DEVELOPING SENA

AS AN INSPECTION AND CERTIFICATION

SERVICE PROVIDER

GROUP FIELD PROJECT

By:

Jernih Debora Sinaga (162210047)

Selo Purna Atmani (162210065)

Sondang Aryanto (162210066)

Academic Supervisor:

Sony W. Antonio, S.T, M.M

MASTER OF MANAGEMENT PROGRAM

IPMI BUSINESS SCHOOL

JAKARTA

2017

DEVELOPING SENA

AS AN INSPECTION AND CERTIFICATION

SERVICE PROVIDER

GROUP FIELD PROJECT

By:

Jernih Debora Sinaga (162210047)

Selo Purna Atmani (162210065)

Sondang Aryanto (162210066)

Academic Supervisor:

Sony W. Antonio, S.T, M.M

MASTER OF MANAGEMENT PROGRAM

IPMI BUSINESS SCHOOL

JAKARTA

2017

DEVELOPING SENA

AS AN INSPECTION AND CERTIFICATION

SERVICE PROVIDER

Prepared by:

Jernih Debora Sinaga (162210047)

Selo Purna Atmani (162210065)

Sondang Aryanto (162210066)

A GFP

Submitted in a partial fulfillment of the requirements for the degree of

Master in Business Administration (MBA)

iii

Table of Content

Certificate of Approval………………………………………………………... i

Non-Plagiarism Declaration.………………………………………………….. ii

Table of Content………………………………………………………………. iii

List of Figures………………………………………………………………… v

List of Tables………………………………………………………………….. vi

Acknowledgement……………………………………….................................. vii

Executive Summary…………………………………………………………... viii

Chapter 1: Introduction………………………………………………………... 1

1.1. Industry Background.……………………………………………………... 1

1.2. Company Background…………………………………………………….. 3

1.3. Problem Background……………………………………………………… 11

Chapter 2: Literature Review …………………………………………………. 13

2.1. The Micro Environment…………………………………………………… 13

2.2. The Macro Environment…………………………………………………… 16

2.3. SWOT and TOWS Analysis………………………………………………. 20

2.4. Industry Competitiveness………………………………………………….. 23

2.5. Identifying The market Segmentation, Targeting and Positioning……….... 27

2.6. Competitive Advantage, Competitive Strategy and Company Value……… 30

2.7. Business Expansion………………………………………………………… 31

2.8. Risk Management………………………………………………………….. 33

iv

2.9. MIGAS Certification………………………………………………………. 37

2.10. The Marketing Mix – 7Ps plus Technology Framework…………………. 40

2.11. Financial Analysis………………………………………………………… 43

Chapter 3: Methodology………………………………………………………. . 48

3.1. Method of Study…………………………………………………………… 48

3.2. Research Design…………………………………………………………… 49

Chapter 4: Findings, Analysis and Discussions………………………………… 38

4.1. Feasibility Study in 7 Aspects……………………………………………… 51

4.2. TOWS Analysis……………………………………………………………. 59

4.3. Financial Analysis………………………………………………………….. 63

Chapter 5: Conclusions and Recommendations……………………………….. 69

5.1. Conclusions……………………………………………………………….. 69

5.2. Recommendations………………………………………………………… 70

References and Bibliography………………………………………………….. 71

Appendix

v

List of Figures

Figure 2.1 The Macro Environment…………………………………………... 17

Figure 2.2 A Potential Framework For a SWOT Analysis……………………. 21

Figure 2.3 TOWS Strategic Alternatives Matrix……………………………… 22

Figure 2.4 Forces Driving Industry Competition.……………………………. 24

Figure 2.5 Four Basic Process to Choose Target Market……………………… 27

Figure 2.6 The 7 Ps Framework ………………………………………………. 40

Figure 3.1 Research Design Process ………………………………………….. 50

Figure 4.1 Risk Heat Map …………….……………........................................ 58

Figure 4.2 TOWS Matrix………….…………….............................................. 60

Figure 4.3 Return on Investment ………........................................................... 66

Figure 4.4 Return on Equity ……….…………….............................................. 67

Figure 4.5 Sales………….…………….............................................................. 67

vi

List of Tables

Table 2.1 Types of Competition…………………………………………....... 15

Table 2.2 Level of Competition……………………………………………… 16

Table 4.1 Risk Identification and Mitigation Plan …....................................... 57

Table 4.2 Volume Projection ………….……………....................................... 68

vii

Acknowledgement

First of all we would like to thank to our merciful God the almighty because without

His blessings, we would never finish our Group Field Project (GFP), Developing

SENA as an Inspection and Certification Service Provider.

This GFP also would not have been possible without the financial support of our

company PT Perusahaan Gas Negara (Persero) Tbk especially from Board of

Directors, Human Capital Management Division and our own Division /

Department / Subsidiaries. We are especially indebted to Mr Jeffry H Simanjuntak

PT Solusi Energy Nusantara (SENA) (PT PGAS Solution Subsidiaries), all partners

in PT PGAS Solution (PT PGN (Persero) Tbk Subsidiaries), Mrs Amanarita

Performance and Portfolio Management Group Head (PT PGN (Persero) Tbk),

Mr Arief Yandi Putra Jaya (PT PJ-Tek Mandiri) as our Mentor and Subject Matter

Experts that give guidance and data for completing the GFP and makes it perfect.

We are grateful to all of those whom we had the pleasure working during this project

such as Mr Feraldi W Loeis and Mr. Sony W Antonio as our advisor, teacher and

also mentor in Management Development Program, Mr Bambang Gunawan and

Mr Roy Sembel as the academic supervisor and also the Dean of IPMI, all IPMI

lectures, IPMI admin academic and all the people that directly or indirectly

involved in Program PGN-IPMI International Business School, Hotman Zainal

Arifin (HZA) Training Consultant, All member of Lebah Menyengat Group, Miss

Nita Widyasymanti and Mr. Imron that contribute a lot in analyzing and designing

our GFP

Finally nobody has more important to us in the pursuit of this GFP than our beloved

family who are the most important and supportive person that keep encouraging

and provide unending inspiration for us to finish all the assignment in Executive

Master of Business and Administration Program until now.

Thank You.

viii

Executive Summary

Delivering reliable engineering solution in oil and gas industry not only one of

SENA objectives in order to become more existence in engineering industry. Being

sustain, increasing profit and market share, reducing cost from doing this inspection

and certification by PGN Group itself, in terms of work safety inspection in PGN

activities are another additional objective why this projection is being proposed.

Feasibility studies has been done by considering in 7 (seven) aspects among others:

Operational, Legal, Technical, Competitors, Environment-Social & Risk, Market

and Financial Aspect. Assumptions in financial aspect is considering with current

situation. TOWS analysis regarding internal and external condition has been done

in order to set up the strategies to strengthen the weaknesses and catch up the

opportunities for sustainability growth of company. The outcomes through did

some analysis shown that this project is profitable, attractive and related to the

objective of company simultaneously in complying with regulations in oil and gas

activities.

This project is feasible to do while doesn’t need any significant capital and

infrastructure in operate it. Company able to use SO Strategies, ST Strategies and

also WO strategies to obtain market share in Indonesia and generate profit growth

for the company. It will not only impacting to the sustainability of SENA but also

positive corporate value for PGN.

Hire experience and competence expert as a pipeline and equipment inspector able

to do if it is needed. Manpower planning program including people development

must be set up before operated this business. Build relationship and networking

with regulator and other parties should be maintain. Placing educated technician to

each customers, delivery and excellent service could be value added and makes

SENA more attractive than other competitors.

1

CHAPTER 1

INTRODUCTION

1.1. Industry Background

Oil and gas are important sectors for human life. In addition to national wide

development both in terms of fulfilment of energy needs such as fuel vehicles

and in the country, as well as the country’s foreign exchange earners. Natural

gas is also considered an alternative energy to replacing air and wind as a power

plant.

According to The World Bank, Indonesia is undergoing a historic

transformation from a rural to an urban economy, with growing rate about

4,1% per year. By 2025, Indonesia can expect to have 68% of its population

living in urban areas. Much of that population will be young and middle class-

increasing the demand for electricity and stimulating growth for business and

industry. This energy requirement could be a golden opportunity for PGN who

has experience operating gas network to serve more than 1.500 Commercial

Customers and 2.081 Industrial-Manufacture Customers, and as a supporting

to the Indonesia government in country growth in using natural gas. With

expanding infrastructure, engineering expertise, deep industry experience and

proven capabilities in the upstream, midstream and downstream sectors, PGN

is best qualified to energize Indonesia’s future.

As a State-Owned Enterprise that engages in the natural gas downstream

business, PGN conducts its business activities in the areas of natural gas

transportation and trading. PGN provide an integrated natural gas

infrastructures to support natural gas trading and ensure the quality of the

natural gas (natural gas composition, pressure, temperature) and the service

(customers contacts, disruption handling) that PGN serve for their customer.

2

PGN divided its business activities into 4 (four) principal business segments,

which are:

1. Natural gas transmission businesses

2. Natural gas trading business

3. Natural gas and oil business

4. Other businesses, i.e. telecommunication, services, constructions and

maintenance of pipeline networks, building management, and financial

lease align with the company’s business strategy.

PGN has grown into a natural gas provider with an integrated infrastructures

that provides the most complete solution in the market. The establishment of

Subsidiaries was intended for supporting the core business and strengthening

the Company’s position in the efforts to increase the domestic natural gas

utilization. One of PGN Subsidiary that currently engages in Operation &

Maintenance Services, Engineering Services, Engineering Procurement and

Construction Services as well as Trading Services is PT PGAS Solution. To

be more competent in engineering field of oil and natural gas, PGAS Solution

has established a new subsidiary which is call as PT Solusi Energi Nusantara

(SENA).

Seeing the importance of oil and gas to human life, it should be able to manage

optimally, especially in terms of facilities and natural gas pipeline. With the

expansion of oil and gas activities, as well as geothermal resources utilizing

high technology, safety and environmental protection by conducting safety

checks on installation, equipment and techniques that used in order to protect

labour, installations, equipment, facilities and networks as well as security of

oil, natural gas and geothermal resources is needed. As has been set out in

Regulation of Minister of Mines and Energy No.: 06 P/0746/M.PE/1991.

Hence to minimize risks and to support the operation of oil and so that the

installation, equipment and techniques used in oil and gas mining operations

must be carried out safety inspection.

3

The safety inspection shall be carried out by the Head of the Mine Inspection

Inspector and the Mining Inspector of the Directorate General of Oil and Gas,

who shall meet the requirement of expertise and theoretically expert in oil and

gas and have sufficient experience. This regulation give the opportunities for

other eligible parties to assist in the conduct of safety inspections. After having

safety inspection, the Director General shall issue a Feasibility Certificate of

use of the installation, equipment and techniques used.

Accordance to the above conditions, it could be an opportunity as a new

business for PGN to participate as a partner who assist the Directorate General

to perform the implementation of safety inspection. In addition to having

technical expertise, industry experience, competent resources and certified

pipeline inspectors, and proven capabilities in the upstream, midstream and

downstream sectors, PGN has become more capable to run the business.

1.2. Company Background

The operator who able to run this business can be submitted to one of PGN

Group which is PT Solusi Energy Nusantara (SENA) – subsidiary of PT PGAS

Solution, that already in line with the scope of work of PT SENA in services

provided include the survey, technical research, Front End Engineering Design

(FEED) and Detail Engineering Design (DED), Project Management

consultancy, inspection and technical testing, commissioning, as well as other

post-operating works. Below detail information about PGAS Solution and

SENA company background.

1.2.1. PT PGAS Solution

PT PGAS Solution was established on 06 August 2009. The Company

started its journey as Engineering Division of PT Perusahaan Gas

Negara (Persero), Tbk. Experience gained through the Engineering

Division has given courage to continue expand the work within the

engineering field of natural gas, by establishing a new subsidiary

company.

4

1. Vision

Reliable Partner Solution in Energy Infrastructure

2. Mission

a. Providing innovative solution with: Strong Resources, Wide

Networking, GCG to increase Share Holder Value through

Growth and Profitable.

b. Bring company with proud to be a winner in future competition

Core Business of PT PGAS Solution :

1. Engineering :

a. Detail Engineering Design

Perform Detailed Engineering Design work with the following

scope of competence:

i. Conduct preparation surveys, covering:

Topography survey

Soil investigation

Marine survey, etc.

ii. Develop specifications for planning and construction

Perform engineering analysis

Develop a detailed picture of planning and work

Create calculation for required materials (Material

Take Off).

b. Marine Radar Surveillance

Marine Radar Surveillance is one of the works of PGAS

Solution which aims to ensure that no potential disruption on

the existing offshore gas pipelines, caused by ships at anchor

within the vicinity. Offshore gas pipeline network has a very

critical safety risks, especially due to the potential disruption of

shipping. Hence, preventive measures are required to maintain

the safety of offshore gas pipeline network. We conduct

5

thorough measure, starting from the installation of marine radar

devices to application of marine radar surveillance software.

