Guide to COST-BENEFIT ANALYSIS of investment projects - Ramiri

More documents

Recommendations

Info

In this framework (according to Article 41), the Commission is responsible for the appraisal of majorprojects on the basis of information provided by the proposer. A project examiner will consider the list ofregulatory requirements as a general indication of the minimum information needed. The major projectwill be appraised in the light of the factors listed in Article 40, its contribution towards achieving the goalsof those priorities, and its consistency with other Community policies.During this process the Commission may ask for integration of information if the application isincomplete, inconsistent or not of a sufficient quality. In doing so, the Commission can consult outsideexperts, including the EIB, if necessary. The EIB is also involved in the JASPERS initiative (see Focusbelow).FOCUS: APPRAISAL BY THE COMMISSIONGeneral RegulationArticle 41 Regulation 1083/2006: The Commission shall appraise the major project, if necessary consulting outside experts,including the EIB, in the light of the factors referred to in Article 40, its consistency with the priorities of the operationalprogramme, its contribution to achieving the goals of those priorities and its consistency with other Community policies.Article 36(3) Regulation 1083/2006: 3) The Commission may consult the EIB and the EIF before adoption of the decisionreferred to in Article 28(3) and of the operational programmes. That consultation shall relate in particular to operationalprogrammes containing an indicative list of major projects or programmes which, by the nature of their priorities, are suitablefor mobilising loans or other types of market-based financing. 4) The Commission may, if it considers it appropriate for theappraisal of major projects, request the EIB to examine the technical quality and economic and financial viability of the projectsconcerned, in particular as regards the financial engineering instruments to be implemented or developed. 5) The Commission,in implementing the provisions of this Article, may award a grant to the EIB or the EIF.FOCUS: THE JASPERS INITIATIVEJASPERS (Joint Assistance to Support Projects in European Regions) is a joint initiative of the EIB, the European Commission(Regional Policy Directorate-General - DG Regio) and the European Bank for Reconstruction and Development (EBRD). It isa technical assistance partnership, aimed at assisting the EU Member States covered by the Convergence Objective in preparingthe high-quality major infrastructure projects to be submitted for co-financing under the Structural and Cohesion Funds. Theassistance provided by JASPERS may cover any preparatory work needed to prepare an application for funds.JASPERS operates on the basis of a Country Actions Plan, prepared in partnership with the Beneficiary State and thegeographical desk in DG REGIO. The completed project form must indicate the inputs of JASPERS to the nationalpreparation and appraisal team of the project.Major projects application forms shall indicate if the project has received assistance from JASPERS and report the overallconclusions and recommendations of the JASPERS contribution. For further details see URL: http://www.jaspers.europa.eu/The Commission’s decisions concerning co-financed projects will be based on an in-depth evaluation.When the evaluation presented by the candidate is insufficient or not convincing, the Commission mayask for a revision or a more thorough elaboration of the analysis; alternatively, it may conduct its ownappraisal, if necessary, availing itself of an independent evaluation. Member States often have structuresand internal procedures for evaluating projects of a certain size, but sometimes difficulties may emerge incarrying out a quality evaluation. In any case, the final decision will be the result of a dialogue with theproposer, in order to obtain the best results from the investment.To sum up, the economic appraisal of projects by the Commission (which is just one of the aspects of thewhole decision process) is based on a three-step approach. The aim of this approach is to check whether:- the project appraisal dossier is complete. This means that all the necessary information should beavailable. If this is not the case the project will not be admissible;- the analysis is of a good quality. This means that the analysis is sound in terms of coherence of theCBA with the Commission’s methodology and the national CBA guidelines (where available). Theworking hypotheses made for the forecasts are realistic and the methods used for the calculation of themain performance indicators are correct;- the results provide a basis for a co-financing decision.22
