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The changing role of the CFOHow energy transformation isshifting the CFO focus

www.pwc.com/utilities

PwC global power & utilities

Introduction 3

The CFO’s new strategic lens 4

The changing CFO role 4

A different value focus 4

Aligning cost to value 5

Key areas of future CFO focus 5

A sharper focus – specific energy transformation challenges 7

1. Anticipating and leveraging the impact of new technologies 8

2. Reassessing and restructuring the asset portfolio to optimise value 9

3. Designing new ventures and commercial arrangements 11

4. Achieving full recovery of prior investments 12

5. Influencing policymakers and regulators 15

6. Replacing declining revenues from traditional businesses 16

7. Measuring enterprise performance as business models shift 18

8. Attracting capital through appropriate risk allocation 19

Reporting more effectively 20

Round-up – the CFO checklist 21

Contacts 22

Contents

2 The changing role of the CFO

The chief financial officer (CFO) role is changing. It’s becomingmore strategically-focused, more value-focused and morefuture-focused. But the role of the power utilities sector CFO ischanging faster than most. The ambit of the power sector CFOis not only being reshaped by the overall transformation that istaking place in the CFO role but also by energy transformation,which is shifting the technological, market and customercontext for companies in the sector.

Introduction

The report includes contributions from power sector CFOs in differentmarkets around the world on howtheir role is changing. And itconcludes with a checklist of some of the key questions CFOs in the sector should be addressing as theyface the challenges of energytransformation.

These twin shifts – in the overall roleof the CFO in the C-suite and in thedemands placed on power companyCFOs by energy transformation – are leading power sector CFOs to look afresh at what they and theirdepartments need to do to keep theircompanies successfully on track andahead of change.

As the direction of the power sectorshifts, the CFO’s role in harmonisingdiverse business strategies becomescritical to aligning risks and rewards.The role is becoming more forward-and outward-facing, with the CFO at the centre of ensuring that value is maximised from new and existingactivities.

In this report, which forms part of a series of PwC publications on energy transformation, we look at how the power sector CFO role isevolving, the challenges it needs toaddress and the capabilities that willbe crucial for delivering first-classperformance.

The changing role of the CFO 3

Norbert SchwietersGlobal Power & Utilities Leader

The world of electricity is changing fast. It’s a transformationthat is exercising a great deal of thought and action in theboardrooms of power utility companies whose traditionalbusiness models are under threat. Technological innovationis creating new choices for customers and new opportunitiesfor a wider range of industry entrants. The combination ofthe ‘push’ of technology, the ‘pull’ of the customer and thethreat that comes from new competitors poses questionsthat go to the heart of company strategies and the role of the CFO.

The changing CFO role

The CFO’s role has always ranged from afiduciary one (a custodian preservingvalue) to a visionary one (an architectcreating value). In the past, the traditionalbusiness model in the power utilities sectorhas tended to move the CFO role towardsthe fiduciary end of the spectrum ratherthan the visionary end. But now this role isbecoming much more about strategy thanstewardship and even more about valuerealisation and optimisation.

A different value focus

However, in the emerging digital,decentralised and technology-disruptedenergy world, value is likely to comethrough more diverse and less stablesources. This broader value creation and greater uncertainty requires a newstrategic lens to be applied by the CFO – one that is capable of discerning ‘where to play’ strategically, ‘how to play’commercially and ‘how to win’competitively (see figure 1).

At a time when energy transformation is leading many companies to embark on new value chain directions, considerrestructuring to separate out differentvalue streams and/or weigh up the merits of new outside collaborations and partnerships, the CFO needs to think more broadly and look harder at a wider range of issues to inform a winning strategy. While the CFO is not the principal architect of the corporatestrategy, the focus provided by thisposition on realisation of valuecomplements the design of thesestrategies.

The CFO will be particularly focused oncreating congruence between thestrategies developed for the enterprise and the financial imperatives establishedfor the business. The CFO understands that strategic success cannot be achievedwithout financial success, and linkage ofthese two key dimensions is fundamentalto realising expected values from strategyto execution. As this new era of industrydisruption evolves further, the CFO willmove from holding a perspective thateffective execution is the primary driver of results to one that recognises thatrealised value is a function of strategic and operational alignment.

Successful CFOs in this new environmentwill develop an enhanced set of keycapabilities that can be leveraged tostrengthen strategic, financial and marketpositioning. These capabilities will need to evolve from an emphasis on rigorousplanning and budgeting and financialperformance management to buildingbusiness acumen and designing effectivecollaboration models.

The CFO’s new strategic lens


Value for companies in the sector has beentraditionally created by a well-understoodcapital investment and commercial modelwith a strong emphasis on effectiveregulatory positioning, clear competitivestrategies for each market segment anddisciplined infrastructure development anddeployment. The emphasis changes fordifferent companies, at different times andfor different markets but the essentialfocus of producing or buying electricity,moving it and selling it on a large-scalecentralised grid basis has been the same.

Figure 1: Key strategic questions

Determine our ‘purpose’ and desired outcomes, e.g. ‘end-to-end’ participationor selected areas

‘Where do we play’?

‘How do we play’?

‘How do we win’?

Establish the ‘positioning’ we wish to achieve, e.g. ‘full offering portfolio’ or highest-value product

Define the ‘role’ we would like to perform, e.g. sole player or ‘partner of partners’

Future strategy

Foundation strategy factors

... but how competitors choose to play affectsthese choices


While the historical capabilities related tomanagement reporting, performancemanagement and investor relationshipswill continue, they will become more akinto minimum requirements. Alongsidethem, differentiating capabilities focusedon turning data into insight and, moreimportantly, insight into foresight willbecome more valuable.

This increased focus on building andembedding enhanced capabilities willenable the CFO to change the nature of theconversation with key parties – at theboard level, within the business and withthe investor community. This conversationwill not abandon the underlying custodianand stewardship functions that havecharacterised traditional CFO roles; rather,it will now evolve to one that emphasisesvalue realisation as the overarchingoutcome that guides strategic decision-making throughout the company.

Aligning cost to value

The ‘strategic CFO’ focuses on linkingstrategy with execution and market plansto deliver the positioning outcomes thatare being pursued. This CFO understandsthat strategy is not an end in itself andlacks real value unless tightly aligned with a ‘purpose’ that visibly underlies itsoperationalisation. Achieving this type of perspective necessitates establishing a clear and common understanding ofpurpose, outlining how the companydelivers value – upwards at the board,outwards to investors, policy-makers and regulators, and downwards throughthe organisation.

