**Annex 2 **

Very little reference has been made in this guide to the important aspects of if and when it is worth making an investment in a more energy-efficient technology. The great differences between countries and regions in the prices of engines, fuel and skilled labour make it meaningless to present quantitative financial guidelines. However, the following basic calculation should assist a vessel operator in investment decisions. It should be noted that the method is a quick approximation; if a large investment is being considered, a more detailed financial analysis is necessary.

Total cash expenditure should be calculated by summing the purchase price, installation cost, any net lost earnings plus the *additional* annual maintenance cost incurred by the new investment. The net lost earnings should be estimated from the number of days the vessel will be out of service multiplied by the owner's normal net earnings (after the deduction of costs and crew share) from the vessel per day.

The money to be invested could have been left in the bank to earn interest, which is effectively lost. Lost interest is calculated by multiplying the bank interest rate by the total cash expenditure. The total cost is the sum of the lost interest and the total cash expenditure.

The anticipated annual fuel savings should be estimated from the fuel savings figures related to the new investment (such as those presented in this guide), multiplied by the present annual total expenditure on fuel. The latter should be estimated from current records.

The payback period for the investment is then calculated by dividing the total cost by the expected reduction in fuel cost, and multiplying by 12 in order to convert from years to months. It is very important for the payback period to be *shorter *than the useful life of the item(s) to be purchased.

The chart shown here is an example only and is not based on a particular case.

**Figure 14: Example assessment of investment in energy-efficient
technology**