cohesion policy interventions work package c -...

EUROPEAN COMMISSION Directorate-General Regional Policy

Ex post evaluation of cohesion policy interventions 2000-2006 financed by the Cohesion Fund (including former ISPA) Work Package C - Cost benefit analysis of environment projects Case study: Project no. 06: Facilities for solid waste management and recycling, Greece (2000GR16CPE001)

May 2011

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Disclaimer: The views expressed in this study are those of the authors and do not necessarily reflect the views of the European Commission or of its services. This report merely acts as a guideline document for policy makers and does not seek to establish the Commission’s future policy in this area. Re-production or translation is permitted, provided that the source is duly acknowledged and no modifications to the text are made.

Ex post evaluation of cohesions policy interventions 2000-2006 – Case study: Project no. 06: Facilities for solid waste management

and recycling, Greece (2000GR16CPE001)

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Table of Contents

1 Project no. 06: Facilities for solid waste management and recycling, Greece (2000GR16CPE001) 6

1.1 Project description 6

1.2 Revision of ex ante cost benefit analyses 15

1.3 Ex post cost benefit analysis 17

1.4 Comparing the ex ante and ex post cost benefit analyses 23

1.5 Unit Costs 23

1.6 Project specific lessons 24

1.7 Site visit - stakeholders interviewed 26

1.8 Sources of information 26



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Foreword This document presents one of ten case study that has been elaborated as part of the study ‘Ex post evaluation of cohesion policy interventions 2000-2006 fi-nanced by the Cohesion Fund (including former ISPA) - Work Package C - Cost benefit analysis of environment projects. The study was commissioned by the European Commission, DG Regio. During the project ten case studies were elaborated that can be used as guidance or good practice for future Cost Benefit Assessments in relation to Cohesion Fund/ISPA applications.

The overall approach to the case studies is as follows:

The projects have been analysed in the period July to October 2010 and con-tains the simple and most important story concerning:

• Why the project was formulated?

• Who the relevant stakeholders were in the decision making process?

• How the project was analysed and decided upon?

• What the outcome of the project was in the ex-post perspective?

The project analyses include to the largest possible extent the ex-ante and ex-post figures in order to assess the project’s performance. Due to the great vari-ety in the data quality, data access and possibility to reconstruct data, the analy-ses vary in quality and extent. However, in every case there is a significant learning that can contribute to the fundamental questions of the study1:

• What were the impacts of the examined projects?

• How can ex post cost-benefit analyses contribute to the practice of ex ante cost-benefit analyses?

• What are the potentials and limits to carry out an ex post cost-benefit analysis to identify and/or analyse the impact of the projects? Is it an ap-propriate tool for impact analysis?

The CBA guidelines have been used to analyse the projects. In all cases the project teams have visited the project sites and the teams have interviewed technical, financial and managerial staff concerning the project development, implementation and the results of the project. Furthermore, the project teams have been in dialogue with the project beneficiaries on the data used in the ex-post analysis.

1 Terms of reference page 6 in chapter 3. Subject of the contract.



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List of Abbreviations B/C Benefit-Cost ratio CBA Cost Benefit Analysis CF Cohesion Fund CO2 Carbon Dioxide EC European Commission ENPV Economic Net Present Value ERR Economic Net Present Value EUR Euro FNPV Financial Net Present Value FRR Financial Rate of Return GDP Gross Domestic Product GDP Gross Domestic Product GHG Green House Gases H2S Hydrogen Sulphide Ha Hectare IRR Internal Rate of Return ISPA Instrument for Structural Policies for Pre-Accession kW Kilo Watt LFG Landfill gas Nm3 Normal Cubic Metres NPV Net Present Value NPV Net Present Value PV Present Value PV Present Value SDR Social Discount Rate



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1 Project no. 06: Facilities for solid waste management and recycling, Greece (2000GR16CPE001)

1.1 Project description The necessity for the project arose due to illegal waste dumping taking place in the ravine of Kouroupitos on the island of Crete. Non-compliance with Euro-pean law by Greek authorities led to the condemnation of Greece by the Euro-pean Court of Justice and to the imposition of heavy fines. Under this pressure and due to negative publicity, the Greek Authorities in September 2000 submit-ted to the European Commission, DG Regional Policy, an application for fi-nancing of a project for the construction of solid waste management and recy-cling facilities.

The objectives of building the Solid Waste Recycling, Composting Plant and a new landfill site were to collect and treat waste produced by the Municipalities of Chania, Akrotiri, Souda, Keramies, Eleftherios Venizelos, Therisos, Kydo-nia, Platania and Mousouri. In addition, excess capacity of the plant was likely to offer the possibility of serving the entire Prefecture of Chania.

Population served: approximately 110,000 inhabitants. Chania is the largest city in the area with a population of approximately 50,000 people.

Project components The total investment comprised a solid waste recycling facility, a composting facility, a new landfill consisting of two cells and a biological treatment facil-ity.

Environmental pres-sure

Project objectives



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Main investment

Units

A: Restoratation of the solid waste burial area

(illegal landfill)

B: Solid waste recycling facility

C: Compost facility of urban waste D: New Landfill E: Biological

treatment

Total: EUR 30 millions EUR 0 EUR 8.7 millions EUR 7 millions EUR 4.8 millions EUR 0.9 millions

Including EUR 9 millions for land aquisition, envrinmental protection work, building construction, trucks, etc

A precondition for funding

Two parellal conveyor belts: One for green bin waste with remains from first sorting of blue bin wasteCapacity 2*25 t/hr

Two compost facility lanes, each with a capacity of 20.000 tonnes of organic waste/year

Two landfill cells combnined capacity of 1 million tonnes, with expected lifetime of 40 years

Consist of several siloes for biological Sequence Batch Reactor. In a later stage extended to chemical process

1.1.1 Project context Crete is one of the 13 regions of Greece. Crete is divided into four prefectures (Chania, Rethymnon, Heraklion and Lassithi) and 70 municipalities. The population of the island is approximately 630,000 (2005), with three major cit-ies, Iraklion (~150,000), Chania (~50,000) and Rethymnon (~30,000) located on the north coast of the island. The current project is concerned with waste handling for the Chania region only.

