The dynamics of today’s business environment have changed rapidly with increasing risks and uncertainties. Therefore, it is crucial for companies to outperform their competitors by providing value and efficiency to their customers. To be successful in this field, one must first carry out precise planning and analysis before entering the industry. A TEV study is the best example of this type of analysis.
What do you mean by TEV study?
A project’s Techno Economic Viability (TEV) study includes evaluating technical and financial information about the project, as well as relevant data about its technological feasibility and economic viability, into one or a few guidelines on the basis of which the project is recommended for selection, modification, or rejection.
Technoeconomic Viability Study & Feasibility Reports provide an assessment of a project’s technological parameters and their impact on the financial viability of the project. TEV analysis is a risk mitigation task performed by banks and financial institutions prior to making lending decisions and understanding the risks inherent in any financing or investment in a project to determine whether or not to lend for such a project.
Purpose
The purpose of a Techno-Economic Viability (TEV) Study evaluation is to help lenders determine the acceptability of the amount of risk involved in a project.
- It considers technological risk, market risk, regulatory risk, financial risk, and so on. For meaningful TEV research, a critical evaluation of these parameters is required.
- TEV target
- The main objectives of technical-economic viability are listed below.
- The Techno-Economic Viability (TEV) study helps advocates make important decisions. The TEV study includes the assessment of technical feasibility and its impact on financial viability.
- TEV research is used to determine whether a business opportunity is technically, practically and financially feasible. TEV analysis provides a realistic assessment of both the positive and negative aspects of a potential opportunity. A wrong decision at this stage can lead to the collapse of the company.
- The TEV report requires extensive knowledge of both technical and financial aspects. RNC’s combination of experienced and highly competent technical and commercial team enables bankers and investors to make appropriate lending/investment decisions.
Why is this important?
Technoeconomic vitality plays a crucial role in an organization. When promoting an organization, it is necessary to have in-depth knowledge on the subject. Below are some reasons why this is necessary.
- Identify the strengths and weaknesses of an existing business.
- Analysis of threats and opportunities in the current environment.
- Reduce the number of resources required for success.
- Understand the project’s prospects.
Banks and other organisations
- Banks, Asset Reconstruction Companies (ARCs), engineering firms, and other institutions require this study for the following reasons:
- Project loan evaluation
- Project funding (including term loans)
- Reviving distressed assets
- Improve the leadership abilities to better manage the team.
- Reduce costs without sacrificing quality
Automate the company.
The primary goal of this research is to gain a thorough understanding of the project descriptions, accounting statements, resource allocations, legal requirements, financial data, tax obligations, and so on.
Advantages of the study
This study is required prior to technical development and project execution to determine whether the project is profitable or not.
Even before deciding on personnel, time and effort, it is necessary to have a good idea of whether the project will be successful.
Increase project team focus and efficiency.
Allows you to discover and exploit new opportunities.
Help you understand the how and why of a project before committing to it.
Take time to optimize your business options.
Find problems before they occur and help solve them.
Helps reduce risks.
Provides team members and stakeholders with valuable information about all project opportunities.
Components of Technoeconomic Profitability
The TEV study includes all the necessary elements to make an informed decision on whether to accept a project as a loan or as an investment.
Promoter Rating
Since the promoters manage the project, the creditworthiness of the promoter is crucial. TEV research requires personal and financial profiles of project sponsors. In order to understand the financial capabilities and competencies of project sponsors, a personal profile assessment is necessary. These include resourcefulness, a record of previous travel experiences, financial stability and support, family history, shares in other businesses/firms, etc.
Choose a capable management team.
Management must have supervised experts from various industries to ensure the success of the project. Each team member must have extensive experience in:
- Manufacturing, Marketing
- Human Resources Development, Finance
- Project Delivery
- The assigned individual must have the required skills and experience in the relevant discipline depending on the size of the project. .
Technical evaluation
This one entails extensive research into the most recent technology and resources needed for the project. one must also investigate the suitability and adequacy of the production process in order to achieve the projected output, the adaptability of project location selection, project rationale, project implementation schedule, project status, and so on.
Market analysis
It is essential to evaluate the project’s future growth and outlook! To assess the demand and supply of the products used in the project, one must have a future outlook in the industry. Keep an eye on whether the product supply covers market size, which includes the competition scenario, consumer trends, and so on.
Extensive industry research
Business owners and other individuals conduct industry analyses to assess the current business environment. Understanding all the different economic aspects of the industry and how they can be used to gain an edge over the competitors is beneficial.
Critical Component
This is a critical component in the Techno-Economic Viability study, as it is in other businesses, where one compares various key parameters such as operations, products, services, and financial growth trends with similar projects.
It also takes into account the geographical landscape of other industry leaders in the same line of business.
Project’s financial viability
This means that the project ought to be able to generate enough cash flow to provide a risk-adjusted return on investment. The project needs to be able to repay its obligations and generate adequate returns. This component is assessed by examining the project’s ability to generate a desirable profit using realistic financial projections. To determine the project’s financial viability, one must consider factors such as ratio analysis, working capital requirements, term loan requirements, and so on.
Sensitivity analysis/Simulation analysis
In this method, one can perform infinite calculations to determine the possible outcomes and probabilities of any action. This financial model is frequently used to forecast the outcome of a decision based on a set of variables. In this case, one can examine the impact of changes in key assumptions such as selling and raw material prices to determine the project’s financial viability.
SWOT Assessment
SWOT is an acronym that stands for Strengths, Weaknesses, Opportunities and Threats. It is a strategic planning tool that involves identifying internal and external factors and highlighting project objectives to look for favourable and unfavourable elements to achieve the desired goal. These are some variables that you have some control over and can change to achieve the desired result.
Financial Stability
It contains capital and collateral and allows lenders to evaluate the coverage of the collateral.
Risk Assessment
Last but not least, a risk assessment is required. It is carried out by identifying operational risk, market risk, financial risk, resource mobilisation risk, project execution risk, regulatory risk, and political risk. The simple reason for including this study is to mitigate the identified risk and develop preventive measures to deal with issues in the near future.
Conclusion
TEV analysis is an essential component of project management, and a well-defined TEV analysis increases the likelihood of project success. A project’s Techno Economic Viability (TEV) study includes evaluating technical and financial information about the project, as well as relevant data about its technological feasibility and economic viability, into one or a few criteria on the basis of which the project is recommended for selection, modification, or rejection. The purpose of a Techno-Economic Viability (TEV) Study evaluation is to help lenders determine the acceptability of the degree of risk involved in a project. Technology risks, market risks, regulatory risks, financial risks, etc. are taken into account. For a critical assessment of these parameters is required