The Study on Improvement of Planning Capability in Sewerage Sector in Malaysia Final Report

Table 4.2.2 Typical Sludge Production for Mechanized Plant

Dewatered Dewatered
PE Produced sludge PE Produced sludge
sludge sludge
(m3/day) (m3/day) (m3/day) (m3/day)
2,000 8.1 0.41 31,000 125.6 6.28
2,500 10.1 0.51 32,000 129.6 6.48
3,000 12.2 0.61 33,000 133.7 6.68
3,500 14.2 0.71 34,000 137.7 6.89
4,000 16.2 0.81 35,000 141.8 7.09
4,500 18.2 0.91 36,000 145.8 7.29
5,000 20.3 1.01 37,000 149.9 7.49
5,500 22.3 1.11 38,000 153.9 7.70
6,000 24.3 1.22 39,000 158.0 7.90
6,500 26.3 1.32 40,000 162.0 8.10
7,000 28.4 1.42 41,000 166.1 8.30
7,500 30.4 1.52 42,000 170.1 8.51
8,000 32.4 1.62 43,000 174.2 8.71
9,000 36.5 1.82 44,000 178.2 8.91
9,500 38.5 1.92 45,000 182.3 9.11
10,000 40.5 2.03 46,000 186.3 9.32
11,000 44.6 2.23 47,000 190.4 9.52
12,000 48.6 2.43 48,000 194.4 9.72
13,000 52.7 2.63 49,000 198.5 9.92
14,000 56.7 2.84 50,000 202.5 10.13
15,000 60.8 3.04
16,000 64.8 3.24
17,000 68.9 3.44
18,000 72.9 3.65
19,000 77.0 3.85
20,000 81.0 4.05
21,000 85.1 4.25
22,000 89.1 4.46
23,000 93.2 4.66
24,000 97.2 4.86
25,000 101.3 5.06
26,000 105.3 5.27
27,000 109.4 5.47
28,000 113.4 5.67
29,000 117.5 5.87
30,000 121.5 6.08

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The Study on Improvement of Planning Capability in Sewerage Sector in Malaysia Final Report

Onsite Strategy

Centralized Strategy

Figure 4.2.4 Example of Sludge Management Alternatives

(6) Financial Analysis

To improve financial analysis, the following tactics are recommended:

1) Introduction of tariff revenue in addition to costs for financial analysis

2) Proper setting of O&M costs for each treatment system

By introducing revenue and by estimating the O&M costs properly, the option of a larger
STP may have a greater chance of selection as a priority project. Due to the STP’s
centralized and rationalised operations, there is a high probability that tariff revenue will
increase in direct proportion to the capacity of the STP.

While O&M costs may also increase as STP capacity increases, they do so at a lower rate.
These two approaches contribute to minimizing net loss over the lifecycle of the sewerage
project.

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The Study on Improvement of Planning Capability in Sewerage Sector in Malaysia Final Report

Table 4.2.3 shows a comparison of two evaluation methods (with two option): the current
financial analysis approach and the new method, which introduces revenue. In Option A,
the developer plans to construct an STP in the catchment area; but in Option B, the plan is
to connect to an existing STP outside the area (Figure 4.2.5). Under the present financial
analysis, O&M costs are a percentage of capital costs. As a result, Option A, which has a
smaller NPV, is selected as the priority project. Under the new financial analysis, the
O&M costs of option B are lower than those of option A because it utilizes the existing STP.
Revenue is the same for both options as they serve the same PE. However, option B,
which has a larger NPV, is selected as priority project. This new financial analysis method
is anticipated to contribute to the rationalisation of existing sewerage systems.

Option A Option B

STP

Z Catchment Area Z Catchment Area STP

Figure 4.2.5 Options A and B for Comparison of Current and New Financial Analysis
Approaches

Table 4.2.3 Expected Revenue and Expenditures

Current Financial Analysis Approach New Financial Analysis Approach

Capital cost O&M cost NPV Capital cost O&M cost Revenue NPV
Option A 100 10 206.1 100 15 10 -158.6
Option B 120 12 247.3 120 8 10 -96.7
Notes: Figures are illustrative.
Under the new financial analysis approach, the option with higher NPV is given higher priority, since NPV is the present
value of revenue minus cost. In other words, the new NPV approach is the required external budget input for the selected
option.

In order to include revenue when performing financial analysis of the options, standardized
unit tariff revenues are calculated and are described in the Guidelines as follows:

Figure 4.2.6 shows the average tariff revenue per PE unit based on the billed amount data
for all types of customer and the total Population Equivalent for the period May 2001 to
December 2007. This figure is presented in the Guidelines to calculate the tariff revenues
of the options. Collection efficiency must also be considered to calculate revenue, since it
is based on billed amounts.

Estimates of revenue and expenditures are put into the Revenue and Expenditure Stream in
Table 4.2.4. The NPV of the difference between revenues and expenditures of each year is

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