Growth and profitability are challenged by the lack of centralised information and financial model management needed to generate proposals and make investment decisions.

In today’s rapidly changing energy landscape, power producers are narrowing their focus on both growth and profitability in order to survive.  Their chances of achieving and maintaining profitable growth are being challenged by a number of external factors, including increased market competition, changing regulations and even emerging customer segments. The heart of profitable growth originates within the business development function, whose role it is to acquire new projects. Growth, however, depends on the rate of new project acquisition, whereas profitability depends on the quality of projects. Business development teams are struggling to acquire high-quality projects quickly due to flawed, inefficient proposal generation and decision-making processes. The root of this issue is caused by dispersed information and lack of financial model control.

 

Challenges in Proposal Generation Today  

The current methods of project proposal generation are significantly slowing down business growth. A report from IDC Energy Insights found that companies blame their current proposal generation processes to be a major bottleneck in their project pipeline, and that “over 30% of asset investment proposals require rework due to missing information, poor assumptions, compliance gaps, etc.” These process inefficiencies are the result of inconsistencies in methodology and data collection, which are diminishing developers’ ability to configure accurate, timely proposals. Depending on the organisation’s size and bandwidth, proposal generation on average today takes anywhere between 2-4 weeks and requires multiple dedicated developers. Putting together a proposal requires sourcing information from multiple sources that are not readily available in most organizations. In fact, many organizations today store project information in multiple Excel documents which exist in disparate systems or desktops. This lack of centralized  project information in a single place makes it difficult to create comprehensive, timely proposals and often results in errors or inconsistencies. This is equally challenging for the Investment Committee, who is tasked with comparing projects and making the most accurate investment decisions. With the comprehensiveness and timeliness of the proposals suffering, business growth is effectively stagnating.

 

The Trouble with Financial Model Management

 At the heart of proposal generation lies the project financial model. Having all the necessary assumptions for cash flows and return on investments are critical to putting together an accurate, comprehensive proposal. However, this is complicated by the diversity of models and lack of control over the various assumption inputs. In consequence, it is becoming virtually impossible to verify the accuracy of information within the model. There are also significant discrepancies in the models used by business development teams and investment committee. Investment Committees use a very detailed model whereas business development operates under a much simpler financial model with a different set of assumption. This model diversity leads to high rejection of project proposals at the late stage, driving up the cost of project acquisition.

 

Why the Status Quo Won’t Scale

 For heads of business development teams who have growth and revenue targets to hit, the loss of employee productivity, missed time to market and the incursion of inefficiencies attribute directly to lost business opportunities, frustrated employees, and unsatisfied managers. With growth at stake, there is a critical need to improve the project acquisition process.

A number of different solutions are being pursued to help improve project acquisition. Large-scale utilities are implementing customer relationship management (CRM) solutions in hopes of solving this problem. However, these systems were not designed for managing financial model management capabilities, nor do they have the ability to capture the complexity of information that goes into an energy project. Smaller-to-medium sized power producers have propagated the status quo by remaining heavily dependent on email, excel and document management systems. However, as project complexity and volume increases, the combination of these systems cannot sustain. A new approach is required that will streamline data collection and management in a single system of truth, otherwise companies will struggle to scale.