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Sustainability of the Wastewater Collection and Treatment Project in Zalaegerszeg Agglomeration PowerPoint Presentation
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Sustainability of the Wastewater Collection and Treatment Project in Zalaegerszeg Agglomeration

Sustainability of the Wastewater Collection and Treatment Project in Zalaegerszeg Agglomeration

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Sustainability of the Wastewater Collection and Treatment Project in Zalaegerszeg Agglomeration

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  1. THESIS DEFEND „Who foresees three days, he will get three more years. „ (a Japanese saying) Sustainability of the Wastewater Collection andTreatment Project in Zalaegerszeg Agglomeration Made by Csaba Rigó Corvinus School of Management 2009 Supervisor: Dr. Sándor Kerekes June 24th, 2009 THESIS DEFEND, Csaba Rigó, 2009

  2. OVERVIEW The structure of the presentation Presentation of the project and target setting (2 slide) 2 min. 1 min. Problem statement, hyphotheses (1 slide) 9 min. Analysis with built in conclusions (7 slide) 2 min. Strategic options, evaluation (1 slide) and recommendation Applied CSM knowledge:Corporate Social Responsibility, Strategy Process, Applying strategy, Understanding Financial Statements, Corporate Finance, Marketing Communication 14 minutes and 11 slides THESIS DEFEND, Csaba Rigó, 2009

  3. PRESENTATION OF THE PROJECT 3 construction and 2 agreements about services Summary of the project details 1. Zalaegerszeg downtown New facilities sewage system (FIDIC Yellow Book) 4. Design of the sewage system 2. WWTP and sludge system Extending and improving WWTP and sludge handling (FIDIC YB) The investment is in process! 5. FIDIC engineering 3. Sewerage pipelines North-East sewage system South part sewage system North-West sewage system (All is FIDIC Red Book) http://www.kazeg.hu 3 June 24th, 2009 THESIS DEFEND, Csaba Rigó, 2009

  4. TARGET SETTINGMission, vision, the way to the target, strategy Vision: Mission: „We work for a better environment for people.” „We implement a sustainable wastewater treatment system based on targets due 2010.” Protect Lake Balaton and Zala River (reduce load of phosphorus and nitrogen). Extend the regional sewerage pipelines. Improve operation safety and extend the biological capacityof the WWTP. Provide new sludge treatment line. Target: Original strategy: 1. Be the No. 1 or 2 in successful implementation of Hungarian Cohesion Fund projects. 2. Maximize the investment budget, maximize the support from EU, minimize own resource! 3. Public procurement is about quality and high technical content. 4. „Financial sustainability”: load up Development Fund for the future additional investments. 5. Communication is about investment benefit. 4 June 24th, 2009 THESIS DEFEND, Csaba Rigó, 2009

  5. HYPHOTHESES PROBLEM STATEMENT • HYPHOTHESES • The macro-environment of the project has changed, the project has to be examinebefore finishing the programme in consideration of the economies of scale. • Raising of Development Fund for future reconstruction should be based on reconstruction schedule! • Excess of residual source can cause headache and results higher tariffs. • Increasing tariffs influence consumption and outstanding debt. • Local taxes can not be a choice of the depreciation included in tariffs. • Well-managed local PR is more useful than general (central) communication. More exciting questions: - What's up with the investment economies of scale? - How the total return can be ensured in the future? - What is the optimal amount of the Development Fund? - Do increasing tariffs influence consumption? - Local PR or central communication? Development Fund for reconstruction 5 June 24th, 2009 THESIS DEFEND, Csaba Rigó, 2009

  6. ANALYSISKey drivers of the changes of the macro-environment Political dimension Minority administration (reforms in tardiness) have the institutional background hesitated Proposed change of the tax law (VAT law, local taxes) Planned restriction of the social supports CONCLUSION 1. Over-bureaucratizeddecision mechanism. Economic dimension Termination of the big users (companies of the food industry) High interest level Increase of the unemployment Decrease of the disposable incomes, decrease of the spending power (PPP) Sociocultural dimension Decrease in the population, alteration in the lifestyle, decrease of working activity Alteration of the consumption habits, decreasing drinking water consumption Rise in the expenses of the public utility in the household consumption Recession in the building operations in the surrounding districts of Zalaegerszeg and in the country Technological dimension Appearance of more developed technologies, alteration of the life cycle of the built-in materials and equipments Rise in costs of energy and chemicals Environmental dimension CONCLUSION 2. The macro-environment of the project has changed. Proposed alteration of the law about water management Changing in the fees for soil strain Legal dimension Changing of the local regulations about the public utility connections (rise in the fees of connecting-up) 6 June 24th, 2009 THESIS DEFEND, Csaba Rigó, 2009

