Ethiopian Construction Works Corporation

(ECWC)

EPS Wall Panel Factory

Feasibility Study Report

Consultant
Walya Management Consultancy and Training PLC
Tel: 0960222522 or 0920725050 or 0118449101
Email: walya.management @gmail.com
P.O.Box: 6014, A.A.
Nifas Silk Lafto Sub City, Woreda 01, Addis Ababa

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 Table of Contents
Page

Table of Contents.......................................................................................................i
I. EXECUTIVE SUMMARY..............................................................................1
II. INTRODUCTION............................................................................................4
2.1. Introduction....................................................................................................4
2.2. Objective of Establishing the Factory............................................................8
2.3. Project Rationale............................................................................................8
2.4. Structure of the Feasibility Study..................................................................8
III. SWOT ANALYSIS......................................................................................10
IV. MARKET STUDY......................................................................................11
4.1. Introduction..................................................................................................11
4.2. Market Destination and Segmentation.........................................................12
4.3. Ethiopian EPS Wall Panel...........................................................................13
4.3.1. Demand for EPS Wall Panel...............................................................13
4.3.2. Demand Projection for EPS Wall Panel.............................................17
4.4. Supply of EPS wall panel............................................................................18
4.5. Demand and Supply Gap of EPS wall panel...............................................18
4.6. Country Experience.....................................................................................20
4.7. Experience of National Housing Corporation of Kenya..............................23
4.8. Price Determination.....................................................................................25
V. TECHNICAL ANALYSIS.............................................................................27
5.1. Project Location and Site.............................................................................27
5.2. Building and Civil works.............................................................................28
5.3. Machinery and Equipment...........................................................................29
5.3.1. EPS Wall Panel Production Factory...................................................29

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 5.3.2. Types of EPS wall panel.....................................................................33
5.3.3. Planned Machinery and Equipment....................................................40
5.3.4. Production Capacity............................................................................41
5.4. Auxiliary items.............................................................................................41
5.5. Vehicles........................................................................................................41
5.6. Office Furniture and Equipment..................................................................42
5.7. Raw materials...............................................................................................42
5.8. Utility Requirement.....................................................................................43
5.8.1. Power and Air Consumption...............................................................43
5.8.2. Water Consumption............................................................................43
5.9. Environmental Impact and Mitigation.........................................................44
5.9.1. Health and Safety................................................................................44
5.9.2. Environment........................................................................................44
5.10.Project Implementation Program.................................................................44
VI. ORGANIZATION AND MANAGEMENT..............................................31
6.1. Organizational Structure..............................................................................31
6.2. Manpower Requirement...............................................................................32
VII. FINANCIAL ANALYSIS...........................................................................35
7.1. Summary of Investment Costs.....................................................................35
7.1.1. Pre-Production Costs..........................................................................36
7.1.2. Working Capital..................................................................................36
7.2. Investment Financing Plan...........................................................................37
7.3. Projected Financial Operation Results.........................................................39
7.3.1. Sales Revenues....................................................................................39
7.3.2. Production Costs.................................................................................39
7.3.3. Projected Profit and Loss Statement...................................................39

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 7.3.4. Projected Cash Flow Statement..........................................................39
7.3.5. Financial Internal Rate of Return (IRR) and Net Present Value (NPV)
40
7.3.6. Uncertainties.......................................................................................40
7.4. Socio-economic Aspects..............................................................................41
7.5. Assumption Used For Financial Analysis....................................................31
III. ANNEX.........................................................................................................31
Annex I: Working Capital Requirement..............................................................32
Annex II: Operating Costs...................................................................................33
Annex III: Projected Profit and Loss Statement..................................................34
Annex IV: Projected Cash Flow Statement.........................................................35
Annex V: Projected Balance Sheet Statement.....................................................36
Annex VI: Calculation of Financial Internal Rate of Return...............................37
Annex VII: Sensitivity Analysis..........................................................................38
Annex VIII: Loan Repayment Schedule..............................................................41

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I. EXECUTIVE SUMMARY

This feasibility study was commissioned by The Ethiopian Construction Works

Corporation (ECWC) to evaluate the commercial, technical and financial viability for

the establishment of EPS wall panel production in Addis Ababa City, Akaki Kality
Sub City. This feasibility study was conducted to evaluate the commercial,
technical and financial viability of establishing EPS wall panel production factory.

The project idea is based on the observation that currently there are local
manufacturing plants that have to produce EPS wall panel; however, the size of the
construction sector demand is very high. This Project is quite lucky in that it does
not go to hunt for market; rather attempt to fulfill the unsatisfied demand in
relation with the rapid construction growth and urbanization.

The study shows that, besides generating significant financial benefits to the
investor, local production of EPS wall panel will and have a number of positive
socioeconomic impacts for the economy at large. The socioeconomic benefits of
the project include employment creation and generation of tax income as well as it
is cost effective and functionally sound.

When the proposed manufacturing plant becomes fully operational, it will be able
to produce 602,349 m2 of EPS wall panels. The factory will hire 158 employees.
The employees that will be hired will have the necessary skills, knowledge and
experiences for their respective positions and appropriate training will be
conducted on key areas to upgrade their capacity.

The total initial investment cost of the project is estimated at Birr 83.06 million.
The estimate is based on price quotations obtained from technology suppliers,

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engineering estimate for civil works, office equipment and furniture, vehicles costs
as well as provisions made for working capital and pre-production costs.

The project is planned to be financed from two sources (equity and long term bank
loan) with the bank loan estimated to be 70% and the balance 30% to be raised by
the owner of the factory as equity. The loan will be for a period of 10 years with a
grace period of 1 year and will be paid back fully at the end of the eigth year with
interest.

The financial analysis made under a set of assumptions and a 10 year economic life
shows that the project will be profitable starting from the first year of its operation.
The Financial Internal Rate of Return (IRR) of the proposed investment stands at
26% and 23% before-tax and after-tax, respectively. The Net Present Value of the
future cash flows discounted at a rate of 12% stands at Birr 78.82 million and Birr
56.39 million before tax and after tax, respectively.

The sensitivity analysis conducted on the base-case scenario indicated that the
project's IRR and NPV are most sensitive to potential losses of revenue which can
arise either from lower volume of sales or lower selling prices. For example, a 10%
decrease in revenue reduced the after tax IRR from 26% to 17%. On the other
hand, a 10% increase in operating costs decreases the IRR to 20%.

This suggests that the factory should keep an eye on its capacity to generate
revenue by keeping its capacity utilization at a high level. On the other hand, loss
of revenue due to lower selling prices due to competitive pressures is an unlikely
scenario because the project is expected to have a significant cost advantage over
local construction materials and can afford to raise its prices and still offer prices
which are lower than other substitute products.

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The study also shows that, while the project's IRR is not as sensitive as it is to
changes in sales volume, increases in the price of raw materials will have a
negative impact on profitability unless compensated by a corresponding adjustment
in the selling price of the output.

The report finally concludes that, besides offering attractive financial returns to its
investor, the project has other positive socio-economic impacts which contribute to
the country development.

Based on the forgoing arguments and observations, the Consultants recommend the
implementation of the project so that the macro and micro level benefits associated
with it can be realized.
 Summary of Financial Results
 Project Investment Cost
Description Amount Percentage
Total Fixed Investment Costs 64,405,007 78%
Pre-production Capital Expenditure 7,419,400 9%
Working Capital 11,235,792 14%
Total 83,060,199 100%
 Source of Finance
Description Amount D/E Ratio
Bank Loan 58,100,000 70%
Equity 24,960,199 30%
Total 83,060,199 100%
 Expected Financial Results
Description Year 1 Year-10
Sales Revenue 53,619,691 85,791,506
Profit (Loss) 5,401,775 16,619,795
Cumulative Cash Balance 4,450,403 96,133,621
Assets Position 83,060,199 123,703,41
5
FIRR Before Tax = 29%

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 FIRR After Tax = 26%
 Sensitivity Analysis
Description IRR Before IRR After
Tax Tax
When Revenue decreased By 10% 20% 17%
When Operating Costs increased By 10% 24% 20%
When Investment Costs increased By 26% 22%
10%

II. INTRODUCTION

2.1. Introduction

The Ethiopian Construction Works Corporation (ECWC) is a newly established

public enterprise with the authorized capital of Birr 20,324,608.143.90 (twenty
billion three hundred twenty four million six hundred eight thousand and one
hundred forty three birr and ninety cents) and with paid up capital of
7,754,333,613.80 (seven billion seven hundred fifty four million three hundred
thirty three and six hundred thirteen thousand birr and eighty cents), on December
18/2015 based on council of Ministers Regulation No. 366/2015 and with
amendment of the Council of Ministers Regulation No. 390/2016.

ECWC is governed by the Public Enterprises Proclamation No.25/1992. Its

supervising authority is The Ministry of Public Enterprises and its policy-making
body is the Board of the Corporation whose members are appointed by the
government selected from different organizations. The headquarters of the
corporation is located in the city of Addis Ababa, around Gurd Shola. It is head by
a Chief Executive Officer (CEO). One of the functional bodies of the Corporation

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is Building Technology and Construction Sector, which is responsible for the
feasibility study and implementation of this specific Project.

The purposes for which the corporation is established are:

 To engage in domestic and overseas construction works as a

contractor in construction, upgrading and maintenance of roads,
bridges, works relating to dams, irrigations, hydropower generations,
water supply systems, sewerage systems, drainage, deep water wells,
reclamations, river diversions, construction of buildings, airfields, rail
ways, ports and other civil works;

 To engage in the assembling of construction equipment and

machineries, manufacturing spare parts and provide maintenance
service for construction equipment and machinery and produce
construction materials and different kinds of pipes necessary for its
activities and sell them as may be appropriate;
 To acquire, own and administer irrigation dams, deep water wells and
as may be necessary water supply canals constructed and to be
constructed by the Federal Government budget and collect charges
from the beneficiaries of such dams;
 To engage in the rental business of construction equipment,
machinery, warehouse and buildings;
 To produce qualified human resource with required discipline,
number and quality for the Corporation by using its own training
facilities or work in co-ordination with relevant domestic or
international research, educational and training institutions;

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  To make studies and forward proposals in line with directions given
by the Ministry of Public Enterprises to get financial, technological
and modern administrative inputs (including attracting investment or
to engage in investment) to be competitive and profitable in domestic
and overseas works;
 To sell and pledge bonds and to negotiate and sign loan agreements
with local and international financial sources in line with the directive
issued by the Ministry of Finance and Economic Co-operation and in
accordance with policy direction given by Ministry of Public
Enterprises;
 To render design and construction, engineering procurement and
contracts, design building operation and management or transfer and
other general construction project management services;
 To engage in deep foundation excavation for specialized
electromechanical works, tunnelling ready mix concrete production
and pouring, demolishing services; render a concrete and steel
structure based building technology and construction solution related
to pre-fabricated building and conventional system.
 To undertake any other related activities necessary for the attainment
of its purposes.

To achieve its purpose the Corporation has esabilished the following

organizatonal structure.

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 Figure 1 Organizational Structure of ECWC

This feasibility study was conducted for EPS wall pane Factory which is
considering entering into the business of producing and marketing of EPS panel by
establishing a factory in Addis Ababa under the management of Building
Technology and Construction Sector of ECWC which is located in Akaki Kality
Sub City, Kality area. The location is ideal for clearing and receiving imported raw
materials, distribution of the final product to the major market center in Addis

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Ababa, and the location is an industrial area where Government endeavors to
ensure a continuous (uninterrupted) supply of electricity and other utilities.

2.2. Objective of Establishing EPS Wall Panel Factory

Currently, the main objective of establishing the factory is to produce EPS wall
panel.
Other objectives of the factory are:
 To contribute on the growth of the overall economy of the country by
engaging all the necessary inputs as well as promoting the modern building
technology services in Ethiopia.
 To improve the market, share and revenue of the corporation using the
possible and applicable building technology system
 To develop, diversify and transfer the modern building construction inputs to
foster the construction services.

2.3. Project Rationale

The rationale of behind establishing the project is to change the existing backward
technology situation which affects the economical, efficiency and effectiveness of
the building construction services. Moreover, there is an existence of high
construction sector inputs demand in the country and the growing urbanization &
change in life style with the growing middle income urban population. The
prevailing government investment policy provides a favorable environment for the
fully functioning of such project that participated in manufacturing sectors.

