Establishing Marafiq as a Private Utility Company

Power & Water Utility Company for Jubail & Yanbu
Case Study:
Establishing Marafiq as a Private Utility Company
Presented by
Diana DePinto, Partner
Introduction – What is Marafiq
Marafiq’s is a private utility company in the Kingdom of Saudi Arabia. Its main objective is to undertake
Operation, Maintenance, Management, Expansion and Construction of Seawater Cooling Systems,
Desalinated and Treated water systems, Sanitary and Industrial Wastewater systems as well as
Electricity Systems to provide such services as required for Industrial, Commercial and Residential
Facilities in both Jubail & Yanbu industrial cities.
Introduction – Establishing Marafiq as a Private Utility Co.
The formation of Marafiq as a private utility company leveraged the international experience of
some of the best international consulting firms. Due to the diversity and complexity of the task of
forming Marafiq, it was evident that no single consulting firm would have the resources to carry it
out. The work had to be done by more than one, each firm representing particular expertise in the
management, legal, technical, financial, regulatory, commercial, information technology and human
resources fields. This led to the appointment of a consortium of six consultants which, under the
umbrella and leadership of Ernst & Young Consulting and working side by side with the
management of Marafiq, started to set up a new company from scratch. The multinational
consortium and the Marafiq management team laid the right foundation for a world-class
commercial utility company.
Marafiq was formed by the Ernst & Young Consortium team as a private utility company in 11
months and became operational in January, 2003.
Multinational Consortium
Ernst & Young Consulting led the multinational consortium which included the following consulting
firms:
NERA
Economic Consulting
Multinational Consortium – Project Hours By Consultant
The consortium spent approximately 56,745 hours of consulting work in forming the new company.
Consortium member
NERA
Responsibilities
Total Project Hours
Lead Consultant, Program Management,
Organization Design, Strategy Dev., Human
Resources, ERP System, Corporate Finance,
Accounting and Change Management
36,614
Water and Waste Water Technical Work
Utility Management & Operations
4,168
Power / Electricity Technical Work
Utility Management & Operations
8,338
Economic and Regulatory Consulting
1,284
Legal work for waste water and power sector
contracts
Water and Waste Water Technical Work
Utility Management & Operations
Total Project Hours
935
5,408
56,745
Establishing Marafiq – 20 Projects
The work associated with the formation of Marafiq was divided into 20 workstreams / projects in the areas of
legal, technical, financial, regulatory, commercial, information technology and human resources fields.
P0 - Program Management
P20 - Contracting
P12 - Safety, Loss, Prev. & Env.
P6 - Regulatory Body
Situational Assessment
P16 - Agreements
P15 - Financial Strategy
P13 - Valuation & Transfer of Assets
P7 - Business Plan
P14 - Transfer of Employees
P3 - Human Resources Management
P9 -Transportation & Equipment
P10 - Material Control, Planning and System & Management Policies and Procedures
P2 - Organizational Structure
P11 - Operations and Maintenance Assessment
P18 - Assessment of Facilities
P5 - Establishment of Tariff & Procedures
P1 - Corporate Policies and Procedures
P4 - Financial Management and Control
P8 - SAP implementation (17 Months)
P- 19 Change Management / Training
M1
M2
Q1
M3
M4
M5
Q2
M6
M7
M8
Q3
M9
M10
M11
Q4
M12
Year 2
Establishing Marafiq - Approach
Resources
Mobilization
Conceptual
Planning
Conceptual Planning
- Key Work streams Develop the vision,
mission and corporate
strategy; Establish key
performance measures
2. Economic,
Financial,
Accounting, &
Valuation
Develop a financial strategy
and plan aligned to the
business plan
4. Information
Technology and
Commercialization
5. Regulatory
and Legal
Orientation and
Implementation
Design, Development and Orientation
1. Organization and
Human Resources
3. Technical
(Utility
Specialists)
Deliverables
and Completion
Design, Development
and Orientation
Assess existing
transportation and
heavy equipment and
recommend options
Develop board and
organizational
structures
Establish world class
HR systems and
processes
Establish financial
management and control
systems and processes
Develop systems and
procedures for
procurement and
material management
Support
saudization, skill
upgrade & transfer
of employees
Undertake asset valuation
and facilitate transfer of asset
Assess existing
Operations & Maintenance
practices & develop
recommendations
Develop procedures for
Safety, Loss Prevention
& Environmental
Protection
• SAP System Implementation (HR, Finance, CRM, Supply Chain, Operation & Maintenance)
• Process Design
•Training / go live
Develop the tariff
procedures and
principles on full-cost
recovery basis
Establish computerized
tariff model, and train
MARAFIQ employees
Develop organization
Design, objectives,
responsibilities, etc of
the regulatory body
Draft relevant
agreements between
MARAFIQ and other
organizations
Establishing Marafiq – Project Team Structure
The work associated with the formation of Marafiq was lead and managed by Ernst & Young Consulting,
which established a Program Management Office (PMO) to manage the 20 projects required to
establish Marafiq. The PMO managed the scope, time, resources, communication, risk, budget, quality
and the integration between the 20 projects
Project Directors
Steering Committee
CEO & President MARAFIQ
Omar Bitar (EYC)
Diana DePinto (EYC)
Marafiq Board of Directors
EYC Consortium Executive Mgmt
PMO
Ernst & Young Consulting (EYC)
Technical Water &
Power Team
Human Resources
Team
Economic
Financial Acct. &
Valuation Team
Regulatory &
Legal Team
Commercialization
Team
EYC
Consortium
Members (
EYC
Consortium
Members (
EYC
Consortium
Members (
EYC
Consortium
Members (
EYC
Consortium
Members (
MARAFIQ
Counterparts
MARAFIQ
Counterparts
MARAFIQ
Counterparts
MARAFIQ
Counterparts
MARAFIQ
Counterparts
Roadmap to Establishing Marafiq
March
April
May
Board
Approved
Bus.
