Construction of a new cement plant

Project

Construction of a new cement plant with a capacity of 1.5 million tons of cement per year in the Republic of Karakalpakstan.

Project goal

Production of cement and various grades

Sphere/industry

Industrial production of building materials.

Project implementation schedule

The term from the beginning of construction and commissioning of the project, from the moment of attracting investments is 2 years.

The term of reaching the project capacity is 5 years.

Project implementation location

Cement plant construction area is located in the Republic of Karakalpakstan, in Karauzak district

Information about project participants:

– initiator         

LLC «AGROSTROYKARER»

– co-executor (in charge of the sectorial authority/ministry/agency)

JSC «Uzqurilishmateriallari» –

State institution, has the status of a ministry.

– creditor

– (there is no such bank).

Project amount

212,4 million USD

Expected financing sources

– own funds and loans

No own funds or loans

– required amount of foreign direct investment

Foreign direct investment at the amount of 212.4 million USD

Main costs composition

– construction and installation work – $43.5 million

– basic equipment (including installation supervision, components and transportation) – $152.5 million

– raw materials for the launch period (3-6 months) – $6 million

– equipment – $10 million

– other – $0.4 million

Expected profitability

35-36% of annual income from total revenue, per year

Expected payback period

7 years

Cash flow                    

– operating income in 5 years

(receipts from the sale of goods and provision of services)

– operating expenses in 5 years

(payments to suppliers of raw materials, goods and services, payment of wages to employees, payment of taxes)

See Appendix No.1

Characteristics of products planned for production

Project capacity/productivity

1.5 million tons of cement per year

Contribution to the project by the initiator

Contribution of the initiator of the project is in assisting in implementation of the project and the enterprise LLC Agrostroykarer. On the basis of which the following were received:

1. Necessary permits from the state authorities for construction of a cement plant in the Republic of Karakalpakstan.

2. Allocation of land on 25 hectares for construction of a cement plant.

3. Technical conditions for provision of industrial site of the plant with electricity, fuel, water, railways and roads.

4. The raw material base for the cement plant was prepared. Letters of guarantee were received for the withdrawal of land plots from government agencies for obtaining licenses for industrial mining and conduction of geological exploration.

– limestone land acquisition “Aktau” – 20 hectares.

– limestone land acquisition “Karauzak” – 30 hectares.

– clay (loam) land acquisition “Karauzak” – 20 hectares.

– silicate sand land acquisition “Karauzak” – 10 hectares.

Current project status

Included in the State Investment Program of the Republic of Karakalpakstan

Company

LLC Agrostroykarer

Details, address, contacts

Legal address:

Republic of Karakalpakstan, Karauzak district, Koybak.

Postal: Tashkent city, Chilanzar 2-15.

C/a 20208000904451553001 at Joint-stock commercial People’s Bank of the Republic of Uzbekistan. Yunusabad branch,

IBT 00823, CNES 16231,

TIN 205986480

Phone. +998 90 1863915

E-mail: vinisu@mail.ru

Date of the company’s foundation

 2006

Statutory fund

  34 975 615 UZS

Founders and distribution of shares

1. Sumin Viktor Nikolayevich – 100%

Name

1. Sumin Viktor Nikolayevich

Date of birth

   1953

Contact number

 +998 90 1863915

e-mail                           

  vinisu@mail/ru

Number and types of created jobs

Total jobs: 350 people, of which:

– administrative and managerial staff: 12 people

– Engineering and technical personnel: 50 people

– Main production: 165 people

– Support service – 65 people

– Career management – 58 people.

Impact of the project on the environment (Environmental Impact Statement Project), including the expected types and volumes of waste, their disposal place

Ecological requirements are established by the Environmental Impact Project of the State Committee of the Republic of Uzbekistan on Ecology and Environment Protection.

Requirements for emissions into the atmosphere – the maximum dust content not more than 40 mg/Nm3 at the output from electro and bag filters.

In general, the category of environmental impact is the emission of combustion products in the kiln and dust waste when grinding raw materials and cement. The method of their utilization is hose and baking electrostatic precipitators.

Information about the land for construction of the enterprise

The khokimiyat of Karauzak district allocated a land plot of 25 hectares for unlimited use for construction of a cement plant. The industrial site is located 0.5 km from the main source of raw materials – limestone and 2.5 km from the clay component.

