SUSTAINABLE CITIES PROJECT (SCP)

Component A: Sustainable City Planning and Management Systems

Terms of Reference

Consultancy Services for Support to ILBANK PMU: Review of Financial Feasibility/Creditworthiness Studies

(IB A2.C8-1/FFR)

 

1. Background

The Sustainable Cities Program (Program hereafter) builds on a Municipal Services Project (MSP) and its Additional Financing (MSP-AF), which was implemented between 2005 and 2016, together with Iller Bankası A.S. (ILBANK).

ILBANK is implementing the Program with technical and financial support from the World Bank (WB) and European Union (EU). The program aims to help municipalities: (i) respond to current and increasing demands for urban services; (ii) plan for future infrastructure service needs in a sustainable manner; (iii) mobilize financing to fund priority investment; and (iv) adhere to new spatial planning mandates and infrastructure service requirements as prescribed by the amended Metropolitan Municipality Law No 6360 in December 2012.

The main goal of the Program is to improve the planning capacity of and access to targeted municipal services in participating municipalities and utilities. It will support improvements the environmental, economic, financial, and social sustainability of Turkish cities by improving access to priority municipal services. The program also tries to expand its support to cities, including in frontier and underserved regions, with the goal of enabling them to secure financing as well as building capacity to directly access financing from capital markets for priority infrastructure needs in the medium-to-long term.

The Program was designed as a series of projects (SOP). The SOP instrument is suitable as it allows for the provision of financing to a single borrower, ILBANK, for subnational lending to a gradually increasing number of municipalities or utilities that are interested in a sustainable cities approach to municipal development. The SOP finances demand-driven municipal and utility infrastructure investments, with eligible sectors including, but not limited to, public transport, water and wastewater, solid waste management, and energy.

Until now, the SOP includes the following series:

(a) Sustainable Cities Project 1 (SCP-I): The first Sustainable Cities Project for  EUR 121.20 million IBRD loan and EUR 23.13 million European Union grant (equivalent to US$132.77 million and US$ 25.20 million, respectively) was approved in December 2016. DESKİ and MUSKİ are the Utilities using the loan for their municipal investments. 

(b) Sustainable Cities Project (SCP-II): The second Sustainable Cities Project (SCP 2) for EUR 73.5 million IBRD loan (equivalent to US$91.54 million) was approved in April 2018 and  finances municipal investments in two municipalities (ASAT -Antalya and MUSKİ -Muğla). Municipalities under SCP-II also benefit from technical assistance under SCP-I, which includes capacity building for the planning and management of sustainable cities.

(c) Sustainable Cities Project-II - Additional Financing (SCP-II-AF): In May 2019, the World Bank’s Board of Executive Directors approved financing of  EUR 500 million (US$ 560.6 million equivalent) to support sustainable development in Turkish cities. The Loan Agreement for SCP-II-AF for EUR 500 Million was signed on July 10, 2019 between the World Bank and ILBANK. The loan became effective on November 5, 2019. It aims for improving municipal needs on infrastructure, zero waste, transportation, energy efficiency, renewable energy, municipal social services, disaster recovery, urban renovation and restoration sectors.

2. Project Description

The emergence of the SCP-II-AF is a response to ongoing technical assistance for sustainable urban development and capital investment planning being provided under Component A of SCP-I. This exceptional demand includes identification of investments to improve public transport, water and sanitation, solid waste management, energy, environment, disaster and climate resilience and social infrastructure. The SCP II AF will allow ILBANK to support municipalities in financing priority projects in the immediate term. It will also support ILBANK, the Government of Turkey and the World Bank to expand the sustainable cities approach both sectoral and spatially which will increase Program’s impact and development effectiveness.

The SCP-II AF will specifically aim to enhance project approaches on city resilience to disasters and climate change mitigation and risks. The AF provides the means to invest in mitigation and strengthening a range of such climate adaptation measures in cities, which are increasingly susceptible to climate change risks.

The AF will support the same components as SCP-II: Municipal Investments (Component A) and Project Management (Component B), as described below.

Component A - Municipal Investments: This component will be scaled up to finance demand-driven municipal infrastructure investments to improve access to quality, sustainable and resilient public transport, water and wastewater, solid waste management, disaster risk management, energy efficiency and renewable energy, and improve the urban environment, municipal firefighting services, and social infrastructure and services.

The table below shows the eligible sectors.

Table 1. Project Budget by sector

 

Component B - Project Management: This component will finance goods, consulting services related to day-to-day Program/project management, reporting, monitoring and evaluation (M&E), supervision and project communications.

