Guide to COST-BENEFIT ANALYSIS of investment projects - Ramiri

horizon. These costs, allocated in the last year (30th) of the analysis period, are assumed to be €32,697,000.Table 4.26 Distribution of the investment cost categories in time horizon (thousand of Euros)Investment costs (current prices) Total 1 2 3Feasibility study, design, work management, licensing, tendercosts etc.8,796 6,980 0 1,816Land expropriation 2,242 1,485 757 0Buildings 75,143 0 57,342 17,801Equipments (furnaces, boiler, electric generator, controls…) 104,628 0 41,355 63,273Total investment 190,809 8,465 99,454 82,890The investment is financed 67 by public funds (ERDF and national or regional government funds) and byfunds provided by the private partner. According to the maximum Community contribution (see below) 68,the requested co-financing EU grant is €58,580,000 (30.7% of total investment costs without VAT). Anamount of €82,585,000 (43.3% of total investment costs without VAT) is provided by a nationalgovernment fund. The private financing (€125,842,000) is given by private equity (€52,921,000) and byloan (€72,921,000). The loan has a 5% interest rate with an amortization period of 10 years.The operation and maintenance (O&M) costs, excluding VAT (when applicable), of the infrastructure(running normally) are as follows:- labour costs: 12 skilled employees (at 36,000 €/person per year) and 58 non-skilled employees (at21,600 €/person per year) are assumed; an overall real growth rate of 0.4% per year is set for thelabour cost;- energy and water service costs: the gas consumed by the plant in a typical year reaches a cost of€185,000, with a real growth rate of 1.1% per year 69 ; the electricity consumed in the plant reaches a netcost of €429,000, with a real growth rate of 0.9% per year; the cost of the drinking and waste waterservice is 6,000 €/y, with a real growth rate of 0.5% per year;- other costs: the materials utilised by the plant have a cost of €260,000 per year; the intermediateservices and goods have an annual cost of €1,299,000;- elimination of ash and slag waste: the yearly cost is €2,697,000.The financial inflows come from the residual value of the investment, from the price of the wastetreatment and from the energy recovered (electricity and heat). They are as follows (amounts withoutVAT):- residual value of the investment: the residual value, over the 27 years of life of the plant 70 , is set to be3.1% of the initial costs of the long life parts of the investment plus 1.7% of the costs of the replacedcomponents (short life parts) 71 . This revenue (€8,990 not discounted) is allocated in the last year (30th)of the analysis period;- waste treatment revenues: the price of treatment paid by final users is fixed at €12 per ton of urbanwaste and €18 per ton of other waste, an overall modest decreasing real rate of -0.5% per year is set forthe prices of the waste treatments;- energy revenues: the recovered electricity is sold with a price of 0.07 €/kWh, giving, in the operationalcondition of the incinerator, a revenue of €47.29 per ton of total wastes burned; a modest real growth67The sum to be financed is the cost of investment at current prices without VAT, because the amount of this indirect tax will be compensatedin the course of the operation period.68The EU contribution in this case study is slightly less than the maximum community contribution.69This should be understood as a relative price change.70At the end of the horizon time, the operative life of the plant is equal to the analysis horizon minus the construction time: 30 – 3 = 27 years.71The depreciation factors introduced in the calculation of residual value are founded upon an engineering estimate, based on the experience ofthe old incinerators and similar plants.157