Existing infrastructure

The following are available around the industrial site:

– high-voltage electrical networks – distance up to 200m.

– water supply networks – 5-6 km;

– natural gas network – 12 km;

– highways – 2-3 km;

– railway line – 3-4 km.

Required infrastructure

It is necessary to provide an industrial site for the plant:

– by electricity – power 30MW.

– by technical and drinking water – 1.3 and 0.9 3 million m3 per year

– by fuel (coal) – 178 thousand tons per year – delivery by import.

– by railroad – transportation volume 1.7 million tons per year

– by road – transportation volume – 0.35 million tons per year

Upcoming construction and installation work

In accordance with the issued specifications, it is necessary to develop working projects for providing industrial site of the plant with external engineering communications.

Construction and installation works to be conducted according to the developed working projects.

Design and estimate documentation

Start to develop design and estimate documentation after the sources of cement raw materials are finally determined (this is necessary for selection of technology and cement equipment), further the availability and conclusion of engineering geology of the plant’s industrial site (this means that it can be built on this area or not), further required sources of electricity, fuel, water, rail and road.

After that, the terms of reference from the Customer for development of design and estimate documentation for the cement plant for the General Designer to be prepared.

In practice, the General Designer of the entire project as a whole is usually determined, and a master plan for construction of a cement plant, which is divided into civil and industrial construction, is first developed. The industrial design includes only the design of the cement plant itself without external communications. The civil includes everything else.

Electric power requirement (kW/h), installed power (kW/h or mW/h

Installed capacity – 30,000 kW per year

Power consumption -26,000 kW per year

Water requirement (m cube)

Daily water demand – for technological purposes 14 742 m3 (recycled water), of which 4219.2 m3 is net water consumption, for domestic needs – 300 m3,

Annual – 1 307.9 thousand m3, for household needs – 93 thousand m3.

Gas requirement (m cube)

Heat consumption for clinker preparation is 3471 kJ/kg. Coal consumption per 1 ton of clinker – 127.5 kg. Total annual demand for coal will amount – 177,862 tons.

Types of products

Listed above.

Annual production

Estimated sales markets and their shares:

Import      

27% of the production volume (3% stock level)

Export      

70% of production. Russia, Kazakhstan, Turkmenistan, Azerbaijan

Production cost

(prices of products sold on the domestic market, including VAT, calculated on the basis of the rate of 1 USD = 7800 USZ).

Need for raw materials (per year)

Provision with raw materials

   The cement plant planned for construction is the main raw material for clinker production. It is necessary to import corrective additives for production of oil well cement, as there are no these minerals on the territory of Uzbekistan.

1. Aktau limestone deposit – explored reserves of 17 million tons. Increase in stocks is possible.

2. Karauzak limestone deposit – it is necessary to conduct geological exploration, the expected reserves are more than 200 million tons per year.

3. Karauzak clay (loam) deposit – it is necessary to conduct geological exploration, the expected reserves are more than 20 million tons per year.

4. Karauzak silicate sand deposit – it is necessary to conduct geological exploration, the expected reserves are more than 10 million tons per year.

5. The gypsum component will be purchased and imported from Bukhara region.

6. The ferruginous component will be purchased in the Republic of Karakalpakstan.

Market volume

Domestic market: Republic of Karakalpakstan, Khorezm region, Bukhara region.

Foreign market: Kazakhstan, Turkmenistan, Azerbaijan, Russia.

Expected market share

The expected market share of Uzbekistan in cement will amount to 10.0 million tons of cement per year.

The planned sales volume of the new plant is 30% for the domestic market. This will amount to 450 thousand tons of cement.

The expected market share will amount to 5% (30 million USD), and the rest for export – (80 million USD).

Main competitors

The main competitors are six large plants:

– JSC Kizilkumcement – 3.0 million tons of cement per year.

– JSC Akhangarancement – 1.7 million tons of cement per year.

– JSC Bekabadcement – 1.5 million tons of cement per year.

– JSC Kuvasoycement – 0.93 million tons of cement per year.

– Jizzak Cement Plant AMMC – 0.73 million per year.

– Sherabad Cement Plant AMMC – 1.5 million per year.

Import of cement is limited. Oil well and high-strength cements are delivered.

The local market is distributed by the Government of the Republic of Uzbekistan, each cement plant is distributed geographically one or another area.

