8. Project Financial Viability & Sustainability
The project viability assessment will be based on a combination of multiple perspectives as given below:
8.1 Overall project perspectives:
The DPR is to provide financial analysis for (Net Present Value) NPV and (Internal Rate of Return) IRR defined in the following two ways:
(i) NPV & IRR (overall): examines overall project viability, including finance cost and asset replacement cost
(ii) NPV & IRR (O&M): examines only O&M viability
The complete supporting project cash flow projections along with underlying assumptions have to be presented. (A reference project cash flow template is provided in Annexure-4 ).
The Project financial assessment should explicitly state the cost of capital considered and calculation method to arrive at the same
8.2 ULB level perspectives and financial situation assessment
The DPR is to provide the following information:
(i ) ULB cash flow:
This includes a complete cash flow covering the last 5 years on an actual basis and projections for the next 20 years. The underlying assumptions for the projections also need to be mentioned (a reference format for ULB Cash flow is given in Annexure 5)13.
An assessment of the annual impact of the project on the ULB’s finances (i.e. revenue receipts, revenue expenditure, capital receipts and capital expenditure) for the Mission Period is to be provided showing the impact being high/medium/low (more than 20 %; between 20% and 5%; less than 5% respectively). The base year to be considered for this exercise is the last completed financial year. A format for providing the impact is given below:
13 The ULB cash flow format has also been separately circulated to all cities as a part of updating/ standardizing their Financial Operating Plans (FoP). The FoP can be taken as the reference document and duly updated, if required
Key issue
Has the financial viability assessment taken into consideration both capital cost & O&M sustainability?
Has it additionally taken into consideration the ULB financial situation?
Impact Low/ Medium/ High (more than 20 %; between 20% and 5%; less than 5% respectively)
Sl.
No.
Head
2005-06 2006-07 2007-08 2008-09 2009-20 2010-11 2011-12
1 2 3 4 5 6 7 8 9
1 Revenue Receipt
2 Revenue
Expenditure
3 Capital Receipt
4 Capital
Expenditure
Base Year: _________ (last completed financial year)
(ii) Debt situation assessment
This includes
• Debt schedules and terms for all debt taken (to be provided in Appendices to the DPR. (Refer Annexure 6 of this document)
• Debt service coverage ratio (DSCR) • Debt-equity ratio for the project and the ULB
(iii) Other financial information:
• Has the ULB been credit rated? If yes: provide the name of the rating agency, type of rating and existing rating details.
• In case of Special Purpose Vehicle (SPV) or Joint Venture (JV) as a separate legal project implementation entity, the Profit & Loss (P&L) Statement and Balance Sheet forecasts for the next 20 years shall be provided. In this context, the given project cash-flow template (as per Annexure 4) may be used as the initial reference format on which appropriate odifications can be made.
Note:
(1) The requirements for financial information under section 8.2 and elsewhere are applicable to parastatals (as well as to ULBs). The given formats may be appropriately modified for the organization entity context.
