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Report No 356a YU

Appraisal of FiLE CopyA Water Supply and Wastewater Projectfor DubrovnikYugoslaviaOctober 9, 1974

Regional Projects DepartmentEurope Middle East and North Africa Regional Office

Not for Public Use

Dowument of the Interratnal Bank for Reconbstt and DevekomTInternational Develo e Assoctton

This report was prepared for offical use only by the Bank rou It may notbe pubkgsed quoted or cted wihota nk romp auowizatro The 8ark Groupdoesnot accept respobdlity for the accutacy or competeross of tte report

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CURRENCY EQUIVALENTS

Currency Unit = Dinar (Din)Din 1 = US$ 0.066Din 1,000,000 = US$ 65,574US$ 1 = Din 15.25US$ 1,000,000 = Din 15,250,000

WEIGHTS AND MEASURES

mm = millimeter (1 millimeter = 0.039 inches)m = meter (1 meter = 3.28 feet)km = kilometer (1 kilometer2s 0.62 miles)km = square kilometer (1 km 100-hectares

= 247.1 acres)ha = hectare (1 hectare = 10,000 square meters

= 2.47 acres)m3 = cubic meter (1 m3 = 1.31 cubic yards3 = 264.2 U gallons)m /sec= cubic meters per second (1 m-/sec

= 264.2 US gallons/second= 35.3 cubic feet/second)

ACRONYM

Vodovod - Dubrovnik Water and W,Zastewater Enterprise(Vodovod i Kanalizacija Dubrovnik)

FISCAL YEAR

January 1 to December 31

APPRAISAL OF

DUBROVNIK WATER SUPPLY AND WASTEWATER PROJECT

YUGOSLAVIA

TABLE OF CONTENTS

Page No.

SUM4MARY AND CONCLUSIONS ............................. i-i

I. INTRODUCTION ........................................ 1

II. THE WATER SUPPLY SECTOR ............................. 2

III. THE PROJECT AREA .................................... 3

A. Background ..................................... 3B. Tourism Facilities ............................. 3C. Water Supply and Wastewater Facilities .... ..... 5

IV. THE PROJECT ENTITY .................................. 5

A. Background ............................. 5B. Organization and Management .... ................ 6C. Accounts and Audit ............................. 7

V. THE PROJECT ........ ................................. 8

A. Description ..................................... 8B. Cost Estimates .................................. 10C. Financing ................................... ,. 12D. Organization and MIanagement .15E. Approval .15F. Implementation Schedule ......................... 15G. Procurement ................. 15H. Disbursement ................. 16

VI. FINANCE . o................. 16

A. Background ...................................... 16B. Past Performance and Present Position .17C. Tariffs ........ ...... ........... 18D. Future Performance. 24

VII. JUSTIFICATION .................... 21

VIII. A0RWMENTS REACHED AND RECOMENDATIONS .23

This report was written by Messrs. B. Grover and D.C. Jones.

Table of Contents (Continued)

LIST OF AMNEXES

1. Statistics and Projections for Tourism2. Existing Facilities of Vodovod3. Project Description4. Cost Estimate5. Construction Schedule6. Disbursement Schedule7. Projections of Population, Water Sales and Water Production8. Organization Chart for Vodovod Dubrovnik9. Income Statements (Water, Wastewater and Summary)10. Funds Flow Statements11. Balance Sheet12. Assumptions for Financial Forecasts13. Tariffs14. Summary of Financial Principles and Regulations15. Details of Non-project Capital Expenditures 1973-198216. Internal Cash Ratios17. Project Expenditure by Years

MAP

1. Dubrovnik Commune (10624)2. Dubrovnitk Water Supply Facilities (10625)3. Dubrovnik Wastewater Facilities (10626)

APPRAISAL OF


YUGOSLAVIA

SUMMARY AND CONCLUSIONS

i. Dubrovnik is on the attractive Adriatic Coast, focal point ofYugoslavia's tourism industry. The town is the country's oldest and bestknown international resort, relying increasingly on tourism for its liveli-hood. Investments in hotel superstructures have recently been substantialand are expected to grow even larger with construction of the Babin-Kuktourism complex, which the Bank is helping to finance. Investments in basicinfrastructure, particularly water and wastewater systems, have not kept pace,however, with investments in hotel superstructures. The existing water sup-ply system, basically sound and capable of serving present demand, needsmodest improvement through expansion to accommodate expected increases indemand. The existing wastewater system is inadequate and needs fundamentalaction to improve drainage in the town and to avoid increased pollution oflocal waters.

ii. Vodovod Duhrovnik-Poduzece Za Izgradnju I Odrzavanje Vodovoda iKanalizacije Dubrovnik (Vodovod), the local enterprise responsible for watersupply and wastewater systems in Dubrovnik, engaged groups of consultants whoprepared separate master plans and feasibility studies for improving the sys-tems. Through the water supply component Vodovod will continue to providesafe and reliable water by means of an increase in pumping capacity and theextension and improvement of the distribution system. Through the largerwastewater component of the project Vodovod will renovate and extend Dubrovnik'sexisting system, eliminating pollution and ensuring preservation of town and.arine environments through a comprehensive system of sewers, pumping stations,treatment and disposal facilities.

iii. The project will cost US$9.6 million, of which US$2.1 million willbe for the water supply system and USS7.5 million for the wastewater system.Vodovod would borrow USS6.0 million from the Bank to cover US$4.8 million ofthe cost, plus US$1.2 million of the interest during construction. The loanwill finance foreign exchange costs of about US$3.3 million, including in-terest during construction, and local costs of about US$2.7 million. Theremaining US$3.6 million, together with US$4.9 million required to cover thebalance of Vodovod's investment program will be financed through: loans fromthe Republic of Croatia Water Fund and the Bank of Dubrovnik; contributionsfrom the Babin-Kuk Hlotel Enterprise, other enterprises, and consumers; a grantfrom the Dubrovnik Commune; and internal cash generation from Vodovod.

iv. Preliminary designs for botlh systems were prepared by Yugoslav con-sultants. Contracts for supply and installation of equipment and for civilworks expected to cost more than US$100,000 will be put to tender on the basis

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of international competitive bidding in accordance with the Bank Group's "Guide-lines for Procurement". For locally manufactured equipment, a preference mar-gin of 15% or customs duty, wqhichever is lower, is proposed. All major equip-ment supply and civil works contracts are expected to be won by Yugoslav firms;contracts for specialized equipment for the treatment plant and pumping sta-tions, may be placed with foreign subcontractors. Civil works are expectedto begin in 1975 and to be completed by the middle of 1978. Vodovod will beresponsible for carrying out the project. Consultants will be needed to as-sist in final design, procurement, and construction supervision.

v. Vodovod's financing policy must be directed toward reform from alow-growth institution relying on soft loans and charging modest tariffs intoan institution capable of expanding its systems extensively to meet increasingtourist demands and to provide much of the necessary finance through its ownresources. The Bank loan is intended to assist Vodovod in such reform. Tomeet requirements for cash, rates of return, and future capital expenditures,Vodovod's low tariffs will have to be raised regularly so that in four yearswater charges will be about 75% higher than at present and wastewater chargesabout double present levels.

vi. Because tourism is highly competitive and extremely sensitive toenvironmental degradations, Dubrovnik's water supply and wastewater systemsmust be improved so that the town's share in the tourism market is not jeo-pardized. The Commune, with its small resident population, has indicatedthe significance it attaches to the project by its willingness to bear locallythe full financial consequences. The modest improvement of the water supplysystem through expansion is the least cost solution to meet increasing demands.The extensive improvement of the wastewater arrangements is similarly theleast cost solution chosen from various alternatives for collection and dis-posal. Tariffs for both services will be progressively increased so that,by 1978, water tariffs will cover long-run marginal costs and overall rev-enues will generate a reasonable proportion of funds needed for future fur-ther expansion of either service.

vii. Agreement having been reached during negotiations with Vodovod oncertain issues, the project is suitable for a Bank loan of US$6.0 million toVodovod for a 24-year term, including 4 years of grace.

APPRAISAL OF

DUBROVNIK TWATER SUPPLY AND WASTEWATER PROJECT

YUGOSLAVIA

I. INTRODUCTION

1.01 The Government of the Socialist Federal Republic of Yugoslavia hasrequested a Bank loan of US$6.0 million to help finance an infrastructureproject for the town of Dubrovnik, costing (including interest during construc-tion) US$10.9 million. This Bank investment in the water supply sector in-volves extensions to the existing water supply system and construction of acomprehensive wastewater system. "Vodovod Dubrovnik" -Poduzece Za IzgradnjuI Odrazznivrej Vodovoda i Kanalizacije Dubrovnik (Vo(dovod, or Dubrovnik Waterand Wastewater Enterprise), a local enterprise which is responsible for waterand wastewater facilities throughout the Dubrovnik Commune 1/, will be theproject entity and the borrower.

1.02 Dubrovnik, on the Adriatic coast in southern Croatia, is the coun-try's oldest and best-known international resort. It is the site of the pro-posed Babin Kuk tourism complex, a project for whiich the Bank made a loan ofUS$20 million in 1971 (782-YU). When this loan was made the Government under-took that infrastructure necessary for the town would be completed before theBabin Kuk project become operational. Funds were provided in this loan tohelp finance studies of the infrastructure necessary to support the tourismdevelopment. The first Bank reconnaissance of infrastructure in Dubrovnikwas carried out in October 1970, during the appraisal of the tourism project.As this mission concluded that reinforcement of the existing water supplyand wastewater systems would be required, several missions have subsequentlyvisited Dubrovnik to help in project preparation.

1.03 Because tourism facilities are expected to expand along the coastnorth of Dubrovnik to meet demand and because water supply will be neededto support this expansion, Vodovod engaged, in 1970, Yugoslav consultants(Inzenjerski Projektni Zavod of Zagreb) to complete a master plan and feasi-bility study for a regional water system. The consultant's report proposeda system, based on the Dubrovnik River as the source, which would includepipelines and pumping stations to transmit water northwest along the coastpast Slano to Ston (see Map 1). Undersea pipelines would supply the islandsof Kolucep, Lopud, Sipan, Jacklan, and Mljet. This regional system, whichwould be built in four stages, was estimated in 1970 to cost US$20 millionequivalent. When major tourism developments proceed in tihis region Vodovodwill have the plans to construct the necessary infrastructure. To date, how-ever, this regional system has not been required.

1/ A Commune, in Yugoslavia, is an administrative area. The DubrovnikCommune covers Dubrovnik town and its surrounding communities. In thisreport, unless otherwise specified, the expression "Dubrovnik" refersto the town and "Dubrovnik Commune" or "the Commune" to either the ad-ministrative area or its responsible governing authority.

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1.04 Yugoslav consultants (Projekt Sarajevo) had been engaged by Vodovod,before the Bank became involved, to prepare a master plan and feasibility studyfor a wastewater system for Dubrovnik. As this study progressed Bank missionssuggested the need for more information on the marine environment, the proposeddisposal system and alternative layouts for the sewer network based on differ-ent treatment plant locations. Accordingly in the summer of 1971 the Insti-tute of Oceanography and the Hydrographic Institute of the Yugoslav Navy,both from Split, completed extensive hydrographic and oceanographic investi-gations of possible disposal sites. Vodovod then engaged additional consul-tants, the Institute of Civil Engineering Faculty of the University of Zagreb,to review Projekt Sarajevo's work in the light of the marine investigationsand to finalize a master plan based on consideration of alternative systems.The Institute's preliminary report was completed in August 1972.

1.05 An appraisal mission comprising Messrs. B. Grover and D.C. Jonesvisited Dubrovnik in May-June 1973. Mr. Jones returned briefly in September1973 to discuss financial aspects and both officers again briefly visitedDubrovnik in June 1974. This report is based on information obtained bythe missions and provided by Vodovod, the consultants involved, and DubrovnikCommune.

II. ThE WATER SUPPLY SECTOR

2.01 The water supply sector in Yugoslavia is not organized at the Fed-eral or Republic level. Individual communities are generally responsible fortheir own water supply and associated wastewater facilities. In most instances,enterprises serving the communes plan, construct and operate these facilities.Vodovod is the responsible enterprise for Dubrovnik Commune.

2.02 Increasing attention is being paid in Yugoslavia to the problemsof water and air pollution, and to the integrated development of the waterresources. The authorities wish to preserve and enhance the relatively highqualitv of their coastal waters, to improve the quality of inland waters byconstruction of flow regulating structures and waste treatment facilities,and to reduce the severe air pollution encountered in certain cities andindustrial centers. Examples of other projects in the sector with whichthe Bank is involved are the:

(a) Ibar multipurpose water project in Kosovo, for which theBank lent US$45 million in 1971 (Loan 777-YU). The Kosovoauthorities are to undertake studies to find means of re-ducing water and air pollution from the major industriesto which the project will supply water;

(b) proposed pollution control project in Sarajevo, which willinclude facilities to improve water supplies and to reducewater and air pollution.

2.03 Efforts to improve water supplies and wastewater facilities havebeen particularly strong along the Adriatic Coast, principal focus for tourism

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in Yugoslavia. The Yugoslavs wish to preserve and enhance this very attractiveenvironment, which is generallv unspoiled by any large scale industrial devel-opment or population concentration. 1/ Wastewater projects similar to thatproposed for Dubrovnik are in various stages of design and construction atthe coastal cities of Split, Herceg Novi and Budva.

III. THE PROJECT AREA

A. Background

3.01 Dubrovnik has long been establishied as a commercial center. Morethan six centuries ago medieval Dubrovnik minted its own money, controlledbuilding development according to an urban plan and provided many publicservices, including a pharmacy, a medical service, a foundling hospital anda refuge for old people. By the sixteenth century, the then Republic ofDibrovnik was a thriving trading state with a rich culture. W4ooden houseshad been replaced bv masonrv buildings and water supply and drainage systemswere operating.

3.02 In 1667, when its comnercial role was declining, a catastrophicearthquake levelled Dubrovnik. Recovery was slow and difficult, but by thesecond half of the eighteenth century the city, its fleet, and trade wereagain prospering. Although Dubrovnik's independence ended formally in 1808when the Republic was abolished, the spirit of its citizens today reflectscenturies of independence, confidence and international trading. DubrovnikCormune, the southernmost cormune in the Republic of Croatia, shares commoninland borders with communes in the Republics of Yontenegro and Bosnia-Iterzegovina (see Map 1).

3.03 The economy of Dubrovnik has changed dramatically over the yearsfrom commerce to tourism. Dubrovnik is now Yugoslavia's leading interna-tional tourist center. When the advent of modern tourism began near theend of the nineteenth century, tourists were first attracted to Dubrovnik'sunique combination of assets: warm Mediterranean climate, scenic coastlines,warr and crvstal clear bathing waters, and strong cultural traditions. Withinthe past decade, the completion of the Adriatic highway, with Bank assistance,and the expansion of the airport have made Dubrovnik accessible to, and popu-lar with, increasing numbers of tourists, both foreign and domestic, includingmany visitors from northern Europe and North America.

13. Tourism Facilities

3.04 Of the 60,000 residents in the Commnte, 54% live in Dubrovnik. Thetown is an important regional center as well as a tourism focal point.

1/ The three largest towns on the coast are Rijeka (population 185,000),Split (population 125,000) and Dubrovnik (population 33,000).

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Statistics on actual growth of tourism from 1965 to 1973 and projections for1980 follow:

Statistics Average Projections AverageAnnual AnnualGrowth Growth

1965 1973 Rate 1980 Rate1965-73 1973-80

Tourism Capacity ofDubrovnik Commune (beds)

Town 9,572 17,401 7.8 23,000 4.0

Surrounding Community 11,654 24,611 9.8 40,000 7.2

Total Commune 21,226 42,012 8.9 63,000 6.0

Tourism Usage ofDubrovnik Commune

(bed-nights)

Town 1,005,792 1,379,560 4.0 2,490,000 8.8

Surrounding Community 953,433 2,182,546 10.9 3,152,000 5.4

Total Commune 1,959,225 3,562,106 7.8 5,642,000 6.8

Annex 1 contains a breakdown of these figures on an annual basis. The major-ity of tourists stay in pensions, camps, and similar lodgings instead ofhotels. Most stay outside Dubrovnik but almost all make at least one visitto the attractive old town during their stay.

3.05 The Babin Kuk project which the Bank has agreed to help finance(Loan 782-YU for US$20.0 million) calls for the construction of an integratedtourism complex with hotels, restaurants, shops, guest services, recreationalfacilities and related on-site infrastructure, including water distributionand sewer networks. Operations are expected to begin in 1976. The site ofthe project is the Babin Kuk peninsula, northwest of the built-up area ofDubrovnik town (Map 2). The Commune has decided that no further hotels shallbe allowed in Dubrovnik apart from the Babin Kuk complex and the several smallhotels now under construction. This decision takes account of space limita-tions and potential traffic congestion in the town. Future tourism develop-ments will be limited to other coastal locations outside the town (e.g. Cavtat,Slano, Mlini, etc. - see Map 1) where, in fact, recent growth is already evid- #

ent.