Therefore some of the scope of the work we do to support the

achievements of these terms are:

i. Monitor the offshore pipeline network through the control

room

ii. Perform routine daily and monthly patrols within radar

monitoring areas

iii. Coordinate with The Indonesian Navy, Indonesian Sea and

Coast Guard, Water Police Force, The Head of Port, etc to

ensure safety

iv. Perform prevention of marine accidents around offshore

pipelines.

c. Survey Detail

Construction of PGN pipeline network requires careful

planning, considering pipes will be installed on tracks along

roadsides with heavy traffic (where other existing utilities have

already been embedded, such as power cable, fiber optic, water

pipes, etc.), crossings (such as rivers, wetlands, roads and

railways), and densely populated residential areas as well as

industrial areas. Thus, PT. PGAS Solution conducts aerial

photographs, which one of the reasons is to be able to see the

real situation of the ground.

Utilization of aerial photo/map image as a base map in the

handling of the planning work is particularly useful since it is

able to show detailed phenomenon that exist in the field

(buildings, body surface water, vegetation, manmade

infrastructure, etc.) in a visualization similar to the original,

hence interpretation of objects associated with the planned

6

pipeline will be more easily carried out and analyzed on tracks

planned for installation of pipes to determine the topography.

2. Trading :

Since 2013, PGAS Solution has partnered with Armatury, a

company from Czech Republic and the world's biggest valve

manufacturer company. In 204, PT. PGAS Solution won the

"Reliable Partner" award for South East Asia region. Products that

PGAS Solutions purchase are valve class 150, 300, 600, 900. Apart

from purchasing to fulfill pipeline network construction needs,

PGAS Solution also resells the products to third parties.

RELIANCE SCADA - GEOVAP

PGAS Solution is licensed to sell Reliance - Scada products from

Geovap, an IT company from Czech Republic. SCADA is short for

Supervisory Control And Data Acquisition, computer-based

industrial control system used for controlling a process. This

process can be categorized into 3 sectors, which are:

i. Industrial proses: manufacture, plant factory, production,

electric power generator

ii. Infrastructure process: drinking water purification and

distribution, sewage treatment, gas and oil pipelines, power

distribution, complex communication systems, early warning

systems and sirens

iii. Facility process: buildings, airports, ports and harbors, space

station

3. EPC

a. Development of City Gas Network

PT PGAS Solution is trusted by PGN to carry out the

development of city gas network in order to expand the

utilization of natural gas for the public. We perform

7

construction work for city gas network, both on-shore and

offshore cross-islands. In addition to meet customer demand,

the addition of natural gas pipelines is also able to support

transport sector, commercial and industrial sectors. Therefore,

more parties will benefit from this environmentally friendly

energy. PGAS Solution is committed to continue support the

Government in providing natural gas infrastructure, all through

to the country.

b. Fuel Station

PT PGAS Solution provide good energy that can be beneficial

for the transportation sector. PT PGAS Solution assist the

Government in accelerating infrastructure Natural Gas

Utilization so that the conversion program of CNG fuel can be

realized immediately.

Fuel stations that have been built:

i. Pondok Ungu Fuel Station

ii. Bogor Fuel Station

iii. PGN Head Quarter Fuel Station

iv. Ngagel Surabaya Fuel Station

Meanwhile, several fuel stations that are currently on

development are: Batam, Sukabumi, Lampung, Purwakarta and

Klender Fuel Station.

c. Upgrading Station

PT PGAS Solution multiplied one of PGN-owned stations that

are located in West Java, and one of stations that are a recipient

of gas flow from Sumatra Island. This station is one of vital

assets of PGN because natural gas originated from this station

allows PGN to distribute the good energy to the Greater Jakarta

8

area. Not only that, by multiplying the force of this station, PGN

is able to distribute natural gas to PLN (a state-owned electricity

company), allowing PLN to provide electricity for the entire

Java and Bali islands. Here, PGAS Solution’s work scope

covers EPC through to installation.

4. Operation and Maintenance

a. Operation and Maintenance Service Work on Distribution

Pipeline Network

PT PGAS Solution maintain and operate the entire PGN-owned

pipelines network, both on-shore and offshore. Wherever PGN-

owned pipelines are located, PT PGAS Solution always ensure

that communities in the areas are feeling secured and not in

danger by it. PT PGAS Solution have a standard procedure

where we respond to any complaint within the first 24 hours.

Therefore, PT PGAS Solution routinely conduct checks through

our competence, such as:

i. Monitoring and Survey of Pipeline Leakages and Facilities

ii. Operation and Maintenance Protection

iii. Operation and Maintenance of Valve System (mechanical

and civil)

iv. Operation and Maintenance of Metering Regulating Station

v. Operation and Maintenance Off-Take (Gas Station)

vi. Cleaning Pigging

vii. Network Trouble Handling

b. Operation and Maintenance Service Work on Transmission

Pipeline Network

In addition, PT PGAS Solution are also operate and maintain

PGN pipeline assets that are available along the transmission

track, whereas in order to operate and maintain pipelines on the

9

ocean floor, different scope is required. Nevertheless, PT PGAS

Solution also conduct operation and maintenance that cover:

i. Onshore Pipeline:

Patrols, Pipeline Network Inspection and ROW

Maintenance

Maintenance of Remote Radio Repeater System and

Lightning Protection on Remote Tower Repeater

ii. Offshore Pipeline

Pipeline Offshore Patrol and Inspection Navigational

Buoy

Navigational Buoy Maintenance

Joint patrols with the authorities

Inspection and Maintenance on Nearshore and Landfall

c. Information Provision Service and Integrated Data Control

PT PGAS Solution are able to assist in rapid, accurate and

reliable data collection to support PGN service quality

pertaining to the entire customers' gas volume usage, by

utilizing technology that we designed. So as to achieve this, PT

PGAS Solution are performing several works such as:

i. Facility Provision and Maintenance and Gas Meter Data

ii. Provision and Maintenance of EVC (Electronic Volume

Corrector)

iii. Provision and Maintenance of AMR (Automatic Meter

Reading)

1.2.2. PT Solusi Energy Nusantara (SENA)

PT Solusi Energy Nusantara (SENA) is subsidiary of PT PGAS

Solution. SENA was established in Jakarta on 20th April 2015. The

10

activities scope of the company in accordance with the Articles of

Association as follows:

a. Execution of the survey work and technical research.

b. Execution of Conceptual Study, Front End Engineering Design

(FEED) and Detail Engineering Design (DED) work.

c. Execution of Project Management Consultancy and other technical

consultancies.

d. Inspection and Testing, Commissioning and other post-operative

works.

Vision and Mission of SENA :

a. Vision

Engineering best solution in Oil and Gas Industry

b. Mission

i. Provide reliable engineering solution related with ESCO

(Engineering Services Company)

ii. Provide growth to stakeholder

Core Business of SENA :

a. Execution of the survey work and technical research

Company has expertise in survey activities. SENA services are:

i. GIS Mapping and Database

ii. Topographic Survey

iii. Boundary Survey

iv. Route Survey

v. Staking Out

vi. Aerial Survey

vii. ROV Survey

b. Execution of Conceptual Study, Front Engineering Design (FEED)

and Detail Engineering Design (DED) work

11

Company has expertise in preparing engineering design document

which refer to conceptual design from all engineering aspects as

needed, such as pipeline, mechanical, electrical, geodetic, civil,

process, instrument and telemetry.

c. Execution of Project Management Consultancy and other Technical

Consultancies

In the managing the project, company is capable of predicting,

controlling and guiding the performance of the project in

accordance with agreement.

SENAs project management consultancy services are:

i. Project Management Consultancy (PMC)

ii. Project Supervision

iii. Technical Assistance Services (TAS)

iv. Study/research in the energy field

1.3. Problem Background

SENA is an engineering services company in the oil and natural gas industry

that include the pipeline, mechanical, electrical, geodetic, civil, process and

telemetry businesses. SENA provide services include the survey, technical

research, inspection, technical testing, as well as other post-operating works.

SENA notice that PGN has about 7.000 km pipeline that still having plan to do

expansion, that should be check on installation, equipment and techniques that

used in order to protect labour, installations, equipment, facilities and networks

as well as security of oil, natural gas and geothermal resources.

All of those pipelines must be check and certified along with other facilities in

accordance with the regulations from Minister of Mines and Energy No.:

06.P/0746/M.PE/1991 about Work Safety of Oil and Gas Pipelines

1.3.1. Background

a. In terms of delivering reliable engineering solution in Oil & Gas

Industry

12

b. In terms of comply with Regulation of Minister of Mines and

Energy No.: 06.P/0746/M.PE/1991 about Work Safety of Oil and

Gas Pipelines and Regulation No.: 84.K/38/DJM/1998 about

equipment used in oil and gas industry

c. In terms of safety and health awareness at work

d. In terms of efficiency so that PGN Group able to minimize the

budget and optimizing their existing internal resources and

competence simultaneously.

e. As an opportunity for SENA to broaden their scope of work by

creating new market outside PGN Group, making SENA be more

independent and competitive in their industry.

1.3.2. Problem Statement

a. SENA still depend on PGN as Holding Company

b. Business Engineering Solution is More Competitive

1.3.3. Objective

The purpose of this project is :

Provide strategic formulation proposal to increase opportunity for PGN

Group in this case SENA in making profit by expanding businesses and

potential market.

1.3.4. Project Scope

Referring to the purpose of this research and considering the time

constraints, the scope of this study is limited to :

a. Analyzing the strategic that can be used by SENA to expansion

their business as a part of Service Provider for Inspection and

Certification.

b. Formulating the strategic proposal for the next 5 years.

13

CHAPTER 2

LITERATURE REVIEW

2.1. The Micro Environment

The micro environment consists of costumers, clients, partners and

competitors. Unlike, the internal environment, the micro environment is not

directly controllable by the organization. The organization can, however, exert

some influence on the costumers, clients, partners, competitors and other

parties that make up its industry. (Elliott, 2014)

2.1.1. Customers and Clients

Organization must understand the current and future needs and wants

of the target market, such as:

a. Understand what their customers value now.

b. Be able to identify any changes in customer preferences.

c. Be willing and able to respond to changes.

d. Anticipate how needs and wants might change in the future.

e. Be able to influence costumer preferences.

2.1.2. Partners

Organization need to understand their partners, how each partner’s

processes work and how their partnerships benefit each party. Partners

include the following.

a. Logistics Firms. Logistics is the term used to describe all the

processes involved in distributing products; it includes storage and

transport.

b. Financiers. Financiers provide financial services such as banking,

loans and insurances, and the financial system’s infrastructure

facilitates electronic payment transactions with partners and

customers.

14

c. Advertising Agencies. Small business tend to devise their own

advertisements, often with the help of the publication, radio station

or other medium they are advertising with. Larger businesses can

hire the services of advertising agencies. When they do so, they put

an enormous amount of faith in the agency to attract the attention

of potential customers and encourage them to actually engage in a

marketing exchange with the organization.

d. Retailers. Retailers are the businesses from which customers

purchase goods and services. Many retailers, such as corner shops

and supermarkets, sell mainly products made by others. Other

businesses make and retail their products, particularly small

boutique businesses, service businesses and businesses with an

online shop.

e. Wholesales. Wholesalers are an intermediary acting between the

producer and the retailers to provide storage and distribution

efficiencies to both.

f. Suppliers. Suppliers provide the resources that the organization

needs to make its products. Suppliers are crucial business partner

and they must be monitored for continuity of supply and price.

Organization need to know their existing and potential suppliers

costs, availability, time frames and planned innovations to

determine how they can best create value. Organization also need

to know and manage the risks involved in their dependency on their

suppliers. Organizations need to be aware of and pre-empt any

problem (e.g. labour strikes and stock shortages) with the supply

of resources they need to ensure they can fulfil demand.

Organization must identify, assess, monitor and manage risks to

supplies and risks to the price of supplies.

15

2.1.3. Competitors

There are many different types of market competition:

Table 2.1 Types of Competition (Elliott, 2014)

Competitive

Structure

Description

Pure Competition Numerous competitors offer undifferentiated product.

No buyer or seller can exercise market power.

Monopolistic

Competition

Numerous competitors offer products that are similar,

prompting the competitors to strive to differentiate their

product offering from others.

Oligopoly A small number of competitors offer similar, but somewhat

differentiated, products. There are significant barriers to

new competitors entering the market.

Monopoly There is only one supplier and there are substantial,

potentially insurmountable, barriers to new entrants.

Monopsony The market situation where there is only one buyer

16

There are many different levels of competition that organizations face.

Table 2.2 Levels of Competition (Elliott, 2014)

Level of

Competition

Description

Total Budget

Competition

Consumers have limited financial resources and therefore

must make choices about which products to consume and

which to forgo. In this sense, organizations are competing

against all alternative ways the consumer can engage in an

exchange of value.

Generic

Competition

Consumers often have alternative ways to meet their product

needs. The same want or need can be satisfied by quite

different product. This is known as substitutability.

Product

Competition

Some products are broadly similar, but have different

benefits, features and prices that distinguish them from

competing products.

Brand Competition Some products are very similar, offering the same benefits,

features and price to the same target market.

2.2. The Macro Environment

The organization itself and all of the forces within the micro environment

operate within a larger environment known as the macro environment. The

macro environment encompasses the factors outside of the industry that

influence the survival of the organization. (Elliott, 2014)

Key environmental factors that organization need to consider when analyzing

the macro environment include political, economic, sociocultural,

technological, environmental and legal forces (PESTEL).