Main competitive advantages

There are two mini cement plants with a capacity of up to 300.0 thousand tons in the Republic of Karakalpakstan. By building a large cement plant of 1.5 million tons per year, a good market for domestic sales and exports can be gotten.

Taking into account the growth of industry and civil construction, the need for cement in the Republic of Karakalpakstan, Khorezm and Bukhara regions is expected to be up to 1.0 million tons per year. It should be taken into account that the nearby Khorezm and Bukhara regions do not have cement plants.

Turkmenistan, Azerbaijan, Russia and Kazakhstan are very close for exporting products.

Main target groups of consumers

Consumers:

– Civil engineering organizations (residential complexes, schools, hospitals, etc.)

– Industrial construction organizations (high-rise buildings, bridges, dams, factories, etc.)

– Private consumer (private houses, etc.)

Sales structure by target consumer groups

Realization of finished products is carried out through Uzbek Commodity Exchange.

Pricing strategy

Prices are taken from the calculation of the average consumer prices for cement in the domestic and foreign markets.

Final product cost structure

The average cost of 1 ton of cement is 42 USD. The share of raw materials is 22% or 9.24 USD.

Patents, licenses, certificates in accordance with the current legislation

There is a license for wholesale trade. It is necessary to obtain licenses for industrial extraction of raw materials.

Formed base of potential customers with a confirmed willingness to purchase products

Finished goods are sold through the Uzbek Commodity Exchange

Marketing research

Marketing research is taken at the rate of needs for cement in the Republic of Uzbekistan.

Presentation component of the project

– sketches

– presentation

– multimedia materials (nothing is ready yet)

Additional information

– tax benefits

– customs privileges

– other preferences

Project risks

Type of equipment

To be determined by the project

Country of origin

To be determined by the investor

Productivity

To be determined by the project

Price in USD

Energy consumption

30 000 kw

Installed power

26 000 kw

Overall dimensions of the equipment

To be determined by the project

Main equipment weight

The weight of the main equipment to be specified when designing a cement plant.

Main equipment units (lines)

1. Warehouses for raw materials.

2. Raw mill.

3. Raw meal silos.

4. Five-stage heat exchanger.

5. Rotating horizontal oven.

6. Griddles.

7. Tent warehouse clinker.

8. Cement mill

9. Cement silos

10. Packaging

Working hours per year

Duty cycle

Around the clock work, 310 days a year, 3 shifts of 8 hours per shift

Frequency of conducting the planned preventive maintenance (PPM)

Established by the regulations of production works.

Number of people involved in the production process and their functions

A number of people are taken from similar production.

The data is in the appendix No.2.

Position

Number

EXECUTIVE OFFICE

Director General

1

Deputy Director

2

Chief Engineer

1

Chief Power Engineer

1

Chief mechanical engineer

1

Head of Sales Department

1

Human Resources Inspector

1

Legal Adviser

1

Chief Accountant

1

Accountant-Cashier

1

Head of Procurement Department

1

TOTAL:

12

Engineering and Technical Staff

Engineer for the operation of the main technological equipment

30

Service mechanic of the main technological equipment

10

Energetic

10

TOTAL:

50

Main production

 Shift Supervisor

5

 Technologist

5

 Head master

5

 Working staff

150

TOTAL:

165

Support service

Garage service

30

Food service and maintenance

10

Security service

20

Marketing service

5

TOTAL:

65

Mining works

Head of the Mine

2

 Working staff

56

TOTAL:

58

ALL:

350

Cash flow for financial planning

USD

Production

1

2

3

4

5

Full inflow of real cash

93 240 892

100 987 248

107 157 998

113 117 883

119 077 767

national currency

26 323 692

28 484 923

30 196 673

31 876 058

33 555 442

foreign currency

66 917 200

72 502 325

76 961 325

81 241 825

85 522 325

Full outflow of real cash

48 964 267

52 984 842

56 019 593

59 083 292

61 891 624

Capital gains:

Increase in current assets

906 226

329 803

255 367

255 367

0

Manufacturing production costs

37 065 422

40 668 204

42 888 444

45 098 624

47 308 803

The amount of VAT paid for raw materials and services

4 790 324

5 089 719

5 389 114

5 688 509

5 987 905

VAT amount to be offset

618 124

759 957

811 894

857 357

902 821

Income tax

2 810 824

3 089 174

3 359 786

3 615 823

3 871 860

Allocations to the social infrastructure

2 773 346

3 047 985

3 314 989

3 567 612

3 820 235

Surplus (deficit)

