Presenters. Cleaner Production Approach, methodology Benefits. UNEP Definition of Cleaner Production. UNEP Definition of Cleaner Production

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1 The Regional Environmental Centre for the Caucasus Promoting competitiveness and efficiency of small and medium enterprises through cleaner production in South Caucasus Cleaner Production Approach, methodology Benefits Training Materials For the Enterprise management staff Presenters David Girgvliani Environmental specialist REC Caucasus Address 23, Chavchavadze Ave. 2 nd floor, 0179 Tbilisi, Georgia Tel/Fax: / info@rec-caucasus.org UNEP Definition of Cleaner Production UNEP Definition of Cleaner Production "Cleaner production means the continuous application of an integrated, preventive environmental strategy to processes and products to reduce risks to humans and the environment "Cleaner production means the continuous application of an integrated, preventive environmental strategy to processes and products to reduce risks to humans and the environment Limited but Practical CP Definition The process Implementation of methodology to improve process efficiency and overall yield of product Materials Energy Facility Boundary FUGITIVE & Minimisation of environmental impact Reduction of the pollutant generation MATERIAL UTILITIES Boilers, water treatment, compressed air and refrigeration plants etc Production Boundary UNTREATED WASTES discharged STORAGE Improvement of environmental performance of the enterprises MANUFACTURING OPERATIONS POLLUTION CONTROL PLANT (PCP) PCP EMISSIONS & DISCHARGES How it can be done HAZARDOUS / At-source, cost-effective actions that improve resource use efficiency or substitute more benign substances for hazardous materials PRODUCT STORAGE SOLID WASTES off-site treatment and disposal PRODUCT RETURNS PRODUCTS Actions to reuse or recycle wastes for benign purposes on/off site (Damaged /Out of Spec) sent for sale

2 CP Includes At sourceprevention or reduction of waste materials, energy, water Energy efficiency though sectoral, institutional and environmental factors may result in its separate promotion Continuous improvement Win-win Lower waste and pollutant loads generated Reduced environmental pollution Economic efficiency Reduced health and safety risks Overall Benefits of CP Environmental improvement Financial Benefits Increase Profitability Reduce operating costs Increase product yield Improve product quality and market share Control pollution costeffectively Business Benefits of CP Business sustainability Improved regulatory compliance Retain/grow market share EMS supply chain pressure Green labelled products Improve working conditions Reduce liability risks Health / Safety / Environment Effective Management plus Technology Development Maximises Benefits Effective Management People and their creativity Information and training Effective metering Effective tools and systems for data interpretation and action Operational methods and control Technical Development Add technology Change technology Change raw materials Change product design Management Actions Include Benefit Reduce Operating Costs Systems for reviewing resource efficiency and stimulate actions to gain improvements Monitoring and targeting Training of staff Communicating to staff the commitment of managers to CP Involving staff and providing incentives for ideas Adoption of an environmental management system, whether informal or formal True costs of waste include Waste treatment and disposal Raw material/ingredient cost Waste energy Excessive water demand Effluent generation Packaging Factory/office consumables Product rejects and returns and rework of intermediates Wasted time and effort The true costs of waste are significant Can be 5 20 times what enterprise staff think of as the costs of waste Typically 4 10% of sales turnover These costs can often be cut by at least 25%

3 Waste Products are Expensive! Impact of Reduced Operating Costs on Profits Illustration Value is added through the production process Minimising product wastage may yield more savings than does minimising raw materials waste Recycling or reuse is not a panacea! Assume CP action cuts waste by 25%, so reducing the cost of waste from 6% to 4.5% of sales Contrast Mature sector with profit margin of 3% on sales Growth sector with profit margin of 30% on sales %age Increase in Profit Potential Influence of CP on Profit Low Margin business High Margin Business Benefit Reduce Operating Costs Annual utility savings after CP was piloted in one workshop of a chemical manufacturer and then applied to the whole factory % Savings 1st year after pilot Energy 2nd year after pilot Water Benefit Increase Product Yield Example Furniture Manufacturer Reduced the Product Return Rate by Improved Packaging Benefit Cost-Effective Pollution Control Reduces capital cost of new PCP Reduces operating costs of PCP Reduces cost for off-site disposal of liquid/solid wastes Benefit Retain/Grow Market Share EMS ISO supply chain relationships Producers increasingly demand that their suppliers practice sound environmental management techniques such as CP Green labelled products use less resources to make/use products gives companies a marketing edge in an environmentally conscious society Respond to consumer demand and be first in the market acquire a leading position

