FEASIBILITY STUDY ON ESTABLISHMENT ASPHALT PLANT

IMPLEMENTED IN OROMIA REGIONAL STATE EAST SHOWA

ZONE LUME DISTRICT MODIJO TOWN

PROMOTER: MARKAN TRADING (MT) PRIVATE LIMITED

COMPANY (PLC)

JULY, 2020
MODIJO, ETHIOPIA
1. INTRODUCTION 6

2. BACKGROUND OF ASPHALT PLANT 8

3. COMPANY PROFILE 12

3.1. General overview of the Company 12

3.2. Vision, Mission and Values: 12

3.3. MARKAN Trading Policy 13

3.4. Construction Experience 13

3.5. Owned Equipment and Machinery 17

5. PROJECT DESCRIPTION AND JUSTIFICATION 19

5.1. Project Rationale 19

5.2. Product Description 20

5.3. Plant Capacity and Production Programme 21

5.3.1. Theoretical and Practical Capacity 21

5.4. Materials and Inputs 21

5.4.1. Asphalt Concrete 21

5.4.2. Bituminous Material 22

5.4.3. Mineral Aggregate 24

5.5. Similar Operations of Batch and Drum Plants 26

5.5.1. Cold Aggregate Storage and Feeding 27

5.5.2. Dust Control and Collection Systems 31

5.5.3. Hot Mix Asphalt Storage 34

5.6. Manufacturing process 35

 5.6.1 Supply of Materials 36

5.6.2. Plant Calibration 37

5.6.3. Feeding of Materials 37

5.6.4. Mixing of Materials 39

5.6.5. Numbers of Control Charts 40

5.6. Machinery and Technology 42

5.6.1. Machinery and Equipment 42

5.6.1. Technology 43

6. MARKET STUDY AND ANALYSIS 44

6.1. Overview Marketing 44

6.2. Market Competition in the Construction Industry 46

6.3. Market Segmentation, Marketing Mix and Marketing channel: 47

6.4. Marketing Strategies 47

8. SCHEDULE OF IMPLEMENTATION 49

9. ORGANIZATION AND MANAGEMENT 50

9.1. Management Summary 50

9.2. Organizational Structure 50

9.3. Duties and responsibilities of Management 51

9.3. Man power requirement with qualification & Salary 52

10. FINANCIAL STUDY AND ANALYSIS 53

10.1. Underlying assumption 53

10.2 Fixed Investment 53

 10.2.1 Building and Construction. 53

10.2.2. Equipment and Furniture Required for Bedroom 54

10.2.3. Vehicles and Motors 55

10.2.4. Office Equipment's and Furniture 55

10.3. Operating Cost 56

10.3.1. Salary Expense 56

10.3.2. Administrative expense 56

10.3.3. Utilities Expense 57

10.3.4. Operating expense for Bedroom service 57

10.4. Depreciation Expense 57

10.5. Revenue Projection 58

10.6. Expected Sources of Finance Requirements 58

10.6.1. Interest Rate 59

10.6.2. Loan repayment Schedules on semi annual 59

10.8. Financial Statements 60

10.8.1. Projected Yearly Profit and Loss statement 60

10.8.2. Projected Cash Flow Statement 61

10.8.3. Projected Balance Sheet 62

10.9. Financial Evaluation and Financial Ratios 65

10.9.1. Financial Evaluation 65

11. ENVIRONMENTAL IMPACT OF THE PROJECT 67

11.1. Economic and Social Benefit and Justification 67

11.2. Project risk and assumption 68

 11.2.1. Project Risks 68

11.2.2. Risk Management 68

11.3. Conclusion and Recommendation 69

11.3.1. Conclusion 69

11.3.2. Recommendation 69
 1. INTRODUCTION

An asphalt mixture plant is an assembly of mechanical and electronic equipment where aggregates,

recycled materials or other additives are blended, heated, dried and mixed with binder to produce

asphalt mixture meeting specified requirements. The plant may be stationary (located at a permanent

location) or portable (moved from contract to contract). There are numerous types of plants, including

batch plants, continuous mix plants, parallel-flow drum plants, counter flow drum plants, and double

barrel drum plants to name a few. In general, however, the majority of plants may be categorized as

either a batch plant (Figure 3-1), or a drum mix plant (Figure 3-2) and the information presented in

this chapter covers these two types of plants.

In the batch-type mixing plant, hot aggregate, recycled materials and binder are added in designated

amounts to make up one batch. After mixing, the asphalt mixture is discharged from the pugmill in

one batch.

In the drum-type mixing plant, the aggregate and other materials are dried, heated, and mixed with

the binder in the drum in a continuous process. Regardless of the type of mixing plant, the basic

purpose is the same. That purpose is to produce an asphalt mixture containing proportions of binder

and aggregate that meets all of the specification requirements.

SAFETY

The Technician is required to always be safety-conscious and alert for potential dangers to personnel

and property. Safety considerations are very important. Dust is particularly hazardous. Dust is not

only a threat to lungs and eyes, but may contribute to poor visibility, especially when trucks, front-

end loaders, or other equipment are working around the stockpiles or cold bins.

Reduced visibility in work traffic is a prime cause of accidents. Noise may be a double hazard. Noise

is harmful to hearing and may distract workers' awareness of moving equipment or other dangers.

Moving belts transporting aggregates and belts to motors and sprocket and chain drives are also

hazardous. All pulleys, belts and drive mechanisms are required to be covered or otherwise protected.

Loose clothing that may get caught in machinery is never worn at a plant.
Asphalt plant is processing different raw material used for asphalt road. The plant mainly processing

range, gravel and other raw materials in mixing together for three to ten hours in high temperature

at a very liquid to the stage mixing other part of materials damped rolled and prepare for road.
 2. BACKGROUND OF ASPHALT PLANT

First example of modern road construction with binder is seen in Nottingham in 1848 (Lincoln

Road) where tar is used as binder. In 1858 bitumen is used as an overlay for cement concrete layers

in Paris. Hot bituminous mixtures gained their present modern form with the beginning of 20 th

century. In this era, with the refining of petroleum, bituminous binder produced. Furthermore

increasing popularity of automobiles made bituminous binder a cheap and inexhaustible resource

for road construction. By the dense usage of bituminous binder in road construction, determination

of physical properties and characteristics of binder is needed. For this purpose many tests and

methods developed and pavement design procedures enhanced.

Investigations about hot bituminous mixtures (asphalt concrete) show that the performance of the

pavement is dependent on design, production and application. Production process of asphalt concrete

basically consists of three steps. These are warming of binder and aggregate to mixture temperature,

feeding materials with exact quantity to mixer and mixing materials to produce a uniform mixture

(Yonar, 2006).

First mixture production facility was consisting of shallow iron pans over coal burners. Mixing of

materials uniformly was the main problem in these facilities. For this reason, first mechanical mixers

used in 1854, Paris. Low standard of these mixers extended the production duration. First facility

that can meet the main standards is produced by Cummer Company in America. Warren Brothers

Company produced the first modern like plant in 1901. In 1910 cement concrete mixers modified to

first drum dryer/mixers. In 1920 cold silos attached to facilities. Vibratory screens used in 1930s.

With 1960s, stock silos built and plants have taken their modern form (Whiteoak, 2004).

Main purpose of the asphalt plants is the production of standardized asphalt concrete rapidly in large

amounts with high quality. To fulfil these purposes, two types of plants are produced and used

worldwide. These are continuous (drum-mix) and batch type plants. As understood from their names,

they differ from each other by their production methods. In continuous types; asphalt concrete

produced continuously as the flow of aggregate. In batch types; asphalt concrete produced

discontinuously, one batch at once. With technological developments, new processes and components

are added to plants; however the main production processes have not changed. The main aim of this
study is to evaluate the performance of asphalt plants and making comparison between a real

application case in Turkey and in the World. To reach this aim, production steps of asphalt plants are

explained and the main tasks of plants are introduced regardless of production method in the first

section of this paper. In second section of this paper, the main tasks of asphalt plants are compared

for continuous and batch type plants. Advantages and disadvantages of each kind of asphalt plant are

introduced. The new production processes and components of each kind of asphalt plant are also

investigated and given special examples about Turkey experience. Finally, the plant types compared

in terms of production performance, quality of product, quality control processes, efficiency and

environmental tasks within conditions of Turkey. Furthermore theoretical and real production

capacities, costs, production and quality losses from various problems faced during applications are

discussed

A composite material of mineral aggregate and asphalt binder, laid and compacted in layers, Asphalt

Concrete is a typical material used in the construction of driveways, roadways, and airport runways.

Given the flexible nature of Asphalt binder, Asphalt Concrete roads are considered a flexible

pavement. Asphalt Concrete can be divided into three broad categories: Hot Mix, Warm Mix, and Cold

Mix Asphalt. These divisions describe the temperatures in which the Asphalt Concrete is mixed.

An asphalt plant is a plant used for the manufacture of asphalt, macadam and other forms of coated

road stone, sometimes collectively known as blacktop or asphalt concrete.

The manufacture of coated road stone demands the combination of a number of aggregates, sand and

a filler (such as stone dust), in the correct proportions, heated, and finally coated with a binder,

usually bitumen based or, in some cases tar, although tar was removed from BS4987 in 2001 and is

not referred to in BSEN 13108/1. The temperature of the finished product must be sufficient to be

workable after transport to the final destination. A temperature in the range of 100 to 200 degrees

Celsius is normal.

Countries have individual specifications stipulating how much of the raw material can be allowed from

recycled asphalt. In-depth research shows that addition of up to 20% recycled asphalt produces the

same quality of asphalt compared to 100% virgin material. The quality of asphalt starts reducing once

the percentage of recycled asphalt increases beyond 20%

Mix Asphalt Plants

Hot mix asphalt (HMA) paving materials are a mixture of size-graded, high quality aggregate (which

can include reclaimed asphalt pavement [RAP]), and liquid asphalt cement, which is heated and mixed

in measured quantities to produce HMA. Aggregate and RAP (if used) constitute over 92 percent by

weight of the total mixture. Aside from the amount and grade of asphalt cement used, mix

characteristics are determined by the relative amounts and types of aggregate and RAP used. A

certain percentage of fine aggregate (less than 74 micrometers [Fm] in physical diameter) is required

for the production of good quality HMA.

Hot mix asphalt paving materials can be manufactured by: (1) batch mix plants, (2) continuous mix

(mix outside dryer drum) plants, (3) parallel flow drum mix plants, and (4) counter flow drum mix

plants. This order of listing generally reflects the chronological order of development and use within

the HMA industry.

In 1996, approximately 500 million tons of HMA were produced at the 3,600 (estimated) active

asphalt plants in the United States. Of these 3,600 plants, approximately 2,300 are batch plants,

1,000 are parallel flow drum mix plants, and 300 are counter flow drum mix plants. The total 1996

HMA production from batch and drum mix plants is estimated at about 240 million tons and 260

million tons, respectively.

About 85 percent of plants being manufactured today are of the counter flow drum mix design, while

batch plants and parallel flow drum mix plants account for 10 percent and 5 percent respectively.

Continuous mix plants represent a very small fraction of the plants in use (#0.5 percent) and,

therefore, are not discussed further. An HMA plant can be constructed as a permanent plant, a skid-

mounted (easily relocated) plant, or a portable plant. All plants can have RAP processing capabilities.

Virtually all plants being manufactured today have RAP processing capability. Most plants have the

capability to use either gaseous fuels (natural gas) or fuel oil. However, based upon Department of

Energy and limited State inventory information, between 70 and 90 percent of the HMA is produced

using natural gas as the fuel to dry and heat the aggregate.
3. COMPANY PROFILE

3.1. General overview of the Company

Markan Trading (MT) Private Limited Company (PLC) is a continuously growing private venture engaged

in merchandise import and sales; real estate development, machinery rental and civil works

construction. These businesses have developed through time by increasing its investment, human

resource deployment and experience in each field.

