Task C : GECOL institutional dev. and perform improvement - deliverable five : final report

REVISED FINAL REPORT November 2017 Task C: GECOL Institutional dev. and perform. improvement Deliverable 5: Final report Disclaimer and copyright note This document has been prepared only for the International © 2017 Bank of Reconstruction and Development ("IBRD") and solely PricewaterhouseCoopers for the purpose and on the terms agreed with the IBRD in our LLP agreement dated 21 March 2017 relating to Task C. All rights reserved. In this The scope of our work was limited to a review of documentary document, 'PwC' refers to the evidence made available to us. We have not independently UK member firm, and may verified any information given to us relating to the services. sometimes refer to the PwC network. Each member firm We accept no liability (including for negligence) to anyone else is a separate legal entity. in connection with this document. We have agreed with you that the report will be provided by you to GECOL for their consideration. We would ask that it not be provided to anyone else unless otherwise agreed in writing by us. This is a draft prepared for discussion purposes only and Please see should not be relied upon; the contents may still be subject to www.pwc.com/structure for amendment or withdrawal and our final conclusions and further details findings will be set out in our final deliverable planned for December 2017 Strategy& | PwC Prepared for The World Bank 1 The present document is the final deliverable of the Task C Task C project approach and current report focus 1 2 3 Financial 4 5 Customer service Project review Project Institutional performance performance and set-up Development assessment & improvement recommendation financial models 1.1 2.1 Strategy for 3.1 4.1 Improving financial 5.1 Tariff framework Findings review and Data collection institutional performance of review final report development customer service 1.2 2.2 Process mapping & 3.2 4.2 Methodology, Tariff structure Improving technical team and approach identification of gaps in set-up and reform Present report performance validation staff, skills, perform. pathway 2.3 3.3 Manpower / org. Tools (excel model) rationalization review and trainings 2.4 ERP System review 6 Workshop & trainings 7 PMO (progress reporting) Source: Task C inception report Strategy& | PwC Prepared for The World Bank 2 Task C focuses on GECOL (differently than Task A which addresses the Libyan institutions) Task A and C perimeters and timeframes Wave I Wave II Timeframe Past Short-term Medium / long-term 3 years 3+ years Today 2020/2021 Stakeholders Libyan institutions Legislation Task A perimeter Policy making Regulation Generation GECOL Transmission Task C perimeter Distribution & Supply See Task C deliverables for analysis of GECOL performance and action plan Source: Strategy& analysis Strategy& | PwC Prepared for The World Bank 3  Task C report is organized in 6 sections, each one related to one deliverable of the project Structure of the present report Task C final report structure Task C deliverables Chapters Content Strategy for institutional 2.1 development of GECOL Institutional development Summary of findings 2.2 Process mapping Recommendations and Processes restructuring action plan Manpower / Organizational 2.3 rationalization review Manpower 2.4 ERP system review IT Improving GECOL technical 3 performance Technical performance Financial performance 4.1 assessment Financial performance Customer service financial 4.2 performance Strategy& | PwC Prepared for The World Bank 4 The report focus on GECOL development & performance improvement with a 6yrs horizon (in alignment with Task A) Task C perimeter of analysis Electricity sector reform (Task A) Current electricity sector structure Wave I Wave II Jan 2018 Jan 2024 Current GECOL GECOL development & perf. improvement operating model (Task C) 6 years Areas / focus of the restructuring Generation Institutional IT development GECOL Technical Transmission Processes performance Financial Manpower performance Distribution & Supply Task A Perimeter Task C Perimeter Source: Strategy& analysis Strategy& | PwC Prepared for The World Bank 5 The Task C started with the review of the previous strategic objectives set by GECOL in its 2010-2015 strategic plan… GECOL’s 2010 Six Part Strategy – Objectives 1 2 3 4 5 6 Improve Reduce Build and Strengthen Influence Redeploy system commercial retain information sector resources performance losses capabilities resources policies OBJECTIVES • Generation • Commercial • Business • Compensation • Database • Regulatory expansion to Loss Processes and Benefits Improvement Strategy meet demand Assessment Reengineering Redesign • Data Handling Development • Generation • Streamlining • New Org. • Performance Processes (e.g., sector assets Customer Structure Roll Appraisal Implementation vision, energy improvement Processes Out System policy, • ERP System Redesign electricity theft • Transmission • Customer • Manpower Activation legal system Service Cultural Rebalancing • Career • GIS Rollout strengthening framework) Shift • Outsourcing Development • e-Management Plan Design • Outreach and • Distribution • Commercial Implementation Communication system Loss • Training strengthening Awareness Programs • Policy Redesign Compliance • Infrastructure • Demand-side and Mitigation management Upgrade • Collection Enforcement Source: GECOL Strategic Plan Update (2009) Strategy& | PwC Prepared for The World Bank 6 …and analyzed GECOL progress against such objectives (taking into account the adverse external conditions) GECOL’s 2010 Six Part Strategy – Targets 1 2 3 4 5 6 Improve Reduce Build and Strengthen Influence Redeploy system commercial retain information sector resources performance losses capabilities resources policies TARGETS • 18% Reserve • 9% commercial • 1.0 output • 100% career • 100% database • 100% margin losses productivity development coverage documented implementation perspectives on • No delay of • 7000 • 100% business • 100% GIS sector policy maintenance of connection process • 100% adequacy implementation issues generation backlog implementation training assets • 100% • No financial • 100% • 100% transaction impact of • 33% thermal outsourcing performance accuracy government efficiency implementation appraisal decrees within implementation • 100% data strategic plan • 2.8% • 100% job accuracy period transmission description losses development • 5.2% distribution losses Source: GECOL Strategic Plan Update (2009) Strategy& | PwC Prepared for The World Bank 7 The review confirmed that several objectives remain well behind completion High-level assessment of results (2010-2015) 1 2 3 4 5 6 Improve Reduce Build and Strengthen Influence Redeploy system commercial retain information sector resources performance losses capabilities resources policies Status Limited No No No progress progress progress N/A N/A progress Description • Capacity expan- • Commercial • GECOL • … • … • No documented sion was only losses have productivity per perspectives on partially fulfilled registered a FTE did not sector policy • Reserve margin dramatic improve, thus issues made has worsened, increase, failing to meet available while efficiency growing to ~60% the +40% target • Gov. decrees increased more instead of increase carried negative than expected decrasing to financial impacts • T&D losses only strategic plan on GECOL slightly improved 9% target Root-causes • Political turmoil • Political turmoil • FTE increase • … • … • Gov. decrees • Decreasing • Payment impacted CAPEX support exemption GECOL ability • Unclear GECOL • Decreasing to recover costs guidance service quality and control Source: GECOL Strategic Plan Update (2009) Strategy& | PwC Prepared for The World Bank 8 Task C has thus began with the refresh / up-date of the strategic priorities of GECOL… Need for new strategic priorities definition Analysis of progress against 2010-2015 strategic objectives Focus in next slide Need for new New strategic strategic priorities priorities & targets Baseline and + issues identification Sources: Strategy& analysis Strategy& | PwC Prepared for The World Bank 9 …and proposed six new strategic priorities, mostly in line with the objectives previously set by GECOL for 2011-2015 GECOL’s strategic priorities Task C focus / areas analyzed New strategic Old strategic objectives priorities identified (2011-2015) Institutional Ensure performance development accountability Processes Redeploy Processes improvement resources Build and Manpower Reskill and redeploy retain resources capabilities Area’s issues Strengthen IT Add value to IT information resources resources Technical Improve system Improve system performance performance performance Financial Improve financial Reduce performance sustainability commercial losses Sources: Strategy& analysis Strategy& | PwC Prepared for The World Bank 10 Task C strategic priorities were then translated into a series of measures where GECOL should focus in the next 6 years… GECOL’s new strategic priorities and measures New strategic Ensure Reskill and Processes Add value to IT Improve system Improve financial priorities performance improvement redeploy resources performance sustainability accountability resources • Reorganization • Pilot revised • HR strategy • Fix IT • Increase plant • Set cost • Accounting business development resources availability & reflective tariff unbundling processes • Manpower • Upgrade IT utilization • Metering roll • Functional • Roll-out new rebalancing and system • Complete out unbundling processes workforce • Add value to IT ongoing • Address • Validate current planning structure capacity electricity theft state • Corporate additions • Fight • Design target reskilling • Launch new insolvency MEASURES capacity state processes • Performance • Improve credit management expansion • Prioritize and collection projects mitigate risk • Succession • Control • Roll-out planning operating processes and expenses manage risk • Transition to operations Sources: Strategy& analysis Strategy& | PwC Prepared for The World Bank 11 …and for each measure, a series of related milestones to be achieved were also derived GECOL’s new strategic priorities and milestones Ensure Reskill and Processes Add value to IT Improve system Improve financial performance redeploy improvement resources performance sustainability accountability resources • Core Bus • Pilot processes • HR&O • Data center • Complete • Tariff covering separated implemented department repaired and generation, part of P&L • ICT, AFC, HR under MD upgraded transmission, costs and fuel • HR strategy in and E&P • New processes control, MV & subsidies place corporate core designed • ERP upgraded Distribution • Critical resource established map targets • Theft area map • Separated • Implementation • Manpower • New IT annual plan ready rebalancing plan governance • Customers accounts • Workforce database submitted planning in place MILESTONES • Independent • Capabilities skills • SMS/e-mail functional map billing in • Reskilling managers operation program appointed • GECOL Academy • GECOL’s • Appraisal system mobile app in place running • Succession See separate planning in place chapters for detailed milestones Sources: Strategy& analysis Strategy& | PwC Prepared for The World Bank 12  ILLUSTRATIVE The next chapters will summarize the issues identified for each focus area and the related recommended action plan Approach of the following chapters Focus areas analyzed Summary of findings Recommendations and action plan Institutional development Wave I Wave II Strategic Processes ! Area’s issues Action plan priorities Manpower Recommendations and action plan | Ensure performance accountability 6 years IT Activities Year n n+1 n+2 … Owner Plan a concentrated 3 year maintenance Resolve Generation BU and overhauling program backlog of Measures Carry out 7 overhauls of GT units, 3 overdue overhauls of ST units, 6 maintenance, Technical maintenance repair and replacement activities every 90% of suspended Generation BU year performance units back in service Plan Execute a timely maintenance program for maintenance running units (expect 6 GT units per year) Generation BU of running No new buildup of Financial units overdue maintenance performance Milestones Source: Strategy& analysis Strategy& | PwC Prepared for The World Bank 13  Institutional development Processes Manpower IT Technical performance Financial performance Back-up – Review of 2011-2015 GECOL 6 part strategy Strategy& | PwC Prepared for The World Bank 14  Findings Task C: Deliverable II (a) – Strategy for institutional development of GECOL In terms of institutional development, the report analyzed the current GECOL’s organizational structure… GECOL organization2 Up-date 12/6/2017 Board of Directors Description Performance BoD Affairs Monitoring and Follow-up Monitors and controls the Media Internal Control Board of activities while leading the Directors company’s organizational Managing set-up Director Contracts Manages 3 BUs and several MD Office & Dev. Accounts Managing departments among which Strategic Plan PMO Legal Affairs Public Transmission Director the projects (engineering) Relations Southern Experts & Projects Planning and development accounts Cons. Office Generation Studies & Dev. Experts and Consultants Office Projects Distribution “Network” Manages the generation and Follow-up Eastern Experts & Projects Operations transmission business Electricity police1 Cons. Office “Network” “Business” Support “Business” Manages the distribution Operations Operations Services Operations and supply business Procurement Generation Distribution & Stores Responsible for accounting, Control General Services Support HR, procurement & general MV Networks Services services across the ICT Consumer Services Financial Affairs organization Department / sub- HR & Communication General department Transmission department or below 1) Electricity Police is not included within GECOL’s organization chart 2015 (unit collocation still to be confirmed by GECOL); within next slides, electricity police is thus excluded 2) Referred within the report as operational (or organizational) units as they seem not to own all levers of a BU/SBU (e.g. accountability on P&L, etc.); Source: Latest up-date of GECOL company organization chart 2015 (June 2017) Strategy& | PwC Prepared for The World Bank 15  Findings Task C: Deliverable II (a) – Strategy for institutional development of GECOL ... Assessing its operating model along a number of criteria Criteria for the assessment of GECOL’s operating model I Clearly defined • Clear separation between BU, operating model corporate core and services VI Alignment with Strategic Priorities II • Alignment of organizational Alignment to best structure with industry best practices • Alignment with GECOL strategic priorities / practice pillars identified within GECOL institutional development strategy III Results • Operational and financial results accountability accountability IV • Efficiency of operating model Efficiency framework (e.g. no duplications, no fragmentation) V • Organization suitability to long- Preparation for term evolution process (e.g. future evolution unbundling, liberalization, etc.) Source: Strategy& analysis Strategy& | PwC Prepared for The World Bank 16  Findings Task C: Deliverable II (a) – Strategy for institutional development of GECOL Several issues which currently limit GECOL’s efficiency and effectiveness were identified Summary of issues Criteria for the assessment of GECOL’s operating model I II III IV V VI Clearly defined Preparation Alignment Alignment vs. Results operating Efficiency for future with Strategic best practices accountability Identified Issues model evolution Priorities 1.1 BU “concentration” ! ! ! ! 