into two main phases one 15 towns prepre-feasibility phase when 15 towns all over the analysed, 10 country were analysed, and one feasibility phase selected for preparation of feasibility studies for ten towns selected from the first 15. On recommendation of the Consultant and after discussions with the Client and the World Bank the feasibility phase inslcudes the following ten towns: Bli, Cahul, Cueni, Drochia, Fleti, Floreti, Orhei, Rcani, Soroca
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Water Supply and Sanitation Implementation Unit 09 November 2007 FINAL Feasibility Study Report for Orhei 1
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and Ungheni. This document contains the feasibility study for This is the FS Apa-Canal in Orhei.
for Orhei
1.2
Institutional Aspects
In meetings with representatives for Orhei ApaCanal and its owner the Consultant got a clear impression that they want to develop Apa-Canal to a good service provider in terms of water quality, efficiency of operations, coverage and reliability of service, and customer satisfaction all statements in fact representing a long-term goal for Apa-Canal.
Orhei Apa-Canal seems committed to improvement
In order to reach these goals the Consultant Political influence believes it important that Apa-Canal acts more too frequent commercially and that Apa-Canals daily operation is more separated from the municipal ownership than now. Too close political involvement in a company often makes decisions and the business in general more bureaucratic and slow. Apa-Canal and its management have, and shall further develop, the capacity and knowhow to accomplish what the political leadership in the municipality demands them to do, and what they are paid for from the customers and possibly from the town budget. The Consultant recommends the following distribution of roles: 1) The political leadership shall decide about the level of service in the town and about the principals for finance of the demanded service, and 2) Apa-Canal shall fulfil what the political leadership has decided.
Make clear division of responsibilities
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The Consultant believes that one way to reach Commercialisation this status is to change the utility to a 100% is important for municipally owned Joint-stock company with a efficiency board consisting of for instance five to six persons representing different know-how and
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interests. The Consultant therefore recommends the Town to seriously consider this possibility and perhaps other possibilities - in order to improve the efficiency of the company. The Consultant also recommends Apa-Canal to Asset inventories prepare an asset inventory including asset needed evaluation and performance and condition grading. This is important for qualified asset management and operations management and for determination of realistic asset values to be used for depreciation in the financial reporting. In order to better use the capacity and interest of all the personnel in the utility the presently practiced detailed top-down management and control model (management by directive) should be changed to more Management by Objectives and to a concept of Accountable Managers. Accountable managers would have delegated responsibilities and would normally be the functional Heads in the company; e.g. Head of Water Treatment Station, Head of Wastewater, Head of Networks etc. The bad condition of the water and wastewater facilities demands of course intensive and correct daily operation. In addition to this ApaCanal is recommended to develop and implement a long-term business strategy - at least for the next 20 years and change focus from the presently dominating daily operation and emergency activities to a strategic long-term focused management. Preparation of a qualified Business Plan would support managers to include both short-term and long-term aspects in their work to develop the utility. The number of staff is, despite already carried out reductions, extremely high 6 staff / 1000 inhabitants and constant efforts to further reduce this ratio must have high priority. Beside improved physical assets constant improvement
Delegate responsibilities and make accountable
A Business Plan would help to balance between short- and longterm measures
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Number of staff is extremely high, education needed to support reduction.
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of the quality of the personnel is important for the further staff reduction. The Consultant therefore identified a number of specific areas of training, which will enhance the skill and knowledge levels within relevant staff and greatly assist in ultimately reducing Apa-Canals costs. Good relations with the customers are crucial for instance for their willingness to pay for the service and consequently for increased incomes for Apa-Canal. The heart of good customer relations is to meet or exceed customers expectations and, when failures occur, to accept responsibility and take positive action. The Consultant has therefore prepared a list of suggested customer service standards which Apa-Canal may further develop in addition to Moldovan state regulations governing the provision of water and wastewater services.
Customer relations must be improved to increase willingness to pay
1.3
Socio-economic Aspects
With industries active in many different sectors, Orhei seems to have a good industrial base; it also showed little better than average growth during the last years. The calculation of the household monthly revenue at local level is difficult to accomplish in most Eastern European Countries. The situation is similar in Moldova. Usually the National Commission for Statistics (or similar entity) calculates the average household revenues at national level without giving any values for county or local level. We estimate the salary levels are 15% lower in Orhei than the national average in Moldova. Still, we find the costs for water services affordable as they consume 2 % of average household incomes.
Healthy industry
Household revenues are difficult to estimate
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Although salaries are low, water costs are affordable.
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During the period June 15 till July 15 a survey was conducted in order to find the general perception of the population regarding the water and wastewater activity of the utility. For the purpose of the survey a representative sample on the basis of: education, age, gender considering the population from 6 towns of Moldova: Bli, Cueni, Ungheni, Nisporeni, Leova and Cahul.
A willingnessto-pay survey was conducted in 6 towns.
Water is clearly reaching the utmost importance in Water is all towns. Population wants to access all communal important.. services, without discrimination, but rank water on a top of the options. Regarding the improvement of quality of water ..but quality is services during the last years, the general a (increasing) perception is that in most of the cities there were problem not recorded major achievements and the quality of the services remained the same or even worsened. People are willing to pay 35-50 Lei monthly for good water services. With improved customer relations and better understanding of the utilitys cost people can become willing to pay more.
Willingness to pay is there and can be improved
1.4
Financial Aspects
Based on the analysis of the historical Forecast 2007performances and considering the macroeconomic 2036 was scenario envisaged by the authorities, a financial developed forecast for the period of the credit was prepared in order to generally assess the maximum level of the credit that can be contracted. A sensitivity analysis is performed in order to better assess the impact in variations of assumptions on the level of the credit and on the capacity of the utility to repay the proposed credit. The delayed adjustment of tariff compared with the The slow tariff cost increases had a negative impact on the development performances of the water utility. The water utility is a problem cannot control the tariff adjustment process, which is the prerogative of the Local Council. The water utility can propose tariff increases based on cost
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increase but the Local Council takes the final decision, often with more attention to politics than to the welfare of its company. The level of account receivables is relatively low Cash flow is showing a good collection level and the cash flow is positive positive. The financial model shows a stable cash flow development that under normal circumstances will secure repayment of credits. There are, however, three potential risks that not are under the control of the management team and that can affect the repayment capacity of the utility: 1). The tariff adjustments; 2). The energy price increases; and 3). The salary increases.
Forecast look stable, but some risks must be mitigated
1.5
Technical Aspects
This Feasibility Study has its main focus on water supply and sanitation investments. Main investments proposed are related to water supply network renovations and designing new WWTP.
Both Water and Sanitation sector investments is the focus of this study Short-term investments to secure sustainable water and sanitation services and some expansion Medium-term investment to secure mediumterm water supply and sanitation services and proper ww
Estimates of the short-term investments required to secure that the water supply and sanitation systems in Orhei can operate acceptably were prepared for the period of years 20072009. Small scale investment packages were also prepared, with the aim to provide suitable financing packages for potential financiers. Estimates of medium-term investment needs were prepared for the years 20102013 in order to secure sufficient medium-term operation of the water supply and sanitation systems, as well as to provide proper wastewater treatment for town of Orhei and water supply for increased number of inhabitants in Orhei.
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treatment
Medium-term investments are not included in the Only short-term outline design, which was prepared only for investments are proposed short-term investments. Also the designed prioritization order for needed investments was done only for proposed short-term investments.
Renovation of pressure pipeline from natural Proposed shortspring and connection of southern pressure zone term investments to northern pressure zone was considered to be were prioritized most feasible in terms of needed short-term investments. Other feasible short-term investments prioritized were rehabilitation of existing water supply network preparation of detail design for new WWTP. Preliminary investment cost estimation for proposed short-term investments was 5.6 MUSD in total. Investment cost estimation for short-term investments needed on sewerage sector was 1.1 MUSD and for water supply sector 4.5 MUSD.
Preliminary investment cost estimations for proposed shortterm investments were prepared
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2
2.1
Introduction
Background
The Republic of Moldova has prepared a Plan up to year 2015 for water supply and sewerage. The Plan is a part of a complex of processes for rehabilitation of water supply sources and for increasing of the technical and sanitary condition of the water supply and sewerage systems, stipulated in the National Action Plan for health in relation to environment, approved by Government Decree no.487 dated June 19, 2001. The main scope of the Plan is solution of a set of problems, with organizational, technical, economical and legal character. Solving these will assure stable and continuous operation of centralized and decentralized water supply and sewerage systems. The scopes of the Plan are the following: Contribution to wealth increase and health protection of the population; Rational use of water Protection of environment; Protection against pollution and depletion of sources of water supply; Reasonable management of capital investments. Rehabilitation of the quality of services provided to consumers Increase of economic efficiency of water supply and sewage collection utilities operation Reducing by 50% of the number of population (about 1 million. inhabitants), which have not access to safe water supply.
2.2
Project Objectives
The project is called The second small town water supply and sanitation project in Moldova and is considered for financing by the World Bank. The ultimate objective of the project is to enable Apacanals in selected towns to supply the population with continuous, efficient and sustainable water and wastewater services over time.
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The project is divided into two main phases one pre-feasibility phase when ten out of fifteen towns should be selected for participation in the subsequent feasibility phase. Pre-feasibility studies were carried out and delivered in June 2007. The ten towns recommended for preparation of feasibility studies were: Bli, Cahul, Clari, Cueni, Drochia, Fleti, Floreti, Orhei, Rcani and Ungheni. During the pre-feasibility phase Soroca Apa-Canal expressed that they did not want to participate in any credit financed project due to an already too heavy credit burden. In discussions between Soroca, the Client and the World Bank after the pre-feasibility study period it was anyway decided that Soroca should be one of the ten towns selected for preparation of feasibility studies1. Therefore, the list now contains Bli, Cahul, Cueni, Drochia, Fleti, Floreti, Orhei, Rcani, Soroca and Ungheni. This document contains the feasibility study for Orhei. According to the Terms of Reference four Aspects should be analysed: the institutional, the socio-economic, the financial and the technical aspects. All these aspects were analysed during the prefeasibility phase according to the Terms of Reference especially the three first ones. All the four aspects are analysed also in the present feasibility phase, now with deepened technical analyses and recommendations.
2.3
Consultants Time Schedule

Figure 2.1 presents a simplified time schedule for the whole project period including Pre-Feasibility Phase and Feasibility Phase. According to an agreement in June 2007 between the Client, the World Bank and the Consultant there are now three deadlines for the draft feasibility studies, one for Soroca, one for Cueni and one for the remaining eight towns. The time needed for the Clients comments is not exactly specified in the contract and therefore only roughly indicated in the time schedule.
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As Clari had the lowest scores among the ten towns recommended in the prefeasibility study, this town will not be further analysed during the feasibility phase.
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Month Apr Activity

Project start Pre-feasibility study Draft feasibility study for Soroca Draft feasibility study for Cueni Draft feasibility study for 8 tow ns Client's comments (assumed time) Final feasibility study for 10 tow ns 2 w eeks after Client's coments.
May
June July
Aug
Sept Oct
Nov
Dec
Figure 2.1 Modified time schedule for the project period.
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General about Orhei

Orhei town is located in the centre of Republic of Moldova, on the left bank of Raut River, 35 km north of the capital on the road between Chiinu and Bli.
Figure 3.1 Location of Orhei

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The official number of inhabitants was a few years ago 47,000. The real number is now, considering emigration to Chiinu and to other countries and immigrants from the surrounding rural areas, estimated to around 34,000 inhabitants. A census was carried out during the summer 2007, but the result is not available when writing this report.
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4
4.1
Institutional Aspects
General
According to the contract for the project most of the institutional work was carried out during the pre-feasibility phase of the project. During the feasibility phase the work should be concentrated on Need for staff training and other forms of institutional strengthening. As a background for easier understanding of the discussions and proposals in this feasibility study some of the findings already presented in the pre-feasibility study are repeated here.
4.2
The Owner. How the Owner Governs Apa-Canal