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2.4. Structure of the Feasibility Study

This feasibility study report is organized in 8 parts. Part I presents the executive
summary of the feasibility study. Part II provides an introduction and company
background; Part III presents the SWOT analysis. Part IV assess the market study
which deals with issues related to description of EPS wall panels and the demand
and supply situation in the country; Part V covers technical issues and deals with
the production technology to be used, production process flow, machinery and
equipment and environmental impact of the project.

Part VI presents the organizational structure and the human resource required by
the project. Part VII and VIII present the financial analysis and the socio-economic
aspects. Finally, Part IX depicts the annexes of different financial results.

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III. SWOT ANALYSIS
The SWOT analysis enables companies to identify the positive and negative
influencing factors inside and outside of a company or organization.
Besides businesses, other organizations, in areas such as community health
development and education have found much use in its guiding principles. The key
role of SWOT is important to create and develop clear understanding of the factors
that may affect strategic planning and decision making and overall undertaking of
the industry. This regards, this project has the following characteristics,

Strength
 The strong structural and communication ability to integrate the EPS product
for the sectors

 Commitment of the governing board and management of the Corporation to

run the project

 Suitable organizational structural, established institutional capacity to

implement the project

 Experienced technical and administrative staff familiar with the project and
construction materials sector

Weakness
 There is a poor information management system to manage new projects
 Less exposure for the international market.

Opportunity

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  Encouraging policy and incentive to the sector that is issued by the
government.
 There is significant improvement in construction sector that will help to
facilitate activities.
 Increasing urbanization and life style of the society
 The economic integration plan in the East Africa as well as Africa which
will be the opportunity to get the international market

Threat
 Lack of foreign currency to foster the establishment of the factory

IV. MARKET STUDY

4.1. Introduction

As the demand and requirement of the clients have continued to grow, it is

essential to find ways constructing faster, cheaper and better-quality buildings. For
this very reason, Prefabrication has become an important and cost-effective
concept in today’s fast-track construction culture in the world.

The installation of prefabricated panels in constructing buildings eradicate the

current the problems associated with conventional construction methods and
shortens the on-site construction period, to enabling timely completion and a
maximum return on investment.

This market study tries to investigate the market for EPS wall panel. The study has
two components i.e. the global and the local market. In both global and local
market the import and export trade aspect are analyzed in detail. The global market

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shows the market share of the traders (importer and exporter). Hence, it identifies
the major competitive countries of prefabricated building producer and gives
valuable information for countries needing to join similar market.

4.2. Market Destination and Segmentation

The destination for EPS wall panel is local market for the short run as there
untouched demand in the country; however, in the long run there is an opportunity
for export market particularly in neighboring countries. The market can be
segmented based on the consumer. These are private house constructor, real estate
developer, Government for condominium house construction and for institution
construction and NGOs. The use of the product is for the construction of parts of
residential houses, offices, shops, hotels, schools, hospitals. The production of
prefabricated construction materials would be for the house construction to
substitute the old and traditional block, brick, stone wall and ceiling with modern
easy, low cost and quality material while responding for the significant challenge
of the country. Though the demand by large high, the corporation primarily focus
to meet the demand for Addis Ababa Housing program both the 20/80 and 40/60. It
is projected in 2019 up to 580510.73m2 and reached to 39649.64m2 in year 2023.
On the top of this the target groups are very large in number since the technology
by itself new for the country. Thus, the team assumed that going in detail is
something futile exercises for the corporation.

Furthermore, for the case of local market, since the product, technology, and
marketing is new to our country as it is mentioned in the above, in projecting the
demand for the under captioned product; it is considered to substitute product
(block, bricks and stone) demand for the existing need, practice prefabricated
building in the country and experience of neighboring country. These approaches

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would comply with the international forecasting practice that is to be familiar
with/in launching of new products in the market.

4.3. Ethiopian EPS Wall Panel

Ethiopia has no experience in the utilization of different construction materials.
The conventional materials are produced from mortar, gypsum, clay, limestone and
others excavated raw material from the ground. The demand for these building
materials which is not compatible with the supply is increasing. This has impact on
the rising cost on construction materials. This shows a need to focus on alternative
building materials produced from raw materials like agro-industrial wastes, and
mineral products with relatively low price and much higher strength than the
ordinary hollow concrete blocks.

In Ethiopia, being one of the developing countries, there is extensive need for basic
material (food, water, shelter etc). The recent fastest growth signifies the
improvement of these basic requirements: food self-sufficiency, residential house
availing and infrastructure development. The country with majority of young
population unable to provide housing for all those needs it. The cost of
construction or building and the in large time taking to complete building are the
main factor that hinders the performance of the construction sector. Therefore, EPS
wall panel would be the best alternative for Ethiopia to avail housing construction
service for its young people who is need of the construction of residential house
and for construction of building for universities, hospitals and other institutions as
well as commercial centers such as shops.

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 4.3.1. Demand for EPS Wall Panel

The demand for EPS wall panel is the driven demand of the housing unit:
residential, commercial and institutional which in turn depends on the growth of
population, income, urbanization and commercialization. Urbanization is another
most important factor that induces the demand. Migration from rural area to urban
area increases the demand for housing in the urban; the current over crowdedness
indicates the excessive need of these housing. Again the demands for EPS wall
panel have higher correlation with the income that the increase income induces the
demand for housing which is one of the basic needs. The EPS wall panel uses as
floor and both interior and exterior wall while, board use as ceiling, floor and both
interior and exterior wall of housing units. According to central statistical agency
population and housing census report, both the total housing unit and the housing
unit those are constructed using concrete, hallow block, bricks, of the country has
shown increasing trend in the last thirteen years with the compound annual growth
of 2.64 and 10 percent, respectively.

Table 4.1: Housing Unit

Housing Unit 1994 2007 AAGR
Total Housing Unit 10,766,729 15,103,135 2.64 %
Construction & Building of houses
115,873 355,194 10 %
( with bricks , block & stone wall)
Source: Central Statistics Authority

The quality aficionada housing units, 2 % age of total housing units as of

2007( CSA, population and housing census,2007), so far constructed using bricks,
hallow blocks and stones are the ultimate consumers of agro-stone products: EPS

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wall panel as alternative technology with desired quality. Therefore, the estimated
demand for agro-stone products of EPS wall panel is calculated using the annual
average growth rate of 10 % that has been in last two country wide census period
(1994 & 2007).

Table 4.2: Estimated housing units from 2007-2017

Housing Unit Construction & Building of Forecasted number
houses (with bricks , block & of house
stone wall)
2007 355,194
2008 390,713 35,519
2009 429,785 39,071
2010 472,763 42,978
2011 520,040 47,276
2012 572,043 52,004
2013 629,248 57,204
2014 692,173 62,925
2015 761,390 69,217
2016 837,529 76,139
2017 921,282 83,753
Source: Computation

Multiplying the housing units with the area of respective parts will give total area
of the required material or demand for the agro-stone products. Most of the
housing units under construction are condominium and real states. The majority of
the building in the country is single bed room and two bed rooms with the average
area of 45 m2 (39%) and 60 m2 (29%), respectively.

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Table 4.3: Condominium House
Single Three
Commercia Two Bed
Year Studio Bed Bed
l Rooms
Room Rooms
1998 E.C 1,727 5,922 11,084 11,717 1,770
2000 E.C 2,465 4,844 11,196 7,068 2,132
2003 E.C 1,286 1,847 8,143 4,204 2,867
2004 E.C 114 355 746 441 317
CAGR 7% 16% 39% 29% 9%

Floor, ceiling, exterior and interior wall are parts of the house to be constructed
and the average area of building materials is assumed by taking the average area of
house that is 52.5 m2. Again according to the 2007 Population and Housing survey
report, the average room of urban housing was found to be 2:1(2 rooms per a
house). Thus, there is at least one partition. Therefore, the parameter of area has
taken for estimation of exterior wall, and side distance is taken for the estimation
of partition length and, the area itself is taken to estimate ceiling and floor of the
housing unit. The parameter of the housing unit is the length of the wall and it will
nearly be 4X 7.25 =29 m and the length of partition will be 7.25m while, the area
of ceiling and floor will be 52.5 m2 each. Totally the housing unit construction
parts area: exterior wall, partition wall, ceiling and floor (29mX2.50m (height) +
7.25mX2.50m (height) + 2X 52.5 m2) will be 196 m2 .

Table 4.4: Estimated area of housing units (m2)

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 Construction & Forecasted
Area of Area of Total area
Housing Building of houses number Area of Area of
Exterior Interior wall of housing
Unit (with bricks , block of new Ceiling Floor
wall (partition) units
& stone wall) houses
2007 355,194
2,575,15 1,864,76 1,864,76
2008 390,713 35,519 643,789 6,948,483
7 9 9
2,832,67 2,051,24 2,051,24
2009 429,785 39,071 708,168 7,643,331
2 5 5
3,115,93 2,256,37 2,256,37
2010 472,763 42,978 778,985 8,407,664
9 0 0
3,427,53 2,482,00 2,482,00
2011 520,040 47,276 856,883 9,248,430
3 7 7
3,770,28 2,730,20 2,730,20
2012 572,043 52,004 942,572 10,173,273
7 8 8
4,147,31 3,003,22 3,003,22
2013 629,248 57,204 1,036,829 11,190,601
5 8 8
4,562,04 3,303,55 3,303,55
2014 692,173 62,925 1,140,512 12,309,661
7 1 1
5,018,25 3,633,90 3,633,90
2015 761,390 69,217 1,254,563 13,540,627
2 6 6
5,520,07 3,997,29 3,997,29
2016 837,529 76,139 1,380,019 14,894,690
7 7 7

4.3.2. Demand Projection for EPS Wall Panel

The demand for EPS wall panel is determined by forecast by analogy method
which is a forecasting method that assumes two different kinds
of phenomena share the same model of behavior. For example, one way to predict
the sales of a new product is to choose an existing product which "looks like" the

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 new product in terms of the expected demand pattern for sales of the product.
Thus, this study assumes the total area of housing units: exterior wall, interior wall,
ceiling and floor that build using bricks, block & stone wall.

Dr. Marlene Jensen, and MBA professor at Lock Haven University states in her
book The Everything Business Planning Book: How to Plan for Success in a New
or Growing Business that it’s reasonable to expect a consumer product to achieve
between 2 and 6 percent market penetration, while the reasonable range for a
business product is between 20 and 40 percent. From there, the determined
population numbers for the target demographic can be multiplied by the numbers
at each end of the market penetration range—either 2 and 6, or 20 and 40
respectively. The resulting numbers give the estimated market penetration range.

Thus, to project the demand for EPS wall panel conservatively, it is used 0.02
market penetration rate assuming that the firm will use lower products prices,
increased promotion, use more distribution channels, have good Product
management and Penetration pricing is a marketing technique which used to gain
market share by selling a new product for a price that is significantly lower than its
competitors.

Table 4.5: Demand for EPS Wall Panel (m2)

Housing Constructio Newly Area of Area of Area of Area of Total market demand for
Unit n& built Exterior Interior Ceiling Floor area of penetratio EPS wall
Building of housing wall wall housing n range panel
houses (with deman (partition units
bricks , d )
block &
stone wall)
2017 921,282 83,753 6,072,084 1,518,021 4,397,02 4,397,02 16,384,15 2% 327,683.17
7 7 9
2018 1,013,410 92,128 6,679,293 1,669,823 4,836,72 4,836,72 18,022,57 360,451.49
9 9 4
2019 1,114,751 101,341 7,347,222 1,836,806 5,320,40 5,320,40 19,824,83 396,496.64
2 2 2
2020 1,226,226 111,475 8,081,944 2,020,486 5,852,44 5,852,44 21,807,31 436,146.30

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 2 2 5
2021 1,348,849 122,623 8,890,139 2,222,535 6,437,68 6,437,68 23,988,04 479,760.93
7 7 7
2022 1,483,733 134,885 9,779,153 2,444,788 7,081,45 7,081,45 26,386,85 527,737.02
5 5 1
2023 1,632,107 148,373 10,757,06 2,689,267 7,789,60 7,789,60 29,025,53 580,510.73
8 1 1 6

4.4. Supply of EPS wall panel

Currently there is no registered domestic production and import of EPS wall panel
in Ethiopia. However, Amhara Regional State Government has been constructing
similar project in Bahir Dar town. As per the researcher survey, the project was
under implementation and the project’s building and civil works were completed
and installation of the plant was started. The project manager mentioned that the
installation of the machinery would be completed in two weeks.

