Professional Documents
Culture Documents
Creditworthiness
Creditworthiness
CREDITWORTHINESS, SELF
ASSESSMENT AND ACTION
PLANNING TOOL
Day 1 Session 3
Johan Kruger Afcapconsulting
World Bank
Jakarta 2018
2
Outline
3
Discussion Point
1 in 10 people
lack acess to
clean water
1 In 3 people do
lack acess to a
toilet
USD 535 Billion
Required for
Universal acess By
2030
The 3 T’s cannot meet
the need
6
Conclusion
7
8
Reward Risk
10
Risk Reward & Creditworthiness
11
The Importance Of Creditworthiness
Risk Reward & Creditworthiness
YES NO
Pricing
Risk
13
Relationship Between Rating, Default And Price
Default probability
7
160
6
5
120
Default
Default %
4
probability
3 80
2
Spread in BPS
1 40
0
AAA AA- A- BBB-
Rating
14
Some Advantages of Being Creditworthy
15
The Dificult Road To Utility
Creditworthiness
• Optional Subtitle
• THE CHALLENGES FACED BY Indonesian
Pdams
17
• THE ROAD TO CREDITWORTHINESS IS
FULL OF CHALLENGES
Creditworthy
Market
resistance
No Borrowing
powers
NRW too high
Transfers
Pressure to from central
expand too low
Coverage
Right sizing
Tariff
increases
Expenditure
too High Revenue too
low
18
What Drives Creditworthiness
Creditworthiness
Strengths of
Economic Fiscal Financial and Institutions and Sovereign
Conditions Performance Debt Position Management Factors
21
Why and How to Measure Creditworthiness ?
Why Creditworthiness of
water utilities and
projects is opaque to
How Assessing the
current and future
borrowers and
lenders. Objective capacity to generate
measures can help cash flows to cover
creditworthy utilities debt commitments
access finance
Measures of
creditworthiness can Credit Ratings are
allow utilities to identify
areas for improvement a way to measure
and to exchange good creditworthiness
practices.
22
THE UTILITY CREDITWORTHINESS
INITIATIVE
UTILITY CATEGORIES
24
DECISION POINT 0
3 – Not possible
5 Don’t know
• THE UTILITY CREDITWORTHINESS
PROGRAMME
26
How does the self assessment work?
Decision points
Knowledge
in presentation Self Identification
Input
In preparation assessment of challenges
dissemination
for Self
and discussion
assessment
Comparison of
responses from
different utilities 27
The process of preparing the action plan
The Challenges
29
Too Little
Revenue Level 2 Challenges for Action Planning
1. OWN SOURCE REVENUE too low 4. UNABLE TO INCREASE TARIFF
A. Collections low A. Unaffordable to poor customers
B. Rates low B. Politically unacceptable
C. Types/ Sources few C. Willingness/ Ability of users to pay unknown
D. Billing low
E. Autonomy to determine tariffs low 5. NRW IS TOO HIGH
A. Water is lost in theft and leakages
2. INTERGOVERNMENTAL TRANSFERS too low B. Too much water provided free
A. Unstable C. Too much water not billed accurately
B. Unpredictable
C. Delayed 6. INCOME FROM CONNECTION FEES IS TOO LOW
A. Connection fee is too low
3. NON-RECURRENT REVENUES too high B. Connection fee is not collected adequately
A. Other revenues insufficient
7. INCOME FROM SALE OF TREATED
WASTEWATER TOO LOW
A. Wastewater volume treated is low
B. Sales of treated wastewater low
30
1. OWN SOURCE REVENUE too low Action 1.9 Initiate discussions with the appropriate central government
A. Collections low authorities regarding the water utility’s interest in raising rates on
B. Rates low
C. Types/Sources few Potential existing taxes and tariffs & fees. [B]
D. Billing too low Actions Action 1.10 Develop a strong case for greater rate tariff setting
discretion by analyzing fiscal, legislative and regulatory issues and work
E. Autonomy to determine tariffs low with supportive decision makers to gain approval of new rates by using
Action 1.1 Implement a revenue enhancement action plan. [GEN] fiscal, legislative and regulatory information/analysis. [B]
Action 1.2 Promote and market the revenue enhancement action plan Action 1.11 Raise tax rates, and/or tariff/fee rates for mandated services
to obtain needed approvals and long-term political support. Mobilize currently not generating sufficient revenue to cover cost of service. [B]
the human and financial resources to implement the revenue Install meters, recruit meter-readers, and teams to monitor
enhancement action plan, and perform continuous monitoring and metering [D]
Action 1.12 Initiate discussions with the appropriate central government
reporting to pinpoint any problems. [GEN] authorities regarding the water utility’s interest in establishing new
Action 1.3 Develop a plan of revenue collection improvement actions before
seeking an increase in tax, tariff and/or fee rates. [A, D] taxes or user charges and fees tariffs. [C]
Action 1.4 Introduce GIS-linked systems for identifying, calculating, Action 1.13 Obtain and document the required approvals for new taxes,
billing and collecting taxes, fees and service bill payments. [A, D] tariffs and fees from higher levels of government and keep all
appropriate local stakeholders apprised of these developments. [C]
Action 1.5 Introduce a mechanism for early identification and resolution of
arrears in tax, fee or service bill payments. [A, D] Action 1.14 Make certain that the local government is both internally
and externally prepared to implement new taxes, tariffs or fees, which
Action 1.6 Consolidate the water and sanitation tax, fee and service bill will include equipment, software and staff. [C]
accounts of residents. [A, D]
Action 1.15 Introduce a new or increased tax for general own source
Action 1.7 Establish specialized collection teams for major arrears, government revenue, or new/increased user charges/fees/ tariffs for mandated
arrears, and seizure/sale of property for arrears. [A, D] services currently not generating revenue. [C]
Action 1.8 Contract with external lawyers for complex billing and Action 1.16 Introduce improved cash management practices to maximize
collection efforts involving litigation. [A, D] interest earnings. [GEN] SEE NOTES BELOW SLIDE
31
How utilities can to use the report to engage
32
Use Of Self Assessment Tool And
Action Planning
• The Final Lap
• Johan Kruger
• World bank Learning Week
• March 2017
34
Key Messages
35
Outline
The process
Step by step
Example of Challenges
Simulation
36
The process
Create a profile
38
Self assessment
39
The steps unpacked (1)
Create a profile
1 SELF-ASSESSMENT
Water / Sanitation Utilities are asked to answer
questions on their service mandates, financial management,
financial performance, planning process and enabling environment
40
The steps unpacked (2)
3 PRIORITIZE CHALLENGES
The Water / Sanitation Utility then ranks
the Challenges to create a customized
set of priorityChallenges based on
local preferences. These priority
Challenges will form
the basis of the Water / Sanitation Utility's Preliminary
Creditworthiness Action Plan. Water /
Sanitation Utilities have the option to add customized
Challenges and actions
41
The steps Unpacked(3)
42
The steps unpacked(3)
43
The Process Of Developing An Action Plan
For ‘internal’ action items: to be done by the WSPs
Poor
Too little long
management of
term financing
resources
Each of these areas can be further refined into more specific Challenges
with further details.
