Hands-on Exercise

Objective

The exercise is intended both as a theoretical exercise for assessing the diverse effects of a natural disaster in a city, and as a practical one that provides with the necessary tools to evaluate real event. You will estimate the impacts of drought on a hypothetical Central American city by applying the ECLAC methodology. The basic information is provided here.

Description

The goal of the exercise is to estimate the impact of drought on a Water Supply Enterprise in the affected city. You will use the data provided by its financial statements and information on water demand and supply to make a projection of the enterprise’s increased expenditure (both investment and operational) and reduced billing, discounting insurance reimbursements. The specific questions are found following the background information.

Background Information

Based on the Preceding Data, Find:

1)       The following expenditure items:

·         Investment required for the digging and equipment of the new deep wells and their connection to the electric grid and the water treatment plant

·         Increased costs of the old well system by increasing the hours of operation

·         Operation costs of the new wells, which can be assumed to be the same as the old wells

2)       The diminished income due to reduced billing for the service, taking into account the supplied volume of water as compared to the “normal” level, for the duration of the drought.

3)       The insurance reimbursements, once accounts are presented by the enterprise.

4)       The impact on the external accounts via:

·         The value or part of the cost of equipment and materials imported, not produced in the country, and

·         The part of insurance reimbursement that comes from external reinsurance.