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C. W4ater Supply and Wastewater Facilities

3.06 The water supply system serving Dubrovnik continues to use thegroundwater sources which first brought water to public fountains in thetown-in 1428 1/. Today, the main source is the Dubrovnik River whichemerges dramatically from a limestone formation at Komolac behind SrdjMountain. Water is chlorinated, pumped and distributed to almost 4,500 con-nections, of which 95% are metered. No shortages have occurred, but pumpsoperated almost continuously on the 1973 peak day and some 90 requests fornew connections are being held over because parts of the distribution sys-tem are inadequate. Map 2 and Annex 2 provide details of the existing sys-tems. Apart from Dubrovnik, Vodovod operates water systems serving fiveother areas: Zupa, Cavtat, Airport, Ston and Slano (see Map 1). Thesesystems are all based on groundwater and together produce water equivalentto about one third of that used in Dubrovnik town. Annex 2 provides details.

3.074 Dubrovnik's wastewater system, dating back to the storm sewers builtcenturies ago in the old town, collects storm drainage as well as wastewater.Some 30 km of sewers (serving about half of those who have water supply con-nections) discharge wastes without treatment through 33 separate outfallsalong the coast (Map 3). This causes serious odor problems, particularlyin the Gruz and old town harbors, as well as severe pollution of inshorecoastal areas. Annex 2 provides details. Properties which are not servedby sewers are forced to rely on septic tanks for wastewater disposal. Inmany parts of the town these septic tanks have to be pumped from time totime. No other areas of the Commune have wastewater systems; individualproperties make independent arrangement (septic tanks, etc.) for wastewaterdisposal.

IV. THE PROJECT ENTITY

A. Background

4.01 "Vodovod Dubrovnik"-Poduzece Za Izgrandnju I Odrzavanje Vodovoda iKanalizacije (Dubrovnik Water and Wastewater Enterprise, or Vodovod) is theproject entity. As with other enterprises in Yugoslavia, Vodovod is con-trolled by its workers who direct the enterprise through the Worker's Coun-cil. Ilowever, Vodovod is not entirely autonomous, because the Commune:

(a) approves Vodovod's charter and any changes therein;

(b) approves all changes in Vodovod's tariffs, or if it dis-approves them guarantees any revenue needed for Vodovod'sefficient operation;

1/ Onforio's large and small fountains are famous landmarks in the oldtown of Dubrovnik.

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(c) may order Vodovod to carry out appropriate public works atthe expense of the Commune; and

(d) acts as coordinator of the various local enterprises, in-cluding Vodovod, for the general economic and social wel-fare of the area.

B. Organization and Management

4.02 Vodovod is responsible for water supply facilities throughout thecommune. The only wastewater system for which Vodovod is responsible is inDubrovnik.

4.03 Vodovod's organization chart is shown in Annex 8. Staff totalling111 is reasonably well directed by the managinig director, with policy guidanceprovided by the worker's council. The responsibilities of Vodovod have beenmodest to date. A qualified technical director was appointed in 1972 andwith the assistance of engineering consultants during project construction(para 5.03), Vodovod should be able to manage the technical aspects of theproject effectively.

4.04 Financial management in Vodovod has not been strong, particularlyregarding future planning. The finance director has recently retired, givingVodovod the opportunity to recruit a qualified replacement to take over andstrengthen this part of the organization. During negotiations agreement wasreached with Vodovod that a satisfactory finance director will be engaged.

4.05 A septic tank service is presently provided by "Sanitat", a sepa-rate enterprise, which charges the property owners each time the tank ispumped (see Annex 2). Sanitat's principal activities concern hygienic con-trol measures for ships and the port; it pumps septic tanks only becausenobody else wants to provide the service. The mission recommends thatVodovod should become responsible for emptying septic tanks because itcould then:

(a) select priorities for expanding the sewer networks moreefficiently if it knew from current information whichareas were experiencing most difficulties with septictanks;

(b) gain increased revenues if it were responsible for servic-ing septic tanks as well as sewers because it could iden-tify unaccounted-for sewer connections. Vodovod knows of2,330 sewer connections and 630 septic tanks, which togetherare about two-tliirds of the water supply connections;

(c) by taking over all wastewater services in Dubrovnik, ensurepublic support for its expansion program and the associatedcharges.

Accordingly Vodovod agreed during negotiations that it will make arrangementsto become responsible for emptying septic tanks in Dubrovnik by December 31,1975.

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4.06 At present no regulations govern the use of the wastewater systemin Dubrovnik. The Commune, in consultation with Vodovod, will have to enactappropriate regulations which, among other things should:

a) prohibit introduction of stormwater into separate sanitarysewers;

b) compel properties served by sanitary sewers to connect tothose sewers and abandon existing septic tanks;

c) permit Vodovod to charge appropriate properties for wastewaterdisposal through a surcharge on water consumption as now and/orsome other reasonable basis such as a charge per sanitary fittingor a property assessment;

d) control the strength of industrial wastes introduced into sewers. 1/

The necessary regulations were discussed during negotiations and assurancesobtained from the Commune that regulations satisfactory to the Bank will be-come effective in Dubrovnik not later than June 30, 1975. It was agreed thatas a condition of loan effectiveness the Commune would enter into an obliga-tion, in consultation with Vodovod, to prepare such regulations.

C. Accounts and Audit

4.07 Financial records are kept according to the standard system laiddown by the Social Accounting Service. The staff are competent and recordsare kept manually in a reasonably efficient fashion, but some tidying-up isrequired. The information provided by the accounting system is adequate,with certain adjustments, to produce financial statements along lines familiarto the Bank. The accounting office could probably benefit from the introduc-tion of simple keyboard accounting machines but extensive mechanization isnot required. Cost accounts give adequate breakdoxwn of financial informa-tion about fixed assets, inventories and job-costs.

4.08 All billings are monthly. Commercial enterprises are billed fromheadquarters but domestic consumers make cash payments to meter readers.The advantage claimed for the latter system is that cash collection is ex-pedited. An ideal division of duties for internal financial control is notpossible in a small organization like Dubrovnik's. However, although the

1/ At present only one industry in Dubrovnik (making vegetable oil andbottling beer) produces significant industrial wastes. Town plannershope to relocate this industry and future ones in an industrial parkin the Komolac Valley behind Srdj Mountain, where an industrial wastesystem might be required in future.

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present arrangements have built-in checks and appear to be well supervised,limited improvements should certainly be possible under the new financedirector.

4.09 During negotiations Vodovod agreed that it will review the account-ing and billing systems in consultation with the Bank to determine what im-provements are necessary and that it will implement any such improvementswithin 12 months of signing the loan agreement.

4.10 As with all Yugoslav enterprises, audit is carried out by the So-cial Accounting Service. The standards of these audits is currently underdiscussion between the Yugoslav authorities and the Bank, with the intentionof establishing within the Social Accounting Service a unit which will auditthe enterprises handling Bank projects to a standard acceptable to the Bank.During negotiations, agreement was reached that the accounts of Vodovod willbe audited in accordance with sound auditing principles consistently appliedby the Social Accounting Service or another competent and experienced audit-ing organization. The auditor's report will be sent to the Bank within sixmonths of the end of each fiscal year.

V. THE PROJECT

A. Description

Summary

5.01 The project consists of facilities to be built by Vodovod duringthe period 1975-1978 to improve the water supply and wastewater systems inDubrovnik. It is intended to reinforce infrastructure so as to sustain thetown's growing economy, based on tourism. Improvements and expansions else-where in the Commune than in Dubrovnik are not included. The water supplycomponent, which involves extensions and improvements to the basically soundexisting system, will enable Vodovod to continue to supply safe and reliablewater. The wastewater component is more complex and involves construction ofa comprehensive system, because existing facilities are inadequate.

Water Supply

5.02 A modest expansion of Dubrovnik's existing water supply system isrequired to accommodate the expected increase in water demand, including theincrease resulting from the Babin Kuk tourism project. Preliminary designsfor the pumping station and rising main were carried out as part of themaster plan for the northern regional water system (para 1.03). Consultantswill be required for final design, procurement and supervision of construc-tion. Map 2 shows the project facilities in red and Annex 3 discusses themin detail. In summary, this project component comprises:

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(a) extensions of the Komolac pumping station and installationof two additional pumps;

(b) new 1.4 km rising main from the pumping station to the tun-nel through the Srdj mountain;

(c) construction of a 2,000 m3 reservoir at Babin Kuk;

(d) extensions and renovations of the distribution system;

(e) acquisition of land; and

(f) engineering design, supervision and project administration.

Wastewater

5.03 Construction of a comprehensive wastewater system in Dubrovnik isintended to eliminate all existing outfalls, to expand the present sewer net-work and to collect all flows for treatment and disposal through a submarineoutfal,l. The wastewater component involves major renovations to upgrade theexisting system. Yugoslav consultants (Project Sarajevo and the Institute ofCivil Engineering Faculty of the University of Zagreb) have prepared prelimi-nary designs for these facilities as the first stage of a master plan servingthe entire town. Consultants will also be required for final design, procure-ment and supervision of construction. The wastewater facilities, which areshown on Map 3 and described in detail in Annex 3, include:

(,a) construction of 13.6 km of network sewers and 8.2 km ofcollector sewers;

(b) modifications to existing sewers;

(c) installation of four automatically operated pumping stations;

(d) construction of a treatment plant for comminution and removalof floatables;

(e) construction of outfall sewer south of the cliff face ofPetka Hill, including 1.3 km of undersea pipeline, terminat-ing in a diffuser section at a depth of 97 m;

(f) acquisition of land; and

(g) engineering design and supervision and project administration.

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5.04 Generally, the existing combined sewer system will be modified toseparate sanitary and stormwater systems. 1/ The sewer network will be ex-tended gradually, with priority given to the old town and to areas whereseptic tanks do not work effectively due to adverse geological conditions.Some existing sewers will be reconstructed and connections from those pro-perties which introduce both wastewater and stormwater into existing sewerswill be modified so that a separate sewer system results.

5.05 Vodovod's offices and workshops will be expanded, in line with theenlargement of the utility's operating responsibilities, and equipment foroperation and maintenance of the wastewater system will be purchased.

Land

5.06 Water pipes and sewers will generally be laid in the streets butVodovod must acquire land on which the pumping stations and the wastewatertreatment plant will be constructed. It is understood that the necessaryland will be purchased from the Commune. During negotiations, agreementwas reached with Vodovod that all necessary land, including easements inthe public roadways, will be acquired for the project not later than June 30,1976.

Ecological Aspects

5.07 By eliminating all existing sewer outfalls the project will gr4atlyenhance the marine environment around Dubrovnik and eliminate obnoxious con-ditions along the coastline, particularly in the new and old harbors. Expan-sion and improvement of the sewer networks will also reduce ground pollutionand associated odor nuisance due to septic tank overflows. The pumping sta-tions and treatment plant will be small structures, sited unobtrusively anddesigned for efficient and odorless automatic operation. The project willaccordingly make a substantial improvement to the environment of Dubrovnik.

B. Cost Estimates

5.08 Project cost estimates, including duties and taxes, but excludinginterest during construction, are shown in detail in Annex 4. These esti-mates, which show an estimated foreign exchange cost amounting to 22% oftotal cost, can be summarized as follows:

1/ Stormwater drainage is the responsibility of another communal enter-prise, "Institute for the Construction of Dubrovnik", or Zavod, whosemain concern is the operation and maintenance of local roads. Separa-tion of responsibilities along these lines is not unusual and shouldpresent no special problems.

-- ~-1

Project Cost % ofProject Elements Total

Dinar (000) US$ (000) Project

Water Supply Sytem Local Foreign Total Local Foreign Total Cost

Pumping Station and 8,738 3,340 12,078 572 219 791 8.3Rising Main

Reservoir 3,530 628 4,158 232 41 273 2.9

Distribution System - 4s782 1.025 6.107 314 87 401 4.2Extension and Renovation

Land 2914 - 2914 1g - 19 0.2

Ragineering 744 40 784 49 3 52 0.14

Sub-total 18,088 5,333 23,1421 19186 350 1,536 16.o

Physical Contingencies 1,888 556 2,14" 124 36 160 1.7

Price Increases 4,5314 1,341 5,875 297 88 385 14.0

Water Supply Sub-total 24,510 7,230 31,7140 1,607 4714 2,081 21.7

Wastewater System

Sewer Construction 31,625 4,746 36,371 2,074 311 2,385 24.9

Sewer Modifications 5,511 429 5,9940 361 28 389 4h1

Pumping Stations 9,170 4,874 14,044 601 320 921 9.6

Treatment Plant and 6,880 5,370 12,250 452 352 804 8.4Outfall Sewer

Vodovod Headquarters andOperation and Maintenance 2,400 790 3,190 157 52 209 2.2Equipment

Land 850 - 850 55 - 55 o.6

Engineering 2,342 123 2s,465 154 8 162 1.7

Sub-total 58,778 16,332 75,110 3$854 1,071 4,925 51.5

Physical Contingencies 7,645 2,124 9,769 502 139 641 6.7

Price Increases 22x,947 6,374 29,321 1,505 418 1,923 20.1

Wastewater Sub-total 89,370 214,830 114,200 5,861 1,628 7,489 78.3

Total Project Cost 113,880 32,060 145,940 7,468 2,102 99570 100.0-~ = : - .= __

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5.09 Cost estimates for the water supply component are based on prelim-inary desions by Vodovod's consultants and engineering, staff, incorporatingfeatures from the 1970 master plan (para 1.(03). Costs for the wastewatercol:Aponent are based on prelimninary designs in tthe 1972 master plan (para1.04). During appraisal all costs were reviewed and expressed in pricesprevailing in mid-1973. During negotiations Vodovod increased the basiccosts in terms of mid-1974 prices, based on Yugoslav cost experience duringtihe previous year. This resulted in an increase of about 22% over the basiccosts at the tiine of appraisal.

5.1( Physical contingencies of 10% were included for all equipment and15¾ for civil works. Prices are expressed in terms of those prevailing inmid-1974, with annual allowances for future price increases at the followingannual rates:

1974 1975 1976 on

Equipment 14% 11 % 7.5%Civil works 18,% 15%, 12%

'..ith allowances for physical and price contingencies totalling 48'5,0 of thebasic costs, the estimated cost for the project is reasonable.

C. Financing

5.11 Annex 10 gives a forecast of the sources and applications ofVodovod's fun1ds. The following table slhows Vodovod's estimated total fundsrequirements for the period of project construction (1975-1978) 1/ and thesources from which they will be met:

1/ Din. 1)0,000 estimated to be spent during 1974 is excluded from the state-ment, since the loan is assumed to become effective no earlier thanJanuary 1, 1975.

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1975-1978

Requirements Amount Amount X

Din (millions) US$ (millions)

Project Expenditures

Water 31.7 2.1 14h5

Wastewater 114.1 7.5 51.7

Other Capital Expenditures

Water 30.2 2.0 13.8

Wastewater 15.7 1.0 6.9

Capitalized Interest 19.2 1.3 9.0

Increase in Net Working Capital 9.5 0.6 -_____

=220.1 1 .5 100.0

Sources

Internal Cash Generation

Less Deductions:

Debt Service 5.6 0.4Compulsory Investments 5.0 0.3Contribution to CollectiveConsumption Fund 4.4h 0.3

Total Deductions 15.0 1.0

Net Internal Cash Generation 60.3 4.0 27.6

Proposed Borrowings:

IBRD Loan 91.5 6.0 41.4Republic Water Fund Loan 10.5 0.7 4.8Bank of Dubrovnik Loan 20.7 1.4 9.7

Contributions:

Enterprises and Consumers 4.8 0.3 2.0Babin Kuk Enterprise 25.0 1.6 11.0

Grant - Dubrovnik Commune 7.6 _05 3.5220. 4 14.5 100.0

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5.12 A Bank loan of US$6.0 million to Vodovod is proposed, which wouldcover about half the project costs, plus interest during construction (US$1.2million). Because of the relatively small foreign exchange component, typicalof Yugoslav projects, the foreign exchange costs are estimated at only US$3.3million, including interest during construction. The proposed loan wouldthus cover US$2.7 million of local currency expenditures which is consistentwith Bank lending policy in Yugoslavia. The proposed loan, assumed to beat the current Bank lending rate of 8%, would be repaid over 24 years witha grace period of 4 years. The remainder of Vodovod's total investment re-quirements for the project construction period, including project construc-tion costs, will be financed from sources within Yugoslavia.

