TABLE OF CONTENTS

TET TEA FACTORY COMPANY LIMITED

F E A S I B I L I T Y S T U D Y.Done By:J.K.A. Koech / R. Koech,Weldon Korir.

P.O. Box 27, Kericho20200.Cell: 0722 668755; 0722 407200

e-mail: joelkoech@yahoo.com

Private and confidential December 2010TABLE OF CONTENTS.4EXECUTIVE SUMMARY.

51.Background.

62.Sponsors of the Project.

63.Details of Tet Tea Factory directors.

74.Advisory and Coordinating Team.

95.Legislation.

106.Management.

106.1Human resource.

116.2Management structure:

136.3Responsibilities and Authorities of Key personnel

137.Current production.

137.1.Current availability of the product:

137.2.Tea producing areas:

147.3.Production in Konoin ,Bomet county:

158.Current Consumption

159.Marketing Outlets and Future Trend.

159.1General:

159.2Current Markets Outlets:

1710.Potential Market Outlets.

1710.1.Branded tea:

1710.2.Value added teas

1710.3.Emerging markets

1811.Pricing Structures

1912.Distribution:

1913.Production.

1913.1.Product:

1913.2.Location of the project:

2214.Production Plan.

2214.1.Source of Heat Energy for Drying.

2314.2.Tea Processing.

2715. Financial Evaluation

2816.Economic Evaluation

2817.Sensitivity Indicators .

2918.Implementation Schedule.

1. EXECUTIVE SUMMARY.1. Tet tea Factory Company limited intends to invest in the establishment of a tea Factory in Kimulot Division of Bomet County. 2. Total estimated value of the investment is Kshs. 209, 444,000 (Two hundred and nine million four hundred and forty four thousand shillings).

3. The project will be financed by Equity contribution from shareholders, promoters and financier/strategic partner as identified by the directors of Tet Tea Factory Company limited.

4. The feasibility study reveals that the project will bring in profits in the first year of operation and continues to be profitable even after the sixth year of operation.

5. The project has good economic benefits to its shareholders and the community around the location of the project. This includes a direct employment of 75 people and a sustainable cooperate tax remittance. 6. The returns on both the Equity and the Investment are quite good and sustained by a good flow of cash.7. The project is technically feasible, economically viable and financially sound and should be supported.8. Tet Tea Factory Company limited, in collaboration with the strategic investor, has identified all the machinery, equipments and materials necessary for immediate implementation of the project.9. The construction of the factory plant will commence as soon as the Tea Board of Kenya issues a manufacturing license to Tet Tea Factory 2. Background.

(a)The Tet Tea Factory Company Limited, a company limited by shares, was founded in 2009.Her directors, shareholders and promoters have been involved in tea farming, fabrication, assembly and maintenance of tea Machinery in various tea factories in East Africa for over thirty years. The directors of Tet Tea Factory Company limited would like to invest in tea manufacturing facility, value adding of tea and in the marketing of finished products in both local and international markets.(b)The government encourages investment in tea sub-sector since Tea processing, packaging and marketing was liberalized in 1992. This liberalization meant opening the tea sector to various investments at various sections of the tea sector. However certain regulatory procedures issued by the Tea Board of Kenya (TBK) as stipulated in the Tea Act, must be met before and during operations in any investment on Tea. These regulations covers various categories in Tea handling such as in Planting, Manufacturing, Value addition, Marketing, Tea Estate management, Warehousing, research Etc. While fulfilling the regulations required by the Tea Act, Tet Tea Factory Company Limited would like to use this window of opportunity to invest in a tea manufacturing factory.(c)Tet Tea factory company limited directors, shareholders and sponsors has a rich background on tea operations and would like to use their experience for further development in tea operations by investing in a manufacturing factory. This project will entail the building of a factory, acquisition and assembly of state of the art tea manufacturing machines and facilitating the purchase of green leaf from the sponsors and Suppliers of green leaf for conversion to black tea and specialty tea products. (d)This project appraisal examine in details the viability and feasibility of Tet Tea Factory companys vision setting up of a tea processing factory to be located in Konoin district in the Bomet County in Rift valley province. 3. Sponsors of the Project.a) The project is to be sponsored by:

i) Tet Tea Factory Company Limited: This is a company limited by shares and incorporated in Kenya under the company Act (Cap.486). It is run by a board of Directors elected periodically. (See appendix 11 certificate of incorporation).ii) Small scale Tea farmers: These are the suppliers of the raw materials to the factory. They have also been offered shareholding in Tet Tea Factory limited. iii) Financier/strategic partner: Tet Tea Factory Company Limited has invited a strategic partner to fill the shortfall in the financing of the project. The engagement will be based on agreed Equity contribution.iv) Other shareholders: These are drawn from the general public who may not necessarily be suppliers of green leaf. Their input will be based on purchase of shares.b) Sponsors Equity: The entire investment will be financed by Equity contribution from the sponsors as in (a) above. It is estimated that the total cost of the factory will be Kshs.209, 444,000.4. Details of Tet Tea Factory directors.Mr. Metet Kipkoech Kenneth, 33, Chairman of the Board of Directors, Tet Tea Co. Ltd.

