fs orhei final

7/29/2019 Fs Orhei Final

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Water Supply and Sanitation Project

Implementation Unit

FEASIBILITY STUDIES FOR SELECTEDTOWNS FOR SECOND SMALL TOWNWATER SUPPLY AND SANITATIONPROJECT IN MOLDOVA

FEASIBILITY STUDY REPORT

ORHEI

FINAL REPORT

Stockholm 9 November2007SWECO International AB

Water and Environment

Project No. 1989 161 000

SWECO INTERNATIONAL

Gjrwellsgatan 22

P.O. Box 34044

SE-100 26 Stockholm, Sweden

Telephone +46 8 695 65 00

Fax +46 8 695 65 10

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


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Table of Content

1 Executive Summary .......................................................................1

2 Introduction ....................................................................................8

3 General about Orhei....................................................................11

4 Institutional Aspects ...................................................................13

5 Socio-economic Aspects ............................................................38

6 Financial Aspects ........................................................................48

7 Technical Aspects .......................................................................64

8 Outline Design ............................................................................70

Drawing Drawing No. Description:

1 1989161-WS-001 Water Supply Network Present Situation, year 2006

2 1989161-WS-002 Short-Term Investment Needs Within Water Supply

Network3 1898161-S-001 Sewerage Network Present Situation, year 2006

4 1989161-S-002 Short-Term Investment Needs Within Sewerage

Network

Error! No text of specified style indocument.2007 Error! No text of specified style in

KAPA/var/www/apps/conversion/tmp/scratch_5/126754721.doc


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Abbreviations and Acronyms

BOD Biological Oxygen Demand

COD Chemical Oxygen Demand

DSCR debt service coverage ratio

GIS Geographical Information System

GDP Gross Development Product

Ha hectare

IAS International Accounting Standard

JSC Joint Stock Company

km kilometre

kWh kilo Watt hour LAN Local Area Network

l/cap/d litre per capita per day

MDL the currency in Moldova, Moldavian lei

mg/l milligram per litre

MIS Management Information System

m2 square metre

m3 cubic metre

n/a not available

NGO Non-governmental Organization

NRW Non Revenue Water p person

PFS Pre-Feasibility Study

PS pumping station

SCADA Supervisory, Control and Data Acquisition

UNDP United Nations Development Programme

USD US dollar

VAT Value Added Tax

WB World Bank

WWPS Wastewater Pumping Station

WTP Water Treatment Plant

WWTP Wastewater Treatment Plant

Water Supply and SanitationImplementation Unit09 November 2007 FINAL

Feasibility Study Report for OrheiI



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Feasibility Studies for Selected Towns forSecond Small Town Water Supply andSanitation Project in Moldova

FEASIBILITY STUDY REPORT

ORHEI

1 Executive Summary

1.1 General

Orhei town is located in the centre of Republic of

Moldova, on the left bank of Raut River, 35 km

north of the capital on the road between Chiinu

and Bli. Emigration has reduced to number of

inhabitants from 47,000 to estimated 34,000.

This feasibility study is prepared as a project within

the frames of a Moldovan plan up to year 2015 for

rehabilitation of the water and sewerage systems in

the country. The project is called The second small

town water supply and sanitation project in

Moldova and is considered for financing by the

World Bank.

The project was divided into two main phases one

pre-feasibility phase when 15 towns all over thecountry were analysed, and one feasibility phase

for preparation of feasibility studies for ten towns

selected from the first 15. On recommendation of

the Consultant and after discussions with the Client

and the World Bank the feasibility phase inslcudes

the following ten towns: Bli, Cahul, Cueni,

Drochia, Fleti, Floreti, Orhei, Rcani, Soroca

Orhei near

Chiinu, has

some 34,000

inhabitants

This study is

part of a

Moldovan plan

for the water

sector

15 towns pre-

analysed, 10

selected


Feasibility Study Report for Orhei1



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and Ungheni.

This document contains the feasibility study for

Apa-Canal in Orhei. This is the FS

for Orhei

1.2 Institutional Aspects

In meetings with representatives for Orhei Apa-

Canal and its owner the Consultant got a clear

impression that they want to develop Apa-Canal

to a good service provider in terms of water

quality, efficiency of operations, coverage andreliability of service, and customer satisfaction

all statements in fact representing a long-term

goalfor Apa-Canal.

In order to reach these goals the Consultant

believes it important that Apa-Canal acts more

commercially and that Apa-Canals daily

operation is more separated from the municipal

ownership than now. Too close political

involvement in a company often makes decisions

and the business in general more bureaucratic

and slow. Apa-Canal and its management have,

and shall further develop, the capacity and know-

how to accomplish what the political leadership

in the municipality demands them to do, and

what they are paid for from the customers and

possibly from the town budget.

The Consultant recommends the following

distribution of roles: 1) The political leadership

shall decide about the level of service in the townand about the principals for finance of the

demanded service, and 2) Apa-Canal shall fulfil

what the political leadership has decided.

The Consultant believes that one way to reach

this status is to change the utility to a 100%

municipally owned Joint-stock company with a

board consisting of for instance five to six

persons representing different know-how and

Orhei Apa-Canal

seems committed

to improvement

Political influence

too frequent

Make clear

division of

responsibilities

Commercialisation

is important for

efficiency





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interests. The Consultant therefore recommends

the Town to seriously consider this possibility -and perhaps other possibilities - in order to

improve the efficiency of the company.

The Consultant also recommends Apa-Canal to

prepare an asset inventory including asset

evaluation and performance and condition

grading. This is important for qualified asset

management and operations management and

for determination of realistic asset values to be

used for depreciation in the financial reporting.

In order to better use the capacity and interest of

all the personnel in the utility the presently

practiced detailed top-down management and

control model (management by directive) should

be changed to more Management by Objectives

and to a concept of Accountable Managers.

Accountable managers would have delegated

responsibilities and would normally be the

functional Heads in the company; e.g. Head of

Water Treatment Station, Head of Wastewater,

Head of Networks etc.

The bad condition of the water and wastewater

facilities demands of course intensive and

correct daily operation. In addition to this Apa-

Canal is recommended to develop and

implement a long-term business strategy - at

least for the next 20 years and change focus

from the presently dominating daily operation

and emergency activities to a strategic long-term

focused management. Preparation of a qualifiedBusiness Plan would support managers to

include both short-term and long-term aspects in

their work to develop the utility.

The number of staff is, despite already carried

out reductions, extremely high 6 staff / 1000

inhabitants and constant efforts to further

reduce this ratio must have high priority. Beside

improved physical assets constant improvement

Asset inventories

needed

Delegate

responsibilities

and make

accountable

A Business Plan

would help to

balance between

short- and long-

term measures

Number of staff is

extremely high,

education needed

to support

reduction.





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of the quality of the personnel is important for the

further staff reduction. The Consultant thereforeidentified a number of specific areas of training,

which will enhance the skill and knowledge levels

within relevant staff and greatly assist in

ultimately reducing Apa-Canals costs.

Good relations with the customers are crucial for

instance for their willingness to pay for the

service and consequently for increased incomes

for Apa-Canal. The heart of good customer

relations is to meet or exceed customers

expectations and, when failures occur, to acceptresponsibility and take positive action. The

Consultant has therefore prepared a list of

suggested customer service standards which

Apa-Canal may further develop in addition to

Moldovan state regulations governing the

provision of water and wastewater services.

