Table of Contents

1. Introduction...........................................................................................................................................4
2. Problem Statement................................................................................................................................5
3. Industrial Overview & Analysis...........................................................................................................5
4.1 Pakistan Natural Gas Sector...........................................................................................................7
4.2 Gas Sector Challenges.....................................................................................................................8
4.3 Way Forward.................................................................................................................................12
4. Our Proposal........................................................................................................................................13
5. Objectives.............................................................................................................................................13
6. Project Scope........................................................................................................................................13
7. Environmental Analysis of LNG Import Business Model................................................................13
7.1 Methane Emission..........................................................................................................................14
7.2 Green House Gas Emissions in LNG Operations Chain.............................................................15
7.3 Regasification.................................................................................................................................16
7.4 GHGs Emitted from LNG Operations.........................................................................................18
8. Marketing Plan....................................................................................................................................18
8.1 Executive Summary.......................................................................................................................18
8.2 Trackable Goals.............................................................................................................................19
8.3 Target Market................................................................................................................................19
8.4 Price................................................................................................................................................19
8.5 Promotion Strategy........................................................................................................................19
8.5.1 Budget......................................................................................................................................19
8.5.2 Goal..........................................................................................................................................20
8.5.3 Actionable Plan.........................................................................................................................20
9. SWOT Analysis....................................................................................................................................21
9.1 Strengths.....................................................................................................................................21
9.2 Weaknesses.................................................................................................................................21
9.3 Opportunities...............................................................................................................................22
9.4 Threats.........................................................................................................................................22
10. Promotion/Distribution Strategy......................................................................................................22
11. LNG Distribution Process.................................................................................................................23
12. PESTEL Analysis of LNG.................................................................................................................24
 12.1 Political......................................................................................................................................24
12.2 Economic...................................................................................................................................26
12.3 Social..........................................................................................................................................27
12.4 Technological.............................................................................................................................29
12.5 Environmental...........................................................................................................................30
12.6 Legal...........................................................................................................................................32
13. Porter’s Five Forces...........................................................................................................................33
13.1 Bargaining power of Supplier:...................................................................................................34
13.2 Bargaining Power of buyers:......................................................................................................34
13.3 The threat of Substitute:............................................................................................................35
13.4 Rivalry among the existing Competitors....................................................................................35
14. Financial Analysis..............................................................................................................................36
14.1 List of Assets..............................................................................................................................36
14.2 Cost of Assets.............................................................................................................................36
14.3 Capital Expenditure...................................................................................................................37
14.4 Working Capital.........................................................................................................................38
14.5 Initial Cash Flows.......................................................................................................................38
14.6 Annual Revenue Estimation.......................................................................................................39
14.7 Annual Estimation of Expense...................................................................................................39
14.8 MACRS.......................................................................................................................................39
14.9 Cashflows...................................................................................................................................39
14.10 Payback Period........................................................................................................................40
14.11 Net Present Value....................................................................................................................40
14.12 Profitability Index.....................................................................................................................41
14.13 Internal Rate of Return............................................................................................................42
14.14 Modified Internal Rate of Return (MIRR).................................................................................42
14.15 Weighted Average Cost of Assets WACC.................................................................................43
 List of Figures

Figure 1: IEA and Pakistan Energy Yearbook.............................................................................................6

Figure 2: BP Statistical Overview 2021.......................................................................................................6
Figure 3: Pakistan Energy Yearbook 2020 and OGRA Petroleum State of Industry Report 2020...............7
Figure 4: : OGRA Gas Schedule as on September 01, 2020 (latest available on OGRA website)...............8
Figure 5: LNG Operations Chain...............................................................................................................15
Figure 6 Schematic Diagram of Re-gasification of LNG...........................................................................17
Figure 7: LNG distribution process...........................................................................................................23
Figure 8: Supply chain of LNG.................................................................................................................24
 1. Introduction
The use of natural gas (NG) for energy production and house heating is in expansion, due to its
lower cost and lower emissions of greenhouse gases. NG is transported as a compressed gas in
pipelines, or as a liquid (LNG) by sea when the distance between the production and delivery
points is so wide to make pipelines too expensive. In addition, transportation via pipelines
requires a serial recompression of gas, with a consumption of the gas itself, to feed the gas
turbines which move the compressors. The pressure drop is usually of 25 bars, from 70 to 45, in
250 km; each recompression involves a consumption of about 0.5% of the gas itself, i.e., 2% in
1000 km. Such losses, in addition to the cost of pipelines, make the gas transportation as LNG
more convenient over very long distances

The use of natural gas (NG) for

energy production and house
heating is in expansion, due to its
lower cost and lower emissions of
greenhouse gases. NG is
transported as a compressed gas in
pipelines, or as a liquid (LNG) by
sea when the distance between the
production and delivery points is
so wide to make pipelines too
expensive. In addition, transportation via pipelines requires a serial recompression of gas, with a
consumption of the gas itself, to feed the gas turbines which move the compressors. The pressure
drop is usually of 25 bars, from 70 to 45, in 250 km; each recompression involves a consumption
of about 0.5% of the gas itself, i.e., 2% in 1000 km. Such losses, in addition to the cost of
pipelines, make the gas transportation as LNG more convenient over very long distances.

The production of LNG, which involves cooling of the natural gas down to -160 C, requires
strong energy consumptions, which in present plants require the consumption of at least 10% of
the gas itself, with sophisticated processes, huge heat exchange surface areas and high
investment costs. LNG is then loaded on special ships with insulated tanks of capacity over
100,000 m3 and carried to the regasification plant, at a harbour across the sea. The insulation of
the tanks is so good that practically no evaporation of LNG happens during the trip, but its
temperature is let to raise a little and the vapor pressure to increase by about 0.1 bars, without
need of wasting vapours. Furthermore, the transportation of LNG is also dependent upon the
geographical location of specified delivery points.

2. Problem Statement

When it comes to Pakistan, the country with the population of approximately 22.5 million people
used NG as a primary source of energy for production and residential heating requirements. This
turns out into the depletion of natural resources with respect to time. Thus, the concept of LNG
was introduced to meet the residential heating requirements. Pakistan is a relatively new player
in global LNG market but has quickly become a major importer. Depleting indigenous gas
reserves and a transition towards cleaner and cheaper power generation have been the major
factors driving the country towards adding LNG to its energy mix. However, the use of LNG is
very limited with respect to neighbouring countries. Therefore, the business model for the LNG
import has been proposed to meet the customers energy requirements.

