PROJECT PROPOSAL ON THE ESTABLISHMENT

OF FUEL STATION AND MOTEL BUILDING IN 11

ADDIS ABABA

PROJECT TO BE IMPLEMENTED IN ADDIS

A B E B A B O L E S U B - C I T Y

JANUARY, 2021

Addis Ababa
 I. Grand Summary of the Project
1 I roject Name' Project Proposal for the Establishment °fa FLI.01 Station and Motel [Wilding in
Addis ;hobo
Proitet Owner The proposed legal struclure of the business entity Is registered as Molianed Umer
Usmiin.,
Nationality Ethiopian
Project Addis Ababa Civic Sub-City.
location
Project This profile envisages the emablishmgni of fuel station used for LPG lilting business
Composition centers for all type of car in the city, Gasoline (Benzene) LPG (Liquefied petroleum
Gas). Gas Oil (Naphtha) and kern :Y=4 Aviation Inc! (Avgas and Jet A-1). ln addition
to ihe provision or Fuels. Lubricants. and Dthcr speda.lized products providing area
like Modern cur. ‘vasli and Lubricant change.. A150 MOW', Office. grease & lib shop,
5llriermarket. restaurant St. cafeteria building will big- added by leasIng out our
premises to the onmpanies that offer services..

Premises The local kind area of lhe Service including the open space Es 5,000 m2.
Required
Fina.nciall The total capital of the psalm is estimaied 10 be Birr 32.0400,000.00 ETIll among this,
Source (3cr i,,) 9400,000.00 E-113 is Morticed by the contribution of the promoter and the
ivrrAriing balance of Birr 221400,000.no j701.ii is to be rimmed by hanks.
Project The capital or this project including working capital is estirnoted at Ilia' 32_00 ETB
Capital million_ Fromi the total investrnm cost the highest share is for fixed investment cost
(Bin 29.-1-1 million or 927.0. And the rest is for pre operation com and initial working
capital la hich is acce Lin( for Birr 2.56 rnilliOn. or( %)..
Employment The local Imo power required for the envisioned project will be 28 empl'oyees at full I
Opporrunity cirociiy_
Technology Tlio machinery ICquirment and tcchnoloo of establishment of th..2 Fuel Suclimi arid \
Lold Bujidin Can be secured from local and foreign. countries.
Marl et Share Bawd on the cash dow stalement, th! calcubled MR of the prig it ig D.1% and the rh:L
present value at 14.5'''-ii discount nth" is iVirr 6,399.999.99s _
Project lirovitie. service and source of rornue. employment opportunity, save/generate the
benellit5 liar country foreign exchange, benefit for the local community stimulate the local econnnly
the city & and itchnology transfer.
country

Table: 1 Grand summery of the project

L lnrroduction
Ethiopia has experienced a lot of growth over the past decade and a half both economically and in
demography. This pushes for more petrol stations around the country; especially around the
capital city Addis Ababa the demand supply gap is high. This growth has consequently increased
the number of investors and visitors. And the people of the capital city around Bole sub-city Bole
Bulbula center need a petrol station to stay close their business. This project aims at providing this
target market requisite petrol station with full facilities and Motel building service for the area.
Our mission is to successfully build, promote and provide quality petrol station and Motel. We
plan to create an environment of convenience that surpasses the standard level for other petrol
station in area. The client of this petrol station development will have every need met to ensure a
total and comprehensive comfort. Petroleum products are among the most valuable natural
resources abundantly available in our country while the country is not making it functional still.
Ethiopia and people everywhere use petroleum products as a fuel in their automobiles,
generating sets industrial plants and for cooking purposes in most of the area of the country, thus
making petroleum products an essential commodity that is needed for the daily operations of
individual, industrial and national activities. Ethiopia being non-oil producing nation, however still
relies on imported petroleum products for the servicing of the economy. Such petroleum utilized
by almost everybody on daily basis at an average of 10 liters daily usage. Due to increasing level of
standard of living more Ethiopian are increasing the number of cars on the road, the need for
constant power supply to aid uninterrupted production of goods and services and also for
domestic use more Ethiopians are increasing the demand for fuel in order to enjoy the usage of
their generating sets and industrial plants. The total projected cost for setting up a standard
motor- fuel filling station in the city state has been estimated at Birr 6,300,000 million it includes
land, building fuel dispensers and other equipment's, spares along with the preliminary expenses
and working capital.

