Economic and Financial Evaluation of Port Projects or Capital.pptVIP

Financial Appraisal Projects and Capital Acquisitions Presented by Andre Walcott of Ernst Young Caribbean Agenda Introduction The Dilemma Options Analysis Options Analysis Methodology Introduction Regional Port Authorities are faced with the ever present dilemma of efficiently and effectively utilising the limited financial and natural resources to fulfill the economic and social obligations of the primary shareholder, usually Government. How do you manage this dilemma? The Dilemma With limited financial resources, the resistance of Government to guarantee financing obligations, and a country of expectations, how do you know which projects to undertake and which capital acquisitions to make at which time? Options Analysis Options analysis: examines the economic benefits examines the costs examines the non-financial benefits identifies the risks and their impact on the investment accounts for other qualitative supporting information Options Analysis Methodology Approach to Options Analysis There are seven tasks in detailed option analysis: Identify and categorise the benefits Identify and categorise the costs Develop a basis for the estimation of costs and benefits Information gathering Estimation of costs and benefits Cash Flow Financing Mechanisms Risk analysis Assembling the analysis in a business case Identify and Categorise Benefits Identify and Categorise Costs Cost Categorisation Cost categorisation involves more than examining the capital costs but also the operating costs associated with the acquisition or project. Information Gathering Information Gathering Information gathering should commence as soon as possible to ensure that the most reliable data available is collected and collated to facilitate estimates and projections of costs and benefits. Information Gathering Some of the challenges that may be encountered are: Inability to locate data Collection of unreliable data Changes in project requirements Changes in alternative options for