17

Figure 2.1. The Macro Environment (Elliott, 2014)

Political

•The political arena has a huge influence upon business and the spending power ofconsumers. Organization must consider:

•The stability of the political environment.

•The influence of goverment policy, laws and regulation.

•Goverment trade agreements such as ASEAN.

•Taxation and goverment rebate policies.

Economic

•Organization need to understand the economy in the short and long terms. Organization must consider:

•Interest rates, economic growth (gross domestic product) and consumer confidence.

•Income levels, savings, credit and spending levels.

•The level of inflation, employment and unemployment.

•Exchange rates and balance of trade.

Sociocultural

•Social and cultural influences have a large influence on businesses. Organization mustunderstand:

•Religion, culture, subcultures, values, attitudes, and beliefs.

•Population trends including age, household size and composition, marriage and divorce trends,places lived, ethnicity and health.

Tecnological

•Technology is vital for competitive advantage. Organization must consider:

•Whether offerings can be made more cheaply and to a better standard of quality using new technologies.

•Whether technology can be used to innovate.

•Whether distribution or communication can be improved using technology.

Environmental

•Organization need to understand environmental influences including ecological and environmental aspects such as weather, climate and climate change.

Legal

•Organization need to understand legal and regulatory influences such as:

•Laws including the Competititon and Consumer Act, The Privacy Act, The Spam Act, The Sale of Goods Act and the Price Surveillance Act.

•Regulations from industry bodies such as the Advertising Standards Bureau.

18

2.2.1. Political Forces

Politics is directly relevant to the organization through:

a. Lobbying for favorable treatment at the hands of the government

b. Lobbying for a ‘light touch’ approach to regulation

c. The very large market that government and its bureaucracy

comprise.

d. The ability of political issues to affect efforts at international

marketing.

Many organization, particularly smaller ones, monitor political issues,

but do not actively engage in politics. Large organizations, or the bodies

created to represent smaller ones, can engage directly in politic by

seeking to influence lawmakers.

2.2.2. Economic Forces

Economic forces refer to all of those factors that affect how much

money people and organizations can spend and how they choose to

spend it. The obvious components of this are income, prices, the level

of savings, the level of debt and the availability of credit.

2.2.3. Sociocultural Forces

Sociocultural forces is a term used to describe the social and cultural

factors that affect people’s attitudes, beliefs, behaviors, preferences,

customs and lifestyles. They comprehensively and pervasively

influence the value people put on different product offerings.

Demographics describe statistics about a population. A population can

be characterized by its demographic characteristics: age, gender, race,

ethnicity, educational attainment, marital status, parental status and so

on. These characteristics influence the behavior of society as a whole

and the individuals within it.

19

2.2.4. Technological Forces

Technology is advancing at an unprecedented rate. Our daily lives are

touched by technology almost all of the time. Technology does not just

change the expectations and behaviors of customers and clients.

Technological change can have huge effects on how suppliers work.

Manufacturers, suppliers and distributors are likely to be in constant

electronic exchange with marketing organizations, ensuring stock

levels are automatically monitored and maintained, tracking goods in

transit down to the nearest kilometers. While enabling many advances,

technology can also pose a threat to organization.

2.2.5. Environmental Forces

Environmental forces is a term used to describe the environmental

factors that affect individuals, companies and societies. There is a wide

range of environmental factors that companies need to be mindful of,

including ecological and environmental aspects such as weather,

climate and climate change. Environmental factors can have more

influence in certain industries, and organization need to be mindful of

the factors likely to influence their particular industry (e.g. tourism,

farming and insurance).

2.2.6. Legal Forces

Laws and regulations are intimately tied to politics. Laws and

regulations govern what marketing organizations can and cannot

legally do. They spell out their obligations to consumers, partners,

suppliers, government authorities and society as a whole. The most

significant laws and regulations fall into the following categories:

privacy, fair trading, costumer safety, prices, contract terms and

intellectual property.

20

2.3. SWOT and TOWS Analysis

SWOT is a simple and useful tool to understand the current condition of the

company. The analysis can trigger into decision making process, as well to

creating strategy within the company.

Strength are those attributes of the organization that help it achieve its

objectives: competitive advantages and core competencies. Weakness are those

attributes of the organization that hinder it in trying to achieve its objectives.

Strength and weakness are considered to be internal factors and therefore

directly controllable by the organization. Opportunities are factors that are

potentially helpful to achieving the organization’s objectives. Note the

emphasis on the word ‘potentially’ in the previous sentence. Opportunities are

only of benefit if the organization responds effectively though the organization

may be able to have influence over them. Threats are factors that are potentially

harmful to the organization’s efforts to achieve its objectives. Like

opportunities, threats are beyond the organization’s direct control, bur require

an effective response by the organizations. Opportunities and threats can arise

from many different factors in the organization’s environment.

21

Figure 2.2 A Potential Framework For a SWOT Analysis (Elliott, 2014)

Another step that will strengthen the analysis from SWOT, we can use SWOT

Matrix, which by identifying fit between company strength and upcoming

opportunities or overcome the weakness to create more business. SWOT

Matrix can be constructed as shown below:

a. S-O Strategies which pursue opportunity that are good fit to the company

strength’s.

b. W-O Strategies which overcome weakness to pursue opportunities.

c. S-T Strategies identify ways that the company can use its strength to reduce

its vulnerability to external threats.

d. W-T Strategies establish a defensive plan to prevent the company weakness

from making it highly susceptible to external threat.

Strengths

•What does your companydo well?

•What do your customerscompliment you on?

•What makes yourcompany stand out fromcompetitors?

•What advantages doesyour company have whencompared with others?

Weakness

•What doesn't yourcompany do well?

•What do your customerscomplain about?

•What are the unmetneeds of your salesforce?

•What disadvantages doesyour company face?

Opportunities

•Are there emergingtrends that fit with yourcompany's strengths?

•Are there things thatyour competitors don'tdo well?

•Are customer and clienttastes changing?

Threats

•What do yourcompetitors do betterthan you?

•Are there emergingtrends that threaten yourbusiness?

Unfavourable Favourable

(Can

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22

All those analysis require the identification of any must do item and potential

opportunity that has been identify from the las analysis in the SWOT matrix.

TOWS and SWOT are acronyms for different arrangements of the words

Strengths, Weaknesses, Opportunities and Threats. The TOWS Matrix is a

relatively simple tool for generating strategic options. By using it, you can look

intelligently at how you can best take advantage of the opportunities open to

you, at the same time that you minimize the impact of weaknesses and protect

yourself against threats.

Used after detailed analysis of your threats, opportunities, strength and

weaknesses, it helps you consider how to use the external environment to your

strategic advantage, and so identify some of the strategic options available to

you.

The only difference between TOWS and SWOT is that TOWS emphasizes the

external environment whilst SWOT emphasizes the internal environment.

Figure 2.3 TOWS Strategic Alternatives Matrix (Weihrich, 1982)

23

This helps you identify strategic alternatives that address the following

additional questions:

a. Strengths and Opportunities (SO) – How can you use your strengths to take

advantage of the opportunities?

b. Strengths and Threats (ST) – How can you take advantage of your strengths

to avoid real and potential threats?

c. Weaknesses and Opportunities (WO) – How can you use your

opportunities to overcome the weaknesses you are experiencing?

d. Weaknesses and Threats (WT) – How can you minimize your weaknesses

and avoid threats?

2.4. Industry Competitiveness

“Porter’s five forces model is an analysis tool that uses five forces to determine

the profitability of an industry and shape a firm’s competitive strategy (Porter,

2008). This will help to understand the attractiveness and competition from the

market itself. Having the clear understanding on the industry, it helps company

to identify the future on the company as well the threat that will face in the

future.

24

Figure 2.4 Forces Driving Industry Competition (Porter, 1980)

There are five important forces that determine competitive power in business,

there are:

2.4.1. Rivalry among Existing Player

Rivalry among existing payers is to understand players strength and

weakness of their business, also important to identify number of player

in the market. Having many players in the market will also bring the

level of competitive high.

This force describes how competition level in the market between

current players. The impact on the high competitive market, pricing can

be low/moderate, less margin.

Competition among existing player is High if:

a. High number of companies (fragmented), roughly smaller size and

capabilities.

b. Slow industry growth or decline, growing market.

Industry Competitors

(Rivalry Among Existing Firms)

Potential Entrants

Suppliers

Substitutes

Buyers

Bargaining power

of buyers

Bargaining power

of suppliers

Threat of new entrants

Threat of substitute products or services

25

c. Diverse competitors approach and style.

d. Commodity, differentiation, low switching cost (for buyer).

e. High fixed cost.

f. Capacity augmented in large increments.

g. Product is perishable.

2.4.2. Threat of New Entrance

Threat of New Entrance is to help to understand the power of current

player in the market. This affected the ability of competitor in the future

will appears.

The competition in industry will be identify high if the situation to enter

the industry is consider tough which requires high investment, high

competition, unique expertise in the market.

The threats of new entries define High if:

a. Economy of scale (supply side) is unimportant.

b. Network effect (demand side) does not exist.

c. Low customer switching cost, low loyalty.

d. Low capital requirement.

e. Low incumbent advantage.

i. Technology patent.

ii. Access to raw material.

iii. Location.

iv. Government subsidy.

v. Long learning or experience curve.

f. Equal access to distribution channel.

g. No restrictive government policy (un/deregulated).

2.4.3. Bargain Power of Buyer

Power of the buyer will determine the price that can be competitive or

not in the market. This driven by number of buyer in the market that

can give pressure to the company to define the price.

26

Supplier is the firms who deliver the good and service to the company

that operate in the industry.

Supplier bargain power is High if:

a. Concentrated supplier, fragmented industry.

b. High switching cost (for player).

c. Differentiated product.

d. Supplier product is an important raw material, cannot be substitute.

e. Threat of potential forward integration by supplier.

f. Industry not important customer group of supplier, small portion of

supplier sales or supplier does not depend on industry, especially

the industry grow is slow.

2.4.4. Treat of Substitutes

Treat of Substitutes is affected consumer/customer can choose other

product/services or using different way to fulfill their needs.

Terms of buyer represent the costumer of the company. Having low

bargaining power of buyer will benefit for the company, which can

generate more profit.

Buyer bargaining power is likely High, if:

a. Concentrated buyer, fragmented industry.

b. Buyer bus in large volumes, especially in high fixed cost industry.

c. Commodity, differentiation, easy to substitute.

d. Low switching cost (for buyer).

e. Potential backward integration of buyers.

f. High portion of buyers cost.

g. Buyers earns low profit or strapped for cash.

h. Quality of buyer product is independent of industry.

2.4.5. Bargain Power of Supplier

Bargain power of supplier is to assess how many supplier can help to

support the needs of the company, this will identify weather the

27

supplier can driving the price. This will drive by number of supplier

exist in the market, and uniqueness of the market can also determine

the power of supplier.

Existing of the substitute will be considered when the existing

product/services compared with an alternative product/service looks

more effective and efficient. This substitute can offer lower price but

having better performance to meet the same purpose. In this case threat

of the substitute will impact to the market share, volume as well the

profit in this market.

Threat of substitute is High, if:

a. New technology, better service and facilities, better

price/performance.

b. New regulation.

c. New idea of doing things.

d. Change of customer habits/demographic.

e. High earning company/industry produces the substitutes.

2.5. Identifying The Market Segmentation, Targeting and Positioning

Each of the organization had developed different marketing strategy to satisfy

the different of customer needs. The process to choose their target market

involves of four basic step:

Figure 2.5 Four Basic Process to Choose Target Market (Elliott, 2014)

Identifying Markets

Determining Market

Segmentation

Selecting Target Market

Positioning through Market

Strategies

28

2.5.1. Identifying market

Identifying market process is a fundamental component of marketing

strategy for any organization. This process requiring detailed analysis

and decision making.

2.5.2. Segmentation

Segmentation variables are characteristics that buyers (i.e. individuals,

groups or organization) have in common and the might be closely related

to their purchasing behavior. Age, gender, income, and occupation, for

example, can all be linked to the purchase or consumption of particular

products (Elliott, 2014)

To ensure that segmentation is effective, the segments should be

evaluated against the following criteria:

a. Measurability. The variable used to define the market segment must

lend themselves to accurate and comprehensive measurement.

Segmentation variables based on demographic variables are high

measurable and extensive data are available through commercial

databases and organization. More abstract variables, such as

personality, can be notoriously difficult to measure.

b. Accessibility. Segments must be able to be clearly identified,

reached and served through distribution and communication

channel. In this sense, opinion leaders are attractive to organizations

but very difficult to identify and communicate with.

c. Substantiality. Market segments must be of sufficient size and

purchasing power to make them a profitable target market. Ideally

segments should be as large as possible, but still be homogeneous in

their purchase preference and behavior.

d. Practicability. Segments are only of use if marketing program can be

formulated to identify, communicate with and service those chosen

market segments. Segmentation based on personality or

29

psychological variables, while theoretically no relevant and recent

data are available.