Customer

relations must be

improved to

increase

willingness to pay

1.3 Socio-economic Aspects

With industries active in many different sectors,

Orhei seems to have a good industrial base; it also

showed little better than average growth during the

last years.

Healthy

industry

The calculation of the household monthly revenue

at local level is difficult to accomplish in most

Eastern European Countries. The situation is

similar in Moldova. Usually the National

Commission for Statistics (or similar entity)

calculates the average household revenues atnational level without giving any values for county

or local level.

We estimate the salary levels are 15% lower in

Orhei than the national average in Moldova. Still,

we find the costs for water services affordable as

they consume 2 % of average household incomes.

Household

revenues are

difficult to

estimate

Although

salaries are

low, water

costs are

affordable.





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During the period June 15 till July 15 a survey was

conducted in order to find the general perception ofthe population regarding the water and wastewater

activity of the utility. For the purpose of the survey a

representative sample on the basis of: education,

age, gender considering the population from 6

towns of Moldova: Bli, Cueni, Ungheni,

Nisporeni, Leova and Cahul.

Water is clearly reaching the utmost importance in

all towns. Population wants to access all communal

services, without discrimination, but rank water on a

top of the options.

Regarding the improvement of quality of water

services during the last years, the general

perception is that in most of the cities there were

not recorded major achievements and the quality of

the services remained the same or even worsened.

People are willing to pay 35-50 Lei monthly for

good water services. With improved customer

relations and better understanding of the utilitys

cost people can become willing to pay more.

A willingness-

to-pay surveywas conducted

in 6 towns.

Water is

important..

..but quality is

a (increasing)

problem

Willingness to

pay is there

and can be

improved

1.4 Financial Aspects

Based on the analysis of the historical

performances and considering the macroeconomic

scenario envisaged by the authorities, a financial

forecast for the period of the credit was prepared in

order to generally assess the maximum level of the

credit that can be contracted. A sensitivity analysis

is performed in order to better assess the impact in

variations of assumptions on the level of the creditand on the capacity of the utility to repay the

proposed credit.

The delayed adjustment of tariff compared with the

cost increases had a negative impact on the

performances of the water utility. The water utility

cannot control the tariff adjustment process, which

is the prerogative of the Local Council. The water

utility can propose tariff increases based on cost

Forecast 2007-

2036 was

developed

The slow tariff

development

is a problem





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increase but the Local Council takes the final

decision, often with more attention to politics than tothe welfare of its company.

The level of account receivables is relatively low

showing a good collection level and the cash flow is

positive.

The financial model shows a stable cash flow

development that under normal circumstances will

secure repayment of credits. There are, however,

three potential risks that not are under the control of

the management team and that can affect the

repayment capacity of the utility:1). The tariff adjustments;

2). The energy price increases; and

3). The salary increases.

Cash flow is

positive

Forecast look

stable, but

some risks

must be

mitigated

1.5 Technical Aspects

This Feasibility Study has its main focus on water

supply and sanitation investments. Main

investments proposed are related to water supplynetwork renovations and designing new WWTP.

Both Water and

Sanitation sector

investments isthe focus of this

study

Estimates of the short-term investments required

to secure that the water supply and sanitation

systems in Orhei can operate acceptably were

prepared for the period of years 20072009.

Small scale investment packages were also

prepared, with the aim to provide suitable

financing packages for potential financiers.

Short-term

investments to

secure

sustainable water

and sanitation

services and

some expansion

Estimates of medium-term investment needs were

prepared for the years 20102013 in order to

secure sufficient medium-term operation of the

water supply and sanitation systems, as well as to

provide proper wastewater treatment for town of

Orhei and water supply for increased number of

inhabitants in Orhei.

Medium-term

investment to

secure medium-

term water

supply and

sanitation

services and

proper ww





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treatment

Medium-term investments are not included in the

outline design, which was prepared only for

proposed short-term investments. Also the

prioritization order for needed investments was

done only for proposed short-term investments.

Only short-term

investments are

designed

Renovation of pressure pipeline from natural

spring and connection of southern pressure zone

to northern pressure zone was considered to bemost feasible in terms of needed short-term

investments. Other feasible short-term

investments prioritized were rehabilitation of

existing water supply network preparation of detail

design for new WWTP.

Proposed short-

term investments

were prioritized

Preliminary investment cost estimation for

proposed short-term investments was 5.6 MUSD

in total. Investment cost estimation for short-term

investments needed on sewerage sector was 1.1

MUSD and for water supply sector 4.5 MUSD.

Preliminary

investment cost

estimations for

proposed short-

term investments

were prepared





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2 Introduction

2.1 Background

The Republic of Moldova has prepared a Plan up to year 2015 for

water supply and sewerage. The Plan is a part of a complex of

processes for rehabilitation of water supply sources and for

increasing of the technical and sanitary condition of the water supply

and sewerage systems, stipulated in the National Action Plan for

health in relation to environment, approved by Government Decree

no.487 dated June 19, 2001.

The main scope of the Plan is solution of a set of problems, with

organizational, technical, economical and legal character. Solving

these will assure stable and continuous operation of centralized and

decentralized water supply and sewerage systems.

The scopes of the Plan are the following:

Contribution to wealth increase and health protection of the

population;

Rational use of water

Protection of environment;

Protection against pollution and depletion of sources of water

supply;

Reasonable management of capital investments.

Rehabilitation of the quality of services provided to consumers

Increase of economic efficiency of water supply and sewage

collection utilities operation

Reducing by 50% of the number of population (about 1 million.inhabitants), which have not access to safe water supply.

2.2 Project Objectives

The project is called The second small town water supply and

sanitation project in Moldova and is considered for financing by the

World Bank. The ultimate objective of the project is to enable Apa-

canals in selected towns to supply the population with continuous,

efficient and sustainable water and wastewater services over time.





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The project is divided into two main phases one pre-feasibility

phase when ten out of fifteen towns should be selected forparticipation in the subsequent feasibility phase.

Pre-feasibility studies were carried out and delivered in June 2007.

The ten towns recommended for preparation of feasibility studies

were: Bli, Cahul, Clari, Cueni, Drochia, Fleti, Floreti, Orhei,

Rcani and Ungheni.

During the pre-feasibility phase Soroca Apa-Canal expressed that

they did not want to participate in any credit financed project due to

an already too heavy credit burden. In discussions between Soroca,

the Client and the World Bank after the pre-feasibility study period itwas anyway decided that Soroca should be one of the ten towns

selected for preparation of feasibility studies1. Therefore, the list now

contains Bli, Cahul, Cueni, Drochia, Fleti, Floreti, Orhei,

Rcani, Soroca and Ungheni.

This document contains the feasibility study for Orhei.

According to the Terms of Reference four Aspects should be

analysed: the institutional, the socio-economic, the financial and the

technical aspects. All these aspects were analysed during the pre-

feasibility phase according to the Terms of Reference especially the

three first ones. All the four aspects are analysed also in the present

feasibility phase, now with deepened technical analyses and

recommendations.

2.3 Consultants Time Schedule

Figure 2.1 presents a simplified time schedule for the whole project

period including Pre-Feasibility Phase and Feasibility Phase.