Markan Trading PLC began its business as a General Importer Sole Proprietorship in 2000, which

expanded to machinery rentals followed by becoming Grade I General Contractor in 2011 focusing on

roads, bridges and airports. The Company is also undertaking real estate development. Markan Trading

PLC paid up capital has been rising through the years and remarkably from Birr 100,000,000 (One

Hundred Million Birr) in 2012 to Birr 205,407,000 (Two Hundred Five Million Four Hundred Seven

Thousand) Birr in 2019.

The Company runs its business from a registered address of rented office around Piazza, the city

center of Addis Ababa, at Eshetu Mamo Commercial Center, 8 th Floor, 804 in Arada Sub-city.

Whereas, the company owns a twin G+3 office building within a compound of 1,500 m 2, located in

Addis Ababa Industrial Zone at Nefas-Silk-Lafto Sub-city, Wereda 12. Furthermore, the Company

owns merchandise items warehouse (10,000m2) and Garage (2,000 m2) at Akaki – Kality Sub-city.

3.2. Vision, Mission and Values:

i. Vision: “To be one of the top five companies in East Africa by year 2030”

ii. Mission: MT PLC is established to engage in diverse business (civil works construction, real estate

development, merchandise items import and sales, import of trucks, export of oil seeds and other

products) and grow progressively by sustaining profitability and satisfying customers need and

expectations.

iii. Values
  Performance  Timeliness  Recognition

 Recognition  Quality  Accountability

 Customer first

iv. Business Objectives

 Continued excellence and mutual benefit relationship with its customers;

 Ensure continuous growth and development of businesses MT is engaged; and,

 Sustain profitability and expand businesses.

3.3. MARKAN Trading Policy

3.4. Construction Experience

MARKAN TRADING PLC began construction work as Sub-Contractor and became Main Contractor in

a relatively short period. The ranges of construction endeavors include asphalt road, bridges and

airports. All the construction works executed to-date are government projects implemented by the
Ethiopian Roads Authority (ERA), Addis Ababa City Roads Authority (AACRA) and Ethiopian Airports

Enterprise. The nature of projects, scope of works and the role of MT, general construction

experience and committed projects, are given in Tables 3. 1 and 3. 2.

Table 3.1: General Construction Experience - Completed Projects
Starting Ending

Month / Month

No Year / Year Contracted Project Description Role of MT

Project Name: Robe Airfield Upgrading Project

Brief Description of the Works: Earthwork and Sub base

Name of Employer: Akir Construction PLC

Owner: Ethiopian Airports Enterprise

January Januar SUB-

1 2015 y 2017 Address: Ethiopia CONTRACTOR

Project Name: Omo River Bridge & its Approach Road Project

Brief Description of the Works: 8 Span Bridge comprising 2 Box girders and 6 T-

girders having a total 220 m span length.

Name of Employer: Akir Construction PLC

Owner: Ethiopian Roads Authority

January May SUB-

2 2015 2017 Address: Ethiopia CONTRACTOR

Project Name: Construction Works of Heavy Routine Term Maintenance Road

Project (Addis – Modjo – Hawassa Road Project; Lot I: Addis – Modjo – Meki)

Brief Description of the Works: Asphalt Overlay Construction (wearing Course and

Binder Course), Pavement Reconstruction and Shoulder Reinstatement.

Name of Employer / Owner: Ethiopian Roads Authority MAIN

May

3 May 2016 2018 Address: Ethiopia CONTRACTOR

Project Name: Shashemene – Alaba Urgent Road Maintenance Work

Brief Description of the Works: Rock fill at the Faults, Diversion works
Septem
Name of Employer / Owner: Ethiopian Roads Authority
ber MAIN

5 June 2016 2016 Address: Ethiopia CONTRACTOR

Project Name: Omo River – Tercha Road Upgrading Project

Brief Description of the Works: Clearing and Grubbing, Common and Hard Rock

Excavation works

Name of Employer: China Railway Third Group

January April Owner: Ethiopian Roads Authority

SUB-

6 2016 2016 Address: Ethiopia CONTRACTOR

 Project Name: Adaba – Angetu Road Project

Brief Description of the Works: Clearing and Grubbing, Common and Hard Rock

Excavation works

Name of Employer: MACRO Construction PLC

Owner: Ethiopian Roads Authority

January20 March SUB-

7 16 2017 Address: Ethiopia CONTRACTOR

Project Name: Adama – Assela Urgent Road Maintenance

Brief Description of the Works: Normal Excavation, Rock fill, Gibbon Boxes, Stone

Pitching & Retaining Wall

Novem
Name of Employer /Owner: Ethiopian Roads Authority
August ber MAIN

8 2016 2016 Address: Ethiopia CONTRACTOR

Table 3.2: Current Commitment Projects (on-going Projects)
Contract Amount Commencemen Estimated
No. Name of Contract Employer /Owner (ETB) t Date Completion Date
July 24/2020
Construction Works of Kunzila Junction - Ethiopian Roads extended to Apr
1 Horticultural Farm- Zege Town Road Project Authority 554,487,294.06 Jan. 23/2018 21, 2021

Construction Works of Package 21 Road

Projects: Ras Desta Hospital –Kechene
Medhanialem - 8 Kutir Mazoria Asphalt Road Addis Ababa City
2 Project Roads Authority 204,450,522.96 Dec 20/2018 Dec 19/2020

Jijiga – Gelelesh – Deghamedo – Segeg (km Ethiopian Roads

3 165+000 – km 217+400) Authority 768,698,951.11 Jul 22/2019 Jul 21/2022

Project Construction Works of Continuation

of Werabe – Bojeber Design and Build Road Ethiopian Roads
4 Project Authority 795,000,000.00 Sep 30/2019 Sep 29/

Note:-Overall status of Projects 1, 2, 3, and 4 as of May 31, 2020 are 32.1%, 47.4%, 14.4% and 8.2%;

respectively. Project No 1 has been severely affected, for about a year, due to Right-of-Way.

3.5. Owned Equipment and Machinery

MARKAN Trading is committed for acquiring modern and springing vehicles, equipment and plants to fulfill its

vision. As of September 2018, types and number of vehicles, major equipment and plants are the following.

I. Machinery

No Type of Machinery Quantity

1 Dozer – CAT D8R 21
2 Excavator – CAT 329DL 2
3 Excavator – DOOSAN 12
4 Wheel Loader SEM 7
5 Wheel Loader XCMG 3
6 Grader CAT 2
Grader SEM 2
7 Steel Drum Roller LIULONG 5
8 Double Drum Roller BOMAG 1
9 Pneumatic Roller BOMAG 2
10 Chip Spreader IKOM 1
11 Asphalt Finisher (Asphalt Paver) 1
12 Asphalt Distributor 1
13 Asphalt Cutter MIKASA 2
14 Asphalt Cutter JEONIL 1
15 Plate Compactor 3

II. Equipment /Plant

 No Type of equipment /Plant Quantity
1 Raymond Filler Mill 1
2 Concrete Pump 1
3 Cut Back MASSENZA 1
4 Slipform Paver WARTGEN SP25 1
5 Concrete Batching Plant 2
6 Asphalt Batching Plant 1
7 Wagon Drill FURUKAWA 1
8 Crusher Set (Jaw, Cone and Screen) McClosky 1
9 Heavy Duty Compressor 3

Note:-Auxiliary equipment such as Vibrator, Mixer, Generator, Pump, Welding Machines as well as

Workshop Tools and equipment are not included.

III. Vehicles

No Type of Vehicles Quantity

1 Crane Truck ( 60 & 70 Ton) 2
2 Truck Mixer 9
3 Trailer – Low Bed / High Bed 3
4 Power Truck IVECO 3
5 Fuel Truck 2
6 Water Truck 4
7 Dump Truck –SINO 13
8 Dump Truck –TATA 11
9 Dump Truck –IVECO 12
10 Double Cabin Toyota Pick-up 44
11 Single Cabin Pick-up 5
12 Extra Cabin – Pick up 1
13 Station Wagon 2
14 Minibus 1
15 Automobiles 3
16 Motor Cycles 2
5. PROJECT DESCRIPTION AND JUSTIFICATION

5.1. Project Rationale

The construction industry in Mauritius accounts for about 5% of the GDP. This sector has witnessed

an unprecedented boom for the past few years. This has been put emphasis on by the construction

company of Markan Trading (MT) Private Limited Company (PLC) in the country and major

infrastructure developments. Furthermore, the evolution of the country towards services- based

economy is also placing additional stress on the construction industry. There has thus been a growing

need for the construction and maintenance of new roads in order to provide the necessary

infrastructure for these amenities.

The promoter has already secured some major government contracts in hand whereby the amount of

asphaltic concrete required will exceed the supply capacity of his existing suppliers. This shortage

of asphaltic concrete has already occurred last year whereby the existing suppliers were unable to

meet the demand of the company. Markan Trading (MT) Private Limited Company (PLC) is a fast

growing company with vast prospects and should be autonomous in terms of asphaltic concrete as it

is the company major activity.

Roads, and means of transport, make a crucial contribution to economic development and growth and

bring important social benefits. Poorly maintained roads constrain mobility, significantly raise vehicle

operating costs, increase accident rates and their associated human and property costs, and

aggravate isolation, poverty and poor health especially in remote communities. Although the need for

road maintenance is widely recognized, it is still not getting adequately done in several instances.

Many countries spend just 20–50 percent of what they should be spending on maintenance of their

road networks.

The promoter of this project intends to provide high quality asphalt materials for the paving of roads

throughout the country. The challenges include distinguishing maintenance from other types of road

work; providing competitive asphalt paving works; and to ensure efficient planning of the maintenance

activity in order not to have adverse impact on traffic flow. 12

Roads are among the most important public assets in most countries. Road improvements bring

immediate and sometimes dramatic benefits to road users through improved access to hospitals,

schools, and markets; improved comfort, speed, and safety; and lower vehicle operating costs for

these benefits to be sustained, road improvements must be followed by a well-planned program of

maintenance. Without regular maintenance, roads can rapidly fall into disrepair, preventing realization

of the longer term impacts of road improvements on development, such as increased in economic

growth and productivity. Postponing road maintenance results in high direct and indirect costs. If

road defects are repaired promptly, the cost is usually modest. If defects are neglected, an entire

road section may fail completely, requiring full reconstruction at three times or more the cost, on

average, of maintenance costs.

Some countries including Mauritius need a core road network that carries about 80 percent of

national traffic, including key roads in urban areas and roads providing sufficient access to rural

areas. Various parts of the overall road budget thus have to be spent on construction and some part

on maintaining the core network. The construction and maintenance of roads is a prerequisite for

continual economic development especially, for developing countries like Mauritius.

Thus, the promoter will provide with the necessary tools, that is, asphalt materials, for ensuring that

the activities are carried out efficiently and at reduced cost. This is why the initiator of the business

undertook huge investment for the purchase of a world class asphalt mixing plant.

5.2. Product Description

The promoter already possesses the required expertise in this field and can therefore provide his

contribution in the supply of quality products to the satisfaction of his customers. On an economic

and technical standpoint, it will not be wise for the promoter to shift to another business in which he

does not have the required proficiency.

With the installation of this Asphalt Plant will considerably reduce transport cost as well as

transportation duration as the aggregate production facility is situated at very close distances from

the proposed site. Therefore, setting up of the asphalt mixing plant will consolidate the area by
regrouping similar activities together in a single region, in other words clustering of bad neighborhood

activities.