ILBANK will be responsible for identifying eligible sub-borrowers and ensuring that the subproject eligibility criteria are met. Sub-borrowers (district municipalities, metropolitan municipalities or their affiliated utilities) in the project will have to meet the sub-borrower eligibility criteria and be mutually agreed by ILBANK and the WB.

Subprojects should meet a set of eligibility criteria to ensure that all subprojects supported under the project are financially, economically, and technically viable and meet all safeguards requirements. ILBANK will work with sub-borrowers to appraise subprojects. The reports and studies of the proposed subprojects will be reviewed and approved by ILBANK and the Strategy and Budget Office of the Presidency in terms of technical, environmental, social, financial, and economic perspective and in accordance with the WB’s environmental and social safeguard policies. ILBANK will support the municipalities by hiring consultancy firms to carry out necessary sub-project preparation studies. Besides financial feasibility studies including creditworthiness analysis for sub-burrowers that are defined in this Terms of Reference, tasks for preparation of technical feasibility studies for sub-projects, preparation of environmental and social safeguard documents as well as review of all these outputs will be conducted through consultancy services.

 

3. Objectives

The objective of the assignment is to ensure effective and efficient implementation of SCP-II AF through increasing the quality of documents in sub-project preparation phase including financial feasibility studies (hereinafter Credit Worthiness studies-CWSs).

ILBANK will use these consultancy services in order to assess validity of sub-project rationale, to review the sub-project preparation documents and to analyze the level of urgency and priority of sub-project in the city context. This study will shorten the sub-project preparation and appraisal period and increase the quality of sub-project documents. Based on findings of this study, ILBANK will initiate sub-project preparation and appraisal phases. ILBANK will also guide the potential sub-project municipalities to prepare the sub-project documents, identify the institutional and implementation arrangements and timeframe for preparation accordingly.

Sub-projects supported under SCP-II AF are required to be financially, economically, and technically viable, and meet all safeguards requirements. ILBANK plans to use separate consultancy services in order to prepare the sub-project preparation documents (including PIDs, ESIAs, ESMPs, SEP, RAP, Ex-Post Social Audit reports and CWS). These documents will be reviewed and approved by ILBANK and the Strategy and Budget Office of the Presidency in terms of technical, environmental, social, financial, and economic perspective in accordance with the World Bank’s environmental and social safeguard policies.

Under the scope of this consultancy services, consultant will assist ILBANK in reviewing and verifying financial feasibility reports (credit worthiness analysis) for the respective Municipalities/Utilities. As these studies will be prepared by consultancy, the consultant will be in close relation with the firm(s) preparing the CWS and provide feedbacks and technical inputs to make these studies qualified enough for final approval.

Financial feasibility reports will include a comprehensive analysis of the Sub-Borrowers’[1] current financial, operational and organizational performance and assessment of its creditworthiness that applied to finance the Sub-Projects[2] under Sustainable Cities Project 2-Additional Finance. Financial analysis section (Section 3) of Financial Feasibility Preparation Guidelines of ILBANK for External Loan Projects will be used as the main reference documents for the financial feasibility studies. Thus, the consultant would ensure that the  financial feasibility studies are in compliance with the  said guideline and the terms of reference of the actual assignment of the financial feasibility studies.

Financial feasibility studies to be reviewed and verified under this contract shall result in the financial and economic basis for selection (appraisal) of the Municipalities/Utilities that are economically and operationally sustainable. The Consultant shall therefore review/assess/verify the submitted financial feasibility reports that investigates the economic soundness of Sub-Borrowers for which it is reasonable to expect that the proposed Sub-Projects shall be approved for financing by ILBANK and WB.

4. Scope of Services

The scope of the service is to review and verify of the all Creditworthiness Studies (CWSs) for the financial and economic appraisal of the respective Municipalities/Utilities listed in Annex. The detailed scope of Services of the Consultant under this Contract is as follows:

The Consultant shall review the creditworthiness study prepared for the municipality’s/utility’s current financial, operational and organizational performance by considering:

• Economic Profile  of the City
• Creditworthiness of the Municipality/Utility
• Creditworthiness Ratios of the Municipality/Utility
• Indebtedness Evaluation
• Fiscal Autonomy
• Capital Investment Effort
• Service Sustainability
• Quality of Operations

The Consultant shall review all information, verify, in general, the accuracy of presented information. The Consultant shall also review and where necessary, revise or supplement submitted creditworthiness studies.

The outcome of this exercise shall serve as a basis for preparation of Creditworthiness Screening Report. With this report the Consultant shall  represent its complete and independent professional judgment to verify creditworthiness study. The Consultant shall achieve all versions of submitted reports with a traceable format. The Consultant shall maintain a record of communications with the İLBANK and municipalities/utilities.

