UNIVERSITAS INDONESIA

PRELIMINARY DESIGN OF BIOGAS PLANT FROM COW MANURE

AND PALM OIL MILL EFFLUENT

Report Assignment 5

GROUP 31
GROUP PERSONEL:
FHANI MELIANA (1206212413)
KASANDIKA GANIARSA (1206250304)
NINDYA SULISTYANI (1206212501)
SEPTI NIAWATI (1206212294)
YOSIA MARSINO (1206248426)

CHEMICAL ENGINEERING DEPARTMENT

FACULTY OF ENGINEERING
UNIVERSITAS INDONESIA
DEPOK 2015
 EXECUTIVE SUMMARY

Economic analysis is aimed to know whether the project is economically

viable or not. The biogas plant has an objective to make compressed biogas price
become more competitive compared with compressed natural gas. Plant will be
build in 2020 and estimated to being operated for 20 years.
Investment cost included cost of site preparation (Csite), cost of service
facilities and buildings (Cbuild), and cost of utility plants and related facilities
(Coffsite). These are added to total bare module cost (CTBM) to give the direct
permanent investment (CDPI). After adding funds to cover contingencies and
contactor fees, the total depreciable capital (CTDC), is obtained. To the CTDC is
added the investment in non-depreciable items, including cost of land (Cland), cost
of royalties (Croyal), and cost for plant startup (Cstartup), to give total permanent
investment (CTPI). After the working capital is added, the total capital investment
(CTCI) is obtained. Then to the CTCI is added the investment for supporting
facilities (CSup) and other cost such as plant overhead cost (Cother) to obtain Capital
Expenses (Capex).
From cost estimation, the Capital Expenses (Capex) is US$ 11,682,610.51
and Operating Expenses (Opex) is US$ 780,322.84 studied using sensitivity
analysis to know their effect on profitability parameters, like IRR, NPV, and PP.
The equity for financing the Capital Expenses is 60% from bank and 40% from
investor. Based on the calculation of cost analysis, the calculation of IRR is
28,53%, larger than MARR which is 15,019%. In addition, the NPV is US$
71,496.34 with payback period is 4,8 years.

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 TABLE OF CONTENT

EXECUTIVE SUMMARY..................................................................................... ii
TABLE OF CONTENT ......................................................................................... iii
LIST OF TABLES .................................................................................................. v
LIST OF FIGURES .............................................................................................. vii
CHAPTER 1 CAPITAL ESTIMATE ..................................................................... 1
1.1 Cost Index ................................................................................................. 1
1.2 Purchase Equipment Cost ......................................................................... 3
1.3 Total Equipment Cost (TCBM)................................................................... 4
1.4 Site Development Cost (Csite) ................................................................... 6
1.5 Building Cost (Cbuilding) ............................................................................ 6
1.6 Offsite Facilities Cost (Coffsite) .................................................................. 6
1.7 Contingency Cost (Ccontingency) .................................................................. 7
1.8 Contractor’s Fee (Ccontractor’s fee) ................................................................ 7
1.9 Land Cost (Cland)....................................................................................... 7
1.10 Royalties Cost (Croyalties) ........................................................................... 8
1.11 Plant Start Up Cost (Cstart-up)..................................................................... 8
1.12 Working Capital (CWC) ............................................................................. 8
1.13 Supporting Facilities Cost (Csupp) ............................................................. 8
1.14 Additional Cost/Other Cost (Cothers) ......................................................... 9
1.15 Capitalized Cost (Ccapitalized)...................................................................... 9
1.16 Calculation of Total Capital Investment (CAPEX) ................................ 11
CHAPTER 2 OPERATING COST ....................................................................... 13
2.1 Equity ......................................................................................................... 13
2.2 Raw Material Cost ...................................................................................... 15
2.3 Utility Cost ................................................................................................. 16
2.4 Labor Cost .................................................................................................. 17
2.4.1 Direct Labor Cost .................................................................................... 17
2.4.2 Indirect Labor Cost .................................................................................. 18
2.5 Maintenance Cost ....................................................................................... 19
2.6 Insurance Cost ............................................................................................ 19
2.7 Marketing and Brand Cost ......................................................................... 20
2.8 Other Operational Cost ............................................................................... 20
2.9 Depreciation ............................................................................................... 21
CHAPTER 3 ECONOMIC ANALYSIS............................................................... 24
3.1 Investment Feasibility Analysis .................................................................. 24
3.1.1 Income .................................................................................................. 24
3.1.2 Cash Flow ............................................................................................. 24
3.2 Profitability Analysis ................................................................................... 28
3.2.1 Internal Rate of Return (IRR) ............................................................... 28
3.2.2 Net Present Value (NPV) ...................................................................... 29

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 3.2.3 Payback Period (PP) ............................................................................. 29
3.2.4 Rate of Return/Return of Investment (RoR/RoI) .................................. 30
3.3 Cost Breakdown .......................................................................................... 30
3.4 Sensitivity Analysis ..................................................................................... 32
3.4.1 Selling Price Fluctuation ....................................................................... 33
3.4.2 Operational Cost Changes (Raw Material) ........................................... 34
3.4.3 Operational Cost Changes (Direct Labor Cost) .................................... 35
3.4.4 Operational Cost Changes (Indirect Labor Cost) ................................. 35
3.4.1 IRR Sensitivity Analysis ....................................................................... 36
3.4.2 NPV Sensitivity Analysis ..................................................................... 37
3.4.3 Payback Period Sensitivity ................................................................... 37
CHAPTER 4 OUTSTANDING ISSUES .............................................................. 39
4.1 Technical Aspects ........................................................................................ 39
4.2 Economical Aspects .................................................................................... 40
CHAPTER 5 CONCLUSION ............................................................................... 41
5.1 Conclusion ................................................................................................... 41
REFERENCES...................................................................................................... 42
APPENDICES ...................................................................................................... 43

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 LIST OF TABLES

Table 1.1 Chemical Engineering Plant Cost Index ................................................. 1

Table 1.2 Projection of Chemical Engineering Plant Cost Index ........................... 2
Table 1.3 Purchased Equipment Cost ..................................................................... 3
Table 1.4 Total Equipment Cost ............................................................................. 4
Table 1.5 Site Development Cost ........................................................................... 6
Table 1.6 Building Cost .......................................................................................... 6
Table 1.7 Offsite Facilities Cost ............................................................................. 7
Table 1.8 Supporting Facilities Cost ....................................................................... 8
Table 1.9 Additional/Other Cost ............................................................................. 9
Table 1.10 Capitalized Cost for Pump in 2025 ..................................................... 10
Table 1.11 Capitalized Cost for Pump in 2030 ..................................................... 10
Table 1.12 Capitalized Cost for Pump in 2035 ..................................................... 11
Table 1.13 Summary of Capital Expenses Calculation ......................................... 12
Table 2.1 BCA Equity ........................................................................................... 13
Table 2.2 City Bank Equity................................................................................... 14
Table 2.3 The Hongkong and Shanghai Banking City Equity .............................. 14
Table 2.4 Investor Equity ...................................................................................... 14
Table 2.5 Total Payment Equity ........................................................................... 15
Table 2.6 Raw Material Cost ................................................................................ 15
Table 2.7 Transportation Cost ............................................................................... 16
Table 2.8 Utility Cost ............................................................................................ 16
Table 2.9 Fixed Direct Labor Cost ........................................................................ 17
Table 2.10 Direct Labor Cost ................................................................................ 18
Table 2.11 Fixed Indirect Labor Cost ................................................................... 18
Table 2.12 Indirect Labor Cost ............................................................................. 19
Table 2.13 Annual Maintenance Cost ................................................................... 19
Table 2.14 Insurance Cost ..................................................................................... 20
Table 2.15 Type of Marketing .............................................................................. 20
Table 2.16 Other Cost ........................................................................................... 20
Table 2.17 Equipment Depreciation ..................................................................... 21
Table 2.18 Building Depreciation ......................................................................... 22
Table 3.1 Cash Flow ............................................................................................. 26
Table 3.2 CAPEX Component Breakdown Cost .................................................. 30
Table 3.3 Cost Breakdown of OPEX .................................................................... 31
Table 3.4 CBG Selling Price Fluctuation .............................................................. 33
Table 3.5 Solid Fertilizer Selling Price Fluctuation .............................................. 33
Table 3.6 Liquid Fertilizer Selling Price Fluctuations .......................................... 33
Table 3.7 Raw Material Cost Fluctuation ............................................................. 34
Table 3.8 Direct Labor Cost Fluctuations ............................................................. 35