The list of Challenges facing your WSP are based on the information you
provided in your Self-Assesment.
44
Response intensity
45
Discussion Point
46
Too Little
Revenue Level 2 Challenges for Action Planning
1. OWN SOURCE REVENUE too low 4. UNABLE TO INCREASE TARIFF
A. Collections low A. Unaffordable to poor customers
B. Rates low B. Politically unacceptable
C. Types/ Sources few C. Willingness/ Ability of users to pay unknown
D. Billing low
E. Autonomy to determine tariffs low 5. NRW IS TOO HIGH
A. Water is lost in theft and leakages
2. INTERGOVERNMENTAL TRANSFERS too low B. Too much water provided free
A. Unstable C. Too much water not billed accurately
B. Unpredictable
C. Delayed 6. INCOME FROM CONNECTION FEES IS TOO LOW
A. Connection fee is too low
3. NON-RECURRENT REVENUES too high B. Connection fee is not collected adequately
A. Other revenues insufficient
7. INCOME FROM SALE OF TREATED
WASTEWATER TOO LOW
A. Wastewater volume treated is low
B. Sales of treated wastewater low
47
1. OWN SOURCE REVENUE too low Action 1.9 Initiate discussions with the appropriate central government
A. Collections low authorities regarding the water utility’s interest in raising rates on
B. Rates low
C. Types/Sources few Potential existing taxes and tariffs & fees. [B]
D. Billing too low Actions Action 1.10 Develop a strong case for greater rate tariff setting
discretion by analyzing fiscal, legislative and regulatory issues and work
E. Autonomy to determine tariffs low with supportive decision makers to gain approval of new rates by using
Action 1.1 Implement a revenue enhancement action plan. [GEN] fiscal, legislative and regulatory information/analysis. [B]
Action 1.2 Promote and market the revenue enhancement action plan Action 1.11 Raise tax rates, and/or tariff/fee rates for mandated services
to obtain needed approvals and long-term political support. Mobilize currently not generating sufficient revenue to cover cost of service. [B]
the human and financial resources to implement the revenue Install meters, recruit meter-readers, and teams to monitor
enhancement action plan, and perform continuous monitoring and metering [D]
Action 1.12 Initiate discussions with the appropriate central government
reporting to pinpoint any problems. [GEN] authorities regarding the water utility’s interest in establishing new
Action 1.3 Develop a plan of revenue collection improvement actions before
seeking an increase in tax, tariff and/or fee rates. [A, D] taxes or user charges and fees tariffs. [C]
Action 1.4 Introduce GIS-linked systems for identifying, calculating, Action 1.13 Obtain and document the required approvals for new taxes,
billing and collecting taxes, fees and service bill payments. [A, D] tariffs and fees from higher levels of government and keep all
appropriate local stakeholders apprised of these developments. [C]
Action 1.5 Introduce a mechanism for early identification and resolution of
arrears in tax, fee or service bill payments. [A, D] Action 1.14 Make certain that the local government is both internally
and externally prepared to implement new taxes, tariffs or fees, which
Action 1.6 Consolidate the water and sanitation tax, fee and service bill will include equipment, software and staff. [C]
accounts of residents. [A, D]
Action 1.15 Introduce a new or increased tax for general own source
Action 1.7 Establish specialized collection teams for major arrears, government revenue, or new/increased user charges/fees/ tariffs for mandated
arrears, and seizure/sale of property for arrears. [A, D] services currently not generating revenue. [C]
Action 1.8 Contract with external lawyers for complex billing and Action 1.16 Introduce improved cash management practices to maximize
collection efforts involving litigation. [A, D] interest earnings. [GEN] SEE NOTES BELOW SLIDE
48
Preparing the WSP Creditworthiness Action Plan
49
LET’S GET TO WORK !
2 - Chicken
3 - Vegetarian
4 - Nothing
Do You your Utility Should Seek Private Sector
Involvement?
1 No Never
2 Depends
3 Yes
4 Don’t Know