3. Industrial Overview & Analysis

Pakistan has an LNG import infrastructure with

capability of handling thirteen vessels per month
with load size ranging from 143,000 CBM to
165,000 CBM. At present, nearly 23% of the
country's natural gas consumption is being met
through imported LNG. Pakistan’s two LNG
terminals have the storage capacity of
approximately 140,000 tons of LNG and
regasification capacity of 1.35 BCFD, out of
which 1.2 BCFD is contracted to South Southern
Gas Company (SSGC). At present there are 13 major LNG importers are functioning in Pakistan.
The detailed industrial analysis of Pakistan gas sector is given below:
Gas is the third-largest energy source consumed around the world. Pakistan has less than a 1 per
cent share in world gas consumption. It meets its energy demand through imported and
indigenous resources in the ratio of 44:56. Natural gas and imported LNG contribute more than
40 per cent to the country's current energy mix, including gas resources used in electricity
generation. In recent years, the demand for gas has increased rapidly in Pakistan. However, gas
exploration and production have declined, and the LNG operational and regulatory framework is
weak, leading to a nationwide shortage and increased supply costs.

Figure 1: IEA and Pakistan Energy Yearbook.

 Figure 2: BP Statistical Overview 2021

4.1 Pakistan Natural Gas Sector

In the upstream, 15 gas exploration and
production companies work in 55 gas elds
spread throughout the country. The gas
distribution and transmission are mainly
owned and operated by two state-owned
companies _ Sui Northern Gas Pipeline
Limited (SNGPL) and Sui Southern Gas
Company Limited (SSGCL). A few
independent pipelines from Mari and Uch also
supply gas to nearby power and fertilizer
plants. SNGPL and SSGCL are listed
companies with the majority of shares owned by the government. After the colossal gas
discovery in Sui in 1952, the GOP started developing a gas transmission and distribution
network. The transmission network (13714Km) and distribution network (183407Km) are spread
across four provinces' main urban areas. The gas exploration/production industry and gas
distribution/transmission industry lack competition in Pakistan.

4.2 Gas Sector Challenges

The sustained growth in gas
production in the early years
made authorities complacent,
and they encouraged
consumption and gave
connections to everyone. Gas
tari- methodology also enabled
capital investments to expand
the transmission and
distribution (T & D) network.

1. Pakistan is the most gas-intense country in the world.

2. Over the years, the gas has been used quite inertially.
3. Cross-subsidization across sectors encouraged inefficient use, and it continues.
Household consumers have a share of around 50 per cent of total gas consumption, and the
percentage of fertilizer plants (feedstock) is about 12%. The majority groups/ slabs in these two
categories are charged a low price (much below the costs) than all other consumer types

Figure 4: : OGRA Gas Schedule as on September 01, 2020 (latest available on OGRA
website)
incentivizing inefficient use. Other consumer categories are charged a price higher than the
actual cost.

Although 78% of households have no access to natural gas in Pakistan, natural gas consumption
in the domestic sector has grown by about 11% over the years maximum growth among all the
sectors. Supplying gas to households requires Signiant investments. The cost of gas supply to
households is much higher than the cost of supply to the industry or power sector. In our gas
prioritization policies (over the years), this has not been reflected, leading to a shortage of gas
supplies.

1. Gas allocation policy has remained based on political priorities rather than on the
objective of maximizing value addition.
2. Low gas prices and inefficient gas allocations have encouraged higher demands.

Table 1: Gas Allocation Priorities

In 2005, the government announced Natural Gas Allocation and Management Policy which was
revised later few times. The latest revision was in 2018. Different sectors have been prioritized
as in Table 1. In most countries (mainly developed countries), a single energy source is provided
at the domestic and commercial levels. In Pakistan, both power and gas are supplied at the
household level. Providing two types of infrastructure at the domestic level is costly and
encourages inefficiencies in the supply chain. Maintaining all operations or controlling all
activities by the GOP create inadequacies, costing welfare and economic loss. Pakistan’s
upstream sector has become unattractive for foreign investment because of the factors listed in
Box 1. A few years back, there were 22 foreign companies in exploration & production
activities, but we are now left with only 3 (Sattar, 2020). Single-pass gas geysers dominate
household gas consumption bills (almost 80%). These geysers are incredibly inefficient
(efficiency level less than 30%). At the same time, very few pay the actual cost in the household
category as most slabs are cross-subsidized (Chart 6). In comparison, the industry can achieve
supply-side efficiencies up to 90%. The industry's gas tari-s are relatively high, in addition to gas
outages. Expensive gas makes goods' costs high and reduces local and global competitiveness.
Subsidized gas supply to fertilizer is for food security and protecting small farmers. But evidence
suggests fertilizer prices are not always below the imported fertilizer costs. Local fertilizer
manufacturers are making enormous ports. While the reduced supply of gas to power or high
tari-s for the power sector sometimes aggravates the power shortage. It increases power
generation costs, adversely affecting the economy (Likewise, despite the forecast of a rising
demand-supply gap, in FY2006, when international oil prices were rising, GOP promoted CNG
to replace motor gasoline by keeping its prices substantially lower than motor gasoline. It was a
government policy of maintaining a substantial difference in the price of petrol and CNG to
promote the CNG industry in the country, despite the declining natural gas resources.
Policymakers/ regulators failed to perceive the gap arising from the oil to gas shift.

With 30.6 billion cubic meters of natural gas, Pakistan shares 0.8 % of global production (BP,
2021). There is a sharp increase in gas demand in Pakistan, but due to the inefficient distribution
of natural gas resources, Pakistan has been facing a colossal gas shortfall. With no significant gas
discoveries in recent years, gas production has started decreasing after reaching a peak in
FY2012. No significant addition, proven gas reserves are also declining (Chart 3). Basin studies
suggest a total gas resource potential of 282 trillion cubic feet. There are only four exploratory
wells per 1000 Sq. KM, three times less than the world average. OGDCL predicts that Pakistan’s
indigenous oil reserves will be exhausted by 2025. Current reserves will last a maximum of 15
years if demand is capped at present-day gas levels by 2030.

In 2005, the government announced which was revised later few times. The latest revision was
in 2018. Different sectors have been prioritized as in Table 1. In most countries (mainly
developed countries), a single energy source is provided at the domestic and commercial levels.

In Pakistan, both power and gas are supplied at the household level. Providing two types of
infrastructure at the domestic level is costly and encourages inefficiencies in the supply chain.
Maintaining all operations or controlling all activities by the GOP create inadequacies, costing
welfare and economic loss. Pakistan’s upstream sector has become unattractive for foreign
investment because of the factors listed in Box 1.
A few years back, there were 22 foreign companies in exploration & production activities, but
we are now left with only 3. Large areas in the country remain unexplored due to security
concerns and the law-and-order situation. For instance, Baluchistan’s Pishin basin is considered a
valuable block. However, no exploration activity in this basin because of the law-and-order
problem. Likewise, the well-head price policy, the structure of the bidding process for the blocks,
and the government’s role in state-run companies are discouraging companies. Political
instability and related policy uncertainty is also not an incentive for investors. Companies are
also exploiting; they bid for blocks but do not start work on them. Government has clauses in the
contract that can penalize or take back blocks but has never really enforced these and has not
taken one back in decades. The attitude of companies in the upstream sector explains regulatory
weaknesses in the oil and gas sector.

