IDEAS home Printed from https://ideas.repec.org/a/mup/actaun/actaun_2015063041365.html
   My bibliography  Save this article

Financial Profitability and Sensitivity Analysis of Palm Oil Plantation in Indonesia

Author

Listed:
  • Tereza Svatoňová

    (Department of Mechanical Engineering, Faculty of Engineering, Czech University of Life Sciences Prague, Kamýcká 129, 165 00 Praha 6-Suchdol, Czech Republic)

  • David Herák

    (Department of Mechanical Engineering, Faculty of Engineering, Czech University of Life Sciences Prague, Kamýcká 129, 165 00 Praha 6-Suchdol, Czech Republic)

  • Abraham Kabutey

    (Department of Mechanical Engineering, Faculty of Engineering, Czech University of Life Sciences Prague, Kamýcká 129, 165 00 Praha 6-Suchdol, Czech Republic)

Abstract

Oil palm cultivation in Indonesia is increasing. This study investigates the financial and economic aspects of establishing an oil palm plantation using data collected in 2014. The financial case study is undertaken from the perspective of company in North Sumatra, Indonesia. A spreadsheet model was used to develop and calculate the net present value (NPV), return of investment (ROI), internal rate of return (IRR) and payback period (PP). Sensitivity analysis of the NPV to the default discount rate (10%) was included. A 8,000 ha plantation over 25 years was estimated to result in a positive NPV of USD 10,670 with a ROI 73.50% and an IRR at 14.83% and payback period of 6.75 years. Establishing an oil palm plantation seems to be very profitable investment on the basis of the assumptions made. System is tested on sensitivity in different capital and recurrent costs and in selling price of raw material, while change in selling price of FFB is more sensitive to NPV than change in investment and recurrent costs Discount rate is also one of the factors affecting NPV and system is tested between 5-15% change in discount rate.

Suggested Citation

  • Tereza Svatoňová & David Herák & Abraham Kabutey, 2015. "Financial Profitability and Sensitivity Analysis of Palm Oil Plantation in Indonesia," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 63(4), pages 1365-1373.
    • Handle: RePEc:mup:actaun:actaun_2015063041365
    DOI: 10.11118/actaun201563041365
    as

    Download full text from publisher

    File URL: http://acta.mendelu.cz/doi/10.11118/actaun201563041365.html
    Download Restriction: free of charge
    File URL: http://acta.mendelu.cz/doi/10.11118/actaun201563041365.pdf
    Download Restriction: free of charge
    File URL: https://libkey.io/10.11118/actaun201563041365?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. Mekhilef, S. & Siga, S. & Saidur, R., 2011. "A review on palm oil biodiesel as a source of renewable fuel," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(4), pages 1937-1949, May.
    2. Lim, Steven & Teong, Lee Keat, 2010. "Recent trends, opportunities and challenges of biodiesel in Malaysia: An overview," Renewable and Sustainable Energy Reviews, Elsevier, vol. 14(3), pages 938-954, April.
    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. Erwan Hermawan & Adiarso Adiarso & Sigit Setiadi & Dudi Hidayat, 2023. "Strategy for the implementation of sustainable green fuels in Indonesia," ECONOMICS AND POLICY OF ENERGY AND THE ENVIRONMENT, FrancoAngeli Editore, vol. 2023(1), pages 103-139.
    2. Tomáš Saller & David Herák, 2023. "Utilisation of rheological models for describing the mechanical behaviour of oil palm empty fruit bunches under compression loading," Research in Agricultural Engineering, Czech Academy of Agricultural Sciences, vol. 69(4), pages 199-205.
    3. Tomas Saller & David Herák, . "Utilisation of rheological models for describing the mechanical behaviour of oil palm empty fruit bunches under compression loading," Research in Agricultural Engineering, Czech Academy of Agricultural Sciences, vol. 0.
    4. Sharvini, S.R. & Noor, Z.Z. & Stringer, L.C. & Afionis, S. & Chong, C.S., 2022. "Energy generation from palm oil mill effluent: A life cycle cost-benefit analysis and policy insights," Renewable and Sustainable Energy Reviews, Elsevier, vol. 156(C).
    5. Harahap, Fumi & Silveira, Semida & Khatiwada, Dilip, 2019. "Cost competitiveness of palm oil biodiesel production in Indonesia," Energy, Elsevier, vol. 170(C), pages 62-72.
    6. L. Kiely & D. V. Spracklen & S. R. Arnold & E. Papargyropoulou & L. Conibear & C. Wiedinmyer & C. Knote & H. A. Adrianto, 2021. "Assessing costs of Indonesian fires and the benefits of restoring peatland," Nature Communications, Nature, vol. 12(1), pages 1-11, December.