1.2 Limited levers for effective BU management ! ! ! ! ! 2 Fragmentation of engineering & projects ! ! 3 Lack of a strong AFC function ! ! ! ! ! 4 Sub-optimal set-up of ICT ! ! ! ! 5 HR&O responsibilities partially outside MD area ! ! ! ! ! 6 Unclear role of Contracts & Development Accounts ! ! ! BoD overstaffed and 7 including functions typically under MD ! ! ! ! ! ! Source: Strategy& analysis ! Target organizational dimension negatively impacted by related identified issue Strategy& | PwC Prepared for The World Bank 17  Recommendations and action plan | Ensure performance accountability Task C recommended that GECOL upgrades its operating model through a full re-organization Measures and activities Measures Activities Year 2021 2022 2018 2019 2020 2021 2023 2022 2023 Owner Separate Generation and Transmission into different BUs MD & Head of BUs Create new core ICT function (managed by CIO) reporting Core BUs MD & Head of ICT directly to MD separated Move IT away from network into ICT corporate core dept. with CIO & MD direct report to MD ICT corporate core established Move Communications unit under Transmission BU CIO, MD & Transmission head Group Generation, Transmission, Distribution MD & Head of BUs projects in an integrated E&P function Move Projects Planning & Studies to E&P function MD & Head of E&P Move Projects Accounting away from Contracts and Dev. MD & Head of E&P, Accounts within E&P function E&P corporate core Head of Contracts established Reorganizati Move Tenders & Contracts from Contracts & Dev. to Procurement MD & Head of on Contracts Create AFC function managed by CFO reporting to MD MD & CFO Move related units1 in the newly created AFC core function, MD & CFO led by a new CFO AFC corporate core established Consolidate in HR&O department (under MD) all the MD & Head of HR HR-related core functions leaving non-core HR activities HR&O corporate core within Support Services established Separate the E&P division by Head of E&P dividing projects within each operational SBU Assign Projects Accounting to SBUs Head of E&P Create a new institutional relations unit within BoD BoD Chairman Create dedicated support services units for each BU if Option 1 is MD & Head of support selected BUs heads 1) Units to be migrated to AFC are: Performance Monitoring general dept. (from BoD), core activities of Financial Affairs (e.g. Financial Planning and Ledger & Fin. reports) and L/C Financing and Customs Clearance from Contracts and Development accounts; Source: Strategy& analysis Milestones Strategy& | PwC Prepared for The World Bank 18  Recommendations and action plan | Ensure performance accountability Task C: Deliverable II (a) – Strategy for institutional development of GECOL After separating Generation and Transmission GECOL shall be organized in 3 SBUs, with full performance accountability To be GECOL organization/management structure Example of typical activities MD • Execute operation of assets and/or installations O&M & • Execute investigations and analyses technical • Analyze technical support affairs • Coordination and execution of Distribution maintenance Generation Transmission & Supply • Resolution of day-to-day tech. problems Generation Transmission Distribution • Manage budget spending • Personnel staffing and deployment Control MV Networks Operations • Prepare (& submit) budget for approval Management & • Propose operational targets (KPI) Planning • Plan O&M strategy Consumer Communication Services • Take corrective actions to align performance with objectives Strategic Business Units • Sales and customer relations Sales • Meter reading (for supply only) • Customer service • Billing and collection Sources: GECOL (company organization chart 2015), Strategy& analysis Strategy& | PwC Prepared for The World Bank 19  Recommendations and action plan | Ensure performance accountability Task C: Deliverable II (a) – Strategy for institutional development of GECOL Moving IT outside the network BU, GECOL will create a core ICT function headed by the CIO, reporting directly to the MD To be GECOL organization/management structure Example of typical activities MD • Perform maintenance of IT Software and hardware/software Applications • Manage the IT application system Management • Manage IT supplier relationships and contracts ICT • Ensure service efficiency for user CIO End-user workplace, telephony, printer services, Services etc. • Users requests / issues resolution Networks ERP Follow-up ICT Center ERP • Ensure IT system deployment Digital Information Follow-up • Conduct ERP implementation Infrastructure & Documentation Telephones Methods and • Manage internal and external IT Technical Support Communication communications From BoD • Formulate IT policies and standards From Network Architecture • Perform IT planning & budgeting activities Operations and • Design IT strategy & procedures Infrastructure Management • Ensure business continuity Corporate Core and • Conduct IT quality assurance Development • Plan and manage IT development in alignment with corporate objectives Sources: GECOL (company organization chart 2015), Strategy& analysis Strategy& | PwC Prepared for The World Bank 20  Recommendations and action plan | Ensure performance accountability Task C: Deliverable II (a) – Strategy for institutional development of GECOL Grouping projects into an integrated E&P center of excellence will speed-up projects implementation To be GECOL organization/management structure Example of typical activities MD • Support MD, BUs, AFC and Government Planning & in planning and budgeting activities Budgeting related to projects • Evaluate projects economics Engineering & (major) Projects • Promote innovation • Perform engineering and technical Engineering support to business Projects Planning Generation Transmission Distribution • Assess maintenance needs and performs accounting1 Studies & dev.2 Projects Projects Projects reliability studies Eco. Research Steam Plants Substations Projects • Act as “owner’s engineer” in relationships & Studies Projects Projects Follow-up with EPC contractors Technical Gas & CC Net. & cables Imports & • Project management services Planning Plants Projects projects Stores • Supervise projects implementation Tech. Res. Development • Monitor projects budget realization Engineering Project & Studies Projects Management • Manage and control project specification, Standards & Engineering Services schedule, quality, contract and New Tech. Dept. construction costs (Tracking, Area Distr. control, etc.) • Drive operation and construction Projects excellence across projects • Obtain permits and ensure regulatory and Corporate Core legal compliance throughout projects implementation • Develop projects reports for MD 1) From Contracts and development accounts department; 2) Strategic Planning from Planning Studies & dev. is moved under AFC function; Sources: GECOL (company organization chart 2015), Strategy& analysis Strategy& | PwC Prepared for The World Bank 21  Recommendations and action plan | Ensure performance accountability Task C: Deliverable II (a) – Strategy for institutional development of GECOL A full consolidation of the AFC function headed by a CFO will increase accountability on GECOL’s financial viability To be GECOL organization/management structure MD Example of typical activities • Establish financial strategy and policies Strategic • Perform capital structuring activities Support Finance • Engages and finalizes CAPEX budget AFC with Government (in alignment with MD) Services CFO Strategic • Design accounting policies, procedures Procurement PMO Strategic Accounting and guidelines • Lead accounting and financial reporting Contracts & L/C’s Financing General services Development Accounts Customs clearance General ledger & Accounting Strategic • Monitoring strategic plan KPI / scorecard financial reports • Tracking & up-date strategic plan PMO Financial planning & Financial Planning reporting1 Materials accounting Fixed assets & insurance • Consolidate and monitor budget strategy HR support and planning development Tech. Perf. Monitoring Budget, Planning • Supervise / monitor BU budget Performance Fin. Perf. Monitoring and Control management and control Monitoring & Follow-up Admin. Perf. Monitoring • Assess financing solutions Administrative Affairs Office • Develop expenditure management policy Strategic Planning Treasury and standard operating procedures for BUs • Manage cash flows Corporate Core Support Services 1) Includes corporate core activities from Financial Affairs (i.e. Ledger and Financial reports and Financial Planning); Sources: GECOL (company organization chart 2015), Strategy& analysis Strategy& | PwC Prepared for The World Bank 22  Recommendations and action plan | Ensure performance accountability Task C: Deliverable II (a) – Strategy for institutional development of GECOL The Contracts and Development Accounts department will be split across different functions Contracts and Development Accounts split As is Contracts & Development Accounts To be split of activities across functional Department structure owners MD MD Contracts and Engineering & Support AFC Development Accounts (major) Projects Services Assistant to GM for administration Projects LC’s and Procurement Accounting finance Assistant to GM for development Customs Tenders and clearance contracts LC’s and finance Activities related to AFC Support Customs clearance Corporate Core Services Activities Projects Accounting related to E&P Tenders and Activities Contracts related to procurement Strategy& analysis Strategy& | PwC Prepared for The World Bank 23  Recommendations and action plan | Ensure performance accountability Task C: Deliverable II (a) – Strategy for institutional development of GECOL BoD will acquire a leaner and more effective structure, and be equipped with a Regulatory & Institutional relations unit To be direct reports to BoD Example of typical activities BoD Audit • Conduct active auditing on BU (financial, technical, administrative, etc.) (& compliance) • Define policies and procedures NEW Regulatory & Inst. Media BoD Affairs Internal control relations • Review and approve corporate governance mission and structure Assistant Adm. Affairs & Financial • Conduct and approve the assessment Manager Office Services inspection Corporate of MD performance Governance Publishing Archives Investigation & • Review, validate and monitor level 1 Complaints appointment, compensation and Awareness and Technical development Meeting Affairs Rat. inspection Follow-up & Administrative • Formulate strategic objectives Documentation Strategic Comp. Records inspection Leadership • Review and approve corporate strategy Secretarial Internal and values, and ensure alignment Media Office Auditing Customer • Develop corporate image that fits with Advertising Identity services inspect. the company’s values and communicate Projects identity to the public and employees inspection • Agree on / set capital spending criteria Capital and parameters • Approve capital and operating plan and major investments and divestitures Sources: GECOL (company organization chart 2015), Strategy& analysis Strategy& | PwC Prepared for The World Bank 24  Recommendations and action plan | Ensure performance accountability Task C: Deliverable II (a) – Strategy for institutional development of GECOL A new HR&O function directly reporting to MD will increase relevance of this function in GECOL’s org. structure To be GECOL organization/management structure Example of typical activities MD • Design organizational structure to deliver Support Organization against strategic objectives HR&O Design • Manage corporate culture and change Services management Procurement Organization & HR & • Manage manpower planning and ensure Structuring Dept. Communication Planning & organization effectiveness General services Staffing Structure Design & Policies and HR • Establish recruiting policies and procedures Development Planning Department Accounting Jobs & Careers Training & HR Development Development Process HR support • Set compensation and payroll policies Compensation Reengineering • Design benefits structure Employee Affairs Comm. & collaboration • Pursue career development planning and Talent talent management Medical affairs development department • Establish training policies and procedures Corporate Core Support Services