281.

PROFILE ON WINDMILL

281-2 TABLE OF CONTENTS

PAGE I. II. III. SUMMARY PRODUCT DESCRIPTION & APPLICATION MARKET STUDY AND PLANT CAPACITY A. MARKET STUDY B. PLANT CAPACITY & PRODUCTION PROGRAMME IV. MATERIALS AND INPUTS A. RAW MATERIALS B. UTILITIES V. TECHNOLOGY & ENGINEERING A. TECHNOLOGY B. ENGINEERING VI. MANPOWER & TRAINING REQUIREMENT A. MANPOWER REQUIREMENT B. TRAINING REQUIREMENT VII. FINANCIAL ANLYSIS A. TOTAL INITIAL INVESTMENT COST B. PRODUCTION COST C. FINANCIAL EVALUATION D. ECONOMIC BENEFITS 281-3 281-3 281-4 281-4 281-7 281-8 281-8 281-9 281-10 281-10 281-13 281-14 281-14 281-15 281-16 281-16 281-17 281-18 281-19

281-3 I. SUMMARY

This profile envisages the establishment of a plant for the production of wind mill with a capacity of 1,500 units per annum. The present demand for the proposed product is estimated at 3,061 units per annum. The demand is expected to reach at 24,908 units by the year 2022. The plant will create employment opportunities for 26 persons. The total investment requirement is estimated at about Birr 5.27 million, out of which Birr 2 million is required for plant and machinery. The project is financially viable with an internal rate of return (IRR) of 35 % and a net present value (NPV) of Birr 6.12 million discounted at 8.5%.

II.

PRODUCT DESCRIPTION AND APPLICATION

A windmill is a structure or machine that converts wind into usable energy through the rotation of a wheel made up of adjustable blades. The energy windmills produce can be used in many ways, traditionally for grinding grain or spices, pumping water, sawing wood or hammering seeds. Modern wind power machines are used for generating electricity and are more commonly called wind turbines. There are two classes of windmill, horizontal axis (variety of these including the post mill, smock mill, tower mill, and the fan mill) and vertical axis. The vertical axis design was popular during the early development of the windmill. However, its inefficiency of operation led to the development of the numerous horizontal axis designs In this profile ,a horizontal axis wind mill of fan-type is considered . The fan-type windmill is made specifically for individuals, is much smaller and used primarily for water pumping application.

281-4

Figure 2.1:Typical Windmill Water Pumping System Component Level Diagram

III.

MARKET STUDY AND PLANT CAPACITY

A.

MARKET STUDY

1.

Past Power Supply and Present Demand

Development and use of windmill pump and wind generator technology can play vital role in order to improve the living standard of the rural population as well as to increase agricultural productivity. The adaptability of the technology for using wind energy to any locality where there exists ample wind energy indicates the possibility of introducing wind energy technology in remote rural areas. At present, most of the energy requirements for water pumping in remote areas are met by petroleum fuel resources resulting in a large drain on foreign exchange and demanding

281-5 elaborate organizational supply and maintenance services. Windmill provides an

independent, reliable power source and it is particularly suitable for remote settlement. Therefore, the use of wind pumping system would help in reducing the problems encountered by using diesel water pumping. Wind mills are mostly used for water pumping in rural areas where there is no electrification and where any other source of energy is not available. Hence the demand for hand pumps is considered in estimating the demand for wind mill. The countrys requirement for hand pumps is essentially met through imports. Table 3.1 shows the amount of hand pumps imported during 1997-2006. As can be seen from the information depicted in the Table, the level of imports was erratic. During the period under reference, imports varied from 5042 units in 1999 to 76465 units in 2005. On the average, 26618 units are imported during the period. Table 3.1 IMPORTS OF HAND PUMPS

Year 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Average

Import (Number) 9886 7099 5042 7852 19420 62958 36978 30111 76465 10371 26618

Source: Customs Authority External Trade Statistics, 1997-2006

281-6 Assuming supply was driven by demand, the average annual supply for the period under reference, which constitutes only imports, is considered as the effective demand for the product for the year 2006. The average rate of growth of imports of the product during the reference period is computed to be about 42%. However, a conservative estimate of 15% rate of growth is adopted in estimating the demand for the product. The present demand for hand pumps is thus estimated at 30,611. Apparently, wind mills can used in areas where there is ample wind energy and where fuel and electric power could not be easily available. Accordingly, the demand for wind mills is conservatively estimated at a mere 10% of the demand for hand pumps. Thus, the present demand for wind mills (i.e. 2007) is estimated at 3,061 units.

