SAME J.V. PROJECT

 

 

 

 

PHOTOWATT

 

FINAL PROPOSAL

Introduction :

 

We have given great attention to your RFP. First, we will explain to You why our company, specialized in solar energy, has decided to answer to the SAME's proposal. There are several reasons that have forged our decision:

 

Participating in such a project is not a new experience for us; indeed, we have already cooperated in humanitarian programs in Africa and it has been a success. Besides, the idea of producing dispensary vans for the South African and Sub-Saharan health care market has interested us insofar as these regions require a quick and efficient method to distribute vaccinations and medical care.

 

Solar power has two big advantages over fossil fuels. The first is the fact that it is renewable; it is never going to run out. The second is its effect on the environment. While the burning of fossil fuels introduces many harmful pollutants into the atmosphere and contributes to environmental problems like global warming and acid rain, solar energy is completely non-polluting. While many acres of land must be destroyed to feed a fossil fuel energy plant its required fuel, the only land that must be destroyed for a solar energy plant is the land that it stands on. Besides, as the primary element of construction of solar panels, silicon, is the second most common element on the planet, there is very little environmental disturbance caused by the creation of solar panels. All these factors are very important for South Africa.

 

Much of South Africaís electricity comes from coal. Even if coal can be found easily in this country, renewable energy is an excellent prospect for the future. Moreover, South Africa and its neighboring countries are known to have the greatest potential for harnessing solar energy in the world. So, this country is the perfect place to utilize photovoltaic power (and some hospitals and clinics have already done it to provide electricity for lighting, refrigeration of medicines, computer systemsÖ).

 

1. Photowatt Company Background:

 

Our Society, founded in 1984, is now the 2nd largest integrated manufacturer of photovoltaic power systems in Europe. This position is the result of strategic decisions on partnerships and processes that have driven enhancements and cost reductions at every stage of our products and manufacturing.

Our society has known an annual growth of 25% to 30%.

Our products are well known in the areas of satellite applications and home applications (lighting, freezing, water pumping, phones).

For 10 years, we have been involved in humanitarian projects such as dispensary powering, school lighting or water pumping. To improve our position on the African area, we implanted a subsidiary in equatorial and sub-Saharan Africa two years ago with two objectives: strengthening our position of innovation and services on home applications and facilitating health improvements in these countries. To be as near as possible to our customer, this subsidiary is composed of 5 African people who are in charge of designing, selling and after sales products manufactured in France.

Thanks to our expertise in this field, we have developed several patents in the use of photovoltaic cells and power supply converter.

 

2. Strategic point of view:

 

As you said, in order to be successful in this business two major points have to be taken into consideration:

First of all, we agree that the aim is to exploit a niche market. In that way the factory should be as profitable as possible.

Moreover we agree that the aim of producing such vehicles is to satisfy our customer. Thatís the reason why the vehicles have to be adapted to the needs of WHO from a technical point of view.

With regard to these concerns, the best strategic plan seems to be:

To have the best adapted vehicles to the needs of the customers at the lowest cost price.

To reduce as well as possible the production and general functioning costs of the factory by choosing an adapted structure to the production needs.

At the beginning to sell the vehicles to WHO and to find new customers and to expand the JVís market in order to sell more vehicles. As you explained, the first target customers could be hospitals in South Africa and in the neighboring Countries. The Military wonít be neglected because of some of their humanitarian projects.

3. J-V Work Force Training:

 

Thereís no doubt that the workers in the JV will need to be trained to increase their technical skills in this field. To respond to your Work Force Training requirement, we have decided that workers of our company will join the JV-R&D team.

They will be responsible for writing the documents needed by:

They will train production people:

Each assembly line manager will be trained by building each final prototype before it will be qualified. Then, this person can trained the line workers with the first products, under control of R&D people .

The same philosophy will be used for assembly line controllers :

The controller will participate the qualify tests of the final prototype before production.

The after sale people will be trained each time new products will be on assembly line. They'll receive two training:

4. Technological Proposal:

1. Refrigeration

We have taken into account the necessity for such a vehicle to be equipped with good quality medical equipment and we have given great attention to this point.

The vaccine refrigerator would be the Photovoltaic solar refrigerator with integrated freezer and compression cycle. It is complete photovoltaic system to run refrigerator/icepack freezer on electricity generated by the sun. Specification reference is Coldfridge E3/RF.4 and it was tested and approved by the World Health Organization (WHO).

This is the most efficient refrigerator in its size range with a lowest system cost. It has an excellent temperature control, a reserve cooling capacity and moreover it is reliable.

It costs $ 1500.

The second refrigerator will be a Coldfridge SFX150 that is a small one with an ice tray. It costs $ 1200.

2. Provision for vaccination

We will treat approximately 100 persons (including children) a trip with three different vaccines and particularly for tuberculosis, which is very frequent in South Africa, with the Bacillus Camille Guerin (BCG).