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Table 3.9 Indirect Labor Cost Fluctuations........................................................... 35
Table 4.1 Technical aspect benchmark ................................................................. 39
Table 4.2 Economical aspect benchmark .............................................................. 40

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 LIST OF FIGURES

Figure 1.1 Chemical Engineering Plant Cost Index ................................................ 2

Figure 1.2 Cost Index Until 2040.......................................................................... 10
Figure 3.1 Cummulative Cash Flow ..................................................................... 27
Figure 3.2 NPBT and NPAT ................................................................................. 27
Figure 3.3 Capex Breakdown ................................................................................ 31
Figure 3.4 OPEX Breakdown ............................................................................... 32
Figure 3.6 Sensitivity Chart for IRR ..................................................................... 36
Figure 3.7 Sensitivity Chart for NPV .................................................................... 37
Figure 3.8 Sensitivity Chart for Payback Period ................................................... 37

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 CHAPTER 1
CAPITAL ESTIMATE

In this chapter, there will be calculating economic aspects and economic

analysis. To overall calculation and analysis about biogas plant, there some
assumption to be used:
 The plant will be built in 2019 and operate in 2020.
 The life time of this plant is 20 years.
 The operation time is 330 days every year, with 24 hour a day.
 Plant total production for 1 year is 66 batches and produces 14,728 biogas
packs.

1.1 Cost Index

Cost index is to estimate purchase equipment cost at a later date by
multiplying the cost from an earlier date. One of index that most commonly
considered by chemical engineering is The Chemical Engineering Plant Cost
Index (CEPCI). The data is gotten from the CEPCI online. Data include CEPCI
for the range year between 2005-2012. Data CE shows in table below.

Table 1.1 Chemical Engineering Plant Cost Index

Year CEPCI
2005 468.2
2006 499.6
2007 525.4
2008 575.4
2009 521.9
2010 550.8
2011 585.7
2012 584.6
(Source: Chemical Engineering Online, 2014)

To estimate purchase equipment cost in 2019, CEPCI data is plotted in

the graphics and we can extrapolating data by linear equation from the graphics.
CEPCI data from 2005-2012 is not linear, so to get linear equation we choose data
from some years that linear likes in 2009-20011. The CEPCI graphic in 2009-
2011 shows below.

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590
580
570 y = 31.9x - 63566

560
CEPCI

550
540
530
520
510
2008.5 2009 2009.5 2010 2010.5 2011 2011.5
Year

Figure 1.1 Chemical Engineering Plant Cost Index

By extrapolating data from the graphic, we can calculate purchase

equipment cost in 2019, with cost index value of 840.1. The cost index value until
2019, shows in table below.
Table 1.2 Projection of Chemical Engineering Plant Cost Index
Year CEPCI
2009 521.9
2010 550.8
2011 585.7
2012 616.8
2013 648.7
2014 680.6
2015 712.5
2016 744.4
2017 776.3
2018 808.2
2019 840.1

To estimate purchase equipment cost, we use cost index at present time

(I) and base cost index (Ibase) like this equation.

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1.2 Purchase Equipment Cost

Purchase equipment cost based on FOB (Free On Board) cost. To
calculation of equipment cost, we use some data sources like from Process and
Product Design Principles by Sieder or online vendor catalog. In estimate
equipment cost, cost index value in 2019 is 840.1. The purchase equipment cost
for every equipment in this plant shows in table below.

Table 1.3 Purchased Equipment Cost

Cost
Equipment Price/Unit Total Price Year Index in Cost in
Qty
Code (US$) (US$) Basis Year 2019 (US$)
Basis
Tank
TK101 1 8464.28571 8464.28571 2006 499.6 14233.08
TK102 1 30386.7857 30386.7857 2006 499.6 51096.75
TK103 1 55602.8571 55602.8571 2006 499.6 93498.72
TK109A 1 10665 10665 2006 499.6 17933.68
TK109B 1 3216.42857 3216.42857 2006 499.6 5408.57
Anaerobic Digester
AD104 2 50000 100000 2001 265.9 315945.8
Gas Holder
GH106 1 2413.71 2413.71 2001 265.9 7626.016
GH113 1 6482.97 6482.97 2001 265.9 20482.67
GH114 1 4095 4095 2001 265.9 12937.98
Absorber Column
AB110 1 38000 38000 2006 499.6 63898.72
AB112 1 35000 35000 2006 499.6 58854.08
Stripping Column
RG110 1 45000 45000 2006 499.6 75669.54
RG112 1 28000 28000 2006 499.6 47083.27
Filter Press
FP108 2 18000 36000 2006 499.6 60535.63
Heat Exchanger
CD110A,
CD110B,
CD110C,
6 11090 66540 2001 265.9 210230.4
CD112A,
CD112B,
CD112C
Pump
PU101A 1 6,765 6764.92212 2000 394 14424.39
PU101B 1 6,151 6150.50543 2000 394 13114.31
PU102B 1 6,151 6150.50543 2000 394 13114.31

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Table 1.3 Purchased Equipment Cost (Cont’d 1)

Cost
Equipment Price/Unit Total Price Year Index in Cost in
Qty
Code (US$) (US$) Basis Year 2019 (US$)
Basis
Pump
PU110B 1 3,979 3978.59137 2000 394 8483.286
PU110C 1 3,876 3876.35033 2000 394 8265.284
PU110A 1 3,963 3962.66193 2000 394 8449.321
PU112C 1 3,996 3995.55544 2000 394 8519.457
PU112B 1 4,000 3999.69481 2000 394 8528.283
PU112A 1 3,998 3998.06147 2000 394 8524.801
PU112D 1 4,225 4224.80725 2000 394 9008.276
Blower
BL01 2 75 150 2001 395 319.0253
Compressor
CS110 1 20000 20000 2001 395 42536.71
Total (US$) 1198722

1.3 Total Equipment Cost (TCBM)

Bare module cost is the costs are added to the purchase cost for installed
cost. A module contains not only the piece of equipment or machinery, but also all
other materials for installing it (setting it and connecting it to equipment in other
modules), including the piping to and from other modules; the concrete (or other)
foundation; ladders and other steel supporting structures; the instruments,
controllers, lighting, and electrical wiring; insulation; and painting (Sieder et al.,
2003). To calculation bare module cost, Guthrie (1969, 1974) provides factors to
estimate the direct costs of materials and labor, as well as indirect cost involved in
the installation procedure (Sieder et al., 2003). Bare module factors for each of
equipment are different. In Table 16.11 and 16.14 of Process and Product Design
Principles by Sieder shows bare module factor for some equipment. Total bare
module cost for our plant described in table below.

Table 1.4 Total Equipment Cost

Cost in Module Total Bare Module
Equipment Code Qty
2019 (US$) Factor Cost (US$)
Tank
TK101 1 14233.0793 4.16 59209.60997

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Table 1.4 Purchased Equipment Cost (Cont’d 1)

Total
Price/Unit
Equipment Code Qty Price Year Basis
(US$)
(US$)
Tank
TK102 1 51096.7548 4.16 212562.4998
TK103 1 93498.7195 4.16 388954.6733
TK109A 1 17933.6799 4.16 74604.10857
TK109B 1 5408.57014 4.16 22499.65179
Anaerobic Digester
AD104 2 315945.844 4.3 1358567.131
GH106 1 7626.01644 4.16 31724.22838
GH113 1 20482.6743 4.16 85207.9251
GH114 1 12937.9823 4.16 53822.00647
Absorber Column
AB110 1 63898.719 4.3 274764.4916
AB112 1 58854.0833 4.3 253072.558
Stripping Column
RG110 1 75669.5356 4.3 325379.0032
RG112 1 47083.2666 4.3 202458.0464
Filter Press
FP108 2 60535.6285 2.32 140442.6581
Heat Exchanger
CD110A,
CD110B,
CD110C, 6 210230.365 3.17 666430.2564
CD112A,
CD112B, CD112C
Pump
PU101A 1 14424.3936 3.3 47600.49881
PU101B 1 13114.3137 3.3 43277.23535
PU102B 1 13114.3137 3.3 43277.23535
PU110B 1 8483.28582 3.3 27994.84319
PU110C 1 8265.28403 3.3 27275.43731
PU110A 1 8449.32053 3.3 27882.75776
PU112C 1 8519.45716 3.3 28114.20864
PU112B 1 8528.28327 3.3 28143.3348
PU112A 1 8524.80061 3.3 28131.84201
PU112D 1 9008.27556 3.3 29727.30933
Blower
BL01 2 319.025316 2.15 685.9044304
Compressor
CS110 1 42536.7089 2.15 91453.92405
Total (US$) 4573263.379

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1.4 Site Development Cost (Csite)

Site development involves making land surveys, dewatering and
drainage, surface clearing, rock blasting, excavation, grading, piling; and addition
of fencing, roads, sidewalks, railroad sidings, sewer lines, fire protection facilities,
and landscaping (Sieder et al., 2003). Site development cost (Csite) for grass-roots
plants around 10-20% of the total bare module cost. For our plant assume Csite
around 10% of the total bare module cost.