4.5. Demand and Supply Gap of EPS wall panel

Since the product is new to the country the research team couldn’t project the
supply side of EPS wall panel and make demand and supply sides comparison to
examine the future gap for required assessment to pass decision. However, as a
substitute product for bricks, block & stone wall it has a potential market since the
product has inherent comparative features like fire resistant, energy efficient; lower
utility costs, earthquake resistant, versatile, flexible design, and sound proof, storm
resistant and own superior strength.

As per the experience from neighboring countries like Kenya, the use of panel
walling system was found to be fast, efficient and effective mode of constructing
houses which enables mass production of modular houses. These mentioned
evident characteristics are expected to conceive potential demand and facilitate the
market penetration and share which is subjected to stiff competition. Since the

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product is new to the country it needs a heavy awareness creation campaign to
penetrate to the market.

Table 4.6: Demand- Supply Gap of EPS wall panel (m2)

Year Potential Demand and Supply Gap
2017 327,683
2018 360,451
2019 396,496
2020 436,146
2021 479,760
2022 527,737
2023 580,510.73

The potential demand supply gap analysis for the meshed polystyrene panel is
made using analogy method which is a forecasting method that assumes that two
different kinds of phenomena share the same model of behavior. Thus, the team
considers 2% market penetration rate for substituting the existing bricks, block &
stone wall market.

4.6. Global Prefabricated Building Market

Prefabricated systems or structures are frames, modular structures, or assembly of
parts and components which are used in construction industry. Types of pre-
fabricated systems include skeleton systems, panel systems, cellular systems, and
combined systems. Skeleton systems include structural elements such as columns,
beams, and roofing elements. Panel systems include wall or flexible partition
elements, cellular systems include three dimensional structures, whereas combined
systems include combination of aforementioned system types. These systems are

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designed based on load bearing requirements and applications such as residential,
commercial, or industrial. Various types of materials used for manufacturing of
these systems include wooden panels, metal panels, composites, plastics, glass, and
other reinforced plastics.

4.6.1. Global Prefabricated Building System Market: Drivers &

Restraints

Some of the underlying drivers for the industry are identified as rising number of
corporate offices or special economic zones, urbanization trend, rapid
industrialization, developing infrastructure prospects in Asian region, and
increasing real estate investments across the globe. The growth of prefabricated
building system market is expected to be in-line with development of real estate
and housing sector across the globe with high growth potential expected to come
from Asia-Pacific and GCC region.

4.6.2. World Prefabricated Building Export

The world export of prefabricated building export has shown increasing trends in
the last five years period, it has been increasing by the CAGR of 2 %. China with
3,310,958.00 ton of export as of 2016 is the leading exporter of all countries
followed by United States of America, Czech Republic, Estonia and Germany. In
general term the export amount of the top three countries has been increasing the
last five years.

Table 4.7: World prefabricated building export ( tons)

Countries 2012 2013 2014 2015 2016 AAG % of
R share
World 3,085,89 3,622,41 3,653,75 3,222,15 3,310,95 2%

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 8 3 4 4 8
China 697,992 682,486 714,318 724,865 815,298 4% 25%
United 309,637 330,500 333,450 223,972 217,437 -8% 7%
States of
America
Czech 126,196 131,697 139,933 180,810 201,320 12% 6%
Republic
Estonia 132,276 136,011 152,371 173,645 183,138 8% 6%
Germany 215,284 181,284 171,704 166,601 157,824 -7% 5%
Source: International Trade Center (www.intracen.org)

4.6.3. World Prefabricated Building Import

The world Import of prefabricated building has shown decreasing trends in the last
five years period it has been decreasing by the annual average rate of 3%. Germany
is the leading importer of prefabricated building followed by Norway, France,
Switzerland, and Indonesia. In general term the export amount of the top three
countries has been increasing the last five years.

Table 4.8: Prefabricated Building Import (tons)

Countries 2012 2013 2014 2015 2016 AAG % of
R share
World 298356 266797 256955 261321 264353 -3%
9 5 5 7 8
Germany 188896 186506 220417 268416 296430 12% 11%
Norway 143046 165607 171040 172465 187837 7% 7%
France 149763 140616 136895 126207 123192 -5% 5%

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Countries 2012 2013 2014 2015 2016 AAG % of
R share
Switzerlan 130096 147376 134005 125101 117684 -2% 4%
d
Indonesia 23722 43929 48414 46963 116601 49% 4%

4.7. Country Experience

Kenya, neigh boring country, has introduced the product as new construction
technology alternative to tackle housing crunch. The panels have been used in this
country for the last 20 years now. The first project was done at the KHIBIT offices
industrial area Nairobi in the year 1996, the Baronzi Estate, a gated community at
Muthaiga North - Nairobi was constructed in the year 2000, the new expansion
wing of silver spring hotel Nairobi was put up in the year 2000.

NHC has managed to have multi-storey commercial building in various parts of the
country (opp TRM Mall at Thika road, Nakuru, Luxury apartments for sale at
Kanduyi area – Bungoma county, Luxury apartments for sale opposite Nazarene
University, Rongai – Nairobi, a gated community in Kisumu) schools projects,
offices, Go-downs in various parts of the country, residential homes in Karen,
Muthaiga North etc

Jomo Kenyatta University of Agriculture and Technology, observed that a standard

size panel weighs only 15kg which allows for easy handling and fast installations
process, thus reduces construction time by 50%. A single story with 3 bedroom
house was completed in 30 days instead of 60 days. The technology was found to
lower construction cost by 30% in red soil areas. Off cuts were easily recycled
hence drastically reducing the cost. The use of panel walling system was found to

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be fast, efficient and effective mode of constructing houses which enables mass
production of modular houses. It is therefore recommended that training and
creation awareness on the use of local EPS panel walling system be done.

The country now has the opportunity to move speedily and utilize the 3D
Expanded Polystyrene ‘EPS Home panels’ to alleviate the housing crunch. The
aim of this technology is to allow for affordable, stronger and faster construction of
houses as well as reducing material wastage. Similar technologies e.g. ‘space
frame’ from South Africa has been used in construction since 1980. This
technology has also been certified and implemented in other countries such as
Britain, Europe, Central America, China, India, Mexico, Mozambique, Nigeria,
Qatar, Sri Lanka, United States of America, etc. using different brand names. The
EPS home panels are now locally available and manufactured by National Housing
Corporation (NHC).

4.8. Experience of National Housing Corporation of Kenya

The National Housing Corporation (NHC) has stepped up its campaign to boost
supply of low cost houses in Kenya as it seeks to bridge the housing demand-
supply gap in the country.
NHC has unveiled plans to build 30,000 low cost houses around the country–
20,000 units for middle-income-earners and 10,000 for low-income earners –
through partnerships with landowners and counties.

The state-owned company plans to build the houses using the Expanded
Polystyrene (EPS) technology that uses soft boards and wire mesh to manufacture
floor, wall and roof panels. NHC managing director WachiraNjuguna said: “The
use of EPS technology will allow for speed and lower the cost of delivery, which
will translate to more affordable housing units.”

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According to MrNjuguna, the innovative technology will accelerate supply of low
cost housing in Kenya, with a three-bedroom house costing Sh1.2 million down
from Sh2.4 million for a brick and mortar house.

NHC has already built 100 houses in Nairobi’s Balozi Estate using the innovative
technology and would aggressively market it among builders across the country.
The EPS panels are manufactured at the firm’s Mavoko EPS factory, which was
launched in 2010. The new technologies come at a time when the demand for
housing in the country greatly surpasses the supply due to rapid urbanization and a
growing middle class.

Statistics show that about 40,000 units are supplied into the local market yearly
against an annual demand of at least 200,000 units – leaving an annual shortfall of
160,000 units.
Wednesday 3 February 2016, the cabinet Secretary to the ministry of Ministry of
Land, Housing and Urban Development, Prof. Jacob Kaimenyi released a press
statement at Ardhi house. In his statement he gave a detailed report concerning the
housing situation in Kenya.

Kenya has faced major challenges in the housing sector but at the same time
provided opportunities for the same. The country has been experiencing an annual
shortfall of housing, exceeding 250,000 units. There has also been an occurrence of
rapid urbanization which is as a result of devolution and realization of vision
2030.Access to both prime and virgin land for housing have provided a perfect
opportunity for investors in the sector. However, there are challenges that come
with housing in Kenya. Such are; expansive growth of slums and informal
settlements ,distorted access to land, high cost of finance ,existence of rigid

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building laws and regulations and the deterioration of housing stock due to lack of
a maintenance framework.

The Kenyan urban areas experiences a demand of 250,000 housing units per
annum and a provision of 50,000 per annum, a low number because a 250,000
deficit has been left per annum. Nevertheless, 922 housing units have been
completed in Kibera zone and the ministry will commence construction of over
8,000 units under Civil Servants Housing Scheme.

Interested developers such as the World Bank, UN Habitat, SIDA, AFD and
Shelter Afrique have come on board to help settle the lack of adequate social
infrastructure in the housing sector. Their hard work bore fruits as there has been a
rapid growth in the number of schools, markets , roads , lighting programs, sewer
lines and dwelling houses hence changing the lives of many Kenyans.

The National Housing Corporation, a state corporation under the ministry of land is
charged with implementation of the Housing policy. It is expected to provide low
cost housing and social housing. Its board has targeted to construct 30,000 housing
units by 2017.

The Kenyan government is committed to ensuring every citizen has access to

affordable and comfortable housing, thereby investing in major transformation
programs and projects and legislature review which has set the trend in the sector.

4.9. Price Determination

The sales price of the product under consideration is assumed to cover only the
domestic market. The selling price is determined based on the cost covered to
produce the product and the market situation of the country. Thus the determined

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reasonable price of EPS wall panel using cost plus profit approach is ETB 178.04 per
m2.

Table 4.9: Selling price using cost plus approach

Product Overhead Depr. & Total Unit Total Unit
Operating Amort. Cost Cost (Birr) cost Plus 30%
cost per unit per unit of Profit margin
of output Output (Birr) (Birr)
(Birr)

EPS wall panel 110.61 26.34 136.95 178.04

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V. TECHNICAL ANALYSIS

5.1. Project Location and Site

The envisaged project will be located in Akaki Kality sub city, Kality area. The
location is ideal for clearing and receiving imported raw materials, distribution of
the final product to the major market center in Addis Ababa, and the location is an
industrial area where Government endeavours to ensure a continuous
(uninterrupted) supply of electricity and other utilities. This will significantly
reduce the logistical and distribution costs of the project. The presence of
widespread and large-scale construction project of residential, mixed use and
commercial buildings and can be considered as a good indicator of demand for the
products of the project.
The presence of well-established infrastructures such as telecommunication,
electricity and water supply contributes to a smooth operation of the project. The
project location is very close to a highway that leads to the Eastern, North eastern
and Southern parts of the Country and is close to a railway line / station, which
would be suitable for transporting finished products and imported raw materials.
At the project site all the necessary facilities, infrastructure and amenities are
readily available. There is ‘’all weather’’ transportation to the site both from port
(Djibouti) and from Addis Ababa. Hence locating the site just 25km from the area
where there is high demand is favourable/ conducive for the project’s operation as
it will help in reducing the cost of transportation and distribution.
The total landholding of the project should be good enough to make every
necessary construction and movement of any truck to load the product and unload
the raw materials.

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5.2. Building and Civil works
The factory building (superstructure of the project) will be constructed from steel
and prefabricated structures. The structure will house the factory plant, store,
administration building, and other necessary facilities.

The total construction cost of the factory building and related works is estimated to
be Birr 19,571,303.07. Table 5.1summarizes the breakdown of costs related to
building and constructions

Table 5.1: Cost Estimates of Building Construction/Structures

No Description Amount (Birr)
1 Main Factory building 9,031,250.00
2 Row Material Store 3,375,000.00
3 Finished Goods Store 3,375,000.00
4 Office Building 1,520,000.00
5 Clinic & Cafeteria 720,000.00
6 Toilet & Changing Room 270,047.91
7 Septic Tank 105,205.97
8 Guard House (2 unit) 129,799.19
9 Power House 150,000.00
10 Site Work 895,000.00
Total 19,571,303.07

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5.3. Machinery and Equipment

5.3.1. EPS Wall Panel Production Factory

EPS is one of the biggest commodity polymers produced in the world. It is rigid
foam with a unique combination of characteristics such as its lightweight, good
thermal insulation, strong absorption of shock, high compressive strength and good
moisture resistance.
In engineering, EPS is used in the building and construction industry and huge
quantities are utilized to make insulation foam for walls, roofs and floor insulation.
EPS has also found uses in road construction, bridges, swimming pools, retaining
walls, basements and construction of sound proof rooms. EPS panels are part of
prefabricated construction. In this process, only the foundation is constructed in the
traditional method of stone and mortar, while the sections of walls, floors and roof
are prefabricated and assembled in a factory, then transported to the site, put in
place and cemented together.

