Water Utilities Financial Planning March 21, 2017 ACWUA Arab Water Week Ahmad Al-Azzam Allied Business Advisors

AGENDA Planning Process Strategic Plan Financial Planning Objectives & process Follow Up and Update Critical Success Factors Conclusion

Planning – Things to Keep in Mind Planning is an ongoing process & not a one time event Plans are highly integrated & dependent on each other Financial Planning is an integral part of planning & not a stand alone process All plans feed into Financial Plans Plan is not a wish list

Planning Process

Strategic Plan Sets direction to improve performance and explore opportunities Identify how to get from where you are to where you want to be Living document to set medium term plan 3-5 years Updated annually and at major events All components are linked and lead to the same direction Utilizes utility’s water and wastewater master plan as a base

Strategic Plan Components Purpose of the Strategic Plan Introduction History, management and partners Background What the utility wants to achieve (Direction) Vision Principles followed by the utility Values Describes the purpose of the utility Mission Statement Key issues need to be addressed (Coverage, Quality) Problem Statement Internal & External Factors SWOT Measurable and actionable specific target Goals & Objectives Measure achievements Operational, financial &KPIs Evaluation

Financial Planning Objectives Translate utility’s objectives into financial indicators to set and measure progress and achievements Shows financial impact of utility’s strategic & operational plan (financial performance and cash flow) Highlights financial challenges for utility’s management

Financial Planning Process

Financial Plan Component Revenue Plan: Water Quantities, Tariff, Subscribers Inventory Plan: Strategy & policy Purchasing Plan (Material & Fixed Assets): Operational details & policy Human Resources Plan: Operational plans and utility’s policy O&M Plan: Operational plan, Financial data & Water balance Compiled Financial Plan (for Strategic Plan) or Annual Budget Financial Statements & Key Performance Indicators Regular Follow up & Variance Analysis Regular Update

Regular follow up and analysis (Quarterly & Annual) Follow Up and Update Variance (Actual vs. plan), and why? Is the plan still valid or needs update Regular follow up and analysis (Quarterly & Annual) Annual for medium term plans (national and strategic plans), Quarterly for annual plans (operational and budget) Regular update & At major events

Critical Success Factors Top management commitment to planning & transparency  Availability of risk plan, governance and related tools Involvement of staff at different levels (Ownership & Commitment) Predefined process, responsibilities and forms Achievable with available capabilities and resources Automation (ERP and other tools)

Conclusion: Effective Plans If you don’t know where are you going you will end up somewhere else (Sense of direction) Should be realistic Involve utility’s team Translated into financial indicators Updated on a regular basis

Thank You Ahmad Al-Azzam Allied Business Advisors aalazzam@abame.com