Diesel generator rent service (long term) for Telecom Operator

DIESEL GENERATOR SERVICE for TELECOM OPERATOR

Otgontugs U.

Assumption

• Average annual hours : 250h

• Rental Contract duration: 5 years + (5 years)

• USD rate: 1USD = 1900MNT

• Diesel fuel cost: 1L = 2000 MNT

• Electricity cost: 1kWh = 124 MNT

• Data package: 1Gb = 10,000MNT

• First year: 10 pcs triple operator site, 20 pcs double operator site

• Annual increase : 3 pcs triple site, 7 pcs double site

Operator situation

Operator Mobicom Skytel Unitel Netcom Gmobile

# of site 373 395 390 330

3G / 2G 74 / 299 362 / 256 390

# of gensets 200+ 45 50?

# of portable gensets

100+ 82 100?

# of person 10 6-8 6-8 30 more

Type of genset Olympian, aska,

fgwilson honda

Aska, Olympian, fgwilson honda

Chinese, CAT,

honda

Aksa, Kipor, Volvo, Koop,

Russian Honda

Kipor, buy gensets directly

from Chinese.

Procurement Genset 14/15

24 + 15 10 + 2 30 + 15 2 + 29 ?

Portable 14/15 40 + 40 13 ?

Netcom’s tender opening March 27, 2015

Company name Quotation MNT Discount

MOST IRRADIANS Monhorus WAE

Operator’s monthly cost on genset

Cost Portable 6k 9.5kVA 13.5kVA 22kVA 33kVA

Generator 300,000 293,000 360,000 422,000 492,000

Installation* 30,000 98,000 98,000 98,000 98,000

Gen Room - 50,000 50,000 50,000 50,000

Guard salary 80,000 80,000 80,000 80,000 80,000

Fuel cost 25h 125,000 130,000 185,000 265,000 350,000

PM** - 100,000 110,000 120,000 135,000

Electricity*** 15,000 15,000 15,000 15,000

CM mod data

CM service

Cost per kWh 4,460 4,506 3,592 2,625 2,033

Total MNT 535,000 766,000 898,000 1,050,000 1,220,000

* - install location 500km ** - include Technical Labor, *** - for battery charger& JWH

Current Problem for Operators

At Any site, any Soum center, any Aimag center Mobicom 22kVA

Unitel 13.5kVA

Netcom 33kVA Skytel 9.5kVA

Gmobile 6.5kVA

Different product, different service quality, difficult to maintain multi vendor gensets.

WAE solution

Mobicom 22kVA

Unitel 13.5kVA

Netcom 33kVA Skytel 9.5kVA

Gmobile 6.5kVA

WAE 88kVA

WAE install diesel generator, operate, maintenance, rent it for telecom operators, 5years duration

get monthly rent fee and working hours fuel fee

Condition Monitoring Service

WAE monthly cost on genset

Site Double 22kVA

Double 33kVA

Triple 55kVA

Quad 88kVA

Generator 422,000 492,000 550,000 670,000

Installation 98,000 98,000 110,000 120,000

Room 50,000 50,000 50,000 50,000

Guard salary 80,000 80,000 80,000 80,000

Diesel fuel 25h 265,000 350,000 785,000 900,000

PM* 120,000 135,000 150,000 165,000

Electricity** 15,000 15,000 20,000 20,000

CM modem 50,000 50,000 50,000 50,000

CM service&data 60,000 60,000 60,000 60,000

Cost per kWh 2,900 2,217 1,855 1,322

Total MNT 1,160,000 1,330,000 1,855,000 2,115,000

Operators cost 1,664,000 1,948,000 1,714,000 3,896,000

6W2H

• Who: Mobicom, Skytel, Unitel, Netcom, Gmobile • What: Supply diesel generator service • When: 5 years Contract duration + 5years • Where: at any site, with 2 or 3 operators • Whom: May cooperate with Netcom • How (many): 10 pcs triple operator site, 20 pcs

double operator site at first year. Then add 3 pcs triple, 6 pcs double, 1pc quad site every year.

• How (operate):WAE install diesel generators, own, operate, maintenance, and get monthly rent fee and fuel fee of additional working hours.

SWOT analysis

STRENTH

High Quality product and service

4 years of warranty

Professional technicians team

New source of income

WEAKNESS

High service cost

Retail CAT generator costs high

OPPORTUNITY

CAT Condition monitoring service

Avoid price competition from low-end

Genset network whole Mongolia

Utilize gensets in WAE stock

THREAT

Economic crisis

Exchange rate

Competitor may do same as WAE

Layoffed employee will go to competitor

CROSS SWOT

(O) Condition monitoring / (W) High service cost

Condition monitoring help to control un-neccessary service cost.

(T) Economic crisis / (S) High quality service

Operators needn’t own gensets, get high-qualified service at same costs, they owned.