I. Technology

EPS technology is by assembling ready-made EPS foam, sandwiched between

galvanized steel wire mesh that is plastered on both sides or fiber cement board, or
other boards like Calcium bored.
Houses built using the EPS technology are strong enough to withstand natural
calamities even better than houses built using the conventional building materials,
despite their low weight. EPS panels can be used to build up to 20 stores.
EPS Cement Sandwich Panels Applications
 Non-load bearing interior & exterior wall panels, partition wall panels, floor
panels, roof panels.

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 Bathrooms, kitchens, garages, basements, prefabricated houses, family homes,
dormitories, residences, apartments, luxurious villas, factory warehouses,
production workshops, auxiliary plants, hotels, bars, shopping malls,
restaurants, schools, hospitals, airports, etc.
II. Eps Cement Sandwich Panels Advantages

 Energy-saving, environment-friendly
Green and environment-friendly, non-harmful substance, no radiation,
reusable, no construction waste, widely used in various places.
 Fireproof
The non-inflammability of the board can be reached national A level standard.
Under the high temperature of 1000 degrees, the fireproof feature can last four
hours, do not radiate toxic gasses.
 Increased the usable area
The thickness of the board is between 50mm-200mm. It largely saves the
construction space compared with the traditional block.

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 Anti-pressure, anti-quake and anti-impact
Because of fabricated construction, 3-in-1 structure and using tongue and
groove to join panels, the anti-pressure, anti-quake and anti-impact all meet the
national standard.
 Waterproof and wet proof
The water container is made of material without any waterproof plaster with no
leakage at all. The tests show that the material has good water proofness and
damp proof. Material can be used in the wet area such as kitchen, toilet, and
basement.
 Sound insulation
Good sound insulation, sound absorption and noise reduction functions. For
example, the amount of sound insulation is up to 40dB with the 90mm
thickness of the wall board, which is 2 or 3 times than the traditional wall.
 Simple construction, high efficiency
The wall material is completely dry work, fabricated construction. The
materials can be arbitrary cut according to specification. During the
construction of transportation concise, pile up, no need of mortal health file,
greatly reduction the time duration, and the calibration material, reducing the
low construction waste. Easily transported, clearly stack and no mortar batch
file largely shorten the construction period. Besides, the construction waste can
be reduced by the lowly loss rate.
 Heat preservation
Wall materials mainly are made from environmental protection and energy
saving heat insulation material. With a good heat insulation and preservation
function, it can keep the indoor temperature at a stable range and make the
environment much more comfortable.

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 Spiking and stick ability
The wall material board can be nailed directly or install expansion bolt to hang
heavy loads. The single point of hanging strength is above 45kg. The surface of
the board can be covered by ceramic tile, wall paper, wood panel and other
materials due to the smooth and ash-free features.
 Lightweight and economy
The core material of wall board is filled with lightweight EPS. The volume-
weight is about 600-800 kg/m3. Freely plastering and the weight is only 1/6 of
the traditional wall.
 Reusable and user-friendly
The wall board can be reused in the movable interior wall such as supermarket,
office, etc. The lightweight energy-saving wall board can be reusable.
Dismounting and installation are simple and improved usage rate and economy
saving. Also it has no construction waste and no affects other people’s normal
work.
 It is a fast method of construction hence reduces construction time
 Cost effective
 Reduction on construction waste
 It is precise
 Set standards can be adhered to easily
 Applicable for mass construction
 Reduction in number of laborers
Disadvantages of prefabrication
 Leaks can form at joints in prefabricated components
 Jobs may be lost due to reduced number of laborers required

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 Need for specialized equipment

5.3.2. Types of EPS wall panel

Depend on the application of EPS wall panel there are two types of wall panel

A. EPS Cement Sandwich Panel (reinforced with fiber cement board or

calcium silicate board) uses for non load bearing wall
B. EPS Panel (reinforced wire mash) uses for load bearing
A. EPS Cement Sandwich Panel (Reinforced with fiber cement board or
calcium silicate board)

EPS Cement Sandwich Panel is a kind of lightweight energy saving wall material,
which uses fiber cement board or reinforced calcium silicate board as face panel,
filled with cement, Expanded Polystyrene (EPS) foam particles, and as core
material and forming by one time compound. It is mainly uses for non-loading
bearing.

Face Panel

Face Panel

Fig.5.1. EPS sandwich wall panel

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EPS sandwich wall panel is a new type of high-grade light wall panel material with
EPS mortar as core material, fiber cement board or calcium silicate board as the
surface material and properly mixed with fly ash, slag and additives.
Product size: length 2270mm, width 610mm, thickness 60-200mm (size and
thickness can be adjusted). The two surfaces of the new type composite sandwich
board are composed of high strength water resistant fiber cement board with good
waterproof properties; good thermal insulation EPS bonding mortar as Core
material; The product is of structural function , waterproof and thermal insulation
performance, mainly used as building wall partition.
This kind of EPS Sandwich Wall Panel is provided with comprehensive advantage
that other wall panel can’t compare with: solid, lightweight, thin body, high
strength, impact resistance, strong Hanging force, heat insulation, sound insulation,
fire prevention, waterproof, easy cutting, can be arbitrary slot, without rendering
coat, dry decoration, environmental protection. Achieving the purpose of saving
energy, improving energy efficiency, Put the construction industry from backward
wet construction to advanced dry construction, thus realizing residential parts
production industrialization, modernization of technical equipment, intensive
production and legal application promotion, construction and equipment
integration.

At the same time also can reduce wall occupying space, increase the rate of using
residential space, reduce structure load, promote building aseismic ability and
safety performance, and reduce the comprehensive cost. This product can be
widely used in all kinds of high, multi-story building as nonbearing wall; also can
be sound insulation, fire partition wall. This product’s introduction and application
is a new breakthrough of the world’s wall materials reform, this wall panel have
tested by the relevant institutions and its strength, sound insulation, fire resistant,

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radioactive, water resistance and other performance indexes all reach or over the
relevant national standards.

Table 5.2: EPS Cement Sandwich Panels Specification

Length Width Thickness Density Applicatio
Appearance
(mm) (mm) (mm) (kg/㎡) n
60 42±5 Non-load With face board,
2270 90 52±5 bearing fiber cements board
100 56±5 walls of as face panel,
2440 610 120 62±5 houses and 100% non asbestos
150 72±5 buildings fiber cement board
180 85±5 panel.
200 95±5

B. EPS wall panel production Raw material

EPS cement wall panel has three layers and the middle parts are mixed on EPS,
Sand, cement, and additives and face panel is fiber cement board. So, the major
raw materials are:-
- EPS Polystyrene Foam Particle
- Cement (Portland cement or Sulphoaluminate cement)
- Water
- Sand
- Additives
- Lightweight aggregate

I. Sandwich Wall Panels Production Process

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EPS Cement Sandwich Panel Production Line is made of mixer equipment,
expander equipment, mold equipment and other machinery set. The capability is
mainly decided on the quantity of mold car. The advantage of the production line is
high output, low input, stable quality and high efficiency.
EPS cement sandwich wall panel production process has four parts
1. EPS Foam Supply System
2. Raw Material Storage and Conveyor system
3. Automatic Mixing Controlling System
4. Casting Moulding System

Fig.2. EPS cement sandwich wall panel production process

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 a) EPS Foam Supply System

Principle: continuous expanding, in a certain body size and the steam flow
conditions, can control the EPS pretest probability density by adjusting the feed
speed and adjusting the height of the machine feed port, in order to get lower bulk
density of EPS raw material, will make “secondary expand”.

Fig. 3 EPS foam particle making and supply system

EPS foam particle making and supply system include boiler system & EPS
foaming machine (EPS Expander and foam tank). The boiler mainly to supply
steam for the foaming machine and thermal efficiency is higher than 98%. The
boiler can be Electrical, Diesel, or Gas Boiler, while, electrical boiler is more
efficient. But due to lack of electricity or on and off supplying of electric power,
we recommend diesel type boiler.

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EPS foaming machine adopts PLC and Touch screen one key control and it
consists of the following to realize automatic production.
- Automatic feeding
- Electronic weighing
- Temperature control
- Material level control

The machine can also realize the primary and secondary expansion raw material
storage, measuring and conveying system include automatic cement supplying
system, automatic sand supply system, automatic water supplying system,
automatic foam material supplying system, and automatic additive supplying
system. This is excellent in function and to be accurate, fast and environmental
friendly.
b) Mixing system

The name indicate that mixing different particles and make it homogenous. The
mixing machine is uses to mixing EPS polystyrene foam particles, cement, sand,
additives and other raw materials at a proper ratio.
Relative equipment: cement screw pumping system, weighting hopper for cement
and sand, foam hopper, outer hopper, water pump and other accessories.

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 Fig.4. Mixing systems

Mixing systems consists of: Mixer, Working Table, Cement Screw Pumping,
Cement Tank, Sand Tank, and Centralized Control System.
c) Mold System

It is uses for moulding EPS cement panels. And there are different types of mold
car horizontal mould car, vertical mould car, semi-automatic mould car, full
automatic mould car.
Feature: face panel and core forming by one time compound, low input and high
output & returns, easy and convenient for operation.
Relative equipment: windlass, railroad, transition car and pouring table.

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 Fig.5. Mold Car

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 5.3.3. Planned Machinery and Equipment
No. Description Qty. Unit Price Total Price
(USD) (USD)
1 Boiler system 1 set 18,850.50 18,850.50
2 EPS Expander 1 set 15,698.20 15,689.20
3 Foam tank 5 set 1,800.00 9,000.00
3 Dryer 1 pcs 6,325.00 6,325.00
4 Blower Fan 4 pcs 920.38 3.681.52
5 Foaming pipeline 1 sets 890.60 890.60
6 Gas tank 1 set 680.50 680.50
7 Mixer 1 set 42,956.93 42,956.93
8 Cement measuring system 1 set 3,990.00 3,990.00
9 Hopper (Outer and Foam) 2 set 586.50 1,173.00
10 Water pump with Time meter, 3 kw 1 set 558.75 588.75
11 Cement Screw Pumping system 2 sets 3,900.00 7,800.00
12 Cement tank 2 sets 11,030.09 22,060.18
13 Sand tank with sand scale and distributor 1 set 7,498.23 7,498.00
14 Cement, Sand, water measuring system 1 set 11,108.00 11,108.00
15 Mold Car different size (L2270mm) 38 sets 58,400.00 316,700.00
16 Casting pump 1 set 6,860.00 6,860.00
17 Form removal 1 set 4,580.00 4,580.00
18 Track Way 300 m 98.66 29,598.00
19 Transition Vehicle 1 sets 16,992.38 16,992.38
20 Transition Vehicle with operation platform 1 sets 21,680.00 21,680.00
21 Windlass 1 sets 11,389.13 11,389.13
22 Cable and control 1 set 5,400.00 5,400.00
23 Production and Installation Tools 1 lot 8,613.00 8,613.00
24 Other accessories for Mould system like, 1 set 1,125.25 1,125.25
Cheer machine, Higher pressure water washer
25 Laboratory equipment 1 sets 22,230.44 22,230.44
Total FOB in USD (Wuhan Port) $593,778.86

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5.3.4. Production Capacity

The proposed project is producing EPS Cement sandwich Panel. In the planned
factory production line of EPS Wall Panel a capacity of 602,349 square meter per
annum.