Since FY 2015, Pakistan has been importing LNG to meet domestic gas shortages. Two state-
owned companies, Pakistan State Oil (PSO) and Pakistan LNG Limited (PLL), are importing
LNG. PSO has signed a long-term contract (15 years) with Qatar. PLL has relatively short-term
contracts with Guvnor and Shell. LNG imported by PSO and PLL is regained at the Engro Elegy
Terminal Limited (EETL) and PGP Consortium Limited (PGPCL), respectively. Rising LNG
price trends in the global energy market are creating problems in securing LNG supplies in
Pakistan. The LNG price shock is expected to continue over the coming several years due to
global developments in the wake of the Ukraine War.

Substantial government involvement across the LNG supply chain, the distorted subsidy
structure6 and political preference for the subsidized category make the actual recovery of LNG
costs difficulty. Like exploration activities, the current operational, regulatory, and procedural
challenges have more to do with government control and exclusive involvement in the business.
How much to import LNG in the spot market or through a long-term contract is unclear. There is
a dual gas pricing system; local gas and RLNG are priced independently (Malik, 2021). The
Senate of Pakistan in February 2022 approved the Weighted Average Cost of Gas (WACOG)
bill. Under WACOG, all gas sources, including Re-gasified Liquefied Natural Gas (RLNG) and
local gas, will be pooled in, and a weighted average cost will be taken for gas purchase. But a
month later, the bill was challenged in court, and a stay was granted.
4.3 Way Forward
1. Prioritize exploration activities for relying minimum on LNG imports_ correct well-head
prices and minimize government interference.
2. A progressive and market-based exploration policy is needed. Pakistan should de-
regulate the natural gas sector and liberalize the pricing structure.
3. Market-based pricing system will also curtail the misuse of gas.
4. For LNG imports, incentivize third-party access_ increased involvement of the private
sector in the LNG supply chain happening in mature LNG markets like Japan, South
Korea and even in India.
5. Higher private sector participation in these countries facilitates cheaper fuel availability,
smooth procurement processes and allow market-based price discovery (SBP, 2021).
6. To maximize returns from private sector involvement and guarantee the sustainability of
the natural gas sector, it is essential to first solve the profound structural and operational
challenges.
7. Without rationalizing the subsidy structure, the financial viability of the natural gas sector
is difficult to achieve.
8. The tari- must be set on a cost-of-service basis for a reliable and sustainable gas sector.

4. Our Proposal

Currently, Pakistan has in total of 13 suppliers that supplies LNG to the local consumers from
the two LNG terminals. The suppliers are transporting 18% of LNG to the residential consumers
which depicts the gap of huge consumer market that can be captured. Therefore, we have
proposed an LNG import business model that buys the LNG from the state-owned terminals and
transport it to the filling station. Once the LNG is transported to filling station then LNG can be
transported to local consumers through LNG cylinders. The filing station will be established in 2
cities based on the analysis of potential consumer requirements.
 5. Objectives

1. Establishment of the contract/licence with government for obtaining the purchasing and
selling rights to local market.
2. Development of filling stations at two proposed sites.
3. Establishment of contract with local LNG transporters.
4. Registration of the organization to SECP.

6. Project Scope

The scope of the project is to establish a filling facility of LNG at the two proposed sites. The
import-based business buys the LNG from the two LNG terminals located at Karachi port and
transport it to filling stations located at proposed sites. After the LNG will be transported to
filling stations, it will be transported to local consumers at some adjusted margin.

7. Environmental Analysis of LNG Import Business Model

Is LNG a contributor to a sustainable

energy future? Initial analysis
indicates that it may be. As the world
grapples with issues related to
climate change and carbon
emissions, it has been widely
recognized that natural gas is one of
the cleanest burning fuels and
produces relatively low carbon
dioxide emissions. (CLNG Media
Advisory) Nonetheless, there are two primary environmental considerations related to LNG. The
first is the methane emissions that exist from all-natural gas. The second consideration is the
criticism that the energy needed to liquefy, transport, and re-gasify LNG (life-cycle emissions)
diminishes any clean-burning benefits LNG might otherwise provide.
7.1 Methane Emission

Although natural gas is a relatively low-carbon,

clean-burning fuel, the principal component of
natural gas is methane (CH4). Methane is a
potent greenhouse gas (GHG) and has 23 times
the radiative forcing impact of CO2 on a weight
basis over a 100-year period. Methane, or CH4,
is the largest contributor to anthropogenic GHG
emissions after carbon dioxide and accounts for
about 16 per cent of the total on a CO2
equivalent basis. This factor makes the control
of CH4 emissions an important component of
any GHG emissions mitigation strategy.
(IPIECA Workshop Report) Methane emissions
occur in all sectors of the natural gas industry, from
drilling and production, through processing and transmission, to distribution. Emissions
primarily result from normal operations, routine maintenance, fugitive leaks and system upsets.
As gas moves through the system, emissions occur through intentional venting and unintentional
leaks. Venting can occur through equipment design or operational practices, such as the
continuous bleed of gas from pneumatic devices (that control gas flows, levels, temperatures, and
pressures in the equipment), or venting from well completions during production. In addition to
vented emissions, methane losses can occur from leaks (also referred to as fugitive emissions) in
all parts of the infrastructure, from connections between pipes and vessels, to valves and
equipment.

7.2 Green House Gas Emissions in LNG Operations Chain

The LNG operations chain consists of several interconnected elements as shown schematically in
Figure 1. However, the figure depicts the gas fields as being closely connected to the liquefaction
plants, which is not uniformly the case. Similarly, the LNG operations chain does not always
terminate in transfer to a pipeline system.
 Figure 5: LNG Operations Chain

we structured the discussion of LNG operations and its associated GHG emissions into five
stages, as illustrated by the operations depicted within the brackets in Figure 1. These operations
include:

 Liquefaction - Plants where natural gas is treated to remove impurities and higher
molecular weight hydrocarbons, and then liquefied and stored for subsequent shipment
 Storage - Storage tanks that are designed to store LNG at atmospheric pressure
 Loading and Unloading - Marine or inland terminals designed for loading LNG onto
tankers, or other carriers or unloading it for regasification
 Shipping - LNG tankers used for transporting LNG
 Regasification - Plants, typically co-located with unloading terminals, where LNG is
pressurized, re-gasified, and injected into pipelines, or other receiving systems, for
delivery of natural gas to end users.

