INVITATION TO TENDER: CONSULTANCY SERVICES TO DEVELOP A FINANCIAL MODEL FOR THE LESOTHO-BOTSWANA WATER TRANSFER SCHEME (LBWTS) I am pleased to inform you that your organisation is invited to take part in a tender procedure for the above contract. The deadline for receipt of tenders is: 11 March 2019 Point of contact: E-mail address: Ziyanda Mpakama ziyanda.mpakama@siwi.org Stockholm International Water Institute SIWI is a knowledge organisation using its expertise and convening power to strengthen water governance for a just, prosperous and sustainable future. SIWI arranges the annual World Water Week in Stockholm. SIWI is duly constituted as a foundation in Sweden. Name: Stockholm International Water Institute Organisation number: 802425-8702 VAT identification number: SE802425870201 Postal address: Box 101 87, 100 55 Stockholm Visiting address: Linnégatan 87A, 115 23 Stockholm Telephone: +46 8 121 360 00 Website: www.siwi.org 1. Background and scope The Orange-Senqu River Basin Commission (ORASECOM) is the river basin organization established in 2000 by the Governments of the four States for managing the transboundary water resources of the Orange-Senqu River basin and promoting its beneficial development for socio-economic wellbeing and safeguarding the basin environment. Over the past decade ORASECOM, with the support of key development partners, has been assessing the water resources management conditions in the basin and commissioning specific studies to understand the challenges and design appropriate responses to ensure sustainable management of the basin water resources. The Stockholm International Water Institute (SIWI) is the implementing entity of the Africa-EU Water Partnership Project (AEWPP), a three-year project that seeks to make more public and private capital accessible for water-related infrastructure projects in Africa and to encourage and support African governments to invest in water governance through capacity building. AEWPP is a joint undertaking by the European Union, the African Ministers Council on Water and the Government of Sweden through Sida and is financed by the European Commission. The Climate Resilient Infrastructure Development Facility (CRIDF) is a UK DFID- funded programme. A major aim of CRIDF is to work with governments, businesses and other organisations in the Southern Invitation to tender v.170922 Page 1 (9)
African region to scope and design key transboundary water projects using best practice in order to ensure that they are both pro-poor, and fundable/bankable investment opportunities. Work ranges from detailed technical inputs and project preparation, to policy work that aims to change thinking SIWI and CRIDF have partnered together to mobilise finance for the Lesotho-Botswana Water Transfer project (the L-BWT project). This includes establishing the institutional and financial structuring options relevant to the Lesotho Botswana Water Transfer Project (LBWTP) pre-feasibility Study. 2. Project Description The project aims to support the development of a pre-feasibility study to investigate the viability of abstracting water from Makhaleng river, the preferred water resource development option in Lesotho, conveying it through South Africa to Botswana by considering engineering, institutional, procurement, costing, social, legal, environmental, economic and financial factors. The pre-feasibility study will be achieved by performing the following activities; Determine water demands up to 2047 for specified areas in the three countries from available relevant information Investigate suitable dam site(s) by analysing available Makhaleng hydrology, Determine the size of dam(s) options on the basis of topography, water demands for specific areas in the three countries In terms of the conveyance system, only investigate pipeline options along the shortest route, which is approximately 800 kilometres to either Gaborone or Lobatse in Botswana, preferably along existing road servitudes Investigate hydropower potential for all three countries, namely at the dam site, along and at the end of the preferred conveyance systems Evaluate the socio-environmental status and sustainability of the preferred option route Investigate land acquisition regulations in each of the three countries for pipeline and other works Estimate costs for Engineering, Construction and Operation phases Consider and summarise the available institutional and financial structuring options that will assist in optimising the outcomes of the potential project The following are some of the expected outcomes upon successful execution of the programme: Increase water security for the three countries of Lesotho, South Africa and Botswana by supplying water stressed communities in Lesotho and along the conveyance route, by also increasing food security from the agro commercial component and potentially increasing power supply to the region from hydropower generation. The outcomes of this project should lead to the socioeconomic enhancement of people living close to the dam, along the conveyance route and in Botswana. The project will also lead to improved cooperation in transboundary WRM between these partners in Orasecom. s2 Invitation to tender v.170922 Page 2 (9)