    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. Mahlia, T.M.I. & Syazmi, Z.A.H.S. & Mofijur, M. & Abas, A.E. Pg & Bilad, M.R. & Ong, Hwai Chyuan & Silitonga, A.S., 2020. "Patent landscape review on biodiesel production: Technology updates," Renewable and Sustainable Energy Reviews, Elsevier, vol. 118(C).
    2. Gan, Peck Yean & Li, Zhi Dong, 2014. "Econometric study on Malaysia׳s palm oil position in the world market to 2035," Renewable and Sustainable Energy Reviews, Elsevier, vol. 39(C), pages 740-747.
    3. Mofijur, M. & Masjuki, H.H. & Kalam, M.A. & Ashrafur Rahman, S.M. & Mahmudul, H.M., 2015. "Energy scenario and biofuel policies and targets in ASEAN countries," Renewable and Sustainable Energy Reviews, Elsevier, vol. 46(C), pages 51-61.
    4. Kalam, M.A. & Ahamed, J.U. & Masjuki, H.H., 2012. "Land availability of Jatropha production in Malaysia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(6), pages 3999-4007.
    5. Awalludin, Mohd Fahmi & Sulaiman, Othman & Hashim, Rokiah & Nadhari, Wan Noor Aidawati Wan, 2015. "An overview of the oil palm industry in Malaysia and its waste utilization through thermochemical conversion, specifically via liquefaction," Renewable and Sustainable Energy Reviews, Elsevier, vol. 50(C), pages 1469-1484.
    6. Darshini, Dina & Dwivedi, Puneet & Glenk, Klaus, 2013. "Capturing stakeholders´ views on oil palm-based biofuel and biomass utilisation in Malaysia," Energy Policy, Elsevier, vol. 62(C), pages 1128-1137.
    7. Ashnani, Mohammad Hossein Mohammadi & Johari, Anwar & Hashim, Haslenda & Hasani, Elham, 2014. "A source of renewable energy in Malaysia, why biodiesel?," Renewable and Sustainable Energy Reviews, Elsevier, vol. 35(C), pages 244-257.
    8. Mofijur, M. & Masjuki, H.H. & Kalam, M.A. & Hazrat, M.A. & Liaquat, A.M. & Shahabuddin, M. & Varman, M., 2012. "Prospects of biodiesel from Jatropha in Malaysia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(7), pages 5007-5020.
    9. Anuar, Mohd Razealy & Abdullah, Ahmad Zuhairi, 2016. "Challenges in biodiesel industry with regards to feedstock, environmental, social and sustainability issues: A critical review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 58(C), pages 208-223.
    10. Mohd Noor, C.W. & Noor, M.M. & Mamat, R., 2018. "Biodiesel as alternative fuel for marine diesel engine applications: A review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 94(C), pages 127-142.
    11. Chakraborty, Rajat & Gupta, Abhishek.K. & Chowdhury, Ratul, 2014. "Conversion of slaughterhouse and poultry farm animal fats and wastes to biodiesel: Parametric sensitivity and fuel quality assessment," Renewable and Sustainable Energy Reviews, Elsevier, vol. 29(C), pages 120-134.
    12. Atabani, A.E. & Silitonga, A.S. & Badruddin, Irfan Anjum & Mahlia, T.M.I. & Masjuki, H.H. & Mekhilef, S., 2012. "A comprehensive review on biodiesel as an alternative energy resource and its characteristics," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(4), pages 2070-2093.
    13. Jun Sheng Teh & Yew Heng Teoh & Heoy Geok How & Thanh Danh Le & Yeoh Jun Jie Jason & Huu Tho Nguyen & Dong Lin Loo, 2021. "The Potential of Sustainable Biomass Producer Gas as a Waste-to-Energy Alternative in Malaysia," Sustainability, MDPI, vol. 13(7), pages 1-31, April.
    14. Obed M. Ali & Rizalman Mamat & Gholamhassan Najafi & Talal Yusaf & Seyed Mohammad Safieddin Ardebili, 2015. "Optimization of Biodiesel-Diesel Blended Fuel Properties and Engine Performance with Ether Additive Using Statistical Analysis and Response Surface Methods," Energies, MDPI, vol. 8(12), pages 1-15, December.
    15. Charlotte Stead & Zia Wadud & Chris Nash & Hu Li, 2019. "Introduction of Biodiesel to Rail Transport: Lessons from the Road Sector," Sustainability, MDPI, vol. 11(3), pages 1-20, February.
    16. Rulli, Maria Cristina & Casirati, Stefano & Dell’Angelo, Jampel & Davis, Kyle Frankel & Passera, Corrado & D’Odorico, Paolo, 2019. "Interdependencies and telecoupling of oil palm expansion at the expense of Indonesian rainforest," Renewable and Sustainable Energy Reviews, Elsevier, vol. 105(C), pages 499-512.
    17. Ullah, Kifayat & Kumar Sharma, Vinod & Dhingra, Sunil & Braccio, Giacobbe & Ahmad, Mushtaq & Sofia, Sofia, 2015. "Assessing the lignocellulosic biomass resources potential in developing countries: A critical review," Renewable and Sustainable Energy Reviews, Elsevier, vol. 51(C), pages 682-698.
    18. Pandey, Vimal Chandra & Singh, Kripal & Singh, Jay Shankar & Kumar, Akhilesh & Singh, Bajrang & Singh, Rana P., 2012. "Jatropha curcas: A potential biofuel plant for sustainable environmental development," Renewable and Sustainable Energy Reviews, Elsevier, vol. 16(5), pages 2870-2883.
    19. Silitonga, A.S. & Atabani, A.E. & Mahlia, T.M.I. & Masjuki, H.H. & Badruddin, Irfan Anjum & Mekhilef, S., 2011. "A review on prospect of Jatropha curcas for biodiesel in Indonesia," Renewable and Sustainable Energy Reviews, Elsevier, vol. 15(8), pages 3733-3756.
    20. Mofijur, M. & Atabani, A.E. & Masjuki, H.H. & Kalam, M.A. & Masum, B.M., 2013. "A study on the effects of promising edible and non-edible biodiesel feedstocks on engine performance and emissions production: A comparative evaluation," Renewable and Sustainable Energy Reviews, Elsevier, vol. 23(C), pages 391-404.

    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:mup:actaun:actaun_2015063041365. 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: Ivo Andrle (email available below). General contact details of provider: https://mendelu.cz/en/ .

    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.