Water Management Initiative (WMI) Performance Improvement Plan for Yarmouk Water Company Dead Sea, March 20, 2017

Water Management Initiative Performance Based Contract Duration of 5 years, ends on April 2021 Total amount $29 Mill. TA + $6 Mill. Inv. Focuses on Yarmouk, Zarqa & JVA but covers the whole Kingdom Tetra Tech with Orient, SEGURA, W4LS and Jordan Social Marketing Center

Approach: Catalyzing Activities Substantial improvement in the water sector Under existing Jordanian law and national policy Lay the groundwork for broader sector reform Emphasis on building autonomy Increasing performance-based accountability Moving toward commercialization

Aligned with the National Water Strategy More decentralization, commercialization and consolidation of water and wastewater services as well as increasing private sector participation (Pg. 2). The Strategy aims to create new momentum for the sector to be better prepared; do business differently and more efficiently (Pg. 6). Each operating agency/unit that is part of MWI would have a clear purpose and incentives to perform effectively and efficiently, a sustainable source of funding and effective regulation. (Pg. 19)

Evolution of the Water Sector in Jordan Before 1990s Early 2000s 2017 Management Contract for Amman Water Authority of Jordan Water Authority of Jordan YWC Reg. Co. North Aqaba Water Company Miyahuna + Zarqa + Madaba Reg. Co. Center As Samra BOT Disi BOT As Samra BOT Red-Dead BOT AW + Ma’an Reg. Co. South Population: 4 Mill Population: 9.5 Mill

Yarmouk Water Company (Operation and Maintenance)

Yarmouk Water Company Operating Income (000 JOD)   2011 2012 2013 2014 2015 2016 Revenues 26,360 27,676 28,615 34,630 36,488 38,429 Expenditures 32,653 38,863 39,854 50,822 54,601 56,589 Operating income -6,293 -11,186 -11,239 -16,192 -18,113 -18,160

YWC Financial Indicators of Operating Performance   2011 2012 2013 2014 2015 2016 Cost recovery 81% 71% 72% 68% 67% Net losses /revenues -45% -68% -60% -63% -67% -66% Wages and electricity/revenues 84% 99% 110% 117% 122% 121%

Net Increase of Revenues 2011-2016   Increase of Revenue from tariffs Increase of Customers Net increase Total Revenues Increase 46% 26% 16% Revenues from Water 38% 24% 11% Revenues from sanitation 97% 48% 33%

YWC Increase of Operating Costs 2011-2016   Increase of operating costs Wages and salaries 73% Electricity 144% Maintenance -64% Others 15% Total costs

WMI Support

Performance Improvement Plan YWC’s Relaunch Financial Restructuring ERP System Implementation Workforce Achievement Program + New Headquarters + Infrastructure

WMI Activities supporting YWC Debt Collection Campaign (creation of incentives, procedures) Organizational structure (min. qual., job descriptions, recruitment) Business Plan 2017 Finance and Accounting Procedures and HR procedures X7 - Billing and Collection system Update of Oracle ERP system in finance, procurement and HR Financial agreement with WAJ FARA accreditation New building guidelines Training (strategic planning, finance and accounting, customer services)

YWC 2017 - 2021

Projected Operating Revenues (000 JOD)

Projected Operating Expenses (000 JOD)

YWC Projected Operating Loss before Subsidies (000 JD)

Factors Contributing to Decrease in Operating Loss (Mill. JOD)   2017 Operating Loss -19.8 1 Increase in water revenues from 40 MM3 of additional water supply per year 11.7 2 Decrease in NRW from meter replacements and water main rehabilitation projects 7.2 3 Retirements and normal attrition of approximately 200 employees 4 Improvement in customer collection rate from 91% to 97% 1.3 5 Increase in sewer revenues and 3% sewer tax from more sewer connections 1.2 6 Decrease in electricity expense due to PMU pump replacement program 7 Increase in electricity expense due to additional water supply -12 8 Operating expense of Wadi Arab project starting in 2021 -4 9 Labor and vendor inflation, net of other minor improvements -3.5 2021 Operating Loss -17.4

Electricity Tariffs vs. Water Tariffs

Projected Cash Flow Before and After Subsidies (Mill. JOD)   2017 2018 2019 2020 2021 Operating loss -19.8 -17.9 -17.1 -14.5 -17.4 - Capital maintenance expenditures -8.0 -8.2 -8.4 -8.6 -8.8 - Loan principal payments -2.3 - = Cash shortage before subsidies -30.1 -26.1 -25.5 -23.1 -26.2 - Electricity subsidy 17.1 17.6 18.5 23.8 - Capital maintenance subsidy 8.0 8.2 8.4 8.6 8.8 - OPEX subsidy 5.0 .3 = Net cash flow 1.4 9.3 6.4