Utilities Case Study
Case #5266: Spin-Off of Generation Assets
As part of its Deregulation Strategy, a large state's Public Service Commission mandated that all full-service energy utilities must divest themselves of all Generation Assets and focus solely on their Distribution business.
We were engaged to help this local regional utility company comply with the PUC's mandate.
The assignment was to prepare the Electric Production Division to function as a stand-alone business unit in anticipation of its required divestiture, and to create a business unit that would be easy to transition and would maximize the price realized by the selling entity.
This required the creation of an Executive Management Team, the creation of the necessary organization design, establishing a separate P&L and infrastructure for the new entity, and creation of arms-length Service Level Agreements for those support services that would continue to be provided to the unit by the parent organization.
Engagement Highlights
- Industry:
- Electric Generation and Distribution, Natural Gas Distribution
- Client:
- Small Regional Electric and Gas Distribution Company
- Approximately 300,000 Electric and 125,000 Natural Gas Customers
- Assignment:
- Prepare Electric Production Division to function as Stand-alone Strategic Business Unit
- Identify Support Services (e.g., HR, IT, Legal, Real Estate, etc.) required by Division
- Identify Improvement Opportunities in Electric Production Business Processes
- Assist in identifying Potential Buyers of the Generation Asset
- Approach:
- Map all Business Processes performed by the Electric Production Division
- Adapt Required Activities from Those Proven in Peer Companies
- Gather Comparative Performance Benchmarks to set Performance Targets
- Achieve Cost Reductions using Employee-led Process Improvement Teams
- Create Electric Division Executive Management Team Roles and Responsibilities
- Provide Executive Coaching and Leadership, Mgmt and Supervisory Skills Training
- Design, Install, Test and Refine Data Gathering and Performance Reporting Systems
- Create Service Level Agreements with all Suppliers of Support Services to Division
- Duration:
- 16 weeks
Results
- A fully functioning Stand-alone Business Unit as required for Asset Divestiture
- An effectively functioning Executive Management Team
- 25% reduction in Operating Costs
- Decision/Value Matrix Created for analyzing Competitive Bids for Asset
- Performance in the Top Quartile of Benchmarked Peers
- Successful Auction and Subsequent sale of Generation Asset