Originally based on farming, the economy of Crete started changing visibly during the 1970's. While farming is still important, tourism is the other major source of income and occupation for the island. Most farmland is occupied by small farms cultivating traditional products, in particular olive oil, but also vegetables such as tomatoes and aubergines often grown in greenhouses to limit evaporation as water is a scarce resource.

Crete, Hania is indicated by the red dot to the left in the picture The landfil and recycling plant is situated just east of the airport and approximately 15 km from Hania City

Socio/economic/environmental context

http://www.interkriti.org/hania.html

http://www.interkriti.org/rethymnon/

http://www.interkriti.org/visits/stnik.htm

http://www.interkriti.org/crete_guide/cretecensus2001.html



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1.1.2 Project history and timeline The application for project financing was submitted to DG REGIO in Septem-ber 2000. On 29 December 2000, the European Commission, DG REGIO ap-proved the request for financing of the project according to Decision C(2000)4324/29.12.2000. The prefecture of Chania assumed responsibility for the construction of the facility and the restoration of the Kouroupitos gorge (the old illegal waste dump site). The private company ENVITEC SA, based in Athens Greece, was selected by the Prefecture of Chania through public tender procedures to build the facility under the supervision of the Prefecture of Cha-nia.

Time overrun The initial time schedule was not followed and was amended on 31 March 2004 by Commission Decision C (2004)1140 due to objections by competing com-panies over the selection of ENVITEC as constructor. Delays are also attributed to the opposition of local authorities from municipalities surrounding the plant. On the location of the plant in Akrotiri, it was argued from neighbouring mu-nicipalities that the plant would undermine the quality of life of local residents (not in my backyard!). Eventually, this complaint was overruled but as a result the plant fully complies with all environmental laws. Further, the plant has en-gaged the University of Chania to undertake all sorts of environmental analyses every three months. The plant was finalized and put into use in 2005 represent-ing a 2 years delay. The operation of the plant was allocated to DE.DI.SA, a company owned by the municipality of Chania, responsible for solid waste management in the area of Chania.

1.1.3 Technical overview The figure overleaf below shows the handling of the waste streams at the plant.

The reception area consists of a weighbridge, a control office and an admini-stration building, which also contains a laboratory engaged with environmental testing and control of the quality of the biological treatment.

Waste is received in two mixed fractions (blue bin waste and green bin waste) and in other fractions that are already separated at source (e.g. yellow bins for glass). Waste suitable for immediate disposal is brought directly to the landfill.

Waste from the blue bins consists of paper, cartoon, plastic and other recyclable waste types. Blue bin waste is unloaded onto the floor in the recycling building and placed on the conveyor belt. Paper, plastic and cardboard waste is removed manually from the conveyor belt and is eventually packed in bales ready for sale. The conveyor belt continues to the automatic sorting of aluminium and iron, while the remaining waste ends up in the sorting line for green bin waste.

Green waste line Waste from green bins is supposed to contain the remaining types of waste. Therefore it is general waste except for the blue waste and glass, batteries, bulky waste etc. which in principle is to be collected separately at the source, e.g. at household, industry or hotel level. In reality, however, the two lines (the blue and the green) look very similar in terms of contained waste elements.

The waste operation at the plant

Blue waste line



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The green bin waste is unloaded in the collection building and unloaded to the recycling line by the bridge crane via a moving floor (to obtain a steady flow and ripping of bags etc.). There are two identical lines for green waste each with a capacity of 25 tons/hour.

The organic fraction is compressed in a reactor with parallel aerobic fermenta-tion and infusion of air. Biological stabilisation is subsequently performed in an environment of controlled temperature and humidity.

The composting process was planned to take place in two treatment lanes, which are located in two similar buildings. Only one of the lanes has been in operation.

The controlled composting process takes six weeks. The compost material is led to the refining unit for final treatment, which is the process of refining, in which unwanted polluters may be removed. The final product that emerges from this treatment is the refined soil improvement material (compost), which is a stabilised form of an organic fraction of waste.

The refined compost is led on a moving belt for humidification where it is piled up for maturation. Part of the compost is packed into sacks while the remainder may be utilised as filling material.

Of the sorted material, the unusable material produced from the compost unit is transferred for final disposal at a nearby space for sanitary burial of solid waste (SSBSW).

The plant has also introduced composting of green waste from gardens and parks.

Composting / com-ponent C



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Figure 1-1 Overview of waste handling

The disposal area is divided into two (2) cells with cell I covering an area of 35,000 m2 and cell II 36,000 m2. The total capacity is 1,100,000 m3.

The disposal site has a complex geological barrier, which is suitable for protec-tion against leakages to the aquifer.

It was planned that only the residues from the treatment of incoming waste, which comprises approximately 35 per cent of waste, was to be disposed of at the SSBSW. The actual amount of waste disposed on site has been substantially higher than planned. About 60 per cent of all waste received is disposed di-rectly to the disposal site as it is regarded not to be of sufficient quality to enter on to the sorting belt.

The wastewater treatment plant receives leachate from the disposal cells and other fluids that are produced during treatment of waste (mainly from the com-posting plant).