All vaccines and information would be carried by the WHO ; That is 300 vaccines a trip in total.

We also have to treat water because of the insufficient amount of magnesium that provokes ischaemic heart disease (IHD) and acute cardiac arrhythmia.

To prevent cholera, Oral Re-hydration Salts can be used since no effective vaccine for this disease exists. We forecast 3000 sachets for distribution.

Material diagnostic, emergency and sterilization equipment will be also carried on each trip in the van. It specially includes syringes and hygiene equipment.

We add special medicines for common diseases in the area.

    1. Extra equipment

To ensure the safety of the passengers and the vehicle, some options have been added. We think ñ as SAME - that a Cellular and/or satellite communication system is needed. Moreover an Argos system is used to locate the van in case of accident.

 

4. Solar equipment

Concerning the equipment that will be in the vehicle, we got the following information: the two refrigerators need approximately 100 amps per day whereas the other on board equipment, fan and lighting will require 20 amps. Given that Sub-Saharan Africa has approximately 5 hours of insulation per day, we will need a solar panel that deliver a total of 20 amps/hour (we got this by dividing the total current intensity necessary by the hours of insulation). Considering that, we had three different modules possible to power the equipment:

 

 

MODEL

SIZE (cm)

WEIGHT (Lbs.)

RATED POWER

TS100W

19x25x5

35

100W

TS100M

27,5x25x3

35

100W

TS100S

55x25x1,5

35

100W

 

We have finally decided to choose the TS100S model, which have the dimensions of 55x25x1.5 and the shortest depth of the three panels (1,5cm). Each one costs $ 400.

To obtain the best result, we should put together 5 solar panels of the model chosen and we use a special system to limit the power losses and the capacity of on board batteries, that permits to gain space. This system is based on two patents we have developed.

NB: four of the five panels are on the van's ceiling, the last one will be inside the vehicle during the trip and put outside during the using.

5. Vehicle

To begin with, we considered the fact that your RFP had underlined the need to have a SUVís van.

The process of selection considered these two main points:

Some global companies are well implanted in Africa:

Toyota

Land Rover

Ford

All of them have an efficient network that covers the country. Consequently, the maintenance will be easier and the warranty would be of better quality. One of these firms will be chosen to provide our van.

After having communicated with SAME officials, we think the best model is the DEFENDER STORM TD5. It has a fuel tank of 75L, which can be, extend with an other fuel tank of 50L. Thanks to this system, the van has a rough range of 850 KM.

Moreover Land Rover provide with shovels, tool kit, 2 spare wheels and 5 air pumps for $900.That is certainly needed if there are problems during a trip!

If we negotiate with this company, a reduction cost of 20% is possible. Consequently each van would cost $31000.

Land Rover sells a stripped-down vehicle and the JV will installed the equipment.

The refrigeration equipment would be installed into the lateral panels of the DEFENDER STORM TD5 to be easily accessed from outside.

Batteries and everything that is not often used would be built into the front of the van to warrant an optimal use of space.

By avoiding the "help" of Land Rover to equip the vehicle, we are more reactive and ready to provide the best product to our customers in the shortest time and at the lowest cost.

Moreover, this policy makes us more independent from the van supplier.

 

6. Cost Price

US $ 1 = 6.12 rand

Vehicle Equipment

Land Rover Storm $ 34000

Storage equipment $ 900

Internal & external lighting $ 150

Ventilation fan $ 42.5

Water storage tanks $ 120

Fuel tanks $ 300

Electrical aspects

Solar panels $ 2000

Batteries $ 200

Medical equipment

Examination tables $ 500

Camping equipment $ 1000
Sterilization equipment $ 1200

Minimal diagnostic and emergency equipment $ 1000

 

Extra equipment

Cellular and/or satellite communication $ 450

GPS $ 350

Argos system $ 200

Laptop computer $ 1500

Refrigerators (general) $ 1200

(Medical) $ 1500

Shower $ 500

 

 

TOTAL : Cost per car : $ 47112

 

 

 

 

 

We can negotiate a global reduce of 15% with our suppliers. Consequently the cost per car is $40000.

 

NB: we plan a maintenance cost of $150 a trip (15 days) which will be paid by the customers.

 

5. J-V Structure:

 

According to you, it was possible to create a new structure in South Africa and we do agree with you. We propose the following JV Company structure in accordance of these hypotheses:

The JV should work as an integrated and self-controlled company,

Due to the previous number of vehicles, we propose to have a simply assembly line solution. That means there is no automatic line,

To do not increase the first 3 years producing, we have consider that one assembly line is able to produce up to 150 vans / year.

1. J-V Corporate Personality

Your Proposal is based on the law in South Africa and determined by the facilities to run the society through a Joint Venture and the possibilities to change the corporate personality if necessary. Thatís the reasons why the most adapted corporate personality seems to be " a public company".

