Business Case Biomass Fuel Pellet

7/22/2019 Business Case Biomass Fuel Pellet

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Disclaimer

The designations employed and the presentation of the material in this document do not imply the expression of any opinion whatsoeveron the part of The World Bank Group or The Apex Consulting Group, Catapult Design, Inotek Foundation, or GATD Foundation(collectively the Program Partners). Moreover, any views expressed do not necessarily represent a decision or the stated policy of theWorld Bank Group or the Program Partners. Any citing of trade names or commercial processes is included for the information of thereader and does not constitute endorsement, recommendation, or favouring by The World Bank Group or the Program Partners.

Some information contained in this document is derived from carefully selected public sources that have been deemed to be reasonableand reliable; however The World Bank Group and the Program Partners cannot be responsible for its accuracy or completeness. Anyopinions expressed reflect the current judgement of the author and do not necessarily reflect the opinion of The World Bank Group or theProgram Partners. All opinions presented are subject to change without notice. This document is provided for informational purposes only,and is not a solicitation of any investment, monetary or otherwise, and should be read in conjunction with additional materials provided bythe Program. No representation or warranty, express or implied, is made as to the completeness or accuracy of the information. Thisdocument contains forward-looking statements. Such statements are subject to certain risk factors which may cause the concept

commercialisation to differ or results to vary from those expected.


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Table of Contents

Business Case Section Page

Opportunity 1Introduction 2Concept 3Customer Profile 5Business Model 6

Pilot Market 8SWOT Analysis 9Risks 10Numbers 11Way Forward 13Program 14


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Families and home industries in rural areas mostly use biomass fuel fromwood or charcoal for cooking. This current option is easy to obtain and lowcost. However, there are major disadvantages from using fire wood,including health hazards, forest degradation, lack of reliability andstandardisation in the quality of fuel. The pattern of reliance on fossil fuelsand ineffective biomass alternatives can be interrupted by introducing aneffective, lower cost, environmentally neutral alternative biomass cookingfuel solution.

To respond the current challenges, a concept of alternative biomasscooking fuel from sustainable sources is being designed. The new conceptis a sustainable biomass fuel pellet that will offer cleaner biomass fuel as itproduces less smoke, and is produced using a more environmentallyfriendly adhesive technology. The demand for biomass fuel pellets andcook stoves exists in rural locations across Indonesia as ruralcommunities have few appealing options for cooking fuel.

This concept converts organic waste from sustainable wood, palm, or papermanufacturers into efficient and cleaner biomass fuel pellets (with an averagecaloric value of 4,972 Kcal / Kilo) to be used for cooking fuel by home industry,street food vendors and households using biomass cook stoves.

The proposed technology to manufacture biomass pellets uses organic wastefrom sustainable wood, palm, or paper manufacturers as raw materials. Theproduct is a biomass fuel pellet with consistent heat and higher average caloricvalue than firewood or conventional wood charcoal. After this biomass fuel pellethas been marketed, theres potential to combine the product with customizedbiomass stove.

This concept offers a solution to provide community scaled conversion of organicwaste into fuel through the establishment of a biomass fuel pellet manufacturingand retail chain.

The road from market partner engagement to validated marketsolution is estimated to take one year consisting of marketexploration, concept development, testing and ultimatelyintroduction of the market solution.

Selected Market Partner(s) will be offered a range of support,assistance and guidance from the Indonesia Demand-Driven

Green Innovation Program Partners.

Over 150 million people in Indonesiacurrently use biomass as a primary sourceof cooking fuel. This causes approximately10,000 hectares of forest destructionevery year and 15,300 deaths every yearfrom biomass cooking health hazards. Theuse of fossil fuels such as LPG for cookingis also common in both on- and off-gridareas.

A demand has been identified for a sustainable product that providescommunities with lower cost, environmental friendly and more efficientbiomass cooking fuel. Biomass fuel pellet supply is a viable option toreplace the use of firewood, wood charcoal, or other fossil fuels. Themarket consists of both households and small food processing homeindustries in rural areas using firewood every day. The option of targeting

street food vendors and including cook stoves in the offering areopportunities to accelerate growth of the concepts market share.

The value proposition for the Market Partner(s):Support to distribute product to new market segments with minimal risk,improved impact potential, and significantly scaled operations to the level

of national distribution.

The value proposition for target community:Individual households, home industry and street vendors in rural areasacross Indonesia will have access to a lower cost, cleaner, safer, moreefficient, uniformed biomass cooking fuel available at their localcommunity store.

.

The total variable cost per kilo of biomass fuelpellets is Rp 1,584 which includes the cost ofmanufacture, and sales commission. Atargeted sales price Rp. 2,800 with a grossprofit for each kilogram sold of Rp. 1,216 hasbeen modelled.

Investmen

Required Investment: Rp 761,300,000

Return on Investment: 27.66 %

Revenue year 1: Rp 3,026,800,000

EBITDA year 1: Rp 1,079,896,000

Profit Margin: 35.68 %


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Over the past several months, Program Partners of WorldBanks Indonesia Demand-Driven Green Innovation

Subprogram (IDDGIS) have explored and screened energyrelated challenges from the target community. Thesechallenges have been narrowed down to the five mostpressing energy-related challenges facing the targetcommunity. From these five challenges, a number ofconcepts have been generated to provide solutions toimprove conditions for rural Indonesians. Program Partnerswork to provide specific information and analysis in areasthat affect commercial and financial viability as well as theimpact potential on the target community.

The next stage of the IDDGIS is to source potential MarketPartner(s) to support and assist in delivering the mostcommercially viable concepts to the market. The designconcepts are presented to potential Market Partner(s)through this Business Case as well as through the delivery ofbusiness presentations.

This Business Case seeks to assist potentialMarket Partner(s) to make an informeddecision of whether or not to engage further

with the IDDGIS in the commercialization ofthe technology. Through this Business Case,potential Market Partner(s) will gain an insightinto the technical and commercial details ofthe concept, provide answers to questionssuch as the concepts target market, where isthe concepts target location, what are thecharacteristics of the ideal Market Partner(s)for implementation of this concept, thecommercial viability of the conceptsimplementation in the target location, whatsocial and environmental benefits are likely tobe generated from this concept, and what isthe recommended way forward tocommercialize the concept.


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Each concept in IDDGIS is developed to meet a particular demand that has been identified as a key energyrelated challenge in the target community. The underlying challenge for this concept was to provide viablesystems for community scaled conversion of organic waste into clean and affordable energy fuel.

This concept converts organic waste from sustainable wood and paper manufacturers into efficient and cleanerbiomass fuel pellets (with an average caloric value of 4,972 Kcal / Kilo to be used for cooking fuel by homeindustry, street food vendors and households using biomass cook stoves. The option of bundling cook stoveswith fuel pellet distribution presents an opportunity for synergies and increased potential for commercial impact.The distribution of fuel pellets will initially be done utilising motorbike sales teams, and trucks can be used foradditional supply runs as volumes surpass motorbike capacity. An indicative caloric value comparison ofcommon alternatives follows:

Log wood (stacked - air dry): 15 GJ / Tonne Traditional wood pellets: 17 GJ / Tonne Concept biomass fuel pellets 21 GJ / Tonne House charcoal: 27 GJ / Tonne

Our research indicates that the commercialization of this concept will generate the following commercial Benefitsfor Market Partner/s:

Reduced R&D costs for product innovation through program support; Access to expanded retail markets; Reduced cost and risk exposure to generate new sales channels; and Access to local networks and customer channels.

Our research indicates that the introduction of this concept to the market will generate the following value forrural Indonesians:

Improves access to a regular, consistent supply of reliable cooking fuel; Provides a comparatively less pollution-generating energy source that is relatively cheaper to wood; Improves worker productivity in home industry operations as fire tendering is not necessary; Improves the cleanliness in villages and hamlets; The burning hours per kilogram of pellets is significantly longer than wood; Higher heat level means time required for cooking is reduced; Pressure on the surrounding forest is reduced; Reduction of workload, mainly for women, in firewood collection and cooking; Reduces cooking fuel expenditure to zero over the long run; Eliminates the dangers of indoor air pollution, increasing productivity and safety; and Provides carbon neutral energy with no new net GHG emissions as it is part of the carbon cycle.


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Sustainable Biomass Fuel Pellet

Converting organic waste from sustainable wood and papermanufacturers into efficient and cleaner burning wood pellets(with an average caloric value of 4,900) and marketing them ascooking fuel for home industry, street food vendors andhouseholds using biomass cook stoves. Once they aremarketed a custom pellet stove could also be introduced tomaximize efficiency.


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The value proposition for the Market Partner(s): Support to distribute product to new market segments withminimal risk, improved impact potential and significantly scaled operations to the level of national distribution.

The value proposition for target community: Individual households, home industry and street vendors in ruralareas across Indonesia will have access to a lower cost, cleaner, safer, more efficient, uniformed biomasscooking fuel available at their local community store.

Commercialisation Strategy

The commercialisation strategy for Sustainable Biomass Fuel Pellet is as follows:

CommercialPillars

Phase I (Pilot)January to June 2013

Phase II (Scaling)June 2013 to June 2014

Market - Sleman, Gunung Kidul, Bantul, Kulon Progo in Jogjakarta - Kalimantan, Sumatra, NTT, and NTBCustomers

- Individual households; Home industry; Street food vendors;Local retail outlets

- Individual households; Home industry; Street food vendors;Local retail outlets; Large Industry; Biomass Power Stations

Manufacture

- An established manufacturer will engaged to manufacture theproduct from a centralised facility

- The manufacturer will collaborate with sustainable wood andpaper manufacturers to obtain raw material inputs

- The manufacturer will be required to ensure only waste fromsustainable sources is used

- A decentralised approach to manufacturing will be adoptedwith new hubs in key regional areas including Mataram,Pekanbaru, and Makassar to service a wider market.

- The manufacturer will collaborate with sustainable wood andpaper manufacturers and other industries to obtain rawmaterial inputs

- The manufacturer will be required to ensure only waste fromsustainable sources is used

- Explore potential stove manufacturer to bundle the productwith biomass fuel pellet sales

Distribution

- The centralised manufacturing facility will distribute to theregional distribution hub and storage facility in Yogyakarta.

- Local sales agents will then distribute the product locally to retailsale points (on consignment) and to bulk buyers directly

- Each manufacturing facility will distribute regionally via localsales agents

- Local sales agents will distribute the product to retail salepoints (on consignment) and to bulk buyers directly

Sales &MarketingStrategy

- A local motor bike sales team of four people will be deployed toeducate and inform the communities of this product and makedirect sales on a commission basis.

- Local sales agents will be commissioned to make direct sales toretail and end-user customers such as traditional markets, mini-markets, cooperatives and other retail outlets.

- These local outlets and retail partners will be responsible fordirect sales in their local communities.

- Sales agents will initially be responsible for introducing theproduct to the market, educating consumers, and engagingpotential outlets.

- Direct marketing will be used to gain market acceptance throughthe conduct of outreach events and consumer educatingworkshops to highlight the superior overall quality and benefits ofthe product.

- Could be also included in the mobile RE shop.

- A local motor bike sales team of four people will be deployedto educate and inform the communities of this product andmake direct sales on a commission basis for each location.

- Local sales agents will be commissioned to make direct salesto retail and end-user customers such as traditional markets,mini-markets, cooperatives and other retail outlets.

- These local outlets and retail partners will be responsible fordirect sales in their local communities.

- Sales agents will initially be responsible for introducing theproduct to the market, educating consumers, and engagingpotential outlets.

- Direct marketing will be used to gain market acceptancethrough the conduct of outreach events and consumer

educating workshops to highlight the superior overall qualityand benefits of the product.

- Piloting to sell bundle product of biomass fuel pellet and itscustomized biomass cook stove.

- Could be also included in the mobile RE shop.Retail

Pricing- Pellets will be sold in 1kg sacks.- 1kg sack is Rp. 2,800 - Pellets will be sold in 1kg and 5kg sacks.- 1kg sack is Rp. 2,800 and 5kg sack is Rp. 13,500

End-UserFinance

- Customers will pay cash on delivery for this product. The productis comparatively cheaper than wood therefore no finance supportwill be required

- Customers will pay cash on delivery for this product. Theproduct is comparatively cheaper than wood therefore nofinance support will be required


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The Competitive Environment

Biomass fuel pellet supply has competition from several substitute products being used by home industries andhouseholds in the target area for cooking fuel. Other biomass alternatives exist with natural and biogas alsorepresenting competition for the successful concept commercialisation. The alternatives are each represented bya specific group which include:

Traditional Firewood: The majority of rural Indonesians use firewood for their daily cooking fuel.End-users in rural areas can collect fire wood and twigs around their community, or alternatively purchase itfrom local firewood collectors.

Charcoal and briquettes: Charcoal and briquettes made from wood, coconut shells, sawdust or otherorganic waste are being commercialised in the market. There are different types of charcoal and briquetteswith different caloric value, but the market price of both charcoal and briquettes is higher than the price offire wood. These processed alternatives are offered commercially by private companies, and in some casessupported or distributed by the not-for-profit community.

Biogas fuel: This technology provides a digester to convert organic waste into cooking fuel. The biogasdigester technologies are being offered to the target market by a range of different organizations withdifferent business models and different motives to disseminate their technology such as private companies,NGO, social enterprises, CSR programs, and local government.

LPG fuel:The Indonesian government is dedicated to disseminate 3kg LPG gas canisters for Indonesiansin an effort to replace the use of kerosene and wood as cooking fuels. LPG gas canisters are a less costlyalternative to kerosene. The government owned PT Pertamina has a monopoly in this market; both inproduction and distribution.

Barriers to Entry

The following points create potential barriers to enter for first movers into this market:

Communication barriers with the community due to language and culture barriers; Difficulties to change community mindset due to assumed expense and change concerns (e.g. switching

cost);

Changing community mindset on assumed technology advantages especially in changing rural areascommunities to switch from using fire wood;

Competition from established alternative solutions providers; Patents of existing wood pellet providers may restrict entry; and Risk of introduction of government operating licensing requirements.Barriers to entry for subsequent market players include:

Identifying a new innovation and solution which is able to make a more attractive offering to the targetcommunity;

Acquiring target community acceptance for a new biomass cooking fuel provider; Competitive responses from established first movers and alternative solutions providers; Access to optimal distribution channels as potential distributors gain increased bargaining power; and National, provincial, regional or rural government regulations limiting competition and endorsing the first

mover.


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Indonesia is the national target market for Wood Pelletcommercialization. Indonesia is the largest country in South-East Asia both in area and in population. It has an estimated

population of 237 million of which 28 million live in themetropolitan area of the capital, Jakarta. Indonesia consists of33 provinces located across 5 major islands and thousands ofsmall islands. The country is an archipelago contains 17,508islands. The Indonesian economy is the world's sixteenth largest by nominal GDP. Indonesias 2011 GDP isestimated to be USD 845.680 billion with GDP per capita estimated to be USD 3,508. Despite the countrys 6.4%economic growth in 2011, Indonesia still faces unemployment and poverty challenges. In 2011, the poverty ratewas estimated to be 13.3% and the unemployment rate 7.9%.

The Pilot MarketThe target community is the community in which the Program isfocusing its activities for pilot commercialization. The local communitys

participation from this location has been the key to the success of theprocess so far. After assessing different possible locations, the SpecialRegion of Yogyakarta was selected as the best suited location for pilotcommercialization of the concept. The province is located near thesouthern coast of Java. In 2010 registered population in Special Regionof Yogyakarta is 3,452,390 inhabitants.

The Special Region of Yogyakarta consists of four districts:

1. BantulBantul district consists of 17 sub districts, 75 villages, and 933 hamlets. The total population in 2011was 1,035,635 inhabitants with total 311,934 people as head of households. Several subdistricts are still

in off-grid areas and most rural areas do not have access to Drinking Water Local Company(Perusahaan Air Minum Daerah). Bantul district has six rivers that flow all year long. Industries locatedin Bantul are typically small industries. In 2010, there were total of 18,146 industries in the area.

2. GunungkidulGunungkidul district consists of 18 sub districts, 144 villages, and 1416 hamlets. The total population in2010 was 674,408 inhabitants. The economy of Gunungkidul Regency is dominated by the agriculturalsector. Traditional home craft industry, food processing, and agricultural products are all the sectorswith significant potential for further development.

3. Kulon ProgoKulon Progo district consists of 12 sub districts, 87 villages, and 917 hamlets. The population of KulonProgo is 388,869 people. Majority of inhabitants occupations in Kulon Progo are farmers. Water supplyfor irrigation in Kulon Progo is taken from Progo and Serang River.

4. SlemanSleman district consists of 17 sub districts, 86 villages, and 1212 hamlets. The total population in 2011was 1,125,369 inhabitants with total 305,376 people as head of households. The biggest Slemaninhabitants occupations are in the field of agriculture and services. In 2009, the number of registeredsmall industries is 15,012. In 2009 there were 181 Solar Power Generators, 3 Micro Hydro PowerPlants, and 105 livestock waste biogas installations registered in Sleman area.

Sleman

BantulGunungKidul

Kulon

Progo


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The proposed biomass fuel pellet is produced using a technology to convert organic waste from sustainablewood or paper manufacturers into cooking fuel. Introduction of a new technology may require a significantamount of consumer education and information to socialise its benefits before meaningful sales will beestablished. Both biogas and government subsidised LPG represent obstacles in the form of real competition.The current existence of both wood pellets and other biomass alternatives on the market create additionalconstraints as well as the dependency on access to raw materials. The technology is, however, superior in themost important areas of biomass fuel attributes, and with a large potential market this concept is viable byobtaining sufficient market share. A brief analysis of the concepts existing Strengths, Weaknesses,Opportunities, and Threats as well as Constraints and Dependencies follows below:

Strengths Weaknesses

Biomass fuel pellets are consistent in their size andheat level;

3 hours of effective burning time per kg; Biomass fuel pellets produce less hazardous smoke; Using biomass fuel pellets reduces households

workload in collecting firewood;

Biomass fuel pellets use organic waste fromsustainable wood, palm, and paper manufacturers asraw materials;

The distribution channels may include rural Indonesianemployees; and

The model can be expanded to include several regionaland national markets.

Biomass fuel pellet technology and benefits may stillbe unfamiliar to members of the target community;

Biomass fuel pellets must stay dry in order to beeffective;

Reliance on the motorbike sales team ability to obtainmarket acceptance;

The availability of raw materials may be limited, thuslimiting production capacity;

Retail price of biomass fuel pellets may appear tohave a higher cost when compared to the currentalternatives, however because of its efficiency in theend it will provide financial savings; and

Some traditional recipes include firewood or charcoal.Opportunities Threats

Over 150 million people in Indonesia still use biomassas a primary cooking fuel;

The need for predictability is an universal considerationfor all business owners, including home industries;

Reduction of health hazards is important forhouseholds where the kitchen is a central part of theliving quarters; and

The raw materials can be located in the targetcommunity and low cost distribution options exist.

Competition with biogas systems or other alternativetechnology of cooking fuel at low cost;

Decrease in or lack of purchasing power in the targetmarkets would have significant implications for thesuccess of the commercialisation process; and

Some of the raw materials are also being used in otherindustries in the target location including wood dust forthe tobacco industry.

Constraints

Some of the traditional cooking methods in the target community rely on firewood or charcoal; The product is entering the market as a subsequent mover; The availability of the raw materials in the target manufacturing location may limit the potential production capacity of

the manufacturing facilities; and

Government efforts to increase LPG dissemination limits demand growth.Dependencies

A steady supply of raw materials including a stable or declining number of companies requiring the same materialsfrom the same suppliers;

A stable or improving financial situation for home industries in the target market; Manufacturer ability for to produce the desired features of the product; and The trust and acceptance of the technology and the product from the local communities.


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The following is a selection of high-level risks, risk events, and suggested mitigation measures to be consideredwhen a comprehensive risk management plan is developed in relation to the potential commercialization of thisconcept.

# Risk Categories Risk Events Risk Mitigation Strategy

1Technology: risk of technology failureortechnological obsolescence

Proposed adhesive technology failure Caloric value inconsistent Incompatible with stove/customer needs

Testing, prototyping for extendable solutions,evaluate multiple options to enablecommercialization, implement and operate anactive management of obsolescence

2Business/strategic:risk affecting the viabilityof the business model and commercial strategy

Marketing strategy fails Pricing points exceed purchasing power Local retail refuses to stock product Pressure from current wood suppliers

Identify lessons learned from previous successand research, pilot selected commercialstrategies in a contained environment prior toscale-up, Develop contingency plans for keyareas of the commercial strategy

3

Environmental and Health:risk of damage tothe environment or health caused duringmanufacture or installation and the liability

arising from such damage

Emissions exceed expected levels Unknown health risks from product use Clean production not viable

A Health, Safety and Environment Plan will bedeveloped and implemented (including staff,supplier and contractor training)

4Financial:risk of insufficient access to capital,employee fraud end-user financing failure

Loss of revenue due to theft Insufficient start-up capital Operational capital delays High outstanding debt levels

Required capital will be secured prior to thelaunching of the pilot, a fraud prevention planwill be developed, multiple finance alternativeswill be locked into long-term service contracts;

5Manufacture and Supply Chain:risk relatingto plant closure, input resources, plant damage,component failure, cost base

Unplanned plant closure Significant increase in input costs Availability of supply

Development of a supply chain riskmanagement plan including the preparation ofsimulation models with mitigation and impactreduction strategies

6Distribution: risk of non-delivery, increasedlogistics costs, transportation related breakage

Logistic supplier is unreliable Trucking accidents Significant increase in distribution costs

Qualify local distributors and logisticsproviders, maximise payloads, use alternativemodes of delivery distribution network design,insurance coverage

7

Operational: risk relating to the operational

management strategy and implementation

Severe product failure Stove modifications fail

Prepare a business continuity and resiliency

plan that documents scenario analysis andimpact reduction strategies

8People: risk of not attracting sufficiently skilledand experience people with the right attitudewho can consistently deliver

Inability to hire staff as required High staff turnover Staff damage community relations

Emphasizing social mission of theorganisation, strict employment screening andImplementing a performance measurementand reporting framework

9Demand:risk of not creating sufficient marketdemand during the pilot phase and beyond

Marketing strategies fail Sufficient demand cannot be created Scale is unachievable

Extensive relationship building with pilotsystem users, regular evaluation of productvalue to the community, assessment of theeffectiveness of marketing and adjustment asnecessary

10Community Acceptance: risk of thecommunity not embracing the offering,business model or local sales representatives

Community rejects product offering Community rejects organisation

Respectfully engaging with the community,defining mutual expectations and monitoringthe their fulfillment

11Business Partnerships: risk infailure ofpartnerships between business partners

Input suppliers fail or discontinue supply Local distribution partnerships fail Manufacturer discontinues production

Seeking multiple alternative suppliers, lockingin major suppliers through long-term servicecontracts; ensuring all business partnerscommit to a shared vision and set of values

12Competition: risk relating to early movercompetition in the market

Competition occurs too quickly Non-Profits undercut pricing model

Maximizing first mover advantages throughaccelerating speed-to-market, utilizingcompetitive intelligence strategies

13Political/regulatory:risk of a change in publicenergy policy, export/import regulations andbusiness enabling environment

Government restrictions on use/purchase oforganic industry waste

Frequent and detailed communications withpolicy makers, regulators, industry bodies,media, consumers, and environmental groups

14Natural Disaster and force majeure:risk of asignificant natural disaster in the pilot marketlocation

Flood or fire, earthquake, tsunami or volcaniceruption at the production or customerlocation

Develop an emergency management andbusiness contingency plan


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This following section provides information on the financial viability of the first year of the pilot commercialization.The total variable cost per kilogram of wood pellets is Rp 1,584 which includes the cost of manufacture, andsales commission. A targeted sales price of Rp. 2,800 with a gross profit for each kilogram sold of Rp. 1,216 hasbeen modelled. The manufacturing capacity will achieve 100% capacity by the 4 thmonth of the initial year, salesand production can be increased the following months however it requires additional capital expense.

The initial investment of Rp. 761,300,000 will cover the procurement of machinery (Rp. 656,000,000) as well as 6months of operational costs (Rp.105,300,000) with no sales assumed. At the end of year one, the company willretain 10% of its earnings while the remaining Rp. 971,906,400 will be returned to investors; ensuring investorsenjoy a 27.66 % ROI. This also supports the companys sustainability by providing additional operational funds inyear two of approximately Rp. 10.8 million.

InvestmentOperational (6 months Covered): Rp 105,300,000

Equipment (Production Machinery): Rp 656,000,000Total Required Investment: Rp 761,300,000Repaid to Investors End Y1: Rp 971,906,400Return on Investment: 27.66 %

Revenue year 1: Rp 3,026,800,000EBITDA year 1: Rp 1,079,896,000Profit Margin: 35.68 %

0

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104 104 104 104 104 104 104 104 104

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Monthly Unit Sales

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100

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300350

1 2 3 4 5 6 7 8 9 10 11 12

Monthly Revenue in Million Rupiah

Risk

Value

Estimated Return on Investment: 27.66 %

Estimated Payback Period: One Year

173.6

291.2 291.2 291.2 291.2 291.2

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100

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300

350

1 2 3 4 5 6 7 8 9 10 11 12

Monthly Revenue & Expense in Million Rupiah

Revenue Expense

5%

4%0.28%

91%

Expenses

Payroll

Operating

Utilities &

Maintenance

Cost of Sales


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Projected P / L Year 1


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The World Bank has brought together a team of experts to provide business and design support services toMarket Partner(s) to assist them in developing and commercialising compelling product and service concepts.The goal is to offer insights, access to networks, tools, and processes to expedite the commercialisationprocess.

IDDGIS will offer Business Support Services to facilitate the development of connections, investment, planning,and strategy needed to bring successful concepts to market; as well as, Design Services to help developinspirational, and technically refined concepts tuned to market demands and ready for launch. In return, MarketPartner(s) will bring specific industry knowledge and business resources to the table allowing us to jointlycreate products and services that are not only financially viable but good for communities and the people thatlive in them.

StageIdentification and

engagement of MarketPartner(s)

Concept development,testing, andprototyping

Market research,business consulting,and feasibility study

Validation of theMarket Solution and

Activities

Potential MarketPartner(s)identification

Engaging mostsuitable partners Market Partner(s)

meet with theProgram Partners

Commercialisationprocess is mappedout

Further conceptdevelopment

Testing of conceptdesign Prototyping (if

necessary)

Several iterationsto prepare conceptfor marketability.

Conduct of afeasibility study

Business Supportto Market

Partner(s)

Market researchassistance

Joint marketingeffort by theProgram Partnersand the MarketPartner(s).

Market Solutiondevelopment,testing, andadjusting to market

research Market Partner(s)

empowerment

Maximised impacton the challenges

Direct improvementof lives of thetarget communities

Inputs

DevelopedBusiness Cases

Innovationcapability

Strategydevelopment andbusiness planning

Seed funding Focus on cost,

value and pricing

Learningorientation andflexibility

Innovationcapability

Marketing strategyand execution

Supply chaindesign and

implementation Funds for market

trials, marketing,and refinement

Risk management Formalisation of

impact standardsand expectations

StakeholderManagement

Funds to supportscaling

Outcomes

Compelling initialbusiness plan

Demonstrated coretechnologiesand/or productprototype

Market Partner(s)selected and

engaged

Refined businessmodel,technologies,product

Validation ofviability andscalability

Indication ofcustomer demand

Feasibility Study Market Research Strong customer

awareness anddemand

Effective supplychain

Fully validated andcustomised MarketSolutions

Sustainablyreaching targetcommunitiesimpacted


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The Indonesia Demand-Driven Green Innovation Subprogram (IDDGIS) supports pro-poor clean energyinnovation by facilitating the generation and market deployment of new business models, products and services.Its objective is to help the private sector identify and exploit opportunities for clean energy innovation. IDDGIS isexecuted by a core team of local and international private sector and non-profit implementing partners.

IDDGIS is funded by the World Bank Group, the Asia Sustainable and Alternative Energy Subprogram, and theNorwegian Trust Fund for Private Sector and Infrastructure. It is implemented by The Apex Consulting Group asMarket Facilitator and Program Coordinator, Catapult Design as Global Design Partner, INOTEK Foundation asLocal Design Partner, and GATD as Mentor-Gatekeeper.

The focus of the IDDGIS is to serve the clean energy needs of poor communities in Indonesia. This is achievedby identifying needs, generating promising concepts, and designing new products and services in partnershipwith market partners. IDDGIS is organised as a tournament whereby market ideas compete for successiverounds of deeper and broader support. Ideas that do not receive sufficient market buy-in are progressivelyscreened out of IDDGIS. This ensures that minimal time and resources are spent on working on prototypes that

will never be commercialised.

The IDDGIS has six stages, and begins by identifying a target community to work with. This is followed byidentifying critical clean energy needs that are prospective market opportunities. Needs are identified through acall for challenges campaign, through field research and through stakeholder workshops. Promising initialconcepts are then systematically developed through iterative rounds of design, prototyping and testing beforethey culminate into market-ready offerings. Once the product/service is market ready it must be implemented, aprocess that involves manufacturing, distribution chains, infrastructure creation. Only when the product orservice is available commercially on the market is it considered commercialised.

IDDGIS approach to clean energy innovation involves the development of product and service solutions usinghuman-centred design methods. In addition to relying on in-house teams, IDDGIS engages the community for

which it is designing in the process of creation. As the solution progresses, IDDGIS also involves local MarketPartner(s) in the refinement of the design relying on them for the full implementation of a commercialisedproduct or service.

More information about IDDGIS and the Program Partners can be found at:www.greeninnovation.or.id

www.worldbank.org

www.apex-cg.com www.catapultdesign.org www.inotek.org www.gatd.org
http://www.greeninnovation.or.id/http://www.greeninnovation.or.id/http://www.greeninnovation.or.id/http://www.greeninnovation.or.id/


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Documents

Business Case Biomass Fuel Pellet