Thinking beyond EPC

November 3, 2014 Samir Idris

How a full-service partner can help safeguard investments in cement plants.

For cement plant owners and investors in today’s demanding business environment, strong partners are a necessity to provide the elements and conditions for efficiently designing and building cement plants - adding capacity and expanding to new markets. Entering into an EPC contract is one way to minimise risk and streamline the process by providing a single source for the delivery of the plant. 

But an EPC contract alone may not be enough to ensure that the plant’s long-term business goals are met. Owners and investors also need assurances that the ongoing operations and maintenance (O&M) of the plant will support the market potential: What happens after production is underway? How will it be staffed and run? How will the plant’s performance goals be monitorised and optimised?

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Design, build and then operate 
The return on investments in a cement plant are achieved through maximising future cement sales. It is therefore vital that investors know how the cement plant will operate over the full extent of its lifetime and have certainty that it can deliver to its full potential. Planning for the long-term operating potential at the same time as preparing the EPC contract will reduce the investment risk, shorten payback time and maximise the return on investment. 

The key is to bring an O&M strategy into the EPC planning from the outset. This will deliver assurances from the very beginning that the plant will run smoothly and deliver the expected return over the full lifetime of the plant.

A strategic approach to O&M requires extensive operational expertise and planning, but contributes significantly to a plant’s bottom line. An effective O&M strategy includes several elements, such as:
•    Implementing and ensuring health, safety and environmental practices in accordance with international standards
•    Having clear performance goals associated with the performance of the plant staff
•    Ensuring sufficient technical expertise is available to run and maintain the plant
•    Ensuring strong organisational and technical training capabilities
•    Securing that the supply chain and organisation is in place to deliver original spare parts 
•    Implementing IT systems for optimising  plant management and maintenance

One-source partner
Forming a full plant lifecycle strategy may seem a complex task before construction begins. That is why it is important to work with a partner who can assist you to plan for the future and navigate every step of the process. A single-source supplier should have the capabilities to provide full life-cycle support, from initial raw material investigation through construction and commissioning to ongoing day-to-day performance. They need to know how to put together a complex industrial project, manage suppliers and contractors, build new organisation and ensure the operational organisation runs efficiently. 

Risk sharing, in particular, should be carefully planned. Typically, the plant owner is responsible for fundamental supply issues, such as power, water, fuel and raw materials as well as capital investments in machinery and property. The full-service provider helps define specifications and make recommendations where and when necessary.

The key is for the owner to be able to transfer the risk and complexities of the operations to a single partner who is responsible for engineering, procurement, construction, and operating and maintaining the facility according to best-in-class standards. This leaves the plant owner to focus on building the business and the marketing and selling of the cement.

Opening doors to financing 
Financing for a cement plant is challenging, and a complete design, build and operations strategy can make a significant difference to the financing terms.  Early on, banks require risk assessments and certainty that production goals and cash flow targets will be met. However, this can only be predicted with reasonable accuracy if the daily operations have been planned in detail from the outset. Thorough strategic planning demonstrates to financial institutions how long-term revenues will be generated and tailor-made solutions guide the investor through the entire process covering all financial institutions requirements to facilitate the credit needed with the right repayment strategy in place. In addition, having the right partner gives the financial institution the best guarantee that the plant will be a successful investment. 

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Sustainable, profitable operations
With an end-to-end solution covering design, build and operations, cement plant owners can put their business goals into action, guaranteeing the most efficient and sustainable model to develop the business and achieve the bottom-line results demanded over the lifetime of the investment. By guaranteeing the plant is operated and maintained according to the highest standards, the plant delivers a lower total cost of ownership and ensures that the asset maintains the highest possible value throughout the plant lifetime.

"Planning for the long-term operating potential at the same time as preparing the EPC contract will reduce the investment risk, shorten payback time and maximise the return on investment "

FLSmidth’s Design, Build, Operate Solution 
FLSmidth provides a unique 360° certainty solution for the cement plant lifecycle, covering everything from initial raw material investigation and Engineering, Procurement and Construction (EPC) through to ongoing operation and maintenance services. 

Our combined EPC and O&M solution is a unique offering managed by some of the most experienced engineers in the business alongside locally recruited staff who are trained and integrated into our expert teams.

With 130 years of specialist know-how, FLSmidth can guarantee a fully sustainable and efficient model that will grow the plant – and profits – long after operations begin.

Read more about our EPC solution >>

 

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