However, our business model specifically focused on re-gasification and transportation of LNG.
Therefore, it is necessary to evaluate the environmental impact of regasification and
transportation of it.

Greenhouse gas emissions from LNG storage tanks are minimal since:

1. There is no systematic
venting from the tanks:
gas is fully contained
within the outer container
of the overall tank design
 2. Gas displaced during tank loading or boiled off due to heat leakage is captured and either
used for fuel gas onsite; compressed and sent to a transmission or distribution system
pipeline; or reliquefied and returned to the storage tank
3. Most piping connections associated with LNG tanks are welded rather than flanged
4. LNG storage tanks are operated near atmospheric pressure with a slight overpressure so
there is minimal pressure differential between the tank and the atmosphere to drive leaks
5. The tanks are double-walled and heavily insulated to minimize evaporative losses, while
their tank in a tank design minimizes the potential for liquid leaks.

7.3 Regasification

Regasification plants, which

return the LNG back into the
gaseous state, are typically
incorporated into LNG receiving
terminals. Figure 2 provides a
schematic of a composite
example of a regasification plant.
Most plants do not have all the
processing capabilities shown on
the chart. For example, the ethane-
plus extraction step shown in the figure is an option that is used at very few potential locations
due to the lack of local infrastructure or markets. Most LNG receiving terminals are only capable
of pumping and vaporizing LNG. Some can blend nitrogen into the send out gas to reduce its
heating value, or to blend in propane and/or butanes into the LNG to increase its heating value. A
limited number of receiving terminals have facilities to separate higher hydrocarbons from rich
LNG or are considering adding the facilities needed to affect that separation. For all LNG
regasification plants, LNG is initially pumped from the LNG ship into the receiving terminal’s
LNG storage tanks. Subsequently, LNG is either transferred further in its liquid phase, e.g.,
loaded onto trucks for transport to smaller storage facilities at a customer’s site, or pumped to
higher pressure through in-tank and high-pressure pumps, vaporized at high pressure, and
delivered into the send out gas pipeline.
 Figure 6 Schematic Diagram of Re-gasification of LNG

7.4 GHGs Emitted from LNG Operations

The most recognized and globally reported GHGs are those covered by the Kyoto Protocol:
Carbon Dioxide, CO2

1. Methane, CH4
2. Nitrous Oxide, N2O
3. Hydrofluorocarbons, HFCs
4. Perfluorocarbons, PFCs
5. Sulfur Hexafluoride, SF6

Notably, GHG emissions from the LNG segments are likely to consist primarily of CO2 CH4
and N2O. The other listed GHGs would potentially be contributing a very minor amount. The
main sources for the GHG emissions are:

 Carbon Dioxide (CO2) - from process CO2 in addition to combustion of fuels in engines,
boilers, heaters, turbines, and other and compressor drivers
 Methane (CH4) – from venting and equipment leaks in all segments of the LNG
operations chain
  Nitrous Oxide (N2O) - from combustion devices, of primary importance for stationary
engines including gas turbines and combustion of non-gaseous fuels
 Other GHGs – these typically include SF6, HFCs and PFCs as required by international
GHG reporting frameworks and should be included if they are germane to company’s
LNG operations.

8. Marketing Plan
8.1 Executive Summary

LNG as a fuel will capture a significant

market share by year 2035. The greatest
potential is seen in residential use road
transport, where annual demand is projected
to reach 96 million tons per year (mtpa).
Therefore, it is evident to have an LNG
resource available in considerable amount for
the use. Primary goal of our business model is
to ensure an on-time delivery and cost viable
LNG to the customers.

8.2 Trackable Goals

1. Number of Customers
2. Amount of LNG sold per month (tons/month)
3. On-time delivery
4. High customer satisfaction index
5. High-cost competitiveness index
6. High responsible vendor index
7. High availability index

8.3 Target Market

1. Residential area of Islamabad and Lahore is our current focused market.

 2. Residential areas of Gujrat, Faisalabad, Charsada, Laki marwat are the potential
consumer markets.

8.4 Price
RLNG MMBTU
Old price $ 15.6165
New price $ 21.8317

8.5 Promotion Strategy

We are intended towards the pull promotional strategy for our business based on the background
knowledge about business and the potential competitors.

8.5.1 Budget

The allocated budget for the promotions is 10% of the overall budget. The reason behind this
allocation is given below:

1. Highly competitive environment

2. Reachability over maximum users and potential customers
3. Fluctuating market index

8.5.2 Goal

The primary goal of promotional strategy is increasing sales and provides awareness to the
potential customers about the benefits of using LNG as a primary source of energy. It also
intends to enhance the branding, reputation, customer loyalty, and retention.

8.5.3 Actionable Plan

The promotion strategy includes the actionable plan to reach out to the customer and provide
essential knowledge that needs to be there. It includes the following:
 1. Launching of social media marketing campaigns
2. Creation of Website
3. Communicate your business and its goals through networking
4. Cultivation of strong client and customer relationships
5. Collaborate and partner with other businesses
6. Host contests and giveaway opportunities
7. Email Campaign
8. SEO Content
9. Influencers
10. Loyalty Plans
11. Samples, giveaways, and coupons
12. Money-back guarantees

9. SWOT Analysis

9.1 Strengths

The strengths of business model look at the key aspects

of its business which gives it competitive advantage in
the market. Some important factors in a brand's
strengths include its financial position, experienced
workforce, product uniqueness & intangible assets like
brand value. Below are the Strengths in the SWOT
Analysis of the proposed business model:

1. Pakistan new buyer of natural gas

2. Strong backing by government authorities
3. Strategic locations
4. Company expanding its capacity to more than double
 5. Strong participation in community development in Pakistan

9.2 Weaknesses

The weaknesses of a brand are certain aspects

of its business which are it can improve to
increase its position further. Certain
weaknesses can be defined as attributes
which the company is lacking or in which the
competitors are better. Here are the
weaknesses in the proposed business model
SWOT Analysis:

1. Reducing margins because of

fluctuation in currency
2. Revenues depends on international LNG price which keeps on fluctuating

9.3 Opportunities

The opportunities for any brand can include areas of

improvement to increase its business. A brand's opportunities
can lie in geographic expansion, product improvements,
better communication etc. Following are the opportunities in
SWOT Analysis:

1. Pakistan’s growing energy requirements

2. Increasing natural gas market globally
3. Heavy import dependence of natural gas
4. Large gap in Pakistan’s demand and supply

9.4 Threats

The threats for any business can be factors

which can negatively impact its business.
Some factors like increased competitor
activity, changing government policies, alternate products or services etc. can be threats. The
threats in the SWOT Analysis are as mentioned:

1. Frequent labor unrest in Pakistan

2. Environmental hazards cause a backlash
3. Economic instability and fluctuations in Pakistan's policies

10. Promotion/Distribution Strategy

The distribution strategy majorly focused on:

1. Order placement through available contacts and website along with the use of social
media platform.
2. Services of a reputable logistics company will be acquired for distribution.
3. It provides solution to challenges in LNG distribution and availability.