  7. ANALYSIS The position of the project determined by CBA in economies of scale matrix The calculation method may differ in each town however! CONCLUSION 3. The original CBA says the project is just economies of scale. BUT! It might become easily deadlock or question mark. It has already included the extra running costs of the 1st stage and the 70 % of the depreciation. 7 June 24th, 2009 THESIS DEFEND, Csaba Rigó, 2009

  8. ANALYSIS The depreciation built in the pubic utility charges Proposed reconstruction plan Decision brought from beside a table. Joint decree no. 14/2004 (VIII. 13.) of TNM-GKM-FMM-FVM-PM 39/A. § (9) Accountancy Model A („24 years duration”) Less reconstruction demand based on vendors’expertise and operator’s experience. 8 June 24th, 2009 THESIS DEFEND, Csaba Rigó, 2009

  9. ANALYSIS 3 accountancy models as the alternative of the project’s total return • CONCLUSION 4. • There is residual source in both of Model A, B and C. • Model A or B results excessive residual source, that raises tariffs more. • Raising of Development Fund should onlybe based on reconstruction schedule! 1x In Model C („50 years”) reconstruction is ensurable with less residual source! Model B („35 years”) gives still excessive residual source! Model A („24 years”) results the excessive residual source! 2x 5x CONCLUSION 5. Model C is more sustainable in social respect. Model A and B is a financial approach rather than a sustainable solution. Calculated depreciation is near 348 million HUF/year on the long run in Model B. Calculated depreciation is near 514 million HUF/year on the long run in Model A. Calculated depreciation is 244 million HUF/year on the long run in Model C. 9 June 24th, 2009 THESIS DEFEND, Csaba Rigó, 2009

  10. ANALYSIS How does relate tariff and outstanding debt? Why is the total return in social respect important? But what is the situation in country of the agglomeration? Because consumption is shrinking. Consumption of Zalaegerszeg significantly influences the average consumption of the agglomeration. CONCLUSION 7. Increase of tariffs is one of the reasons has influenced outstanding debt for 5 years. BUT! Outstanding debt is bear by liquidation of food industry firms also. The drinking water tariff is raising more intensive below 190 litre/day/capita consumption. CONCLUSION 6. Increasing tariffs influence consumption. It has been justified for 5 years. Beside the drinking water tariff, the wastewater tariff is implemented also in 2001. It did not cause a notable decline in consumption. 10 June 24th, 2009 THESIS DEFEND, Csaba Rigó, 2009

  11. ANALYSIS Development source built in tariff The position of the project to be expected CONCLUSION 8. The project might easily become deadlockor question mark. It depends on the size of investment and wastewater volume. CONCLUSION 9. Both of Model A, B and C results in enough residualvalue. Depreciation built in tariff is more practicalthan local taxes. 11 June 24th, 2009 THESIS DEFEND, Csaba Rigó, 2009

  12. ANALYSIS Well-managed local PR or general central communication? LOVELY BUT THAT IS ALL! The general communication popularize the EU support does not have much sense. • CONCLUSION 10. „To be more concrete!” • Well-managed local PR is more useful than • general central. The communication should • be about: • economies of scale • density of sewer connections • operational issues (predicted tariffs) • quality of drinking water (www.zalaviz.hu) • „sustainable consumption” • motives of raising of tariff (www.kazeg.hu) • assessment of affordability http://www.nfu.hu//videoanyagok (information viewed on April 24th, 2009) 12 June 24th, 2009 THESIS DEFEND, Csaba Rigó, 2009

  13. RECOMMENDATION BASED ON CONCLUSIONSStrategic changeover is needed! CONCLUSION 1-10. Proposed strategy: • Be the No. 1 or 2in successful implementation ofHungarian CohesionFund projects. • Optimizethe investment budget, maximizethe support from EU, to minimize ownresource! • Public procurement is about quality andprice competition. • „Social sustainability”:load up Development Fund is required for future reconstruction, no more! • Communication is about „sustainable consumption”. C O R R E C T I O N 13 June 24th, 2009 THESIS DEFEND, Csaba Rigó, 2009

  14. THANK YOU! Thank you for your kind attention! 14 June 24th, 2009 THESIS DEFEND, Csaba Rigó, 2009