Kenneth is a graduate of Maseno University in Bachelor of Science in Horticulture.

He worked with M/S Sulmac, a horticulture firm in Naivasha in Kenya before venturing in to private agri-business.

He is result oriented personality, easily accessible and a team builder. He currently manages family tea and real Estates. He is also a chairman of small scale tea farmers supplying green leaf to Williamson Tea Company in Kericho. He is the current lead trainer for Utz, Fair trade and Rain Forest certification of small scale tea farmers. He will be a big asset to Tet Tea Factory Company limited in harmonizing Tea quality procedures and welfare of the community with international standards. Mr. Didar S Hunjan, 67vice-Chairman of the Company

Didar is a Mechanical Engineer by profession. He has over 30 years of experience in tea having worked with African Highlands Produce Company Ltd. (now James Finlay (K) Ltd.) in their tea plantations and factories. He has been mainly involved in the research and development of new inventions of tea machineries especially tea sorting machines. He is all round trained on tea production and quality control. He is a co-founder of Tealand group of companies. His wealth of experience in tea machinery will be of great value to Tet Tea Factory.Mrs. Bornice Soi, 56She is a teacher by profession and a devoted tea farmer. She has a lot of interest in real estate development and owns a well established real estate in the heart of Kericho town and in local trading centers in Konoin District. She has been a district representative in the Bomas Constitutional reform commission. She sits in various community based committees and licensing Boards in the district. She is the contributor of the parcel of land where the proposed Tet Tea Factory company limited will be built on. Mr. Kirpal S Hunjan, 66Mr. K S Hunjan is a Mechanical Engineer with a lot of experience in structural design and fabrication. His experience in structural works will be useful to Tet Tea Factory in building designs and in the erection of structural works and subsequent maintenance.

Mr. Robert Cheruiyot Metet, 33Robert is a graduate of University of Nairobi in Quantity Survey and Management. His profession will be an asset to Tet Tea Factory limited in the management of resources during the construction of the factory. His management skills will also be useful in the design and placing of management systems and controls. Robert is one of the small scale tea farmers who will supply Tet tea Factory with green leaf. He will take care of the interests of small scale tea growers in the board.

Mr. Inderjit S Hunjan, 61Inderjit is a British citizen and a Mechanical Engineer by profession. He has gained substantial experience in tea machineries relating to the design, fabrication, quality control and installation. His international exposure in tea and tea machinery technological advancement will be very beneficial to Tet Tea Factory. He is also a founder member of Tealand Group of companies.5. Advisory and Coordinating Team. Tet Tea Factory Company limited has contracted the following team of three individuals to provide advisory services. They will also coordinate the project starting from the feasibility study until six months after the commissioning of the project. (a) Rehmi K. Koech: Is a certified public accountant, has a bachelor of commerce from Nairobi University currently pursuing the final year in MBA in the same university. He has worked in management position with National housing corperation, Industrial commerce Development Corporation (ICDC), Kenya National Trading Corporation (KNTC) and now works with Kenya Institute of public policy Research Authority (KIPPRA). He specializes in Auditing. He has been a national chairman of Rotary club among many other public engagements.b) Weldon Korir: is a certified public accountant with many years of service with Unilever limited. On retirement with Unilever, he has been engaged in private business which includes tea farming and service provision to Multinational tea companies in Kericho. Weldon has a rich background in management and control of accounts. Some of the major assignments has been in sales collections marketing strategies, construction of unit accounts, setting and managing Financial controls, Executive reporting, appraisal of new projects and their implementations and evaluation.(c) Joel K.A.Koech: A career manager of over 32 years working with Tea. On completion of E.A.A.C.E (passed with 3p and 1s), Joel was employed as a management trainee with the then Brooke Bond (K) Ltd (now Unilever Tea Kenya ltd.). He rose through the ranks to be senior manager both in field and factory operations. A few of the areas he worked extensible includes:

Estate Field operations. Mombasa trading and saleroom operations. Running development Projects in factories technical services. Management of Factory production. Retooling of various factories. Management of company small scale farmers both in Rift valley and Central provinces.. Rehabilitation of Small scale tea farms in Bahati, Nakuru. Managing Value adding projects for specialty markets. Installation and Presentation of factorys good Manufacturing practice (GMP) for external Audit.

Training assignments under Future Force Training Consultancy Company. He has extensive training in various fields both locally and in U.K. He will oversee and coordinate the implementation of the entire project of Tet Tea factory company Limited. 6. Legislation.1. Tea Act (Cap 343) and Tea (Licensing, Registration and Trade) Regulations, 2008.This act generates the several regulatory requirements in detail in the Tea sub sector of the Kenyan economy. The directors and shareholders of Tet Tea Factory Company Limited are confident that they will satisfy all the requirements and demands of the Act and be able to obtain the various licenses from the Tea board of Kenya for the intended investment. A standard form C is attached as appendix 12.2. National environmental management Authority (NEMA): Tet Tea Factory directors have an elaborate policy on environment, attached as appendix 13.

