FINANCIAL FEASIBILITY ANALYSIS OF BORROW-TO-USE PERMIT FOR FOREST AREA IN PT. XYZ
Indonesia is a major producer and exporter of coal especially thermal coal. The volatile and unpredictable nature of coal prices increases the risk associated with doing business in the coal mining industry. From early 2011 to mid-2016, the decline in global economic activity resulted in a significa...
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| Format: | Theses |
| Language: | Indonesia |
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| Online Access: | https://digilib.itb.ac.id/gdl/view/62566 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | Indonesia is a major producer and exporter of coal especially thermal coal. The volatile and unpredictable nature of coal prices increases the risk associated with doing business in the coal mining industry. From early 2011 to mid-2016, the decline in global economic activity resulted in a significant drop in coal prices. Besides the global economic issues, government regulations also increase the challenges in the coal mining industry.
PT. XYZ is a coal mining company located in East Kalimantan. The challenges and uncertainty of the future business pushed the company to develop strategies to increase the profit received. In production Area B, there is a problem of not enough waste dump capacity available to accommodate all waste material that should be removed to fully recover all available coal reserves. There is an opportunity to propose a Borrow-to-Use Permit (PPKH) in an area that overlaps between PT. XYZ’s Coal Contract of Work (CCOW) and Production Forest as new disposal/ waste dump location to maximize the company's coal reserves. To implement the permit PT. XYZ will have to spend additional expenses in the form of Non-Tax State Revenue (PNBP) payment, forest investment compensation, watershed rehabilitation, and other operating costs in exchange for increasing the coal production.
Before applying for the permit, the company must determine the feasibility of the project, as several payments required for the permit will increase the company's operating cost. The purpose of this paper is to analyze the financial feasibility of this project using the capital budgeting method, as well as to assess the risk associated with the project via sensitivity analysis and Monte Carlo simulation. The outcome of this study shows that the project is financially feasible to be executed with incremental cash flow NPV is greater than 0 which is US$ 76.764.736, and the risk analysis shows that the project will have a 69.6% probability of giving more value to the company, it still meets the level of acceptance set by PT. XYZ.
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