The treatment process is a biological Sequence Batch Reactor (SBR) type with extended ventilation. In a later stage, the treatment process is extended by chemical process (fluctuation and sedimentation) and in the final treatment process, the leachate is filtered through reed bed basins.

All treated leachate and wastewater are utilized on site for irrigation and for sprinkling of internal roads (dust abatement).

Disposal site or new landfill site

Wastewater treat-ment plant



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During the anaerobic decomposition of waste at the waste body, biogas is pro-duced. For this reason, plant design included a unit that collects the biogas pro-duced. The unit consists of vertical collection sumps.

The composition of the landfill gas has been analysed continuously. So far, the gas amount and its composition has not been found suitable for installation of a gas utilisation plant.

Comments on design and capacity Recycling plant Manual sorting of green bin waste

and blue bin waste often creates a negative working environment along the sorting line. Manual sorting could be found to be an outdated method for sorting and separation of waste.

The plant also plans to introduce optical separation of waste to avoid manual separation of the waste from the green bin line. Such improvements would im-prove working environment significantly.

Composting plant The plant is constructed with two identical composting reactors located in separate buildings. One of the composting reactors has never been in operation and the composting reactor in use does not operate at full capacity.

The expected flow:

70,000 tonnes/year (total)

45,500 tonnes/year (recyclable waste, 65%)

16,835 (organic waste for composting, 37%)

One reactor will have a capacity higher than 20,000 tons of organic waste per year, and it seems that construction of two identical reac-tors was overrated.

The plant considers implementing an anaerobic digester prior to the aerobic composting reactor.

The structure of the building ac-commodating the active reactor has

clear signs of corrosion because of the very aggressive environment in the

Biogas management



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building. The lifetime of the building might be shorter than expected. Other-wise, thorough and frequent maintenance of the buildings is required.

The building housing the reactor in use has very visible corrosive attacks after five years of use.

The total capacity of the two landfill cells is 1,100,000 m3 (~1 million tons). It was assumed that only 35 per cent of the incoming waste (~27,500 m3/year) should be disposed of in the landfill (as opposed to the actual 60%), and the lifetime was estimated to 40 years in the original application.

The amount of waste disposed of in the landfill has been much higher than ex-pected, e.g. due to require-ments for reducing the total operating costs of the plant.

The remaining lifetime of the disposal area is expected to be approximately four years. With a total capacity of 1,100,000 m3 and a total ex-pected lifetime of 10 years (Commencement in 2005 and closure in 2014 with remain-ing four years), the average disposal rate should have been approximately 110,000 m3/year (100,000 tons/year). Either the total capacity/annual amounts are wrong, or the use of daily cover etc. is very high or the remaining lifetime is more than 4 years.

The plant already plans to extend the disposal capacity by constructing new disposal areas east of the plant.

Waste flow The waste flow through the Solid Waste Recycling & Composting Plant & Sanitary Burial of Solid Waste Space situated at Korakia of Akrotiri, Chania is presented in the table below.

Table 1-1 Waste flow through Recycling and composting plant, Chania (figures in tons/year)

Waste type Expected fl (201 )*

2005** 2006** 2007** 2008** 2009** Total incoming waste 80,500 - - - - 90.000*** Green bin and blue bin waste - 1,676 14,678 29,119 33,302 35,4782 WWTP sludge - ? ? ? ? 8,0003 Green waste 10,500 ? ? ? ? 8004

2 At the meeting on 21 September 2010, the operator reported that the total annual amount of incoming waste was 98,000 tons/waste 3 Information received at meeting 21 September 2010 4 Information received at meeting 21 September 2010

Landfill cells



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Waste type Expected fl (2015)*

2005** 2006** 2007** 2008** 2009** To landfill, total 25,000 ? ? ? ? 58,5005 Produced or recycled Paper 9,000 1,925 3,443 5,112 7,195 7,060 Plastic 5,200 236 498 585 987 1,103 Metal 1,800 97 256 620 990 1,315 Aluminium 600 - - - - - Glass 0 53 72 96 145 Compost 20,000 - - 1,917

( ld)783 (sold) 42 (sold)

* From PAC homepage. Expected waste amount in the application was 50,000 tonnes in 2002 and 70,000 tonnes in 2015 ** Actual waste amount reported in annual report, ***90,000 tonnes of total incoming waste has been confirmed by the Plant Operator)

The total amount of waste received (in the order of 90,000 tonnes) is more or less what was expected. The difference lies in the amount of treated waste and hence the amount of waste that goes directly to the landfill. The capacity of the sorting plant is based on a much higher amount of green and blue bin waste. Due to the high sorting costs, which is due to the poor sorting at the level of the households, around 60% of the waste goes directly to the landfill. Hence, the sorting plant currently operates with a large overcapacity.

The amount of compost represents the amounts sold. In reality the amount pro-duced lies around 3500-4000 tonnes a year. Due to lack of demand most of the compost is given away for free to be used in parks etc by the municipality.

1.1.4 Summary of project outcomes Our main observations are summarised below:

The project is now compliant to EU Waste regulation.