5.4. Auxiliary items

The project will use various auxiliary items as per the table indicated below;

Table 5.3: Auxiliary Equipments

No Description Qty Unit Price Total Price (Birr)
(Birr)
1 Forklift 3 ton 1 pcs 1,376,423.00 1,376,423.00
2 Generator 620kva 1 pcs 1,400,000.00 1,400,000.00
3 Workshop 1 lot 2,921,538.47 2,921,538.47
equipment
4 Compressor 1 pcs 548,750.00 548,750.00
Total in Birr 6,246,711.47

5.5. Vehicles
Isuzu FSR truck is planned for loading of raw material or product delivery to outlet
shops and corporate customers. Toyota hillux also planned for the general manager
to run the factory smoothly in other hand Service Bus planned for the worker’s
service. The investment cost of the above Vehicles is Birr 11,877,846.00.

Table 5.4:- Vehicles Requirement

Vehicles Unit Qt Unit Price Total Cost
y
Toyota HI-LUXP/UP Double Cabin PCS 1 3,204,000.0 3,204,000.00
0
ISUZU FSR PCS 2 1,800,000.0 3,600,000.00

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 0
Toyota coaster Bus PCS 1 2,321,000.0 2,321,000.00
0
Forklift PCS 2 1,376,423.0 2,752,846
0
Total Cost of Vehicles 6 11,877,846.0
0

5.6. Office Furniture and Equipment

The essential office furniture and equipment will be procured and for this purpose
the factory planned Birr 277,464.47.

Table 5.5:- Vehicles Requirement

No. Description Qt Unit price Total Price
y
1 Presidential Chair 1 13,260.44 13,260.44
2 Managerial chair leather 1 10,843.96 10,843.96
3 L-shape table 1 11,448.08 11,448.08
4 L-shape table with fixed lockable drawers 2 7,551.50 15,103.00

5 Managerial office table 2 12,988.58 25,977.16

6 Shalf three door 2 9,031.60 18,063.2
7 Chair 6 2,990.39 17,942.34
8 Swivel chair 4 2,809.16 11,236.64
9 Coffee table 1 4,198.63 4,198.63
Total 128,073.45
Vat 15% 19.211.02
Sub total 147,284.47
1 lap top 2 19,800.00 39,600
2 Desk top 2 17,000.00 34,000
3 Photocopy machine with scanner, & printer 2 19,800.00 39,600
Subtotal including Vat 130,180.00
TOTAL (Including Vat) 277,464.47

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5.7. Raw materials
The required raw material for the production of EPS wall panel is stated below.

Table 5.6: - Raw material requirement

Product size/ Annual raw Unit Price Total Price

Product type
type material
EPS 260 ton
3,300 USD 858,000 USD
Fly ash or Sand 14,780.6 ton
0.75 birr 11,085.45Birr
2.4 birr 35,376.576
Cement 14,740.24 ton
Birr
L2270 xw610
Additive 60.8 ton 950 USD 57,760 USD
Sub Total 29,780.84ton
13 birr 14,456,376
Fiber Cement board 1,204,698 m2
Birr
Total Price including cost build up (Birr) 43,700,369.58

5.8. Utility Requirement

5.8.1. Power and Air Consumption

Electric line with a capacity of 800 KW is requested from the concerned
government authority, which guaranteed the availability of the power supply with a
total installation cost of Birr 2,100,000.00 in the factory, for the planned machinery
it is enough to run the factory machineries and over all activities of the plant.
Beside to this, the company planned to procure a stand by generator of 620 kva and
air compressor with a total cost of Birr 5, 400.000.00

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5.8.2. Water Consumption
The water absorption of expanded polystyrene is low. Fusion is the most important
factor influencing the moisture resistance of expanded polystyrene. Good fusion
reduces the amount of water absorption.
Water consumption in the factory is minimal because of minimum water
absorption of the product. Water consumption is mainly for mixing of the raw
material and factory personnel. The factory already has connected water line,
which is enough for cooling as well as for daily staff utilization.

5.9. Environmental Impact and Mitigation

The impact of the Project on the general Environment is discussed below with
respect to health and operator safety and the environment. This is just to show the
main issues with the Plant as a separate and comprehensive Environmental Impact
Assessment will be done.

5.9.1. Health and Safety

All machinery and processes in the workshops use electric power as source of
energy, while supplemental machinery and vehicles use mainly diesel. The
fabrication processes are essentially mechanical. These are relatively safe for the
operators because the processes involved are routine and come within the standard
training of the operators.

Safety measures and apparel suited to the particular process will help in preventing
routine accidents. Proper training at the Plant to acquaint operators with the
particular machinery should mitigate any possible problem areas comfortably.

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5.9.2. Environment
The processes involved are smoke and chemical free. The effluent at the machine
is routine sanitary waste which should be taken care of by regular sewerage
disposal system.
Although the plant is mainly environmentally friendly and without health risks,
care should be taken so operators are properly work in the environments.

5.10. Project Implementation Program

The major activities considered in the implementation program comprises bank
loan processing and sanction, building and construction, procurement of machinery
and equipment, installation of machinery and equipment, procurement of vehicles
and generator, procurement of raw materials, purchase of furniture and equipment
and test operation and startup of full operation and commercialization. The new
project implementation is planned to be finalized within 13 months starting from
loan processing and becomes operational. A generalized implementation phase is
indicated below;

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Table 5.10: Project Implementation Schedule

2018 2019

September
November

December

February
January
October

October
August
March
Description

April

June
May

July
Loan processing
Electric power supply and installation
Borehole drilling & procurement of
submersible pump
Building and construction
Procurement of machinery & equipments
Purchase of vehicles and generator
Procurement of imported raw materials
Installation of machinery& equipment
Recruitment and training of manpower
Purchase of furniture and equipment
Procurement local raw material
Trial production start-up
Operation commencement

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VI. ORGANIZATION AND MANAGEMENT

The organizational structure plays an important role in the day-to-day functioning

of an organization. It is an organization’s skeleton which defines the roles and
departments that make up an organization’s functioning and shows how everything
fits together into a whole. It depicts the relationship among those involved and
their various levels of authority and responsibility for organizational performance.

This section presents the proposed organization structure and the manpower
requirement for the company to make the EPS wall panel project operational.

6.1. Organizational Structure

The overall oversight of proposed project will be controlled and monitored by the
General Manger which is the highest body in the hierarchy of the factory. The
General Manager will be responsible for the overall management of the company
as a whole.

The organization structure is built around three departments the company which is
led by their respective general managers. The roles and responsibilities of the
divisions are presented below.

a) Production and Technical Department - is responsible for turning inputs

into finished outputs through a series of production processes. Under
Production Department, there are different technical persons engaged in the
day to day operation of the factory.

b) Business Development and Strategic Planning Department - is

responsible for planning and research departments. It plans, organizes,
coordinates and directs the planning and business development functions.

71 | EPS Wall Panel Manufacturing

 c) Finance & Administrative Department– is responsible for finance,
budgeting, plan, human resource, procurement, and administration of the
factory. It plans, organizes, coordinates and directs the support services.

The proposed organization structure for the company is presented in Figure 6.1
below.

Figure 6.1: Organizational Structure of the Factory

6.2. Manpower Requirement

To produce quality product it required technical person. Manpower is critical
factor for their successful implementation and production of EPS wall panel
manufacturing. Hence, the availability of technical employee and its productivity is
essential in the EPS wall panel industry.

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The factory has both technical and managerial staffs in order to achieve its
objective. The company will create a job opportunity for a total of 157 employees
for both skilled and unskilled. Regarding benefits the following are considered;
o Annual increment 5 percent of the salary
o Fringe Benefit 5 percent including annual salary and wage

Table 6.1: Manpower Requirement of the Company

Sr. Description Required Salary Monthly Gross
No. Number Scale Salary Annual
(Birr) (Birr) Salary
(Birr)
I General Manager Office
General Manager 1 30,000 30,000 360,000
Legal Advisor 1 10,000 10,000 120,000
Executive Secretary 1 4,000 4,000 48,000
Senior Quality Inspector 1 5,500 5,500 66,000
Junior Quality Inspector 1 4,500 4,500 54,000
Internal Auditor 1 8,000 8,000 96,000
Financial Auditors 1 4,500 4,500 54,000
Sub-total 7 66,500 798,000
II Production and Technical
Department
Production and Technical 1 20,000 20,000 240,000
Department head
Technical section head 1 10,000 10,000 120,000
Senior Mechanics for Plants 2 4,500 9,000 108,000
Senior Auto Electrician 2 4,500 9,000 108,000
Senior Industrial 2 4,500 9,000 108,000
Electrician/Electronics
Junior Mechanics for plants 2 3,000 6,000 72,000
Junior Welding Machine 10 3,000 30,000 360,000
operator
Production Section Head 1 12,000 12,000 144,000
Production Supervisor 2 7,500 15,000 180,000
Production Line Owner 4 4,500 18,000 216,000
Assistant Line Owner 2 2,500 5,000 60,000

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 Casual laborer 80 1,500 120,000 1,440,000
109 263,000 3,156,000
III Business Dev't and
Strategic Planning Dep't
Department head 1 15,000 15,000 180,000
Marketing Section Head 1 10,000 10,000 120,000
Planning Section Head 1 10,000 10,000 120,000
Senior Planning Expert 1 7,500 7,500 90,000
Marketing communication 1 5,000 5,000 60,000
Officer
Senior Sales officer 1 5,500 5,500 66,000
Junior Sales officer 2 3,500 7,000 84,000
Sub-total 8 60,000 720,000
IV Administrative and
Finance Department
Department Head 1 15,000 15,000 180,000
Finance Section Head 1 10,000 10,000 120,000
Accountant 2 4,500 9,000 108,000
Cashier 2 2,500 5,000 60,000
Senior purchase officer 2 3,000 6,000 72,000
Junior Purchase officer 1 2,500 2,500 30,000
Stock Controller 1 2,500 2,500 30,000
Property & Store keeper 1 1,500 1,500 18,000
HRM Section Head 1 10,000 10,000 120,000
General Service Officer 1 4,500 4,500 54,000
HRM- Officer 2 3,500 7,000 84,000
Secretary 1 3,500 3,500 42,000
Human Resource Clerk 1 3,500 3,500 42,000
Archives 1 3,000 3,000 36,000
Driver 4 2,800 11,200 134,400
Messenger 2 1,500 3,000 36,000
Telephone Operator 1 1,800 1,800 21,600
Team leader-Guards 1 1,800 1,800 21,600
Guards 4 1,200 4,800 57,600
Janitors 4 800 3,200 38,400
Sub-total 34 108,800 1,305,600
Grand Total 158 498,300 5,979,600

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VII. FINANCIAL ANALYSIS

7.1. Summary of Investment Costs

The total investment cost of the project is estimated approximately at Birr 83.06
million. Of the total investment, 77.5% accounts for fixed investment, 13.5%
accounts for working capital and 8.9% for pre operating cost and interest.

Table 7.1: Summary of Investment Cost (Birr)

Sr. Description Investment (Birr)
No.
1 Building and Civil Works 19,571,303
2 Machineries & Equipments 18,931,682
3 Auxiliary equipments 6,246,711
4 Vehicles 11,877,846
5 Generator 5,400,000
6 Office Furniture & Equipments 277,464
7 Electric Power Supply and Connection Fee 2,100,000
Sub-total 64,405,007
9 Pre-production Cost 500,000
10 Pre-production Interest 6,919,400
Sub-total 7,419,400
11 Working Capital 11,235,792
Sub-total 11,235,792
Grand Total 83,060,199

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7.1.1. Pre-Production Costs

Preproduction costs comprise of all expenditures incurred by the project in relation

to establishment of the project prior to beginning of operation. It includes
construction design and other consultancy service costs, travel and accommodation
expenditures, and interest during the construction period. Interest during
construction is determined based on the implementation schedule and grace period.
The total cost including interest is estimated at Birr 7,419,400.

7.1.2. Working Capital

Working capital is an essential and vital component of investment in a

manufacturing industry since maintaining adequate level of raw materials that lasts
long enough until new orders are placed and materials are delivered is critical for
smooth operation of a factory. This is especially crucial to manufacturing
industries that depend on imported materials, as the process to obtain foreign
currency permits, placing orders and receiving deliveries takes a long time. Hence,
to ensure smooth and continuous operation, it is absolutely necessary to maintain
adequate levels of stock, for which provision of working capital is essential.
Likewise, it is absolutely necessary to provide for working in process and finished
goods inventories, account receivables that may arise due to credit sales and
operating expenses until the factory generates sufficient resources from internal
operations to meet the financial needs.