5.13 The Republic of Croatia has promised a loan of Din 10 million (US$0.7million) from the Republic Water Fund and its terms provide for interest, whichwill amount to Din 871,000 1/, to be capitalized until two years after the endof the disbursement period. Repayment will be by level annual payments ofcombined principal and interest over 40 years with interest at 2% and a graceperiod ending 2 years from the completion of disbursements.

5.14 Another loan, amounting to Din 19.8 million (US$1.3 million equiv-alent) will come from the Bank of Dubrovnik. This bank, a commercial bank inthe city, is understood to have made special arrangements with its founders(local enterprises acting as bank shareholders) for these funds to be providedon concessionary terms. Interest will be capitalized during construction andwill be at 2%. Repayment will be by level annual payments of combined princi-pal and interest over 25 years from the end of construction.

5.15 The Babin Kuk hotel enterprise will make a non-returnable consumer'scontribution of Din 25 million and the Commune will provide a grant of Din 7.6million towards project construction. Although its resources are limited,the Commune is to undertake to provide or raise funds necessary to meet costoverruns. Non-returnable contributions are expected from enterprises andconsumers toward a proportion of Vodovod's investment costs outside the proj-ect. The remaining requirements are expected to come from Vodovod's internalfunds, necessitating large tariff increases, as discussed in paras 6.10 to6.16. The contribution from the Babin Kuk enterprise is contingent upon thehotel project (para 1.02) proceeding, but it has been agreed that the fullamount (Din 25 million) will be contributed, irrespective of the final out-come of discussions on the eventual size of the Babin Kuk project. Furtherdelay of the Babin Kuk project could possibly affect the timing of the avail-ability of funds, but not the amount. The Vodovod project would be virtuallyunaffected by any scaling down or delays in the Babin Kuk tourism developmentexcept perhaps for elements of the water supply distribution system, amountingto some 5% of the total project cost.

1/ Interest capitalized during the construction period only is estimatedat Din 449,000.

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5.16 During negotiations it was agreed that confirmation of the varioussources of finance and the various terms and conditions thereof would be acondition of loan effectiveness. It was also agreed that, as a conditionof loan effectiveness, the Commune would give an undertaking to be respon-sible for providing or arranging funds to cover cost overruns.

D. Organization and Management

5.17 Vodovod will be responsible for carrying out the project. Becauseits engineering staff is limited, further progress on the project depends onthe engagement of appropriate consultants (see paras 5.02 and 5.03). Vodovodintends to assign responsibility for final design and procurement of the proj-ect, as well as technical advice during its construction, to the Institute ofCivil Engineering Faculty of the University of Zagreb, its wastewater consul-tants (para 5.03). During negotiations it was agreed that this contract willbe signed in a form acceptable to the Bank before the loan becomes effective.Construction supervision will be assigned to a separate group of consultantsacceptable to the Bank to be engaged by January 1, 1975. During negotiationsit was agreed that these arrangements, too, would be a condition of loaneffectiveness.

E. Approval

5.18 Before Vodovod can begin construction, the project must be approvedby various Yugoslav authorities. The wastewater component requires the ap-proval of the:

(a) Bureau of Construction of Dubrovnik Commune;

(b) Sanitary Inspector of Croatia Secretariat for Health; and

(c) Minister for Water of Croatia.

Tne approval of these authorities is expected to be granted without any prob-lems and during negotiations it was agreed that this would be a condition ofloan effectiveness.

F. Implementation Schedule

5.19 The project works are expected to begin in 1975 and to be completedin 1978, with facilities for the Babin Kuk area (including the wastewater dis-posal system) operational by mid-1976. Annex 5 shows the construction schedule.

G. Procurement

5.20 Contracts for the supply and installation of equipment and for civilworks expected to cost more than US$100,000 will be put to tender on the basisof international competitive bidding in accordance with the Bank Group's "Guide-lines for Procurement". Local competitive bidding will be used for smallercontracts. A margin of preference for local equipment manufacturers of 15%or customs duty, whichever is lower, has been agreed to. Vodovod will carry

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out by force account minor works, such as renovations and modifications tothe existing water and sewer networks. The total value of such minor worksis expected to be less than 10% of the project cost.

5.21 All major supply and civil works contracts are expected to be wonby Yugoslav firms; contracts for some specialized equipment for the treat-ment plant and pumping stations would probably be placed with foreign sub-contractors.

H. Disbursement

5.22 The proposed Bank loan would be disbursed to finance the CIF costof imported equipment, the ex-factory cost of locally manufactured equipment;100% of the cost of consultants; 35% of all civil works contracts; and in-terest during construction. The percentage relating to civil works contractswould be adjusted as necessary over the implementation period of the projectto ensure disbursement in proportion to total civil works expenditures. Oncompletion of the project, any unused balance of the loan would be cancelled.The estimated schedule of disbursements is shown in Annex 6.

VI. FINANCE

A. Background

6.01 Vodovod's revenues are derived from monthly water and wastewatercharges based on metering. In those few cases where metering is absent,usually premises with low consumption, charges are based on estimated con-

sumption, related to size of dwelling and number of occupants. For water

consumers connected to the wastewater system, wastewater charges are made,based on water consumption.

6.02 Charges are made for connections to the water system. A deposit is

required, based on estimated cost, adjusted to final ascertained cost on com-

pletion. In a limited number of cases, where a large potential consumer, suchas a high-class hotel, has requested a connection requiring major improvementsto Vodovod's system, a much larger charge has been collected as a cash contri-bution towards construction. In certain cases, in lieu of these contributions,consumer enterprises have constructed works and on completion have handedthem over to Vodovod for operation and maintenance. Connection charges andconstruction contributions have not been collected, to any significant extent,for the wastewater system.

6.03 At the end of each year Vodovod is required by law to allocate fromits net income a contribution to a reserve fund, which is required to be setaside as a special bank deposit. In addition, present law requires each en-terprise to make a compulsory loan to federal authorities for development ofthe nation's less-developed areas. Both the reserve fund contribution andthe compulsory loan are calculated by formulae based on appropriately adjustednet income. Also, at the end of each year, the workers vote a contribution to

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the Collective Consumption Fund, a kind of trust fund managed by the workersfor housing, educational, social and cultural purposes. Remaining earningsare retained in a "Business Fund".

B. Past Performance and Present Position

6.04 In the past, Vodovod has raised a large number of low-interest orinterest-free loans to finance capital expenditures. At December 31, 1972, 38such loans were outstanding, ranging from about Din. 15,000 to over Din. 3million. The average interest rate is just under 3%, with repayment periodsas long as 50 years. Vodovod's debt/equity ratio at December 31, 1972 wasabout 15:85. As a result of these financial arrangements, Vodovod has beenable to earn modest profits and adequately cover its debt service obligationswith tariffs which have earned only a very modest rate of return on fixedassets.

6.05 Because of its low tariff practice, Vodovod has financed a decreasingproportion of its increasing investment from internal funds. During the lastfew years, Vodovod's finances have become increasingly strained by the needto finance extensions to its system mainly to meet rising demands from thetourism sector. This strain on Vodovod's finances has been compounded by ahardening of the general economic climate in which it operates. Inflation hasbeen running considerably above 10% annually, price controls have been imposedand funds have been generally short, affecting all enterprises including Vodovod.Loans have become much more difficult to raise and those raised are availableonly on significantly harder terms than in the past. Recent borrowings byVodovod have been at 8% for periods as short as 5 years. Increasingly, Vodovodhas requested capital contributions from beneficiaries to finance extensionsof its system.

6.06 In fixing its tariffs, Vodovod has paid little regard to the relativerequirements of the separate water and wastewater systems. There has beensome separation of directly identifiable expenditures, but separate sets ofaccounts have not been kept for each system. In consultation with Vodovod,and using arbitrary, but reasonable, apportionments of common expenses, themission has constructed separate accounts for each service for fiscal years1970-73. These show that whilst the water supply service has been reasonablyprofitable, earnings of the wastewater system have not even covered cashoperating and maintenance expenses, let alone depreciation and interest.

6.07 Vodovod's collection of receivables from consumers has been less thansatisfactory. At the end of 1972, outstanding receivables averaged about 4montlhs revenue from water and wastewater charges. An analysis of total re-ceivables shows that some 40% has been outstanding for over three months andnearly 20% for over six months. Some amounts have been outstanding for morethan two years, particularly from the tourist and building trades.

6.08 Recovery of these outstanding amounts and a general improvement incollections have been difficult for Vodovod. For one thing, all enterprisesare affected by general liquidity problems currently common in Yugoslavia.

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Further, with the area relying on tourism, Vodovod has been reluctant to, ordissuaded from, enforcing disconnections, because of the bad image which wouldresult for the town. Recently, Vodovod seems to have given increasing atten-tion to this problem and the results of their efforts are awaited. The SocialAccounting Service has recently introduced a regulation requiring a specificprovision for bad and doubtful debts. Because this regulation will result inremoving accrued revenue from the amounts which workers could legally claim forincome or collective consumption, workers are likely to place additional pres-sure on Vodovod to pursue more vigorous collection policies. During negotia-tions agreement was reached with Vodovod that it will use its best efforts toreduce its receivables from consumers to no more than the equivalent of 2.5months' revenue from water and wastewater charges by December 31, 1978.

6.09 In 1970 Vodovod earned an overall rate of return on fixed assets of5.6%. This rate increased slightly in 1971, but fell to 3.2% in 1972 becauseof a general asset revaluation in accordance with Yugoslav law. Vodovod'sfinancial position is worse than these rates suggest because the depreciationrate of 1.5% charged on its water and wastewater systems is relatively lowand because the recent revaluations of fixed assets, being mainly relatedto exchange rate changes, have not fully allowecl for internal inflation, thusoverstating rates of return.

C. Tariffs

6.10 Tariff increases of 30-35% for water supply and 25% for wastewaterwere implemented on July 1, 1973 (see Annex 13), thus accentuating the inade-quacies of wastewater tariffs relative to those for water. However, followingdiscussions with the Bank, wastewater tariffs were doubled on July 16, 1974and water tariffs increased by an average of about 20%, which was a signifi-cant step towards increasing revenues and reducing relative inequities be-mteen the services. Present water tariffs per m3 are Din. 1.60 (domestic)and Din 3.20 (commercial). The wastewater tariff is Din. 1.00 per m3 ofwater. In the years 1973 and 1974 a return of about 8% on fixed assets willbe earned by the water supply service. The wastewater service which in 1973,nearly doubled its losses over 1972, will, in 1974, reduce them to about thesame level as in 1972.

6.11 If present tariffs remained in force, and inflation continued asprojected, (See Annex 12), Vodovod would begin to suffer increasingly largecash shortages, and taking both services together, rates of return would fallfrom about 5% in 1974 to nil by 1979. By 1979, when the full effects of debtcharges should be felt, Vodovod's cumulative cash shortage would be Din 25.million, circumstances under which it would be impossible to operate effect-ively, if at all.

6.12 Further tariff increases are required if Vodovod is to meet cashand rate of return requirements and to finance future capital expenditurewithout excessive additional borrowing. To meet the above requirements, themost significant tariff increases would need to be made before 1979, by whichtime the project assets come into operation and the burden of additional debt

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service is felt. By then, water tariffs would have to be about 75% and waste-water tariffs about 100% above present levels. While quite high rates ofreturn could be achieved during the construction period with lower tariffincreases, gradual increases are appropriate over this period so that therequired 1979 levels are reached by stages. This has the following advantagesover the alternative of treating each year's requirements in isolation:

(a) consumers should find regular gradual increases more acceptablethan fewer, erratic, and larger increases;

(b) additional cash generated during the construction period, can beused to finance more of construction costs; and

(c) as a consequence of (b) less borrowing will be necessary.

6.13 In addition to the tariff increases recently imposed by Vodovod(para 6.10) further increases will be necessary early in 1975. It is in-tended that these increases as well as those in later years will be appliedto both services but that after operating costs are met for the wastewatersystem, additional revenues needed for overall rates of return to be accept-able wil-l be collected throughout the Commune by further increasing watercharges. 1/ This procedure has two important advantages.

(a) because Vodovod supplies virtually every household in theCommune with water some indirect costs of the wastewatersystem, for example the costs of capital implicit in rateof return requirements, will be borne by all residents ofthe Commune, to whom indirect environmental benefits willaccrue;

(b) additional charges to water consumers will help cushion theimpact of the large increases necessary for the wastewatersystem because the water supply system has a larger tariff base.

6.14 Based on present financial projections, the tariff increases neces-sarv to meet the above requirements are:

(i) water tariffs should increase by 10% on January 1, 1975 andby 15% on January 1 in each year thereafter until 1978;

(ii) wastewater tariffs should increase by 20% on January 1, 1975and by 20% on January 1 in each year thereafter until 1982.

1/ Water charges are the same throughout the Commune. Although wastewatersystems do not operate outside Dubrovnik, all water consumers in theCommune benefit to some degree from improvements to the town's waste-water system.

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Annex 13 elaborates on these proposals. Should there be a reduction in watersales as a result of any scaling down of the Babin Kuk project (para. 5.15)tariffs might have to be slightly further increased in certain years to com-pensate for the resulting loss of revenue. Agreement was -reached during nego-tiations that tariffs will be set by Vodovod, with approval by the Commune(para 4.01) so as to satisfy the following objectives:

(a) individual revenues for the water and wastewater services shouldcover operating expenses, including depreciation, for that service;

(b) during each year of project construction the internal cash ratio 1/will exceed 4%;

(c) overall rates of return on fixed assets will exceed 6% in thefirst full year of project operation and in every year thereafter.

It was further agreed that, as a condition of effectiveness, the Commune wouldgive assurances, in satisfactory form, that it would undertake to approve alltariff increases necessary to enable Vodovod to meet the above requirements.

6.15 Because of continuing inflation, fixed asset values in each yearwill be understated for the purposes of ratemaking. Because of this, the rateof return tends to overstate the true rate, which is probably around 4%. How-ever, since accounting regulations do not permit annual revaluations of fixedassets, book values, revalued in accordance with Yugoslav law and practice, 2/or by some other method acceptable to Bank, should be the fixed asset base forratemaking purposes.

6.16 The relatively low overall rate of return is acceptable for severalimportant reasons:

(a) while the wastewater revenues would cover only operation, main-tenance and depreciation costs, the water revenues would earna rate of return of about 15% in 1979, falling to about 11.5%in 1982 (even if assets were revalued the rate of return wouldnot be less than about 8% in any year);

1/ "Internal cash ratio" is defined as net operating income; plus deprecia-tion; less debt service; less changes in non-cash working capital; lesscontributions to the collective consumption fund and compulsory invest-ments; all divided by gross plant in service plus fixed assets underconstruction (see Annex 17).

2/ Whilst assets are not revalued annually, the Yugoslav authorities have,in the past, required ad hoc nationwide revaluations on specific dates,related to some extent, to currency devaluations.

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(b), apart from the Bank loan, all other capital finance has beenprovided at some sacrifice to the local community through in-creased taxation, water fund contributions, construction con-tributions and (because of concessionary loans to Vodovod)dimininished returns on local bank investments;

(c) there is a strong case for Communal subsidy of the wastewatersystem because of its benefits to the environment as well as toconsumers - present proposals represent a compromise to preserveVodovod's operational and financial autonomy;

(d) Vodovod's funds requirements will be adequately covered.

D. Future Performance

6.17 Vodovod's immediate future financing policy must be directed towardrapid reform from a low-growth institution relying upon soft loans and chargingmodest tariffs into an institution capable of expanding its systems extensivelyto meet increasing tourist demands and to provide much of the necessary financefrom its own resources. In particular, the finances of the wastewater serviceshould be overhauled so that users, as well as residents and enterprises ofthe area who will benefit from its expansion and improvement, pay chargescovering operating costs.

6.18 If the tariff proposals referred to in paragraphs 6.10 to 6.16 areimplemented, Vodovod will be able to finance internally a reasonable proportionof its investment program until 1982. Its debt service coverage will rise from2.3 times in 1979 to 2.7 times in 1982. During negotiations, it was agreedthat Vodovod would not raise further loans without Bank approval unless itsnet cash earnings before depreciation and interest exceed 1.5 times its debtservice in any future year, including debt service on the amount to be borrowed.

6.19 The 1.5% depreciation rates charged by Vodovod on its water andwastewater systems are the minimum prescribed by law but are considered by themission to be inadequate. Vodovod may increase them if it wishes and duringnegotiations agreed that the rates be increased to 2%. The financial projec-tions assume that these increases will take place.

