1. EMBU WATER & SANITATION CO. LTD (EWASCO) A BRIEF CASE STUDY ON COMMERCIAL FUNDING AND ITS IMPACTS CONTENTS BACKGROUND STATUS AS AT JULY 2005 PROJECT FUNDING APPLICATIONS FUNDING APPLICATION OUT COMES PROJECT IMPLEMENTATION STRUGGLES IMPACTS LESSONS LEARNED PRESENTED AT MOMBOSA BY H M KARUGENDO 11 TH NOV. 2011 (MOMBASA)

2. EWASCO: BACKGROUND INCORPORATED BY EMBU MUNICIPAL COUNCIL IN 2004 IN ORDER TO BE WATER ACT 2002 COMPLIANT. COMPANY OPERATED AS A DEPARTMENT OF THE COUNCIL UNTILL JULY 2005. IT WAS OPERATED WITHOUT A BUDGET. BECAME OPERATIONAL IN JULY 2005. THERE WAS NO FORMAL HAND OVER BY THE COUNCIL TO THE COMPANY

3. COMPANY STATUS AS AT 1 ST JULY, 2005 The Company general status at inception was as follows: WATER SUPPLY; Own Water Production Capacity = 2,000m3/day Water Supply Demand = 7,000m3/day As a result low water pressures and rationed 3 hrs every alternate day PLANS : No plans (technical & financial) existed for improving water supply and sewerage services situation OPERATING ENVIRONMENT: Staff morale and discipline was low Lukewarm support by Tana W S Board and shareholders of the Company The Company was indebted to suppliers An empty Company Account handed over The Customers had high expectation of immediately improved water services. It can simply be said that the environment was generally hostile, characterized by a low capacity to perform and a sense of helplessness

4. PROJECT FUNDING APPLICATIONS >PROJECT DESISGN EWASCO could not afford Consultancy Services. A design of a pipeline from source to Treatment was undertaken internally. Estimated Engineering Cost for the pipeline was KES 50,000,000 >A FUNDING PROPOSAL : was prepared to suit possible financiers >PROPOSALS SUMMITED TO POSSIBLE FINANCIERS : GOK through Tana Water Services Board Commercial Banks NGOS, Donor/Grants Organizations

5. FUNDING APPLICATION OUT COMES: GOK through Tana Water Services Board: no funds availed, no budget Commercial Banks: Only Cop-Bank agreed possibly because; EWASCO bank was Cop- bank, accepted EWASCOS argument of good management as the best security, the proposed project was financially feasible and sustainable. All Other Banks Refused: Citing short history of the company and lack of suitable collateral. NGOS, Donor/Grants Organizations: GIZ (GTZ) and JICA accepted to consider our applications for funding. Worked with both until EWASCO settled to work with JICA

6. PROJECT IMPLEMENTATION STRUGGLES( 2006, OCTOBER) Commercial Banks: Tana W. S. Board refused EWASCO permission to implement the Project through Cop-Bank loan. Gave no optional funding and decamped from Embu for 0ne year. Credit Financing without Tana W S Board Approval (11,000m3/day)  ESLON PLASTICS agreed to provide project pipes and fittings worth about KES 30,000,000, on a credit payable over a two year period after a down payment of KES 9,000,000. A grace period of 4 months was agreed.  EWASCO raised funds for un-skilled labor, builders works,used own skilled labor and finished construction of the pipeline ( 12km) in 2 months  The credit finance was re-paid in 18 months.  EWASCO continued to construct Treatment Works with internally generated funds. The Project has been implemented at a cost of about KES 80,000,000 JICA PROJECT (KES 2.2 billion)  the Project implementation is on-going.  EWASCO prepared the proposal for funding  EWASCO paid for all pre-implementation undertakings

7. IMPACTS AS A RESULT OF THE CREDIT FINANCING (1) JULY 2005 MAX. WATER PRODUCTION CAPACITY =2,000m3/DAY (RATIONNING) POPULATION IN MANDATED SUPPLY AREA = 54,000 (80SQ.KM) WATER COVERAGE = 24SQ.KM POPULATION SERVED =24,000 NO OF WATER CONNECTIONS =3,800 ( Functional water meters = 1800) NO OF SEWER CONNECTIONS =1,500 OCTOBER 2011 MAX. WATER PRODUCTION CAPACITY =13,000m3/DAY (24 HRS WATER SUPPLY) POPULATION IN THE MANDATED SUPPLY AREA=150,000 (900SQ.KM) WATER COVERAGE = 460SQ.KM POPULATION SERVED =97,000 NO OF WATER CONNECTIONS =12,000 ( Functional water meters = all metes) NO OF SEWER CONNECTIONS =2,300

8. IMPACTS AS A RESULT OF THE CREDIT FINANCING, (2) JULY 2005 PERMENANT STAFF=19 NO OF COMPUTERS = 2 FUNCTIONAL VEHICLES = 0 FUNCTIONAL MOTORCYCLES=0 NO OF COMPUTER SERVERS =0 OCTOBER 2011 PERMENANT STAFF=81 NO OF COMPUTERS = 37 FUNCTIONAL VEHICLES = 4 FUNCTIONAL MOTORCYCLES=19 NO OF COMPUTER SERVERS =3

9. LESSONS LEARNED 1.Public Private Partnership is a viable option for developing water infrastructure. 2.Good Project Planning, commitment and hard work on the part of a WSP IS ESSENTIAL. 3.WSPS do not have to DEPEND WHOLLYT on external organizations to provide solutions for their financial challenges. Innovative combinations of internal strengths and external financing could provide the optimum financial solution 4.Financiers will be attracted to work with WSPS which have a successful truck record. A production capacity of 11,000 to 28,000m3/day will be realized by Dec. 2012 through a grant support by JICA which is as result of a good truck record.