Armenia: Fostering the Long-Term Financial Viability and Sustainability of the Armenian Water and Sewerage Company

Date: March 2013
Type: Papers and Briefs
Country:
Subject:
Series: Central and West Asia Working Papers
Author: Torres, Adrian

Description

In 2007, ADB approved a loan of $36 million to Armenia to help improve public health and the environment for 576,000 people in 16 towns by (i) revitalizing and rehabilitating the existing water infrastructure, and (ii) increasing the capacity of the water supply and sanitation service providers. While this project had positive implementation results, the need to address pressing issues, including capital investments for upgrading of the network and the long-term financial sustainability of the Armenian Water and Sewerage Company (AWSC), remained. Thus, in 2012, ADB approved the Government of Armenia’s request for $40 million in additional financing to continue and expand the improvements delivered by the initial project.

This paper outlines ADB’s interventions to improve water supply and sanitation services in Armenia through the initial project and the additional financing. It also highlights the rationale behind the structure of a new tariff regime, which is aimed at fostering the long-term financial sustainability of AWSC.

Lessons learned

Much of the ASWC network spread across the country requires upgrades and repairs after decades of neglect. The abundance of water in the country, which is almost considered unlimited by its users, also contributes to its misuse. ADB loans to date will assist in the network upgrade in 29 towns and 160 villages. These loans are still insufficient to rehabilitate the entire network and immediately address the high level of non-revenue water. The tariff reform condition under the additional financing is structured so that it will allow for a more market-based tariff increase to reach a tariff level over time that will match cost recovery. This gradual increase will not only be more agreeable for users, but it will also match the service improvements delivered by AWSC through various infrastructure upgrades and overall management improvements under the PPP arrangement with utility company Saur.

Contents

  • Abstract
  • Introduction
  • Key Sector Challenges
  • Policy, Institutional and Legal Reforms
  • ADB Support to Armenia's Water Supply and Sanitation Sector
  • Tariff Reform as a Key Covenant in the Additional Financing
  • Lessons Learned
  • The Next Chapter for the Armenian Water and Sewerage Company