Authors: Prince Elisha Nsiah-Asamoah1, Dr. David Ackah, PhD2
1PhD. Student, Business University of Costa Rica
2President, Institute of Project Management Professionals
Email: nanayawghgh@yahoo.com | drackah@ipmp.edu.gh
Abstract
Project finance is the long-term financing of economic infrastructure and industrial projects based upon the projected cash flows of the project rather than the balance sheets of the project sponsors. Projects can be finance with equity from one or more sponsoring firms and non-recourse debt for investing in a capital asset – to own and invest in the project. Equity and debt instruments such as shares, venture capital, institutional investors, bonds, loans and debentures serve as sources of funding for infrastructural and developmental projects. Other specialized sources for funding projects are grants, crowd funding and peer-to-peer funding. Project finance creates value by reducing the costs of funding, maintaining the sponsors financial flexibility, increasing the leverage ratios, avoiding risk, reducing corporate taxes, improving risk management, and reducing the costs associated with market imperfections. It involves non-recourse financing of the development and construction of a particular project in which lenders looks to the revenue expected to be generated by the project for repayment of its loans and to the assets of the project as collateral for its loan rather than to the general credit of the project sponsor. Project finance has its own challenges especially Public Private Partnership Projects. Public Private Partnership for developmental and social infrastructures involve the private sectors in the designing, building, financing and operating public infrastructure in institutional sectors such as power generation, transportation-roads, or railways, water supply, energy, hospitals, sanitation, waste management, affordable houses and schools.
Public Private Partnerships (PPPs), project financing for public infrastructure, are now emerging as a viable source of infrastructure investment in developing countries. A successful PPP arrangement capitalizes on the strengths of the private and public sectors to provide a better and more cost-effective public service, and speed up the rate of its implementation or coverage. The growth in PPPs has been attributed to several reasons, including increased efficiency in project delivery and operation; reinforcing competition; access to advanced technology; and reducing government budgetary constraints by accessing private capital. Sewerage fecal sludge waste management is an emerging issue in urban sanitation and is fast becoming an insurmountable challenge across Ghana, requiring urgent solutions and access to sewerage network. Rapid urbanization and migration to cities results to the inability of local districts assemblies to tackle it sewage systems and use of safety toilets at houses. In order to come up with viable solutions to this problem in Accra the capital of Ghana, Accra Sewerage Systems an Engineering Procurement Construction company initiated public–private partnership to construct the sewerage system at Korle lagoon popularly called ‘‘Lavender Hill’’ in Ghana.
The Accra Metropolitan and Government of Ghana are the benefiters of the project. Therefore, this participatory research was undertaken to investigate the project financing of Accra Sewerage System, its operations and environments in which it was carried out, the budget model used by Jospong Group of Companies in collaboration with Government of Ghana under the Public Private Partnership sector operations. The target population was focused group participation of key stakeholders such as project managers, staffs of Accra Sewerage Systems and Accra Metropolitan Assembly and other stakeholders from various public and private institutions close to the project. Face to face, interviews for focused group and discussions were conducted between the researcher and a sample size of 200 respondents and data collected was analysed. The research findings prove that the project sources of funding were from; Internal Generated Funds from the Jospong Group of Companies, Bank Loans, Equity financing from Owners and Grant from the government of Ghana and its development partners.
The data collected indicated that Accra Sewerage Systems Project was finance with a total cost of $25,000,000 and $500,000 cash inflows from Ghana Government for management and operational cost. It was therefore necessary to look into the project viability and its payback period since Internal Generated Fund (IGF) from the Jospong Group and Bank Loans was the source of funding to the project. In analyzing the project viability and payback, it was therefore necessary to apply the project-financing model known as the Payback Period. Therefore with an initial investment of $25,000,000 and $500,000 cash inflows from Ghana per month: As against the payback period decision “accept the project only if it’s payback period is less than the project performance duration”. It therefore know that, an initial investment of $25,000,000 will be paid within fifty (50) months as against the project performance duration. It is true that the Accra Sewage System Projects was a viable project with a payback period estimated to be approximately 8 years. The findings of the study also reveals that the three major impact of the Accra Sewerage System Plant within the communities; the project have improved the living condition of the people, aquatic life, the project has stopped the nuisance of disposing raw faecal into the sea and the project has eliminated bad stench from the community. Furthermore, the respondents indicated that the social impacts of the plant have brought is an improved tourism business in the community and has help community members to be more responsible. The Plant treat human faecal wastes without any health or environmental impacts meeting environmental and regulations and standards for faecal management.
Keyword: Project Financing, Sewage System, waste management, feacal waste treatment, Public Private Partnership
