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Lusaka wastewater project: Consulting services for a financial and tariff study

Project details
Donor organisation: 
Water & Sanitation
Project volume: 
206,969 €
Value of services: 
206,969 €
Start of project: 
January, 2015
End of project: 
August, 2015
Project description: 

The project was structured into two phases. Phase I consisted of the rehabilitation and upgrading of wastewater facilities, main collectors and pumping stations and was potentially be financed by KfW and EIB. Phase II addressed the expansion of the associated sanitation and sewerage network and was potentially financed by WB and AfDB.

KfW has been asked to undertake preparatory studies for the implementation of Phase I and has agreed to finance a Financial and Tariff Study (Study 1) which was the subject of this project and an Environmental and Social Impact Assessment (Study 2).

The overall purpose of the study was to thoroughly investigate Lusaka Water and Sewerage Company (LWSC) as a company and elaborate a financial model which can be used for scenario analyses and to guide the DFIs (Development Finance Institutions) in their investment decision.

Service description: 

Analysis of the company LWSC

Analysis of LWSC’s business model, its organizational structure, internal control systems and procedures, risks related to the business and the future outlook:

Assessment of corporate structure, business strategy and customer relations, maintenance approach, internal control systems, procurement procedures, human resources, finance and accounting systems

Financial analysis and investment modelling

Development of a corporate cash flow model in cooperation with LWSC that can be used to calculate different scenarios and provides for separate cost centre accounting for water and sanitation services

Analysis of the tariff system in light of the results obtained in the financial model

Review of the existing tariff system taking into account the water supply and sewage disposal situation in Lusaka, the tariff system for network-connected water supply and sewage disposal, prices/costs of alternative supply and disposal, analysis of the financial burden on the different groups of consumers for different types of service levels, cost coverage and cross-subsidization

Recommendations for adjustments to the tariff system

Recommendations for adjustments to the tariff system to ensure sustainability of the drinking water supply and sewage disposal for the entire target group as well as financial sustainability for LWSC