Present Situation (Text from the Pre-feasibility study) The Town is the only owner of the service utility. The utility consists of one of the departments of the Town Administration. The Town Council appoints the Director of the utility, and he reports to the Deputy Mayor responsible for technical questions. Beside he also reports twice per year to the Town Council. Tariffs and consumption norms are approved by the Town Council. The Town has no service agreement with Apa-Canal describing for instance the level of service. Consultants Comments In meetings and other contacts with representatives for the town and Apa-Canal in Orhei the Consultant has got a clear impression that the Town Councils purpose with Apa-Canal is to ensure the customers in Orhei reliable, high quality water supply and sewage treatment services in a cost effective and affordable way with a minimum impact on the environment. It is therefore important for the owner to understand that the institutional framework of a company is crucial for its efficiency. It determines the incentives for different parties concerned to deliver desired outputs. It also determines how the performance in achieving objectives is monitored and assessed. The key to a successful
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institutional development lies thus in designing the institutional framework as well as the structure of the enterprise, so that rights, duties, incentives and sanctions produce outputs meeting the goals both of the owner and of the society as a whole. In discussions with the Mayor of the town, thus the representative of the owner, and the Director of Apa-Canal these facts seem to be well understood. According to the Consultants understanding, the situation in Orhei may also be described so that the local authorities as well as the ApaCanal managers are interested in continuing the already started development of Apa-Canal to a good service provider in terms of water quality, efficiency of operations, coverage and reliability of service, and customer satisfaction. Each part of such a statement represents a long-term goal for Apa-Canal, in all probability demanding changes relating to the ownership and operation not only technical improvements through physical investments. In order to realize these statements there is a need for great efforts from all parties involved during long time. In order to reach the mentioned long-term goals, including optimal development of the efficiency of Apa-Canal, the Consultant believes it important that Apa-Canal acts more commercially and that ApaCanals daily operation is separated from the municipal ownership. The cooperation between the owner and the utility seems presently to function well. However, usually too close political involvement in a company makes decisions and as well as business in general more bureaucratic and slow, and this might also be the situation in Orhei with other individuals than now involved. Apa-Canal and its management have, and shall further develop, the capacity and knowhow to accomplish what the political leadership in the municipality demands them to do, and what they are paid for from the customers and possibly from the town budget. The Consultant recommends the following distribution of roles: 1) The political leadership shall decide about the level of service and about the principals for finance of the demanded service, and 2) Apa-Canal shall fulfil what the political leadership has decided. The Consultant recommends this to be specified in a performance agreement between the town and Apa-Canal. Such a situation may to some extent be compared with management by objective in a company, which properly handled may result in a win-win situation, when the subordinate has a more free and creative
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work increasing his motivation, and the superior may concentrate on other more qualified tasks than using a major part of his time controlling his subordinates. This kind of leadership often results in better work at less cost. See more under section 4.4. The present form of municipal company in Orhei might function well and give a possibility to distribute the roles of the owner and operator as described above. The Consultant recommends, however, the town to reflect on changing the utility to a 100% municipally owned Jointstock company with a board consisting of for instance five to six persons representing different know-how and interests. The board could have representatives from the municipality, specialists from a university in Moldova, market and business specialists, technical specialists, a representative for an NGO etc. The board is important for the strategic management necessary for efficient guiding of ApaCanal to a modern commercial company. Besides functioning as the government of Apa-Canal it should be a resource for the Director in his difficult task of managing the company. Important advantages with a joint-stock company (JSC) are in many countries, and probably also in Moldova: Autonomy with clear roles, responsibilities and rights for the owner and for the company. Financial freedom and possibilities increases. Less bureaucracy resulting in more rapid decisions. Direct contact with the market and a feeling for the market. The company will have its own board. A board composed of carefully selected members is important not only for the companys long-term strategic development but also as a resource for the director when managing a company. Internationally there exist a number of forms for ownership and operation of water service utilities. In e.g. Sweden, Finland, Norway, Denmark, Netherlands and Germany the completely dominating legal form is just a municipal administration. In e.g. France, and especially in UK, private arrangements are dominating. Also in many countries with a low water and wastewater standard in need of major improvements, different kinds of private arrangements are common.
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Countries and municipalities have thus chosen different legal status and governance for their water and wastewater services. This shows that there is no absolute, objective truth that one or another solution is the best. The reason for the existence of different solutions may be historical, e.g. that it started as a municipal responsibility, or it might be the technical or economic situation of the utility, demands from funding agencies, social considerations due to the fact that the water utility is a natural monopoly, a subjective conviction that one solution is more efficient than another, a political idea etc. Considering efficiency private engagement or personal incentives often gives the best result for a business. This is the case also in for instance most Swedish services, although water and wastewater utilities, despite almost 100% municipally owned and operated, are highly efficient due to e.g. political pressure, outsourcing of non-core activities, high transparency, free and efficient media, free and active NGOs and efficient benchmarking. A few of these facts are commented below. Outsourcing can be seen as a privatization of parts of the company and a concentration to the core business. Both the remaining core business and the outsourced parts may gain from this. For instance are, according to the Consultants experience, private companies also in former Soviet countries more efficient than municipal companies the more private engagement and incentives though more efficient company. A high degree of transparency is crucial for democracy in general but also for the customers (owners/voters) trust in the utility and willingness to pay tariffs allowing full cost recovery and financial selfreliability.
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Benchmarking may be defined as a process of comparing business practices and performance levels between companies (or divisions in the same company or comparison between different periods of the same company) in order to gain new insight and identify opportunities for making improvements. The key elements of benchmarking are simple: at its core, benchmarking is about systematically comparing the performance of operations with a view to stimulating performance improvement either from the shock value of the comparison or from the extraction of the principles of best practice from high(er) performing operations. It is this
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combination identifying differentials in performance or processes and then using this information to leverage improvement, learning and change, which best characterizes benchmarking.
Systematic benchmarking, when comparing a number of carefully chosen key ratios indicating the performance of the utility, may be an efficient tool for the owners monitoring of the utility and for the utilitys own efforts to improve its efficiency.
For the benchmarking it is important to identify which processes should be benchmarked. Reliable statistical data should be prepared, preferably a sequence of data during a certain period. The ratios should cover different aspects of the efficiency, for instance normal financial ratios. The ratios could also cover more apprehensible or tangible facts, for instance number of damages per kilometre of pipes, number of employees per 1,000 inhabitants, costs per operational unit or department, etc.
To summarize the above comments the Consultant recommends the Town Council of Orhei and the management of Apa-Canal to go through different opportunities and tools for management, ownership and government of the utility and then, based on a goal stating that Apa-canal shall provide Orhei with reliable, high quality water supply and sewage treatment services in a cost effective and affordable way with a good coverage, a minimum impact on the environment and a high customer satisfaction, continue to develop not only the technical facilitates but also the institutional situation including the legal status and form of government. In addition to the above text, see also Consultants comments under Section 4.4.
4.3
Legal Aspects
Present Situation (Text from the Pre-feasibility study) The enterprise has its own statutes but no separate service agreement with its owner describing for instance the level of service to the customers.
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Consultants comment:
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Independent from the legal status chosen for the utility, but especially if it would be changed to a Join-Stock Company, the Consultant recommends Apa-Canal and the Town Council to prepare a service agreement. A service agreement is in this case a contract between the Orhei municipality and Apa-Canal. The service agreement will be a good tool for both parties in order to define what service the Town demands and Apa-Canal shall deliver, define the quality of service and its improvement. The Town may also use it as a control and monitoring tool allowing the Town to follow the effect of the work for improvement of Apa-Canal and its tasks specified in the agreement and related documents, e.g. a business plan. Depending on the content of the agreement it might also help the Town and Apa-Canal to formally capture and respond to comments from customers and other stakeholders and use this for further development of the utility. In the service agreement Apa-Canal can agree to: effect the restructuring tasks and responsibilities specified in the agreement and in a business plan recommended by the Consultant; present to the Town Administration written quarterly and annual progress reports about the performance of the implementation of the agreed activities (normally specified in a business plan); follow the demands and instructions from the Town Administration based on results from their control and monitoring of Apa-Canal and its tasks. As long as Apa-Canal is a municipal service enterprise, efforts relating to regulatory and institutional development may also be included in the service agreement. This may include management training, operational management, core business / non-core business evaluation, cost cutting strategy, financial management and increased human resource management. When preparing a service agreement, it might be suitable to compare with a private contract, especially if Orhei Apa-Canal is transformed to a JSC, as a private company is directing towards profit maximisation. Apa-Canal is also according to its charter a profit making company, and there may be possibilities to introduce improved profit thinking also in this type of company and introduce relevant financial
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indicators parallel to other performance indicators. At least a few of the indicators in a service agreement for Apa-Canal should be linked to costs. Present Situation (Text from the Pre-feasibility study) The Municipality is the owner of all the assets including both water and wastewater facilities. The enterprise operates these facilities. Consultants comment: The Consultant recommends Orhei Apa-Canal to prepare a good asset inventory including a) asset evaluation and b) performance and condition grading. This is important for qualified asset management and operations management. Cost evaluations of the assets will help to determine realistic values to be used for depreciation in the financial reporting. It is recommendable to put data into a computerised operational database. A person within a production department under the chief engineer may be responsible for data entry, validation and reporting, possibly supported by external specialists. Data held in an Excel spreadsheet format makes possible future updating, retrieval and reporting. Present Situation (Text from the Pre-feasibility study) Beside the national legislation Orhei has local rules for metering, wastewater discharge from enterprises to the municipal system and regulations on payment for being a client. Apa-Canal has written agreements with all its customers. Consultants comment: The situation in Orhei seems presently to be good. The local rules and agreements should of course be looked through and perhaps amended then and then.
4.4
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Organization and Management

Present Situation (Text from the Pre-feasibility study) The organization chart for the enterprise is presented below.
construction team operators Welder team N 1 team N 2 team N 3 Machinists, operators&welders of chlorine equipment drivers Repair station, garage Welder-auto Welders team E n e rg e tic s d e p -t welders-metrologists Loaders, mash.operators Dispatcher-auto Service team Emergency team Heating service Wastewater tecnology dep-t Maitenance dep-t Ecological dep-t Laboratory tecn.team Laboratory Pumping & maitenance dep-t G u a rd ia n s Mecanic & metrological station Equipment repair station D e p - t o f d e v e lo p - t & in v e s t- t W a te r s u p p ly d e p - t Water intake, pumping & maitenance dispatchere &.public relations dep-t
Safety dep-t
Figure 1 The Organization of Orhei Apa-Canal

G u a rd ia n s G u a rd ia n s Deretictoare office assistant Secretary Brigada instalare i deservire Casa IT office Oficiul calcul S e rv ic iu l c o n tra c te , a b o n a m e n t, fa c tu r ri echipa de control Sector eviden, control apometre Metrology dep-t Economy dep-t casa Biroul financiar F in a n c e & a c c o u n tin g d e p -t Biroul contabil Magazioneri Planing dep-t HR section Economy dep-t Biroul economic Biroul TPP Procurement & marketing dep-t Economy dep-t Accounting dep-t Accounting dep-t L a w e r P ro d u c tio n H R d e p -t d e p -t d e p -t H e a d o f T r a d in g d e p - t S ec ia "P res t ri s e rv ic ii" H e a d o f e c o n o m ic d e p - t T e c h n ic a l D ire c to r D e p -t o f S e w e r n e tw o rkW a s te w a te r te c n o lo g y & d e p -t d e p a rt- t e c o lo g y
.M . R E G IE I " A p -C a n a l" O r h e i
M a n a g e r- c h ie f
O rg a n ig ra m a
The Director has worked in his present position since 2004 but came to the utility already 1978. He was at the utility 1978 and has worked as electrician, head of a department, chief engineer and technical director. The utility has a formal management team working almost as a sort of owners council. It consists of a few persons from the utility, often heads of departments elected by the Director, plus 2-3 persons from the Town Council and one from the Town Administration. The persons representing the town are appointed by the Town authorities and are not paid for their work in the management team. Written regulations for the management team are just now under preparation. The management team are controlling and supporting the director. All major questions are discussed in the management team. When the management team has discussed and approved a question, it is normally not necessary to take it up with the Town Council. The management team does not deal with the daily operation of the utility. The management team is using a fixed agenda and writing minutes of meetings. For the daily operation of the utility the Director has a meeting every day with the head of production and other heads of departments. Apa-Canal has an integrated management information system. The system includes computers and software for accounting, for technical purposes and for commercial and billing, although it must be partly upgraded, especially for the commercial and billing. Information is open and spread in all directions in the utility. Apa-Canal has prepared a very good document called Feasibility Study March 2007. There the company has defined its mission and strategic objectives. There is also a table listing approximately 40 indicators, of which many can be used as performance indicators in a possible future business plan. The company uses to some extent principals of accountable manager and management by objective. The Director and the heads of different groups agree a budget. If a group can work reach a better result than the budget, 50% of the profit go to a bonus for the group members, 25% go to activities for the development of the group, 14% to the management of Apa-Canal and 11% to others outside the group but involved in the result. The latter may for instance be the companys lawyer. The agreements with the group leaders are written. Goals and performance indicators are specified (operational costs, water losses, energy consumption and good management for the group).
Consultants comment: The existing formal management team in Orhei seems to work at least partly as a sort of owners council or board of directors. This is an interesting idea, which seems to function well. See, however, also Section 4.2, where the Consultant discusses the Owners government of the utility. The Consultant believes that a development towards the situation discussed there would be of interest to consider for Orhei. The written regulations for the management team were still under preparation during the Consultants visit to Orhei and not available. Also as long as the utility is working as the present Municipal Company, the regulations could more or less include the same type as the corporate governance framework as for a joint-stock company. Management by objective. The type of management in Orhei Apa-Canal seems to be less dominated by detailed top-down management and control (management by directive) then in many other utilities visited. The Consultant judges this to be very good for the continued development of the utility. Although this already rather well developed type of management of the utility, there are always possibilities for further improvements. In meetings with the Major, the Director and others in Orhei management by objectives and the concept of Accountable Managers were discussed. These management models seemed to be known and also partly used, but the Consultant repeats them anyway briefly below. In contrast to many other management models, for instance management by directive, where objectives flow from the top of the hierarchy down, management by objectives presumes that every unit manager and employee has a primary responsibility for the implementation of his tasks or the establishment of his units objectives. A typical approach is that a superior and a subordinate meet and discuss goals (defined in terms of results) for the subordinate. The goals are often of two types. One sets forth the subordinates unit goals and relates them to overall organizational goals. The second sets usually aims at personal development goals for the subordinate. (See also Staff Review Scheme under Section 4.5 point 7.) The goals should be stated in terms of results and indicate an area of activity and performance level. It is important that goals are realistic, clearly formulated in few words and are understood and accepted by both parties. For example, a production manager may agree to reduce production costs by 5% during the next year. In a later meeting the superior and subordinate evaluate the performance in terms of stated goals. Although management by objectives, as all management models, has its limitations, it usually uses the capacity, ability and experience of
the subordinate in a much better way than a detailed top-down management and control model. It stimulates the creativity of the employees. It increases motivation especially if it is combined with some sort of benefit, e.g. a share of gained result, improved working conditions, better carrier possibilities etc. Properly handled both parties may be winners the subordinate who may have a more free, creative and profitable work, the superior who may concentrate more on other tasks than detailed direction and control of his subordinates, and the company who may deliver better service to the clients at less costs. Therefore the Consultant believes it is of interest for Apa-Canal to continually further test and develop its already started use of management by objective in systematic and judicious way. Accountable Managers Partly related to the above described management model is the concept of Accountable Managers, which also is at least partly introduced into the management structure of Orhei Apa-Canal. Accountable managers shall have delegated responsibilities and shall normally be the functional Heads in the company; e.g. Head of Water Treatment Station, Head of Wastewater, Head of Networks, Head of Transport, etc. The managers shall receive budget allocations and management information reports indicating unit cost performance and overall performance against issued budget. The idea is that the managers shall utilise a combination of these reports to control expenditure and undertake performance analysis and comparisons. The reports may also enable senior management to use benchmarking to compare Orhei Apa-Canals performance with other Apa-Canals. The performance data can furthermore be used for decision making regarding outsourcing. Organizational Changes The organization of Apa-Canal may need to be strengthened and clearer in order to meet the requirements of daily operation, planned maintenance, investment activities and long-term strategic planning. The present technical and financial situation makes it of course necessary for the management to concentrate lots of efforts on the daily operation and emergency activities, but the focus must be changed to include also a more long-term view, something requiring a strong management of Apa-Canal. Therefore the Consultant recommends Apa-Canal to analyze and maybe modify its organization in order to simplify and strengthen the daily activities and long-term planning as well as the decision making process. As a starting-point it is necessary to clearly pinpoint the most important activities in the company. Under a strong and long-term focused management these activities are:
Daily operation and emergency activities; Maintenance and investment activities; Economy and Customer Service; Supporting Services. Especially needs focus on long-term management and business strategies to be further strengthened and developed in order to meet the future requirements of a more business driven organization within frames given by the owner (the Town) and to fulfil the service objectives for the customers There may therefore during the coming intensive years of investments and institutional development be a need to have in the organization a separate person, who together with the Director has the main responsibility for the long-term strategic development of Apa-Canal. There is already a position in Apa-Canals organization chart called Department of development and investment. The person having that position could perhaps take care also of the long-term strategic development, but it is more probable that a separate person during a couple of years would be more efficient. The role of Orhei Apa-Canal as a customer service company has to be emphasized. Development and implementation of a long-term business strategy (at least for the next 20 years) for Apa-Canal is necessary. The long-term business strategy should include, for example, the following strategic issues: Level of Services to be fulfilled (Customer related). (See also the table Suggested Customer Service Standards in Section 4.7) ; Environmental, Quality and Technical requirements; Improvement of the effectiveness in the daily operation; Improvement of the effectiveness of planning and implementation of the maintenance activities; Improvement of the effectiveness of planning and implementation of investments. A business adapted investment programme (partly developed in this feasibility study) is also seriously needed, as international financiers need to be fully convinced that grants and credits will be properly handled by Apa-Canal and the Town. The IT office has now a very low position in the organization. It is under the Accounting department which is under the Contract, customer and invoicing department which is under the Head of Trading department. IT covers, or will at least cover, more than just
accounting and Apa-Canal should therefore consider moving it higher up in the organization, perhaps even directly under the Director. See more comments relating to the organization under Section 4.6 Staff Structure below. Business plan Orhei Apa-Canals Feasibility Study from March 2007 includes partly what is normal for a Business Plan. The Consultant anyway recommends Apa-Canal to prepare and annually update a more complete annual Business Plan (Corporate Development Plan) describing e.g. the utilitys Mission in Orhei, the utilitys Vision defined as a guiding star to strive towards and the main Strategic Objectives such as Institutional objectives, Financial objectives, Society and Customer objectives, Operational and technical objectives and Human resources objectives. The Business Plan should also define a number of concrete goals to achieve, goals crucial for Apa-Canals efforts to move towards the vision. The Business Plan should furthermore include an Action Plan specifying: activities in order to reach the goals, individuals appointed to be responsible for implementation of each activity, deadlines when each of the activities shall be completed and performance indicators making it possible to measure the progress towards each goal. The purpose of the Business Plan would for instance be to: Promote strategic development of Apa-Canal and facilitate guidance and supervision provided by the Town of Orhei Convince the financiers of the viability and sustainability of ApaCanal operations in order to attract funding for investments Lead management development and organizational restructuring at Apa-Canal Enhance staff interest and motivation Attract new talent to Apa-Canal Present Apa-Canal to customers and suppliers as a competent and reliable business partner
Create a favourable image of Apa-Canal internationally Attract potential investors and partners The Business Plan could contain inter alia: a proposal for changed legal status; proposals for new and higher tariffs, as well as other financial changes for improved financial status; a financial model for simulation of the consequences of different decisions and situations; development of management information systems; short-term and long-term investment plans; an environmental policy; proposals for improved contacts with the customers; proposals for cost savings, improved organization and development of the personnel.
4.5
Staff. Efficiency and training needs