However, an independent impact assessment and certification by NEMA is part of the requirement by the Tea Act. Tet Tea Factory Company limited has therefore engaged the services of GREANEIA consultants for this purpose.3. Other legislation:These include licenses from the county government, Water companies, Kenya Power and lighting. The process of acquiring these required documents is already on- going. Water Resource Management Association of Lake Victoria Basin will process the water abstraction permit once the mandatory conditions have been satisfied.

See appendix 14.The Kenya Power and Lighting Company limited Western Kenya Region have confirmed their willingness to connect electricity to the factory once the construction starts. A copy of their response to our application is attached as appendix15. 4. Quality certification: Tet Tea Factory Company intends to produce a world class product which is good and safe to the consumer. The directors have already drawn a product Quality and consumer safety policy, attached as appendix 16. However, Tet Tea factory will commit all the necessary resources to obtain Quality Certifications such as Kenya Bureau of standards, ISO, Rain forest Alliance, Fair Trade, Utz etc. The process of acquisition of each relevant certification would commence once production starts. One director of Tet Tea Factory limited is already involved in Rain Forest Alliance, UTZ and Fair Trade in anticipation of Tet Tea factory using his expertise as soon as Production starts.7.

Management.(a)Human Resource. (i)Employment creation: The project is expected to create 75 direct employment opportunities with a multiplier effect of over 20 to give over 1000 indirect opportunities for inhabitants of the area. Konoin and the greater Kericho districts has plenty of experienced and professional workforce in tea processing in want of immediate employment and Tet Tea Factory would like to tap into this available human resource.(ii)Placing: This Investment in a factory demands that the positions of both management and directorship will be occupied by persons of high integrity and professionalism. Tet Tea Factory Company Limited are already aware of this prerequisite and will therefore put up rigorous engagement procedures for recruiting and placing of staff in both management and directorship. Additionally strict controls procedures and modern professional management systems will be instituted to govern this investment accountably and more so transparently. (iii) Management Information system: Placed human resource would require a comprehensive computerized management system as operational assistance.The directors of Tet Tea Factory Company Limited are keen in putting in place modern management information systems for use in running, monitoring, controlling and evaluating every aspect of this investment instantly and periodically. This will include the installation of security surveillance cover.. (i)

Management structure and Numbers:Chairman

Chairman

Chairman

Human r

Unit Manager

Total factory employees = 73(ii) Key Job Description:(a)Board of Directors: This consist directors of the company and has a chairman and a secretary. They formulate policies and oversee the overall strategy of the investment. They are elected regularly as per the company articles of association.(b)General Manager: This is will be the chief executive of the company and is responsible for the day to day running of the factory. He will be reporting to the Board of Directors on the performance of the factory.(c) Factory unit manager: He will be in charge of factory operations that cover production and plant management. He will be assisted by a factory engineer, two shift management assistants and a field extension services assistant .He will be reporting to the General Manager.

(d) Personnel and administration Manager: He will be in charge of all personnel and administration matters that include facilitation of employment, placing, training, governance matters, security, transport fleet management and procurement. He will be reporting to General Manager.(e)Factory Accountant: He will be in-charge of all factory accounts reporting, sales accounts, stores administration, and data entry. 8. Production: i) Tea producing areas:The major Tea producing areas include former districts of Kericho, Nakuru, Nandi, Kisii, Nyamira, Kiambu, Kirinyaga, Nyeri, Muranga, Meru, Tharaka, Nithi, Nyambene, Mt Elgon, Bomet, Vihiga, Tranzoia and now Transmara.ii) Production in Konoin ,Bomet county:

The location of the proposed Tet Tea factory will be Konoin in Bomet County where there are six other factories which manufacture tea from small scale growers. The District has all agronomical and climatic factors which favors tea growing in all seasons.

The sponsors of Tet Tea Factory are among those currently supplying green leaf to the six factories in the zone. However, the existing factories cannot cope with the volume of leaf available throughout the year and especially in peak seasons. The peak season normally starts in April and continues into early January with a climax in November /December.

This bottleneck in factory capacity has given room to informal transfer of leaf to other manufacturing facilities far away from the farmers area of operation. Furthermore, the informal green leaf transfer gives the farmer erratic and low income i.e. the farmer is not adequately rewarded for both the Quality and the Quantity of leaf he produces.