4 Benefit - Improve Working Conditions Reduced loss of hazardous materials into working environment Contributes to worker health and safety, employee loyalty and good morale Contributes to a reduction in liability risk Types of CP Action A Low Cost (self-resourced) B Moderate Cost Internal finance Tacis project procurement Revolving fund etc C High Cost Needing Investment Finance Financial Assessment of CP action Simple pay-back method - A/B actions Return on investment (ROI) - B/C actions Don t Ignore Low Cost Actions Low-cost actions also save waste, are easily identified and are always affordable The savings achieved can be used to invest in higher cost options Simple low-cost actions include Repair of leaking steam lines and leaking pipework Switching electric lights off when not needed Switching water taps off when not needed Fitting automatic triggers onto water hosepipes Key Learning Points Module 1 CP is a preventive strategy that focuses on at-source reduction of waste energy, materials, water and products Many CP actions can be low-cost Efficiency and sustainability gains are major benefits for enterprises Significant environmental, safety and health benefits too Cleaner Production Approach, methodology Benefits Questions and answers

5 The Regional Environmental Centre for the Caucasus Promoting competitiveness and efficiency of small and medium enterprises through cleaner production in South Caucasus Cleaner Production Approach, methodology Benefits Module 2 General approach Training Materials For the Enterprise management staff Module 2 - Content Systematic Approach CP Audit Tools and Techniques Feasibility study (B/C) Financial and Economic Appraisal (B/C) Business Case Preparation (B/C) CP Performance Audit / Impact Assessment Organisational Aspects for Sustainable CP Action Relation of CP to EMS MANAGEMENT COMMITMENT Systematic CP Approach Systematic Approach - Performance Audit / Impact Assessment Continuous improvement depends on retaining management commitment REVIEW PERFORMANCE AUDIT IMPLEMENTATION FINANCE Identify key performance indicators and determine baseline situation SCOPE CP AUDIT Low Cost Measures PRIORITIES Invest? BUSINESS CASE FEASIBILITY APPRAISAL Monitor key performance indicators and report back to management following CP action implementation 4 Scope of CP Audit To be determined for each site Whole site or part only Processes, utilities or both Technology and management Beneficial to take a comprehensive view at first Define scope more narrowly after initial review and assessment CP Audit Tools and Techniques Map processes and wastes 2. Walk-through audit 3. Review plant data and operations 4. Compare against benchmark performance indicators 5. Examine resource use vs. production relationships 6. Energy audit 7. Mass, water and energy balances 8. Identify & rank waste costs 6

6 CP Audit Tools and Techniques Analyse the root causes of waste 10. Brainstorming and brainwriting 11. Use CP databases to identify best practice 12. Waste minimisation club activities 7 1 st CP Audit Result CP Actions List Type A no/low cost List of actions - prioritise Implementation action plan Type B moderate cost Identify equipment and review options Identify scope of any further feasibility study that may be needed plan action Procure equipment if and when appropriate Type C Identify possibilities and the scope of feasibility study Plan action 8 Output from CP Audits 1 st Phase Identified irrational practices that contribute to waste energy, materials, water, product List of waste sources and quantities List of potential no/low cost CP actions (type A) Identified potential CP options requiring further study/investment (B/C) Identified equipment needs for procurement (i) monitoring for type B/C appraisal (ii) plant modifications/retrofit 2 nd Phase Developed type B/C options for CP action pass forward to detailed costing, appraisal and business case preparation Systematic Approach Feasibility Study B / C Actions Technical appraisal Technology design, type, size Performance specification inputs / outputs May need Quantified benefits Appraisal may need additional monitoring data Financial Appraisal Payback and ROI analyses Economic Appraisal Required by International Financial Institutions (IFIs) 9 10 Systematic Approach Aspects Feasibility study - economic and financial appraisal of type B and C actions Sources of finance Preparation of the business case for investing in CP Organisational aspects for sustainable CP action Relation of CP to environmental management systems (EMS) 11 Key Learning Points Module 2 Adopting a structured approach is likely to lead to longer-lasting benefits and continued CP action Many tools exist to help identify waste, the causes of waste and actions to prevent or minimise waste Use the tools that you find most appropriate to your situation 12