VII. JUSTIFICATION

7.01 With tourism to Dubrovnik Commune expected to expand in the future,accommodation is also expected to expand to meet demand. In 1972 facilitieswere available in the town to accommodate tourists equal to 50% of the residentpopulation (Annexes 1 and 7). This proportion is expected to increase to 60%by 1980. Accommodation in the surrounding community is expected to grow evenmore rapidly than in the town, with the result that by 1980 the total capacityfor tourists is expected to equal 90% of the Commune's resident population.

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7.02 Despite its natural advantages as a tourist center, Dubrovnik isaware of the sensitivity of the volatile tourism market to any degradation ofthe environment. In March 1972, for example, an outbreak of smallpox inKosovo spread to other parts of Yugoslavia. Although no cases reachedDubrovnik, the fear of this epidemic caused substantial losses to the economythrough a significant drop in tourism. Total tourist bednights in the towndropped over 7% from 1971, whereas the growth in the previous year had been8% (Annex 1). The difference between a theoretical 4% growth in tourism in1972 1/ and the actual results represents some 50,000 bed-nights. With eachtourist conservatively assumed to spend an average of US$10 daily, the lossin revenues associated with this decline in tourism in Dubrovnik in 1972 musthave been in excess of US$500,000.

7.03 Dubrovnik's success as a tourist resort cannot be sustained, letalone expanded, without adequate and reliable basic infrastructure, of whichwater supply and wastewater systems are vital elements. Although the watersupply system has kept pace with demand it needs to expand in order to avertfuture shortages. The wastewater system is presently inadequate and is in-creasingly polluting local waters, particularly the popular harbors, andmaking them increasingly objectionable. If these coastal waters are notaesthetically attractive, particularly in the water recreation areas suchas those for the Babin Kuk complex (see map 3), Dubrovnik stands to losetourists in this highly competitive market.

7.04 The expansion of the water supply system is the least cost solutionto meet increasing demands. Sales are expected to increase at about 10% an-nually in the near future as Babin Kuk begins to operate, then grow at 3%-4%annually thereafter. This compares to sales which have increased on averagejust over 6% annually for the past four years.

7.05 The wastewater component was selected from various collection anddisposal alternatives as the least cost solution to meet the reasonable ob-jectives of the project. The project facilities will substantially improveDubrovnik's environment and will enable the town to comply with Yugoslavstandards for coastal water quality.

7.06 The project is expensive for such a relatively small community butthe community is proposing to meet about half of the capital costs from limitedlocal resources and to pay user charges adequate to meet operating and main-tenance expenses, service debts and generate funds partially to finance futuresystem extensions.

7.07 The benefits of the wastewater system do not accrue to the individualwater consumers, particularly since most are already connected to the existing

I/ A reasonable assumption, since the average rate of increase of touristbed-nights in Dubrovnik town in the preceding six years 1965-1971 was4% annually. See Annex 1 for details.

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but admittedly unsatisfactory system. Instead, the principal benefits result-ing from considerably improving the present system accrue to the general envi-ronment. The consumer's willingness to pay for these facilities is thereforenot a relevant measure of benefits. The appropriate way to evaluate the bene-fits would be to quantify the environmental improvement (e.g. cleaner harbors,less noxious odors, improved bathing, reduced risk of epidemic disease, in-creased tourism, etc.). However, these benefits cannot be quantified.

7.08 Based on present financial projections, water consumers connectedto the wastewater system would pay (in constant prices) a total unit tariffof Din 3.85/m 3 in 1978, 1/ the year the project comes into operation. Thiscould be seen as representing the currently evaluated long-run incrementalunit cost of water (Din 2.40/m 3 ) 2/ plus a contribution (Din 1.45/m 3 ) towardswastewater costs. For water consumers not connected to the wastewater system(mainly outside Dubrovnik) the unit charge in 1978 would be Din 2.65/m 3 , re-presenting the long-run incremental cost of water (Din 2.40/m ) plus an en-vironmental tax (Din 0.25/m 3 ) as a contribution towards the wastewater system.These tariff proposals indicate that the pricing policy for water is economic-ally reasonable, with tariffs approximating long-run marginal costs. Expressedanother way, the economic rate of return for the water supply investmentscould be regarded as a minimum of 10%, the discount rate used in calculatingthe long-run incremental unit cost.

VIII. AGREEMENTS REACIIED AND RECOMIMNDATIONS

8.01 During negotiations, agreements were reached that:

(a) a satisfactory finance director will be engaged by Vodovod(para 4.04);

(b) Vodovod will make arrangements to become responsible foremptying sectic tanks in Dubrovnik by December 31, 1975(para 4.05);

(c) draft wastewater regulations will become effective inDubrovnik not later than June 30, 1975 (para 4.06);

1/ In current prices in 1978, the average unit tariff for all water expectedto be sold is estimated at Din 4.72/m 3 and that for wastewater at Din2.08/m 3 , giving a total unit tariff of Din. 6.80/m3/ (See Annex 9).

2/ With all incremental costs (in constant 1973 prices) and incrementalsales volumes for the next 30 years discounted to the present at 10%.Major system expansions after the project and associated extra sales(above an annual increase in sales of about 3%) are excluded.

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(d) Vodovod will review its accounting and billing systems inconsultation with the Bank to determine what improvementsare necessary and Vodovod will implement any such improve-ments within 12 months of signing the loan agreement(para 4.09);

(e) the accounts of Vodovod will be audited in accordance withsound auditing principles, consistently applied, and theauditor's report sent to the bank within six months of theend of each fiscal year (para 4.10);

(f) all necessary land, including easements in the publicroadways, will be acquired for the project (para 5.06);

(g) consultants will be engaged to assist in final design, procure-ment and supervision of construction in accordance with theBaank Group's I'Uses of Consultants!! (para 5.17);

(h) Vodovod will use its best efforts to reduce its receivablesfrom consumers by December 31, 1978 (para 6.08);

(i) tariffs will be set in such a manner as to satisfy acceptableexpense coverage, rate of return and cash generation objec-tives (para 6.14);

(j) Vodovod will not raise further loans unless its net cash earn-ings before depreciation and interest exceed 1.5 times its debtservice in any future year, including debt service on the amountto be borrowed (para 6.19); and,

(k) 2% rates of depreciation on water and wastewater systems willbe implemented (para 6.20).

8.02 Before the loan becomes effective:

(a) the Commune should have entered into an obligation to preparewastewater regulations (para 4.06);

(b) confirmation should have been received of the various sourcesof finance for the project (para 5.16);

(c) the Commune should have given an undertaking to provide orarrange funds to meet cost overruns (para 5.16);

(d) Vodovod should have signed satisfactory contracts with en-gineering consultants (para 5.17);

(e) all necessary approvals for project construction should havebeen received (para 5.18); and,

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(f) the Commune should have given assurances in satisfactory form,that it will undertake to approve all necessary tariff increases(para 6.14).

8.03 On the basis of agreements reached during negotiations on the issuesreferred to above, the project is suitable for a Bank loan of US$6.0 millionto Vodovod for a 24-year term including 4 years of grace.


STATISTICS AND PROJECTIONS FOR TOURISM IN DUBROvNIK TOWN-'

CAPACITY FOR TOURISTS (Beds) UTILIZATION BY TOURISTS (Bed Nights) UTILIATIO'. FACTOR'

YEAR Hotel and Category L-InT11 Htl ein c.. Oh.' Tt1P i -. P 'h ..A B C Sub-Total Pension Camps Other Total Hotels Pension Caops Other- Tot) FHoctls Poosioc (aopo ,thC,- Totol

196S. E15 1,589 291 2,695 4,5F5 500 1,722 9,572 457,132 309,952 67,485 i71,223 1.005,792 .46 .16 .37 .27 .27

1966 889 l.e4 291 2,764 7,092 500 1,109 11,461 530,859 226,736 65,531 157,134 980,260 53 .09 .36 .39 .2J

1967 958 1,249 29Re 3,09. 6,04-7 500 664 10,306 530,959 201,376 64,769 152,199 949,303 .47 .09 .35 .63 .25> 1969 1,104 ;',084 503 3,491 c,567 2,500 1,241 13,799 607,524 162,327 73,435 137,379 960,665 .47 .07 ,08 .30

2 1969 1,150 2.349 34P 3,827 7,040 2,500 1,136 14,503 779,622 166,396 88,570 123,163 1,157,771 .56 .06 .10 .30 .22

1970 1,12E 2,421 350 3,899 7,013 2,000 1,251 14,163 840,598 125,312 77,516 133,182 1,176,608 .59 .05 .11 29 .23

1971 1,533 3,035 350 4,916 7.056 2,000 1,632 15,604 878,577 149,673 97,374 147,207 1,272,331 .49 .06 .13 .25 .22

1972 2,861 2,620 308 5,799 7,183 2,144 936 16,062 790,000 159,035 99,551 133,481 1,187,067 .37 .06 .12 .39 .2C,

1973 . 2.831 2.576 299 5,706 8.686 2,152 857 17,401 1.012.530 148.034 106,561 112,435 1,379.560 .48 .05 .13 .36 .22

1974 2,270 2,630 310 5, 10 7.400 - 960 14,170 - - -_ NA NA NA NA NA

1975 3,5s O 2,650 310 6,500 7,PO - 980 15,280 _ _ _ _ _ NA NA NA NA NA

I 1976 3, 260 3,230 310 7,400 0,100 - 1,000 16,500 - _ _ _ NA NA NA NA NA

1977 4,3560 4.300 310 8,970 E,500 - 1,000 18,l70 _ _ _ _ X. NA NA NA NA

197- 5,5>.0 5.630 510 11,500 I 9,000 - 1,200 21,700 2,000,000 220,000 - 130,000 2,350,000 48 .07 - .30 .30

1979 5,56o0 S,;0 ,10 11,500 9,500 - 1,350 22,350 _ - - - - NA NA NA NA NA

1930 I 5,56o 5,63j ',10 11.500 I 10,000 - 1.500 23,000 2,115,000 240,000 - 135,000 2,490,000 .50 .06 - .74 .30

ilSource: Dubrovnik t-urist authorities, with prcjections of utilization for 1980 booed on interpolation between projections for 1978 and 1985.-iHostels.,business resort., onion canps, etc.3/Bed nights divided by theoretical maximum utilization (Beds X days/year).

September 17, 1974

DUBWOVNIK WATER SUPPLY AND WASTEWATER PRO.JECT

STATISTICS AND PROJECTIOSS FOR TOlRISM IN DUBROVNUK 00101121 OUTSIDE DUBROVNIK TOWel/

CAPACITY FOR TOURISTS (Beds) UTILIZATICN BY TOURJSTS (Bed Nights) 1 I' FACTORY

/10 Il'TFlS PENISION CAMPS OTHER2/ TOTAL HOTELS PENSION CAMPS OTBIIB8! TOTAL NOTELS A'E7S'Y.P CARDS oTPFEB2/ TOTAL

r-7p5 1,339 3,o60 709 6,555 11,654 176,110 180,522 79,761 517,040 953,433 .36 .16 -1

19(f 1,582 4,105 700 6,576 12,963 214,61? 242,235 112,17'7 533,317 1,102,341 .37 .16 44 .22

196.7 2,356 4,998 - 4,434 11,088 275,713 3275,167 133,289 488,o68 1,172,237 .32 P .30 .29

E 1968 3,544 4,110 ?2870 4,212 14,736 317,070 272,233 121,0h4 450,148 1,160,475 .24 .18 .12 .29 .21

i l969 4,730 5,433 2,930 5,347 18,440 611,46- 277,120 110,978 597,042 1,596,604 .35 1L .10 .30 .21

1970 5,780 4,958 2,2?0 8,2^9 21,197 781,137 252,512 196,870 440,241 1,670,760 .37 .14 24 .15 .91

1971 7,012 14,482 2,500 9,508 93,502 1,,31,391 211,025 154,320 520,422 1,887,158 .39 .13 .17 .1, .?1

1972 6,735 4,867 4,960 9,618 ?6,1So 967,916 288,005 147,359 513,993 1,917,273 .39 .16 .08 .15 .?0

1973 B,204 4,237 5,540 6,630 24,611 1,130,505 271,116 250,230 530,695 2,182,546 .38 .17 .12 .22 .24

1974 7,000 5,200 5,500 9,800 27,500 1,022,000 312,000 170,500 519,400 2,023,900 .40 .16 .08 14 so

1975 7,500 5,600 5,900 9,800 28,800 1,095,000 341,600 182,900 529,740 2,1149,240 .40 .17 .08 .15 .20

r 1976 8,ooo 6,ooo 6,ooo 9,900 29,900 1,176,000 366,o00 186,000 534,600 2,262,600 .40 .7 .08 .15 .21

1977 8,900 6,800 6,700 10,000 32,400 1,317,000 421,600 207,700 540,000 2,486,300 .40 .13 .98 .15

ER 1978 9,400 7,500 7,400 10,200 34,500 1,410,030 465,000 229,400 550,800 2 .40 .17 .09 .15 .21

1979 10,200 8,200 8,300 10,700 37,400 1,550,400 516,(00 265,600 588,503 2,921,103 .40 .1' .09 .1 .- 1

1980 11,000 9,000 9,000) 11,000 40,000 1 ,683,000 576,000 288,000 605,000 3,132,00) .40 .i .09 13 .21

Jlourcee. D,brovnikr tourist a-xthorities.

;{Bostels, busanier resorts, union camps, etc. 5

3/ ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~02/Bed nights di'le- by theoretical majximum utilization 'Beds Y days /year).

September 17, 1974

ANNEX 2Page 1 of 5 pages


EXISTING FACILITIES OF VODOVOD

WATER SUPPLY

1. Vodovod operates a total of six water supply systems throughoutthe commune, the largest of which serves Dubrovnik town. The areas servedby each system are shown on Map 1. Statistics for 1973 for the varioussupplies can be summarized as follows:

Average Daily Average Daily UnaccountedNo. of Water Production Water Sold Water as % of

System Connections Cubic Meters Cubic Meters Production

Dubrovnik 4,727 12,460 9,331 25Zupa 367 2,879 2,121 26Cavtat 592 1,373 1,007 27Airport 582 412 29Ston 378 285 200 30Slano 123 280 195 30

Total 62187 17,859 13,266 26

2. All of the systems rely on groundwater which is pumped, afterchlorination, into the distribution system. Two sources, the Duboka Ljutaand Prahivac springs, supply the interconnected Zupa, Cavtat and Airportsystems. The systems for Dubrovnik town, Slano and Ston are physicallyindependent.

3. Projections of future water production and sales are shown graphi-cally in Annex 7 and outlined in Annex 9.

DUBROVNIK TOWN WATER SUPPLY

4. The town of Dubrovnik has had a water supply for more than fivehundred years. The original system, using water from the Sumet springs inKomolac valley, first operated in the year 1428. A covered channel conveyedwater to the town from the source over a distance of some 11 km (see Map 2).These springs, which yield from 5 to 100 liters per second, continue inservice today, along with much of the original aqueduct. Two famous land-marks in the old town are Onforio's large and small fountains, which werebuilt by and named for the architect responsible for the original water sup-ply system.

5. Early in this century, the distribution system was improved toprovide direct connections to the houses. Demand increased accordingly andit was necessary to augment the spring supply by pumping directly from theDubrovnik (ombla) River at Komolac to the reconstructed original channel.


6. Fifteen years ago, as the town grew and tourism became increasinglyimportant, plans were made for large-scale expansion of the system. The ob-vious source was the Dubrovnik River, which emerges dramatically from lime-stone mountains at its origin near the town. Although the hydrology of thissource is not completely understood, it is clear that it is basically aspring for which the recharge area is the watershed of the Trebisnjica River.In Karstic regions inland from Dubrovnik, this river disappears with no sur-face outlet (see Map 1). Solution channels in the limestone convey the waterto the sea at Dubrovnik in abundant quantities: the metered flow of theDubrovnik River has never been less than 2.0 cubic meters/second, or somefifteen times the amount of water pumped on an average day in 1972.

7. The water is normally quite clear and requires no treatment exceptprecautionary chlorination. After it rains heavily in the recharge area, theemerging river is reported to be slightly turbid. This situation only lastsa few days during the winter season. Construction of a new dam on theTrebisnjica River in the recent past has reduced this periodic turbidity, nodoubt due to the sedimentation which occurs in the reservoir. The maximumturbiditv measured in the past reached 100 units 1/ but it has not exceeded50 units since the dam was built. In normal conditions the turbidity is al-

wavs less than 10 units and usually less than 3 units. In any case Vodovodreceives no complaints about water quality from its consumers, so provisionalplans to install treatment facilities for this slight and infrequent turbidityhave not been pursued.

8. In 1961 and 1962, the system (see Map 2) was substantially expand-ed. A new pumping station was built near the original one at Komolac onthe river with three electrically driven centrifugal pumps, with characteris-tics of each pump as follows:

Hlead - 85 metersFlow - 140 liters/secondMotor power - 180 kilowatts

The original station continues to pump water to the aqueduct which servesproperties along the river. At the new station two pumps are used together

and the third acts as a standby. On the peak day in 1973, two pumps operatedfor 23 hours.

