Project Feasibility Study1.ppt

7/23/2019 Project Feasibility Study1.ppt

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Introductory Discussion on Projects:Project Selection and

Feasibility Study

Shish Haider Chowdhury

Finance Controller (Army), Log Area

Dhaka Cantonment

BPI, 03 February 2012http://www.youtube.com/watch?v=oTyWeW5MEio
http://www.youtube.com/watch?v=oTyWeW5MEiohttp://www.youtube.com/watch?v=oTyWeW5MEio


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What is project?

Project is a set ofinterrelated activitiesimplemented through aunified management toachieve some specificpurposes within atimeframe throughmobilization of clearly

defined resources (human,Physical and financial).

2


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Project Cycle


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Selection Criteria for Foreign Fund Projects

Respond to community needs and involve communityparticipation;

Foster self-reliance by encouraging locally-managedand financed initiatives

Address social, economic and sustainable developmentactivities;

Maximize the use of local resources;

Demonstrate sustainability;

Involve women, youth and children as activeparticipants and beneficiaries

Promote environmental protection and sustainability


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Project Approval Process (Private Sector)


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Project Approval Process (GOB)


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Strategic Planning and Project Selection

Strategic planning involves determining long-termobjectives, predicting future trends, and projectingthe need for new products and services.

Organizations often perform a SWOT analysis:

Strengths, Weaknesses, Opportunities and Threats

As part of strategic planning, organizations should:

Identify potential projects.

Use realistic methods to select projects to work on. Formalize project initiation by issuing aproject charter.


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Information Technology Planning Process


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Methods for Selecting Projects

There is usually not enough time or resources toimplement all projects.

Methods for selecting projects include:

Focusing on broad organizational needs;

Categorizing projects based on nature and size;

Performing net present value or other financial

analyses; Using a weighted scoring model.


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Focusing on Broad Organizational Needs

It is better to measure gold roughly than tocount pennies precisely.

Three important success criteria for projects:

There is a need for the project.

There are funds available for the project.

There is a strong will to make the project succeed.


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Categorizing Projects

One categorization assesses whether the projectprovides a response to:

A problem

An opportunity

A directive

Another categorization is based on the time it willtake to complete a project or the date by which itmust be done.

Another categorization is the overall priorityof the

project.


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Financial Analysis of Projects

Financial considerations are often an important aspect of

the project selection process.

Three primary methods for determining the projected

financial value of projects:

Net present value (NPV) analysis

Return on investment (ROI)

Payback Period (PBP) analysis


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Net Present Value Analysis

Net present value (NPV) analysis is a method ofcalculating the expected net monetary gain or loss from a

project by discounting all expected future cash inflows and

outflows to the present point in time.

Projects with a positive NPV should be

considered if financial value is a key criterion.

The higher the NPV, the better.


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Net Present Value Example

Note that

totals areequal, but

NPVs are

not because

of the time

value of

money.


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Return on Investment

Return on investment (ROI) is calculated by subtracting the

project costs from the benefits and then dividing by the costs.

ROI = (total discounted benefits - total discounted costs) /

discounted costs The higher the ROI, the better.

Many organizations have a required rate of return or

minimum acceptable rate of return on investment for

projects.

Internal rate of return (IRR) can by calculated by setting

the NPV to zero.


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Payback Period (PBP) Analysis

The payback period is the amount of time itwill take to recoup, in the form of net cash

inflows, the total amount invested in a

project. Payback occurs when the cumulative discounted

benefits and costs are greater than zero.

Many organizations want projects to have a fairlyshort payback period.


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Charting the Payback Period

Excel file
http://localhost/var/www/apps/conversion/tmp/PPT%20Originals/Fig4-3.xlshttp://localhost/var/www/apps/conversion/tmp/PPT%20Originals/Fig4-3.xls


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Weighted Scoring Model

A weighted scoring model is a tool that provides a systematic

process for selecting projects based on many criteria.

