Phương pháp đo lường hiệu suất chiến lược trong các công ty điện lực của EVN: Phương pháp tiếp cận điểm chuẩn

Nội dung text: Phương pháp đo lường hiệu suất chiến lược trong các công ty điện lực của EVN: Phương pháp tiếp cận điểm chuẩn

1. STRATEGIC PERFORMANCE MEASUREMENT IN EVN’S POWER COMPANIES: BENCHMARKING APPROACH PHƯƠNG PHÁP ĐO LƯỜNG HIỆU SUẤT CHIẾN LƯỢC TRONG CÁC CÔNG TY ĐIỆN LỰC CỦA EVN: PHƯƠNG PHÁP TIẾP CẬN ĐIỂM CHUẨN Do Thi Binh, Thuongmai University Nguyen Thi Nguyen Hong, Thuongmai University Abstract There is a growing concern regarding the ability of Vietnam Electricity to strategically finance the large investment requirements that are required to sustain the sector’s ability to meet growing demand. With this background, the paper aimed to developing comprehensive strategic performance measurement by benchmarking analysis of 5 power corporations of EVN. The strategic performance was measured based on operational and financial indicators. International standards gathered from International Energy Agency were used for benchmarking analysis to meet to objective of the research. Key words: Strategic performance measurement, benchmarking, strategic management, EVN’s power companies Tóm tắt: Ngày càng có nhiều mối quan tâm về khả năng của Tập đoàn Điện lực Việt Nam đối với vấn đề cấp vốn một cách chiến lược cho yêu cầu đầu tư mở rộng cần thiết để duy trì khả năng đáp ứng nhu cầu ngày càng tăng của ngành. Trong bối cảnh này, bàiviết nhằm mục đích phát triển phương pháp đo lường hiệu suất chiến lược toàn diệnbằng cách phân tích điểm chuẩn của 5 công ty điện lực của EVN. Hiệu suất chiến lược được đánh giá dựa trên các chỉ số hoạt động và tài chính. Các tiêu chuẩn quốc tế thu thập được từ Cơ quan Năng lượng Quốc tế được sử dụng để phân tích điểm chuẩn nhằm đạt được mục tiêu nghiên cứu. Từ khóa: Đo lường hiệu suất chiến lược, đo điểm chuẩn, quản lý chiến lược, các công ty điện của EVN 1. Introduction The relationship between performance measurement and strategy has been the subject of several researches. Strategic performance measurement is relatively complex and difficult process, which is now undergoing significant changes. Although measuring performancehas been studied for a long time, it still confounds.Dixon et al. (1990) suggest that inappropriate performance measurement is a barrier to organisational development since measurement provides the link between strategies and actions. Inappropriate measures lead to actions incongruent with strategies. Appropriate measures should provide and strengthen this link, and both lead to attainment of strategic goals and impact on the goals and strategies needed to achieve them. For many organizations strategic performance measurement produces a real mess. 48
2. EVN Corporate EVN NPT EPTC NLDC PCs NPC Multi- Genco1 CPC purpose Genco2 SPC HPPs Genco3 HCM End-users HN - Operation - Operation - Operation - Maintenance - Maintenance - Maintenance Operation - Investment - Investment - Investment Maintenance new new power new transmission plants distribution grid grid Organiztional structure Money flow Figure 1. EVN’s power business structure (EVN, 2016) EVN stands for Vietnam Electricity. EVN and its subsidiaries are the key players in the power sector. EVN is the single wholesale power purchaser from generators. They control about 60% of installed the generating capacity. EVN is not only involved in generation, transmission and distribution, but also in national dispatch, settlement processes, consulting, non-core activities, etc as Figure 1. The three generation companies (Genco) hold most of the capacity, but a number of multiple purpose hydro plants (which provide both power and irrigation) are owned centrally. TheNational Power Transmission Corporation (NPT) owns and operates the transmission network (500kV and 220kV). The ownership and operation of the distribution (medium and low voltage) network rests with five Power Companies (PCs), which are Hanoi PC, Hochiminh PC, Northern PC, Southern PC and Central PC. There are many positive aspects to the Vietnam power sector. Access to electricity is almost universal with over 97 percent of households connected nationwide and over 99 percent in urban areas. Power losses in transmission and distribution are at or close to best practice international standards. All consumers are billed regularly and collection rates are almost 100 percent. However, the Vietnam power sector ingeneral and Vietnam power distribution sector also face significant challenges over the next five to ten years. Power demand is increasing rapidly at almost twice the pace of gross domestic product (GDP). This increasing demand necessitates significant investment in not only generation, but also in transmission, and distribution.The inability to cope with the increase demand in addition to other legacy issues deteriorates the performance of EVN, making the levels of key indicators not high enough to acquire additional financing. Moreover, the public sector is unlikely to be able to increase its investment in the power sector given the general thrust of government policy that requires companies to confine their activities to their core areas of business. Quality of power supply is not as good as it should be. Unless stopped, this will lead to an unsustainable situation. With this background, this paper aims to develop 49
