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Project management
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Feasibility Study Preparation
Venelina Varbova
www.rec.org
Session OverviewPurpose of the Feasibility Study
The Feasibility Study process according to international standards
The Feasibility Study outline
Discuss the challenges faced by many SEE consultants and local governments in preparing projects
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The Feasibility Study:something we already know
Feasibility study as project plan - assumes the project concept is feasible and maps out the course for project implementation
Focus on engineering aspects – low attention to social, institutional, environmental aspects
Economic and/or financial analysis limited to budgeting exercise and some cash flow
Feasibility analysis as part of the process is missing
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The Feasibility Study:international standards
Feasibility study is the result of feasibility analysis
Convince the reader (financing entity) that the project is worth funding
Document relevant information and aspects regarding the project
Assess whether the project is relevant, viable and implementable
Enable the project proponent to prepare financing application and present the project to sources of financing
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Project Preparation vis-à-vis Project Cycle
Strategic and Sectoral Considerations Design Phase
Feedback loops
Process flow
Project Identification
Project Preparation
Implementation Planning
Project Start-up
Project Execution
Project Sustainability
Implementation Phase
Feasibility Study, EIA,
PSD
Pre-feasibility Study, PPD
PIP
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Overview of FS Contents and Outline
FEASIBILITYSTUDY
Executive Summary (PSD)
I. Introduction
II. Project Strategic Context
III. Technical Analysis
IV. Institutional Assessment
V. Environmental Assessment
VII. Financial and Socio-Economic Analysis
VI. Stakeholder Analysis
VIII. Conclusions
IX. Project Implementation Plan
IX. Appendices
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Project Strategic Context
Strategic goals; priority programs at local/regional level
National policies: National, regional or sectoral goals which the project supports
Project environment issues: policy, legal and regulatory, institutional framework, environmental, etc.
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Technical Assessment Several subsequent assessment levels: Technical assessment of existing services,
physical system, and treatment, and measures for their optimum use
Demand (wastewater flow) analysis and forecasting
Establish gap between the current level service and future demand
Develop technical alternatives for the project required outputs (design, technology, process, scale)
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Technical Assessment - Illustration for scope of wastewater project Wastewater services:
Determine service area and coverage Identify consumers per categories Develop scenarios for future service development
Wastewater system: Description of existing system and facilities Evaluate the system components and its operation
Wastewater treatment: Describe and assess existing facilities Describe and assess present environmental impacts of
untreated wastewater/sludge discharges into surface water bodies
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Financial and Socio-economic Rationale of environmental investment project Purpose of the financial analysis is multiple:
Assessment of project viability and implementability for the municipal utility and the local community and economy
A tool for analyzing, structuring and selecting different project options
Assessment of project returns on overall investment and capital
A tool for identifying appropriate types of project financing
Analysis of project broader socio-economic impact to the community
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Aspects of Feasibility Analysis Input to the financial and socio-economic analysis
Technical Analysis
Institutional Analysis
Social andStakeholder
Analysis
Environmental
Analysis
Economic Analysis
Financial Analysis
Project Feasibility
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Financial Cost-Benefit Analysis of a Project
The unit of analysis is the project, not the company
Evaluates and calculates the project’s financial: Revenues Costs Net benefits (of revenues over the costs)
Project revenues, costs and net benefits are determined on a with-project and without project basis.
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Financial Cost-Benefit Analysis Project Revenues
Only the project contributed revenues, i.e. water/wastewater sales to the utility are estimated:
The project revenues are determined for different groups of users (different tariffs): Households Government/public institutions Commercial/industrial users Other (connection fees)
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Financial Cost-Benefit Analysis Project Costs
1. Investment costs: Capital costs: land, civil works, equipment,
studies Education programs, lab equipment & training, Institutional Development (consulting services,
capacity building programs, M&E of benefits)2. Operation and maintenance costs: labor,
electricity, chemicals, materials, overheads, raw water charges, insurance, etc.
3. Residual values (of project assets at the end of the project life)
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Conclusions of the Financial Analysis
Selection of options and technology Overall project profitability and sustainability Financial impact on the utility Final phasing of investments and priorities Financing Plan and application requirements Tariff setting and proposal to the municipality Responsibility chart Project cash flow skeleton for conducting socio-
economic analysis
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Economic Cost-Benefit Analysis of a Project
Purpose: To assess the project economic worth to the country
Evaluates and calculates the project’s economic benefits and costs to the whole economy in constant economy prices (adjusted financial prices) including external benefits: Environmental benefits Health effects Non-technical losses (UFW)
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Social and Stakeholder Analysis
Local GovernmentConsumersOperator/UtilityVulnerable groupsWider communityFinancier
Ultimately all ventures are about people!
It’s more important to understand the people than the technology: Who gains? Who loses?
Social and distribution analysis of project effects (different beneficiaries)
Poverty Impact Analysis
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Environmental Impact Analysis Assessment of project impacts to physical and also
non-physical environmental aspects:Physical (water, air, land)BiodiversityNuances (noise, odors)SafetyAesthetics, cultural and historical heritage
Two possible levels of assessment:Preliminary (Initial) Environmental ReviewFull Environmental Impact Assessment
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Institutional Analysis
Assessment of legal and institutional framework Relationship and independence of the water
company from the municipality in setting tariffs Capacity of the project entity to: implement,
manage and maintain the project Financial sustainability of the project entity Adequate project management processes,
including procurement and human resources Capacity building programs
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Sensitivity and Risk Analysis
A technique for investigating the impact of changes in project variables
Identify key variables which influence project costs and benefits
Investigate the consequences of likely adverse changes
Identify mitigation actions Qualitative Risk Analysis at the: project level,
sector level and national level
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Summary
The feasibility analysis is an internationally accepted process used to evaluate various project dimensions important for achieving the desired project benefits.
An effective tool for appraising the project from standpoints of all project stakeholders
It is not a waste of time. It significantly reduces the risks in project implementation