In practice, this requires understandingand separating those projects and practicesthat create clear market positioning valuefrom those that merely draw resources anddo not advance the strategic agenda of thecompany. This understanding needs to bebased on a clear, evidenced rationale,drawing on experienced insights, strategicperspective and fundamental dataanalytics. In this case, the CFO needs to be well informed on the relative value tobe derived from an investment, as well as persuasive in how to position thearguments favouring one option overanother.

In particular, the capital allocation processnow needs to focus more diligently oninvestment screening, benefits evaluation,expenditure priorities, commitmentmanagement, results verification, andreturn realisation – all from theperspective of how value will be createdand at what level against the full portfolioof available options. Managing theseprocesses is critical to a company being

able to improve total value contributionand optimisation of the current and futureinvestment portfolio. These processes,however, will now need to be executeddirectly against the strategies that guidethe business rather than against thefinancial constraints that limit the abilityto invest indiscriminately. And, if theenterprise’s strategic outcomes are to be achieved, these will now need to bedesigned to enable comparison of capitaldeployment options across the business,not just within a particular business unit.

The application of this perspective topotential capital investment optionsbecomes the basis for achieving greaterclarity about strategic cost allocation. It helps the CFO identify those projects andinvestments that are capable of deliveringdistinctive, sustainable growth and whichshould be backed and nurtured. It alsoenables the CFO to identify others thatmay not be as profitable, but are necessaryto create a ‘right to grow’ or to establish amarket presence to build and sustaincustomer credibility.

Key areas of future CFO focus:

For many key processes, the CFO is an architect of what to do and how todo it. Energy transformation1 has added a new dimension to how the CFOapproaches these key areas.

Strategy design: As the direction of the utility sector shifts, the CFO’s role in harmonising diverse business strategies becomes critical to aligningrisks and rewards. As this strategy devises and leverages new investmentstructures, the CFO is at the heart of the consideration of how these modelsare best structured and managed.

Governance model: Effective alignment and decision-making within the enterprise are fundamental to both strategic and financial success. The CFOis at the centre of designing how to increase collaboration and transparencywithin the business, in order to support decision-making and reinforceaccountability.

Inorganic growth: Organic business expansion will need to be complemented by targeted inorganic growth to support future enterprisesuccess. In addition to creative transaction structuring, the CFO has todisplay a dispassionate corporate conscience over valuation and priorityamong options.

Portfolio optimisation: The selected strategies also lead to a more diverse portfolio of businesses and assets, many of which do not co-exist.The CFO needs to be both the custodian and craftsman of all sources ofshareholder value, instilling the discipline to optimise the parameters andcomposition of the current portfolio.

Capital allocation: The disciplined deployment of investment capital is a distinctive way to ‘stretch’ financial resources. CFOs need to sharpenthe criteria employed to assess alternative investment uses so thatallocation of capital flows to the most attractive blend of available optionsand projects.

Market positioning: Once the enterprise has selected ‘where and how to play’, a requirement still exists to communicate the strategy in a compellingmanner. The CFO is the face of the company to the market and will need toarticulate positioning and value in a distinctive and differentiating manner.

Risk management: The future utility competitive environment and market model are redefining the nature of industry risks and uncertainties.These emerging challenges require the CFO to rethink how to framerelevant risks and to reassess how to evaluate and mitigate their impacts.

Performance management: After the corporate strategies and deployment decisions are executed, outcomes become the yardstick forwhether results conformed to expectations. The CFO performs a vital rolein not simply tallying the resulting metrics, but in shaping the overallassessment framework.

1 For a full discussion of energy transformation see The Road Ahead: gaining momentum from energy transformation, PwC, 2014.


Perspective: the changing CFO role

Going beyond thenumbers

Act as change leaders As the utility world becomes greener,leaner and more de-central, the financefunctions have to change as well in termsof how they operate. And the CFO mustpersonally lead this change. There arethree directions emerging in parallel.Firstly, some functions which are more of a service-like nature (e.g. transactionalaccounting, tax or treasury) will bebundled company-wide including near- or offshoring or even outsourcing.Secondly, functions such as performancecontrolling which are close to theoperational business will see even more‘de-central’ empowerment as the businessmodels become more decentralised. And thirdly, there are emergent new and innovative business models whichrequire setups for financial control andcompliance that are rather different from the established large-scale, capital-intensive utility businesses.

Define the right arena for utilities tocompete The CFO will drive the debate on whichrole in the utility arena one should adoptas opposed to other players active there.This is about consciously choosing whetheryour company should seek its competitiveadvantage in the role of asset owner (as compared to, for example, financialinvestors who may be seen as ‘natural’asset owners with their low cost of capitaland ample funds), or asset operator, orservice provider, or systems integrator of all those bits and pieces on a higher level.

RWE is one of Europe’s five leadingelectricity and gas companies, active atall stages of the energy value chain, andserving over 16 million electricitycustomers and seven million gascustomers with energy.

Dr Bernhard Günther,Chief Financial Officerof the Executive Board,RWE AG, says the CFO needs to play a key part in shapingstrategy, change and

competitive direction as the utilityindustry transforms.

I see two forces at work driving theevolution of the utility CFO. The first oneis the general development of the CFO roleinto broader tasks than pure finance whichwe observe in many industries. The secondone is the transformation of the utilityindustry towards becoming ‘greener’,leaner and more decentralised.

These factors can be summarised in threetrends. CFOs will increasingly:

Go beyond the numbers to be a co-shaperof the corporate agenda They will be contributors and challengersto strategy and business development by providing a critical and independentsecond pair of eyes. Likewise they will bein the natural position to challenge theperformance of the business and push for continuous efficiency improvements – more than most other members of the C-suite.


Energy transformation, as we saw in the previous chapter,is forcing power company CFOs to take a more strategicview in addressing business challenges with consequencesfor the nature of their role. Many power utility companiesare now operating in conditions where the traditional corerevenue stream is much more uncertain. For the first timeever, the potential for a power utility company’s businessmodel to become eclipsed and left stranded is a real one.

Customer- and asset-relevance areeverything. Power utilities cannot afford tobe seen as being of dwindling or marginalrelevance to the customer or being leftwith the wrong set of assets, technologiesor capabilities. The business models andthe operational focus of many companiesin the sector are changing in response. In broad terms, there is the distinctionbetween asset-based strategies, withreturns largely set by the ability of thecompany to manage assets within adefined regulatory regime, and those that are customer-focused, with returnsdictated by the competitive marginachieved by delivering greater value tocustomers and, in turn, gaining greatervalue from them.

There is an industry transformation takingplace and, within that, companies areembarking on their own transformationstrategies. Some companies are movingfast to occupy new positions while othersplay more of a ‘wait and see’ game. CFOs are at the centre of explaining anddelivering on their company’s chosenstrategy. Their audiences are still the same – boards, investors, policy-makers,regulators, ratings agencies – but the storyis much more diverse and complex.