Table 1.5 Site Development Cost

Type of cost Value Total Price (US$)
Site Development (Grass Root Plant) 10% CTBM 457326.3379
Total (US$) 457326.3379

1.5 Building Cost (Cbuilding)

Our plant is subsidiary of PTPN VI and located in PTPN VI region. Total
area of our plant is 6,000 m2 consist of 4,000 m2 process area and 2,000 m2 office
areas.

Table 1.6 Building Cost

Type of Cost Cost/m2 (US$) Area (m2) Total Price
Building 71.42857143 4000 285714.2857
142.8571429 2000 285714.2857
Total (US$) 571428.5714

1.6 Offsite Facilities Cost (Coffsite)

Offsite facilities include utility plants, when the company provides its
own utilities, pollution control, ponds, waste treatment, offsite tankage, and
receiving and shipping facilities (Sieder et al., 2003). The utility plants may be
estimated with use Table 16.12 of Process and Product Design Principles by
Sieder. To other facilities may be added 5%of CTBM.

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Table 1.7 Offsite Facilities Cost

Bare
Cost
Price/Unit Total Year Bare Modul
Facility Code Qty Index
(US$) Price Reference Modul Cost in
Reference
2019
Steam RB110,
2 515 1,029 2000 394 1.86 864,466
Boiler RB112
Generator GR-101 2 56,429 112,857 2014 621.3 0.73 111,399
Process
PW01 1 2563.59 2563.59 2563.59
Water
Total (US$) 978,428

1.7 Contingency Cost (Ccontingency)

Contingencies are unanticipated cost incurred during the construction of a
plant. It is common to set aside 15% of the CDPI,

1.8 Contractor’s Fee (Ccontractor’s fee)

Contractor is paid a negotiated amount regardless of incurred expenses.
Commonly, contractor fee is 3% CDPI for contactor’s fee; Cconfee is obtained from
equation below.

1.9 Land Cost (Cland)

Cost of land is non-depreciable, since land rarely decreases in value. Our
biogas plant is using land from PTPN VI, because the biogas plant is procceed
raw material from PTPN VI which is cattle manure. So, we use the assumption
that our biogas plant free of land cost because using the PTPN VI area.

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1.10 Royalties Cost (Croyalties)

Costs of royalties are cost that paid to patent’s owner for process license
that used in the plant, suchs as royalty for technology from vendors. In this plant,
royalties are paid as an initial license fee, so it is just paid in the first year. But, we
don’t calculate royalty cost because royalty cost is included to purchased
equipment cost. Besides that, royalty is commonly used in product design not in
plant design.

1.11 Plant Start Up Cost (Cstart-up)

Cost of plant startup is typically estimated as 10% of CTDC.

1.12 Working Capital (CWC)

Working capital cost includes the initial investment in temporary and
consumable materials, as well as cash for initial payments of salaries and other
operating expenses. This cost is estimated to be 17.6% of CTPI.

1.13 Supporting Facilities Cost (Csupp)

Supporting facilities cost includes electronics equipment and furniture
used in administrative office, and transportation vehicle. The calculation is shown
below.

Table 1.8 Supporting Facilities Cost

Equipments Quantity Price ($) Total Price ($)
Office Desk 20 US$ 50 US$ 1,000.00
Office Chair 22 US$ 15 US$ 330.00
Receptionist Desk 1 US$ 150 US$ 150.00

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Table 1.8 Supporting Facilities Cost (Cont’d 1)

Equipments Quantity Price ($) Total Price ($)
Air Conditioner 6 US$ 150 US$ 900.00
Dispenser 3 US$ 50 US$ 150.00
Sofa 3 US$ 750 US$ 2,250.00
Computers 15 US$ 700 US$ 10,500.00
LCD Projectors 2 US$ 500 US$ 1,000.00
Meeting Desk and Chairs 3 US$ 500 US$ 1,500.00
Cupboards 5 US$ 150 US$ 750.00
Photocopy Machine 3 US$ 1,000 US$ 3,000.00
Fax Machine, Scanner and Printer 2 US$ 300 US$ 600.00
Office Car 3 US$ 10,000 US$ 30,000.00
Pick-Up Truck 5 US$ 30,000 US$ 150,000.00
Total Supporting Facilities Cost (Tsupporting) US$ 202,130.00

1.14 Additional Cost/Other Cost (Cothers)

This cost includes plant overhead cost for some installations. The
calculation is shown below.

Table 1.9 Additional/Other Cost

Components Cost
Water Installation US$ 8,500
Telephone Installation US$ 5,000
Electricity Installation US$ 6,500
Internet Installation US$ 1,700
Hydrants Installation US$ 4,500
Total Other Cost (Cothers) US$ 26,200

1.15 Capitalized Cost (Ccapitalized)

Capitalized costs are not expensed in the period they were incurred, but
recognized over a period of time via depreciation or amortization. In our plant, the
annual replacement is only for pumping equipment. We calculate capitalized cost
from cost index in year of replacement times to CTBM. So, capitalized cost is
Pump life time is 5 years, so the capitalized cost is calculated for every 5 years.
We calculate capitalized cost in 2025, 2030, 2040.

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1600
y = 31.9x - 63566
1400
R² = 1
1200
1000
CEPCI

800
600
400
200
0
2015 2020 2025 2030 2035 2040 2045
Year
Figure 1.2 Cost Index Until 2040

A. Replacement in 2025
Cost Index in 2025 = 1,22783002
Table 1.10 Capitalized Cost for Pump in 2025
Pump CTBM Capitalized Cost
PU101 A US$ 47.600,50 US$ 58.445,32
PU101B US$ 43.277,24 US$ 53.137,09
PU102B US$ 43.277,24 US$ 53.137,09
PU110B US$ 27.994,84 US$ 34.372,91
PU110C US$ 27.275,44 US$ 33.489,60
PU110A US$ 27.882,76 US$ 34.235,29
PU112C US$ 28.114,21 US$ 34.519,47
PU112B US$ 28.143,33 US$ 34.555,23
PU112A US$ 28.131,84 US$ 34.541,12
PU112D US$ 29.727,31 US$ 36.500,08

B. Replacement in 2030
Cost Index in 2030 = 1,41768837
Table 1.11 Capitalized Cost for Pump in 2030
Pump CTBM Capitalized Cost
PU101 A US$ 47.600,50 US$ 67.482,67
PU101B US$ 43.277,24 US$ 61.353,63
PU102B US$ 43.277,24 US$ 61.353,63
PU110B US$ 27.994,84 US$ 39.687,96
PU110C US$ 27.275,44 US$ 38.668,07
PU110A US$ 27.882,76 US$ 39.529,06

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Table 1.11 Capitalized Cost for Pump in 2030 (Cont’d 1)

Pump CTBM Capitalized Cost
PU112C US$ 28.114,21 US$ 39.857,19
PU112B US$ 28.143,33 US$ 39.898,48
PU112A US$ 28.131,84 US$ 39.882,19
PU112D US$ 29.727,31 US$ 42.144,06

C. Replacement in 2035
Cost Index in 2035 = 1,607546721
Table 1.12 Capitalized Cost for Pump in 2035
Pump CTBM Capitalized Cost
PU101 A US$ 47.600,50 US$ 76.520,03
PU101B US$ 43.277,24 US$ 69.570,18
PU102B US$ 43.277,24 US$ 69.570,18
PU110B US$ 27.994,84 US$ 45.003,02
PU110C US$ 27.275,44 US$ 43.846,54
PU110A US$ 27.882,76 US$ 44.822,84
PU112C US$ 28.114,21 US$ 45.194,90
PU112B US$ 28.143,33 US$ 45.241,73
PU112A US$ 28.131,84 US$ 45.223,25
PU112D US$ 29.727,31 US$ 47.788,04

Total Capitalized Cost for Pumping Equipment until 2040 is US$

1,409,570.84.

