TA3290 Life-Cycle Modeling and Economic Evaluation CiTG, minor - - PowerPoint PPT Presentation

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TA3290 Life-Cycle Modeling and Economic Evaluation CiTG, minor - - PowerPoint PPT Presentation

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TA3290 Life-Cycle Modeling and Economic Evaluation CiTG, minor Mining and Resource Engineering Economie 3: Vervolg Investment Projects Dr.ir. Gerard P.J. Dijkema Energy & Industry Group December 15, 2011 1 Vermelding onderdeel organisatie

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December 15, 2011

Vermelding onderdeel organisatie 1

TA3290 Life-Cycle Modeling and Economic Evaluation

CiTG, minor Mining and Resource Engineering Economie 3: Vervolg Investment Projects Dr.ir. Gerard P.J. Dijkema

Energy & Industry Group

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 2

Project (economic) evaluation Focus on a new >100M€ facility

  • What does one (management) have to do?
  • Market research
  • Life-cycle economic estimate
  • Investment & production cost
  • Economic performance
  • Funding strategy
  • Risk assessment
  • Strategic alignment – project portfolio!
  • Initial go/no go on business case
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 3

Life cycle economic estimates

Activity

  • D – Design
  • B – Build
  • F – Finance
  • O – Operate
  • M – Maintain
  • D – Dismantle

When looking at a “project” life of decades! Estimate

  • Investment capital cost
  • Lead time (go <-> live)
  • Interest rate
  • Operating cost/revenue
  • Maintenance time & cost
  • Dismantling cost
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 4

Industrial project life cycle

Production D e s i g n Technical perspective Optimization? B u i l d Decision perspective Where? What? How? Go? No-Go? Improve process for Environment…. Economic reasons… License to operate? Economic perspective Build Production Design Dedicated money on project Profit Go? No-Go? Slope of curve is Industry-specific!

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 5

Hoe nu een investering evalueren?

Voor de onderneming geldt: Winstafter tax = Verkopen + Andere inkomsten – Kosten – Taxes

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 6

Investeringsselectie

  • Bij het beoordelen en selecteren van investeringen

maken ondernemingen gebruik van cashflow of kasstroom

  • Cashflow is het verschil tussen de uitgaande en

binnenkomende kasstroom in een onderneming

  • “Cash in hand”
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 7

Kasstroom / Cash flow

  • te gebruiken of je iets kunt betalen...
  • ...dan wel moet lenen
  • brood, benzine, huur, kleren etc.
  • kun je meestal betalen uit je lopende kasstroom
  • huis, auto, (scooter, flatscreen) niet  lenen
  • kun je de rente betalen uit je lopende kasstroom?
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 8

Kasstromen

  • drie hoofdcategorien kasstromen
  • operating – de activiteiten van de onderneming
  • investing – merger, acquisities, investeringen
  • financing – aflossingen, dividenden, aandelen-inkoop
  • Voor het beoordelen van investeringsprojecten wordt de
  • perating cash flow gebruikt.
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 9

Operating cash flow

  • Direct gekoppeld aan winst (uit een project)
  • Cashflow = kasstroom in – kasstroom uit
  • Winst = opbrengst – kosten
  • Omdat afschrijving wèl bij de kosten is meegerekend

(terwijl het géén uitgave is) moeten we deze afschrijvingen weer bij de winst optellen om de

  • perating cashflow te bepalen
  • Operating Cashflow = Winst + Afschrijvingen
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 10

Voorbeeld

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 11

Voorbeeld

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 12

Voorbeeld

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 13

Voorbeeld

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 14

Voorbeeld

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 15

Voorbeeld

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 16

Voorbeeld

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 17

Investeringsselectie

  • Terugverdientijd
  • Netto contante waarde
  • Return-on-Investment
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 18

Terugverdientijd

  • Na hoeveel tijd is de investering terugverdiend
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 19

Terugverdientijd

  • Na hoeveel tijd is de investering terugverdiend
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 20

Terugverdientijd vs. netto contante waarde

  • Voordeel: eenvoud
  • Nadelen:
  • Revenuen na de terugverdientijd niet meegenomen
  • Verdeling van cash-flow over de tijd
  • Geld dat eerder binnenkomt is 'meer waard'
  • Ondervangen door Netto-Contante-Waarde berekening
  • Cash flows worden contant gemaakt m.b.v.

rentevoet

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 21

Return-on-Investment

  • Naast terugverdientijd & NCW
  • Veel gebruikt in kapitaalsintensieve industrie
  • “wat is de verdienkracht van een project over de

looptijd uitgedrukt in fictief rentepercentage”

  • ROI is gelijk aan het rentepercentage i waarbij de

NCW van de cash-flow serie over de looptijd n van het project gelijk is aan 0.