9. A 500 millimeter diameter steel pressure pipe leads the water 1,400meters from the pumping station to the entrance to a tunnel through the Srdjmountain. Inside the 3 kilometer long unlined tunnel is a concrete channel(capacity 400 liters/second) which terminates in an underground reservoir(capacity 5,000 cubic meters) with a top elevation of 74 meters.

1/ Turbidity measured as milligrams of silica (SiO2) per liter of water.These units can be converted to Jackson Turbidity Units (JTU) bymultiplying by 0.4.


10. There are two main pressure zones in the distribution system serv-ing the town. The lower zone which includes the Babin Kuk area, Gruz and theold towm, supplied from the reservoir at the end of the tunnel. The higherzone, from 55 to 120 meters, is supplied from a 2,000 cubic meter reservoirsituated at elevation 135 meters. Water is pumped automatically to thisreservoir from the station at the tunnel exit, which has three electricallydriven pumps with the following characteristics:

Head - 80 metersFlow - 30 liters/secondMIotor Power - 75 kilowatts

11. Facilities on top of Srdj mountain (where the tourist cable carterminates) are supplied with water from a 100 cubic meter reservoir. Wateris pumped to this reservoir from the station at the middle reservoir whichhas two pumps with the following characteristics:

Head - 165 metersFlow - 15 liters/secondMeter Power - 75 kilowatts

12. The distribution system consisted of some 62 km of pipes at theend of 1972, as follows:

Pipe MaterialCast Asbestos

Diameter Iron Cement Steel Plastic Total--------------------length in meters----------------…

40 mm 2,443 - - 2,44350 mm 1,294 2,664 3,394 7,35260 mm 2,284 - - - 2,28480 mm 2,774 3,573 834 - 7,181100 mm 9,391 7,165 - 2,350 18,906125 mm 3,890 3.849 - - 7,739150 mm 634 6,135 - 6,769200 mm - 6,145 - - 6,145250 mm 80 770 - 500 1,350300 mm 1,700 - 1,416 - 3,116400 mm 800 - - - 800500 mm 2,050 - - 2,050600 mm 1,600 - - - 1,600

Total 289400301 2,250 6,244 67735

In addition there are some 29 km of galvanized iron pipes, mostly 1/2 inch,which are regarded as house-connections. It should be noted that most ofthe distribution pipes are very small. Only 43% are larger than 100 mm dia-meter.


13. At the end of 1973, there were 4,727 connections to the distribu-tion system, of which 95% were metered. There were some 90 requests for newconnections pending in mid-1973 which could not be supplied, mainly becauseof the inadequate distribution system.

WASTEWATER

14. Throughout the commune, there are two basic methods of wastewaterdisposal, either to the sea via an outfall sewer or to the ground via aseptic tank and/or soak pit. Generally, the property owner is responsiblefor making the necessary arrangements to dispose of his wastewater. Only inDubrovnik town is there a fairly comprehensive system, for which Vodovod hasbeen responsible since 1966.

Dubrovnik Town Wastewater Facilities

15. The sewers in Dubrovnik town, which are shown on Map 3, have atotal length of some 30 km, as follows:

Concrete andMasonry Concrete VitrifiedChannels Pipes Clay Pipes Total

Length(meters) 16,260 13,160 700 30,120

16. The original system in the old town is hundreds of years old andis a combined system, removing storm drainage as well as wastewater. Itscapacity is inadequate-and flooding of low places occurs after heavy rains.Because of its age and location, these sewers are difficult to inspect orrepair.

17. All sewers in Dubrovnik dispose of their contents to the sea.There are presently some 33 outfall sewers, as indicated on Map 3, most ofwhich concentrate these untreated wastes in the harbors of Gruz and the oldtown. The resulting odors are quite unpleasant due to this gross pollution.To prevent pollution of the beaches along Sumartin Bay, where many new hotelsare located, a 500 m long tunnel was excavated beneath Petka hill (see Map 3).Storm drainage and wastewater from this area of town enter the sea at thecliff face where the tunnel terminates. Surface currents prevent any con-tamination of beaches in Sumartin Bay.

18. Vodovod knows of only 2,330 connections to its sewers, or justover 50% of the number of water connections. There are 630 known septictanks and/or soak pits, but added to the number of sewer connections, thisonly accounts for two-thirds of the water supply connections. Undoubtedly,some of the septic tanks receive wastewater from several buildings, but it isalso likely that many properties have connections to the sewers of whichVodovod is unaware.


19. A typical "septic tank" in Dubrovnik is little more than an unlinedhole in the ground, dug in an irregular shape (according to the nature ofthe ground) to a depth from one to three meters, with a concrete cover. Inseveral sections of the town (marked on Map 3), the limestone is relativelyimpermeable and the septic tanks have to be emptied periodically by pumping.This service is provided by an enterprise called "Sanitat", whose principalinterests concern hygienic control, disinfection and anti-pollution measuresrelated to shipping and the port. This firm has two 5 ton pump trucks whichmake a total of about 400 trips annually while emptying septic tanks. It isestimated that the average septic tank contains some 7 cubic meters, meaningthat the 400 truck loads would empty some 300 septic tanks annually. Themanager of "Sanitat", the only firm providing this service in Dubrovnik, es-timates that the volume of pumping is increasing at about 15% annually.

20. The charge for the service of pumping septic tanks is Din 250 to280 (US$16 to $18) per truck load (5 tons which are 5 cubic meters). Inmany parts of Dubrovnik access to the septic tanks is extremely difficultfor the truck, and in cases where pumping over a long distance is requiredthe additional charge is Din 150 (US$10). "Sanitat" reports that none ofDubrovnik's hotels require this service.

21. Many properties in Dubrovnik have a garden. The summer is fairlydry so irrigation is required for luxurious plant growth. Homes which haveseptic tanks nearby frequently use this polluted water for irrigation.


DUBROVNIK, WATER SUPPLY AND WASTEWJATER PROJECT

PROJECT DESCRIPTION

1. The project comprises investments to be made by Vodovod in theperiod 1974-1978 to improve the water supply and wastewater facilities serv-ing the town of Dubrovnik. These components are discussed separately. Newwater supply facilities are shown in red on map 2 and wastewater facilitieson map 3. Cost estimates are provided in Annex 4 and its construction sche-dule in Annex 5.

WATER SUPPLY COMPONENT

2. The existing Komolac pumping station at the Dubrovnik River wouldbe enlarged to meet the growing demands for Dubrovnik town and in anticipa-tion of demands in the near future along the north side of the river towardsZaton. Preliminary designs call for the installation of two pumps, each witha capacity of 370 liters/second. This capacity will be reviewed during finaldesign to take account of projected peak demands, reliability of existingpumps and necessary spare capacity.

3. River flows averaged some 40 m3/second with minimum flows of about2 m3/second, which is more than ten times the water presently pumped forDubrovnik. Thus the source has adequate capacity for the proposed expansion.

Rising Main

4. A second rising main would parallel the existing one from theKomolac pumping station to the entrance to the tunnel through Mount Srdj.This steel pipe, with a length of 1.4 km and a provisional diameter of 600 mm,would reduce punping energy requirement and would provide security and flex-ibility by augmenting the existing line.

Reservoir at Babin Kuk

5. The reservoir on the Babin Kuk peninsula would serve the tourismdevelopment there. It would be built of reinforced concrete with a capacityof 2,000 m3 and a top water level of approximately 74 m above sea level.

Extensions to the Distribution System

6. Some 2.7 km of pipes will be laid along the west side of GruzHarbour to improve service in that area and to supply the Babin Kuk develop-ment. Preliminary designs call for pipes as follows:


Asbestos Cement - 300 mm diameter 758 m- 350 mm diameter 598 m- 400 mm diameter 189 m

Subtotal 1,545 m

Plastic - 250 mm diameter 1,130 m

Total 2,675 m

The plastic pipe would be laid along the harbor edge near the salt water andwould replace pipes which have been corroded.

Renovations to Existing Distribution System

7. Many bad pipes in the existing distribution system cause leakageand reduce pressure. Vodovod intends to continue its program of identifyingpipes which are corroded or whose capacity is restricted and to replace themto improve the system. It is estimated that about 2 km of pipes (less than2% of the existing pipes) will be replaced in this program.

WASTEWATER COMPONENT

Sewer Construction

8. Collector sewers will be built to intercept sewers which now flowto the sea and to collect wastewater from existing and proposed branch sewersin order to direct all wastewater to the Lapad treatment site. Networks willbe built gradually, particularly in areas where septic tanks require frequentpuniping (Annex 2 and Map 3). Data concerning the proposed collectors andnetwork sewers which feed into them are outlined as follows:

Item Length (km) Diameter (cm) Description

Collector I 3.3 30 to 100 Collecting wastewater from(also 240 m west side of Dubrovnik, in-of tunnel) cluding old town, to Lapad

treatment plant.

Network I 6.8 25 and 30 Supplying collector I

Collector II 3.2 30 to 60 Along Gruz harbor, inter-cepting 11 existing out-falls. Includes 175 m ofpressure pipe.

Network II 4.2 25 and 30 In areas draining into Gruzharbour.


Collector III 1.7 30 and 50 Through the center of theold town, then 900 m ofpressure pipe from the Pilepumping station.

Network III 2.6 25 and 30 In the old town and adjacentareas on the west side ofDubrovnik.

Total 21.8

Modifications to Existing Sewers

9. About 1,500 existing connections which introduce both stormnwaterand liquid wastes into combined sewers will be modified so that separateconnections are made to the storinwater drainage system and to the sanitarysewers. No stormwater will be allowed to enter the Vodovod sewer system,except in the old town (where a combined system already exists) until newseparate sewers are eventually installed.

10. Old sewers of inferior quality will be reconstructed to serve inthe expanded svstem. This work is generally restricted to masonry channelswhich are not strong enough for current traffic loads.

Pumping Stations

11. Four pumping stations are required to direct wastewater to thetreatment site. All stations will have electrically driven pumps which willoperate automatically and will have one spare pump for standby. Characteris-tics of each station are as follows:

No of Capacity per PumpingLocation Pumps Pump (l/s) Hlead (m) Remarks

Gruz 2 74 14 In port.

Gliman 3 96 18

Pile 3 134 42 In moat outside Pilegate of old town wall.

Lapad 3 328 24 Lifts all wastewaterto treatment plant.

Treatment Plant and Outfall Sewer

12. Before any decisions were made concerning the optimum disposalprocess a thorough investigation was made of the marine environment alongthe Dubrovnik coastal area. During four months in the summer of 1971 threeresearch vessels and divers collected considerable data and made numerous


observations along the coast. These investigations, by the Institute ofOceanographv and Fisheries in conjunction with the Hydrographic Institute ofthe Yugoslav Nav , both from Split, resulted in the publication of a compre-hensive three volume report titled "Oceanographic and Biological Propertiesof the Coastal Area Dubrovnik."

16. Consultants from the Civil Engineering Faculty of the Universityof Zagreb studied various disposal alternatives, including combinations ofdifferent degrees of treatment and various outfall locations, and used dataprovided by the foregoing investigations. The consultants concluded thatthe most economical disposal system which would meet the qualitv standardsfor the coastal waters 1/ consisted of a limited degree of treatment combinedwith a submarine outfall sewer terminating in a diffuser at a depth of about95 m.

14. The treatment process will consist of comminution and removal offloatables. Commiinttors will desintegrate all solids in the wastewater in agrinding process. Anv floating material, including fats and oils, will beskimmed off in a specially designed flotation tank which will utilize com-pressed air. These materials will be periodically removed in sealed con-tainers to an inland disposal site.

15. Dubrovnik town is not expected to grow much in the future, sinceno further hotels are to be permitted after the Babin Kuk complex. Tf, how-ever, wastewater quantities were to increase significantly or if the receiv-ing water standard becomes more stringent, more intensive treatment could heprovided at the plant site by adding facilities for chlorination. Spacerequirements would be modest because of the small flows involved.

1/ Croatian regulations define three categories of coastal waters:

1 - Sea water suitable for the cultivation of ovsters and shellfish.2 - Sea water suitable for beaches, recreation and water sports.3 - Rest of the coastal area.

Standards are most stringent for category 1 and least for category 3.The coastal waters around Dubrovnik are classified as category 2 andthe criteria for this water quality are as follows:

Indicator Limit

a. Suspended solids Less than 10 mg per literb. Most probable number of Less than 20,000 per 100 mil

coliform organismsc. Oil, mineral oil and Nil

associated productsd. Visible wastes Nile. Color Nil


16. The Lapad treatment plant site is on a gently sloping section onthe north side of Petka Hill, about 100 m inland from the coast and 50 m in-land (and uphill) from the only road. The entire hillside is in forest sothe relatively small plant will be well screened from the hotels in the area.Odor problems are not expected and the prevailing winds are from the hotelzone towards the plant on the hillside, almost never in the opposite direction.

17. After this partial treatment the wastewater will flow by gravityto and through a 60 cm sewer in the existing tunnel beneath Petka Hill. Anoutfall sewer will convey the effluent some 1,300 m into the sea, from thetunnel exit on an uninhabited and rocky cliff face to a depth of about 95 m.Twin plastic pipes of 45 cm diameter laid on the seabed will terminate at aspeciallv designed diffuser section, some 64 m long with about 20 ports of15 cm. diameter each. An initial dilution in excess of 1 to 400 will beprovided. After allowances for dispersive dilution due to currents (approxi-mately 0.1 m per second at the diffuser) and for bacterial die-off, the pro-posed disposal system is expected to preserve the coastal waters in accord-ance with the Croatian seawater standards.

ANNE7X 4

DUB2ROVNIK WATER SUPPLY AND WASTEWATEP PROJEC'T

COST ESTIIIS2E

Local Foreign Total Local Foreign Tolal___- ;000) ----- - _--------- US -(000) ------------

WTh.R SUPPIS t'o1ryl5El

Epe.n.i.s '_ Sostiso Station at Lu,ho--,ik RiverCqt .tlvet 530 1,240 1,770 35 81 116

,->; A:-3.780 420 4,200 247 28 275

- sI!rtal 4,310 1,660 5,970 282 109 391

uising tic Sctt. Puopics Station to Coumic5

Pipes anod fictioagi ' 2,140 1,430 3,570 140 94 234Civil Works 2,200 250 Z,538 150 16 166

Sick-Vcoco 4,428 1,680 6,108 290 110 400

SI)strihcition 2hilst Ftxciosl3o21Pipet -cl iitings 2, 240 960 3, 200 147 63 210Clvii Socks 1,534 170 1.704 101 11 112

Sob - tat,tl 3,774 1,130 4,904 246 74 322

Oicttiltt tiatil Sy,t.m Seovatlcttc (Old Town)l'ipe-,atdal iitticgo 253 110 36 1 7 24Civil Woren 255 85 840 49 6 55

Sci- oral 1,008 195 1,203 66 13 79

Rtcot rstoic atr ko.icl Ktic 3,530 028 4, 150 232 41 273

StiI.-?ot,tS. 17,050 5,293 22,343 j 1,118 347 1,465Land 294 - 294 j 19 - 19'to 3.-ct Sotig.i nod Scltorni4ion 744 40 704 40 2 52

Total Ks.cldls Ceotingeocica 18.088 5,333 23.421 ; 1,186 330 1,536

P?kysic.tl Cotxttiottenico (10.441 1,888 556 2,444 I 124 36 160

Price i-cc-a-en (22.71.) 4,534 1,341 5,8751 292 88 30

TOTAL - WAd23 SIIPI'LY 24,_10 7,230 31,740 1,607 474 2,081

WAsICOWA'iSR CO2tPtINST I

>00cr Cost. trig cioc ~~ ~ ~~ ~ ~~~~~~~~~~~~~~~~~~~~~72 31 103Pip.. and fittiogs 1,102 47 1,75sruer Ce.llertcti. - CioSE WiorCl s ,5233 582 2,057 343 38 381

Nrt.t.aork I - Pipco cod f£ttitgo 593 254 847 39 17 56COt.ii gkcko ,107 602 6,785 401 44 445

Colit.otor 1l - Pipot cod fittioRa 872 374 1,244 57 25 82Civil Weks 4,811 535 5,346 315 35 350

Nc;.orck 71 - Pipes and fitticgs 413 177 590 27 12 39Civil woarks 4.271 475 4,746 280 31 311

;_-. .e. 'I - Pipes and fittogo 618 265 883 41 17 38Ciri'. Work 2,603 289 2,892 171 19 190

