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Feasibility Study: Case of a Biomass Project*

CASE STUDY, FINANCIAL MANAGEMENT
ET Cases - FLAME, 8 Pages
AUTHOR(S) : Dr. Monika Chopra, Senior Assistant Professor, Lal Bahadur Shastri Institute of Management, Dr. Manisha Singh, Faculty, IBS, Bangalore

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Feasibility Study: Case of a Biomass Project

 

After the final approval from the board, it will release the funds, so it’s a big step, may be even the biggest. It’s not just a rubber-stamp process; the board will look very carefully at the feasibility study prior to making a decision.

– Kimball Hansen


ISGEC Heavy Engineering Ltd., a diversified global engineering company based in India was established in 1933. It was a INR2434 crore multi-product, multi-location public company providing engineering products to customers across 76 countries. It had been ranked 309 in the ET500 listing, 329 in the Fortune India 500 listing and also ranked at No. 198 (Standalone net sales rank) in the Business Standard BS1000 companies list released in March 2012.

The company operated with the following business units – Process Equipment, EPC Power Plants, Boilers, Sugar Plants & Machinery, Mechanical & Hydraulic Presses, Steel & Iron Castings, Contract Manufacturing, and Trading.

The major target sectors for the company were Power, Oil & Gas, Automobiles, Fertilizers, Sugar and Defense. With a team of over 4000 employees, including 700 qualified engineers and over 450 designers, the company had its manufacturing plants and design offices spread across India in Haryana, Uttar Pradesh, Gujarat, Tamil Nadu and Maharashtra................

Teaching Note Preview

Feasibility Study: Case of a Biomass Project

 

Synopsis

The case brings out a problem of feasibility analysis for an electric power generation project. It presents information of a company ISGEC heavy engineering limited which plans to set up an electric power generation plant in Guatemala. Before that the company wishes to conduct a feasibility study in order to establish the viability of the project. The case presents all information related to demand and supply of electricity in Guatemala for past few years, market share of various competitors, technical specifications, projected cash flows, economic factors etc. It brings out the details of these areas and other information to be segregated for proper understanding of feasibility analysis.

Teaching Plan

The discussion should be on the following aspects of feasibility study of a project:

a) Development objectives to which the project conforms
b) Detailed project objectives and government policy
c) Analysis of market demand and technical soundness of the project
d) Operational viability of the project
e) The economic and financial feasibility of the project proposal
f ) Analysis of other legal and environmental issues

The students would be advised to complete the background reading before the case is introduced. Evaluation would include: MCQ, Case reading and analysis, and Assignment Questions...............

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Abstract

The case highlights the process of feasibility analysis for a Biomass electric power generation project. The case provides details of the project taken up by a company ISGEC heavy engineering limited. The project was to set up an electric power generation plant in Guatemala. Before selecting the project, the company carried out a feasibility study in order to establish the viability of the project. The company conducted various kinds of analysis viz. market, technical, environmental, economic and financial feasibility in order to determine whether to take up the project or not. Market analysis involved study of demand and supply of electricity generation in Gautemala along with the discussion of major competitors in the sector. Technical specifications of the project were detailed along with which the cash inflows expected from the project were also mentioned. Finally, the case details the government incentives, and environment control technology developed as a part of the project.


Pedagogical Objective

  • To understand various aspects involved in project feasibility viz. market, technical, economic and financial feasibility

Case Positioning and Setting
The case can be used in the course of Project planning, financing and control as well as in corporate finance as a part of Capital Budgeting for students of MBA, B.Com and BBA


* FLAME INTERNATIONAL CASE CONFERENCE 2016

This Case Pack Includes:
- Abstract
- Case Study
- Teaching Note (**ONLY for Academicians)
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