Valuation Of Food Processes And Plants PDF

VALUATION OF FOOD PROCESSES AND FST4406 PLANTS DR. ALIFDALINO SULAIMAN 1 LEARNING OUTCOMES TO IDENTIFY DIFFERENT TYPES TO ESTIMATE PROCESS CAPITAL OF COSTS & OPERATING COSTS...

VALUATION OF FOOD PROCESSES AND FST4406 PLANTS DR. ALIFDALINO SULAIMAN 1 LEARNING OUTCOMES TO IDENTIFY DIFFERENT TYPES TO ESTIMATE PROCESS CAPITAL OF COSTS & OPERATING COSTS 2 THIS TOPIC COVERS TYPES OF COST CAPITAL COST OPERATING / MANUFACTURING COST 3 COMPONENTS OF COSTS 4  Equipment, installation, piping, utilities Direct equipment, building, site development, service facilities Cost Engineering and supervisor, taxes, insurance, Indirect interest, contingency, contractor’s fee 5 COMPONENT OF CAPITAL N OPERATING COST Capital Fixed Working Contingency Home office Cost cost Fixed Variable Operating overhead 6  PROJECT CYCLE High Cost Low Design Detailed Procurement Construction Start-up Concept Design As the project proceeds, costs accumulate and the overall cost estimate becomes more certain 7  PROJECT CYCLE High Cost Low Design Influence Design Detailed Procurement Construction Start-up Concept Design At the same time, the influence of design decisions on project costs decreases. This creates an incentive to try to use cost information to guide the design at as early a stage as possible (even though the cost estimate is least accurate). 8 TYPES OF COST ESTIMATE 9 ESTIMATING PLANT COST FOR MANUFACTURED PRODUCTS For large scale mass manufacture (>0.5 Million This allows a very pieces/yr) a rule of approximate estimate of thumb is plant cost if other fixed costs and utilities can be Total cost of production = 2 x estimated materials cost More detailed methods allow for number of components, number of assembly steps and complexity of assembly 10 OTHER METHODS Order of magnitude (~50% ) based on production rate and major equipments (lab data) Study estimate (~35%) Based on prelim process design Preliminary estimate (~20%) Based on detailed process design →optimized Definitive estimate Based on detailed design, incl drawing, cost, Check estimate Based on real information 11  50 PROJECT CYCLEAn order of magnitude estimate (“ballpark estimate”, “guesstimate”, “Class 5 estimate”) requires minimal Order of design information 40 Magnitude Accuracy ± % Usually based on the costs of similar processes 30 Cost of producing the estimate is < 0.1% of project 20 costs 10 0 Design Detailed Procurement Construction Concept Design The terminology is taken from the Association for the Advancement of Cost Estimating International, AACEI © 2012 G.P. Towler / UOP. For educational use in conjunction with Towler & Sinnott Chemical Engineering Design only. Do not copy  PROJECT CYCLE 50 A study (“factorial”, “preliminary”, “Class 4”) estimate requires a flowsheet and the approximate size and duty Order of of the major plant equipment 40 Magnitude Accuracy ± % The estimate is based on applying installation factors to 30 main plant item costs Study Estimate 20 The cost of producing the estimate is usually 0.1 to 0.2% of project costs 10 0 Design Detailed Procurement Construction Concept Design © 2012 G.P. Towler / UOP. For educational use in conjunction with Towler & Sinnott Chemical Engineering Design only. Do not copy  PROJECT CYCLE 50 The definitive (“authorization”, “budgeting”, “Class 3”) estimate can be put together once the Order of PFD, P&ID and equipment list are completed, all 40 Magnitude vessels and instruments are sized and a plot Accuracy ± % plan and plant layout has been developed 30 Study The cost is typically 0.4 to 0.8% of project cost Estimate Definitive 20 Estimate 10 0 Design Detailed Procurement Construction Concept Design © 2012 G.P. Towler / UOP. For educational use in conjunction with Towler & Sinnott Chemical Engineering Design only. Do not copy  PROJECT CYCLE 50 Order of 40 Magnitude Accuracy ± % 30 Study Estimate Definitive 20 Detailed Estimate Estimate 10 0 Design Detailed Procurement Construction Concept Design The detailed estimate (“quotation”, “tender”, “contractor’s estimate”, “Class 2 estimate”) is prepared by the contractor and is often in shopping list form, usually with a firm commitment to the client. It incorporates price information from initial discussions with vendors and usually requires some mechanical design work From 1 to 3% of project cost goes into preparing this estimate © 2012 G.P. Towler / UOP. For educational use in conjunction with Towler & Sinnott Chemical Engineering Design only. Do not copy  PROJECT CYCLE 50 Order of 40 Magnitude Accuracy ± % 30 Study Estimate Definitive 20 Detailed Check Estimate Estimate Estimate 10 0 Design Detailed Procurement Construction Concept Design The check estimate (“tender”, “Class 1 estimate”) is prepared by the contractor after negotiations with vendors and sub-contractors have been concluded The cost of this estimate can be up to 