_ .P ip-s god fitti.go 280 120 400 18 8 26Civil Wortk 3,154 350 3,504 207 23 230

Repairs to esistiog et**rs 1,368 174 1,742 103 11 114

sicO-rotet 31,625 4,746 36,371 2,074 311 2,385

Soiollfcallona Cs Eistin0 Sewortie

4nocvasion af old occors 2,376 264 2,640 156 17 173Separatlo,t .of cosoectioot 3,135 165 3,300 205 11 216

lab-i'etal 5,511 429 5,940 361 28 389

Ptopics St*tiantlt.dpal - Eqcip-t 1,112 1,669 2,781 74 109 183

Civil Warks 2,672 297 2,969 175 20 195Cli-on - 2qcip-iaot 597 896 1,493 39 59 98

Civil Waks 1,690 188 1,378 il 12 123EELs - L.qoip-ttct 880 1,320 2,200 57 87 144

Civil Worka 1,867 208 2,075 122 14 136Cr-s - iqoip-nt 185 277 462 12 18 30

Civil Works 167 19 106 11 1 12itS,-lcala 9,170 4.874 14,044 601 320 921

''lvcatmoot PlantOgoipcrettl 393 589 982 26 39 65Civil W-rkn 1,207 141 8,408 83 9 92

Sob-Total 1,660 730 2,390 109 48 157

outftll SoetoPipcs and fittings 1,400 2,100 3,500 92 138 230ln*ctnllationu 3,820 2,540 f,360 251 166 417

tiib-Toial 5,02d'O 4,640 9,860 343 304 647

ttqtoalns aof Vodovod 1l4-odqga-ttnr 1,800 200 2,000 118 13 131

op-rotiao "ad ltaiot-aoeEqoipo-ot 600 590 1,190 39 39 78

S-local 3.55,586 16,209 71,795 3,645 1,063 4,708Land 850 - 850 55 - 55

Pro ect 2cc Ssc ncd Sapetticioc 2,342 123 2,465 154 8 162

otal Inaloding osiisgeveiot 58,778 16,332 75,110 3,854 1,071 4,925

P'.s ticaL s'tstigt',oncioY (13.01.) 7,645 2,124 9,769 502 139 641trio, Igecoost. td4.5') 22,947 6,374 29,321 1,505 418 1,923

VOVkL - WASiJIAVER 89 370 2 114_200 5,861 1.628 7,489

IIIIAL PR102 C S2,' 113 000 32 060 1_ 4940 7_ _ _468 2I102I W 4 ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ _ _ _ _-9 7

DUBROVNIK WAlf R SUPPLY AND WASTEWATER PROJECTCONSTRUCTION SCHEDULE

1974 1976 1977 1978

WATER _ SUPPLY a pPUMAPING STATION EQUIPMENT 1 T r

PUMPING STATION CIVIL WORKS In l 'l I~ II

RISING MAIN TO TUNNEL

RESERVOIR AT BABIN KUK L Lt ,11 oil1too11 Wr WA

EXTENSIONS TO DISTRIBUTION SYSTEM W

\NAsTEVNATER

SEWER CONSTRUCTION '' ''I I'l I It 'A r J TZ -M'Ar

PUMPING STATIONS IIjlfilt J1A I VNFWI . la IITREATMENT PLANT ImeI I I' F1 ' W

OUTFALL SEWER jIlit a lit It W{', SWIP' LEGEND

Design and preparation of tender documents

1111111 ilt ii iititit a Tender period and tender evaluationi

Mantifacture and delivery of equipment

WrAKF~WAIKWAWAV01W, Site constructioin Wvorld B~, 79OO(R,

MI 6

UBROVN WATER SUPPLY AMWSATER PROJ1CT

ESI%MATED SCHKDULE OF DISF RSTS

IBRD Fiscal, Year Cuw3lative Disbureuntsand Fsalter At End of Quarter

(Ust 000)

March 31, 1975 0.2Jume 30, 1975 0.7

1975/765

September 30, 1975 1.0December 31, 1975 1.4March 31, 1976 2.0une 30, 1976 2.7

1976/77Z

September 30, 1976 3.3December 31, 1976 4.1March 31, 1977 4.5June 30, 1977 4p8

22z=L-

September 30, 1977 5.1December 31, 1977 5,4March 31, 1978 5.6June 30, 1978 5.8

1978B79

Septeber 30, 1978 5.9December 31, 1978 6.0

Assunptions

1. Bank loan for US$ 6.0 million signed by December 31, 1974.2. Grace period of 4s years with closing date Deember 31, 1978.