This has impacted negatively on improvement of yields and on the desired expansion programme by the growers. They believe that by supporting Tet Tea factory they will get access to farm extension services that can translate to better yields and to improved factory capacity that can encourage them to expand their area under tea. In answer to the wishes of the sponsors (green leaf suppliers) Tet tea Factory Limited will set up systems that will ensure the farmers are well rewarded for their efforts in the supply of both quality and quantity of Greenleaf at all times. The factory will also work with the farmers by providing extension and advisory services. Tet Tea Factory Company limited will also, on behalf of the farmers, connect with other stakeholders e.g. Tea Research Foundation, Relevant government departments and other Agencies to ensure the sponsors do not lack behind in relevant information and latest technological advancement 9. Consumption. (a) Local consumption: The production of tea in 2010 stood at total of three hundred and ninety eight and a half (398.5) million Kgs. Local consumption was a mere 18.7 million kilogram of tea. This works out to below 0.5 Kgs. of tea per each head of forty million Kenyans Most of the tea drank locally are in loose packets or tea bags. Specialty tea products are still majorly underdeveloped. Tet Tea Factory Company Limited would like to explore windows of opportunity for selling its product in the local market.

(b) Exports: Kenya exported a total of four hundred and forty one ( 441) million kilograms of tea in 2010.The major consumers of Kenyan tea are Egypt, UK, Pakistan .Afghanistan and Sudan which in total consumed 73% of last years (2010) export volumes ( statistics released by the Tea board of Kenya).These are mainly Kenyas traditional markets. However emerging markets like China, UAE, Canada, U.S.A. and Poland are encouragingly beginning to make their presence felt in the Kenyan Tea Trade. Tet Tea Factory Company limited has factored in the Muslim world and other emerging international markets in their marketing plans. 10. Market Outlets.(1) General:This investment will be basically market driven. Tet Tea Factory Company Limited plans to engage with international marketing partners for maximum profitability. Market plans, therefore, will incorporate all partners inputs.(2) Current Markets Outlets: (a) The Mombasa Tea Auction outlet.Mombasa Auction: run by East Africa Tea Trade Association currently the biggest tea outlet for East and Central Africa and Tet Tea Factory Company limited will acquire membership of the Association to be able to operate in this Auction.Tea is allocated to registered brokers contracted to each producer for purposes of obtaining the highest price of tea for each of their clients. The broker doubles up as security in the collection of proceeds from sales for the account of their clients. It should be noted that this process is long and expensive but secure. Tet Tea Factory Company limited while using this outlet, will explore other outlets that would minimize the supply chain.(b)Direct linkage outlet:This outlet is referred to as Forward contracts or Direct Sales through Private Treaties for both local and international marketsMost consumers and distributors are now moving into direct linkages with the first line producers. This will bring the benefit of maximization of product quality, pricing, identity, and traceability. Moreover, most consumers of commodity products worldwide have rising awareness on social responsibilities and would like to participate directly in the social development of the communities producing products. Tet Tea Factory Company Limited would develop and identify themselves with these group of end users of tea.

(c)Factory gate sales outlet:Direct Gate Sales to a multiplicity of buyers at the factory gate either for local distribution or consumption or for repacking for resale is a recent market opening in the country.The consumption of tea in the country is still very low compared to rise in population (a scanty half a kilogram of tea per person annually). There are various companies for both branded and strait teas from multinational, local companies and upcoming small tea packers engage in this sector of the market and yet the local demand for quality tea is still low. The value addition such as flavored teas, ready to drink tea, etc. are largely undeveloped and the country depends largely on imports for this category of tea. Through consistent production of good quality product and innovative marketing, the Tet Tea Factory Company Limited expects to enter into this high premium flavored tea market.11. Potential Market Outlets.1 .Branded tea:

Tea sales to the foregoing markets are serviced almost exclusively with bulk exports (unbranded) and therefore subjected to reworking elsewhere before it reaches the end consumer. This unnecessary long supply chain erodes substantial income that would have benefitted the producer.

The reworking and re -handling of tea before the end consumer not only compromises quality but also make the tea lose its original identity.Tet Tea Factory Company Limited would like to develop branded teas with consistent quality for both local and international markets. This will be possible with partnership where necessary with other marketing partners. 2. Value added teas: It is should be noted that very small amount of tea are value added at the country of origin before exporting. This robs the farmer (primary producer) the premium price that is associated with value addition. Tet Tea Factory Company Limited plans to add value to part of its Tea products before releasing to the market. It is anticipated that packeted teas, flavored teas and ready to drink Teas will with time be produced by Tet Tea Factory limited. 3. Emerging marketsThe United States, Canada and Australasia despite their big purchasing power are not major tea consumer but tea is beginning to gain popularity. It should be noted that there is a growing Diaspora population emigrants from tea drinking and growing regions that could assist in the introduction of Tea drinking in these countries. It is gratifying to note that our Tea Board of Kenya has also identified this window of opportunity for marketing Kenyan Tea as in their TEA NEWS issue of October / December 2010. High premium markets such as North Americas Japan and Australasia are still lowly developed and yet there is a considerable influx of immigrants from tea drinking countries to these areas. Tet Tea Factory Company Limited would develop marketing channels for its range of product in these areas. This would take the engagement of the population Diaspora to jump start the marketing operations in those regions..

