1 75. PROFILE ON SOLAR WATER PUMP SET ASSEMBLING
2 75-2 TABLE OF CONTENTS PAGE I. SUMMARY 75.3 II. PRODUCT DESCRIPTION & APPLICATION 75-3 III. MARKET STUDY AND PLANT CAPACITY 75-5 A. MARKET STUDY 75-5 B. PLANT CAPACITY & PRODUCTION PROGRAMME 75-8 IV. MATERIALS AND INPUTS 75-9 A. RAW MATERIALS 75-9 B. UTILITIES 75-9 V. TECHNOLOGY & ENGINEERING 75-0 A. TECHNOLOGY 75-0 B. ENGINEERING 75- VI. MANPOWER & TRAINING REQUIREMENT 75-2 A. MANPOWER REQUIREMENT 75-2 B. TRAINING REQUIREMENT 75-3 VII. FINANCIAL ANALYSIS 75-4 A. TOTAL INITIAL INVESTMENT COST 75-4 B. PRODUCTION COST 75-5 C. FINANCIAL EVALUATION 75-6 D. ECONOMIC BENEFITS 75-7
3 75-3 I. SUMMARY This profile envisages the establishment of a plant for the assembly of solar water pumps with a capacity of 2,500 units per annum. The present demand for the proposed product is estimated at 9,027 units per annum. The demand is expected to reach at 3,65 units by the year The plant will create employment opportunities for 60 persons. The total investment requirement is estimated at Birr 0.40 million, out of which Birr 274,000 is required for plant and machinery. The project is financially viable with an internal rate of return (IRR) of present value (NPV) of Birr 7.77 million, discounted at 8.5%. 22 % and a net II. PRODUCT DESCRIPTION AND APPLICATION Water pumping has a long history; so many methods have been developed to pump water with a minimum of effort. These have utilized a variety of power sources, namely human energy, animal power, hydro power, wind, solar and fossil fuels for small generators. Utilization of these power sources has their own merits and demerits. A solar water pumping system consists of four main parts: the pump set, pump controller, the solar electric panels and a storage unit. The pumping systems are broadly configured into five types, namely: Submerged borehole/ multistage centrifugal motor pump set, Submerged pump with surface mounted motor,
4 75-4 Reciprocating positive displacement pump, Floating motor pump sets and Surface suction pump sets Among the above-mentioned systems, submerged multistage centrifugal motor pump set - Figure- is probably the most common type of solar pump used for village water supply. The advantages of this configuration are that it is easy to install, often with lay-flat flexible pipe work and the motor pump set is submerged away from potential damage. Either AC or DC motors can be incorporated into the pump set although an inverter would be needed for ac systems. If a brushed dc motor is used then the equipment will need to be pulled up from the well (approximately every 2 years) to replace brushes. If brushless dc motors are incorporated then electronic commutation will be required. The most commonly employed system consists of an AC pump and inverter. Figure 2. SUBMERGED MULTISTAGE CENTRIFUGAL MOTOR PUMP SET,
5 75-5 Solar pumps are used principally for three applications: Village water supply Live stock watering Irrigation III. MARKET STUDY AND PLANT CAPACITY A. MARKET STUDY. Past Supply and Present Demand Ethiopia imports various types of pumps for liquids. These include pumps for dispensing fuel & lubricants, concrete pumps, pumps with measuring device, reciprocating and rotary positive displacement pumps. centrifugal pumps, wind pumps and solar pumps. Substantial efforts have been made in recent years to develop reliable and cost effective solar powered pumping stations. Solar water pumps are now a day used in rural areas of most of developing countries. Ethiopia has also started applying solar energy for different purposes like in telecommunication, health, education and water sector mainly in areas where there is no electricity. SNNPRS has huge potential in this type of technology due to its climatic condition. As mentioned above the county imports various types of pumps including solar water pumps. However, data on import of solar pumps could not be found from the Customs Authority due to aggregation problem. Hence, import data for hand pumps has been used as proxy to estimate the demand for solar pumps. This is taken by assuming that solar water pumps will substitute some portion of the demand for hand pumps in the future if they are made available. Accordingly import of hand pumps is shown in Table 3..
6 75-6 Table 3. IMPORT OF HAND PUMPS FOR LIQUIDS (NO) Year Import , , , , , , ,7 Source:- Ethiopian Customs Authority. As could be seen from Table 3., import of hand pumps excluding year 2006 has shown an increasing trend. The yearly average level of import during the years was about 3,26. But the figure has risen to a yearly average level of about 36,09 during the period This is believed a result of the efforts made by governmental and NGOs to expand water supply for rural areas and increase awareness of the rural population in the use of pumps for drinking water and small scale irrigation. In the absence of data on the supply and demand for solar water pumps the average quantity of hand pumps imported during the period has been taken as an effective demand for the year 2007 and the share of solar pumps form the estimated hand pumps demand is estimated to be 25%. Based on the above assumption current demand for solar water pumps in the county is estimated at 9,027.