5% of total project cost, particularly if most of the engineering design has been completed © 2012 G.P. Towler / UOP. For educational use in conjunction with Towler & Sinnott Chemical Engineering Design only. Do not copy  PROJECT CYCLE 50 ChE design courses usually only 40 Order of have enough detail to get this far Magnitude Accuracy ± % 30 Study Estimate Definitive 20 Detailed Check Estimate Estimate Estimate 10 0 Design Detailed Procurement Construction Concept Design © 2012 G.P. Towler / UOP. For educational use in conjunction with Towler & Sinnott Chemical Engineering Design only. Do not copy ESTIMATING THE CAPITAL COST 18  FIXED CAPITAL, CF Fixed investment, needed to supply the necessary plant facilities Total cost of designing, constructing, installing a plant, including associated modification Working capital, Cw Additional money needed to start the plant up and run it Includes raw material 19  CF = [CF(ISBL)+CF(OSBL)]x 120-140% (contingency+home office) ESTIMATING THE FIXED CF(OSBL) = 40% of CF(ISBL) CAPITAL COST The major factor that influence CF(ISBL) is the cost of equipment and installation 20 We want to estimate the entire amount of money that the investor has to put into the project to get it started. This has several components: Purchased equipment Installation Piping Instrumentation and control Electrical Building and constructions Site improvement Land These are called Inside Battery Limits (ISBL) fixed capital CF(ISBL) This is the cost of the plant “inside the fence” 21  ISBL Equipments, roads,material OSBL Lab, boilers, 40% of ISBL Fixed capital, Cf Detailed design Engineering costs / engineering, home office procurement, construction admin Contingency `extra cost added 22  ISBL COSTS  Direct Field Costs  Indirect Field Costs  Major equipment  Construction costs Furnaces, heat exchangers, coolers Construction equipment Vessels, reactors, columns, tanks Temporary construction Pumps, drivers, compressors, fans, turbines Temporary power and water Refrigerators, driers, centrifuges Construction workshops  Bulk items  Field expenses & services Electrics, instrumentation, computer control Field canteen Piping, valves Specialists costs Structures, insulation, paint Overtime, adverse weather Lube oils, solvents, catalysts  Construction insurance  Civil works  Labor benefits & burdens Roads, foundations Piling, buildings  Installation labor & supervision 23 OSBL Off-site facilities (supply, docks) Includes additions to site infrastructure Boilers, electric sub-stations Workshop and maintenance E&C Cooling towers, circulation pumps Warehouses, loading facilities Often approximated as 40% of ISBL cost as first approximation ? 24   Working capital is the money you need to get the plant running  Buy feedstocks, pay bills, etc., until product is sold & revenue begins  Raw materials,  Simple rules estimate is as a proportion of CF(ISBL) (e.g.: 15%)  Between 5-30% of fixed capital cost 3.2 WORKING 5%-for single product process, no finished CAPITAL, CW product storage 30%-process that produced a diverse range of product trades for a sophisticated market Food process≈10% 25 More sophisticated methods break out working capital in terms of operating costs, e.g. in terms of  Days of rm storage  Days of product storage  Days accounts receivable less accounts payable  Inventories held (e.g. warehouse parts)  Cash on hand 26 CONTINGENCY 10% from total fixed cost Contingency charges allow for variation from the predicted cost estimate To allow for the unexpected Variation can be caused by  Scope change  Change in economic scenario  Currency fluctuations  Labor disputes, weather problems, subcontractor problems  Validity of cost estimate and vendor quotes Contingency =10% of CF(ISBL)+CF(OSBL) 27  Engineering Procurement Construction services Construction supervision Project management HOME OFFICE Expenses COST Bonding Contractor’s fee These costs should be estimated individually as they do not scale that well with project size, but a rule of thumb is 10 – 30% of ISBL plus OSBL investments 28 HOW TO ESTIMATE FIXED CAPITAL COST We can use Lang factor CF (ISBL ) = f LCeq fL= Lang Factor (8.1) Ceq= purchased major equipment cost where nj Aj= size of the j th equipment (8.2)  Aj  Ceq =  Coj   Aoj   Coj= cost of the equipment j   nj= scaling factor Ceq can also be considered as total delivered cost of all the major equipment items. 29 In food processing plant, fL=1.35 (min) = 1.80 (most probable) = 3.1 (predominantly solids) = 3.6 (mixed solids-fluids) = 4.7 (predominantly fluids) However, in modern food processing plant that includes modern instrumentation and process control and sophisticated environmental protection, Lang factor of 3 should be used for plant. 