INVESTMENT ANALYSIS FOR COAL FIRED STEAM POWER PLANT DEVELOPMENT BY XYZ LTD IN BULUNGAN REGENCY, EAST KALIMANTAN

• Main Author: (NIM : 29110311) Pembimbing: Erman Sumirat, SE. AK., M.Bus., SHIERLY
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/19466
• Institution: Institut Teknologi Bandung

XYZ is a Singaporean based company, which the main of their business are in agriculture, industry and energy in Indonesia. XYZ has nickel ore mining in Kendari, Southeast Sulawesi since 2008 and had exported the nickel ore to some countries. Due to new regulation of Mineral and Coal Mining Ministry, certain of raw minerals and metals has been banned. It is support the obligation of mineral and mining companies to improve mineral values through processing and refinery starting from 2014. Forced by the law, mining companies should build smelter to increase their product value including XYZ. Due to the unavailable electricity near the mineral concession, available coal owned by subsidiary and strategic location, then XYZ plan to build a coal fired steam power plant in Bulungan Regency, East Kalimantan.Unlike power plant projects of which the electricity were generally bought by PLN, XYZ initiated the power plant project to supply electrical demand for its nickel smelter. The main concern for XYZ in the pre-development stage is how to maximize their proposition effectively and efficiently, as well as managing associated risks before and during construction, and risks of power plant operation. The project is technically feasible. However, both of the power plant and nickel smelter are ‘greenfield’ projects. As internal operation purpose, XYZ’s nickel pig iron market shares in the global market might be affect to power plant availability factor and net income. In order to minimize the cost, the project also faced with the selection of diesel engine fuel. Power plant project require large investment cost. XYZ plans to finance the project 30% by equity and 70% by loan. As a private and foreign company in Indonesia, XYZ will face a challenge in finding investors to finance the project. The project is a high risk project.Investment analysis shows the construction of this power plant financially feasible. MFO is selected to be the best fuel alternative for diesel engine. The project will be paybacked in 8 years, with NPV at US$ 487 million, IRR at 14.81%, and PI at 2.09. Monte Carlo Simulation indicates that in pessimistic, moderate, and optimistic scenario of power plant availability factor, the probability of NPV negative and IRR is lower than discount rate is 7.50%. From sensitivity analysis, electricity price, availabity factor, completion time, and cost factor affect to project IRR. Loan schedule affect to project NPV. Thus, XYZ requires business model improvement such as bank guarantee, alternatives of joint venture, selling the excess electricity capacity to PLN, and work phase project financing.