December 15, 2011
TA3290 Life-Cycle Modeling and Economic Evaluation
CiTG, minor Mining and Resource Engineering
Economie 1: Investment Projects Dr.ir. Gerard P.J. Dijkema
Energy & Industry Group
Introduction (1)
• What is the main purpose of a company?
Economic Evaluation Introduction (2)
• What is the main purpose of a company?
• Rijnland model:
• long-term continuity ;
• profit = condition
• Stakeholder-model
• Anglo-Saxon model:
• maximum profit
• profit = goal
• Shareholder model
Kapitaalsintensieve sectoren Energie en Industrie
• Waar denk je dan aan?
Kapitaalsintensieve sectoren Energie en Industrie
• energievoorziening:
• olieraffinage, elektriciteitsproduktie, aardgasleidingen
• LNG, kolenvergasser, bioethanolfabriek
• industrie
• voedingsmiddelenindustrie (bijv. bierbrouwerijen)
• (basis)metaalindustrie machinebouwers
• (petro)chemische industrie
• polymeerindustrie (kunsstoffen en vezels)
• farmaceutische industrie
• watersector
• drinkwaterproductie
• afvalwaterzuivering
• water(peil)beheer en waterkeringen
Kapitaalintensiteit Energie en Industrie
• Energievoorziening ('world-scale' installaties):
• Olieraffinaderij: > 1 miljard Euro 'Greenfield' Raffinaderij
• E-centrale 1000 MW
• kolen +/- 1.5 miljard;
• aardgas +/- 800 miljoen
• kolenvergasser: 1.8 miljard
• nucleair: 2-3 miljard
• LNG-terminal: 200 miljoen
• Aardgasleiding: 1-4 miljoen / kilometer
• Bioethanolfabriek: 200 miljoen
• Watersector
• Drinkwaterfabriek: 50 – 200 miljoen
• Afvalwaterzuivering: 400 – 900 miljoen
• water(peil)beheer (gemalen): 5 – 50 miljoen
• Waterkeringen: 2 – 10 miljoen / kilometer
Kapitaalintensiteit Energie en Industrie
• industrie
• voedingsmiddelenindustrie (bijv. Bierbrouwerijen): 20 – 200 miljoen
• (basis)metaalindustrie:
• Hoogoven (Fe)
• Aluminium-smelter > 1 miljard
• (petro)chemische industrie
• Naftakraker complex: 2 miljard
• Overige fabrieken: 50-500 miljoen
•
• polymeerindustrie (kunsstoffen en vezels): 20-120 miljoen
• farmaceutische industrie: 10-50 miljoe
Kapitaalsintensieve sectoren Energie en Industrie
• En waarom / waarin investeren?
Investeren
• Waarom: concurrentiepositie
• Aandeelhouderswaarde (Angelsaksisch model)
• Continuïteit voor alle stakeholders (Rijnlands model)
• Investeren in
• Producten
• ontwikkeling, introductie, upgrade
• service
• verbeteren product/Markt combinaties; optimale productmix
Investeren (2)
Investeren in
• Productieprocessen - bestaand
• Verbeteren operatie (korte termijn < 1 jaar)
• Kostenreductie; Onderhoud
• Health/Safety/Environment (HSE)
• Vergroten van de capaciteit
• Debottlenecking; 'Capacity creep'
• Productieprocessen – realisatie van additionele installaties
• Vervanging & groei van de vraag (2 – 5 jaar)
• Productieprocessen – ontwikkeling van nieuwe processen
• Innovatie van installaties en producten (> 5 jaar - lange termijn)
Economische Evaluatie
Profit
after tax=
Sales + Other Income – Expenses – Taxes But how to Evaluate?
and what to Evaluate?
A company and a project
Economic Evaluation (Investment) Projects
• Everything can be considered a project
• New product introduction
• Plant capacity increase
• R&D program
• Maintenance work
• HSE improvement
• New facility
• Corporate training
• Marketing campaign
Industrial project investment cycle
Company strategy
Market research (where/when to invest)
Conceptual design
Go/no-go decision
Investment
What is the demand forecast?
What are my competitors doing?
What is the expected revenue Technical design?
(Life-cycle) cost estimates
Is the combination of location, design and market feasible? (For instance ROI > 15%)
If decision is go: implement plans.
Project (economic) evaluation Focus on a new >100M€ facility
• What does one (management) have to do?
Industrial market research
(existing product or service)
Demand for product X Production capacity product X
Range of future demand outcomes
Time Present
T=0
Forecast
Possible outcome on
market research for
product X
Market research
Revenues:
• Product volume – trends and forecasts
• Market structure – who are our competitors
• Existing asset portfolio
• Known capacity expansions (competitors)
Costs
• Market status – preferred/availability suppliers
• Trends – major cost indices (labour, steel, energy, ICT..)
• Site selection, transport infrastructure etc.
• Capital
Project (economic) evaluation Focus on a new >100M€ facility
• What does one (management) have to do?
• Market research
• Life-cycle economic estimate
• Investment & production cost
• Economic performance
• Funding strategy
• Risk assessment
• Strategic alignment – project portfolio!
• Initial go/no go on business case
Life cycle economic estimates
Activity
• D – Design
• B – Build
• F – Finance
• O – Operate
• M – Maintain
• D – Dismantle
When looking at a “project” life of decades!
Estimate
• Investment capital cost
• Lead time (go <-> live)
• Interest rate
• Operating cost/revenue
• Maintenance time & cost
• Dismantling cost
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