30  In food processing, generally the equipments can be categorized into 3 categories : - unit operations - mechanical processes ESTIMATING (Transportation, Processing, operation, Separation) EQUIPMENT - packaging processing COST, CEQ The most accurate cost estimation is to obtain quotation from fabrication specification sheets for each process unit needs to be prepared. 31   For specialized equipment (e.g. fancy reactors) or proprietary equipment, cost correlations are not widely available  To estimate the cost of such equipment we need to estimate the materials, labor and DETAILED fabricator’s margin DESIGN &  Materials and labor require a detailed mechanical design, as well as a good VENDOR understanding of fabrication methods and costs QUOTES  Even a vendor will be unable to provide this information accurately until the design is specified in detail, hence this is usually left until later project stages  Websites such as www.aacei.com, or software like ASPEN 32  A popular method to calculate/ estimate equipment cost, n  A  C = Co   A   (8.3)  o  C and Co= equipment cost at equipment capacity A and Ao n= scale index (0.5 to 1) in food processing, n =1 for complex unit (motors, compressors, packaging machine) n =0.5 for large processing units (evaporators, tanks) 33  EXPONENTS FOR EQUIPMENT Equipment costs can be scaled from similar equipment of different size using the same exponent rule: n Cost A  Size A  =   Cost B  Size B  Exponents vary with equipment type: Equipment Type Scale Parameter Exponent Blower Flowrate 0.6 Centrifugal pump Power 0.67 Centrifuge Filter area 0.65 Compressor, reciprocating Power 0.85 Dryer, drum Area 0.52 Heat exchanger, DEL Area 0.59 Motor Power 0.77 Pressure vessel Volume 0.62 Tower Flowrate 1 (Holland, F.A., Watson, F.A. & Wilkinson, J.K., 1984, in Perry’s Handbook, 6th Edn., McGraw Hill, New York) © 2012 G.P. Towler / UOP. For educational use in conjunction with Towler & Sinnott Chemical Engineering Design only. Do not copy The equation (8.3) can also written as n  A  C = fI fm f p Co   A  (8.4)  o  fI= inflation factor fm=material factor fp=pressure factor 35  MATERIAL FACTOR, FM Cm fm = (8.5) C cs Cm= Cost of material M, $/kg Ccs= cost of carbon steel, $/kg ε=Portion of material M in the equipment construction Pressure factor, fp  P −1 f p = exp  (8.6)  75  36  Express costs relative to plain carbon steel  Carbon steel 1.0  Aluminum & bronze 1.07 MATERIALS   Cast steel 304 stainless steel 1.1 1.3 COST   316 stainless steel 321 stainless steel 1.3 1.5 FACTORS, FM  Hastelloy C 1.55  Monel 1.65  Nickel & inconel 1.7 37  INFLATION FACTOR, FI  CEP  fI =   (8.7)  400  CEP= Chemical Engineering Plant Cost Index It consists of weighted average of four major components CEP= 480+10 (year-2005) (8.8) 38  EXAMPLE COST CORRELATIONS: GRAPHS Note: Shell and Tube Heat Exchangers Log scale 10000000 2+ orders of magnitude validity Cost, GBP, Jan 2000 1000000 Error reading graph corresponds to error in 100000 correlation Uninstalled 10000 10 100 1000 10000 100000 Area, m2 39  In addition to the purchased cost of the equipment itself, we need to consider the costs of: ESTIMATING  Installing the equipment  Piping, ducting, etc. INSTALLED  Instrumentation and control  Electrical systems COSTS  Civil engineering work such as foundations & piling  Structures and buildings FACTORIAL  Insulation, paint and fireproofing For preliminary and study estimates these ESTIMATES are estimated by multiplying the main plant item cost by an installation factor Cinstalled = C (1 equipment) x F 40 INSTALLATION  Lang originally proposed three installation factors, depending on plant type, FACTORS roughly 4.0  Simple methods allow for variation of F by equipment type (e.g., the factors proposed by Hand): Equipment Type F Compressors 2.5 Distillation columns 4 Furnaces 2 Heat exchangers 3.5 Instruments 4 Miscellaneous equipment 2.5 Pressure vessels 4 Pumps 4  More complex methods build up F from component factors 41  F = (1 + fp)fm + fer + fi + fel + fc + fs + fl Where:  fp is the piping installation factor  fm is the material cost factor  fer is the site erection installation factor INSTALLATION   fi fel is the instrumentation installation factor is the electrical installation factor FACTOR    fc fs fl is the civil installation factor is the structure & buildings installation factor is the lagging, paint and fireproof installation factor  All of these factors (except fm) vary with installation complexity and equipment cost  Note that the factors are standardized on a plain carbon steel basis 42  INSTALLATION FACTOR Gerrard & Perry’s Handbook give detailed methods for estimating component installation factors Typical behavior of installation factors is: F Increasing complexity of installation Cequipment Overall installation factor is almost always 2 < F < 6 Estimation of F is easy to code in spreadsheets & is effectively built into commercial estimating software 43  To estimate the installed equipment cost (for 1 equipment) Cins=C x F (8.9) Where F is the installation factors (2