In particular, CBA results should provide evidence that the project is 4 :- desirable from a socio-economic point of view. This is demonstrated by the result of the economicanalysis and particularly by a positive economic net present value being positive;- consistent with the operational programme and other Community policies. This is achieved bychecking that the output produced by the project contributes to the attainment of the programme andpolicy goals (see Chapter 2 for further details);- in need for co-financing. More specifically, the financial analysis should demonstrate the existence of afunding gap (negative financial net present value) and the need for Community assistance in order tomake the project financially viable. Alternatively (see the application form, section G, Justification for thepublic contribution), any possible involvement of State-aid rules should be declared.Figure 1.3 The role of CBA in the Commission appraisal processManagingauthorityManaging authority submits the application form AND encoded informationSTEP 1. Admissibility checkCommission ServicesThe Commissionasks for missinginformationThe application form and/or the encodedinformation is not complete.PROJECT INADMISSIBLEThe project is complete.PROJECT ADMITTED TOAPPRAISALSTEP 2. Methodology checkCommission Services in consultation with EIB and external consultants if necessaryThe Commissionasks forexplanation/revisionsThe methodology is not consistent insome pointsCBA RESULTS ARE UNRELIABLESTEP 3. Commission decisionThe methodology is soundCBA RESULTS ARE RELIABLEThe project isrejectedThe project is not desirable from asocio-economic point of viewThe project is not in need for cofinancingThe project is desirable from a socioeconomicpoint of viewThe project is in need for co-financingCalculation of EU grantFurther assessment of the Commission Services on the basis of informationother than CBA4See also European Commission, Working Document No 4, page 5.23
Page 3: ACRONYMS AND ABBREVIATIONSBAUB/CCBA
Page 7 and 8: TABLESTable 2.1 Financial analysis
Page 9: FIGURESFigure 1.1 Project cost spre
Page 12 and 13: Cohesion Fund, and through the leve
Page 14 and 15: or the plant will not reveal excess
Page 17 and 18: CHAPTER ONEPROJECT APPRAISAL IN THE
Page 19 and 20: Some specifications for financial t
Page 21: FOCUS: INFORMATION REQUIREDGeneral
Page 25 and 26: CHAPTER TWOAN AGENDA FOR THE PROJEC
Page 27 and 28: objectives, are, as far as possible
Page 29 and 30: considered the appropriate shadow p
Page 31 and 32: 2.3.2 Feasibility analysisFeasibili
Page 34 and 35: This approach will be presented in
Page 36 and 37: Current assets include:- receivable
Page 38 and 39: The following items are usually not
Page 40 and 41: Mainly, the examiner uses the FRR(C
Page 42 and 43: The dynamics of the incoming flows
Page 44 and 45: eturn on their own capital (Kp). Th
Page 46 and 47: While the approach presented in thi
Page 48 and 49: 2.5.1 Conversion of market to accou
Page 50 and 51: Table 2.9 Electricity price dispers
Page 52 and 53: 2.5.1.2 Fiscal correctionsSome item
Page 54 and 55: previously estimated in projects wi
Page 56 and 57: FOCUS: ENPV VS. FNPVThe difference
Page 58 and 59: 2.6 Risk assessmentProject appraisa
Page 60 and 61: Table 2.14 Impact analysis of criti
Page 62 and 63: Figure 2.6 Probability distribution
Page 64 and 65: eneficiary. The project proposer sh
Page 66 and 67: There are many ways to design an MC
Page 68 and 69: PROJECT APPRAISAL CHECK-LISTCONTEXT
Page 70 and 71: - reduction of congestion by elimin
Page 72 and 73:
- the methods applied to estimate e
Page 74 and 75:
- the marginal external costs: cong
Page 76 and 77:
- the benefits for the existing tra
Page 78 and 79:
The following tables show some refe
Page 80 and 81:
3.1.1.6 Risk assessmentDue to their
Page 82 and 83:
As shown in Figure 3.1, only under
Page 84 and 85:
3.1.3.7 Other project evaluation ap
Page 87 and 88:
- Waste Management Hierarchy rules
Page 89 and 90:
The time horizon for a project anal
