Feasibility Study

Preparation
 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
Implementation Strategic and Sectoral Considerations Design
Phase Phase

Project Pre-feasibility
Project
Identification Study, PPD
Sustainability

Project Project
Execution Preparation Feasibility
Study, EIA,
PSD
Feedback
loops Implementation
Project Start-up
Planning
Process flow 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 V. Environmental Assessment
STUDY
VI. Stakeholder Analysis
VII. Financial and Socio-
Economic 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
Financial Social and
Analysis Stakeholder
Analysis
Project
Feasibility
Economic Environmental
Analysis 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

 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 Government  Ultimately all ventures are

about people!
 Consumers
 It’s more important to
 Operator/Utility understand the people than
 Vulnerable groups the technology: Who
gains? Who loses?
 Wider community
 Social and distribution
 Financier 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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