CAPEX Douglas Else-Jack. FCIPS CIPS Switzerland, 4 Feb 2015

Transcription

1 CAPEX Douglas Else-Jack. FCIPS CIPS Switzerland, 4 Feb 2015

2 Today = eggs? What s in the Carton? 1 st, chicken or the egg? Egg essentials CAPEX? Scrambled vs s boiled Flying Chickens. we'll also discuss nappies!

3 Severnside EFW Jan 2014 HZI in a carton

4 Hitachi Zosen Inova AG Waste is our Energy Hitachi Zosen Locations Zurich-based Hitachi Zosen Inova is a global leader in Energy and Material from Waste solutions. proprietary EfW technology and complete turnkey plant and system solutions more than 80 years experience operation, maintenance & service business 460+ employees in Switzerland, USA & UK more than 500 reference projects worldwide a Hitachi Zosen Corporation subsidiary

5 EfW-technologies: Globally build, operate & maintain Removes need for landfill Vastly reducing CO, CO2 and methane impacts Increases recycling (pre & post burn) & reclaim metals Generates electricity and can power local heating systems or Used in Middle East & Africa to power water desalination 1kg waste = 10l of drinking water 1.5 Mio man hours to build!

6 Supply Management 24.3 FTE Category Management / Sourcing 12.8 eprocurement & SRM 2 Project Procurement B spend

7 Procurement (the buck stops with us!) 95% of Spend is Project specific, 5% Indirects and minimal tail spend Supplier List < 600 Support Sales Bidding on predicted cost (generally 3-5 year predicted cost, over 100 Category lots) Serve projects and partner with Engineering Category Management / Select and manage Suppliers (via eproc Tool & Audits) Drive sourcing of project lots Manage Supplier Awards with Engineering & Project Management Teams Scope of Supply Legal Terms & Conditions Project Delivery Schedule Long Term Supplier Capability Total Cost of Ownership Administer Contract Finalisation & Manage contract change Drive Supplier Development & Performance Management Collect Rebates (funds SRM / Sustainability Investments)!!

8 Egg essentials - unscrambling the Golden Egg (Light guide to CAPEX)

9 Integrated Solution Integrated Design Saves CAPEX and OPEX Designed and costed for 25 years operation

10 What an EFW project entails: Design, Project Engineering, Project Management, Commissioning, Warranty Support Site Services Civil Engineering 120+ Process Equipment Categories, including; Air Cooled Moving Grate with ram feeders and advanced combustion controllers Boilers Turbine Generator & Water Cooled Condenser & bypass condenser Auxiliary Heat Exchanger incl. District Heating Heat Exchangers Waste Cranes, Bottom Ash Crane and Turbine Hall Crane All residue and additive transport and handling systems Boiler Hall and Turbine Hall Structural Steel 25,000 tonnes of Structural Steel All HV and LV Electrical Equipment and associated cabling and controls DCS, Instrumentation & CEMS Circulating cooling water system incl. equipment for water intake Flue Gas Treatment: HZI Semi Dry with 2 stage scrubber, FG cooler & Lime hydrator Compressed Air Equipment All Process Piping Water treatment and various tanks for water management

11 EfW-technologies: Simple Maths Main Categories Civils (UXO, Dig, Build & Plant) 75 Mio Boiler 40 Mio Turbine Generator 19 Mio Electrics 15 Mio Structural Steel 9 Mio Piping 7 Mio Insulation 6 Mio Condensers 6 Mio 120+ other purchases 20 Mio Project Hours (80% Bought) 39 Mio Procurement Lots 236 Mio SG&A + Profit Total Capital Cost 14 Mio 250 Mio Local site purchases / non-po 0.1%

12 EfW-technologies: Simple Maths 50 Mega Watt site in W EU with 500,000 tonnes annual burn capacity = 250 Million Capital Spend = 50 Mio Land = 5% Cost of money = 6.3% compounding running costs = 594 Mio / 25 years, What about inflation, index costs & taxes? What about NPV, IRR & EAC? What about subsidies? What about gate price of waste? What about landfill charges (local / international)? What about waste calorific value?.. what about???? Poznan, PL EFW Luzern, EFW Minor changes in technology easily +/ Mio / 25 years

13 Technical: Load range diagram (3D) Bio-mass * * Nappies Business case is balance between investments, running costs, gate revenue, power or heat generation & recycling revenue

14 How do we measure success? Budget for Project set 2-3 years ahead of NTP (adders often rejected) Typical Project months Mallorca EFW We monitor: TCO v Project Budget Transactional Efficiency LTSC Impact Supplier Scoring Supplier Audits Site Performance - OTD, FPY - Safety Performance - Quality Performance - Personnel & Qualifications - Supervision - Language / Local Reg s - Cooperative approach - Health & Safety performance

15 What Levers exist to get best out of CAPEX? Accenture's Winning Hand Positive Purchasing s Value Levers Category: Specification Design Spend Process: Market: Supplier: Demand: Efficiency Analyse Cost Increase Capability Competition Low Cost Country Sourcing Restructure Supply Base Relationship Performance Development Eliminate / Buy Less Policy & Compliance Asset Utilisation

16 Doug s Levers - Relationship Management (Stakeholders & Supplier) - Capability & People Skills - Policy Alignment (equal rights!) - Maximise Cost and Value Transparency (ROI v MoB v TCO) - Maximise Competition - Split Categories according to opportunity/risk - Standardise Spec s - Manage Demand (Reduce to the Max!) - Contract Risk Appropriately - Negotiate, negotiate, negotiate!

17 Our Approach (not a wrapping exercise)

18 Approach marries to elements Twin track approach! Risk Management (Currency, Tax & Commodity indexes) Often 3 currencies per project Main index = Steel & Electrical Wholesale price National productivity and wage data Category Management Both feed back and forwards into each other Commercial Risk Management is made in partnership between Client, HZI Sales + Finance & Supply Management Category Management is made in partnership between HZI Supply Management + Engineering + R&D SRM only actioned with genuine supply partners and part of overall Cat Man process stage 5

19 The benefits of hard boiled scrambled golden eggs Able to project costs accurately 3-5 years forwards 5-25 years is focussed on cost of operation Able to project technological improvement 2-3 years forwards (R&D + Supply Management) Constantly adjusting costings & including breakthrough impacts 700+ projects in cost system (HZI Plants + bids) Project Costing managed by Sales, Service & Supply Management with heavy IT support (reviewing new system to increase reviewability!) In the past 3 years we ve: Increased procurement influence & are at the top table Tripled Savings (Cat Man) Reduced claims by 2/ 3 rd s Project Management reports net savings, not SSC-SM!

20 What to do if CAPEX isn t your OPEX! Cross functional approach Operations, Production, Supply Chain, Real Estate, Fleet, Procurement, Legal, Finance OPEX & INDIRECTS Production Knowhow Real Estate & Facilities Mgmt Appoint suitable Category Experts to help build the various business cases Don t let the Engineers run free in the sweetie shop! It s a real opportunity to VALUE ADD, MITIGATE RISK and CONTROL COSTS.

21 Final question? How do you deal with internal supply divisions? Open Books? Transfer Price? Competition? How do you ensure internal divisions remain competitive in the long run?