2.5.3. Targeting

After the segmentation analysis we can see the market opportunities

available in the target market. The second step in marketing when

selecting the most attractive and potential segment, the company have

to evaluate the potential sales of these segment, the growth opportunity

the competition and its ability to compete. Then it have to decide how

many segments to enter and determining which segments offer the most

potential opportunity, also whether they can market to this potential

segment because it will be the market segment or segment appointed

toward all marketing activities will be directed.

2.5.4. Positioning

Positioning describes how target markets perceive the organization’s

offer relative to competing offers. It is how customer distinguish the

organization, its product and its brands from competitors when they are

selecting from among the available alternatives (Elliott, 2014).

The organization can pursue positioning to manage:

a. How it, as a whole, is perceived relative to competitors in the minds

of its stakeholder groups.

b. How its brands are seen, typically focusing on distinguishing

product attributes.

c. How the market distinguishes its offering from those of closely

competitive brands.

Position is fundamental important for organization, because it describe

how organization is perceived by the market, relative to its competitors

on the attributes that customers regard as important in their decision

making.

30

2.6. Competitive Advantage, Competitive Strategy and Company Value

2.6.1. Competitive Advantage

Today leaders of multi-business corporations are learning to identify

the maximum strategic opportunity set, those opportunities that can let

companies take the fullest advantage of their capabilities and their

potential to pursue new strategies.

Competitive Advantage describes the way a firm can choose and

implement a generic strategy to achieve and sustain competitive

advantage.

Competitive advantage can be defined as anything that a firm does

especially well compared to rival firms (David, 2011). Competitive

advantages is something to do with more competitive market: lower

barriers to entry or simply a large number of firms may give an industry

an advantage in competing with foreign rivals (Gupta, 2009). Where it

is stated that a firm has a competitive advantage when it is

implementing a value creating strategy not simultaneously being

implemented by current or future competitors (Barney, 1991).

2.6.2. Competitive Strategy

To gain competitive advantage, there may be several sources. The

company can make product with the highest quality, creating product

with better performance, giving customers more value for money,

having lower cost than competitors, giving superior customer services,

and making a more reliable and longer-lasting product.

2.6.3. Company Value

To measure the company value we also used Projected Financial

Statement Analysis, this will used to know is the company has a good

value after the business expansion.

According to Sharmeen (2014) valuation is the way we view or focus

on the limitation and also advantages of various methods and learn the

31

suitability of the methods that would prove the usefulness to the

researchers in the conduct of research on valuation. Value is created

when capital is invested at a rate of return higher than the cost of capital.

The value will increase along with the time value of money and the

risk-free rate of interest. These things happen due to the present value

of the exercise cost decreases as interest rates increases.

2.7. Business Expansion

Based on Seven Ways to Expand Articles there are 7 ways to have business

expansion:

2.7.1. Increase your sales and products in existing markets. This is

obviously the easiest and most risk-free way to expand. This tactic

may require a bigger location, different pricing strategies,

new/improved marketing techniques - but it will be in a customer

group with whom you already have a relationship.

2.7.2. Introduce a New Product. You have a successful product/service that

you have been offering for some time and have been collecting data,

customer feedback and doing the tinkering on your newest product.

This is a normal evolution in business, not just an expansion tactic.

When positioned as adding value and being responsive to customer

needs, this can be a relatively risk-free way to expand.

2.7.3. Develop a New Market Segment or Move into New Geography. Both

of these areas require cost outlays and uncertainty. Moving your

products into new categories or demographic segments requires

market research, beta testing and new marketing strategies, i.e. a

message for a 16-year old will differ that one for a 60-year old.

Management of new remote locations may absorb significant time

and attention. While the risks are more, the payoffs are large - and for

32

most businesses looking to expand, these two methods of expansion

are inevitable.

2.7.4. Start a Chain. A restaurant, retail or service business that's easily

reproduced and can be run from a distance is all you need to launch a

chain. But, you must be cognizant of what made the first location a

success - was it location, your staff or you? If it is just you, then

duplication is only possible through detailed operations plans and

sharing staff between locations. You will need to duplicate the plan

of your first location while meeting increased customer demands.

Starting a chain gives your current staff a crack at "management"

duties, training opportunities and an opportunity to expand their

horizons.

2.7.5. Franchise or License. While it's a quick way to grow, a franchise

agreement can cost (minimally) $100,000 to prepare. You will need

to be a good teacher, be able to prepare the training manuals

(preferably in more than one language), be very organized and willing

to travel. Licensing can carry less risk, but demands giving up a

certain amount of control. Licensing a patent, trademark or industrial

design means that you sell manufacturing, distribution or production

rights.

2.7.6. Join Forces / Strategic Alliance. A merger or acquisition combines

the best of two companies, expands your customer base, increases

intellectual capital and delivers operational efficiencies. The trick is

finding the right partner. These partners may be new distributors, but

be forewarned large retailers exact heavy performance expectations.

Can you perform to the letter of your promise? Can you meet high

standards of quality (ISO, or the like) and adapt your procedures to

33

meet just-in-time delivery? Due diligence and strong contractual

arrangements are essential here.

2.7.7. Go Global. You can decide to go global in a number of ways.

Growing markets, rising consumer spending, improved business

climate--sometimes the only place to find these things is overseas.

Doing business internationally can take the form of exporting,

licensing, a joint venture or manufacturing, but whatever form you

choose, the basic business rules apply: assess customer demand, gain

legal and accounting assistance, protect intellectual property and

obey regulations.

More difficult to understand than the regular business affairs may be

the cultural nuances - ignore them at your peril. In some countries,

particularly those in Asia, a local partner is virtually a requirement.

Your first stop should be your target country's economic development

agency, which can help marshal local resources to get you on your

way, possibly with a small financial boost. Be patient. Growing your

business globally can take more than one "sightseeing trip" to the

region. Here are some steps in going global, from easiest to hardest.

2.8. Risk Management

Building a culture of risk management is primarily a process of developing

people in your organization who think and plan projects effectively, and who

are supported by company systems that encourage them to think and plan

effectively.

It is important to see risk as a business-wide challenge. After all, business

enterprise itself is a risk and that is what makes success and payoff satisfying

to the business entrepreneur. Project risk starts with the business itself, its

market position and business viability, its partnerships and vendor

34

relationships, and the economic risks the business itself faces, as well as

customer and client risks (Barkley, 2004).

Once we have identified the risks in a particular situation we need to consider

how we can measure them. And the simple reason to measure is that it is easier

to talk more objectively about risk when there are numbers attached to it. As

we have discussed earlier, there is a considerable amount of subjectivity

involved in dealing with risk issues, so the more that subjectivity can be

removed, the easier it will be to make meaningful decision about risk issues.

Once those decisions are made, the more objective data we have available the

easier it will be for the impacts of those decisions, good or bad, to be tracked.

Risk is a concept that describes and measures the combination of the

likelihood of a negative outcome and the severity of consequences that result

from that outcome. The higher the risk number, the more “risky” is the

combined likelihood and severity of a particular event.

Likelihood is measured as probability (a number between 0 and 1 that

represents the chance of some consequence occurring) or as frequency (a

number that represents how many times a consequence occurs during a fixed

time period).

Consequence is measured in a variety of ways, depending on the nature of the

consequences being considered. For example, if the consequences involve

human health or safety, then consequences may be measured by fatalities or

injuries. If consequences involve environmental damage, they may be

measured by the cost required to repair the damage and restore the affected

environment.

Risk assessment is used to address issues pertaining to safety, environmental

protection, financial management, project or product development, and many

other areas of business performance. In the pipeline industry, risk assessments

35

are utilized for many of these same reasons. For the purposes of this fact sheet,

however, we are addressing risk assessment related to pipeline safety – that

is, protecting the public, property, and the environment from pipeline failures.

Risk assessments of this kind begins by looking at the different ways a

pipeline can fail and release its contents – such as oil or natural gas – into the

environment. Factors that can lead to pipeline failure are referred to as

pipeline failure threats. For example, a pipeline can leak because corrosion

weakens the steel in the pipe. Failures also occur as a result of excavation

equipment striking the pipe. Identifying potential threats to a pipeline requires

looking at the factors that cause failures as well as looking for unique factors

that could lead to failure at a particular location, whether or not that particular

failure has occurred or been observed before.

The next step in risk assessment is to assess the likelihood that each threat

could lead to a failure at a particular location on the pipeline. This assessment

is performed by looking at the specific characteristics of the pipeline at any

given location, along with the unique characteristics of the area around the

pipeline. For example, the susceptibility of the pipeline to failure due to

corrosion is dependent on numerous characteristics, such as the type and

condition of the pipe’s coating, the effectiveness and operability of the

operator’s corrosion control equipment, and the soil conditions surrounding

the pipe.

As another example, the susceptibility of a pipeline to third-party excavation

damage is dependent on characteristics such as the extent and type of

excavation or agricultural activity along the pipeline right-of-way, the

effectiveness of the One-Call System in the area, the amount of patrolling of

the pipeline by the operator, the placement and quality of right-of-way

markers, and the depth of cover over the pipeline. In all cases, different threats

will exist at different locations along the pipeline.

36

The next step is to assess the types of consequences that could result from a

pipeline release at a specific location, along with the potential severity of those

consequences. For example, failures of pipelines in remote areas, where

people do not live or congregate, will likely result in lower impacts than

failures in areas of dense residential or commercial development. Similarly,

failures in areas sensitive to environmental damage, such as the locations of

drinking water sources or endangered species’ habitats, have higher

environmental consequences than areas without these features.

The final step in risk assessment for a pipeline is to use the results of the

likelihood and consequence assessments to determine the overall risk at each

pipeline location. This allows the operator to ensure that sections identified as

having the highest risk are assigned top priority for actions that will reduce

the likelihood of a release, reduce its potential consequences, or both.

The results of the likelihood assessment also provide the operator with

information on the significance of different pipeline threats at different

locations, allowing them to carry out actions that reduce the likelihood of a

pipeline failure. For example, an operator may choose to conduct internal

inspections on those pipeline sections that are shown to be most susceptible

to corrosion, to identify where corrosion might be occurring, and to repair any

damage before the pipe fails.

The results of the consequence assessment provide the operator with

information on the significance of consequences of accidents at different

locations, so that operators can carry out steps to reduce or eliminate those

consequences. For example, an operator may place specialized emergency

response equipment at an environmentally sensitive site to allow for quick

response should a pipeline release occur.

It is important for pipeline operators to be keenly aware of threats and

potential consequences of accidents along the entire length of their pipelines,

and to employ rigorous assessment as a tool to manage those risks.

37

As required by Regulation of Indonesian Government, Equipment used in Oil,

gas, Geothermal, Petrochemical and Power Generation and all general

industries in Indonesia shall be certified by Government prior to operate and

require operators to perform risk assessments of their pipelines to:

a. Ensure that integrity assessment methods (internal inspection, pressure

testing, direct assessment, etc.) are employed to address significant threats

on pipeline segments.

b. Ensure that integrity assessments of the highest risk segments are

scheduled with priority over lower risk segments.

c. Ensure that assessments of threats and potential consequences are

conducted to define, evaluate, and implement additional measures that

address significant threats to the pipeline (e.g., conducting depth-of-cover

surveys and correcting any deficiencies), or reduce potential consequences

of failures (e.g., installing additional valves on the pipeline to reduce the

amount of liquid or gas that might be released should a failure occur).

2.9. MIGAS Certification

As required by Regulation of Indonesian Government, Equipment used in Oil,

gas, Geothermal, Petrochemical and Power Generation and all general

industries in Indonesia shall be certified by Government prior to operate.

That was also stated in Kepmentamben No. 06.P/0746/M.PE/1991 Chapter 5,

that the safety inspection is carried out as follows:

1. Upon installation and or installation will be installed;

2. When the technical performance is used;

3. Periodically according to the nature and type of installation, equipment and

techniques used.

4. At any time if deemed necessary by the Director General cq Directorate of

Oil and Gas Mining Engineering (Direktur Jenderal cq Direktorat Teknik

Pertambangan Minyak dan Gas Bumi).