Model
Board
Workshop
Scoping &
Mobilization
Organization
& HR
Corp Strategy
& Policy
Operating
Model
Org.
Structure
Detailed Org.
Structure
June
July
M.O.F
Sign Off
HR
T+C
Opening
Balance
Sheet
Detailed Job
Description
Sep
Oct
Transfer of
RC
Employees
Incorporate
MAFRAFIQ
Nov
Dec
SAP
Go Live
Transfer of
Assets
Continuation
• Staffing new Organization Structure
• Assessment and Selection Process
for RC Employees
Develop Detailed DB of Employees
Develop HR Policies &
Compensation Design Selection – Job/
Person Matching Process
Employee
Aug
• Ongoing Selection of External Resources
Identify “Pools” of Potential Candidates
Inventory of Assets & Material
Asset
Finance &
Accounting
Value Assets
(Initial Draft Agreed
With RC/ Contractors
Establish Fin + Accounting
Policies & Procedures
Create
Balance
Sheet
Inventory of Liabilities
Financing Strategy
Draft Initial Business Plan
Regulations
& Legal
Legal/
Regulatory
Draft Corporate Documents
• Shareholders etc.
• Supplier/ Customer
• Contracts ( Inc Employee Contracts)
• Purchase
Update
Of Assets Final
+ Valuation
Valuation
Single
Operating
MARAFIQ
Business
Established
Complete
Business
Plan
Finalize Draft Corp.
Documents, Obtain Board
Approval
Develop Regulatory Framework & Tariff Principles
Review with Shareholders
Technical Evaluation of Assets
Technical
Technical
Develop To Be Process Operations & Maintenance
Materials & Supply Chain ( And Balance of Finance
eg. Proc/AP) Transportation of Heavy Equipment
Scoping &
Mobilization
Design, Configure, Build Out System Process
System
Develop Training
System
Testing
Roll Out Training
Go
Live-HR &
Finance
Continuation
Roadmap to Establishing Marafiq (Cont’d)
Roadmap to Establishing Marafiq (Cont’d)
March
April
May
Board
Approved
Bus.
Model
Inventory of Assets & Material
Asset
Finance &
Accounting
Org.
Structure
June
July
M.O.F
Sign Off
HR
T+C
Opening
Balance
Sheet
Value Assets
(Initial Draft Agreed
With RC/ Contractors
Establish Fin + Accounting
Policies & Procedures
Legal/
Regulatory
Sep
Transfer of
RC
Employees
Incorporate
MAFRAFIQ
Create
Balance
Sheet
Inventory of Liabilities
Financing Strategy
Draft Initial Business Plan
Regulations
& Legal
Aug
Draft Corporate Documents
•Shareholders etc.
• Supplier/ Customer
• Contracts ( Inc Employee Contracts)
• Purchase
Oct
Nov
Transfer of
Assets
Dec
SAP
Go Live
Update
Assets Final
+ Valuation
Valuation
Complete
Business
Plan
Finalize Draft Corp.
Documents, Obtain Board
Approval
Develop Regulatory Framework & Tariff Principles
Review with Shareholders
& Submit for Filing
Assets: Valuation Approach for Formation of Company
Regulatory: Tariffs – Approval Process
Roadmap to Establishing Marafiq (Cont’d)
Systems: SAP Implementation Scope & Objectives
1. Implemented the following six SAP Modules:
SAP
1
Utilities
& Customer Service
SAP
Material Mgmt
SAP
Maintenance
4
2. Knowledge & Skill Transfer:
• Train management on new policies & procedures
• Train end users on SAP application
• Train end users on New Processes
2
3
SAP
Human Resources
SAP
Finance
5
SAP
Logistics
6
3. Process Implementation:
• Implement proposed processes within SAP
based on the new business model example:
⇒ disconnection or reconnection
⇒ move in/move out
4. Business Effectiveness:
• Integrating utilities business activities across Marafiq
• Integrating core functional areas across Marafiq
• Eliminating legacy systems
• Streamlining business processes across business
functions
MARAFIQ - Business Model as a private company
Contact Details
Diana DePinto
Partner, Head of Privatization & Restructuring
Ernst & Young - Middle East
P.O. Box 140
Garden Center, Manama
Kingdom of Bahrain
telephone: +973 17 535 455
fax: +973 17 535 405
mobile (Bahrain): +973 3 967 0665
mobile (Saudi): +966(0) 50 681 5937
email: diana.depinto@sa.ey.com