Business-plan of organizing the production of fuel straw pellets
In this business-plan the order of the implementation of the project devoted to straw pellet production is presented. Itâ€™s noted that for reaching the set goal itâ€™s primarily necessary to build industrial premises, to purchase the needed equipment and also transport. The other fixed, variable, operational (production) and administrative costs as well as the expenses for marketing are named. The analysis of the sales market of straw pellets is conducted, on the basis of this analysis the annual sales are forecasted. The approximate sale prices are formed. Besides this, the expected profit and the payback period are calculated.
Production capacity of the pelleting line: 1,6 MT per hour
The total cost of the investment project implementation is 1 084 370 EUR
Calculations period: 10 years.
Net present value - NPV by the project, EUR 70 329
Internal rate of return (IRR) 8,58%
The initiator and the idea of the project are presented in the business-plan summary. The situation with the provision of gas supply in Odessa region is described, after this the following conclusion is made: when there the level of supplying houses and social facilities with gas is rather low the need in alternative fuel and in fuel equipment definitely exists. The sales volume which may be reached by the company is noted, the conditions which are necessary for achieving this rate are described. The total value and the calculation period in the project are given.
The schedule of the project implementation presents the stages of organizing and launching the production process, the number of days for solving these or those tasks is indicated. Then the table depicting the required noncurrent assets and their types is given.
Two such variants as joining up an existing gas head pipe within a small distance (till 500 meters) and the installation of a pellet boiler in a house are reviewed in the chapter "Comparison characteristics of gas and pellets usage for heating dwelling houses". The costs for purchasing, installing and launching a pellet line are listed out, the problem of safety during usage is described, such points like additional efforts, environmental effects, the value of heating and certain advantages of using gas or pellets are considered. Then the following conclusion is made: usually the initial costs for connection to the main gas line are two or tree times more than the costs for installation of a pellet boiler with the same power. At the same time, the price of gas usage for heating is equal to the price of pellet usage.
In the chapter "Production plan" the technology of producing straw pellets is described, the technical characteristics of these pellets as well as their advatrages over other energy sources (during using, storing and transporting) are listed out. Itâ€™s noted that the planned production plant will hardly have problems with receiving raw materials as the volume of straw produced by the nearby agricultural companies is much higher than the volume of straw required for supporting an uninterrupted production process.
Then the specifications and technical features of the straw pelleting line are listed out, the direct and general costs and also a staff list are presented.
The section "Marketing plan" is devoted to the price policy of the future plant. Itâ€™s notified that at the first stage of the project implementation the method "Pricing oriented on the actual price level" is chosen as a basic one. According to this method competitorsâ€™ rates on the sales market will be taken as the basis for forming prices. The strategy of the companyâ€™s development during the stage of the market penetration and within the following stages is described. After this the analysis of the sales market is performed, this study proves that nowadays in Odessa region the demand for an alternative fuel including straw pellets obviously exists.
The section "Financial plan" contains the table with all kinds of taxes paid by the company with their division on tax types and months. The description and the examples of profit and loss accounts as well as the structure of profits and costs are given.
In the section "Investment plan" all necessary investment costs and also own funds of the company are listed out. The date of the beginning of the project implementation is notified. The description and the example of the cash-flow statement presenting the schedule of the principal debt and interest rate redemption are given.
The chapter "Balance" reflects the structure of the companyâ€™s assets, its liabilities and own funds at every stage of the project implementation. The balance statement lets see the strategy of managing the companyâ€™s capital and the level of companyâ€™s dependence on loans. The analysis of the carrying amount totality lets assess the risk of the companyâ€™s financial investing in the fuel straw pellet production. Besides this, the estimation of the investmentsâ€™ economic effectiveness including the project payback period, its profitability index, net present income and the internal rate of return is given. Itâ€™s notified that the period of calculating integral rates is 10 years. Then the analysis of the project vulnerability is given, its purpose is to is to identify the level of influence of different changeable factors on the financial result of the project. Such rates as the projectâ€™s internal rate of return, its payback period, net present income and profitability index are chosen for that analysis. In the conclusions the projectâ€™s viability and its high potential are noted and grounded.
Straw Pellet Business Plan ContentsProject summary ..... 5
Schedule of the project implementation ..... 7
Stages of the project implementation ..... 7
List of the assets ..... 7
Comparison characteristics of gas and pellets usage for heating dwelling houses ..... 8
Sales volume (items) ..... 13
Sales revenue ..... 14
Production plan ..... 16
Description of the production ..... 16
Technology of fuel granule (pellet) production ..... 16
Equipment specification of the line with a production capacity 2 tones per hour ..... 17
Brief equipment specifications ..... 18
Direct costs ..... 18
Staff list ..... 19
Marketing plan ..... 20
Pricing policy ..... 20
Analysis of the sales market ..... 21
Financial plan ..... 21
Taxation ..... 21
Profit and loss account ..... 23
Structure of profits and costs ..... 24
Investment plan ..... 30
The balance of investment costs and the volumes of financing ..... 31
Cash-flow statement ..... 31
Cash-flow analysis ..... 33
Balance ..... 39
The structure of assets ..... 40
Estimation of the investmentsâ€™ economic effectiveness ..... 46
Financial rates ..... 47
Analysis of the project vulnerability ..... 49
Conclusions ..... 49
Effectiveness of investments ..... 50
Appendix 1 ..... 51
Appendix 2 ..... 52
Appendix 3 ..... 53
Appendix 4 ..... 54