(S) 4 years of warranty / (O) Standardized service quality

WAE will become beneficiaries of 4 years service warranty

(O) Utilize WAE stock / (S) New source of income

Using gensets of WAE stock, get new source of income for company

(O) Genset network whole Mongolia / (S) High quality of product and service

Create service driven sales opportunity

Value to Customers

• No need High cost Initial investment

• No need worry on operation & maintenance

• Get high quality service from WAE

• Monthly fee as same as pay now on own gensets

• Free from multi vendor’s head-ache.

Critical Success Factor (CSF)

Site Double 22kVA

Double 33kVA

Triple 55kVA

Quad 88kVA

Cost per kWh 2,900 2,217 1,855 1,322

Total MNT 1,160,000 1,330,000 1,855,000 2,115,000

Operator need 9.5 + 13.5 kVA 13.5 + 22 kVA 9.5+13.5+ 22 2X13.5 + 2X22

Operators cost 1,664,000 1,948,000 2,714,000 3,896,000

Difference MNT 474,000 578,000 859,000 1,631,000

Difference % 30% 32% 32% 45%

Difference is what WAE want to earn monthly

Service price structure

• (A) Monthly fee include 25h fuel cost + additional hours fuel cost

• (B) Monthly fee not include fuel cost +

Cost/kWh * total KW (powermeter)

• (C) No monthly fee,

only Cost/kWh * total KW (powermeter)

* - In service price calculation, fuel cost 1L = 3000MNT

• Monthly fee include 25h fuel cost

+ additional hours fuel cost

Service price structure (A)

Site up to 6.8kW Up to 10kW Up to 16kW Up to 24kW

Monthly fee 766,000 898,000 1,050,000 1,220,000

Fuel consumption L

2.6 3 5.3 7

Additional hours fuel cost per hour

7,800 11,100 15,900 21,000

Advantages Disadvantages

Monthly fee is high

• Monthly fee not include fuel cost

+ cost / kWh * total kW (powermeter)

Service price structure (B)


Monthly fee 630,000 710,000 790,000 870,000

Cost per kWh 1,000 1,000 1,000 1,000


Most feasible price structure

Pay as use

Service price structure (B) used for further calculation

• No monthly fee,

Cost/kWh * total KW (powermeter) only.

Service price structure (C)


Monthly fee

Cost per kWh 4,400 3,390 2,450 1,900


Low operating hours, drive loss to WAE

High cost per kWh

Product / Service Forecast

Fiscal year 2016 2017 2018 2019 2020 Total

year 1 2 3 4 5

Double 22kVA

10 3 3 3 3 22

Double 33kVA

10 3 3 3 3 22

Triple 55kVA

10 3 3 3 3 22

Quad 88kVA

1 1 1 1 4

Total 30 10 10 10 10 70

Operator’s Equivalent

70 25 25 25 25 170

SE

RV

IC

E

Cost Analysis

• Initial investment: 1,242,000,000 MNT

• 30 pcs gensets, include DE55E2, DE33E2, and DE22E3

• Annual income: 817,320,000 MNT, annual cost: 467,080,000 MNT

• Profit in Cash (for 5 years): 2,544,480,000 MNT

• ROI (for 5 years): 204.87%

Financial Projection (initial investment of 2016) year 1 year2 year3 year 4 year5

Investment 1,242,000,000.00

Equity 1,242,000,000.00

Debt 0.00

Income 817,320,000.00 817,320,000.00 817,320,000.00 817,320,000.00 817,320,000.00

Yearly fee 598,200,000.00 598,200,000.00 598,200,000.00 598,200,000.00 598,200,000.00

Fuel 219,120,000.00 219,120,000.00 219,120,000.00 219,120,000.00 219,120,000.00

Cost 467,080,000.00 467,080,000.00 467,080,000.00 467,080,000.00 467,080,000.00

Guard salary 28,800,000.00 28,800,000.00 28,800,000.00 28,800,000.00 28,800,000.00

Fuel 168,000,000.00 168,000,000.00 168,000,000.00 168,000,000.00 168,000,000.00

PM 49,000,000.00 49,000,000.00 49,000,000.00 49,000,000.00 49,000,000.00

Electricity 6,000,000.00 6,000,000.00 6,000,000.00 6,000,000.00 6,000,000.00

CM service and data 21,600,000.00 21,600,000.00 21,600,000.00 21,600,000.00 21,600,000.00

Interest 8.00% 0.00 0.00 0.00 0.00 0.00

Depriciation 193,680,000.00 193,680,000.00 193,680,000.00 193,680,000.00 193,680,000.00

profit before tax 350,240,000.00 350,240,000.00 350,240,000.00 350,240,000.00 350,240,000.00

Tax 35,024,000.00 35,024,000.00 35,024,000.00 35,024,000.00 35,024,000.00

Profit after tax 315,216,000.00 315,216,000.00 315,216,000.00 315,216,000.00 315,216,000.00

Cash Flow

Cash income 508,896,000.00 508,896,000.00 508,896,000.00 508,896,000.00 508,896,000.00

Profit after tax 315,216,000.00 315,216,000.00 315,216,000.00 315,216,000.00 315,216,000.00

Depriciation 193,680,000.00 193,680,000.00 193,680,000.00 193,680,000.00 193,680,000.00

