Environmental Cost-Benefit Analysis and Investment Priority Indicator for Sewer Projects in Taiwan

Like numerous other countries around the world, the Taiwanese government has introduced the concept and approach of Public-Private partnership (PPP) for initiating the delivery of public infrastructure projects. Therefore, Since 2001, Taiwan government promulgated “Act for Promotion of Private Participation in Infrastructure Projects”, which preselected thirteen types of major infrastructures, including wastewater treatment plants, to be funded and operated under Public-Private partnership (PPP) model. Amongst these projects, the Sewer Projects for Private Financial Initiatives (SPFI), one of the major private initiatives recently performed by the Taiwan government, have launched 36 Sewerage system projects and will be announced to attract private sector’s investment based on the PFI mechanism. Financial model is a key issue affecting SPFI projects. This investigation analyzes on how the Taiwan government has devised an appropriate financial model that consider factors such as financial planning, repayment mechanism, structural tariff, concession period, capital structure and rate of equity internal return and so on. Three SPFI projects, Tamsui, Nanzih, and Lodong have been investigated in this paper. Iincorporating household connection as the concessionaire’s responsibility has been a unique characteristic of Taiwan’s SPFI. All three projects are performing well, as evident from an analysis on their construction schedules and quality, household connection contribution, and finance situations. This study compares the cost-benefit analysis of Lodong sewer system construction between traditional government procurement and PFI models. The research results find out that SPFI has a positive net environmental benefit in the start of construction. However, Government has to invest more capital cost in the early stage of construction if in the traditional model. This study develops a method of evaluating cost and efficiency of government projects to identify investment priorities of sewerage PFI projects (SPFI indicator). According to a database of preliminary master plans of thirty-one sewerage Projects, eight assessment parameters was established: Initial cost of wastewater treatment plant (A1), Construction cost per household (A2), Discounted construction cost of 1% household connection (A3), Wastewater treatment tariff(A4), Ratio of O&M tariff with wastewater tariff(B5), Financial capability of local government(B6), Project constructing efficiency(B7) and Pipeline service rate(B8). Finally, each parameter is graded by score; total scores for the eight parameters were used to generate a SPFI indicator. Principles of investment priority assessment are thus established for each sewerage project: SPFI indicators of sewer projects lower than 24, from 25 to 30, from 31 to 37 and higher than 37 were considered excellent, good, fair and poor, respectively.