38

The following is Certification Category as required:

2.9.1. Migas Certification (under Directorate of Oil & Gas)

The certification covers equipment and facility operates in the Oil and

Gas Industries, except for Boiler Certification

a. SKPI (Facility Worthiness Certification)

b. SKKP (Platform Certification)

c. SKPP (Individual Equipment Certification)

i. Pressure Vessel, Heat Exchanger, Cooler, etc (standard API,

ASME, SNI, ISO)

ii. Pressure Safety Valve (PSV)

iii. Lifting equipment (standard API, ASME, AWS, ISO)

iv. Electrical equipment

(Power Generator Unit, Power Transformer Unit,

Switchgear and Motor Control Center Unit - (standard API,

IEC, ISO))

v. Rotating Equipment (Pump and Compressor Unit)

vi. Pipeline (standard ASME, API, DNV-OSS)

vii. Storage Tanks (standard API, SNI, NFPA)

viii. Rig (standard API, ASME, IADC, SNI, ISO, MODN, DNV,

AWS)

d. WPS/PQR

e. Welder/Operator Certification

2.9.2. LPE Certification (under DGEED - Directorate General Electricity and

Energy Development)

The certification covers facility that generate Electricity power both for

Own Private consumption use and Public consumption use

a. Commissioning Certification

b. IUKU (Permit for Public Consumption Electricity power)

c. IUKS (Permit for Private Consumption Electricity power)

39

2.9.3. GSDM Certification (under General Mining and Geothermal

resources)

The certification covers equipment and facility operates in the general

mining and geothermal resources, except for Boiler Certification

a. Facility Worthiness Certification

b. Individual Equipment Certification

i. Pressure Vessel, Heat Exchanger, Cooler, etc

ii. Pressure Safety Valve (PSV)

iii. Lifting equipment

iv. Electrical equipment

(Power Generator Unit, Power Transformer Unit,

Switchgear and Motor Control Center Unit)

v. Rotating Equipment (Pump & Compressor Unit)

vi. Pipeline

c. WPS/PQR

d. Welder/Operator Certification

2.9.4. Depnaker Certification (under Directorate of Man Power)

The certification covers equipment and facility operates in General

Industries

a. Boiler, Pressure Vessel, Heat Exchanger, Cooler, etc.

b. Pressure Safety Valve (PSV)

c. Lifting equipment

d. Electrical equipment

(Power Generator Unit, Power Transformer Unit, Switchgear and

Motor Control Center Unit)

e. Rotating Equipment (Pump & Compressor Unit)

f. Lightning

g. WPS/PQR

h. Welder/Operator Certification

40

2.9.5. Helideck and Helipad Certification (under DGAC (Directorate General

Air Communication))

The certification covers Helideck and Helipad operates in all area in

Indonesia.

2.10. The Marketing Mix - 7Ps plus Technology Framework

The marketing mix is the term given to a set of variables that a marketer can

exercise control over in creating an offering for exchange.

A target market is a group of costumers with similar needs and wants. Not

all costumers in a target group will have exactly the same needs and wants

but they are more similar than different.

The 7 Ps Framework is Product, Price, Promotion, Place, People, Process,

and Physical Evidence (Elliott, 2014).

Figure 2.6 The 7 Ps Framework – Product, Price, Promotion, Place, People,

Process, And Physical Evidence (Elliott, 2014)

41

2.10.1. Product

A product is anything offered to a market. It can be a good, a service,

an idea or even a person. Some product are branded and others are

not. A brand is a collection of symbols such as a name, logo, slogan

and design intended to create an image in the costumer’s mind that

differentiates a product from competitors products.

Products can be best understood as a bundle of attributes that when

exchanged have value for customers, clients or society. Bundle of

attributes refers to the features and functions of a product, which

benefit the customer. We should understand that customers have

needs and wants, and this thinking is based on economics. Needs are

day-to-day survival requirements. Wants are desires, and are not

necessary for day-to-day survival. And demand, a want that a

consumer has the ability to satisfy. Products can also be categorized

as either goods or services. Goods are physical (tangible) offerings

that are capable of being delivered to customer. Services are

intangible offerings.

To many of marketers remain product rather than customer focused.

It is important to understand that marketing thinking starts with the

customer and ends with the customer.

2.10.2. Price

Price is the amount of money a business demands in exchange for its

offerings. Pricing is a complex marketing decision that must take

account of many factors, including:

a. Production, communication and distribution costs

b. Required profitability

c. Partners requirements

d. Competitors prices

e. Customers willingness to pay.

42

2.10.3. Promotion

Promotion describes the marketing activities that make potential

customers, partners and society aware of and attracted to the

business’s offering. The product might be already established,

modified, new, information or education. Promotion should not be

thought of merely as advertising. While advertising is an important

component of promotion, many organizations use other methods to

promote products as well.

2.10.4. Place (Distribution)

Place (Distribution) refers to the means of making the offering

available to the customer at the right time and place. We must ensure

products are available to the target market in the right amount and at

the right time while managing the costs of making the products

available. Such costs include inventory, storage and transport.

The science (or art) of ensuring products are in the right place at the

right time in the right quantity is known as logistics and the various

partners that contribute to the process make up what is called the

supply chain.

2.10.5. People

People refers to any person coming into contact with customers who

can affect value for customers. The people must have appropriate

interpersonal skills, aptitude and knowledge to deliver offerings that

customers value. Fellow customers can also affect the costumer’s

service experience.

2.10.6. Process

Process refers to the systems used to create, communicate, deliver

and exchange an offering. We must understand the systems that are

used to create, communicate and deliver offerings for exchange.

43

Processes can also be viewed more broadly to take into account

almost everything the marketing organization does, from market

research to innovation to mailing our catalogues.

2.10.7. Physical Evidence

Physical evidence refers to the tangibles cues, including the physical

environment, that customers use to evaluate product, particularly

services. We can use physical evidence to reassure potential

customers as to quality of the services.

2.10.8. Technology

Technology, particularly the internet and associated communications

innovations, dramatically changed distribution, particularly for

products that have been digitally enabled.

With technology, we can also create the simply process (refers to the

systems used to create, communicate, deliver and exchange an

offering) and connecting the people more easily.

2.11. Financial Analysis

In this GFP, we use some financial indicators as the tools to measure the

financial impact of this business proposal, as part of company’s performance.

2.11.1. Cash Flow

Cash flow is a measure of how much money the firm actually has on

hand at any given time to pay accounts payable, such as: employee

salaries, taxes, insurance premiums, reimbursable expenses, etc.

2.11.2. Operating Income

Operating income is calculated by taking revenues and adjusting for

the cost of doing business or operational expenses. This number can

be found on a company’s income statement and is an important

measure before calculating the net profit.

44

2.11.3. Present Value

In economics, present value, also known as present discounted value,

is the of an expected income stream determined as of the date of

valuation. The present value is always less than or equal to the future

value of money, expect during times of negative interest rates, when

the present value will be greater than the future value (Moyer et al,

2011:147-498).

The most commonly applied model of present valuation uses

compound interest. According to Brealey et. al (2014:20), the general

formula for Present Value (PV) as follow:

𝑃𝑉 =𝐹𝑉

(1 + 𝑖)𝑛

Where :

𝐹𝑉 is the future amount of money that must be discounted.

𝑛 is the number of compounding periods between the present

date and the date where the sum is worth.

𝑖 is the interest rate for one compounding period (the end of a

compounding period is when interest is applied, for example,

annually, semiannually, quarterly, monthly, daily). The interest

rate, , is given as a percentage, but expressed as a decimal in this

formula.

2.11.4. Future Value

Future value is the value of an asset at a specific date. It measures the

nominal future sum of money that a given sum of money is “worth”

at a specified time in the future assuming a certain interest rate, or

more generally, rate of return.

From PV equation before, then the Future Value (FV) calculation can

be formulated as follow:

𝐹𝑉 = 𝑃𝑉. (1 + 𝑖)𝑛

45

Where:

𝑃𝑉 is the value at time = 0 (present value),

𝐹𝑉 is the value at time = n (future value),

𝑛 is the number of periods (not necessarily an integer),

𝑖 is the interest rate at which the amount compounds each period.

2.11.5. Capital Budgeting

Capital budgeting, or investment appraisal, is the planning process

used to determine whether an organization’s long term investments

such as new machinery, replacement machinery, new plants, new

products, and research development projects are worth the funding of

cash through the firm’s capitalization structure (debt, equity or

retained earnings). It is the process of allocating resources for major

capital, or investment, expenditures (Sullivan et. al. 2005:375). One

of the primary goals of capital budgeting investments is to increase

the value of the firm to the shareholders.

Many formal methods are used in capital budgeting, commonly

including the following techniques:

a. Payback Period

The length of time required to recover the cost of an investment.

The payback period of a given investment or project is an

important determinant of whether to undertake the position or

project, as longer payback periods are typically not desirable for

investment positions. It is calculated as (Weygandt et. al.

2012:468):

𝑃𝑎𝑦𝑏𝑎𝑐𝑘 𝑃𝑒𝑟𝑖𝑜𝑑 =𝐶𝑜𝑠𝑡 𝑜𝑓 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡

𝐴𝑛𝑛𝑢𝑎𝑙 𝐶𝑎𝑠ℎ 𝐼𝑛𝑓𝑙𝑜𝑤𝑠

46

b. Net Present Value

Net Present Value (NPV) is the difference between the present

value of cash inflows and the present value of cash outflows. NPV

is used in capital budgeting to analyze the profitability of a

projected investment or project.

NPV equation as follow (Brealey et al, 2014:22):

𝑁𝑃𝑉 = ∑𝐶𝑡

(1 + r)t− 𝐶𝑜

𝑇

𝑡−1

Where:

𝐶𝑡 is net cash inflow during the period t,

𝐶𝑜 is total initial investment costs,

𝑟 is discount rate,

𝑡 is number of time periods.

A positive net present value indicates that the projected earnings

generated by a project or investment exceeds the anticipated

costs. Generally, an investment with a positive NPV will be a

profitable one and an investment with a negative NPV will result

in a net loss. This concept is the basis for the Net Present Value

Rule, which dictates that the only investment that should be made

are those with positive NPV values.

c. Internal Rate of Return

The IRR is the interest rate, also called the discount rate, that is

required to bring the net present value (NPV) to zero (NPV=0).

That is, the interest rate that would result in the present value of

the capital investment, or cash outflow, being equal to the value

of the total returns over time, or cash inflow. As the following

equation (Brealey et al, 2014:112):

47

𝑁𝑃𝑉 = ∑{𝑃𝑒𝑟𝑖𝑜𝑑 𝐶𝑎𝑠ℎ 𝐹𝑙𝑜𝑤|(1 + 𝑅)^𝑇} − 𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝐼𝑛𝑣𝑒𝑠𝑡𝑚𝑒𝑛𝑡

Where:

R is the interest rate

T is the number of time periods

IRR is calculated using the NPV formula by solving for

R if the NPV equal zero.

After obtain the IRR, the decision shall be “Accept the project

when the internal rate of return is equal to or greater than the

required rate of return. Reject the project when the internal rate

of return is less than the required rate of return” (Weygandt et al,

2012:481).

48

CHAPTER 3

METHODOLOGY

3.1 Method of Study

3.1.1 Data Collection

There are two types of methods to collect the data for this research:

primary data collection and secondary data collection method. In this

GFP, we were using both data collection method for the analysis.

According to Sekaran (2010), primary data refers to information comes

from the first-hand by the researcher on the variables of interest for the

specific purpose of the study. Some examples of sources of primary

data are individuals, focus groups, panels of respondents specifically

set up by the researcher and from whom opinions may be sought on

specific issues from time to time, or some unobtrusive sources such as

a trash can. The Internet can also serve as a primary data source when

questionnaires are administered over it. And based on Sekaran (2010),

secondary data refers to information gathered by someone other than

the researcher conducting the current study. The data can be internal

and external and information that can be accessed through the internet

or published information. There are several sources of secondary data,

including books and periodicals, government publications of economic

indicators, census data, statistical abstracts, databases, the media,

annual reports of companies, etc.

Primary data will be gathered from several sources as follow:

a. Internal Interview (PT PGAS Solution and SENA)

b. External Interview (PT PJ-Tek Mandiri)

49

While for secondary data, we were use several data as follow:

a. Annual reports of SENA

b. Total existing PGN pipeline and also projection

c. Budget and Cost Realization of PGN Pipeline Certification

d. Total Human Resources that already have capability in inspection

and certification

3.1.2 Data Analysis

With all data collection that we were gathering, selecting, structuring,

and interpreting. The next step is try to analyze the relevant data. This

method of study is conducted through qualitative and quantitative

analysis in Pipeline Construction Inspection and Certification issues,

where by quantitative analysis we can reach appropriate

recommendation for implementation new opportunity business in the

company. TOWS Analysis, Feasibility Analysis in 7 Aspects and

Financial Analysis area qualitative analysis that we choose to use in

this GFP to strengthen points of recommendation.

3.2 Research Design

According to Kothari (2004) research design is a plan of the study, a road map

and blueprint strategy of an investigation to obtain answers from the objective

of the research.

Based on Creswell (2014) research design is a model or an action plan upon

which the entire study is built, dictates the manner in which a study is

conducted and provides the road map of a study in terms of the sample, data

collection instruments and analysis procedure.

50

Below is a picture of the research design process that will be used in the

research:

Figure 3.1 Research Design Process

Current Situation (Problem

Statement)

Expected Results (Recommendation)

Data Collection

Business

Opportunity Data Analysis

51

CHAPTER 4

FINDINGS, ANALYSIS AND DISCUSSUONS

4.1 Feasibility Study in 7 Aspects

Major corporations take advantage of the opportunity to conduct a Feasibility

Study (FS) as a part of the strategies in this new project. Feasibility study is

an analysis and evaluation of a proposed project to determine if it is technically

feasible, if it is feasible within the estimated cost, and will it be profitable. FS

are almost always conducted where large sums are a stake. A feasibility study

aims to objectively and rationally uncover the strengths and weaknesses of an

existing business or proposed venture, opportunities and threats present in the

environment, the resources required to carry through and ultimately the

prospects for success. In its simplest terms, the two criteria to judge feasibility

are cost required and value to be attained.