(b)The Middle East and the entire Muslim world is a very important market for Kenyan Tea and its potential is yet to be optimized. The Far East- Japan, China, and Russia have a big potential, which is yet to be explored by the tea producers in Kenya.

12. Pricing Structures.The current market price for processed tea is Ksh 280/= per kilogram in the local market and Ksh 220/= for export and the sponsors will retain and even improve on these price levels. The real value of this price levels is heavily dependent on the strength of Kenya shilling against the US dollar. Tea is auctioned in Mombasa in US Dollar. It should be noted that that prices of tea are normally set in reference to the prevailing levels at the Tea auctions which varies every week. Tet Tea Factory Company Limited will negotiate regularly with consumers for dynamic and progressive changes in price. The negotiated price would be much improved from auction prices .This is possible on selling direct to the consumer on a forward contract. The company will therefore avoid the current long chain of middlemen as much as is practicable.

13. Distribution: The black tea will be distributed through the following Outlets:i) Retailers:This will be to the supermarket chains both locally or internationally: This will gather for the bulk of the value added Teas. The supermarket chains are currently spreading their influences across the country and their direct collaboration with producers is being developed. This is an area the Tet Tea Factory Company Limited would like to maximize on.ii) Directly sales to consumersThis is locally referred to as factory gate sales which will ensure speedy delivery to individual consumers. Tet Tea factory company limited will establish a sale distribution system locally.. (iii) Mombasa Auction:

This would take substantial volume of loose teas from Tet Tea factory Company Limited.14. Location of the project and attendant utilities:(i)Location: The project will be located in Konoin district in Bomet County. The area has good soil, adequate rainfall, and good supply of labor force that has supported tea growing.

(ii)The site description:

(a) The land parcel for the factory site has been identified, surveyed and the process of acquisition is complete. Application for transfer are attached as appendix 17).(b)The parcel of land is fronted by a permanent water spring that will be the source of sufficient water to the facility.(c)It is situated within two hundred meter distance from a developed market centre supplied with water, 3-phase electric power supply.

(d)An all- weather trunk road passes at the edge of the factory site and has been planned and committed by the government of Kenya for tarmacking soon. The existing tarmac road is only 8 kilometers from the proposed factory site. (e)The Kimulot Market next to the factory site is currently a divisional administration centre and its security detail is only 50m from the proposed factory gate. iii) Source of raw materialsSpecific quality of green tea leaves will be purchased from the small holder tea farmers in the catchment area of the factory (not more than 10 Kilometers from the factory).These are the sponsors and also shareholders of Tet Tea Factory Company Limited. These growers have already applied to supply green leaf to Tet tea factory as soon as it starts manufacture. Tet tea factory has already opened a register for those applications. Their total area under Tea is 980.3 acres which is well above the mandatory 512.5 acres.(250h.a). However, a supply contract agreement will be entered into between each farmer and Tet tea factory Company limited. There will also be an affirmed affidavit by the farmer confirming commitment to support Tet Tea Factory Company Limited.

These will only be affected once Tea Board of Kenya grants a manufacturing license to Tet Tea Factory Company limited. (iv) Growers/applicants register:Serial