1.16 Calculation of Total Capital Investment (CAPEX)

Investment cost included cost of site preparation (Csite), cost of service
facilities and buildings (Cbuild), and cost of utility plants and related facilities
(Coffsite). These are added to total bare module cost (CTBM) to give the direct
permanent investment (CDPI). After adding funds to cover contingencies and
contactor fees, the total depreciable capital (CTDC), is obtained. To the CTDC is
added the investment in non-depreciable items, including cost of land (Cland), cost
of royalties (Croyal), and cost for plant startup (Cstartup), to give total permanent
investment (CTPI). After the working capital is added, the total capital investment
(CTCI) is obtained.
Then to the CTCI is added the investment for supporting facilities (CSup) and
other cost such as plant overhead cost (Cother) to obtain Capital Expenses (Capex).

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Table 1.13 Summary of Capital Expenses Calculation

Total bare-module cost for fabricated equipment CFE
Total bare-module cost for process machinery CPM
Total bare-module cost for spares Cspare
Total bare-module cost for storage and surge tanks Cstor
Total for initial catalyst charge Ccat
Total bare-module investment CTBM US$ 4,573,263.38
Cost of site preparation Csite US$ 457,326.34
Cost of service facilities and building Cbuild US$ 571,428.57
Cost for utility plants and related facilities Coffsite US$ 978,428.39
Total of direct permanent investment, DPI CDPI US$ 6,580,446.68
Cost for contingencies Ccontingency US$ 987,067.00
Cost for contractor’s fee Ccontractor’s fee US$ 197,413.40
Total depreciable capital, TDC CTDC US$ 7,764,927.08
Cost of land Cland US$ 0
Cost of royalties Croyal US$ 0
Cost of plant startup Cstartup US$ 776,492.71
Total permanent investment, TPI CTPI US$ 8,541,419.79
Working capital CWC US$ 10,044,709.67
Total capital investment CTCI US$ 10,044,709.67
Total Cost of Supporting Facilities CSupporting US$ 202,130.00
Total Other Cost COther US$ 26,200.00
Total Capitalized Cost Ccapitalized US$ 1,409,570.84
Capital Expenses CAPEX US$ 11,682,610.51

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 CHAPTER 2
OPERATING COST

Operating cost or operational cost is cost required for operating the plant,
which calculated annually such as, salaries, utility, insurance, maintenance, etc.
All of these expenditures are needed to operate the plant. Two types of operational
cost are fixed cost and variable cost. To calculate the operational cost, some data
of expenditure is needed.

2.1 Equity
On the first year, our biogas plant doesn’t have any capital, but now on
government have a resolution of our problem. There is loan system in Indonesia
which called KUR (Kredit Usaha Rakyat) that is being held by Indonesian Bank.
Actually we need at least 11,682,610.51 USD for our first capital. In building
factory, the most important factor that will be reviewed is whether the plant is
profitable or not. Owners can only invest a whole, but it would be very risky if
something happens when the factory is still in the active period.
We’re choosing bank with the most minimum rate of interest. The interest
rates of bank loans are usually around 11.6%-14% with payback period less than 6
years. The banks are Citibank NA, PT. Bank Central Asia Tbk, and The
Hongkong and Shanghai Banking Corp, that have rate of interest 10% per year,
11.5% per year and 10.25% per year. We got the source of the interest rate of each
bank from http://www.bi.go.id/id/perbankan/suku-bunga-dasar/Default.aspx.
Owner may extend the contract if they are not able to pay off the loan from the
bank. The higher the interest, investors will be more interested in investing, but
investors are constrained by the high interest rate bank loan. However, for the
design of this plant will be used 60% equity loan from the bank and 40% of the
investors. So the cost per year can be counted as in table below.

Table 2.1 BCA Equity

Loan Paid With
Year Bank Loan Annual Interest Loan Paid
Interest
0 US$2,336,522.10 US$ 0.00 US$ 0.00 US$ 0.00
1 US$2,336,522.10 US$ 268,700.04 US$ 389,421.13 US$ 658,121.17

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Table 2.1 BCA Equity (Cont’d 1)

Loan Paid With
Year Bank Loan Annual Interest Loan Paid
Interest
2 US$2,067,822.06 US$ 237,799.54 US$ 389,421.13 US$ 627,220.67
3 US$1,830,022.52 US$ 210,452.59 US$ 389,421.13 US$599,873.72
4 US$1,619,569.93 US$ 186,250.54 US$ 389,421.13 US$575,671.67
5 US$1,433,319.39 US$ 164,831.73 US$ 389,421.13 US$554,252.86
6 US$1,268,487.66 US$ 145,876.08 US$ 389,421.13 US$535,297.21
Total US$ 1,213,910.52 US$ 2,336,526.78 US$3,550,437.30

Table 2.2 City Bank Equity

Loan Paid
Year Bank Loan Annual Interest Loan Paid
With Interest
0 $2,336,522.10 $0.00 $0.00 $0.00
1 $2,336,522.10 $233,652.21 $389,421.13 $623,073.34
2 $2,102,869.89 $210,286.99 $389,421.13 $599,708.12
3 $1,892,582.90 $189,258.29 $389,421.13 $578,679.42
4 $1,703,324.61 $170,332.46 $389,421.13 $559,753.59
5 $1,532,992.15 $153,299.22 $389,421.13 $542,720.34
6 $1,379,692.94 $137,969.29 $389,421.13 $527,390.42
Total $1,094,798.46 $2,336,526.78 $3,431,325.24

Table 2.3 The Hongkong and Shanghai Banking City Equity

Loan Paid
Year Bank Loan Annual Interest Loan Paid
With Interest
0 $2,336,522.10 $0.00 $0.00 $0.00
1 $2,336,522.10 $239,493.52 $389,421.13 $628,914.64
2 $2,097,028.59 $214,945.43 $389,421.13 $604,366.56
3 $1,882,083.16 $192,913.52 $389,421.13 $582,334.65
4 $1,689,169.63 $173,139.89 $389,421.13 $562,561.02
5 $1,516,029.75 $155,393.05 $389,421.13 $544,814.18
6 $1,360,636.70 $139,465.26 $389,421.13 $528,886.39
Total $1,115,350.67 $2,336,526.78 $3,451,877.44

Table 2.4 Investor Equity

Loan Paid
Year Bank Loan Annual Interest Loan Paid
With Interest
0 $4,673,044.21 $0.00 $0.00 $0.00
1 $4,673,044.21 $467,304.42 $934,608.84 $1,401,913.26
2 $ 4,205,739.79 $420,573.98 $934,608.84 $1,355,182.82
3 $3,785,165.81 $378,516.58 $934,608.84 $1,313,125.42

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Table 2.4 Investor Equity (Cont’d 1)

4 $3,406,649.23 $340,664.92 $934,608.84 $1,275,273.76
5 $3,065,984.30 $306,598.43 $934,608.84 $1,241,207.27
6 $2,759,385.87 $275,938.59 $934,608.84 $1,210,547.43
Total $2,189,596.92 $5,607,653.05 $7,797,249.97

According the result of calculation, so the total payment that we have to

pay including the interest is summarized in the Table below..

Table 2.5 Total Payment Equity

Loan Paid
Year Bank Loan Annual Interest Loan Paid
With Interest
0 $11,682,610.51 $0.00 $0.00 $ 0.00
1 $11,682,610.51 $1,209,150.19 $2,102,872.23 $3,312,022.42
2 $10,473,460.33 $1,083,605.93 $2,102,872.23 $3,186,478.16
3 $9,389,854.39 $971,140.98 $2,102,872.23 $3,074,013.21
4 $8,418,713.41 $870,387.81 $2,102,872.23 $2,973,260.04
5 $7,548,325.59 $780,122.42 $2,102,872.23 $2,882,994.65
6 $6,768,203.17 $699,249.22 $2,102,872.23 $2,802,121.45
Total $ 5,613,656.57 $12,617,233.37 $18,230,889.94

2.2 Raw Material Cost

In our biogas plant, this cost is very important, because this production is
really depend on the material supplier. So, this is the cost of raw material
production the raw materials summarized in the table below:

Table 2.6 Raw Material Cost

Raw Need/Year
No Supplier Location Price/Unit Total Price
Material (tone)
Cattle
1 PTPN VI Jambi 5850 - -
Manure
2 POME PTPN VI Jambi 5305.9 - -
Cellulose CV.NIKA
3 Yogyakarta 8.31 $6,400.00 $53,184.00
Enzyme YOGYAKARTA
PT. Lamurindo
4 MDEA Palembang 1.4 $686.00 $960.40
Indonesia
PT. Lamurindo
5 TEG Palembang 194.7 $701.00 $136,484.70
Indonesia
Total 11360.31 $7,787.00 $190,629.10

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The shipping of POME and Cattle Manure is conducted by our plant

because PTPN VI doesn’t facilitate the transportation. So, we decided to buy 6
Dump Trucks FM 260 JD. Exception for the MDEA, cellulose enzyme and TEG
the shipping are done by the supplier, so we only need to facilitate a warehouse.