44 276 625

48 002 406

51 138 405

54 034 591

57 186 144

Cumulative cash balance

44 276 625

92 279 031

143 417 436

197 452 027

254 638 170

debt service ratio

1,0

1,0

1,0

1,0

1,0

Total annual costs of products sold

USD

Production

1

2

3

4

5

Productive capacity

80%

85%

90%

95%

100%

Raw materials:

main raw material

8 477 660

9 007 514

9 537 368

10 067 222

10 597 076

auxiliary raw materials

2 546 526

2 705 684

2 864 842

3 024 000

3 183 158

Salary:

production personnel

1 457 280

1 548 360

1 639 440

1 730 520

1 821 600

Income tax deduction (25%)

364 320

387 090

409 860

432 630

455 400

Depreciation of production assets

13 433 077

13 433 077

13 433 077

13 433 077

13 433 077

Engineering communications costs

15 671 083

16 650 526

17 629 969

18 609 411

19 588 854

Transportation costs

2 012 650

2 138 440

2 264 231

2 390 021

2 515 812

Spare parts

1 400 000

1 487 500

1 575 000

1 662 500

1 750 000

Maintenance of fixed assets

268 662

268 662

268 662

268 662

268 662

Production cost

45 631 258

47 626 853

49 622 448

51 618 043

53 613 638

Stocks of manufactured products

1 368 938

1 428 806

1 488 673

1 548 541

1 608 409

Production cost of goods sold

44 262 320

47 566 985

49 562 580

51 558 175

53 553 770

Administrative overhead:

        Administrative and managerial staff wage

129 000

129 000

129 000

129 000

129 000

Income tax deduction (25%)

32 250

32 250

32 250

32 250

32 250

Other administrative expenses

87 976

95 290

101 119

106 743

112 367

Marketing costs

439 881

476 451

505 593

533 713

561 833

Exchange charges

743 130

804 868

854 049

901 550

949 050

Land tax

1 087

1 087

1 087

1 087

1 087

Mineral tax

201 639

214 241

226 843

239 446

252 048

Property tax

1 522 051

1 445 949

1 369 846

1 293 744

1 217 641

Deductions to the Pension Fund

1 407 618

1 524 644

1 617 899

1 707 883

1 797 867

Deductions to the Road Fund

1 231 666

1 334 064

1 415 661

1 494 397

1 573 134

Deductions to the Reconstruction Fund

439 881

476 451

505 593

533 713

561 833

Period expenses

6 236 179

6 534 296

6 758 941

6 973 526

7 188 110

Cost of products sold

50 498 499

54 101 281

56 321 521

58 531 701

60 741 880

Average cost per ton (in USD)

43,4

43,0

42,3

41,6

41,0

Average cost per ton (in UZS)

338 392,0

335 351,8

329 699

324 587

319 986

Report on net income from operations

USD

Stat

Production

1st year

2nd year

3rd year

4th year

5th year

Sales revenue

93 240 892

100 987 248

107 157 998

113 117 883

119 077 767

VAT on local sales

5 264 738

5 696 985

6 039 335

6 375 212

6 711 088

Net revenue

87 976 154

95 290 263

101 118 663

106 742 671

112 366 679

Production cost

44 262 320

47 566 985

49 562 580

51 558 175

53 553 770

Gross profit

43 713 834

47 723 278

51 556 083

55 184 496

58 812 909

Period expenses

6 236 179

6 534 296

6 758 941

6 973 526

7 188 110

Profit from operating activities

37 477 654

41 188 982

44 797 142

48 210 971

51 624 799

Income tax

2 810 824

3 089 174

3 359 786

3 615 823

3 871 860

       Profit less income tax

34 666 830

38 099 809

41 437 357

44 595 148

47 752 939

Tax on improvement and development of social infrastructure

2 773 346

3 047 985

3 314 989

3 567 612

3 820 235

Net profit

31 893 484

35 051 824

38 122 368

41 027 536

43 932 704

Net Profit/Income

34%

35%

36%

36%

37%

Net Profit/Cost

63%

65%

68%

70%

72%