7 Cleaner Production Approach, methodology Benefits Questions and answers

8 The Regional Environmental Centre for the Caucasus Promoting competitiveness and efficiency of small and medium enterprises through cleaner production in South Caucasus Cleaner Production Approach, methodology Benefits Module 3 Preparing the Business Case for CP Investment Training Materials For the Enterprise technical staff Module 03 Content Sources of finance and loan criteria Economic vs. financial appraisal of projects Project financial appraisal - basics Project risks and sensitivity analysis Project business case a bankable proposal Preparing a project business case 2 Introduction Potential no/low cost CP actions (type A) Low-level decision needed for implementation Potential type B/C options, which may need Detailed costing Appraisal Finance Business case to secure implementation finance Objective To assist appraisal and financing of B/C options Sources of Finance and Loan Criteria What are your observations or experience of accessing finance to make technical improvements in your enterprise? 3 4 Potential Sources of Finance Include Enterprise s funds retained from profits New equity - finance raised on the stock market Commercial bank loan Revolving fund IFI loan (international financial institution) EBRD, AsDB, World Bank (IFC) Foreign investment Grants Main Loan Criteria and Conditions Project and enterprise viability Economic and financial appraisal required by IFIs Financial appraisal required by commercial lenders Minimum commitment of funds by borrower Date at which repayment begins grace period Repayment period and dates of payment Interest rate Minimum CP and EE benefits Proportion of project savings paid to lender Covenants A promise to undertake stated actions as a condition of receiving the loan monitored by the lender 5 6

9 Enterprise Viability and Project Sustainability Economic and financial evaluations are done on a project-specific basis Even though a project may be economically viable, it will attract commercial finance only if the enterprise is financially viable Externality Costs and Benefits Externality benefits are likely to result from CP project implementation Reduced pollution (local, regional, global) Social benefits - improved health and safety (at work, neighbourhood) IFIs will take externalities into account in economic appraisal But externalities are not normally considered in financial appraisal by commercial lenders For large loans, however, commercial lenders may consider these project impacts favourably, as part of an overall assessment of project risk and potential future liabilities 7 8 Revolving Fund Principle of Revolving Fund Purpose Provide a dedicated sustainable financing mechanism for CP and energy efficiency projects with relatively short pay-back periods Mechanism Initial capital injection into fund Application Establishment fee charge for evaluating the application and setting up the loan Loans from the fund to profitable, eligible projects Proportion of the financial savings made on a project is returned to the fund A growing fund finances new projects 9 10 Revolving Fund (RF) vs. Bank Loan Potential advantages of Revolving Fund for enterprises Relatively soft loans Receptive of good project concepts Reduced bureaucracy ( red tape ) Eligible Projects/Borrowers - Requirements Minimum financial contribution from borrower Project size: minimum/maximum Project pay-back: minimum/maximum Borrower solvency Technical capacity of borrower Minimum CPEE effect 11 12

10 Principle RF Forms and Documentation Application forms Agreements between the stakeholders involved The RF loan Contract Repayment plans Developed by borrower on the basis of the estimated savings Borrower takes the risk if the estimated savings are not made Reporting forms Economic vs. Financial Appraisal Economic appraisal is needed if seeking finance from an International Financial Institution (IFI) e.g. EBRD, World Bank, AsDB for type C projects It may be required by Government if co-funding Project must be economically viable for IFIs to consider a project If seeking IFI finance, therefore, make an economic assessment before proceeding with loan application Economic vs. Financial Appraisal Common Features Economic vs. Financial Appraisal Main Differences (1) Uses estimated capital and operating costs and revenues expressed in monetary terms Analyses projected cash flows over the project lifetime to determine whether the value of the project benefits exceed its costs Uses discounted cash flow (DCF) analysis to take into account the time-value of money Identifies key risks and uses sensitivity analysis to assess their potential impact on project feasibility Economic Appraisal Concerns overall benefits to a country Seeks to optimise the use of resources Uses shadow prices if market prices do not reflect true resource costs Financial Appraisal Concerns the benefits to an enterprise only Seeks to optimise the monetary benefit Uses actual market prices to value resource costs and revenues Economic vs. Financial Appraisal Main Differences (2) Constant, Real and Current Prices A1 A2 A3 Economic Appraisal Financial Appraisal A1 Constant price Uses real prices i.e. constant values adjusted for any change in the real value of a commodity Uses current prices i.e. constant prices adjusted for expected price inflation A2 Real price assuming no change in relative economic value A3 Current price at 5.0 % price inflation Price Year 17 18

