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Rotterdam:
1. Improvements in gas supply line of polypropylene that were using the railway
facilities which must go through three refineries to provide gas for a single refinery.
This gives the assurance of continuous supply for the plant in Rotterdam.
2. Supply through pipe line project includes the right of way for 3.5 million; it is
the price when the sale has reached 6 million. According to a consultant, the
selling price in the next 15 years will reach 35 million.
3. Application of technology from Japan that has been proven over 3 years to
provide increased output and reduced costs and save energy. Besides, there are
opportunities in the application of German technology in Rotterdam project through
an analog process-control system that offers benefits in increased output and
reduced cost compared with a ratio of 1,1:1 technology from Japan that will be
implemented within a period of five years.
Merseyside Rotterdam
Strengths Receive positive cash flows Polymerization process becomes
immediately continuous
Increased competitiveness
Technology flexibility
Will have to compete to regain lost Lost cash flows from not
market share implementing the Japanese
technology
Obsolescence of technology
Flexibility
Merseyside is the project with a positive free cash flow and faster project payback
period of 3.62 years shorter therefore allowing the Merseyside project to invest in
switching to new technologies.
The flexibility affect the economic attractiveness of Rotterdam project because the
project chance in getting positive free cash flow is faster and the payback period is
shorter so that it becomes an attraction for investors since it is the indication to do
a better investment.
(1) relocating and modernizing the tank car unloading area which allows the flow of
the process of becoming shorter.
b. The decision will be based on which projects will be able to meet the four criteria
set by Diamond Chemical, NPV, IRR, Payback Period, and EPS as well as strategic
factors. But other than that, the reporting style of Elizabeth on the Rotterdam
project is more detailed and complete, of course, it is also becoming a consideration
in determining which projects will be taken.
Of the four project selection criteria set by Diamond Chemicals we can see that the
Merseyside project has met all the criteria there. While on the other hand, the
Rotterdam project does not meet the Payback Period criteria. So, I propose to James
Fawn to select Merseyside project. There was also a reason that is included in
strategic factors, namely:
1. Merseyside project has flexibility options that are not owned by the Rotterdam
project so it is easy to upgrade the technology.
2. The existence of uncertainty in the Rotterdam project associated with the use of
German technology in the period of 5 years to come, because the German
technology is still in research stage and not yet proven to be better than the
Japanese technology.
3. The potential loss if the Rotterdam project is not implemented within 6 months is
3.5 million