Amortization

Amortization is based on the French word, “amortir”, which means “to repay”. In a plant operation context, amortization refers to using the revenue generated by operating a new pump or piece of equipment to pay for the cost of investing in the new item. Savings can also be used for amortization, as when an old pump is replaced by a more energy-efficient model. The time it takes to recoup the investment costs is called the “amortization period”. Plant operators use amortization to assess how long it will take for an investment to turn a profit. The amortization period is heavily dependent on the profitability and thus lifecycle costs of a piece of equipment.