According to an agreement in June 2007 between the Client, the

World Bank and the Consultant there are now three deadlines for thedraft feasibility studies, one for Soroca, one for Cueni and one for

the remaining eight towns. The time needed for the Clients

comments is not exactly specified in the contract and therefore only

roughly indicated in the time schedule.

1 As Clari had the lowest scores among the ten towns recommended in the pre-

feasibility study, this town will not be further analysed during the feasibility phase.





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Month Apr May June July Aug Sept Oct Nov Dec

Activity

Project start

Pre-feasibility study

Draft feasibility study for Soroca

Draft feasibility study for Cueni

Draft f easibility study for 8 towns

Client's comments (assumed time)

Final feasibility study for 10 towns

2 weeks after Client's coments.

Figure 2.1 Modified time schedule for the project period.





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3 General about Orhei

Orhei town is located in the centre of Republic of Moldova, on the left

bank of Raut River, 35 km north of the capital on the road between

Chiinu and Bli.

Figure 3.1 Location of Orhei





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The official number of inhabitants was a few years ago 47,000. The

real number is now, considering emigration to Chiinu and to othercountries and immigrants from the surrounding rural areas, estimated

to around 34,000 inhabitants. A census was carried out during the

summer 2007, but the result is not available when writing this report.





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4 Institutional Aspects

4.1 General

According to the contract for the project most of the institutional work

was carried out during the pre-feasibility phase of the project. During

the feasibility phase the work should be concentrated on Need for

staff training and other forms of institutional strengthening. As a

background for easier understanding of the discussions and

proposals in this feasibility study some of the findings already

presented in the pre-feasibility study are repeated here.

4.2 The Owner. How the Owner Governs Apa-Canal

Present Situation (Text from the Pre-feasibility study)

The Town is the only owner of the service utility. The utility consists of

one of the departments of the Town Administration.

The Town Council appoints the Director of the utility, and he reports

to the Deputy Mayor responsible for technical questions. Beside he

also reports twice per year to the Town Council. Tariffs andconsumption norms are approved by the Town Council.

The Town has no service agreement with Apa-Canal describing for

instance the level of service.

Consultants Comments

In meetings and other contacts with representatives for the town and

Apa-Canal in Orhei the Consultant has got a clear impression that the

Town Councils purpose with Apa-Canal is to ensure the customers in

Orhei reliable, high quality water supply and sewage treatmentservices in a cost effective and affordable way with a minimum impact

on the environment.

It is therefore important for the owner to understand that the

institutional framework of a company is crucial for its efficiency. It

determines the incentives for different parties concerned to deliver

desired outputs. It also determines how the performance in achieving

objectives is monitored and assessed. The key to a successful





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institutional development lies thus in designing the institutional

framework as well as the structure of the enterprise, so that rights,duties, incentives and sanctions produce outputs meeting the goals

both of the owner and of the society as a whole. In discussions with

the Mayor of the town, thus the representative of the owner, and the

Director of Apa-Canal these facts seem to be well understood.

According to the Consultants understanding, the situation in Orhei

may also be described so that the local authorities as well as the Apa-

Canal managers are interested in continuing the already started

development of Apa-Canal to a good service provider in terms of

water quality, efficiency of operations, coverage and reliability of

service, and customer satisfaction. Each part of such a statementrepresents a long-term goal for Apa-Canal, in all probability

demanding changes relating to the ownership and operation not

only technical improvements through physical investments. In order to

realize these statements there is a need for great efforts from all

parties involved during long time.

In order to reach the mentioned long-term goals, including optimal

development of the efficiency of Apa-Canal, the Consultant believes it

important that Apa-Canal acts more commercially and that Apa-

Canals daily operation is separated from the municipal ownership.

The cooperation between the owner and the utility seems presently to

function well. However, usually too close political involvement in a

company makes decisions and as well as business in general more

bureaucratic and slow, and this might also be the situation in Orhei

with other individuals than now involved. Apa-Canal and its

management have, and shall further develop, the capacity and know-

how to accomplish what the political leadership in the municipality

demands them to do, and what they are paid for from the customers

and possibly from the town budget.

The Consultant recommends the following distribution of roles: 1) Thepolitical leadership shall decide about the level of service and about

the principals for finance of the demanded service, and 2) Apa-Canal

shall fulfil what the political leadership has decided. The Consultant

recommends this to be specified in a performance agreement

between the town and Apa-Canal.

Such a situation may to some extent be compared with management

by objective in a company, which properly handled may result in a

win-win situation, when the subordinate has a more free and creative





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work increasing his motivation, and the superior may concentrate on

other more qualified tasks than using a major part of his timecontrolling his subordinates. This kind of leadership often results in

better work at less cost. See more under section 4.4.

The present form of municipal company in Orhei might function well

and give a possibility to distribute the roles of the owner and operator

as described above. The Consultant recommends, however, the town

to reflect on changing the utility to a 100% municipally owned Joint-

stock company with a board consisting of for instance five to six

persons representing different know-how and interests. The board

could have representatives from the municipality, specialists from a

university in Moldova, market and business specialists, technicalspecialists, a representative for an NGO etc. The board is important

for the strategic management necessary for efficient guiding of Apa-

Canal to a modern commercial company. Besides functioning as the

government of Apa-Canal it should be a resource for the Director in

his difficult task of managing the company.

Important advantages with a joint-stock company (JSC) are in many

countries, and probably also in Moldova:

Autonomy with clear roles, responsibilities and rights for the

owner and for the company.

Financial freedom and possibilities increases.

Less bureaucracy resulting in more rapid decisions.

Direct contact with the market and a feeling for the market.

The company will have its own board. A board composed of

carefully selected members is important not only for the

companys long-term strategic development but also as a

resource for the director when managing a company.

Internationally there exist a number of forms for ownership and

operation of water service utilities. In e.g. Sweden, Finland, Norway,

Denmark, Netherlands and Germany the completely dominating legal

form is just a municipal administration. In e.g. France, and especially

in UK, private arrangements are dominating. Also in many countries

with a low water and wastewater standard in need of major

improvements, different kinds of private arrangements are common.





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Countries and municipalities have thus chosen different legal status

and governance for their water and wastewater services. This showsthat there is no absolute, objective truth that one or another solution is

the best. The reason for the existence of different solutions may be

historical, e.g. that it started as a municipal responsibility, or it might

be the technical or economic situation of the utility, demands from

funding agencies, social considerations due to the fact that the water

utility is a natural monopoly, a subjective conviction that one solution

is more efficient than another, a political idea etc.

Considering efficiency private engagement or personal incentives

often gives the best result for a business. This is the case also in for

instance most Swedish services, although water and wastewaterutilities, despite almost 100% municipally owned and operated, are

highly efficient due to e.g. political pressure, outsourcing of non-core

activities, high transparency, free and efficient media, free and active

NGOs and efficient benchmarking. A few of these facts are

commented below.

Outsourcingcan be seen as a privatization of parts of the company

and a concentration to the core business. Both the remaining core

business and the outsourced parts may gain from this. For instance

are, according to the Consultants experience, private companies also

in former Soviet countries more efficient than municipal companies -

the more private engagement and incentives though more efficient

company.

A high degree oftransparencyis crucial for democracy in general but

also for the customers (owners/voters) trust in the utility and

willingness to pay tariffs allowing full cost recovery and financial self-

reliability.

