Financial assessment of a biodiesel value chain: case study of Chiapas, Mexico

Abstract

Purpose

This paper aims to assess the biodiesel value chain produced by the State of Chiapas and, through a financial model, determines its profitability and feasibility as a business.

Design/methodology/approach

The literature review was based on searching in journal databases and in official web sites. To quantify value chain activities, a questionnaire was used to interview project leader. Besley's methodology was used to create the financial model and determine the net present value (NPV). Finally, the SWOT model summarized the analysis based on the results obtained.

Findings

All the costs of the value chain were calculated and the results show that the greatest cost corresponds to the “internal logistical activity,” with 74 percent of the total cost/liter. The NPV of the project was positive and the project was thus considered financially feasible.

Practical implications

Biodiesel production plants must know the real costs of raw material (sewing and harvesting the seed) as well as extraction by farmers and regional producers in order to calculate their real profit margin and set competitive prices.

Originality/value

The research responds to a specific demand by the State of Chiapas to assess the feasibility of its value chain by identifying the activities that do not create value.

Citation

del Carmen Díaz-Peña, L., Salvador Chavez-Capo, A., Angel Tinoco-Castrejón, M., Rosano-Ortega, G. and Pérez-Armendariz, B. (2013), "Financial assessment of a biodiesel value chain: case study of Chiapas, Mexico", Management Research Review, Vol. 36 No. 12, pp. 1291-1302. https://doi.org/10.1108/MRR-08-2013-0196