11. LNG Distribution Process

The LNG distribution is one of the most critical processes of the overall supply chain. Figure 3
present the conventional distribution process of LNG. The LNG ship once docked on the
seashore is then transported to LNG storage tanks located at the port through LNG unloading
lines. Afterwards, it is transported to gas compressors where it is to be re-gasified and then move
to the vaporizer to eliminate the vapor content in the natural gas. Then the natural gas is
transported to the desired gas network through pipelines.
 Figure 7: LNG distribution process

However, the alternate method for the transportation and distribution of LNG is provided in the
Figure 4. Once the LNG is transported to the LNG storage tanks located at the port terminals, it
is then transported through high graded steel trailers consisting of cylinders with overall tare
weight of 8680 kg to the regasification centers owned by private contractors and suppliers. The
regasification plant then transforms the LNG into natural gas and move it towards the filling
station. It is then filled in the LNG cylinders and move towards the consumers. It is worth
mentioning here that this project focuses on the stages from regasification to distribution process.
 Figure 8: Supply chain of LNG

12. PESTEL Analysis of LNG

The PESTEL analysis is a comprehensive framework to determine the
overall pros and cons of the project. It is a tool use to better understand
the long-term sustainable future of the business.

12.1 Political

12.1.1 Government stability

1. The strong political structures and institutions support growth

and development for Our Company.
2. Government stability also allows businesses like Our Company to expand regionally as
well as internationally.
3. Trade relations with other countries because of political stability and strength allows
businesses like Our Company to maintain offshore business affiliations easily and
smoothly.
4. Government stability also attracts investors for businesses and companies such as Our
Company – which leads to growth and development in the infrastructure as well as
enhances international image.
5. High government stability can also attract resources for industry development, which in
turn will boost player performance and improve overall competitive positioning.

12.1.2 Tax policy

1. Favorable tax policies allow businesses like Our Company to expand easily.
 2. Government subsidies and favorable tax rates will also allow Our Company to maintain
competitiveness by controlling its costs of doing business.
3. Costs of doing business, in turn, will also not be passed on to the consumers – thereby
allowing consumers to enjoy favorable and competitive pricing.
4. Desirable tax policies that support business growth and development will allow
businesses like Our Company to expand, and thereby add to creating economic value for
the country as well.

12.1.3 Competition regulation

1. It is important for government and political institutions and bodies to monitor

competition in the industry.
2. This will ensure that companies are using fair play for their products, and business tactics
and strategies.
3. Competition regulation will also help the government monitor, restrict, and regulate
imports to help local businesses grow and expand.
4. Competition regulation is important for the protection of all groups and stakeholders, as
well as for maintaining the rights and interests of the related stakeholders.

12.1.4 Trade blocks

1. Companies like Our Company can take advantage of trade blocks and trade treaties that
have been formed and signed by the respective country of origin.
2. Trade blocks can facilitate businesses like Our Company by lowering resource costs,
lowering cost of doing business, as well as increasing the supply of talented people.
3. With trade blocks, companies like Our Company can also make their products and
services easily accessible through various channels and distribution agencies for
consumer to purchase and benefit from.
4. Strong industrial ties could be developed and maintained under trade blocks across
borders, and in different countries which could help companies like Our Company benefit
from advanced knowledge, knowhow, and technology as well.

12.2 Economic
12.2.1 Inflation rate

1. A moderate inflation rate is needed in the economy for companies like Our Company to
flourish.

2. A moderate inflation rate will also help the business grow and work positively towards
increasing the consumer confidence, and consumer spending trends.

3. As a result, the economy will get a boost and the overall disposable income will also
increase.

4. A higher inflation rate would lead to a lower disposable income, and thus could lead to
lower overall expanding, which could harm businesses and companies, as well as lower
consumer confidence.

5. A lower inflation rate will lead to a high increase in the disposable income, and thereby
could increase competitiveness, especially through pricing strategies which could lead to
unethical price wars that take undue advantage of the consumer.
12.2.2 Interest rate

1. A moderate interest rate will help businesses sand companies like Our Company in taking
loans from the banks.

2. This business loan would be used for purposes of growth and development.

3. Business loans would also help in the development and building if the industry
infrastructure at a large level.

4. Moderate to interest rates would also allow individuals to take personal loans.

5. With lower to moderate interest rates, personal loans will translate into higher purchases
and consumption patterns by the consumers. This in turn would lead to a boost in sales,
consumption, and penetration of businesses like Our Company.
12.2.3 Consumer spending trends

1. Consumer spending trends are important and critical for companies like Patagonia Gold
Plc, and their performance.

2. Higher consumer spending trends are preferred as they lead to higher purchases and
consumption of products sold by Our Company.

3. The higher consumer spending is also reflective of higher purchasing power, which is
important for increasing overall consumption patterns, and health of the economy.

4. These higher consumer trends can be positively influenced through product quality and
marketing strategies.

5. In addition, these trends are also influenced by other economic indicators such as
inflation rate, interest rate, and unemployment trends.
12.2.4 Unemployment trends

1. Higher unemployment trends will lead to lower overall disposable income in the
economy, which in turn would directly affect the performance of companies like
Patagonia Gold Plc.

2. Higher unemployment trends could also be reflective of a gap in labor skills and
knowledge – which again would harm consumers through higher prices of the products.
The higher prices would be associated with the increased cost of doing business when
labor would be imported from other sources for purposes of work.

12.3 Social

12.3.1 Demographics

1. A higher portion of the younger population is beneficial for Our Company as it will allow
the company a larger consumer population base.
 2. In addition, a younger population will also promise Our Company with more skilled and
educated workers and human resources, thereby adding breadth and depth to the talent
pool.

3. A moderate to high middle class is also important for Our Company as its current
consumers, and advocates.

4. This group acts as brand ambassadors for Our Company, and encourages younger
population to become loyal customers as well.
12.3.2 Education

1. A higher education in the population is desirable for multiple reasons that will benefit
Our Company.

2. A higher education means more talented, skilled, and knowledgeable persons in the talent
pool for Our Company.

3. A higher education also means that the population s consumers will be more aware of
their purchases and consumption patterns.

4. As a result, they will focus on positive consumption which will give Our Company an
advantage because of its unique competitive positioning and placement.

5. A higher awareness level also means that consumers will prefer quality and will be
knowledgeable of what the product promises and delivers. This comparison will form
basis of repeat purchase.

