The value of Intermediate Bulk Storage

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The value of Intermediate Bulk Storage

• Tom Taylor

Taymark Engineering Consultants
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Objective

• The need for Intermediate Bulk Storage.
• How can we measure its value?

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The need for Intermediate Bulk Storage.

• Processing - efficiency
• Packing - flexibility
• Safety - tracing
• Technology - integration

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Customer Requirements

• Users need guidelines for design and operation
• Working capital needs to be minimised

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Meeting the Needs

• Value - worth or desirability or utility
• Measures of value include historical cost,
  lifetime cost, opportunity cost, DCF analysis and
  option analysis.

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Measures of Value - Historical Cost

• Raw Materials
• Labour
• Utilities
• Overheads

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Measures of Value - Lifetime Cost

• Capital Investment
• Installation
• Operating
• Energy
• Repairs Maintenance
• Shutdown
• Environmental

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Measures of Value - Opportunity Cost

• This is the cost in terms of an opportunity
  foregone (and the benefits that could be received
  from that opportunity), or the most valuable
  foregone alternative.
• Cost of sales lost
• Cost of market share lost
• Cost of alternative project.

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Measures of Value - Discounted Cash Flow Analysis

• Net present value is a method of calculating the
  present value of future financial changes.
• They include capital investment.
• Revenue income and expenditure
• Calculated over the lifetime of the investment.

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Measures of Value - Discounted Option Analysis

• What are the cost and benefits of different
  options?
• How do these vary over time?
• How do shareholders value these options?

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Measures of Value - Discounted Option Analysis
principles

Option 1
Income
Income
Disposal
Income
0 1 2 3 4 5 n time
Investment

Option 2
Income
Income
Disposal
Income
0 1 2 3 4 5 n time
Investment
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Key Benefits from Analysis

• Reductions in Capital Cost
• Lower Operating Costs
• Faster response
• Higher Operating Efficiency
• Increased shareholder value

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