2.

Projected Power Demand

As stated above, a growth rate of 15% is considered in projecting the demand for wind mills. The projected demand for the product is shown in Table 3.2. Table 3.2 PROJECTED DEMAND FOR WIND MILLS (NUMBERS) Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Projected Demand 3061 3520 4048 4656 5354 6157 7080 8143 9364 10768 12384 14241 16377 18834 21659 24908

281-7 3. Pricing and Distribution

Based on previous study and information gathered from knowledgeable people, a unit price of Birr 3,500 is recommended for the product of the envisaged plant. The envisaged plant can supply its product directly to users. The plant can also appoint agents at selected locations.

B.

PLANT CAPACITY AND PRODUCTION PROGRAMME

1.

Plant Capacity

Market study for windmill indicated that the unsatisfied demand for the year 2008 is 3250 units and this figure will grow to 24,908 units in year 2022.On the basis of demand projection made for the product and in consideration of high capital costs associated with high volume of production, a plant with a capacity of 1,500 windmill set /year is envisaged in this project profile. Production capacity is based on a schedule of 300 working days per annum and eight hours each per day. Increasing the number of working hours can increase this capacity. The envisaged plant will produce a windmill set having the specification given below:

Diameter of Cylinder [mm] 76.2

Pumping Capacity [Lt./Hr] 2136

Wheel Diameter [mm] 2438

Pumping Elevation [mm] 20,726

Number of Blades 18

2.

Production Programme

Table 3.2 shows the production programme of the envisaged project. At the initial stage of the production period, the plant requires some years to penetrate into the market. Therefore, in the first and second year of production, the capacity utilization rate will be 70% and 85%, respectively. In third year and thereafter, full capacity production shall be attained.

281-8

Table 3.2 PRODUCTION PROGRAMME

Sr. No. 1. 2

Product 2008 Windmill (Sets) Capacity Utilization (%) 1050 70

Production Year 2009 1275 85 2010-2016 1,500 100

IV.

RAW MATERIALS AND INPUTS

A.

RAW MATERIALS

The main body of the fan-type mills is made with galvanized steel. This process of treating steel makes it weather resistant and strong. The blades of the fan are made with a lightweight, galvanized steel or aluminum. Table 4.1 indicates the annual requirement of raw materials and corresponding cost of the proposed project.

281-9 Table 4.1 RAW MATERIALS REQUIREMENT AND COST (AT FULL CAPATIY)

Sr. No. 1.

Raw Material Lightweight Rolled galvanized steel sheet 4mm thick

Unit of Measure Tone

Qty. 20

Cost (000 Birr) 800

2.

Solid Shaft feed material ST-37, 100mm dia x 1000mm length

Pcs

800

800

3.

Treated Wooden pump rod pole & guide 50 mm dia. x 12000mm length

Pcs

3100

155

4. 5 6

Assorted MS bolt and nut and fittings Carbon steel rods 8 mm x 6 mt length Replaceable Babbitt bearing Total

Kg Pcs Set

500 500 3100

10 25 620

2,615.00

B.

UTILITIES

Electricity and water are the principal utilities of the project. The annual utilities requirement and cost are indicated in Table 4.2.

281-10 Table 4.2 UTILITIES REQUIREMENT AND COST

Sr. No. 1 2

Utility Electricity Water Total

Unit of Measure KWh M

3

Qty. 40,000 600

Cost (000 BIRR) 18.944 6 24.944

V.

TECHNOLOGY AND ENGINEERING

A.

TECHNOLOGY

1.

Production Process

It consists of a fixed tower (mast), a wheel and tail assembly (fan), Gear box, pump ,Furl and support assembly,. The masts can be 3-20 m high. The number of blades can range from 4 to 20 and have a diameter between 1.8-4.9 mt. Windmills are always erected on site using pre-made parts. The following description relates to the fan-type windmill. The basic steps include making the parts and then assembling the structure. Making the tower parts 9 The tower parts are made from galvanized steel. This process begins with a roll of coiled sheet metal. The coils are put on a de-spooling device and fed to the production line. They are run under a straightener to remove any kinks or twists. The pieces are cut to the appropriate size and shape. In some cases, pieces may be put on a machine that rolls them and welds the seam. The ends are passed under a crimping machine and the pieces are moved to the finishing station.

