A FINANCIAL FEASIBILITY STUDY TO DETERMINE THE BEST FUNDING STRUCTURE FOR A TOTAL RENOVATION PROJECT OF THE KAREBOSI FIELD IN MAKASSAR

• Main Author: Asyifa Sufi Setyandri, Nurul
• Format: Theses
• Language: Indonesia
• Subjects: Manajemen umum
• Online Access: https://digilib.itb.ac.id/gdl/view/76012
• Institution: Institut Teknologi Bandung

This study aims to determine the best debt-equity combination to fund a PublicPrivate Partnership (PPP) project involving the complete renovation of Karebosi Field in Makassar City, Indonesia, under the Build-Operate-Transfer (B-O-T) scheme. The author conducts a financial feasibility study, which includes external and internal analyses. The external analysis considers macroeconomic and microeconomic factors using PESTEL and Porter's Five Forces frameworks, while the internal analysis focuses on project resources. All the external and internal analysis are summarized in SWOT analysis. Three funding structure scenarios are presented: scenario 1 with full equity funding, scenario 2 of hybrid funding with a 50% debt and 50% equity, and scenario 3 of hybrid funding with a 70% debt and 30% equity. Operational occupancy scenarios are also considered, with worst-case, base-case, and best-case scenarios at 40%, 60%, and 80% occupancy, respectively. Financial projections, including Net Present Value (NPV), Internal Rate of Return (IRR), and Payback Period, are calculated for each funding scenario. The findings indicate that the project is feasible, and scenario 3 (70% debt and 30% equity) is identified as the best funding structure. A sensitivity analysis reveals that certain variables, including WACC, operational occupancy, interest rate, soccer field rental rate, and operating expense ratio, significantly impact the NPV. Strategies to mitigate potential risks are proposed, such as maximizing operational occupancy through effective marketing and operations, developing new revenue streams, negotiating long-term rate fixes with lenders, implementing cost-cutting strategies, and closely monitoring expenses. The study suggests that future research should explore the dynamic nature of external factors that influence NPV, IRR, Payback Period, and WACC. Continual assessment of market conditions, interest rate fluctuations, and industry-specific factors may be necessary to determine the best funding approach. Moreover, further investigation into how the 5 input variables stated above impact NPV would be beneficial.