3. comprehensive strategic performance measurement frombenchmarking approachof EVN’s 5PCs in compare to international standardsgathered from International Energy Agency. 2. Literature review 2.1. Strategic Performance Measurement Strategic Performance Measurement (SPM) is being used in a wide number of organizations to support performance planning, measurement, and control. According to the management control literature, the uses of SPM may have a significant influence in their outcomes (Chenhall, 2005). SPM is designed to present managers with financial and nonfinancial measures covering different perspectives which, in combination, provide a way of translating strategy into a coherent set of performance measures (Chenhall, 2005). SPM typically provide information on financial and nonfinancial performance measures in an effort to both report on past performance and help manager’s influence future performance. Financial measures assess the short-term impact of managerial decisions in areas such as revenue growth, asset utilization, and cash flows (Kaplan, 2001; Rappaport, 2005), while nonfinancial measures capture variables that are likely to influence future financial performance, such as customer service and quality products. SPM is expected to help organizations achieve and maintain strategic alignment in their decisions, resource allocations and activities, in order to obtain results and increase shareholder value both in times of stability and during times of change in strategic direction. First proposed by Kaplan and Norton, the most popular form of SPM is the Balanced Scorecard (Kaplan, Norton, 1992). Recently, benchmarking and the integration of balanced scorecard and benchmarking are also used in SPM. 2.2. Benchmarking One of the modern approaches for determining appropriate measures is benchmarking. From the 1980s onward, benchmarking has been applied in many companies in a more or less formalized form. Nowadays, benchmarking is a widely spread management tool (Harrington, 1995). The formal form of benchmarking was first used in production companies, so it has been closely connected with production, development and quality. More narrowly defined, benchmarking is a systematic and continuous process involving the comparison of characteristics of the best products, services and processes in order to improve business performance (Harrington, 1995; Dahlgard et al., 1998). According to Prasnikar et al. (2005), “Benchmarking is a process of creating business knowledge by comparing and analyzing business information about other companies with the goal of improving the quality of decisionmaking.” It seems this definition encompasses all the objectives and activities that are normally performed within the framework of benchmarking. Although the content of available resources on benchmarking is diverse, their approach is primarily product or process benchmarking and they focus only on the technical and quantitative aspects of benchmarking. However, as Furey (1987), Goldwasser (1995), Kaplan and Norton (1992) and Talluri and Vazacopoulos (1998) 50
4. argued, effective benchmarking is more than comparative analysis of quantitative measures from one company to another. Due to lack of integrated strategy, product or process benchmarking generally yields limited results. The value of benchmarking is most effectively utilized when it is integrated into organizational strategy and incorporated into all performance improvement efforts. 3. Research methodology Inheriting previous SPM studies and learning from Vietnam power context, this paper implemented a strategic performance measurement from benchmarking approach of operational and financial indicators. Both operational and financial indicators help utilities measure and benchmarkEVNPCs’strategic performance over time by identifying any worrying operationalor financial trends within the utility, and by comparing performance with international standards. Benchmarking analysis in this paper based on international standards gathered from International Energy Agency. It is a tool that helps improve the quality of service and lift operational and financial performance of the utilities; this is the main objective of this paper. Operational Indicators Table 1: Operational Indicators and benchmarks KPIs Formula Acceptable range Assets to Energy ratio (USD/MWh) Total Assets/Energy Wheeled 50-150 Energy Losses (%) Total Losses/ Energy Wheeled 700 Source: International Energy Agency, 2016 The indicators used to evaluate the operational performance of EVN’s GENCOs have been selected so as to capture the main activities in the utilities and be able to establish acceptably direct links with issues or improvement in their strategic performance as in Table 1. 51