Benchmarking may be defined as a process of comparing

business practices and performance levels between companies(or divisions in the same company or comparison betweendifferent periods of the same company) in order to gain newinsight and identify opportunities for making improvements.The key elements of benchmarking are simple: at its core,benchmarking is about systematically comparing theperformance of operations with a view to stimulatingperformance improvement either from the shock value of thecomparison or from the extraction of the principles of bestpractice from high(er) performing operations. It is this





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combination identifying differentials in performance or

processes and then using this information to leverageimprovement, learning and change, which best characterizesbenchmarking.

Systematic benchmarking, when comparing a number of carefully

chosen key ratios indicating the performance of the utility, may be an

efficient tool for the owners monitoring of the utility and for the utilitys

own efforts to improve its efficiency.

For the benchmarking it is important to identify which processesshould be benchmarked. Reliable statistical data should be

prepared, preferably a sequence of data during a certain period.The ratios should cover different aspects of the efficiency, forinstance normal financial ratios. The ratios could also covermore apprehensible or tangible facts, for instance number ofdamages per kilometre of pipes, number of employees per1,000 inhabitants, costs per operational unit or department, etc.

To summarize the above comments the Consultant recommends the

Town Council of Orhei and the management of Apa-Canal to go

through different opportunities and tools for management, ownership

and government of the utility and then, based on a goal stating that

Apa-canal shall provide Orhei with reliable, high quality water supply

and sewage treatment services in a cost effective and affordable way

with a good coverage, a minimum impact on the environment and a

high customer satisfaction, continue to develop not only the technical

facilitates but also the institutional situation including the legal status

and form of government.

In addition to the above text, see also Consultants comments under

Section 4.4.

4.3 Legal Aspects


The enterprise has its own statutes but no separate service

agreement with its owner describing for instance the level of service

to the customers.

Consultants comment:





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Independent from the legal status chosen for the utility, but especially

if it would be changed to a Join-Stock Company, the Consultantrecommends Apa-Canal and the Town Council to prepare a service

agreement.

A service agreement is in this case a contract between the Orhei

municipality and Apa-Canal. The service agreement will be a good

tool for both parties in order to define what service the Town

demands and Apa-Canal shall deliver, define the quality of service

and its improvement. The Town may also use it as a control and

monitoring tool allowing the Town to follow the effect of the work for

improvement of Apa-Canal and its tasks specified in the agreement

and related documents, e.g. a business plan. Depending on thecontent of the agreement it might also help the Town and Apa-Canal

to formally capture and respond to comments from customers and

other stakeholders and use this for further development of the utility.

In the service agreement Apa-Canal can agree to:

effect the restructuring tasks and responsibilities specified in the

agreement and in a business plan recommended by the

Consultant;

present to the Town Administration written quarterly and annualprogress reports about the performance of the implementation of

the agreed activities (normally specified in a business plan);

follow the demands and instructions from the Town

Administration based on results from their control and monitoring

of Apa-Canal and its tasks.

As long as Apa-Canal is a municipal service enterprise, efforts

relating to regulatory and institutional development may also be

included in the service agreement. This may include management

training, operational management, core business / non-core businessevaluation, cost cutting strategy, financial management and increased

human resource management.

When preparing a service agreement, it might be suitable to compare

with a private contract, especially ifOrheiApa-Canal is transformed to

a JSC, as a private company is directing towards profit maximisation.

Apa-Canal is also according to its charter a profit making company,

and there may be possibilities to introduce improved profit thinking

also in this type of company and introduce relevant financial





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r

ao1e

2005-01-17

SWECO INTERNATIONAL

indicators parallel to other performance indicators. At least a few of

the indicators in a service agreement for Apa-Canal should be linkedto costs.


The Municipality is the owner of all the assets including both water

and wastewater facilities. The enterprise operates these facilities.


The Consultant recommends OrheiApa-Canal to prepare a good

asset inventory including a) asset evaluation and b) performance andcondition grading. This is important for qualified asset management

and operations management. Cost evaluations of the assets will help

to determine realistic values to be used for depreciation in the

financial reporting.

It is recommendable to put data into a computerised operational

database. A person within a production department under the chief

engineer may be responsible for data entry, validation and reporting,

possibly supported by external specialists. Data held in an Excel

spreadsheet format makes possible future updating, retrieval and

reporting.


Beside the national legislation Orhei has local rules for metering,

wastewater discharge from enterprises to the municipal system and

regulations on payment for being a client. Apa-Canal has written

agreements with all its customers.


The situation in Orhei seems presently to be good. The local rules

and agreements should of course be looked through and perhaps

amended then and then.

4.4 Organization and Management


The organization chart for the enterprise is presented below.





23/92

Figure 1 The Organization of Orhei Apa-Canal

L a w ed e p -

Safetydep-t

Repairstation,

garage

Equipmentrepair

station

ecanic

metrological

station

Wastewater

tecnologydep-t

Ecologicaldep-t

Laboratory

Planingdep-t

HRsection

Economydep-t

Birouleconomic

BiroulTPP

Procurement&

marketingdep-t

Economydep-t

Accountingdep-t

Accountingdep-t

Metrologydep-t

Economydep-t

Biroulfinanciar

Biroulcontabil

Secretary

IToffice

Sectoreviden

,

controlapometre

casa

constructionteam

operators

Welder

teamN1

teamN2

teamN3

Machinists,

operators&weldersof

chlorineequipment

drivers

Welder-a

uto

Weldersteam

welders-metrolo

gists

Loae

rs,

mash.opera

tors

Dispatcher-auto

Serviceteam

Emergencyteam

Heatingservice

Maitenancedep-t

Laboratorytecn.team

Deretictoare

Brigadainstala

rei

deservire

Oficiulca

lcul

echipadeco

ntrol

Magazio

neri

Ca

sa

S e r v i c i u l

c o n tr a c t ,a bo na m e ,

f a c tu r r i

M a n a g e r- i

officeassistant

H e a d o f T r a d i

P r o d uc id e p - t

S e c ia"P re st is e r v i c i i

G u a r d i a n

Waterintake,

pumping&

maitenance

W a t e r s u p pl D e p - t ot e c n o l o g

e c o l o g y

W a s t e w ad e p a r t - t

G u a r d i a n

S e w e r n e td e p - t

G u a r d i a n

Pumping&

maitenancedep-t

dispatchere

&.publicrelations

dep-t

T e ch ni c al D i

H R d eE n e r ge id e p - t

D e p - t o f d e v e l o p - t i

.M . R E G IE I " A p -C a n al " O rh e i

F i n a n ca c c o un i

d e p - t

H e a d o f e c on o i

O r ga n ig ra m a


24/92

The Director has worked in his present position since 2004 but came

to the utility already 1978. He was at the utility 1978 and has worked

as electrician, head of a department, chief engineer and technical

director.

The utility has a formal management team working almost as a sort of

owners council. It consists of a few persons from the utility, often

heads of departments elected by the Director, plus 2-3 persons from

the Town Council and one from the Town Administration. The

persons representing the town are appointed by the Town authorities

and are not paid for their work in the management team. Written

regulationsfor the management team are just now under preparation.

The management team are controlling and supporting the director. All

major questions are discussed in the management team. When the

management team has discussed and approved a question, it is

normally not necessary to take it up with the Town Council. The

management team does not deal with the daily operation of the utility.

The management team is using a fixed agenda and writing minutes of

meetings.

For the daily operation of the utility the Director has a meeting every

day with the head of production and other heads of departments.

