White Fuels Storage Terminal Financial Model

Description
This financial model is useful as a corporate finance tool to assist in decision making for insourcing own fuel storage terminals as opposed to outsourcing from other white fuels storage service providers.


The financial model assumes white fuels i.e. petrol, diesel and jet fuel come to a country's port via a vessel/ship. The Company XYZ importing the fuel could be a fuel retailer who needs temprary storage prior to collecting product for sale to retailers or wholesalers.


The Company XYZ has been doing this using third-party services and needs to find out if it makes investing on self-storage as opposed to outsourcing. Any excess capacity/unutilized or idle capacity can be rented out to third party customers as hospitality business at a fee.


The Company XYZ has been incurring pipeline fees, offloading fees from vessel as well as loading to trucks.


With this project, Company XYZ should now stop paying for these and that will be a cost saving and for the idle capacity, they can charge others similar revenue streams i.e. pipeline use revenue, offloading from ship and loading to trucks revenue.


To compute the feasibility of the project in terms of IRR, NPV, Break-even analysis and Payback Period, one will compare the capital expenditure required against the cost savings plus the new revenue generated from third party customers on the unutilized capacity.


In the financial model, one can adjust the selling prices (which is currently set at what customers are paying currently), operating costs, admin costs and funding plan. Volumes can also be adjusted as annual growth as well as current sales volumes.


As sales volume from Company XYZ grows, the third-party hospitality business will decline to a natural death.


From the performance metrics, one can make a corporate finance decision whether to continue outsourcing from other storage service providers or go ahead with the insourcing project.