The technical option chosen including the recycling facility and the composting plant seems reasonable and sensible. So does the geographical location of the plant, approximately 20 km from the city of Chania from which the majority of the waste originates. It is next to the original, illegal landfill. The plant is lo-cated in a remote area, the closest neighbour being the airport and a military base. The plant is situated on rocky soil close to the sea with minimal risk of groundwater contamination. On the capacity of the plant, it appears that the composting facility is oversized. Of the two composting plants constructed, only one is used and not even to full capacity. The capacity of the recycling & composting plant is not fully utilised, and there is a potential for obtaining a higher degree of recycling. Due to low utilisation of the recycling and compost facility, the disposal capacity is limited and soon used up. New disposal facili-

5 Reported at meeting that 60% (58,800 t) of all waste are directly disposed of on the land-fill

Environmental ac-quis

Technical solution and capacity of plant



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ties will be required in 2014 or 2015.Obviously, composting capacity is far too high. One line has more than sufficient capacity to cope with the incoming or-ganic waste, also in the case where organic waste is not disposed of directly at the disposal site. Due to the aggressive environment in the composting reactor building, thorough and frequent maintenance of buildings is required. The plant and its facilities are well maintained, and the area is kept nice and clean.

Apart from the obvious benefit of not having 90 thousands tons of waste ending op in illegal landfills every year causing severe environmental damage, the main direct benefits can be nailed down to two main elements. The first being resource efficiency due to the recycling of different types of plastic, different types of paper, glass, aluminium and iron. The second element is the production of compost as an output of the waste handling process. The production of com-post potentially constitutes a major financial and environmental benefit that has not yet been realised. So far, the plant has experimented a lot with the quality and mix of producing compost. Although some of the compost has been sold, it appears that the production of compost remains very low.

The main problem in taking full advantage of the benefits of using compost for agricultural purposes on the island is related to the resistance of the local farm-ers. Another problem relates to the amount of the waste still ending up in the landfill. Ideally, only a fraction (approximately 30 per cent was assumed at homepage presentation) of the total 90 thousands tons of waste handled every year should end up in the landfill. In reality, due to lack of optimal sorting both at the level of the households and at the plant sorting belt, up to 60 per cent of the total amount of waste end up in the landfill. Lack of education of citizens to sort household waste into the three different types of waste streams (blue bins for paper, cardboard, plastic, tetrapack and cans, the yellow bins for glass, and finally green bins for the remaining waste) remains a problem. As a result, the blue bins and the green bins contain nearly the same type of waste.

Although some illegal landfills in remote areas have been closed, there are still an unknown amount of waste ending up in uncontrolled sites mainly in remote areas and smaller villages. This is partly due to the lack of reinforcement and that the remote communes are reluctant to pay the asked waste fee or that they do not possess the necessary infrastructure to collect the waste, e.g. waste trucks, collection stations, etc.

Due to the existence and operation of the plant, a number of follow-on effects have been observed as a direct outcome of the plant. It should be mentioned that the Chania plant is the first of its sort on the island of Crete. The technical waste management know-how of the engineers of the plant, therefore, are well recognised on the island of Crete and are feeding in to the combined waste management planning currently taking place on the island of Crete. There are plans of establishing a similar waste handling facility to serve the other large cities of the island, e.g. Iraklion and Rethymnoon. Another interesting outcome and a necessary initiative to tackle the issue of promoting the use of compost for agriculture purposes is the setting up of pilot projects with farms to demon-strate the added value of using the compost. Thirdly, it is also worth mentioning

The main direct out-comes of the project

…and some of prob-lems hindering reali-sation of the benefits

Enabling benefits or accompanying ef-fects



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that due to the construction of the plant and all the media attention in local TV, visiting school classes, education programmes in schools about sorting of waste, etc are all contributing to an increased awareness of citizens concerning environmental issues.

Although the plan to build one more centralised waste management plant on the eastern part of the island is a sensible thing to do in order to move towards a complete waste management plan for the entire island, the Chania plant opera-tors also expressed some concerns. Apparently, the idea is to outsource the con-struction and operation of the Eastern Plant to a private operator and in order for the private operator to maintain a sound business, the fear is that this private operator might start to collect the 'good' waste such as cardboard, green waste from the large industries, hotel resorts, large supermarkets and restaurants etc, hence clearing the island for the good waste.

1.2 Revision of ex ante cost benefit analyses

1.2.1 Review of ex ante assumptions The table below provides an overview of the main ex-ante assumptions and an assessment of the robustness of these assumptions in an ex-post perspective.

Figure 1-2 Main ex ante assumptions

Investment costs of individual components

The initial investment costs as presented in the application turned out to very close to the actual costs, only the timing of the costs varied due to the delay of the project

Operational costs Underestimated.

In reality operating costs turned out to be twice as much as budgeted costs.

Potential demand for waste management

The sorting plant is constructed to handle 70.000 tons of waste per year (not including what goes di-rectly on the landfill). It was assumed that the capacity need would start at 50,000 tonnes in 2005 to reach full capacity by 2015. However, currently in year 2010, the used capacity is in the order of 35,000 tonnes of waste handled per year.

Capacity of compost production

The fact that only one of two composting facilities is in use it could indicate a situation of overcapac-ity. One of two composting facilities could in fact have been saved (corresponding to approximately EUR 3.5 million in investment costs)

Prices of recycled ma-terials

The following prices were used in the ex ante:

Ex ante assumptions:TYPE OF STOCK PRICE (Euro)Paper 0.059 59 eur pr tonnesPlastic 0.065 65Film plastic 0.073 73Ferrous Metals 0.023 23Aluminum 0.939 94Glass 0.029 29Compost 0,015 15

Revenue streams There are two types of revenue streams: one is the revenue stemming from the sales of recycled ma-terial, the other is the fee to be paid by each of the municipalities for each truck load of waste arriving to the plant.