September 17, 1974

ANNEX 7


PROJECTIONS OF POPULATION AND OF WATER SALES AND WATER PRODUCTIONBY DUBROVNIK VODOVOD

~~~~~~~~~~~~~~~~~~1 1 i

9,000 1 90

8,000 TOTAL P O0DUCTiON,__* 80IDUBROVNIK COMMUNE , * 8_ T l~~~~~~~~~~~~~~~Left Scale) . <

7,000 70

w : TOTAL POPULATION,DUBROVNIK COMMUNE *

6,000 ( (Right Scale) I,Cens 60X 1 2 _ _ ..................... ,, 1TOTAL SALES, ,*

X 1 ~~~~ . _ .t | -~~~~~~DUBROVNIK CMMUNE . 4.0

o ! t , ~~~~~~~~~~~~~~~~~~~~~~..** $E- ... 0~~~~~~~~~~~~~~~~~~~~~

. 5;000 . _ . + e .>- - 50 P:s ~~~~/ * ...,-Js

OIL i : * - PRODUCTION '*** _ > D~~~~~~~~~~~ UBROVNIIK ~~ 0

/ r ^ . .- j;; TOWN . SALES, 0

LU 1* > * DUBROVNIK TOWN

4.000 f 40

. ,,K : ** _ xPOPULATION, DUBROVNIK TOWN/ * __ I~~~~~~~~~~~~Right Scale)

' * / . Census3,000T 30

P .. +- | | ~~~~~~ANNUAL /o

*-'-*l *vt l ~~~~~ ~~~~~~~RATES //8%¢ ,, -' .,-++ l /< ~~~~~~~~~~~~~~~~6%

**** ,-PROJECTIONS RAT4%AC UAL-' | 2o

2;000 1 Afi _ _ . 20165 1968 1971 1974 1977 1980 1982

Semi-logarithmic scale

World Bank-7899

Novenmber ?, 1973

DUBROVNIK WATER SUPPLY AND WASTEWATER PROJECTORGANIZATION CHART FOR DUBROVNIK VODOVOD

- WORKER'S',OUNCILj

MANAGINGDIRECTOR

ECONOMIST SECRETAR

FINANCIAL OFFICE TECHNICALDIRECTOR DSUPERINTENDENT IRECTOR

SANITARYSURVEYOR TECHNICIAN

OPERATION AND~ COSTING ACCOUj TIN COLLECN S S PU r OFFICUE j DEARMENT DEPARTMENT WORKSHOP MECHANICALt

FIACONCIAL REVENUEDESIG MAINTENANCE CONSTRUCOION MAINTENANCE

World Rrink 8181

November 9, 1973

YUGOSLAVIA

DUBRCVNIi_ WATER A:ID WASTEWATER ENrEfRPf.ITS. (/0D0,'DD)

Income Statements for the Years 1970-1982

WATE-R

(Diln Lixousands)

Year Ending Dec. 31 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1 981?--------- Actual --------- ------------------------ a-------------------- Fsti mated --------3

r osumtn ( thnous andm_)Domestic 1,594 1,768 1,873 1,955 2,090 2,190 2,280 2,360 2,430 2,510 2,580 2,655 2,740Conmmrcial 1,936 2,231 2,387 2,560 2,720 2,880 3,100 3,530 3,650 3,760 3,890 4,015 4,120Si ipping 31 35 55 60 65 75 80 85 90 95 100 105 110

Connectionsc,w Connections During Year 235 270 395 498 350 340 340 330 320 320 320 320 310Total Connections at Year End 5,187 5,457 5,852 6,350 6,700 7,040 7,380 7,710 8,030 8,350 8,670 8,990 9,300

Charges (Average) (_rs_er _ )Domestic 0.80 0.85 0.94 1.23 1.46 1.84 2.12 2.44 2.81 2.81 2.81 2.81 2.81Commercial 1.90 1.90 1,94 2.37 2.88 3.68 4.23 4.86 5.59 5.59 5.59 5.59 5.59Ships 3.97 6.45 8.17 11.00 11.50 13.92 16.01 18.41 21.17 21.17 21.17 21.17 21.17

RevenuesCnarges - Domestic 1,275 1,502 1,764 2,405 3,050 4,030 4,835 5.760 6,830 7,055 7,250 7,460 7,700Commercial 3,678 4,239 4,636 6,065 7,835 10,600 13,115 17,155 20,405 21,020 21,745 22,445 23,030Shipping 123 226 449 660 745 1,045 1,280 1,565 1,905 2,010 2,115 2,220 2,330Meter Rents 103 153 329 375 515 635 760 870 1,010 1,150 1,300 1,500 1,700Connection Fees 2,373 3,521 2,716 3,575 2,695 3,085 3,480 3,715 3,960 4,360 4,790 5,270 5,620Other Revenues 507 804 893 900 1.050 _I,300 1_500 1.750 2_000 2,600 2,800 3,000Total Revenues 8 059 145 10,87 13,_ 90 20.8 0 240970 30 815 36.110 37845 3_,00 41695 43 380

Operating ExpensesSalaries & Wages 2,327 2,749 2,586 2,730 3,335 3,690 4,155 4,615 4,975 5,580 6,255 7,130 8,215Power 863 1,144 1,363 1,560 2,400 2,650 3,070 3,550 4,100 4,750 5,470 6,320 7,300Materials for Maintenance 648 1,091 1,359 1,435 1,915 2,100 2,400 2,500 2,900 3,200 3,400 3,900 4,400Insurance 141 189 205 245 250 260 270 280 300 310 320 330 340Other Operating Expenses 179 200 285 260 300 325 370 390 440 500 530 600 680Provision for Bad Debts - 163 430 30 30 30 35 35 40 40 50 50Taxes & Contributions 332 397 232 380 540 585 660 680 750 820 840 930 1,020Extra-ordinary Losses 73 100 42 85 85 90 100 105 115 125 130 140 155Depreciation 940 856 1_605 2 _ 25 2,465 3 _ 3,805 4 045 4.315 4,605Total~prating Ex,enses p5503 6,726 7,840 9,131 108 25 1_3 3290 14,620 167,60Q 2 1 03_3_2Net Income Before Interest 2 556 _,719 _2947 _4849 5,065 _,850 i 6_50 16_195 19,350 18,715 8,770 17980 16 615

Rate of Return IAverage Net Fixed Assets in

3, zOperation (millions) 25.9 36.7 51.5 58.9 63.2 67.1 70.9 76.6 100.9 123.9 129.5 136.0 143.2 emRate of Return (M) 9.9 10.1 5.7 8.2 8.0 13.2 16.4 21.1 19.2 15.1 14.5 13.2 11.60

September 20, 1974 '

YUGOSIAVIA

DUBROVNIX WATER AND WASTEWATER ENTYRI'BI5II ( )

Income Statements for the Y'ears 1970-_1962

I4ASTEWATER

(Din thousands)

Year Ending Dec. 31 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982

---------- Actual ------- --- l---- - - --------------- Estinsa ted ----------------------

Consumption of a t PremisesConnected to Wastewater System (thousand m ) 1,760 1,860 2,060 2,200 2,430 2,650 2,920 3,370 3,580 3,790 3,960 4,140 4,320

ConnectionsNew Connections During Year 25 25 50 50 100 100 300 300 300 200 200 200 200

Total Connections at Year End 2,245 2,270 2,320 2,370 2,470 2,570 2,870 3,170 3,470 3,670 3,870 4,070 4,270

Charges (Average) (dinars per i3

) 0.29 0.30 0,35 0.45 0.73 1.20 1.44 1.73 2.08 2.50 3.00 3.60 4.32

RevenuesCharges 514 557 712 990 1,775 3,180 4,205 5,830 7,445 9,475 11,880 14,905 18,660Other Revenues 70 84 17 20 30 40 50 60 70 80 _ 90 100 -_ 110

Total Revenues 584 641 729 LQ1Q 1.805 3.220 4.255 7515 9, 555 11,970 15,005 1_8770

Operating ExpensesSalaries & Wages 414 494 590 675 835 925 1,170 1,535 2,130 2,625 3,220 3,840 4,425Power 1 1 3 - - - - 200 500 710 820 950 1,100

Materials for Maintenance 222 278 270 305 480 525 600 850 950 1,100 1,500 1,700 1,900Insurance 18 25 43 45 75 90 150 230 300 380 400 420 440Other Operating Expenses 51 42 77 65 75 80 90 130 150 165 230 260 290

Provision for Bad Debts - - 16 30 10 15 20 20 25 25 30 30 40Taxes & Contributions 137 167 58 145 150 160 165 225 250 275 360 400 450

Extra-ordinary Losses 21 36 15 30 30 30 30 35 40 45 55 60 65Depreciation 111 _16 219 729 690 _690 690 690 2.525 4.515 4,845 _5,85 5,532

Total Operating Expenses 975 1,159 1 291 2,024 2.345 2.515 2,915 3.915 6.870 9.840 11_460 12 _45 14,240

Net Income Before Interest (391) (518) (562) (1,014) (540) 705 1.340 1.97 45 285)5 510 2,160 4,530

Rate of ReturnAverage Net Fixed Assets in

Operation (millions) 12.9 17.9 23.9 24.9 24.5 23.8 23.1 22.5 94.1 170.2 178.9 187.5 195.8Rate of Return (M) - - - - - 3.0 5.8 8.8 0.7 - 0.3 1.2 2.3

SUM_5RY - WATER & WASTEWATER OPERATIONS

Net Income Before InterestWater 2,556 3,719 2,947 4,849 5,065 8,850 11,650 16,195 19,350 18,715 18,770 17,980 16,615Wastewater (391) (518) (562 (1.014) (540) 705 1.340 1.975 645 (285) 510 2,160 4,530

Total Net Income Before Interest L2165 3,201 2,385 3,835 4.52s 9.555 12,990 18,170 19.995 18_430 19,280 20,140 21_145

InterestGross Interest 150 169 305 376 403 1,924 4,280 6,687 7,822 8,198 8,009 7,807 7,577

Less Charged Construction -___ 1.464 3.886 6.341 7507 -

Net Interest Charged Operations 150 169 305 376 403 460 394 346 315 8,198 8,009 7,807 7,577

Net Income 2.015 3.032 2,080 3.459 4.122 9.095 12.596 1 19.680 10,232 11 271 12.333 13,568

Distribution of Net IncomeCollective Consumption Fund 506 962 540 745 800 900 1,000 1,150 1,300 1,450 1,600 1,750 1,900

Reserve Fund 20 27 128 160 240 270 330 400 480 580 700 850 1,000

Business Fund 1.489 2,043 1,412 2.554 3.082 7,925 11.266 16,274 17.900 8.202 8.97 1 9,733 10.668

Rate of ReturnAverage Net Fired Assets in ;!:

Operation (millions) 38,8 54.6 75.4 83.8 87.7 90.9 94.0 99.1 195.0 294.1 308.4 323.5 339.0 a

Rate of Return (7) 5.6 5.9 3.2 4.6 5.2 10.5 13.8 18.3 10.3 6.3 6.3 6.2 6.2 , 5Z0

September 20, 1974

KICCILAV IIA

0U860V711( WATER AN) WAITEI4ATI6 VIIIPBS ISV (VODOVOD)

Statenents of loors and ic s of Funds 1970-1982

(Din thous.nds.)

Year Ending Dec. 31 1970 1971 1972 1973 1974 1975 1976 1977 1978 1979 1980 1981 1982- ---- Actual-I----------------------- Estimted ---------------------------------------SOURCES OF FUNDS

Internal Cash CenierationNet Income Before Depreciationand Interest

Water 3,496 4,575 4,552 6,855 7,035 10,965 13,915 18,660 22,495 22,520 22,815 22,295 21,220Wastevater (280) (402) (343) (285) 150 17395 2,030 2 3.17 4,230 .35 7.345 Net lnters_0 Cash 6en_rAtion 3.2 4570 7.185 12_360 15.945 21,325 25_665 26_750 28.170 29,640 31.280

ExiSting toans 366 3,103 2,112 - 2,903 - -- -' -Proposed IBiD Loan - - - - - 21,310 41,675 20,004 8,511 -Proposed Republic Water Fund Loan - - - - 1,273 5,065 3,480 631 209 213Proposed Bank of Dubrovnik Loan _ _- - - 2,515 10,029 6.897 1.247 - -TotaL LoanRatised 366 3.103 2,112 2_9 56,769 30,381 _10389 209 213 - -

E4uty Contributtons & GrantsEnterprises & Cons,u,ers 1,336 (2,199) 9,604 3,740 - 1,400 2,500 900 11,500 24,900 26,700 29,600Bebin Euk Enterprise - - . - 3,150 12,480 8,310 1,060 - - - -Cosune 369 337 __ _ _ 960 3,790 2.530 320 - _ _ -Total Concributions & Grants 1.705 (1.62) 9.595 3.740 - 4 110 17,670 13.340 2.280 11.500 4 26,700 26Total Saurces of Funds 5.287 5.414 1S.916 10,310 10 088 41.568 90.384 65.046 38.334 38.459 53.28 56.340 60,880

APPLICATIONS OF FUNDS

_ixd AsetCnstructionProject Expenditures

Water - - - - 50 15,374 15,605 711 - - - -Wastewater 100 13,588 58.423 37.422 4.667 - --

Total Project Expqenditures _ _ _ - 150 28_962 74.028 38.133 4_667 _Other Expenditures

Water 3,000 4,150 8,863 4,740 5,900 6,000 7,400 8,700 8,100 9,000 22,100 26,300 30,100Wastewater _ 69 _ 30 2954 660 - ___ 5.800 9.900 12.700 14.100 14400Total Other Ependito,res 3 9 4 10 11-817 5 400 50 6 000 7,400 14.500 18,000 121,700 36,200 39 300 44,500Total Fixed Asset Construction 3.069 4 _ ,S817 5,400 6.050 34962 81,428 52,633 22,667 21,700 39.300 44.500

Debt ServiceAmorti2ation

Existing Loans 425 739 1,066 1,185 1,256 1,276 1,206 818 756 652 671 690 684Proposed 18RD loon - - - - - - - - - 1,964 2,124 2,297 2,485Proposed Water Fund Loan - - -ISO - - - 180 184Proposed Bank of Dubrovnik Loa -

__ 646 67 685Total Anortizatfon 425 -739 1_066 1_185 1,356 1 . 206 818 756 3 3_,454 3839 4_038Interest

Existing Loans 150 169 305 376 403 460 394 346 315 294 274 255 228Proposed IBED Loan - - - - - 1,426 3,662 5,864 6,909 7.281 7.121 6,947 6,761Proposed Water Fund Loan - - - - - 13 75 160 201 209 213 217 214Propoasd Bank of Dub-ovnik Loon _= __ = - 25 149 317 3_97 414 _401 388 374Total lnter-st _50 -_ 1.9 305 376 403 t, 280 6,687 7,822 5.196 8,009 7,847 5Total DcbtLlervidc >15 9;6 1,371 1,551 1,659 3,200 5.4S6 7,505 8,578 13,460 11,463 11,646 11,6157.vna-to &AdTsA 657 A775 . 23D 960 1,020 310 1,300 1=4 _ _185_tq _L -- A ___ __L_ ___Z0_26q iaJi 9 2.00nFtmibutionk to Collective _,cs ,'un,, . 952 540 741 _ 800 9500 ICI) 1,150 1.300 _, 1.600 75 1.9Tucrnaaa in Net W.orking CsgiurJ

lncrr6as in Net WrkingCapital (Exel.di,g Caol) (12" 429 1,798 (633) 117 tS2 782 668 2,131 509 434 78 367Increzee in Cash (681' ?15 47 472 6 -P 1,90 1,674 1,760 1 1,71 490

Total Inc,reann ir Wrn _ 4 2 413 2.374 _ _5 8 "37 _245 4, 1. 2 ,269 Z.270 1.794 865Total Ap]Licoatjjn_ oF od S,§7 56 10 340 1-0.06 41,56n 53') 3t4 _5.046 3S,33, 3 45 53.7 563 340 60.880Year BEd Cash BalanCe ',4l CO8 s,175 3,632 4,104 4,788 5,296 7,086 8,910 10,670 12,50e 14,221 14,719Ratio of Internal Cash Onnerationto Annual Debt Service 5 4.6 3 1 4 .2 4.3 3.9 9 2.8 3.0 2.3 2.5 2.5 2. 7

September 20, 1974

"07311 'OU kA'I'R A.9 1291119 I , AlaS: ( (D: IQT1

Balm:sore Slats as at D-sembar 31, 193h-1982

(TDir tl,-sad.s)

As at Dea. 31 1969 1970 1971 1972 1973 1974 1971 1976 1977 1979 1979 1910 1991 1982

_ ___ _ ----- Actual --- -------- -_ _ __-_-_-_-_-___-i-stnl-a-ted ---------------------------------- -----

Assets

Fixed Assets - Watas S:pWl

Fixed Assets in Operatiss, 31 989 33,380 59.800 69,095 75,756 81.656 87,f356 93,65f 109,75s 147,772 11'6,772 1699872 178,172 190,172Less Aaccumulated Oepr..iatioe 6.28° _6297 12,078 17,500 409 I6,47 193.51 01 95f 23,37 2,46 9'76 34,31 38,63 _43,236

Net Fixed Assets is Operatis 251706 2_7 083 47_749 56 545 _1, 50 6A,180 69,065 72 7-00 40-,45 121.306 123 301 132 55T 139, 5'1 146936

Fixed Ass,ts-lLas-ewate- StemAxe.d Assets is Opera- iso 13,399 13,540 24,449 26,956 27,616 27,616 27,616 ?7,616 27,f616 174,145 186,845 200.945 '13.945 ?28,345

Less Accumslated Depreriatta, _ 478 9 700 1 581 2,0l15 2744 3 434 4 124 1494 814 5,90 ,S029 .544 17,38 72.574 4210Net Fix-l Arseta is Operatios 172991 1?2,40 7? 969 _ 941 24872 29 4 18 2 73 492 22 90 22.112 166 16 1746 301 193 353 191 371 299 711

Fixed Assets uls,dr tess trseAs _ 659 _ 797 90 3578 7 1 737 3 183 111,497 160,371 _ - 12,000 27.0 0 4

Talal let Fixed Assets 39,286 40,720 75,100 85, (f,4 87,729 91,119 14,2_740 207,099 2762,918 28797_ 300,802 289,112 137,912 392,277

Tls,te, seses 134 _11 037 1 017? 1,242 232 02 4,49 5,792 7-210 _8.7972 _19 54 2 3,42 14_392

C-,rrent AssetsImvem[sries 909 1,312 1,326 1,432 1.700 1,900 2,300 3,300 4,009 4,800 1,300 5,800 5,900 6,100

aReeivabiss 2,025 1,661 3,088 3,140 3,488 4,320 5,452 6,084

6,992 7,707 S.316 9,030 9,849 10,836Consttuctian Advantes - 273 240 80 100 11O 130 150 160 180 200 220 240 260Shs,t Term TJvestments 73 160 190 207 220 240 280 320 350 390 420 470 310 570Casb: 9846 1 451 960 1175 3,632 ', 104 4,788 S 29n 7.086 9 910 19.6/7 12,506 19 1221 14,719

Total Chr-tas Assets 3753 4 359 _5794 6.034 9,140 1 7 12,950 1 5150 21,997 25006 2 776 3770 12 997

fetal Assets 43.193 4A 390 81131 92,1 10 98,l11 104, 025 140 992 ,731 28 316,621 334s,60 491 024 3

I_ab_1itlas & EasitA<l 1-- tv 5 E l/

l3sisess Fud- 30,931 31,785 63,014 66,306 68,960 72,092 79,967 91,233 107,507 525,407 133,609 142,599 132,313 162,981Contribut les & Grea.ts

Eatarprises & Cossum'rs - 1,336 (877) 8,727 12,467 12,467 12,467 13,867 16,367 17,267 28,767 53,667 80,367 109,967Babia Kk Lat.nrptise - - - - - 3,150 15,930 23,940 25,000 25,000 25,000 25,000 75.000Commune - 369 706 697 697 697 1,657 5,447 7,977 8,297 8,?97 9,297 8,?97 8,297

Res.r.- Faad 163 734 _ 261 -380 540 780 I ,OSO 9_30 1_790 2_260 290 3540 4,390 7,799

Total squsty 91,094 37 724 65 104 76.210 82,664 85 996 98,291 127,5s7 157, 571 179 21 19 513 233,084 270_367 311.635

L_nTerm .ialbilitiesReisting Loass 10.546 10.487 12,851 13,897 12,712 14,359 13,083 14,877 l,159 10,303 9,651 8,980 8,295 7,606Froposed IBR1O L..a - - - - - 21,310 62,985 82,989 91.500 89,536 87,412 85,115 82,630Proposed Republie Water 9usd teas - - - - - 1,273 6,338 9,918 10,449 10,658 10,871 ls,691 10,507Proposed Bank f *ubronik Losn s - - _ - _ 5 __ 12 ,44 _19,4_41 _0 69 84 19,383 18,711 18,026

Total T,lg Tarm Debt 10,546 10,487 12,851 13,897 12,712 14,359 38,181 93,744 123.307 132,940 129,887 126,646 122,807 118,769Less Corre-t Mlaturities 425 _739 1 0_6 6 1,185 1,256 _17276 1,206 _919 _ 756 3,262 3,454 39 39 4_038 _ 4.2

_ct t L i 19,121 9,74 11 _785 1l,712 _1 456 139083 36,975 9459% 122,551 129_678 126_443 12_2 807 118 769 114 502

Currest L.iabilitiesC-stemets Depesits 363 792 303 549 600 650 770 880 960 1,030 1,150 1,250 1,400 1,550Seort-Term Bask T.sa,: 200 - - - - - - - - - - - - -Payables - Gescral 393 532 786 585 890 1.230 1,350 1.550 1.800 2,100 2,400 2,700 3,100 3,500Liabilities a. Cntrar.Yrs 14 349 1,125 329 500 1,000 1,500 2,000 2,500 1.000 1,200 1,400 1,600 1,800Propasel Distribtioe, 783 506 962 540 745 800 900 1,000 1,150 1,300 1,450 1,600 1,750 1,900Curres,t lata rities of Loa, Tens Debt 475 739 T, 066 1,185 1_256 1 276 1 706 91 7 3'i,262 3. 454 3,839 4_079 4, 267

Total Carre,t Lisabilities _199 7 919 4242 _,188 3,991 4.959 3 576 _6,949 7 6 84,17 9 654 10,789 _1 17017Total L6abilities & Eqaity _41443 46_390 81131 92_40 9-8 ,11.1 104 025 1.40592 226 , 27,288 31661 334,5600 366,680 401,024 439,154

RatiosDebt/Pquity Ratio 24:76 22:73 15:85 14:86 12:88 13:87 27:73 42:58 44:56 472:58 39 61 35:65 31:69 27:73Carrent Ratio 1.9 1.7 1.4 1.9 7.3 2.2 2.3 2.4 2.6 2.5 2.6 2.6 2.6 2.5

1/ CGamtributions & grants brafre lea. 31, 1969 are included is the Bssi-ess Fuad. '2/ Distribution to Clilective Casaumptiom Fund.

September 20, 1974

AINNEX 12Page 1 of 4 pages

DUBROV4IK WATER AiD WASTEWATER ENTERPRISE (VODOVOD)

Assumptions For Financial Forecasts

A. General

In each financial statement explicit provision has been made incapital and operating costs and in capital receipts and operating revenuesfor the effects of inflation from mid-1973. Inflation in operating expenseshas been assumed to be 20% in 1974, 16% in 1975 and 10% thereafter.

Operating expenses and fixed asset costs for the separate servicesof water supply and wastewater disposal are, where possible, specificallyidentified from the accounts. Expenses on commlon services are arbitrarilyallocated 75% to water supply and 25% to wastewater disposal, a close approx-imation to the ratio of connections for each service at the end of 1972.

B. INCOME STATEMENTS

1. Revenues

The tariffs assumed for water and wastewater are shown in Annex 13.A weighted average tariff was calculated for ships in 1974 and the proportionof foreign to Yugoslav ships assumed to remain constant thereafter.

Meter rents are assumed to be an average of Din. 6 per connection,monthly, in 1974, increasing thereafter for inflation. Other revenue hasbeen assumed to increase in relation to the numLber of connections.

Connection charges are based upoII estimates of connection costsderived fromn experience in the years 1970-1972.

2. Operating Expenses

Salaries and wages, power and materials for maintenance were esti-iatea on the basis of increased production of water and upon requirementsfor the new wastewater systems.

Insurance costs are related to the value of fixed assets in opera-tion, adjusted for price changes.

Other expenses, taxes and contributionis and extraordinary losseshave been increased relative to water sales.

Provision for bad debts is based upon a formula imposed by theSocial Accounting Service, adjusted to allow for expected limited improvementsin collection patterns.


The estimated depreciation rates for water and sewer systems havebeen increased from the 1.5% currently used by Vodovod to 2.0%. The remainingrates used by Vodovod have been continued unchanged. The approximate ratesused are therefore as follows:

Water and sewer pipes,buildings and reservoirs 2.0%

Electrical equipment 6.0%Office equipment 7.0%M4echanical plant 10.0%Vehicles 12.0%Stores and laboratoryequipment 10.0%

Office furniture 8.0%

3. Interest

Interest on loans has been clharged to construction until the end of1978.

4. Distribution of Net Income

Contributions to the collective consumption fund are based on theestimates of Vodovod staff. Contributions to reserves are based on the form-ula currently in force. In the case of Vodovod the annual reserve fund con-tribution amounts to 2% of net income before salaries and wages, bad debtsprovision, taxes and contributions, extraordinary losses and about 20% ofother expenses.