11 Economic vs. Financial Appraisal Main Differences (3) Project Financial Appraisal Basics Economic Appraisal Certain cash flows are excluded from analysis e.g. Debt service Depreciation Taxes and Grants Financial Appraisal Cash flows opposite are included in the analysis Calculating project related costs Investment appraisal objectives Cash Flows Payback Time Value of Money Discounted Cash Flow Methods (DCF) Net Present Value Methods (NPV) Internal Rate of Return Methods (IRR) Incremental (Value Added) Analysis Financial Engineering Calculating Project Related Costs Capital Costs - Depreciation Capital Costs Initial project investment Equipment / machinery Land and buildings Installation Start-up / commissioning Training Professional fees Working capital Interest during construction Security and insurance Operating Costs Resource consumption Process energy, water, materials, chemicals Building/office services energy, water, materials etc Maintenance Labour Indirect and overhead costs Storage, rents & rates, insurance, administration, distribution etc Project capital cost is depreciated over subsequent years Most common method is straight line annual depreciation is a constant portion e.g. 15% of the initial investment Depreciation reduces the corporate tax payable - equal to depreciation x the marginal tax rate Example: an investment of 500,000 Euro depreciated straight line at 15% per year with marginal corporate tax at 40% Annual Depreciation = 75,000 Euro Annual Tax deduction of 30,000 Euro Operating Costs The value of a CP project is related to how quickly and to what extent the operating cost savings exceed the initial capital investment Savings = new system costs old system costs Pricing (tariffs) of resources is important but forecasting can be difficult e.g. Subsidy levels, Market forces, Negotiable prices Relate total costs to forecast production levels Fixed costs do not change with plant output Variable costs vary directly with plant output NOTE: many individual cost items have both fixed and variable components relationship between resource consumption and production must be taken into account Investment Appraisal - Objectives Determine which investments make the best use of the enterprise s money Ensure optimum benefits from each investment Minimise risk to the enterprise Provide a basis for a subsequent analysis of the performance of each investment 23 24

12 Step 1 of investment appraisal gather information on project costs and benefits and calculate the cash flow generated Cash Flow = Money In Money Out Simple example of year-byyear cash flow and total net cash flow Cash Flows Cash Flow Year $ 0-100, , , , , , ,000 Total Net Cash 140,000 Flow 25 Payback Payback time is an easy to calculate financial measure Payback = Capital Cost / Annual Savings The length of time required for the running total of net savings to equal the capital cost The basic idea is that the shorter the payback time the more attractive the investment 26 Payback - Advantages Payback - Disadvantages Easy to calculate Easy to interpret tangible measure i.e. years No assumptions needed regarding project Timing, Lifetime or Interest Rates Favours projects with short payback times so reducing investment risks Takes into account (crudely) the timing of net savings 27 It takes no account of any cash flows after the payback period, hence It doesn t assess the overall value of the project It s use favours the acceptance of short-life projects over longerlife ones It doesn t indicate a rate of return on the money invested It takes no account of any residual value of the capital asset It takes no account of the time value of money 28 Payback 3 Examples Time Value of Money (1) 3 projects each with a capital cost of 50,000 Euros Net Annual Savings (NAS) and Running Totals (RT) What are the payback times for each project? Year NAS RT NAS RT NAS RT Project 1 Project 2 Project ,000-50,000-50,000-50,000-50,000-50, ,000-40,000 25,000-25,000 8,000-42, ,000-30,000 25, ,000-33, ,000-20,000 25,000 25,000 10,000-23, ,000-10,000 25,000 50,000 23, , ,000 75,000 9,000 9, ,000 10,000 25, ,000 8,000 17,000 You have a choice Accept 1,000 Euro now or 1,000 Euro after 1 year Your response? 29 30