A well designed feasibility study should provide a historical background of the

business or project, a description of the product or service, accounting

statements, details of the operations and management, marketing research,

policies, financial data, legal requirements or even environment, social and

risks condition. There are 7 (seven) aspects that have to understand and analyse

before running this project:

4.1.1 Operational Aspect

Operational feasibility aspect is the measure of how well a proposed

system able to solve the problems, and takes advantage of the

opportunities that have been identified during definition and

requirements.

PGN as the largest natural gas transportation and distribution company

in Indonesia, has about more than 7.000 km pipeline that still growing

52

and having plan to do expansion. And to minimize risks and to support

the operation of oil and gas and so that the installation, equipment and

techniques used in oil and gas mining operation, must be carried out

safety inspection. It could be great opportunities for PGN to take role as

a part of Service Provider for Inspection and Certification by optimizing

one of PGN Subsidiary – SENA (Solusi Energy Nusantara), and also

Other consideration why PGN should take this opportunity to do it

because PGN must have to comply with MIGAS Regulation that regards

to Installation and Equipment in Oil and gas activities shall be obligated

to carry out Work Safety Inspection, regarding to Regulation of Minister

of Mines and Energy No: 06.P/0746/M.PE/1991. Also based on The

Director General of Oil and Gas Decree No: 84.K/38/DJM/1998 about

Inspection Guidelines for Safety on Facilities, Equipment and

Technology Used in Oil and Gas and Geothermal Activity which stated

that installation and equipment need to be certified and recertified every

three years.

Besides PGN has already existing internal resources that already

competence and certified in doing inspection and certification to

installation and equipment in oil and gas activities. About 12 employee

of PGN who already certified as MIGAS Pipeline Inspector, and more

than 55% person of total PGN employees are Engineer background, it

means easy for PGN to running this business expansion as Inspection

and Certification Service Provider.

Seeing from the current condition above, it will be more efficient if the

work safety inspection is being done by internal resources itself. SENA

as one of PGN Subsidiary also must be able to develop their capabilities

so that they could able to operate this business. For SENA, doing and

being as an Inspection and Certification Service Provider is new thing,

they must be able to transform from current condition to expected

condition. But it also could be as an opportunity to broaden SENA

53

capability, experiences, be more exist as engineering services in the oil

and natural gas industry. SENA should optimize their current condition

either by collaboration in PGN Group or doing it by growing their

networking outside PGN Group. The three element for successful in

organizational transformation are focusing on People, Process and

Technology area.

a. People

In order to upsizing the competences of human resources, SENA

should build capabilities and expertise in inspecting and also

creating specialize carrier path. Since it is for corporate action,

SENA able to do collaboration with other entity on PGN groups and

supporting by Human Capital Division of PGN as a centralize policy

maker that related to human resources in PGN Group.

b. Process / System

Making a system that related to Inspection and Certification area.

Provide Procedure and Policy, Implementation instruction, and

others. As a part of process in operating this business area, SENA

must be able to build networking with Government and other

company in terms to get new market.

c. Technology

Build a technology related to Inspection and Certification of oil and

gas installation and equipment activities.

4.1.2 Legal Aspect

In order to obligate with regulation, legal aspect should be part of

consideration of SENA. There are several regulations that should be

notice if SENA would like to be inspection and certification services

provider :

54

1. Regulation of Minister of Mines and Energy No.:

05/P/M/Pertamb/1977 about obligations having construction

feasibility certifications for oil and gas platform near offshore

2. Regulation of Minister of Mines and Energy No.: 06

P/0746/M.PE/1991 about work safety examination on installation

and techniques used in oil and gas and exploitation of geothermal

resources

3. The Director General of Oil and Gas No.: 84/K/38/DJM/1998 about

guidelines and procedures for safety inspection on installation,

equipment and techniques used in the mining of oil and gas and

exploitation of geothermal resources

4. Letter of Director General of Oil and Gas number

234/382/DJM/1993 about technical inspection and testing of the

equipment installation and inspection services company

5. The Director General of Oil and Gas No.: 43.P/382/DDJM/1992

about requirements and procedures of the technical inspection

services company in oil and natural gas mining and the geothermal

resources.

6. Application for Technical and Gas Inspection Service Company

7. Related International Standard and Codes

All of the regulations above must be meet with the requirement and

provides by SENA. Detail information such as about procedures in

doing safety inspection, about requirement as service company in

technical inspection and others, already stated and must be comply by

SENA.

4.1.3 Technical Aspect

A business is considered technically and operationally feasible if it has

the necessary expertise, infrastructure and capital to develop, install,

55

operate and maintain the proposed system, and by establishing such a

system, the business will be able to deliver goods or services at a profit.

When considering a new business, it is important to consider if there is

sufficient access to resources. One of the primary reasons that new

business fails is under capitalisation, not enough money to keep the

business going from start up until it stars to make a profit. This able to

lead to a lack of resources.

In order to comply with government regulations particularly in oil and

gas related field of activities and project specifications as well as all

standard practices and the requirement for occupational safety on the

pipeline system and equipment to be installed, a qualified Inspection and

Certification Service Provider who shall have the role of surveillance on

the works and ensure the conformity to MIGAS and Customer

requirements. In order to comply with MIGAS regulations, SENA shall

obtain SKPP Certificates prior to commissioning of the entire project

system. There are several of technical aspect that should be prepare by

SENA before being inspection and certification service provider :

1. SENA shall be accredited by a recognized institution and be

compliant with the requirements of ISO 9000, ISO 18001, ISO

14001, 19-17020 KAN, SMK3PL and other quality, safety, health

and environmental management and project control standard and

requirements.

2. Shall be member of APITINDO (Asosiasi Perusahaan Inspeksi

Teknik Indonesia)

3. Shall have numbers of expert in doing inspection and certification

services, how many person that needed in operating as an inspector

per project. Manpower planning shall be prepared

4. Shall be expert in technical inspection procedures

56

5. Shall be expert in knowledge of equipment list, inspection and Test

Plan (ITP) for which a work safety inspection is obligatorily carried

out

6. Shall understand about type of work that already / being installed of

constructed

7. SENA shall have recruitment and training plan for their resources

4.1.4 Competitors Aspect

There are numbers of competitors in inspection and certification service

provider, but only about 5 big competitors who still consistence

operating as this service provider. Seeing from the current condition of

PGN, problem statement and objective and situational background, PGN

supposed to take this opportunity since there are potential market in

Indonesia. SENA has strength in not only financial aspect (capital and

others) but also in resources. It’s not difficult for SENA to compete with

other competitors in this industry.

4.1.5 Environment, Social and Risk Aspect

Basically there is no specific environment and social issue in being

inspection and certification service provider, but the most important

thing is SENA must have knowledge and expert with regard to

installation and equipment in oil and gas mining activities shall be

obligated to carry out work safety inspection.

As an Inspection and certification service provider, SENA could be

facing numbers of risk that we already identified and also the mitigation

plan in managing this risks, they are:

57

Table 4.1. Risk Identification and Mitigation Plan

No Risk

Description Likelihood Impact

Risk

Level Mitigation Plan

1 Licenses is

not being

approved by

Dirjen Migas

Possible Fatal Extreme Coordinate and

approach to

regulators

2 High in

employee

turn over

Possible Moderate Medium Reaward and

appreciation to

employees,

People

development

3 Payment

delay by

customer

Rarely Moderate Low Creating payment

schedule

4 Loss of

opportunity

due to

competitors

Rarely Moderate Low Improving the

quality of service,

Creating different

features from

competitors

58

Figure 4.1 Risk Heat Map

Source : Based on PGN Risk Management Operating Procedures

4.1.6 Market Aspect

The potential market for this inspection and certification service

provider not only in PGN Group itself but also other oil and gas

(downstream, midstream like FSRU and upstream) including

geothermal company. As a projection we divided it in 5 years with

several area and calculating about 20% of each market as an pessimist

assumption (lowest assumption).

a. In Year 1 & 2 : the potential market is PGN Group Downstream. 1st

year about 20% PGN Pipeline and 15% PGN Equipment, and 2nd

year about 20% PGN Pipeline and 20% PGN Equipment

b. In Year 3 & 4 : the potential market is PGN Downstream and

Midstream, and also other entities outside PGN like geothermal

company. The percentage for each year similar to 1st and 2nd year,

additional with 50% FSRU and 5% of Geothermal as an introduction

Rar

ely

3, 4

Minor Moderate Major Catastropic

Po

ssib

le

2 1

Alm

ost

Ce

rtai

nLi

kely

Heat Map

59

c. In Year 5 : the potential market not only for PGN Group (since it

should be recertified in every 3rd years) but also other company

outside PGN.

4.1.7 Financial Aspect

To be Inspection and Certification Service Provider there is no needed

big capital at all, no needed special equipment, tools or technology. The

biggest asset to run this business is people. The calculation for

operational and capital expenses about 6,4 Billion IDR (detail financial

projection will be discussed bellows).

The several assumptions for financial aspect in being inspection and

certification service provider are :

a. Capital : Expenses on 1st year operational + 10%

b. Interest / month : 4,5%

c. Currency : IDR (In Million)

d. Total PGN Pipeline : 7.769 km

e. Potential Market : Captive Market (PGN Group) and Outside PGN

about 10% till 20% (as lower assumptions)

f. Annual Discount Rate : BI Rate + Inflation (6% + 5.5%) = 12%

g. Depreciation : 5 years

4.2 TOWS Analysis

TOWS and SWOT are the same acronyms for different arrangement of the

words Strengths, Weaknesses, Opportunities and Threats. By analysing the

external environment (threats and opportunities) and internal environment

(weaknesses and strengths), we could arrange the strategy for whole process

on the organization. Below the TOWS matrix of this inspection and

certification service provider project.

60

Figure 4.2 TOWS Analysis

Source : Internal Group Discussion

From the table above shown that there are internal and external factor that need

to be manage. Analysis is starting from external factor to internal

4.2.1 Threats (T)

We do realize that there are existing competitors who already playing in

this field business. It will able to create others threats that should be need

to prevent. Those kind threats are like:

a. New Entrants : considering to establish this company does not need

significant capital, makes other new entrants are interested to

participate in doing similar business

b. Customer Choice : since there are a lot of participant who play a role

as installation and certification service provider, it is easier to

customer move from one provider to another

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c. Price : the more player in this business, the more competitive price

of this services

4.2.2 Opportunities (O)

Even though there are several threats that should be face when entering

this business, there are also several opportunities that needs to be taken.

Moreover when we are seeing to the vision of President Republic of

Indonesia, focuses on the development of Indonesia, especially in the

leading areas of Indonesia. Means that infrastructure development will

be implemented continuously, it also wider the opportunities such as :

a. New Markets : New development means new market, and it means

new opportunity to get more potential market and get more profit

b. New Services : New development, new market, means new

opportunity to serve customer, we could create new services based

on customer needs

c. Alliances / Co-Branding : it also called brand partnership, could be

SENA’s opportunity to do an alliance to work together with other

party

4.2.3 Weakness (W)

Weakness usually comes from internal factors, regarding through the

interview and seeing the existing data several weakness are :

a. Experience : Since this business area is new things for SENA, SENA

still lack of experience, it will make them to be more tough to

compete with other parties

b. Skills/Technology : Lack of experience, means lack of skills.

c. Networking : Lack of experience, new things, lack of skills, means

lack of networking. They should be more fighting in terms of skills

and also wider the networking in this business area.

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4.2.4 Strength (S)

The strength of current condition of SENA are :

a. Existing Market : SENA already have existing market which is PGN

Group as a captive market

b. Existing Resources : SENA already have internal resources who

already certified as pipeline inspector

c. Existing Competences : Since already have internal resources who

already certified as pipeline inspector means the competences is no

doubt

d. Costumer Perspective : PGN already well-known in operating and

doing any pipeline or equipment infrastructure, the positive

customer perspective has been there

e. PGN Brand which has positive perspective from public, is an

advantage for SENA as a PGN Group

The next step of analysis is fit in the external opportunities and threats with our

internal strengths and weaknesses, as illustrated above.

a. SO : “Maxi-Maxi” strategy, that use strengths to maximize opportunities

In order to maintain the profit for company, SENA should catch non

potential market which means outside PGN. Seeing the opportunity of new

markets, SENA able to get it since they already existing resources who

competences and certified as inspector. The strategy as value added for

customer through helping them and giving advice in technical aspect, able

making SENA to be different that other competitors

b. ST : “Maxi-Mini” strategy, that use strengths to minimize threats

New entrants could be facing by SENA through their strengths in

competence resources, and positive customer perspective, by serving the

customer and focus to deliver great quality of solution product to either to

existing market or potential market outside PGN. It will also help SENA

63

to face other threats like price competition and solve the customer choice

problem.

c. WO : “Mini-Maxi” strategy, that minimize weaknesses by taking

advantage of opportunities

Entering new markets, delivering new services and do some alliances /

partnership strategy with other parties will help SENA in solving their

weakness in lack of experience, lack of networking and technology.

Besides SENA able to build networking with government who play an

important role in running this business.

d. WT : “Mini-Mini” strategy, that minimize weaknesses and avoid threats

To be bigger company and well-known as inspection and certification

service provider, SENA have to set different pricing strategy, do some

benchmarking and continuously upgrading their skill and technology.

