Project Manager: Hayk N. Tell: GREEN G LTD

Transcription

1 Name: GREEN G Ltd (Start-up) Business Plan For: Materials Recovery Facility (MRF) for processing the recyclable materials of Gyumri city s municipal solid waste 1 P a g e

2 Contents 1. Executive summary The business idea Marketing Business location and operations Start-up capital and Costs Financial planning Objectives and Potential Risks P a g e

3 1. Executive summary Increased recycling provides an attractive option since it eliminates some disposal requirements with the additional benefits of reducing pollution, conserving energy, creating jobs and building more competitive manufacturing industries. In addition, through the utilization of a well-designed materials recovery facility, recycling can be a very economical opportunity. A materials recovery facility (MRF) is a place where solid wastes are delivered to be separated, processed and stored for later use. The idea, described in this business plan, determine the operation of a tons a day facility that could handle all of City`s waste stream. The product will be recovered materials from waste (paper/cardboard, plastic, glass, metal, etc.). Our recycled waste will be targeted toward manufacturers, which use recycled raw materials (excluding food and drink manufacturing). As the collection of city waste is conducted by The Municipality, it is planned to contract with them to deliver collected waste directly to the MRF. It will give them a feasible and cost effective alternative to landfilling the whole waste (Landfill is filling up). We will solve this problem by accepting this waste and recycling it into a useful product, therefore the Landfill will fill up slower. Recycling can be both a thriving business - by creating employment and generating profit as well as a major step of environmental progress for Gyumri. This dual aim will thus create an opportunity for a sustainable business. Green G Ltd is entering a niche market in that municipal solid waste has not been recycled on any sizeable scale in Armenia. This is a unique and viable concept that addresses the needs of various customers and reaches an untapped market with great growth potential. One of the most attractive aspects is that the business is projected to attain a strong cash position and achieve profitability in the first year of operation. Due to a large need for these products, and a lack of direct competition, our projection of quick profitability is attainable. The current business plan calculates costs and benefits for the recycling of four main types of materials: plastic, glass, metal and paper/cardboard. The processing of other types of materials (e.g., organic, textile, rubber, etc.) are left for a potential second stage of expansion of the business. Research will be an ongoing process for the company; one particular area of 3 P a g e

4 interest is the possibility of fertilizing the organic waste. In this case, the profitability of the business will increase. For realizing this project it is needed to invest $ 447,200. The realization of the project will take 4-6 months and the payback period is 60 months. Up to 35 new jobs with $ 292 average salary will be created. The main objective of this business plan is to submit a concrete profit and loss forecast for the MRF that could work as a practicable business case. The company s five year projections include sales ranging from $ 261,763 in the first year to over $ 473,194 in the fifth year. The following table summarizes our anticipated profit and loss for the first five years. PRO FORMA PROFIT AND LOSS Gross Profit $ 245,681 $ 366,431 $ 413,119 $ 434,579 $ 457,112 Fixed Expenses $ 142,583 $ 204,361 $ 228,247 $ 243,814 $ 252,177 EBIT $ 103,098 $ 162,070 $ 184,872 $ 190,765 $ 204,935 EBIT/Gross Profit 42% 44% 45% 44% 45% 4 P a g e

5 2. The business idea Name of business: GREEN G Ltd Location: Gyumri, Armenia The management team: Director - Hayk N., has four year background as manager and PhD on Finance. Operations Manager Karen M., has solid background in waste recycling and operated plastic recycling company in Russia almost 8 years. The idea is to establish a material recovery facility (MRF) plant in the city of Gyumri. The suggested MRF is able to accept mixed municipal solid waste, to separate it and process for recycling. MRF recycling process will include three steps, namely: Manual sorting of recyclables from remaining waste, Processing some of recyclables into raw materials, Packaging and transportation of recyclables to processors or remanufacturers. The main function of the MRF is to maximize the quantity of recyclables processed, while producing materials that will generate the highest possible revenues in the market. Separated materials and sources of waste would be following: Separated materials for Recycling Common sources of waste materials Paper magazines, catalogs, cardboard (boxes, tubes, smooth, egg cartons), office paper, beverage cartons, books, other mixed paper Plastic bottles (PET), bags, pipes, fuel tanks, refillable and detergent bottles, thin films used for food packaging, computer parts, chairs and tables, door mats and outdoor carpets, trash bags, etc. (PVC, PEHD, PP, PELD) Glass Transparent, brown, green glass jars and bottles Metal metal cans, aluminum foil/trays, other metal (aluminum, bronze, steel) Others textiles, rubber, bones, clothes, batteries, fluorescent lights, electronic waste (e-waste), water heaters, etc. 5 P a g e