3. SIWI to appoint a Financial Modelling Expert To this purpose, SIWI has agreed to finance the consultancy services to support SIWI in its endeavours to contribute towards the pre-feasibility study for Orasecom. SIWI seeks the services of a financial modelling expert to be part of the team that will deliver the financial and institutional prefeasibility study for the Lesotho-Botswana Water Transfer project (the L-BWT project ). The primary role of the financial modelling expert will be to develop financial models that will allow a robust financial analysis of the relevant information from the prefeasibility studies to guide decision-making during the feasibility phase of the L-BWT project. 4. Requirements on the tenderer The proposed project will be implemented in two consecutive phases, according to a timeline indicated in section 5. The main objective of this assignment is to develop a comprehensive options analysis that will consider the relevant institutional and financial structuring options that can be utilised during the pre-feasibility and feasibility stages of the LBWTP. 4.1 Scope of work Phase 1 The Consultant must prepare a critical analysis of the financial and financing structures of similar projects in the region and internationally ( comparable projects ), including but not limited to the Lesotho Highlands Water Project. The identification of comparable projects must be done in collaboration with the consultants working on the institutional prefeasibility study. During Phase 1, the Consultant must also carry high-level financial analysis of the main financial drivers of the Project. This includes an overview of the relevant, existing tariff and government financing structures for water in the three countries, with a view to understanding any opportunities for financing that tariffs and government transfers present to the Project. The budgeted allowance for this part of the assignment is 5 working days. It is expected that this work will commence in March 2019 and be completed by the end of April 2019. Phase 2 Phase 2 will commence once preliminary results from the Pre-feasibility report of the LBWT have been carried out. During Phase 2, the Consultant must prepare a cashflow-based financial model that allows a detailed analysis of the extent to which the revenue component of the Project covers the operating and financial costs over the Project s economic lifetime. This includes, among other things, the proposed investment costs, anticipated income and operating costs of the Project. The model will need to highlight the optimal revenue and price levels to ensure that the project is viable from the perspective of an internal rate of return (IRR), and at various levels of required return on investment (ROI) to shareholders. It will also need to reflect the optimum levels of debt and equity investments required. The cashflow model must be submitted with the written analysis, without any protection of cells or worksheets. s2 Invitation to tender v.170922 Page 3 (9)
Guidelines for the content and structure of the cashflow model are detailed in Annex 1 - Guidelines for the content and structure of the cashflow model. Based on the model and other relevant sources of information, the Consultant must assess the financing options for the Project, including public financing options such as tariffs for water and electricity, and concessional and private finance options. The write-up needs to include an analysis of the key risks and opportunities faced by the project. The analysis should answer the question as to whether or not the project is financially viable and if not, the conditions which would allow it to become financially viable. Such conditions could include new financing models (e.g. public-private partnerships), additional grant funding, or reduced capital costs. The budgeted allowance this part of the assignment is 14 working days. It is expected that this work will commence in June 2019 and be completed by the end of July 2019. Capacity building Two capacity building workshops will be held with ORASECOM and certain stakeholders, one after Phase 1 and one after Phase 2. The Consultant is required to provide input to and attend these workshops. The budgeted allowance this part of the assignment is 6 working days. It is expected that the first workshop will take place in April 2019 and the second workshop in August 2019. 5. Requirements on the supplies/services The Consultant will be responsible for delivering the outcomes and scope of work listed above, according to the following timetable; Activities and reports Timeline (in months) Phase 1- Baseline assessment and high-level financial analysis Start of the study M 0 Review process M 0 + 1 Final report M 0+ 2 Half day workshop M 0 + 3 Phase 2 Options analysis, development of financial model and financing plan, and development of draft Terms of Reference for the Feasibility stage Financial Model M 0 + 4 s2 Invitation to tender v.170922 Page 4 (9)
Final report M 0 + 4 Half day workshop M 0 + 5 6. Experience The following skills and qualifications are required of the Consultant: At least five (5) years experience in project finance for large water infrastructure projects, such as dams and/or hydropower plants. At least ten (10) years experience in developing Microsoft Excel-based financial models for project finance transactions. Excellent financial analysis skills, with attention to detail. Proficiency in Microsoft Excel, including VBA. Knowledge of the key financial drivers and risks of large water infrastructure projects. Experience working in multi-disciplinary teams that are brought together for financial transactions. Competence in the use of standard Microsoft Office Applications (Word, PowerPoint). 7. Qualification At least a Post Graduate Degree in Finance/Accounting/Financial Management. SIWI requires the services of a Financial Modelling Expert that is a strategic thinker, a problemsolver and adviser with working knowledge of water infrastructure and transboundary experience. 8. Award criteria The contract will be awarded based on the following criteria: The award criteria, the points available and minimum scores which must be achieved are listed below. No other award criteria, sub-criteria or weightings shall be used by the evaluation committee. Any tender not achieving the minimum points score indicated below for each sub criterion shall be eliminated and not evaluated for price. Award criteria Weighting % Maximum points available Minimum points which must be achieved s2 Invitation to tender v.170922 Page 5 (9)