According to UNEP, one of the cleaner production concepts is to setup up symbiotic industries in

close proximities. In view of the location and nature of the site and considering the promoter

background, it can be concluded that no alternatives exist for such a project. Therefore, this

development should be encouraged and favored to sustain the demand in the future and delivering

the government projects within the given timeframe.

5.3. Plant Capacity and Production Programme

5.3.1. Theoretical and Practical Capacity

Asphalt concrete is an expensive construction material. High cost of asphalt concrete is dependent

on expensive binder material, high fuel consumption in production process and high investment cost

of facilities. Return of the investment takes a long time period (Yonar, 2006). Because of the

mentioned causes, plants must be operated in optimum capacity and highest performance.

Plants are marketed by their hourly capacity by the producers. These capacities are theoretical and

generally calculated in % 5 moisture ratios. A plant must optimize the moisture ratio, altitude of

facility and material quality to reach this capacity (Yonar, 2006). Capacity of batch plants are up to

300 tons per hour, however the capacity of continuous types may vary up to 450 tons per hour,

because of continuous production. As mentioned before, highest capacity is not a solution for the

product quality. Highest product quality may be provided by the optimum capacity

5.4. Materials and Inputs

5.4.1. Asphalt Concrete

A composite material of mineral aggregate and asphalt binder, laid and compacted in layers, Asphalt

Concrete is a typical material used in the construction of driveways, roadways, and airport runways.

Given the flexible nature of Asphalt binder, Asphalt Concrete roads are considered a flexible
pavement. Asphalt Concrete can be divided into three broad categories: Hot Mix, Warm Mix, and Cold

Mix Asphalt. These divisions describe the temperatures in which the Asphalt Concrete is mixed.

5.4.2. Bituminous Material

Bituminous Materials consist of occurring hydrocarbon byproducts of organic decomposition. These

materials are dark brown or black, oily, and viscous materials. They are commonly classified as Tar

and Asphalt.

i) Tar: Tars are produced by the destructive distillation of bituminous coal or by the cracking of

petroleum vapors. Tars are commonly used as sealers or waterproofing membranes for roofs. Since

tars are less susceptible to petroleum fuels then Asphalt Binders, tars are used as surface

treatments on parking lots, airport aprons, and driveways where fuels spills are more likely.

ii) Asphalt Binder: Also called Asphalt Cement, this dark brown or black material is found in natural

deposits or manufactured by distilling crude oil. Asphalt Binder has no definite chemical composition,

but is made of large chains of mostly hydrogen and carbon atoms. Asphalt binder can be used in either

a neat or a modified fashion when used in asphalt concrete.

a) Modified Asphalt Binder: Modified Asphalt Binders are those which have been altered with a

chemical additive or an elastomer to enhance the properties of the parent “Neat” Asphalt Binder.

These additives can make parent asphalt binders harder at high temperatures, less brittle at low

temperatures or even more elastic to resist permanent deformation.

b) Asphalt emulsions: Asphalt Emulsions consist of globules of asphalt binder suspended in water.

Since asphalt and water do not naturally mix into solution, the asphalt globules are coated with an

emulsifying agent (soap), which gives the globules an electrically charged film. When added to water

the charge film forces the globules to repel each other which allow them to flow freely. This also

allows the asphalt particles to remain suspended in water. Emulsions can be used at lower

temperatures than binders. They require little or no heat for use.

c) Cut Back Asphalts: Cut-Back Asphalts are Asphalt Binders that have been diluted with a solvent,

such as naphtha, kerosene, or diesel fuel. They can be used with little or no heating. Due to the
harmful nature of the solvents used, environmental regulations in recent years have dramatically

reduced the use of cut-back asphalts.

d) Asphalt Binder Production: Asphalt Binders are produced at refineries during the distillation of

crude oils or other petroleum products. Heating the crude oil in a still allows for it to separate into

various fractions, known as distillates. The lightest distillates of the oil become gasoline; the middle

is used for such products as diesel fuel, motor oil and kerosene. What remains in the still after

everything else has boiled off may be processed into asphalt. See Figure 5, for a visual of the process

that crude oil undertakes. Unfortunately for the asphalt industry advancements in petrochemical

technology has given rise to alternate products, such as plastics, which can now be produced from the

heavy residuum. As a results only about 25% of the petroleum refineries in the US produce asphalt.

Figure 5.1 - Refinery Operation

The world’s first successful oil well was drilled in southern Ontario in 1858. Shortly after, in 1859

the first American well at Titusville, Pennsylvania was established. In the late 1800’s, asphalt that

was refined from crude oil became available for paving. However, being a by-product of fuel

production, at the time there was no attempt to make Asphalt binder into a quality paving material

since the focus was on fuel for automobiles. The growing popularity of the automobile meant that
more crude oil was needed to provide gasoline, making the refinery by-product, asphalt, readily

available and cheap. More cars increased the demand for paved roads. Refined asphalt quickly became

a quality paving material and began to price natural asphalt out of the market.

Even with the technical refinements from the last decade, Asphalt Binder is still not a consistent

product across the globe. Asphalt binders may be softer or harder, depending on the source of the

crude. Some crudes sources, like Nigerian oil, barely contain any of the heavier fractions used to

produce asphalt, while oils from the Middle East contain larger quantities and produce more asphalt

binder.

5.4.3. Mineral Aggregate

Mineral Aggregate or aggregate is a term that means a mixture of various types and sizes of stone.

Typically Aggregates make up approx. 95 percent of Asphalt Concrete. The aggregate within Asphalt

Concrete is responsible for carrying the loads of the passing traffic and transferring them to the

subgrade under the pavement. Therefore to ensure a quality pavement we must begin with quality

aggregates. Below is a list of the commonly used aggregates in West Virginia for highway construction.

i) Limestone

Limestone is formed from the compression of sediment at the bottom of a body of water. As it was

covered with other layers of sediment it was compressed into rock. As the land rose, erosion began

to cut away the new land surface. The limestone was exposed as thick rock layers in the sides of hills.

Limestone is quarried, usually by blasting, and then reduced to a suitable size by crushing. This

produces an angular stone that compacts into a strong, durable paving mat. There is an abundance of

limestone in West Virginia, providing us with an inexpensive source of high quality paving stone, unlike

many other parts of the country, where suitable paving aggregates are scarce.

ii) Gravel

Gravel is a naturally occurring aggregate, dredged from river bottoms or dug from deposits where

rivers once flowed. It is made up of various kinds of stone that have been rounded by being rolled

along the river bottom by the water current. Gravel is a durable and plentiful resource. However, due
to the roundness of the stone particles, gravel poorly interlocks and has little skid resistance. Also,

a mixture comprised of only gravel would be extremely hard to compact, due to the rounded nature

of gravel, which would allow for the aggregate particles to slip by one another under the load of the

roller. Once gravel is crushed, to create angularity, it is more suitable in asphalt concrete. The

angularity increases skid resistance and allows the aggregate to interlock, which allows for more stone

surface contact to aid in stability of asphalt concrete.

iii) Blast Furnace Slag

Blast Furnace Slag is a co-product of the reduction of ore for metal manufacturing, iron ore being

the most common. Slag can also come from the production of other metal ores, like copper, gold,

silver, or aluminum. In the blast furnace the ore will melt and the slag, usually being lighter in weight

than the metal that is being extracted, will float in the furnace. The slag, being a molten rock, is then

removed from the furnace and allowed to cool and harden. The conditions and the rate of cooling will

heavily affect the properties of the slag. A rapid cooling will lead to large amounts of voids in the

slag. This large amount of pores can entrap water and can be a problem during asphalt production.

These also soak up addition asphalt and require higher binder content mixtures. Slag is a good skid

resistant aggregate with a high durability.

iv) Sand

Sand is used as the fine aggregate in Asphalt concrete mixes. Sand is classified into two groups;

manufactured sand, which is made by crushing stone and screening out the coarser particles, or

natural sand, which is sand that occurs in natural deposits and is usually found along with gravel.

Manufactured sand is more angular than natural sand. Sand is classified by the material from which

it is made, for example: limestone, slag and sandstone. Sand that is made from crushed sandstone is

called silica sand, to distinguish it from other kinds of sand. The name comes from the fact that its

main ingredient is silicon dioxide.

v) Mineral Filler

Mineral Filler is a dust sized aggregate (passing the #200 sieve). Paving mixes need a small amount

of dust to fill voids and act as a binder extender. An asphalt concrete production plant’s dust
collection system usually captures the mineral filler that is released as the aggregate is dried. The

amount of dust required for the mixture is then metered back to the plant’s mixer.

vi). Recycled Asphalt Pavements (RAP)

Recycled Asphalt Pavement (RAP) is asphalt pavement that has been pulverized, usually by milling, and

is used like an aggregate in the recycling of asphalt pavements. There are economic and environmental

advantages to recycling pavement materials. The use of RAP in Asphalt concrete reduces the need

for virgin binder and aggregate which reduces costs and limits the impact on the environment.

Gradation inconsistency and age hardening of the asphalt binder are the main disadvantages of using

RAP. For these reasons most specifying agencies put restrictions on the amount of RAP that can be

used in asphalt concrete. However, further processing of the RAP into two or more stockpiles of

different aggregate sizes and proper stockpile management provides the potential for a substantial

increase in the amount of RAP that can be used in asphalt concrete. Chapter 4 - Mix Design and

Testing discusses the WVDOH design limits for using RAP in asphalt concrete, and Appendix-C

contains a copy of MP 401.02.24 which is a guideline for designing mixtures containing RAP using the

Marshall Design method. MP 401.02.28 covers the use of RAP in Super pave mixtures.

5.5. Similar Operations of Batch and Drum Plants

Certain plant operations are common to both the batch plant and drum mix plants. These operations

include: 1) Cold aggregate storage and feeding 2) Dust control and collection 3) Mix storage 4)

Recycled materials storage and feeding

Also common to all plants is the importance of uniformity and balance, both in materials used and in

plant operations. Uniformity encompasses uniformity of materials, uniformity of material

proportioning, and continuous, uniform operation of all plant components. Changes in material

characteristics, proportions, and intermittent stops and starts in plant operations make producing an

asphalt mixture meeting Specifications extremely difficult.

Balance requires careful coordination of all elements of production. Balancing material quantities to

plant production, and balancing plant production and pavement placing operations guarantee a
continuous, uniform production and placement effort. Uniformity and balance are best ensured by

careful preparation. Materials are required to be sampled and tested and plant components carefully

inspected and calibrated before production begins.

5.5.1. Cold Aggregate Storage and Feeding

The cold aggregate feed is the first major component of the mixing plant. The cold feeder may be

charged by one or a combination of three methods:

1) Open top bins with several compartments. Materials are usually fed by a front-end loader

2) Tunnels under stockpiles separated by bulkheads. Materials are stockpiled over the tunnel by belt

conveyor, or front-end loader

3) Bunker or large bins. Materials are usually fed by trucks, car unloaders, or bottom dump freight

cars emptying directly into the bunkers. When charging the cold bins (Figure 3-3), segregation and

degradation of the aggregate are problems that may occur. These problems may be prevented by

taking the same precautions outlined for proper stockpiling. Enough materials are required to be

maintained in all bins to provide a constant and uniform flow.

Figure 3-3. Typical Cold Feed System

When a front-end loader is used to charge the bins, the operator should not pick up material from

the storage stockpile at ground level. The scoop is held high enough above the ground to prevent

contamination. When trucks are used to charge the bins, the aggregate is deposited directly above
the feeder. When the stockpile is replenished by overhead belts or elevated conveyors, the free

falling materials is controlled by baffles.