Future competition



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The yearly revenue to the plant was slightly overestimated with around 10% . There are two reasons for this: (1) as amounts of blue and green bin waste are lower than expected, the amounts of recycled material that can be generated are also lower. In other words, the quality of the waste is less appro-priate for sorting as expected, and as a consequence less material is recycled and more ends up in the landfill. (2) the demand for compost is much lower than expected, hence creating just a fraction of the revenue than expected (se below)

The production of compost and the de-mand for compost

According to the original plan it was assumed that 20,000 tonnes of compost was to be produced on a yearly basis. In reality that is far from the case. According to the plant operator around 3500-4000 tonnes of compost are produced each year, but only 20% of this is sold at a the 'market' price of 55EUR per tonnes, the rest is given away for free to the municipalities to be used in Parks, etc.

1.2.2 Use of ex ante cost benefit analysis for decision-making The CBA analysis was not used as basis for the decision making. As mentioned in the introduction the application for funding was made in response to the pressure of the European Court for not complying with European legislation. The application does contain a financial CBA but not an option analysis nor a socio-economic CBA.

1.2.3 Project identification and alternative options The study has not been able to document if alternative options were considered.

1.2.4 Ex ante financial analysis The ex ante financial analysis as included in the application is summarised be-low in net present values. It should be noted that no re-investment costs are in-cluded, which is wrong. Interestingly, as the operational costs were envisaged to be at a much lower level compared to the revenue, the project in fact pre-sented a positive financial rate of return (FRR) of more than 8% without the CF and nearly 35% with CF funding. In such case, the project should not have been eligible for funding.

Figure 1-3 Results of Ex ante financial analysis

EX ANTE NPV (EUR) Financed by CF

Financed by the national authori-

ties Total

Investment Costs -19.123.807 -6.374.602 -25.498.409 Re-investmentes 0 0 Residual value 2.446.184 2.446.184 Operational cost -17.332.623 -17.332.623 Revenue 47.286.088 47.286.088 FNPV (with CF) 19.849.608 FNPV (without CF) 725.802

FRR (C) with CF 34,33%



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FRR (C) without CF 8,36% Discount rate 8%

The revenue streams were estimated as indicated in the table below consisting on the expected revenue of different types of recycled material, e.g. paper, plas-tic, compost, etc and the municipality fees constituting the majority of the yearly revenue.

Figure 1-4 Revenue ex ante Revenues Ex ante (EU 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Paper 275.000 279.000 288.000 293.000 302.000 311.000 316.000 325.000 334.000 339.000 438.000 357.000 366.000 375.000 384.000 Plastic 23.000 23.000 24.000 24.000 25.000 26.000 26.000 27.000 28.000 28.000 29.000 30.000 30.000 31.000 32.000 Plastic film 179.000 182.000 188.000 191.000 197.000 203.000 206.000 212.000 218.000 221.000 226.000 232.000 238.000 244.000 250.000 Metal 22.000 23.000 23.000 24.000 24.000 25.000 26.000 26.000 27.000 27.000 28.000 29.000 30.000 30.000 31.000 Aluminium 446.000 454.000 468.000 476.000 491.000 506.000 513.000 528.000 543.000 550.000 565.000 580.000 595.000 610.000 625.000 Glass 23.000 24.000 25.000 25.000 26.000 27.000 27.000 28.000 28.000 29.000 30.000 30.000 31.000 32.000 33.000 Compost 319.000 324.000 335.000 340.000 351.000 361.000 367.000 377.000 388.000 393.000 404.000 415.000 425.000 436.000 446.000 Municipality fees 3.522.000 3.581.000 3.698.000 3.757.000 3.874.000 3.992.000 4.050.000 4.168.000 4.285.000 4.344.000 4.461.000 4.579.000 4.696.000 4.814.000 4.931.000 Total 4.809.000 4.890.000 5.049.000 5.130.000 5.290.000 5.451.000 5.531.000 5.691.000 5.851.000 5.931.000 6.181.000 6.252.000 6.411.000 6.572.000 6.732.000

1.2.5 Ex ante Economic analysis Except for the mentioning of the environmental benefits of the investment the application did not include any economic CBA, sensitivity analysis, risk analy-sis or mitigation measures.

1.3 Ex post cost benefit analysis

1.3.1 Ex post financial analysis The actual investment costs of the plant are indicated in the table below and are very close to the original budget.

Table 1-2 Investment costs

Year Initial cost distri-bution per year

Revised cost distribu-tion per year Actual cost

2000 4,500,000 3,939,306 3,939,306

2001 9,000,000 0 0

2002 17,300,000 3,049,832 3,034,664

2003 10,106,837 10,083,024

2004 13,704,025 8,739,485

2005 4,944,898

Total 30,800,000 30,800,000 30,741,377

The operating costs, on the other hand, have turned out to be much higher com-pared to what was included in the application. Either the original operating costs were underestimated in the application or the current operating costs are a result of overspending. The truth is likely to be the first reason mentioned since

Investment costs

Operating costs



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an amount of around EUR 5 million in yearly operational costs seems reason-able for this size of plant. An amount of EUR 1 million in yearly operational costs also seems reasonable. Other costs include environmental monitoring costs, insurance, etc.

Ex post OP costs 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017Staff costs 2.825.000 3.335.792 3.148.000 3.300.000 3.300.000 3.300.000 3.300.000 3.300.000 3.300.000 3.300.000 Operational costs 1.026.000 895.072 1.454.000 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000 1.000.000 Other costs 1.342.000 748.506 710.006 750.000 750.000 750.000 750.000 750.000 750.000 750.000 Total 4.500.000 4.500.000 4.500.000 5.195.008 4.981.379 5.314.016 5.052.011 5.052.012 5.052.013 5.052.014 5.052.015 5.052.016 5.052.017

COWI Estimates COWI estimatesActual

The sales of the recycling material are about EUR 1 million less than expected per year, while the municipality fees are slightly lower (about 10%). The mu-nicipality fee is based on a fixed rate of EUR 45 per tonnes of received waste.

