Download Feasibility Study Preparation - Regional Environmental Center

Feasibility Study Preparation
Venelina Varbova
Session Overview
Purpose 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
Project
Sustainability
Project
Preparation
Project
Execution
Feedback
loops
Process flow
Pre-feasibility
Study, PPD
Project
Identification
Project Start-up
Feasibility
Study, EIA,
PSD
Implementation
Planning
PIP
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Overview of FS Contents and Outline
Executive Summary (PSD)
I.
Introduction
II. Project Strategic Context
III. Technical Analysis
IV. Institutional Assessment
FEASIBILITY
STUDY
V. Environmental Assessment
VI. Stakeholder Analysis
VII. Financial and SocioEconomic 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
Social and
Stakeholder
Analysis
Financial
Analysis
Project
Feasibility
Economic
Analysis
Environmental
Analysis
Institutional Analysis
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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

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
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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 socioeconomic 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 Government
Consumers
Operator/Utility
Vulnerable groups
Wider community
Financier



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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)
Biodiversity
Nuances (noise, odors)
Safety
Aesthetics, cultural and historical heritage
 Two possible levels of assessment:
Preliminary (Initial) Environmental Review
Full 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
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