Before engaging in construction project investment activities, the project feasibility study report is a document prepared by the feasibility study entity (usually a professional consulting institution) to conduct specific investigation, research, and analysis on project influencing factors such as political, legal, economic, social, and technical aspects, to determine favorable and unfavorable factors, analyze the necessity and feasibility of the project, evaluate the economic and social benefits, and provide decision-making support opinions for the project investor or apply for approval from the project主管部门.
The "Feasibility Study Report for Three-Phase Electric Energy Meter Calibration Device Project" conducts research on market demand, resource supply, construction scale, process route, equipment selection, environmental impact, fund raising, profitability, etc., and conducts investigation, research, and comparative analysis from technical, economic, and engineering perspectives. It also scientifically predicts the financial, economic benefits, and social environmental impacts that may be achieved after the project is completed, providing fair, reliable, and scientific investment consulting opinions for project decision-making. Specifically, this report has the following main uses:
As the primary part of the feasibility study report, the general introduction should comprehensively describe the main issues and research conclusions of each part of the report, and provide final recommendations on the feasibility of the project, facilitating the approval of the feasibility study.
6. "Methods and Parameters for Economic Evaluation of Construction Projects (Third Edition)", National Development and Reform Commission, 2006
In the feasibility study, clear conclusions should be drawn on major issues such as product sales, raw material supply, policy support, technical solutions, total capital and financing, project financial benefits, national economy, and social benefits, mainly including:
In the general introduction, the main technical and economic indicators of each part of the report can be summarized and listed in a table of main technical and economic indicators, so that approval and decision-makers can have a comprehensive understanding of the project.
The total investment of the project mainly comes from the self-raised funds of the project initiating company. According to the plan, the project application and approval work will be completed before March 2012. It is expected that the total project investment funds will be in place by the end of April 2011. During the entire project construction period, the main tasks include compiling the project feasibility study report, project filing, civil engineering and supporting works, personnel recruitment and training, equipment production, equipment operation and acceptance, etc.
The project initiating company plans to set up a special fund account for the management of project construction funds. The insufficient part of the funds will be solved through bank loans, equipment financing, cooperation, leasing, and other methods.
The raw materials for the project products are currently in sufficient supply in the market and can be purchased locally. The project adheres to the concept of producing high-quality products and creating a first-class brand, strictly controls the raw material procurement process, selects raw material suppliers, and ensures smooth production.
The project production adheres to the principles of high starting point and high standards, plans to purchase advanced technology and process equipment, introduce advanced production management experience, provide professional training for production technical staff, and ensure efficient production, advanced processes, and product quality that meets standards.
This part mainly explains the background of the project initiation, the necessity of investment, the reasons for investment, and the supporting conditions for project implementation.
The industry to which the three-phase electric energy meter calibration device project belongs has developed rapidly in recent years. The industry plays an increasingly important role in prospering the domestic market, expanding export earnings, absorbing social employment, and promoting economic growth……
China attaches great importance to the development of the three-phase electric energy meter calibration device field. In recent years, the policy support from national and local governments in this field has been significantly strengthened, mainly reflected in the following aspects:
The construction of this project adheres to high starting point and high standard plans. To ensure advanced technology, key equipment is imported from foreign manufacturers, while auxiliary equipment is selected from domestic manufacturers. The company was established in 1998 and restructured into a joint-stock company in 2001. After years of technical transformation and production practice, the company has created first-class three-phase electric energy meter calibration device technology and advanced management technology, fully capable of producing and testing according to industry standards. The introduction of new technical solutions will effectively ensure the smooth implementation of this project.
The implementation of the three-phase electric energy meter calibration device project is organized by the project initiating company itself, introducing advanced production equipment, and the civil engineering is constructed by the company independently. After the project is completed, the project operation will be led by a wholly-owned subsidiary registered by the company, and the project products will target both domestic and international markets. Currently, both domestic and foreign markets are developing rapidly, with market space expanding faster and strong market demand, ensuring effective sales of products.
The important position of market analysis in the feasibility study lies in the fact that for any project, the determination of production scale, technology selection, investment estimation, and even site selection must be decided after fully understanding market demand. Moreover, the results of market analysis can also determine product prices, sales revenue, and ultimately affect the profitability and feasibility of the project. In the feasibility study report, it is necessary to study the current market situation in detail as a basis for later decision-making.
Market forecasting is the continuation of market investigation in time and space. It uses the information obtained from market investigation, based on the conclusions of market information analysis reports, to make quantitative and qualitative judgments and analyses on the future market demand for the project products and related factors. In feasibility study work, the conclusions of market forecasting are the necessary basis for formulating product plans and determining the construction scale of the project.
In a commodity economy environment, enterprises should formulate appropriate sales models according to market conditions, strive to expand market share, stabilize sales prices, and improve product competitiveness. Therefore, in the feasibility study, it is necessary to study marketing models.