2. J-V Corporate localization

Moreover to get as many as possible Grants, this factory could be located in areas where these Grants are more significant.

3. J-V Department Structure

 

R&D Department

This department will be composed of 4 persons:

1 power electronic designer in charge of power solar systems and electric equipment,

1 mechanic designer in charge of dispensary cabin and integration of equipment,

2 technicians for testing prototypes.

These persons will be in charge of:

Production Department

For each assembly line, 10 persons will work. At the beginning only one assembly line will be necessary.

We agree that the production department will be responsible to assemble all the components as to produce the final products. And two of these persons will be in charge of planing the production and checking the quality of the works.

Quality and Control Department

This department will be composed of 2 persons at the beginning.

One will be in charge of the quality of the company (procedures of each department). He is also the correspondent of customer through after sales department. He has also the role of exchange quality information between internal department.

The second one will be in charge of the production control. There will be one person by each assembly line. The control on production will be based on R&D instructions and placed in 3 sectors: entrance of spare parts, in the middle of assembly line after mounting solar panel, and after final step of assembly. These controls on assembly line will be made on each vehicle.

Marketing and Sales Department

This department will be composed of 6 persons.

Two people would be responsible for finding new potential customers and new markets. Moreover they will have to be in connection with the R&D Department to give the main headlines to adjust the vehicles to the needs of new potential customers.

The others meet potential customers to present the vehicles and to discuss with them about their specific needs.

Purchase Department

This department will be composed of 2 persons.

As you explained in your RFP, most of the parts of these vehicles will come from various suppliers. Thatís why these persons will be in charge of contracting out with various suppliers and following contracts with suppliers. Moreover they will have to find suppliers, who will sell produce of good quality at the lowest price.

 

Operation Department

This department will be composed of 2 persons. One of them will be responsible for payroll and establishing bills. The other one will be in charge of more strategic issue like human resources and legal counsel as you described in you RFP.

 

After sales Department

This department will be composed of four persons.

They will be responsible for replying customer's problems.

 

J-V Board of Directors:

In order:

To do not charge the financial results of the JV,

To be business efficient,

We propose that the board of directors will be composed with 7 persons:

SAME manager and financial director, Partner manager and financial director, Local government official, JV manager and R&D manager.

 

 

 

 

 

 

 

 

 

 

 

6. JV financial Structure:

 

What will make your proposal possible on a financial point of view? As you wished, our proposal largely achieved your objectives from a profitability point of view. Moreover we paid attention to the environmental working condition since the workers of the JV will receive a significant wage compared to the wage granted in this sector.

1. A few ratios:

 

We forecast the Return On Investment and Return On Equity in a period of 10 years.

 

 

The Return on Investment will start at a level of 18,58% and will increase constantly to a level of 64,93%.

 

 

 

The same curve is expected with the Return On Equity. The Return on Equity will start at a level of 46,44% and will increase constantly to a level of 114,8%.

 

 

 

 

 

 

 

 

 

 

These ratios are made possible thanks to a significant Margin. The price of the vehicles could be fixed at $ 66 000 to optimise the margin with a fair price for our customers. Moreover the cost price of the vehicles will decrease constantly as following:

 

 

 

2. Balance Sheet Forecast

 

Year 1

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

Year 8

Year 9

Year 10

Turnover

6600000

7920000

9240000

10560000

11880000

13200000

13200000

13200000

13200000

13200000

fixed costs

1012531

1035177

1092410

1101526

1105079

1106859

1106739

1104588

1100263

1093613

variable costs

4335373

4955373

5777269

6597269

7417269

8237269

8237269

8237269

8237269

8237269

Taxes

-438234

-675308

-829612

-1001422

-1175178

-1349555

-1349597

-1350350

-1351864

-1354191

profit

813862

1254143

1540709

1859784

2182474

2506317

2506395

2507793

2510604

2514927

 

 

The Turnover is based on your sales forecast. Concerning the investments required for the first year, we estimated them at $ 643 345.

3. Capital breakdown

 

As you proposed in your RFP, the most adapted capital breakdown is the following

 

Concerning the debt breakdown, we agree with your proposal. Moreover the debt will be contracted through the J-V:

 

Concerning the equity breakdown, we accept to let you the control of the JV and we propose the following equity breakdown:

 

 

7. JV Plan Schedule:

The schedule of this JV Company is, after signing contract:

At t0 + 2months, R&D, purchaser, marketing and financial departments will work.

At t0 + 6/7 months, assembly, quality departments will be integrated, and trained for assembly.

At t0 + 8/10 months, the after sale peoples will be trained.

This schedule takes account the building time (2months), the first design delay, and the need to be sure that the first 20 vehicles are good enough and available.

 

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