4.3 Financial Analysis

Through the financial assumptions above, we do some financial analysis

projection for 5 years on this project. Positive NPV (Net Present Value) that

we get by doing some calculation will make this project be more attractive and

showing the profitability of this project. The difference between the present

value of cash inflows and the present value of cash outflows, supported by the

fact that this project not needed significant capital at all, no specific investment

or even no specific tools needed. With 12% annual discount rate assumption,

positive NPV already shown at first year as long as the captive market able to

handle by SENA.

There is no up-front specific investment besides small inspection tools,

Personal Computer and some Notebook which is already provide at SENA in

this moment. The higher expenses is operational than capital expenses. SENA

should spend more expenses for their resources and training/development cost

to upgrade their resources skill to compete with other parties.

64

In the 1st year company operated, the management projected revenues in

pipeline about 11,614 IDR Bio and equipment about 2,048 IDR Bio, with total

operational and capital expenses about 7,295 IDR Bio, this project creating

about 5 IDR Bio at their 1st year. Having positive NPV already, with high IRR

about 20% making more desirable to undertake this project. Return on

Investment (ROI) ratio of this project at 1st year able to reach up until more

than 100%. A high ROI means the investment’s gain compare favourably to

its cost, and means the efficiency of this investment relating profits to capital

invested. Since the 1st year is the beginning year for company to operated,

means company have to spend quite much money. The Return on Equity

(ROE) ratio of this project at 1st years still below 100%, but it is still seeing as

a good business to be undertaken. The way company generate earnings growth

from the equity available and their performance in the same industry is feasible.

ROE at this 1st year is about 99%, while even only 15%-20% ROE are

generally considered good.

In the 2nd year company operated, based on management production and

strategy to get more market for generate more revenues, company projected

revenues in pipeline similar to the 1st year, since the length of total PGN

pipeline and equipment projection being ramp up until 3 years. It won’t be

able do at same time but have to do it continuously about 20%-25% of total

length of PGN pipeline and equipment. A higher ROI is predictable on this 2nd

year. About 127% ROI and 109% of ROE can be obtained. Operational

expenses still similar with 1st year since it is the important thing to be maintain

when running this business. Pipeline and equipment assumption on this year

still similar with the 1st year. But getting higher Net Profit about 10% than the

1st year.

In the 3rd year company operated, management believe that the company has

built a strong marketing, sales team, knowledge, experience, and has a strong

relation between company to regulator and between company and market. The

65

management looks for more profit in order to increase equity and company’s

value. Management optimistic able to get Net Profit 40% increase then

previous year, with ROI about 175% and ROE increase to 153%. It is

supported by management strategy to start entering not only in downstream

area but already in midstream area and getting outside PGN customer.

In the 4th year where the company is already being settle, mature and proficient

in doing this business, SENA able to generate net profit more than 100%, ROI

more than 350% and ROE about 300%. Actually having too big percentage of

ROI and ROE are not good enough, management should able to re-arrange

their strategy in terms of maintaining the company’s value added. Even though

captive market already being held by SENA, but they have to expanse to

outside PGN market. It is better for experience and sustainability growth of

company.

In the last year of projected financial analysis, company projected sales are

raised up by 13% from the previous year. Means that this business still able to

generate profit to company. Management confidence to keep operation

expense stable as the years before. Management argue that to keep expense

stable as previous years is logically can happen because there is no specific

depreciation cost that should be spend by company.

4.3.1 Return on Investment

We use the projected Return on Investment to analyse the efficiency of

an investment. This chart analysis shows that the level of profitability

of investment from 1st year till the 5th years are increasing.

66

Figure 4.3. Return on Investment

4.3.2 Return on Equity

We use the projected Return on Equity to measure of the profitability of

a business in relation to the book value of shareholder equity, it also

measure of how well a company uses investments to generate earnings

growth. This chart analysis shows that the level of profitability of equity

from 1st year till the 5th years are increasing

103% 127%175%

365%

718%

0%

200%

400%

600%

800%

Year I Year II Year III Year IV Year V

Return On Investment (ROI)

67

Figure 4.4. Return on Equity

4.3.3 Sales Projection

ROI and ROE above are obtained from sales. Management believe that

this project able to increase their sales in each years, like shown below

(in IDR Bio)

Figure 4.5. Sales

99% 109%

153%

313%

353%

0%

100%

200%

300%

400%

Year I Year II Year III Year IV Year V

Return on Equity (ROE)

13,663 14,345

18,471

30,910

34,068

0

10000

20000

30000

40000

Year I Year II Year III Year IV Year V

Sales

68

The sales are obtained from volume projection below :

Table 4.2 Volume Projection

The increasing sales trend shown that this project is very attractive, as

long as the management are implementing the strategies to prevent

threats and overcome weaknesses.

69

CHAPTER 5

CONCLUSIONS AND RECOMMENDATIONS

5.1 Conclusion

Based on the outcomes of the research and analysis from the previous chapter,

research conclusions can be drawn as follows:

1. Any installation and equipment for which a work safety inspection has

been carried out, shall be given an Installation Worthiness Certificate

(SKPI) and Equipment Worthiness Certificate (SKPP) by Directorate

General Oil and Gas

2. Installation Worthiness Certificate (SKPI) and Equipment Worthiness

Certificate (SKPP) should be recertified every 3 years

3. SENA as an Engineering Services have to delivering reliable engineering

solution in Oil and Gas Industry. Work Safety Inspection and

Certification Inspection function is part of business field as Engineering

Services that could become an opportunity for companies to generate

revenue continuously for the company.

4. Becoming Inspection and Certification Service Provider doesn’t need

any significant capital and infrastructure

5. ROI (Return on Investment) average projection that could be obtained

from this project between 100% and up to 7 times multiple. While ROE

(Return on Equity) average projection about 99% and up to 3 times

multiple.

6. SENA able to optimize the existing internal resources at PGN Group who

already certified as pipeline inspector in handling this business

7. SENA already have existing potential market and market from outside

PGN in order to generate profit for company and as one steps for

company enterprise.

70

8. Seeing from the financial projection that discussed on the previous

chapter, shown that this project is profitable with positive NPV and IRR

about 20%.

5.2 Recommendation

From the discussion of the previous conclusion, we recommend company to

use SO Strategies, ST Strategies and also WO strategies. We do believe if the

company able to apply those strategies, and also considering the external

factor, company able to gain big market share in Indonesia and generate profit

growth for the company.

Company also must be able to consistent in implementing the competitive

advantage that already implemented in PGN in order to achieve these

objectives.

Seeing from the projected financial statement of this project, provides a

positive impact on corporate value not only for SENA but also for PGN

Group. The strategies that we propose as below :

a. Recruitment and manpower planning program must be set up before

operated this business

b. Hire experience and competent who expert as a pipeline inspector to

strengthen the existing resources

c. Placing educated technician to each customers

d. Build the relationship and networking with regulator and other parties

e. Maintain on time delivery and excellent services

71

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sena.co.id

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Weygandt, Jerry J.; Paul D, Kimmel; Donald E. Kieso. (2012) Managerial

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Work safety examination on installation and techniques used in oil and gas and

exploitation of geothermal resources No.: 06 P/0746/M.PE/1991, Minister of

Mines and Energy, 1991.

APPENDIX 1

WORKLOAD

APPENDIX 2

EMPLOYEES & REMUNERATION

APPENDIX 3

NPV IRR

Description

annual discount rate 0.12

Initial cost of investment one year from today(7,004) (7,004)

Return from 1st year 5,573 4,976

Return from 2nd year 6,115 5,460

Return from 3rd year 8,591 7,670

Return from 4th year 17,541 15,661

Return from 5th year 19,796 17,675

NPV 1 27,984 44,439

NPV 2 31,341.96

Year Balance

0 (7,004)

1 5,123

2 10,839

3 19,020

4 36,561

5 61,864

Interest 12%

IRR in 5 years 143.61%

IRR in 2 years 66.24%

APPENDIX 4

NPV

IRR

Year Balance

0 (7,004)

1 5,123

2 10,839

3 19,020

4 36,561

5 61,864

Interest 12%

IRR in 5 years 143.61%

IRR in 2 years 66.24%

Description

annual discount rate 0.12

Initial cost of investment one year from today(7,004) (7,004)

Return from 1st year 5,573 4,976

Return from 2nd year 6,115 5,460

Return from 3rd year 8,591 7,670

Return from 4th year 17,541 15,661

Return from 5th year 19,796 17,675

NPV 1 27,984 44,439

NPV 2 31,341.96

APPENDIX 5

PAYBACK PERIOD

Year CF Balance

0 (7,004) (7,004)

1 5,123 (1,881)

2 10,839 8,958

3 19,020 27,979

4 36,561 64,540

5 61,864 126,403

PB 2.47 years

Year CF PV CF Balance

0 (7,004) (7,004) (7,004)

1 5,123 4,574 (2,430)

2 10,839 18,318 15,888

3 19,020 45,684 61,572

4 36,561 111,049 172,621

5 61,864 223,005 395,626

r 12%

DPB 1.65

APPENDIX 6

COST

Units FY16E FY17P FY18P FY19P FY20P FY21P

Material Cost

Headcounts

Employees Number - 7 13 13 16 16

Average Monthly Salary

Employees IDR/ month - 127 173 225 289 302

Employee Cost 0.00 0.01 0.03 0.04 0.06 0.06

Power & Fuel Cost IDR Mn - 82 86 90 94 99

Preparation Costs IDR Mn 42 - 8 - - -

Training & Development IDR Mn - 27 24 37 42 0

Office & Administration IDR Mn - 298 313 331 348 365

Total Costs USD Mn 42 406 431 459 484 464

APPENDIX 7

OPERATIONAL EXPENSES

CAPITAL EXPENSES

1 2 3 4 5

Remuneration Expenses 1,524 2,079 2,695 3,473 3,624

Office & Maintenance 3,574 3,574 3,574 3,574 3,574

Training & Development 320 288 448 504 559

Other Expenses 950 400 509 400 230

Total Volume 6,367 6,341 7,226 7,951 7,987

DescriptionYears

1 2 3 4 5

Notebook, PC, Tools 450 400 409 400 230

Total Volume 450 400 409 400 230

DescriptionYears

APPENDIX 8

PROFIT AND LOSS (in IDR Bio)

Revenues :

Pipeline 11,614 11,614 11,614 23,228 23,228

Equipment 2,048 2,731 2,731 2,731 3,414

FSRU Equipment 320 384 576

Geothermal Installation 3,805 4,566 6,849

Upstream Installation 5,337

Gross Profit 13,663 14,345 18,471 30,910 34,068

Expenses :

- Remuneration 1,524 2,079 2,695 3,473 3,624

- Training & Development 3,574 3,574 3,574 3,574 3,574

- Office & Maintenance 320 288 448 504 559

- Other Expenses 950 400 509 400 400

Operating Profit 7,295 8,004 11,244 22,959 25,911

Interest 4.5% 328 4.5% 360 4.5% 506 4.5% 1,033 4.5% 1,166

Profit Before Tax Benefit 6,967 7,644 10,738 21,926 24,745

Tax Benefit 20% 1,393 20% 1,529 20% 2,148 20% 4,385 20% 4,949

Net Profit 5,573 6,115 8,591 17,541 19,796

Items Year I Year II Year III Year IV Year V

GROUP FIELD PROJECT – ELEBAH MENYENGAT MEMBER TEAM :

Developing SENA as an Inspection and Certification Service Provider

1. IMRON2. JERNIH DEBORA SINAGA3. NITA WIDYASUMANTI4. SELO PURNA ATMANI5. SONDANG ARYANTO

1

Background

Problem Statement & Objective

Analysis (TOWS Matrix & 7 Aspect)

Conclusion

2

a) Delivering reliable engineering solution in Oil & Gas Industry

b) Kep. Dirjen. Minyak dan Gas Bumi Nomor : 84.K/38/DJM/1998, equipment

used in oil and gas industry shall be certified by MIGAS;

c) PGN has 7.769 km pipeline that need to be recertified every three years (re-

certification cost +/- 11,6 Billion Rupiahs/year);

d) PGN is still expanding infrastructure and facilities (+/- 1.053 km), that will be

needed to be certified as a compliance to the MIGAS Regulation;

e) PGN has Existing Resource. 3

4

a) SENA still depend on PGN as Holding Company.

b) Business Engineering Solution is More Competitive.

Making Profit From Developing Business and Potential Market.

Legal

Operational

Market

Financial

Technical

Competitors

Environment, Social, and

Politic (Risk)

5

OperationalExcellence

Current Condition : PGN Resources just have roles as

owner and contractor only. Limitedness roles for optimize

competence. Limitedness position for Specialize

Carrier Path

People: Optimizing productivity

of PGN HumanResources create values; Build Capabilities and

Expertise in inspecting; Specialize Carrier Path.

Process: PGN Resources have

more roles not just as anowner, and contractor,but Inspector also;

Technology: Build Technology;

Networking (Governance): Build Governance

Networking; Build Networking for

New Market.

Operational Excellence: Propose Inspection

Solution as SENAAdded Value; Asset Database more

organize; The confidentiality of

Asset Database moreprotected. Maintain Pipeline

Reliability.

