Guide to COST-BENEFIT ANALYSIS of investment projects - Ramiri

ate of 0.6% per year is assumed for this price; the recovered heat gives, in the operational condition ofthe incinerator, a revenue of €27.02 per ton of total wastes burned; a real growth rate of 0.7% per yearis assumed for this price.For simplicity’s sake, the income potentially deriving from the recovered recyclable materials is not takeninto account in the project analysis because this income is negligible 72 .Table 4.27 Sources of finance (current prices) over the time horizon (thousand of Euros):Finance sources Total 1 2 3 4 - 18 19 20 – 30Public fundsInvestment financingEU grant 58,580 1,381 29,444 27,753 0 0 0National grant 82,585 4,162 45,674 32,749 0 0 0Total 141,165 5,545 75,118 60,502 0 0 0Private fundsInvestment and operation financingEquity 16, 729 1,576 7,727 7,182 244 0 0Loan 36,729 1,576 17,727 17,182 244 0 0Total 53,458 3,152 25,454 24,364 488 0 0Replacement of short life components financingEquity 36,192 0 0 0 0 36,192 0Loan 36,192 0 0 0 0 36,192 0Total 72,384 0 0 0 0 72,384 0The financial performance indicators (before taxes) are:- Financial Net Present Value (investment) FNPV(C) €-71,877,422- Financial Rate of Return (investment) FRR(C) 0.7%- Financial Net Present Value (capital) FNPV(K) €-16,059,396- Financial Rate of Return (capital) FRR(K) 3.7%With regard to the financial sustainability of the project the cumulative cash flow is always positive with aminimum value of about €1,066,000 in the fourth year.The amount to which the co-financing rate of the priority axis applies is for this project equal to€78,106,666. This is determined by multiplying the project’s eligible cost (in this case €184,649,330 atcurrent price) by the funding-gap rate (42.3%). Assuming the co-financing rate for the priority axis is equalto 75%, the EU contribution is then found to be equal to €58,580,000.4.3.3 Economic analysisThe conversion factors (CF) for the present case study are shown in Table 4.28. The notes accompanyingthis table outline the criteria assumed in setting or calculating the CF’s.The conversion factors allow for the calculation of the social costs due to the investments, the runningcosts and the replacement of ‘short’ life equipment (see financial analysis), the social benefits due to theresidual value of the investment, and the revenues of the waste treatment and energy production. The72The market for these goods (at the moment of the analysis) is not well-developed in the country in which the incinerator will operate.Cautiously, the possible market growth in the field of recycling of secondary goods, which in the future could allow for an additional gain for theplant operator, is not taken into account.158