State electrical power corporation of China (Analytical Forecast complex)

Goal

Changes in state policy and economy of the People's Republic of China and also rapid development of the company delivered before the State electrical power corporation of China (GEK of China) a number of essential tasks in the field of corporate and financial management:

• need of development of means for the analysis and modeling of policy of the company and fast decision makings;
•   improvement of interrelation between acceptance of management decisions and assessment of operational and financial performance, data collection for support of acceptance of management decisions;
• creation of tools for risks assessment and their timely warning;
• the need for model of calculation of electricity rates for reduction of difficulties when receiving support of rates from the government. For the solution of these tasks the corporation came to a conclusion about need of implementation of a single platform for system decision support in the course of activity of corporation.

Result

Specialists of Prognoz company implemented for the State electrical power corporation of China an analysis system and modeling of corporate finances. At the heart of a system - a number of models using which the user can calculate electricity rates and financial performance of activity of the company. As when calculating data on interest rates, state loans, demand for the electric power, investment policy are used, systematically organized models allow to create a complete picture of interrelations between economic climate, state policy, business solutions of the company and efficiency of corporate activity.

As before implementation of a system decision making process was based on experience of several experts and managers, and information from separate files, the analysis system and modeling of corporate finances represents a major step forward, being a single platform for systematization of necessary information sources, methodological and instrumental filling.

Systems are the cornerstone two main categories of models:

Models of electricity rates are models for forecasting of electricity rates on the basis of the forecasted demand on the electric power and the tariff policy of the government. Calculation can be used as at price fixation for electricity production by the government (in China electricity rates are controlled by the government), and for its market assessment.

Financial models are models for forecasting of financial performance of GEK of China on the basis of the predicted financial statements.

In a system forecasting is used scenario ("that will be, if …") and target ("that is necessary for …").

Basic functions of a system:

• Analysis and modeling of external influence.
  

By means of a system impact assessment of state policy, changes in demand and supply on the electric power, the planned costs for elimination of effects of emergencies for operational and financial performance of corporation is performed.

• Analysis and modeling of corporate solutions.
  

By means of a system specialists of corporation analyze influence of solutions in the field of investment and financial policy on operational and financial and economic indicators of corporation.

• Analysis and modeling of impact of a number of key indicators on operational and financial performance of corporation.

A system allows to perform modeling of electricity rates at its holiday in network, the analysis and modeling of demand for the electric power, calculation of normative cost value.

• Monitoring and data analysis, including data for preceding periods and forecast data.

Turns on tools for a financial analysis, the analysis of electricity rates and analysis types set by the user.

System implementation allowed to enter a number of significant improvements to decision making process during activity of corporation:

• Quantitative representation of the external environment: assessment of effects of tariff policy of the state as price impact on consumers of the electric power of the company.
• Quantitative representation of corporate solutions in the field of investment and financial policy.
• The analysis and modeling of a financial position taking into account the different temporary periods, interrelations between a financial position and external/internal factors.
• The analysis and modeling of retail electricity rates at its holiday in network, transfer and distribution.
• Risks assessment: application of the Monte-Carlo method for determination of the extent of market risks, timely warning of possibility of financial losses.
• Assessment of influence of tariff policy in the field of power industry on economy of the state (consumer price index and also other indicators) and demand for the electric power.
• Development of measures: process optimization of decision making using sensitivity analysis and goals management.

Effects of implementation

The analysis system and modeling of corporate finances promotes quality improvement of the made management decisions, helps to perform advance planning, provides information support at the solution of investment questions, cost control. Use of a system allows corporation to lower operating costs considerably. Use of a system provided to users several advantages:

1. Systematization: the application represents the system of the models interconnected with external factors. For example, at communication of price model with financial, it is easier for specialist to carry out price analysis on user groups and price influence on financial performance.

2. Automation: in a system the difficult logic of reorganization of model is implemented. When choosing by the user of the company, a forecast period, amount of data a system automatically executes reorganization of models.

3. Convenience of using: the application provides to users the convenient interface and the scheme of work. Using a system, even nonspecialists can analyze and model situations in the field of state policy, corporate solutions, monitor changes of operational and financial performance, estimate risks, etc.

Reference on the customer:

The state electrical power corporation of China - the largest in the People's Republic of China and around the world supplier company of the electric power. Branches of corporation on all territory of the country are engaged in electric power distribution.