6. Again, Our Company will be at an advantage because of their focus on quality.

12.3.3 Family size and structure

1. The family structure and size determine the frequency and nature of purchase made

2. This is also important for understanding consumption patterns.

 3. For the target population it he current market, Our Company is faced largely with
families of nuclear style, with two older children, and sometimes a younger child

4. The key decision makers are eth parents, though they take into consideration the
suggestions and requests of their children.

5. These parents as kept decision makers are influenced by marketing, store manager
reviews, and recommendations and by friends and family.

6. As a result, Our Company applies push and pull strategies for its appeal.
12.3.4 Health consciousness

1. An increasing portion of the population is adopting health and wellness trends.

2. The health and wellness trend has also translated into consumption decisions and
patterns.

3. Our Company has introduced health aspects in its marketing and add features of health in
their products as per consumer research and behavioral assessments.

4. The increased health consciousness has also led Our Company to make collaborations
and take CSR initiatives focusing not only on physical, but also mental and emotional
health and wellbeing.

12.4 Technological

12.4.1 Technological infrastructure

1. The country has a strong infrastructure with regards to technology.

2. There is a high rate of technological development and advancement.

3. Increasingly, businesses like Our Company are incorporating technological up-gradations

and innovation to increase business efficiency and affectivity.

4. There is high rate of innovation across all industries, which makes companies including
Our Company competitive as well as progressive.
 5. The improved technological infrastructure also helps in attracting foreign direct
investment, which in turn leads to further development and advancement.

6. The improved technological infrastructure also helps in attracting foreign direct

investment, which in turn leads to further development and advancement.

7. As a result, Our Company has a distinctive competitive advantage in terms of

technological advancements, and the business continues to make use of, as well as
participate in innovation processes to enhance the business cycles and operations.
12.4.2 Internet penetration

1. The country, and all consumer markets enjoy a high rate of internet penetration

2. The high penetration of internet is used for personal and social lives along with
professional responsibilities

3. most all of the population own a smart phone for internet accessibility, and have access to
computers and laptops as well

4. The higher penetration of internet reflects a progressive and educated population, which
is beneficial for Our Company

5. Our Company has also made use of the high internet penetration to reach consumers, and
for marketing and promotional strategies to be able to directly interact with consumers
and gather feedback

6. As a result, the higher internet penetration has helped Our Company in improving its
quality and delivery, as well as allowed it to engage in strategic communications and
marketing processes
12.4.3 Use of social media

1. There is a higher portion in the population of the youth, as well as middle ages persons

2. These population segments widely make use of social media for connectivity
 3. Increasingly, social media is also being used by businesses like Our Company for
gathering consumer data and information

4. Our Company also interacts with, gathers feedback, and communicates promotions to
customers through official social media channels

5. Business like Our Company have also started using social media for purposes of
recruitment, which highlights the changing trends in the business community with respect
to social media.
12.4.4 Investment in R &D

1. There is a high level of local as well as international investment in the technological

R&D of the country

2. The high investment helps in advancing industries, and equipping them with new, and
more flexible as well as effective ways for business operation and other business
processes

3. The higher investment, and related research has also allowed for an increased rate of
innovation

4. Businesses take advantage from innovation and development through the overall
industrial growth along with development of competitive edge for the industry in the
global market

5. Adaptations by individual players like Our Company also leads to the building of high
competitive advantage for companies

12.5 Environmental

12.5.1 Recycling

1. There is an increased focus on environmental sustainability and recycling

 2. Consumers are becoming more aware, and demanding ways for recycling products to be
disposed off

3. Consumers are also increasingly demanding recycled products for consumption

4. Our Company has launched specific sites for disposing off products to be recycled

5. Our Company, like many other players, is also introducing a novice product line of
recycled products for consumers to benefit from
12.5.2 Waste management

1. The country has high regulations for waste management and control

2. Our Company should associate itself with, and register with the waste management
authorities and institutions to be able to follow regulations, maintain checks, and avoid
any future hassles

3. Our Company, in view of environmental sustainability, already has a controlled and

designated process of managing waste, and disposing waste in an environmentally
friendly manner.
12.5.3 Green consumption

1. The increased awareness of environmental sustainability has also given way to an

increase in the green lifestyle

2. Consumers in the country, and across all markets are increasingly preferring products and
services that are green i.e. produced and marketed using environmentally friendly and
sustainable ways and methods

3. Companies are also hopping on the bandwagon and introducing green products to appeal
to the consumers

4. Our Company engages regularly in environmental friendly CSR activities.

 5. Our Company has also introduced a green product line – which is a variation of its
existing products. The company plans on increasing weightage for the green product line
gradually to increase its role in environmental sustainability.

6. Our Company also contracts with suppliers and distributors in its integrated back chain,
who are following strong principles with regards to environmental sustainability
12.5.4 Renewable energy investments

1. The country as a whole it all its industries is gradually moving towards the use of
renewable energy for operations and business processes

2. This is being done to reduce the environmental footprint by the market, as well as for
reducing the carbon effect

3. Our Company and related industry members are increasingly making use of solar energy,
and hydroplanes for purposes of operation management and business processes

4. Our Company has a company controlled hydro plant – on a small scale – to help in
manufacturing operations.

12.6 Legal

12.6.1 Health and safety law

1. There are strict regulations pertaining to the health and safety of employees at the
workplace

2. Respected associations and institutions regularly check with businesses about

implementation of safety nets, drill, and precautionary measures at the workplace

3. The safety and health involves not only physical wellbeing, but also the emotional and
mental wellbeing if employees.

4. Our Company has placed high importance of the safety and health of its employees, a and
continually strives to improve it further
12.6.2 Employment laws

1. Country wide regulations demand businesses to form legal contracts pertaining to

employment

2. These contracts are authorized by the respected governmental bodies, and involve all
aspects of employment

3. Employability contracts ensure a healthy relation between all parties involved, and also
ensures that there is no misunderstanding or colluding

4. Our Company practices employment laws, and briefs its employees about the same
during the recruitment process

5. The HR department of Our Company also regularly conducts workshops and training
sessions for employees to engage them, and make them aware of the employment laws,
along with other legal formalities.
126.3 Anti-discrimination law

1. The country and the market is made up of divers population

2. There is a high number of immigrants, and the businesses from the country also operates
at multiple off shore locations

3. Our Company, as a result, has always been comfortable with diversity in its workforce,
and has framed internal company policies to support diversity

4. The company follows the anti-discrimination law in all its processes – from recruitment
to promotion

5. All employees regularly undergo diversity trainings and workshops to be able to avoid
discriminatory and prejudiced actions – which could have severe repercussions

6. Our Company, like other players in the industry, is an equal opportunity employer
 7. Our Company also ensures that there is no discrimination within the company, and the
organizational culture remains toxic free

8. Our Company ensures this by following regulations about the anti-discrimination law as
well as through regular investment in trainings and employee development sessions

13. Porter’s Five Forces

The threat of a new entity in the market:

New players in the energy sector bring innovation and new ways of doing things, and they put
pressure on the LNG distribution business by lowering prices, cutting expenses, and offering
consumers new value propositions. To maintain its competitive edge, Liquefied Natural Gas
distribution business must address all these issues and erect strong barriers.

