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Institutional Consultant (IC)

Business planning

The WPIP / MIP V support is characterised by ‘performance based financing’. This means, that the foreseen investments for each UKR will be set free under the condition of INCREASED COST COVERAGE.

This will be achieved by the following measures:
• reducing costs (energy costs, increasing work efficiency, using more efficient technology)
• increasing tariff collection rate
• adapting tariffs
• reducing water leaks and loss
• reduce and close illegal connections

Therefore the WPIP / MIP V Institutional Consultant (WPIP / MIP V – IC) Component is elaborating for each UKR a BUSINESS AND TARIFF ADJUSTMENT PLAN, in which the exact target values are set and agreed with the UKR and finally approved by the administrative board and shareholder assembly of the utility.

Annually updated Business Plans - Key tools for monitoring performance

The Business Plans for the UKRs and the regular annual updates during the project period are the most important way to summarize, present and analyse integrally all physical, technical, financial, operational, social and legal factors defining the overall performance of the new regional water service companies.

  • Each business plan provides detailed assumptions for the next 5 years and more general assumptions for the next 15 years.
  • Each business plan is prepared with realistic assumptions and commitments of the UKR which can ensure the achievement of the agreed performance indicators, in particular with regard to cost coverage.
  • The reports also reflect the ERRU requirements for tariff approval and highlight problems that could arise in the tariff approval process, in particular if the application of ERRU standards may compromise cashflow or cost coverage.

Tariff adjustment

The BPs present a detailed analysis of the current situation (starting from 2022 baseline data) and make projections for 2023-2027. Potential measures to arrive at a more financially sustainable performance of the utilities are elaborated in these plans.

The plans aim to ensure that the utilities generate sufficient revenue to become self-sustainable and reach 100% DOC coverage from collections, including 10-euro annual maintenance expenditure per water connection

Tariff adjustments based on consent of all stakeholders and management

In the process of elaboration of the BP the IC has utilized the inclusive approach, meaning that
all data included in it has obtained a prior consent of the concerned stakeholders and primarily, the management of the UK/UKR and AKUK. The process itself consisted of several step, as follows:

  • Data collection from the UK/UKR
  • Verification of reliability of data and crosscheck with data of AKUK and ERRU reporting
  • Introduction of the first set of draft assumptions (as per the opinion of the IC) in the model
    and obtaining the initial results.
  • Presentation of the initial draft to the UK/UKR management and discussion about the assumptions and results
  • Introduction of aligned assumptions including tariff adjustment
  • Elaboration of final draft
  • Presentation to stakeholders:
  • Supervisory Board
  • AKUK
  • KfW
  • Auditor
  • Preparation of final version including addressing to the stakeholders’ comments
  • Approval by the General Assembly of UKR
  • Receiving the notification of fulfilment of milestone B