<<
>>

§5. Key indicators of efficiency of the investment program in a control system of the power company

In 2004 within the limits of re-structuring of electric power industry and according to the ideas mortgaged in the concept of strategy of the Russian Open Society "United Power Systems" on 2003-2008 ("5+5 [31], the organizational structure of the Russian Open Society"United Power Systems"definitively reoriented from problems delivered in 90th of anti-recessionary management on management by development of business and reform has been reformed, In its frameworks the control centre of reform has been created; the management structure (DZO) has been transformed by affiliated and dependent companies to five business - of units which are responsible now for achievement subordinated DZO the purposes delivered for them [19]. For realisation of a company strategy and objects in view it is developed and the system of the balanced indicators (Balanced Scorecards), assuming an establishment of key indicators of efficiency in four areas is introduced: operational activity; financial and economic activity; reliability of work; a reforming course.
The essence of control system DZO in new organizational structure of the Russian Open Society "United Power Systems" is reduced to achievement of the established significances of key indicators of efficiency by them (KPI, key performance indicators) [19] at observance of the confirmed standards. Thus system KPI in the Russian Open Society "United Power Systems" provides availability of the so-called through indicator identical both for head company, and for all DZO irrespective of type (joint-stock company-energo, the institute, the operating, building or marketing company), that allows to make between them comparison. It is obvious, that an indicator which the business kind does not influence, can be only financial.
The basic estimated indicator of work DZO for the last three years is profitability of all assets ROTA [68] (Return on Total Assets), representing the relation of profit to the taxation to asset of balance. At introduction it has been aimed at profitableness increase
The companies ^ disposal of non-profitable assets, debt receivable collection, allocation and transfer of not profile objects.
Target significance of indicator ROTA was originally established identical to all DZO — 5 % (for joint-stock companies-hydroelectric power stations in connection with a seller's price of their fixed capital this indicator was established at level of 3 %). Thanks to this indicator in 2003 yield of cumulative assets of holding has increased almost twice in comparison with 2002 g
[19]. For 2004 for each DZO already uniform, individual significances ROTA were established. It has been connected by that division of all DZO holding only on two groups (HYDROELECTRIC POWER STATION and not HYDROELECTRIC POWER STATION) did not reflect their variety. Among DZO there are the companies having practically completely depreciated fixed capital, and rather recently placed in operation energoobekty with expensive fixed capital. Thus, an establishment of a uniform lath for all target significance demotivirovalo part DZO: for one target significance it became practically unattainable, for others - it was executed almost
Automatically. As a result both those, and others have appeared are a little interested in the further increase of yield of assets. After differentiation of the given indicator target significances for various DZO have placed in wide enough range: from close to zero to exceeding 10 %.
According to [131], indicator ROTA is also the basic indicator used for an estimation of efficiency and the control for
Realisation of investment programs DZO.
At the same time, among defects of concept ROTA it is necessary to note following [68]:
1. Use of indicator ROTA motivates reduction of used company assets (fig. 2.7.)


Fig. 2.7. Decomposition of the purposes at use of control indicator ROTA
Ill
Absence of the account financial leveridzha, and consequently effect from loan capital attraction. In an indicator denominator there is a total significance of assets, i.e. balance currency, instead of a company ownership capital, is leads to that the effect from investments or current activity is considered on the involved capital, instead of on actually share capital.
Building of new capacities requires some time, during this period of a stream of profit on new station yet will not be, and assets will already increase (at the expense of not complete building). Accordingly ROTA essentially decreases or it is equal to zero, and since the moment, when paying interest under the credit will begin (under condition of not capitalised percent), ROTA becomes negative (since profit to the taxation = the zero — percent for the credit).
In case of realisation of revaluation of a fixed capital the sum of assets of balance grows, the accounting depreciation at the same time increases and, hence, the profit decreases. It conducts all to aggravation of indicator ROTA. As a result the management prefers to transfer revaluation of a fixed capital on the future, losing thus the depreciation charges necessary for simple reproduction.
Thus, maximisation of indicator ROTA not always promotes optimisation of an investment policy of the company, its modernisation and tehperevoooruzheniju. The choice of other through indicator of the efficiency reflecting new priorities of the power company is necessary: sustainable development maintenance in competitive environments and appreciation of the company for shareholders.
It would seem, to the greatest degree these purposes reflect indicators of dynamics of capitalisation of the companies, but as a through indicator they are inapplicable: number DZO the Russian Open Society "United Power Systems" is 100 %-s' affiliated companies, or they have a large strategic investor therefore quantity of the shares traded at exchange, very few, and on individual transactions in the market it is impossible to evaluate dynamics of capitalisation adequately. Besides,
Growth of capitalisation of some large joint-stock companies-energo is in most cases caused not by improvement of quality of management and level of yield of the share capital, and is faster interest of strategic investors to purchase of power assets, and consequently, growth of demand for these shares at exchange.
Therefore now the most comprehensible are indicators of profitability and the share capital return, focused on increase in a market value of the company through a gain of profitable assets. Thus interest is represented by the indicators using not an accounting earning, and a free cash flow for shareholders.
The model of firm "DuPont" with main control indicator ROE (Return on Equity, Profitability of an ownership capital) (rice 2.8) [28] can become one of comprehensible concepts


