Feasibility Study: Case of a Biomass Project*

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................

Exhibits

Exhibit I: Electric Power Consumption in Guatemala (in Kwh)

Exhibit II: Investment cost of the Project

Exhibit III: Cash Flows from Biomass Project

Exhibit IV: Other Financials (in INR crore)

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...............