1.1. Plarpose of the Document

The objective of this feasibility study is establishment of fuel station aid potential entrepreneurs to
facilitate investment and provide an overview about petrol filling station and Motel business. The
project feasibility may form the basis of an important investment decision and in order to serve
this objective. The document covers various aspects of the business concept development start up.
The document also provides sectorial information brief on government policies and international
scenario. Which have some bearing on the project itself? This particular pre-feasibility is regarding
"fuel filling station which comes under "petroleum sector"
1.2. Crucial Factors & Steps in Decision Making for Investment Key success factors
Following factors are the key in making this project profitable:- Location of the project will play a
pivotal role in the successful running of the fuel station. The daily turnover of the cars largely
depends on this important factor. ▸ Selection of proper equipment is another key for carrying out
of successful operations of the proposed project. A. Opportunities The proposed project would
have a number of competitive advantages:- The project will increase the number of fuel station
and provide fuel to more customers reducing the problem of fuel scarcity in the area and reducing
the cost. Addis Ababa being a state capital and close to the commercial hub of the central part of
the country. The City is a good location because of the high rate of vehicular movement in and out
of region. B. Threats The proposed project will be following threat:- > The processing of license
may take time because of the satiation in the country. Threat of likely increase in the prices of the
petroleum facilitated by the government as a result of the planned deregulation and removal of
fuel subsidy.
2. Objectives of the project
2.1. General Objectives
The general objective of the project is to establish the fuel station with full facility packages (modern
car wash, lub. & grease change, shop, supermarket, cafeteria and restaurant) and Motel center with
a capacity of serving 302 cars per day.
2.2. Speciflc Objective
The market demand for fuel station service center is going to increase continually. Currently, the
expected demand of this service is assumed to increase at high average growth rate. Like any
business enterprise and establishments of its kind, the project is basically planned with an objective
of generating profit for the promoter. Beyond that, it is also aimed to promote the following
objectives. > To establish fuel station and Motel service center, Implementing a cost-effective
promotional strategy that will maximize awareness for the quality of petrol station and other
facilities, Aiming at exceeding the customer's expectations, Providing high quality petrol station at
minimized cost, Provide direct and indirect employment to a large segment of the population and
reduce unemployment, > Increase Government revenue through different forms of taxes which in
turn used to facilitate social and economic development,
3. Project Implementation Schedule
The project's implementation is expected to take 24 months. The major activities include Bank loan
processing construction of the building, cleaning the area around the building, Procurement of
equipment's and start rendering services. The time schedule for the above matured major activities is
presented below:
Table 2: General Project Implementation schedule

SN Activities Date
I Land request processing . Janit...Lr - Mardi. 2021
2 Land approval 3,1-hrdi. 21121
Site clearing. and Inc Ling April.- Jun. af21
Fence Wad., April- _ILI lys 202 I
Site DeVelarrile1111. . April- July, 2021
sank loan processing March-April. 202 I
13tul Id I ng and ecrns4ruulion work Jun. 21)21- April 20!2
Preparation far seri,: i cc Jun- DoiJiiirrther 2012
Service execui 1 cal January, 2023