Aggregate feeder units are located beneath storage bins or stockpiles, or in positions that ensure a

uniform flow of aggregates. Openings located at the bottom of the bins deposit the different

aggregates on a belt conveyor, and/or bucket lines, which carry the aggregates to the dryer. Feeder

controls regulate the amount of aggregate flowing from each bin, thereby providing a continuous,

uniform flow of properly-graded aggregate to the plant. The most common type of cold feeder used

in a plant is the continuous belt type (Figure 3-4).

Figure 3-4. Continuous Belt Feeder

The key element in the continuous belt feeder is how to control or regulate the flow of material from

each bin. Every manufacturer has a different control method. Typical control variations are:

1) Gate opening a. Fixed b. Adjustable

2) Belt a. One speed (on or off) b. Adjustable speed

The most common configuration is the adjustable gate with an adjustable belt speed.

a. Ensuring Proper Feeder Functions

Because a uniform flow of proper-sized aggregates is important to asphalt mixture production, the

Technician is required to check before and during production to be certain that the feeder system

is functioning properly. Conditions that help ensure proper feeder functions include:
 1) Correct sizes of aggregates in stockpiles and cold bins 2) No segregation of aggregates 3) No

intermixing of aggregate stockpiles 4) Accurately calibrated, set, and secured feeder gates

5) No obstruction in feeder gates or in cold bins 6) Correct speed control settings

b. Calibrating and Setting Feeders

The cold aggregate feeder is calibrated, set, and secured to ensure a uniform flow of aggregate. This

calibration is the responsibility of the Producer. The feeder is calibrated for each type and size of

aggregate. Manufacturers often furnish approximate calibrations for their equipment, but the only

accurate way to set a cold feed is to prepare a calibration chart for each of the aggregates to be

used in the asphalt mixture. The Technician is required to examine the calibration charts of the cold

feed systems to be aware of the production rate settings and how adjustments are made during

production. Calibration is simply determining the "Flow Rate" of a material graphed against the

"Control" used by the particular system. Each material is calibrated for three to four control settings

spanning the working production range anticipated for the material.

 c. Control Setting

Each manufacturer has a method to control the flow of material from the cold feeds. The variable

speed short belt feeder under each cold feed is the most common. The operator may adjust the RPM

of the belt from the control room. Therefore, control is expressed as RPM or a percentage of the

belt's total speed potential (Figure 3-4). This same concept is used with vibrating units. The vibrator

may be adjusted from the control room and expressed as a percent of maximum vibration potential.

Adjustable gates are employed on most cold feeds. The gate height is measured by the height of the

opening. This gate height is required to not change when using the variable speed control. There may

be variations and modifications of these concepts. Each plant is unique; however, the plants are

required to have some means to control the cold feeder. The system is required to be completely

understood and controlled in a positive way to provide a uniform flow of material.

d. Flow Rate

Flow rate may be determined by a variety of methods that are basically predetermined by the

configuration of the plant. The most common and accurate method of determining flow rate is to

physically weigh the material delivered at a specific control setting over a measured period of time.

A divert chute on the intake of the dryer is the simplest, most accurate, and quickest method to do

the calibration. Material may be weighed on a weigh bridge, if available, or completely processed

through the plant and weighed on the plant scales. The flow rate is then converted to tons per hour.

Moisture content is required to be considered in this procedure. The degree of accuracy is only as

good as the method used to determine the flow rate for each control setting. Therefore, the larger

the sample measured, the more accurate the data received. Using an entire truck load of material

provides dependable numbers.

 e. Calibration Chart

After understanding the plant "Control" system and determining the best method to obtain a "Flow

Rate", a calibration is required to be done. This process determines a flow rate at four different

control settings for each cold feed. The process may be time consuming but the benefits are worth

much more than the time spent. (Figure 3-49) illustrates a typical calibration chart of each bin. After

multiple calculations have been done for each bin used during production, the calibration chart is

prepared. On the chart, control settings are plotted on a horizontal scale, and the flow rate is plotted

on the vertical scale.

For larger production plants, more than one bin is required to be calibrated for each material. This

back-up cold feed calibration allows continuation of production if a cold feed bin fails mechanically.

Another common practice for large production rates is to use two cold feeders to supply the same

size of material. This practice allows for slower machinery rates, and tends to reduce segregation.

5.5.2. Dust Control and Collection Systems

Enforcement of air pollution regulations or codes is usually done by the local pollution agency.

However, since the dust control system is integrated with plant operation, the Technician is required

to at least be aware of the controls and equipment necessary to meet these standards. The Technician

is required to also be aware of how this equipment may affect asphalt mixture properties.

Mixing plant manufacturers recognize the problem of air pollution and have developed equipment that

restricts the escape of pollutants from the plants. Even so, during the operation of a plant, some

gaseous and particulate pollutants may escape into the air. These pollutants are required to be limited

to meet established clean air regulations. The Producer is required to be familiar with the state and

local laws concerning air pollution. More definitive standards are based on the quantity of particulates

coming from the stack. The most common requirement sets an upper limit on the mass of the particles

being released as compared to the volume of gas released with them. Other standards relate the

quantity of particulates emitted to the mass of the material being produced.

A major air pollution concern at a plant is the combustion unit. Dirty, clogged burners and improper

air-fuel mixtures result in excessive smoke and other undesirable combustion products. Continual
close attention to the cleanliness and adjustment of the burners and accessory equipment is

important.

Another source of air pollution at a plant is aggregate dust. Dust emissions are greatest from the

plant rotary dryer. Dust collectors commonly are used in the plant to meet anti-air pollution

requirements. The types of dust collectors that are commonly used to capture the dust from the

dryer are the centrifugal dust collectors, wet scrubbers, drop boxes, and bag houses (fabric filters).

When the aggregate is especially dusty, two or more of these devices may need to be used in sequence.

If the dust system returns the material to the plant, the return system is required to be calibrated.

Some of the dust emitted from a plant is fugitive dust. This is dust escaping from parts of the plant

other than the primary dust collectors. A scheduled maintenance program is required to keep fugitive

dust to a minimum.

i. Centrifugal Dust Collectors

Centrifugal dust collectors (cyclone type collectors) operate on the principle of centrifugal

separation. The exhaust from the top of the dryer draws the smoke and fine materials into the

cyclone where they are spiraled within the centrifuge (Figure 3-5). Larger particles hit the outside

wall and drop to the bottom of the cyclone, and dust and smoke are discharged through the top of

the collector. The fines at the bottom of the cyclone are collected by a dust return auger and may

be returned to the plant or wasted.

Figure 3-5. Cyclone Dust Collector

Centrifugal dust collectors have been the most common type used, especially in rural areas. However,

under today's more stringent pollution laws, the centrifugal dust collectors are usually used in

combination with either a wet scrubber or a bag house.

ii. Wet Scrubbers

The purpose of a wet scrubber (Figure 3-6) is to entrap dust particles in water droplets and remove

the particles from the exhaust gases. This is done by breaking up the water into small droplets and

bringing those droplets into direct contact with the dust-laden gases. As the figure illustrates, gases

from the dryer are introduced into a chamber through one inlet, while water is sprayed into the

chamber from nozzles around the periphery.

Figure 3-6. Typical Wet Scrubber

Wet scrubbers are relatively efficient devices, but have certain drawbacks. First, the dust entrapped

in the water is not recoverable. Second, the waste water containing the dust is required to be properly

handled to prevent another source of pollution, since more than approximately 300 gallons per minute

may be used. Most wet scrubbers are used in combination with a cyclone collector. The cyclone

collects coarser materials and the wet scrubber removes the finer particles. Due to the drawbacks,

wet scrubbers are no longer in common use.

iii. Bag houses (Fabric Filters)

A bag house (Figure 3-7) is a large metal housing containing hundreds of synthetic, heat-resistant

fabric bags for collecting fines. The fabric bags are usually silicone-treated to increase their ability
to collect very fine particles of dust. A bag house functions much the same way as a vacuum cleaner.

A large vacuum fan creates a suction within the housing, which draws in dirty air and filters the air

though the fabric of the bags. To handle the huge volume of exhaust gases from the aggregate dryer,

a very large number of bags (a typical unit may contain as many as 800) are required.

A bag house is divided into a dirty gas chamber and a clean gas chamber. The filter bags are contained

in the dirty gas chamber, into which the air from the dryer enters. The flow of air carrying the dust

particles passes through the fabric of the filter bags, depositing the dust on the surface of the bag.

The air then continues to the clean gas chamber. During the operation, the fabric filter traps large

quantities of dust. Eventually, the dust accumulates into a "dust cake", that is required to be removed

before the dust reduces or stops the flow of gas through the filter. There are many ways of cleaning

the bags in a collector, but the most common methods are to flex the bags, back-flush the bags with

clean air, or both flex and back-flush. Dust removed from the bags drops into an auger at the bottom

of the bag house and is transferred to a storage silo. The dust may then be returned to the plant or

wasted.

Figure 3-7. Typical Bag house

5.5.3. Hot Mix Asphalt Storage

To prevent plant shutdowns due to temporary interruptions of paving operations or shortages of

trucks to haul asphalt mixture from the plant to the paving site, most plants are equipped with surge

bins (storage silos) for temporary storage of asphalt mixture. When a surge bin is used, the asphalt
mixture is deposited by conveyor or hot elevator into the top of the bin (Figure 3-8) and is discharged

into trucks from the bottom. Surge bins work well if certain precautions are followed, but may cause

segregation of the asphalt mixture if not used properly. A good practice is to use a baffle plate or

similar device at the discharge end of the conveyor used to load the bin. The baffle helps to prevent

the segregation of the asphalt mixture as the mixture drops into the bins. A good recommendation is

to keep the hopper at least one-third full to avoid segregation as the hopper empties and to help keep

the mix hot.

Figure 3-8. Typical Storage Structure Configuration

5.6. Manufacturing process

Screening, grouping and collecting processes are repeated in production tower in batch type plants

and also cumulative weighing process provides the correct ratio for binder and aggregate. These

obtain the increase in production quality. Number of equipment’s is less than the batch plants in

continuous types. This provides the faster warming up of equipment’s and lower chance of bad quality

product.

In order to have adequate control over the manufacture of hot mix asphalt, the manufacturing

process needs to be broken down into a number of elements and then appropriate controls

consistently applied for each of these elements. The basic elements in the manufacture of hot mix

asphalt may be considered as:

  Supply of materials  Mixing of materials

 Plant calibration  Delivery of asphalt to work site

 Feeding of materials

5.6.1 Supply of Materials

I. Aggregate

(a) Supply of Material

With the supply of aggregate to an asphalt plant the asphalt plant manager is in the position of a

client. The asphalt plant manager should be relying heavily on the process control systems of the

aggregate supplier to ensure aggregate is of consistent and adequate quality. In tllis regard the

aggregate supplier should be encouraged to keep control charts for each aggregate size supplied. In

addition, the asphalt plant manager will need to carr5r out audit testing to be satisfied that the

quality and consistency are adequate. The amount of audit testing required will depend on:

 The amount of aggregate being used

 The variability of the aggregate being supplied

 The confidence the asphalt plant manager has in the quality control being exercised by the

aggregate supplier.

Care should be exercised in the management of aggregate stockpiles in terms of best practice.

(b) At tlle asphalt plant Stockpiles should be:

 constructed and operated in such a manner as to avoid segregation

 Clearly labelled

 Well drained13

 Asphalt Plant Process Control

 Established on a hard surface to prevent contamination

 Adequately separated to prevent segregation

Sampling and testing of aggregate at the asphalt plant should be on the basis of grading as this is a

rapid and simple test to perform. Other properties such as soundness, abrasion resistance etc., should

be performed from time to time but are generally consistent from a known source. Where there is

doubt about the consistency of aggregate properties, additional testing may be required. Aggregate

supply may be monitored by the use of control charts, by means of a separate control chart for each

aggregate size.

