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Implementation of the Financial Planning Tool at Armvodocanal Sofya Hovhannisyan Armvodocanal

This project aims to address the financial weaknesses of EECCA water utilities by implementing a comprehensive financial planning tool. The FPTWU enables practical experience in financial analysis and modeling, allowing for improved decision-making and monitoring.

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Implementation of the Financial Planning Tool at Armvodocanal Sofya Hovhannisyan Armvodocanal

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  1. Implementation of the Financial Planning Tool at Armvodocanal Sofya HovhannisyanArmvodocanal Helsinki, Finland 24-25 May 2007

  2. PROBLEMS SOLUTION • EECCA water utilities remain financially weak, unstable, with inadequate level of funding • There are many reasons for such a situation. One of main reasons is lack of medium- and long-term financial planning • Implementing such a financial planning scheme presumes the water utility has practical experience in regular comprehensive analysis of all the financial and economic aspects • However, such a systemic analysis is only possible if there is a financial modeling and planning tool in place TOOL FOR IMPLEMENTING SOLUTION • The main objective of the project was to develop such a Financial Planning Tool for Water Utilities (FPTWU) Why is the FPTWU Necessary? EAP Task Force

  3. Computerized Model in Excel: User DATA INPUT MODEL CALCULATIONS DATA OUTPUT Decision making, statements, monitoring Concept of the FPTWU Tool EAP Task Force

  4. FPTWU Tool Features It is enough to have basic computer skills. User-friendly and includes user manual SIMPLE Can be expanded by adding additional modules/tables EXPANDABLE Adaptable to the EECCA country contexts (e.g. various tax regimes) MULTI-PURPOSE Graphical presentation of key operational and financial parameters possible VISIBLE EAP Task Force

  5. General Features of the FPTWU Tool • Consists of 34 linked spreadsheets (Excel) • Model navigation is done through the menu • Planning period – quarterly model for three years (with a possibility to extend the forecast period of the model to twenty years) • Calculations can be done either in nominal prices or in reference year prices • Information presented separately by water supply and wastewater collection • Allows entering “historical/actual” data • “Historical/actual” data period can be modified • Data entry is concentrated mostly in two spreadsheets (facilitates the entry process and reduces room for error) EAP Task Force

  6. Input – TI Input – TD Cost indexation Water supply and wastewater collection Demand dynamics Assets CIP module Financial plan Budget Revenues and Collection Tariff module Affordability assessment Costs Taxation accounting Financial statements Outcomes and financial gap analysis EAP Task Force

  7. Implementation at Armvodocanal • Structure • Utility assets • Consumers • Taxation • Unaccounted-for-water • Accounting practice • Payments structure • Method of tariff calculation and approval • Costs calculation • Investment plan

  8. Financial Gap Analysis Financial Gap/Surplus Cash Use of cash Net surplus/gap

  9. Graphical Presentation of Parameters Revenue and costs Total Revenue O&M costs

  10. Graphical Presentation of Parameters Tariff for population Water tariff Factual water tariff Wastewater Tariff Factual wastewater tariff

  11. Graphical Presentation of Parameters Water and wastewater connection rates< % Multi-storey buildings,water Multi-storey buildings, wastewater Private housing sector, water Private housing sector, wastewater

  12. Necessary input-data set (1/3) • Economical data • Inflation • Exchange rate • Процентные ставки • Income per capita and per household • Population and households • Water demand • Water consumption by consumer categories • Wastewater by consumer categories • Water consumption norms • Metering • Service level • Water and wastewater coverage • Water infrastructure capacities • Wastewater infrastructure capacities

  13. Necessary input-data set (2/3) • Technical conditions and assumptions • Infrastructure age (pipes, pumps etc) • УWear and tear of infrastructure • Service level • Assets lifetime • Capital costs • Plan of replacement/repair/reconstruction of assets • Capital costs by assets categories • Materials costs • Construction and installation works costs • O&M costs • Prices for energy and materials • Staff costs • Maintenance costs • Overhead costs • Costs distribution by consumers categories • Costs distribution for water and wastewater

  14. Necessary input-data set (3/3) • Financial Data • Revenues by consumer groups • Water and wastewater tariffs • Billed and collected amounts • Public budget/municipal subsidies • Other revenues • Financing • Conditions and characteristics local loans • Conditions and characteristics international loans • Accounting and taxation • Depreciation • Income tax, VAT and other taxes • Operating assets

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