Energy sector participants are increasinglyoperating under a mix of business modelsalong the value chain, from traditional rateof return or revenue cap to margin-basedand incentive models. As their operatingenvironments become more complex andunpredictable, the CFO role needs to takeon a much greater focus on both strategyand optimising value through continuousimprovement.

As well as the overarching issues discussedin the preceding chapter, energytransformation presents a number ofspecific challenges. In the sections thatfollow, we highlight eight that we believeshould be at the front of every CFO’s mind.The degree to which each challengeapplies will depend on each company’sexact market context and jurisdictionalvariations.

A sharper focus – specific energytransformation challenges

Figure 2: Business model and technology transformation

Business model transformation

• New markets

• New customers

• New products and services

• New competitors

• New partnerships

Technology transformation

• Digitisation of customers

• Digitisation of assets and operations

• Distributed energy resources and micro-grids

• Energy efficiency and demand response

• Beyond-the-meter automation


Challenges for the CFO to address

Assessing and quantifying the businessrisk associated with the adoption ofnew technologies and making the righttechnology bets.

Utilising new technologies to create or enhance revenue streams.

Managing the costs of implementation and maturation, with good riskmitigation plans.

Advising on appropriate risk/reward incentives for new forms of technologypartnerships.

Positioning communications with financial stakeholders as the businessembraces technology.

Ensuring the business has effective cybersecurity protection in place andhas robust business contingency andrecovery arrangements that will allow it to withstand cyberattacks.

On the ground: examples and issues

The smart meter rollout in the UK isbeing hampered by delays in agreement on technical specifications, creatingreluctance to commit capital for full-scale implementation.

In countries such as Japan, where full customer competition is due to takeplace, utilities need to determine theirstrategy for investment in end-to-endcustomer and revenue systems.

Anticipating and leveraging the impact of newtechnologies

1

The acceleration of technologies such asdigitalisation, combined with theexpansion of the breadth of the ‘internet of things’, is creating new opportunities for utilities. The pace of development of many of these technologies is far fasterthan many of the technological changesthat have taken place in the power sector in the past and well beyond theexpectations of many industry observers.Importantly, barriers to entry are being broken down and new entrants are takingup positions in the sector, particularly in distributed energy resources andcustomer-facing technologies.

The rapid change in technology alsocreates business risk, not just because the technology is new but also because the increased digitisation of assets andcustomers opens up the utility to greater risk of malicious cyberattacks.Ensuring that the business has robustcybersecurity protection, along withcontingency arrangements that allow itto continue to operate, is now high on the agenda of many CFOs.

Internet-connected home devices of alltypes, premises-based distributedgeneration and higher-efficiency storageenable business-to-consumer and business-to-business relationships andhave the potential to realign elements of the traditional energy value chainthrough the creation of new valuenetworks. Data directly from theproliferation of discrete generation andconsumption points may become acommodity that can be monetised by new market entrants through newproducts and services, as well as enhancedgrid ‘value’. Utilities need to assert theirrole in these future value networks toreduce the risk of losing revenue, marketshare or the ability to build new sources of margin.

The effects of technological change poseboth an opportunity and threat to utilities.For example, it can help utilities meetdemand loads while limiting capitalcommitments for generation through net-metering of the contribution fromdistributed generation and by supportingthe smarter utilisation of energy when it isnecessary to be consumed. But the same‘beyond-the-meter’ technology also enablesnew market entrants to disintermediatecertain customer loads from theirtraditional utility providers and to do sowithout costly infrastructural investments.

Among the issues that are of CFOrelevance:• Evaluating the impacts on revenues and

business models from new technologies. • Leveraging the capabilities of new

technologies to enhance business execution and customer value.

• Predicting the pace of change and the risks and rewards of ‘first mover’ investments.



The benefits of restructuring or ‘carve-out’ of segments of the businessto reflect new strategic goals and valueoptimisation.

Optimising the financial viability of any ‘carve-outs’ from the core business.

Developing investment propositions with a risk profile that will attract newcapital.

Alternative approaches to investment financing in an environment of morecompetitive markets.

The need to reassess the structure of transfer pricing agreements betweendifferent parts of the business.


The split of E.ON into two groups (thefuture E.ON, including the Germannuclear business of PreussenElektra,and Uniper) with different strategicfocus and operating models.

The unbundling of different parts of the business as part of national electricityindustry restructuring in Saudi Arabia.

In the US, alternative corporate structures such as yieldcos, masterlimited partnerships (MLPs) and realestate investment trusts (REITs) play asignificant role in the energy sector.

Reassessing and restructuring the asset portfolio tooptimise value

2

Regulatory policies, financial pressuresand market outlooks are forcing utilities to look both at the appropriateness of their corporate structures and the parts of the value chain where they wish toparticipate. As energy transformationexpands, the need to introduce responsivecapabilities increases and the need for new assets, delivery systems and executionprocesses lead to the reassessment of thecapability to succeed in current businessareas or to optimise the value potential of the portfolio.

On the one hand, companies are beingforced to make a choice where none wasrequired before – do I ‘hold or harvest’certain assets or businesses? Thesedeterminations will need to be based on a sober assessment of whether theincumbent owner is best suited tomaximise the value of the asset orbusiness, or whether a new owner would be better positioned to add value.

Alternatively, the choice may be betweentraditional or unconventional ownership.New structures are emerging, such asREITs, yieldcos, etc. that enable owners torestructure the business and create a newsource of financial value. These structuresoffer the potential to realise highervaluations, as well as capture tax andearnings benefits. As companies makethese assessments – and wrestle with thedual dilemma or whether to ‘hold orharvest’ and ‘retain or restructure’ theasset or business, companies will need toplace greater emphasis on understandingbusiness and financial risks and managingportfolios to optimise value.

Among the issues that are of CFOrelevance:• Separating or exiting businesses to

be either fully regulated or fully unregulated.

• Derisking asset investment projects to make them attractive to particular types of investors.

• Expanding access to non-traditionalforms of capital.

• Devising defensive or proactive interactions with regulators to address the impact of market changes on asset recovery.



Turning transformation to advantage

‘skate to where the puck is going to be’, but it’s not easy to see around the corner in today’s world, especially with theacceleration of technological advances.

I’m acutely focused on ensuring that ourstrategy is directly linked to our financialand operating imperatives – more thanever before. Historically, our assets and the service we provide have been animportant foundation for the economichealth of our service territories. Today Ineed to understand ‘where and how’ theelectric grid will sustain and add value inthe future. I also need to understand howSouthern Company can capitalise on itsposition as one of the most admiredcompanies in our industry andcommercialise that reputation.