Present Situation (Text from the Pre-feasibility study) The total number of personnel in the enterprise is now 203. Total number of consumers 23,961. The productivity in the water services based on this figure is therefore around 118 customers per employee. The number of households connected to water services is 10,903, and the number of commercial and budget organizations is 281. The productivity in the water services is therefore around 55 customers per employee. The number of households connected to the wastewater services is 5,914. If adding some 250 commercial and budget organizations, the productivity based on wastewater customers is around 30. The number of connections to the water system is according to received information 5005 resulting in a productivity of 25 connections per employee. This is probably only population connected, and if 229 business companies and 20 budget organizations are added, the productivity figure is slightly better. The number of connections to the wastewater system is 3,600.
Most of the heads of departments, engineers and specialists have an education in the right area for their work, although there is a considerable need for further training in the utility. The following training needs were presented to the Consultant: The average salary is too low in the company. This causes difficulties to attract and keep qualified persons, and the personnel turnover is round 20%. Apa-Canal has an experienced implementation unit capable to organize and manage investment projects. Consultants comment: As the real number of inhabitants is around 34,000 and the number of employees is 203, the efficiency of the company may be expressed as a ratio 6.0 staff / 1,000 inhabitants2. This is extremely high. If the ratio is calculated on the official number of inhabitants, 47,000, it is 4.3 staff / 1,000 inhabitants, which also is very high. One of the most important tasks for Orhei Apa-Canal management is to analyse every possibility to reduce the number of staff. The high level is of course to some degree dictated by the low levels of automation and poor state of equipment, but the high ratio indicates anyway that there must be possibilities to reduce staff already now. There is also already some new equipment, for instance a rather developed integrated management information system with computers connected through a local network. Such new equipment should make it possible to use less number of personnel. Until such time as more automation is introduced, together with procurement of modern equipment, the very large staff reductions will be difficult or even unattainable. However, as new equipment and technologies are introduced, an initial phased target of 4.0 / 1,000 inhabitants should be achievable over 3 years, i.e. 33% staff reduction during that period. As more automation and labour-reducing equipment is introduced a further target of 2.5 staff / 1,000 inhabitants could be introduced over another 2 or 3 years. These are rather drastic reductions, but if there is not any very special reason for the presently high ratio, they should be achievable. To some degree the
2
In Arkhangelsk in Russia the ratio is around 3.5, in Kaunas in Lithuania reduced from around 2.5 some ten years ago to presently around 1.2. In Sweden the ratio is around 0.2 staff / 1,000 inhabitants, and if also all external consultants, persons in construction companies etc temporarily working for the water wastewater utilities, the ratio is around 0.6 staff / inhabitant.
reduction can probably be achieved by natural wastage. National safety standards of efficient operation must of course be followed. The figures are based on results in successful water utilities in other former Soviet countries, for instance Kaunas in Lithuania. External personnel such as temporary engaged consultants and constructors during the proposed investments in Orhei as well as personnel to a possible new wastewater treatment plant are not considered in the assumptions. Apa-Canal management is aware of the very high staffing levels but in many cases this is a consequence of the high levels of plant and system failure and low levels of automation. In terms of re-structuring, a major limitation is the difficulty in attracting the right calibre of staff to Apa-Canal, mainly because salaries are lower than in the private sector. The Consultant recommends the utility to prepare a Cost Reduction Strategy. In such a strategy further reduction of staff is an important part. Less staff will help reducing costs and allow more attractive salaries and help the company to attract and keep good personnel. See further under Staff Structure below. The number of computers is rather good and there is a local area network (LAN) connecting all the computers. This should be further developed and cover all commercial, administrative and technical activities. See more comments below under Training Recommendations Point 2 Management Information Systems (MIS. Another point to emphasize in the Cost Reduction Strategy is that the utility should normally use tender procedures for procurement in order to assure that the lowest price is paid for a specified and demanded product or service. Present Situation (Text from the Pre-feasibility study) Most of the heads of departments, engineers and specialists have an education in the right area for their work, although there is a considerable need for further training in the utility. The following training needs were presented to the Consultant:
Description of areas Financial Management
Managerial staff Top and medium level
Number of persons 12
2 3 4 5 6
Technical Management Technical Audit Financial Audit Senior Management Quality Management
Top and medium level Top and medium level Top and medium level Top and medium level Top and medium level
12 12 12 12 12
Consultants comment: Training Recommendations Successful companies all have one thing in common they ensure that there is a training culture within the organization. This does not simply relate to programmed training events for staff but includes motivation and encouragement for employees to develop themselves by self-study, using the Internet or distance learning. A well trained and developed workforce makes a significant contribution to the advancement and success of the organization. In fact, without continual vocational training Apa-Canal can, at best, only stand still. It cannot advance. The Consultant discussed the need for training with the management of Orhei Apa-Canal. Based on this, and mainly in line with the table above, the Consultant identified the following specific areas of training which will enhance the skill and knowledge levels within relevant staff and greatly assist in ultimately reducing costs: 1. Strategic Management & Business Finance Apa-Canal is operating under the restrictions caused by underfunding, a partly ageing infrastructure and inadequate costrecovery tariffs. Although cost-savings are uppermost in the minds of the Director and others involved in the financial management, there is a large element of fire-fighting in the daily routine of the Chief Engineer and other senior managers. There is a need for a management course, which would motivate the senior management to manage strategically, rather than on a day by day basis. Such a course would include the following elements: The economics of running a modern water utility including profit, cash flow; financial impact of the capital expenditure programme; network development, marginal costs, maintenance costs, tariffs, operational staffing and outsourcing. International Accounting Standards Asset Management Planning Business & Corporate Planning. Delegating
Negotiating Crisis and emergency management Time management Managing meetings
This course should be a minimum of two weeks duration and would be for Director and other Senior Managers and Heads of departments. It can also include middle managers who are considered as potential directors or senior managers. The course should be conducted by a professional management training organization or as part of a study tours to a successful water utility in which case it should be for three weeks and would include meetings with directors and heads of departments in order to gain further knowledge transfer. 2. Management Information Systems (MIS) Orhei Apa-Canal has, as mentioned above, already a MIS and has trained accountants and others in using it. The Consultant recommends anyway Apa-Canal to further develop the system and continue the training of different personnel. Good hardware, a developed Local Area Network (LAN) and advanced software result of course not, in itself, automatically in management information being fed to the right people at the right time. The whole concept of the effective and efficient use of MIS must be understood otherwise managers will suffer from data overload or lack of well-presented key data for efficient management of the company. This course would be aimed at all users of the system, whether they be inputting raw data or monitoring Apa-Canals performance. The course would be slightly different for differing levels of management but in essence the following topics should be discussed: Data in data out. What inputs are required in order that required outputs are available; Filtering information different levels of management require different degrees of information; Reporting how to create useful and timely reports; Security and data protection; Storing, archiving, retrieving and backing-up data; Accuracy verification of data;
This course can be addressed either in-house using experienced MIS specialists and / or as part of a study tour to other water
utilities. For full and effective use to be made of the system a study tour is advantageous as it would provide an insight into the advantages and limitations of such a system. 3. SCADA. If Apa-Canal would install a SCADA (Supervisory, Control and Data Acquisition) system, helping the utility to make operation more efficient, there will be a need for training. SCADA is much more than simple telemetry and it would be a totally new concept to Apa-Canal. Therefore the future operators of the system, along with relevant managers would need varying levels of training in order to maximise the use of such a system. Depending on the possible future reorganization and change of legal status the names of the positions in need of training might be different, but in principle the following type of managers and other categories of personnel will need training: The director, the chief accountant, chief economist, chief engineer, heads of energy and IT, operators and technicians. The courses could for instance include both study tours to a water utility experienced in the procurement, installation, commissioning and use of a modern SCADA system and a technical, hands-on course provided by the supplier.
4. Non-Revenue Water Reduction There appears to be insufficient knowledge about internationally accepted non-revenue water terminology and water balance calculations. Training is required for Technical staff, including the Chief Engineer and staff responsible for the reduction of non-revenue water in the following topics: Leak detection and mains tracing techniques and equipment Districts and meters Pressure effects International Water Association Water (IWA) Water Balance terms and definitions: o Real losses o Apparent losses o Measurements / data required o Calculations o Assumptions
Confidence limits
The course could be a one-week course presented by experts in the field of non-revenue water; preferably as part of a study tour to a successful water utility. The training in the use of leak detection and mains tracing equipment should be provided by the suppliers of such equipment. 5. General Training Programme In general the operators have been trained on the job in the early days of their appointment to the particular post. The training is concluded with an examination but thereafter there is no routine refresher training. Apart from training generated by the introduction of new equipment or technologies there is also a need to periodically provide short training events to achieve the following:

Break bad habits than can develop over time Reinforce safety procedures Remind operators of best practice Improve operators knowledge of the process in addition to pure skills Promote a quality culture whereby employees take pride in doing a good job Promote cost savings, encourage more efficient working practices Encourage team working Encourage the staff to develop ideas for financial and technical improvements to the processes.
Operator courses should conclude with a test and successful candidates awarded a certificate. For multi-skilled operators several training modules would lead to a vocational qualification and special award. Courses would include, but not be limited to:

Treatment processes Mains and service repairs Leakage detection Network operation Pumping operations Water sampling and basic testing
The scheme should not be limited to operators; administration staff and technical staff should benefit from further training, especially in IT such as:

Advanced use of word processing package Advanced use of database
Reporting using 1C software Basic computer skills and knowledge such as antivirus, internet and e-mail. PowerPoint presentations.
As part of the succession plan to promote potential managers there should be a programme of personal skills training to include:

Time management Management of people Giving presentations Report writing Managing meetings Negotiation
There should also be a programme of sharing knowledge; this promotes teamwork and broadens the knowledge of all staff, enabling them to contribute more fully to the activities of ApaCanal. The purpose is not to replace existing specialists with halftrained people; it is a way of developing staff with a well-grounded background and a generalist approach to the services that ApaCanal provides. It provides an appreciation of the activities of other departments and reduces parochial behaviour. Events are usually short, up to five days, and would include:

Finance for non-specialists Water supply for non-specialists Wastewater for non-specialists Reduction of non-revenue water Publicity campaigns and customer surveys
In addition, each Head of Department should give presentations to other staff on the activities and outputs of his / her department. This promotes teamwork and provides a forum for reviewing activities and the interaction between departments. 6. Development of an in-house training capability Technically competent and experienced employees should be selected as potential trainers and provided with presentation skills training. This would be the start of an in-house training capability and would encourage a learning culture. The new presenters could be given salary enhancements as encouragement to take on the role of presenter. These would not be seen as full-time positions but it would provide a core of trainers who would be involved in the General Training Programme (see 5, above). A few of the Apa-canals in Moldova seem to be more developed in some areas then the others. The Consultant has for instance got an impression that Apa-Canal in Orhei has a more developed type management than many others. Another example is Floreti
where Apa-Canal already is a Joint-Stock Company. In Cueni the staff was reduced by more than one third during a period of three years. Bli has fewer employees per thousand inhabitants than the other towns in the project, a ratio of 2.5 staff /1,000 inhabitants. Although the Apa-Canals, which are more developed or successful in one or another area, still have to develop much more, a cooperation where they share there experience with the others would be useful for all the utilities. 7. Staff Review Scheme (sometimes called Annual Appraisal or Performance Review) No matter what infrastructure improvements are made, new equipment procured or modern technologies introduced, without well trained, motivated staff Apa-Canal will never live up to a statement of the kind the Consultant indicated under Section 4.2, namely that Apa-canal shall provide Orhei with reliable, high quality water supply and sewage treatment services in a cost effective and affordable way with a good coverage, a minimum impact on the environment and a high customer satisfaction. Such a statement (which could be further developed to a vision for Apa-canal) requires staff motivated to develop new skills and gain new knowledge, not for its own sake but for the long-term benefit of Apa-Canal and its customers. Because it is difficult for Apa-Canal to recruit ready-trained staff of the right calibre the existing staff need to be trained (and re-trained if necessary) and developed such that they become more effective in their present roles, and in addition can offer extra skills which are essential to Apa-Canals success. A Staff Appraisal Scheme, with the full support of management will, if properly conducted, provide a vehicle for developing staff. It will provide information for managers to be able to fairly assess the performance and potential of employees. In addition it identifies training and development needs which, when fulfilled, will significantly increase the overall skill and knowledge base within Apa-Canal. Ultimately it will assist the Director to objectively assess professional / administrative staff for re-grading and ultimately promotion. A Staff Appraisal Scheme can form the core of a succession plan, ensuring that Apa-Canal has potential managers and directors of the future ready to take on new responsibilities when the current senior staff reaches retirement age.
4.6
Staff Structure
The Cost Reduction Strategy recommended in the first Consultants Comment under Section 4.5 above should include not only technical areas and training but also other aspects such as staff functions. Some key areas relating to staff are mentioned below as examples for review of Apa-Canal management. The positions should not automatically be full time manned, especially as Orhei Apa-Canal is a rather small company; part time manning should be considered in order to keep costs down. When preparing the next organization chart it might be of interest to create a Technical Support function, which is off-line as opposed to the operational part of the organization. The logic for this is to a) reduce the number of people reporting directly to the Technical Director and b) to gradually separate core and non-core functions, eventually providing opportunities for future outsourcing. It might also be of value to appoint a person responsible for quality and reporting directly to the Director. This person would cover internal processes, and could even carry out business process reviews. The responsibility could be expanded to cover all quality issues including the environment, working practises and conditions, etc. Another recommendation is an Internal Auditor. The role would be that of policeman in terms of undertaking financial and technical audits to ensure that Apa-Canal obtains best values for money from suppliers and that Apa-Canals customers are also receiving an effective service at a reasonable cost. Customers and society in general as well as the staff of the utility are important for Apa-Canal. A Public Relations Function, for instance within the Trading department or the Human Resources department, would therefore be valuable. Given the modern need for proactive customer relations, and the need to keep staff informed of changes, a bespoke function is recommended. See more under Section 4.7 below. Before any major reorganisation takes place it is recommended that a business process review takes place. This will highlight duplicated effort and reveal unnecessary or out-dated activities. It will help to realign reporting and responsibility lines, and it will help to improve the speed of response to customers queries and requests. It will also provide a scientific approach to staff reductions, enabling Apa-Canal to be fair, methodical, transparent and consistent when making redundancies.
4.7
Relations to customers
Present Situation (Text from the Pre-feasibility study) In addition to working with different kinds of media such as radio and newspapers for information to the customers Apa-Canal has also broschures and other written iformation. This information treats e.g. the need for water saving, different methods for water saving, different basic information about the utility and its activities. There is no tradition of letting school classes, pensioners groups etc visiting Apa-Canal. Consultants comment: As for all companies the customers are very important for Orhei ApaCanal. Good relations with the customers are crucial for instance for their willingness to pay for the service. The already existing abovementioned information to and contacts with the customers should therefore constantly be improved. The heart of good customer relations is to meet or exceed customers expectations both when it comes to information and other contacts and of course when it comes to the product sold and, when failures occur, to accept responsibility and take positive action. There are a range of Moldovan state regulations governing the provision of water and wastewater services, but these tend to focus mostly on the technical aspects of the service. It is suggested that Apa-Canal should expand these regulations to formulate its own Customer Service Standards. A list of suggested customer service standards is contained in the below table for consideration. Apa-Canal should establish targets for reaching full compliance over a period of (say) 5 years. Note: If ApaCanal can claim 100% compliance today, then the targets are not sufficiently rigorous! Apa-Canals performance against these standards should be provided by the responsible department each month, with the results consolidated into a monthly report for the Director. Selected results could also be included in the written quarterly and annual progress reports to the Town Administration mentioned under Section 4.3.
Suggested Customer Service Standards
Water Supply Services