13 Time Value of Money (2) You have a second choice to make Accept 1,000 Euro now or 2,000 Euro after 5 years Your response this time? Time Value of Money (3) In general: Later savings are worth less today than the same savings made earlier in the project The Present Value (PV) now, i.e. year 0, of money (M N ) spent or saved in year N is related to the interest (discount) rate I % Quantitatively: PV = M N / (1 + I / 100) N Discounted Cash Flow (DCF) Annual cash flows are multiplied by the discount factor (DF) for each year DF = 1 / (1 + I / 100) N For year 0, i.e. the current time, DF = Forms the basis for the Net Present Value Method Year I = 6% I = 8% I = 10% I = 12% I = 14% I = 16% I = 18% I = 20% I = 22% I = 24% Discount Rate (1) Value selected for appraisal depends on the project risk and opportunity cost of capital - the financial return foregone (lost) by investing in the project rather than alternative opportunities Riskless projects appropriate to discount cash flows at risk-free rate of return e.g. interest on central bank s Treasury Bills Risky projects a risk premium should be included in the discount rate Discount Rate (2) Nominal discount rate (R%) given by R = (1 +I R /100) x (1 + OPI/100) 1 where I R = real discount rate (%); OPI = overall price inflation (%) Good practice for project sponsors (enterprises and or their advisors /consultants) is to Justify clearly their choice of discount rate Conduct sensitivity analysis of the impact of discount rate on project net present value (NPV) Each project should be evaluated at its own opportunity cost of capital appropriate to the project risk involved Net Present Value (NPV) NPV = Present Value (PV) of all yearly capital costs and net savings throughout the lifetime of the project Forecast all annual after tax cash flows (costs have negative values, net savings are positive) Discount the cash flows at the appropriate discount rate NPV of a project should be positive for the project to be accepted NPVs may be used to rank projects for acceptance 35 36

14 NPV (2) A project with acceptable simple payback time might not be profitable e.g. project 3 below I R taken as 14% Projects having the same total cash flow have different NPVs this depends on the annual profile Incremental NPV Analysis (1) Example of a multi-component CP project Project 3 Project 3A Year DF Net PV Net PV Savings (Euro) Savings (Euro) ,000-50,000-50,000-50, ,000 7,016 23,000 20, ,000 6,921 20,000 15, ,000 6,750 10,000 6, ,000 13,616 9,000 5, ,000 4,671 9,000 4, ,000 9,120 8,000 3,648 NPV = -1,906 NPV = 5, Water recycling Energy recovery Raw material recovery 38 Internal Rate of Return (IRR) IRR is widely used in financial appraisal IRR = discount rate at which a project s NPV equals zero (0) The IRR represents the rate that money would have to earn outside or elsewhere in the enterprise to be a better investment The higher the IRR the better the project Enterprises should accept any investment offering an IRR in excess of the opportunity cost of capital 39 Calculate project NPV at different discount rates Determine IRR by iteration or interpolation Example IRR = 19.5% NPV IRR (2) 7,000 6,000 5,000 4,000 3,000 2,000 1, ,000 IR % I R = 14% I R = 16% I R = 18% I R = 20% Year Net PV PV PV PV DF DF DF DF Savings (Euro) (Euro) (Euro) (Euro) 0-50, , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,679 NPV = 5,948 NPV = 3,637 NPV = 1,481 NPV = Financial Engineering The distribution of investment finance between different sources so as to optimise cashflow Principle sources: Enterprise s retained earnings simplest in practice Enterprise equity - stock issue Debt Project Financial Appraisal Work Exercise Refer to Handout Exercise The mix aimed for depends on the present and target capital structure of the enterprise This subject is beyond the scope of this module 41 42

15 Project Risks and Sensitivity Analysis No project is without some risk or risks Enterprise managers and lenders will want risks to be identified, assessed and, if found significant, minimised They want assurance that a proposed investment is robust to shocks hence a sensitivity analysis of financial appraisal is needed Sensitivity Analysis (1) For most B type CP projects it is the sensitivity of project financial appraisal to potential shocks that is of more usual concern Sensitivity analysis might assess and compare the effects on NPV and IRR of, for example Capital costs increasing by 20% Operating costs increasing by 10% Revenues reduced by 10% Discount rate reduced by 5% Sensitivity Analysis (2) A more powerful method is to calculate the Switching Value This is the change in a variable needed to switch the value of NPV from positive to negative i.e. to make the project non-viable The likelihood of a change of this size can then be assessed Switching Value is determined by interpolation similar to the technique used to calculate IRR Sensitivity Analysis (3) Illustration Sensitivity to Variations from Base Case NPV Base case 11,100 20% investment cost overrun -22, % increased operating costs % fall in revenues -18,800 Discount rate drop: 15 to 10% 33, Sensitivity Analysis (4) Key Project Risks Illustration Switching Values (when NPV = 0) Investment cost overrun 7 % Increased operating costs 9% Fall in revenues 4% Rise in discount rate 3% (from 10% to 13%) Construction Sponsor/Owner Technology Supply Sales Operating Environment Foreign Exchange Political Country Inflation Sovereign 47 48