In recent years, the diversified industrial economy in the project location has developed rapidly. The primary industry is basically stable, and the industrial economy has strong development momentum; emerging industries have become a new driving force for local economic development; the tertiary industry such as catering, entertainment, and transportation is booming; a large number of restructured enterprises are full of vitality, and the development of the private economy is accelerating. Key industrial adjustment projects are being solidly promoted, the diversified pillar industrial structure is being formed, and overall strength has been significantly enhanced……
The project operates locally, targeting both domestic and international markets. The transportation conditions at the project construction site are superior, and a three-dimensional transportation network of railways, highways, and aviation has been formed. The highway network extends in all directions, with 3 national highways and 2 provincial highways in the area. The acceleration of expressway construction will further improve local road transport conditions. The gradually optimized transportation conditions are conducive to improving the efficiency of product sales logistics, enabling products to be delivered to the target sales market in a timely manner.
In project construction, it is necessary to implement national laws and regulations on environmental protection, energy conservation, and occupational safety and health. The possible short-term and long-term impacts of the project on the environment, as well as factors affecting workers' health and safety, must be analyzed in the feasibility study stage, and prevention measures should be proposed and evaluated. The best solution with feasible technology, economy, reasonable layout, and minimal adverse environmental impact should be recommended. According to current national regulations, any construction project that has an impact on the environment must implement the approval system for environmental impact reports. At the same time, the feasibility study report must have a special discussion on environmental protection and labor safety.
According to the regulations of the National Development and Reform Commission, energy conservation needs to be a separate chapter. According to the relevant regulations of the National Development and Reform Commission, for public building projects with a construction area of more than 20,000 square meters, residential building projects with a construction area of more than 200,000 square meters, and other projects with an annual energy consumption of more than 2,000 tons of standard coal, the project construction party must issue a "Special Chapter on Energy Conservation" as an important part of the project energy conservation assessment and review. The project can only be approved after obtaining the energy conservation review and approval opinion. Therefore, for projects whose construction scale exceeds the requirements of the National Development and Reform Commission, the "Special Chapter on Energy Conservation" is a necessary pre-review link for project construction, just like the "Environmental Impact Assessment Report".
In the feasibility study report, according to the project scale, project composition, and process flow, the corresponding enterprise organizational structure, total labor force, labor sources, and corresponding personnel training plans should be studied and proposed.
This project adopts "standardized training" for personnel training. The so-called "standardized training" refers to pre-position recruitment, basic skill training, etc., which are uniformly implemented by technical backbones of each department according to regulations, aiming to make employees familiar with company business and various basic skills they need to master. After standardized training, the company determines positions based on individual performance, and then the technical leader of each position provides apprenticeship-style guidance and training for the specific business of the position. The combination of the two methods not only ensures the accuracy of employee positioning but also shortens the time for employees to become qualified after positioning, which has excellent effects on saving training costs and shortening training time.
The schedule arrangement during the project implementation period is also an important part of the feasibility study report. The so-called project implementation period, also known as the investment period, refers to the period from the formal determination of the construction project to the project reaching normal production. This period includes project implementation preparation, fund raising arrangements, survey and design, equipment ordering, construction preparation, construction and production preparation, trial operation, and final acceptance and delivery. Some of these investment activities and work links are mutually influential and closely connected, while others are carried out simultaneously and cross-cutting. Therefore, in the feasibility study stage, it is necessary to plan and balance the various work links in each stage of the project implementation period, and make reasonable and feasible arrangements.
The investment funds required for a construction project can be obtained from multiple sources. In the project feasibility study stage, the fund raising work is based on the results of fixed asset investment estimation and working capital estimation, to study and implement the source channels and methods of fund raising, and select funds with favorable conditions. In the feasibility study report, each source channel and its fund raising method should be discussed one by one, with necessary calculation tables and attachments. In the feasibility study, the following contents should be explained:
1. "Accounting Law of the People's Republic of China", [Presidential Order No. 24], effective from January 1, 2000.
3. "Regulations for the Implementation of the Enterprise Income Tax Law of the People's Republic of China", [State Council Order No. 512], effective from January 1, 2008.
4. "Detailed Rules for the Implementation of the Interim Regulations of the People's Republic of China on Value-Added Tax", [Order No. 50 of the Ministry of Finance and the State Administration of Taxation], effective from January 1, 2009.
5. "Methods and Parameters for Economic Evaluation of Construction Projects (Third Edition)", approved and implemented by the National Development and Reform Commission in 2006.
When evaluating a construction project, most of the data used come from forecasts and estimates. Due to the limited nature of information and data, the actual situation in the future may differ, which may bring risks to project investment decisions. To avoid or minimize risks, it is necessary to analyze the impact of uncertain factors on the project economic evaluation indicators to determine the reliability of the project. This is uncertainty analysis.
