IDEAS home Printed from https://ideas.repec.org/a/eee/jrpoli/v89y2024ics0301420724000060.html
   My bibliography  Save this article

Monte Carlo simulation-based financial risk identification for industrial estate as post-mining land usage in Indonesia

Author

Listed:
  • Ronyastra, I Made
  • Saw, Lip Huat
  • Low, Foon Siang

Abstract

The issue of post-mining land usage is emerging in Indonesia due to the significant contribution of the mining industry to the country's economic development. Among the popular options for utilizing these lands is the establishment of industrial estates. The objective of this study is to investigate the complexities associated with identifying financial risks using an integrated framework to be implemented in industrial estates located on post-mining lands in Indonesia. The framework was constructed by combining traditional feasibility study methods with Monte Carlo simulation. The financial model was built using 31 input variables (assumptions) and 3 output variables (forecasts). The Monte Carlo simulation results revealed that there is an approximately 82.32% probability of the project's payback period being within 25 years, and a 94.23% probability of a positive net present value. Three input variables were found to contribute to 80% of the variation in average earnings. Additionally, five variables were identified as financial risk factors impacting net present value and discounted payback period. Out of the thirteen financial risk factors, ten were internal factors that require a management plan to mitigate them effectively. The framework contributed an emphasize on the importance of risk analysis as complementary analysis in a feasibility study.