Steps in identifying a weighted scoring model:

1. Identify criteria important to the project selection

process.2. Assign weights (percentages) to each criterion so they

add up to 100 percent.

3. Assign scores to each criterion for each project.

4. Multiply the scores by the weights to get the totalweighted scores.

The higher the weighted score, the better.


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Sample Weighted Scoring Model for

Project Selection


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Problems in Project Portfolios

No link between strategy and project selection;

Poor-quality portfolios (e.g. projects);

Reluctance to execute projects;

Scare resources, a lack of focus;

Selecting short-term and easy projects;

Information overflow (or lack of quality of

information); Decision making basing on power.


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Project Selection Stages

Stage 1: Strategic Considerations Phase Considering both external and internal business

environments

Matching with business strategies

Stage 2: Project Evaluation Phase Economic returns

Risk analysis

Other criteria Stage 3: Project/Portfolio Selection Phase

Scoring method


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Project Selection Decision Process Step1: Proposal Submission

Ensure the completeness of proposal

Step 2: Assignment of external reviewers (division managers)

Assign each proposal to one or more peer reviewers

Step 3: Peer review (external reviewers/division managers)

Division managers coordinate the process as coordinators Validate the peer review results

Step 4: Aggregation of review results (division managers)

Recommend proposal list for panel evaluation

Step 5: Panel evaluation (department/division managers &

experts) Suggest a funded list

Step 6: Final decision (top management division managers)


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Key Success Factors for Project Selection

Centralised view: have and inventory of current andproposed significant projects

Financial analysis: ROI, NPV, Payback,

Risk analysis: complexity, technology risk, cash flow,organizational changes

Interdependencies among projects

Overall analysis: focus on overall portfolio performance

Accountability and governance: top managementinvolvement, business leaders accountable, using regular project

portfolio reporting


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Challenge of Project Selection

Lack of knowledge to evaluate risks

Lack of commitment of project authority

Lack of cross-functional communication

Lack of a clear strategy

Lack of appropriate way to measure project

benefits

Lack of knowledge of portfolio managementtechniques


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Project Feasibility Study


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Factors to be considered

A brief description of the business to assess

more possible factor(s) which could affect the

study

The part of the business being examined

The human and economic factor

The possible solutions to the problems


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Feasibility study is valuable

A feasibility study is valuable for:

Starting a new business

Expansion of an existing business Adding an enterprise to an existing business

Purchasing an existing business


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Feasible business will-

A feasible business will:

Generate adequate cash flow and profits,

Withstand risks,

Remain viable in the long-term

Meet the goals of the founders


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Feasibility Study helps

The feasibility study helps to frame and

flesh-out specific business scenarios so they

can be studied in-depth.


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Pre-feasibility study helps

May help sort our alternatives and determine ifa full-blown feasibility study is warranted.


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Market Assessment

A market assessment may be conducted first to

identify market opportunities. If no

opportunities exist, there may be no reason to

proceed further.


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Study Results

Outline in depth the various business scenarios

examined and the implications, strengths and

weaknesses of each.


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Go/No Go Decision

The feasibility study will be a major information

source in making this critical decision.


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Reasons Not to do a Study

We already know it is feasible. We did a study a couple of years ago.

Just a way for consultants to make money.

The company selling us the equipment says it is

feasible.

Lets hire a general manager and have him do the

study.

Waste of time we need to buy the site andbegin construction.


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Reasons to Do a Study

Gives focus to the project. Narrows the business alternatives.

Identifies new opportunities.

Identifies reasons not to proceed.

Provides valuable information for go/no go

decision.

Increases probability of business success by

identifying weaknesses early.


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Reasons to Do a Study

Provides documentation that the idea was

thoroughly investigated.

Helps attract funding from lenders, grant

providers, etc. Helps attract equity investment


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Not the Business Plan

Feasibility study conducted before decision

to proceed (go/no go).