3.1. Action Plan Template

PROJECT l'4TAMF, PROJECT MAN,AGER
Project Proposal for the Establishment of a Fuel MOHANED UMER
Station USMAN,
and Moici Building jn Addis Ababa
Actic n EI:ilzponyiil:Ple Priority Rauh.- S1ar1 I '...nd Notes
Cioal I : Site From .2 )21 Sanuanr.....023
Visit venues The Promoter High - January:2021
Identify venue optic n The Promoter II igh -
Land Requem Pluressiii , The Promoter Medium - March,110 I
Land a Irma! Ilia Promoter High - rid arch.202 I
Sign Lase Ailreement The Promoter High -
Goal 2: Site clearing, and [al:ling The Plutnoter I 411 - Feb ruary,2021 A p r i I. 2021
And Sign contract
Fence Work The Promoter I I it.th = February,2021 \Nil, 2021
Site Development The Promoter - - February.202 I 'I. p ri l 2021
fioal 3: Bank loan procesgin.: The Promoter - Februarv-'011 un, 201 I
Providl n * the rornoters e uih. The Promoter 1E6 - I anuarv11:111
CO31-VELIlding and consirue ti The Promoter - Jun, 2021 April .2022
on tvork
Preparation for siervinc Tho Prilinoiar Medium - 1 un,101"1 ihTcmlier.2022
Service execution High - .I.iinamry, -2 on ---
3.2. Land Use Plan The project shall have an overall plot
coverage of 5,000 m2,
Table 3: Building Blocks and Areas
Block No. Block i Area
Block I Fuel Pump Area 1,500 m2
Block 2 Shopping Area 401J rrr
Block 3 se.rvi•e Arta I 04N1 m2
Block 4 Motel pudding AreJ 1,0ii0i m2
Parking and Greenery area 1,001P 1112
 Tot it l 5,0001) m2

Facility I Floor Functions Area Covered

Block I
• Main Fuel Pump round Fuel Pump 1,200 ril2
Truck Fuel Pump 'Ground Fuel Pump 300 m:2
Block 2
Shopping Area 'Ground Shop 250 rn2 50
Toilets and both room
m2
Block 3
:Service Area Ground Modern car wash, lull. & 1,100 n12
jrease cluinge, Office

Parking and tireenery area 1.000m1

Block 3
Motel Building Ground Supermarket , Cafeteria, Isla) m2
Restaurant

1st- 3rd Bedroom Service ,

Total .5000m2

4. Estimated Cost of Project

The cost of project has been estimated as 32.00 million including land, Civil works, Fuel dispenser,
equipment, underground tanks, motel building, modern car wash, and office equipment, preliminary
expenses, and also petroleum licensing and other regulatory charges are estimated cost. The petrol,
diesel and kerosene equipment comprise dual hose dispensers and eclectic control panels.
Table-5 Project Investment Fixed investment Working capital Total investment
Fixed investinent 29,44%000 92%

'orking capital 2,5(10.000 6%

Total investment 311100,0001 100%

The prOpOalt1 pre feasibility is bated nn ilia assumption of 7(.11 deht and 30Th
equity. The project seems to be viable with the following? returns on in

Table 6 Project Returns

Internal rate of recum (Project) 13 1 c.-...ii

internal rate of recur n (equity) 45.1%

Nei Present Value p•2.0rNi (P.399.999.998

Payback period — based on cash inflows 7 yeah
 Viable Economic Size
A minimum of 302 cars is required to be filled daily in order to operate at breakeven points.
Considering the market trends and number of vehicles in use in the city this ranges of feet of
government vehicles fleet of transporters playing within the city, Addis and other neighboring
towns and villages. Also the heavy vehicular traffic of travelers from other parts of the country to
the City is estimated that the project would be able to attract and serve at least 302 vehicles per
day. This does not include the increasing number of motor cycles, three wheeler motor and
those who purchase fuel for their generating sets.
4.2. Proposed Capacity
The equipment for dispensing petroleum products that has been considered for preparing this
prefeasibility study is of German Origin. This equipment is relatively more efficient and effective
of the all types of equipment available in the market. Various other types of equipment are also
available at lower prices. The chosen equipment is capable of refueling 50 vehicles per hour.
Twin hose dispenser accompanies this equipment and it handles refueling of two vehicles at a
time Viable Economic Size A minimum of 302 cars is required to be filled daily in order to
operate at breakeven points. Considering the market trends and number of vehicles in use in the
city this ranges of feet of government vehicles fleet of transporters playing within the city, Addis
and other neighboring towns and villages. Also the heavy vehicular traffic of travelers from other
parts of the country to the City is estimated that the project would be able to attract and serve
at least 302 vehicles per day. This does not include the increasing number of motor cycles, three
wheeler motor and those who purchase fuel for their generating sets. 4.2. Proposed Capacity
The equipment for dispensing petroleum products that has been considered for preparing this
prefeasibility study is of German Origin. This equipment is relatively more efficient and effective
of the all types of equipment available in the market. Various other types of equipment are also
available at lower prices. The chosen equipment is capable of refueling 50 vehicles per hour.
Twin hose dispenser accompanies this equipment and it handles refueling of two vehicles at a
time