Revenue ex post2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Sales of recycling material 98.882 195.714 327.839 431.752 279.440 304.355 400.000 450.000 500.000 550.000 600.000 650.000 700.000 Subsidy from National Recycling entity 58.875 115.307 199.548 395.003 673.138 700.000 800.000 900.000 1.000.000 1.100.000 1.200.000 1.300.000 1.400.000 Municipality fee 800.000 2.000.000 2.400.000 2.800.000 3.600.000 4.050.000 4.050.000 4.050.000 4.050.000 4.050.000 4.050.000 4.050.000 4.050.000 Revenues EUR (000) 957.757 2.311.021 2.927.387 3.626.755 4.552.578 5.054.355 5.250.000 5.400.000 5.550.000 5.700.000 5.850.000 6.000.000 6.150.000

COWI EstimatedActual

The results of the ex post financial analysis is provided in the table below. The main issues of the financial analysis are the level of the operational costs and in particular with the amount of revenue generated by the production and selling of the recycled material and the compost.

Table 1-3 Ex post financial result

EX POST FNPV (EUR) Financed by CF

Financed by the national authori-

ties Total

Investment Costs 20.246.698 6.748.899 26.995.597 Re-investmentes 0 0 Residual value 3.728.829 3.728.829 Operational cost 37.980.621 37.980.621 Revenue 38.914.470 38.914.470 FNPV (with CF) -3.734.590 FNPV (without CF) -23.981.288 FIRR with CF -0,37% FIRR without CF -9,18% Discount rate 5,5%

Operating revenues

Financial result



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The financial internal rate of return (FIRR) therefore are negative both with and without CF funding6 and the project is actually not financial sustainable.

The Plant operators are aware of the weak performance on the rate of recycling material and the relatively high cost associated with running the sorting belt and is experimenting with improving the efficiency of the sorting belt to reduce the amount of waste going directly to the landfill. For instance an additional pre-sorting facility has been introduced to remove large items, ropes, etc to minimise the risk of abruptions to the sorting belt. The municipality are aware of the lack of waste sorting 'skills' at the level of households and have intro-duced the subject to the schoolchildren, however much more awareness and education of the citizens will be required to reach a satisfactory level of sorted waste

The project was more or less on time and the original investment was kept.

1.3.2 Ex post Economic analysis The main both negative and positive externalities identified per components are provided in the table overleaf.

Table 1-4 Overview of externalities

Main investment

Units


(illegal landfill)



treatment

6 The EIRR was not calculated because all economic cash-flows over the projection period were positive. In the cases such as this there are no positive roots (neither negative actually, there are no real roots) to the nth degree polynomial equation EIRR (r) = 0. In this case all14 roots of the equation are imaginary numbers.

Mitigation and ac-companying measure

Overruns



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Socio-economic impact/externalities

(both positive and negative)

Avoidance of groundwater contaminationPolution avoidance in future (ground water, odor) due to termination of illegal landfilAvoidance of Landfill gas emmissionLandscape restoration/ecosystem benefits

Increased ressource efficiency (glass, aluminimum, metal, paper)

Net savings on fertilizer and irrigation costs if substituted with use of compost

Avoidance of polution if waste alternatively

was to end up in illegal landfills (e.g.

cost of cleaning illelegal landfills per

tonnes waste)Additional CO2

emmission of waste trucks

The following economic analysis has taken the following negative as well as positive impacts into account:

• The lack of market uptake of compost for agricultural purposes can be regarded as an unrealised benefit. The potential savings for the farmer has been calculated using market prices for both water for irrigation, fertilizer and compost. There are externalities connected with the use of fertilizer as it has negative effect on soil biodiversity as well as contrib-ute to ground water contamination. There are positive externalities with applying compost to the soil as the soil increases its ability to absorb moisture, hence reduce the need for water irrigation. This implies using market prices for both water (for irrigation), fertilizer and compost Net savings in the use of fertilizer and water for irrigation given that com-post is used for the growing of olive trees.

• The negative externality of having in the order of 4000 waste trucks a year to drive to and from the Chania Waste plant.

• Considering a willingness to pay for the citizens of the Chania area for having the waste management facility on basis a general concern for the environment.



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Table 1-5 Calculation of economic impacts

Externalities Saved use of fertilizer

Saved water for irrigation

WTP per household

Truck loads per year Cost of CO2 (EUR) Costs savings (EUR)

Costs savings (EUR)

WTP(EUR)

200020012002200320042005 570 730 500.0002006 1.812 2319 500.0002007 2.959 3788 500.0002008 3.306 4232 500.0002009 3.564 4562 500.0002010 3.600 4608 500.0002011 3.700 4736 81.250 781 500.0002012 3.800 4864 81.250 781 500.0002013 3.900 4992 81.250 781 500.0002014 4.000 5120 81.250 781 500.0002015 4.100 5248 81.250 781 500.0002016 4.200 5376 81.250 781 500.0002017 4.300 5504 81.250 781 500.000

Total 43.811 56.078 568.750 5.469 6.500.000

Method of calculation

Assuming local farmers can use all the potential produced compost of 5.000 tonnes a year. Saved costs for fertilizer is 130 EUR pr hectare in current prices.

Assuming need for irrigation is to be reduced by 25% due to soil enrichment of compost. 625 hectares served. Irrigation costs from 2-8EUR per hectare.