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 22

Investeringsproject-evaluatie

  • Tot zover: financiële methoden
  • Voor deze gebruikte methoden zijn inputs nodig:
  • Te verwachten / geschatte opbrengsten
  • Te verwachten / geschatte kosten
  • Probleem: looptijd investering > 20 jaar!
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 23

Vervolg: schatten investeringskosten

  • Project
  • Arbeid, materialen, grondstoffen enz.
  • Afzetmarkt, opbrengst produkten enz.
  • Kapitaalgoederen / bedrijfsmiddelen
  • Kapitaalsintensieve industrie: investeringskosten /

kapitaalslasten werken sterk door op elk project

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 24

Annualized costs

  • Kt = Total Annual Cost
  • Kp = direct Production Cost
  • a = model parameter > 1 indirect production costs

→

  • L = direct Labour costs
  • d = parameter to convert to total Labour cost
  • i = depreciation and interest
  • f = other capital related cost
  • IB = Total On-Site Investment
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 25

Cost Types

  • Investment related cost
  • Direct capital cost
  • Cost of working capital
  • Startup expense
  • Goodwill, engineering & license fees
  • Operating cost
  • maintenance
  • operating labor
  • overhead
  • charges, taxes, insurance
  • raw materials
  • operating materials
  • utilities

shipping/packaging

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 26

Working capital

  • Funds required to actually operate the plant:
  • to pay for initial raw materials
  • to pay salaries
  • to fill up tanks
  • to fill up equipment
  • to buy catalysts
  • etc.
  • Estimate: 10 to 20% of capital cost
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 27

Operating cost - I

  • raw materials
  • quotations from literature and suppliers
  • operating materials
  • safety clothing, instrument charts, etc.
  • 10% of maintenance cost
  • utilities
  • steam, power, air, water
  • depends on location
  • shipping/packaging
  • depends on product
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 28

Operating Cost - II

  • maintenance
  • 5 to 15% of capital cost
  • operating labour, incl. supervision
  • operators in shifts plus overheads
  • appr. 15% of total operating cost, 20% extra
  • overhead
  • general management, security, etc.
  • appr. 50-100% of total labour cost
  • charges, taxes, insurance
  • 15-20% of fixed capital
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 29

Capital Cost Estimation

Detailed Design Basic Design Conceptual Design Strategic How? Accuracy Phase

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 30

Capital Cost Estimation

  • Cost of making the estimate increases from 0,1% to 2% of total project cost

Detailed cost estimation; procurement +/- 2-5% Detailed Design Refined Lang Factor method; +/- 10-15% Basic Design e.g. Guthrie + Lang Factor method; FUM +/- 20-30% Conceptual Design Indices (e.g. Nelson Refinery Index) +/- 40-50% Strategic How? Accuracy Phase

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 31

Working with Indices

  • “Weather forecast”
  • Cost of a new plant = Last Plant * Index
  • Simplest index = Inflation
  • Order of Magnitude Estimates: Capacity*Index
  • Index may be sector specific
  • Nelson (Oil) Refinery Index
  • CE (Chem. Eng) Plant cost index
  • Or location specific
  • U.S. Gulf Coast Plant Cost Index
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 32

Chemical Engineering Plant Cost Index (CEPI) / Producer Price Index (PPI

  • CEPI
  • 1957-1959 = 100
  • 1960 = 102
  • 1970 = 126
  • 1980 = 261
  • 1990 = 358
  • 2000 = 394
  • 2005 = 468
  • PPI
  • 1984 = 100
  • 1990 = 121
  • 2000 = 157
  • 2005 = 187
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 33

Economy-of-scale

  • ECONOMY OF SCALE (Guthrie)
  • I = I0 * (C / C0) n
  • Process Industry: n = 0.6
  • A plant of double capacity costs only 50% more!
  • In many a sector, only world-scale plants are competitive
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(c) G.P.J. Dijkema, TU Delft, 2009

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Evolution of Plant Size Capacity of new construction W.Europe Product X

  • 50

100 150 200 250 300 350 400

1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

KT / Plant

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 35

Capital cost when operating

  • DBFOM
  • Typical plant utilisation rate is 85%

(Dutch Chemical Industry)

  • AVERAGE PRODUCTION = 85% of RATED CAPACITY
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(c) G.P.J. Dijkema, TU Delft, 2009

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Evolution of Plant Age Distribution W.Europe as of 2002; Product X

1 2 6 3 1 14 10 5 7

0% 5% 10% 15% 20% 25% 30% <=1965 1965 to 1969 1969 to 1973 1973 to 1977 1977 to 1981 1981 to 1985 1985 to 1989 1989 to 1993 1993 to 1997 >1997 Percent in Year

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(c) G.P.J. Dijkema, TU Delft, 2009

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Evolution of Plant Size Capacity Distribution W.Europe Product X as of 2002

