Transcript slide title - ICSG ISTANBUL

SMART METERING GAS
Revenue Potential or Waste of Money?
Director Strategic Market Development, André Wankelmuth, Itron
Istanbul, May 9th, 2014
SMART METERING - WHY SHOULD YOU CARE?
1.0bn
revenue USD
450
30m
yearly
employees
$$$$$$$$$$
100m
profit USD
1.5m
gas meters
installed
2.5 m
Investment
budget
$$$
m³ distributed
per year
Break Even
?
Net Benefit
Equipment
Cost
+ installation cost
(Capital Expenses)
Efficiency
Improvements
+
Avoided Costs
+
New services
(Cash Benefits)
THE RIGHT WAY?
From features to benefits – technology in search of a problem
Assets
• Smart Meter
Functionalities
• Remote management of
meters
Benefits
• Reduced meter reading
costs
Monetary value
• milllions/year
*Methodology for performing a CBA (own representation acc. Giordano, et al., 2012)
LOOKING AT PROBLEMS, THEN TECHNOLOGY
» Do you know the impact meter
accuracy has on your net income?
8m $$
5% undersized
5% undercounting
» Have you wondered about
the risk exposure of prepayment
meters to gas price and
m $$
9
exchange rate fluctuations?
250m USD
worthof gas
hedged
» Do you know the impact of
improving your
100m $$$
read-to-bill-to-cash cycle ? $$$$$$$$
60 days outstanding
receivables
CREATING A WIN-WIN VIA SHARED DISCUSSIONS
?
What is
at stake
Safety and
security
Operational
efficiency
Resource
management
Regulatory
compliance
Network delivery
performance
Revenue
protection
Consumer
satisfaction
1
RISK ANALYSIS METHODOLOGY
Identify
Risks
Revenue
protection
Business model analysis using
the business model canvas to
find areas for improvement
Risk analysis methodology to
identify key risks to be addressed
1
RISK ANALYSIS METHODOLOGY
2
40-70
M
YEARLY IMPACT – 4-7%
Risk Assessment
FMEA like approach
assess impact, likelihood
quantify impact (min, max)
impact
Revenue
protection
3
4
m
1
m
likelihood
cash | income
effect
Identify
Risks
Prioritize
Risks
Assess
Risks
1
RISK ANALYSIS METHODOLOGY
2
Eliminate
3
Revenue
protection
Moves: Anticipate, Mitigate, Eliminate, Transfer, Increase, Collect
more data, Do nothing
Anticipate
Revenue
protection
4
Identify
Risks
Prioritize
Risks
Assess
Risks
Risks
Mgmt Opt.
1
RISK ANALYSIS METHODOLOGY
2
3
4
Identify
Risks
Prioritize
Risks
Assess
Risks
Risks
Mgmt Opt.
1
RISK ANALYSIS METHODOLOGY
2
3
4
5
$
Identify
Risks
Prioritize
Risks
Assess
Risks
Risks
Mgmt Opt.
Risk Mgmt
Strategy.
1
RISK ANALYSIS METHODOLOGY
2
220
3
120
4
20
Identify
Risks
Prioritize
Risks
Assess
Risks
Risks
Mgmt Opt.
-80
5
-180
Total Costs
Benefits
Investment
Payback
Free Cash Flow
Scenario evaluation: $150 M 5 years
$
IRR
55%
NPV
$ 100 M
Risk Mgmt
Strategy.
INVESTOR│TURKEY
Turkey
Turkish DSO
M
61 199
3 YEAR MIN IMPACT
M
3 YEAR MAX IMPACT
MAIN RISKS IDENTIFIED
 Tamper detection
 Timeliness of readings
 Supply/demand balancing  Meter rightsizing
THANK YOU
www.itron.com
GOVERNMENT│UZBEKISTAN
Uzbekistan
Deputy Prime Minister
M
259 694
3 YEAR MIN IMPACT
MAIN RISKS IDENTIFIED
 Security Of Supply
 Demand response
 Revenue protection
M
3 YEAR MAX IMPACT
EXAMPLE: RATE MAKING
» Workshop 1: Basic data mining / gathering
» Rate making regulation:
» Workshop 2: understanding business processes (business process audit),
verifying assumptions
» In depth analysis of current assets and
planned invests (KR), Opex (KA / CS),
revenue streams per segment
» Workshop 3: Presentation of results, fine tuning of underlying assumptions
0.09
Scenario 1
0.04
Scenario 2
» Findings: regulated margin will drop
50% when regulation applied in
8 years (!) instead of expected increase.
EXAMPLE: METER TO CASH
»
»
»
»
Up to 60 days outstanding receivables
• Assuming 1Bn$ yearly revenue with 1.5 M
residential customers
• Average 2.74 M$ per day (1Bn$ / 365)
• Or 110$ per point in 60 days
(2.74 M$ /1.5M meters *60 days)
Payment period (e.g. 1 month) will be
programmed by utility or factory
At the end of the payment period the meter gives
a warning and the consumer has 5 days to pay
the total volume of what he consumed.
If the consumer doesn’t pay the total outstanding
volume on the meter, the valve of the meter will
close until the total outstanding volume is paid.
City Gate
Customer 1
Customer 2
1st read
2nd read
Estimated data
1
City Gate
Customer 1
2
Customer 2
1st read
2nd read
Granular data