No.NameAcresID No.Title Deed Registration

numbers

1Musa Kiplangat Rotich1001760232Ker/Kim/152 Ker/Kim/1Ker/Kim/1281 Ker/Chept/1987

2Cherogony Investments96-Ker//Kim/ 202,

Ker/Kim/203 & Ker/Kim/204

3Bornice Chelangat Soi803849531Ker/Kim/50, 38, 707

Ker/Kim/708, 1646

4Esther Chepkoech Soi1503846967Ker/Kim321, Ker/Kim/1, Ker/Kim/324

5Julius C Ngeno500737065Ker/Kim/146

Ker/Kim/145

6Joseph K Sang503848249Ker/Kim/658

7Sammy Chepkwony5012915456Ker/Kim/249

8Annah C Chepkwony203848650Ker/Kim/208

9Stephen A Nyigei303858035Ker/Kim/339

10Peter C Serem300866058Ker/Kim/1102, Ker/Kim/1103

11Paul Kipkirui Keter307062158Ker/Kim/263

12Misiri Kiprono Ruto158660291Ker/Kim/114

13Jeremiah Kipsang Langat203876920Ker/Kim/133, 137, 009

14Christopher Langat303848253Ker/Kim/1005

15Zephania Kirui150473938

16Jonah Rono10-Ker/Kim/356

17Samuel Soi30866319Ker/Kim/753

18Jonathan Mutai33861499Ker/Kim/966

19Sofia Koech133951363Ker/Kim/372

20DAVID Kimutai Arap Soi68109025Ker/Kim/331

21Elijah C Koskei60322521Ker/Kim/303

22Peter Keinoi70851101Ker/Kim/859

23Ezekiel Kipkoech Siele60739162Ker/Kim/627

24James K Siele163851587Ker/Kim/ 466, 121

25Charles Kipkurgat A Too153876939Ker/Kim/4

26DAVID Kitur Maritim183848540Ker/Kim/76, 79

27Simion Kitur83850051Ker/Kim/879

28Pascalia Chepkemoi Sang1012922146Ker/Kim/715

29David Kiprotich Arap Chpekulul57482116Ker/Kim/49

30Kenneth Mutai322374907Ker/Kim/667

31Richard Korir59434308Ker/Kim/ 1186

32Rusi C Langat111760103Ker/Kim/73, 736, 23

33Daniel Barchok73849312Ker/Kim/837

34John Roberto Chepkwony51773422Ker/Kim/154

35Samuel K Rono2.51760372Ker/Kim/1156, 972

36Vincent Langat920245964Ker/Kim/239

37Kipkoskei Arap Maritim60322565Ker/Kim/510

38Joseph Yegon10604147Ker/Kim/24

39Joseph Kibet Rotich10.50868912Ker/Kim/504

40 Daniel Kipchirchir Ngeno12.323848835Ker/Kim/122

41Stanley Kiptonui61761313Ker/Kim/113

42Joel Kimalel Cheruiyot53848182Ker/Kim/742

43Benson Kirui57374061Ker/Kim/81

TOTAL980.32

15. Energy requirement:i)source of heat Energy for drying.(a) Fuel wood: The factory will require reliable supply of wood fuel for its tea drying process. Tea industry in Kenya relies predominantly on wood fuel from eucalyptus trees planted strategically near factories. The ratio in acreage of tea to wood fuel is usually 4:1. Or Every 100 Kgs. of made tea uses an average of 0.40cubic meter of firewood. The suppliers of green leaf to Tet tea factory have already provided for this requirement in their farms and some are ready for use once the factory starts operating. Tet Tea factory will continue to encourage farmers especially those suppliers of tea to also raise eucalyptus trees for sale to the factory by keeping a constant supply of seedlings in the factory Nurseries for planting by the farmers This is currently the cheapest means of drying tea. (b). Other sources: However, Tet Tea Factory company limited will progressively explore alternative sources of heat energy, in line with innovation in the energy sec rtor, that are convenient and cost effective. In particular, use of briquettes made from agricultural wastes e.g. bagasse or tea waste will be evaluated.

Furnace oil, coal or electricity are not cost effective but a standby facility will be installed for use in dare emergency only. .ii) Energy source for machinery and lighting needs: The prime mover for machines will be electric energy sourced from Kenya Power and Lighting Company. However, there will be a standby generator to gather for unexpected power interruptions.16. Tea Processing.(a) Harvesting and Plucking in the Farms:

The final quality of tea in a cup depends on the genetic composition of the leaf, the agronomic practices, plucking standards and the handling of the plucked leaf. The Plucking of tea is meticulously done to ensure that only the upper two leaves and a bud are picked. Tet Tea Factory Company limited will provide Extension services to the farmers; ensure the farmer get access to information and technological advancement to ensure good

Agricultural practice is upheld at all times.(b) Factory Production:Receiving of green leaf: Quality assurance of green leaf is done at the receiving bay in the factory by a process called leaf count. The inspection of green leaf ensures that only the best quality of leaf will be manufactured and poor quality leaf is rejected.

The green leaf is also weighed and recorded. Tet Tea Factory Company Limited will invest in computerized digital scales linked to various terminals users.(c) Withering stage:The green leaf once in the factory is spread on to large troughs by the green leaf labor. The large troughs are fitted with reversible low pressure fans to assist in removal of moisture from the leaf. The target is to remain with a moisture content of 65-70%. This is referred to as Physical wither. The leaf stays in withering troughs for a period of between 12-16 hrs to allow for the necessary biochemical reaction in the leaf. This is referred to as chemical withering. Tet Tea Factory Company limited plans to invest in withering troughs complete with motorized fans. These troughs are available and ready for installation by our strategic as soon as a manufacturing license is issued. (a) Maceration:Maceration process is the stage where semi permeable membrane in the leaf is ruptured and distorted allowing the juice and the sap to be mixed in the presence of oxygen. This commences the chemical changes necessary for black tea production through the process of oxidation. The green leaf color changes to golden brown. There are many systems of maceration of green leaf depending on the targeted end product. Tet Tea Factory limited plans to initially invest in one line of modern CTC macerating machines. This will be followed later with other types of machines. These CTC machines are readily available ex stock from our strategic partner in Kericho. (b) Fermentation Stage:The fermentation is the most distinguishing quality factor in black tea processing. It is at this stage that most important properties of tea qualities of tea are produced. The leaf is kept here for about 90-120 minutes under strict temperature controls between 18-26 0 C. At the end of this duration, the fermented leaf attains a bright copper brown color. The Process demands machinery that allow free flow and abundant oxygen to reach every particle of macerated leaf in the allowed fermenting time. There are several types of fermenting equipment but the most preferred for consistent quality is Continues Fermenting System. Tet Tea Company plans to install a modern Continuous Fermenting System commonly referred to as Intelligent Continuous Fermenting System.