Fresh water supply
5-YEAR ULTIMATE STANDARD

100% compliance with Moldovan norms and regulations Progressive compliance with EC directives 100% compliance with Moldovan norms and regulations No properties without overnight water Water and wastewater services will be available 24 hours a day, 7 days a week Normally within 12 hours Normally within 24 hours
Cold water supply pressure
Availability Response time for attendance to fault complaints - Fresh water or wastewater supply fault - Others Notice of planned suspension of water supply or wastewater services - Suspension of less than 12 hours - Suspension greater than 12 hours Duration of any suspension of water supply or wastewater services (planned or emergency) Suspension of water supply exceeding 12 hours (planned or emergency)
2-days advance notice to all affected customers 5-days advance notice to all affected customers Restoration within 12 hours (water) Restoration within 4 hours (wastewater) An alternative water source will be made available to all affected customers
Account-related Services
New application for water/sewerage connection Change of customer details Water service bills - Accuracy 14 days to grant approval 2 days (where no technical changes required) 100% accurate
- Timing
Issued within 2 days of end of month (domestic); 2 days of meter reading (enterprises)
Issued within 2 days of authorisation 2 days 10 days 10 rings 24 hours a day, 365 days a year 8am 5pm, Monday to Friday 9am 1pm, Saturdays
- Amended bills Reply to written requests or complaints - Interim reply - Full response Telephone response Accessibility: - emergencies - non-emergencies
5
5.1
Socio-economic Aspects
Presentation of the Area
5.1.1 Social Environment The population in Orhei town at 1st of January 2007 is the following:
Table 5.1: Population
Population Total Urban Rural Average number of population for 2006

Source: National Institute for Statistics
(Thou.) 33.7 33.7 35.15
In the last years the population evolution recorded a decreasing trend mainly as result of negative natural growth of population and emigrations for work in Western European countries. 5.1.2 Economic Aspects The volume of industrial production in Orhei Raion, compared to the total industrial production in the Republic of Moldova, is presented in the following table:
Table 5.2: Volume of Industrial Production Evolution Orhei Raion
Volume of industrial production in 2006 Total out of which Orhei
Current prices (mil. lei) 17533 266.3
2004 Compared to previous year (%) 106.9 104.1
Current prices (mil. lei) 21123.5 401.7
Current prices (mil. lei) 22243.2 350.8
Total production in the Republic of Moldova increased with 26% during 2004-2006. For Orhei Raion, the production increased considerably with 50% in 2005 (current prices), and decreased with 13% in 2006 (current prices). Therefore, for the analyzed period, the production increased with 32% (current prices), being above the national average. Financial situation of Commercial Companies in Orhei Raion, compared to the total financial situation of Republic of Moldova, is presented in the following table:
Table 5:3: Financial Status of Commercial Companies
Financial status Number of reporting enterprises, out of which Profitable enterprises Enterprises with loss Average Number of employees Financial result before tax (profit/loss) -mil. Lei Sales revenues-mil. Lei Receivables related to commercial invoices and budget compensation -total, mil. Lei Debts -mil. Lei
Jan.-Sept. 2004 Total Orhei

29423 11289 13906 57278 6 2790 53031 19140 61291 617 278 270 11507 -0.9 572.6 159.0 723.8

31870 12380 14893 570143 3424 66870 22717 68420 651 308 265 11178 18.8 693.8 258.4 790.0

34700 13155 16532 56969 8 3689 79052 26867 81804 695 303 310 10808 -2.3 820.2 252.7 971.
As can be observed from the table above, the number of profitable enterprises is increasing, but the percentage of profitable enterprises in total reporting enterprises remains approximately the same (46%). In Orhei Raion, the number of enterprises and the profitable enterprises slightly increased. Average number of employees at national level kept a stable trend. In Orhei Raion, during the analyzed period, the average number of employees registered a decrease of 6%. Financial result before tax recorded a negative value in 2004. In 2005 financial result increased, reaching a value of 18.8 mil Lei. For 2006, financial result recorded again a negative value. Sales revenues increased in 2005 (21% compared to 2004) and continued to increase in 2006 (18% compared to 2005). Receivables related to commercial invoices and budget compensation increased significantly in 2005 with 62% and kept a stable trend in 2006. During the analyzed period, debts recorded a growth of 34% in 2006, compared to 2004.
5.2
Estimation of Household Average Revenues

The calculation of the household monthly revenue at local level is difficult to accomplish in most Eastern European Countries. The situation is similar in Moldova. Usually the National Commission for Statistics (or similar entity) calculates the average household revenues at national level without giving any values for regional or local level. But, what can be identified at local level, in most of the cases, are the average salaries from different industries. Using these figures the level of household revenues can be approximated by adjusting the national average level with the ratio between the
average salaries at local level and the average salaries at national level. Using the approach presented above, the estimation of average household revenues at local level was performed. The results of the analysis are presented in the following table:
Table 5.4: Estimation of household revenues
Estimation of Household Revenues Average nominal monthly salary - National level Average nominal monthly salary - Orhei County Disposable household income (national average per household member) Average monthly pension (national level) Average household disposable income in the county (per member) Average monthly pension at county level Lei Lei Lei Lei Lei Lei
Orhei 2004 2005 1,103.1 1,318.7 889.8 1,079.5 491.4 325.3 396.4 262.4 568.6 383.4 465.5 313.9
Number of persons in household Average household (no of persons) Pensioner household (no of persons) Average household disposable income in the county (per household) Average monthly pensioner household revenues at county level (per household)
No. No. Lei Lei
3.0 1.8
3.0 1.8
1,189.1 472.3
1,396.4 564.9
To have a better view of the impact of water and wastewater service on all categories of inhabitants, the ideal case would be to identify more categories of consumers or at least to separate from the average the socially vulnerable cases. In this case, an affordability analysis of the social vulnerable cases is performed by considering the pensioners. In estimating the level of revenues for different categories of inhabitants a special attention was paid to the revenues from foreign countries. In most of the town of Moldova, an important segment of the inhabitants is working in foreign countries. These inhabitants are sending on regularly basis (monthly, quarterly, etc) money to their families in Moldova and these amounts have a significant impact on the household revenues. These amounts are difficult to identify. One possible solution would be to get statistical data from the local banks about the level of foreign currency sent to the region by the inhabitants working abroad (services like Western Union or similar). However, for the feasibility stage the Consultant did not succeed to obtain such data in due time.
Considering this lack of information, the Consultant decided to use for the affordability analysis a conservative approach and not include these additional household revenues.
5.3
Tariff Policies and Affordability

5.3.1 Tariff policies and levels Historically, tariff levels have been imposed by the Ministry of Communal Services and Territorial Development. Because of the institutional restructuring and decentralization, currently the tariffs adjustments are approved by the local authorities. The domestic tariff level is calculated based on the total cost per cubic meter plus a profit allowance (between 5-10%). Changes would be applied following significant increases in costs, mainly electricity. The evolution of invoiced quantity and the increase of prices for energy should have been the main factors affecting the evolution of tariffs. The decrease of invoiced quantity is mainly due to metering. The tariff evolution of the water tariffs for the last years is presented in the following chart:
Figure 5.2: Water Tariff Evolution

Water average tariff evolution
1.40 1.20 1.00 0.91 0.98 Domestic customers 0.56 0.46 0.44 Instutions and companies 1.17
USD/m3
0.80 0.60 0.40 0.20 2004 2005 2006
Source: Water Utility in Orhei
The last tariff increase for water and wastewater was performed in January 2006. Tariff for domestic customers recorded an increase of 33%. Tariffs for public institutions were increased with 24%. The company wishes to increase tariffs in April, but due to the fact that 2007 is an election year; it will be very difficult to approve by the Local Council. The tariff evolution of the wastewater tariffs for the last years is presented in the following chart:
Figure 5.3: Sewerage Tariff Evolution
Sewerage average tariff evolution

0.90 0.80 0.70 0.60 Domestic customers 0.79 0.85
0.81
USD/m3
0.50 0.40 0.30 0.20 0.10 2004 2005 2006 0.07 0.06 0.11 Public Institutions
For the future the utility should consider the possibility to take all the necessary actions to adjust the tariff more often to avoid the negative effects of the cost increases due to the inflation. In the future the water utility will have to cover also the possible debt service related to the credit from the World Bank. The management team considers that a tariff increase will solve most of the financial problems of the utility. One of the most wide spread idea about tariff increase in Moldova is to increase tariffs for private entities and institutions more and the tariffs for inhabitants less. In most of the cases this is mainly a political decision with the purpose of maintaining a lower pressure on the domestic customers This approach leads to an increase of the cross-subsidization between entities (private companies and institutions) and inhabitants. This discourages the economic development.
5.3.2 Affordability Levels Affordability means the possibility (capacity) of inhabitants to pay the water and sewerage bill. The affordability ratio highlights the percentage of household revenues spent on water and sewerage. The main elements in calculating the affordability ratio are household revenues and monthly bill. The estimation of average household revenues was presented in the previous chapters. The level of the monthly bill for households should be calculated considering the individual consumption, the existing tariffs and the number per persons per household. To calculate complete affordability ratios, it is also important to calculated average monthly bill for special categories of inhabitants (pensioners, households with low income) if there are some special treatments for these categories. The affordability ratio is calculated by dividing the average household bill (invoice) with the average household revenues. This ratio is calculated mainly for an average case. Usually it is not investigated
how many families are actually paying more than a certain percentage of their income for water. In most of the cases there are no statistical data available on how much income in general in Moldova should be or actually is spent on water and sewerage. To identify the impact also on inhabitants with low incomes, special affordability ratio is calculated for the pensioners. The evolution of the affordability ratio in the last years is presented in the following table:
Table 5.5: Affordability ratio calculation and evolution 2005-2007 Affordability analysis Amounts in USD Inhabitants receiving water Inhabitants having sewerage services Water invoiced quantity Waste water invoiced quantity Individual consumption water Individual consumption sewerage Water tariff Sewerage tariff Household consumption water Household consumption sewerage Number of people per average household Number of people per pensioner household Average household invoice (no VAT) Average pensioner household invoice (no VAT) Average household invoice ( with VAT) Average pensioner household invoice (with VAT) Household monthly revenue - average Average household Pensioner household Affordability ratio average Average household Average pensioner household % % No. No. Th. m3 Th. m3 liter/per/day liter/per/day USD/m3 USD/m3 m3/hous/month m3/hous/month no. no. USD/month USD/month USD/month USD/month
2005 23,50 9 12,81 4 393.0 263.7 46 56 0.44 0.06 4.2 5.1 3.0 2.1 2.2 1.5 2.2 1.5
2006 23,50 9 12,81 4 402.3 249.5 47 53 0.56 0.11 4.3 4.9 3.0 2.1 2.9 2.0 2.9 2.0
2007
23,509 12,814 393.0 263.7 46 56 0.44 0.06 4.2 5.1 3.0 2.1 2.2 1.5 2.2 1.5
USD/month USD/month
110.8 44.8
130.7 52.9
110.8 44.8
1.94 % 3.36 %
2.24 % 3.87 %
1.94% 3.36%
In normal conditions in the Central and Eastern part of Europe, if the affordability ratio is below 3.5%-4% the level of tariffs are considered
to be affordable for the domestic customers. In case of Orhei, the actual level of affordability ratio is below 2%. An important element that needs to be considered by the management team of the Water Utility is to maintain the collection ratio at high levels. In some cases, the low level of domestic customers willingness to pay is the result of the protective policy of the local authorities of not allowing consumer disconnection for nonpayment and of poor PR strategy of the Water Utility in establishment of good customer relations. In this respect there is an urgent need for strong measure to assure and maintain the collection ratios at high levels through the following activities: Implement corrective measures for non-payment (disconnection of consumers, etc); Develop and implement a public relation strategy for making the consumers better understand the companys objectives and needs; Encourage the secondary metering and take strong measure for eliminate the illegal connection and the theft of water. Considering the existing low levels of affordability ratio, the Water Utility still has the possibility to increase the tariff in order to assure the full operating costs recovery and to assure the repayment of the existing and future World Bank credit.
5.4
Results of Social Surveys

5.4.1 Introduction and methodology During the period June 15 till July 15 a survey was conducted in order to find the general perception of the population regarding the water and wastewater activity of the Water Utility. For the purpose of the survey a representative sample on the basis of: education, age, gender considering the population from 6 towns of Moldova: Balti, Soroca, Ungheni, Nisporeni, Leova and Cahul. The survey selected respondents on a probabilistic format, multi-stadial (3 stages, including: towns - 6, households selected according to the main routes/streets of the town, individual respondents identified according to the closest birth date), which admit a probabilistic error of 3%. 3 Focus Group Surveys have been implemented in the first 2 weeks of August in 3 towns, respectively in Balti, Nisporeni, Leova, involving 60 participants to the focus groups in total. Data is attached in SPSS format, easy for cross-tabulation.
5.4.2 Results of the Survey The surveys focused on the following main aspects: o Perception of the consumers regarding the quality of services (access to service, quality of water); o Perception of consumers regarding the importance of water services; o Customer willingness to pay for water services; The customers consider that the water and wastewater services are ranked as being the most important for them. The results of the surveys are presented in the following chart:
Figure 5.4: Importance of communal services for domestic customers
Water is clearly reaching the utmost importance in all towns. Population wants to access all communal services, without discrimination, but rank water on a top of the options. Regarding the improvement of quality of water services during the last years, the general perception is that in most of the towns there were not recorded major achievements and the quality of the services remained the same or even worsened.
Figure 5.5: General perception on improvement of water services
Figure 5.6: Drinking water source preferences for domestic customers
The domestic customers are in general not satisfied with the quality of the potable water and they prefer to drink water from other sources. The following series of charts clearly show this. Analyzing the structure of water consumers by age, one may conclude that young people (16-29 years) use to drink bottled water and keep stored water in various plastic or glass recipients, middleaged people (30-45 years) prefer to a larger extent water filters, while 46-years and older (to 60) seem to be pleased with the local opensprings (42%) and boiled water (40%). One important aspect tested during the survey was the willingness to pay for higher water tariffs. The survey results show that people are willing to pay amounts between 35-50 lei monthly for water consumption, regardless of their current professional occupation. The water is perceived important and an indispensable part of their family life. Non-payments are not generally related to ability to pay but are more related to the managerial capabilities of the Water Utility and their freedom from the Local Authorities in implementing strong collection measures. There is a category of people considering that water services provision is an obligation of the central and local authorities for which they should not be punished if they do not pay.
The level of the willingness to pay for water services is presented in the following chart.
Figure 5.7: Willingness to pay, National Average/Year
The results of the 3 focus groups show similar perception for the water services importance, quality, water consumption patterns and willingness to pay. The results of this survey clearly show that the general perception regarding the water services is relatively unfavourable. The main part of the customers considers that the water services are very important but they are not pleased with the quality of the services and they prefer to drink water from other sources. The customers are willing to pay a higher tariff in case of improvement of water quality however, the need for tariff increases are higher than the expectation of the customers. In this case, in order to do not record decreases of the collection level, the management team of the Water Utility has to implement communication strategies in order to convince the customers about the necessity of higher tariffs. The poor quality of the water services leading to low degree of satisfaction of customers is an important element suggesting that implementation of investments in the water and wastewater sector are needed.
5.5
Conclusions
The economic situation of Orhei Raion is relatively good with important potential of increase. The exiting level of affordability ratio shows that there is a potential for further tariff increases in order to generate additional financial resources for credit repayment.
6
6.1
Financial Aspects
General
The scope of this study is to assess the financial status of the Water Utility in Orhei in order to analyze the possibility of contracting a World Bank credit for financing investments in infrastructure. The information on historical financial statements, management accounting costs and revenues, tariff evolutions and financial management procedures were obtained from each water utility directly or via the World Bank Project Implementation Unit. Extensive discussions with all involved stakeholders were conducted during the analysis process as follows: Answers to the questionnaire prepared by the WB PIU; Discussions with the management team and specialists from the financial department; Discussions with the representatives of the local authorities; Statistical data from the National Institute for Statistics for the period 2002-2006; Based on the analysis of the historical performances and considering the macroeconomic scenario envisaged by the authorities, a financial forecast for the period of the credit was prepared in order to generally assess the maximum level of the credit that can be contracted. A sensitivity analysis is performed in order to better assess the impact in variations of assumptions on the level of the credit and on the capacity of the Water Utility to repay the proposed credit.
6.2
Analysis of the historical financial performances

