Good Project Preparation

1
Good Project Preparation

• Sara Browning and John Maguire
• PPC /EBRD
• DABLAS Task Force Meeting
• 6 May, 2004

2
Overview of presentation

• What is a project?
• What is project preparation? (a good feasibility
  study)
• What are the project finance options?
• Some thoughts on good project preparation.

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What is a project?

• For this presentation
• An infrastructure based project including
  significant capital investment, which requires
  the involvement of external sources of finance,
  including loan finance.
• Projects with the specific aim of reducing
  pollution in the Danube and Black Sea i.e. water
  projects and waste management projects.

• Important!!
• It is more than a project
• Utility finance
• Good utility management
• Sustainable public service provision

4
What is project preparation?
The project cycle
Project Preparation
Idea to.
Ready for implementation
5
A Good Feasibility Study

• Assessment
• Assessment of financial performance
• Institutional framework assessment
• Assessment of operational efficiency
• Socio-economic and affordability assessment
  (public consultation)
• Current and forecast service requirements and
  parameters (legal requirements)

• Investment plans (BATNEEC/CATNIP)
• Long term investment plan
• Short term investment plan
• Implementation planning
• Financial analysis/forecast (co-financing,
  financing plan)
• Implementation and Procurement
• FOPIP and CEP
• EA / EIA

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What are the project finance options?
Cost of finance
Commercial
Municipal
Sovereign
Debt options
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Good project preparation, some thoughts..

• Project financing from the beginning
• Two sided preparation (project and client)
• Balanced, strategic and integrated design
• Appropriate implementation support
• Drive from the local level

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Project financing from the beginning

• Project preparation should be carried out in
  partnership with finance sources, taking into
  account specific appraisal criteria. Assistance
  may be provided.
• Commercial banks and commercially orientated IFIs
  will require the loan to be repaid from revenue
  streams.
• Other IFIs and donors will require projects to be
  part of national policy plans or programmes.
• If necessary, guarantees should be negotiated as
  early as possible.

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Two sided preparation

• Preparation should include
• Preparation of the physical project i.e. the
  priority investment need.
• This should be a balanced, strategic and
  integrated design.
• Preparation of the client or beneficiary, to
  facilitate and implement a sustainable project,
  including debt repayment capacity.
• This should include the design of appropriate
  implementation support.

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A balanced, strategic and integrated design

• The project design should take into account
  financial, economic, social and environmental
  factors, in addition to technical criteria.
• In particular, the balance between technical
  design, cost and affordability should be
  carefully investigated.
• The project should be designed as part of a long
  term strategy or investment programme for the
  sector, and not in isolation.
• Projects should address water and wastewater in
  an integrated fashion.

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Appropriate implementation support

• The implementation arrangements should take into
  account the capabilities of the municipal company
  concerned. Consideration should be given to
  procurement.
• Institutional support will be needed to ensure
  that environmental benefits and service
  improvements are sustainable.
• Support should include assistance to improve the
  creditworthiness of the municipality and
  municipal company, so that they can attract
  finance for future needs.

12
Drive from the local level

• Drive, ownership and commitment at the local
  level, both within the municipality and the
  municipal company is key.
• Political (and public) support for tariff reform
  is critical.
• An understanding of the process, timeframes and
  key decision points will be needed across the
  municipal company and municipality.
• Engagement with and management of consultants
  involved in preparation is important.

13
Discussion, questions, comments