The remainder of net income is transferred to the Business Fund.

5. Collective Consumption Fund

All transactions relative to this fund have been excluded fromVodovod's accounts, the fund itself being treated as having separate accounts.

C. FUN'DS FLOW STATEMENT

1. Borrowings

(a) IBRD Loan - Din. 91.5 million, (US$6.0 millionequivalent) including capitalized interest, for24 years with a 4 year grace period and interestat 8% per annum;

(b) Republic Water Fund Loan - Din. 10.0 millionplus interest capitalized until 1980 (Din. 0.87million), repayment over 40 years, with interestat 2% per annum;


(c) Bank of Dubrovnik Loan - Din. 19.8 millionwith interest capitalized during construction(Din. 0.89 million repayment over 25 years, withinterest at 2% per annum.

2. Contributions and Grants

(a) Contribution from the Commune of Dubrovnik - Din.7.6 million towards the project;

(b) Equity contributions towards proportions of worksconstructed outside the project;

(c) Contribution from "Babin Kuk" hotel enterprise - Din.25.0 million towards the project.

3. Investments and Advances

Based on current practice, additional investments and advances areassumed to be compulsory investment of the reserve fund and a compulsory loanfor underdeveloped areas.

D. BALANCE SHEET

1. Fixed Assets

Fixed assets are shown at current price costs.

2. Current Assets

The level of inventories has been increased annually to reflectchanges in the size of the system and increasing material costs.

Receivables from consumers represent 4 months sales at the end of1973 reducing to about 2-1/2 months sales by the end of 1978 and at a constantratio thereafter. The receivables figure includes provision for payments byVodovod to be recovered from the Collective Consumption Fund. It is alsonet of the current provision for bad and doubtful debts.

3. Equity

No information is available about the extent to which the balanceof the Business Fund on December 31, 1969 includes contributions from con-sumers and grants from the Commune. For the period from 1970 onwards thesehave been shown separately. The Business Fund balance includes the surplusesarising from various asset revaluations. Consumer contributions in 1970-1972include assets constructed by consumers and vested in Vodovod on completion.The negative balance in 1971 arises because assets originally though to bedebt-free were subsequently related to a loan taken over by Vodovod fromanother enterprise.


4. Current Liabilities

Payables have been held at tile same average ratio that they had torelevant expenditures for tile years 1970-1972.

ANNEX 13

YUGOSLAVIA

DUBROVNIK WATER i WASTEWATER ENTERPRISE (VODOVOD)

WATER & WASTEWATER TARIFFS

(Din. per m3)

A. ACTUAL

WATER SUPPLY WASTEWATERPUALIC YUGOSLAV FOREIGN ALLY N A R NOHESTIC COMMERCIAL BUILDINGS SHIPS SHIPS CUSTOMERS

1969 0.80 1.90 0.25 1.90 7.00 0.30

1970 0.80 1.90 0.25 1.90 7.00 0.30

1971 (to 7/14) 0.80 1.90 0.25 1.90 7.00 0.30

1971 (from 7/15) 0.90 1.90 1.90 1.90 15.00 0.30

1972 (to 7/31) 0.90 1.90 1.90 1.90 17.00 0.30

1972 (from 8/1) 1.00 2.00 2.00 2.00 17.00 0.O40

1973 (to 6/30) 1.10 2.10 2.10 5.00 20.00 0.40

1973 (from 7/1) 1.35 2.60 2.60 5.00 20.00 0.50

1973 (to 7/15) 1.35 2.60 2.60 5.00 20.00 0.50

1974 (from 7/16) 1.60 3.20 3.20 5.50 22.00 1.00

B. ESTIMATED (From Jan. 1 - except where shown)(Average - Din. per m

3)

__________________IDEX OF INCRASES FRON 1974WATER WASTEWATER!/ WATER/ WASEWATE @R

COMMERCIALY E A R & ALL CURRENT CONSTANT CURRENT CONSTANT

DOMESTIC PUBLIC SHIPS CUSTOMERS PRICES PRICES PRICES PRICES

1974 (from 7/16) 1.60 3.20 12.10 1.00 100 100 100 100

1975 1.84 3.68 13.92 1.20 115 106 120 111

1976 2.12 4.23 16.01 1.44 132 108 144 118

1977 2.44 4.86 18.41 1.73 152 113 173 129

1978 2.81 5.59 21.17 2.08 175 119 208 141

1979 2.81 5.59 21.17 2.50 175 108 250 154

1980 2.81 5.59 21.17 3.00 175 98 300 168

1981 2.81 5.59 21.17 3.60 175 89 360 183

1982 2.81 5.59 21.17 4.32 175 81 432 200

/ Weighted average for local and foreign ships./ 15% per annum from 1975 to 1978.

3/ 20% per annum from 1975 to 1982.

September 18, 1974



Suramary of Financial Principles and Regulations

For Enterprises in Yugoslavia

A. Summary of Principles and Regulations

1. The most important form of business organization in Yugoslavia isthe "Enterprise." The enterprise is independent and has powers to conductessentially all transactions necessary to carry on a business.

2. The "means of production" (fixed assets and working capital) are"social property" and therefore cannot be sold to increase the personalincome of the working community, which otherwise possesses certain rights inrelation to the socially-owned means of production managed by it.

3. The Yugoslav constitution provides that the working organization(enterprise) has the right to decide on the use of socially-owned means andtheir disposal and to employ these means so as to gain the greatest returnsfor the working organization and the social community.

4. The Workers' Council, a body elected by the employees of theenterprise, has the right, among other things, to make decisions about thedistribution of income after payment of costs of operation other than wagesand bonuses, payment of creditors, and payment of taxes.

5. Essentially the distribution of income is made to cover thefollowing:

- obligations towards employee (personal income);- obligations towards funds of the enterprise.

6. The personal income of the employees is subject to the income ofthe enterprise after settlement of contractual and legal obligations. If thelatter cannot be met from the income after depreciation, which is regardedas part of the operating costs, depreciation funds can be used for repaymentof debt.

7. In determining personal income, the Workers' Council normallytakes into account:

- that the average minimum rate for a given branch ofindustry is maintained;

- that sufficient funds are provided for "enlargedreproduction" of the enterprise (funds for plantexpansion);


- that sufficient funds for maintaining the socialstandard of the employees are provided (jointconsumption fund for housing, rest homes, additionalschooling and professional training); and

- that a reserve fund is established and maintainedfor financial contingencies.

8. In accordance with the relative priority of the various obligationswhich have to be met from the income of the enterprise, the Yugoslav account-ing system recognizes two stages of "profit or loss." However, these inter-mediate balances in the calculation are better defined as surplus or deficit,since in the Yugoslav accounting system the cash flow concept is more dis-tinctly recognizable than the earnings concept.

9. The first stage in the calculation determines the balance availableto meet legal and contractual obligations; the second stage determines thebalance available to meet requirements for the funds of the enterprise. Ateach stage the inability of the enterprise to provide sufficient income tomeet the requirements constitutes a default, which is considered more seriousin the first stage than in the second stage.

10. The Yugoslav accounting system recognizes depreciation primarily asa cost of operations. Accumulated depreciation funds are used mainly tofinance replacement of assets. In case of material changes of price levels,such as those experienced up to 1965, special laws provide for revaluationof assets and corresponding adjustments in depreciation. Asset revaluationswere made following the January 1971 devaluation of the currency. Repaymentof debt from accumulated depreciation is only allowed in exceptional cases.

B. Conclusions

11. The financial principles and regulations followed by Yugoslav en-terprises result in a different presentation of financial results than thatcommon in non-socialist countries. However, the -basis of accounting is thesame double-entry system used by business firms in non-socialist countries.

12. The Yugoslav system recognizes the need to generate from revenuesufficient funds to cover all operating expenses (including depreciation)and to provide funds for debt service and reserves for replacement of assetsand additional investments in the business or in social facilities for theemployees.

13. A presentation of financial forecasts for Vodovod in the form ofcommon in non-socialist countries is not in conflict with Yugoslav financialpractice, even though the format of future actual financial statements forVodovod would be different. Covenants for financial performance can be basedon the format used for projections, since the future actual financial state-ments of Vodovod can be converted into this format for purposes of supervison.

ANNEX 15

YUGOSLAVIA

DUBROVNIK WATER AND WASYATER ENTERPRISE (VODOVOD)

DETAILS OF NON-PROJECT CAPITAL EXPENDITURES, 1974-1982(Mid-1974 Prices)

(Din. Thousands)

ITEM 1974 1975 1976 1977 1978 1979 1980 1981 1982

Water Supply

Minor Extension and Renewals!/ 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500

Prahivac Pump Station 600

Prahivac-Zvekovica Force main 1,200 1,400

Zupa Network 600 600 600 600

Dubrovnik West (Zaton) Exteneioa 6,ooo 7,000 8,000

Price Increases 800 1,500 1,700 2,800 3,000 3,900 11,000 14,200 17,600

Sub-total 5,900 6,000 7,400 8,700 8,100 9,000 22,100 26,300 30,100

Wastewater

Cavtat - Stage 1 j4,000 5,000

Zupa - Stage 1 6,000 6,000

New Works (unspecified) 14,800 14,800

Minor Extensions 1,200 1,200 1,200 1,200 1,200

Price Increases _ - 1,800 3,700 5,500 6,900 7,000 8,400

Sub-total _ -_ 5,800 9,900 12,700 14o100 13,000 14,400

TOTAL 5,900 6 000 7,1400 1 18,000 21,700 36,200 39,300 4450oo

!/Except for minor extensions and renewals, Prahivac pump stations, and Cavtat - Stage 1, the above works

are assumed to be financed by contributions and grants from enterprises, consumers or other communitysources.

September 17, 1974

ANNJEX 16Page 1 of 2 pages

YUGOSLAVIA

DUBROVNIK WAfER AND WASTEWATLR ENTELIRPRISE (VODOVOD)

Internal Cash Ratio

As explained in the text of the report (para 6.12) Vodovod's presenttariffs require to be progressively raised over the next few years so as togenerate adequate funds for construction during the project construction per-iod and for debt service and contribution towards future development afterthe project becomes operational. A suitable standard rate of return covenant,relating net income after depreciation, but before interest, to net fixedassets in operation will achieve the desired results once the project is inoperation. However, during construction, project costs will be excluded fromthe conventional rate base, even though internal funds are required towardsthese costs. Consequently, a rate of return in the conventional range of6%o-8% will easily be achieved without the tariff increases necessary to fi-nance a reasonable share of construction costs and without providing for theprogressive tariff increases explained in para 6.14. One remedy would be toinclude project construction costs as part of the fixed assets base until theassets are brought into operation. A reconmnended alternative is to calculate"internal cash ratios". These ratios relate net cash availability, afterneeting contractual obligations (e.g. debt service), and other cash require-ments (e.g. dividends), to the organization's gross fixed asset values, in-cluding fixed assets under construction. The appropriate ratio is determineduniquely for each entity and does not lend itself to interfirm comparisons.Hlowever, adherence to a required ratio directs attention towards the way inwhich compulsory or discretionary prior cash requirements reduce the fundsavailable for expansion of the entity's activities. In the case of VodovodDubrovnik, this is particularly meaningful because, as well as allowing fordebt service, it also highlights the effect of the compulsory investments andcontributions to the Collective Consumption Fund.

Details of the "internal cash ratios" for Vodovod Dubrovnik are shownon the following table indicating that a requirement of about 4% during proj-ect construction will achieve satisfactory results. 5%/ will be achieved dur-ing the first year of construction (1975) only if tariff increases are imple-mented on January 1, 1975. This may not be possible for administrative rea-sons, and the cash ratio requirement for this year has been left at 4%.

YUGOSLAVIA

DUBROVNIK WATER AND WASTEWATER ENTERPRISE (VODOVOD)

INTERNAL CASH RATIOS

1972 122 122k 122 2& 2 2n 1218 12 1980 1281 1982- - - - - Estimated Din Thousands-

Net Income before Depreciationand Interest 69570 2,360 15 945 21325 259665 26,750 28,170 29,640 31,280

Less Debt Service 1,561 1,659 3,200 5,486 7,505 8,578 11,460 11,463 11,646 11,615

Increase in Non-CashWorking Capital (83) 117 752 782 668 2,535 509 434 79 367

Compulsory Investment 230 990 1,070 1p180 1,300 1P430 1,580 1,750 1,850 22000

Contributions to CollectiveConsumption Fund 8010 2 600_S7oo

Total Deductions 2,453 3,566 5,922 8,448 102,623 13,843 14,999 15,247 15,325 15,882

Net Cash Generation (A) 4,117 33619 69438 7,497 109702 11,822 11,751 12,923 14,315 15,398

- - ----- Estimated Din Millions --- - - - --

Gross Plant in ServiceWater 69.0 75.8 81.7 87.7 93.7 103e8 147.8 156.8 166.9 178.2 190.2

Wastewater 27.0 27.6 27.6 27.6 27.6 27.6 174.1 186.8 200.9 213.9 228.3

Fixed Assets UnderConstruction 3.6 1.6 1.8 32.2 60-12.0 27.0__ 45.1

Gross Fixed Assets 99.6 105.0 111.1 147.5 232.8 291.8 321.9 343.6 379.8 419.1 463.6

Average Gross FixedAssets (B) 102.3 108.1 129.3 190.2 262.3 306.9 332.8 361.7 399.5 441.4

Internal Cash Ratio A/B 4.0 3.3 5.0 3.9 4.1 3.9 3.5 3.6 3.6 3.5

September 17, 1974 ap, 0`O

(DO

ANNEX 17

DUBROVN7gi WATER SUPPLY AND WTASTEWATER PROJECT -

ESTDITED EXPENDITURE BY YEARS

TOTAL

1974 1975 1976 1977 1978 1974-1978WATER SUrPPLY CONDONENT ---------------------------- Dinar (thousands) -------------- --------

Expansion oi Punping Station at Dubrovnik River

Equipue-t - 1,000 770 _ - 1,770Civil Works - 2.000 2,200 - 4,200Sub-Total 3,000 2,970 _ - 5,970

Bising Main from Thanping Station to Tunnel

Pipes and fittings ~ 2,700 870 - - 3,570CiPil Wostt 1,000 1,538 - - 2,538

Sob-Total _ 3,700 2,408 - - 6,108

Distribution, Mains ZEte=sion

Pipes snd fittings 2,000 1,200 _ _ 3,200Civil Works - 500 1,204 - - 1,704

aub-Total 2,500 2,404 - - 4,904

Distribution System Renovatio-s (Old TOYn)Pip- - 250 113 - - 363Civil Works - 300 300 240 - 840

So.b-Total - 550 413 240 - 1,203

Re-crveir at babin Kuk - 2,000 2,158 - - 4,158Sob-Tota' - - 11,200 9,940 - - 22,341

l-od - 294 - - 294Project Ocoigs and Supervision 50 300 350 84 _ 784

rotal EIcluding Cantinyentits 50 12,344 10,703 324 - 23,421Plysical CoLtisgescie- - 1,000 1,290 154 _ 2,444

ri-c Inor..sos - 2,030 3,612 233 _ 5,875

lTOTAL WATER SUPPLY COMIPXNENT 50 15,374 15,605 711 - 31,740

WASTEWATYR COMPONENT

Secor ConstroctionCollector I - Pipes and fittinga - 600 600 375 - 1,575

Civil Works - 3,000 2,815 - 5,815Sotwork I - Pipen and fittings - 480 300 67 847

Civil Works - 3,000 3,000 785 6,785Collector II - Pipes and fittings - 400 450 396 - 1,246

Civil Works - - 2,800 2,546 - 5,346Terwork 1I - Pipes and fittings - 400 190 _ 590

Civil Uorks - - 2,000 2,200 546 4,746Collector III- Pipes and fittings - 300 300 283 - 883

Civil Works - - 1,500 1,392 - 2,892T,rvock III - Pipes and fittinga - - 200 180 20 400

Civi1 Works - - 1,500 1,700 304 3,504Repairs to Esiotiog Scours - - 800 700 242 1 742Sob-Total - 1,300 17,030 16,077 1,964 36,371

Mbdifiertiors to Ecisting SewersRcoovations tu old sewers - 700 900 800 240 2,640Separation of ounne.tionn - - 1,500 1,600 200 3,300Sub-Total - 700 2,400 2,400 440 5,940

Psoping stationsLap.d - Equipment 1,100 1,681 - - 2,781

Civil Works - 2,700 269 - 2,969Glinan - Equimnt 500 993 - 1,493

Civil Works - 1,700 178 - 1,878Pil - Equipent 900 700 600 - 2,200

Civil Works - - 2,075 - 2,075:n,,

0 - Equipnnnst - 250 212 -_ 462Civil Works -- 186 _ - 186

Sob-Tetal 2,750 8,172 3,122 - 14,044

Trerneotr PlantEqoipseest 500 482 - - 982Civil Works - - 1,408 - - 1,408Sub-Total - 500 1,890 - -,390

CuIt fa ll Seour IPipes snd fittipsS - 1,500 2,000 _ _ 3,500Instolltasie - - 6,360 - - 6,360S,tb-Tota.l 1,500 8,360 - - 9,860

Lbp55Zon of Jodovod Hctdquarters - 1,000 1,00 2,000Op-ration sod Maintruanc Equipacnt - 1,190 _ - -S,,b-tI...al - 8,940 38,852 21,599 2,404 71,795La-d - 850 - - - 850Stojsc t Decloane.d Supervision 100 800 800 600 165 2,465

Totol Esec.din8 Con-inge-oiee 100 10,S90 39,652 22,199 2,569 75,110

Pes-ic-l Contintr-ci-o - 1,300 4,990 3,230 249 9,769Price-Tccreoseo - 16980 13,781 11.993_ 1.849 29.321T'OTAL - WASTEWATRS CTEsPfONSPAT 100 15,586 58.423 37.422 4 667

TOTAL I'ROJECT COSTS 150 28.962 74,026 38.133 48 145 940

Auguist 26, 1974

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V \ \ o vJ (P \ ' ~ Main Roads A spest

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Z KOSOVA \ i */ , Commune Boundary o 10 20 30 40fin'~~~~~~~~~~~~

rn.... 7 1 k * -Republic Boundaries KILOMETERS

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____________________ _________________ ~~~~~~~~~~~~~~~IBRD 10625

<V <~~~~~~~~~~~~~~~~-K C M OL~~~~~~~~~~~~~~~OOAC

-- -- ~~~~~~~~~~~~~ ~~ ~~~~~~~~~~~~~~~~~~~~PUMPING- J! K\

-I, - ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~~~~~~~~~~x

WASTEWATER PROJECT 9~~~~~~~~~~~~~~~~~~~~~~~~S DJ

---PETKGA HILL--.- Raiway

LASTOVQ S $ '44 ss Cliffs~~~~~~~~~~~~~~~~~~~16E~

_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ ~ :- _ _ _ _ _ _ _ _ _ H_ _ _ __R_ _

_________________________________ ~~~~~~~~~~~~~~~~~~~~IBRD 10626

O.OI BOSNIA HERCEGOVINA 0

; ~~~~~~~~~~~...... ...---- unl RalasPS ,A\$\' .\ -'ror /

MONTE - u 8 C, V N P~~~~~~~~~~~~~~~~~_-N

TIS Komolac~~1

HavetobePumped~~~~~~~~~~~~~~~~~~~ 1' \/ __ ' \ -

__ 77~~~~~~~~~r__ ~T\

NN

MajorRoads A0c Mcesns \ (M ajro d............. ~~~unnels Railways Pl

Q Got FallIs ,-20

-- Contour Intervals 25m

Bfb WASWk P Area Boudares of Re-pbli,/

Are;sWhere SepficTanks Haet ePumped

0 000 400 600 0 0 ooD BO NKW TRSPL N

m OGO 2000 3000 4000

FEETWATWAE FA~ILITIIES -M

NOVEMBER 1973

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Transcript of World Bank Document - Documents & Reports - All Documents | …€¦ · resources. The Bank loan is...