Annex H - Project Inputs

Project Budget

H-1        Details of the assumptions on which the following cost estimates have been based are given in Appendix C to Atkins’ Final Report. Atkins’ outline design has been subjected to an internal review, and an external review by LEAPP consultants. Cost estimates were reviewed by Atkins’ in-house quantity surveyors, Faithful and Gould, and have been independently reviewed by quantity surveyors E C Harris.

H-2        The breakdown below is based on Atkins baseline cost estimates for the long runway.  The level of contingency has been set to achieve a 70% level of confidence that these costs will not be exceeded, based on the Monte Carlo analysis of construction using a traditional procurement approach.  Atkins’ advice is that adoption of DBO procurement will increase the level of confidence for the same capital outlay.

1)           Airport Construction Capital Costs

Item                                                                                               Estimated Cost (£000's)

2)           Equipment

3)           Design/Procurement costs

4)           Supervision/Technical Assistance

5)           Contingency                                                                                                    

6)           Airport and Air Service Operational Costs

  7)         Environmental Management

8)           Institutional Support

TOTAL                                                                                                                     █████

Projected Cash-Flow

H-3        Expenditure in 2005/2006 is primarily on technical assistance with the procurement of the DBO contractor, carrying out the ESIA, and commencing some of the institutional development work to build capacity on St Helena .

H-4        Construction is expected to commence in late 2006, with the bulk of the capital expenditure spread over the next four years.

H-5        █████.

H-6        It is proposed that DFID will continue to monitor the project to the end of the DBO contract period in 2020. At this point, SHG will seek further bids from the private sector to operate and maintain the airport. For the last five years, the project will be fully self-supporting.

H-7        All costs are in current day prices. It is not possible to provide a meaningful estimate of inflation in project costs over the course of the project. To a large extent it will depend on the country of origin of the DBO and air service contractors. If, as is likely, these are South-Africa based, then based on recent trends, inflationary costs could be more than compensated for by changes in the exchange rate. For example, over the years between 1998 and 2003, South African inflation amounted to approximately 40%, while the Rand depreciated by nearly 48% against the UK pound.  This equates to an effective annual deflation of 1.5%.

H-8        In contrast, if we were to assume an annual inflation rate of 2.5%, as recommended in the E C Harris report, the cash cost over 10 years would be approximately █████.

H-9        In light of the above, the overall project budget is presented in constant 2005 prices.

H-10      Table H.1 gives the cash flow of project expenditure over the financial years 2005/6 to 2015/16, both in 2005 prices and allowing for an annual inflation rate of 2.5%.  The amounts in 2005 prices are illustrated graphically in Figure H.1.

Table H.1               Project Expenditure

Figure H.1              Expenditure Profile (Constant 2005 prices)

[Figure H.1 has been removed as it contains information that is commercially sensitive.]