6.2.1. Past Demand

According to mot report due to the increasing price of petroleum most vehicles currently are
Naphtha and those vehicles which are using Benzes are converted in to Naphtha
Table: 7 Inspected and Registered Vehicles by License and Plate Type

6.2.2. Forecasted Demand

According to transport ministry the growth of vehicles is 7% and 9.4% for minibus and bus's
respectively. Based on the above data the forecasted number of the vehicles in the country for
the coming 10 years is as follows.
Table: 8 Forecasted numbers of the vehicles in the country for the coming 10 years
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6.3. Market Supply
Total number of petrol stations that are fully operational in the city is quite low for meeting the
growing demand for petroleum products. Apart from these, stations are many other stations that are
not functioning while a few others are spring up. There has been a tremendous growth in the
downstream petroleum sector over the years. There are 710,000 vehicles in Ethiopia with more than
70 percent of them (410,000) registered in Addis Ababa. However, the number of fuel stations in the
capital stood at only 100. "Most of the fuel stations are very old and have small storage capacity,"
sources said. "Securing plots of land to construct fuel stations is a big hurdle," they said. The above
growth rates present an opportunity for the new entrants to earn profits by setting up new petrol
filling to meet the growing demand.
7. Regulations and Licenses
7.1. License
Obtaining a license from Ministry of Petroleum and Natural Resources and Department of Petroleum
Resources (DPR) are pre-requisites for setting up the motor Fuel filling station? o Licensing . Bid
documents will be prepared and can be collected from the Ministry (MOMPNG). - The notice will stay
at least for 45 days The beginning and ending dates will be specified. • Evaluation will follow based on
the score cards set at beginning, The winner will be notified officially to all bidders. • Signing date will
be fixed with the winner, . Signing ceremony with the Minister and authorized company
representative will be followed, o If there is only one interest Negotiation will be carried out between
the company team and Ministry of Mines team,
. When agreement is reached on various fiscal terms and articles of the PPSA. report will be submitted
the Ministers offices (MOM). The PSA will be endorsed to the Council of Ministers, • • The Council of
Ministers, chaired by the PM will approve the PPSA. . After the approval of the Council, the Minister
and the authorized company representative will sign the agreement.
7.2. Guidelines for Setting up of motor-fuel filling satiation Basic principle of the governing
consideration is to minimize as much as possible interference to normal flow of traffic on the road by
vehicles using the amenity and also to ensure safety. General conditions of inactive:-
1. The clear distance between two adjacent fuel filling station (these will also include fuel filling -cum-
services station) should not be less than 300 meters,
2. Fuel filling station should be well distribution on both sides of the road, so that vehicles do not have
to cut across the traffic to reach a fuel filling station. The fuel filling station on opposite sides shall be
staggered.
3. Sitting of fuel filling stations near existing check barriers should be avoided. They should be at least
1 km away from the check barrier.
4. The distance between the tangent point of the curves of the side road and the fuel filling station
measured in a direction parallel to the center line of the road should not be less than 100 meters and
the station should be located only in the outbound direction. However on expressway and arterial
road having dual carriageway. The distance from the junction should not be less than 300 meter.
7.3. Income Tax The income of the petrol filling station is not exempted from the income tax. The
investor has to pay tax on his/her income according to the nature of the business entity. The current
project is being operated as a private owned company. So the income tax is payable at the prevailing
rate.
 8. Project Cost
The details of the cost of project are as follows
Table-9 project costs

Items Cost in Birr

Land 5.00OrtC2. 2,554877.35

tiolidint! — civil works 24,110.79979

1
DispiNbers undagrOttnii tanks & other equipment Z412,698.41
Office Equipment , 406,349.21

Furniture & fixtures 225,5 .4

Licensosipermils 2,209523_81
Preliminary experts 77,180.95
'Workiny. Caill II I 32,00E1,00am