II. Binder

The quality and consistency of the supply of binder is also largely dependent on the Quality

Management Systems of the binder supplier. However, audit sampling may still be required by the

asphalt plant manager to check for contamination in transit. When binder is delivered to the plant

care must be taken to ensure that:-

 Binder tanks are clearly labelled and that labels are clearly visible for both the deliverer and

the batch plant operator.

 Polymer modified binders are circulated before use and checked for consistency.

 Binder tanks have been adequately drained prior to filling with different grades of binders.

The batch plant operator should record which tank is being used to supply binder for each mix being

produced or when the supply tank is changed.

5.6.2. Plant Calibration

Ensuring that all components of an asphalt plant are kept in calibration will obviously make a significant

impact on process by reducing potential sources of assignable causes. Calibration should therefore

be addressed as part of the asphalt producer's quality plan. Suggestions are made throughout the

guide of what is considered to be good practice regarding calibration.

5.6.3. Feeding of Materials

I. General
The accurate feeding of materials into the mixing plant is one of tl.e most critical operations carried

out in an asphalt plant in terms of ensuring a consistent output from the plant. The elements in feeding

of materials into the asphalt plant are:

 Cold feeding of aggregates

 Aggregated drying and screening

 Filler system.

II. Cold feeding of aggregates

Most modern asphalt plants have variable speed belts to feed aggregate. These need to be calibrated

regularly to ensure accurate feed rates. For drum plants, these need to be calibrated regularly or

when material types are changed or when equipment is repaired or replaced. The moisture content of

cold aggregate usually only varies within a relatively small range (- 7o/o to I2o/o) between summer

and winter and measurements made every 2 months should be sufficient to maintain adequate control.

Moisture content probes are now available but their accuracy is questionable.

AII belt systems:

 Require a no flow alarm

 Should shut down within 60 seconds of the alarm sounding.

In addition, the maintenance of bin gates, feeders and conveyors needs to be carried out in a

systematic manner. A check list for these items is given in Appendix B.

III. Aggregate Drying. Screening & Consistency

The efficiency of aggregate drying and screening are important elements in the production of quality

hot mix asphalt. Most plants measure the temperature of the material coming out of the dryer which

feeds back to the burner control. This usually provides automatic control over the drying process.

As a means of controlling the heating process of both the aggregates and binder, the variability of

the temperature of the final mix may be measured and evaluated using a control chart. The control

of the hot bin screens is difficult to monitor as it is hard to know if they are blocked or have
developed a hole. The asphalt plant operator can observe how quickly the bins fill or samples of the

screened materials may be taken for a visual check or grading test. Bin sensors should be installed

and operating correctly. Sonar sensors are considered to be the most reliable but contact high and

low sensors are also available. If the flow into the bins is blocked for more than 3O seconds, the

plant should be shut down until the cause is identified and remedied. Aggregate batch weights may

be recorded and monitored using control charts. Most modern plants are computer controlled and

have systems for measuring and recording batch weights.

IV. Filler System

The amount of filler added to hot mix, although only a small quantity, is very important in terms of

the performance of the final asphalt mix. The consistent and accurate metering of filler quantities

is, therefore important to achieve adequate process control. Filler comes from two sources that

collected from the bag house and imported filler. There is a need to have adequate weighing and

recording systems for both these sources to ensure the requirements of the mix design are met. Due

to the line nature of filler materials, it is not uncommon for arching to occur in the weigh-bin and

devices should be fitted to ensure this does not happen. Filler batch weights may be controlled using

a control chart. This can often pick up problems in the screening process.

V. Binder System

Drum plants display feed rates usually in t/hr and provide control to measure progressive tonnage.

These controls are usually of sufficient accuracy and repeatability that they may not require

monitoring by control charts.

5.6.4. Mixing of Materials

I. Pugmill

Mixing time of the ingredients in the pugmill is determined by the requirements of the mix design.

Mixing time is determined to ensure thorough mixing of all ingredients and coating of the aggregate

particles with binder. Mixing times should be set at the minimum time required to ensure complete

mixing and should not be unnecessarily extended. Any mix left in the pugmill for more than 60 seconds
should be discarded. Most modern plants have automatic mix timers and any change in the mixing time

for a particular mix should require the batch plant operator to receive appropriate authorization.

II. Hot Storage Bins

The correct operation of hot storage bins is critical to prevent segregation of the mix when loaded

into trucks for transportation. When operating hot storage bins the cone at the base of the bin

should be kept full at all times. The temperature of the final mix, either in the hot bins or as it is

discharged into trucks should be measured and the variable monitored by control charts.

5.6.5. Numbers of Control Charts

I. Introduction

Section 2.5 suggests the parts of the asphalt production process that are suitable for monitoring

using control charts.

These can be summarized as:

 Aggregate grading ‘A8igregate and filler batch weights

 Temperature of mixed asphalt

 Binder weight.

The control charts for these parameters which can be generated from simple measurements and

tests, allow for upstream control of the manufacturing process and provide the maximum amount of

time in which to correct the process if it gets out of control. However, this is not meant to preclude

the use of control charts for the usual end product testing that is also carried out to ensure

conformance with the specification.

The mechanics of developing control charts is identical in both cases. Scherocman and Decker (1995)

have developed a ranking system that ranks the factors that contribute to the differences that occur

in the properties of hot mix asphalt for mix designed in the laboratory and the properties of the

"same" mix produced in an asphalt batch or drum mix plant. This may be of assistance in helping decide

which parts of the asphalt manufacturing process should be monitored by control charts.
The number of control charts needs to be determined for each plant. Each parameter measured needs

to be controlled by a pair of control charts, one plotting averages and one plotting ranges.

In deciding the number of control charts to be developed, cognizance has to be given to the amount

of work involved in setting up and maintaining the charts. A rational approach would suggest that

effort should be directed to controlling the high volume mixes produced by each plant. If this is

achieved, there will obviously be a flow-on effect to all mixes produced, even if they are not directly

involved in the control chart process.

In selecting the mix or mixes to be controlled, care should be taken tllat the mixes use all the

ingredients commonly used in the plant, so that the likelihood of the above flow-on effect is

maximized.

II. Aggregate Grading’s

As aggregates are generic to all mixes separate control charts for each mix design are not required.

It will be adequate to have a pair of control charts for each aggregate size from each supplier tJ:at

are to be monitored. For example if there are 2 suppliers of 10 mm aggregate separate pairs of charts

would be desirable for each supplier.

These charts can be set up and monitored according to the amount of a particular aggregate size

used on the basis of the percent passing a particular sieve size.

III. Aggregate and Filler Batch Weights

As aggregate and filler batch weights vary according to the mix design, pairs of control charts for

each aggregate size and filler may need to be kept for each high volume mix produced from the plant.

IV. Temperature of Mixed Asphalt

As the temperature of the mixed asphalt is also dependent on mix design and particularly binder type,

a pair of control charts for each mix design needs to be kept.

V. Binder Weight
Variations in binder batch weight can be monitored by control charts which display the difference

between target and actual binder weights for each batch. In this way a continuous monitoring of the

plant can be made, even if binder contents/weights vary when production mixes change.

5.6. Machinery and Technology

5.6.1. Machinery and Equipment

Investment and maintenance costs are higher in batch type plants, because of more components

(production tower, screening unit, hot bunkers) (Simge, 2005). Personnel needed for the operation of

the plant are the same for two types. Total energy consumption is higher in batch plants. In a general

evaluation, Batch types are commonly used in Turkey because of their low defective production

method. Continuous types are still used by some public and private companies, for small construction

jobs especially in rural areas. Nowadays double unit batch plants started to use to meet the optimum

capacity need.

The project consists of the erection of an Asphalt Plant at St. Julien in the district of Moka to

supply of asphaltic concrete to the company for ongoing and future projects. The siting of the

proposed plant has been carefully chosen to comply with a minimum buffer of 1.0 km radius from the

residential area. As can be depicted in the site and location plan attached in Annex 2 the plant has a

setback of 1.3 km to the nearest residential area.

This plant will be of the make Apollo of DMX series with a peak production capacity of 90 tonnes per

hour. This plant will comprise of various equipment design with the latest art of technology related

to pollution control. An overall idea of the sizing of the plant can be observed in the Table 2.1

Table 2.1: Overall Specification of the Asphalt Mixing Unit.

Equipment Length / m Width /m
Aggregate Feeder 12.1 1.975
Vibrating Screen 2.785 0.882
Drum Unit 8.646 1.86

The Asphalt Plant will consist of the following main equipment and facilities:

 Cold Aggregates Bin Feeders  Continuous Electronic Belt Weighting Systems

  Drying Mixing Drum

 Burner  Mess Room

 Load-out Conveyor  Toilets

 Bitumen Tanks and auxiliary Equipment  Storage area

 Pollution Control Unit  Machinery shed

 Control Cabin Offices  Laboratory

5.6.1. Technology

In lay man’s terminology an asphalt plant is mechanized system where the various ingredients of the

asphalt compound is brought unto unity. From a more technical/scientific perspective Neveling (2007:

25) describes the asphalt operation as follows:

Hot mix asphalt (HMA) paving materials are a mixture of size-graded, high quality aggregate (which

can include reclaimed asphalt pavement [RAP]), and liquid asphalt cement, which is heated and mixed

in measured quantities to produce HMA. Aggregate and RAP (if used) constitute over 92 percent by

weight of the total mixture. Aside from the amount and grade of asphalt cement used, mix

characteristics are determined by the relative amounts and types of aggregate and RAP used. A

certain percentage of fine aggregate (less than 74 micrometers [μm] in physical diameter) is required

for the production of good quality HMA.

Hot mix asphalt paving materials can be manufactured by: (1) batch mix plants, (2) continuous mix

(mix outside dryer drum) plants, (3) parallel flow drum-mix plants, and (4) counter flow drum-mix

plants. This order of listing generally reflects the chronological order of development and use within

the HMA Industry.

Emissions forthcoming from the production process are released into the atmosphere via a stack.

There are currently three emission reduction systems used to minimize stack emissions (particles,

dust and gasses) namely bag house systems, wet scrubber systems and cyclone systems.
6. MARKET STUDY AND ANALYSIS

6.1. Overview Marketing

Successful companies are strongly committed to marketing management. However, marketing is

either misunderstood or completely neglected in many construction companies, mainly due to the

difficulty of applying conventional marketing in the industry, accompanied by the lack of sufficient

research on the nature of marketing and tailored marketing theories and strategies for the

construction. This study attempts to fill a part of this gap by examining the nature of the

construction industry from the marketing viewpoint and developing a comprehensive framework. A

systematic investigation into the nature via a combination of Kotler’s product classification system

and Lovelock’s classification criteria reveals that construction is an “industrial, project-based, and

primarily service-oriented” (IPS) product with specific characteristics from the marketing

perspective. Based on this nature, a reference framework for strategic marketing planning is

developed through a literature review based on grounded theory and using the focus group discussion

as a refinement tool. The framework indicates that construction companies are involved in and should

plan for three working fields—project-based activities, relationship marketing, and marketing mix-

related functions. The findings provide a fundamental basis that helps researchers and practitioners

gain a true understanding of the concepts and scope of construction marketing and draw a clear and

practical roadmap for future work.

Construction enterprises are aware of the importance of involving marketing in their management

functions as a way to adapt themselves not only to the continuous changes in the industry, but also to

satisfy their clients’ demands, while being competitive and improving their business strategy. As many

study was showing through a literature search, with subsequent processing and analysis of the papers

found. Despite the efforts made in the last decade, it is difficult to generalize how to apply marketing

in construction companies, due to the special features of this sector. Nevertheless, there is a range

of possible strategies that could be used by construction companies, and once they know their clients’

needs they will be able to choose what strategies to apply. Research gaps such as marketing

implementation, marketing differentiation according to the type of clients, and application of

information technologies are proposed.

