Cost-driven model for aquaculture evaluation

Introduction

The cost-driven techno-economic model aims to supply the analyst with the appropriate indicators and project's annual economic values such as revenues and expenses cashflows, earnings before and after depreciation, cummulative profit / loss, that will be useful in the aqua farm's overall project investment evaluation.
Due to the nature of the aqua farm project the model is enhanced with depreciation and equipment replacement schedule techniques in order to break down and plan for the technological parts' costs over time.
Through the analysis of costs versus revenues over the project's timespan the model supplies the indicators' formulas with the required values for them to produce meaningful results for the analyst.

Cost

Component List

List of infrastructure components required for establishment and operation. The list includes

  • pricing information
  • price behaviour parameters (behavioural class, factors etc)
  • write-off period / depreciation.
  • maintenance needs (in labour hours/period and labour class needs)
  • other operational costs: power / labour / fuel ...

etc

Shopping List

Infrastructure to be purchased, pointing out components and the period of time that they will be acquired (or sold). Purchases go by the current price, sales go by depreciated price.

Several elements with different volumes / analysis period

Investment Costs

List of direct and indirect costs for the project

  • Pre-project study and analysis expenses
  • Main Equipment
  • Equipment installation costs
  • Electrical installation
  • General starting-up costs (minor various costs that may sum up to a notable expense)
  • Engineering and supervision
  • Construction expenses

Maintenance Costs

Operation Cost

Infrastructure & Equipment Depreciation

The installed equipment and the existing infrastructure in general will be subject to value depreciation. Depreciation legislation may vary per country / location.

Revenue

Production (products)

  • List of different species farmed and their charecteristics.
  • Total weight of production per period and species.
  • Optimal sell age of each species must be defined (time-frame containing the optimal value in which the current product is still acceptable by the market)

Sales

  • Volumes
  • Prices (& price curves)

Market Size / definition

The number of customers addressed (products address specific markets, with specific penetration rates)

Market Penetration

The penetration of a product in a market (%)

Cannibalization phenomena

The negative impact of a new product on the sales of existing related products.

Sales price

The price evolution of a product (do we assume equal prices across markets ? )

Revenues

The revenues of the Aqua Farm from its main business activities

Output

Cash Flows

Yearly cash flows of expenses and income

KPIs

  • NPV: Net Present Value (with socio-economic alternative computation function)
  • IRR: Internal Rate of Return
  • Yearly Net Profit Margin = (Revenues - Expenses) / Expenses

Parameters

Tax Rate

The tax over profits percentage

Indicative value: 0.29

Price Inflation Rate

This is the base year inflation rate that is used for the estimation of the project's key components' prices over a ten year period.

Time To Deduct Losses

The rolling window on which losses are deductible in taxes (in years)

Indicative Value 5 year (1 = next year only)

Labour Hourly Rate

Per specialty class, the hourly rate of labour

Interest Rate

The rate of interest of loans.

Analysis period length

The analysis period length. Indicatively 1 year. Other periods : 6-month, quarterly, monthly

Component price behaviour

Price curve for a particular class of component. Input are factors of the curve, output is the price at a given time-point.

Labour costs

Classes of labour costs, along with parameters to describe their time evolution.

References