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1、Energy & UtilitiesNovember, 2001Business Consulting Providing Management Consulting Services to the Power Industry in China 2001 Andersen. All rights reserved.1AgendaSection I.The Situation in China and the Challlenges for Power Companies II.The Opportunities for ImprovementII.Implementing BPR and E
2、RP 2001 Andersen. All rights reserved.2I.The Situation in China and the Challlenges for Power Companies 2001 Andersen. All rights reserved.3The major stakeholders evident in other power markets are yet to fully develop in ChinaUtilityGovernmentCustomersEmployeesEnvironmentShareholdersCaptive custome
3、rs cannot choose their supplier of powerLow expectations of serviceLow consumption per capitaEmployees are captive with little choice to move between employersStaff Turnover 1% in most companiesThe PRC government is yet to enforce major environmental regulations as are evident in most other deregula
4、ted marketsFew power companies are fully privatisedNo provincial utilities privatisedPlans for reform have been spoken of, but no concrete decision yet madeRegulatorsEffective “self regulation” through SPCCNo independent regulatory body 2001 Andersen. All rights reserved.4From our work with a number
5、 of provincial utilities, we observe a number of areas where opportunities exist to significantly improve operating performanceInability to accurately account for different functional segments (Generation,Transmission, Distribution and Retail)Lack of quality financial information generally and inade
6、quate management reportingManagement to technical KPIs and some financial ones, but a broad group of performance measures not usedExcessive duplication of effort between business units (eg. accounting, purchasing conducted at multiple locations)Duplication of data entry through lack of integration o
7、f technologyExcessive manual processing of major transactional tasks, and some areas completely lacking any form of technology (ie. paper-based records)Non-standard processes (driven by differing uses of technology within the same organisation)Remuneration based on standard national salary scales im
8、pacting ability to reward employees based on performance 2001 Andersen. All rights reserved.5III. The Opportunities for Improvement 2001 Andersen. All rights reserved.6What is a “World Class” or “Best Practice” utility?The transition to becoming a “Best Practice” power company is an “evolution” driv
9、en, in most cases, by the deregulation of the market and the introduction of competitionThe evolution starts with operational excellence, and develops into innovation and a customer focus, to a focus on creating value from multiple business activitiesOperational ExcellenceFocus on Shareholder ValueI
10、nnovation and CustomerFocusObligation to ServeMonopolyCompetitiveSTATE OF DEREGULATIONMANAGEMENT FOCUS 2001 Andersen. All rights reserved.7From.To.Functional ManagementManage business functions as defined by regulatory accounting categories to comply with authorised expense budgets.Process Managemen
11、tDevelop and manage business processes linked directly to the utilitys outputs to focus resource allocation priorities, improve quality, and control cost.Budget ControlNegotiate costs with government and then conrol expenditures to achieve authorised earnings.Strategic Resource AllocationAplly capit
12、al and operational, and non-financial resources to achieve competitive advantage consistent with strategic objectives.There are a number of shifts in general management practices required to meet “Best Practice”Booking financial performance or contribution to governmentAchieve earnings targets as re
13、quired by government revenue contribution needs.Creating Shareholder ValueIncrease cash flow, reduce risk, and retain or pay out cash based on available investment opportunities. 2001 Andersen. All rights reserved.8There are a number of shifts in general management practices required to meet “Best P
14、ractice”Regulatory AccountingCollect and report information primarily to comply with regulatory controls and government accounting standards. Management ReportingCollect analyse and report information necessary to support management decision making and performance tracking.Monopoly DevelopmentDevelo
15、p geographic territory by promoting load growth.Business DevelopmentDevelop profitable new markets or services that leverage of existing business assets and core competencies.Employee administrationEncourage comparability of compensation among employees, maximise company experience through seniority
16、, and avoid labour relations-based service interruptions.Human resources developmentDevelop and maintain a focused, agile and effective workforce operating in a culture that supports continued competitiveness.From.To. 2001 Andersen. All rights reserved.9Below we have provided a high-level summary of Best Practices that Andersen sees employed in leading utilitiesBest practice utilities are:Focussing on Asset Management practices that optimize capital and operational expenditure by better understa