In order to obtain a clear picture of the financial status of the company, we have analyzed the financial statements for the years ended at December 31, 2004, December 31, 2005 and December 31, 2006. 6.2.1 Analysis of the operating activity The operational performance of the utility for the last three years reflects both evolutions of physical production and tariff adjustments. A summary of the operating results is shown in the table 6.1.
Table 6.1: Operating result evolution
Operating result for the year Amounts in thou. USD Operating revenues Sales Revenues from services Other revenues
2004 479.8 479.8 -
2005 527.3 507.8 19.4
2006 691.9 641.8 50.1
Operating result for the year Operating costs Material expenses Third parties services Personnel expenses Salaries Social insurance taxes Other costs for water and sewerage Depreciation Energy cost Costs related to other activities Operating result
2004 534.2 84.9 8.4 232.0 178.7 53.4 27.1 83.9 97.5 0.4 (54.4)
2005 560.7 83.0 9.2 257.7 200.0 57.7 26.6 83.8 100.4 (33.5)
2006 663.7 95.6 12.2 304.6 238.4 66.1 51.5 92.6 107.1 28.2
In 2006, approximately 49% of the operating revenues result from water supply and 49% from wastewater operations. The total operating result is negative for 2004 and 2005 with an improvement tendency in 2006, when the operating result was positive. The evolution of the structure of operating revenues is presented in the following chart:
Figure 6.1: Structure of Sales

Structure of Sales
400.0 350.0
Thousand USD/year
300.0 250.0 200.0 150.0 100.0 50.0 2004 2005 2006 Water Wastew ater
The level of revenues increased in 2006 because both invoiced quantity and tariffs increased The level of non-revenue water is important and the utility will try to decrease the losses in the following years. One of the main purposes of the investment promoted with financial resources from The World Bank credit is to decrease the water losses. The evolution of invoiced quantities is presented in the following table:
Table 6.2: The Evolution of Invoiced quantity 2004-2006
Evolution of invoiced quantity Water Inhabitants Private companies and institutions Waste water Inhabitants Private companies and institutions
2004 Th. m3 454.1 383.0 71.1 521.0 244.9 276.2
2005 Th. m3 482.6 393.0 89.6 558.1 263.7 294.5
2006 % Th. m3 6.3% 501.2 2.6% 402.3 26.0% 7.1% 7.7% 6.6% 98.9 574.2 249.5 324.7 % 3.9% 2.4% 10.4% 2.9% -5.4% 10.3%
The water consumption slightly increased in the last years, mainly as result of increase of water delivered to companies and institutions. The weight of water delivered to companies and institutions is low (represents only 20% in total invoiced water). Blockhouses are metered with high precision meters, the metering coverage being of approximately 88-90%. Because the level of tariff for companies and institutions is significantly higher than for domestic customers, these entities have the tendency to find water from other sources (have their own sources) and to pay only sewerage services to the utility. The delayed adjustment of tariff compared with the cost increases had a negative impact on the performances of the water utility. The water utility can not control the tariff adjustment process, which is the prerogative of the Local Council. The water utility can propose tariff increases based on cost increase but the final decision is taken by Local Council. The evolution of the structure of total operating costs is presented in the following chart:
Figure 6.2: The Structure of Operating Cost
Structure of operating costs
24.0%
16.1%
Energy
Personnel (salaries and related taxes) Depreciation
13.9% 45.9%
Other costs
The most important cost elements are personnel costs (wages, salaries and related taxes), which represents 45.9% of operating expenditures in 2006 and other costs, which represents about 24.5% of operating expenditure in 2006. The weight of energy costs was relatively constant in the last years. The salaries have increased in nominal terms every year. The increase of salaries has to be performed based on premises stipulated in the law regarding evolution of salaries in the public sector. This element is more or less not under the control of the water utility. Due to lack of financial resources the last mandatory salary increases was not yet implemented. The evolution of operating costs is presented in the following chart: Personnel costs increased constantly in the period under analysis. Other costs kept a stable trend in 2004 and 2005, and increased in 2006. Energy costs recorded a stable evolution.
6.2.2 Analysis of the balance sheet The evolution of the balance sheet in the last three years is presented in the following table:
Table 6.3: Operating result evolution
Balance Sheet as at:

Thousand USD
31-Dec-04
31-Dec-05
31-Dec-06
Assets Fixed assets Intangible assets Tangible assets Financial assets Current Assets Inventory Account receivables Other current assets Cash and cash equivalents Total assets Owner' Equity Share capital Reserves Retained earnings Current result Subsidies for investment Liabilities Long-term liabilities Short-term liabilities Accounts payables
1,280.3 3.2 1,267.9 9.2 249.9 30.9 183.6 35.4 1,530.2
1,460.9 3.3 1,449.6 7.9 318.4 117.4 154.9 46.1 1,779.3
2,146.0 3.1 2,136.0 6.8 609.2 349.7 193.4 66.1 2,755.2
1,465.5 15.5 (159.2) (46.6) 17.4 48.8 189.0 17.8
1,423.0 15.0 (201.0) (46.1) 73.4 363.2 151.9 12.8
1,414.9 14.9 (259.9) 36.6 90.4 1,342.8 115.4 26.6
Balance Sheet as at: Personnel Social Insurance Taxes Liabilities to the budget Other liabilities Provisions Total liabilities and owners equity
31-Dec-04 15.7 107.2 37.8 10.4 1,530.2
31-Dec-05 17.5 95.1 19.2 7.3 1,779.3
31-Dec-06 23.8 41.3 19.4 4.5 2,755.2
A breakdown of the account receivables from commercial companies is shown in the following table:
Table 6.4: The Level of Account Receivables as at December 31, 2006
Account Receivables <3 Months Between 3 months and 1 Year > 1Year Total
31.12.2006 USD % 89,822 49.6% 35,551 19.6% 55,687 30.8% 181,060 100.0%
The management of the company needs to have among its priorities the maintenance of the collection level at high levels. Collection level for 2006 was 96%. The level of short term liabilities has decreased in the last years. They consist mainly from liabilities to social security fund, state budget and local budgets. However, according to Official Gazette no. 64-66 from May 11 2007, Law regarding the modification of some legal acts no 300, part 4 Legalization of capital and fiscal exemption, the liabilities to social security fund, stat budget and local budgets will be written of in 2007. 6.2.3 Analysis of the cash flow statement The evolution of the cash flow statement in the last two years is presented in the following table:
Table 6.5: Cash flow statement
Cash flow statement

Thousand USD
2005 50.3 (89.0) 23.9 (4.6) (27.5) (13.6) (60.6) 321.6 (305.5) 56.3
2006 120.8 (228.9) (38.7) 13.6 (48.7) (1.1) (182.9) 964.7 (774.0) 3.3
EBDIT Increase/decrease in inventory Increase/decrease in trade receivable Increase/decrease in trade payable Changes in other working capital Income tax Net cash flow from operations Increase/decrease in long term liabilities Investments Credit disbursements Variation of equity items
Cash flow statement Net cash flow for debt service Debt service Net cash flow for the period Translation gain/loss Cash at the beginning of the period Net cash at the end of the period
2005 11.9 0.1 12.0 (1.2) 35.4 46.1
2006 11.0 8.9 19.9 0.1 46.1 66.1
In the last years the collection level was relatively good showing some improvements. In the last years, the Company had the following list of priorities regarding payments in order to deal with cash shortages: first: the energy bill; second: wages and salaries; third: other suppliers; fourth: taxes to the budgets (social fund, etc);
6.3
Forecast of the financial statements

The purpose of the financial forecast is to assess the level of the credit that can be contracted by the Water Utility and the covenants that should be included in the subsidiary credit agreement. 6.3.1 Approach and assumptions The main assumptions used for the financial forecast are the following: Macroeconomic scenario: We used a combined scenario consisting of elements from the scenario considered by the Government of Moldova (www.scers.md) and some insertions from scenarios provided by the international financial institutions. The main assumptions for the macroeconomic scenarios are presented below: Fiscal Policy/ Public Debt Strong VAT receipts (from remittance-driven consumption) mean constant revenues despite a tax cut. Together with a tight expenditure regime this permits the general government deficit to remain below 2% of GDP. Public debt remains constant. Full servicing of public debt, both external and domestic, resumes. Monetary policy will continue to be tight, bringing inflation back to single digit levels. Current floating exchange rate regime will remain in place. Central bank will intervene occasionally to maintain stability of the
Monetary Policy Exchange Rate
Structural Reforms Domestic Politics
exchange rate vis--vis the US dollar. Structural reforms go ahead more quickly, with accelerated privatization and substantial reforms, including in the agriculture sector. The political environment will remain stable and the Transnistrian conflict will remain frozen in the forecast period.
The evolution of the main macroeconomic indicators is presented in the following table:
Table 6.6: Macroeconomic assumptions
Base case scenario Inflation for the year Average inflation factor Nominal increase in revenues Exchange rate -USD end of year Exchange rate -USD average
2006 2007 2008 2009 2010 2011 12.6% 8.5% 7.5% 7.0% 6.3% 6.0% 1.0611 1.0416 1.0368 1.0344 1.0310 1.0296 28.6% 20.0% 15.0% 10.0% 8.0% 8.0% 12.91 13.13 12.90 12.90 12.80 12.85 12.70 12.75 12.65 12.68 12.60 12.63
Balance sheet: The balance sheet was forecasted using the following assumptions: Fixed assets: the existing fixed assets are depreciated using the existing depreciation rate; the new investments are depreciated according to the Accounting Standards. Accounts payable, accounts receivables and inventory are forecasted based on the evolution of the number of payment, collection and turnover days. The water Utility will repay all outstanding liabilities to different budgets in the following years. The other elements are considered constant in time. The changes of these elements are either difficult to identified or the impact is very low. Income Statement: The main items are forecasted as follows: The revenues are calculated by multiplying the invoiced quantities with the tariffs for each customers category; The other revenues are considered constant in time. The personnel costs are calculated according to the evolution of adjustments of salaries without considering any decreases of personnel; The tariff were adjusted on regular basis with inflation and in real terms considering a maximum level of the affordability ratio of 3.5%4% The individual consumption of water will start to increase until it reaches a level of 80 litres / person / day.
Cash Flow Statement: The calculation was made using the indirect formula. The cash flow is important to see if the analyzed scenario generates sufficient cash to have a sustainable activity. The three financial statements presented above are highlighting the performance of the utility. These statements are linked and any change of one is affecting also the other. The forecast covers the period 2007-2036. 6.3.2 Affordability analysis Affordability means the possibility (capacity) of inhabitants to pay the water and sewerage bill. The affordability ratio highlights the percentage of household revenues spent on water and sewerage. The main elements in calculating the affordability ratio are household revenues and monthly bill. The estimation of the average household disposable income and the methodology for calculation was presented in the socio-economic section. For the present analysis we used the estimation of the average household revenues in Orhei based only on statistical data (without considering the additional revenues from the gray economy or revenues from people working abroad). These estimated revenues for 2005 were adjusted according to the evolution of revenues forecasted by the Government. The evolution of average household revenues is presented in the following table:
Table 6.7: Evolution of average monthly household revenues (amounts in MDL)
Evolution of revenues Average household Pensioner household
2005 1,396.4 564.9
2006 1,716.2 694.3
2007 1,962.1 793.8
2008 2,145.3 867.9
2009 2,281.2 922.9
2010 2,509.3 1,015.2
The tariff increase assumptions considered for the following periods are the following: In 2008: Water tariff: 20% for domestic customer tariff and 20% for the other customers; Sewerage tariff: 30% for domestic customer tariff and 20% for the other customers; In 2009: Water tariff: 15% for domestic customer tariff and with inflation for the other customers;
Sewerage tariff: 20% for domestic customer tariff and with inflation for the other customers; In 2010: Water tariff: 15% for domestic customer tariff and 15% for the other customers; Sewerage tariff: 15% for domestic customer tariff and 15% for the other customers; The individual water consumption is considered to slightly increase in the following years, mainly as result of decrease of level of illegal connections and increase of water consumptions. Considering the assumptions presented above, the evolution of the affordability ratio is presented in the following chart:
Figure 6.3: Evolution of affordability ratio

