Supplies (SC)

This usually covers such items as water for make-up and general use, lubricating
oils, water treatment chemicals, tools and wiping cloths. In general, any items that is not
included in the categories of fuel or maintenance are charged to the supplies account.
(Power Station Engineering and Economics by Skrotzki and Vopat, page 562). This cost
is about 15% of the total cost for maintenance. (Plant Design Engineering and Economics
for Chemical Engineers by Peters and Timmerhaus, p.204)

= (0.15) (LML)
= (0. 15) (96,835,663.4)
=P 14,489,036.14
Supervision
Supervision usually includes the salary of a station superintendent, chief engineer.
chemist, and efficiency engineer (Power Station Engineering and Economics by Skrotzki
and Vopat, page 562,). In some classifications this itern also covers any materials that
these men require.
Operating Taxes (OT)
The magnitude of local property taxes depends on the particular locality of the
plant and the regional laws. Annual property taxes for plants in highly populated areas
are ordinarily in the range of 2-4?'o of the fixed capital investment. In less populated
areas, local property- taxes are about I%-2% of the fired capital investment (Plant
Design Engineering and Economics for Chemical Engineers br Peters and Timmerhaus,
p. 205)
In the chosen locality of the plant, the local tax is about 1.50% as estimation.
= (0.01-0.02) (FCI)
= (0.015) (1,936,713,168 )
= P 29.050.699 02

Total Annual Income (TAI):

Based on the reliable source the designers got from www.npc.gov.ph, the average
price of electricity in Mindanao is P3.3557 per kw/hr. The total income would then be,
= Power x total cost
= (3.3557) (324, 120,000 KW)

= P 1,058,253,552

Total Annual Operating Cost (TAOC):

=P 754,097,439.4
Financing Interest (FI)
Interest is considered to be the compensation paid for the use of borrowed capital
A fixed rate of interest is established at the time the capital is borrowed: therefore. interest is
a definite cost if it is necessary to borrow the capital used to make the investment for a plant.
(Plant Design Engineering and Economics for Chemical Engineers by Peters and
Timmerhaus, p.247').
Annual interest rate is 0%-8% of the total capital investment hence,
= (0.04) (FCI)
= (0.04) (1,936,713,268)
= P 77,468,530.72
Gross Earning Cost (AGE)
AGE = Ti -TAOC (Plant Design Engineering and Economics for Chemical
Engineers by Peters and Timmerhaus, p. 208)
= Total Income - TAOC
= 1,058,253,552- 7 54,097,439.4

= P -304,097,439.4
Profitability
This is employed as a general for the measure of the amount of profit that can be
obtained from a given venture. Profitability, therefore, is a common denominator for all
business activities. The depreciation cost is based in a straight line method.
Pa= Pb-Pbx
Pa = AGE - (AGE x X) where X: 30%
Pa = 304,097,439.4- (304,097,439.4x 0.30)
Pa= 212,868,207.6
Depreciation Cost (DY):
Depreciation cost is an expense due to the assumed periodic decrease in value
throughout the usual life of material possessions of the manufacturing plant such as
equipments, building and other material objects. In order to write off these cost, a decrease
in value is assumed to occur throughout the usual life of the material possessions.
This decrease in value is designated as depreciation is computed using
straight line method;
D = (v-vs)/N
Where;
D = annual depreciation
V = Original Value of the property
V5 = Salvage value at the end of the service life
N = Service Life
N = 30 years.
Since land is not depreciable,
Pay-out Time (POT)
It is defined as the minimum length of time theoretically, necessary to recover the original
capital investment in the form of cash floii to the project used on total income minus all cost
except depreciation.
=FC1 - Land cost/ Pa

Dy = (FCI) / N, N= 30 years
= (2,437,869,303 - 3,825,000) / 30
= 81,138,810. i
POT = 1,936,7 13,268 I 212,868,207 .6/
POT = 9.1 years
ECONOMIC CONCERN AND LOCATION OF HYDRO-POWER PLANT
In designing a power plant proper location or site for the said power plant should
be carefully considered. According to PK Nag on his book of Power Plant Engineering for
a conventional steam power plant, the following factors should be considered
1.
2.
3.
4.
5.
6.

Availability of cooling water.

Availability of fuel.
Distance from the center of gravity of load demand.
Cost of Land.
Rail and road connections.
Security considerations.

There are also considerations to be made aside from the mentioned above it should also be
noted that noise from the plant should not affect the residential community near the plant. As
much as possible, the plant should be located miles from the mentioned community.
Estimation of the Total Capital Investment Cost
I. Direct Cost
The value of the entire plant will be $116,000,000.00 because according to the
feasibility studies we have researched from the net the value of constructing an entire
hydroelectric power plant will be 750-2000 dollars per kilowatt. We assumed that in building
power plant we used the highest possible value which is 2000 dollars per kilowatt where the
609/o of the money will be used in civil engineering purposes such as construction
A.) Purchased Equipment Cost (EQC)
A complete package hydro engine with the complete equipment having a capacity of
58,000 kW with summing up the equipments prices. a total of S-16.'t00,000.00.00 is
obtained.