For sure, the financial markets willcontinue to focus on the fundamentals, i.e. sales, return on capital and cash flow.However, our long-term investors are alsoincreasingly thinking like business ownersand focusing on broader non-financialdimensions than they have in the past, e.g. competitive capabilities, businessmodels and innovation. Each of thesefactors will likely receive greater scrutinyin the future and we need to educate our investors on our readiness andcommitment to protect our intrinsic valueand take advantage of opportunities thatpresent themselves.

It will not be an easy task to preserve value in the electric industry in light oftransition we are now seeing. But if we can design our strategies in a manner thatenables new or enhanced business models,we can open new revenue streams, solidifyour customer relationships and buildsustainable value for our owners.

The coming evolution in technologyadoption and customer behaviourpromises to fundamentally change theoperating and financial environment ofAmerica’s electric utilities. Even SouthernCompany, one of the largest powercompanies in the United States, will notbe immune to the advancement of energypolicy, deployment of disruptivetechnology and shift in market structurethat accompanies an industry reachingits next inflection point. The Atlanta-based company has been an industryleader for more than 100 years and haslong been recognised for its fiscalmanagement prowess and attractivenessas a stable yield and growth investment.

Art Beattie, theExecutive Vice Presidentand Chief FinancialOfficer, SouthernCompany, knows that a company’s past is not a prologue to its future

and successfully meeting tomorrow’schallenges requires strategicallypositioning the business.

The role of today’s CFO has evolvedbeyond the custodial model so common inthe past and often focused on accountingover finance. While preserving enterprisevalue remains a key focus, it is just one ofseveral roles that I play. Now, there is anever-increasing emphasis on architecting astrategic future and transforming legacyvalue into new value sources.

Our company operates in an environmentwhere increased complexity, and thusuncertainty, is the norm. When you factorin sustained economic malaise and marketrisk, it’s increasingly difficult to ascertainexactly how the future may look. We try to



Achieving congruence in partnerstrategy from the early stages of anyformal relationship by aligning interestsand appropriately sharing costs, risksand rewards.

Maintaining adequate control of investments while giving leeway tobusiness partners to enhance value.

Management and optimisation of a portfolio of business relationships with non-utility partners.

Gaining comfort on the ability to risk assess new ventures – especiallytechnical risk and optimism bias, andputting in place appropriate mitigationmeasures.

Development of the right exit strategies when necessary to preserve value.


Emergence of ‘beyond-the-meter’ home automation devices and services(e.g. Google, Apple and Samsungthrough their Brillo, HomeKit andSmartThings initiatives).

Data aggregation as a service enabling, distribution businesses to partner tomanage energy balancing on a morelocal level (e.g. pilot projects in the UK and France).

Designing new ventures and commercial arrangements

3

The new business models we are seeingrequire new business partners, new skillsand competencies and different kinds ofcommercial relationships. The digitalrevolution is leading to customer accessinnovation at the same time thattechnology performance innovation isleading to grid parity across renewables.This trend is set to continue across boththe technologies and solutions that will be offered to customers along the energyvalue chain.

If utilities are to maximise theopportunities arising from technology,they need to take a different strategicapproach. The challenge is to determinewhich technologies to support, the type of services to offer to consumers and howbest to harness the skills and competenciesrequired to move from strategy to marketdelivery. Incumbent utilities will need toassess whether they have the requisiteinnovation, experience and portfoliobreadth to address future customer needsfor products and services. From thecurrent standing start, the answer is likelyto be that the requirements of the futureare not met through the capabilities of the past.

We see first movers appreciating the need to learn from the experiences ofother industries, by entering into strategicpartnerships and recognising that thetraditional self-contained utility mindsetcan actually constrain innovation. These companies are identifying potentialpartners that can accelerate their marketreadiness through available technology,market positioning or innovative productsand services. The type of collaborativearrangements that might open up are anew departure for many utility companieswho may have previously not venturedbeyond traditional partnershiparrangements. As transformation unfolds,utilities will take advantage of capabilities,channels and relationships that were either not available or not leveraged formarket advantage.

Among the issues that are of CFOrelevance:• Assessing opportunities against the

existing portfolio of businesses and relationships.

• Defining the range of structural approaches to position within an evolving marketplace.

• Balancing the need to invest in new channels to market with the need to maintain adequate visibility.

• Defining the parameters of attractive partnering relationships and arrangements.

Customer relationshipLimited number ofproducts/services

Channel to market formultiple products

Risk preferenceRisk averse Risk takers – ‘big bets’

Technology preferenceProven Innovative

Timescale for implementationSlow, driven byapprovals

Fast-moving

View of competitorsLimited, ring-fencedprojects

How to partner toincrease value

CompetitionConstrained byregulation

Free market mindset

Utility New partner

Figure 3: Designing new ventures and commercial arrangements



Whether, how and when to take capitalwrite-downs given broader strategicand financial imperatives?

Understanding the value of the asset portfolio to drive rebalancing decisionsand mitigate the impact of strandedassets.

Adjusting long-term capital spending plans to take account of uncertainties in supply sufficiency and demandprojections.

Determining which new investments can achieve financing that will supportmaintenance of the utility’s target credit rating.

Dealing with liabilities linked to specific assets in the portfolio.


According to the expert opinionpublished by the Federal Ministry forEconomic Affairs and Energy,companies supplying nuclear energy inGermany have made €38.3 billion inprovisions for decommissioning nucleargeneration.2 And in the UK, there was a£2.8bn writedown of generation assetsaccording to the 2014 reports of theseven biggest power utility companies.3

In the US, Duke Energy closed 3.8GW of coal-fired plant and expects to close a further 2.5GW by 2018 due toenvironmental regulations and the price of shale gas.4

In Saudi Arabia, diesel-fired generatorsare stranded as part of a planneddecommissioning programme.

Achieving full recovery of prior investments

4

In many markets, serviceable generationassets are being retired early. In Europe,this is driven by environmental subsidiesand public policy initiatives. In the US,expansive gas supplies, market structuresand environmental policies arecontributing to assets being prematurelytaken out of service. And in developingcountries, inadequate rates and non-payment are forcing assets out.

In particular, electricity markets havebecome less stable. Merit order dispatchhas changed as a result of low-carbonpolicies such as the introduction andremoval of feed-in tariffs for renewableenergy, relative fuel prices (gas vs. coal),market intervention such as capacitymarkets, the impact of technology on fuel prices (for example, shale gas) andincreasing levels of distributed and micro-generation.

With little prospect of change in themedium term, some thermal andrenewable generators have foundthemselves unable to compete. The need to maintain shareholder returns has led to unexpected decisions being taken withimpacts occurring in cost recognition, cost recovery and asset reinvestment.