What a Liquefied Natural Gas distribution business can tackle the Threats of New
Entrants
1. By innovating new services to the customer with a fair price to attract to buy Liquefied
Natural Gas.
2. In Pakistan, it is very difficult to the fixed price of LNG because the dollar fluctuates in
the country.
3. Building capacities and spending money on research and development. New entrants are
less likely to enter a dynamic industry where the established players such as Liquefied
Natural Gas distribution business keep defining the standards regularly. It significantly
reduces the window of extraordinary profits for the new firms thus discouraging new
players in the industry.

13.1 Bargaining power of Supplier:

Suppliers in a dominant position can decrease the margins Liquefied Natural Gas distribution
businesses can earn in the market. Powerful suppliers in the Energy sector use their negotiating
power to extract higher prices from the firms in the Energy field. The overall impact of higher
supplier bargaining power is that it lowers the overall profitability of Energy.
What a Liquefied Natural Gas distribution business can tackle the Bargaining Power of the
Suppliers:
 By building an efficient supply chain with multiple suppliers.
 By experimenting with product designs using different materials so that if the prices go
up of one raw material the LNG distributor business can shift to another.
 Developing dedicated suppliers whose business depends upon the firm. One of the things
Liquefied Natural Gas distributor business can learn is that Pakistan is the new market for
LNG distribution.

13.2 Bargaining Power of buyers:

Buyers are often a demanding lot. They want to buy the best offerings available by paying the
minimum price possible. This put pressure on Liquefied Natural Gas distributor business
profitability in the long run. The smaller and more powerful the customer base of Liquefied
Natural Gas distributors the higher the bargaining power of the customers and the higher their
ability to seek increasing discounts and offers.
What a Liquefied Natural Gas distribution business can tackle the Bargaining Power of
Buyers:
1. By building a large base of customers. This will be helpful in two ways. It will reduce the
bargaining power of the buyers plus it will provide an opportunity for the distributor to
streamline its sales of LNG.
2. By rapidly innovating new discounts and offerings to established customers to attract
them to buy Liquefied Natural Gas at a low-rate price.
3. New services to give the Liquefied Natural Gas distribution to the customer within a
given time to deliver the LNG to the end users.

13.3 The threat of Substitute:

When a new product or service meets similar customer needs in different ways, LNG industry
profitability suffers. The threat of a substitute product or service is high if it offers a value
proposition that is uniquely different from the present offerings of the LNG industry.

What a Liquefied Natural Gas Distribution business can tackle the Treat of Substitute
Products / Services:
 1. By being service oriented rather than just product oriented.
2. By understanding the core need of the customer rather than what the customer is buying.
3. By increasing the switching cost for the customers.

13.4 Rivalry among the existing Competitors

If the rivalry among the existing players in an industry is intense then it will drive down prices
and decrease the overall profitability of the industry. Liquefied Natural Gas Limited operates
in very competitive Energy industry. This competition does take a toll on the overall long-
term profitability of the organization.
What a Liquefied Natural Gas Distribution Business can tackle Intense Rivalry among the
Existing Competitors in the Energy industry
1. By building a sustainable differentiation
2. By building scale so that it can compete better
3. Collaborating with competitors to increase the market size rather than just competing for
a small market.

14. Financial Analysis

14.1 List of Assets

Summary of Project
List of Assets
Description Excepted Cost
Land and Building 7500000
Machinery 1450000
Furniture and Fixture 532500
Transportation 8000000
Total 17482500
Working Capital Requirement
Particular Monthly
Raw Material Inventory 1600000
Salaries and Wages 120000
Utilities 95000
 Others 100000
Cash 250000
TOTAL 2165000
14.2 Cost of Assets

Cost of Assets
Assets

Land and Building

Description Required Unit Cost Expected Cost
Area
Renovation work including sign 3000 square 2500 7500000
board development feet

Machinery Quantity Expected Total Cost

cost
NGV Easy Bay 1 150000 150000

Control System. 1 250000 250000

Customized Pressure Vessels / 1 120000 120000
Piping Systems.
Dual CNG/LNG Pump Skid. 1 180000 180000
Fisher Valve Assembly. 1 85000 85000
High-Pressure Vaporizers. 1 300000 300000
LNG Dispenser 1 225000 225000
LNG Double Boost Pump Skid 1 140000 140000
TOTAL 1450000
Furniture & Fixtures Quantity Expected Total Cost
cost
Cash register 1 20500 20500
Chairs 3 4000 12000
Working table with marble 2 40000 80000
Desktop Computer 1 65000 65000
AC Inverter (2 tons) 2 80000 160000
Solar system 1 150000 150000
Safety dress code including 3 15000 45000
uniform set, aprons, gloves, face
masks, hair caps & nets, shoe
covers and Beard masks
TOTAL 532500

Vehicle Quantity Expected Total Cost

cost
heavy vehicle for transportation 1 8000000 8000000
TOTAL 8000000
 Cost of Assets
Total Cost of Asset 17482500

14.3 Capital Expenditure

Capitalized Expenditure
Description Description Expected Total Capitalized Expenditure
Cost Cost
NGV Easy 1 150000 150000 Installed by the technical labor Rs.
Bay
Control 1 250000 250000 Transportation and installation through
System. Petroleum technician Rs. 25000
Customized 1 120000 120000 Installation through Mechanical technical
Pressure Rs. 12000
Vessels /
Piping
Systems.
Dual 1 180000 180000 Transportation and Installation through
CNG/LNG Petroleum Technician Rs.25000
Pump Skid.
Fisher Valve 1 85000 85000 Transportation and Installation through
Assembly. Mechanical Technician Rs. 8000
High- 1 300000 300000 Logistics and Installation expense through
Pressure Mechanical technician Rs. 30000
Vaporizers.
LNG 1 225000 225000 Transportation and Installation expense
Dispenser through skilled labor Rs. 15000
LNG Double 1 140000 140000 Transportation and Installation through
Boost Pump Petroleum Technician Rs.18000
Skid
Deep Freezers 1 62900 62900 Transportation Expense Rs. 800
Exhaust fan 1 1000 1000 Installation expense Rs. 250
Working table 2 40000 80000 Transportation and installation through
with marble carpainter Rs. 700
Desktop 1 65000 65000 Transportation and Fitting expense Rs.
Computer 1800
AC Inverter (2 2 80000 160000 Transportation and installation through
tons) Electrician Rs. 3000
Solar system 1 150000 150000 Installation fee Rs. 35000
Safety dress 3 15000 45000 Transportation expense Rs. 1500
code
including
uniform sets
etc
vehicle for 1 8000000 800000 Registration and tax expense Rs. 27,000
 Capitalized Expenditure
Description Description Expected Total Capitalized Expenditure
Cost Cost
transpotation 0
Total Capital 9863900
Expenditure