16 Construction and Completion Risk Sponsor Risk Physical completion non-completion cost overruns time delays Financial completion A bank values technical experience deep financial reserves sizeable equity contribution facilities completed operations tested pre-determined criteria are met Technology Risk Technology track record Experience of contractor Guarantees and warranties Ease of maintenance Limit scale-up risk Supply / Input Risk Security of fuel supply, materials and other feedstock price volume Anticipate lender s requirements security requirements independent verification Demonstrated availability and efficiencies Sales Risks Ability of cash flows to repay debt within a sales contract period Creditworthiness of an enterprise s customer or customer base Subsidised local prices creating resistance as prices approach world levels Rapid changes in moving to market economy Operating Risk Experienced operator / contractor making conservative assumptions for Efficiencies Down times Operating costs Technical capability of the plant Market 53 54

17 Environmental and Approvals Risks Country Risk Consents and approvals Status of pending approvals Evidence of ability to meet current and future constraints Limitations on lending in certain countries due to portfolio constraints Increasing instability causes banks not to continue existing business Liability for past pollution Political Risk Government inaction Failure to issue permits Failure to enforce local legal provisions Government direct action Preventing payments on foreign loans Restricting foreign exchange Introducing price or supply restrictions Nationalising the industry or project Foreign Exchange & Inflation Will the exchange rate move against the project? Is the ability to convert local currency into foreign currency guaranteed? Sovereign Risk This relates to projects which are Partially or wholly owned by the government Supported by government guarantee Legal Risk Legal and economic systems present risks Is contract law in place and supported in practice? Can the lender take effective security? Can foreigners own real property? How are contractual disputes resolved? Are local lawyers familiar with cross-border and project related issues? 59 60

18 Preparing a Business Case / Plan Top managers of an enterprise will want to review the business case in deciding whether or not to implement a project Commercial lenders may want to see a robust business case before they issue a loan If small loan this may be foregone but they will want to see evidence of company viability IFIs will insist on seeing a robust business case before they will issue a loan Business Case / Plan The Business Case must demonstrate the viability of the project and the enterprise and attract the interest of lenders if external finance is sought It is a document containing information on Legal status of the enterprise Its financial status and prospects Technical, financial (and perhaps economic), environmental and organisational aspects of the proposed project Financing plan Financial projections Preparing a Business Case Know and anticipate the investment appraisal and approval procedures of your enterprise and its lenders (banks, RF, IFIs) Prepare the business case: chapters Executive summary Borrower Project information Benefits: include energy efficiency and environment Market Financing plan Financial projections Project implementation Appraisal/Approval Procedures Enterprise Revolving Fund Banks commercial and IFIs Initial proposal Concept clearance Initial Review Final review Board review Signing Business Case Executive Summary Important part of the business case should capture main points and engage interest Not to exceed 2 pages May serve as an initial proposal to a lender Identifies applicant and any other sponsors Type and amount of of finance required Simplified cash-flow-analysis Efficiency gains (energy, materials, water etc) Business Case - Borrower Contact persons and contact details Legal status and company structure Management and staff structure Introduction to the business Products, services and markets Banking relationships 65 66

19 Business Case Project Information Present production and technology main figures Objective of new technology Technical description of new plant including evaluated alternatives Technological viability Operation & maintenance Staff training Benefits from the project Profitability key figures Savings energy, water, materials, waste, labour etc Intangible benefits Total costs of implementation Investment time schedule bar chart Business Case Environmental Benefits Environmental characteristics of the plant now Project measures that reduce environmental impacts Emissions and impacts local, regional, global Impacts on human health and ecology Relevant environmental regulations and enterprise compliance Business Case - Market Efficiency gains in an existing operation or Establishing a new / expanded production facility Your potential customers? Prices your customers will pay? Market size and your market share Your competitors? Your advantages over the competition? Business Case Financing Plan Describes existing financing structure and required sources of finance Describe the requested role of the Bank Include information on Financial sources Proposed disbursement plan Role of the Bank Business Case Financial Projections Include information on: Cashflow demonstrating the viability of the project Sensitivity analysis important to Banks Risk analysis important to Banks Financial analysis Business Case Project Implementation Information to be included: Project Implementation Unit organisation Project sponsors who they are - their roles Implementation time schedule bar chart Contracting procedures Commissioning, guarantees and insurance Regulations and permissions needed Relation between project structure and enterprise s accounting system Reporting 71 72

20 Business Case - Appendices Income statement (past 3 years) Balance sheet (past 3 years) Repayment plan Detailed cashflow calculations Financial ratios Other information as required Cleaner Production Approach, methodology Benefits Module 3 Preparing the Business Case for CP Investment Questions and answers 73 74