OPTIMIZING OLD AMMONIA PLANT TO COMPETE IN GLOBAL AMMONIA MARKET : CASE OF AMMONIA KALTIM 2

• Main Author: Sri Widodo, Anton
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/36226
• Institution: Institut Teknologi Bandung

This paper is addressed the issue of domestic old ammonia plant to compete with foreign competitor in global ammonia market. Generally, ammonia plant over 20 years old is considered as inefficient plant and consequently, the cash cost of ammonia product will be higher among its competitor. Else, the trend of domestic natural gas as a main raw material for ammonia production increased time to time because of limited source. This situation contrary to its competitor in foreign country, new ammonia plant was built with new modern technology which is deemed as more efficient plant, and also, abundant resources of raw materials become competitive advantage for foreign ammonia plant to compete in global ammonia market. Ammonia Kaltim 2, 34 years old plant, is the oldest plant among ammonia plant in Pupuk Kaltim. However, according to the Plant Reliability Index (PRI) in 2017 at 97.10%, Ammonia Kaltim 2 was granted as the second reliable ammonia plant among existing ammonia plant. The aim of this research is to find out the best solution for Ammonia Kaltim 2 to sustain in global ammonia market competition. The author uses several analyses such as Porter’s 5 Forces, PESTEL, Financial Analyses, and SWOT analysis is used to understand the business condition from the inside and outside company. Root cause analysis is carried out to define the cause of the business issue and to generate possible alternative solutions for the problem. Then, to refine the alternative to the best solution, the author utilizes capital budgeting tools to asses an investment profitability : Net Present Value (NPV), Internal Rate of Return (IRR), Pay Out Time (POT). At the end, the best selected solution was also assessed the risk of the project to minimize the loss on investment. The result shown that option #2 – Revamping project of Ammonia Kaltim 2 is the best choice. The result of Revamping project is IRR = 18.09% (WACC basis = 7.25%), NPV = USD 33,128,543.43 and POT = 5.2 year. Moreover, based on the sensitivity analysis with the worst case scenario, the selling price dropped 10% and the investment cost increased 10% from the basis assumptions, NPV is 13.48%, and it still above the WACC basis. Finally, the revamping project for ammonia existing plant is feasible.