(c) Drying process:This is the stage where heat energy is used to dry Tea with a moisture content of 65% reduced to below 3%.Drying stops fermentation, preserves tea quality and reduces its mass among many other chemical changes. Drying process takes an average of 20 minutes.Heat energy is derived from burning firewood in the Boiler furnace in the boiler house. Heat energy boils water in the boiler drum and water boils to generate steam which is channeled through steam pipes and fittings into the drier radiators. The dryer fans draw air from the atmosphere through the radiators where the air is heated and blown through the perforated bed of the dryer and into contact with fermented leaf. The steam in the radiator looses heat energy and turns back to condensate. The condensate returns back to the Boiler drum and the circle begins again.

There are several system of drying available in the market but Tet Tea Factory Limited have picked one for installation from the market leader in drying machinery fabrication.

This has been picked for efficiency and the Quality of the product it produces.

Tet Tea Factory limited has also identified an efficient Boiler for importation and installation. Firewood will be sourced from among the farmers living close to the factory location and Tet Tea factory limited has plans to supplement or diversify use of firewood in drying into other alternative source of energy like briquettes made from farm waste. (g) Sorting stage

Tea sorting is a function of fiber/stalk and black tea separation and separation of particle sizes into grades. The first stage of sorting is the removal of caseharden chunks of tea from the bulk of Tea from the Dryer discharge then followed immediately by separation of stalk/Fiber from black Tea by a Pre-sorter. This involves conveying EX-dryer Tea and passing below electro statically charged rotating rollers. Separated black tea, referred to as primary grades, is conveyed into a fibro screen with layers of different sieves with various holes sizes. The fibro screen separates granular sizes into grades as below and their percentages:

Broken Pekoes (BP 1)

10 %

Pekoe Fannings (PF1)

60 %

Pekoe Dust (PD)

20 %

Dust 1 (D)

5 %Primary grades are all conveyed to the storage bins.The fibrous teas are conveyed to a sorter that separates size particles into secondary grades. These are: Fannings (F 1)

2 %

Dust (D)

2 %

Broken Mixed Fiber (BMF) 1 %

All sorting machines are readily available in Kericho for immediate purchase and installation by Tet Tea Factory Company Limited.(d) Storage and Packing:The biggest percentage of tea will be packed in large consignment for sale and Export .It is therefore necessary to store made tea in large quantities before packing.

Properly designed bins will be installed in Tet TEA factory for storing particularly the primary grades which constitute over 95% of the total production.Secondary grades of tea are normally floor bulked before packing for the market.Not:. Each stage of manufacture has well set quality parameters, controls and records kept for the purpose of quality assurance and traceability of the product. Tet Tea factory plans to invest in modern quality assurance equipment relevant to each stage of manufacture.17. Profitability and Financial Evaluationa) Analysis of profit and loss forecast: A six year forecast has been tabulated and shows that progressive profits are realized from the project from the first year of operation.

Details of the projection are tabulated in appendix 8 attached.b) Cash flow Analysis: Proceeds from sales are realized within three months of each production and this will well sustain the cash requirement for the project. The cash requirement will only be a challenge in the first three months of operations and this will be provided for in the initial working capital. (see appendix 10).

c) A Balance sheet See Appendix 9.d) Others: Appendices 1 to 16 contain all other necessary portraits of the proposed project. e) Working capital: It is anticipated that once the factory is commissioned cash remittance from tea sales will take three months to be realized. A working capital of kshs.87 million has been set aside for operations during that period.18. Economic Evaluation

i) The proposed unit will create direct permanent employment for at least 75 individual and over 30 casuals. This has multiplying effects ii) Tet Tea Factory Company Limited has policy of identifying and partnering with the local community in the development of facilities such as health, education environment etc. that would improve the welfare of the community.