Table 2.7 Transportation Cost

Price Consumption Fuel Transportation/
No Type Amount
(Buy) (Liter) Price/Liter Year
Dump
1 Truck FM 6 $7,720.00 200 $0.50 $59,160.00
260 JD
Total $59,160.00

2.3 Utility Cost

a. Steam
Steam is used to help the work of our two absorbers. In addition, steam is also
used for cleaning or for maintenance. The steam needed have been calculated
in chapter before.
b. Water
We can obtain total water needed for this plant per day by sum up all water
needs in our biogas plant. We calculated the needed of water using the utilities
rule of thumb in Seider. We divide our water for 3 things such as cooling
water, process water and domestic water. We can see that our water needs
9,039.6 m3/year, 17,532 m3/year and 9,360 m3/year respectively.
c. Electricity
From the chapter before, we calculate electricity for our plant is about 3,825
kWh. Here below the conclusion of our utilities.

Table 2.8 Utility Cost

No Utility Need/Year Unit Price/Unit Total Price
1 Steam 435.96 m3 $7.15 $3,117.11
2 Cooling water 9039.6 m3 $13.00 $117,514.80
3 Process water 17532 m3 $1.69 $29,629.08
4 Domestic water 9360 m3 $0.20 $1,872.00
5 Electricity 3825.391 kWh $0.10 $382.54
Total $152,515.53

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2.4 Labor Cost

2.4.1 Direct Labor Cost
Direct labor cost consists of:
- Operator, minimum is D3 graduate. Operator is responsible to control the
production process in the plant.
- Technicians, minimum is S1 graduate. Technicians work to oversee and seek
the tool.
- Supervisor, minimum is S1 graduate. Supervisor is responsible to supervise the
workers, operators, and field technician.
- Support workers/labors, at least high school graduate. The important thing is
their physical and agility.
Salary paid to employees should be directly above Upah Minimum Regional
(UMR/Regional Minimum Wage) in Jambi region IDR1,570,000 in 2015. In a
day, there are four shift time so the working time for each employee is 8
hours/day. There will be one shift where the labor can get day off.
Direct operating labor can also be determined by an equation. Based on its
capacity and equipment,Biogas manufacturing plant can be classified as large and
automatic plant. Therefore, the formula used to calculate direct operating labor :
𝑀=10.4 𝑝0.25𝑀=10.4 𝑝0.25 = 10.4 (1189)0.25 = 61
where :
M = direct operating labor (per hours, day, processing step)
p = production capacity (ton/day) = 1189 ton/day
Because we have five main process, the amount of direct labor used is :
M = (number of labor/working hours) × number of process
= (61 labor/24hours/day) × 5
= 11 people/day
Direct labor cost consists of fixed and variable cost. Fixed costs are costs
that its value remains throughout the year. It has fixed price benchmark for every
detail explanation of labor costs involved.

Table 2.9 Fixed Direct Labor Cost

No Qualification Amount Fee/month Fee/Year Total Fee/year
1 Labor 11 $118.52 $1,422.22 $15,644.44
2 Operator 20 $129.63 $1,555.56 $31,111.11

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Table 2.9 Fixed Direct Labor Cost (Cont’d 1)

No Qualification Amount Fee/month Fee/Year Total Fee/year
3 Supervisor 8 $370.37 $4,444.44 $35,555.56
4 Process Engineer 5 $518.52 $6,222.22 $31,111.11
Total $113,422.22

Direct labor variable costs are bonus amount earned by workers. Some
reason for this bonus are religious holiday (THR), special allowance in each year,
and overtime cost. The amount of direct labor variable cost is 20% of direct labor
fixed cost. Details of fixed and variable cost for direct labor is shown in following
table.
Table 2.10 Direct Labor Cost
No Direct Labor Cost Amount
1 Fixed Cost $113,422.22
2 Variable Cost $22,684.44
Total $136,106.67

2.4.2 Indirect Labor Cost

Indirect labor costs consist of fixed and variable costs, just like the direct
labor cost category. Fixed costs are costs which remain throughout the year, the
benchmark price has been fixed for any detailed explanation of labor costs
involved. Details of the indirect labor costs were fixed can be seen in table shown
below.
Table 2.11 Fixed Indirect Labor Cost
Total
No Qualification Amount Fee/Month Fee/Year
Fee/Year
1 President Director 1 $1,703.70 $20,444.44 $20,444.44
2 Finance Manager 1 $925.93 $11,111.11 $11,111.11
3 Maintenance Manager 2 $925.93 $11,111.11 $22,222.22
4 Laboratory Manager 2 $592.59 $7,111.11 $14,222.22
5 HRD Manager 1 $666.67 $8,000.00 $8,000.00
Production Planning
6 2 $1,111.11 $13,333.33 $26,666.67
Manager
Total $102,666.67

Indirect labor cost variable is the amount of bonuses earned by workers.

Some of the reasons for this bonus allowances, for example because there are
compensation labor costs, such as religious holidays, special allowances each

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year, and the cost of overtime. The amount is 20% of the wages of workers for a
year. Total variable cost for indirect labor cost is $ 20,533.33. The breakdown of
fixed and variable cost for indirect labor costs can be shown in table below.

Table 2.12 Indirect Labor Cost

No Indirect Labor Cost Amount
1 Fixed Cost $102,666.67
2 Variable Cost $20,533.33
Total $123,200.00

2.5 Maintenance Cost

A considerable amount of expense is necessary for maintenance and repairs
if a plant is to be kept in efficient operating condition. For average process with
normal operating condition, it is usually estimated to be annual maintenance cost.
Thus, the maintenance cost/year can be calculated as follow:

Table 2.13 Annual Maintenance Cost

No Annual Maintenance Cost Cost
1 Wages and benefit (MW&B) $27,311.30
2 Salaries & Benefit (engineer & supervisory personnel) $6827.824887
3 Materials and services for maintenance $27311.29955
4 Maintenance overhead $1365.564977
Total Annual Maintenance cost $62815.98896

2.6 Insurance Cost

Insurance is a cost paid by the insurance company to cooperate with the
company. Insurance is one way to protect the company's assets both movable
assets or fixed assets. Insurance costs paid covers the cost of buildings and
equipment owned insurance company (the insurance company's assets) and
employee insurance.
The estimation used for the cost of insurance are as following:
- Health Insurance Costs and Safety = 1% of employees' salary = US$ 2,593.07
/year.
- Building and Plant Insurance Cost = 0.5% of Total Capital Investment = US$
170,828.40/year.

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- Raw Material Insurance Cost = 2% of Total Raw Material Cost = US$

177,234.04/year

Table 2.14 Insurance Cost

No Insurance Specification Cost/Year
1 Work Insurance 1% of worker salary $2,593.07
2 Building and Plant Insurance 2% of TPI $170,828.40
2% of Total Raw
3 Raw Material $3,812.58
Material
Total $177,234.04

2.7 Marketing and Brand Cost

Here below the marketing and brand cost of our products:

Table 2.15 Type of Marketing

No Type of Marketing Amount
1 Proposal $200.00
2 Website development $350.00
3 Brand $87.50
Total $637.50

2.8 Other Operational Cost

In general expenses there are CSR, R&D, and royalty for operating cost.
Corporate Social Responsibility is consisted of national disaster, academic, and
social infrastructure. According to Indonesian law, the CSR cost is 5% of the
revenue of the plant. For royalty itself the cost is 2% of revenue. For Research and
Development the cost is 1% from CAPEX.
Table 2.16 Other Cost
No Other Cost Amount
1 Patent Royalty $141,777.78
2 CSR $388,246.35
3 R&D $0.00
Total $530,024.13

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2.9 Depreciation
Depreciation is the reduction in value of an asset over time. Depreciation
cost of each eequipments depend its salvage value and lifetime of the equipments
that depreciate. In this plant, the method that we used to calculate depreciation
cost is Declining Balance by using the following equation:

The calculation of depreciation cost can be seen in the appendix. Thus, we

obtained depreciation cost as seen in the following table:

Table 2.17 Equipment Depreciation

Salvage Value
No Equipment Price Depreciation
S = B (1-d)^n
Tank
1 TK101 US$ 59,209.61 US$ 5,710.11 US$ 53,499.50
2 TK102 US$ 212,562.50 US$ 20,499.28 US$ 192,063.22
3 TK103 US$ 388,954.67 US$ 37,510.34 US$ 351,444.34
4 TK109A US$ 74,604.11 US$ 7,194.73 US$ 67,409.37
5 TK109B US$ 22,499.65 US$ 2,169.84 US$ 20,329.81
Anaerobic Digester
6 AD104 US$ 1,358,567.13 US$ 131,018.64 US$ 1,227,548.49
7 GH106 US$ 31,724.23 US$ 3,059.45 US$ 28,664.78
8 GH113 US$ 85,207.93 US$ 8,217.35 US$ 76,990.57
9 GH114 US$ 53,822.01 US$ 5,190.53 US$ 48,631.47
Gas Holder
10 AB110 US$ 274,764.49 US$ 26,497.97 US$ 248,266.52
11 AB112 US$ 253,072.56 US$ 24,406.02 US$ 228,666.53
Absorber
12 RG110 US$ 325,379.00 US$ 31,379.17 US$ 293,999.83
13 RG112 US$ 202,458.05 US$ 19,524.82 US$ 182,933.23
Stripping Column
14 FP108 US$140,442.66 US$ 13,544.13 US$ 126,898.53
Filter Press
CD110A,
CD110B,
CD110C,
15 US$ 12,673.22 US$ 1,222.19 US$ 11,451.03
CD112A,
CD112B,
CD112C
Pump
16 PU101A US$ 47,600.50 US$ 4,590.54 US$ 43,009.96

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Table 2.17 Equipment Depreciation (cont’d)

No Equipment Price Salvage Value Depreciation
Pump
17 PU101B US$ 43,277.24 US$ 4,173.61 US$ 39,103.63
18 PU102B US$ 43,277.24 US$ 4,173.61 US$ 39,103.63
19 PU110B US$ 27,994.84 US$ 2,699.79 US$ 25,295.05

Table 2.17 Equipment Depreciation (Cont’d 1)

Salvage Value
No Equipment Price Depreciation
S = B (1-d)^n

20 PU110C US$ 27,275.44 US$ 2,630.41 US$ 24,645.03

21 PU110A US$ 27,882.76 US$ 2,688.98 US$ 25,193.78
22 PU112C US$ 28,114.21 US$ 2,711.30 US$ 25,402.91
23 PU112B US$ 28,143.33 US$ 2,714.11 US$ 25,429.22
24 PU112A US$ 28,131.84 US$ 2,713.00 US$ 25,418.84
25 PU112D US$ 29,727.31 US$ 2,866.87 US$ 26,860.44
Blower
26 BL01 US$ 685.90 US$ 66.15 US$ 619.76
Compressor
27 CS110 US$ 91,453.92 US$ 8,819.71 US$ 82,634.21
Total US$ 369,172.94 US$ 3,458,879.48

Table 2.18 Building Depreciation

Year No. of Year Initial Value Depreciation Salvage Value
2019 0 US$571,428.57 US$0 US$0
2020 1 US$514,285.71 US$57,142.86 US$191,306.25
2021 2 US$462,857.14 US$51,428.57 US$172,175.62
2022 3 US$416,571.43 US$46,285.71 US$154,958.06
2023 4 US$374,914.29 US$41,657.14 US$139,462.26
2024 5 US$337,422.86 US$37,491.43 US$125,516.03
2025 6 US$303,680.57 US$33,742.29 US$112,964.43
2026 7 US$273,312.51 US$30,368.06 US$101,667.98
2027 8 US$245,981.26 US$27,331.25 US$91,501.19
2028 9 US$221,383.14 US$24,598.13 US$82,351.07
2029 10 US$199,244.82 US$22,138.31 US$74,115.96
2030 11 US$179,320.34 US$19,924.48 US$66,704.36
2031 12 US$161,388.31 US$17,932.03 US$60,033.93
2032 13 US$145,249.48 US$16,138.83 US$54,030.54
2033 14 US$130,724.53 US$14,524.95 US$48,627.48

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Table 2.18 Building Depreciation (cont’d)

Year No. of Year Initial Value Depreciation Salvage Value
2034 15 US$117,652.08 US$13,072.45 US$43,764.73
2035 16 US$105,886.87 US$11,765.21 US$39,388.26
2036 17 US$95,298.18 US$10,588.69 US$35,449.43
2037 18 US$85,768.36 US$9,529.82 US$31,904.49
2038 19 US$77,191.53 US$8,576.84 US$28,714.04
2039 20 US$69,472.37 US$7,719.15 US$25,842.64
2040 21 US$62,525.14 US$6,947.24 US$23,258.37

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 CHAPTER 3
ECONOMIC ANALYSIS

3.1 Investment Feasibility Analysis

3.1.1 Income
The main income source of our plant depends on the selling of our product.
We have one main product (compressed biogas) and two by-products (liquid
fertilizer and solid fertilizer). To calculate income, then we must first determine
the selling price of those products. Selling price will be benchmarked on existing
similar product price in Indonesia if the product isn’t existing here.
According to Widodo et al (2006), the consumption of biogas for cooking
per household per month is 40m3. LPG price in Indonesia is around Rp7.000/kg
and CNG price is around Rp3.800/kg equivalent to LPG. 3 kg packed LPG in
Indonesia is sold for around Rp25.000/kg and used for two weeks. From that data,
we will packed our biogas in 20 m3 cylinder so it can last for two weeks. By
assuming that biogas price will be similar to CNG and by comparing it to LPG
price, we decide to sold our compressed biogas for Rp14,000/cylinder or
equivalent to $1,01/cylinder.
Solid fertilizer price will be determined from solid organic fertilizer made
by Petrokimia Gresik “Petroganik” which sold at Rp500/kg. We too will sell our
solid fertilizer in 25 kg sack so the product selling price will be Rp12,500/sack or
equivalent to $0,90/sack
Liquid fertilizer price will be benchmarked from similar business who sold
liquid fertilizer from cow farm waste. The price of their product is Rp10,000/liter
and we will also use those price. Those price is equivalent to $0, 72/liter.

3.1.2 Cash Flow

3.1.2.1 Cash Flow and Components
Cash flow is the difference of amount of cash available at the beginning of
the beginning of a period and the amount at the end of that period. Cash flow is
increased by selling goods or services, selling asset, reducing cost, increase selling
price, collecting faster, paying slower, bring more equity, or taking a loan. Cash

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flow can indicate fluctuation in income earned over the lifetime of plants through
net income.
The component of cash flow include production capacity, product price,
revenue, OPEX, maintenance cost, depreciation, cash expenses, all expenses,
gross profit, net profit before tax, net profit after tax, cash flow, and cumulative
cash flow.
Production capacity for our product will be 100% at each year except for
the first and last year (70%) and for the 2nd and before the last year (85%).
Product price had been stated in previous sub-chapter. We can get revenue value
by multiplying production capacity and product selling price. OPEX had been
stated on previous chapter and the values is dependent to production capacity.
Maintenance and depreciation cost is also had been stated in the chapter before.
Cash expense is the expenses paid in cash or equivalent to sum of OPEX and
maintenance cost while all expense is the sum of cash expense and depreciation.
We can get gross profit by subtracting cash expense from revenue. Net profit
before tax (NPBT) is revenue minus all expense while net profit after tax (NPAT)
is NPBT – NPBT*tax rate. We will use tax rate of 25% flat for all years. Cash
flow is the sums of gross profit minus income tax and cumulative cash flow is the
total cash flow from each years. The cash flow table for our plant is shown below.

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Table 3.1 Cash Flow

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 Based on the data from cash flow, we can make a chart for cumulative cash
flow, NPBT and NPAT. The figure is shown below.

