Feasibility Study for the Establishment of Biodiesel Production
Plant in the Area of Vassiliko in Cyprus
EXECUTIVE SUMMARY
F.K. Technology-Biodiesel Ltd has retained a team of Consultants made up of Mr Andreas Theodorou, Ing. Christakis Neophytou and Mr. Salouck Bambang to conduct study assessing the feasibility of establishing a bio-diesel production facility in an area located near the Vassiliko Cement Factory adjacent to the small Vassiliko Sea Port.
Based on extensive research and financial analysis, the team recommends the development of the bio-diesel production facility in the area.
The projected feedstock resource base (mainly imports) and the projected product markets in Cyprus can potentially support a bio-diesel facility that will produce up to 57 million litres per year from crude palm oil, rapeseed oil, soy bean oil, animal fats and/or recycled vegetable oil.
Project Concept
The objective of the project is the construction and operation of a bio-diesel processing plant, storage tanks and associated infrastructure on a piece of land located near the Vassiliko Cement Factory in the Lamaca District. The location of the site is very strategic, as it is very close to the small sea port at Vassiliko. After construction, the plant will be just 500m away from the seaport. This seaport is presently servicing the needs of the Vassiliko Cement Factory.
The physical plant will occupy approximately 10.000 sqm of land for the building, the tank farm and the transportation areas. The building needed to house the plant will contain all the processing equipment plus a laboratory for quality control and administration offices. The processing area will use about 1.000 sqm, The tank farm will occupy about 3.800 sqm and will contain tanks with a total capacity of about 23.000 tonnes divided between holding tanks for oil feedstock, for methanol, for bio-diesel and for glycerine.
The Plant will cost about Euro 25 million and the plant train will be designed for continuous 24 hour production of 152 tons of bio-diesel and 24 tons of glycerine per day equating to a total of approximately 50.000 tons of bio-diesel and 7.920 tons of glycerine per year from imported oil feedstock and chemicals.
The plant will operate continuously on a three shift per day basis; it will operate 24 hours per day and 330 days per year and will stop only for maintainance purposes.
The processing plant will produce bio-diesel of B100 grade (100% bio-diesel) and crude clycerine. The bio-diesel will be stored in dedicated storage tanks on site from where it ill be loaded to trucks with a loading rack using Bottom Loading facilities and transported to the distribution companies and other consumers on the island. Glycerine will be delivered to the Vassiliko Cement Factory to be used as combustion fuel for its furnaces.
Results of the Financial Analysis
Financial analyses were conducted on the basis of assumptions that were carefully made on the basis of experience of the promoter and the research carried out by the consultants. The revenue from sales of bio-diesel and glycerine were estimated at €37.896.998 in year one and were projected at an assumed growth rate of 5% per annum to reach € 58.630.693 in year ten.
The project generates a healthy net profit of € 2.966.432 in year one which steadily grows up to € 7.282.050 in year ten which was marked as the horizon of the project. The project generates an annual average profit of €4.970.729 during the ten years horizon as can be seen in the figure below:
(NPAT = Net Profit after Tax; GP = Gross Profit).
The free cash inflows of the company was estimated at €6.641.968 in year one and cumulated to €47.277.969 in year ten. The cumulative cash flow indicates that the company is able to payoff all its financial obligations and generate a surplus.
The financial analysis established that the main parameters that influence the project returns are feedstock price, capital cost, bio-diesel price and to a lesser degree, labour and energy cost.
At an Average Weighted Cost of Capital of 14%, and at the price of oil feedstock of US$ 600 per tonne, the Net Present Value (NPV) of the project is positive at €36.787.774 and the Internal Rate of Return (IRR) is 45% which is about 3,2 times the cost of capital; and the Company fully pays back the initial investment into the project after 5 years of operation. This is mainly due to the consistent positive cash flow generated by the project.
These returns are sufficient for the team of consultants to recommend the establishment of the project.
We conducted a sensitivity analysis to indicate how the project returns behave when the price of feedstock vary. When the price of feedstock increases, the returns (NPV & IRR) show a declining trend:
Sensitivity of NPV to Price of Oil Feedstock
Alternative Energy Investments
F. K. Technology - Biodiesel Ltd
For further information (full set of feasibility study for the establishment of Biodiesel Production Plant) and in case of any questions please do not hesitate to contact us.
E-mail: info@dulipgroup.com
General Manager: Stelios Frangou