Among the issues that are of CFOrelevance:• Determining investment hurdle rates

that reflect the changing risk profiles in energy markets.

• Determining the level of sustained investment to maintain individual assets until the market improves.

• Assessing impacts on cash flows, credit rating and financing capability of impaired assets.

• Weighing up the costs of closure, mothballing, operating or conversion of ‘underwater’ assets.

2 Federal Ministry for Economic Affairs and Energy expert opinion, 10 October 2015.

3 Analysis of company annual accounts.

4 Duke Energy, https://www.duke-energy.com/about-us/retired-coal-units-potential-retirements.asp

Figure 4: Achieving full recovery of prior investments

Early plant closures?

Utilisation down

Revenues down

Political pressuresincreased

Environmental requirements increased

Risks increased

Economic viabilityreduced



Communicating where the future is taking us

At AGL we have identified the need todevelop an anticipatory culture to preparefor these changes early. It began with astrategic review and organisationalrestructure during 2015 and is ultimatelyfocused on improving return on equityagainst the tide of falling energy demand.

One noticeable impact on the role of CFO at AGL has been to group in IT,procurement and corporate developmentfunctions alongside traditional financeactivities. This is allowing for a strongerfocus on cost and process improvement,even while strengthening businesspartnering to get strong endorsement forthe changes needed.

At a more macro level, the change is alsohelping to enable what AGL is calling ‘asset portfolio management’, which isbuilding in the right processes and culturesto move in and out of asset positions fast as the market evolves. In the short term it includes selling non-core assets andstrengthening the balance sheet. At thesame time, we are developing ways ofvaluing and on-boarding new, often smalland hard-to-value business ideas whichmay or may not work as the future unfolds.

Now more than ever, the ability tocommunicate is vital. As a leader in talkingto share markets, banks, boards andinternal stakeholders, the CFO in activepartnership with the CEO must be able toexplain where the future is taking us.

* AGL Energy, 2015 Annual Report.

AGL Energy is one of Australia’s leadingintegrated energy companies and was thefirst energy retailer to launch a batterystorage device into the Australianmarket, as it shifts its business strategy.The company has traditionally pursued a classic ‘gentailer’ business model ofvertical integration but now asserts that“the categorisation of a gentailer is notsomething that should define AGL.Rather, our new business definition is to ‘harness insights to enrich thecustomer’s energy experience.’ In thisway, everything we do is centred on thecustomer and the interaction they havewith AGL around their energy use.” *

Brett Redman, ChiefFinancial Officer, AGL Energy Limited,gives his perspective on how the role of theCFO is evolving as his and other power

companies respond to a changing energy model.

The pace of change is picking up in the power and utility space. Ten yearsago investments were large, long-term and made off the back of a steady rise in consumption. In ten years’ time, thecentralised energy model will befragmented and more engaged customerswill be demanding rapid innovation tomeet their lifestyle and business needs.

The role of the CFO is simultaneouslychanging. A shift is underway to movefrom being the custodian of a largelystately balance sheet to finding ways tosupport nimble start-up ideas withoutcompromising the integrity of the central systems.



Delivering growth andtransformation

have impacted the role of the CFO,requiring new skills. SEC adapted well tolocal financing, having a credit rating andreviewing international financialtransactions.

Today’s CFO is to help shape and direct thestrategy of the SEC business with financialdecision-making processes, whilstrecognising the changing regulatoryenvironment. Finance now works hand inhand with engineering to define high-valecapital programmes, with stage gatesmonitored by the financial function.Therefore, today the business strategy isfully supported by Finance, which in turnprotects the company and the Kingdom of Saudi Arabia (KSA), taking intoconsideration the risks exposed by growth. Redefining the finance budgetengineering improved the ability tosupport the high-value capital spend,including sourcing primary and secondaryloans. The CFO has to consider the creditrating of SEC to ensure the capital costsare protected. Changes in credit ratingaffect the ability to raise income over along period of time. The CFO now has theability to reflect with the government andregulator on how to protect the creditrating of the business.

In the future, the CFO will be morefocused on the KSA electricity marketchanges, including more privatisation andincreased competition. The future CFOmust protect SEC market share whilstdealing with reduced obligations fromgovernment and possible electricity pricechanges. The CFO will also require astrong relationship with government andthe regulator to drive changes in the utility market.

Saudi Electricity Company (SEC) is thelargest utility in the Middle East,addressing megatrends such as growingurbanisation, demographic changes and increasing sustainable technologybreakthroughs. The Saudi electricitymarket is the largest in the Arab world.Demand for electricity is predicted toincrease by an average annual rate of7–8% for the foreseeable future, drivenby a growing population, rising percapita consumption and an expandingindustrial base. As well as meeting thedemands of growth and potentialchanges in regulation, SEC isimplementing positive internal changesthrough its Accelerated StrategicTransformation Programme (ASTP).

Ahmed Jogaiman servedas Chief Financial OfficerCFO of SEC and has seen at first hand thechanging role of the CFO.

Whatever the elements of energytransformation, the role of the CFO in SEC has evolved in order to meet theenvironmental challenges of that time.Between 2000 and 2010 the CFO of SECwas mostly looking at cost control. SECwas a service provider, with little room forchange. Expenses were strictly controlledand any gaps would be supported byfurther government spending.

Around 2011 the CFO’s role changed toone of cost control and treasury.Empowerment was given to treasury andfinancing options whilst costs andefficiencies within the utility became morecomplex due to changes in technology.More recent and drastic changes in finance



Developing investment and financialmanagement strategies that recogniseregulatory policy uncertainties andtheir impact on the business.

Adapting the financial management of the business in response to regulatoryobligations such as mandates forunbundling, smart grid or renewableprogrammes.

Devising new regulatory mandates to address changes in current marketsrelated to transformation.

Defining the right future policies to address ‘second stage’ effects from poor policy design.

Determining and defending the rate case or regulatory submission toregulators to incorporate theoperational implications of technologyand transformational change.


The UK network regulatory regimeincorporates incentives for networkbusinesses to adopt operationalinnovation and to share the resultingbenefits.

In India, utilities have had to justify retrospective changes to regulatedtariffs to reflect changes to fixed costsand fuel costs.

Influencing policymakers and regulators

5

Balancing the energy trilemma ofaffordability, security of supply anddecarbonisation is resulting in increasedregulation and scrutiny from policymakers,leading to increased uncertainty forutilities and an unwillingness to makesignificant investments without support.

Renewable portfolio standards and smartgrid mandates are increasingly drivinginvestment priorities. Alongside this,utilities are under pressure from energyefficiency standards which reduce energyrevenues, depress demand for newgeneration and can lead to excess networkcapacity. Regulatory regimes are thushaving a more intense effect on the natureof investments, including delayingexpansion and replacement decisions. At the same time, increased regulatoryscrutiny is necessitating additionalreporting and data gathering, affectingprocesses, systems, staff and operatingefficiency.