$100,000,000

$80,000,000

$60,000,000

$40,000,000

$20,000,000

$-
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21
$(20,000,000)

Cumulative Cash Flow

Figure 3.1 Cummulative Cash Flow

$6,000,000

$5,000,000

$4,000,000

$3,000,000

$2,000,000

$1,000,000

$-
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21

Net Profit After Tax Net Profit Before Tax

Figure 3.2 NPBT and NPAT

From figures above, we can see that our plant cumulative cash flow won’t
be positive until the end of fourth year. Our cumulative cash flow at the end of
project is expected to be $88,798,127

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3.1.2.2 Weigthed Average Cost of Capital

Weighted average of cost of capital (WACC) is the minimum rate (MARR)
that a company is expected to pay on average to all its security holders to finance
its assets. The WACC is commonly referred to as the firm’s cost of capital. A
company’s assets are financed by debt and equity. WACC is the average of the
costs of these sources of financing, each of which is weighted by its respective use
in the given situation. By taking a weighted average, we can see how much
interest the company has to pay for every dollar it finances. WACC can be
calculated by using the formula of:

( ) ( )

where:
CE = Cost of equity (%) = 17.82%
ATCD = After tax cost of debt (%) = 9.54%
E = Market value of equity = 17.82%
D = Market value of debt = 12.72%
After getting all the components, we get the value of WACC is 15.019%

3.2 Profitability Analysis

3.2.1 Internal Rate of Return (IRR)
Internal Rate of Return (IRR) is a measure of the maximum interest rate
paid on a project and still break even at the end of the project life. In other words,
the IRR is the interest rate when NPV = 0 so that the formula used to calculate the
IRR is:

with the value of r is the IRR. Calculating cash flow by Microsoft Excel, we
obtain IRR of 28.53% from our plant. If we compare the IRR with MARR
(28.53% (IRR) >15.019% (MARR)), the difference is high (13.5%). IRR of this
value will be very interesting to investors and bank which only wanted 15.019%
return rate.

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3.2.2 Net Present Value (NPV)

Net Present Value (NPV) shows the net benefits received by a project over
the life of the project at a certain interest rate. NPV can also be interpreted as the
present value of the cash flows generated by the investment. In calculating the
NPV is necessary to determine the relevant interest rate. In this calculation, the
interest rate used is our own setIRR, which is 20.019% (MARR + 5%)
A project can be counted as feasible if the NPV>0, which means the
project is profitable or provide benefits if implemented. If NPV<0, the project is
not eligible to run because it does not generate profit. Cash flow in year-n drawn
into present value with a reasonable interest rate by using the following formula:

IRR value for our product is 20.019%, then we obtained that the NPV
value is$71.496,34, the rule of thumb of NPV is the NPV should be positive with
high interest (higher than 10%). If the NPV is negative the project will be stopped.
Our NPV is positive and high. It means that the project can be implemented.

3.2.3 Payback Period (PP)

Payback Period is the duration (in years) of an investment will be returned.
Here is the formula for calculating payback period taking into account the Time
Value of Money:

If the payback period is less than a pre-determined period, the project is

acceptable. If the payback period exceeds the pre determined period, the project is
rejected. The payback period for this plant is 4.8 years.

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Our payback period matches the rule of thumb. According to the rule of
thumb. the tolerable payback period is about10 years and should be done after all
the loan are fully paid.

3.2.4 Rate of Return/Return of Investment (RoR/RoI)

Rate of Return (ROI) is the annual profit generated by one unit of capital
invested. The formula for calculating ROI is as follows:
𝑝
( )
𝑝
Annual net profit net profit used is obtained either before or after taxes.
Annual Net Profit used is the after tax annual net profit of $2,950,267,85 and
invested capital of $11.682.610,51. the calculation is shown by equation below:

( )

So the ROI obtained from this plant was 25.25%. From the ROI
calculation, we can see that our plant is attractive to investors because it has a
pretty high rate of return value.The ROI is calculated from the after tax cash flow.

3.3 Cost Breakdown

Cost breakdown will help us to see which cost has the highest percentage of
our total cost. Cost breakdown will be done both to CAPEX and OPEX and
shown in figure below.

Table 3.2 CAPEX Component Breakdown Cost

Cost Value Percentage
Total Equipment Cost $4,573,263.38 42%
Site Development Cost $457,326.34 4%
Building Cost $571,428.57 5%
Offsite Facilities Cost $978,428.39 9%
Contingency Cost $987,067.00 9%
Contractor Fee $197,413.40 2%
Working Capital $1,503,289.88 14%
Supporting Facilities Cost $202,130.00 2%
Capitalized Cost $1,409,570.84 13%
Additional Cost $26,200.00 0%
Total $10,906,117.81 100%

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 31

13% Total Equipment Cost

2%
Site Development Cost
Building Cost
42% Offsite Facilities Cost
14%
Contingency Cost
Contractor Fee
2% Working Capital
9%
Supporting Facilities Cost

9% 4% Capitalized Cost
5%

Figure 3.3 Capex Breakdown

Table 3.3 Cost Breakdown of OPEX

Cost Value Percentage
Raw Material $ 190,629.10 23%
Direct Labor $ 136,106.67 16%
Indirect Labor $ 123,200.00 15%
Utility $ 152,515.53 18%
Marketing and Brand Cost $ 637.50 0%
Insurance $ 177,234.04 21%
Other $ 637.50 0%
Total annual maintenance cost $ 62,815.99 7%
Total $ 843,776.33 100%

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 32

0% Raw Material
7% Direct Labor
23%
Indirect Labor
21%
Utility

Marketing and Brand

0% 16% Cost
Insurance
18%
Other
15%
Total annual
maintenance cost

Figure 3.4 OPEX Breakdown

The cost breakdown shows that the most affecting price for total equipment cost
for CAPEX and raw material for OPEX.

3.4 Sensitivity Analysis

In this section, we’re going to make a sensitivity analysis from cash flow.
The variable that we use to see the effect towards the cash flow is selling price,
raw material cost and labor cost. The reason we choose raw material and labor
(direct and indirect) cost as free variable is because those two have actually
contributed a lot in operational cost; 23%, 16%, and 15%. Insurance cost, 21%, is
higher than both labor costs. But because most of the value is obtained from TPI,
which is constant, insurance cost will be constant too.
The reason we choose selling price is because, generally the selling price
itself is the most contributed variable that affect the cash flow. Those changes
concluded the selling price fluctuations, changes in operating expenses, and rising
raw material costs. Parameters - parameters used in the sensitivity analysis is
NPV, IRR, and Payback Period. Below is the result:

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3.4.1 Selling Price Fluctuation

This sensitivity analysis was performed in the decrease and increase of the
product sales price. The following is the calculation of the parameters of the
economic viability while a decline in the level of product sales. When a decrease
in the selling price is occur. the percentage IRR obtained is smaller. Which means
the rate of return will become more long until undefined. It is also evident from
the lower sales price. Then the value of the payback period becomes higher. There
are 3 products, therefore there are 3 separated selling price counted.

Table 3.4 CBG Selling Price Fluctuation

Change CBG Price/ Unit ($) IRR NPV ($) PP (years)

-15% 0.8585 28.52% 71,468 4.8
-10% 0.909 28.52% 71,478 4.8
-5% 0.9595 28.53% 71,487 4.8
0% 1.01 28.53% 71,496 4.8
5% 1.0605 28.54% 71,505 4.8
10% 1.111 28.54% 71,515 4.8
15% 1.1615 28.55% 71,525 4.8

Table 3.5 Solid Fertilizer Selling Price Fluctuation

Change Solid Fertilizer IRR NPV ($) PP (years)

Price per Unit ($)
-15% 0.765 28.06% 70,496 4.9
-10% 0.81 28.21% 70,830 4.9
-5% 0.855 28.37% 71,163 4.9
0% 0.9 28.53% 71,496 4.8
5% 0.945 28.69% 71,830 4.8
10% 0.99 28.85% 72,163 4.8
15% 1.035 29.01% 72,496 4.7

Table 3.6 Liquid Fertilizer Selling Price Fluctuations

Change Liquid Fertilizer IRR NPV ($) PP (years)

Price per Unit ($)
-15% 0.612 23.37% 60,658 6.1
-10% 0.648 25.09% 64,271 5.6
-5% 0.684 26.81% 67,884 5.2
0% 0.72 28.53% 71,496 4.8
5% 0.756 30.26% 75,109 4.5

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 34

Table 3.6 Liquid Fertilizer Selling Price Fluctuations (cont’d)

Liquid Fertilizer
Change IRR NPV ($) PP (years)
Price per Unit ($)
10% 0.792 31.99% 78,722 4.2
15% 0.828 33.72% 82,335 4

As we can see from the table above, the selling price of the liquid fertilizer
is very sensitive. The fluctuation by 5% higher or lower really impacts the IRR,
NPV, and payback period. This is very unacceptable from the investor side.

3.4.2 Operational Cost Changes (Raw Material)

Sensitivity analysis was performed on the change of the operational costs
of this product. An increase in the cost of that support production activities can
impact the NPV values are getting smaller. So does the value of its IRR will be
lower. Which means the returns would be lower. It is also evident from the
payback period is the longer the payback. The factory is said to be visible because
it is not easily swayed by these changes despite the cost breakdown can be seen
that most influence the production process is the cost of raw materials.