5. Financial Indicators There are many financial indicators which can be used to compare and evaluate the performance of power utilities including power corporations. However, there is a trade-off between how detailed the indicator is and the availability of information to calculate it. This paper looked at ratios that are relatively simpler to estimate and benchmark for PCs as following. Table 2: Financial Indicators and benchmarks KPIs Formula Acceptable range - Current ratio = Current assets/current liabilities > 1 - Net Operating Margin = Net profit/ Total revenue > 5 - Working ratio with = (OperatingExpenses + Depreciation < 100% depreciation and net interest +Net Finance costs) / Total revenue Source: International Energy Agency, 2016 Data Selection This paper used samples of 5PCs which belong to EVN. Table 3 presented the descriptive statistics for this paper’s dataset. Table 3: Information about EVNPCs for survey Owner Company Information Period 1 EVN Hanoi PC Financial Statements 2012-2016 2 EVN Hochiminh PC Financial Statements 2012-2016 3 EVN Northern PC Financial Statements 2012-2016 4 EVN Southern PC Financial Statements 2012-2016 5 EVN Central PC Financial Statements 2012-2016 4. Research results 4.1. Operational Performance Performance of power distribution companies was assessed by benchmarking KPIs observed in each of the EVN PCs against international reference levels obtained from International Energy Agency. PCs are very successful in collecting full payment from customers on a timely basis and in alignment with their international peers (collection performance over 99.5 percent in all cases except Central PC where it was 99.15 percent; still a good performance level). The PCs’average collection period is very short, around 10 days, because they invoice 3 times a month to industrial customers. Regarding PCs’ operations, interruption statistics, the SAIDI and SAIFI, are among the upper tier (worst performing) distribution companies when compared to the peer group. Nonetheless, it is difficult to assess whether these interruptions are actually caused by 52
6. underperformance of the PCs or due to shortfalls of the system. The SAIDI and SAIFI are high and there is not enough historic data to analyze the evolution over the years except for 2014–2015, within which the frequency and duration of customer interruptions slightly worsened. Table 4. Benchmark Operational Performance 2015 EVNPC’s Indicator Range of Benchmark Comment Performance Assets to Energy ratio 28.06–64.58 54.33– Generally below the minimum of (US$/MWh) 416.37 the benchmark range. Low investments in assets in relation to the energy wheeled. Aggregated technology, 5.56–8.04 4.99–12.52 Within the benchmark. Good loss comm, and collection loss levels. (%) Collection efficiency (%) 99.15–100.15 98.5–99.5 Excellent collection performance SAIFI (#) 16.5–53.0 0.69–15 In the worst-performing tier for the benchmark. Considerable room for improvement, target SAIFI = 10 or lower. SAIDI (minutes) 2,988–9,797 17.08–432 Very far from the benchmark levels. Large room for improvement. Need to distinguish sources of interruptions. OPEX (US$)/MWh 2.89–4.67 4.99–29.21 Low OPEX, below the benchmark minimum level. Linked to low labor costs but possibly also low budgets available for spare parts, maintenance, and quality programs. Customers/Employee 250–289 557–2,868 Out of the benchmark range. Very low ratio. Linked to potential overstaffing, the low automation level, and low outsourcing rate. Source: Own elaboration The SAIFI in the Northern PC is more than double that of the other 4 Vietnamese distribution companies. According to the experience of the consultant in Vietnam, the maintenance actions carried out are considered adequate in most of the cases, but the availability of spare parts is limited mainly due to the age of most assets, thus preventing timely repairs and/or replacement of equipment. The performance of the distribution companies in terms of system interruptions (both SAIDI and SAIFI) shows considerable scope for improvement. It may be that maintenance spending, which is well below international benchmarks, is too low. Increases in maintenance spending, for example, on increased holding of spare parts or enhanced engineering skills, could reduce the SAIFI 53