Accordingly, based on sound assumptions, the initial working capital requirement

of the factory is estimated at Birr 11.26 million in the first year of its operation.
The requirement increases with production capacity expansion in the subsequent

71 | EPS Wall Panel Manufacturing

three years and stabilizes from the fourth year and thereon. However, the
incremental working capital requirement from the second year will be financed
from internally generated funds as can be noted from the cash flow statement
forecast (Annex IV). The detailed calculations and assumptions in terms of
minimum days of coverage are shown in (Annex I).

7.2. Investment Financing Plan

The investment is planned to be financed from two sources: equity and bank loan
in the ratio of 30% and 70% respectively. The table below summarizes the total
investment by sources of financing.

Equity contribution is estimated at Birr 24.96 million (30%), and it is planned to

cover partial cost of building and construction, auxiliary equipments, vehicles,
generator, electric installation cost, preproduction costs and interest. Loan from
lending bank is estimated at Birr 58.10 million (70%), and expected to cover the
entire cost of machinery and equipment’s, generator and cost of working capital.

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Table 7.2: Source of Finance (Birr)
Sr. Description Owner's DBE Total Cost
No. Equity Loan (Birr)
Contributio (Birr)
n (Birr)
1 Building and Civil Works 11,861,294 7,710,009 19,571,303
2 Machineries & Equipments 5,679,505 13,252,177 18,931,682
3 Auxiliary Machineries and 6,246,711 6,246,711
Equipments
4 Vehicles - 11,877,846 11,877,846
5 Generator - 5,400,000 5,400,000
6 Office Furniture & Equipments - 277,464 277,464
7 Electric Power Supply and - 2,100,000 2,100,000
Connection Fee
Sub-total 17,540,799 46,864,208 64,405,007
8 Pre-production Cost 500,000 - 500,000
9 Pre-production Interest 6,919,400 - 6,919,400
Sub-total 7,419,400 - 7,419,400
10 Working Capital - 11,235,792 11,235,792
Sub-total - 11,235,792 11,235,792
Total 24,960,199 58,100,000 83,060,199
Percentage D/E Ratio 30% 70% 100%

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7.3. Projected Financial Operation Results

7.3.1. Sales Revenues

The project is expected to generate revenues of Birr 107 million at full capacity
production. Revenues at different capacity utilization levels are presented below:

Table 7.3: Annual Revenue (Birr)

Project Year Capacity Revenues (Birr)

Utilization
1 50% 53,619,691
2 60% 64,343,630
3 70% 75,067,568
4 and thereafter 80% 85,791,506

7.3.2. Production Costs

The total cost of raw materials at 100% production capacity is estimated at Birr
43.70 million/annum. Other operating costs such as utilities, labor, repair and
maintenance, and administrative overhead are shown in detail in Annex II.

7.3.3. Projected Profit and Loss Statement

The projected profit and loss statement (presented in Annex III) shows that the
project will remain profitable over its lifetime. The projected annual net profits
show steady growth over the project period, from Birr 5.40 million in years 1 to
Birr 16.62 million in years 10. The average annual net profit turned out to be Birr
14.11 million.

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7.3.4. Projected Cash Flow Statement

The cash flow plan depicts the project’s projected cash inflows and outflows. As
can be noted from the cash flow forecast in Annex IV, the project will remain with
cash surplus over its lifetime after meeting its internal and external commitments,
thereby standing at a sound liquidity position. The ending cash balance begins with
Birr 4.45 million surpluses and steadily builds up to Birr 96.13million at the end of
the 10th year. The project can also meet its debt service obligations to lender banks
over 10 years.

7.3.5. Financial Internal Rate of Return (IRR) and Net Present Value (NPV)

The profitability of the investment was tested by applying the discounting

techniques as well (Annex VI).The calculations show that the investment yields
before and after tax internal rates of return (IRR) of 29% and 26%, respectively on
total operation. The Net Present Value calculated at a 15% discount rate (which is
far greater than the bankers' lending rate of 12%) comes up to Birr 78.82 million
and 56.39 million before and after tax, respectively.

7.3.6. Uncertainties

There are uncertainties surrounding project operation in real life. These

uncertainties arise because of possible deviations from what is planned. Among
others, deviations can occur because of sales price decreases, operating cost
increases and investment cost increases. The sensitivity of the internal rate of
return to such uncertainties was tested by decreasing sales price by 10%, increasing
operating cost and investment cost by 10% one at a time (The detail is stated in
annex VII). The impact of these changes on the IRR - taking one change at a time
– is presented below.

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Table 7.4: Sensitivity Analysis

Measure of Change Profitability IRR

Decrease in sales by 10% IRR (Before tax) 20%
IRR (After tax) 17%
Increase in operating cost by10% IRR (Before tax) 24%
IRR (After tax) 20%
Increase in investment cost by 10% IRR (Before tax) 26%
IRR (After tax) 22%

From the above analysis, the project's profitability appears to be robust

withstanding all adverse conditions. A 10% decrease in sales price results in an
after tax IRR of 17%, while a 10% increase in operating and investment cost
results in after tax IRR of 20% and 22%, respectively. Overall, the analysis depicts
that the project can withstand adverse effects and can remain profitable.

7.4. Socio-economic Aspects

The construction section in Ethiopia is increasing at at rapid and thus the

establishment of this project will have its own positive impact on the growth of the
sector.
Moreover, as indicated in the human resources section of this business plan, the
investment into the manufacturing of EPS wall panel will create employment
opportunity for 158 employees.

The additional tax income that will accrue from this project and any other
businesses that may be established because of the company's entry into the market
can be considered as another positive socio-economic impact of the project.

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 7.5. Assumption Used For Financial Analysis
1. Basic Assumptions
1.1. Working days per 300 Days
annum
1.2. Number of shifts per 1 Shift
day
1.3. Working hours per shift 8 Hours
1.4. Machine Efficiency 100%
1.5. Plant Capacity 304,378 m2 per annum

2. Production and Revenue Determination at Full Capacity

Sr. Production at Selling Annual

No Description Unit full capacity price per Revenue at Full
(m2/annum) unit (Birr) Capacity (Birr)
1 EPS Wall Panel m2 602,349 178.0 107,239,383
4

3. Production and Revenue Determination at different capacity utilization

No Product Type Project Years and Capacity Utilization Rate

1 2 3 4 and Above
50% 60% 70% 80%
Quantity Revenue Quantity Revenue Quantity Revenue Quantity Revenue
(M2) (Birr) (M2) (Birr) (M2) (Birr) (M2) (Birr)
1 EPS Wall Panel 301,175 53,619,691 361,409 64,343,630 421,644 75,067,568 481,879 85,791,506
Total 301,175 53,619,691 361,409 64,343,630 421,644 75,067,568 481,879 85,791,506

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 4. Direct Operational Cost Determination

4.1. Raw material Cost at Full Capacity

No. Product type Product Unit Annual Unit Unit Total Total Price Total price
size/ type raw Price Price (Birr) including
material cost build up
(birr)
1 EPS Ton 260 USD 3,300 462,000 24,144,701.7 27,355,947.0
2 5
2 Fly ash or Sand Ton 14,780.6 Birr 0.75 5,543 11,085.45 11,085.45
3 Cement Ton 14,740.24 Birr 2.4 25,795 35,376.58 35,376.58
L2270
4 Additive Ton 60.8 USD 950 28,880 1,625,405.56 1,841,584.50
xw610
Sub Total Ton 29,780.84 522,218.1 25,816,569.3 29,243,993.5
5 1 8
5 Fiber Cement m2 1,204,698 Birr 13 913,134 14,456,376.0 14,456,376.0
Board 0 0
Total Price 40,272,945.3 43,700,369.5
1 8

4.2. Consumables Cost

Consumables are assumed to 2% of raw material 875,951.2
be cost 0

4.3. Electrical Consumption Cost

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 Description Annual Productio Multiplier Equivalent Unit Daily Daily Annual
Productio n Per Factor Production Consumption Power Power cost Power cost
n (Panel) Hour Per Hour (KW/Panel) Consump (Birr) (Birr)
(Panel) (Panel) tion (KW)
EPS Wall Panel 304,378 126.82 1.00 126.82 6.31 800.00 555.44 166,632.00
Total 304,378 126.82 126.82 800.00 555.44 166,632.00

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4.4. Direct Production Cost at different capacity utilization
NO Description Total Direct Project Years and Capacity Utilization Rate
. Operating at Year 1 Year 2 Year 3 Year 4 &
Full thereafter
Capacity 50% 60% 70% 80%
1 Raw material 43,700,370 21,850,18 26,220,22 30,590,259 34,960,296
Cost 5 2
2 Consumable cost 874,007 437,004 524,404 611,805 699,206
3 Electrical 166,632 83,316 99,979 116,642 133,306
Consumption
cost
Total 44,741,009 22,370,50 26,844,60 31,318,706 35,792,807
4 5

5. Overhead Operating Cost Determination

5.1. Employees Benefits
Sr. Description Assumptions Annual
No. Cost
(Birr)
1 Medical & Health Insurance 5% of Wages & Salary expense 298,980
2 Perdiem & Traveling Expense 1.27% of wages & salary expense 75,941
4 Uniform and Protective Birr 350 per-annum per-employee 55,300
Total 430,221
5.2. Fuel, Oil & Lubricant Cost
Fuel Cost per Liter 18.35 Birr
Pick-up and service bus will be used for 300 days/Annum and travel 40 12,000 Km/Annum
Kms per day
Truck is assumed to cover total distance of 20,000 Km/Annum
Forklift will be used for 2 hours per working days 600
Generator will be used for 8 hrs/week due to electric power interruption 416 Hr/Annum
Qty Description Consumption Operation Total Fuel Total
Rate Per Km Per Consumpt Cost
or Hr (Liter) Year (Km, ion (Liter) (Birr)
Hr)
I. Fuel
1 Toyota Hilux Pick-up 0.17 12,000 2,000 36,700
1 Toyota Coaster Bus 0.20 12,000 2,400 44,040
2 Isuzu FSR 0.33 20,000 13,333 244,667

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 2 Forklift 5.00 600 6,000 110,100
1 Generator@ full load 242.4 416 100,838 1,850,38
capacity 5
Sub-total 2,285,89
1
II. Oil & lubricants (2% of fuel cost) 45,718
Total Fuel & Lubricant Cost 2,331,60
9
5.3. Insurance Expense
Sr. Description Value (Birr) Rate of Annual
No. Premium Premium
(Birr)
1 Building and Civil Works 19,571,303 0.75% 146,785
2 Machineries & Equipments 18,931,682 0.75% 141,988
3 Auxiliary Equipments 6,246,711 0.75% 46,850
4 Vehicles 11,877,846 2.50% 296,946
5 Generator 5,400,000 0.75% 40,500
6 Office Furniture & 0.75% 2,081
277,464
Equipments
7 Electric Power Supply and 0.75% 15,750
2,100,000
Connection Fee
Total 64,405,007 690,900
5.4. Spare Parts
Sr. Description Value Spare Spare
No (Birr) Parts Rate Parts Cost
(%) (Birr)
1 Machineries & Equipments 18,931,682 5% 946,584
2 Auxiliary Machineries and 5% 312,336
6,246,711
Equipments
3 Vehicles 11,877,846 5% 593,892
4 Generator 5,400,000 5% 270,000
Total 2,122,812
Note: - The above listed items will be procured with spare parts sufficient for at least
a year period.
5.5. Repair and Maintenance Cost
Sr. Description Value Rate Annual
No. (Birr) Cost
(Birr)

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 1 Building and Civil Works 19,571,30 2.0% 391,426
3
2 Machineries & Equipments 18,931,68 5.0% 946,584
2
3 Auxiliary Machineries and 6,246,71 5.0% 312,336
Equipments 1
4 Vehicles 11,877,84 5.0% 593,892
6
5 Generator 5,400,00 5.0% 270,000
0
6 Office Furniture & Equipments 277,46 5.0% 13,873
4
Total 62,305,007 2,528,111
Note: -
Maintenance of building and construction will start from year three
Maintenance remaining fixed assets will start from year two
5.6. Other Overhead Costs
Sr. Description Total Time Unit Price Total Cost
No. Per Annum Per Per
(Seconds) Second Annum
(Birr) (Birr)
1 TV promotion is assumed to be twice a 12,480 60 748,800
week and it will take two minutes at a
time.
Radio promotion is assumed assumed 10,950 20 219,000
to be daily and it will take three 30
seconds at a time.
Total 23,430 967,800
Note: - Advertising and promotion shall be for only the first three years.
Sr. Description Assumptions Annual Cost
No. (Birr)
1 Office Supplies 0.2% of annual sales 111,098
2 Telephone, Fax & 0.12% of annual sales 66,659
Internet
3 Legal and Audit Fee 100,000 Birr Per 100,000
Year
4 Miscellaneous Expense Birr 10,000 per-month 120,000
Total 397,757