Apa-Canal has an integrated management information system. The

system includes computers and software for accounting, for technical

purposes and for commercial and billing, although it must be partly

upgraded, especially for the commercial and billing. Information isopen and spread in all directions in the utility.

Apa-Canal has prepared a very good document called Feasibility

Study March 2007. There the company has defined its mission and

strategic objectives. There is also a table listing approximately 40

indicators, of which many can be used as performance indicators in

a possible future business plan.

The company uses to some extent principals of accountable

manager and management by objective. The Director and theheads of different groups agree a budget. If a group can work reach a

better result than the budget, 50% of the profit go to a bonus for the

group members, 25% go to activities for the development of the

group, 14% to the management of Apa-Canal and 11% to others

outside the group but involved in the result. The latter may for

instance be the companys lawyer.

The agreements with the group leaders are written. Goals and

performance indicators are specified (operational costs, water losses,

energy consumption and good management for the group).


25/92


The existing formal management team in Orhei seems to work at

least partly as a sort of owners council or board of directors. This is

an interesting idea, which seems to function well. See, however, also

Section 4.2, where the Consultant discusses the Owners government

of the utility. The Consultant believes that a development towards the

situation discussed there would be of interest to consider for Orhei.

The written regulations for the management team were still under

preparation during the Consultants visit to Orhei and not available.

Also as long as the utility is working as the present Municipal

Company, the regulations could more or less include the same type

as the corporate governance framework as for a joint-stock company.

Management by objective.

The type of management in Orhei Apa-Canal seems to be less

dominated by detailed top-down management and control

(management by directive) then in many other utilities visited. The

Consultant judges this to be very good for the continued development

of the utility. Although this already rather well developed type of

management of the utility, there are always possibilities for further

improvements. In meetings with the Major, the Director and others in

Orhei management by objectives and the concept of Accountable

Managers were discussed. These management models seemed to be

known and also partly used, but the Consultant repeats them anyway

briefly below.

In contrast to many other management models, for instance

management by directive, where objectives flow from the top of the

hierarchy down, management by objectives presumes that every unit

manager and employee has a primary responsibility for the

implementation of his tasks or the establishment of his units

objectives. A typical approach is that a superior and a subordinate

meet and discuss goals (defined in terms of results) for the

subordinate. The goals are often of two types. One sets forth the

subordinates unit goals and relates them to overall organizational

goals. The second sets usually aims at personal development goals

for the subordinate. (See also Staff Review Scheme under Section4.5 point 7.) The goals should be stated in terms of results and

indicate an area of activity and performance level. It is important that

goals are realistic, clearly formulated in few words and are

understood and accepted by both parties. For example, a production

manager may agree to reduce production costs by 5% during the next

year. In a later meeting the superior and subordinate evaluate the

performance in terms of stated goals.

Although management by objectives, as all management models, has

its limitations, it usually uses the capacity, ability and experience of


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the subordinate in a much better way than a detailed top-down

management and control model. It stimulates the creativity of the

employees. It increases motivation especially if it is combined with

some sort of benefit, e.g. a share of gained result, improved working

conditions, better carrier possibilities etc. Properly handled both

parties may be winners the subordinate who may have a more free,

creative and profitable work, the superior who may concentrate more

on other tasks than detailed direction and control of his subordinates,

and the company who may deliver better service to the clients at less

costs. Therefore the Consultant believes it is of interest for Apa-Canal

to continually further test and develop its already started use of

management by objective in systematic and judicious way.

Accountable Managers

Partly related to the above described management model is the

concept of Accountable Managers, which also is at least partly

introduced into the management structure of Orhei Apa-Canal.

Accountable managers shall have delegated responsibilities and shall

normally be the functional Heads in the company; e.g. Head of Water

Treatment Station, Head of Wastewater, Head of Networks, Head of

Transport, etc.

The managers shall receive budget allocations and management

information reports indicating unit cost performance and overall

performance against issued budget.

The idea is that the managers shall utilise a combination of these

reports to control expenditure and undertake performance analysis

and comparisons. The reports may also enable senior management

to use benchmarking to compare Orhei Apa-Canals performance

with other Apa-Canals. The performance data can furthermore be

used for decision making regarding outsourcing.

Organizational Changes

The organization of Apa-Canal may need to be strengthened and

clearer in order to meet the requirements of daily operation, planned

maintenance, investment activities and long-term strategic planning.

The present technical and financial situation makes it of coursenecessary for the management to concentrate lots of efforts on the

daily operation and emergency activities, but the focus must be

changed to include also a more long-term view, something requiring a

strong management of Apa-Canal. Therefore the Consultant

recommends Apa-Canal to analyze and maybe modify its

organization in order to simplify and strengthen the daily activities and

long-term planning as well as the decision making process. As a

starting-point it is necessary to clearly pinpoint the most important

activities in the company. Under a strong and long-term focused

management these activities are:


27/92

Daily operation and emergency activities;

Maintenance and investment activities;

Economy and Customer Service;

Supporting Services.

Especially needs focus on long-term managementand businessstrategies to be further strengthened and developed in order to meet

the future requirements of a more business driven organization within

frames given by the owner (the Town) and to fulfil the service

objectives for the customers There may therefore during the coming

intensive years of investments and institutional development be a

need to have in the organization a separate person, who together

with the Director has the main responsibility for the long-term

strategic development of Apa-Canal. There is already a position in

Apa-Canals organization chart called Department of development

and investment. The person having that position could perhaps take

care also of the long-term strategic development, but it is moreprobable that a separate person during a couple of years would be

more efficient.

The role of Orhei Apa-Canal as a customer service companyhas to

be emphasized.

Development and implementation of a long-term business strategy(at

least for the next 20 years) for Apa-Canal is necessary. The long-term

business strategy should include, for example, the following strategic

issues: Level of Services to be fulfilled (Customer related). (See also

the table Suggested Customer Service Standards in Section

4.7) ;

Environmental, Quality and Technical requirements;

Improvement of the effectiveness in the daily operation;

Improvement of the effectiveness of planning and

implementation of the maintenance activities;

Improvement of the effectiveness of planning and

implementation of investments.

A business adapted investment programme (partly developed in this

feasibility study) is also seriously needed, as international financiers

need to be fully convinced that grants and credits will be properly

handled by Apa-Canal and the Town.

The IT office has now a very low position in the organization. It is

under the Accounting department which is under the Contract,

customer and invoicing department which is under the Head of

Trading department. IT covers, or will at least cover, more than just


28/92

accounting and Apa-Canal should therefore consider moving it higher

up in the organization, perhaps even directly under the Director.

See more comments relating to the organization under Section 4.6

Staff Structure below.

Business plan

Orhei Apa-Canals Feasibility Study from March 2007 includes partly

what is normal for a Business Plan. The Consultant anyway

recommends Apa-Canal to prepare and annually update a more

complete annual Business Plan (Corporate Development Plan)

describing e.g.

the utilitys Mission in Orhei,

the utilitys Vision defined as a guiding star to strive towards

and

the main Strategic Objectives such as Institutional objectives,Financial objectives, Society and Customer objectives,

Operational and technical objectives and Human resources

objectives.

The Business Plan should also define a number of concrete goals to

achieve, goals crucial for Apa-Canals efforts to move towards the

vision. The Business Plan should furthermore include an Action Plan

specifying:

activities in order to reach the goals,

individuals appointed to be responsible for implementation of

each activity,

deadlines when each of the activities shall be completed and

performance indicators making it possible to measure the

progress towards each goal.