7. and SAIDI in the future. However, it is not possible to reach a definitive judgment at this stage. EVN has strong engineering capabilities and the capacity to reach appropriate conclusions and increase spending if necessary in the future. The financial impact will be small as maintenance spending is a small part of the costs of the power sector. 4.2. Financial Performance Financial performance is very similar across the PCs due to EVN’s management of the PCs through its setting of bulk electricity tariffs. The PCs’ report of larger net losses for 2011 related to the wider financial difficulties throughout the EVN group than to specific difficulties within the PCs. Table 5. Financial Indicators - PCs for 2015 and 2016 Indicator 2015 Range 2016 Range Acceptable range Accounts receivable as number of days 12–23 11–17 30–60 revenue Accounts payable as number of days 38–98 36–93 40–120 operating expenses Working ratio 86–95% 99–100% 60–80% Net operating margin 2.1–4.8% 0–2% >5% Current ratio 65–95% 75–105% >100% ROE (Return on Equity) 4,2–10% 0–3% 5–20% Debt:Equity 23:77–44:66 20:80–34:74 1.25 SFR (Self-financing Ratio) 8–120 % 37–125 % >25% Source: Own elaboration. A portion of the losses that originated in the EVN parent company in 2011 may have been assigned to the PCs. As a result of the existing mechanism for setting bulk tariffs, the financial performance of the PCs is not independent of EVN and its other member companies. All five were marginally profitable in 2015, in line with improved performance in EVN as a whole, with operating margins between 2.1 percent (Central) and 4.8 percent (Hanoi). The return on equity varied from 4 percent and 10 percent. Financial ratios such as the SFR and DSCR are stretched in some cases, but overall the companies were at acceptable levels of performance in 2015. Profitability fell again in 2016 due to inadequate retail tariff adjustments. All the companies have had success at managing accounts receivable which are in the range of 11 to 17 days revenue in 2016. They have also managed to reduce levels of accounts payable which are now in the range of 36 to 93 days operating expenses. As a consequence, all the companies have had positive cash flow from operations in the last few years. 54
8. The current ratio of all the PCs is somewhat low, which can indicate the potential for liquidity difficulties. The PCs provided some clues on current ratios presented in audited financial statements (2015). The reasons behind current liabilities exceeding current assets are the following: • Trade receivables by the end of the year are underestimated due to the power meter reading regulation. • According to International Accounting Standards, inventories are calculated including construction expenses in progress to form fixed assets in the future. Therefore, when converting Vietnamese Accounting Standards to IFRS, current assets increase. This means that revenues from electricity sales covered all cash operating and maintenance expenditures and left a surplus that could be used to contribute to capital investments and debt repayment. While the level of debt within the PCs has progressively increased between 2011 and 2014, the capital structures of the PCs remain much more balanced between debt and equity than for EVN’s generation and transmission businesses. Moreover, in 2015, debt- to-asset ratios have improved among all the PCs although this largely reflects asset revaluation exercises. In particular, the EVNSouthern PC and EVNHochiminhPC hold the lowest share of debt compared to other businesses. This ratio improved in 2015 mainly due to the asset revaluation carried out by EVN. For 2016, there is a small increase in the equity as a result of profits, but in general, investments in new assets are fully funded by loan. 5. Conclusions In summary, the subsidiaries of EVN in distribution have generally strong operational performance and the companies are well managed. However, they operate under considerable financial constraints because tariffs are low and the companies have low levels of equity. In 2013 and 2014, EVN was unable to meet its financial commitments to fuel suppliers and defaulted for a period. Improvements in financial performance were achieved in 2015, but, as demonstrated with 2016 results, these improvements can only be sustained with a steady increase in tariffs. There are considerable financial challenges in both servicing existing debt and financing the level of capital investment expected in the period up to 2020. In the absence of regular tariff increases, the financial condition of EVN could deteriorate rapidly with defaults not only to fuel suppliers but also potentially to lenders. Such defaults are highly risky as they suggest the possibility of insolvency and more wide- ranging defaults and consequential negative impacts on economic growth. As a result, lenders and suppliers tend to tighten credit terms at precisely the time when there are cash flow difficulties. In such circumstances new loans are likely to be difficult to secure and the capital expenditures get deferred. Potential investors in IPPs will be unwilling to accept the credit risk of supplying EVN and will demand payments directly from the government. 55
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