Marketing is a management function that seeks to increase a target market, to build long-term

relationships, to satisfy clients, to ensure the desired profitability, and to strengthen competitive

advantage. Although marketing in the industrial and service sector is a well-known discipline, in the

construction industry it is still misunderstood. This is reflected by the little scientific research and

literature produced on this topic. It is difficult to define the “product” in the construction industry;

it is even more difficult to define its marketing. This study was developed in order to establish the

current state of the art of marketing in the construction industry and to determine whether there

are guidelines to implement this function inside construction companies.

It is necessary to take into account that the construction industry is a sector characterized by

several particularities that make it different from the industrial and service industries. Some of

them are: construction enterprises sell a hybrid between a product and a service; its production is

based on projects; the product changes in size, location, and complexity; and the company promotes

its abilities to fulfill and exceed the criteria of cost, schedule, and quality. Moreover, there are

important differences between the demand of public and private clients, and also, professional

training is based on scientific and technological knowledge, instead of managerial education.

Marketing should also consider cultural differences when it is seen from an international perspective.

For all these features, construction marketing is a new phenomenon that is seen with skepticism and

considered synonymous with sale, because clients buy something that does not exist yet.

Thus, marketing applied to the construction industry combines existing theories of the industrial and

service sectors; for example, marketing mix (MM), a strategy used by the industrial sector that

combines five issues (product, price, promotion, place, and people) has been applied to the

construction industry and analyzed by several authors. Other authors have studied the application of

service sector strategies such as relational marketing (RM), business to business, co-development,

partnering, customization and differentiation. Specific strategies for the construction sector have

been proposed: public private partnership; design and construction; pricing strategy; and social

marketing.
6.2. Market Competition in the Construction Industry

High competition and high risk have been identified as the construction industry's greatest challenge

contend that, the construction industry is typically characterized by extreme competitiveness, high

uncertainty and risks, and generally low profit margins when compared to other industries. The rapid

changes in project procurement and implementation processes and the pervasive utilization of

information and communication technology (ICT), changing client needs in the construction industry,

advances in technology, and the particular needs of the country as a developing economy have also

added to the woes of the construction industry.

In Ethiopia, this effect of competition resulting from globalization has taken a toll on the efforts

to develop the construction industry. In the report on developing the construction industry in

Ethiopia, The constraints on the construction industry in Ethiopia) will be exacerbated by several

wider trends. Globalization will be manifested in an inflow of investment into Ethiopia) which will

create work opportunities. However, the local construction consultants, contractors and individual

practitioners will face greater competition from their foreign counterparts which are likely to have

greater experience and resources.

These challenges arising out of globalization which has given rise to competition can better be

addressed through the implementation of effective marketing by the local construction consultants,

contractors and individual practitioners in the construction industry in Ethiopia). The out such studies

are expected be marketing performance framework that will guide construction businesses towards

effective implementation of marketing in management of construction businesses. Such framework

will result in these benefits:

(i) Avoid competition between firms being based solely on price, leading to reduced profitability,

and,

(ii) Provide a mechanism to enable firms to cope with the changing environments within which

they find themselves. This will ensure that such firms are profitable and able to survive and

the same time the nation will also get appropriate and quality services from the construction

industry.
It is obvious from the foregoing that the problems of marketing in construction are hinged on a lack

of understanding, misunderstanding and misperceptions about the true meaning of marketing and

most importantly a lack of appropriate framework to guide the application of marketing in managing

construction businesses. This calls for two main approaches to deal with the problem:

i. Review of the education and training of construction professionals,

ii. Framework to guide construction businesses on effective marketing implementation

6.3. Market Segmentation, Marketing Mix and Marketing channel:

i. Marketing Mix: Marketing mix is a tool used by the marketers in order to meet their marketing

objectives. Marketing mix is used to meet the requirements of the target market. Marketing

mix is the combination of 4P’s of marketing that is the Product, Price, Promotion and Place6.

Hence a systematic and balanced combination of these 4 P’s can influence the demand for their

product or services.

ii. Market Segmentation: Markets are always segmented on the basis of age, life cycle, income,

social class, psychographic, behavioral, geographical, demography, gender etc. Hence in order to

market a product or service there is no single one that fits all the segments. These segments

helps in identifying different needs, attitudes and lifestyles of the customers. Market

segmentation helps in catering specific needs of the group more efficiently 7. Marketing Channel:

iii. A marketing channel: is a set of activities where in the goods are transferred from the point

of production to the point of consumption. All the institutions and the marketing activities

involved in this transfer are the marketing channels. The marketing channels may include

telemarketing, online advertising, e-mail marketing, social media etc.

6.4. Marketing Strategies

Marketing strategies are the steps to be taken in order to achieve the marketing objectives. It

guides and directs the firm to achieve its goal. Marketing strategies sets its target market and the

marketing mix that it has to use. This marketing strategy is broken down into marketing plan which

will be implemented according to the time line set with a specified budget. Every company tries to

develop innovative marketing strategies in order to gain competitive advantage. Marketing strategies
are developed not blindly, it is backed by a market research which helps in identifying new and unique

opportunities. Hence marketing strategies are developed keeping in mind the customer’s needs, the

firm’s objectives and resources, and the competitor’s strategies10. However one cannot device a

single universal strategy or the one which is applicable at all times and situations. Marketing

strategies are determined by various factors like product diversity, quality, market segment,

marketing channel, geographic area covered, branding etc. It also depends upon development of new

product, firm’s position in the market, innovation, and pricing policy, relationship with its customers,

partners, suppliers and competitors. Apart from this the strategies should also consider the

marketing complexity, stakeholders and customers’ expectations, and dynamic external and internal

environment. Thus the marketing strategies to be successful need to choose the right segments,

develop differential products, devise alternative distribution channels, and use innovative

manufacturing processes that produce high quality products at lower prices. Thus we can say that

strategies helps us to understand our position today, where we want to reach, how we are going to

reach there, and how we get to know we have reached our objectives.
8. Schedule of Implementation

A tentative implementation schedule for the project is detailed hereunder

Table 8.1: implementation schedule of the project

Schedule of Implementation Purchase of Equipment January 2015

Submission of EIA December 2014

Approval & Issue of EIA license and other permits January 2015

Pilot testing of plant February 2015

Start-up of operation February 2015

9. ORGANIZATION AND MANAGEMENT

9.1. Management Summary

Organizing, the process of structuring human and physical resources in order to accomplish

organizational objectives, involves dividing tasks into jobs, specifying the appropriate department for

each job, determining the optimum number of jobs in each department, and delegating authority

within and among departments. One of the most critical challenges facing managers today is the

development of a responsive organizational structure that is committed to quality the ownership of

this project is Markan Trading (MT) Private Limited Company (PLC) Therefore, organizational

structure of this project is of simple type.

9.2. Organizational Structure

The organizational structure of the project is designed by including all the necessary personnel under

the right division. At the top of the organizational structure, there will be manager with the

responsibility of supervising the overall activity of the plant. Depending up on the nature of the center

and the amount of work to be performs; there exist auxiliary units under the general manager.

Employees under each unit will be supervised by the department head that is accountable for the

general manager. General Manager is appointed by board of director.

9.3. Duties and responsibilities of Management

Hence the following section deals with the duties and responsibilities of management of the construction
firm is.

1. Project Manager

 She/he will plan, organize, direct and control the overall activities of the plant.

 She/he will devise policies and strategies that will enable the plant to be profitable.

 She/he will incorporate modern technological innovation that will facilitate the service

delivery of the project center and increase customer’s satisfaction.

 He/he will plan, organize, direct and control the human and non-human resources of the plant

so as to achieve the short and long run objectives of the organization.

2. The Production Department Duties and responsibilities:-

It is the core department of the project center it has two main sections and has the following

responsibilities.

 Designs and prepared prototypes of Markan Trading (MT) Private Limited Company (PLC)

based on the plant standard and customer preferences

 Use modern manufacture and processing technologies that will enhance the quality of

products

 Produce quality product that will enable the center competent both in the domestic and

international market.

 Use appropriate technology to manage maintenance of its products.

 Control on the quality of raw materials, inputs, quality of the product and also the overall

production process.

 Produce products in least cost so that the profitability of the center is guaranteed.

 Moreover control over the quality of the final products.

3. Administration and Finance Department

It has two main sections, i.e. Administration and HRM section and Finance section

Administration and HRM Duties and responsibilities:-

  Will control the human and non-human resources of the plant, which include: effective

handling of the different inventories of the machineries, equipment’s, raw materials, finished

products, and devise strategies of controlling against fraud and damage.

 Administer and control the company logistic resource

 Provide and manage general supportive service to the plant.

Finance section

 Will develop sound financial control system by developing modern financial control systems.

 Will prepare the annual financial statements and prepare condensed reports for the general

manager, owner and other concerned government body.

 Manage and execute the company national and international procurement procedure

4. Marketing and Sales Department

It has two main sections, i.e. marketing and Sales section and Finance section with the following duties

and responsibilities

 Will handle the overall marketing activities of the organization which include planning,

organizing, directing, and controlling.

 Provide cost estimates in preparation for securing the profitability of the factory.

 Gather information on new product design, type and profile

 Approval of new products profile & brand plan analyzes market research.

 Plan and execute sales.

 Will develop effective customer handling strategies

 Will develop the marketing strategies for future project center’s development.

 Conduct both foreign and domestic market research for expanding the sales of the company.

9.3. Man power requirement with qualification & Salary

Table 9.1: human power require

10. FINANCIAL STUDY AND ANALYSIS

10.1. Underlying assumption

Construction period 2 year

Source of finance 25% equity and 75% loan

Tax holidays 2 years

Bank interest rate 13.25%

Discount for cash flow 13.25%

Spare Parts, Repair & Maintenance 1% of fixed investment

Depreciation Straight line method

Building 5%

Machinery and equipment 10%

Office furniture 10%

Vehicles 20%

Pre-production (amortization) 20%

Working Capital Management

 Accounts Receivable 30 days

 Cash in Hand 15 days
 Accounts Payable 30 days

10.2 Fixed Investment

The total investment cost of the project including working capital is estimated at Birr 18.039 million

as shown in the next table below. The Owner shall contribute 25% of the finance in the form of equity

while the remaining 75% is to be financed by bank loan.