Business plan prepared after decision to

proceed (go/no go).

Feasibility study provides investigative

function.

Business plan provides planning function.


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Feasibility Study Outline

1) Description of the Process:

Identification and exploration of business

scenarios.

Define the project and alternative

scenarios.

Relationship to the surrounding

geographical area.


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2) Market Feasibility

Industry description.

Industry competitiveness.

Market potential

Access to market outlets.

Sales projection


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3) Technical Feasibility

Determine facility needs.

Suitability of production technology.

Availability and suitable of site.

Raw materials.

Other inputs.


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4) Financial/Economic Feasibility

Estimate the total capital requirements.

Estimate equity and credit needs.

Budget expected costs and returns.


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5) Organizational/Managerial Feasibility

Business Structure

Business Founders


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Study Results

Identify and describe various business

scenarios.

Compare and contrast scenarios.

Outline criteria for decision making.


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Energy Planning in Bangladesh


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Vision and Mission

Vision

To provide access to affordable and reliable

electricity to all by the year 2020.

Mission Statement

Ensure uninterrupted and quality power

supply for all by 2020 through improvement in

generation, transmission and distribution

systems.


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Bangladesh Energy Profile 2012

Natural gas and coal are the primary mineralresources produced in Bangladesh. Natural gasand petroleum are found in the northeast of thenation, and in the coastal waters. Limestone is

also produced. To reduce the current gas and power deficit,

Bangladesh plans to build several infrastructures:a 500 MW transmission line with India by 2012,

2 nuclear reactors by 2017 and a LNG re-gasification unit by 2012 with a capacity of 3.5 Mt/year.


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In FY 2010-11 total generation capacity was 6,727 MW (upto June 15, 2011)

including 3,534 MW in Public sector and 3193 MW in Private sector

(including REB).

G i C i


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Power Generation CapacityIn the FY 2010-11 maximum generation was 4,890 MW (June 13, 2011).


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Reform Objectives

Bringing the entire country under electricity service by the year2020 in phases;

Making the power sector financially viable and able to facilitateeconomic growth;

Increasing the sectors efficiency;

Introducing new corporate culture in the power sector entities ; Improving the reliability and quality of electricity supply;

Using natural gas as the primary fuel for electricity generation;

Increasing private sector participation to mobilize finance;

Ensuring reasonable and affordable price for electricity by pursuing

least cost options; Promoting competition among various entities.


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Calendar Year Wise Projects Completion(From 2010 to 2015)


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Energy Efficiency Initiative

Steps to revise Building Code inserting Energy Efficiency and Solar Energyissue

To build awareness amongst the children, steps t to incorporate EnergyEfficiency and Solar Energy issue in the of School/Madrasa/Colleges;

Installation of Solar Panel in the Govt., Semi Govt and autonomousorganizations within next 3 years;

Use of CFL bulb in all Ministries and power sector entities;

Conventional street lights will be replaced by LED and solar;

Public awareness for energy conservation;

Discontinuation of incandescent bulb and electric heater gradually;

Limited use of Air Conditioners keeping temp within 25%C;

Encouraging the business community for using solar energy;

Introduction of Energy Star Rating system in the electric appliances (BSTI);

Discouraging use of neon sign in the markets/ shopping malls at night;

Closing of markets and shopping malls within 8 p.m.;

Steps to introduce Pre-paid metering system all over the country.


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Renewable Energy (Goals)

To increase access to electricity among the people living inoff grid, isolated and in accessible remote areas by solarhome systems (SHS);

Improve the standard of living and increase income byintroducing solar power and wind power;

To increase the supply of power by installing offshore windturbines;

Explore the potential of other forms of renewable energysuch as micro hydro, tidal energy, bio-mass and bio-dieselto meet the power and energy demand of the rural people;and

To explore the potential of municipal wastes to generateelectricity.


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Thank You Very Much

Project Feasibility Study1.ppt

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