Sources: GECOL (company organization chart 2015), Strategy& analysis Strategy& | PwC Prepared for The World Bank 25  Recommendations and action plan | Ensure performance accountability Task C: Deliverable II (a) – Strategy for institutional development of GECOL The first reorganization will lead to corporate core AFC, ICT, HR&O and E&P departments, and clearly distinct BUs… GECOL to be organization (2021) Board of Directors BoD Affairs Internal Control Media Managing Corporate Core Director ICT Center MD Office ERP Follow-up Technical Support Follow up Digital Inf. & Doc. ICT Networks Public Relations Infrastructure Experts and Telephones consultants office Legal Affairs Strategic PMO Performance Monitoring Planning Studies & dev. Distribution projects and Follow-up E&P Transmission projects Financial planning & Projects Accounting AFC Generation projects reporting1 Contracts & Dev, accounts Organization & Structuring Strategic Planning2 HR & O Dept. HR & Communication Business Distribution & Services Generation Transmission Support Units Supply Services Generation Transmission Distribution Procurement General Services Control MV Networks Reorganization Customer changes to be Accounting HR support Communications further deep-dived Service 1) Includes corporate core activities from Financial Affairs (i.e. General ledger and financial reports, Financial Planning and Fixed assets and insurance); 2) Strategic Planning unit from the Planning Studies & development division; Sources: GECOL (company organization chart 2015), Strategy& analysis Strategy& | PwC Prepared for The World Bank 26  Recommendations and action plan | Ensure performance accountability Task C: Deliverable II (a) – Strategy for institutional development of GECOL … However, in the long run higher, synergies might be realized if SBUs have full responsibility over projects To be GECOL organization/management structure MD Distribution & Generation Transmission AFC Supply Generation Transmission Distribution Strategic planning Planning studies & Consumer Control dev. Services Corporate Core Generation Planning studies & MV Networks Projects dev. Steam Plants Planning studies & Distribution & Projects dev. Supply Projects Gas & CC Plants Projects Transmission Projects Follow-up Projects Imports & Stores Development Projects Engineering Dept. Strategic Business Units Area Distr. Projects Sources: GECOL (company organization chart 2015), Strategy& analysis Strategy& | PwC Prepared for The World Bank 27  Recommendations and action plan | Ensure performance accountability After the first reorganization GECOL will decide between embedded or shared support services Reorganization options Organizational structure 2021 OR Option 1 Option 2 Embedded support services Enterprise shared services Move shared services units below business units to Clustered shared services separated from corporate empower BU managers and prepare for an holding core and BUs in order to outsource non value added structure activities in the near future Business Units Distribution & MD Generation Transmission Supply Embedded support services Corporate Core Generation Transmission Distribution & Supply HR & Procurement Procurement Procurement AFC ICT Organization Generation HR Transmission HR Distribution & Supply Services Services HR Services Business Units Enterprise shared services Generation Transmission Distribution & Supply Generation Transmission Accounting Accounting Accounting General Procurement Services Generation General Transmission Distribution & Supply Distribution & Services General Services General Services Supply HR Services Accounting Source: Strategy& analysis Strategy& | PwC Prepared for The World Bank 28  Recommendations and action plan | Ensure performance accountability If the embedded support services option is selected the organization will be more compact with more powerful SBUs GECOL embedded support services organization (2024) Option 1 BoD Regulatory & Inst. BoD Office relations Internal Media Control MD MD Office Corporate Core Legal Affairs HR & AFC ICT Organization Business Units Distribution & Generation Transmission Supply Generation Transmission Distribution & Supply Procurement Procurement Procurement Generation HR Transmission HR Distribution & Supply Services Services HR Services Generation Transmission Distribution & Supply Accounting Accounting Accounting Generation General Transmission Distribution & Supply Services General Services General Services Source: Strategy& analysis Strategy& | PwC Prepared for The World Bank 29  Recommendations and action plan | Ensure performance accountability On the other hand, if the shared support services is selected a clear division of roles between CC, SBUs and SS will emerge GECOL enterprise shared services organization (2024) Option 2 BoD Regulatory & Inst. BoD Office relations Internal Media Control MD MD Office Legal Affairs Corporate Core (CC) Shared Services (SS) HR & Support AFC ICT Organization Services Procurement General Services Strategic Business Units (SBUs) HR Services Accounting Distribution & Generation Transmission Supply Source: Strategy& analysis Strategy& | PwC Prepared for The World Bank 30  Recommendations and action plan | Ensure performance accountability Reorganization shall be coupled with a structured change management program… Change program phases 1 2 3 Define the change Drive the change Measure the change Leadership Education Strategy Alignment & Training Business Org & Talent Communications Alignment People Operating Culture Model Stakeholder Behavior Engagement Adoption Leading Lagging Focus in next slide Tailored program of interventions Clarity on what needs to change to Mechanisms to monitor progress ad drawing on formal and informal deliver the key business goals course correct as needed approaches Source: Strategy& Analysis Strategy& | PwC Prepared for The World Bank 31  Recommendations and action plan | Ensure performance accountability …which will drive change through 6 levers to achieve rational compliance and emotional commitment Drive the change measures • Align leaders on future vision and Leadership Education convey the case for change • Design and deploy training related • Enable leaders to actively and Alignment & Training to acquiring new skills and capabilities, learning new processes, visibly support and role-model policies, systems, etc. change • Build awareness and • Leverage existing culture; adjust understanding of the case for Org & Talent job roles, career paths, and behavior change, what it means and what Communications expectations; and link to individual people need to do differently Alignment performance management • Communicate behaviors changes • Incentivize and reinforce desired and how they should be exhibited behaviours formally and informally • Engage and energize stakeholders directly and indirectly; top-down • Identify critical behaviours that and bottom-up, informally and Stakeholder Behavior must be exhibited to create new formally Engagement Adoption mind-sets and increase adoption • Leverage change agents, • Determine performance outcomes exemplars, trusted nodes and key impacted by the behavior changes influencers Source: Strategy& Analysis Strategy& | PwC Prepared for The World Bank 32  Recommendations and action plan | Ensure performance accountability To ensure performance accountability, GECOL shall also pursue its accounting and functional unbundling by 2023 Measures and activities Measures Activities Year 2018 2019 2020 2021 2021 2022 2023 Owner Establish clear accounting system to allocate directly CFO and indirectly related BS and IS accounts to value chain activities Accounting Draft separated annual accounts (IS and BS) for each BU AFC function unbundling Submit separated annual accounts (IS and BS) for each AFC function value chain activity to the regulatory agency Sep. annual accounts submitted Select and appoint independent managers for each SBU MD & BoD Independent managers Functional appointed unbundling Provide SBUs managers with full authority over financial MD & BoD resources personnel Milestones 1) Units to be migrated to AFC are: Performance Monitoring general dept. (from BoD), core activities of Financial Affairs (e.g. Financial Planning and Ledger & Fin. reports) and L/C Financing and Customs Clearance from Contracts and Development accounts; Source: Strategy& analysis Strategy& | PwC Prepared for The World Bank 33  Institutional development Processes Manpower IT Technical performance Financial performance Back-up – Review of 2011-2015 GECOL 6 part strategy Strategy& | PwC Prepared for The World Bank 34  Findings Task C: Deliverable II (b) – Process mapping report Task C analyzed the 5 main business processes which were directly linked to the most pressing issues affecting GECOL Processes analysis overview Task A- Increasing costs Unbalanced tariff framework Electricity sector issues’ root Commercial losses Poor operating performance causes and poor collection 1 2 3 4 5 Analyzed CAPEX Invoicing Maintenance OPEX budget development Collection processes / billing budget Contracts and Financial Process Transmission development affairs Customers service department owner department accounts department department Source: Task A-Final report; PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 35  Findings | 1 Maintenance Task C: Deliverable II (b) – Process mapping report The maintenance process was mapped within with the Transmission General department Transmission general department structure (2017) Managing Director Assistant Business Unit Department Network operations Focused on Sub-department maintenance activities Transmission General Assistant to the GM Darna extra high voltage Department maintenance sub- department Administrative Affairs Programming sub-department maintenance department Maintenance of Eastern Supplies sub-department Lines department Maintenance of Western Transmission Networks National Training & department Administration Maintenance of Eastern Transmission Networks Mechanization and department development department Maintenance of Western Lines department Technical affairs Maintenance of Central department transmission networks department Source: Latest up-date of GECOL company organization chart 2015 (June 2017); PWC-Process mapping & identification gaps of staff skills and performance Strategy& | PwC Prepared for The World Bank 36  Findings | 1 Maintenance Task C: Deliverable II (b) – Process mapping report GECOL currently uses three different types of maintenance approaches to support the network Overview of GECOL’s maintenance approaches Predictive – Corrective (breakdown) Preventive maintenance Condition Based maintenance maintenance • Regularly performed on an • Performed to predict when Performed when equipment failure equipment to check the likelihood equipment failure might occur occurs of its failing • Monitors the actual condition of Definition • Performed while the equipment is the asset to decide if still working, so that it does not maintenance needs to be done break unexpectedly • For all substations equipment • For all substations equipment • All failed equipment Application • For high voltage lines • For high voltage lines • For substations indoor feeders criteria used • For lines remote protection by GECOL • For load shedding scheduling Scheduled periodically (e.g. daily, Frequency Triggered by asset/equipment weekly, monthly, semi-annually, Triggered by asset/equipment failure condition annually, etc.) Source: PWC-Process mapping & identification gaps of staff skills and performance Strategy& | PwC Prepared for The World Bank 37  Findings | 1 Maintenance Task C: Deliverable II (b) – Process mapping report Maintenance activities are initiated by the maintenance programming dept. which prepares the yearly plan Maintenance plan sections 1. Substations preventive and predictive 2. Indoor feeders preventive maintenance maintenance  It includes preventive plan for the indoor  It includes predictive and preventive plan feeders in 80 substations in 2 regions for 97 substations in 12 areas in the year (Eastern & Western) in the year  It sets the maintenance period (starting  It sets the maintenance period (starting date and the end date) for each substation Substations date and the end date) for each substation Indoor feeders preventive preventive and predictive maintenance maintenance 5. Transmission lines preventive 3. Lines remote protection schedule and predictive maintenance  It includes preventive plan for 108  It includes predictive and high voltage lines in 2 regions preventive plan for 175 line (220 Transmission Lines Remote (Eastern & Western) in the year lines preventive & 400 kV) in 2 regions (Eastern & and predictive Maintenance protection  It sets the maintenance period Western) in the year testing  It includes cleaning plan for 154 maintenance Plan (starting date and the end date) for each substation lines (220 kV) in 2 regions (Eastern & Western) in the year  It sets the maintenance period (starting date and the end date) Load for each line 4. Load shedding testing schedule shedding schedule  It includes preventive plan for 63 substations in 12 areas in the 4 quarters  It sets the maintenance period (starting date and the end date) for each substation Source: Transmission department-2017 Maintenance plan; PWC-Process mapping & identification gaps of staff skills and performance Strategy& | PwC Prepared for The World Bank 38  Findings | 1 Maintenance Task C: Deliverable II (b) – Process mapping report Lack of costing, WO prioritization and ERP use have been identified as the most compelling issues of O&M practices Benchmark of existing vs. best practice workflow GECOL maintenance workflow process Maintenance Schedule WO Allocate WO Execute Feedback & Plan for next period to the teams WO Reporting Lack of: Lack of costing & • Costing reporting to finance Unscheduled • WO prioritization department through WO • ERP use ERP Best practices maintenance workflow process Schedule Feedback, Maintenance Calculate & Prioritize Allocate WO Execute WO costing & Plan