Subject Code & Title :- ENGM263 Infrastructure Financing
Assessment Type :- Assignment Coursework
Unit of Assessment weighting :- 30%
2. Learning Outcomes :-
• Developing and understanding techniques for measuring financial viability
• Developing project appraisal methodologies
• Identifying and evaluating options for devising viable tariff and revenue regimes
• Identifying and evaluating options for public support or subsidy regimes
• Understanding the comparative merits of public and private sector approaches to investment
ENGM263 Infrastructure Financing Assignment – UK
3. Coursework Brief :-
Background
The capital of the Republic of Meganisia is Georgetown, a coastal city on the Atlantic sea board with a population of 800,000. Georgetown is situated on both sides of the Demerara River and the East and West bank are at present connected by a single bridge which is located 5 km. inland from the seafront requiring for some journeys a round-trip of up to 15km along congested urban roads. The Demerara is approximately 300 meters wide where it enters the sea.
The Western side of the city includes the principal residential zones and a 60 ha. logistics hub providing a range of support activities to the burgeoning off-shore oil and gas industries. The Eastern side includes the central business district and high-end residential areas.
The Annual Average Dairy Traffic (AADT) count for traffic using the existing bridge amounted to 8000 in 2021.
Meganisia is a low medium income country with a per capita income of approximately USD 4,800 in 2021 and a sub-investment grade country credit rating of BB-.
Retail Price inflation: 7 per cent
Outstanding Public Sector debt: 90 per cent of GDP
Public Sector Budget Deficit: 9 per cent
Ministry of Transport Capital Expenditure Budget: USD 50 million.
All figures above refer to calendar year 2021
The Meganisian Dollar depreciated by 9 per cent against USD in 2020 and by 5 per cent in 2021.
The Ministry of Energy has entered into a substantial off shore oil and gas development programme in partnership with Exxon. Exxon has developed the infrastructure logistics hub referred to above for the purpose of under taking the storage supply and assembly of supporting plant and equipment as well as materials and services required both for its own operations and for third parties forming part of the Exxon supply chain.
Meganisia is starting to derive substantial revenues from windfall taxes and profit sharing arrangements with Exx on since early 2022 and for this purpose the Government has established a Sove reign Wealth Fund. At present the Fund holds un committed cash reserves amounting to approximately USD 250 million.
Proposed Investment
Georgetown City Council and the Government of Meganisia have undertaken pre-feasibility studies to identify solutions with the objective of alleviating urban congestion and to improve the connectivity between the Western and Eastern parts of the City and to promote the economic and social development of the Western flank.
Solution (a) A new 400 m. single span two-lane bridge located close to the estuary mouth with an estimated hard construction cost of USD 300 million.
Solution (b) A fast ferry service operated by two vessels with an initial acquisition cost of USD 60 million and annual operating and maintenance costs estimated at USD 12 million.
It is estimated that the two vessels would have a capacity to carry up to 9000 vehicles in both directions per 24 hour period.
Both solution(a) and (b) would require additional out lays for the construction of access slip roads and the reconfiguration of some essential infrastructure networks principally electricity water and waste water and and in the case of the ferry service the additional cost of constructing pontoons
ENGM263 Infrastructure Financing Assignment – UK
Tasks :-
1. Identify additional information that would be required to develop a business case to evaluate the respective merits of each possible solution. Make and show with appropriate justification any necessary high-level assumptions to enable the materially significant data inputs including for Q.2 below required for under taking the preparation of a simple financial model to be completed.
2.Identify a tariff regime for each of the solutions that reconciles as far as possible:
• Revenue maximisation there by minimising the requirement for subsidy or other form of support from the public purse
• Environmental benefits or disbenefits
• Affordability
3.Prepare a model to evaluate the economic robustness for both of the possible solutions on the basis that no external debt is utilised.
4. Prepare a short memorandum for the City Council and Ministry of Transport with recommendations and reasons for the solution preferred by you.
5.Introduce to the model a financing plan that draws on:
• third party debt and equity funding;
• public sector subsidy or other form of support only to the extent required;
and demonstrate that there is a bankable structure.
4. Marking Criteria
The coursework will be marked based on the following criteria:
• Understanding of essential financial concepts for investment appraisal and project mselection.
• Use of appropriate evaluation methodologies and ratios.
• Use and deployment of realistic assumptions.
• Insights into the differing requirements of public and private sector investors.
• Focus on the factors that are truly material and significant for financeability.
• Succinctness brevity and clarity of the recommendations and write-up.
The distribution of the percentage of marks for each question is indicated in Section 3 above.
ENGM263 Infrastructure Financing Assignment – UK
Your report should be no more than 15 pages (single-spaced) and can include separate cashflows that should be attached as Excel files with clear description of your assumptions. Submission should be through Surrey Learn using the coursework assignment submission folder that will be created.
The University grade descriptors against which the work is marked are available in SurreyLearn in the same coursework folder.
5. Feedback opportunities
You are welcome to ask for advice when working on your coursework as you may get stuck or you need any clarifications. The best opportunities would be to ask directly during the face-to-face seminars and/or post questions on the SurreyLearn discussion forum that is specifically created for the coursework.
6. Feedback form
The feedback form that will be use to return back feedback after marking your submission is shown below:
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