Total Employees: 1.477 (+/- 55% Engineer Background)

Certified as MIGAS Pipeline Inspector : +/- 12

Expected Condition :

6

7

1. Per Men 05 / P / M / Pertamb / 1977

2. Regulation of Minister of Mines and Energy No. 06 P / 0746 / M.PE / 1991

3. Dirjen Migas No. 43.P/382/DDJM/1992

4. Dirjen Migas No. 84.K / 38 / DJM / 1998

5. Application for Technical and Gas Inspection Services Company

Regulations to the Certification in the Oil and Gas Company :

8

1. SMK3PL

2. ISO 18001, 14001, 9001:2000 Certification and 19-17020 KAN

3. Member of APITINDO (Asosiasi Perusahan Inspeksi Teknik Indonesia)

4. Numbers of Expert

5. Inspection Equipment List

6. Technical Inspection Procedures

7. Inspection and Test Plan (ITP)

8. Type of work that Already / Being Installed of Constructed

9. Training Plan

10.Recruitment Plan of Resources / Expert

Remaining Preparation of Inspection Services Company :

9

1. Indospec Asia2. TriHasco Utama3. Sucofindo4. Biro Klasifikasi Indonesia5. Titis Sampurna6. Radiant Utama Interinsco7. Depriwangga8. Carsurin Oil and Gas Services9. Devnusa Roga Planindo10.Kasnia Inspektindo11.Mafhindo Utama12.Marka Inspektindo Technical

(Marindotek)13.Sertco Quality14.Sertifikasi Raharja Indonesia15.Valarbi

Top 5 Competitors

Experience

Market Leader

Well Known By Costumer

Skill/Technology

Networking

10

Rare

ly

3, 4

Minor Moderate Major Catastropic

Poss

ible

2 1

Alm

ost

Cert

ain

Like

ly

Heat Map

No Likelihood Impact Risk Level

1 Possible Fatal Ekstrim

2 Possible Moderat Sedang

3 Rarely Moderat Rendah

4 Rarely Moderat Rendah

Risk Description

Licenses is not being approved by Dirjen MigasEmployee high turn over

Payment delay by customer

Market being take over by competitor

Extreme

Medium

Low

Low

11

20 % PGN Pipeline 15 % PGN Equipment

Year 1

20 % PGN Pipeline 20 % PGN Equipment

Year 2

20 % PGN Pipeline 20 % PGN Equipment 50 % FSRU 5 % Geothermal

Year 3

Recertification 20 % PGN Pipeline 20 % PGN Equipment 50 % FSRU 5 % Geothermal

Year 4

Recertification 20 % PGN Pipeline 25 % PGN Equipment 50 % FSRU 5 % Geothermal 1 % Upstream

Year 5

DownstreamPGN Group

Downstream & Midstream

PGN Group and Others

Downstream, Midstream & UpstreamPGN Group and Others

12

Assumptions: Capital : Expenses on 1st y + 10%

Interest / month : 4.5%

Currency : IDR (In Million)

Total Pipeline (PGN) : 7.769 km

Market : PGN Group and Non PGN (10% - 20%)

Annual Discount Rate : BI Rate + Inflation (6%+5.5%) = 12%

Depreciation : 5 Y

13

Net Profit : 5 BnROI : 103%ROE : 99%

Net Profit : 10% ROI : 127%ROE : 109%

Net Profit : 40% ROI : 175%ROE : 153%

Net Profit : 104% ROI : 365%ROE : 313%

Net Profit : 13% ROI : 718%ROE : 353%

0 year : Business Start Up- Licenses and Permit- Assets and Equipment- As a Business Unit (Part of

Subsidiary)

5th

Year5th

Year

4th

Year4th

Year

3rd

Year3rd

Year

2nd

Year2nd

Year

1st

Year1st

Year

NPV : Positive (± 24 Mn)IRR : 20 % Payback Period : 2,4 years

TOWSMATRIKS

Opportunities – O :1. New Markets2. New Services3. Alliances/Co-Branding

Threats – T :1. Customer Choice2. New Entrants3. Price

Strengths – S :1. Existing Market 2. Existing Resources3. Existing Competences4. Costumer Perspective5. PGN Brand

SO strategies :1. Non potential market2. Solution as value

added for customer

ST strategies :1. Create solution product

base on Costumer needs2. Focusing to deliver great

quality of solution product to existing market (PGN).

Weakness – W :1. Experience2. Skills/Technology3. Networking

WO strategies :1. Partnership strategy2. Networking with

government (Migas)

WT strategies :1. Benchmarking2. Different Pricing Strategy3. Upgrade skills/

technology on existing market (PGN).

14

15

Investment ExistingInternal

Resources

Existing Potential Market

Profitable

Feasible

Investment : 8 BnIDR Capex : 4 hnd IDR ROI :

103% < ROI < 700% ROE :

99% < ROE < 353%

Internal Certified Resources in PGN Group

PGN Group NP : 13% < NP < 120%

16

17

17

18

19

20

Current Condition : PGN as an Owner PGAS Solution as a

Contractor Others (3th Parties) as an

Inspection and Certification Service

Expected Condition : PGN as an Owner PGAS Solution as a

Contractor SENA as an Inspection

and Certification Service

21

22

Regulation Content

Per Men 05 / P / M / Pertamb / 1977 Kewajiban Memiliki Sertifikat KelayakanKonstruksi Untuk Platform Minyak Dan Gas Bumi Di Daerah Lepas Pantai

Regulation of Minister of Mines and Energy No. 06 P / 0746 / M.PE / 1991

Pemeriksaan Keselamatan Kerja Atas Instalasi, Peralatan Dan Teknik Yang Dipergunakan Dalam Pertambangan Minyak Dan Gas Bumi Dan Pengusahaan Sumber Daya Panas Bumi

Dirjen Migas No. 43.P/382/DDJM/1992 Syarat-syarat Dan Tata Kerja Perusahaan JasaInspeksi Teknik Bidang PertambanganMinyak dan Gas Bumi Dan PengusahaanSumber Daya Panas Bumi

Dirjen Migas No. 84.K / 38 / DJM / 1998 Pedoman Dan Tata Cara PemeriksaanKeselamatan Kerja Atas Instalasi, PeralatanDan Teknik Yang Dipergunakan Dalam Usaha Pertambangan Minyak dan Gas Bumi Dan Penguasaan Sumber Daya Panas Bumi.

23

1 2 3 4 5Pipeline 39 39 39 78 78

PGN Equipment 7 10 10 10 12

FSRU 1 1 2

Geothermal 13 16 24

Upstream 19

Total Volume 46 48 63 105 135

DescriptionYears

24

1 2 3 4 5Notebook, PC, Tools 450 400 409 400 230 Total Volume 450 400 409 400 230

DescriptionYears

1 2 3 4 5Remuneration Expenses 1,524 2,079 2,695 3,473 3,624 Office & Maintenance 3,574 3,574 3,574 3,574 3,574 Training & Development 320 288 448 504 559 Other Expenses 950 400 509 400 230 Total Volume 6,367 6,341 7,226 7,951 7,987

Description Years

25

Revenues :Pipeline 11,614 11,614 11,614 23,228 23,228 Equipment 2,048 2,731 2,731 2,731 3,414 FSRU Equipment 320 384 576 Geothermal Installation 3,805 4,566 6,849 Upstream Installation 5,337

Gross Profit 13,663 14,345 18,471 30,910 34,068

Expenses :- Remuneration 1,524 2,079 2,695 3,473 3,624 - Training & Development 3,574 3,574 3,574 3,574 3,574 - Office & Maintenance 320 288 448 504 559 - Other Expenses 950 400 509 400 400

Operating Profit 7,295 8,004 11,244 22,959 25,911 Interest 4.5% 328 4.5% 360 4.5% 506 4.5% 1,033 4.5% 1,166

Profit Before Tax Benefit 6,967 7,644 10,738 21,926 24,745 Tax Benefit 20% 1,393 20% 1,529 20% 2,148 20% 4,385 20% 4,949

Net Profit 5,573 6,115 8,591 17,541 19,796

Items Year I Year II Year III Year IV Year V

26

FY17P FY18P FY19P FY20P FY21P

Arus Kas dari Aktivitas OperasiPenerimaan pelanggan (dari pihak ketiga) - - 3,805 4,566 12,186

Penerimaan pelanggan (dari PGN) 13,663 14,345 14,665 26,343 27,218

Pembayaran untuk beban usaha dan aktivitas operasi lainnya (4,844) (4,262) (4,531) (4,077) (4,133)

Pembayaran bunga (328) (360) (506) (1,033) (1,166)

Pembayaran kepada karyawan (1,524) (2,079) (2,695) (3,473) (3,624)

Pembayaran untuk pajak (1,393) (1,529) (2,148) (4,385) (4,949)

Arus Kas Bersih dari Aktivitas Operasi 5,573 6,115 8,591 17,941 25,532

Arus Kas dari Aktivitas InvestasiPenambahan Aktiva Tetap (450) (400) (409) (400) (230)

Arus Kas Bersih dari Aktivitas Investasi (450) (400) (409) (400) (230)

Arus Kas dari Aktivitas PendanaanHasil Pinjaman Shareholder Loan - - - - -

Arus Kas Bersih dari Aktivitas Pendanaan - - - - -

KENAIKAN BERSIH KAS DAN SETARA KAS 5,123 5,715 8,182 17,541 25,302

KAS DAN SETARA KAS AWAL TAHUN SEBELUM PENYESUAIAN - 5,123 10,839 19,020 36,561

KAS DAN SETARA KAS AKHIR TAHUN SETELAH PENYESUAIAN 5,123 10,839 19,020 36,561 61,864

DESCRIPTION

27

Units FY16E FY17P FY18P FY19P FY20P FY21P

Material CostHeadcounts

Employees Number - 7 13 13 16 16

Average Monthly SalaryEmployees IDR/ month - 127 173 225 289 302

Employee Cost 0.00 0.01 0.03 0.04 0.06 0.06

Power & Fuel Cost IDR Mn - 82 86 90 94 99

Preparation Costs IDR Mn 42 - 8 - - -

Training & Development IDR Mn - 27 24 37 42 0

Office & Administration IDR Mn - 298 313 331 348 365

Total Costs USD Mn 42 406 431 459 484 464

28

Descriptionannual discount rate 0.12

Initial cost of investment one year from today(7,004) (7,004)

Return from 1st year 5,573 4,976

Return from 2nd year 6,115 5,460

Return from 3rd year 8,591 7,670

Return from 4th year 17,541 15,661

Return from 5th year 19,796 17,675

NPV 1 27,984 44,439 NPV 2 31,341.96

Year Balance0 (7,004)

1 5,123

2 10,839

3 19,020

4 36,561

5 61,864

Interest 12%IRR in 5 years 143.61%

Year CF Balance 0 (7,004) (7,004)

1 5,123 (1,881)

2 10,839 8,958

3 19,020 27,979

4 36,561 64,540

5 61,864 126,403

PB 2.47 years

Year CF PV CF Balance 0 (7,004) (7,004) (7,004)

1 5,123 4,574 (2,430)

2 10,839 18,318 15,888

3 19,020 45,684 61,572

4 36,561 111,049 172,621

5 61,864 223,005 395,626

r 12%DPB 1.65

29

Year I Year II Year III Year IV Year V

Growth 0 10% 40% 104% 13%

ROI 103% 127% 175% 365% 718%

ROE 99% 109% 153% 313% 353%

30

NO JABATAN RATE GAJI/BULANTOTAL REMUNERASI

PER TAHUN

TOTAL BIAYA REMUNERASI

TAHUN PERTAMA

TOTAL BIAYA REMUNERASI

TAHUN KEDUA

TOTAL BIAYA REMUNERASI

TAHUN KETIGA

TOTAL BIAYA REMUNERASI

TAHUN KEEMPAT

TOTAL BIAYA REMUNERASI

TAHUN KELIMA1 General Manager Inspection 30,000,000.00 426,840,000.00 426,840,000.00 448,182,000.00 469,524,000.00 490,866,000.00 512,208,000.00 2 Tenaga Ahli 20,000,000.00 284,600,000.00 569,200,000.00 597,660,000.00 939,180,000.00 1,309,160,000.00 1,366,080,000.00 3 Tenaga Inspektor 9,000,000.00 128,400,000.00 256,800,000.00 539,280,000.00 564,960,000.00 738,300,000.00 770,400,000.00 4 Tenaga Admin Teknik 7,000,000.00 100,000,000.00 100,000,000.00 210,000,000.00 330,000,000.00 460,000,000.00 480,000,000.00 5 Tenaga Admin Umum 5,000,000.00 71,600,000.00 71,600,000.00 75,180,000.00 157,520,000.00 164,680,000.00 171,840,000.00

Grand Total 71,000,000.00 1,424,440,000.00 1,870,302,000.00 2,461,184,000.00 3,163,006,000.00 3,300,528,000.00

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FY17P FY18P FY19P FY20P FY21PPipe Line 1 1 2 2 2Equipment 1 1 1 1 1FSRU 1 1 1GeoThermal 11 Team 2 orangTotal manday/tim/year 288 DaysDays / Pipeline Spread 4 DaysDays / Equipment-FSRU-Geo 2 DaysPipeline 72 SpreadEquipment 144 UnitFSRU 144 UnitGeoThermal 144 Unit

Description Team