Capital Cost EstimatingQ&A

       

                              

                              

Today Suggest you review

Equipment Costing Folder on CD Is this real? What do we do? How does it work?

Methods of estimating Using CapCost What is a “Capital Cost?” ‘Dealing’ with CapCost limitations

       

                              

                              

Is This Real ? Question:

We seem to be applying simplifications and assumptions that this project doesn’t seem very ‘real.’

Your thoughts?

       

                              

                              

Question 1: What do we do?

We will use CapCost which integrates

Estimation of equipment costs Utility costs Raw material costs and product

revenue Other costs Profitability analysis Sensitivity analysis

       

                              

                              

CapCost See the material in the CapCost folder Install the program from the CD that

came with the text (run install.html) View the movies on the CD (run

cost.html) with a computer that has speakers and Quicktime (at home or use the TEAM computer)

Run Capcost.xls and look through it

       

                              

                              

How Does It Work?

       

                              

                              

x x FactorsFactors

Direct Field Cost (DFC)Direct Field Labour (DFL)

Indirect Field Cost (IFC)

Home Office Engineering

Total Project Cost (ITC)Allowances

0.25 x DFC

1.0 to 1.6 x DFL 0

.25

x

DFC

Equipment PurchasePrice Equipmen

t Factors“Off Sites” Cost

       

                              

                              

Estimate•DIRECT FIELD COSTS

•Equipment Cost

•bulk materials (piping, valves, instruments) & labour to install

•off-sites (pipe racks, rail spurs …)

•INDIRECT FIELD COSTS

•engineering, freight, insurance, overhead, const supervision

•CONTINGENCY AND FEES

•first fill of plant, taxes, duties

•escalation

TOTAL PROJECT(CAPITAL)

COST

       

                              

                              

Method 1: Lang Factored Estimate

Total Capital Cost =

Flang * (Sum Of Purchased Cost of Equipment)

Flang = 4.74 for fluid processing plant

       

                              

                              

Method 2: The CapCost ApproachEquipment Parameters (Pressure, MOC, Size, Hp …)

“Base Cost” = Purchase Cost of Equipment - in Carbon Steel and 0 barg

BARE MODULE COST (Directs and Indirects) - installed equipment in actual materials and actual pressure

Bare Module Factor = f (Factorpressure, Factormaterial)

MODULE COST OF PLANT - for expansion to an existing Plant -contingency 15%, fees 3%

Module Factor = 1.18

GRASS ROOTS COST OF PLANT - infrastruction (utilities, off-sites aux. Buildings, product storage, loading and unloading facilities ...)

Grass Roots Factor = 1.30 CHEE470 StopsHere

Which One Do We Want?

       

                              

                              

Determine Equipment Cost

Fixed Tube exch with28 m2 = $6500

Convert ToToday’s $’s using the CEPCI value

Note: Price for Carbon Steel Construction and 0 Bar(g)

       

                              

                              

Factor to Today’s Cost

$6500 * (1999 CECPI / 1996 CECPI) = today’s cost

$6500 x (390.6 / 381.7) = $6650 in 1999

       

                              

                              

Pressure Factor (Fp)

Pressure FactorFp = 1.14

       

                              

                              

Material Factor (Fm)

       

                              

                              

Bare Module Factor FBM

Fp Fm

1.14 x 3 = 3.42

Therefore FBM = 7

Bare Module Cost= Base Cost x FBM

= $6650 x 7= $46,550

Cost of Equipment Installed

       

                              

                              

“Module Cost” Of Plant

Add Contingency and Fees (building permits, environmental permits etc.)

Module Cost = 1.18 (of Bare Module Cost for all equipment)

Module Cost = 1.18 x $46,550 = $ 54,900

       

                              

                              

Now a Short Demo A movie to illustrate the capital cost

sections of CapCost One of the sheets in an Excel workbook The utilities, raw materials and cash

flow sections will be covered later in the Economic Analysis workshop

       

                              

                              

Questions What do we do when equipment is

larger than CapCost can cost? Split it up into equal sized pieces Get a cost in CapCost and then apply

the capacity factor exponent new cost=old cost x capacity ratio0.6

       

                              

                              

Special Equipment CapCost has an equipment type “User

Defined” If you know the cost of something, you

can supply A name Equipment cost Bare Module Cost

Set the first factor to 1, ignore the second

       

                              

                              

User Defined Equipment

       

                              

                              

Question What is a capital cost?

       

                              

                              

Capital Cost What’s “Capital ?”

Capital is the money required to build a plant or facility

It’s separated from “Expense” money because of the Tax implications imposed by Revenue Canada, IRS, etc.