Model ROE is sufficient is easy in application and is adapted for the Russian standards of the account. However she allows to consider only indirectly a vested capital, does not consider capital cost (both extra, and own). Such model can is effective be applied as a whole for
Estimations of efficiency of activity of the company, however for a through indicator of the control over investments DZO it is a little suitable.
Other possible approach is the estimation of efficiency and the control over realisation of the investment program on the basis of the concept of management in cost. One of the tools, within the limits of the given concept and purchasing the increasing distribution, the indicator of economic added value EVA (Economic Value Added) [44] is widely used. Indicator EVA developed in the beginning of 90th by company Stern Stewart and With, is used today more than in 250. The in the lead companies with a world name. The economic added value reflects growth of cost of the company for the analyzed period and is defined as a difference between a pure trading profit after the taxation (EBIT (1)) and expenses for the capital:
EVA = EBIT (1) - WACC • With = (ROI - WACC) • With,
Where EBIT - profit to the taxation and the interest payment,
Tax — a tax rate on profit, %
ROI — profitability of a vested capital
WACC - the average cost of the capital
With — size of the involved capital (Capital employed)
The essence of indicator EVA consists in the following: the pure trading profit after the taxation (EBIT (1)) is the income received after subtraction of costs and amortisation. The part of the given income goes on the payment of expenses for use of resources (it is expressed in expenses on own and a loan capital), and other part makes the created cost which measures EVA. New cost forms only when the company receives such return from a vested capital which exceeds expenses for attracting capital.
The concept of an economic added value is based on the same principles which are applied at traditional NPV the analysis that allows to consider indicator EVA alternatively. Numerically total discounted economic added value for all life cycle of the project is equal to the pure discounted income of the project, (fig. 2.9., tab. 2.11.). In tab. 2.11. Comparison of indicators NPV and EVA for the conditional investment project which realisation is calculated for fifteen years is resulted. The rate of depreciation under the project makes 4 %, the average cost of the capital starts at level of 14 %. It is obvious, that results of application traditional NPV the analysis are identical to the indicators received on the basis of realisation of concept EVA.