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6. Exchange Rate

Exchange rate at 7/9/2018

USD to BIRR 28.1407
EURO to BIRR 33.0625

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 III. ANNEX

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71 | EPS Wall Panel Manufacturing
Annex I: Working Capital Requirement
Description Period Project Years
(Months) 0 1 2 3 4 5 6 7 8 9 10
I. Direct Costs
Raw material 4 7,283,395 7,283,395 8,740,074 10,196,75 11,653,43 11,653,43 11,653,43 11,653,43 11,653,43 11,653,43 11,653,43
3 2 2 2 2 2 2 2
Consumables 4 145,668 145,668 174,801 203,935 233,069 233,069 233,069 233,069 233,069 233,069 233,069
Electric Consumption 1 6,943 6,943 8,332 9,720 11,109 11,109 11,109 11,109 11,109 11,109 11,109
Sub-total 7,436,006 7,436,006 8,923,207 10,410,40 11,897,60 11,897,60 11,897,60 11,897,60 11,897,60 11,897,60 11,897,60
8 9 9 9 9 9 9 9
II. Indirect Costs
Wages and Salaries 1 498,300 498,300 523,215 549,376 576,845 605,687 635,971 667,770 701,158 736,216 773,027
Medical & Health Insurance 1 24,915 24,915 26,161 27,469 28,842 30,284 31,799 33,388 35,058 36,811 38,651
Perdiem & Traveling Expense 1 6,328 6,328 6,645 6,977 7,326 7,692 8,077 8,481 8,905 9,350 9,817
Uniform and Protective 6 27,650 27,650 27,650 27,650 27,650 27,650 27,650 27,650 27,650 27,650 27,650
Fuel, Oil and Lubricant 1 194,301 194,301 194,301 194,301 194,301 194,301 194,301 194,301 194,301 194,301 194,301
Insurance 12 690,900 690,900 690,900 690,900 690,900 690,900 690,900 690,900 690,900 690,900 690,900
Spare Parts 3 - - 530,703 530,703 530,703 530,703 530,703 530,703 530,703 530,703 530,703
Repair and maintenance 1 - - 178,057 210,676 210,676 210,676 210,676 210,676 210,676 210,676 210,676
Advertising & Promotion 3 241,950 241,950 241,950 241,950 - - - - - - -
Office Supplies 3 50,566 50,566 60,679 70,792 80,905 80,905 80,905 80,905 80,905 80,905 80,905
Telephone, Postage & Internet 1 10,113 10,113 12,136 14,158 16,181 16,181 16,181 16,181 16,181 16,181 16,181
Legal and Audit Fee 3 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000 25,000
Land Lease Payment 12 - - - - - - - - - - -
Miscellaneous Expense 1 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Sub-total 1,780,023 1,780,023 2,527,396 2,599,952 2,399,329 2,429,979 2,462,163 2,495,955 2,531,437 2,568,693 2,607,812
Work-in-progress (3 days) 0.10 232,020 232,020 288,645 329,220 364,201 365,734 367,343 369,033 370,807 372,669 374,625
Finished Goods Stock (7 days) 0.23 597,948 597,948 761,570 856,049 926,432 933,033 939,965 947,244 954,886 962,910 971,336
Account Receivables (15 0.50 1,189,795 1,189,795 1,515,368 1,703,363 1,843,410 1,856,546 1,870,339 1,884,821 1,900,028 1,915,995 1,932,760
days)
Sub-total 2,019,763 2,019,763 2,565,583 2,888,633 3,134,043 3,155,313 3,177,647 3,201,098 3,225,720 3,251,575 3,278,721
Total 11,235,792 11,235,79 14,016,18 15,898,99 17,430,98 17,482,90 17,537,41 17,594,66 17,654,76 17,717,87 17,784,14
2 6 3 1 2 9 2 7 7 2
Increase in Working Capital - 2,780,394 1,882,806 1,531,989 51,921 54,517 57,243 60,105 63,110 66,266
Proposed Permanent 11,235,792
Working Capital

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Annex II: Operating Costs
Description Project Years
1 2 3 4 5 6 7 8 9 10
I. Direct Costs
Raw material 21,850,185 26,220,22 30,590,25 34,960,29 34,960,29 34,960,29 34,960,29 34,960,29 34,960,29 34,960,296
2 9 6 6 6 6 6 6
Electric Consumption 83,316 99,979 116,642 133,306 133,306 133,306 133,306 133,306 133,306 133,306
Sub-total 22,370,504 26,844,60 31,318,70 35,792,80 35,792,80 35,792,80 35,792,80 35,792,80 35,792,80 35,792,807
5 6 7 7 7 7 7 7
II. Indirect Costs
Wages and Salaries 5,979,600 6,278,580 6,592,509 6,922,134 7,268,241 7,631,653 8,013,236 8,413,898 8,834,593 9,276,322
Medical & Health 298,980 313,929 329,625 346,107 363,412 381,583 400,662 420,695 441,730 463,816
Insurance
Perdiem & Traveling 75,941 79,738 83,725 87,911 92,307 96,922 101,768 106,857 112,199 117,809
Expense
Uniform and Protective 55,300 55,300 55,300 55,300 55,300 55,300 55,300 55,300 55,300 55,300
Fuel, Oil and Lubricant 2,331,609 2,331,609 2,331,609 2,331,609 2,331,609 2,331,609 2,331,609 2,331,609 2,331,609 2,331,609
Insurance 690,900 690,900 690,900 690,900 690,900 690,900 690,900 690,900 690,900 690,900
Spare Parts - 2,122,812 2,122,812 2,122,812 2,122,812 2,122,812 2,122,812 2,122,812 2,122,812 2,122,812
Repair and maintenance - 2,136,685 2,528,111 2,528,111 2,528,111 2,528,111 2,528,111 2,528,111 2,528,111 2,528,111
Advertising & Promotion 967,800 967,800 967,800 - - - - - - -
Office Supplies 202,264 242,716 283,169 323,622 323,622 323,622 323,622 323,622 323,622 323,622
Telephone, Postage & 121,358 145,630 169,901 194,173 194,173 194,173 194,173 194,173 194,173 194,173
Internet
Legal and Audit Fee 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000 100,000
Land Lease Payment - - - - - - - - - -
Miscellaneous Expense 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000 120,000
Sub-total 10,943,752 15,585,69 16,375,46 15,822,67 16,190,48 16,576,68 16,982,19 17,407,97 17,855,04 18,324,475
9 2 9 7 5 3 6 9
Total Operating Cost 33,314,256 42,430,30 47,694,16 51,615,48 51,983,29 52,369,49 52,775,00 53,200,78 53,647,85 54,117,282

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Annex III: Projected Profit and Loss Statement
Description Project Years
1 2 3 4 5 6 7 8 9 10
Sales/Revenue 53,619,69 64,343,63 75,067,56 85,791,50 85,791,50 85,791,50 85,791,50 85,791,50 85,791,506 85,791,50
1 0 8 6 6 6 6 6 6
Less: Operating Costs 33,314,25 42,430,30 47,694,16 51,615,48 51,983,29 52,369,49 52,775,00 53,200,78 53,647,856 54,117,28
6 5 8 7 4 2 0 3 2
Gross Profit 20,305,43 21,913,32 27,373,39 34,176,01 33,808,21 33,422,01 33,016,50 32,590,72 32,143,650 31,674,22
5 5 9 9 2 4 6 3 4
Less: Depreciation & 7,931,660 7,931,660 7,931,660 7,931,660 7,931,660 7,931,660 7,931,660 7,931,660 7,931,660 7,931,660
Amortization
Profit Before Interest & 12,373,77 13,981,66 19,441,73 26,244,35 25,876,55 25,490,35 25,084,84 24,659,06 24,211,990 23,742,56
Tax 5 5 9 9 2 4 6 3 4
Less: Interest Expense 6,972,000 6,100,500 5,229,000 4,357,500 3,486,000 2,614,500 1,743,000 871,500 (0) -
Profit Before tax 5,401,775 7,881,165 14,212,73 21,886,85 22,390,55 22,875,85 23,341,84 23,787,56 24,211,990 23,742,56
9 9 2 4 6 3 4
Less: Profit Tax (30%)1 - - - 6,566,058 6,717,166 6,862,756 7,002,554 7,136,269 7,263,597 7,122,769
Net Profit 5,401,775 7,881,165 14,212,73 15,320,80 15,673,38 16,013,09 16,339,29 16,651,29 16,948,393 16,619,79
9 2 6 8 2 4 5

Dividend (30%)2 1,620,532 2,364,349 4,263,822 4,596,240 4,702,016 4,803,929 4,901,788 4,995,388 5,084,518 4,985,938
Retained Earning 3,781,242 5,516,815 9,948,918 10,724,56 10,971,37 11,209,16 11,437,50 11,655,90 11,863,875 11,633,85
1 0 8 4 6 6
Cumulative Retained 3,781,242 9,298,058 19,246,97 29,971,53 40,942,90 52,152,07 63,589,57 75,245,48 87,109,360 98,743,21
Earning 5 6 7 5 9 5 7
Note: -
1
The project will have three years of
tax holiday privilege.
2
Dividend is assumed to be 30% of net profit
starting from year one.

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Annex IV: Projected Cash Flow Statement
Description Project Year
0 1 2 3 4 5 6 7 8 9 10
Cash Inflows
Owner's Equity 24,960,199
DBE Loan 58,100,000
Net Profit 5,401,775 7,881,165 14,212,73 15,320,80 15,673,38 16,013,09 16,339,29 16,651,29 16,948,39 16,619,79
9 2 6 8 2 4 3 5
Depreciation 7,931,660 7,931,660 7,931,660 7,931,660 7,931,660 7,931,660 7,931,660 7,931,660 7,931,660 7,931,660
Total Cash Inflows 83,060,199 13,333,43 15,812,82 22,144,39 23,252,46 23,605,04 23,944,75 24,270,95 24,582,95 24,880,05 24,551,45
5 5 9 2 6 8 2 4 3 5
Cash out Flows
Fixed assets 64,405,007
Pre-operating Interest & 7,419,400
Cost
Working Capital 11,235,792
Increase in Working - - 2,780,394 1,882,806 1,531,989 51,921 54,517 57,243 60,105 63,110 66,266
Capital
Loan Repayment 7,262,500 7,262,500 7,262,500 7,262,500 7,262,500 7,262,500 7,262,500 7,262,500 - -
Replacement 17,277,84 - - - - -
6
Dividend (30%) 1,620,532 2,364,349 4,263,822 4,596,240 4,702,016 4,803,929 4,901,788 4,995,388 5,084,518 4,985,938
Total Cash Outflows 83,060,199 8,883,032 12,407,24 13,409,12 13,390,72 29,294,28 12,120,94 12,221,53 12,317,99 5,147,628 5,052,204
4 8 9 3 6 0 3
Net Cash Flow - 4,450,403 3,405,581 8,735,271 9,861,733 (5,689,23 11,823,81 12,049,42 12,264,96 19,732,42 19,499,25
6) 2 2 1 5 1
Cumulative Cash Balance 4,450,403 7,855,984 16,591,25 26,452,98 20,763,75 32,587,56 44,636,98 56,901,94 76,634,37 96,133,62