10.2.1 Building and Construction.

The Engineering cost of estimation to build mixed use building G+ 4 costs will be shown in the next

table below.
 Sr. /No Description Cost in birr in Br.
Fixed Investment
1 Building and construction 10,982,120.44
2 Equipment and furniture Required for bedroom 1,988,810.00
3 Vehicles 2,580,000.00
4 Office Equipment's and Furniture 231,250.00
5 Generator 1,200,000.00
Pre-operating Expense 35,000.00
Total Fixed cost 17,017,180.44
Working capital
1 A/R 30 days 248,687
2 Cash on hand 15 days 38,597
A/P 255,665
Sub Total 479,391
Total 1,022,339.86
Grand Total 18,039,520.30

10.2.2. Equipment and Furniture Required for Bedroom

Sr. No Description Measurement Quantity Unit Price Total Price

1 Bed Room(1200*1900) Pcs 10 15,000.00 150,000.00
2 Bed Room(1500*1900) Pcs 7 20,000.00 140,000.00
3 Spring Matters(1200*1900) Pcs 10 6,000.00 60,000.00
4 Spring Matters(1500*1900) Pcs 7 8,500.00 59,500.00
5 Bed sheet(spring mat size 5 above) Pcs 34 2,000.00 68,000.00
6 comforters(spring mat size 5) Pcs 34 2,000.00 68,000.00
7 blanket Pcs 17 2,000.00 34,000.00
8 Bed side cabinet Pcs 171 1,500.00 256,500.00
9 Bed side lump Pcs 17 500 8,500.00
10 phone internal( for gust) Pcs 17 3,500.00 59,500.00
11 Air conditioner Pcs 17 3,000.00 51,000.00
12 Reading Light Pcs 17 450 7,650.00
13 Chair and Table (reading) Pcs 17 2,500.00 42,500.00
14 Receptionist table Single pedestal Pcs 1 1,500.00 1,500.00
15 coffee table Pcs 17 3,000.00 51,000.00
16 TV Flat screen 14''(guest room) set 17 7,000.00 119,000.00
17 Refrigerator Pcs 3 12,500.00 37,500.00
 18 Ash tree Pcs 17 250 4,250.00
19 Laundry machine 2 50000 100,000.00
20 Kitchen Equipment LS 250,000.00

Satellite dish with Color TV 21"

21 &antenna set 1 25,000.00 25,000.00
22 cupboard Pcs 17 6,000.00 102,000.00
23 Mirror Pcs 17 2,000.00 34,000.00
Total 1,729,400.00
VAT 259,410.00
Grand Total 1,988,810.00

10.2.3. Vehicles and Motors

No Description Meas. Qty Unit cost Total cost

1 Mini Bus No 1 600,000 600,000.00
2 Pickup No 1 950,000 950,000.00
3 Isuzu No 1 850,000 850,000.00
4 Generator No 1 1,200,000 1,200,000.00
Sub Total 3,600,000.00
Insurance 5% 180000
Total 3,780,000

10.2.4. Office Equipment's and Furniture

No Description Measure Qty Unit price Total Price

1 Chairs No 15 1,800.00 27,000.00
2 Tables No 10 2,500.00 25,000.00
3 Computers No 5 13,650.00 68,250.00
4 Printers No 1 6,000.00 6,000.00
Photocopy machine No 1 28,000.00 28,000.00
5 Computer table No 2 1,000.00 2,000.00
6 Managerial chair No 5 1,400.00 7,000.00
7 Filing Cabinet No 4 2,000.00 8,000.00
8 Managerial Table No 5 2,000.00 10,000.00
9 Decorations - - - 50,000.00

Total 231,250.00
10.3. Operating Cost

10.3.1. Salary Expense

No Description No Qualification Monthly salary Annual Salary

1 G. Manager 1 BA in management 5,000.00 60,000.00
2 Accounting Head 1 BA in Accounting 3,000.00 36,000.00
3 Marketing Head 1 BA in marketing 3,000.00 36,000.00
4 General service Head 1 BA in Mgt 2,500.00 30,000.00
5 Accountant 1 Diploma in Acct 2,000.00 24,000.00
6 Marketing Officer 1 Diploma in Acct 1,500.00 18,000.00
th
7 Receptions 2 12 complete 1,200.00 28,800.00
th
8 Purchaser 1 12 complete 1,500.00 18,000.00
9 Store keeper 1 10th grade 1,200.00 14,400.00
th
10 casher 2 10 grade 1,200.00 28,800.00
th
11 Guards 4 8 grade 850.00 40,800.00
th
12 Janitors 4 4 grade 750.00 36,000.00
13 Parking Workers 1 4th grade 750.00 9,000.00
th
14 Drivers 3 8 grade 2,000.00 72,000.00
Total 24 451,800.00
Employee benefit 40,662.00
Grand Total 492,462.00

10.3.2. Administrative expense

SN Description Annual Cost in birr Assumption Used

1% of fixed Investment
1 Property Insurance 170,171.80 Cost
2 Audit & Legal Fee 10,000.00 833 per month
3 Uniforms 5,400.00 18*300br
4 Telephone, fax and postal 12,000.00 1000per month
5 Cleaning goods supplies 6,000.00 500per month
1 % of the Fixed
6 Repair and maintenance 8,116.94 Investment
7 Adverting 15,000.00 1 % of sales
Stationery and other office
6 supplies 5,400.00 450per month
10 Fuel 48,000.00 3000 lit*16 per year
11 Oil and lubricant 4,800.00 10% of fuel cost
12 Miscellaneous Expense 12,000.00 1,000 per month
Total 296,888.74

10.3.3. Utilities Expense

Description Qty. unit cost Cost (Birr)

Electricity, kWh 15,000 0.473 7,095
Water, m3 7,500 6 45,000
Diesel, lt 2,000 17 34,000
Total 86,095

10.3.4. Operating expense for Bedroom service

Description mesa Quantity unit price Total

Soap and cleaning
materials Derzon 141 8 1,128.00
Bed sheet No 42 480 20,160.00
Anti pest DDT No 169 38 6,429.60
Air freshener No 112 75 8,400.00
Towel pcs 42 160 6,720.00
uniform and shoes meter 23 350 8,050.00
Total 50,887.60

10.4. Depreciation Expense

Depreciation Annual
Sr. /No Description Book value rate Depreciation
1 Building and construction 11,017,120.44 5% 550,856.02
2 Equipment and furniture 1,988,810.00 10% 198,881.00
3 Vehicles 2,580,000.00 20% 516,000.00
4 Generator 1,200,000.00 10% 120,000.00
Office Equipment 231,250.00 10% 23,125.00
Total 1,408,862.02
10.5. Revenue Projection

As we discuss in the previous section the source of revenue will be generated by providing rental

services and its full capacity utilization ranges from 70%, 85% and 100% from year one to three. The

detail revenue of this mixed use building shown in the next table below.

Sr. No Description 70% 85% 100%

1 Rental income

1.1. Bank 420,000.00 510,000.00 600,000.00

1.2 Shop 907,200.00 1,101,600 1,296,000.00
Sub-Total 1,327,200.00 1,611,600 1,896,000.00
2 Café mini hall
2.1 Café and Restaurant 80,640.00 97,920.00 115,200.00
2.2 Mini hall 210,000.00 255,000.00 300,000.00
Sub-Total 290,640.00 352,920.00 415,200.00
3 Bed room
3.1 Single bed 806,400.00 979,200.00 1,152,000.00
3.2 Double bed 560,000.00 680,000.00 800,000.00
Sub-Total 1,366,400.00 1,659,200 1,952,000.00
Ground Total 2,984,240.00 3,623,720 4,263,200.00

10.6. Expected Sources of Finance Requirements

The owner of covers 25% of (birr 5,411,856.09) birr and 75% (12,627,664.21) will be covered by

the Financer.

Sr. No Description % of fund contribution Amount

Owner
1 25% 5,411,856.09

Financer
2 75% 12,627,664.21

Total
100% 18,039,520.30
10.6.1. Interest Rate

The owners of this mixed use building Markan Trading (MT) Private Limited Company (PLC) would like

to get loan from local commercial Bank. Accordingly, the fixed investment loan and working capital

would be taken from local commercial bank charge at 12.5% interest rate repaid on the decline

balance.

10.6.2. Loan repayment Schedules on semi annual

Pmt. Payment Beginning Scheduled Total Ending Cumulative

No. Date Balance Payment Payment Principal Interest Balance Interest

1 43,525.00 12,627,664.21 800,494.74 800,494.74 500,587.71 299,907.02 12,127,076.50 299,907.02

2 43,617.00 12,127,076.50 800,494.74 800,494.74 512,476.67 288,018.07 11,614,599.82 587,925.09

3 43,709.00 11,614,599.82 800,494.74 800,494.74 524,647.99 275,846.75 11,089,951.83 863,771.84

4 43,800.00 11,089,951.83 800,494.74 800,494.74 537,108.38 263,386.36 10,552,843.44 1,127,158.19

5 43,891.00 10,552,843.44 800,494.74 800,494.74 549,864.71 250,630.03 10,002,978.74 1,377,788.23

6 43,983.00 10,002,978.74 800,494.74 800,494.74 562,923.99 237,570.75 9,440,054.74 1,615,358.97

7 44,075.00 9,440,054.74 800,494.74 800,494.74 576,293.44 224,201.30 8,863,761.30 1,839,560.27

8 44,166.00 8,863,761.30 800,494.74 800,494.74 589,980.41 210,514.33 8,273,780.89 2,050,074.60

9 44,256.00 8,273,780.89 800,494.74 800,494.74 603,992.44 196,502.30 7,669,788.45 2,246,576.90

10 44,348.00 7,669,788.45 800,494.74 800,494.74 618,337.26 182,157.48 7,051,451.19 2,428,734.37

11 44,440.00 7,051,451.19 800,494.74 800,494.74 633,022.77 167,471.97 6,418,428.41 2,596,206.34

12 44,531.00 6,418,428.41 800,494.74 800,494.74 648,057.06 152,437.67 5,770,371.35 2,748,644.01

13 44,621.00 5,770,371.35 800,494.74 800,494.74 663,448.42 137,046.32 5,106,922.93 2,885,690.33

14 44,713.00 5,106,922.93 800,494.74 800,494.74 679,205.32 121,289.42 4,427,717.61 3,006,979.75

15 44,805.00 4,427,717.61 800,494.74 800,494.74 695,336.45 105,158.29 3,732,381.16 3,112,138.05

16 44,896.00 3,732,381.16 800,494.74 800,494.74 711,850.69 88,644.05 3,020,530.48 3,200,782.10

17 44,986.00 3,020,530.48 800,494.74 800,494.74 728,757.14 71,737.60 2,291,773.34 3,272,519.70

18 45,078.00 2,291,773.34 800,494.74 800,494.74 746,065.12 54,429.62 1,545,708.21 3,326,949.31

19 45,170.00 1,545,708.21 800,494.74 800,494.74 763,784.17 36,710.57 781,924.04 3,363,659.88

20 45,261.00 781,924.04 800,494.74 781,924.04 763,353.35 18,570.70 - 3,382,230.58

10.8. Financial Statements

This section defines certain key financial accounts used by this proposal from the standard. The

definitions are provided in two main sections, (1) those found on the income statement; and (2) those

found on a balance sheet. There is additional a cash flow statement which used to measure the

business liquidity position.

10.8.1. Projected Yearly Profit and Loss statement

The income statement is also known as the profit and loss statement. It is a flow statement that

summarizes all financial activity during a stated period of time, usually a month, quarter or year. It

displays all revenues and expenses for a stated over three years. The bottom line of an income

statement is the net income (or net profit or surplus) for the period.

We expect to make a reasonable after- tax profit of birr (137,866.93) for year one and year five

1,823,209.48 the remaining years profit and loss shown in the next statement. This is before the

owner’s drawings. Any owner’s drawings will be contingent on performance being better than that

expected in the plan and expected to earn monthly income in the form of owner drawing account.

Markan Trading (MT) Private Limited Company (PLC)

Projected Profit & Loss Statement
For the periods of year1-5
Particulars Yr-1 Yr-2 Yr-3 Yr-4 Yr-5

Revenue from Mixed use building 2,984,240.00 3,623,720.00 4,263,200.00 4,476,360.00 4,700,178.00

Total Revenue 2,984,240.00 3,623,720.00 4,263,200.00 4,476,360.00 4,700,178.00

Administrative Expense

Salary expense 344,723.40 418,592.70 492,462.00 517,085.10 542,939.36

Running Cost 145,475.48 252,355.43 296,888.74 311,733.18 327,319.84

Depreciation Expense 1,408,862.02 1,408,862.02 1,408,862.02 1,408,862.02 892,862.02

Others materials 35,621.32 43,254.46 50,887.60 53,431.98 56,103.58

Utility Expense 60,266.50 73,180.75 86,095.00 90,399.75 94,919.74

Total Expense 1,994,948.73 2,196,245.36 2,335,195.37 2,381,512.03 1,914,144.53

 Gross Profit 989,291.27 1,427,474.64 1,928,004.63 2,094,847.97 2,786,033.47

Finance Charge 1,127,158.20 922,916.40 698,569.42 452,138.08 181,448.49

Income before Tax (137,866.93) 504,558.24 1,229,435.21 1,642,709.89 2,604,584.98

Income Tax - 151,367.47 368,830.56 492,812.97 781,375.49

Net Income (137,866.93) 353,190.76 860,604.65 1,149,896.92 1,823,209.48

10.8.2. Projected Cash Flow Statement

The cash flow projections for the year as shown in cash flow statement that a positive cumulative

cash flow year one birr 7,824,586.09 to birr 28,304,105.37on the fifth year. The year-end cash

surplus of after the owner has forecasting additional term loan financing of birr 12.98million. That

will be repaid within three years. The owner has further considering 5% changes receipt & payment

to see the impacts of the changes.