The purpose of the Business Plan would for instance be to:

Promote strategic development of Apa-Canal and facilitate

guidance and supervision provided by the Town of Orhei Convince the financiers of the viability and sustainability of Apa-

Canal operations in order to attract funding for investments

Lead management development and organizational

restructuring at Apa-Canal

Enhance staff interest and motivation

Attract new talent to Apa-Canal

Present Apa-Canal to customers and suppliers as a competent

and reliable business partner


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Create a favourable image of Apa-Canal internationally

Attract potential investors and partners

The Business Plan could contain inter alia:

a proposal for changed legal status;

proposals for new and higher tariffs, as well as other financial

changes for improved financial status;

a financial model for simulation of the consequences of different

decisions and situations;

development of management information systems;

short-term and long-term investment plans;

an environmental policy;

proposals for improved contacts with the customers;

proposals for cost savings, improved organization and

development of the personnel.

4.5 Staff. Efficiency and training needs


The total number of personnel in the enterprise is now 203.

Total number of consumers 23,961. The productivity in the water

services based on this figure is therefore around 118 customers peremployee.

The number of households connected to water services is 10,903,

and the number of commercial and budget organizations is 281. The

productivity in the water services is therefore around 55 customers

per employee.

The number of households connected to the wastewater services is

5,914. If adding some 250 commercial and budget organizations, the

productivity based on wastewater customers is around 30.

The number of connections to the water system is according to

received information 5005 resulting in a productivity of 25 connections

per employee. This is probably only population connected, and if 229

business companies and 20 budget organizations are added, the

productivity figure is slightly better.

The number of connections to the wastewater system is 3,600.


30/92

Most of the heads of departments, engineers and specialists have an

education in the right area for their work, although there is a

considerable need for further training in the utility. The following

training needs were presented to the Consultant:

The average salary is too low in the company. This causes difficulties

to attract and keep qualified persons, and the personnel turnover is

round 20%.

Apa-Canal has an experienced implementation unit capable to

organize and manage investment projects.


As the real number of inhabitants is around 34,000 and the number of

employees is 203, the efficiency of the company may be expressed

as a ratio 6.0 staff / 1,000 inhabitants2. This is extremely high. If the

ratio is calculated on the official number of inhabitants, 47,000, it is4.3 staff / 1,000 inhabitants, which also is very high. One of the most

important tasks for Orhei Apa-Canal management is to analyse every

possibility to reduce the number of staff.

The high level is of course to some degree dictated by the low levels

of automation and poor state of equipment, but the high ratio

indicates anyway that there must be possibilities to reduce staff

already now. There is also already some new equipment, for instance

a rather developed integrated management information system with

computers connected through a local network. Such new equipment

should make it possible to use less number of personnel.

Until such time as more automation is introduced, together with

procurement of modern equipment, the very large staff reductions will

be difficult or even unattainable. However, as new equipment and

technologies are introduced, an initial phased target of 4.0 / 1,000

inhabitants should be achievable over 3 years, i.e. 33% staff

reduction during that period. As more automation and labour-reducing

equipment is introduced a further target of 2.5 staff / 1,000 inhabitants

could be introduced over another 2 or 3 years. These are rather

drastic reductions, but if there is not any very special reason for thepresently high ratio, they should be achievable. To some degree the

2In Arkhangelsk in Russia the ratio is around 3.5, in Kaunas inLithuania reducedfrom around 2.5 some ten years ago to presently around 1.2. InSweden the ratio isaround 0.2 staff / 1,000 inhabitants, and if also all externalconsultants, persons inconstruction companies etc temporarily working for the waterwastewater utilities,the ratio is around 0.6 staff / inhabitant.


31/92

reduction can probably be achieved by natural wastage. National

safety standards of efficient operation must of course be followed.

The figures are based on results in successful water utilities in other

former Soviet countries, for instance Kaunas in Lithuania. External

personnel such as temporary engaged consultants and constructors

during the proposed investments in Orhei as well as personnel to a

possible new wastewater treatment plant are not considered in the

assumptions.

Apa-Canal management is aware of the very high staffing levels but

in many cases this is a consequence of the high levels of plant and

system failure and low levels of automation. In terms of re-structuring,

a major limitation is the difficulty in attracting the right calibre of staff

to Apa-Canal, mainly because salaries are lower than in the private

sector.

The Consultant recommends the utility to prepare a Cost Reduction

Strategy. In such a strategy further reduction of staff is an importantpart. Less staff will help reducing costs and allow more attractive

salaries and help the company to attract and keep good personnel.

See further underStaff Structure below.

The number of computers is rather good and there is a local area

network (LAN) connecting all the computers. This should be further

developed and cover all commercial, administrative and technical

activities. See more comments below under Training

Recommendations Point 2 Management Information Systems (MIS.

Another point to emphasize in the Cost Reduction Strategy is that theutility should normally use tender procedures for procurement in order

to assure that the lowest price is paid for a specified and demanded

product or service.


Most of the heads of departments, engineers and specialists have an

education in the right area for their work, although there is a

considerable need for further training in the utility. The following

training needs were presented to the Consultant:

Description of areas Managerial staff Number of persons

1 Financial Management Top and medium level 12


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2 Technical Management Top and medium level 123 Technical Audit Top and medium level 124 Financial Audit Top and medium level 125 Senior Management Top and medium level 126 Quality Management Top and medium level 12


Training Recommendations

Successful companies all have one thing in common they ensure

that there is a training culture within the organization. This does not

simply relate to programmed training events for staff but includes

motivation and encouragement for employees to develop themselves

by self-study, using the Internet or distance learning. A well trained

and developed workforce makes a significant contribution to the

advancement and success of the organization. In fact, without

continual vocational training Apa-Canal can, at best, only stand still. It

cannot advance.

The Consultant discussed the need for training with the management

of Orhei Apa-Canal. Based on this, and mainly in line with the table

above, the Consultant identified the following specific areas of training

which will enhance the skill and knowledge levels within relevant staff

and greatly assist in ultimately reducing costs:

1. Strategic Management & Business Finance

Apa-Canal is operating under the restrictions caused by under-funding, a partly ageing infrastructure and inadequate cost-

recovery tariffs. Although cost-savings are uppermost in the

minds of the Director and others involved in the financial

management, there is a large element of fire-fighting in the daily

routine of the Chief Engineer and other senior managers. There is

a need for a management course, which would motivate the

senior management to manage strategically, rather than on a day

by day basis. Such a course would include the following

elements:

The economics of running a modern water utility includingprofit, cash flow; financial impact of the capital expenditure

programme; network development, marginal costs,

maintenance costs, tariffs, operational staffing and

outsourcing.

International Accounting Standards

Asset Management Planning

Business & Corporate Planning.

Delegating


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Negotiating

Crisis and emergency management

Time management

Managing meetings

This course should be a minimum of two weeks duration andwould be for Director and other Senior Managers and Heads of

departments. It can also include middle managers who are

considered as potential directors or senior managers. The course

should be conducted by a professional management training

organization or as part of a study tours to a successful water utility

in which case it should be for three weeks and would include

meetings with directors and heads of departments in order to gain

further knowledge transfer.