281-11 9 At the finishing station, holes are drilled in the metal parts at specific places as required by the windmill design. The parts may also be painted or coated before being arranged in the final windmill kit. Making the fan 9 The fan is made up of a metal rim with slightly curved blades attached. The rim is produced on a machine that rolls steel strips into circular hoops. A hole is drilled in both ends, and they are connected with a small clamp and screw after the fan blades are attached. A center axle is then connected to the rim and attached with small steel spokes. A typical design will have five pairs of spokes attached to an evenly spaced interval along the rim. 9 The fan blades and tail are cut from pieces of sheet metal. The blades are then run through a machine that gives them a slight curve. They are attached to the metal rim with small bolts and metal clamps. They are attached in such a way that they can be raised or lowered depending on the wind conditions. Gearbox, Pump, Brake, Furl and Supporting System 9 The gearbox is an intricate assembly made up of various gears, axles, rotors, and wheels. The parts are die cast and assembled by hand. They are placed in a weather resistant housing that is designed to accommodate the gearbox parts and the attached wheel and tail assembly. 9 The pump is made of bronze and brass that inhibits freezing. Leather or synthetic polymers are used for washers and o-rings.

9 Brake, Furl and supporting system also an intricate assembly of various links, axles, pins. These are die caste and assembled by hand.

281-12 N.B Due to the complexity of technology, economic scale of production and

requirement of additional investment the above mentioned parts of the windmill are considered to be outsourced. Preparing the site 9 Finding and preparing the construction site is a crucial step in creating a functional windmill. First, an area with a prevailing wind of at least 24 km/hr is needed. Then the area needs to be cleared of trees and other structures that may block wind. In some cases, a dirt mound or concrete base is erected to raise the windmill off the surface to catch more wind. Final assembly 9 The parts of the main body are connected first. They are bolted together on the ground and then raised up vertically. The outer poles are joined with the connecting rods. Clamps are bolted at each joint for stability. After the tower is raised it is loosely bolted to the solid base. Next stay wires are strung from the frame down to the ground and attached to tensioners and ground anchors. When the structure is level, the bolts are tightened and the structure integrity is tested. In some cases a ladder is built into the frame design to allow access to the fan on top, which makes cleaning maintenance easier. 9 The fan wheel, gearbox, and main shaft are next attached. The gearbox is first clamped and bolted to the top of the tower. The main shaft is then inserted into the bottom of the gearbox. Next, the fan and its attached axle are connected to the gearbox. Finally, the tail section is attached to the gearbox. The pump is then hooked up to the main shaft and the windmill is operational. Quality Control 9 Various tests may be done to ensure that each part of the windmill meets the specifications laid out in the design phase. The most basic of these are simple

281-13 visual inspections. These will catch most of the obvious production flaws. Since windmills are erected by hand, the quality of each part goes through an additional visual inspection. The quality of workmanship that goes into construction of the windmill will be primarily responsible for the quality of the finished product. To ensure that it remains efficient during operation, regular maintenance checks are necessary.

2.

Source of Technology

Selam Technical and vocational college Tel:011 646 2942 Web Page: WWW.selamethiopia.org Addis Ababa Ethiopia

B.

ENGINEERING

1.

Machinery and Equipment

The list of machinery and equipment is indicated in Table 5.1. The total cost of machinery is estimated at Birr 2 million.

281-14 Table 5.1 LIST OF MACHINERY AND EQUIPMENT REQUIRED

Sr. No. 1. 2. 3. 5. 6. 7. 8 9 10 11 12 13 14 15

Raw Material De-spooling machine Rolled sheet metal straighter Crimping machine Shearing machine, max. 4mm thick. Manual bending machine Drilling machine Bench grinder Mechanic tool box Welding transformer, ARC, & its accessories Riveting machine Power hack saw Welding transformer, GAS, & its accessories Work bench with w/s vice Hand drilling machine Total cost (Birr)

UOM Pcs Pcs Pcs Pcs Pcs Pcs Pcs Set Set set

Qty. 1 1 1 1 1 2 4 2 4 1 1 4 4 4 2,000,000

2.

Land, Building and Civil works

The plant requires a total of 1000m2 area of land out of which 500 m2 is built-up area, which includes manufacturing area, raw material stock area, offices etc. Assuming construction rate of Birr 1500 per m2, the total cost of construction is estimated to be Birr 1.5 million. The total cost, for a period of 80 years with cost of Birr 1 per m2, is estimated at Birr 1000. The total investment cost for land, building and civil works is estimated at Birr 1,501,000.

