Vattenfall Treasury - from decentralisation to ONE Treasury

Robert Flink,

Vattenfall AB, Group Treasury

September 2011

Facts about Vattenfall

• Vattenfall is one of the largest generators of electricity in

Europe and the largest generator of heat.

• Operations in Sweden, Finland, Denmark, Germany, Poland,

the Netherlands and the United Kingdom

• Electricity: generation, distribution and sales

• Heat: production, distribution and sales

• Gas: distribution and sales

• Energy trading and lignite mining

• 38 000 employees

• Owned 100 percent by the Swedish state

Our markets and positions in Europe

Wind power # 2 offshore • 955 MW onshore

• 772 MW offshore

Technical development Wave power & CCS

Hydro # 3 34.6 TWh

Biomass # 5 1 TWh

Electricity generation # 6 159 TWh

of which 41.5 TWh nuclear

Trading # 5 Presence on the most important

trading markets

Heat production # 1 37.9 TWh

Electricity distribution # 6 7.8 millions private customers

5.7 millions network customers

Core Markets

Key financial figures

2010 2009

Net sales, MSEK 213 572 205 407

EBIT (operating profit) MSEK 29 853 27 938

Profit (after tax) MSEK 13 185 13 448

Dividends, MSEK 6 500 5 240

Investment MSEK 41 794 102 989

Electricity generation, TWh 172,5 158,9

Heat production, TWh 44,5 37,9

No. of electricity customers 7 773 000 7 661 000

No. of network customers 5 719 000 5 669 000

No. of gas customers 2 134 600 2 124 800

Total electricity generation 2010

Other renewable energy

Hydro power

Nuclear power

Fossil-based power

Present environment

SAP TRM

Germany

SAP TRM

Netherlands

Treasury Road Map

Need

„The barrier to further integrate the group treasury team and harvest

efficiency gains lies within the IT infrastructure, which is different in

all locations…. Set up a global common Finance Platform will enable

Group Treasury to reach the highest possible level of cross country

integration.„ source: Group Treasury Business Plan 2011

VF In House Bank VF In House Bank

FunctionalitiesFunctionalities

Intr

agro

up

pay

me

nts

Acc

ou

nt

mgm

t.

Cas

h p

oo

ling

Exte

rnal

pay

me

nts

Cas

h in

vest

me

nts

Loan

ext

en

sio

n

Ce

ntr

al b

an

kst

atem

.

There is a vision to create a In-House Bank Func-

tionality where Group Treasury takes responsibility

for all banking related business in the Vattenfall

group. As a principle Treasury can be seen as a

group shared service for treasury matters, cash

pooling, internal/external payments, liquidity

forecasting, FX hedging, loan and funds

management.

- Standard Systems based on SAP

- Global payment file formats (XML-ISO20022)