Total 32,000,000.00

8.1. Project
Financing The total cost of the project is Birr 32.00 million including the working capital of
Birr 754,780. The sponsors of the project will contribute 30% or 9,600,000 ETB and the bank
will finance the remaining amount of Birr 70% will 22,400,000.
8.2. Location For setting up a fuel filling location is the prime factor. As per the
requirements of the federal government, the filling station must be situated in a
commercial area. Fuel filling station is not allowed to be installed in the residential areas.
5000 m2 of land with at least 75 feet front opening is required for installing fuel filling
station. The amount for land leas has been allocated for acquired of premises of
commercial land in in Addis Ababa around Bole sub- city based on the current leas cost of
the city. In these report prices of commercial land in Addis Ababa has been considered
however prices may considerably vary in the other places.
8.3. Building 17
There are certain civil works required to be carried out at the proposed location. The civil
works will be carried out on an area of 3,500 m2. The rest of the area will be floored with
concrete. Civil work includes the following. > Motel Building.

➤ Office Shed for dispenser

➤ Toilet/washroom
Underground tanks and power cables
Flooring The total cost of construction is estimated at Birr 17,910,861.86 details for the
said cost is as follows:
Table-10 construction cost (amount in naira)
Descripti DR
h.nd Building that comprises Office, shed and 11,68(146703
toileCwashroom, Restaurant FR.Careteria, supermarket

Underground tanks 8 gas piping 232871.43

Flouring (5.111tHim2) 3,174.603.17
Contingencies bri7 ..12o,.-L3 I
Total cast 17,9 iikittif.86

8.4. Equipment
The following equipment is required for a fuel station > Gas compressor The purpose of compressor is
to compress the fuel enabling it to discharge the petrol for refueling. This compressor requires an
input pressure of 8 or 15 PSIGS from the main gas supply with the outfit pressure of 3,625 PSIG with
this discharge pressure the equipment can refuel 50 vehicles per hour. Electric control panel, electric
control panel is required to operate the gas compressor priority panel for vehicle priority during rush
hours the compressor is directly connected to the dispenser by passing the storage cascades/cylinders
with the help of priority panel. This are enable as to facilitating the refueling of vehicles at a faster
rate. Fuel dispenser high floe dual hose gas is flied into the vehicles with the help of dispenser.
This dual hose dispenser is in capable of handling two vehicles at a time. There are various forging
manufactures providing the fuel filling station equipment in this pre-feasibility report a German origin
compressor has been selected this equipment is selected because of its low electrically consumption
higher outlet pressure. It is low. maintenance, durable working, longer periods between overhauls
and good market repute and presence.
 8.5. Suppliers
Products will be sourced directly from an oil company accredited marketers with reliable and
high quality products and delivery time suppliers such as capital Oil Libya, Total and like
petroleum and host of other will also highly recommended.
8.6. Furniture and Fixtures
Furniture and fixtures mainly include table's chairs sofas fans & lights carpet curtains and fire
extinguishers. It is estimated that the furtive and fixtures of Birr 480,000 would be purchased.

8.7. Office Equipment

Some office equipment is also required for the proposed project. A provision of Birr 200,000
has been made for acquiring the required office equipment.
8.8. Manpower Requirement
Manpower requirement for the fuel filling station includes manager, cashier, dispenser,
operators, accountant, watchman and sweeper .The total staff strength would be 28 persons
for the two shifts. The staff salaries for team as follows:-
Table 11 human resource requirement
1)csiiIniition No of employee's For two shift , Salary per month Totil salary
Manager l 20,000 240,000
Npuiy :ii itinii ger 1 JUNI roni IN) loo
Accountant 1 6,001) 72,000
Cashior I1 2,500 30+000
Dispenser 8 3.570 300,100
Operator 2 5 100
. 112,m)
1
Watchmen 3,01)
,
Sweeper I 1 ' 500 3nroliti
Motel floincr I1 I I,.000 132,001.)
Total 28 lianS,(1100
9. Basis for Financial projections
9.1. Inflation Rate 10% inflation rate has been considered while making the projections for
cost of sales, operational expense and salaries the prices for electricity, operational expenses
and staff salaries are increased by 10% every year as a result of inflation.
9.2. Revenue Assumption
9.2.1. Number of Cars
Based on the survey of same fuel stations in Addis Ababa, the number of cars assumed for
revenue projections is as follows
Table - 12 Detailed projected increased in cars for 5 years financial period