Assuming 4 persons per household. 100.000 inhabitants. At a rate of 15 EUR per household per year a break-even is reached for the investment

CO2 emission of waste transport

Number of truck loads per year*40 km*0,032EUR pr KMSource: Danish Energy Agency 2010 http://www.ens.dk/da-DK/KlimaOgCO2/Transport/Alternativedrivmidler/Sider/Forside.aspx

The table below reveals the result of the economic analysis taking into account the above mentioned economic contributions of externalities, the unrealised benefits of the use of compost and given a willingness to pay from the house-holds in the Chania area of EUR 15 per household per year.

Table 1-6 Result ex post economic analysis

EX POST ENPV (EUR) NPV

Investment Costs -26.995.597Re-investments 0Residual value 3.728.829Operational cost -37.980.621Revenue 38.914.470Negative externalities -37.239Benefits 4.896.635ENPV -17.473.522



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ERR -3%B/C Ratio 0.22Discount rate 5,5%

1.3.3 Risk analysis Due to the fact that investment costs are historical data therefore not subject to any uncertainty, the sensitivity test has been performed only with regard to the economic performance of the project, since the financial performance is not affected by the variation of the input variables. On the contrary, all variables that refer to forecasts and not to historical data have been considered in the economic sensitivity test. Variables that resulted to be critical are:

Risk analysis

Independent variables unit Base value Low High

1 Operational costs EUR/year 5000000 -4% 10%2 Sales of recycled material EUR/year 300000 0% 200%

3 Household's WTP for waste treat-ment EUR/year 375000 0% 100%

4 Compost market uptake (expressed in saved costs to farmers) EUR/year 81250 -26% 38%

The return on investment calculations were performed probabilistically, by do-ing 500 Monte Carlo simulations, with the following results:

Figure 1-5 Probability distributions of the results

NET PRES VAL

Expected value -22431 10% -24481 50% -22555

90% -20357 -26122 -17441

INT R OF RET

Expected value -5.4065 10% -6.875750% -5.4401

90% -3.9325 -8.3066 -2.1958

NPV / PV INV

Expected value -0.7876 10% -0.8596 50% -0.7919

90% -0.7148 -0.9172 -0.6124

The NPV was computed using 5.5% as a discount rate, instead of the 8% used in the ex-ante evaluation. The expected value is EUR -22.431 million. In the table above the percentages in the left column indicate cumulative probability



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values. Thus an 80% confidence interval is given by the range of EUR -20.357 million to EUR -24.481 million which is a rather low dispersion. Further the graph show a rather regular shape and there for it can be concluded that the outcome of the analysis is robust. The computed ERR is expected to be 5.4% with at confidential interval of 80% between 3.9% and 6.8 %. This again has a similar shape as the result of the NPV analysis.

The expected value and confidence interval of the ratio of NPV to the present value of investments is also shown in the above table. This ratio is equal to the familiar B/C minus 1. Thus the expected value of the B/C ratio is 0.22 which is similar to the one estimated in the economic analysis. As show in the figure the results are rather negative but not under minus one and therefore provides a positive B/C ratio.

The results indicate that discounted benefits do not cover discounted costs. The likelihood of this project being economically unfeasible is therefore 100%.

The sensitivity analysis performed shows that the most important variables are the operation cost, investment cost and municipality fee. These all have elastic-ity above 1 (expresses a ratio of change). The variables related to willingness to pay are less important because of the relative low value of those benefits.

Based on these observations it can be concluded that the project is very likely never to generate a surplus and the result of the analysis is robust.

1.4 Comparing the ex ante and ex post cost benefit analyses

The table below compares the ex ante and ex post financial and economic analysis based on the observations presented above.

Table 1-7 Comparison of ex ante and ex post CBA

FNPV(C) FRR(C) FRR(K) ENPV ERR € % € % B/C ratio

Ex ante 26.025.047 34,33% 8,36% na na naEx post -2.086.221 -0,37% -9,18% -17.473.522 -3% 0,22

1.5 Unit Costs The following provides an overview available unit costs information available at with the project owner and at which level of detail.

WASTE MANAGEMENT

Market prices of recycled material EUR/T



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Compost 55 Tariffs Commune fee (per tonnes) 45

Investment costs per com-ponent Capacity

Waste reception unit 1.608.102 Not relevant

Waste mechanical selection unit 6.626.878 70.000 tonnes/year

Compost production unit 4.614.783

Compost refining unit 1.708.177

Compost storage and packaging unit 694.625

Total composting units 7 MEUR 2*20000 tonnes/year

Material selection and storage unit 495.073

Landfill 4.817.241 1,100,000m3

Mobile equipment 1.309.908

Liquid waste management unit 787.035

Biogas management unit 92.548

Buildings 597.518 Offices, labs

1.6 Project specific lessons

Key reporting topics

03 Crete Waste management

Identification of project

There are five distinct components of the invest-ment

Main investment

Units


(illegal landfill)



treatment

Technical analysis including rate of utilisation

The pricing of the individual components seems reasonable.

There is obviously overcapacity in the composting units

Options Different options were considered, however the geographic location chosen was politically motivated (next to the existing illegal landfill)

Demand analysis The main variables used for the demand analysis was the expected amounts of waste produced in the areas, which must be said to have been based on reasonable assumptions at the time being.

Financial analysis The Ex-ante assumptions related to the operational costs were underestimated, while the assumptions concerning production and hence revenue of recycling and compost were overestimated. A municipality fee to be paid by the municipalities for each delivered tonnes of waste constitutes the main source of revenue. The project is nearly financial sustainable, at least the yearly revenues excess the yearly opera-tional costs.

