JASPERS in the Environment, Energy and Municipal Sectors Cost – Benefit Analysis Prague, 28 th November 2007

2 Components and Key Issues of CBA Purpose of Cost Benefit Analysis Identify sustainability and viability issues; Optimise scope of the project and its individual components; To determine level of support realisable from EU Cohesion Fund; Methodology requirements and Jaspers involvement Outlined in Working Document 4 with some changes made to previous guidelines; Advice on interpretation of guidelines; Review and assistance in the preparation of cost – benefit analysis

3 Type of Past Jaspers Involvement Methodology Queries  Preparation of CBA guidelines in Romania and Bulgaria;  Update of guidelines in Poland;  Methodology guidelines for demand and risk assessment in Slovakia;  Questions concerning interpretation of guidelines Preparation of CBA  Support in ensuring most appropriate option is selected;  Review and advice on optimisation of EU grant contribution and calculation of the contribution;  Advice on wider affordability and sustainability issues and methods to improve project sustainability;

4 Key Issues : Lower Sustainability EU compliance requirements  Wastewater : services to populations above 2,000;  Wastewater : higher degree of treatment and sludge management issues;  Solid waste : landfill rehabilitation and diversion requirements;  Energy : focus of carbon reduction and efficiency Issues  Higher costs of the project with impact on affordability;  Changes in the methodology in particular the calculation of the EU grant element;  Less tangible benefits reducing economic benefits;

5 Key Issues : Reduced Funding Gap Change in methodology with inclusion of maximum co-funding rate fixed for the priority axis  EU Grant = Decision Amount * Maximum Co-Funding Rate  The inclusion of Maximum rate reduces the funding amount, but project scope means that greater financial sustainability issues should arise; Project options to overcome issues  Ensuring optimum calculation of incremental revenue with complexities associated with common tariff levels;  Establishing adequate basis for calculation of incremental operating costs  Ensuring cost eligibility;  Identification and optimisation of additional sources of finance to support EU grant;

6 Concluding Remarks CBA is central to the feasibility study and application process  Assists in optimising the project  Provides the basis for determining level of EU financing support; Projects are excepted to be less sustainable  Higher cost projects owing to development status and EU compliance needs;  Change in methodologies mean that lower EU financial support can be expected; Jaspers assistance; To improve project financial, cost and economic sustainability; Ensure that best practices are applied in project evaluation and comply with EU evaluation needs;