1 6 6 22 6 3

0% 10% 20% 30% 40% 50% 60% <=50 50 to 100 100 to 150 150 to 200 200 to 250 250 to 300 >300 2001 KTA Capacity Percent in size Distribution

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(c) G.P.J. Dijkema, TU Delft, 2009

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Evolution of Plant Size Capacity of new construction W.Europe Product X

  • 50

100 150 200 250 300 350 400

1964 1966 1968 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

KT / Plant

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 39

General structure of an industrial plant:

An assemblage of unit operations

Puri- fication Recycle Flow Separation Reaction Feed Product Purge Feed preparation

T

Fuel

Dijkema, G.P.J., Process System Innovation by Design, 2004

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 40

General structure of an industrial plant:

An assemblage of unit operations

Unit operations model and cost engineering: This model is the basis for a number of methods of cost estimation (early phase)

Puri- fication Recycle Flow Separation Reaction Feed Product Purge Feed preparation

T

Fuel

Dijkema, G.P.J., Process System Innovation by Design, 2004

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 41

Functional Unit Method Zevnik and Buchanan (1963)

  • Investment = f (capacity, complexity)
  • A plant is divided into “functional units”
  • IB = Investment estimated
  • CI = plant cost index (e.g. 361.3 in 1991; 1970=100)
  • Cf,i = complexity factor per functional unit
  • Pi = capacity per functional unit; m = 0.6
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 42

Functional Unit Methode (2)

  • Complexity factor
  • Ft =Temperature
  • Fp =Pressure Factor
  • Fm= Material Factor”
  • Steel, wood = 0
  • Al, Cu, Bronz, 400-steel = 0.1
  • Monel, Ni, Inconel 300 = 0.2
  • Hastelloy etc. = 0.3
  • Precious Metals = 0.4
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 43

Functional Unit Method

  • Advantages?
  • Disadvantages?
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 44

Capital Cost Estimation - Lang

  • Modified Lang factor method
  • A plant is thought to be composed of a collection of

(major) equipment items, each with their own cost characteristics

  • These determine the cost of the item
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 45

Capital Cost Estimation – Lang (2)

  • The plant cost is given by

Cf = ∑ fL,i * Ce,i Where

  • Cf = Fixed capital cost
  • Ce,i = Cost of major equipment i

(from quotes or estimates)

  • FL,i = Lang factor of equipment i:

3.1 for solids processing 4.7 for fluids processing 3.6 for solid/fluid processing

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 46

Equipment cost estimation

Ce = C*Sn

  • Ce = equipment cost
  • C = cost constant
  • S = size parameter
  • n = index for that

equipment (-1.0 to 1.3) Ce = C*Sn

  • Ce = equipment cost
  • C = cost constant
  • S = size parameter
  • n = index for that

equipment (-1.0 to 1.3) 100 101 102 103 102 103 104 Vessel height V e s s e l c

  • s

t D=1 m D=2 m

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 47

Compounded Lang factor

  • fL = Σ fi
  • f1 = equipment erection
  • f2 = pipes
  • f3 = instrumentation
  • f4 = electrical
  • f10-12 = design and engineering, contractor
  • Compounded Lang factor helps estimating the total

fixed capital cost

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 48

Capital cost when operating

  • DBFOM
  • Typical plant utilisation rate is 85%

(Dutch Chemical Industry)

  • AVERAGE PRODUCTION = 85% of RATED CAPACITY
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 49

Aluminium smelters in Ijsland

Alcoa Fjardaál smelter in Reydarfjordur, Iceland Opened June 2007

  • System perspective (?
  • The author of an anti-smelter book says

efforts to please aluminum giants like Alcoa have created a "heroin economy" and worries that leaders are "diverting the whole ecosystem of the east.“

  • Er zijn niet alleen effecten in Ijsland

(alumina smelting) maar ook elders (bauxiet-mining, red-mud)

  • Aluminium-boom  overcapaciteit drijft

prijzen naar beneden; boom &bust cyclus?

  • enz. enz.
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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 50

Literature

  • Investment Estimation Theory
  • Thane Brown (2007), Engineering Economics and Economic

Design for Process Engineers, CRC Press, Boca Raton, Chapter 1 & 3 (in electronic reader)

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 51

Industrial design

technology/system

Design of new production facilities has become more efficient:

  • Computer aided design methods.
  • Better understanding of underlying engineering problems.

Process efficiency Time Theoretical maximum efficiency Design efficiency gains 50’s 2003 Operational efficiency

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(c) G.P.J. Dijkema, TU Delft, 2009

December 15, 2011 52

ta3290

Vragen, Discussie?

Dr.ir. Gerard P.J. Dijkema

Faculty of Technology, Policy and Management Energy and Industry Group

PO Box 5015, 2600 GA Delft-NL