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RE: P2 Financial Analysis



Don't be so fast to blame bureaucratic bean counters for busting P2
projects.  There's a big difference between financial theory and the reality
of budgeting.  If corporate bean counters impose higher hurdle rates (a
speaker from Dow Chemical at the MidAtlantic P2 conference said that Dow
expects a 40% ROI) it's because other reinvestments in the business are more
attractive and because the business doesn't want too much debt.  

One reason that financiers aren't interested in projects with long paybacks
is because of the rapid pace of change.  P2 doesn't pay if you're no longer
producing that product. 

One important "overhead" cost that works against P2 is the value of an
engineer's time (which is far greater than his/her salary and benefits).
Certainly one of the most common excuses for not pursuing P2 is "we don't
have time".  Suggesting that the company hire a consultant or 0.17 engineers
to do the project isn't always feasible either. 

While P2 projects may reduce the risk of environmental fines, most P2
projects are inherently riskier than the status quo.  Even proven P2
technology can have startup problems that detract from its payback. (But
maintaining the status quo can also send your business the way of the
dinosaur.)

Bottom line, investments in P2 shouldn't necessarily expect special
treatment.

Mike Heaney
NC Division of Pollution Prevention &
Environmental Assistance
919-715-6511
wrrc.p2pays.org