Table 3.7 Raw Material Cost Fluctuation

Change Raw Material Price ($) IRR NPV ($) PP (years)

-15% 162034.735 28.67% 71795.02 4.8
-10% 171566.19 28.63% 71695.46 4.8
-5% 181097.645 28.58% 71595.9 4.8
0% 190629.1 28.53% 71496.34 4.8
5% 200160.555 28.48% 71396.79 4.9
10% 209692.01 28.44% 71297.23 4.9
15% 219223.465 28.39% 71197.67 4.9

From the table above, we can see the sensitivity of raw material. If the raw
material cost is increase about 5%, the IRR will become lower, the NPV become
lower, and the PP become longer. However the different is also small. It means
that raw material is not very sensitive.

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3.4.3 Operational Cost Changes (Direct Labor Cost)

This sensitivity analysis was performed also based on the change of the
operational costs of this product. Labor cost is fluctuative, depending on the price
of gasoline which change the price of household needs.

Table 3.8 Direct Labor Cost Fluctuations

Change Direct Labor Cost IRR NPV ($) PP (years)
-15% 115690.6695 28.63% 71707.5 4.8
-10% 122496.003 28.60% 71637.12 4.8
-5% 129301.3365 28.57% 71566.73 4.8
0% 136106.67 28.53% 71496.34 4.8
5% 142912.0035 28.50% 71425.96 4.9
10% 149717.337 28.46% 71355.57 4.9
15% 156522.6705 28.43% 71285.18 4.9

From the table above, we can see the sensitivity of direct labor cost. If the
direct labor cost is increase about 5%, the IRR will become lower, the NPV
become lower, and the PP become longer. However the different is also small. It
means that direct labor cost is not very sensitive.

3.4.4 Operational Cost Changes (Indirect Labor Cost)

This sensitivity analysis was performed also based on the change of the
operational costs of this product. Labor cost is fluctuative, depending on the price
of gasoline which change the price of household needs.

Table 3.9 Indirect Labor Cost Fluctuations

Change Indirect Labor Cost IRR NPV ($) PP (Years)
-15% 104720 28.62% 71687.48 4.8
-10% 110880 28.59% 71623.77 4.8
-5% 117040 28.56% 71560.05 4.8
0% 123200 28.53% 71496.34 4.8
5% 129360 28.50% 71432.63 4.8
10% 135520 28.47% 71368.92 4.9
15% 141680 28.44% 71305.21 4.9

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From the table above, we can see the sensitivity of indirect labor cost. If the
direct labor cost is increase about 5%, the IRR will become lower, the NPV
become lower, and the PP become longer. However the different is also small. It
means that direct labor cost is not very sensitive.
To see the sensitivity easily we can make graphs that consist of the
deviation between the product price, raw material cost, and distribution cost that
affect to value of NPV, IRR, and Payback Period.

3.4.1 IRR Sensitivity Analysis

40.00%
CBG Price
35.00%
Solid Fertilizer Price
30.00%
Liquid Fertilizer Price
25.00% Raw Material Price
IRR

20.00% Direct Labor Cost

15.00% Indirect Labor Cost

10.00%
5.00%
0.00%
-20% -10% 0% 10% 20%
Deviation

Figure 3.5 Sensitivity Chart for IRR

From the chart above that greatly affects the IRR is the liquid fertilizer
price. It can be seen that the increase in the value of the liquid fertilizer price
causes a very significant increase in the IRR. However, even at the cheapest price
of liquid fertilizer, our plant will still be attractive to the investors or bank because
the IRR will still be higher than MARR.

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3.4.2 NPV Sensitivity Analysis

90,000
80,000
70,000
60,000 CBG Price
50,000 Solid Fertilizer Price
NPV

40,000 Liquid Fertilizer Price

30,000 Raw Material Price

Direct Labor Cost
20,000
Indirect Labor Cost
10,000
0
-20% -10% 0% 10% 20%
Deviation

Figure 3.6 Sensitivity Chart for NPV

From the graph above that again the liquid fertilizer price is an important
factor, because the increasing value of its price will change into a higher NPV
while other factors are raw materials and distribution cost.

3.4.3 Payback Period Sensitivity

7

5
Payback Period

CBG Price
4 Solid Fertilizer Price
3 Liquid Fertilizer Price
Raw Material Price
2
Direct Labor Cost
1
Indirect Labor Cost
0
-20% -10% 0% 10% 20%
Deviation

Figure 3.7 Sensitivity Chart for Payback Period

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From the chart above to obtain a rapid payback period greatly affects the
product is the increase in the liquid fertilizer price. Higher value of its price will
accelerate the payback period.

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 CHAPTER 4
OUTSTANDING ISSUES

4.1 Technical Aspects

Benchmarked on technical aspect will be done to seven plants in Poland.
Biogas or compressed biogas is not a common commodities in Indonesia. There
are many researches about it, but so far we can’t find compressed biogas plant.
Information about technical aspect in existing biogas plant overseas is also not
easy to find as they tend to not showing it on their website or anywhere else.
Some aspects that we’ll benchmarked are capacity, raw material
composition and weight, digester capacity, fermentation temperature, and usage of
the biogas. The benchmark result shown in table below.
Table 4.1 Technical aspect benchmark

From table above, we can see that our plant has the least capacity per year
but also the biggest digester. This could happen because we need a lot of POME
which in quite big volume and it has the density similar to water. Other existing
plant also has more digester than we do, so they can separate the volume needed
to more digester. Almost all benchmarked company use mesophilic temperature
for their fermentation process. This choice, after all, is depend on individual
parameters of biogas plant, although mesophilic temperature is more common

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because not all microorganism can live with thermophilic temperature range.
Existing biogas plant also tend to produce biogas in conjunction with electricity
and heat/thermal energy in contrast to our compressed biogas plant although we
also produce solid and liquid fertilizer as well.

4.2 Economical Aspects

Benchmarked on technical aspect will be done to seven plants in East
Europe. Biogas or compressed biogas is not a common commodities in Indonesia.
There are many researches about it, but so far we can’t find compressed biogas
plant. Information about economical aspect in existing biogas plant overseas is
also not easy to find as they tend to not showing it on their website or anywhere
else.
Aspect that will be benchmarked are capacity and total investment. The
result can be seen in table below.
Table 4.2 Economical aspect benchmark

From the table above, we can see that our investment to capacity ratio is
quite high compared to other plants. But it can’t be compared apple to apple like
that since our plant will be built on 2019 and the existing plant had been built over
decades before. The value of money at those times could increase tenfold in 2019.
These existing plant also generate either electricity or CHP at their plant. The
equipment and operating price of their plant (in same year) should normally
higher than the cost in our plant.

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 CHAPTER 5
CONCLUSION

5.1 Conclusion
Some points we can get from this report are:
1. Plant will be built in 2020 and estimated to being operated for 20 years. From
cost estimation, the Total Capital Investment is (CTCI) is US$ 10,044,709.69
and the Capital Expenses (Capex) is US$ 11,682,610.51.
2. Operating cost (Opex) calculation is including raw material cost, utilitites
cost, maintenance cost, operating labor and insurance cost that has total about
US$ 780,322.84.
3. The price of compressed biogas, liquid compost, and solid compost that will
be sold is US$ 1,01/pack, US$ 0,72/bottle, and US$ 0,90/pack, respectively.
4. The equity for financing the Capital Expenses is 60% from bank and 40%
from investor. Based on the calculation of economic analysis, the value of
economic parameters are:
a. IRR = 28,53%.
b. MARR = 15,019%.
c. NPV = US$ 71,496.34.
d. Payback period = 4,8 years.

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 REFERENCES

Seider, W. D., Seader, J. D. & Lewin, D. R. 2003. Product and Process Design
Principles, John Wiley and Sons, Inc.

Ryan, Tom. 2006. Slurry Storage Costs Compared. Available at

http://www.teagasc.ie/environment/publications/other/Buildings/build_feat
_111106.pdf (Accessed on 30th November 2015)

Anonymous. Available at
http://www.equipnet.com/search/?q=COMPRESSOR%20GAS (Accessed
on 30th November 2015)

Anonymous. Available at http://www.equipnet.com/36''-shriver-filter-

press_listid_366797/ (Accessed on 30th November 2015)

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 APPENDICES
Appendices A – Depreciation Value for Equipment

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