B.) Purchased Equipment Installation Cost (PEIC)

PEIC = (0.20) (EQC)
PEIC = (0.20) ($46,400,000.00)
PEIC = $ 9,280,000.00
C.) Instrumentation and Control (IAC)
IAC = (0.0ee) (EQC)
IAC = (0.099) ($46,400,000.00)
IAC = $ 4,593,600
F.) Electrical Installation (EI)
EI = (0.10) ($46,400,000.00)
EI = s 4,640,000.00
G.) Yard Improvements (YI)
YI = (0.001) ($46,400,000.00)
YI = $ 46,400.00
H.) Land Cost (LC)
The land in a site chosen by the designers has a price of $ 2,300 per hectare with the
70 hectares used in this design; the amount of the land then is about $160,000.00
TOTAL DIRECT COST (DC) = $ 65,121,000.00
II. Indirect Cost
A.) Engineering and Supervision (EAS)
EAS = (.01XDC)
EAS = (0.01) ($65,121,000.00)
EAS = $ 651,210.00
C. Contractor's Fee (CF)
CF = (0.04) ($65,121,000.00)
CF = $2,604,840 00
TOTAL INDIRECT COST
TIC = 3.156.050 00

III. Fixed Capital Investment (FCD

FCI = Total Direct Cost + Total Indirect Cost
FCI = $ 65,121,000.00+ $ 3,256,050.00
PCI = $68,377,050.00
IV. Working Capital (WC)
WC = (0.15) (TCI)
WC = (0.1 5) ($80,443,588.24)
WC = 12,066,538.24
V. Total Capital Investment (TCI)
TCI = FCI + WC
TCI = $68,377,050.00 + 0.15TCI
TCI = $68,377,050.00/0. 85
TCI = $80,443,588.24
VI. Annual Operating Cost
A.) Labor
It is assumed that the labor cost would be just the same as the steam power plant
considering they have the same number of employees.
The following data is the employees in a power plant with their corresponding annual
salary.
Employee
Plant Manager
Administration and Finance
Division Manager
Section Chief
HR Specialist
Property Officer (2)
Senior Nurse
Senior Security Officer
Finance
Section Chief
Senior Accountant
Senior Financial Specialist
Cashier
Senior Financial Analyst
Plant Technical Services
Division Manager

Salary (Peso)
812,351
689,772
511,272
385,452
770,904
340,908
385,452
514,272
452,796
452,796
340,908
340,908
689,772

Principal Engineer B (2)

QA/Safety
Principal Engineer B
Principal Engineer C
IS/IT Specialist
Operations
Plant Operations Manager
Plant Superintendent (2)
Principal Engineer B (2)
Equipment Operator C (2)
Equipment Operator D (4)
Maintenance
Mechanical
Plant Maintenance Manager
Plant Superintendent
Senior Mechanic (2)
Senior Welder
Electrical
Plant Superintendent
Senior Electrician (2)
Senior Technician (2)
TOTAL
TOTAL WITH 13th MONTH FEE
B. Maintenance Labor and Material (MLM)
MLM = (o.o5XFCI)
MLM = (0.05X $68,377,050 00)
MLM = $ 3,418,852.5
C. Supplies (SC)
SC = (0.15x MLM)
SC = (0.15) ($ 3,418,852.5)
SC = $512,827.875
D. Supervision
Supervision = P 2,442,540
Supervision = $ 61,063.5

905,592
452,796
385,452
385,452
689,771
1,028,544
905,592
414,936
698,976
698,772
514,272
592,752
296,376
514,272
592,752
197,584
P15,955,456
$398,886.4
$432,126.933

E. Operating Taxes (OT)

In the chosen 1oca1i4, for the plant, the local tax is about loo as estimation.
OT = (0 02) (FCI)
OT = (0.02) ($68,377,050.00)
OT = $1,367,547.00
Total Annual Income (TAI).
Based on the reliable source the designers got from www.npc.gov.ph. the average
price of electricity in Mindanao is P3.3557 per kW/hr. The total income would then be.
TAI = (3. 3 5 57) (36,000kw) (24hr) (365days)
TAI = P 1,058,253,552.00
TAI = $ 26,456,339.9
Total Annual Operating Cost (TAOC):
TAOC = $5,792,411.808
VII. Financing Interest (FI)
Annual interest rate is 09,'0-89,6 of the total capital investment. Hence
FI = 0 04 (TCI)
FI = (0.04) ( $80,443,588 00)
FI = $3,217,743.52
VIII. Gross Earning Cost (AGE)
AGE = TAI -TAOC
AGE = $ 26,456,339.9 - $5,792,411.909
AGE = $20,663,926.99
IX Profitability
Depreciation Cost (DY):
D = (v-vs)/N

Where;
D = annual depreciation
V = Original Value of the property
Vs = Salvage value at the end of the service life
Vs = 0
N = Senvice Life
N = 30 years.
Since land is not depreciable,
V = FCI - Land Cost
V = $68,377, 050.00 - $161,000.00
V = $68.216.050 00
Vs = $50,000
DY = ($68, l77, 050.00 -$50,000)/30
DY = $2,277.568.333
A.) Annual Profit (AP)
Annua1 Profit = AGEB (Annual Gross Earnings before tax)
AP = AGE6-xAGEs
X = 35% (Section 24 of the National Internal Revenue Code of the Philippines)
Thus
AP = ($20, 663,926.99) - ($20, 66 3,926.99) (0.35)
AP = $14,464,748.89
B.) Pay - out Time (POT)
POT = Depreciable FCI / (AP)
POT = 568.216,050 00 I ($14,464,748.89)
POT = 4.8 years or approximately 5 years.
C.) Rate of Return (ROR)
ROR = (AP/TCI) x 100
ROR = (14,464,748.89 / $80,443,588.24) x 100
ROR = 17.9835%