Suggested Citation

  • Ronyastra, I Made & Saw, Lip Huat & Low, Foon Siang, 2024. "Monte Carlo simulation-based financial risk identification for industrial estate as post-mining land usage in Indonesia," Resources Policy, Elsevier, vol. 89(C).
    • Handle: RePEc:eee:jrpoli:v:89:y:2024:i:c:s0301420724000060
    DOI: 10.1016/j.resourpol.2024.104639
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0301420724000060
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.resourpol.2024.104639?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Li, Ying & Chiu, Yung-ho & Lin, Tai-Yu, 2019. "Coal production efficiency and land destruction in China's coal mining industry," Resources Policy, Elsevier, vol. 63(C), pages 1-1.
    2. Pouran, Hamid M., 2018. "From collapsed coal mines to floating solar farms, why China's new power stations matter," Energy Policy, Elsevier, vol. 123(C), pages 414-420.
    3. Liu, Zhe & Adams, Michelle & Cote, Raymond P. & Geng, Yong & Ren, Jingzheng & Chen, Qinghua & Liu, Weili & Zhu, Xuesong, 2018. "Co-benefits accounting for the implementation of eco-industrial development strategies in the scale of industrial park based on emergy analysis," Renewable and Sustainable Energy Reviews, Elsevier, vol. 81(P1), pages 1522-1529.
    4. Nick French & Laura Gabrielli, 2006. "Uncertainty and feasibility studies: an Italian case study," Journal of Property Investment & Finance, Emerald Group Publishing Limited, vol. 24(1), pages 49-67, January.
    5. Shi, Buchao & Huang, Liangxiong & Wei, Shengmin & Geng, Xinyue, 2022. "Overseas industrial parks and China's outward foreign direct investment," Journal of Asian Economics, Elsevier, vol. 83(C).
    6. Mavrotas, George & Makryvelios, Evangelos, 2021. "Combining multiple criteria analysis, mathematical programming and Monte Carlo simulation to tackle uncertainty in Research and Development project portfolio selection: A case study from Greece," European Journal of Operational Research, Elsevier, vol. 291(2), pages 794-806.
    7. Caralis, George & Diakoulaki, Danae & Yang, Peijin & Gao, Zhiqiu & Zervos, Arthouros & Rados, Kostas, 2014. "Profitability of wind energy investments in China using a Monte Carlo approach for the treatment of uncertainties," Renewable and Sustainable Energy Reviews, Elsevier, vol. 40(C), pages 224-236.
    8. Kamel, Ahmed & Elwageeh, Mohamed & Bonduà, Stefano & Elkarmoty, Mohamed, 2023. "Evaluation of mining projects subjected to economic uncertainties using the Monte Carlo simulation and the binomial tree method: Case study in a phosphate mine in Egypt," Resources Policy, Elsevier, vol. 80(C).
    9. Ronyastra, I Made & Saw, Lip Huat & Low, Foon Siang, 2023. "A review of methods for integrating risk management and multicriteria decision analysis in financial feasibility for post-coal-mining land usage selection," Resources Policy, Elsevier, vol. 86(PB).
    10. Yongjun Yang & Yue Li & Fu Chen & Shaoliang Zhang & Huping Hou, 2019. "Regime shift and redevelopment of a mining area’s socio-ecological system under resilience thinking: a case study in Shanxi Province, China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 21(5), pages 2577-2598, October.
    11. Mostafaei, Kamran & maleki, Shaho & Zamani Ahmad Mahmoudi, Mohammad & Knez, Dariusz, 2022. "Risk management prediction of mining and industrial projects by support vector machine," Resources Policy, Elsevier, vol. 78(C).
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Zhai, Dongsheng & Zhang, Tianrui & Liang, Guoqiang & Liu, Baoliu, 2024. "Quantum carbon finance: Carbon emission rights option pricing and investment decision," Energy Economics, Elsevier, vol. 134(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ronyastra, I Made & Saw, Lip Huat & Low, Foon Siang, 2023. "A review of methods for integrating risk management and multicriteria decision analysis in financial feasibility for post-coal-mining land usage selection," Resources Policy, Elsevier, vol. 86(PB).
    2. Yuliang Yang & Chaoqun Cui, 2022. "Which Provincial Regions in China Should Give Priority to the Redevelopment of Abandoned Coal Mines? A Redevelopment Potential Evaluation Based Analysis," Sustainability, MDPI, vol. 14(23), pages 1-22, November.
    3. T. Chatzivasileiadis & F. Estrada & M. W. Hofkes & R. S. J. Tol, 2019. "Systematic Sensitivity Analysis of the Full Economic Impacts of Sea Level Rise," Computational Economics, Springer;Society for Computational Economics, vol. 53(3), pages 1183-1217, March.
    4. Fernández, Eduardo & Figueira, José Rui & Navarro, Jorge & Solares, Efrain, 2022. "Handling imperfect information in multiple criteria decision-making through a comprehensive interval outranking approach," Socio-Economic Planning Sciences, Elsevier, vol. 82(PB).
    5. Pejman Bahramian, 2021. "Integration of wind power into an electricity system using pumped-storage: Economic challenges and stakeholder impacts," Working Paper 1480, Economics Department, Queen's University.
    6. Xiangqian Wang & Shudong Wang & Yongqiu Xia, 2022. "Evaluation and Dynamic Evolution of the Total Factor Environmental Efficiency in China’s Mining Industry," Energies, MDPI, vol. 15(3), pages 1-19, February.
    7. Mo, Jian-Lei & Agnolucci, Paolo & Jiang, Mao-Rong & Fan, Ying, 2016. "The impact of Chinese carbon emission trading scheme (ETS) on low carbon energy (LCE) investment," Energy Policy, Elsevier, vol. 89(C), pages 271-283.
    8. Dariusz Knez & Omid Ahmad Mahmoudi Zamani, 2023. "Up-to-Date Status of Geoscience in the Field of Natural Hydrogen with Consideration of Petroleum Issues," Energies, MDPI, vol. 16(18), pages 1-17, September.
    9. Viktoriia Myronchuk & Oleksandr Yatsenko & Dmytro Riznyk & Olena Hurina & Andrii Frolov, 2024. "Financing Sustainable Development: Analysis of Modern Approaches and Practices in the Context of Financial and Credit Activities," International Journal of Economics and Financial Issues, Econjournals, vol. 14(5), pages 317-329, September.
    10. Liu, Chunyu & Zheng, Xinrui & Yang, Haibin & Tang, Waiching & Sang, Guochen & Cui, Hongzhi, 2023. "Techno-economic evaluation of energy storage systems for concentrated solar power plants using the Monte Carlo method," Applied Energy, Elsevier, vol. 352(C).
    11. Rafi Zahedi & Parisa Ranjbaran & Gevork B. Gharehpetian & Fazel Mohammadi & Roya Ahmadiahangar, 2021. "Cleaning of Floating Photovoltaic Systems: A Critical Review on Approaches from Technical and Economic Perspectives," Energies, MDPI, vol. 14(7), pages 1-25, April.
    12. Padi, Richard Kingsley & Douglas, Sean & Murphy, Fionnuala, 2023. "Techno-economic potentials of integrating decentralised biomethane production systems into existing natural gas grids," Energy, Elsevier, vol. 283(C).
    13. Ussama Assad & Muhammad Arshad Shehzad Hassan & Umar Farooq & Asif Kabir & Muhammad Zeeshan Khan & S. Sabahat H. Bukhari & Zain ul Abidin Jaffri & Judit Oláh & József Popp, 2022. "Smart Grid, Demand Response and Optimization: A Critical Review of Computational Methods," Energies, MDPI, vol. 15(6), pages 1-36, March.
    14. Chen, Huadong & Wang, Can & Cai, Wenjia & Wang, Jianhui, 2018. "Simulating the impact of investment preference on low-carbon transition in power sector," Applied Energy, Elsevier, vol. 217(C), pages 440-455.
    15. Mitra Khalilidermani & Dariusz Knez, 2023. "A Survey on the Shortcomings of the Current Rate of Penetration Predictive Models in Petroleum Engineering," Energies, MDPI, vol. 16(11), pages 1-23, May.
    16. Zhang, Rui & Qie, Xiaotong & Hu, Yanyong & Chen, Xue, 2022. "Does de-capacity policy promote the efficient and green development of the coal industry? –Based on the evidence of China," Resources Policy, Elsevier, vol. 77(C).
    17. Yan, Kun & Gao, Hanbo & Liu, Rui & Lyu, Yizheng & Wan, Mei & Tian, Jinping & Chen, Lyujun, 2024. "Review on low-carbon development in Chinese industrial parks driven by bioeconomy strategies," Renewable and Sustainable Energy Reviews, Elsevier, vol. 199(C).
    18. Xu Lei & Tang Shiyun & Deng Yanfei & Yuan Yuan, 2020. "Sustainable operation-oriented investment risk evaluation and optimization for renewable energy project: a case study of wind power in China," Annals of Operations Research, Springer, vol. 290(1), pages 223-241, July.
    19. Hossein Shayeghi & Elnaz Shahryari & Mohammad Moradzadeh & Pierluigi Siano, 2019. "A Survey on Microgrid Energy Management Considering Flexible Energy Sources," Energies, MDPI, vol. 12(11), pages 1-26, June.
    20. Enevoldsen, Peter, 2016. "Onshore wind energy in Northern European forests: Reviewing the risks," Renewable and Sustainable Energy Reviews, Elsevier, vol. 60(C), pages 1251-1262.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:jrpoli:v:89:y:2024:i:c:s0301420724000060. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/inca/30467 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.