6 The hierarchy of municipal solid waste management usually includes 5 main steps - waste collection, recycling, composting, energy recovery and disposal (Sanitary Landfills). In Gyumri the stakeholder of waste management is the Municipal authority. The chain of city`s waste management is, however, limited to collection, open dumping, and burning practices. Recycling is currently not being held systematically in Gyumri, which implies substantial loss in revenue as well as raises major environmental concerns. As it is argues in this plan, recycling can be both a thriving business - by creating employment and generating profit as well as a major step of environmental progress for Gyumri. This dual aim will thus create an opportunity for a sustainable business. Recycling is being strongly encouraged in most developed countries. From an environmental perspective, it is an extremely favorable option for municipal solid waste management, mainly due to its relatively low negative environmental impact (MRF process excludes the mostly dangerous components from waste), and its role in preserving raw materials by reusing discarded ones, as well as the energy it saves by reducing extraction processes. 3. Marketing Product Green G Ltd will produce secondary raw materials (paper, plastic, metal, glass, etc.) recovered from municipal solid waste, which will be used by manufacturers. We performed analysis of the city s waste stream to determine the type and relative quantity of each incoming material. Below are listed the key data and assumptions used in further analysis. o Current population of Gyumri: permanent- 157,972, existent 119,268 1 o Average per capita waste produced in Armenia: 219 kg waste per year 2 o Implied waste stream to MRF: 26,119-34,596 tons per year, Recycling of Household Waste in Armenia: Personnel training, data collection including waste analyses, recommendations for waste management actions. Project partners: Otto-von-Guericke-Universität Magdeburg and Yerevan State University of Architecture and Construction, Project management: Federal Environment Agency of Germany (Umweltbundesamt) P a g e

7 o Assumed waste stream: 30,000 tons/year. o Proposed MRF will be able to recover 15-30% of total waste weight. The target after two years will be 16.19% (this is the practical efficiency of operating MRFs in Russia, as we are going to purchase equipment from a Russian company). Yearly output of MRF Name Index Recycling Clarification (tons/year) Municipal solid waste 30, % Organic waste % for composting or disposal Recovered raw materials 4, % for sale Non-utilizable waste 25, % for dumping o According to the study (reference 2) the composition of waste in Vanadzor city is following: Composition of Waste Middle grain 8% Fine waste 4% Ferrous/ non-ferrous metals 4% Paper and cardboard 10% Other waste 10% Glass and ceramics 6% Leather/ rubber 2% Inert waste 8% Plastics 17% Textile 4% Assumption: As the cities (Gyumri & Vanadzor) have almost the same industry structure, the waste composition of Vanadzor will be presumed to Gyumri. Waste type Organic waste (food and small waste <80mm) (leftovers of fruits, vegetables, cleaning, waste of meat and fish products, remains of bread, eggshells, foliage, waste of branches, branches, etc.) Organic waste 27% Output calculation (30,000 TPY) Composition of waste (by weight) Mass flow (TPY) Sorting efficiency Recovered raw materials (TPY) Recycling 27.00% 8,100 0% % 7 P a g e