Affordability Ratio Evolution
5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Average Low income
The affordability ratio is recording maximum value of around 2.5%2.7%% for a number of years which can be considered reasonable for a limited number of years and can assure a relatively high level of collection. This is considered the base case scenario from the tariff adjustments point of view. In the following chapter we will analyze the capacity of the proposed tariff scenario to cover the debt service of the existing credit and the capacity of the Water Utility to contract a new credit. 6.3.3 Results of the financial forecast
The main purpose of the financial forecast is to identify the level of the credit that can be afforded by the Water Utility in Orhei by having a sustainable development on medium and long-term.
The conditions of the existing World Bank credit considered for the analysis are the following: Interest rate: 1.5% per year; Total period of credit: 30 years; Grace period: 6 years; Repayment period: 24 years; Principal repayment starting date: 2009 The Water Utility requested an additional credit of 500,000 USD in order to finance some investment related to the investment project related to the first World Bank credit. This credit was considered also for the analysis. The conditions of the new World Bank credit considered for the analysis are the following: Interest rate: 1.5% per year; Total period of credit: 30 years; Grace period: 6 years; Repayment period: 24 years; Interest and commitment fee payment starting date: immediately Principal repayment starting date: 2014 During the analysis, extensive discussions with all involved stakeholders were conducted in order to identify all possible resources for credit repayment. The involved entities are: The Water Utility as the contractor of the credit; The Local Council as the entity responsible with the tariff adjustments approval and possible guarantor of the credit; During these discussions the following main options of financial resources for credit repayment were identified: c) The local budgets: According to the possible guarantee agreements, the local authorities will commit themselves to repay the credit in case the water utility will not generate sufficient financial resources. In our opinion this should be the last option for repaying the credit and should be used only as an emergency solution. The resources of the local authorities are limited and usually the needs are higher than the available resources. The discussions with the local authorities revealed that they also consider this as the last solution for credit repayment. a) Reduction of operating costs: This was the first resource mentioned by the local authorities for repayment of the credit. There are two major cost categories that can be reduced in the future: energy costs and personnel costs.
The analysis of energy costs revealed that these are the main variable costs recorded by the water utility. The discussions with the authorities clarified their expectations: the investments will lead to reduction of the water losses, which will lead to the decrease of energy costs. The levels of water losses are high and after the investments are finalized the utility can record important reduction of losses. The experience of other investment projects learned that the water losses cannot be reduced more than until a level of 20-25% even if the system is in good shape. To reduce the losses beyond this limit requires large investment and maintenance costs higher than the savings, making these investments inefficient. The reduction of energy costs and related elements can represent only a partial source for repayment of the existing credit. Other operating costs that can be reduced are personnel costs. The analysis performed in the previous section shows that the water utility can be considered as overstaffed compared with utilities from similar countries. The number of personnel can be reduced until a minimum level required by the safety norms and regulations for the sector. However, it can be mentioned that the level of salaries is not under the control of the water company being set by Governmental decision for the entire water sector. b) Tariff increases: This is the most sensitive issue. The local authorities see this as the second solution, after savings from cost reductions, for covering the debt service. The past experience of the water utility regarding tariff adjustments led us to say that this solution will face problems of implementation. In our opinion, the tariff increases presented in the affordability analysis represents the maximum tariff increases that will assure a relatively high level of collection being still affordable to the domestic customers. A scenario with higher tariff increases can be designed in the case of lower level of individual consumptions by maintaining the same level of the average household monthly bill. The tariff increase can partly solve the problems but the tariff increases without strong measure regarding personnel cost and water production decreases are not sufficient. The ratio used for analyzing the credit repayment capacity is the Debt Service Coverage Ratio (DSCR) calculated as annually Cash Flow before Debt Service divided by annual Debt Service. The minimum recommended level should be above 1. The proposed investment level from the pre-feasibility study is in amount of 2.2 million USD. However, in order to identify a level of credit that will assure a smooth repayment process and a sustainable development of the Water Utility different scenarios for the investments were considered.
Considering the repayment sources mentioned above, based on discussions with the representatives of the local stakeholders, the following scenarios were identified: 1). For tariff adjustments: o A scenario considering the adjustment of tariff only in line with inflation. The evolution of the DSCR is presented in the following chart.
Evolutia DSCR
0.50 0.40
0.30 0.20 0.10 0.00 2008 -0.10 -0.20 -0.30 2009 2010 2011 2012 2013 2014 2015 2016
DSCR
The evolution shows that the tariff adjustments only to inflation are not sufficient, tariff increases in real term are needed. o A scenario that considers the adjustment of tariff in real term according to the scenario presented in the affordability analysis section. The evolution of the DSCR is presented in the following chart.
Evolutia DSCR
2.00 1.80 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 2008 2009 2010 2011 2012 2013 2014 2015 2016
DSCR
The tariff adjustments according to this scenario lead to DSCR levels below 1 in a few years of the analysis. The level of the DSCR in 2014 and 2015 (the first years of principal repayment for the new credit) show values below 1 highlighting the risk of non payment. In order to mitigate this risk and to assure a higher degree of repayment
capacity, a new scenario for the credit level of 1.5 million USD was considered. The evolution of the DSCR considering this new level of credit is presented in the following chart.
Evolutia DSCR
2.50
2.00
1.50
DSCR
1.00
0.50
0.00 2008 2009 2010 2011 2012 2013 2014 2015 2016
The evolution of the DSCR shows a higher degree of repayment capacity. Regarding the 2 operating cost elements mentioned as financial sources options for credit repayment the following assumptions were considered for the base case: energy costs: as result of investment implementation, starting with the finalization of investment (2010), the energy costs will be decrease by 5%; the personnel costs: A benchmarking ratio was calculated for the personnel level by dividing the total population served with water by the number of personnel for water and wastewater. Considering the existing levels of this ratio, a decrease of personnel costs in 2008 of 10% and in 2009 and 2010 of 5% was considered.
Considering the assumptions mentioned above and the selected tariff scenario, the evolution of the DSCR is presented in the following chart:
Evolutia DSCR
3.50
3.00
2.50
2.00
DSCR
1.50
1.00
0.50
0.00 2008 2009 2010 2011 2012 2013 2014 2015 2016
The evolution shows that the Water Utility can afford a credit of 1.5 million USD if the conditions presented above are fulfilled. There are 3 potential risks that not under the control of the management team of the Water Utility and that can affect the repayment capacity of the Water Utility: 1). The tariff adjustments: The level of tariff adjustment needed in order to assure the repayment of the credit (according to the scenario presented above) might not be approved by the Local Authorities. In order to mitigate this risk, the levels of tariff adjustments should be included as covenants in the subsidiary credit agreement. 2). The energy price increases: The increases of energy prices are approved by the central authorities. If in the future, the increases of energy prices will be above the levels of the assumptions used for this analysis, the Water Utility might need to additionally increase the tariffs in order to cover the energy price increases in due time. In order to mitigate this risk, this provision should be included as covenants in the subsidiary credit agreement. 3). The salary increases: The increases of salaries levels are approved by the central authorities according to the national strategy. If in the future, the increases of salaries will be above the levels of the assumptions used for this analysis, the Water Utility might need to additionally increase the tariffs in order to cover the increases in due time. In order to mitigate this risk, this provision should be included as covenants in the subsidiary credit agreement.
6.4
Present and proposed arrangements for financial auditing

Currently the financial statements of the company are audited as a requirement of the subsidiary credit agreement for the existing World Bank credit.
It is recommended that in the future the Water Company will audit its financial statements by contracting an international recognized auditing company.
6.5
Need for training of accounting staff within the Water Utility

Even if the financial and accounting recording process recorded improvement in the last years, the personnel of the Company need further training on the following areas in order to improve the financial management function: Financial strategic issues; Financial part for the business planning process; Tariff strategies development;
6.6
Conclusions
The historical financial analysis of the Water Company in Orhei highlighted the relatively good situation of the Water Utility. However, in the last years there were recorded some insufficient and rare tariff adjustments mainly as result of the political interference in tariff adjustments. The evolution of the main operating costs is out of the control of the management team. The energy price and the salaries increases are decided at national level. The only element that is under the control of the management team is the number of personnel but there are also some restrictions according to the national standards of safety of efficient operation. The detailed analysis conducted reflected that the Water Utility in Orhei can contract a credit of 1,500,000 USD for financing the proposed short term investments. However, it is recommended that the following assumptions to be included in the subsidiary credit agreement as covenant in order to assure the smooth repayment of the credit and assure a sustainable development of the Water Utility: The tariff increases: In 2008: Water tariff: 20% for domestic customer tariff and 20% for the other customers; Sewerage tariff: 30% for domestic customer tariff and 20% for the other customers; In 2009: Water tariff: 15% for domestic customer tariff and with inflation for the other customers; Sewerage tariff: 20% for domestic customer tariff and with inflation for the other customers;
In 2010: Water tariff: 15% for domestic customer tariff and 15% for the other customers; Sewerage tariff: 15% for domestic customer tariff and 15% for the other customers;
Starting with 2011, the tariffs are adjusted with inflation (at last once a year or when the cumulated inflation exceeds 5%); The personnel costs: in 2008 decrease of 10% and in 2009 and 2010 decrease of 5%.
7
7.1
Technical Aspects
General
In the Pre-Feasibility Study Phase, the needed short and mediumterm investment packages related to the proposed investments within the water and sanitation services for the town of Orhei were prepared, on a preliminary level. These investment packages are presented in more detail in this Feasibility Study Report and in the Pre-Feasibility Study Report (Water Supply and Sanitation Projects Implementation Unit, June 12, 2007). The Pre-Feasibility Study Report is available from the Client upon request. Proposed investment packages were as follows: 1st Investment Package for short-term investments (year 2007 2009): - Renovation of pressure pipeline from natural spring water intake to town of Orhei including replacement of some 16.0 km of existing pressure pipelines; - Implementation of automation system for natural spring water intake and for water supply pumping arrangements; and - Continuing of renovation of water supply system. 2nd Investment Package for medium-term investments (year 20102013): - Rehabilitation and extension of sewerage network including 20 km of new sewerage network; and - Construction of new WWTP and connection of new WWTP to the existing sewerage network In the Feasibility Study Phase proposed investments were discussed and the list of investments was revised together with Apa-Canal of Orhei. In following Chapters the investments that are required are described more in detail. Also the outline design has been presented for the proposed short-term investments required. 7.1.1 Short-Term Investments
The short-term investments required to secure that the water supply and sanitation systems in Orhei can operate acceptably were identified for the time-period 20072009.
The short-term investments proposed for the water supply and sanitation sector for the town of Orhei are listed below, and serves as a basis for the outline design presented further on in this report: Renovation of pressure pipeline from natural spring water intake to town of Orhei including replacement of some 8 km of existing pressure pipelines; Connection of southern pressure zone to northern pressure zone in order to supply whole Town of Orhei from natural spring water source. This investment requires some seven (7) kilometres of new pressure pipeline from PS3 to PS1 and PS2; Continuing rehabilitation of water supply network by replacement of old water mains made of cast iron and steel by polyethylene pipelines; Implementation of automation and control system (SCADA) for water pumping arrangements including ultra sonic flow metering for all PSs; Renovation of water reservoirs at PS1 and PS2 used for water supply network; Implementing the study on condition of existing sewerage network; Detailed design for new WWTP including connection sewers; and Upgrading laboratory with western standard equipment. Implementation of chlorination equipment at PS1 and PS3. Both are located near residential areas and for safety reasons special equipment will be needed.
Furthermore, it is proposed that Apa-Canal shall on short-term bases reorganize the existing septic tank emptying system including purchasing one vehicle for this purpose or renting a vehicle from private sector or some nearby municipality which already have one but does not need it for full time on daily bases. Further on in this report the outline design - including investment cost estimations for above-mentioned short-term investments - has been presented. 7.1.2 Medium-term Investments
Estimates of medium-term investment needs were prepared for the years 20102013 in order to secure sufficient operation of the water supply and sanitation systems in the medium-term, as well as to provide water supply and wastewater treatment for an increased number of inhabitants in Orhei. Medium-term investments needed for water supply and sanitation services are listed below.
Rehabilitation of Gradina Publica water intake area to secure water supply in case that quality of water at natural spring dramatically changes; Construction of new network including water meters for 4,000 new consumers so that connection rate in town Orhei would be 100 % (some 22 km of new network); Rehabilitation of at least 10 km of water supply network (the remainder of the existing network which has not been renovated in 20062009); Rehabilitation of existing sewerage network based on the conditional analysis carried out under short-term investment programme; Construction of new WWTP for capacity of 4,100 m3/day (1st stage) with option for enlargement for total capacity of 6,000 m3/day (2nd stage); and Enlargement of the existing sewerage network to serve at least 5,000 new inhabitants (> 10 km of new network) including new sewer system in Lupoaica District in where new water network has been constructed in 20052007.
The above-mentioned medium-term investments are not included in the outline design, which are to be prepared only for proposed shortterm investments.
7.2
Prioritisation of Investments Required

