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Project Finance and Appraisal

Orientation and Project Dimensions

Mona Iyer
CEPT University
Ahmedabad
Session Outline
• Course outline
• What is Project
• Project Development Cycle
– What is Project Appraisal and at what stage
– Importance of Project Finance
• PPP Based projects
• Municipal Finance Based Projects
Course Outline
– Introduction

– Module 1: Infrastructure Projects in PPP Mode


(Sessions 3-13)

– Module 2: Municipal Finance based Infrastructure


Projects (Sessions 14-19)

– Module 3: Project Appraisal Techniques through case


studies and approaches by différent agencies (Sessions 20-
24)
Course Outline
• INTRODUCTION
– Project dimensions
– Project development cycle (Identification,
Appraisal,Mobilisation Implementation,
Operation, Management (Monitoring and
Evaluation)
Course Outline
• MODULE 1 INFRASTRUCTURE PROJECTS IN PPP MODE
– Basic Concept of project finance analysis
• Reading financial statements for firms (balance sheets,
P&L accounts, cash-flow statements)
• Estimating project costs
– Means and Sources of Finance: external and internal
sources of financing,
– Cash flow projections, present value introduction,
calculation, the net present value rule)
Course Outline
• MODULE 1 INFRASTRUCTURE PROJECTS IN PPP MODE
– Requirements of external financing, Types of
debts, Leasing
– Basic ratio analysis – (internal rate of return,
risk and sensitivity analysis
– Investment decisions (Discounted and Non-
Discounted Methods)
• Application of PPP finance project (2 hours hands-
on exercise for each stream on 2 Sundays)
Course Outline
MODULE 2: MUNICIPAL FINANCE BASED INFRASTRUCTURE PROJECTS

– Basic concepts of analysis of municipal budget and finance:


• Municipal revenues and expenditure, capital and revenue accounts,
• Sources of investment finance (internal generation, debt, direct
community contribution and grants)
• Concepts of basic ratio analysis (operating ratio, debt-service coverage)
• Finance and operating plan – projection methods
• Application of municipal finance project (2 hours hands-on exercise for
each stream on 2 Sundays)
Course Outline
• MODULE 3: PROJECT APPRAISAL TECHNIQUES

– through case studies and approaches by différent


agencies
• Technical
• Financial
• Economic
• Social
• Environmental

What is Project?
• Number of activities to be completed in sequence
– Activity- defined chunk of work
• Sequence generally based on technical requirements
• Have a single goal
• Specified time
• Some random variations can occur
– (eg. Power failure, someone sick etc….how, when and with what impact it happens is not
predictable always)
• Specified deliverables/output
• Resource limits (man, machine, money)

Thus, A project is a endeavor undertaken to create a unique product or service..


Project Parameters
• Scope
– What will be done and what will NOT be done
– Generally called ToR, Scope of work, doc of understanding, scoping statement, project
initiation document…
– Foundation for all project work
– Scope can change during the course of project with mutual consent of concerned parties
• Quality
– Process quality
– Product quality
• Cost
– Budget, estimate, quote for the project
• Time – Timeframe or deadline
• Resources- Assets like people, equipment etc..
Project Parameters

Time Cost
Scope and quality

Resource availability

Scope and quality bound by time, cost and resource availability


Project Development Cycle
Preliminary Assessment Preliminary Analysis/Planning

Market /User demand

Technical
Detailed feasibility
Project Appraisal
Analysis/ Financial
Project Appraisal/
Project Evaluation Economic/SCBA

Environmental/Ecological

Mobilization Selection of Feasible


Option

Financing

Management Implementation

Review and Monitoring


Preliminary Project Analysis /Project Planning
Generation of ideas

Initial
Screening/Brainstorming/
Meetings

No
Idea Promising? Terminate

Yes
Plan Detailed Feasibility
Analysis/ Project
Appraisal/Project
Evaluation

Appraisal
Project Appraisal
Detailed Feasibility Analysis/Appraisal

Conduct Demand Conduct Technical


Analysis Analysis
(Secondary/Primary)

Conduct Financial
Analysis

Conduct Economic,
Social, Environmental
Analysis

No
Project Worthwhile? Terminate

Yes
Prepare
Financing/Mobilization
Plan
Project Mobilization
Project Financing Plan

Finalization of
Stakeholders

Bidding and Negotiations

No
Mutual Consensus Terminate

Yes
Contracts and
Agreements

Project construction-
commissioning
Project Management
Project Planning & Implementation Work
Time Schedule

Manpower and Organization


Money/Expenses

Information System

Project control,
evaluation and
monitoring