Investment Analysis on the Development of Polymer Modified Bitumen (PMB) Production Plant to support the building of Indonesia Infrastructures

School Of Business And Management, Institut Teknologi Bandung, Indonesia ,Sugeng Riyadi

doi:10.47191/ijcsrr/v5-i2-13

School Of Business And Management, Institut Teknologi Bandung, Indonesia , Sugeng Riyadi

Open Access

https://doi.org/10.47191/ijcsrr/v5-i2-13

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Abstract

Indonesia is one of the countries that focuses on infrastructure development to support the areas of connectivity and accelerate economic growth while maintaining the global commitment to GHG emission reduction. In order to support the above objectives, competitive bitumen prices with less GHG emissions are foreseen for the infrastructure’s development. Polymer Modified Bitumen (PMB) is one of the materials that is used for the pavement application that could provide 16.99% less GHG emissions compared to the unmodified bitumen due to their capability to provide similar performance with the thinner pavement layer requirement. There are 3 common PMB production processes recognized in the industry, such as Low Shear Mill Technology, High Shear Mill Technology, and Mobile PMB Plant. The Capital Budgeting technique (NPV, IRR, Profitability Index, Payback Period), internal and external analysis such as PESTEL and Porter’s five forces analysis are used to support the decision making for the right technology selection for the PMB processing plant in order to stay competitive in the Bitumen market. The economic analysis has shown that the low shear technology generates an NPV of IDR 186.573.816.286 with an IRR of 75,90%, the high shear technology generates an NPV of IDR 179.179.736.676 with an IRR of 62,39% and the mobile PMB plant generates an NPV of IDR 243.276.282.784, with an IRR of 68,37%. In addition to the highest NPV, the mobile PMB plant has the full flexibility to be mobilized to any project location, especially in remote areas where other production technologies are not available. Based on the above analysis, the mobile PMB plant is the right technology to be selected for the PMB provision to support the infrastructure development in Indonesia.

Highlights

The government of Indonesia, via the Ministry of National Development Planning (Bappenas), has set a clear path for the future of Indonesia through the rollout of Indonesia Vision 2045, where the development will be focused on four pillars: (1) Human Development and Scientific and Technological Mastery (2) Long-Term Economic Development(3) Equitable Development (4) National Resilience and Governance
The analysis is conducted for the three types of technology commonly used in the industry and the comparison of the project economics acceptance criteria is used as the baseline for the investment decision, including sensitivity analysis
AND DISCUSSIONS The project economics analysis is developed based on a series of assumptions that are agreed upon by the company. (1) the source of capital is 70% from debt and 30% from equity (2) tax rate is 20% (3) Market share for the low shear and high shear mill technology is only at Java Island (4) Market share for Polymer Modified Bitumen (PMB) mobile plant is laid from central of Java up to eastern part of Indonesia (5) the plants are available for production on January 2023 (6) the WACC is 9.81% (7) economic modelling for 10 years (8) the inflation rate is 2.7% (ADB, 2021) and GDP growth rate is 3.2% (World bank, 2021) from 2022 onwards

Summary

Introduction

The government of Indonesia, via the Ministry of National Development Planning (Bappenas), has set a clear path for the future of Indonesia through the rollout of Indonesia Vision 2045, where the development will be focused on four pillars: (1) Human Development and Scientific and Technological Mastery (2) Long-Term Economic Development(3) Equitable Development (4) National Resilience and Governance. The integrated infrastructures aforementioned, including the main roads for islands, rail-based transportation, air and sea transportation to support inter-region connectivity, sea transportation as the main maritime connectivity, development of aerotropolis areas, digital connectivity, fulfilment access to the basic infrastructures, and reducing the logistics cost to 8% of GDP (Kementrian PPN/Bappenas, 2019). High quality materials, such as Polymer Modified Bitumen, must be provided to support infrastructure development in order to provide reliable infrastructure, for roads and airport runways. The production of an unmodified mixture generates 34.851 kg of CO2 per lane-km, while a modified mixture generates only 29.596 kg of CO2 per lane-

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