Cp gp day03 session 10 - feasibility of cp options

1. Feasibility Evaluation of
Cleaner Production Options

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Select workable CP opportunities
 Categorize options into:
1. Implement obviously feasible options
2. Reject obviously non-feasible options
3. Remaining options - conduct feasibility
analysis

3. Feasibility of CP options
Technical feasibility
Financial feasibility
Environmental feasibility
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Technical feasibility
Availability and reliability
of equipment
Requirements for utilities,
process monitoring and
control, space etc.
Maintenance
requirements
Operator and supervisor
skills
Ease of retrofitting into
existing system
Projected material
balance
Projected energy
balance

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Assess technical feasibility
Consumption Rates: Before implementation After implementation
Inputs:
raw materials
labour
energy
water
etc.
Outputs:
products
solid waste
wastewater
Gaseous emissions
etc.

6. Parameters Weight Score Weighted Score
Level of meeting
specifications
3 5 15
Availability and
reliability of after
sales service
2 2 4
Utility
requirements
2 3 6
Availability of
auxiliary
equipment
2 3 6
Compatibility with
other systems
2 4 8
Total 39
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7. If technically not feasible,
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Reject the option
Not necessary to evaluate financial
and environmental feasibility

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Assess financial viability
Consists of:
1. Data collection:
investments;
operational costs & benefits
2. Choice of economic criteria
3. Economic calculations

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Assess financial viability
Data collection (from technical evaluation):
1. Investment:
equipment, construction, training, start up etc.
1. Operational costs and benefits:
before and after comparison

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Operational costs and benefits
Electricity
Man power
Chemical
Maintenance
Training cost
Interest and
depreciation
Direct savings
(tangible benefits)
Indirect savings
Treatment cost
Disposal cost
Health and safety

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Timing of Cash Flows
Working
capital
Annual Operating Costs
Annual Tax Payments
Annual Financing
Payments
Salvage Value
End of project:
Time zero:
Initial Investment
Working Capital
TIMEYear 1 Year 2 Year 3
Annual Revenues/Savings

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Profitability Indicators
A profitability indicator, or “financial
indicator”, is: “a single number that is
calculated for characterisation of project
profitability in a concise,
understandable form.”
Common examples are:
Simple Payback
Return on Investment (ROI)
Net Present Value (NPV)
Internal Rate of Return (IRR)

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Simple Payback
This indicator incorporates:
the initial investment cost
the first year cash flow from the project
Simple
Payback
(in years)
Initial Investment
Year 1 Cash Flow
=

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How to Interpret Simple Payback
The simple payback calculated for a
project is usually compared to a
company rule of thumb called a
“hurdle” rate:
e.g., if the payback period is less
than 3 years, then the project is
viewed as profitable

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The Time Value of Money
and
Net Present Value (NPV)

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Question:
If we were giving away money,
would you rather have:
(A) $10,000 today, or
(B) $10,000 3 years
from now
Explain your answer...

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Inflation
Money loses purchasing power over time
as product/service prices rise, so a dollar
today can buy more than a dollar next
year.
costs $1 costs $1.05
inflation 5%
nownow next yearnext year

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Investment Opportunity
A dollar that you invest today will bring
you more than a dollar next year —
having the dollar now provides you with
an investment opportunity
Interest, or
“return on investment”
Investing
$1 now
Investment
Gives you
$1.10 a year
from now

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Present Value Factors
Value of $1 in the future, NOW
Discount rate (d): 10% 20% 30% 40%
Years into future (n)
1 .9091 .8333 .7692 .7142
2 .8264 .6944 .5917 .5102
3 .7513 .5787 .4552 .3644
4 .6830 .4823 .3501 .2603
5 .6209 .4019 .2693 .1859
10 .3855 .1615 .0725 .0346
20 .1486 .0261 .0053 .0012
30 .0573 .0042 .0004 .0000

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Net Present Value (NPV)
• Net Present Value (NPV) = the sum of
the present values of all of a project’s
cash flows, both negative (cash
outflows) and positive (cash inflows)
• NPV characterises the present value of
the project to the company
If NPV > 0, the project is profitable
If NPV < 0, the project is not

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Environmental evaluation
Comparison between the current material
balance and the projected material
balance
Reduction in quantity of waste
Less hazardous materials
Reduction in energy losses
Reduction in water consumption
Reduction of material consumption

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Selection of feasible options
Tabulate the results of technical,
economic and environmental evaluations
Eliminate technically non-feasible options
Eliminate options without significant net
environmental benefit
Combine the results to rank the options

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Weighted matrix method
Technical Feasibility - 25 Low: 0 – 5
Med: 6 – 14
High: 15 – 25
Economic Viability - 50 Low: 0 – 10
Med: 11 – 29
High: 30 – 50
Environmental Feasibility 25 Low: 0 – 5
Med: 6 – 14
High: 15 - 25

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Weighted matrix method
Technical – cannot be negative
Economical – can be negative
Environmental – no option should be
negative
Ranking – prioritize according to your
needs

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Thank
You!