Developing an Action Plan to Strengthen SEDAPAL’s Financial Management
The World Bank, as part of an ongoing program to support SEDAPAL in improving its operational and commercial performance, hired K&M to provide support to SEDAPAL in strengthening its financial performance. As part of this assignment, K&M supported SEDAPAL through workshops to develop an action plan to enhance SEDAPAL’s financial management. This action plan was developed as terms of reference for contracting services financed by a World Bank loan and constitutes one of the components of Component 2 of the Program.
K&M’s scope of work included the following:
- Conducted a desk review of at least three years of SEDAPAL financial statements.
- Carried out an analysis of key financial indicators and its benchmarking across other water utilities in Latin America.
- Conducted an analysis of the current tariff structure.
- Developed recommendations for the improvement of SEDAPAL’s financial management.
- Prepared materials and analysis results for the client via virtual workshops.
- Created part of the project appraisal document (PAD) to be included in the main text or annex describing SEDAPA’s financial areas of improvements and recommendations.
A confidential US client which provides debt and/or equity financing to power projects engaged K&M to perform a commercial due diligence review to support a loan transaction for the Inkia generation portfolio.
A confidential US client which provides debt and/or equity financing to power projects engaged K&M to perform a technical due diligence review. The technical due diligence review was for a transaction where the confidential client is providing debt financing to a holding company which has power assets in Peru and Guatemala.
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K&M conducted a feasibility study for the proposed 95-150 MW Shougang Hierro Peru(SHP) power project at San Nicholas. K&M evaluated power generation alternatives to determine the most cost-effective means of meeting SHP’s future energy requirements. The evaluation considered installation of additional generating capacity on land owned by SHP at its Marcona, Peru iron ore facility. It included a review of the expected future energy demand by SHP and a review of the potential for selling excess energy production into the electricity market in Peru. It also compared several alternative generation technologies, various fuels including Orimulsion and sizes of plants by evaluating their overall life cycle costs.
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The World Bank hired K&M advisors to support Sedapal in strengthening its investment planning and financing capacity by developing a financial model that assist decision makers in prioritizing a CAPEX plan and its corresponding financing plan. In addition, this consultancy will provide investment planning support to Sedapal to ensure the required payments to the Concession of “Obras de Cabecera” and other PPPs can be accommodated within the wider Sedapal budget, at a socially acceptable tariff and politically acceptable level of subsidy. The consultancy is also expected to provide specific recommendations to strengthen Sedapal’s planning and financing areas through the application of the World Bank’s Water Utility Turnaround Framework.
K&M is carrying out a rapid review of a US$1 billion capital investment program for Sedapal, the water and sanitation utility that provides service to Lima. The government of Peru is attempting to implement a PPP transaction to expand water supply and coverage in Lima (the “Project”). The objectives of the project are to increase coverage to an estimated 1.8 million unserved people in eight districts in Lima and improve the quality of service for another 1.8 million inhabitants in an additional six districts.
The World Bank contracted K&M to develop a financial model of Sedapal, assess the impact of the proposed project on the finances and tariffs of Sedapal, provide recommendations to the World Bank and the Government on financing the proposed project while minimizing increases of Sedapal’s tariffs, and recommend ways to prioritize Sedapal’s overall capital investment plan.
K&M has been engaged a European-based private equity firm to analyze renewable (and possibly gas) energy investment opportunities in six Latin American countries. For the first phase of the engagement, K&M analyzed each country’s energy sector in terms of market fundamentals, market design and regulation, access to PPAs, risk, level of competition, and return dynamics, and then evaluated each market based on the client’s investment criteria. K&M then presented its market conclusions and recommendations to the client. For the second part of the engagement, K&M performed a deeper-dive assessment of the two countries with the highest investment potential for the client and designed potential entry strategies. This phase also included identification of particular project investment opportunities consistent with the client’s criteria. The conclusions were presented to the client.
The World Bank has contracted K&M to assess the impact of COVID-19 on water and sanitation utilities in Peru. K&M will begin with an assessment of the impact to date by reviewing data provided by utilities. Following this review, K&M will develop a generic financial model that can be used to quantify the projected financial and operational impact on the utilities. This draft financial model will be tested by applying it to one utility in Peru. After testing the financial model, K&M will finalize the generic financial model and prepare a user manual for it. In addition, based on the results of the application of the financial model, K&M will produce recommendations for mitigating the impacts of COVID-19 on utilities in Peru.
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