Years Number °fears

1 30'
2 Eiti3
3 463
535
•• 622

The average number of cars in the first years is estimated at 302 cars per day starting from
220 cars per day in the first month and going up to 290 cars per day in the 12th month in the
second years. It has increased to 303 cars per day after second year. Number of cars in Addis
Ababa is increasing at a rate of 20% till fifth year because the project would be in its growth
stage. An increase of 5% has been considered from sixth year, because at that time the
project would be at its maturity stage.
9.2.2. Accounting Profit
Depreciation on the assets has been charged at the following rates are for the calculation of
accounting profit.
Table 13 Depreciation rates Description Building Fuel plant & equipment Motel & Office
equipment Furniture & fixture
Description Depreciation Rates
Building 5%
Fuel plant & equipment 10511
Motel & Office equipment 20%
Furniture & fixtuN 1051,
9.2.3. Taxable Profit
For the purpose of calculating taxable profit depreciation is calculated on the rates as per the
income tax law which is as follows,
Table -14 Tax adjustments
Land IN
Buildin2 5%
Fuel plant & equipment 105i
Motel & Unice equipment 10%
Furniture& fixture 10%

9.2.4. First Year Allowance

Other than the normal depreciation allowance first year allowance is also provided on the newly
installed plant and equipment for the purpose of providing benefit to the entrepreneur. The first
year allowance is calculated as 40% of written down value of fuel plant and equipment.
9.2.5. Multiple Shift Allowance
In addition to normal depreciation and first allowance multiplier shift allowance is also provided
for the plant and machinery which operate on double or triple shift basis. In this proposed
project fuel plant will run on two shift basis during the while years. So multiple shift allowance is
calculated and added to the depreciation of plant and equipment for all of the ten years.
Multiple shift allowance has been taken as 66.6% of the normal depreciation allowance.
9.2.6. Amortization for Primary Expense
Preliminary expense amounting to Birr 30,390/-wills is amortized at the rate of 20% per annum.
9.2.7. Working Capital
Working capital is calculated on the basis of following assumptions.
9.2.7.1. Accounts Receivables
Mostly the sale of petrol is on cash basis; however some fuel filling stations do offer a credit
facility to reputable companies on agreed terms and conditions. Therefore recoverable are
estimated at 6% of the total sales amount.
9.2.7.2. Advance to Employee
Advance to employees are calculated on the bases of 30 days of both payroll and staff benefits.
9.2.7.3. Accumulated Utilizes and Power Expenses
Normally, it would take 20 days to deposit the utilities (electrically) water and telephone) bills.
Therefore; utility expenses for 20 days have been taken as the basis for working capital
computation.
9.2.7.4. Accounts Payable
Cost of electricity for 20 says has been considered in calculating accounts payable.
9.2.7.5.Value Added Tax Payable
Every company is required to deposit the amount of VAT collected from the consumers. With 30
days. The same has been taken as the basis for calculating the amount of sales tax payable.
9.2.7.6. VAT
The value added tax levied by government is charged to the customers at the rate of 5% on the
sale of fuel these funds are deposited after every 30 days in favor of the federal government
through the federal Inland Revenue service.
9.2.7.7. Ratio/ financial Analysis
The figures for the rate of return on investment and return on equity are average for the five years
to make it more reasonable.
9.2.7.8. Alternative Investment Opportunity
The cost of land is the major portion of investment in this project. If any investor does not have
enough resources for the acquisition of land he/she also has another alterative course of action to
setup the fuel filling station without acquiring the land. The investor can make investments only in
the purchase of fuel equipment and install this equipment for installing that new equipment will
be made by the investor and the space will be provided by the dealer/owner of the existing petrol
station. The investor will pay 15% commission on the total revenue to the dealer/owner of the
petrol station. Moreover, the investor can also avail lease facility from any leasing company on the
purchase of the equipment.