       

                              

                              

Facility Timeline

ConceptualEngineering

Detailed Engineering& Construction

Start-up

Capital $Expense $ Expense $

Capital Cost

Facility Creation Facility Operation

Expense $- Operating Expenses-Depreciation

       

                              

                              

Capital vs ExpenseOnce the plant is running ‘Expenses’ are small items or costs which are incurred yearly, or have about a 1 year life.

i.e. Software, Office supplies, wages, advertising, heat, lighting, ...

When Calculating Yearly Income Subtract your Expenses From Your Income

       

                              

                              

Capital vs Expense ‘Capital’ are expensive items or items which

have more than a year of life. i.e. House, lawnmower, TV, computer,

chemical plant equip, first fill of chemicals Revenue Canada etc. only allow you to

subtract a % of the Capital every year to account for the wearing out of the facility (depreciation). This is called the “Capital Cost Allowance”

       

                              

                              

Capital vs Expense Capital Cost Allowance ( CCA )

Works Like a Bank Account Revenue Canada allow a % of the

remaining asset value to be claimed

RemainingAsset Value

Time (years)

       

                              

                              

CCA Classes

       

                              

                              

Capital vs Expense Revenue Canada Treat Depreciation per

above More common (?) to treat Depreciation

with a straight line for the economic analysis 10 year depreciation, therefore 10%

of capital is ‘expensed’ per year

       

                              

                              

Taxable Income Income That’s Taxable (Net Income)

Taxable Income = Income - Expenses - CCA

Can’t use CCA if Expenses are greater than Income (can’t use CCA to claim a loss)

CCA can be ‘banked’ for later years where profit is occurring

       

                              

                              

Small Business Tax- Revenue

       

                              

                              

Small Business Tax - Expenses

CCA

       

                              

                              

Capital - The Point Capital is only allowed to be

‘depreciated’ over years and thus it’s ability to minimize taxable income is limited.

Expenses are claimed in the year they’re paid. They’re better for minimizing your taxes.

The Games People play

       

                              

                              

The Capital Cost Estimate

The tax implications of Capital money requires that you know how much Capital was spent on any asset.

The business financial analysis (NPV etc.) requires that you know the Capital Cost and the Operating Cost well ahead of actually spending any significant amounts of money.

       

                              

                              

Capital Cost Estimate Summary:

The cost to initially build the facility which will be depreciated over time.

       

                              

                              

Question: CapCost - arrggh! CapCost does not change price when we

change the maximum pressure. What’s wrong?

       

                              

                              

Off The Shelf Items

Piping, Valves, Pumps and most equipment have been standarized in design pressures of the connecting Flange

Standards are called 150, 300, 600, 900, 1500, 2500 “lb” flange ratings. A 150lb rating 150 psig rating,

temperature is important in the ultimate strength of the item

Along with standard flanges are standard pipe wall thickness (Sch 40, Sch 80 etc.)

       

                              

                              

Max Pressure vs Temp

0

200

400

600

800

1000

1200

1400

1600

0 500 1000

Temp (°F)

Pre

ssu

re (

psi

g) 150 lb Rating

300 lb Rating

600 lb Rating

300 lb 304 SS

600 lb 304 SS

Flange Rating

       

                              

                              

Heat Exchanger Standards TEMA - Tubular Exchanger

Manufacturers Association dictates minimum requirements for

exchanger mechanical design Legislation does not require TEMA

standards be used.

       

                              

                              

ASME- Pressure Vessel Standards ASME Code

It started in Chicago after a major explosion in a shoe factory that had a boiler. The boiler explosion caused the government to start regulating pressure vessels (including boilers).

A tool for regulating manufacturers of pressure vessels, heating exchangers, and piping, not pumps, not compressors (no rotating equipment)

       

                              

                              

ASME- Pressure Vessel Standards

Since the explosion in Chicago codes were developed for the guidance in the calculation of pressure vessels, tables of metal strength vs temp

Safety factor of 4 has historically been applied to the mechanical strength of metal, recently (year 2000) it was reduced to 3.5

       

                              

                              

ASME Code SectionsI - Power Boilers

II - Materials (properties i.e. allowable stresses)

III - Nuclear Power Plants

IV - Heating BoilersV - Non Destructive Examination

VII - Guidelines for the Care and Operation of Heating Boilers

IX - Welding and Brazing Qualifications

X - Fiber-Reinforced Plastic Pressure Vessels

XI - Rules for Inservice Inspection of Nuclear Power Plant Components

       

                              

                              

Minimum Design and CapCost Allowing CapCost to choose a minimum

makes sense since the manufacturer would do the same.

       

                              

                              

The Final Screen