FINANCING STRATEGY FOR ENCHANCE BUSINESS VALUE OF CIKANCANA MINI HYDRO POWWER PLANT PROJECT

• Main Author: Lintangcahya M, Avique
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/41999
• Institution: Institut Teknologi Bandung

Electricity in one of the needs that always increase from time to time. Electricity has become one of the priority projects category of Indonesia to bring electricity equality all over Indonesia. However, nonrenewable energy sources is still become the most dominant sources for electricity production in Indonesia. Meanwhile, the government have a target to increase the number of renewable energy sources in Indonesia to minimize the fuel oil and environmental damage. Mini hydro power plant is one of power plant with renewable sources that encourage to develop in Indonesia. PT Cahaya Kancana Nusantara in one of private companies in Indonesia that develop mini hydro power plant in Indonesia. The company has plan to develop the mini hydro power plant with 4.7 MW capacity to distribute electricity in Cikancana village, Cianjur. Mini hydro power plant project need high funding from external sources. Generally, the company will use local bank loans as the external funding resources. In this research, the financial condition of the project will be compared by using local bank loans or using the international bank loans. It will be analyzed whether the Cikancana mini hydro power plant project are feasible to conducted or not and find the most sensitive factors that affected financial condition of the project. The research will be started by analyzed the external and internal environment of the project. The external and internal condition will generate projected cash flow of the project and from the cash flow the financial feasibility of the project will be analyzed by using IRR, NPV, and PBP indicator. The profitability indicator will become the comparation indicator between local bank loan schemes and international bank loans schemes. The research show that Cikancana mini hydro power plant project are financially feasible to build in 2019 with using 30% equity and 70% debt financing schemes. The project is profitable by 13.48% ROI and 46.40% ROE. The project give NPV value in Rp 490,877,949,688 and the 14.38% of IRR, which have higher value than WACC. The most sensitive factors that affected mini hydro power plant project is capacity factor, long-term debt interest rate, and electricity tariff. To finance this project, the company can used local bank loans and international bank loans, with different value of long-term debt interest rate. The local bank give 11% interest rate while international bank give 9.34%. The calculation show that by using international bank loans, the project is more profitable and give higher return to equity shareholder. The company’s capability to pay its debt, also become much higher than using the bank loan. This better performance can make the project more attractive to investors and more profitable both for company and equity shareholder.