2. Management Information Systems (MIS)

Orhei Apa-Canal has, as mentioned above, already a MIS and

has trained accountants and others in using it.

The Consultant recommends anyway Apa-Canal to further

develop the system and continue the training of different

personnel. Good hardware, a developed Local Area Network

(LAN) and advanced software result of course not, in itself,

automatically in management information being fed to the right

people at the right time. The whole concept of the effective and

efficient use of MIS must be understood otherwise managers willsuffer from data overload or lack of well-presented key data for

efficient management of the company. This course would be

aimed at all users of the system, whether they be inputting raw

data or monitoring Apa-Canals performance. The course would

be slightly different for differing levels of management but in

essence the following topics should be discussed:

Data in data out. What inputs are required in order that

required outputs are available;

Filtering information different levels of management

require different degrees of information;

Reporting how to create useful and timely reports;

Security and data protection;

Storing, archiving, retrieving and backing-up data;

Accuracy verification of data;

This course can be addressed either in-house using experienced

MIS specialists and / or as part of a study tour to other water


34/92

utilities. For full and effective use to be made of the system a

study tour is advantageous as it would provide an insight into the

advantages and limitations of such a system.

3. SCADA.

If Apa-Canal would install a SCADA (Supervisory, Control and

Data Acquisition) system, helping the utility to make operation

more efficient, there will be a need for training. SCADA is much

more than simple telemetry and it would be a totally new concept

to Apa-Canal. Therefore the future operators of the system, along

with relevant managers would need varying levels of training in

order to maximise the use of such a system. Depending on the

possible future reorganization and change of legal status the

names of the positions in need of training might be different, but in

principle the following type of managers and other categories of

personnel will need training: The director, the chief accountant,

chief economist, chief engineer, heads of energy and IT,operators and technicians.

The courses could for instance include both study tours to a water

utility experienced in the procurement, installation, commissioning

and use of a modern SCADA system and a technical, hands-on

course provided by the supplier.

4. Non-Revenue Water Reduction

There appears to be insufficient knowledge about internationally

accepted non-revenue water terminology and water balance

calculations.

Training is required for Technical staff, including the Chief

Engineer and staff responsible for the reduction of non-revenue

water in the following topics:

Leak detection and mains tracing techniques and

equipment Districts and meters

Pressure effects

International Water Association Water (IWA) Water

Balance terms and definitions:o Real losses

o Apparent losses

o Measurements / data required

o Calculations

o Assumptions


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o Confidence limits

The course could be a one-week course presented by experts in

the field of non-revenue water; preferably as part of a study tour

to a successful water utility. The training in the use of leak

detection and mains tracing equipment should be provided by the

suppliers of such equipment.

5. General Training Programme

In general the operators have been trained on the job in the early

days of their appointment to the particular post. The training is

concluded with an examination but thereafter there is no routine

refresher training.

Apart from training generated by the introduction of new

equipment or technologies there is also a need to periodically

provide short training events to achieve the following:

Break bad habits than can develop over time Reinforce safety procedures Remind operators of best practice Improve operators knowledge of the process in

addition to pure skills Promote a quality culture whereby employees take

pride in doing a good job Promote cost savings, encourage more efficient

working practices Encourage team working Encourage the staff to develop ideas for financial

and technical improvements to the processes.

Operator courses should conclude with a test and successful

candidates awarded a certificate. For multi-skilled operators

several training modules would lead to a vocational qualification

and special award.

Courses would include, but not be limited to:

Treatment processes Mains and service repairs

Leakage detection Network operation Pumping operations Water sampling and basic testing

The scheme should not be limited to operators; administration

staff and technical staff should benefit from further training,

especially in IT such as:

Advanced use of word processing package Advanced use of database


36/92

Reporting using 1C software Basic computer skills and knowledge such as

antivirus, internet and e-mail. PowerPoint presentations.

As part of the succession plan to promote potential managers

there should be a programme of personal skills training to include:

Time management Management of people Giving presentations Report writing Managing meetings Negotiation

There should also be a programme of sharing knowledge; this

promotes teamwork and broadens the knowledge of all staff,

enabling them to contribute more fully to the activities of Apa-

Canal. The purpose is not to replace existing specialists with half-trained people; it is a way of developing staff with a well-grounded

background and a generalist approach to the services that Apa-

Canal provides. It provides an appreciation of the activities of

other departments and reduces parochial behaviour. Events are

usually short, up to five days, and would include:

Finance for non-specialists Water supply for non-specialists Wastewater for non-specialists Reduction of non-revenue water

Publicity campaigns and customer surveys

In addition, each Head of Department should give presentations

to other staff on the activities and outputs of his / her department.

This promotes teamwork and provides a forum for reviewing

activities and the interaction between departments.

6. Development of an in-house training capability

Technically competent and experienced employees should be

selected as potential trainers and provided with presentation skills

training. This would be the start of an in-house training capabilityand would encourage a learning culture. The new presenters

could be given salary enhancements as encouragement to take

on the role of presenter. These would not be seen as full-time

positions but it would provide a core of trainers who would be

involved in the General Training Programme (see 5, above).

A few of the Apa-canals in Moldova seem to be more developed

in some areas then the others. The Consultant has for instance

got an impression that Apa-Canal in Orhei has a more developed

type management than many others. Another example is Floreti


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where Apa-Canal already is a Joint-Stock Company. In Cueni

the staff was reduced by more than one third during a period of

three years. Bli has fewer employees per thousand inhabitants

than the other towns in the project, a ratio of 2.5 staff /1,000

inhabitants. Although the Apa-Canals, which are more developed

or successful in one or another area, still have to develop much

more, a cooperation where they share there experience with the

others would be useful for all the utilities.

7. Staff Review Scheme (sometimes called Annual Appraisal orPerformance Review)

No matter what infrastructure improvements are made, new

equipment procured or modern technologies introduced, without

well trained, motivated staff Apa-Canal will never live up to a

statement of the kind the Consultant indicated under Section 4.2,

namely that Apa-canal shall provide Orhei with reliable, high

quality water supply and sewage treatment services in a cost

effective and affordable way with a good coverage, a minimum

impact on the environment and a high customer satisfaction.

Such a statement (which could be further developed to a vision

for Apa-canal) requires staff motivated to develop new skills and

gain new knowledge, not for its own sake but for the long-term

benefit of Apa-Canal and its customers. Because it is difficult for

Apa-Canal to recruit ready-trained staff of the right calibre the

existing staff need to be trained (and re-trained if necessary) and

developed such that they become more effective in their presentroles, and in addition can offer extra skills which are essential to

Apa-Canals success.

A Staff Appraisal Scheme, with the full support of management

will, if properly conducted, provide a vehicle for developing staff. It

will provide information for managers to be able to fairly assess

the performance and potential of employees. In addition it

identifies training and development needs which, when fulfilled,

will significantly increase the overall skill and knowledge base

within Apa-Canal.

Ultimately it will assist the Director to objectively assess

professional / administrative staff for re-grading and ultimately

promotion. A Staff Appraisal Scheme can form the core of a

succession plan, ensuring that Apa-Canal has potential managers

and directors of the future ready to take on new responsibilities

when the current senior staff reaches retirement age.


38/92

4.6 Staff Structure

The Cost Reduction Strategy recommended in the first Consultants

Comment under Section 4.5 above should include not only technical

areas and training but also other aspects such as staff functions.

