Feasibility study preparation

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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

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

The Feasibility Study:

 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

Project Preparation

Implementation Planning Project Start-up

Project Execution

Project Sustainability

Implementation

Phase

Feasibility Study, EIA, PSD

Pre-feasibility Study, PPD

PIP

Overview of FS Contents and

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.

Technical Assessment

 Several subsequent assessment levels:

 Technical assessment of existing services,

physical system, and treatment, and

measures for their optimum use

forecasting

 Establish gap between the current level

service and future demand

 Develop technical alternatives for the project

required outputs (design, technology,

process, scale)

 Develop scenarios for future service

development

 Wastewater system:

 Description of existing system and facilities

operation

 Wastewater treatment:

 Describe and assess existing facilities

impacts of untreated wastewater/sludge discharges into surface water bodies

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

Aspects of Feasibility Analysis

Input to the financial and socio-economic

analysis

Technical Analysis

Institutional Analysis

Social and Stakeholder Analysis

Environment

al Analysis

Financial Cost-Benefit Analysis of

Net benefits (of revenues over the costs)

 Project revenues, costs and net benefits

are determined on a with-project and

without project basis.

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):

Financial Cost-Benefit Analysis

 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)

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

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

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

Environmental Impact

Analysis

 Assessment of project impacts to physical

and also non-physical environmental

 Two possible levels of assessment:

Preliminary (Initial) Environmental

Review

Full Environmental Impact Assessment

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

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

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