14.4 Working Capital

Working Capital Requirement

Particular Monthly 1 Years
Raw Material Inventory 1600000 19200000
Salaries and Wages 120000 1440000
Utilities 95000 1140000
Cash 250000 3000000
TOTAL 2065000 24780000

14.5 Initial Cash Flows

Initial Cashflow
Cost of Assets 17482500
Add: Capital Expenditure 9863900
Working Capital 2065000
Requirement
Initial cash outflow 27346400

14.6 Annual Revenue Estimation

Annual Revenue Estimation

Year 1 2 3 4 5
Revenu 370000
3500000 3900000 4100000 4300000
e 0

14.7 Annual Estimation of Expense

Annual Estimation of Expense

Year 1 2 3 4 5
Salaries 550000 600000 650000 700000 750000
Utilities Bill 150000 200000 250000 300000 350000
 Total 700000 800000 900000 1000000 1100000

14.8 MACRS

We will use the 3 years MACRS property class for depreciation of our Project
Year 1 2 3 4 5
Rate 33.33% 44.45% 14.81% 7.41% 0.00%
Depreciation 9114555.12 12155474.8 4050001.84 2026368.24 0

14.9 Cashflows

Incremental Cashflow

Year 1 Year 2 Year 3 Year 4 Year 5

Revenue 3500000 3700000 3900000 4100000 4300000
Less: Expense 700000 800000 900000 1000000 1100000
Net Operating 2800000 2900000 3000000 3100000 3200000
Income
Less: 9114555.12 12155474.8 4050001.84 2026368.24 0
Depreciation
Profit Before -6314555.12 -9255474.8 -1050001.84 1073631.76 3200000
Interest Tax
Less: Tax 35% - -3239416.18 -367500.644 375771.116 1120000
2210094.292
Profit After - -6016058.62 -682501.196 697860.644 2080000
Tax 4104460.828
Add: 9114555.12 12155474.8 4050001.84 2026368.24 0
Depreciation
Incremental 13219015.95 18171533.42 3367500.644 2724228.88 2080000
Cashflow 4

14.10 Payback Period

Payback Period

Year Cashflow Cumulative Inflows

0 -27346400
1 13219016 13219015.95
2 18171533.4 31390549.37
3 3367500.64 34758050.01
4 2724228.88 37482278.9
5 2080000 39562278.9
 Note: Payback Period = a+(b+c)/d

PBP =
2+(27346400-31390549.37)/3367500.644
0.799065 years
Approximately 1 year
14.11 Net Present Value

Net Present Value

Time Cashflow PV@10% PV@15% PV@18%

0 -27346400
1 13219015.95 12017287.23 11494796.5 11202555.89
2 18171533.42 15017796.21 13740289.9 13051230.55
3 3367500.644 2530053.076 2214186.34 2049564.856
4 2724228.884 1860684.983 1557586.71 1405126.952
5 2080000 1291516.352 1034127.61 909187.1698
32717337.85 30040987.1 28617665.42

PV@10% NPV = PV of cash flow - Cashoutflow

5370937.85

PV@15% NPV= PV of cashflow - Cashoutflow

2694587.05

PV@18% NPV=PV of cashflow-

Cashoutflow
1271265.42

14.12 Profitability Index

Profitability Index

Time Cashflow PV@10% PV@15% PV@18%

0 -27346400
1 13219015.95 12017287.2 11494796.4 11202555.8
3 8 9
2 18171533.42 15017796.2 13740289.9 13051230.5
 1 2 5
3 3367500.644 2530053.07 2214186.33 2049564.85
6 6 6
4 2724228.884 1860684.98 1557586.70 1405126.95
3 6 2
5 2080000 1291516.35 1034127.60 909187.169
2 9 8
32717337.8 30040987.0 28617665.4
5 5 2

PV@10 Profitabilty Index = PV of Cashflow /

% Cashoutflow
1.1964

PV@15 Profitability Index = PV of Cashflow /

% Cashoutflow
1.0985

PV@18 Profitability Index = PV of cashflow /

% Cashoutflow
1.0464

14.13 Internal Rate of Return

Internal Rate of Return

Time Cashflow PV@15% PV@20% PV@22% PV@25%

0 -27346400
1 13219015.95 11494796.48 11015846.63 10835258.98 1644864
2 18171533.42 13740289.92 12619120.43 12208770.1 1896518
3 3367500.644 2214186.336 1948785.095 1854505.798 637224
4 2724228.884 1557586.706 1313767.787 1229714.434 484559
5 2080000 1034127.609 835905.3498 769598.4451 367411
30040987.05 27733425.29 26897847.75 5030576
 Interpolated IRR = 0.15+(0.22-0.15)*(30040987.05-27346400)/30040987.05-26897847.75
21 Approximately

14.14 Modified Internal Rate of Return (MIRR)

Modified Internal Rate of Return (MIRR)

Time Cashflow PV@19%

0 -27346400
1 13219015.95 26508611
2 18171533.42 30621923.09
3 3367500.644 4768717.662
4 2724228.884 3241832.372
5 2080000 2080000
67221084.12 Terminal value

MIRR =( Terminal Value / Cashflow)^1/4-1

0.2521
25.21%
So 25.21% > 19%
then the project is good for execution.

14.15 Weighted Average Cost of Assets WACC

Weighted Average Cost

of Assets WACC
Targetted WAAC = 0.21

WAAC = WE*KE + WD*KD (1-t)

1 = WD + KD
WAAC = 0.21
KE = 0.12 Cost of Equity
KD = 0.15 Cost of Debts
WD = 1 - WE Debts
WACC = WE(KE)+WD(KD)(1-t)
 WAAC = WE (0.12)+ (1 - WE)(0.15) (1- 0.30)

0.21= 0.12WE + 0.105 - 0.105WE

0.21-0.105 = 0.12WE- 0.105WE
0.105 = 0.015WE
WE = 7 Equity
1 = WD+WE
1 = WD + 7
WD = 6

This means the debt-to-equity ratio must be 49/51 which will satisfy the
Weighted Average Cost of Capital