8 Various paper 6.00% 1,800 80% 1, % Cardboard 4.00% 1,200 80% % Terpak 0.04% 12 0% % PET bottles (mix) 2.00% % % Polymer films (LDPE) 1.19% % % Polymer films (stretch) 0.05% 15 50% % LDPE bottles, cans 0.60% % % Polypropylene (boxes, lids) 0.55% % % Polystyrene 0.20% 60 0% % Polyvinylchloride 0.50% 150 0% % Non-ferrous metal - copper 0.02% 6 0% % Non-ferrous metal - aluminum can 0.25% 75 90% % Black metal (thin sheet, barrels) 4.00% 1,200 50% % Glass (mix) 6.00% 1,800 50% % Non-utilizable waste 47.60% 4,280 0% % Total % 30,000 4, % After utilizable materials are sorted from waste stream, some of them will be packaged and sold, the others will be processed before being sold. This depends on the market demand and the cost of recycling. Our research suggests that that the recycling of some materials is financially not viable, while the following list of materials can be recycled with positive cost-benefit margins: Material Future Product specification Potential clients Paper/Cardboard Baled Paper/Cardboard production PET bottles (mix) Baled PET bottle recycling production Polymer films (LDPE, HDPE) Densified (agglomerated) HDPE, LDPE (bottles, cans, etc.) & Any type of production using plastic Flake Polypropylene (boxes, lids, etc.) Non-ferrous metal - aluminum can recycled to aluminum scrap Black metal N/A Metal production Glass (mix) Shredded Glass production Commonly, paper/cardboard, PET bottles, metal and glass will be baled and packaged for further sale. Polymer films are considered to be densified and after be sold. The other reclaimed post-consumer plastics will be restored to manufacturing quality. The plastic will be processed through a series of steps that will grind, wash, separate and dry the finished product (flake). Potential Clients & Competitors In the municipalities of Armenia waste recycling is in general not performed or at least not in a streamlined way. The collection of valuable materials from waste is left to unorganized informal operations, for example, often performed by homeless people. 8 P a g e

9 The business we propose will streamline all this activities and will create economies of scale. This scale will in turn substantially cut the costs on all sides of collection, procession, recycling as well as transportation to final customers. Recycled raw materials are much cheap than primary ones, so that the market advantage of our product is its low price. The following enterprises are currently active in the area of buying recyclable materials: Names of the enterprises Competitively large organizations in Armenia that buy recyclable materials Recycling material Capacity tons/year Prices per kg (AMD) Prices per kg in Russia (AMD) Ltd Paper/Cardboard 1200 Ltd. Kartontara Paper/Cardboard Ltd. Grand Holding Paper/Cardboard - Ltd. Saranist Broken glass (mix) Ltd. Prom Sintez Polymer films (densified) Ltd. Cleanland PET bottles Ltd. Eco-Enginering PET bottles Ltd. NTG and Sons Plastic (not processed) - JSC Plastik Plastic (not processed) Ltd. Poliplast DW Plastic (not processed) - Ltd. Europa Ferrous and nonferrous metals - Ltd. Dsulkentron Ferrous and nonferrous metals P/E Nikol Duman Ferrous and nonferrous metals aluminum: , black metal:20-50 aluminum: , black metal:40-60 The list above is not limited and as it is stated above the range of our clients is wide. The output of MRF will be up to 5,000 tons/year, and it is feasible to distribute all products in Armenia. We also made some price researches of materials in Russia and it showed that priced are higher, so Russian market could be considered as alternative market for our products. 4. Business location and Operations The MRF will be located close to city`s dumpsite in order to minimize transportation expenses. This is feasible since the location is far from residential areas. As it is assigned bellow, the business will contract with Gyumri Municipality to deliver collected solid waste directly to MRF plant. The contract should be long termed, and can be included the further properly disposal of non-utilizable waste (every year the Municipality budget includes 10 ml AMD for proper disposal of city waste, so this service can be carried by our firm with stated fee). 9 P a g e