Economic analysis Ex-ante: No economic benefits were included in the calculations

Three main externalities has been included in the ex post economic analysis. These are (1) a negative



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externality related to the CO2 emissions of 3000-4000 waste trucks a year (2) the environmental bene-fits potentially to be derived from using compost for agricultural purposes and (3) a willingness to pay (WTP) fee per household in the Chania area

When these factors are taken into account, and assuming a WTP per household of EUR 15 per year and including the CF investment, then the project becomes economically viable.

Risk management Identification of key critical elements were not identified ex ante, however ex post risks are being dealt with, e.g. to improve the efficiency of the sorting belt and hence to improve the rate of recycled mate-rial, as well as addressing the market uptake of the use and acceptance of compost for agricultural pur-pose through participation in pilot projects.

Project outcome – wider benefits

Due to the existence and operation of the plant, a number of follow-on effects have been observed as a

direct outcome of the plant. Firstly, it should be mentioned that the Chania plant is the first of its sort on

the island of Crete. The technical waste management know-how of the engineers of the plant, therefore

are well recognised on the island of Crete and are feeding in to the combined waste management plan-

ning currently taking place on the island of Crete. There are plans of establishing a similar waste handling

facility to serve the other large cities of the island, e.g. Iraklion and Rethymnoon. Secondly, another in-

teresting outcome and a necessary initiative to tackle the issue of promoting the use of compost for agri-

culture purposes is the setting up of pilot projects with farms to demonstrate the added value of using

the compost. Thirdly, it is also worth mentioning that due to the construction of the plant and all the

media attention in local TV, visiting school classes, education programmes in schools about sorting of

waste, etc. are all contributing to an increased awareness of citizens concerning environmental issues.

How was CBA used to support the project deci-sion process?

Only the financial analysis was made. The CBA was therefore not directly used in the decision support process.

Could a more optimal use of CBA have changed or influences the decision process (and planning and execution of the project)?

The solution chosen is relatively optimal (despite some problems with the over and under capacity). It is therefore difficult to assess whether an ex ante CBA would have arrived at the same solution or a differ-ent solution. However, a more thoroughly demand or market analysis concerning the potential demand for compost might have revealed reluctance from the point of view of the farmers, hence had lead to considerations concerning the usefulness of a EUR 7 million investment into a composting facility. Alter-natively, only one composting unit could have been build initially with an option for another to emerge in case the market was to pick up. Also it might have been useful to have allocated more money to awareness campaigns at the level of household to wards waste sorting and campaigns or pilot projects with the farmers to promote the use of compost.

Which other as-pects might be more important than the CBA to support the deci-sion process?

The main problems in taking full advantage of the benefits of the plant are related to behavioural as-pects, e.g. (1) educating consumers in sorting the waste at the level of the households (2) educating local farmers to use compost to supplement or substitute the use of pesticides and to reduce the need for irrigation

What are the main lessons learned from the case study related to success of the project in terms of achieving the objectives of the project?

The objectives of the projects have been achieved, now the 90 thousands tons of waste are treated al-though there is still room for improvements in order to produce more recycled material and compost and thereby minimising the amount of waste ending up in the landfill

The existence of non-realised benefits should not be underestimated, e.g. the importance of investing a marginal amount to facilitate the education of users for waste sorting and education of in this case farm-ers to understand the environmental advantages (and the potential costs savings in terms of water and fertilizer saving costs for the individual farmer).



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1.7 Site visit - stakeholders interviewed Name and role Contact details

Prefecture of Chania Dimitris Marinakis Plateia Eleftherias, 73 134 Chania, Crete Tel: 0030 28210 301445 Fax: 0030 28210 30215 Email: [email protected]

Waste management plant Kostas Paterakis Director of the waste management plant Tel: 0030 28210 91888 Email: [email protected]

Polytechnic School of Crete Environmental Engineering De-partment

Dr Nikos Kalogerakis Tel: 0030 28210 37794 Email: [email protected]

Institute for olive trees and sub-tropical plants of Chania

Dr Kostas Chatzoulakis Director Tel: 0030 28210 83442 Email: [email protected]

1.8 Sources of information Financial and economic analysis, July 2000: File name: ECHO Chania

Request to DG REGIO for project finance, September 2000: File name: Appli-cation submission 2000

Request for amendment of Commission Decision C (2000) 4324/29-12-2000: File name: Modification request submitted end 2003

Commission Decision for amending Decision C (2000) 4324/29-12-2000: File name: 2000GR16CPE001_24_03_2004_CE_2004_1140

Commission Decision for the approval of finance request: File name: 2000GR16CPE001_Dec_29_12_2000

Payment request: File name: 2000GR16CPE001_Final Report_1RST_PART, Greek Ministry of Finance, Audit report

File name: 2000GR16CPE001_Final Report_2ND_PART, Greek Ministry of Finance, Audit report

File name: 2000GR16CPE001_Final Report_3RD_PART , Greek Ministry of Finance, Audit report

mailto:[email protected]



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Prefecture of Chania, website: http://www.chania.eu/index.php?option=com_content&view=article&id=450%3A2008-07-03-09-40-19&catid=119%3Aaporimata&Itemid=153&lang=en

Annual budget 2009 and 2010, waste management plant

CF Application

Various operational statistics (Excel tables) from the Chania Waste Management Plant (operated by Dedisa)

Yearly summary sheets with financial results year 2009 and 2010, provided by Dedisa (Excel sheets)

http://www.chania.eu/index.php?option=com_content&view=article&id=450%3A2008-07-03-09-40-19&catid=119%3Aaporimata&Itemid=153&lang=en

http://www.chania.eu/index.php?option=com_content&view=article&id=450%3A2008-07-03-09-40-19&catid=119%3Aaporimata&Itemid=153&lang=en

cohesion policy interventions work package c -...

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