There is now also a much wider set ofregulations that come into play as well asenergy regulation. Health and safety,environmental, data protection and privacy,and legislative safeguards against briberyand corruption all need robust auditingand reporting to be in place. This becomeseven more of an issue for the CFO ascompanies extend their global footprintand/or partner with new organisations.

Companies will find that an ever greaterportion of their strategic focus is directedtoward policy, rather than the competitivemarkets. In this environment, capabilitieswill need to centre on building and honinglegislative and regulatory prowess.Incumbents will spend more externaleffort on shaping near-term policies that have long-term implications for theirbusiness positioning and their financialperformance.

Among the issues that are of CFOrelevance:• Shaping the proactive role to be taken

with the regulator to make the case for new sources of revenue or defend existing ones.

• Managing the obligation to deliver accurate and timely financial and regulatory reporting during periods of significant business change.

• Forecasting business performance and demonstrating continuous improvement through periods of regulatory and policy uncertainty.

• Educating regulators on the business and financial risks related to transformation of the industry.

Figure 5: Influencing policymakers and regulators

Carbon pricing

Feed-in tariffs

Contracts fordifference

Beyond-the-meterservices

Consumer pricebenchmarking

Cap and collarincentives

Capacity market

Emissions – limitedrunning hours

Load management services

Continual change anduncertainty


Traditional users

Centralised generation

Transmission and distribution (centralised)

Consumers

New users, new products, new tariffs

Transmission and distribution (distributed, local energy systems)

Storage Metering

Electricvehicles

Energy management

services

Homeservices

Demandresponse

Distributed generation


Predicting, measuring and managingthe impact of customer load reductionon revenues.

Defining the options and potential for new revenue creation and capture.

Design of alternative cost-recovery approaches given the decline in volumeand level of potential unrecovered costs.

Identification and development of other services that could be offered to replacelost revenues.

The appropriateness of different business models to be considered fornetwork ownership or operation toenhance derived value.


In Australia, network utilities are having to review their maintenance andinvestment programmes as reduceddemand results from economicdownturns, micro-generation andenergy efficiency.

In the US, focus is now turning to the adoption of more certain cost-recoverymechanisms, e.g. straight-fixed variablemodels, to reflect fixed cost levels.

Network companies in the UK have entered into strategic partnerships withcompanies in their supply chain to more effectively manage their cost basein areas such as maintenance, newconnections and network expansion.They have adopted multi-year contractswith incentive arrangements thatencourage operational innovation andmanagement of schedule, cost andquality.

Replacing declining revenues from traditional businesses

6

In recent years, utilities have experiencedthe sharp adverse impacts of demanddestruction from economic stress, as wellas the sustained impact of decliningconsumption as the cumulative effects ofenergy efficiency programmes continue tomount. More recently, new technologies,such as roof-top solar, and changedcustomer behaviours, such as the desire for choice, threaten traditional utilitybusiness models. Customers can now self-supply, bypass utility infrastructureand install more inventive consumptiontools, challenging the role of utilities.

For example, traditional utility networkbusiness plans are based on regulatedreturns from long-lived assets. Astechnology leads to more decentralisation,the network businesses need to raise thesame level of revenues from a smallernumber of customers and reduced volumethroughput. The necessary solutions will be guided by both strategic andregulatory solutions.

To avoid a continuous decline, the utilitysector needs to look at both how to delivertraditional services efficiently, but moreimportantly create the ability to backfillrevenue erosion, regardless of cause. This will demand more innovation at thetop line, as well as more inventive policydefinition to enable pricing models to beredefined to match the nature of marketstructure and cost-recovery requirements.

Among the issues that are of CFOrelevance:• Reassessing timescales for capital

investments and efficiency improvement schemes to offset reductions in revenue.

• Identifying alternative business models and partnerships to offer alternative services and approaches to pricing and recovery.

• Justifying regulatory tariff requirements given forward revenue and volume projections.

Figure 6: Replacing declining revenues from traditional network businesses



Constantly mapping changesand risks

What do you see as the major challengesfor the CFO role arising from energytransformation?I’d expect the transformation of energy to lead the CFO role to move to more of a chief risk officer considering theemergence of newer technologies,renewables becoming the mainstreamsource of energy at competitive prices, and the expected shift in the whole energy chain to a totally different scale and methodologies. The way the energybusiness is expected to run would be very different from today consideringvarious factors, most importantly theenvironmental and social considerations.

How do you see your role and yourdepartment changing to keep yourcompany successfully on track and ahead of change?Diversification of sources of generation,geographies, customers and supplierswould be the key requirement apart from asset sweating in a traditional way.Of course, diversity in financing sources,innovation and differentiation would benecessary to keep ahead of competition. As a finance function and CFO, the rolehas to be seamlessly integrated in everyfunctional area to protect and enhancevalue.

India’s Mytrah Energy has developed a substantial windpower portfolio spread across six Indian states –Rajasthan, Gujarat, Maharashtra,Andhra Pradesh, Karnataka and Tamil Nadu. The company’s portfolio was built using a combination of ‘turn-key’ developers and in-houseproject development, with wind turbinespurchased from three leading vendors.

Shirish Navlekar, Chief Financial Officerand Director, MytrahEnergy Limited, gives his viewpoint on the contrastsbetween the CFO role

today and what it will look like in tenyears’ time.

What are the biggest changes you expectto see in the CFO role in power and utility companies?I see the CFO role transforming tosomething more akin to a businessintelligence unit where constant mappingof environmental changes would need tobe simulated to predict and realign thestrategy and reduce risks.


Measuring enterprise performance as business models shift

7

While changes to business models aredriving new relationships with customersand suppliers in the energy value chain,they are also putting additional pressureon the management of businessperformance in a more demanding marketand investment environment. They are also causing traditional business modelsto change, which further exacerbates the stress to produce requisite financialresults.

Utilities need to put in place moredefinitive operational standards andtargets that directly address theseheightened enterprise performancerequirements. Customer behaviours arechanging rapidly. The need to recognisecustomers’ greater demand for highervalue from their discretionary spend isleading utilities to focus with greaterdiligence on aligning business strategies,financial targets and market outcomes.

As this range of issues broadens, theresponses of the industry will also need to expand. While some of these issues arelinked to the process of liberalisation andothers are arising due to the proliferationof emerging technologies, the challengesto the industry do not differ greatly.Companies will need to find the rightbalance between pursuing aggressivestrategic goals and ensuring that coreoperational performance is not onlysustained, but also enhanced.