 

5. Team Composition & Qualification Requirements for the Key Experts

5.1. General Requirements

The Consultant shall be a firm with experience in carrying out similar tasks, specifically to include the following minimum qualifications;

• Experience in the preparation, review and/or financial audit regarding the Creditworthiness studies, Company Valuation Studies, Financial and Economic Feasibility Studies etc. for public or private sectors and preferably for World Bank or other IFIs financed projects
• Experience in reporting requirements and projects financed by international financing institutions,
• Experience in working with Municipalities and other Public Authorities.
• Have a background in national regulatory environment for municipal finance and creditworthiness.

5.2. Team Composition - Key Experts

Alternative professional staff shall not be proposed, and only one curriculum vitae (CV) may be submitted for each position. All experts who have a crucial role in implementing the contract are referred to as key experts.

The consulting team members must demonstrate strong skills in surveys, data collection, doing economic and financial analysis and preparing feasibility reports.

The consultant’s team shall include at least the following qualified experts and other professionals who are competent to carry out the duties described within this ToR:

 

The Consultant will make available the following Key experts:

 

1. Team Leader
2. Senior Financial Expert
3. Senior Economist

 

The number of the above-mentioned staff will be determined by the Consultant Firm and also approved by ILBANK to comply with the strict duration limitation of the contract. Consultant is free to propose additional professional experts as deemed necessary for successful completion of the assignment. The Consultant shall provide adequate staff in terms of expertise and time allocation, as well as needed equipment in order to complete the activities required under the scope of services and to finally achieve the objectives of the project in terms of time, costs and quality. Team leader and the experts co-operate with the other consultants and join the meetings whenever required by the Client.

 

The consultant’s team must at least have following experience and qualifications requirements:

 

Team Leader

The team leader is responsible for the overall contract coordination and quality control of contract implementation. S/he will ensure that the engagement of experts is agreed with the Client and that they are engaged on time to deliver the project outputs.

 

• University Degree on Economics, Finance, Business Administration and Master’s degree will be a plus.
• Minimum 8 years of relevant professional experience, comprising of 5 years of experience in related fields (such as Investment Programs, Financial and Economic Analysis of investments, Feasibility studies, etc.)
• Experiences in municipal and/or project finance and experiences in accounting and financial reporting and delivering training with outstanding analytical, synthesis, communication, and writing skills.
• Experiences in preparation of CW studies, credit analysis, feasibility studies and/or company valuation for public or private sectors.
• Experiences in working with Turkish municipalities and public investment projects.
• Have outstanding analytical, synthesis, communication, and writing skills.
• Have a good knowledge of requirements of Turkish legislation
• Experiences in working with international donors and/or international projects
• Fluency in written and spoken English and Turkish

 

Senior Financial Expert

• University Degree in Economics and Finance or similar relevant qualifications
• Minimum 5 years of relevant professional experience, comprising of 3 years of experience in related fields (such as Investment Programs, Financial and Economic Analysis of investments, Feasibility studies, etc.)
• Preferably, experience in developing Credit analysis
• Proven successful experience in collaboration with municipalities and international financial institutions
• Have a good knowledge of requirements of Turkish legislation with respect to Public Financial Management and Control as well as Institutional Framework for Local Administrations
• Excellent knowledge of the Turkish and English language

 

Senior Economist

 

• University Degree in economics, finance, accounting or similar relevant qualifications.
• Preferably 5 years’ experience in economic analysis, accounting, audit or finance.
• Experience in financial reporting for projects, preferably financed by Multilateral Development Banks of International Donors.
• Experience in accounting and/or financial audits.
• Knowledge of Turkish financial and accounting system will be an asset.
• Knowledge of requirements of Turkish legislation concerning issues relevant to this assignment would be an advantage.
• Fluency in Turkish and English would be an advantage.

Other experts, support staff & backstopping

The Consultant shall select and hire other experts as required according to the needs. CVs for other experts will also be submitted in the technical proposal, however technical evaluation will be conducted based on qualification of the key experts. The selection procedures used by the Consultant to select these other experts shall be transparent, and shall be based on pre-defined criteria, including professional qualifications, language skills and work experience.

All experts should have as a minimum requirement a university degree, at least three (3) years’ work experience, be fluent in English, and proven experience in the field(s) relevant for their specific projects, and work experience in Turkey will be an asset.

Cost for backstopping and support staff, as needed, are considered to be included in the financial proposal of the consultant. The Consultant should provide adequate administrative staff (i.e. secretary, translator, interpreter, accountant, document controller etc.)) needed to support the expert team in order to assure the quality of all its activities and outputs.

Consultants are reminded that communication with Client will be in Turkish. Therefore, if necessary, the Consultant has to hire respectively qualified experts or must provide interpretation and translation services which must be covered by the contract price. The reports will be submitted in two languages (Turkish and English).

