What are Capital Projects?

In this episode, Ricardo explains what the differences between capital projects, also known as Capex (Capital expenditure) projects, and traditional projects, which are focused on a business operation, also known with Opex (Operational expenditure) projects.

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Episode transcript

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Hello, everyone. Welcome to the five minutes BM podcast today. I like to talk about Capital Projects a lot of people did not understand what is a Capital project. Basically a capital project is a long term investment. The most visible way to explain what is a Capital project. It's like when we can see a construction, a big road, a big airport, a nuclear power plant. This are very capital intensive projects.

And that I'm not saying only, you know, the money I'm saying money, labor, complexity, and they required a very solid understanding of all the interfaces. They are related to the capital expenditures of what we call CapEx. So if we go back to an organism, basically an organization has to kind of expenditures. The first one is what we call OPEX or operational expenditures.

And the other one is CapEx the capital expenditures. The OPEX are all costs related to operation related to our routine process. To the way you currently make money in the organization. CapEx is everything related to add value to your operations each to really implement a new generation of energy that will supply energy for a lower cost or at the better stability.

For example, So all this capital Projects. They require a very solid project management because you may ask me Ricardo is it completely different managing this kind of project from a normal project? I would say no. If you go back to the deep root of this two Projects, you will find basically dis same aspects. You need to clear understand, and the work that must be done, you need to clear understand which kind of resources do you need for that project.

You need to understand all the stakeholders, what is the interference and the interest of each stakeholder? So this is basically the normal. So what makes this project so challenging? Its because the level of complexity of each of these elements is show big that it changes completely the landscape. Imagine when you were doing a power plant, a hydroelectrical power, but, and you plan to float a big piece of land to make the reservoir.

So imagine people that are living in this, so you need to manage the community and you need to manage the agents'. You need to manage the shareholders. So everything. So this is what makes this Projects very complex. The second aspect that makes this, Projects also a very complex that they are long term. So you need to be very good on forecasting things because if they are longterm, they are much more vulnerable to environmental factors.

Like for example, exchange rates, like for example, government regulation, the are much more vulnerable to this kind of environment. So this is what you, and they require a lot of attention. And on the top of that, they expend many times they are Mac Projects. I'm talking about spending billions of us dollars. They required thousands of employees. So it's very, very important. And on my final, like I said, a lot about roads, power plants, but you may have an it project that could be a Capital project let's suppose that you are implementing an ERP that will change completely the landscape of your organization that will take years.

So does, is it or a capital expenditures? So its a project that will wrap up Y a notable amount of money and labor that is a very long term oriented. So this is also a Capital project. So next time when someone, we can talk to you about the Capitol project now, you know, what do they mean by that? Remember capital projects related to capital expenditures related to longterm investment.

I hope you enjoyed this podcast. It was, I hope it was helpful to you and see you next week with another five minutes BM Podcast.

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