Source: accounts of the author
At the same time, if account NPV of the project states an estimation of a gain of a market value of the company as a result of project realisation for all period of its life cycle in the form of uniform integrated significance indicator EVA allows to evaluate increment value in each of the life cycle periods (fig. 2.9.), that is extremely actual for the projects of electric power industry characterised by long life cycle.
Comparison of indicators NPV and EVA (throughout life cycle of the project and integrated)
The table 2.11.\r\n # Indicators / Years 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15\r\n 1. ACCOUNT of the PURE DISCOUNTED INCOME (NPV) \r\n1 Investment and operational streams \r\n2 Investments into permanent assets 762,00 \r\n3 the Reproduction new cost of permanent assets on the beginning of the period 645,76 619,93 594,10 568,27 542,44 516,61 490,78 464,95 439,12 413,29 387,46 361,63 335,80 309,97\r\n4 Depreciation charges 0,00 25,83 25,83 25,83 25,83 25,83 25,83 25,83 25,83 25,83 25,83 25,83 25,83 25,83 25,83\r\n5 the Gain from realisation of production 0,00 546,28 546,28 546,23 546,28 545,28 546,28 546.28 546,28 546Д8 546,28 546,28 546,28 546,28 546,28\r\n6 Receipts from realisation of the cores and circulating assets (in the end of project life cycle) 284,14\r\n7 Operational costs 247,69 247,69 247,69 247,69 247,69 247,69 247,69 247,69 247,69 247,69 247,69 247,69 247,69 247,69\r\n8 Taxable profit 272,76 272,76 272,76 272,76 272,76 272,76 272,76 _272j76_ 272,76 272,76 272,76 272,76 272,76 272,76\r\n9 the Profit tax (24 %) 65,46 65,46 65,46 65,46 65,46 65,46 65,46 65,46 65,46 65,46 65,46 65,46 65,46 65,46\r\n10 Net profit (approximately corresponds NOP AT) 207,30 207,30 207,30 207,30 207,30 207,30 207,30 207,30 207,30 207,30 207,30 207,30 207,30 J&LB-\r\n1] Compensation of the VAT of a pas of the investment 53,75 62,49 \r\n12 the Free cash flow (FCF) 286,88 295,62 233,13 233,13 233,13 233,13 233,13 233,13 233,13 233,13 233,13 233,13 233,13 517,27\r\n13 the Discounted free cash flow-762,00 258,25 241,88 157,36 138,03 121,08 106,21 93,17 81,73 71,69 62,89 55,16 48,39 42,45 82,61\r\n14 the Pure discounted income (NPV) 798,89 \r\n \r\n 1. RA the ACCOUNT the HOUSE-KEEPER And the CHESKY ADDED VALUE (EVA) \r\n1 the Involved capital 645,76 594,10 568,27 516,61 490,78 464,95 _439Д2_ 413,29 387,46 361,63 335,80 309,97\r\n2 the Average cost of the capital (KW), % annual 0,14 0,14 0,14 0,14 0,14 0,14 0,14 0,14 0,14 0,14 0,14 0,14 0,14 0,14\r\n3 Cost of the capital 90,41 86,79 83,17 79,56 75,94 72,33 68,71 65,09 61,48 57,86 54,24 50,63 47,01 43,40\r\n4 the Trading profit after the taxation 207,30 207,30 207,3Q 207,30 207,30 207,30 207,30 207,30 207,30 207,30 207,30 207,30 207,30 207,30\r\n5 the Economic added value 116,89 120,51 124,13 127,74 131,36 134,98 138,59 142, 21 145,82 149,44 153,06 156,67 160,29 163,91\r\n6 the Discounted economic added value 102,54 92,73 83,78 75,63 68,22 61,49 55,39 49,85 44,84 40,31 36,22 32,52 29,18 96,87\r\n7 the Cumulative discounted economic added value (EVA) 798,89 \r\nIstochnik: accounts of the author \r\n
The expediency of construction of a control system and the control over investments DZO on the basis of EVA in comparison with use of concept ROI or ROE can be evaluated on a following example. The manager of division, ROI or ROE which 2 % are equal, will try to realise any investment project which will allow to lift a little at least an accounting rate of return (almost not considering significance NPV). On the contrary, the manager of division with high ROI will show some conservatism because of fear of decrease in this indicator. The situation when less profitable divisions "aggressively" invest while the most successful invest too cautiously, obviously, is not desirable for the company and its shareholders.
One more advantage of use of the given indicator at the control over fulfilment of the investment program consists in relative simplicity of realisation of a factor analysis as indicator EVA bases on three basic components: the income on the capital, expenses for the capital, vested capital size. Decrease in indicator EVA from investment activity of the company in comparison with planned or even its negative significance is the indicator of that or the company sufficient investments have not been conducted, or the capital is used not in the best way (i.e. expenses for the capital exceed return from it). Thus, application EVA will allow to simplify considerably the comparative analysis of planned targets of the investment project with actually * the reached.
<< | >>
A source: KULIKOVA Kira Aleksandrovna. ECONOMIC MODELS of FORMATION of the INVESTMENT PROGRAM of the ELECTROGENERATING COMPANY In the conditions of REFORMING of BRANCH. 2005

More on topic §5. Key indicators of efficiency of the investment program in a control system of the power company:

  1. 1.3. System engineering of indicators of a complex estimation of ekologo-economic efficiency of the investment project
  2. 2.2. Perfection of system of the indicators characterising efficiency of nature protection actions, carried out within the limits of the investment project
  3. 1.3 Key indicators of a sustainable development at company level
  4. 1. The purpose and problems of an appraisal plan of key indicators of efficiency (KPI).
  5. §4. The offered economic-mathematical model of formation of the investment program of the generating company in the conditions of limitation of financial resources
  6. 2. Objects and a supply with information of an appraisal plan of key indicators of efficiency (KPI).
  7. CHAPTER 2. MODELS of FORMATION of the INVESTMENT PROGRAM of the ELECTROGENERATING COMPANY
  8. Subjects of an appraisal plan of key indicators of efficiency (KPI).
  9. 3.2 Account ekologizirovannyh indicators of efficiency of the investment project
  10. KULIKOVA Kira Aleksandrovna. ECONOMIC MODELS of FORMATION of the INVESTMENT PROGRAM of the ELECTROGENERATING COMPANY In the conditions of REFORMING of BRANCH, 2005
  11. 1.1. The Procedure of payments and a scale of an estimation of key indicators of efficiency KPI of the economic subject.
  12. 2. The indicator «factor of productivity of the program Ur is offered the company», used for an estimation of level of a sustainable development of the company
  13. 4.2. The Procedure of payments and a scale of an estimation of key indicators of efficiency KPI of processes of activity of the economic subject.