Economics and Business
ISSN 2775-9237 (Online)
Published: 15 October 2022
Utilizing LNG as a Cheap and Environmentally Friendly Energy Source (Regasification) in West Java
Achmad Faisal, Edison Sembiring, Kholil
Sahid University, Indonesia
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Keywords: Business Plan, Economic Feasibility, Environmentally Friendly Energy, LNG
The increase in population and economic development requires more energy support that grows every year. To meet energy needs in Indonesia, especially in Java, it is necessary to find cheap and environmentally friendly energy sources other than oil and coal, by utilizing LNG (Liquid Natural Gas). This study aims to determine the business feasibility of developing an LNG terminal as a cheap and environmentally friendly energy source (regasification) in West Java. The approach used in this research is analytical descriptive, data collection through interviews and discussions with stakeholders selected from the retail LNG terminal which includes owners, potential investors, potential customers and competitors. The data analysis used economic feasibility NPV (Net present value), IRR ( Internal Rate Of Return), PBP (payback period) and PI (Profitability Index). The results of the analysis show that the construction of the LNG terminal is feasible with the net present value of the project amounting to USD 9,883,927 with a discount of 11%. This result displays a positive NPV value which means that the invested funds are able to generate positive cash flows thus the NPV value is positive. IRR Project value is 12.48% and IRR Equity is 19.42% which is greater than bank interest. The payback period for this LNG project is 6 years with a profitability index (PI) of 1.3. A PI value of 1.3 which is greater than 1 means that the proposed investment project is declared feasible (accepted). It also indicates the present value of cash inflows generated by the investment project is greater than the present value of cash out flows. Given the urgent need for alternative energy, the construction of an LNG terminal must be carried out immediately; therefore, it needs affirmative policy support from the government.
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