STRATEGIC DECISION ANALYSIS ON SCALING UP REFUSE DERIVED FUEL (RDF) UTILIZATION IN CEMENT PLANT OF PT BUMI SEJAHTERA TBK

• Main Author: Yuliadi Nugraha, Budi
• Format: Theses
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/61293
• Institution: Institut Teknologi Bandung

DKI Jakarta as the capital of Indonesia produce almost 8000 ton of Municipal Solid Waste (MSW) on daily basis that goes to Bantargebang landfill, which soon reach full capacity if there is no landfill expansion or other solution. Refuse Derived Fuel (RDF) is one of the solution to reduce number of waste send to landfill by turning MSW into renewable energy as an alternative fuel for energy intensive industries, such as Cement Industries. DKI Jakarta Province have planned to build RDF Plant to treat 2000 ton/day MSW in Bantargebang to produce total 750 ton per day of RDF product in 2023. Taking part in commitment to provide solutions for sustainable future, PT Bumi Sejahtera Tbk as one of Cement Company operated in Indonesia, is the closest potential off-taker but currently have lower capacity to absorb RDF product which is not more than 100 ton per day in their cement production process. PT Bumi Sejahtera Tbk need to scale up RDF utilization at their cement plant in order to absorb higher RDF volume produced by DKI Jakarta Province in 2023. This will be the main research in the Final Project to explore potential challenges in scaling up RDF utilization in Company’s cement plant and to propose recommendation for Company in order to absorb higher RDF volume produced by DKI Jakarta Province. Based on interview result findings and brainstorming session during Forum Group Discussion (FGD), the potential challenges in scaling up RDF utilization at the cement plant are limitation of infrastructure/facilities, complex characteristic of RDF fuel which required adjustment in Kiln process capability, environment and regulation, potential community issues as well as investment. To allow higher RDF utilization at West Java Cement Plant, Company need to do major investment required to do Kiln debottlenecking and upgrade in infrastructure/facilities which requires higher investment. With this upgrade, Company can absorb RDF from DKI Jakarta with maximum volume 500 ton/day as best scenario option due to technical constraint compare to high volume scenario of 750 ton/day. Based on combination of Fishbone and Five Whys analysis, there is a major root cause/issue in scaling up RDF utilization at the Cement Plant which high urgency to be solved is about investment limitation, since Company is not in strong financial condition thus limiting its Capex spending. In the business solution, the focus of research to find possible external financing option to finance the project, while internal fund will be used as complementary if Company cannot get full amount of fund from external financing source. There are 3 alternative option to be explored in this research which is Loan (Option A), Strategic Partnership (Option B) and Grant (Option C). The Analytic Hierarchy Process (AHP) is used to prioritize the selection of investment financing option. AHP is widely used in many areas including in financial management due to complex problems which involving number of conflicting criteria, including quantitative and qualitative criteria, that need to be considered. The decision making criteria is consist of financial and non-financial criteria including NPV, IRR, Size of Funds, Access to Finance, Time and Risk/Benefit. The selection of decision making criteria is based on combination of literature review, internal company’s policy and Forum Group Discussion (FGD). Based on AHP calculation result from pairwise comparison and financial evaluation, Option C (Grant) has the highest final priority calculation with 0.396 (39.6%), following with Option B (0.349/34.9%) and Option A as the lowest priority (0.256/25.6%). The major contribution result of Option C is coming from sub-criteria of NPV (0.673/67.3%), IRR (0.619/61.9%) and Risk/Benefit (0.496/49.6%). From sensitivity analysis of criteria, if local priority of main criteria financial and non-financial will have same weight, the priority ranks are still the same where Option C has the highest final priority. This shows that original decision has robust decision in term of decision making process. Interest rate assumption in Option A and Option B are quite sensitive to the impact of overall priority selection of alternatives. The Company’s ability to access the finance with lower interest rate will determine the overall priority selection of alternatives. Although the investment to upgrade the capacity is high and will require longer payback, Company must do the investment since it’s aligned with Company’s target in Sustainable Development to reduce CO2 emission and will be part of Company’s competitive advantage especially in the current situation where cement industries are now facing ultracompetitive situation in the cement market.