- Standard list of treasury products

- Automation of group internal payment process

- Integrated IT interfaces

- Straight throug processing

- Establish Global Finance plattform

- One Treasury System

- One In-House Bank & Payment Factory

- One Cash Management System

- Central monitoring of financial processes

Treasury Roadmap

fits Vattenfall Strategy

Safety

Reduce risk

and improve

control

Performance

Reduce cost

and increase

efficency

Centralization

Automation

Standardization

Instruments Targets Measures of the Treasury Roadmap

The anchoring process

• Three pre-studies

- In House Cash

• Conclusion - IHC not enough scope needs to be broaden

- In House Bank

• Conclusion - Business case in replacing Treasury systems but

IHC/Payment Factory business case weak

- Replace Sungard FrontArena

• Conclusion - possible to replace FrontArena but we have accept

- non-real time system effects reporting/valuation

- less structured instruments

• Pre study cost approx 4-5 MSEK

Visualisation of Treasury Scope Landscape

SAP Benelux

PlatformFinancials, Cash

Management,

Actual liquidity

SAP

Transaction

Manager

SAP Inhouse

Cash

SAP Market

Risk Analyzer

Integration to

External banks

Bank

Connectivity

Bank 1

Bank n

Bank 2

Customer

Bank account

Vendor Bank

accountVendor

payment

Financial

Transaction

Payment

BS customer

payment

BS customer

payment

BS customer

payment

BS customer

payment

Bank statement

Customer payment

of invoiceVendor

payment

BS Vendor

paymentBS Vendor

payment

BS Vendor

payment

BS Vendor

payment

Bank statement

Vendor payment

Financial

transaction

BS Financial

transactionBS Financial

transactionBS Financial

transaction

Bank statement

Financial transaction

SAP Cash

management

SAP Actual

calculation

SAP

Business

warehouse

Forecast toolSAP Report

tool

SAP Credit

Risk Analyzer

Posting of

Financial

Transaction

SAP Kis

PlatformFinancials, Cash

Management,

Actual liquidity

SAP Classic

PlatformFinancials, Cash

Management,

Actual liquidity

Liquiidity

Data

Vendor

payment

Financial

Transaction

Payment

SAP Portfolio

Analyzer

SAP

Financials

Posting of

Financial

Transaction

IHC Postings

Financial cashflow

Actual liquidity

Prerequisites:

Standardised financial products

Standardised processes

One treasury organization

360 T

Financial

Transaction

SAP Poland

PlatformFinancials, Cash

Management,

Actual liquidity

MISYS

SAP

Platform

Ringhals

Risk

Reporting

IFS Poland

PlatformFinancials, Cash

Management,

Actual liquidity

Reuters

SAPNon SAP

SystemBank

Customer

VendorLiquiaity

SAP

PlatformFinland

SAP IS-U

SAP Loans

Treasury Road Map

Local Treasury

Treasury Center

SAP TRM

In House Bank

SAP IHC

Payment Factory

IHC & ipcN

De

gre

e o

f ce

ntr

alis

atio

n, a

uto

ma

tion

an

d p

roce

ss h

arm

on

ization

High

2011 2012 2013

Focus: Group Internal Functionalities

Treasury and Risk Management

- Inhouse Cash (Central Hub, Hub Benelux) / Cash Pooling

- Bank Connectivity (Cash Pool Banks)

- Treasury intercompany payments

Focus: Group external Functionalities

- Commercial intercompany payments

- External Payments

- Bank Connectivity (Roll-Out)

TG 2 TG 5

TG 5

TG 5

Ph

ase

on

e: T

RM

P

has

e tw

o :

Inh

ou

se B

ank

stabilization phase

Treasury Road Map - two steps

TG 2

Resource estimate – SAP TRM

Business IT Conultants Total

Project

Preparation

41 4 57 102

Business

Blueprint

220 134 247 601

Realisation &

Test

250 444 343 1 037

Final

Preparation

111 68 52 231

Go Live &

Support

87 124 106 317

Total Days 709 774 805 2 288

Project Management and support

estimated to 537 days

Testing 250 days

Interfaces 117 days

Customising TRM and Analyser

316 days

Reports, Forms Enhancements,

conversion development 141 days

Budget (EUR)

506.621 €

2.083.011 €

- €

500.000 €

1.000.000 €

1.500.000 €

2.000.000 €

2.500.000 €

IT - external/SAP (project) 1.064.366 € 263.880 €

IT - internal (project) 452.000 € 98.400 €

IT - infrastructure (project) 102.650 € 17.225 €

Others (PM-support, PO-rent,

out of the pocket)

382.395 € 106.716 €

Business Cost (project) 81.600 € 20.400 €

Summe 2.083.011 € 506.621 €

2011 2012

, contingency)

Gained experience – so far

• Language is an issue – a lot of misunderstandings

• Cultural differences especially in decision making

• Blue print concept difficult when users don’t know the system, maybe

prototyping better

• IT and consultant spent time are according to budget

• Business spent time is above to budget

• Conflict between daily work and project work

Success factors

• Don’t do everything in one go.

- Implement it stepwise. Make sure first step working before you start next

• Don’t try to implement it on your own!

- Use consultants with a deep knowledge of system and of treasury business -

Don’t go for “cheapest to deliver”

• Use experienced project leaders (IT/Business) 100% dedicated to the project

- Implementing TRM is very complex and you need to keep control of costs,

time plan, deliverables

• Business staff has to be able to focus 100% on the project

- If you have a cross border project travelling is a must

• Realistic budget and time plan

- Don’t do the project if you can’t afford it and if you don’t have time - accept it

- it takes time and is expensive

• Make sure that you have commitment from ALL stakeholders that the project is

Prio “ONE”

- You need full support from all involved to succeed