10 Initial data for MRF Name Index Unit of measure Solid waste Q-ty 30,000 tons/year Number of shifts 1 shifts Number of h/y 2,800 hours/year Number of days in a year 350 days/year Number of hours per day 8 hours/day Number of hours per shift 8 hours/shift Productivity per hour 11 tons/hour Trucks filled with the collected waste from Gyumri City will travel to the MRF. When waste are brought into the facility, they are deposited in a large recessed area called the tipping floor. The tipping floor will be designed to accommodate extra materials for the second operational shift and for at least two days of the expected volume of materials. The floor will be designed to handle heavy weight, withstand the wear of pushing materials and provide efficient drainage for liquids. Tipping floor utilize front-end loaders to move the deposited waste onto conveyors that rise up to the separation systems. The heavy loads, that are characteristic of mixed wastes, will be removed from stream by front-end loaders. After, conveyor lines transport mixed waste to the sorting platform, where pickers will remove recyclable items into bins. These bins will then be removed by a forklift and the recyclable products will be taken to different areas where they will be packaged or processed for sale. Remaining waste will be transferred to a Landfill for dumping. The following list contains various activities or administrative tasks that must be undertaken to get such an operation running. 1. Training for recycling company pickers conducted by equipment suppliers. 2. Computer training for one or more employees 3. Investigations and site visits of similar recycling plants in Russia (equipment supplier s projects). 5. Municipal involvement in recycling 6. Contacting markets and development of agreements with buyers. Municipal involvement and legislation Municipal involvement is important to the creation of a successful recycling enterprise in Gyumri. It could be done in numerous ways: 10 P a g e

11 1. Contracting to deliver collected municipal waste directly to MRF plant. The MRF will contribute the existing landfill site to fill a lot slower with recycling and thus the ultimate cost (environmental and fiscal) will be lower. 2. A recycling company could do the recycling on municipal land (dump site) with assistance from the municipality via the waste collection. 3. Municipality could pay a fee for every ton or cubic meter of non-utilizable waste to be disposed properly in landfill. Municipality could implement plans to secure sustainability of recycling enterprise through source separation initiatives, by-laws, fines and general recycling awareness campaigns. There are no legislative texts specifically addressing solid waste management, apart from some small fragments and general guidelines that directly deal with solid waste management in Armenia. However, the distribution of roles and responsibilities in the implementation of the laws and decrees is unclear, and enforcement is practically non-existent. Waste collection is clearly the responsibility of municipalities, while its treatment and disposal are somewhat vague. Because the business recycles a waste product and incorporates it into an environmental product, the company is under the potential jurisdiction of Ministry of Environmental Protection. We will obtain all required permits and licenses to operate its facilities. 11 P a g e

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13 5. Start-up capital and Costs START-UP CAPITAL Our start-up costs will be $ 447,200. The funds will be primarily used for the following: o o o o Business premises 220,000 USD Equipment 169,200 USD Vehicles 30,000 USD Working capital 28,000 USD The bulk of our Start-up funding will be used for capital asset purchases, listed in the table below. REQUIRED START-UP CAPITAL Investments USD Business Premises 220,000 Pr. Construction 200,000 Other (Utilities) 20,000 Equipment 169,200 large angle skirt belt conveyor (MRF) 47,800 Horizontal sorting belt conveyor (MRF) 34,600 Control system (MRF) 5,800 Installation (MRF) 8,700 Hydraulic baler 17,300 Plastic granulator m. 25,000 Shredder 12,000 Pelletizer m. 3,000 Transportation fee 15,000 Vehicles 30,000 Loader V. (2 q-ty) 30,000 Working Capital 28,000 Operating costs 12,000 License & Leg. Costs 1,000 Contracting 5,000 Other costs 10,000 Total Start-up capital 447,200 Notes: 1. As the source of funding is not clear, it is considered that the business will raise the start-up capital from loan granted with following conditions: Loan amount 447,200 USD Period 60 months Interest 10% Loan repayment grace-period 12 months 13 P a g e

14 2. Costs on business premises includes purchasing land, construction of premises (1000 sq.) and utilities. But if the premises can be rented, these costs can be excluded. 3. MRF equipment will be purchased from a Russian firm operating in the field of waste management (the purchase value of these items has been estimated, VAT included), and the other machinery would be sought second hand as the prices of many of these items new would exceed the projects capability for repayment. There is no custom fees for importation of equipment from Russia. 4. The MRF will start-over after 3-4 months the loan is granted. COSTS There would be no feedstock procurement costs, the only cost on good considered to be the disposal of unused waste. This cost varies from % of monthly revenue. Below stated all monthly operating costs of the business. Operating costs per month Salary 8,762.9 Payroll (taxes etc.) 3,608.2 Repairs/ Maintenance Vehicles (repairs & gas) Accounting and Legal Utilities Interest 3,333.3 Overalls Transport. of materials 3,866.0 Other expense Total 22,354.0 Notes: 1. Costs on labor include 35 employees with 2 shifts and $292 average salary. 2. Below listed required human resources: Human resource requirements Job Title Number of people Salary (AMD) Salary (USD) Managing Director 1 500, , Manager of Facility 1 250, Sorters / pickers / 15 1,800, , Front-end loaders 6 480, Operators 4 400, Drivers 2 240, Engineer 1 80, General labor/cleaners 5 500, , Total 35 4,250, , Total with taxes 35 6,000, , P a g e

