Eskom could learn from Denmark's DONG experience

South Africa's electricity supplier Eskom and Danish gas supplier DONG are similar utilities - both having introduced elements of privatisation recently, and both planning some major unbundling.

This is according to Peter Venn, strategic account manager at SAS Institute SA, who says that because many parallels can be drawn between the two utility giants, Eskom management teams could gain some valuable insights from DONG.

"Eskom's management teams could simplify their tasks if they leveraged the knowledge gained from DONG's experience not only in the areas of restructuring, but also from how DONG has used technology enablers."

Venn points out that both Eskom and DONG use SAS software for their performance management and reporting needs.

Denmark has been very active in promoting industry deregulation and open markets. DONG has undergone a reorganisation from a state-owned monopoly into a modern, independent operator in an open, competitive and liberalised market.

"Changing from a government utility into a corporate entity with a focus on the bottom line and earnings is no easy task," says Anders Eldrup, President of DONG. "Our new orientation toward open competition required a change of culture as well as a new management structure."

All of these changes require the support of not only large ICT systems, but also more flexible tools for management reporting, consolidation, risk management, gas optimisation and other types of analyses.

Effective performance management has been the key to success in DONG's reorganisation. Management determines the strategy, which is approved by the board of directors, and the strategy is then broken down into objectives for every business unit and incorporated in the decentralised budgets. Performance management is reflected in the budgets for each business unit.

DONG's management information system will even break down the strategy into objectives and communicate them to the subsidiaries. Every month management gets key figures and performance management reports for each business unit.

DONG is consolidated on a consistent SAP R/3 platform with financial solutions and a number of industry specific solutions. SAP, however, is too inflexible to handle some types of data extraction and analyses, and therefore DONG chose SAS Financial Management Solutions and SAS Strategic Performance Management for analyses.

It uses SAS Financial Management Solutions for the flexibility. Because contracts are extremely complicated, buying and selling the right contracts at the right time demands optimisation.

"Finding the right balance of information is very important, as producing too many reports can seem superfluous. The management reports should be brief and concise without going into unnecessary detail. The first page should contain the essentials and any problems should be covered in a note," maintains Eldrup.

Management receives information and key figures and if reports or budgets have a yellow or a red flag, they may need to be examined further.