In our cash flow projection, we have assumed the whole birr 12.98 million additional financing for

working capital, over draft and investment has come from a bank loan. We have assumed & allowed

for interest on the outstanding amount for the whole periods.

 Markan Trading (MT) Private Limited Company (PLC)
Projected Cash Flow Statement
For the periods of year1-5
Particulars Yr-1 Yr-2 Yr-3 Yr-4 Yr-5
Cash Inflow

Income before tax (137,866.93) 504,558.24 1,229,435.21 1,642,709.89 2,604,584.98

Depreciation 1,408,862.02 1,408,862.02 1,408,862.02 1,408,862.02 892,862.02

12,627,664.2
Loan proceed 1

13,898,659.3
Total cash inflow 0 1,913,420.26 2,638,297.24 3,051,571.91 3,497,447.00
Cash Outflow
Purchase of fixed asset 8,508,590.22

profit tax payable - 151,367.47 368,830.56 492,812.97 781,375.49

Employee benefit 31,025.11 37,673.34 44,321.58 46,537.66 48,864.54

Increase in A/P (255,664.97) (294,014.72) (338,116.92) (388,834.46) (447,159.63)

Principal loan repayment 2,074,820.75 2,279,062.55 2,503,409.53 2,749,840.88 3,001,959.78
Interest loan repayment 1,127,158.20 922,916.40 698,569.42 452,138.08 181,448.49
11,485,929.3
Total Cash Outflow 1 3,097,005.05 3,277,014.17 3,352,495.12 3,566,488.67
Surplus/deficit 2,412,730 -1,183,585 -638,717 -300,923 -3,566,489

Beginning Cash balance 5,411,856.09 7,824,586.09 6,641,001.30 6,002,284.36 5,701,361.15

Ending cash balance 7,824,586.09 6,641,001.30 6,002,284.36 5,701,361.15 2,134,872.47
14,465,587.3 20,467,871.7 26,169,232.9 28,304,105.3
Cumulative cash balance 7,824,586.09 9 5 0 7

10.8.3. Projected Balance Sheet

The balance sheet of the firm will shows what the asset liabilities and owner’s capital for specific

date especially end of the year, because the firm’s fiscal year runs as of June 30 in E.C each year.
 Markan Trading (MT) Private Limited Company (PLC)
Projected Balance Sheet
For year ends June 30 each year, year1-5

Particulars Yr-1 Yr-2 Yr-3 Yr-4 Yr-5

Asset
Current Asset

Cash 2,150,667.23 1,914,599.84 1,542,389.75 649,855.86 42,063.04

A/R 248,686.67 301,976.67 355,266.67 373,030.00 391,681.50

Total Current Asset 2,399,353.90 2,216,576.51 1,897,656.42 1,022,885.86 433,744.54

Fixed Asset

Building and construction 10,466,264.42 9,915,408.40 9,364,552.37 8,813,696.35 8,262,840.33

Equipment and furniture 1,789,929.00 1,591,048.00 1,392,167.00 1,193,286.00 994,405.00

Vehicles 2,064,000.00 1,548,000.00 1,032,000.00 516,000.00 -

Generator 1,080,000.00 960,000.00 840,000.00 720,000.00 600,000.00

Office Equipment 208,125.00 185,000.00 161,875.00 138,750.00 115,625.00

Total Fixed Asset 15,608,318.42 14,199,456.40 12,790,594.37 11,381,732.35 9,972,870.33

Total Asset 18,007,672.31 16,416,032.90 14,688,250.79 12,404,618.21 10,406,614.87

Liability and Equity
Current Liability

Employee benefit 31,025.11 37,673.34 44,321.58 46,537.66 48,864.54

Profit Tax Payable - 151,367.47 368,830.56 492,812.97 781,375.49

Account Payable 255,664.97 294,014.72 338,116.92 388,834.46 447,159.63

Total current Liability 286,690.08 483,055.53 751,269.07 928,185.09 1,277,399.67

Long term loan 10,552,843.44 8,273,780.89 5,770,371.35 3,020,530.48 -

Total Liabilities 10,839,533.52 8,756,836.42 6,521,640.42 3,948,715.57 1,277,399.67

Equity

Korsa Capital 5,411,856.09 5,411,856.09 5,411,856.09 5,411,856.09 5,411,856.09

Properties capital 1,894,149.63 1,894,149.63 1,894,149.63 1,894,149.63 1,894,149.63

Net profit (137,866.93) 353,190.76 860,604.65 1,149,896.92 1,823,209.48

Total Equity 7,168,138.79 7,659,196.49 8,166,610.37 8,455,902.64 9,129,215.20

Total Liabilities and Equity 18,007,672.31 16,416,032.90 14,688,250.79 12,404,618.21 10,406,614.87
10.9. Financial Evaluation and Financial Ratios

10.9.1. Financial Evaluation

A. 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) will show an

increasing trend during the life-time of the project. The income statement and the other indictors

of profitability show that the project is viable.

B. Sensitivity Analysis

i. Break-Even Analysis

The break-even point of the project is estimated by using income statement projection.

BE = Fixed Cost/ (Sales - Variable Cost) = 63%

ii. Pay –Back Period (PBP)

The investment cost and income statement projection are used to project the pay-back period the

project’s initial investment will be fully recovered at the 3rd years of operation.

PBP = initial investment

Incremental Cash inflow

=3rd year

iii. Net Present Value

The difference between the present value of cash inflows and the present value of cash outflows.

NPV analysis is sensitive to the reliability of future cash inflows that an investment or project will
yield. Net present value (NPV) is defined as the total present (discounted) value of a time series of

cash flows. NPV aggregates cash flows that occur during different periods of time during the life of

a project in to a common measuring unit. NPV is an indicator of how much value an investment or

project adds to the capital invested. In principal a project is accepted if the NPV is non-negative.

Accordingly, the net present value of the project at 13.25% discount rate is found to be Birr 9.24

million which is acceptable.

iv. Internal Rate of Return

IRR is the discount rate which equates the present value of the future cash flows of an investment

with the initial investment. It is one of the several measures used for investment appraisal. Decision

Rule a project should only be accepted if it’s IRR is not less than the target internal rate of return.

The internal rate of return (IRR) is the annualized effective compounded return rate that can be

earned on the invested capital, i.e., the yield on the investment. Put another way, the internal rate of

return for an investment is the discount rate that makes the net present value of the investment's

income stream total to zero. It is an indicator of the efficiency or quality of an investment. A project

is a good investment proposition if its IRR is greater than the rate of return that could be earned by

alternate investments or putting the money in a bank account. Accordingly, the IRR of this project is

computed to be 38.26 % indicating the viability of the project.

11. ENVIRONMENTAL IMPACT OF THE PROJECT

Currently the issue of environment and envelopment get due emphasis and thus every citizen called

to exert their maximum effort for fighting against any negative impacts on the environment so as to

result in a win-win solution on common agenda that is creating environmentally friendly business

.
environment Therefore, Markan Trading (MT) Private Limited Company (PLC) does cause very

less/insignificant adverse negative impact on the environment during implementation and operation

phase. Even though, if the project adverse within the environment the promoter must be use modern

technology, that it mitigate (protect) Environmental negative impacts.

11.1. Economic and Social Benefit and Justification

Based on the foregoing presentation and analysis, we can learn that the proposed project possesses

wide range of benefits that complement the financial feasibility obtained earlier. In general the

envisaged project promotes the socio-economic goals and objectives stated in the strategic plan of

the Oromia National Regional State as well as promote tourisms of the country. These benefits are

listed as follows

A. Profit Generation

The project is found to be financially viable and earns on average a profit of birr 0.45 million per year

and birr 4.25 million within the project life. Such result induces the project promoters to reinvest

the profit which, therefore, increases the investment magnitude in the region.

B. Tax Revenue

In the project life under consideration, the region will collect about birr 2.9 million from income tax

(i.e. excluding income tax, sales tax and VAT). Such result create additional fund for the regional

government that will be used in expanding social and other basic services in the region
C. Employment and Income Generation: The proposed project is expected to create employment

opportunity to 24 citizens of the country. This would be one of the commendable accomplishments

of the project.

11.2. Project risk and assumption

11.2.1. Project Risks

As any business project this project can be faced by different risks at different level. So, as business

the following risks are expected to face Markan Trading (MT) Private Limited Company (PLC) during

its implementation and operation.

 The joining of new competitors,

 Shortage of supply inputs from the supply side,

 Sudden shut off power supply,

 Sudden Outbreak of sudden Fire,

 Suddenly over flooded and

 Of confidence to the creditor’s bank to get the loan without any hurdle.

11.2.2. Risk Management

To deal with the above possible risks that are external and unforeseen factors and have their own

effect on the life business and its smooth operation, the following assumptions are set to manage

their effect as a risk.

 The joining of new competitors can be managed by advertising and promoting our products

produced Markan Trading (MT) Private Limited Company (PLC) through print media to keep

new customers know about our machine and by refreshing existing clients.

 The risk of sudden shortage of inputs will be managed by holding reasonable stock in the store

with due attention to the date of expiration.

 The risk of the sudden shut off power will affect our production. So, Markan Trading (MT)

Private Limited Company (PLC) mixed use commercial building is ready to manage such risk

through having power generator and make it stand by for immediate solution.
  Since we are working with electric we feel that there might be a risk of getting fire and being

flooded. So, we planned to manage such risks through purchasing insurance facility from the

potential insurance institution that have insurance coverage for such risks.

11.3. Conclusion and Recommendation

11.3.1. Conclusion

At the end of the study of this project proposal analysis interpretation of data and facts collected

from the project area based on marketing principles. The followings are conclusion made:

 Markan Trading (MT) Private Limited Company (PLC) needs plot of land from Adama City

where this innovative idea changed in to reality

 Markan Trading (MT) Private Limited Company (PLC) has lack of finance to fund this project

and needs financial assistance as a loan from the potential bank to cover the partial cost of

the project expenses.

 Markan Trading (MT) Private Limited Company (PLC) needs 70% loan from bank and the

remaining 30% will be from the owner’s contribution.

11.3.2. Recommendation

I would like to provide my recommendation to the points raised as conclusion in the above conclusion

section of this project study. To this end the changing of this sacred idea into practice will be

effective if the critical and supportive assistance will be given to the following recommendation to

the points raise in the conclusion section of this project study.

 Markan Trading (MT) Private Limited Company (PLC) should have plot of land from the Adama

City administration to change this innovative idea in to reality

 Markan Trading (MT) Private Limited Company (PLC) should have financial assistance as a loan

from the potential bank that help the it cover the partial cost of the project as per the

creditors bank policy for long term loan for such business.

 Markan Trading (MT) Private Limited Company (PLC) should have 70% collateral arrangement

support from the government as a letter from Adama City.