7 Projected Demand The demand for solar water pumps is expected to increase with the plan of expanding water supply coverage in the rural areas of the county for drinking, irrigation and other purposes. Moreover, solar water pumps will be preferred in the future if proper promotional measures are taken by the concerned organizations. Solar water pumps could be preferred because of their low running and maintenance costs. Hence, by taking the current effective demand as a base an annual average growth rate of 0% is assumed to project the future demand (see Table 3.2). Table 3.2 PROJECTED DEMAND FOR SOLAR WATER PUMPS (NO) Year Projected Demand , , , , , , , , , , , , ,65
8 3. Pricing and Distribution 75-8 The price of solar water pumps varies depending on the capacity of the pumps. Accordingly for the purpose of financial analyses an average price of Birr 4,000 is adopted. The plant can sell its product either directly to end users or through agents that distribute similar products throughout the country. B. PLANT CAPACITY AND PRODUCTION PROGRAMME. Plant Capacity On the basis of demand projection made for the product and in consideration of high capital costs associated with high volume of production, a plant with a capacity of 2,500 pump set /year is envisaged in this project profile. Production capacity is based on a schedule of 300 working days per annum and eight hours each per day. Increasing the number of working hours can increase this capacity. The assembling plant will produce a solar water pump set having the specification given below: Motor pump/configuration: Submerged borehole motor pump Out put (m 3 5 kwhm/ m 3 /day insolation: Head (Mt.): Solar array (Wp): Production Programme The plant will start its operation at 70% of its full capacity in the first year with a 0% build-up of capacity reaching full capacity in the fourth year and then after, considering skill development & market penetration problems.
9 IV. MATERIALS AND INPUTS 75-9 A. RAW MATERIALS The major raw materials required for assembling of solar water pump set are the main parts of the pump, PV modules, motor, wiring, control system, array support structure and packaging. The consumption rate & their cost are shown in Table 4.. The total cost of raw materials is estimated to be Birr 32,795,000, out of which Birr 32,625,000 is required in foreign currency. Table 4. ANNUAL RAW MATERIALS REQUIREMENT AND COST Sr. Type of Raw Unit of Qty. Cost ('000 Birr) No. Material Meas. FC LC TC. Parts of the pump set (Pump Set 2,500 32,625-32,625 parts, PV modules, wiring, motor, control system) 2. RHS pipe (40x40x2 mm) Mt. 5, Packaging Grand Total 32, ,795 B. UTILITIES The major utilities required by the assembling plant are electricity and water. Estimated annual requirements of electricity & water are 6,000 kwh and 250m 3, respectively. The total cost of utilities is estimated at Birr 30,66. Detail of which is shown on Table 4.2.
10 75-0 Table 4.2 ANNUAL UTILITIES REQUIREMENT AND COST Sr. Description Unit of Qty Cost ('000 Birr) No. Measure. Electricity kwh 6, Water m Total V. TECHNOLOGY AND ENGINEERING A. TECHNOLOGY. Production Process Solar Water Pump set assembling is a manual process involving: Assembling of parts of the pump, PV modules, motor, control system,and accessories; Assembling of pump set together with wiring system; Testing (Mechanical and electrical); and Packing. 2. Source of Technology The assembling technology and machinery required solar water pump assembling plant can be obtained from renowned suppliers in Asia. The following company is renowned in this line of business and can supply the machinery at affordable prices. Tata BP Solar 78, Electronic City, Hosur Road, Bangalore 56 00, India. Phone: +9 (80) , , Fax: +9 (80) , 6
11 75- B. ENGINEERING. Machinery and Equipment The list of machinery and equipment required for assembling of solar water pump set is given in Table 5.. As shown on the table there is no need of having special machinery and/or equipment but special hand tools and testing equipment meant for proper assembling and testing of the pump set. Total cost of machinery and equipment is estimated at Birr 273,995, out of which Birr 75,280 is required in foreign currency. Table 5. MACHINERY AND EQUIPMENT REQUIREMENT AND COST Sr. Description UOM Qty. Cost in '000 Birr No. FC LC TC Crimpers. Set Screw drivers, Set Hacksaw, Pcs Work bench with 4x vise, Pcs Wrenches, Set Battery charger, Pcs Digital multi-meter (V,A,Ω) Pcs Pressure gauge Pcs Heat gun, Set Air compressor Pcs Steel measuring tap Pcs Total
12 2. Land, Building and Civil Works 75-2 The plant requires a total of 2000 m 2 area of land out of which 000 m 2 is built-up area, which includes Processing area, raw material stock area, offices etc. Assuming construction rate of Birr 2500 per m 2, the total cost of construction is estimated to be Birr 2.5 million. The total cost, for a period of 80 years with cost of Birr per m 2, is estimated at Birr The total investment cost for land, building and civil works is estimated at Birr 2,502, Proposed Location Based on the resource potential study of the region, Bonga Zuria and Yeki woredas are found as potential woredas. Based on the availability of infrastructure, utility and market out let Bonga town of Bonga Zuria Woreda is selected and recommended to be the location of the envisaged plant. VI. MANPOWER AND TRAINING REQUIREMENTS A. MANPOWER REQUIREMENT Total manpower requirement, including skilled and unskilled labour is 60 persons. Correspondingly, total annual labour cost, including fringe benefits, is estimated at Birr 5,800. Table 6. shows the list of manpower required and the estimated annual labour costs.
13 75-3 Table 6. MANPOWER REQUIREMENT AND LABOUR COST (BIRR) Sr. No Job Position Req. No. Salary Per Month Salary Per Year A. Production Manger 2,000 24,000 Production supervisor 2 2,400 28,800 Ex Secretary 850 0,200 Production clerk 600 7,200 Technician 20 5,000 80,000 Elctrician 20 5,000 80,000 Labour 6,800 2,600 B. Others Stores, Finance, administration,300 5,600 and sales head Salesman 600 7,200 Secretary 600 7,200 Cashier/ clerk 600 7,200 Store clerk 450 5,400 Security guard ,400 Messenger/ cleaner 200 2,400 Driver 550 6,600 Total 60 42,650 5,800 B. TRAINING REQUIREMENT The production supervisors are intended to get overseas training by the pump set parts supplier and the expatriates will also arrange on site training programme for technicians and electricians. All the cost should be included in the cost of supplying the parts.
14 VII. FINANCIAL ANALYSIS 75-4 The financial analysis of the solar water pumps project is based on the data presented in the previous chapters and the following assumptions:- Construction period year Source of finance 30 % equity 70 % loan Tax holidays 3 years Bank interest 8% Discount cash flow 8.5% Accounts receivable 30 days Raw material local 30 days Raw material, import 90 days Work in progress 5 days Finished products 30 days Cash in hand 5 days Accounts payable 30 days A. TOTAL INITIAL INVESTMENT COST The total investment cost of the project including working capital is estimated at Birr 0.40 million, of which 53 per cent will be required in foreign currency. The major breakdown of the total initial investment cost is shown in Table 7..
15 75-5 Table 7. INITIAL INVESTMENT COST Sr. Total Cost No. Cost Items ( 000 Birr) Land lease value Building and Civil Work 2, Plant Machinery and Equipment Office Furniture and Equipment Vehicle Pre-production Expenditure* Working Capital 6,938.7 Total Investment cost 0,400. Foreign Share 53 * N.B Pre-production expenditure includes interest during construction ( Birr thousand ) and Birr 75 thousand costs of registration, licensing and formation of the company including legal fees, commissioning expenses, etc. B. PRODUCTION COST The annual production cost at full operation capacity is estimated at Birr million (see Table 7.2). The material and utility cost accounts for per cent, while repair and maintenance take 0.5 per cent of the production cost.
16 75-6 Table 7.2 ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR) Items Cost % Raw Material and Inputs 32, Utilities Maintenance and repair Labour direct Factory overheads Administration Costs Total Operating Costs 33, Depreciation Cost of Finance Total Production Cost 33, C. FINANCIAL EVALUATION. Profitability According to the projected income statement, the project will start generating profit in the first year of operation. Important ratios such as profit to total sales, net profit to equity (Return on equity) and net profit plus interest on total investment (return on total investment) show an increasing trend during the life-time of the project. The income statement and the other indicators of profitability show that the project is viable.
17 Break-even Analysis The break-even point of the project including cost of finance when it starts to operate at full capacity ( year 3) is estimated by using income statement projection. BE = Fixed Cost = 3 % Sales Variable Cost 3. Pay Back Period The investment cost and income statement projection are used to project the pay-back period. The project s initial investment will be fully recovered within 6 years. 4. Internal Rate of Return and Net Present Value Based on the cash flow statement, the calculated IRR of the project is 22 % and the net present value at 8.5% discount rate is Birr 7.77 million. D. ECONOMIC BENEFITS The project can create employment for 60 persons. In addition to supply of the domestic needs, the project will generate Birr 5.6 million in terms of tax revenue. The establishment of such factory will have a foreign exchange saving effect to the country by substituting the current imports.