FEASIBILITY STUDY OF HYDROPOWER PLANT PROJECT BY COMPANY XYZ

• Main Author: Hansel B.M. Nababan, Rihuel
• Format: Final Project
• Language: Indonesia
• Online Access: https://digilib.itb.ac.id/gdl/view/83474
• Institution: Institut Teknologi Bandung

Indonesia's population continues to increase every year. This increase happens alongside the rising demand for electricity. On the other hand, the transition towards new renewable energy is being strongly promoted by both the Indonesian government and international bodies. This situation has prompted company XYZ, which operates in the procurement sector for the government, state-owned enterprises, and private companies, to expand their business in the utilities industry. In addition to the business aspect, company XYZ also wants to actively assist in the Indonesian government's programs. This study was conducted to perform a feasibility study on a hydropower plant project to be undertaken by company XYZ. The feasibility study in this research was conducted to determine whether the hydropower plant project is feasible. The study began by creating a pro forma financial statement for this project to observe the future financial condition of the project. Then, capital budgeting analysis was performed using several indicators such as Net Present Value (NPV), Internal Rate of Return (IRR), Profitability Index (PI), and Payback Period. Finally, risk analysis was performed using methods such as sensitivity analysis and Monte Carlo simulation. The results indicate that the project is feasible based on the indicators obtained. The net present value of this project amounts to Rp 148,635,753,753, which is positive, indicating that the inflows are greater than the outflows. The internal rate of return for this project is 27.61%, which is above the cost of capital of 9.8% and also above the industry average. Additionally, the profitability index of this project is above 1 at 1.079, indicating the project's profitability. The payback period for this project is 5 years and 5 months, which is much faster than the project's duration of 26 years. This research also assess the feasibility of the project from the investor’s perspective, The indicators of Net present value, internal rate of return, and profitability index shows that the project is considered as acceptable because all the indicators are passing their minimum acceptance. The risk analysis conducted using sensitivity analysis and Monte Carlo simulation also shows that the project has low risk. This is demonstrated by the Monte Carlo results, which are a continuation from the sensitivity analysis, showing that the net present value of this project has a 95.6% probability of being above 0 or positive. Moreover, the worst possible net present value is Rp -92,193,838,683, and the best possibility is Rp 390,072,600,036 with a mean of Rp 142,224,766,305.