Authorize cost WO to the teams WO for next period reporting Allocate WO Unscheduled to local WO contractors Continuous Improvement Carried out through ERP Source: PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 39  Findings | 2 OPEX budgeting Task C: Deliverable II (b) – Process mapping report The OPEX budgeting process was mapped within the financial affairs department Financial affairs department structure (2017) Managing Assistant Director Department Financial affairs general Sub-department department Assistant to GM for Assistant to GM for Regional financial Assets management financial planning regions accounting departments General ledger & financial reporting Accounting department Material accounting sub- Materials accounting department Financial planning department Fuel accounting sub- department Budget sub-department Administrative affairs Financial follow up sub- department Strategic finance sub- department Key responsibility: Budget preparation Finance sub-department Risk management sub- department Costing sub-department Source: Latest up-date of GECOL company organization chart 2015 (June 2017); PWC-Process mapping & identification gaps of staff skills and performance Strategy& | PwC Prepared for The World Bank 40  Findings | 2 OPEX budgeting Task C: Deliverable II (b) – Process mapping report The OPEX budget today is split in 7 categories dealing with expenses related to operations and small investments OPEX budget categories OPEX budget Categories I II III IV V VI Financial VII Material & expenses & Small Salaries Fuel Maintenance Other services spare parts power investments1 purchases • Chemicals • Spare parts for generation/ transmission/ • Buildings • Travel • Customs, • Basic Salaries distribution maintenance expenses maritime • Cars and • Benefits • Heavy/Light stations services • Lodging expenses vehicles • Overtime fuel • Spare parts • Vehicles and allowances • Bank • IT equipment • Social • Natural gas for vehicles cars • Ports and expenses • Trainings security • Lubricants and cars maintenance airport • Power • Spare parts services expenses purchase for street lighting • Fuel and oil for vehicles and cars 1) Small capital expenditures that require investment within the annual budgeting period Source: PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 41  Findings | 2 OPEX budgeting Task C: Deliverable II (b) – Process mapping report Key issues identified in the OPEX budget process are items ranking, target setting and the limited role of the committee As-is GECOL opex budgeting process workflow Limited role of the Budget Oversee the progress in the process but have no say in the budget approval budget committee in committee the process Preparation phase Completion phase Budget approval before No: send back for receiving modifications Government General Review/ confirmation Assembly approve • Lack of prioritization Yes • Missing targets & Yes operational Finalize allocation Review/ MD efficiency factors & determine approve reserves Financial Requests Consolidates and Develops Amend Issue final Finalize Planning budget to estimates GECOL’s draft estimated budget budget Department Cost centers salaries OPEX budget budget Estimates budget No: Send back Allocate budget requirements for modifications End Cost centers across (excl. salaries) departments Lengthy and manual process The opex budget is compiled using Excel and does not use GECOL ERP system (using excel and not ERP) Other Organizational coordination The finance departments in each area increased from 7 in 2010 to 15 in 2017 creating coordination complexity complexity identified issues Challenging budget follow up Budgets are separated for the areas making follow up challenging and resulting in diseconomies of scale and increase in costs Lack of transparency & GECOL budgeting process lacks transparency between the different departments and accountability accountability of budgeting execution Source: PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 42  Findings | 3 CAPEX budgeting Task C: Deliverable II (b) – Process mapping report The CAPEX budgeting process was mapped with the Contracts & Development and Planning Studies departments Contracts and development and Planning studies department structure (2017) Managing Assistant Director Department Sub-department Contracts and Planning & Studies Development Accounts Assistant to GM for Assistant to GM for administration administration Department is directly Assistant to GM for Assistant to GM for linked (responds) to the information and development Government archive Strategic planning LC’s and finance Economical research and studies Customs Standards and new technology Projects Accounting Technical research and studies Contracts Technical planning Source: PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 43  Findings | 3 Capex budgeting Task C: Deliverable II (b) – Process mapping report The issues related to the CAPEX process is the limited control over sums and priorities of GECOL As-is capex budgeting workflow process Government PM/CBL Review Yes Yes & Budget accept Ministry of Template Planning No: send back for modifications Review Issue Final MD & CAPEX Budget accept Contracts Prepare draft No: send back Distribute Distribute Amend draft & dev. Budget Template CAPEX Budget CAPEX budget for modifications Final CAPEX GECOL accounts against template Budget Planning Provide next year budget Provide next year revised and requirements of planned budget requirements of End studies projects from Master plan planned projects Provide status and next Projects year budget of on-going (G,T & D) projects Limited power over setting priorities in the budget allocation process Identified No control over Development Projects Budget from GECOL issues Difficulties in budget estimation due to long lead time of infrastructure projects Delays in budget finalization Source: PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 44  Findings | 4 5 Invoicing and collection Task C: Deliverable II (b) – Process mapping report The invoicing and collection processes were mapped within the Consumers services department Consumers services (2017) Assistant Managing Business Unit Director Department Sub-department Business operations Tripoli consumer service Western consumer service Follow up on bank Consumer services Central instalments and salaries consumer service Area consumer Benghazi consumer Debt recovery Commercial Affairs services service Southern consumer Commercial Affairs service Government & Green Mountain Companies ACCs consumer service Gharyan consumer service Jafara Commercial Losses consumer service Tarhuna consumer service Energy & Zliten consumer service Measurement Mergab consumer service Tobruk Consumer Services consumer service Systems West Coast consumer service Mountain consumer service Source: Latest up-date of GECOL company organization chart 2015 (June 2017); PWC-Process mapping & identification gaps of staff skills and performance Strategy& | PwC Prepared for The World Bank 45  Findings | 4 Invoicing Task C: Deliverable II (b) – Process mapping report GECOL meter-to-invoice is today highly dependent on manual work of meter readers As-is meter-to-invoice process Process Process step/activity Description • Metering department sets a route plan for all meter readers defining the areas Route plan that they need to visit and the time plan • The plan is installed on a Hand Held Unit (HHU) • The meter readers will conduct a visit to all meters assigned to them and will get the reading of the meters on the handheld system Meter reading and • GECOL doesn’t estimate the consumption of any missing readings inspection • Meter readers will also inspect the meters and report back whether any visible Meter manipulation to the meter was made reading Process • Once back in the headquarters (or branch), customer information will be Export data uploaded to the billing system or the local database by the debt recovery division • Billing department will prepare the bill and do bill verification (applicable tariff, unreasonable consumption, etc.) Generate invoice • Generate bill • Update AR • Meter readers will visit again the customers to deliver the invoice, also it can be Invoice delivery delivered by email and soon by SMS Invoicing Process • Quarterly for residential customers Time frame • Monthly for others ( Commercial, Industrial, Agricultural) Source: PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 46  Findings | 4 Invoicing Task C: Deliverable II (b) – Process mapping report Manual readings, no estimation of consumption, duplication of visits are the key issues in this process As-is meter-to-invoice process Multi period invoicing: Send SMS to Issue invoices customer invoicing is performed every Consumer Set route plan for all prepare the bill and four months for residential do bill verification Or services/ readers and upload customers customer file on the (applicable tariff, commercial unreasonable reader HHU1 affairs consumption, etc.) Manual and missing readings Upload meter Visit the customer Customer reading Route Distribute Meter premises Yes Duplication meter is into the HHU and complet invoices to Reader as specified in the of number accessible inspect meter ed customers reader route of visits to condition the customer No No Yes No estimation of Consumer consumption if meter reading is Upload customer services/ information from the not feasible debt HHU to the billing End recovery system or the local database division Other issues Lack of installation Meters are not installed to all GECOL’s customers, hence GECOL does not issue invoices to customers identified of meters not having meters not directly • The system is not fully automated across all regions and different billing systems exist across regions related to Not fully automated • Lack of integration between local databases and ERP: revenues are collected manually and the the process billing system auditing employees record it in the accounting system (costly and time consuming exercise) 1) Hand Held Unit (HHU) Source: PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 47  Findings | 5 Collection Task C: Deliverable II (b) – Process mapping report Customers can settle their position in several ways, each one corresponding to a different collection process As-is customers settling facilities Process Process step/activity Description Processes flowcharts Customers pay the invoice in cash in GECOL’s Cash branches Customers pay the invoice by checks in GECOL Bank Checks branches Invoice amount is deducted directly from customer Preauthorize bank Invoices bank account based on a prior arrangement collection methods Preauthorize Invoices of GECOL employees are deducted from salary their salaries (GECOL employee) Customers pay the invoice through LYD prepaid LYD pre-paid card card Institutions invoices are settled (netted) through the Netting general budget Source: PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 48  Findings | 5 Collection Task C: Deliverable II (b) – Process mapping report Yet, if customers do not settle voluntarily their positions, no penalties or disconnection policy are in place As-is collection process Consumer services/ Register payment on debt GECOL billing End recovery system division GECOL Payment by cash or cash box bank check No penalties for delayed payments Yes Receive the Settle Lack of Customer invoice position End No disconnection policy Lack of incentives for settling positions Source: PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 49  Findings Task C: Deliverable II (b) – Process mapping report Overall, we identified several issues/areas of intervention on the key processes identified Organization IT related Identified issues related 1 2 3 4 5 OPEX CAPEX Invoicing/ Processes Maintenance budgeting budgeting billing Collection Lack of prioritization Not fully automated Lack of ranking/ among OPEX items Limited power over billing system & no prioritization to setting priorities in No penalties for integration across determine order of Organizational the budget allocation delayed payments local billing databases maintenance coordination process and ERP complexity Missing targets & Lack of meters operational No control over Missing cost and Development installation Lack of efficiency factors budgeting info Projects Budget from disconnection policy Lengthy and manual GECOL Multi-period process invoicing (using excel not ERP) Issues Challenging budget Difficulties in budget Underutilized ERP follow up estimation due to Manual and missing Lack of incentives for functionalities long lead time of meters readings settling positions Limited role of the infrastructure projects budget committee in No estimation of the process consumption if meter Budget approval reading is not feasible before receiving Gov. Delays in budget confirmation finalization Duplication of number of visits to the customer (for meter reading and for collection) Lack of transparency and accountability Source: PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 50  Recommendations and action plan | Processes improvement Task C: Deliverable II (b) – Process mapping report We designed the TO BE maintenance process, proposing several solutions to address the issues highlighted Proposed solutions 1 2 3 4 5 OPEX CAPEX Invoicing/ Processes Maintenance budgeting budgeting billing Collection To be processes • Once received both scheduled and unscheduled work orders, critically rank them according to the asset failure consequence on GECOL • Include maintenance cost & budget information in P maintenance report • Request approval on budget from finance Proposed department before sending wo to maintenance team solutions • Use ERP to: – Issue PM schedule (list of work orders based on maintenance plan) – Issue scheduled work orders – Compute & monitor costs • Explore the possibility of working with local contractors to increase efficiency of maintenance Source: PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 51  Recommendations and action plan | Processes improvement Task C: Deliverable II (b) – Process mapping report The TO BE OPEX process introduce ranking, efficiency targets, ERP us and a wider role of the budget committee Proposed solutions 1 2 3 4 5 OPEX CAPEX Invoicing/ Processes Maintenance budgeting budgeting billing Collection • Set up prioritization plan to rank different OPEX items To be processes and separate what must be done now and what can be done later • Set targets and efficiency factors for OPEX expenditures • Increase role of budget committee, which together with P MD shall: – Set prioritization policy and targets Proposed – Enforce efficiency factors solutions • Use ERP to: – Gather data and prepare requests – Estimate electricity and water production, fuel and other requirements (Generation dept.) – Estimate Distribution and Consumer services requirements – Estimate manpower changes and other requirements • Discuss with the Government before finalization Source: PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 52  Recommendations and action plan | Processes improvement Task C: Deliverable II (b) – Process mapping report We recommended to transform the CAPEX budget into a 3-5 years plan with revisions carried out on an annual basis Proposed solutions 1 2 3 4 5 OPEX CAPEX Invoicing/ Processes Maintenance budgeting budgeting billing Collection To be processes • Transform the CAPEX budget into a 3-5 year plan P approved and committed by the Government with a revision carried out on an annual basis Proposed • Include risk identification/assessment and monitoring to solutions ensure risk mitigation • Make risk identification an iterative process involving the project team and other key stakeholders (i.e. MD/MP/CB) Source: PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 53  Recommendations and action plan | Processes improvement Task C: Deliverable II (b) – Process mapping report Invoicing and collection shall include penalties for late positions settling and a new disconnection policy Proposed solutions 1 2 3 4 5 OPEX CAPEX Invoicing/ Processes Maintenance budgeting budgeting billing Collection To be processes • Collect and maintain customer master file to include all GECOL customers connected to the grid • Estimate reading based on set parameters when customer meter is not accessible • Introduce penalties for late positions settling P • Introduce disconnection policy against non-paying customers based on specific criteria (e.g. number of unpaid invoices) Proposed • Introduce a wider array of payment channels to make solutions payment more agile for customers, also exploring the possibility of engaging third party merchant processors • Work closely with the Government to advertise and make people aware of changes in collection policies including fees, timelines and disconnection • Send reminders to non paying customers and consequently disconnect electricity in line with the disconnection policy in force Source: PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 54  Recommendations and action plan | Processes improvement GECOL shall first test the implementation of the 5 processes analyzed at the beginning of 2018 Measures and activities Measures Activities Year 2018 2019 2020 2021 2022 2023 Owner Test solutions identified in the design phase for the 5 Department in charge analyzed processes of the process Pilot revised Assess improvement against previous performance Department in charge business and if any identify areas of improvement of the process processes Finalize solutions based on results of the pilot test Department in charge of the process Roll-out new Roll-out processes Department in charge processes Pilot processes of the process implemented Milestones Source: PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 55  Recommendations and action plan | Processes improvement Task C: Deliverable II (b) – Process mapping report GECOL should also extend the process reengineering activities towards other departments and areas… Business process reengineering approach Analysis and design Implementation Validate current Design target state Prioritise processes Plan Roll out processes Transition to state processes and mitigate risk Implementation and manage risk operations • Define list of key • Agree criteria for • Identify critical to • Agree • Monitor success • Monitor processes to be bespoke vs. quality and risk implementation via live scorecard performance analysed standard process steps approach (parallel • Train the trainer during bedding-in • Agree process processes • Review existing etc.) • Assess location period taxonomy, value • Filter current state operational risk • Define high readiness for roll- • Measure process streams and into bespoke and events benefit, low risk out adoption and metrics for target standard • Assess the risk of quick-wins • Deploy selected benefits processes • Design processes disruption to • Determine current pilots and quick- realisation • Review existing and iterate with business as usual processes impact wins to capture • Confirm handover processes and users from implementing • Determine training benefits check-list and identify gaps • Document processes and change • Run BAU weekly provide “close- • For each gap, processes • Develop risk approach back-fill plan out” document complete the • Determine mitigation plans • Determine • Document • Agree a process inventory exception and • Determine optimal success metrics detailed continuous • Agree focus areas error handling process locations values procedures improvement and conduct time scenarios • Forecast expected • Determine • Roll-out framework with and motion • Agree metrics for volumes and deployment processes per focus on studies (incl. target service headcount by schedule and agreed sequence exception, error workload requirements location BAU back-fill rates balancing) • Prioritise process • Create • Discuss further • Develop process rollout by location implementation improvement standardisation plan opportunities hypotheses Source: PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 56  Recommendations and action plan | Processes improvement Task C: Deliverable II (b) – Process mapping report … With the target to launch the implementation of several new (prioritized) processes by 2019 Measures and activities Measures Activities Year 2018 2019 2020 2021 2022 2023 Owner Define key processes to be analyzed GECOL management & External consultants Validate Agree value streams metrics for target processes GECOL management & current state External consultants Conduct time and motion studies External consultants (including workload balancing) Agree criteria for bespoke vs standard processes GECOL management & Design target External consultants state Design processes and iterate with users External consultants processes New processes Document processes designed External consultants Identify prioritization criteria for rollout and External consultants Prioritize and review operational risk mitigate risk Develop risk mitigation plans External consultants Plan Agree implementation approach and define quick wins GECOL management & implementati External consultants Implementation on Create implementation plan plan ready External consultants Document detailed procedures External consultants Train the trainer External consultants Roll-out & HR processes Deploy selected pilots and quick wins Department in charge and manage of the process risk Roll-out processes as per agreed sequence Department in charge of the process Monitor performance during bedding-in period Department in charge Transition to of the process operations Confirm handover check-list and provide Dept. in charge closed-out documents & External consultants Milestones Source: PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 57  Institutional development Processes Manpower IT Technical performance Financial performance Back-up – Review of 2011-2015 GECOL 6 part strategy Strategy& | PwC Prepared for The World Bank 58  Findings Task C: Deliverable II (c) – Manpower/organizational rationalization review Task C carried-out a manpower sizing exercise, assessing the distribution of staff and resources across GECOL … FTE evolution (2010-2017)1 CAGR %, 2010-17 45,582 Total +4.2% 41,662 41,824 40,116 38,316 36,163 34,272 35,040 Distribution +4.0% Supply +3.8% Support +4.8% Generation +4.4% Transmission +4.2% 2010 2011 2012 2013 2014 2015 2016 2017(2) 1) Different data sources: 2010-2015 data received by GECOL on 31/10/2017; 2017 data received by GECOL on 05/04/2017 2) Data excluding police and collaborators received on 05/04/2017 Source: GECOL data collection ID17; PWC-Manpower/Organizational Rationalization Review; Strategy& analysis Strategy& | PwC Prepared for The World Bank 59  Findings Task C: Deliverable II (c) – Manpower/organizational rationalization review …and confirming the magnitude of GECOL staff unbalance, especially when compared to regional peers Manpower benchmark / comparison 16 1,078 Distribution & Supply Generation Net 8 Avg. Avg. generation 6 Customers/ 317 4 (MWh) / Dept. FTEs 160 Dept. FTEs 47 GECOL ONEE EEHC Sonelgaz GECOL ONEE EEHC Sonelgaz Libya Morocco Egypt Algeria Libya Morocco Egypt Algeria 0.7 16% Transmission 11% 0.4 Support Dept. FTEs FTEs in 0.3 7% Avg. / Km Avg. support (%) 0.1 2% GECOL ONEE EEHC Sonelgaz GECOL ONEE EEHC Sonelgaz Libya Morocco Egypt Algeria Libya Morocco Egypt Algeria Note: Data for GECOL refers to 2015 Source: GECOL data collection ID1; GECOL data collection ID17; GECOL data collection ID24; GECOL data collection ID36; ONEE Annual Report 2016; EEHC Annual Report 2015/2016; Sonelgaz Annual Report 2016; PWC-Manpower/Organizational Rationalization Review; Strategy& analysis Strategy& | PwC Prepared for The World Bank 60  Findings Task C: Deliverable II (c) – Manpower/organizational rationalization review The manpower and skills assessment has identified four key issues affecting GECOL Identified manpower and skills issues Issues Description Increasing • Manpower increased annually by 4% between 2010 and 2015 staff & low • Productivity ratio is among the worst across regional peers productivity • Technical skill gaps identified in all business units Skills • Succession planning issues are not addressed leading in the future to critical shortage knowledge loss Limited role • HR and organization are grouped under support services even though certain of HR functions are corporate core department • HR function influence on manpower and skill set is very limited Lack of clear HR • No clear HR strategy in place & training • Hiring follows no strategy and increasing manpower without a clear plan strategy • No clear training/reskilling strategy in place Source: PWC-Manpower/Organizational Rationalization Review; Strategy& analysis Strategy& | PwC Prepared for The World Bank 61  Findings | Increasing staff & low productivity Task A: Deliverable II– Rapid assessment of the sector performance Since 2010, the number of FTEs has been constantly growing leading to a low productivity with respect to regional peers # FTEs evolution (2010-15, ‘000) Productivity benchmark (2015) GWh / FTE Although having a lower 45 +4.0% 18 17.2 share of its total FTEs in 41.7 40.1 generation, GECOL has still 40 38.3 16 a worse productivity than 35.0 36.2 peer countries 35 34.3 14 12 11.7 30 25 10 9.5 8.21 20 8 15 6 5.0 10 4 5 2 0 0 2010 2011 2012 2013 2014 2015 Morocco Jordan Algeria Libya Egypt Generation FTEs share 19% 20% 17% 10% 20% vs. total Note: includes Sonelgaz, ERC, CEGCO, SEPGCO, AES, QEPCO, ONEE-BE, Masen, and EEHC Generation Companies; 1) Updated with new data received Source: GECOL data collection ID13, GECOL data collection ID17, Strategy& analysis Strategy& | PwC Prepared for The World Bank 62  Findings | Increasing staff & low productivity Task C: Deliverable II (c) – Manpower / organizational rationalization review Overstaffing is especially evident in support units, distribution and supply BUs Results of benchmarked KPIs # Supply department # Distribution department # Support activities (Customers per FTEs) (Customers per FTEs) (% FTEs) +72% 352 +270% 17% 16% 16% 294 205 202 +151% 181 7% 79 77 64 2008 2010 2015 Average 2008 2010 2015 Average 2008 2010 2015 Average peer peer peer GECOL group GECOL group GECOL group GECOL is highly overstaffed in Distribution & Supply department and it employs double the number of FTEs in support services activities with respect to the average of regional peer companies Source: PWC-Manpower/organizational rationalization review; Strategy& analysis Strategy& | PwC Prepared for The World Bank 63  Findings | Increasing staff & low productivity Task C: Deliverable II (c) – Manpower / organizational rationalization review Furthermore, despite the general over-staffing, the analyses at department level has also underlined lack of personnel GECOL manpower need assessment results # Support Units need only 25% of current staff according minus 75% to regional benchmarks Overstaffing # # Supply Unit should be Distribution Unit needs only reduced by 75% according to minus 75% 25% of staff according to benchmarks regional benchmarks Understaffing # # Currently Generation is Transmission Unit is more or staffed in line with regional less in line with regional benchmarks but increase in plus 200% plus 30% average but according to best future capacity needs sharp practice could be also increase of staff increased by 30% Strategy& | PwC Prepared for The World Bank 64  Findings | Skills shortage Task C: Deliverable II (c) – Manpower / organizational rationalization review Although the number of technicians and engineers across departments might suggest a proper skills distribution… Skills distribution (2015) 4,217 4,159 27,486 159 266 905 404 1,007 2,671 438 100% Generation Transmission Distribution Generation Transmission Distribution Financial HR General ICT O&M O&M O&M Projects Projects Projects Affairs Services Others Services (manual) Financial Drivers Technician Software Engineers Admin Source: PWC-Manpower/Organizational Rationalization Review; Strategy& analysis Strategy& | PwC Prepared for The World Bank 65  Findings | Skills shortage Task C: Deliverable IV (b) – Improving GECOL technical performance …bottom up interviews highlighted skill gaps in all departments and aging staff in generation and transmission Evidence from interviews # # # # # Generation Transmission Control MV network Distribution • Shortage in • Maintenance Lack of skills in: Lack of skills in MV Lack of skills in technical positions engineers have no • Advanced EMS Voltage O&M Distribution O&M despite the overall skills to maintain functionalities especially in: especially in: overstaffing at and repair DCS • DMS functionality • Cable works • Substation DC GECOL systems • Substation DCS • Substation DC systems • Minimal training • Loss of developed systems systems • Transformers (sufficient only for skills in jointing • Substation • Transformers maintenance Lack of ordinary daily and termination modeling and maintenance • Preventive skills operations) on new of 220kV cables data entry • Preventive maintenance units that have • Usage of 11kV maintenance come into service control room and over the last 5 facilities years • O&M staff • Aging linesman not approaching physically able to retirement age perform the • Not supported by demanding work of enough younger overhead lines engineers and maintenance technicians to Aging apprentice under staff them and learn from their experience and skills Source: PWC-Manpower/Organizational Rationalization Review; Strategy& analysis Strategy& | PwC Prepared for The World Bank 66  Findings | Limited role of HR department Task C: Deliverable II (c) – Manpower/organizational rationalization review HR and Org. role/importance is limited by their position under support services not responding directly to MD HR & Communication structure (2017) Managing Business Unit Director Department Sub-department Support services HR & Communication Training & HR Organization & development Structuring Employee affairs Structure Design & Development Communication & Jobs & Careers collaboration Development Medical affairs department Process Reengineering Policies and HR planning Administrative affairs and follow-up Source: Latest up-date of GECOL company organization chart 2015 (June 2017); Strategy& analysis Strategy& | PwC Prepared for The World Bank 67  Findings | Limited role of HR department Task C: Deliverable II (c) – Manpower/organizational rationalization review HR function and human capital agenda should have a corporate core importance ILLUSTRATIVE HC agenda pillars Operating Model 1 2 Human capital planning Management • Organizational design 1 Operating Model Management • Workforce planning • Processes & decision rights • Strategic Resourcing management 2 Human Capital Planning 3 4 5 6 3 Culture alignment 5 Talent management • Culture management • Talent development • Change management • National development program • Employee engagement and communication Culture Leadership Talent Performance Alignment Development Management & Rewards 4 Leadership development 6 Performance management • Assessment and development • KPIs management • Succession planning • Appraisals managament • Global mobility • Compensation & benefits 7 HR Management 7 HR Management • Recruiting • Personnel Services Source: Strategy& analysis Strategy& | PwC Prepared for The World Bank 68  Findings | Lack of clear HR & training strategy Task C: Deliverable II (c) – Manpower/organizational rationalization review GECOL also lacks of a comprehensive HR strategy cascading from organizational business strategy and culture HR strategy cascade ILLUSTRATIVE BoD Business Strategy and Culture What the firm wants to achieve and how Organizational Competencies Individual What firm employees need to know capability and do engagement Processes and Organization Skills and Structures How to organize in order to achieve strategic goals Passion Comprehensive HR Strategy How the firm drives and reinforces desired competencies and behaviors Talent Learning and Succession Performance Value Acquisition Development Management Management Propositions Missing at GECOL Source: Strategy& analysis Strategy& | PwC Prepared for The World Bank 69  Recommendations and action plan | Reskill and redeploy resources Task C: Deliverable II (c) – Manpower / organizational rationalization review The recommendation has focused on a conservative set of actions rather than a sharp rightsizing Recommended resizing approaches Wave I Wave II Immediate actions Mid-term actions Immediate actions starting from 2018 focusing on Mid-term actions starting upon successful completion of reskilling as top priority immediate actions (i.e. indicatively from 2020 to be completed by 2025) Start immediately to reassign especially Re-Skilling Reallocate technicians to other departments like the generation department Offer buyout solutions for non core Incentivize Leverage current resources to fill unmet businesses like Health Service, Driver, Retrain Buyouts Translation etc. needs in the generation department Institute a hiring freeze as more than Incentivize to Ask employees to take voluntary lay- Freeze hiring 12% are aged below 30 and more than leave offs 40% aged below 40 Prepare an early retirement package for Temporarily or permanently terminate Early employees aged over 60 (2% of total Dismiss employment for a group of employees Retirement FTEs) especially in D&S Train managers and staff professionals Start GECOL to be hired inside but also outside the Academy company Source: PWC-Manpower/organizational rationalization review; Strategy& analysis Strategy& | PwC Prepared for The World Bank 70  Recommendations and action plan | Reskill and redeploy resources Task C: Deliverable II (c) – Manpower/organizational rationalization review GECOL shall focus on strengthening its HR role, org. and strategy, preparing to re-balance its manpower situation... Measures and activities Measures Activities Year 2018 2019 2020 2021 2022 2023 Owner Consolidate in HR&O department (under MD) all the MD/Head of Centralize HR HR-related core functions leaving non-core HR activities HR department HR activities under MD within Support Services Same as institutional development action plan Develop a comprehensive HR strategy including: Head of workforce planning, learning & development, HR HR strategy performance management, succession planning, development talent acquisition Negotiate/ approve HR strategy BoD HR strategy in place Freeze hiring Head of HR Reassess manpower needs for each business process Critical resource map Head of HR Manpower Develop manpower rebalancing plan Manpower rebalancing plan Head of HR rebalancing & workforce Assess legal implications and constraints Head of HR planning Deploy re-sizing plan Head of HR Workforce Develop a structured workforce planning process planning in place Head of HR driving the hiring process Targets One shot activity Source: PWC-Manpower/organizational rationalization review; Strategy& analysis Strategy& | PwC Prepared for The World Bank 71  Recommendations and action plan | Reskill and redeploy resources Task C: Deliverable II (c) – Manpower/organizational rationalization review …and in parallel will need to focus on launching a corporate- wide reskilling and training plan through targeted programs Measures and activities Measures Activities Year 2018 2019 2020 2021 2022 2023 Owner Assess current employees capabilities and skill-set HR dept. Define future skill needs HR dept. Match current capabilities with future needs to identify gaps Capabilities & skills map HR dept. Prepare & launch a training and reskilling program to fill HR dept. identified gaps Reskilling program Develop a general training policy Head of HR Approve training policy BoD Estimate training budget Head of HR Negotiate, review and approve training budget BoD Corporate reskilling Centralize training activities in the GECOL training academy HR dept. GECOL Academy Open the academy to external parties HR dept. Academy opened To 3rd parties Set up an online platform for e-training HR dept. Develop executive development plan for executives training HR dept. Continuous executive and BoD training HR dept. Introduction of training incentives schemes (e.g. trainee programs, HR dept. talent schemes) Establishment of international exchange training programs HR dept. Targets DETAILED TRAINING INITIATIVES FOR SBUs IN THE TECH. IMPROV. ACTION PLANS One shot activity Source: PWC-Manpower/organizational rationalization review; Strategy& analysis Strategy& | PwC Prepared for The World Bank 72  Recommendations and action plan | Reskill and redeploy resources Task C: Deliverable II (c) – Manpower/organizational rationalization review GECOL shall also introduce a performance management and succession planning Measures and activities Measures Activities Year 2018 2019 2020 2021 2022 2023 Owner Set up a clear performance appraisal system Head of HR Appraisal system in place Annually appraise performance and provide feedback All departments coordinated by HR Performance management Link performance to pay, career development and Head of HR & MD succession planning Launch mentoring programs (e.g. pairing between experienced All departments employees and more junior ones) to monitor, support and coach coordinated by HR performance improvement Define succession priorities Head of HR Design succession program Head of HR Succession program in place Identify key positions and potential successors Head of HR Succession Gather performance, potential and aspiration data Head of HR planning Assess and plan development needs of potential Head of HR Successors for key positions Assess and plan development needs of the organization Head of HR Manage development needs of potential successors for Head of HR key positions Targets Source: PWC-Manpower/organizational rationalization review; Strategy& analysis Strategy& | PwC Prepared for The World Bank 73  Institutional development Processes Manpower IT Technical performance Financial performance Back-up – Review of 2011-2015 GECOL 6 part strategy Strategy& | PwC Prepared for The World Bank 74  Findings Task C: Deliverable II (d) – ERP system review In terms of IT, Task C has focused on the analysis of the functionalities of the ERP system of GECOL Current GECOL MIS1 IFS ERP 2 Logistics module 3 Human resources 4 Enterprise asset and payroll module management module  Work Order  Inventory  HR Management  Purchasing  Payroll  Maintenance 1 Finance Module  Accounts  Fixed Assets Payable  General Ledger  Accounts  Budgeting Receivables  Billing System ERP MAIN MODULE ERP SUB MODULE BILLING SYSTEM Note: Project Scope of Work did not require the definition of a major IT infrastructure review but only requested the review of the ERP functionalities 1) Management Information System Source: PWC-ERP system review; Strategy& analysis Strategy& | PwC Prepared for The World Bank 75  Findings Task C: Deliverable II (d) – ERP system review The analyses identified a number of issues where GECOL shall focus going forward Summary of ICT issues identified Key issues identified Finance • No evidence of cash flow functionalities installed • Required review and update of basic data (e.g. inventory parts, etc.) Logistics • Required system upgrade ERP Enterprise Asset • Bugs when delivery installed Management IT framework components • Required standardization of prompt names of fields in Arabic and English Systems • Lack of storage space for some fields Human resources • Impossibility to change GECOL’s roles and payroll • Lack of data validity, completeness and accuracy • Lack of utilization of document management in IFS to save employee documents • Shrinking billing rollout INDRA Billing system • Lack of integration between other regions and GL Systems integration • Lack of integration of EAM and other modules (i.e. logistics, financial and HR) • Components obsolete and degraded Infrastructure • UPS system out of service from 2012 • Several OPGW network break points identified Governance • Lack of IT governance and written policies and procedures • Lak of training Users • Lack of system functionalities awareness • Lack of utilization by sub-users Source: PWC-ERP system review; Strategy& analysis Strategy& | PwC Prepared for The World Bank 76  Recommendations and action plan | Add value to IT resources The report recommended that GECOL maintains / upgrades its IFS/INDRA, adding (or correcting) some functionalities IT Recommendations overview Our recommendation Rationale • ERP systems currently in use at • The system uses oracle GECOL represents one of the technology, which makes the data best practices in the utilities structure available and industry modifications can be implemented • Our recommendation is thus to • The system has minimum number maintain the current ERP system of bugs and functionality meets and to: requirements to certain extent 1. Upgrade current release of • The system can be up-graded application IFS/INDRA • GECOL staff has a good 2. Add more functionalities knowledge of the systems and can use them 3. Correct and develop some functionalities and • Other skills required to maintain integration and upgrade the system can (and shall) be obtained through partners and suppliers • The general feedback of GECOL on the different modules meets or exceeds expectations Source: PWC-Manpower/organizational rationalization review; Strategy& analysis Strategy& | PwC Prepared for The World Bank 77  Recommendations and action plan | Add value to IT resources Task C: Deliverable II (d) – ERP system review The recommendation focused on GECOL upgrading its IFS with additional customization IT recommendations • Allow auto reconciliation in GL module through e-access to bank information and transactions • Use the recruitment functions which will simplify the hiring of new employees by supporting all hiring processes from the Optimize personnel requisition to the final transfer of data to the employee file inside the IFS HR current • Activate the submission of the proposals, invoices through e- ERP functionalities procurement (portal) IT framework components • Apply scheduling and resourcing in the work order/preventive Systems maintenance to ensure utilization