15 6. Financial planning Profit and loss forecast The calculation of expected revenues have been based on the studies of the city waste stream and composition. Also it is stated above, that the MRF waste recovery efficiency is about 16%. Product Target revenue for 30,000 tons/year waste stream Final specification Recovered (TPY) Prices (tons/amd) Prices (tons/usd) Income (USD) Paper/Cardboard Baled-packaged 2, , , PET bottles (mix) Baled- packaged , , Polymer films Densified- packaged , , Other Plastic Shredded or granulated , , Metal - aluminum can Processed to aluminum , , Black metal N/A , , Glass (mix) Shredded- packaged , , Total 4, , P&L projection (target year) Revenue (Sales) $ 429,201 Disposal $ 16, % Gross Profit $ 413,119 Operating Expenses Salary expenses $ 105, % Payroll expenses $ 43, % Repairs/ Maintenance $ 7, % Vehicles $ 8, % Accounting and Legal $ 3, % Utilities $ 8, % Overalls $ 1, % Transport. of materials $ 46, % Other expense $ 3, % Total Expenses $ 228, % EBIT $ 184, % It is considered, that with 30,000 tons/year stream of waste the proposed MRF will be able to recover about 5,000 tons of raw materials and the target revenue from sales will be up to 430,000 USD a year. This 15 P a g e

16 Income from Sales (USD) Project Manager: Hayk N. Tell: amount of revenue will be reached after 2 years operation. Further increase in revenue will depend on either increase of waste stream or increase of efficiency. 500, , , , , , , , ,000 50,000 0 Revenue projection for 5 years 473, , , , ,763 Year 1 Year 2 Year 3* Year 4 Year 5 *target year The tables below outlines the income statement (5 years) and Cash flow (24 months) projection. The forecast is based on reasonable sales projections within our market. 16 P a g e

17 Projected Income Statement (5 Years) Green G Ltd Revenue (USD) 261, , , , ,194 Variable costs 16, % 16, % 16, % 16, % 16, % (disposal) Gross Profit $245,681 $366,431 $413,119 $434,579 $457,112 Operating Expenses Salary expenses 64, % 93, % 105, % 115, % 121, % Payroll expenses 26, % 38, % 43, % 47, % 50, % Repairs/ 4, % 6, % 7, % 7, % 7, % Maintenance Vehicles 5, % 7, % 8, % 8, % 8, % Accounting and 3, % 3, % 3, % 3, % 3, % Legal Utilities 5, % 7, % 8, % 9, % 9, % Overalls 1, % 1, % 1, % 1, % 1, % Transport. of 28, % 41, % 46, % 46, % 46, % materials Other expense 3, % 3, % 3, % 3, % 3, % Total Expenses $142, % $204, % $228, % $243, % $252, % 0 EBIT 103, % 162, % 184, % 190, % 204, % Interest 44, % 39, % 28, % 17, % 6, % EBT 58, , , , ,882 Profit Tax (20%) Net Income $ 58, % $122, % $156, % $173, % $198, % 17 P a g e