 

6. Institutional Arrangements

Institutional and implementation arrangements for the AF, build on the existing structure under the ongoing SCP-I and SCP-II. ILBANK is committed to rapid development and implementation of the SCP-II AF, as well as supporting municipalities to develop feasibility studies and undertake efficient procurement activities. ILBANK has set a Project Management Unit (PMU) within its International Relations Department, which will be responsible for the operation of the Program at central level. PMU is the main unit in charge of overall coordination and implementation of the Program. The PMU is led by a department head and unit managers, and it has staff capacity in business development, contract management, financial management and technical management.  

Individual sub-loans are subject to the mutual agreement of ILBANK and the World Bank, based on subproject eligibility criteria. ILBANK will hire consultancy firms for the preparation of creditworthiness studies. Review of these documents will be done by the Consultant and will be submitted for the approval of ILBANK and the WB. Financial feasibility studies will be assessed and approved by ILBANK based on comments of the WB. The documents are reviewed and cleared by ILBANK and World Bank. Following the appraisal of technical and financial feasibility studies, sub-projects for sub-loan will be mutually agreed by ILBANK and the WB. Based on this approval ILBANK will sign the Sub-Loan Agreement with Sub-Borrowers

For this Contract, the procurement processes in the selection of the Consultant will be under the responsibility of ILBANK (referred to as " Client ") and the Consultancy Services Contract will be signed by ILBANK as the contract party.

7. Reporting Requirements and Time Schedule for Deliverables

7.1. Expected outcomes

After the commencement of the services, the Consultant shall prepare and submit an evaluation framework identifying the process, methodology, schedule and checklists for reviewing documents. Upon the approval of the ILBANK the Consultant will mobilize its resources.

The Consultant shall submit the following deliverables in electronic copies in due time. The deliverables and due time are defined in the below table;

 

This indicative table presents the standard workflow for these tasks, but the review process will continue until the approval of ILBANK. Thus, the Consultant should be aware that these tasks might include a few rounds of the review process without any additional cost to the Client.

As this assignment is financed from grant funding provided under from the European Union Instrument for Pre-Accession, the consultant shall follow all necessary visibility rules defined by European Commission.

 

7.2. Other Reports and deliverables

a- Monthly Progress Reports

The Consultant shall prepare and submit to the ILBANK each calendar month a report that summarizes the progress in reviewing activities with respect to creditworthiness studies. The report shall give a detailed number of outputs performed by the Consultant during the previous month as well as a working plan for the following months. The report shall also give information about personnel employment status of the Consultant. The report shall be submitted to the Client by the tenth day of following month.

b- Final Report

A final report shall be submitted at the end of the Contract giving full details of all activities carried out during the service period. This report shall be submitted by the Consultant to the Client at least 15 days prior to the contract expiration date.

All the reports prepared under the scope of services shall be prepared in both English and Turkish.

8. Client’s Input and Counterpart Personnel

ILBANK PMU will oversee the progress of the assignment and review the quality of the Consultant’s deliverables. The Consultant is obliged to closely cooperate with the Project Team, to ensure constant contact and provide necessary justifications for the submitted review reports. The approval of the deliverables will be done by ILBANK PMU. The PMU will assist the Consultant to ensure coordination with Municipalities/Utilities and other Consultants who are the author of the subject studies while preparing the review reports.

All available project information, reports, and documents will be made available for the Consultant by ILBANK in parallel with the submission of the studies from the related Consultants. The Consultant will report directly to the ILBANK PMU. All documents related to the Services are and will remain the Client’s property, and the Consultant shall not use or disclose this documentation without previous Client’s written consent.

The Consultant shall participate in working meetings upon the Client’s invitation. The Consultant shall also attend and actively partake in the presentation of individual sub-project phases. The Consultant shall, for the needs of the meeting, take part in the preparation of documents and presentations required, take part in these, and present his work. The key staff defined in ToR shall take part in all the key meetings, as well as in the presentations of activities.

9. Contract Type

The contract will be signed between ILBANK and the Consultant, and payments to consultant will be made upon consultant’s submission of deliverables and approval. This assignment will be based on the lump-sum payment against the deliverables as defined in this Terms of Reference.

 

10. Duration of the Assignment

 

The estimated duration of the assignment is 10 (ten) calendar months. The Consultant shall submit all the studies in a timely manner to complete the services on time without any delay. It is expected that the Consultant will work “on demand” basis depending on delivery of documents prepared by other consultants. The exact timing of the services will be agreed between the ILBANK and the Consultant.

 

Annex-Draft List of Municipalities/Utilities and Estimated # of CW Studies

 

 

 

ANNEX

Draft List of Municipalities/Utilities and Estimated # of CW Studies