|
It is the stated desire of the Government of Sri Lanka (GOSL)
to finance new infrastructure projects through private sector
participation. This study outlines a methodology based on
financial and risk analyses that can be used by the GOSL
or a government utility to analyze the viability of private
sector participation in new infrastructure projects. The
method is complementary to the price, tariff or toll measure
of viability that is adopted at present and it force utilities
to compare the benefits of projected consumption growth
with cost of incremental supply before rejecting private
sector participation in new infrastructure projects. The
water supply projects in Sri Lanka are used as the case
study.
Financial analyses of a bulk water supply
project and a water distribution project are carried out
to estimate subsidy percentages that are required to make
the projects viable using a model that is developed for
investment analysis of all types of new infrastructure projects.
This analysis looks at four pricing options for the bulk
supply project and sixteen procurement options for the distribution
project from the view point of the utility, for three cases
of non revenue water (35% as base case, 50% and 25% as extreme
cases). The risk analysis takes into account the risk and
uncertainty in non revenue water, cost and demand estimates,
rate of debt and forecasts of escalation. These analyses
show that the best option for the utility for water supply
in Sri Lanka is to obtain both bulk supply and distribution
projects through private sector participation using BOT
arrangements.
The suggested method addresses some of
the key issues that arise in Sri Lanka regarding private
sector participation in new infrastructure projects. To
reap benefits from private sector participation in new infrastructure
projects in the water supply sector, the GOSL should review
its policy on water pricing with reasonable increases in
tariffs.
Table of Contents
- Introduction
- Private Sector Participation
- Financial Model
- Case Study
- Risk Analysis
- Discussion
- Conclusions
- References
|