281-15 3. Proposed Location

Based on the resource potential study of the region, Meanit Shash woreda is found as potential woredas. Based on the availability of infrastructure, utility and market out let Jemu town of Meanit Shash Woreda is selected and recommended to be the location of the envisaged plant.

VI.

MANPOWER AND TRAINING REQUIREMENT

A.

MANPOWER REQUIREMENT

The manpower requirement of the envisaged project is 26 persons. The list of manpower is indicated in Table 6.1. The total annual labour cost including fringe benefits is estimated at Birr 148,500. Table 6.1 MANPOWER REQUIREMENT AND LABOUR COST

Sr. No. 1. 2. 3. 4. 5. 6. 7. 8 9

Description General Manager Secretary/cashier Production & technical Head Operators Fitters Welders Laborers Guard Driver Sub-Total Benefits (25% BS) Grand Total

Req. No. 1 1 1 4 4 8 5 2 1 26

Monthly Salary (Birr) 2,000 700 1,200 2,400 1,600 4800 1,500 500 550 15,250 3812.5 19,063

Annual Salary (Birr) 24,000 8,400 14,400 28,800 19,200 57,600 18,000 6,000 6,600 183,000 45750 228,750

281-16 B. TRAINING REQUIREMENT

Currently, government, private and other institutions are training several students on metal work. In addition, experienced machine operators and fitters can be assigned for the job. Therefore, there is no need of training arrangement for the envisaged project.

VII.

FINANCIAL ANALYSIS

The financial analysis of the wind mill project is based on the data presented in the previous chapters and the following assumptions:Construction period Source of finance Tax holidays Bank interest Discount cash flow Accounts receivable Raw material local Raw material, import Work in progress Finished products Cash in hand Accounts payable 1 year 30 % equity 70 % loan 3 years 8% 8.5% 30 days 30days 90days 5 days 30 days 5 days 30 days

A.

TOTAL INITIAL INVESTMENT COST

The total investment cost of the project including working capital is estimated at Birr 5.27 million, of which 17 per cent will be required in foreign currency. The major breakdown of the total initial investment cost is shown in Table 7.1.

281-17

Table 7.1 INITIAL INVESTMENT COST

Sr. No. 1 2 3 4 5 6 7 Cost Items Land lease value Building and Civil Work Plant Machinery and Equipment Office Furniture and Equipment Vehicle Pre-production Expenditure* Working Capital Total Investment cost Foreign Share

Total Cost (000 Birr) 80 1,500.00 2,000.00 150 650 408.71 490.36 5,279.1 17

* N.B Pre-production expenditure includes interest during construction (Birr 208.71 thousand ) and Birr 200 thousand costs of registration, licensing and formation of the company including legal fees, commissioning expenses, etc.

B.

PRODUCTION COST

The annual production cost at full operation capacity is estimated at Birr 3.73 million (see Table 7.2). The material and utility cost accounts for 70.77 per cent, while repair and maintenance take 4.02 per cent of the production cost.

281-18 Table 7.2 ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)

Items Raw Material and Inputs Utilities Maintenance and repair Labour direct Factory overheads Administration Costs Total Operating Costs Depreciation Cost of Finance Total Production Cost

Cost 2,615.00 24.94 150 137.25 57.19 91.5 3,075.88 460 194.26 3,730.14

% 70.10 0.67 4.02 3.68 1.53 2.45 82.46 12.33 5.21 100

C.

FINANCIAL EVALUATION

1.

Profitability

According to the projected income statement, the project will start generating profit in the first year of operation. Important ratios such as profit to total sales, net profit to equity (Return on equity) and net profit plus interest on total investment (return on total investment) show an increasing trend during the life-time of the project. The income statement and the other indicators of profitability show that the project is viable.

281-19

2.

Break-even Analysis

The break-even point of the project including cost of finance when it starts to operate at full capacity (year 3) is estimated by using income statement projection.

BE =

Fixed Cost Sales Variable Cost

21 %

3.

Pay Back Period

The investment cost and income statement projection are used to project the pay-back period. The projects initial investment will be fully recovered within 3 years.

4.

Internal Rate of Return and Net Present Value

Based on the cash flow statement, the calculated IRR of the project is 35 % and the net present value at 8.5% discount rate is Birr 6.12 million.

D.

ECONOMIC BENEFITS

The project can create employment for 26 persons. In addition to supply of the domestic needs, the project will generate Birr 3.67 million in terms of tax revenue. The establishment of such factory will have a foreign exchange saving effect to the country by substituting the current imports.