7.2.1 General In the following two Chapters the priority order for needed short-term and medium-term investments in the water and sanitation sector has been presented. The priority order for needed investments was determined in discussions with Apa-Canal of Orhei. The prioritisation was based on a number of considerations. In general, ensuring and securing supply of clean water to the residents was considered to be a highest priority but also collection and proper treatment of wastewater was considered to be important on short-term bases. Renovation of the most critically damaged network (water, thereafter sewerage) was prioritised over the construction of new networks. 7.2.2 Priority Order for Needed Short-Term Investments Based on aforementioned considerations as well as the condition of existing structures and equipment (see Feasibility Study Report, Water Supply and Sanitation Projects Implementation Unit, June 12, 2007) the priority order for needed short-term investments was determined.
The highest priority is thus to secure the supply of drinking water from existing natural spring water source renovation of pressure pipeline from water intake to town of Orhei including replacement of some 8 km of existing old poor condition pressure pipelines. Furthermore, due the poor quality of water from ground water sources the connection of the whole water supply network in Orhei to natural spring water source has a high priority. The work should be done by connecting existing two (2) different pressure zones. This could be possible by implementing some seven (7) km long pressure pipeline connection from southern pressure zone to PS1 and PS2 which serves the northern pressure zone. Large parts of the existing water supply network (18 km) has been renovated in 20062007. However, there are still some 22 km of existing network which could be considered to be in a critical condition and needs to be renovated in the near future. Also all existing water supply network pumping stations should have proper automation and control system (SCADA) including ultra sonic flow metering. In addition to renovation the network shall on medium-term basis also be extended by constructing of new water supply network for existing housing areas (which does not have water supply at the moment), including water meters at all new connections. (for at least 4,000 new inhabitants). For sewerage network the proper flushing of pipelines and emptying of manholes is required, and is already done by Apa-Canal staff. Orhei Apa-Canal owns a vehicle which is used for flushing of sewer pipes. Furthermore, conditional analysis of all pressure mains (pressure mains between sewerage pumping stations) shall be included in short-term action plan. If the condition of these pressure mains is not exactable shall these pipelines to be replaced with new concrete pipelines within the medium-term action plan. It is also important for sanitarian reasons that the system for emptying septic tanks functions effectively. Therefore it is proposed that Apa-Canal shall on short-term bases purchase one vehicle for septic tank emptying purposes or rent a vehicle from some nearby municipality. Short-term investment plan should also include new main equipment for used laboratory in order to secure the quality of supplied water from natural spring. The recommended priority order for proposed short-term investments for Orhei is presented in Table 7.1.
Table 7.1. Priority order for proposed short-term investments for town of Orhei.
Priority No. 1. 2. 3. 4. 5. 6. 7. 8.
Task
Renovation of pressure pipeline from natural spring Connection of southern pressure zone to northern pressure zone Continuing rehabilitation of water supply network and automation of all network PSs Implementing conditional analysis of existing sewerage network Implementing detail design for new WWTP Implementation of chlorination equipment at PS1 and PS3 Renovation of reservoirs at PS1 and PS2 Upgrading laboratory equipment
The outline design for above-mentioned prioritized short-term investments has been presented later in this report. 7.2.3 Priority Order for Needed Medium-term Investments The priority list of proposed medium-term investments has been prepared based on the assumption that all proposed short-term investments have been carried out by 2010. After the short-term investments have been implemented there will be more information available about the operation of the water distribution and sewerage networks. Thus, before implementation of the proposed medium-term investment programme more information about the network should be collected and a full conditional analysis carried out. In the medium-term, more renovation of the water and sewerage network should be carried out. The highest priority is believed to be rehabilitation of at least 10 km of water supply network, but also damaged/clogged parts of the sewerage network should be renovated. WWTP is in need of complete renovation. Taken into consideration the condition of existing structures and machineries and insufficient process technology and placement on the very high level on the hill it could be recommended that the whole treatment plant will be replaced with new modern and more compact WWTP taken into account current and future wastewater flows and loads. New WWTP should be located on lower ground level near the Town centre so that collected wastewater could be led to the treatment plant by gravity. This would bring considerable savings in pumping costs and significant health as well as environmental improvements in the area.
The new WWTP is preferably constructed after renovation of the sewerage network has commenced. The new WWTP should be designed to treat both current and future wastewater flows and loads. The extension of water supply network must also be continued to serve a larger number of residents. The installations shall include household connections and in-house water meters. After implementation of proposed short-term investments the sewerage network is planned to cover some 80 % of all water customers representing some 22,000 inhabitants. Thus, the sewerage network must be extended to cover at least 5,000 new inhabitants for sanitary reasons and to allow increased living standard in the area. Proposed prioritised Medium-term Investments are as follow: Rehabilitation of at least 10 km of water supply network; Rehabilitation of existing sewerage network; Construction of a new WWTP; Construction of new water supply network including household connections and in-house water meters; and Enlargement of the existing sewerage network.
8
8.1
Outline Design
General
This Chapter outlines the design of the proposed short-term investment needs, and includes design criteria and different implementation methods for the investments. 8.1.1 Design Criteria
8.1.1.1
Projections for year 2013
During past three (3) years both total amount of water pumped to the distribution network and actual billed water amount have increased some 10 %. Same time the amount of non-revenue water (NRW) has been on very high level being 5457 % of all water pumped to Orheis water supply network. The amount of water pumped to the distribution network as well as billed water consumption for the years 20042006 is presented in Table 8.1.
Table 8.1. Produced and billed water demand in 20042006.
Water pumped to distribution, m3/year Billed water demand, m3/year Non-Revenue Water (NRW), %
2004 1,030,000 460,000 56 %
2005 1,045,000 483,000 54 %
2006 1,176,000 501,000 57 %
Currently, it is very difficult to predict if the amount of billed water demand would increase in the near future as it has stayed on the same level during past three (3) years. Still, within industrial users the reported metering rate in Orhei is already 100 % and 90 % within private households and it is clear that without investments on enlargement of the network and connection of more customers to the water supply the volume of billed water shall not increase dramatically. Furthermore, the increased use of water within private customers is highly dependable on provided water quality and the price of water.
The projections prepared for year 2013 are based on the following assumptions: The population in town of Orhei is 34,000 inhabitants yr 2013;
Per capita consumption in Orhei yr 2013 is 140 litres/capita/day; The connection rate to the water supply network is 100 % of all inhabitants in Orhei; Because of network improvements such as reparations and maintenance as well as installation of new pipelines for new housing areas, the amount of leakage from the water supply network is estimated to decrease with about 30 %; The connection rate to the sewerage system within customers having water supply is 80 %.; The own wells and own water sources used by industries is not know but is estimated to increase the wastewater flow by some 20 % in the future; and Owing to better in-house flow measurement and a possible increase in water tariffs, the per capita consumption has been estimated to decrease some 15 %.
Prepared water and wastewater flow projections for Orhei are summarized in Table 8.2 below.
Table 8.2 Water and wastewater flow projections for the town of Orhei year 2013.
Parameter Population connected to water supply network Population connected to sewerage network Water pumped to distribution Water pumped to distribution Non-revenue water Non-revenue water Average total flow to WWTP Average total flow to WWTP
Year 2006 Value Unit 23,000 capita 16,900 3,220 140 57 % 80 2,790 165 Capita m3/d l/cap/d % l/cap/d m3/d l/cap/d
Year 2013 Value Unit 27,000 capita 22,000 3,780 140 37 % 52 3,800 170 capita m3/d l/cap/d % l/cap/d m3/d l/cap/d
8.1.1.2
Treatment Requirements for Wastewater
According to the Global Environmental Facility (GEF) the EU standards for effluent wastewater will be used as guiding principles for new Moldavian effluent standards in the future. However, currently the official requirement for the effluent quality of treated wastewater is the local standard, which also requires disinfection as a tertiary treatment for the effluent. In the following table both Moldavian and EU standards for effluent wastewater quality have been presented.
Table 8.3. EU and Moldovan requirements for effluent wastewater.
Parameter
Requirement
BOD 5 SS Total N Total P
ECC (271/91) <10,000 PE mg/l % 25 90 60 -
ECC (271/91) > 10,000 PE mg/l % 25 90 35 10 70 1.0 80
Moldova3 mg/l 34 3.0-5.0 0.39 / 9.05 0.2 % -
We have understood that new effluent standard will be introduced by the government in year 2008. We have also understood that new standard will be based on used European standards. We recommend that effluent criteria shall be clarified in detail design phase after above mentioned decision is made by the government.
8.1.1.3
Design Parameters for year 2013
As short-term investment it is proposed to renovate the pressure pipeline from natural spring and to construct a new pressure pipeline to connect southern and northern pressure zones of water supply network. Also enlargement of water supply network was proposed. The relevant design parameters for above mentioned short-term investments are presented in the Table 8.4.
Table 8.4. Preliminary design parameters. Presented population figures are estimated and serves only as bases for preliminary design parameters.
Year 2013
Unit
Connected inhabitants Consumption Needed capacity Pipe size
Capita l/cap/day m3/day m3/h (qdim) DN
Pipeline from natural spring 27,000 5,0007 500 300
Pipeline to connect pressure zones
New WWTP 6 22,000 170 3,800 6 220
WWTP inlet and effluent sewer 4 250 400
Represents maximum permitted concentrations in receiving water bodies after mixing with treated WWTP effluent 4 Total BOD 5 Ammonia Nitrogen / Nitrate Nitrogen 6 Not included in short-term investment plan. 7 Estimated needed capacity in 2020. Design capacity for 2013 is 3,780 m3/day as indicated in Table 8.3.
The presented design capacity for new WWTP is for 1st stage investment year of 2013. Tentatively the design capacity for 2nd stage investment year of 2020 is proposed to be 5,000 m3/day. Thus the sewerage system is separate system the presented design values for wastewater flows does not include the additional storm waters but small amount of water due infiltration from the ground water. As described earlier in the section 8.1.1.1 the increase in wastewater flow caused by use of own wells and other water sources by industry is estimated to be 20 % in 2013.
8.2
The Sewerage System
8.2.1 Present System A description of the present sewerage system in the town of Orhei is presented in more detail in the document Pre-Feasibility Study PFS) Report (Water Supply and Sanitation Projects Implementation Unit, June 12, 2007). The present system is also presented in the Drawing 1989161-S-001 attached to this report. The existing sewerage network has total length of approximately 50 km. Most parts of the network are 30-40 years old and have never been renovated. Network consist three (3) district pumping which are all renovated (or will be renovated) by the end of year 2007. Some 17,000 inhabitants out of 27,000 are currently connected to network. WWTP, taken into operation in 1976, has a design capacity of 10,000 m3/day and consists the following treatment units: - Grit chamber; - Primary sedimentation tanks; - Biological filtration (filtrate material gravel); - Secondary sedimentation; - Sludge handling in sludge drying beds; - Contact stabilization for effluent wastewater (chemical adding is not in use); - Sludge pumping stations; and - Chlorination plant (not in use). At present the reported wastewater flow to the treatment plant is some 2,300 m3/day which is only some 23 % of design flow of the plant. In general, WWTP has no any grit removal or screening and the existing primary clarifiers are in very poor condition. Furthermore, the biological filtration and secondary sedimentation works unsatisfactory. Available effluent wastewater analyses are presented in Table 8.5. Wastewater quality is measured on daily bases by Orhei Apa-Canal.
Table 8.5 Analysis from effluent wastewater quality from Orhei WWTP. Data provided by Orhei Apa-Canal from year 2006.
Parameter SS Dry residuals BOD5 Chlorides Ammonia Nitrites Nitrates Fe
Unit mg/l mg/l mg/l mg/l mg/l mg/l mg/l mg/l
Inlet concentration N/A N/A N/A N/A N/A N/A N/A N/A
After treatment 533 1,670 233 247 36.2 0.1 1.0 1.9
8.2.2 Main Problems in the Present System The main sewerage network originates from the 1960s and 1970s and has not been renovated since. However, flushing of the network is made by Apa-Canal staff using vehicle which they have. The network is made of ceramics, reinforced concrete and cast iron pipes, and is considered to be in a poor condition. It has not been within the scope of this study to carry out a full condition analysis of the sewerage network. It is however considered likely that - at least - a complete renovation of the most critical parts of the network and pumping stations is needed to keep the network in working order. As in the other towns in Moldova the network was originally designed to, mainly, serve Orheis largest industries. However, only a fraction of the old industries are still in operation. The network is thus currently merely used to serve some smaller industries, apartment blocks in the town centre and some private households nearby the town centre. Some 60 % (17,000 inhabitants) of the total population of Orhei (mainly people living in the multi-storey apartment buildings or in private households in the Town centre) is currently connected to the sewerage system. Sewerage PSs have recently been renovated with new submersible centrifugal pumps and frequency converters. Furthermore civil constructions of the pumping stations have also been upgraded and pumping stations could be considered to be in a reasonable good condition. Still, there is not adequate operational monitoring in the stations and PSs should be equipped with flow measurements and possibility to connect to SCADA system in the future. Currently the collected wastewater flow from the Town sewerage network is considerably large. Still, due a very poor condition of WWTP the wastewater is basically not treated at all. Wastewater quality from industries is not known. Wastewater flow from Town of Orhei can be estimated to increase in the future after network renovations and enlargements are carried
out. However, at the moment it is not possible to predict design wastewater flow for the new treatment plant thus it is not known when the implementation of the new plant is about to take place and on which time schedule the enlargement of the existing network is carried out. Still, it can be preliminary justified that at least level of current wastewater collection must be secured and some network enlargements shall be carried out in the future. WWTP is in need of complete renovation. Taken into consideration the condition of existing structures and machineries and insufficient process technology it could be recommended that the whole treatment plant will be replaced with new modern and more compact WWTP taken into account current and future wastewater flows and loads. In addition to above mentioned the existing WWTP is located on very high level and wastewater is currently pumped to the treatment plant from the Town some 100 meters lower level through some 5 km long pipeline causing high energy consumption. Therefore, it is recommended to find a new location for WWTP from lower ground level near the Town centre so that most of the produced wastewater could be led to the treatment plant by gravity. This would bring considerable savings in pumping costs is likely to result in significant health as well as environmental improvements in the area. Apa-Canal has tentatively studied four (4) different locations (all places located on same area some 1-2 km west from the Town centre) for new WWTP. In addition to that, in 2006, Town of Orhei has made agreement with Moldavian-Czech construction company Boncom SRL for construction of new WWTP to be located at one of above mentioned 4 proposed locations. According to this agreement the design work for this contract should take place in 2007. However, at this time the situation regarding this issue was not clear and it was indicated by Apa-Canal that the contract with Boncom SRL was postponed. Furthermore, the design documents and contract details were requested from Apa-Canal by Consultant several times but these were not available. 8.2.3 Implementation Methods
8.2.3.1
General
The priority order for needed short-term investments has been presented earlier in chapter 7.2. This chapter presents different options for implementation of prioritized investment packages. Proposed short-term investments related to sewerage system which were prioritised are as follows:
Implementing conditional analysis of existing sewerage network; and Implementing detail design for new WWTP including connection sewers (inlet and effluent).
Purchasing of new vehicle for septic tank emptying purposes has not been included in the proposed investment packages. However, there is a need for septic vehicle and it is highly recommended that ApaCanal studies possibilities for renting vehicle on daily bases from nearby municipalities. When considering the feasible investment packages for short-term investments in Orhei the main focus in near future renovations was paid on securing the water supply from existing natural spring water source and renovation on water supply network. However, it can be recommended that the renovation of sewerage network could also be started in the first place and work to be carried out in parallel with renovation of water supply network. Still, after renovation and possible enlargement of existing networks the next priority should be implementation of a new wastewater treatment plant and continue of extension of both sewerage and water supply networks. Furthermore, construction of new Orhei WWTP and continue of enlargement of the existing sewerage network could be considered as a most important medium-term investment in terms of renovation of sewerage system. Tentatively the new WWTP shall be designed for 27,000 inhabitants with wastewater flow of 150 l/cap/day respectively 4,100 m3 per day. However, the amount of industrial wastewaters in the future is not known and the design flow of the WWTP shall be re-estimated in the detail design phase of the plant. Tentatively the 1st construction phase (year 2013) of new WWTP shall include: Biological nitrogen removal process for inlet flow of 3,800 m3 per day with option for enlargement up to capacity of 5,000 m3 per day (for year 2020).
Furthermore, due very poor functioning of the current WWTP it is proposed that at least proper mechanical treatment shall be implemented to new WWTP site in first place. The proposed short-term investments within sewerage network have been presented in annex drawing 1989161-S-002.
8.2.3.2
Conditional Analysis of Existing Sewerage Network
Condition of whole sewerage network shall be analysed in detail. Parts of network with improvable condition shall be replaced under the medium-term investment plan.
8.2.3.3
Detail Design for new WWTP
The proposed location for new WWTP and proposed routing of inlet and effluent tunnels for new WWTP has been presented in drawing 1989161-S-002. Thus Apa-Canal does not have the existing design for new WWTP it should be contracted in the first place. Present WWTP should be replaced by new more compact WWTP in first place including mechanical treatment in minimum. The new WWTP should be located near the Town center so that the wastewater can be lead to the treatment plant by gravity. When selecting the place for new WWTP the following should be taken into consideration: A safety distance to near by housing areas; The distance to the effluent water bodies should be more than 500 m; and There is enough area for a rational compact plant and sludge treatment facilities.
The new WWTP shall include proper sludge treatment including stabilisation for instance in anaerobic digesters or in aerobic digestion, or by including the stabilisation in an activated sludge system, normally addressed as extended aeration. In the following three different options are presented and could be taken into consideration when selecting the process option for Orhei. Within all of presented options the constructed wetland is proposed as an option for tertiary treatment. It shall be noted that according to international design practises for municipal wastewater treatment the constructed wetland is suitable to be used only as a tertiary treatment after conventional wastewater treatment process. For storm waters the constructed wetland could be used as only treatment method. Option A: A classic treatment model based on the following treatment methods:
Pre-treatment including screening and sand/grit removal facilities; Primary sedimentation; Classic activated sludge process including aeration basins and final clarifiers; and Sludge treatment facility based on sludge thickening + anaerobic digestion and sludge drying beds.
o o
Option A is illustrated in the following picture.
Screens
Grit and fat removal
Primary sedimentation
Aeration basins
Final clarifiers
Optional: Wetlands
Figure. Simplified flowsheet of the classic treatment model for Orhei new WWTP Option A
Option A is based on the activated sludge process system, and probably the most used system for treatment of municipal wastewater world wide. The process can reduce the suspended solids by up to 70 % and BOD5 by 85 to 95 %. The biological process will be dimensioned as a medium loaded activated sludge process, typically reducing most of the organic matters found in the wastewater. The sludge from the plant will be stabilized separately. An anaerobic digestion is normally preferred for large plants; while for medium and small plant other systems are used. A classical activated sludge prpcess is found for instance in Balti. Option B: B modified extended aeration system, arranged as an Oxidation Ditch system, and based on the following treatment train: Pre-treatment including screening and sand/grit removal facilities;
Modified aeration basin for aerobic/anoxic operation, designed for nitrify-cation/denitrification and built in sludge stabilisation; Final clarifiers; and Sludge drying beds.
Option B is illustrated in the following picture:

Screens Grit and fat removal
Oxidation Ditch
Final Settling
Optional: Wetlands
Figure. Simplified flowsheet of the Oxidation Ditch model for Orhei new WWTP Option B
An attractive configuration of the Extended aeration system was developed during the 1950-s in the Netherlands. Due to the layout of the plant it was soon to be known as an Oxidation Ditch. The aeration basins are shaped like a horsetrack, normally equipped with two or four brush aerators. The aerators secure both the aeration and the mixing/transportation within the aeration reactor. By operating the aerators in an on/off mode it was found that both energy savings and improved nitrogen reduction was achieved within the system. The oxidation ditch is always followed by a final sedimentation stage, designed in the same way as in a conventional activated sludge system. A further development of the Oxidation Ditch system is the Carousel system, where the brush aerators are replaced by at least two slow speed surface aerators. The shape of the aeration reactors is specially elaborated in this case. The surface aerators will serve both as aerators and transportation units within the aeration tank. The arrangement of the basin walls is to a large extent the typical label for the Carousel system. Accordingly this system has a final sedimentation stage, designed in the same way as for the other cases.
In modern plants the aeration/mixing system is often based on a fine bubble bottom aeration system and separate slow speed mixers, securing the horizontal movement in the reactor. This arrangement secures also that zones within the reactor will have high levels of oxygen (> 2 3 mg O2/l), and other zones with virtually no free oxygen (anoxic zones). This in turn creates good conditions for nitrification/denitrification within the reactors;
The recycle activated sludge flow is normally at least 100 % of the design flow into the reactor system. Option C: C modified extended aeration system, arranged as a Sequncing Batch Reactor system, and based on the following treatment train: Pre-treatment including screening and sand/grit removal facilities; Four units of SBR-units working in sequence and in parallel; An equalization basin; Sludge drying beds.
The option C is illustrated in the following picture.
Screens
Grit and fat removal
SBR-units
Equalization
Optional: Wetlands
Figure. Simplified flowsheet of the SBR model for Orhei new WWTP Option C.
The SBR technology belongs to the emerging technologies developed during the last two decades in the 20th century. (SBR = Sequencing Biological reactor.) One of the main reasons for the development of this technology is the need for biological nutrient removal. It may be characterised as an Extended Aeration operated in a batch mode. Although the SBR was developed in the UK during the second decade of the 1900s, it is regarded as a new technology option. As it also normally provides a small footprint it may be seen as a distinct variant to be considered in the study. The SBR works as a Fill and Draw system. The low level in the reactors is always predetermined, while the filling level will vary from time to time. The technology is almost always based on at least a two reactors system. In the Tejgaon case it would be suitable to use four units. The unique features of the SBR system may be summarised as follows: The sizing of the aeration system, that is designed for only 8 - 12 h/d per reactor, as compared to the continuous aeration in the conventional activated sludge systems; and The design of the decanter system that is a unique feature of the SBR. Each set of decanter(s) in a separate reactor must by necessity be able to decant the maximum amount of water entering the reactor during one cycle at less than 1 hour.
8.3
8.3.1
Water Supply Network