Cash cost 1,242,000,000.00 0.00 0.00 0.00 0.00 0.00

Investemnt 1,242,000,000.00

repayment 0.00 0.00 0.00 0.00 0.00

Profit in Cash 508,896,000.00 1,017,792,000.00 1,526,688,000.00 2,035,584,000.00 2,544,480,000.00

Debt 0.00

repayment 0.00 0.00 0.00 0.00 0.00

expectation 0.00 0.00 0.00 0.00 0.00 0.00

Financial Projection (investment of 2017-2020) year 1 year2 year3 year 4 year5

Investment 426,000,000.00

Equity 426,000,000.00

Debt 0.00

Income 289,560,000.00 289,560,000.00 289,560,000.00 289,560,000.00 289,560,000.00

Yearly fee 211,680,000.00 211,680,000.00 211,680,000.00 211,680,000.00 211,680,000.00

Fuel 77,880,000.00 77,880,000.00 77,880,000.00 77,880,000.00 77,880,000.00

Cost 162,384,000.00 162,384,000.00 162,384,000.00 162,384,000.00 162,384,000.00

Guard salary 9,600,000.00 9,600,000.00 9,600,000.00 9,600,000.00 9,600,000.00

Fuel 61,200,000.00 61,200,000.00 61,200,000.00 61,200,000.00 61,200,000.00

PM 15,600,000.00 15,600,000.00 15,600,000.00 15,600,000.00 15,600,000.00

Electricity 2,040,000.00 2,040,000.00 2,040,000.00 2,040,000.00 2,040,000.00

CM service and data 7,200,000.00 7,200,000.00 7,200,000.00 7,200,000.00 7,200,000.00

Interest 8.00% 0.00 0.00 0.00 0.00 0.00

Depriciation 66,744,000.00 66,744,000.00 66,744,000.00 66,744,000.00 66,744,000.00


Tax 12,717,600.00 12,717,600.00 12,717,600.00 12,717,600.00 12,717,600.00

Profit after tax 114,458,400.00 114,458,400.00 114,458,400.00 114,458,400.00 114,458,400.00

Cash Flow

Cash income 426,000,000.00 181,202,400.00 181,202,400.00 181,202,400.00 181,202,400.00 181,202,400.00

Profit after tax 114,458,400.00 114,458,400.00 114,458,400.00 114,458,400.00 114,458,400.00

Depriciation 66,744,000.00 66,744,000.00 66,744,000.00 66,744,000.00 66,744,000.00

Cash cost 426,000,000.00 0.00 0.00 0.00 0.00 0.00

Investemnt 426,000,000.00

repayment 0.00 0.00 0.00 0.00 0.00

Profit in Cash 181,202,400.00 362,404,800.00 543,607,200.00 724,809,600.00 906,012,000.00

Debt 0.00

repayment 0.00 0.00 0.00 0.00 0.00 expectation 0.00 0.00 0.00 0.00 0.00 0.00

Financial Projection (Cumulative)

2015 2016 2017 2018 2019 2020

Investment 1,242,000,000.00 426,000,000.00 426,000,000.00 426,000,000.00 426,000,000.00 426,000,000.00

Equity 1,242,000,000.00 426,000,000.00 426,000,000.00 426,000,000.00 426,000,000.00 426,000,000.00

Debt 0.00 0.00 0.00 0.00 0.00 0.00

Income 817,320,000.00 1,106,880,000.00 1,396,440,000.00 1,686,000,000.00 1,975,560,000.00

Yearly fee

Fuel

Cost 467,080,000.00 629,464,000.00 791,848,000.00 954,232,000.00 1,116,616,000.00

Guard salary

Fuel

PM

Electricity

CM service and data

Interest

Depriciation


Tax 35,024,000.00 47,741,600.00 60,459,200.00 73,176,800.00 85,894,400.00

Profit after tax 315,216,000.00 429,674,400.00 544,132,800.00 658,591,200.00 773,049,600.00

Cash Flow

Cash income 508,896,000.00 690,098,400.00 871,300,800.00 1,052,503,200.00 1,233,705,600.00

Profit after tax 315,216,000.00 315,216,000.00 315,216,000.00 315,216,000.00 315,216,000.00

Depriciation 193,680,000.00 260,424,000.00 327,168,000.00 393,912,000.00 460,656,000.00

Cash cost 0.00 0.00 0.00 0.00 0.00

Investemnt

repayment 0.00 0.00 0.00 0.00 0.00

Profit in Cash 508,896,000.00 1,198,994,400.00 2,070,295,200.00 3,122,798,400.00 4,356,504,000.00

Debt 0.00

repayment 0.00 0.00 0.00 0.00 0.00

expectation 0.00 0.00 0.00 0.00 0.00 0.00

Conclusion

• Win-win solution for WAE and telecom operators

• Need to work closely with operators

• WAE have financial capability to provide such service.

• This is preliminary financial projection. Need to do more for correct financial calculation.

• Thank you for your attention.

WAE DIESEL GENERATOR NETWORK

Diesel generator rent service (long term) for Telecom Operator

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