Approach and methodology 40% 40 20 Delivery of services (the tenderers expertise) 40% 40 20 Management of the service (the tenderer s capability to deliver the tender expected outcomes on time and with the quality requested). 20% 20 10 Each evaluation committee member shall score each tender out of the maximum points available for each of the three (3) sub criterion. The total score to be awarded to each tenderer for each sub criterion shall be the average score of the points of all the members, calculated to two decimal places. A check shall then be made if the tenderer has met the minimum score required for each sub criterion. If this has not been achieved, the tenderer shall be eliminated at this stage. Where the minimum score has been achieved in each sub criterion, the total points shall then be converted to the weighting percentage for the three criteria mentioned above (Approach and methodology: 40%, Delivery of services: 40% and Management of services: 20%). The final score out of 100% shall be given to two decimal places 9. Tendering SIWI must have received the tender by 11 March 2019. All interested parties are to submit, via email an expression of interest to submit a proposal by Friday, 22 nd February. The tender must contain the following information: A description of your organisation; A description of the supplies/services offered; Daily Rate (excl VAT), and payment terms; Estimated delivery time; Draft agreement; Name and contact information of point of contact; The tender must be submitted to the following email addresses: ziyanda.mpakama@siwi.org and andre.kruger@siwi.org copy: malango.mughogho@cridf.com The subject of the email should be CONSULTANCY SERVICES TO DEVELOP A FINANCIAL MODEL FOR THE LESOTHO-BOTSWANA WATER TRANSFER SCHEME (LBWTS) s2 Invitation to tender v.170922 Page 6 (9)
Processing of personal data SIWI will process personal data included in tender documents and communications. For information about SIWI s processing of personal data, please use the following link: Processing of personal data We look forward to receiving your tender. Yours sincerely Anton Earle Director SIWI Africa Regional Centre s2 Invitation to tender v.170922 Page 7 (9)
Annex 1 - Guidelines for the content and structure of the cashflow model The parameters for the cashflow model are taken, in part, from the EIB s Guidelines for financial modelling and summary of financial information. A cashflow model must be developed which fulfils the following, non-exhaustive conditions: Content Terms Currency Inflation Accounting standards Projections Source of inputs Revenues Returns Scenario Sensitivity analysis Funding analysis Structure Instruction sheet and The model must accurately reflect all the financial and operational assumptions presented in the due diligence information made available. Where only one country is involved, the model must be in the nominal local currency of that country and converted to GBP using reasonable exchange rate expectations. Nominal figures must be used, with adjustments for projected inflation included in the input sheets. Where applicable, financial statements must be prepared according to IFRS. Projections should go out to the expected life of the equipment and technology, taking into account the need for any major capital overhauls. The source of each particular input shall be clearly stated in a comment alongside that input e.g. Feasibility study, National Water Development Plan, IMF projections etc. The model must clearly show the different revenue sources, including tariffs. It must also show revenues adjusted for non-revenue water, split into physical losses and non-physical losses. Where the feasibility studies have included willingness to pay research, this research must be included in the revenue assumptions, either in the baseline case, the sensitivities or the scenarios. At a minimum, the model must show the following ratios for the project: Modified IRR and NPV, with the rationale for the discount and reinvestment rates rate clearly spelt out. A base case with at least 2 other scenarios must be clearly articulated. Sensitivity analysis based on the key factors which affect the model must be included. These factors are likely to be changes in tariff, changes in costs and changes in non-revenue water. For projects that can absorb loans, sensitivity to changes in the interest rate must be incorporated. Many water projects do not achieve positive MIRRs because tariffs are rarely cost-reflective. It is therefore expected that some form of grant funding is needed to make the project financially viable. For projects receiving loans or concessional finance, the model must clearly reflect any assumptions such interest rates, disbursement, grace and repayment periods. The model must also show relevant ratios, such as DSCR. The first sheet of the model must explain the model: its objectives, the creator of the model and the colour-coding use. s2 Invitation to tender v.170922 Page 8 (9)
Summary sheet Check sheet Sheet order Input sheet Columns / time ruler Outputs Transparency Circularity Macros External links Hiding Offset accounts Model developer and auditor The second sheet of the model should provide a summary of the key findings. The model must include a separate check sheet where all model calculation checks are summarised and presented on an aggregate basis. Sheet should be arranged so that the calculation order flows from left to right. All inputs (hard coding) should be included in a separate sheet that is clearly labelled. No hard coding must be found in other sheets. All sheets must maintain a consistent column and date structure throughout the model. Outputs must be presented in specifically denominated sheets, with no calculations in them. The model must not contain any circularities The use of macros is to be kept to a minimum. Where macros are used, they need to be concise and easily traceable There should be no links to external worksheets outside the model. The model must not have any hidden worksheets, rows or columns that include data, whether material or immaterial. However, grouping is allowed. There must not be any unexplained offset accounts or entries to offset mismatches. The summary sheet must contain the names of the person who created the model and the person who audited it. s2 Invitation to tender v.170922 Page 9 (9)