of existing resources and customer satisfaction through providing the service on time and enhance the overall equipment effectiveness • Electronic transfer of items to the purchase order especially INDRA when there is a purchase order with more than 100 items to be entered • Implement cash flow management module which will help Systems integration GECOL in managing cash flows more efficiently • Implement e-customer service through AR module, allowing New payment of invoices online Infrastructure functionalities • Implement the employee self service (ESS) which allows employees to update their personal information such as (phone numbers, addresses, passport number etc.) and apply online Governance for HR requests (leave, certificate) • Implement Business Intelligence (BI) module on top of ERP IFS which help in better analytics on data and help decision making Users Source: PWC-Manpower/organizational rationalization review; Strategy& analysis Strategy& | PwC Prepared for The World Bank 78  Recommendations and action plan | Add value to IT resources Task C: Deliverable II (d) – ERP system review Task C also suggested an integration between metering and revenue recognition in the billing system IT recommendations • Allow auto payment of bills for customers with bank accounts authorization provided • Allow customers to enquire online on bills and settle outstanding payments Optimize • Develop consolidation reports that shows any differences in: – Metering and billing current – Electricity consumed and electricity generated and ERP functionalities compare variances with accepted standard rates – Revenue values generated from billing and scenario build IT framework components Systems based on electricity rate change with metering to ensure proper system calculation of bill amount with the correct electricity price INDRA Policies and • Develop policy, procedures and functional documentation Systems integration procedures and enroll across all regions to ensure unified standards Infrastructure Governance Users Source: PWC-Manpower/organizational rationalization review; Strategy& analysis Strategy& | PwC Prepared for The World Bank 79  Recommendations and action plan | Add value to IT resources Task C: Deliverable II (d) – ERP system review GECOL shall also solve its integration problems by building all requirements into the system IT recommendations Work orders • Work in developing integration between work orders and and employees which help in fixing current challenges employees ERP • Build complete rules between modules which help business IT framework components integrity such as fixed asset management where purchasing Systems Rules between integrates with fixed assets and resulted JV such as orders depreciation automatically calculated in FA module and posted to GL. Until we reach to disposal of asset INDRA Reporting • Work on consolidation on reporting from different systems to consolidation ensure revenue recorded and collected Systems integration Infrastructure Develop • Develop or modify integration programs that link billing to integration ERP to ensure reconciliation and revenue recognition from programs billing into ERP Governance Users Source: PWC-Manpower/organizational rationalization review; Strategy& analysis Strategy& | PwC Prepared for The World Bank 80  Recommendations and action plan | Add value to IT resources Task C: Deliverable II (d) – ERP system review In terms of IT infrastructure and users, a complete upgrade of the latter and training of the former are required IT recommendations • Detailed assessment required to develop complete solution for the infrastructure which should cover all aspects of the Specialist existing data center such as servers, cooling, UPS, anti-fire analyses systems, location, facility, risk mitigation, stability, space and environment, physical security and access control ERP Oracle • IT framework components Upgrade of Oracle 10g to Oracle 12c Systems upgrade IT infrastructure • Develop operational process and life cycle strategy INDRA strategy Systems integration • Study the possibility of moving the data center on cloud Consider located to safe location (e.g. at least tier 3 data center) to cloud take advantage of high availability, greater connectivity, Infrastructure increased scalability and heightened security that is beyond introduction the means of most companies to create in-house Governance • Define a corporate wide training program to ensure correct Capabilities & employee master data entered to the system and then review training the system calculation of leave entitlement to ensure proper Users leave balances. Source: PWC-Manpower/organizational rationalization review; Strategy& analysis Strategy& | PwC Prepared for The World Bank 81  Recommendations and action plan | Add value to IT resources Task C: Deliverable II (d) – ERP system review GECOL shall first repair existing resources, then upgrade systems and finally add value to the whole infrastructure Measures and activities Measures Activities Year 2018 2019 2020 2021 2022 2023 Owner Step 1 Repair data centers: IT dept. Fix IT • Restore network in the east region Data centers repaired resources • Achieve a robust building with certain level of protection Introduce a new transmission media network IT dept. Step 2 Upgrade existing data center: IT dept. • Provide a suitable environment for equipment Data center upgraded (i.e. proper cooling and uninterrupted power supply) • Increase performance of DC system Upgrade IT • Ensure stability by upgrading current servers and storage systems Upgrade current ERP applications( e.g. provide latest functionality IT dept. and proper support on IFS ERP and INDRA) ERP upgraded Deploy ERP training program to achieve proper use of the system IT dept. and increased productivity Step 3 Invest in new access layer (new branches, 120 nodes) IT dept. Add value to Develop a new disaster recovery site to: IT dept. IT structure • Ensure business continuity and • Ensure future stability and proper awareness of new systems governance or modification on existing processes or functionalities Revise IT governance IT dept. New IT governance Milestones Source: PWC-ERP system review; Strategy& analysis Strategy& | PwC Prepared for The World Bank 82  Institutional development Processes Manpower IT Technical performance Financial performance Back-up – Review of 2011-2015 GECOL 6 part strategy Strategy& | PwC Prepared for The World Bank 83  Findings Task C: Deliverable IV (b) – Improving GECOL technical performance In terms of technical performance, Task C carried-out a review of GECOL performance and identified several issues Poor operating performance issues Covered in more detail in next slides1 # # # # MV & Sector Generation Transmission Control Distribution Deficient asset Issue / Damaged Failure of Overdue installation and concern substations and communication maintenance maintenance identified overhead lines links practices O&M Improve maintenance of Incorrect and unsafe overhead lines & O&M practices S/S2 DC systems Transformers failures Inadequate fuel Operational and 30kV network supply deficiencies earthing Delayed investment Delayed capacity Delayed substation Delayed control Delayed and replacement expansion projects rehab. programs projects investments projects Skills shortage Poor sector operating performance 1) For further detail, see “Task C – 4.2. Improving GECOL technical performance report; 2) Substations (S/S) Source: Improving GECOL technical performance report, Strategy& analysis Strategy& | PwC Prepared for The World Bank 84  Findings | Overdue maintenance Task C: Deliverable IV (b) – Improving GECOL technical performance In the past years, GECOL was unable to cope with its plants maintenance needs: in ’17, 34 units were pending overhaul… Generating units overhauls (2010-20171) 34 31 28 27 Number of units to be 19 overhauled 16 16 (Backlog + 11 Due in year “Due in year”) From previous year From 2+ years Backlog 20103 2011 2012 2013 2014 2015 2016 Nov. 2017 Units actually overhauled2 Avg. units 7 7 8 overhauled 6 5 6 2 3 5.5 Due in year 20103 2011 2012 2013 2014 2015 2016 2017 “Due in year” From previous year actually N/A 0% 14% 50% 38% 0% 0% 0% From 2+ years overhauled4 1) Generating units overhauls up to November 2017; 2) Overhauls are considered in the year of their completion; 3) No clear identification of backlog was available for 2010; 4) “Due in year” overhauled units divided by total overhauled units; Source: Awardbrand - Improving GECOL technical performance report, Strategy& analysis Strategy& | PwC Prepared for The World Bank 85  Findings | Overdue maintenance Task C: Deliverable IV (b) – Improving GECOL technical performance …accounting for a total installed capacity with maintenance issues ranging between 5.2 GW and 6.7 GW Evolution of due for overhaul units nameplate capacity (GW, 2010-2017) Nameplate capacity of units requiring complex and less complex maintenance3 6.7 Detailed assessment of generating units capacity with complex and less complex 5.2 maintenance requirements in Generation capacity 4.2 review excel file2 3.9 43% 3.5 3.0 18% 26% 60% 16% 19% 2.0 1.9 62% 1.5 10% 59% 70% 23% 74% 5% 58% 38% 33% 23% 30% 16% Due in year 16% From previous year 20101 2011 2012 2013 2014 2015 2016 Nov. Dec. From 2+ years 2017 2017 Backlog 1) No clear identification of backlog was available for 2010; 2) Data provided in December 2017 by GECOL generation department task force created ad hoc for the capacity assessment of the generation fleet; 3) Less complex maintenance includes both overhauls and units that require replacement of parts but not a complete overhaul (replacement of pumps, bearings, etc.); Source: Awardbrand - Improving GECOL technical performance report, Strategy& analysis Strategy& | PwC Prepared for The World Bank 86  Findings | Inadequate fuel supply Task C: Deliverable IV (b) – Improving GECOL technical performance GECOL’s P/S is also adversely affected by several fuel supply constraining factors Fuel supply constraining factors today Generating unit Fuel transportation / supply Ship unloading Pipeline Truck by land through sea Lack of Weather Logistics & Pressure conditions security Depending on fuel Smaller units are taken External factors such Impractical for large transportation offline to ensure as bad weather and plants requiring a sufficient pressure to unfavorable waterways constant stream of Fuel supply bigger units constrain cargos trucks constraining HFO Limited size of tank farms requires factors Limited storage constant stream of fuel and prevents Depending on the capacity from having a buffer to cover periods of type of fuel LFO shortages in supply Less important units switched to LFO so Gas Gas availability more sensitive units can operate on gas Going forward, NOC has estimated a decrease of local gas available for power generation after up-stream uses and non-thermoelectric demand further possibly affecting availability of gas units currently under construction Identified fuel supply issues Note: Improving GECOL technical performance report has identified in 600MW the available capacity directly connected to fuel supply constraining factors today Source: Awardbrand - Improving GECOL technical performance report, Strategy& analysis Strategy& | PwC Prepared for The World Bank 87  Findings | Overdue maintenance & Inadequate fuel supply Task C: Deliverable IV (b) – Improving GECOL technical performance Combined overdue less complex maintenance and fuel constraints are the cause of 2.0GW unavailable power Breakdown of GECOL unavailable capacity1 (GW, 2017) 10.8 10.2 0.5 1.1 8.7 1.2 7.4 2.0 0.1 GW 1.4 0.6 5.3 Libya GECOL Capacity Avg. Theoretical Unavailable Unavailable Max Unavailable Unavailable Available nameplate nameplate ready for unavailable max power power due to power for available power power due to power capacity capacity retirement3 power due from complex other/ power after requiring fuel supply 20171 20172 to ambient installed maintenance5 unknown less complex less constraints conditions4 capacity reasons maint. and complex fuel maint.5 1) Includes third party power stations: Sarir MMRA and Misurata Steel; 2) Includes GECOL main power stations and ready for retirement units; 3) Updated ready for retirement capacity agreed with GECOL in December 2017; 4) Unavailable power due to ambient conditions was assumed to be equal to be 0 for steam turbines and equal to nameplate times a derating factor of 12.5% for gas turbines; 5) Maintenance was classified as less complex maintenance if it can be solved within a short period of time (max 4 months; for example gas turbines whose maintenance is recurring every 3-4 months) while overhauls on steam units and all maintenance requiring more than 4 months was considered complex maintenance; Source: Awardbrand - Improving GECOL technical performance report, Strategy& analysis Strategy& | PwC Prepared for The World Bank 88  Findings | Overdue maintenance Task C: Deliverable IV (b) – Improving GECOL technical performance With a worse situation in the eastern region since 43% of capacity is lost due to lack of less complex maintenance Units requiring less complex maintenance3 (MW, 2017) % Nameplate lost due to lack of % Nameplate lost due to lack of WEST1 21% less complex maintenance EAST1 43% less complex maintenance 0 200 400 0 200 400 MW MW MisurataGT-31 MisurataGT-32 Benghazi North 2GT-31 MisurataST-1 ZawiaGT-11 SarirGT-1 ZawiaGT-12 ZawiaGT-13 ZawiaGT-14 SarirGT-3 ZawiaGT-15 Western MountainGT-12 Benghazi North 2ST-30 Western MountainGT-13 Western MountainGT-14 Benghazi North 1GT-14 Western MountainGT-16 Khoms 1GT-03 Khoms 1GT-04 Benghazi North 1GT-13 ZawiaST-10 ZawiaST-20 ZweitinaGT-11 Available power ZawiaST-30 Average unavailable Tripoli SouthGT-11 due to ambient conditions2 Tripoli SouthGT-12 KufraGT1 Unavailable power Tripoli SouthGT-13 requiring less complex maintenance3 Tripoli SouthGT-14 KufraGT2 Unavailable power Tripoli SouthGT-15 for other/unknown reasons 1) West includes Western, Southern, Tripoli and Central regions, while East includes Wahat, Benghazi and