Modernization and Reconstruction of Oil Extraction Plant Located in Shuya, Ivanovo Region

In recent years, against the background of construction of many modern businesses of oil-extracting industry (processing of oils), almost all existing enterprises that operate without essential modernization and reconstruction have turned out to be uncompetitive.

The analysis repeatedly conducted by Intesco Research Group Company showed that general trends of development of a production complex for processing oils in Russia have a moderately pessimistic nature, and, without modernization and reconstruction of existing enterprises with attraction of significant investments and thorough investment justification, such businesses have to stop their activity with actual impossibility of further restoring it.
The project initiator company found itself in this very situation by 2011-2012, which stopped its activity and demonstrated a loss of 14 857 000 rubles for 2012 reporting year.

Aims of Modernization Project

In conditions of evident need of changes, the Company made an order for development of business plan about oil-extraction plant modernization and reconstruction with Intesco Research Group. In addition to solving these tasks, the aims of the project were the following:

• meeting the modern world standards for organization of the plant operation;
• achieving a stable position in the Russian market of fat-and-oil products;
• long-term integration of the business in economy of Asian and European Bank for Development countries with first-priority solving issues of integration in economy of Kazakhstan and Belarus, countries of the Customs Union.

Project Competitive Advantages

According to the preliminary analysis, conducted by experts of Intesco Research Group, the company has the required potential, including an advantageous geographic location, associated infrastructure, current assets, interest of local authorities and enterprise owners in the planned changes.

The enterprise is located in the territory with a developed road network and transport infrastructure, which enables organizing stable supplies of products, with entry to the largest sales markets of Moscow, St. Petersburg, Kazakhstan and Belarus, and in future – to the European market.

Project Implementation Effectiveness Conditions

Additional conditions promoting project implementation effectiveness reflected in the business plan were the following:

• location within the radius of about 500 km from the production site of more than 10 mln of plough lands, suitable for growing spring and winter rape and creating prospects for formation and development of the Company’s own raw materials base;
• planning of using the Company’s own land plot 134 071 m2, with the right of permanent use, according to the sales and purchase agreement, and absence of the need in expenditure on purchasing (renting) land plots.

Production Range and Volume

According to the project, it was planned to keep the current range with its expansion by including new categories of products that enjoy a high demand. In accordance with the estimates, with the plant running at its full capacity, the production volumes were to be the following:

• sunflower oil (refined deodorized oil, including packed oil, and unrefined oil) and unrefined rape oil  - 150 000 tons annually;
• sunflower oil cake - 168 521 tons annually;
• rape cake - 14 978 tons annually;
• biodiesel (biofuel based on oil or animal fats and products of their etherificafion) - 10 000 tons annually;
• pellets (biofuel based on agricultural waste – sunflower pellets) - 24 000 tons annually;
• pure natural glycerol (high-quality glycerol for perfume and pharmacologic industries) - 1 237 tons annually.

Investment Financing Structure

The project provided for 100-per cent investment financing to the volume of 2 068 000 000 rubles with a loan, the annual interest rate 14%, with the bank guarantee, of which:

Project Implementation Effectiveness Rates

Within the framework of estimating the project implementation effectiveness, analysts of Intesco Research Group developed the following rates:

• net cash flow/net present value – 10 480 616 000/5 591 933 000 rubles;
• simple/discounted pay-back period – 1.98/2.13 years;
• internal rate of return – 102%;
• breakeven point – 11% or 169 750 000 rubles per quarter.

You can order development of a business plan for your project by calling at +7 (495) 212-91-91 or filling in a request at the website, after which our manager will call you.

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