Financial Analysis:.

Financial analysis should be carried out to determine the financial feasibility of City Gas
Distribution projects in the charge area and calculate network tariff and selling price of gas to the
various consumer categories like domestic, commercial, industrial and automobile consumers, in
line with the guidelines of PNGRB, its Acts & Regulations.
Financial Calculations shall include
a. Calculation of tariff for Feeder pipeline:
Tariff for Feeder Pipeline (including CGS) Calculations shall be submitted to the Engineer-In
Charge for vetting before the same is taken up for further analysis.
b. Calculation for overall City Gas Distribution Network (Downstream of CGS):
I .CGD network tariff and Compression charge for CNG
Network tariff means the weighted average unit rate of tariff in Rs./MMBTU for all
categories of customers of natural gas in a CGD network.
Compression charge for CNG means a charge in Rs./KG for online compression of natural
gas into CNG for subsequent dispensing to consumers in a CNG station.
This should be calculated using Discounted Cash Flow Methodology considering the reasonable
rate of return as the projects internal rate of return.
Discounted cash flow refers to equating the inflows from the projected revenue earnings out of
network tariff and compression charge for CNG with the outflows of CAPEX and OPEX over
the economic life of the project by discounting these flows at the reasonable rate of return.
The reasonable rate of return shall be the rate of return on capital employed equal to 14% post
tax considering the rate of return on long term risk free government security and the need to
incentivise investments in creation of CGD infrastructure.
II. Prepare estimate of realistic capital and operating costs with detailed break-up and work
out financial viability of the project along with the different sensitivity scenarios. The capital
cost should be arrived for the material, machinery, equipment, SCADA etc. For CGD excluding
the cost of feeder pipeline and city gate station (CGS).
III. Net Present Value (NPV) and Internal Rate of Return (IRR) of the project
Net Present Value represents the difference between the present value of cash inflows and the
present value of cash outflows.
Internal Rate of Return shows a discount rate that makes the net present value (NPV) of all
cash flows from a particular project equal to zero.
IV. Estimated yearly Profit/Loss over the economic life of the project and yearly end balance
sheets.

V. Information related to the adoption of optimum financing pattern and dividend policy as well
as the estimated balance sheets, cash flows and working capital requirements.
VII. Marketing & Distribution expenses on unit basis
VII. Proposed Selling prices for CNG and PNG in all sectors.

Sensitivity Analysis:Sensitivity Analysis of the post-tax IRR on project and equity investments to variations in capital
cost, demand projections, operating cost parameters, project schedules, gas costs etc should be
carried out, in line with the guidelines of PNGRB, its Acts & Regulations.