By the end of this section, you should be able to:
Understand The elements that contribute to the capital cost for a plant
Total Capital Investment (TCI)
Total Capital Investment (TCI) is the amount of money (A.K.A. capital) needed for a project to proceed. TCI is the total amount of funds needed to build and start a chemical plant, including the testing and troubleshooting stages before the actual production. It does not include operating expenses or maintenance during the production process. This is further divided into 2 types of capital:
- Fixed Capital Investment (FCI)
- Working Capital (WC)
[latex]TCI = FCI + WC[/latex]
Fixed Capital Investment (FCI)
Fixed capital investment is the total price to purchase equipment, get it installed and tested.
FCI is made up of direct costs and indirect costs. These are described below and common direct and indirect cost categories are listed in the table below.
- Direct costs: related to tangible things or products such as process equipment.
- Indirect costs: related to intangible items, these won’t stay at the end of building the plant. For example, supervision and project management expenses are indirect costs.
Table 1: Examples of Direct and Indirect Costs that Contribute to FCI
|Directs costs||Indirect costs|
|1. purchased equipment (PE) cost||1. Engineering and supervision|
|2. PE installation||2.Construction expenses|
|3. Instrumentation and controls||3. Contractor’s fee|
|4. Piping||4. Contingency|
|5. Electrical equipment and materials|
|7. Yard improvements|
|8. Service facilities|
Working Capital (WC)
The Working Capital is the initial money required to start the plant. You can think of this like a float (initial money in a cash box) when selling something like samosas or baked goods in CHBE. It is money needed for supplies or people that is not recovered until after the plant closes. Since this is generally a long-time in the future, it is considered a capital investment rather than a manufacturing cost.
WC includes capital invested in:
- Raw materials and supplies in stock
- Finished product in stock
- Cash for monthly operating expenses such as wages, utility bills, etc.
- Accounts receivable
- Accounts payable
- Taxes payable
Typically the WC is 10-20% of the TCI for most chemical plants