INVESTMENT PROJECT ANALYSIS OF SUSPENSION RIVER CROSSING COAL CONVEYOR PROJECT (CASE STUDY: PRAPATAN MINE OPERATION PT BERAU COAL)
PT Berau Coal (PTBC) is one of Indonesia’s largest private coal mining companies, which have 118,400 hectares of concession area lying on the vast land of East Borneo. In 2019, the company opens a new mining area, called Prapatan Mine Operation (PMO). After the Covid-19 pandemic began to subside, th...
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| Format: | Theses |
| Language: | Indonesia |
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| Online Access: | https://digilib.itb.ac.id/gdl/view/75052 |
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| Institution: | Institut Teknologi Bandung |
| Language: | Indonesia |
| Summary: | PT Berau Coal (PTBC) is one of Indonesia’s largest private coal mining companies, which have 118,400 hectares of concession area lying on the vast land of East Borneo. In 2019, the company opens a new mining area, called Prapatan Mine Operation (PMO). After the Covid-19 pandemic began to subside, the Indonesia Coal Price Reference (HBA) rebounded from $49.2/ton in September 2020 to $75.84/ton in January 2021. The HBA kept increasing even still and reached over $300/ton in mid 2022. This further motivated PT Berau Coal to expand its mining area in PMO. As a result, the coal production plan for PMO was revised from 1.7 million tons (MT) per year to a maximum of 4.2 MT in a 5-year plan.
However, there is a constraint (bottlenecking) on the transportation for raw coal. PMO coal must be transported through the Binungan Mine Operation (BMO) area, across the Kelay River. Currently, hauling trucks rely on ferries (Landing Craft Tanks) to cross the river. However, this method limits the hauling capacity to 1.9 MT/year. To overcome this constraint, PT Berau Coal plans an alternative scenario to build a Suspension River Crossing Coal Conveyor, capable of supporting production up to 5.5 MT/year. The construction requires an additional capital expenditure of IDR 151 billion. The decision to invest in this infrastructure is crucial for achieving the production target in PMO. This study will provide a comprehensive investment project analysis to determine the feasibility and potential returns of this investment project for PT Berau Coal.
From this study, the PI is calculated to be 1.68, indicating a favorable performance. The IRR is 47.36%, surpassing the interest rate used (WACC), which is 11.07%. The NPV is positive at 108.63 billion IDR. This is calculated using the incremental cash flow between the existing and alternative scenarios. Meaning, this positive value indicates that the alternative scenario is better and will financially benefit the company.
The sensitivity analysis shows that the price of coal, cost of mining, and rate of coal production achieved are considered to be sensitive variables, with a 20% swing in either direction resulting in an NPV swing of more than 20%. The scenario analysis presents that the worst-case scenario indicates a potential failure of the project with a negative NPV of IDR 488 billion. On the other hand, the best-case scenario shows a significantly high NPV of IDR 2,666 billion. The Monte Carlo Simulation further supports the project's feasibility, with an 11.20% probability of negative NPV and a 14.90% probability of NPV falling below the baseline NPV. The 95% confidence interval for the mean NPV ranges from IDR 896.22 billion to IDR 984.68 billion, with a mean NPV of IDR 940.45 billion, significantly surpassing the baseline NPV. In the end, this study concludes that the Suspension River Crossing Coal Conveyor project is deemed feasible and recommended for implementation by PT Berau Coal.
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