According to different analysis contents and focuses, uncertainty analysis can be divided into break-even analysis, sensitivity analysis, and probability analysis. In feasibility studies, break-even analysis, sensitivity analysis, and probability analysis are generally conducted, depending on the project situation.
After determining the technical route of the construction project, it is necessary to conduct financial and economic benefit evaluations of different schemes to judge whether the project is economically feasible and to select the best scheme. The evaluation conclusion in this part is one of the main bases for recommending the selection of schemes and an important basis for investment decisions on construction projects. This part provides a brief explanation of the main contents of financial, economic, and social benefit evaluations in the feasibility study report.
Financial evaluation examines the financial status of the project after completion, including profitability, debt repayment ability, and foreign exchange balance ability, to judge the financial feasibility of the construction project. Financial evaluation mostly uses a combination of static analysis and dynamic analysis, with dynamic analysis as the main method. The financial evaluation indicators are compared with corresponding benchmark parameters - financial benchmark yield, industry average investment payback period, average investment profit rate, and investment profit and tax rate - to judge whether the project is financially feasible.
Financial net present value refers to the sum of the present values of the net financial cash flows in each year of the project calculation period, discounted to the beginning of the construction period (the beginning of the first year of the project calculation period) at a set standard discount rate (benchmark yield). Financial net present value is the main dynamic evaluation indicator for examining the profitability of the project during its calculation period.
If the financial net present value of the project is equal to or greater than zero, it indicates that the project's profitability has reached or exceeded the required profitability level, and the project is financially feasible.
Financial internal rate of return refers to the discount rate at which the sum of the present values of the net financial cash flows in each year of the project's entire calculation period equals zero, that is, the discount rate at which the financial net present value of the project equals zero.
Investment payback period can be divided into static investment payback period and dynamic investment payback period according to whether the time value of funds is considered. Taking the dynamic payback period as an example:
The calculation of the dynamic investment payback period in practical applications is based on the project's cash flow statement, using the following approximate formula:
Pt = (number of years when the cumulative net cash flow present value becomes positive - 1) + absolute value of the cumulative net cash flow present value of the previous year / present value of the net cash flow in the year when it becomes positive
1) When Pt ≤ Pc (benchmark investment payback period), it indicates that the project (or scheme) can recover the investment within the required time and is feasible;
Project investment return rate refers to the ratio of the annual earnings before interest and tax (EBIT) in a normal year after the project reaches design capacity or the average annual earnings before interest and tax during the operation period to the total project investment (TI). If the total investment return rate is higher than the reference value of the same industry, it indicates that the profitability expressed by the total investment return rate meets the requirements.
When ROI ≥ the average investment profit rate of the department (industry) (or benchmark investment profit rate), the project can be considered acceptable financially.
Project investment profit and tax rate refers to the ratio of the annual total profit or average annual total profit in a normal production year after the project reaches design production capacity, plus sales tax and surcharges, to the total project investment. The calculation formula is:
When the investment profit and tax rate ≥ the average investment profit and tax rate of the department (industry) (or benchmark investment profit and tax rate), the project can be considered acceptable financially.
Project capital net profit rate refers to the ratio of the annual net profit in a normal year after the project reaches design capacity or the average annual net profit (NP) during the operation period to the project capital (EC).
If the project capital net profit rate is higher than the reference value of the net profit rate of the same industry, it indicates that the profitability expressed by the project capital net profit rate meets the requirements.
National economic evaluation is the core part of project economic evaluation and an important basis for decision-making departments to consider project selection. The national economic evaluation of construction projects adopts the method of cost-benefit analysis, using parameters such as shadow prices, shadow exchange rates, shadow wages, and social discount rates to calculate the net contribution of the project to the national economy and evaluate the economic rationality of the project. National economic evaluation adopts national economic profitability analysis and foreign exchange effect analysis, with the economic internal rate of return (EIRR) as the main evaluation indicator. According to the specific characteristics and actual needs of the project, the economic net present value (ENPV) indicator can also be calculated. For projects involving product export to earn foreign exchange or import substitution to save foreign exchange, the economic foreign exchange net present value (ENPV), economic foreign exchange earning cost, or economic foreign exchange saving cost should be calculated.
In the feasibility study, in addition to calculating and analyzing the above indicators, the social benefits and social impacts of the project should also be analyzed, that is, qualitative descriptions of non-quantifiable benefit impacts.
Based on the research and analysis results of the previous sections, a comprehensive evaluation of the project in terms of technology and economy should be conducted, the construction plan should be summarized, and conclusive opinions and suggestions should be proposed. The main contents include:
1. Conclusive opinions on the construction conditions, product plan, process technology, economic benefits, social benefits, and environmental impact of the recommended proposed plan
Any documents that fall within the scope of the project feasibility study but are separately bound outside the research report should be listed as attachments to the feasibility study report. The listed attachments should indicate the name, date, and number.