18 Cash on hand (beginning of month) ,800 8,075 4,350 4,771 5,910 7,766 10,440 13,832 18,193 23,648 29,948 37,090 35,739 35,004 34,888 34,849 34,657 34,733 35,075 35,685 36,562 37,706 39,118 CASH RECEIPTS Cash Flow Projection (24 months) GREEN G Ltd Beginning May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 Total Cash sales ,711 14,180 15,649 17,325 18,794 20,778 23,021 24,747 26,474 28,149 29,412 30,521 30,521 30,047 30,436 30,824 31,212 31,601 31,989 32,377 32, ,536 Loan proceeds 447, ,000 TOTAL CASH RECEIPTS 447, ,711 14,180 15,649 17,325 18,794 20,778 23,021 24,747 26,474 28,149 29,412 30,521 30,521 30,047 30,436 30,824 31,212 31,601 31,989 32,377 32, ,536 Total cash available 0 447,000 11,800 8,075 17,061 18,952 21,559 25,090 29,234 34,610 41,213 48,396 56,422 65,240 65,151 65,524 65,408 64,897 65,093 65,557 66,288 67,286 68,551 70,084 71,884 CASH PAID OUT Process residue and reject disposal 1,340 1,340 1,340 1,340 1,340 1,340 1,340 1,340 1,340 1,340 1,340 1,340 1,340 1,340 1,340 1,340 1,340 1,340 1,340 1,340 1,340 28,144 Salary expenses 3,114 3,474 3,834 4,245 4,605 5,091 5,640 6,063 6,486 6,897 7,206 7,478 7,478 7,362 7,457 7,552 7,647 7,742 7,837 7,933 8, ,167 Payroll expenses 1,282 1,431 1,579 1,748 1,896 2,096 2,322 2,497 2,671 2,840 2,967 3,079 3,079 3,031 3,070 3,110 3,149 3,188 3,227 3,266 3,306 54,833 Repairs/ Maintenance ,400 Vehicles ,967 Accounting and Legal ,495 Utilities ,967 Interest 3,725 3,725 3,725 3,725 3,725 3,725 3,725 3,725 3,725 3,725 3,725 3,725 3,725 3,647 3,570 3,492 3,415 3,337 3,259 3,182 3,104 3,027 2,949 81,407 Overalls ,165 Transport. of materials 1,374 1,533 1,692 1,873 2,031 2,246 2,488 2,675 2,862 3,043 3,179 3,299 3,299 3,248 3,290 3,332 3,374 3,416 3,458 3,500 3,542 58,750 Other expens ,495 SUBTOTAL 0 3,725 3,725 12,290 13,042 13,793 14,651 15,402 16,417 17,565 18,448 19,332 20,189 20,835 21,324 21,247 20,927 21,048 21,169 21,290 21,411 21,532 21,653 21, ,790 Loan principal payment -9,313-9,313-9,313-9,313-9,313-9,313-9,313-9,313-9,313-9,313-9,313-9, ,750 Capital purchases -419, ,200 Other startup costs -16,000-16,000 Owners' withdrawal 0 TOTAL CASH PAID OUT 435,200 3,725 3,725 12,290 13,042 13,793 14,651 15,402 16,417 17,565 18,448 19,332 29,501 30,147 30,637 30,559 30,239 30,360 30,482 30,603 30,724 30,845 30,966 31, ,160 Cash on hand (end of month) 0 11,800 8,075 4,350 4,771 5,910 7,766 10,440 13,832 18,193 23,648 29,948 37,090 35,739 35,004 34,888 34,849 34,657 34,733 35,075 35,685 36,562 37,706 39,118 40, P a g e

19 7. Objectives and Potential Risks The objectives of this business are: 1. To form a Materials Recovery Facility for Processing the Recyclable Materials in Gyumri. 2. To develop a business centered on sound business practice. 3. To ensure that recycling is sustainable in Gyumri. 4. To minimize landfilling. 5. To create jobs. 6. To investigate options for processing and value adding to recycled products. There are two main areas where the business may face potential problems. These are insufficient distribution (Municipal involvement) and insufficient sales. We have considered each of these areas in the business plan. The problem of insufficient distribution will be sold by contracting with Municipality to deliver city waste on daily basis. The benefit of Municipality will be decrease of costs on disposal and influence of open burning on environment as open dumping and burning carry extremely high risks for contaminating natural resources with harmful and potentially toxic pollutants. Our market research shows that the business will be well positioned to meet market demands for reclaimed materials. The company's location makes it good to collect, process and deliver product to clients. Local trucking companies and independent truckers will be used for distribution of the product. 19 P a g e