Present System
A description of the present water supply system including available water analysis in the town of Orhei is presented in more detail in the PFS report. The existing water supply network before and after renovation has been presented in the annex drawings 1989161-WS-001 and, -002. Water supply network of Orhei is 164 km. There are 10,900 connections serving approximately 23,000 inhabitants out of a population of 27,000 inhabitants in town of Orhei. 9,000 connections have water meters. In outer districts there are 7,000 inhabitants for which Orhei Apa-Canal is not at present responsible for water supply or sewer collection. No information has been available to the consultant regarding water supply in these outer districts. Most enterprises have there own wels for water supply. Also the hospital has its own well while smaller companies, schools and
kindergartens get water from Orhei Apa-Canal. 100% of connected enterprises and institutions have water meters. Of sold water from Orhei Apa-Canal 85% is to private homes and apartments, while 15% is to enterprises and institutions. A new water supply network has been constructed in north-east part of town supplying 340 houses. Funds from World Bank provided need PE pipes while the work was done by Orhei Apa-Canal staff.
Water supply at present is 80% from natural springs which have rather good water quality, while 10% is from deep well at Gradina Publica and 10% from deep well at Mitocul Vechi. Water from natural springs is also supplying 5 surrounding villages. Capacity of Natural Springs 4800 m3/day while present consumption in Orhei is 2000 m3/day. From natural springs water is delivered to reservoir R3, with a capacity of 2000 m3, by a pressure pipeline of 13 km out of which 4 km is new and 8 km needs renovation. Due to difference of elevation between water intake at Natural Spring and R3 being more than 200 meters it is needed 3 pumping stations for the pipe from natural springs to PS3. PS5 is located at natural springs while PS6 and PS7 are located in between natural springs and R3. At PS5 there are 2 reservoirs of 125 m3 each, at PS6 there are 2 reservoirs of 250 m 3 each, and at PS7 there are 2 reservoirs of 250 m3 each. From reservoir R3 a small area is supplied by gravity, while pumps supply an even smaller area. Due to high elevations water is generally pumped into different reservoirs from which water is supplied by gravity to some areas and by pumping to other areas. On the distribution network there are 10 reservoirs: at PS1 (Gradina Publica) there are 2 reservoirs of 125 m3 each, at PS8 there are 2 reservoirs of 150 m3 each, at PS2 there are 2 reservoirs of 500 m 3 each and one of 300 m3, at PS8 there are 2 reservoirs of 2,000 m 3 each and one of 300 m3. 18 km of water network of size DN100 and smaller has been renovated. Work to replace pipes of DN100 and smaller will continue when funds are available.
8.3.2
Main Problems in the Present System
Many in-house water meters are old and give inaccurate readings. Orhei Apa-Canal received 1,000 new accurate water meters from World Bank. Presently work is carried out to test the old water meters
and those that are in worst condition will be changed. Until now 600 water meters have been changed and work is under progress to change 400 more. There is a need to replace most of the old water meters but presently funds are lacking. Old water meters are in general owned by consumers but new are owned by Orhei ApaCanal. Some old water meters in apartment house are owned by Orhei Apa-Canal. From water intake at Natural Spring 8 km of pressure pipeline needs renovation, while 4 km where pressure pipeline goes over private land has already been newly constructed on public land (along road). Water quality in natural springs is of rather good quality and more than sufficient to supply the entire population in town of Orhei. At present the water supply network in town does not have capacity to deliver natural spring water to all population. For this reason water from deep wells, where water quality is not of such good quality, is used for approximately 20% of water consumption. New pipes to connect reservoir R3 to pumping stations PS1 and PS2 are needed, approximately 7 km. After this new pipe is completed natural spring water can be used for water supply of entire town. 8.3.3 Implementation Methods
8.3.3.1
General
The priority order for needed short-term investments has been presented earlier in Chapter 7.2. This chapter presents different methods for implementation of prioritized short-term investment packages. Needed short-term investments on water supply network should include at least the following: Renovation of pressure pipeline from natural spring, 8 km; Connection of southern and northern pressure zones, new pipe 7 km Continuing renovation of existing network; and Chlorination plant at PS1 and PS3
In following chapters implementation methods for above-mentioned short-term investments have been presented on outline design level.
8.3.3.2
Renovation of Pressure Pipeline from Natural Spring
To secure future water supply from natural spring the pressure pipeline needs to be renovated. Due to large difference in elevation the pipeline will be under high pressure during operation. It is important to select material for pipeline according to this. To reduce energy cost diameter of pipe and operation of pumps should be selected to minimize energy consumption. Water consumption in 2013 (for which the system must be designed) average 3,800 m3/day, with expected maximum use of 5,000 m3/day and maximum hourly consumption of 500 m3/day. The pumps and the pipeline should be designed for this demand of 500 m3/hour. However, usually pumping should be kept close to average consumption since the reservoir R3 with a capacity of 2000 m3 will usually supply peak demand. There are also ten (10) reservoirs on the water distribution network with a total capacity of 6,150 m3. Designed capacity will be needed to secure water supply at peak demand at all times. New pipeline from natural spring to R3 should be DN300. Short-term investments related to renovation of pipeline from natural spring water intake to town of Orhei have been presented in drawing 1989161-WS-002.
8.3.3.3 Connection of Southern and Northern Pressure Zones and Renovation of Network
Needed renovation work shall include at least: Installation of new polyethylene pipes with dimensions between DN 50 and DN 200; Excavation work on streets to replace existing pipes with new; Replacement of old valves with new; Installation of new shut-off valves in order to disconnect smaller areas of the network from the main network in case of need for network renovations; Checking the condition of existing in-house connections and meters and replacement of all poor condition household connections; and Installation of new in-house water meters.
Connection of northern and southern pressure zones is needed in order to be able to supply the entire town of Orhei with natural spring water which is of better quality than deep well water. New pipe of 7 km is needed. The new pipe should connect R3 with PS1 and PS2.
About half of town is supplied either directly from PS3 or from pumps and reservoir at PS1. It means the new must have a high capacity from R3 to PS1 since also PS2 is supplied through the same pipe. It is suggested to design the pipe for estimated peak demand 500 m3/hour. From PS1 to PS2 the capacity can be approximately half of this, 250 m3/hour. Renovation of existing water supply network should be prioritised for of DN100 and smaller for which Orhei Apa-Canal can do the work with their own staff, only needing external funds for material. Replacing the old pipes will reduce leakage and in the long-term save water and energy. In areas where water pipes are in worst condition also larger pies need to be replaced. To identify these areas a more detailed study must made than what has been made in this outline design. During renovation of network old valves in poor condition should be replaced with new. In-house water meter of new reliable type must be installed at all connections lacking water meter or where the water meter is of old, unreliable type. Houses that are not connected to the water supply network are mainly located in areas where water pipes are existing, except they are not extended for the entire street. Mainly there are many short distances that need new water pipes. Preferably work on this can be done in connection with replacement of old pipes since many of the areas lacking water pipes will be located where old pipes are replaced with new. Short-term investments related water supply network renovation in short-term have been presented in drawing 1989161-WS-002.
8.3.3.4
Chlorination
New chlorination equipment is needed at PS1 and PS3. Since the reservoirs are located in residential areas it is not possible to use ordinary, traditional chlorination equipment. It is needed equipment which is approved for use in residential area. Orhei Apa-Canal has already started negotiation for delivering equipment from company of Aqua-Chlor. 8.3.4 Investment Cost Estimations Investment cost estimations for selected short-term investments have been presented in Table 8.6. It shall be noted that presented investment costs are only tentative and shall be re-estimated in the beginning of detail design phase. Investment costs are based on real collected investment cost information reported from similar construction works in Moldova in 20022007.
Table 8.6. Investment cost estimations for proposed short-term investments.
Investment Sewerage Operations
Unit Cost
Unit
8 3 7.0 22 2 7
Cost 1.10 MUSD

100,000 200,000 800,000
Conditional analysis of existing network Local design Detail design for sewerage network Local design enlargement Detail Design for new WWTP including International Design pressure sewer and effluent pipeline
Water Supply
Renovation of pressure pipeline from natural spring Renovation of PS5, PS6 and PS7 within pipeline from natural spring Connection of southern and northern pressure zones, new pipe Continuing renovation of existing network Chlorination plants at PS1 and PS3 Automation and control of all PS 130,000 USD/km 70,000 USD/PS 130,000 USD/km 90,000 USD/km 100,000 USD/unit 30,000 USD/unit
4.50 MUSD
1 000 000 200 000 900,000 2,000,000 200,000 200,000
TOTAL
5.60 MUSD
The design for new WWTP and related sewerage networks is included in the short-term investment plan while the implementation of new WWTP is considered as a long term investment. However, this investment is considered to have a high priority and thus we have included the preliminary investment costs for different implementation options presented earlier in Section 8.2.3.3 in the following Table:
Table 8.7. Preliminary investment costs estimation for different implementation options for new WWTP.
WWTP Investment Component 1 Phase: 3 800 m /day Mechanical Treatment Primary Clarification Aeration Tanks/Biological Reactor Secondary Clarification Sludge Thickening and Dewatering
Sludge Anaerobic Digesters for cas production (option)
st 3
Option A 4.90 MUSD 530,000 390,000 1,840,000 770,000 560,000

1,740,000 8
Option B 5.80 MUSD 530,000 3,070,000 770,000 560,000

1,740,000 8
Option A 5.20 MUSD 530,000 3 240 000 560,000

1,740,000 8
Power Supply Others (admin. and workshop buildings etc.)

Constructed Wetland for effluent treatment (option)
8
480,000 360,000
480,000
8
480,000 360,000
480,000
8
480,000 360,000
480,000 8
Option. Not included in total investment cost estimation.
In addition to above mentioned there will be additional investment costs for pressure sewer to new WWTP and for effluent sewer after the treatment plant. Tentatively these investment costs are as follows: Pressure Sewer to new WWTP: 0.6 MUSD (4.0 km, 150,000 USD/km); and Effluent sewer to the river downstream from the city centre: 1.0 MUSD (8.0 km, 125,000 USD/km)
8.3.5 O & M Cost Estimations Operation and maintenance cost estimations for selected short-term investments have been presented in Table 8.8. It shall be noted that presented O&M costs are only for short term investments and maintenance costs are estimated to be 3 % from all new mechanical investments including new pipelines.
Table 8.8. O&M costs for proposed short term investments.
O&M Costs Maintenance costs, 3 % Chemicals (chlorine) Energy
Unit Cost 250 USD/ton 0,07 USD/kWh
Unit 10 0
9
0,13 MUSD 129 000 2 500 0
Main O&M costs for WWTP options were estimated to be same for each of the option AC. Table 8.9 presents the tentative annual energy and chemical cost estimations for new WWTP. Personnel costs are not included thus those have been estimated to be same as with current costs.
Table 8.9. Tentative O&M cost estimations for WWTP option.
O&M Costs WWTP, energy WWTP, chemical (FeSO4)
Unit Cost 0,07 USD/kWh 45 USD/ton
Unit 329,000 55
0,13 MUSD 23,000 2,000
8.3.6 Energy Saving Investments Different investments related to energy saving potential can be limited to following actions as follows:
9
Estimated thus Chlorine is to be used only in case of emergency.
Renovation of pumping stations within 8.0 km long pipeline from natural spring to Orhei; Renovation of water supply network in order to reduce amount of water pumped to the distribution network (lower the level of NRW); Construction of new WWTP on lower level and taking out of operation of existing inlet PS for existing WWTP; and
Most remarkable energy saving potential is related to new WWTP and water amount pumped to the distribution. However, currently there are no energy consuming operations at the WWTP and only main energy consumption related to sewerage operations is wastewater pumping from the Town to WWTP site. When considering the energy saving potential within WWTP the main focus should be paid on implementation of new investments so that the best available technology would be used. Sewerage operations: Basically the WWTP is not operated and it does not have any significant energy consuming operations. Still, it is clear that wastewater from Orhei must be properly treated in the future and it could be justified that for this purpose either existing WWTP must be completely renovated or new WWTP will be constructed on a lower ground level near the Town centre so that most of the produced wastewater could be led to the treatment plant by gravity which would bring considerable savings in pumping costs. Still, due the fact that a possible new WWTP will dramatically increase the energy consumption it is not possible to calculate direct energy savings achieved by taking existing inlet PS out of operation. However, when new WWTP is constructed on lower level so that wastewater can be lead to the treatment plant by gravity the existing sewerage PS can be taken out of operation. This will bring significant savings in terms of energy consumption. Water Supply Operations: For water network energy consumption is mainly connected to pumps. Since there are large differences in altitude, both from natural springs to reservoir R3 and within the town energy consumption can be expected to be high. The pumps (and supporting systems) within pumping stations used to deliver water from the natural spring to the city have been proposed to be replaced. The renovation of each of the three PS is estimated to cost 70,000 USD while the total amount of needed investment is approximately 200,000 USD.
One of the important ussues is to reduce leakages from the network which will reduce needed amount of water pumped. Leakage will be reduced when old pipes are replaced with new. Also by selecting pumps designed for real water demand can reduce energy consumption. Operation of network and pumps should be made to minimise energy need. E.g. reservoirs can be used to supply peak demand. In that case water can be pumped to reservoirs at a low rate meaning lower flow velocity in pipes and hence less energy loss in distribution pipes. An automation and control system (SCADA) for water pumping arrangements and reservoirs including ultra sonic flow metering for all pumping stations and level meters in all reservoirs would be very useful for this purpose. Tentatively automation and control system would have cost of 30,000 USD pr PS including monitoring room within Water Supply Company. The total amount of needed investment is approximately 200,000 USD.

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SWECO INTERNATIONAL

Water Supply and Sanitation Project Implementation Unit

Project No. 1989 161 000

P:\ 1080\01 Uppdrag\1989161000 FS 15 Towns Moldova

Abbreviations and Acronyms

This study is part of a Moldovan plan for the water sector

Delegate responsibilities and make accountable

Number of staff is extremely high, education needed to support reduction.

Household revenues are difficult to estimate

Although salaries are low, water costs are affordable.

A willingnessto-pay survey was conducted in 6 towns.

Consultants Time Schedule

Month Apr Activity

Figure 2.1 Modified time schedule for the project period.

General about Orhei

Figure 3.1 Location of Orhei

The Owner. How the Owner Governs Apa-Canal

Organization and Management

Figure 1 The Organization of Orhei Apa-Canal

Staff. Efficiency and training needs

Description of areas Financial Management

Managerial staff Top and medium level

Negotiating Crisis and emergency management Time management Managing meetings

Advanced use of word processing package Advanced use of database

Suggested Customer Service Standards

Water Supply Services

5-YEAR ULTIMATE STANDARD

Cold water supply pressure

Population Total Urban Rural Average number of population for 2006

(Thou.) 33.7 33.7 35.15

Volume of industrial production in 2006 Total out of which Orhei

Current prices (mil. lei) 17533 266.3

2004 Compared to previous year (%) 106.9 104.1

Current prices (mil. lei) 21123.5 401.7

2005 Compared to previous year (%) 106.3 132.1

Current prices (mil. lei) 22243.2 350.8

2006 Compared to previous year (%) 93.1 81.9

Source: National Institute for Statistics

Table 5:3: Financial Status of Commercial Companies

Jan.-Sept. 2004 Total Orhei

Jan.-Sept. 2005 Total Orhei

Jan.-Sept. 2006 Total Orhei

Source: National Institute for Statistics

Estimation of Household Average Revenues

No. No. Lei Lei

Tariff Policies and Affordability

Figure 5.2: Water Tariff Evolution

0.80 0.60 0.40 0.20 2004 2005 2006

Source: Water Utility in Orhei

Sewerage average tariff evolution

Source: Water Utility in Orhei

Results of Social Surveys

Figure 5.6: Drinking water source preferences for domestic customers

Analysis of the historical financial performances

2004 479.8 479.8 -

2005 527.3 507.8 19.4

2006 691.9 641.8 50.1

Figure 6.1: Structure of Sales

Source: Water Utility in Orhei

Table 6.2: The Evolution of Invoiced quantity 2004-2006

2004 Th. m3 454.1 383.0 71.1 521.0 244.9 276.2

2005 Th. m3 482.6 393.0 89.6 558.1 263.7 294.5

Personnel (salaries and related taxes) Depreciation