iii) The newly established counties will benefit from this investment as a way of wealth creation to the county not withstanding revenue from taxesiv) Tet Tea Factory Company Limited plans to attract and encourage other service providers e.g. banks, communication companies, etc. to bring their services close to the factory vicinityv) Tet tea Factory Company limited intends to use her influence for the development of infrastructure while remitting proceeds from cess and other taxes for the good of the country and the local community.vi) Tet Tea factory limited would like to develop a win win opportunities in the community it is operating in.19. Sensitivity Indicators and their mitigation.The sensitivity analysis has been performed to assess the viability of Tet Tea Factory Co. Ltd. under unforeseeable changes and the current assumptions. The sensibility of issues below can be as low as 5% change and calls for stringent controls to be set in place.(i) Decrease in tea prices realizable in the market: This comes as a result of drop in quality or worldwide market forces of demand and supply. As mentioned earlier Tet Tea factory will set up systems that would guarantee quality at all times. TTFCL also intends to put up forward market intelligence and contracts that would guarantee a premium sale price return over her own original estimates and the prevailing Mombasa Auction price level. (ii) Increase in the cost of production: stringent management and system controls with alarm indicators will be set up in all areas of operations. (iii) Decrease in factory green leaf throughput: This is a volume based indicator and any downward trend in the supply of green leaf will negatively impact on use of assets and hence unfavorable condition on dilution of fixed costs. Tet Tea Factory Company limited will ensure consistent supply of raw materials and high level of efficiency in machinery maintenance and human resource management. It should also be that value addition is part of Tet factorys strategy and this is expected to bring in sales premium even with low factory throughput. (iv) Fluctuations in Exchange rates: Apart from local sales, all teas are sold in foreign currencies and predominantly in U.S.Dollar. A strong Kenya shillings will Impact negatively on Export sales whereas a weak shilling will bring more cash volumes into the business.The above has sensitivity as at 5% change but adverse effect will be more profound at 10% negative change. The Directors of Tet Tea factory company limited fully understand these challenges and have program in place to success fully face up to these challenges.Details of Tet Tea Factory directors.Mr. Metet Kipkoech Kenneth, 31, Chairman of the Board of Directors, Tet Tea Co. Ltd.

He is the anchor management lead operations coordinator of the nucleus tea farm of 80 acres to subscribe its tea green leaf production to the proposed Tet Tea Factory Complex. Kenneth is a graduate of Maseno University and did B.Sc. in Horticulture. Thereafter, he worked with M/S Sulmac, a horticulture firm in Naivasha in Kenya before venturing in to private agri-business

Mr. Didar S Hunjan, 65, Vice-Chairman of the Company

Didar is a Mechanical Engineer by profession. He has over 30 years of experience in tea having worked with African Highlands Produce Company Ltd. (now James Finlay (K) Ltd.) in their tea plantations and factories. He has been mainly involved in the research and development of new varieties of tea machineries. He is all round trained on tea production and quality control

Mrs. Bornice Soi, 54She is an astute educationist and a devoted farmer. She is also an established and respected business lady based in Kericho with substantial interests in real estate and agriculture

Mr. Kirpal S Hunjan, 64

Mr. K S Hunjan is a Mechanical Engineer and has been involved majorly in the design and fabrication of tea and coffee machinery but more widely on tea

Mr. Robert Cheruiyot Metet, 31

Robert is a Quantity Surveyor/Management by profession and will be an asset in the key elements of the design and contract management of the project

Mr. Inderjit S Hunjan, 59

Inderjit is a British citizen and a Mechanical Engineer by profession. He has gained substantial experience in tea machineries relating to the design, fabrication, quality control and installation.TO

The managing Director ,

Tea Board of Kenya,

Tea Board House,

Naivasha Road-off Ngong Road,

P.O.Box 20064-00200,

NAIROBI -KENYA.

12th March 2011.Dear Madam, REF: Application for tea manufacturing license for Tet tea factory.Refer is made to your TBK/TSD/CONF2 dated 10th September 2009 on the above application for a license.

Enclosed, please find:-

(a) Report on Environmental Impact Assessment as done by Greanei consultants.(b) Copies of letters of commitment by the growers supporting the project.

(c) Letter of commitment by Tealand Engineering (2001) limited to assist in the Funding of the project together with other share holders.

(d) A Tea Board of Kenya application Form C duly completed.

(e) A complete feasibility Study on the viability of the project.

We look forward to your earliest and favorable response.Thank you.

Yours sincerely.

Chairman, Tet Tea Factory Company Limited.

Kenneth K. Metet

15.2. Standard Black Tea Processing Flow Chart:

M.C. is moisture content.

PF is Pekoe Fannings.

PD is Pekoe Dust.

SHAPE \* MERGEFORMAT

General Manager (1)

Factory unit manager 1

Factory

Accountant (1)

Personnel & Admin . Manager 1

Production assistants(3)

Factory

Engineer (1)

Sales

Clerk (1)

Store

Clerk (1)

Data Entry Clerk (4)

Technical Assistant (3)

Section

Heads (10)

Transport

Assistant (1)

Personnel

Assistant (1)

Purchasing

Clerk (1)

G e n e r a l F a c t o r y W o r k f o r c e (43)

1`

WITHERING & COLLECTING

68

70% M.C

GREEN LEAF RECEPTION

85% Good Quality

15

% Acceptable

Leaf

CUTTING

V Profile

Roller Changing

FERMENTATION

Time

Temperature

DRYING

2.5

3.5

% M.

C

Temperature

SORTATION

Fibre Extraction

True Grades

PACKING

Packing Wts

PF1/PD in

Paper sacks

QA AND DESPATCH

M.C

Density Checks

Documentation

SAMPLING AND SALE

Sampling Procedures

Warehousing

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