ERG completed a feasibility study which investigated the development of a potable water supply system for a group of Native American clients located in the Southwestern U.S. ERG’s study was accomplished to investigate the following:
- alternative engineering designs for water production, storage and distribution facilities;
- project cost estimation,
- an assessment of projected rates of return on investment;
- alternative project financing methods and potential sources of capital necessary to fund the project;
- discounted cash flow financial modeling, and
- development of a proposed contractual agreement between the parties for development of the project.
Several significant issues facing water supply systems in dry and arid areas of the country, such as scarcity of water sources, rapid growth associated with increase in population, and other unique local characteristics were considered in ERG’s analyses.
ERG provided valuable expertise in performing an assessment of project financing options. Although cash investment was possible, ERG determined that project funding via issuance of the revenue bonds would benefit the project, given the relative risks of developing a new water production system, and in support of maintaining the project’s revenue stability. ERG prepared twelve project development and funding scenarios for several wholesale and retail system alternatives, which considered alternative system sizing, water source availability, variable municipal bond yields, and the prospect of potential system growth. ERG was also intimately involved in developing a draft contractual agreement between the participants in the project.
Based upon ERG’s study results, preliminary project development activities have commenced.