Page 91 and 92:
Page 93 and 94:
every user support the total costs
Page 95 and 96:
Territorial reference frameworkIf t
Page 97 and 98:
Cycle and phases of the projectGrea
Page 99 and 100:
One of the most important aims of t
Page 101 and 102:
projects, as in other sectors in wh
Page 103 and 104:
3.2.3.2 Project identificationBasic
Page 105 and 106:
Page 107 and 108:
In order to evaluate the overall im
Page 109 and 110:
for regassification plants, number
Page 111 and 112:
Examples of objectives are:- change
Page 113 and 114:
decontamination if any;- the techni
Page 115 and 116:
3.3.3.6 Risk AnalysisCritical facto
Page 117 and 118:
3.3.4.6 Risk assessmentCritical fac
Page 119 and 120:
3.4.1.5 Economic analysisThe follow
Page 121 and 122:
Financial inflows• Admission fees
Page 123 and 124:
expectancy suitably adjusted by the
Page 125 and 126:
The time horizon for project analys
Page 127 and 128:
A Cost-Benefit Analysis should cons
Page 129 and 130:
CHAPTER FOURCASE STUDIESOverviewThi
Page 131 and 132:
- finally, there is the traffic tha
Page 134 and 135:
c) Road users producer’s surplus:
Page 136 and 137:
4.1.5 Scenario analysisTwo scenario
Page 138 and 139:
The financial performance indicator
Page 140 and 141:
Table 4.10 Economic analysis (Milli
Page 142 and 143:
Table 4.12 Financial return on capi
Page 144 and 145:
4.2 Case Study: investment in a rai
Page 146 and 147:
4.2.4 Economic analysisThe benefits
Page 148 and 149:
Financial investment costs have bee
Page 150 and 151:
Figure 4.6 Results of the risk anal
Page 152 and 153:
Table 4.22 Economic analysis (Milli
Page 154 and 155:
Page 156 and 157:
4.3 Case Study: investment in an in
Page 158 and 159:
ate of 0.6% per year is assumed for
Page 160 and 161:
The shadow price of the CO 2 avoide
Page 162 and 163:
As a result, the probability distri
Page 164 and 165:
Page 166 and 167:
16 17 18 19 20 21 22 23 24 25 26 27
Page 168 and 169:
4.4 Case Study: investment in a was
Page 170 and 171:
4.4.2 Financial analysisAlthough in
Page 172 and 173:
THE CALCULATION OF REVENUESReferrin
Page 174 and 175:
0.15 m 3 /m 2 a depreciation of 20%
Page 176 and 177:
As result, the probability distribu
Page 178 and 179:
Figure 4.13 Probability distributio
Page 180 and 181:
Table 4.48 Financial return on nati
Page 182 and 183:
Table 4.50 Financial return on priv
Page 184 and 185:
16 17 18 19 20 21 22 23 24 25 26 27
Page 186 and 187:
4.5 Case Study: industrial investme
Page 188 and 189:
4.5.4.1 Investment costsThe total i
Page 190 and 191:
Finally, a residual value was estim
Page 192 and 193:
This analysis shows the need to pay
Page 194 and 195:
Table 4.62 Financial return on inve
Page 196 and 197:
Table 4.64 Return on private equity
Page 198 and 199:
Table 4.66 Economic analysis (thous
Page 200 and 201:
ANNEX ADEMAND ANALYSISDemand foreca
Page 202 and 203:
The method applied for the forecast
Page 204 and 205:
Furthermore, travel demand depends
Page 206 and 207:
This Guide supports a unique refere
Page 208 and 209:
A higher discount rate for countrie
Page 210 and 211:
Figure C.1 Project ranking by NPV v
Page 212 and 213:
The main problems with this indicat
Page 214 and 215:
EXAMPLE OF SHADOW WAGE IN DUAL MARK
Page 216 and 217:
Another exhaustive way to include d
Page 218 and 219:
Figure E.2 Percentage of low income
Page 220 and 221:
ANNEX FEVALUATION OF HEALTH &ENVIRO
Page 222 and 223:
Figure F.1 Main evaluation methodsS
Page 224 and 225:
- expenditure on capital equipment
Page 226 and 227:
due to air pollution or water conta
Page 228 and 229:
BENEFIT TRANSFER - SELECTED REFEREN
Page 230 and 231:
ANNEX GEVALUATION OF PPP PROJECTSIt
Page 232 and 233:
adjustments for Competitive Neutral
Page 234 and 235:
ANNEX HRISK ASSESSMENTIn ex-ante pr
Page 236 and 237:
Reference ForecastingThe question o
Page 238 and 239:
Figure H.5 Levels of risks in diffe
Page 240 and 241:
ANNEX IDETERMINATION OF THE EU GRAN
Page 242 and 243:
A.4. Technological Alternatives and
Page 244 and 245:
GLOSSARYAccounting period: the inte
Page 246 and 247:
Market price: the price at which a
Page 248 and 249:
BIBLIOGRAPHY1. ReferencesBelli, P.,
Page 250 and 251:
Ray, A. 1984, Cost-benefit analysis
Page 252 and 253:
EnvironmentGeneralAtkinson, G., 200
Page 254 and 255:
European Commission, DG Tren, 2003,
show all

Guide to COST-BENEFIT ANALYSIS of investment projects - Ramiri

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?