Among the issues that are of CFOrelevance: • Determining how to monetise

information about customers and customer demand and develop new opportunities.

• Determining how to assure revenue as billing becomes more complex and new bi-directional customer/supplier channels emerge.

• Determining the new levers and key performance indicators (KPIs) required to manage increasing complexity.

Increased cost to serve

Traditional revenue destruction

Increased complexity of meter-to-cashprocess

Greaterchallenges in

measuring performance

Demand for new products and services

Changing systems, processes, accountabilities

Increased customer expectations

Increased performance challenges


Ensuring that the execution modelsutilised by the company are alignedwith the financial needs of the business.

Making sure that finance performs the role of an agile business partner to theoperations and commercial parts of the business.

Ensuring that the KPIs monitored are effective at demonstrating qualityoutcomes against strategic objectives,balancing consistency, quality andefficiency.

Implementing a culture of continuous improvement and efficient changemanagement.

Developing a model for measurement of business performance that extendsbeyond common financial andoperational metrics.


Some US utilities have adopted a new tariff strategy that incentivisesconsumers to reduce load at shortnotice in return for lower tariffs.

Similarly, in the UK, the introduction of smart meters is set to reduce to costto serve for pre-payment customers and result in the advent of lifestyletariffs. These tariff structures willrequire radically different sets of KPIsand performance measures to trackprofitability.

Across the globe, the advent of the prosumer – a customer that bothproduces and consumes – is creatingnew business models requiring morecomplex billing and settlementprocesses. Monitoring the effectivenessand ensuring the accuracy of theseprocesses requires new models formeasuring performance that cut acrossdifferent parts of the utility value chain.

Figure 7: Increased performance challenges


Attracting capital through appropriate risk allocation

8

The energy sector competes for scarceglobal capital with large infrastructureprojects, regulated businesses and cross-industry retail investmentopportunities. The unprecedentedvolatility and uncertainty in the energysector is changing investor risk perception,placing additional pressure on utilitybalance sheets.

Attracting capital has always been achallenge, but the disruption caused byenergy transformation has added a newdimension to the challenge for utilities. As the structure of the market changes and becomes less stable, both in thecompetitive and regulated sectors, thechoices of where to allocate scarce capitalbecome more complex. Investors have avast array of infrastructure projects inwhich to place their capital and the adventof smart grids, renewable technology andbeyond-the-meter services increases therisk profile above that of a traditionalutility.

Companies need to balance the longer-term capital replacementrequirements associated with traditionalbusiness models with the shorter-termcapital return horizons that align with the new fundamentals of the market. Risk allocation to the party best able tomanage the risk becomes ever moreimportant in attracting investment.

Among the issues that are of CFOrelevance:• Risk management of projects, new

business assets, new ventures and operations.

• Prioritising capital investment across traditional and new ventures to assurecompetitive position.

• Structuring supply chain contracts to provide a more appropriate risk/reward balance to demonstrate derisking of projects to investors.


Prioritisation of future capitalinvestment levels and timing tooptimise financial outcomes.

Understanding of the differences in risks related to capital projects acrossthe company value chain.

Development of risk-adjusted returns to reflect the true level of risks associatedwith individual capital projects.

Management of capital deployment performance in a manner consistentwith internal risk assumed.

Adoption of more stringent project evaluation business case methodologiesto ensure optimisation of scarceresources.

Ensuring appropriate risk allocation and return on investment to attractfinancial investors for major projects.

On the ground: examplesand issues

US utilities are seeking to spread therisk associated with major capitalprojects by offering a larger number of discrete work packages where riskscan be more appropriately allocated.

Some UK distribution companies areaddressing the challenge of managingmaintenance and expansion capex byentering into strategic partnerships with supply chain companies and usingrisk/reward incentive structures.

Also in the UK, major capital projects are seeking support from thegovernment’s Infrastructure UKGuarantees scheme to reduce theproject risk profile and provideadditional comfort to the financialcommunity for financing purposes.

Figure 8: Attracting capital – key concerns

Reputation

Capital marketconstraints

Key concerns

Cashflows, margins, outlook

Regulatory revenues/unit rates

Returns achievable

Risks of new businesses

Credit ratings

Recycling of capitalbetween businesses


The range of strategic and energy transformation issuesdiscussed in the preceding chapters add to the reportingchallenge faced by power and utility sector CFOs. As thenature of their business models and the structure of their markets change, the need to explain this throughgood reporting becomes all the more important. Formal reporting is a key channel for communicating the company’s story, its strategy for future investment,approach to risks and opportunities and the way itmonitors performance.

Investment professionals have specificinformation needs and many power andutilities companies struggle to satisfy themcompletely. Recent PwC research withinvestment professionals who specialise in the power and utilities sector found that there are important areas where areview of current reporting could deliverimprovements.5 In particular, it found that investment professionals focusing onthe power and utilities sector are highlyinterested in business model disclosures – but see huge room for improvement (see figure 9).

The PwC research found substantial‘effectiveness gaps’ in the reporting ofstrategy and risk. Investors and analyststold us they need clearer explanations ofissues such as how long-term strategyrelates to the current business model, and how key risks are managed andmitigated. They also want to see clear links between strategic goals, risks and KPIs.

The level of granularity, clarity andspecificity are the most frequently citedareas of business model explanations that need attention. Many investmentprofessionals said they would like to seemore transparency about how capital flowsthrough the company. They also want abetter focus on how power and utilitycompanies make money, both in terms ofcash today and value that will convert tocash in the future.

Ultimately, companies that fail to provideinvestors and analysts with theinformation they need could face a highercost of capital and greater difficulty infunding infrastructure investment. As energy transformation results instrategies diverging further away from thefamiliar, traditional power utility businessmodel, company CFOs will need to ensurethat their reporting keeps pace and thatthey bring the investment communityalong with them. This report highlights a number of the important areas for CFO attention and some of the ways inwhich they could be addressed. It will bevital that these are also reflected inimproved reporting.

If companies can deliver better reporting,we see another important benefit in theform of building and improving trust withall stakeholder groups. Energy is by itsnature a key public trust issue, with a greatamount of trust invested in power utilitycompanies. Energy transformation createschallenges for companies to ensure thatthey build on that and don’t have this trusteroded. More effective and transparentreporting can help with this.

Reporting more effectively

Figure 9: Reporting gaps – key areas for power and utility sector reporting improvement*

*On a scale of 0 to 100, where 0 is not at all important or not at all effective and 100 is very important or very effective.

Importance Effectiveness

The company’s overall explanationof its business model

How the company creates value

How the company generates cash

How the business is positioned in its wider value chain

Dependencies on key relationships and resources

The company’s dependency and impact on the future supply of resources

89

50

81

36

89

56

57

43

75

50

61

475 PwC, Powerful Reporting: what do global power

and utilities sector investment professionals want to see in company reporting? November 2014.


