Agenda - Achilles Live 2014

Achilles Live 2014
Michael Gieseking, Head of Supplier Management
Oslo, September 18th, 2014
1
Agenda
Vattenfall’s challenges and ambitions
Development example I: Engineering
Development example II: New Supplier Markets
Key success factors for suppliers
2
The Nordic generation landscape is marked by growing overcapacity
Nordic surplus generation development
TWh
55
50
Issue during windy
periods in Europe or
extreme wet years
(rather than other
way around).
16
45
27
40
35
30
25
20
Swedish exports
~16 TWh
4
37
15
10
24
>24
Surplus 20201
(Net Export)
Estimated
export demand
5
0
2
Surplus 2012
(net exports)1
New RES
and OL3 +
other Nuclear
Energy efficiency
Demand growth
Adjustment for
normal hydro year
Existing Interconnectors ~24 TWh2 (and electrical boilers) will handle the
surplus during a normal year
1. The surplus is based on the available low margin production and the must run CHP. If all condensing power would be included the surplus will be 38 TWh.
To these volumes a possible import of up to 6 TWh from Russia has to be taken care of. 2. The existing cable capacity 6,000 MW with a 4,000 hours export
utilization gives 24 TWh. Until 2020 ~4,000 MW new capacity is expected that would add ~16 TWh of export capacity.
3
Significant decline in profitability of large scale conventional
generation …
Electricity forward prices (rolling front year + forward curve)
EUR/MWh
Key drivers
• Loss of electricity demand
• Lower industrial activity
leading to oversupply of
CO2 certificates and low
price levels
• Severe overcapacity and
strong generation growth
Front year rolling
100
90
80
70
60
Current market
50
40
30
20
Nordic
Germany
10
0
2005
2006
Reference date: 2014-04-02
4
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
Events since 2007 have had a large impact on commodities and
market development….
5
Underlying EBIT has been drastically affected by price declines, only
partially mitigated by cost savings programmes
Underlying EBIT
(incl restructuring costs)
SEK bn
35,0
Market and cost as in 2010
+3 bn
ROCE target
9%
Current forecast
+6 bn
+8 bn
+11 bn
- 29 bn development (excl cost
savings)
+13 bn
+14 bn
Net cost
savings
Development (excl cost
savings)
2010 - 2018
2010
6
2011
2012
2013
2014
2015
2016
2017
2018
Vattenfall capex has been cut substantially over the last five years…
Historic investment levels (Vattenfall group)
Investment plan 2014-18 break down
Reduction by 35% of rolling 5 year capex plan
41 of 105 bn SEK to be invested in Sweden
5 year Capex limit
(bn SEK)
180
-35%
160
140
120
100
80
60
40
20
0
2010
2011
2012
2013
2014
Source: Annual Report 2013
7
We have the ambition to build a strong position in the growing Wind
market
The Wind generation and it’s share of the total electricity generation
2012
2020
~6.5
1%
4%
1.6
<1 %
0.6
TWh
7.2
5%
~5.0
TWh
~14.0
TWh
9%
TWh
~17.5
10.2
TWh
26 %
TWh
50 %
TWh
TWh
Total: 20 TWh
Total: 43 TWh
We will accelerate the development by working with long term financial partners
8
6%
Share per Spend Category
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Agenda
Vattenfall’s challenges and ambitions
Development example I: Engineering
Development example II: New Supplier Markets
Key success factors for suppliers
10
Vattenfall is spending a larger share on A category suppliers
11
We want to involve suppliers more in our operational excellence
• Lower prices is a prerequisite
• Suppliers must be active in improving ways of working
- Fewer hours spent on the same tasks
• Less resource staffing – steering towards delivery of projects
• ”Copy paste smartness”: Experience exchange through suppliers
expected
- Between Vattenfall’s units
- Between Vattenfall and other companies and industries
12
Agenda
Vattenfall’s challenges and ambitions
Development example I: Engineering
Development example II: New Supplier Markets
Key success factors for suppliers
13
Vattenfall is still purchasing mostly in its main markets
Geographic distribution of
suppliers
•
Vattenfall’s suppliers (by entity)
are typically located in the
country of operation.
•
Germany is the most important
market, accounting for SEK
30bn of spend (50% of total
and 97% of spend from the
German operations).
•
United States
Vattenfall-SE
13,800 suppliers
85% spent locally
Country Importance
by spend
High importance
Medium importance
Low importance
18,000 suppliers are also
located in Germany, which
represents 51% of the total
supply base.
