The financial viability assesses whether private parties will find a project commercially attractive. The due diligence typically incorporates an assessment of the projected revenue structure (for example, proposed tariffs or required annuities) and any need for financial support from the public sector.
A gender-sensitive approach might, for example, ask whether the demand predictions backed by surveys or demand forecast models are done in a sex-disaggregated way, or if proposed tariffs or fees are affordable for poor women and men, and assess potential means to make these affordable, while still ensuring good financial returns for the private partner.
Box 16: Upfront Capital Subsidy Helped Make Kumasi Toilet PPP Project Financially Viable A pre-feasibility study undertaken for the Kumasi Toilet Project in Ghana sought to determine the viability of PPP transaction(s) to deliver sustainable and high-quality public toilet facilities in Kumasi. The pre-feasibility study found that a PPP structure was not financially viable, based on the cost estimate for rehabilitation and operation of the facilities set against current usage levels and tariffs. The study noted that the average tariff would need to be raised by close to 100 percent to ensure financial viability. Given that this new tariff would not be affordable for Kumasi's lower-income population (based on a willingness-to-pay survey conducted as part of the pre-feasibility study), an upfront subsidy was required to lower private-sector capital-expenditure requirements and ensure project bankability. The main recipients of these facilities were the lower and lower-middle-income groups, including women. Source: Global Partnership for Output-Based Aid, Concept Note dated May 13, 2015. |