Round-up The CFO checklist

1. Does the board have a clear view of the answers to the questions that need to shape your focus as a CFO – ‘where to play’ strategically, ‘how to play’ commercially and ‘how to win’ competitively?

2. Are the requirements of the transformation being matched with the capabilities to analyse value and to differentiate activities that create clear market positioning value from those that merely draw resources and do not advance the strategic agenda of the company?

3. Have you got the necessary tools and insights to judge the best financing and corporate restructuring options to deliver on the chosen future strategy?

4. Do you have the right forward- and outward-facing data gathering and analysis capabilities in place that can turn data into insight and, more importantly, insight into foresight?

5. Is your reporting keeping pace? Are you able to align and communicate about the energy industry transformation that is taking place with a clear and convincing value realisation strategy – upwards at the board, outwards to investors, policymakers, regulators, customers and the public, and downwards through the organisation?

6. Do you know what impact different incubation, collaboration and partnering structures might have on value and on your options for venturing into new areas?

7. Have you got processes in place that enable comparison of capital deployment options right across the business, not just within particular business units, so that capital allocation can be truly matched to the enterprise’s strategic outcomes?

8. Do you have effective processes that enable alignment of the critical functions necessary to support quality financial stewardship and a distinctive strategic architecture?

9. Are you gathering the evidence and insight that will enable you to have a proactive dialogue with policymakers and the regulator to ensure that the regulatory roadmap around energy transformation does not lead to unintended consequences?

10. Do you have flexible risk allocation and mitigation strategies in place to enable the company to manage the impacts of energy transformation?


Europe

AustriaMichael SponringTelephone: +43 1 501 88 2935Email: [email protected]

BelgiumKoen HensTelephone: +32 2 710 7228Email: [email protected]

Central and eastern EuropeAdam OsztovitsTelephone: +36 14619585Email: [email protected]

DenmarkPer TimmermannTelephone: + 45 39 45 91 45Email: [email protected]

FinlandMauri HätönenTelephone: + 358 9 2280 1946Email: [email protected]

FrancePascale JeanTelephone: +33 15657 1159 Email: [email protected]

GermanyNorbert SchwietersTelephone: +49 211 981 2153Email: [email protected]

GreeceVangellis MarkopoulosTelephone: +30 210 6874035Email:[email protected]

IrelandAnn O’ConnellTelephone: +353 1 792 8512Email: [email protected]

IsraelEitan GlazerTelephone: +972 3 7954 830Email: [email protected]

Norbert SchwietersGlobal Power & Utilities LeaderTelephone: +49 211 981 2153 Email: [email protected]

Jeroen van HoofGlobal Power & Utilities Assurance LeaderTelephone: +31 88 792 14 07Email: [email protected]

David EtheridgeGlobal Power & Utilities Advisory LeaderTelephone: +1 925 519 2605Email: [email protected]

Karen DawsonTelephone: +44 7711 771387Email: [email protected]

Tom FlahertyTelephone: +1 214 208 7129Email: [email protected]

Brian WilliamsTelephone: +971 56 991 0160Email: [email protected]

Olesya HatopGlobal Power & Utilities MarketingTelephone: +49 211 981 4602Email: [email protected]

Global contacts Territory contacts

Asia-Pacific

AustraliaMark CoughlinTelephone: +61 3 8603 0009Email: [email protected]

ChinaGavin ChuiTelephone: +86 10 6533 2188Email: [email protected]

IndiaKameswara RaoTelephone: +91 40 4424 6688Email: [email protected]

IndonesiaSacha WinzenriedTelephone: +62 21 52890968Email: [email protected]

JapanYoichi Y HazamaTelephone: +81 90 5428 7743Email: [email protected]

KoreaLee-Hoi DohTelephone: + 82 2 709 0246 Email: [email protected]

Contacts


ItalyGiovanni PoggioTelephone: +39 06 570252588Email: [email protected]

NetherlandsJeroen van HoofTelephone: +31 88 792 1328Email: [email protected]

NorwayHildegunn Naas-BibowTelephone: +47 9526 0118 Email: [email protected]

PolandPiotr LubaTelephone: +48227464679Email: [email protected]

PortugalJoao RamosTelephone: +351 213 599 296Email: [email protected]

RussiaTatiana SirotinskayaTelephone: +7 495 967 6318Email: [email protected]

SpainCarlos Fernandez LandaTelephone: +34 915 684 839Email: [email protected]

SwedenAnna ElmfeldtTelephone: +46 10 2124136Email: [email protected]

SwitzerlandMarc SchmidliTelephone: +41 58 792 15 64Email: [email protected]

TurkeyMurat ColakogluTelephone: +90 212 326 64 34Email: [email protected]

United KingdomSteven JenningsTelephone: +44 20 7212 1449Email: [email protected]

Middle East and Africa

Middle EastJonty PalmerTelephone: +971 269 46 800Email: [email protected]

Anglophone & Lusophone Africa Angeli HoekstraTelephone: +27 11 797 4162Email: [email protected]

Francophone AfricaNoel AlbertusTelephone: +33 1 5657 8507Email: [email protected]

The Americas

ArgentinaJorge BacherTelephone: +54 11 5811 6952Email: [email protected]

BrazilRoberto CorreaTelephone: +55 31 3269 1525Email: [email protected]

CanadaBrian R. PothTelephone: +1 416 687 8522Email: [email protected]

United StatesMichael A. HermanTelephone: +1 312.298.4462Email: [email protected]

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should notact upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express orimplied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law,PricewaterhouseCoopers does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone elseacting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2015 PwC. All rights reserved. Not for further distribution without the permission of PwC. “PwC” refers to the network of member firms ofPricewaterhouseCoopers International Limited (PwCIL), or, as the context requires, individual member firms of the PwC network. Each memberfirm is a separate legal entity and does not act as agent of PwCIL or any other member firm. PwCIL does not provide any services to clients.PwCIL is not responsible or liable for the acts or omissions of any of its member firms nor can it control the exercise of their professionaljudgment or bind them in any way. No member firm is responsible or liable for the acts or omissions of any other member firm nor can it controlthe exercise of another member firm’s professional judgment or bind another member firm or PwCIL in any way.

PwC helps organisations and individuals create the value they’relooking for. We’re a network of firms in 157 countries with morethan 195,000 people who are committed to delivering quality inassurance, tax and advisory services.

The Global Energy, Utilities and Mining group is the professionalservices leader in the international energy, utilities and miningcommunity, advising clients through a global network of fullydedicated specialists.

For further information, please visit:www.pwc.com/utilities

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