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Annex V: Projected Balance Sheet Statement
Description Project Years
0 1 2 3 4 5 6 7 8 9 10
A. ASSETS
Current Assets
Cash - 4,450,403 7,855,984 16,591,25 26,452,98 20,763,75 32,587,56 44,636,98 56,901,945 76,634,370 96,133,621
5 7 1 3 4
Inventory 11,235,79 11,235,79 14,016,18 15,898,99 17,430,98 17,482,90 17,537,41 17,594,66 17,654,767 17,717,877 17,784,142
2 2 6 3 1 2 9 2
Total Current Assets 11,235,79 15,686,19 21,872,17 32,490,24 43,883,96 38,246,65 50,124,98 62,231,64 74,556,712 94,352,247 113,917,76
2 4 0 8 9 3 2 6 4
Fixed Assets
Borehole Drilling & - - - - - - - - - - -
Submersible Water Pump
Building and Civil Works 19,571,30 18,592,73 17,614,17 16,635,60 15,657,04 14,678,47 13,699,91 12,721,34 11,742,782 10,764,217 9,785,652
3 8 3 8 2 7 2 7
Machineries & Equipments 18,931,68 17,038,51 15,145,34 13,252,17 11,359,00 9,465,841 7,572,673 5,679,505 3,786,336 1,893,168 -
2 4 6 7 9
Auxiliary machineries and 6,246,711 5,622,040 4,997,369 4,372,698 3,748,027 3,123,356 2,498,685 1,874,013 1,249,342 624,671 -
Equipments
Vehicles 11,877,84 9,502,277 7,126,708 4,751,138 2,375,569 11,877,84 9,502,277 7,126,708 4,751,138 2,375,569 -
6 6
Generator 5,400,000 4,320,000 3,240,000 2,160,000 1,080,000 5,400,000 4,320,000 3,240,000 2,160,000 1,080,000 -
Office Furniture & 277,464 249,718 221,972 194,225 166,479 138,732 110,986 83,239 55,493 27,746 0
Equipments
Electric Power Supply and 2,100,000 1,890,000 1,680,000 1,470,000 1,260,000 1,050,000 840,000 630,000 420,000 210,000 -
Connection Fee
Total Fixed Assets 64,405,00 57,215,28 50,025,56 42,835,84 35,646,12 45,734,25 38,544,53 31,354,81 24,165,092 16,975,372 9,785,652
7 7 7 6 6 2 2 2
Intangible Asset
Land Lease Down Payment - - - - - - - - - - -
Pre-production Cost 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 -
Pre-production Interest 6,919,400 6,227,460 5,535,520 4,843,580 4,151,640 3,459,700 2,767,760 2,075,820 1,383,880 691,940 -
Total Intangible Assets 7,419,400 6,677,460 5,935,520 5,193,580 4,451,640 3,709,700 2,967,760 2,225,820 1,483,880 741,940 -
Total Assets 83,060,19 79,578,94 77,833,25 80,519,67 83,981,73 87,690,60 91,637,27 95,812,27 100,205,68 112,069,55 123,703,41
9 1 6 4 5 5 4 8 4 9 5

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B. LIABILITY +
CAPITAL
Liability
DBE Loan 58,100,00 50,837,50 43,575,00 36,312,50 29,050,00 21,787,50 14,525,00 7,262,500 (0) (0) -
0 0 0 0 0 0 0
Capital
Equity contribution 24,960,19 24,960,19 24,960,19 24,960,19 24,960,19 24,960,19 24,960,19 24,960,19 24,960,199 24,960,199 24,960,199
9 9 9 9 9 9 9 9
Retained earning - 3,781,242 9,298,058 19,246,97 29,971,53 40,942,90 52,152,07 63,589,57 75,245,485 87,109,360 98,743,217
5 6 7 5 9
Total Capital 24,960,19 28,741,44 34,258,25 44,207,17 54,931,73 65,903,10 77,112,27 88,549,77 100,205,68 112,069,55 123,703,41
9 1 6 4 5 5 4 8 4 9 5
Total Liability & Capital 83,060,19 79,578,94 77,833,25 80,519,67 83,981,73 87,690,60 91,637,27 95,812,27 100,205,68 112,069,55 123,703,41
9 1 6 4 5 5 4 8 4 9 5

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Annex VI: Calculation of Financial Internal Rate of Return
Project Revenue Working Fixed Asset Total Initial Replacement Operating Total Income Total Cost Net Benefit Net Benefit
Years Capital Recovery Benefits Investment Costs Costs Costs Tax Including Before Tax After Tax
Recovery Income
Tax
0 - - 83,060,199 83,060,199 83,060,199 (83,060,199) (83,060,199)
1 53,619,691 53,619,691 - 33,314,256 33,314,256 - 33,314,256 20,305,435 20,305,435
2 64,343,630 64,343,630 - 42,430,305 42,430,305 - 42,430,305 21,913,325 21,913,325
3 75,067,568 75,067,568 - 47,694,168 47,694,168 - 47,694,168 27,373,399 27,373,399
4 85,791,506 85,791,506 - 51,615,487 51,615,487 6,566,058 58,181,544 34,176,019 27,609,962
5 85,791,506 85,791,506 17,277,846 51,983,294 69,261,140 6,717,166 75,978,306 16,530,366 9,813,200
6 85,791,506 85,791,506 - 52,369,492 52,369,492 6,862,756 59,232,248 33,422,014 26,559,258
7 85,791,506 85,791,506 - 52,775,000 52,775,000 7,002,554 59,777,554 33,016,506 26,013,952
8 85,791,506 85,791,506 - 53,200,783 53,200,783 7,136,269 60,337,052 32,590,723 25,454,454
9 85,791,506 85,791,506 - 53,647,856 53,647,856 7,263,597 60,911,453 32,143,650 24,880,053
10 85,791,506 17,784,14 9,785,652 113,361,300 - 54,117,282 54,117,282 7,122,769 61,240,051 59,244,018 52,121,249
2
Before Tax After Tax
IRR 29% 26%
NPV@12 78,818,699 56,394,97
% 9

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 Annex VII: Sensitivity Analysis
If Revenue Decreases by 10%
Year Revenue Working Fixed Asset Total Initial Replaceme Operatin Total Profit Total Net Benefit Net Benefit
Capital Recovery Benefits Investme nt g Costs Tax Cost Before Tax After Tax
Recovery nt Costs Including
Profit
Tax
0 - - - - 83,060,1 - - 83,060,19 - 83,060,19 (83,060,199) (83,060,199)
99 9 9
1 48,257,72 - - 48,257,722 - - 33,314,25 33,314,25 - 33,314,25 14,943,466 14,943,466
2 6 6 6
2 57,909,26 - - 57,909,267 - - 42,430,30 42,430,30 - 42,430,30 15,478,962 15,478,962
7 5 5 5
3 67,560,81 - - 67,560,811 - - 47,694,16 47,694,16 - 47,694,16 19,866,643 19,866,643
1 8 8 8
4 77,212,35 - - 77,212,355 - - 51,615,48 51,615,48 4,657,698 56,273,18 25,596,869 20,939,171
5 7 7 5
5 77,212,35 - - 77,212,355 - 17,277,846 51,983,29 69,261,14 4,833,990 74,095,13 7,951,215 3,117,225
5 4 0 1
6 77,212,35 - - 77,212,355 - - 52,369,49 52,369,49 5,003,846 57,373,33 24,842,863 19,839,017
5 2 2 8
7 77,212,35 - - 77,212,355 - - 52,775,00 52,775,00 5,166,943 57,941,94 24,437,355 19,270,412
5 0 0 3
8 77,212,35 - - 77,212,355 - - 53,200,78 53,200,78 5,322,944 58,523,72 24,011,572 18,688,628
5 3 3 8
9 77,212,35 - - 77,212,355 - - 53,647,85 53,647,85 5,471,494 59,119,35 23,564,500 18,093,006
5 6 6 0
10 77,212,35 17,784,14 9,785,652 104,782,14 - - 54,117,28 54,117,28 5,307,195 59,424,47 50,664,867 45,357,673
5 2 9 2 2 7
Before After Tax
Tax
IRR 20% 17%
NPV@1 35,690,18 19,283,13
2% 9 6

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If Operating Costs Increases by 10%
Year Revenue Working Fixed Total Initial Replacem Operatin Total Profit Total Net Benefit Net Benefit
Capital Asset Benefits Investment ent g Costs Tax Cost Before Tax After Tax
Recovery Recovery Costs Including
Profit
Tax
0 - - - - 83,060,199 - - 83,060,19 - 83,060,19 (83,060,199) (83,060,199)
9 9
1 53,619,69 - - 53,619,691 - - 36,645,68 36,645,68 - 36,645,68 16,974,009 16,974,009
1 2 2 2
2 64,343,63 - - 64,343,630 - - 46,673,33 46,673,33 - 46,673,33 17,670,294 17,670,294
0 5 5 5
3 75,067,56 - - 75,067,568 - - 52,463,58 52,463,58 - 52,463,58 22,603,983 22,603,983
8 5 5 5
4 85,791,50 - - 85,791,506 - - 56,777,03 56,777,03 5,853,859 62,630,89 29,014,471 23,160,612
6 5 5 4
5 85,791,50 - - 85,791,506 - 17,277,84 57,181,62 74,459,47 6,017,278 80,476,74 11,332,036 5,314,759
6 6 4 0 7
6 85,791,50 - - 85,791,506 - - 57,606,44 57,606,44 6,173,617 63,780,05 28,185,065 22,011,448

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 6 1 1 8
7 85,791,50 - - 85,791,506 - - 58,052,50 58,052,50 6,322,521 64,375,02 27,739,006 21,416,485
6 0 0 1
8 85,791,50 - - 85,791,506 - - 58,520,86 58,520,86 6,463,619 64,984,48 27,270,644 20,807,025
6 2 2 1
9 85,791,50 - - 85,791,506 - - 59,012,64 59,012,64 6,596,522 65,609,16 26,778,865 20,182,343
6 2 2 3
10 85,791,50 17,784,14 9,785,652 113,361,30 - - 59,529,01 59,529,01 6,415,793 65,944,80 53,832,290 47,416,497
6 2 0 0 0 3
Before After Tax
Tax
IRR 24% 20%
NPV@12 51,970,79 31,793,43
% 6 2

If Investment Costs Increases by 10%

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 Year Revenue Working Fixed Asset Total Initial Replacement Operating Total Costs Profit Tax Total Cost Net Benefit Net Benefit
Capital Recovery Benefits Investment Costs Including Before Tax After Tax
Recovery Profit Tax

0 - - - - 91,366,218 - - 91,366,218 - 91,366,218 (91,366,218) (91,366,218)

1 53,619,691 - - 53,619,691 - - 33,314,256 33,314,256 - 33,314,256 20,305,435 20,305,435
2 64,343,630 - - 64,343,630 - - 42,430,305 42,430,305 - 42,430,305 21,913,325 21,913,325
3 75,067,568 - - 75,067,568 - - 47,694,168 47,694,168 - 47,694,168 27,373,399 27,373,399
4 85,791,506 - - 85,791,506 - - 51,615,487 51,615,487 7,382,793 58,998,279 34,176,019 26,793,227
5 85,791,506 - - 85,791,506 - 19,005,631 51,983,294 70,988,925 7,559,085 78,548,010 14,802,581 7,243,496
6 85,791,506 - - 85,791,506 - - 52,369,492 52,369,492 7,728,941 60,098,433 33,422,014 25,693,073
7 85,791,506 - - 85,791,506 - - 52,775,000 52,775,000 7,892,038 60,667,038 33,016,506 25,124,468
8 85,791,506 - - 85,791,506 - - 53,200,783 53,200,783 8,048,039 61,248,822 32,590,723 24,542,684
9 85,791,506 - - 85,791,506 - - 53,647,856 53,647,856 8,196,588 61,844,444 32,143,650 23,947,062
10 85,791,506 17,784,142 9,785,652 113,361,300 - - 54,117,282 54,117,282 8,032,289 62,149,571 59,244,018 51,211,729
Before Tax After Tax
IRR 26% 22%
NPV@12% 69,532,288 44,273,061

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 Annex VIII: Loan Repayment Schedule

Project Years
DESCRIPTION 0 1 2 3 4 5 6 7 8
Loan
Requirement 58,100,000
Beginning 29,050,00 21,787,50 14,525,00 7,262,50
Balance 23553755 58,100,000 50,837,500 43,575,000 36,312,500 0 0 0 0

Interest to be paid 6,972,000 6,972,000 6,100,500 5,229,000 4,357,500 3,486,000 2,614,500 1,743,000 871,500
Interest rate 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00%
Loan
Repayment
Interest 6,972,000 6,972,000 6,100,500 5,229,000 4,357,500 3,486,000 2,614,500 1,743,000 871,500
7,262,50
Principal 0 7,262,500 7,262,500 7,262,500 7,262,500 7,262,500 7,262,500 7,262,500 0
10,748,50 8,134,00
Total 14,234,500 13,363,000 12,491,500 11,620,000 0 9,877,000 9,005,500 0
21,787,50 14,525,00
Ending Balance 58,100,000 50,837,500 43,575,000 36,312,500 29,050,000 0 0 7,262,500 0

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