THE ANALYSIS OF CAPITAL BUDGETING MODEL FOR THE OVERLAND CONVEYOR AND SHIP LOADING FACILITIES PROJECT OF PT BATUBARA INFRA

• Main Author: Hedianto, Dasep
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/42578
• Institution: Institut Teknologi Bandung

The need for energy is one of the global needs. One source of energy is coming from coal conversion as a non-renewable energy resource with a low cost. Today, coal continues to be one of the most important source of electricity fuel in Indonesia. And word widely, the increase of demand of coal in was mainly due to the increment in population as well as the rapid growth of developing countries, which will affect towards the demand for energy including electricity. Those are the main reasons for the business continuation and expansion of coal mining companies in Indonesia. PT Batubara Infra (“the Company) is a coal mining infrastructure service provider that have been engaged with certain coal mining companies for the utilization of the coal processing, transportation, and ship loading facilities based on rental contract. To continue serving its clients’ needs with regards to the new area expansion, the Company have been starting to study the feasibility of new Overland Conveyor (OLC) and Ship Loading Facilities (SLF) project. The purpose of this study is to measure the feasibility of the OLC and SLF project and to examine the optimum project financing alternatives whether by fully equity-funded or by the combination between debt and equity, from the perspective of the Company, as a coal mining facilities service provider. The capital budgeting model indicators: Payback Period, Return on Investment (ROI), Net Present Value (NPV), Discounted Payback Period, Profitability Index and Internal Rate of Return (IRR) were used to analyze the data, and sensitivity analysis. The analysis was done with three project financing scenarios they are 100% equity, Debt/Equity or D/E : 41%/59% and D/E : 80%/20%. Based on those analysis, it leads to the conclusion that the project is feasible for all the three project financing scenarios. The result shows the project has the lowest indicators’ value with the fully equity-funded and produced higher value if the debt to equity ratio is higher. The sensitivity analysis was done to evaluate the volatility of relevant variables which might be affected the capital budgeting analysis result.