Financial, economical and technical aspects of establishing remote desalination plants

This paper stresses the different aspects related to remote water desalination plants which should be considered during the feasibility study and planning phases. The paper summarizes the related techno-economic factors and refers to an in-house developed computer routine that allows the planner to immediately see graphically how the system develops with varying limit sizes, time frames, etc.; this interaction allows many variations and instant flexibility to change the plan for different input data and cases thus allowing the establishment of the possible alternatives and scenarios. The paper lists the elements of the economical study that has to be undertaken to choose the optimum scenarios and to achieve the economical comparison through calculating the Economical Internal Rate of Return (EIRR) for each case based on annual costs and revenues. The elements and steps of financial analysis are focused, and the related inputs and outputs are demonstrated in the form of a printout of an in-house computer program applied to the case of a remote plant on the Red Sea. The program is based on the method of financial projection that covers the whole study horizon (20 years) and concludes with projected values of the ratios for financial evaluation such profit ratios, debt coverage ratio and internal rate of return on equity.

Financial evaluation of IPWP/IWP is important in determining the optimal solution for client and developer. Where tenders invited different solution types (direct purchase, B.O.O.T, loan, lease) the financial burden increased with increased responsibility to developer thus raising selling prices. Different aims also dictate prices such as subsidy or loan conditions. Hence for a true picture the financial analysis is indispensable prior to initiating projects. Other aspects such as permits and legalities are also important but not subject for the current paper.