Some key areas relating to staff are mentioned below as examples

for review of Apa-Canal management. The positions should not

automatically be full time manned, especially as Orhei Apa-Canal is arather small company; part time manning should be considered in

order to keep costs down.

When preparing the next organization chart it might be of interest to

create a Technical Support function, which is off-line as opposed to

the operational part of the organization. The logic for this is to a)

reduce the number of people reporting directly to the Technical

Director and b) to gradually separate core and non-core functions,

eventually providing opportunities for future outsourcing.

It might also be of value to appoint a person responsible for quality

and reporting directly to the Director. This person would cover internal

processes, and could even carry out business process reviews. The

responsibility could be expanded to cover all quality issues including

the environment, working practises and conditions, etc.

Another recommendation is an Internal Auditor. The role would be

that of policeman in terms of undertaking financial and technical

audits to ensure that Apa-Canal obtains best values for money from

suppliers and that Apa-Canals customers are also receiving an

effective service at a reasonable cost.

Customers and society in general as well as the staff of the utility are

important for Apa-Canal. A Public Relations Function, for instance

within the Trading department or the Human Resources department,

would therefore be valuable. Given the modern need for proactive

customer relations, and the need to keep staff informed of changes, a

bespoke function is recommended. See more under Section 4.7

below.

Before any major reorganisation takes place it is recommended that a

business process review takes place. This will highlight duplicatedeffort and reveal unnecessary or out-dated activities. It will help to re-

align reporting and responsibility lines, and it will help to improve the

speed of response to customers queries and requests. It will also

provide a scientific approach to staff reductions, enabling Apa-Canal

to be fair, methodical, transparent and consistent when making

redundancies.


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4.7 Relations to customers


In addition to working with different kinds of media such as radio and

newspapers for information to the customers Apa-Canal has also

broschures and other written iformation. This information treats e.g.

the need for water saving, different methods for water saving,different basic information about the utility and its activities. There is

no tradition of letting school classes, pensioners groups etc visiting

Apa-Canal.


As for all companies the customers are very important for Orhei Apa-

Canal. Good relations with the customers are crucial for instance for

their willingness to pay for the service. The already existing above-

mentioned information to and contacts with the customers should

therefore constantly be improved.

The heart of good customer relations is to meet or exceed customers

expectations both when it comes to information and other contacts

and of course when it comes to the product sold and, when failures

occur, to accept responsibility and take positive action.

There are a range of Moldovan state regulations governing the

provision of water and wastewater services, but these tend to focus

mostly on the technical aspects of the service. It is suggested that

Apa-Canal should expand these regulations to formulate its ownCustomer Service Standards.

A list of suggested customer service standards is contained in the

below table for consideration. Apa-Canal should establish targets for

reaching full compliance over a period of (say) 5 years. Note: If Apa-

Canal can claim 100% compliance today, then the targets are not

sufficiently rigorous!

Apa-Canals performance against these standards should be

provided by the responsible department each month, with the results

consolidated into a monthly report for the Director. Selected resultscould also be included in the written quarterly and annual progress

reports to the Town Administration mentioned under Section 4.3.


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Suggested Customer Service Standards

Water Supply Services 5-YEAR ULTIMATE STANDARDFresh water supply 100% compliance with Moldovan norms and

regulationsProgressive compliance with EC directives

Cold water supply pressure 100% compliance with Moldovan norms and

regulationsNo properties without overnight water

Availability Water and wastewater services will beavailable 24 hours a day, 7 days a week

Response time for attendance to fault complaints- Fresh water or wastewater supply fault Normally within 12 hours- Others Normally within 24 hours

Notice of planned suspension of water supplyor wastewater services- Suspension of less than 12 hours 2-days advance notice to all affected

customers- Suspension greater than 12 hours 5-days advance notice to all affected

customers

Duration of any suspension of water supply Restoration within 12 hours (water)or wastewater services (planned or emergency) Restoration within 4 hours (wastewater)

Suspension of water supply exceeding 12 hours An alternative water source will be(planned or emergency) made available to all affected customers

Account-related ServicesNew application for water/sewerage connection 14 days to grant approval

Change of customer details 2 days (where no technical changesrequired)

Water service bills- Accuracy 100% accurate- Timing Issued within 2 days of end of month

(domestic); 2 days of meter reading

(enterprises)

- Amended bills Issued within 2 days of authorisation

Reply to written requests or complaints- Interim reply 2 days- Full response 10 days

Telephone response 10 rings

Accessibility:- emergencies 24 hours a day, 365 days a year - non-emergencies 8am 5pm, Monday to Friday

9am 1pm, Saturdays


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5 Socio-economic Aspects

5.1 Presentation of the Area

5.1.1 Social Environment

The population in Orhei town at 1st of January 2007 is the following:

Table 5.1: Population

Population (Thou.)

Total 33.7

Urban 33.7

Rural -

Average number of population for 2006 35.15Source: National Institute for Statistics

In the last years the population evolution recorded a decreasing trend

mainly as result of negative natural growth of population and

emigrations for work in Western European countries.

5.1.2 Economic Aspects

The volume of industrial production in Orhei Raion, compared to the

total industrial production in the Republic of Moldova, is presented in

the following table:

Table 5.2: Volume of Industrial Production Evolution Orhei Raion

Volume ofindustrial

production in

2006

2004 2005 2006

Current

prices

(mil.

lei)

Compared

to

previous

year (%)

Current

prices

(mil.

lei)

Compared

to

previous

year (%)

Current

prices

(mil.

lei)

Compared

to

previous

year (%)

Total 17533 106.9 21123.5 106.3 22243.2 93.1

out of which

Orhei 266.3 104.1 401.7 132.1 350.8 81.9Source: National Institute for Statistics

Total production in the Republic of Moldova increased with 26%

during 2004-2006. For Orhei Raion, the production increased

considerably with 50% in 2005 (current prices), and decreased with13% in 2006 (current prices). Therefore, for the analyzed period, the

production increased with 32% (current prices), being above the

national average.

Financial situation of Commercial Companies in Orhei Raion,

compared to the total financial situation of Republic of Moldova, is

presented in the following table:

Table 5:3: Financial Status of Commercial Companies


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Financial status Jan.-Sept. 2004 Jan.-Sept. 2005 Jan.-Sept. 2006

Total Orhei Total Orhei Total Orhei

Number of reporting

enterprises, out of which29423 617 31870 651 34700 695

Profitable enterprises 11289 278 12380 308 13155 303

Enterprises with loss 13906 270 14893 265 16532 310

Average Number of

employees

57278

611507 570143 11178

56969

810808

Financial result before

tax (profit/loss) -mil. Lei2790 -0.9 3424 18.8 3689 -2.3

Sales revenues-mil. Lei 53031 572.6 66870 693.8 79052 820.2

Receivables related to

commercial invoices and

budget compensation

-total, mil. Lei

19140 159.0 22717 258.4 26867 252.7

Debts -mil. Lei 61291 723.8 68420 790.0 81804 971.Source: National Institute for Statistics

As can be observed from the table above, the number of profitable

enterprises is increasing, but the percentage of profitable enterprisesin total reporting enterprises remains approximately the same (46%).

In Orhei Raion, the number of enterprises and the profitable

enterprises slightly increased.

Average number of employees at national level kept a stable trend. In

Orhei Raion, during the analyzed period, the average number of

fs orhei final

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