Vattenfall-DE
18,300 suppliers
96% spent locally
Vattenfall-NL
4.000 suppliers
84% spent locally
Vattenfall AP
Number of suppliers by Country
GE
SE
NL
Total
15,555
57
67
18
61
6
65
2,359
130
18,318
214
11,061
70
50
117
76
136
1,905
243
13,872
129
40
3,355
32
10
5
96
193
114
3,974
15,898
11,158
3,492
100
188
87
297
4,457
487
36,164
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Conveyor Belts price development
130%
120%
118%
111%
110%
106%
104%
100%
100%
92%
90%
80%
78%
70%
Base 2010
04/11 - 03/13
04/13 - 03/14
Median (of Sample Belts only)
(Vattenfall prices)
04/14 - 03/15
Price Index Development
*
NSM Goals & desired state
Goal of 2012
Year of understanding
Goal of 2014
Knowing exactly the gap between CN & VF
Goal of 2013
Year of acceleration
Goal of 2015
Bridging the gap between CN & VF, ready to tender
Final technical pre-qualification status
Participation of NSM supplier in final negotiation for
Projects – huge impact to planned
savings
Realization phase, continuous development,
supplier, supervision and minimize risk till Zero
> 2015: Participation in tender - frame contract of recurrent demand
Communication to market
*Source: Calculation based on price indices from “Eurostat” & “Federal Statistical Office Germany“
.
For the major part of the challenges inherent in sourcing from NSM
countries, solutions have been developed.
Description
Management commitment
Risks / Open issues
Both from procurement and BU: Commitment of Procurement AND Technical
function to invest time in new supplier development. The willingness to help
supplier improve.
General Gaps
- Vattenfall internal – buyers/NSM team/technicals
- Vattenfall external – VF/3rd party/CN suppliers
- Culture differences among all parties – DE/SE/CN
- Languages differences – DE/EN/CN
Doc. availability
Solutions
Mangement support
Responsibility
Management team
Open and complete communications among
all parties
All
- Availability of all the necessary documents/specs in EN
Department function
BU
Vattenfall commercial requirements
- EU Tender procedure
- Apllication law
- Payment / Delivery terms
- Credit risk & Bank guaranteen
- Warranty & Insurance
- Import tax & VAT rebate claim in EU
in discussion with all the related departement,
VF tax office, VF credit risk and logistics
partners, with focus on Germany, Sweden is
not checked yet
Vattenfall technical requirements
- GB standards (CN standards) to EU/DIN norms.
- Testing capacity & capability in VF
- Acceptance & measurement differences
- BU invests in time
- Tuev China & Bureau Veritas support
- Quality audit
BU in lead, support from
buyer & NSM team
Vattenfall healthy & safety
requirement
CN supplier needs Vattenfall's support to improve
- BU invests in time
- 3rd party audit
- NSM Training
BU in lead, support from
buyer & NSM team
CSR issues
CN supplier needs Vattenfall's support to improve
Buyer & BU needs training to understand process
- Sustainability support
- Frame agreement signed with SGS China
- 4 CN audits done in China 2013/2014
Sustainability
NSM team
Logistics partners
CN supplier needs Vattenfall's support to solve the logistics issue, in order to be
competitative in our tender and can supply the required scope.
DB Schenker, Lascheco & Green carrier
selected as potential forarders and test
project ongoing
NSM team
Installation, service partner
CN supplier needs Vattenfall's support to solve the logistics issue, in order to be
competitative in our tender and can supply the required scope.
In discussion with different service partners,
with focus on Germany, Sweden is not
checked yet
Buyers
Support from BU
NSM team
Distribution partners
CN supplier needs Vattenfall's support to solve the logistics issue, in order to be
competitative in our tender and can supply the required scope.
In discussion with different different
distribution partners
Buyers
Support from BU
NSM team
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Buyers
NSM team
Status
Agenda
Vattenfall’s challenges and ambitions
Development example I: Engineering
Development example II: New Supplier Markets
Key success factors for suppliers
17
Key Sucess Factors
• Cooperation with suppliers
- Open dialogues
- Proactivity
- Develop new forms for cooperation
The total volume is decreasing but a larger share on category A suppliers
“The winner takes it all”
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Contact details
Michael Gieseking
Head of Supplier Management
T +49 30 267 10225
M +49 174 197 4816
[email protected]
www.vattenfall.com
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