Eastern regions; 2) Unavailable power due to ambient conditions was assumed to be equal to be 0 for steam turbines and equal to nameplate times a derating factor of 12.5% for gas turbines; 3) Maintenance classified as less complex if it can be solved within a short period of time (max 4 months); Source: Awardbrand - Improving GECOL technical performance report, Strategy& analysis Strategy& | PwC Prepared for The World Bank 89  Findings | Damaged transmission and overhead lines Task C: Deliverable IV (b) – Improving GECOL technical performance Damages to transmission substations and overhead lines did also present some issues Damaged substations and overhead lines Substations Overhead lines 13 Total # 400kV Total length of substations 86 + 99 overhead lines 14,458 220kV (km) 2,290 Out of service 6 6% Needing replacement of 25 old switchgears With damaged / Damaged power 9 old transformers Out of service 819 components overhead lines (6%) (km) Not in service 23 earthing 15 (1%) resistors 49% 220 kV 400 kV Source: Awardbrand - Improving GECOL technical performance report, Strategy& analysis Strategy& | PwC Prepared for The World Bank 90  Findings | Improve maintenance of overhead lines and S/S DC system Task C: Deliverable IV (b) – Improving GECOL technical performance Execution of the transmission maintenance plan is often interrupted by a large number of unscheduled work orders Maintenance plan completion rates (2012-2015) Maintenance of transmission lines Cleaning of transmission lines Completion Completion Rate (%) Rate (%) -5% 100 92 100 83 78 -3% 80Highest 73 80 completion rate 68 60 due 60 51 maintenance 44 46 contacted out to 40contractors local 40 20 20 0 0 2012 2013 2014 2015 2012 2013 2014 2015 Completion rate of lines maintenance work orders Completion rate of cleaning work orders Maintenance of transmission lines was negatively affected by: Cleaning of transmission lines decreased due to: • Threats to security • Threats to security • Rising number of unscheduled/unplanned maintenance work • Aging GECOL’s linesmen no longer physically capable to orders perform the demanding overhead lines maintenance activity • Lack of tools in particular service vehicles (cranes, forks • Lack of required equipment (e.g. water tankers, self utility vehicles, etc.) propelled or pulled by other vehicles, water pumps and lengths of hosepipe) Source: Awardbrand - Improving GECOL technical performance report, PWC-Process mapping & identification gaps of staff skills and performance; Strategy& analysis Strategy& | PwC Prepared for The World Bank 91  Findings | Failure of communication links Task C: Deliverable IV (b) – Improving GECOL technical performance Issues with communication links inhibit an effective control of the network, also increasing operational risk Status of NCC/TRCC SCADA availability and quality of data 100% 76% Unavailable data 36% 7% 6% 27% 24% Total OPGW Problems Telecom RTU/DCS1 Other reasons Availble necessary data equipment data problems • Problems with contacts, relays, • Defects in some Functioning transducers & part of the problems to the other data RTU/DCS Cut and broken terminal equipment sources Reasons for data • Problems with OPGW conductors to which the fiber • Problems with unavailability the interface and fiber optic cables are wiring/ bad protocols connected at each contacts • Incompatibility line end • RTU not yet in the equipment commissioned/ in service 1) Remote Terminal Units (RTU) / Digital Control Systems (DCS); Source: Awardbrand - Improving GECOL technical performance report, Strategy& analysis Strategy& | PwC Prepared for The World Bank 92  Findings | Deficient asset installation and maintenance practices Task C: Deliverable IV (b) – Improving GECOL technical performance Data show a sharp increase in feeder outages after 2011 mainly due to several installation incorrect practices Number of feeders interruptions evolution Reasons for 30kV cable1 network failures (2007-2016) Laying cables with excessive Fault rate tension, without controlling the Pre-2011 Post-2011 per km tension torque and without using (2016)2 2,682 rolling pulleys -4% +16% Metallic screens of single core 1% cables bonded to the ground at 2,097 both ends regardless of cables 1,954 1,803 1,811 ! lengths 7% Fatal incorrect practices in cable 1,481 Deficient termination grounding installation (e.g. connecting aluminum to copper, 1,126 practices grounding tails connected in the wrong places) Cross-bonding and single-point 14% bonding of single core cables not applied Solidly grounded transformers 2007 2008 2009 2012 2014 2015 2016 resulting in fault current exceeding 5kA 11kV feeders 66kV feeders 30kV feeders (above the max specification of cable screens) 1) Single core cables 1x630mm2 (N2XSAY 1X630 R/V 18/30 kV); 2) Total length considered: 11kV 51152km, 66kV 8853km, 30kV 12174km Source: Awardbrand - Improving GECOL technical performance report, Strategy& analysis Strategy& | PwC Prepared for The World Bank 93  Recommendations and action plan | Improve system performance Task C: Deliverable IV (b) – Improving GECOL technical performance Task C has then proposed a detailed action plan for GECOL to restore its technical performance and service quality Detailed issues, measures and milestones # GENERATION IMPROVEMENT ACTION PLAN # Generation Measures Milestones issues • Resolve backlog of overdue maintenance • 90% of suspended units back in service Overdue • Plan maintenance of running units • No new buildup of overdue maintenance 1 • • maintenance Retire old units List of units to be retirement approved • Ensure availability of 3rd party plants • 250 MW added to grid • Zero unavailable capacity due to fuel supply Inadequate fuel • Protect fuel supplies to P/S and address fuel • Supply Sarir P/S with gas 2 problems • Full implementation of fuel quality control supply procedures • Updated generation expansion plan • Complete under construction projects • RFP for first round of new generation projects • Update load forecast and generation expansion Delayed capacity issued 3 plan expansion projects • Obari completed (4x125 MW online) • Tender new generation capacity • Gulf completed (3x350 MW online) • Complete EDM system • Fully functioning EDM • Certification program for P/S O&M personnel in • Solve lack of O&M competences place 4 Skills shortage • Solve Generation BU understaffing • All P/S operation shifts adequately staffed with qualified personnel Source: Awardbrand - Improving GECOL technical performance report, Strategy& analysis Strategy& | PwC Prepared for The World Bank 94  Recommendations and action plan | Improve system performance Task C: Deliverable IV (b) – Improving GECOL technical performance By addressing overdue maintenance, GECOL will increase its capacity availability and recover several “suspended” units # GENERATION IMPROVEMENT ACTION PLAN Measures and activities Measures Activities Year 2018 2019 2020 2021 2022 2023 Owner Resolve Plan a concentrated 3 year maintenance and Generation BU backlog of overhauling program overdue Carry out 7 overhauls of GT units, 3 overhauls of ST units, 6 Generation BU maintenance maintenance, repair and replacement activities each year 90% of suspended units back in service • Prioritize operating units based on operating conditions, Generation BU Plan maintenance needs and importance to the grid maintenance • Draft a comprehensive maintenance program for operating units of running • Allocate the necessary budget units Execute timely maintenance program for running units Generation BU (expect 6 GT units per year) No new buildup of overdue maintenance Review GECOL’s power plants retirement policy Generation BU & MD Assess the financial viability of old units continued maintenance Generation BU & Retire old and upkeep and set retirement dates for non viable old units AFC units Approve list of units to be retired BoD/GA List of units to be retired approved Retire all very old and unviable units (i.e. ready for retirement units) Generation BU Write off retired assets from GECOL’s books AFC dept. Ensure avail. Negotiate with Libyan Steel Co. for overhaul of units Generation BU of 3rd party (possibly carry out overhauls on their behalf for 2/3 units) 250 MW P/S added to grid Continue Continue executing the previously established maintenance Generation BU improving program for running units O&M Continue with timely retirement of old and unviable units Generation BU Milestones Source: Awardbrand - Improving GECOL technical performance report, Strategy& analysis Strategy& | PwC Prepared for The World Bank 95  Recommendations and action plan | Improve system performance Task C: Deliverable IV (b) – Improving GECOL technical performance Securing fuel supply, will allow GECOL to further increase its capacity availability # GENERATION IMPROVEMENT ACTION PLAN Measures and activities Measures Activities Year 2018 2019 2020 2021 2022 2023 Owner Work with the Government to protect fuel convoys Generation BU & to P/S especially in remote regions Government Work with local communities to engage in protecting Generation BU & fuel supply lines Local communities Assess which plants could benefit from increased fuel tanks Generation BU capacity to act as a buffer for delayed or unsuitable fuel deliveries Protect fuel Tender and contract additional fuel tanks Generation BU supplies to Zero unavailable capacity P/S and due to fuel supply address fuel Work with the Government and Gas Transport & Distribution Co. Generation BU, problem to resolve contractual issues for the completion Supply Sarir P/S with gas Government & Gas of Entisar-Sarir pipeline Transport & Distr. Co. Provide key P/S with fuel analysis lab equipment and train staff Generation BU Full implementation of fuel quality control procedures Continuous implementation of fuel quality control procedures Generation BU Establish a joint NOC/GECOL commission to oversee and resolve GECOL & NOC supply problems to individual P/S Milestones Source: Awardbrand - Improving GECOL technical performance report, Strategy& analysis Strategy& | PwC Prepared for The World Bank 96  Recommendations and action plan | Improve system performance Task C: Deliverable IV (b) – Improving GECOL technical performance Completing under construction units and tendering for new generation capacity will then enable GECOL to meet demand # GENERATION IMPROVEMENT ACTION PLAN Measures and activities Measures Activities Year 2018 2019 2020 2021 2022 2023 Owner Complete Complete Obari power station and connect to power network Generation BU under ensuring fuel supply Obari completed (4x125 MW online) & E&P1 construction Complete Gulf Power Station Generation BU projects Gulf completed (3x350 MW online) & E&P Contract to renew 20-year load forecast study and Generation BU Update load regularly update and extend load forecast study forecast and generation Based on updated load forecast, contract for 20-year Generation BU expansion generation expansion study considering also optimal Updated generation expansion plan & E&P plan generation mix and regularly update and extend generation expansion plans (first annually and later biannually) Tender, contract and execute first generation of new plants Generation BU (either autonomously or through IPPs) RFP for first round of new projects issued & E&P Tender new Finalize arrangements for 4 new power stations (ensure funding, Generation BU generation finalize contracts, assess local support needs to ensure rapid & E&P capacity completion) Execute first generation of previously tendered new Generation BU plants (either autonomously or through IPPs) New capacity& E&P added to grid Procure any remaining materials or replacement for EDM system Generation BU Complete installation of EDM meters and telemetry station to ensure Generation BU Complete new network installation are correctly metered EDM system Define departments responsibilities for maintenance and servicing Business Units and for reporting of operating results Fully functioning EDM Milestones 1) Engineering and Projects Department Source: Awardbrand - Improving GECOL technical performance report, Strategy& analysis Strategy& | PwC Prepared for The World Bank 97  Recommendations and action plan | Improve system performance Task C: Deliverable 2.2 – Process mapping & identification of gaps in performance To carry-out its investment process, GECOL shall also review and strengthen its investment planning process… Investment planning process Process steps GECOL E&P department to establish policies for to be organizational structure Project selection capital investment planning (i.e. eligibility criteria setting criteria; prioritization criteria) Actors directly dealing with the Government for financing Managing E&P to provide BUs with schedules and Director Provision of requests forms, each requiring information for calendar, forms project ranking and instructions AFC Bus to assess progress of ongoing projects Project requests and prepare and submit projects proposals to preparation E&P dept. Engineering & Projects Provides Review projects E&P to review all BUs project proposals criteria for according to the predetermined criteria cost-efficient Submit requests projects project prioritization requests Prioritize projects E&P to prioritize projects through least cost Business units planning methodology requests Focus in next slide Draft the Master Plan from the projects final Distribution list arranged by priority order according to the Generation Transmission Draft Master Plan & Supply criteria used in the scoring process Sources: Strategy& analysis Strategy& | PwC Prepared for The World Bank 98  Recommendations and action plan | Improve system performance Task C: Deliverable 2.2 – Process mapping & identification of gaps in performance …Using consistently a least-cost-planning methodology Least-cost planning methodology ILLUSTRATIVE Supply/demand balance Option selection GW Load 12 A Option forecast 10 study 8 ! Need for Negative investment 6 reserve B Option in new + 4 margin resources 2 Existing 0 resources C Option 2017 2018 2019 2020 Select option with lowest: