Memorandum to:<insert name
<insert title
<insert department/division
<insert company name
Proposal for International Cooperation
Dear <insert name:
This memorandum represents an inquiry of Jiangsu Electric Power Company (“Jiangsu Power”) for establishing an international cooperation with <insert company name with the over-arching objective of developing a sustainable, trust-based, and mutually beneficial, long-term relationship.
INTRODUCTION TO JIANGSU POWER
Jiangsu Power is the monopoly transmission & distribution electricity company of China’s Jiangsu province, an administrative region with 74 million people, and an GDP of EUR123bn in 2002.Jiangsu Power today is a leading transmission & distribution company with 2002 revenues of EUR4.9bn, total assets of EUR10.6bn, and an installed base of 24 million customers.
Over the past three years, Jiangsu Power has enjoyed rapid development, with revenue growing at a compounded annual rate of 18% and fixed capital investment in grid construction totaling EUR1.4bn in 2002.In 2002, Jiangsu province’s power consumption was 124.5 TWh, growing over 15% from the previous year.Currently, Jiangsu Power has 3,933 kilometers of 500 KV lines, 9,078 kilometers of 220 KV lines and 11,909 kilometers of 110 KV lines.The Company is ranked China’s third largest provincial electricity company in terms of capacity (20.7 GW) and China’s second largest provincial electricity company in terms of power consumption (124.5 TWh).
As in many developing countries, China’s electricity industry is undergoing broad and fundamental reform.By the early 1990s, foreign investors were allowed to invest in independent power producers.In year-end 2002, the State Power Corporation, the government operator of China’s electricity industry, was separated into five gencos and two gridcos, each with individual P&L responsibilities.This separation of the transmission & distribution business from generation business and the associated corporatization of transmission & distribution companies bring a new set of challenges to Jiangsu Power.In recognition of the increasingly competitive nature of its business environment, Jiangsu Power is undertaking systematic measures to comprehensively enhance its commercial capabilities.
THE OBJECTIVE
Jiangsu Power has a grand and ambitious vision: to be one of the world’s leading transmission and distribution companies by 2010.Mr. Kou Shi Qing, the company’s top leader is committed to realizing that vision through the cultivation and development of world-class leadership and managerial processes, technology, and human talent.Despite challenges such as regulatory uncertainty in tariff pricing and social responsibilities in employment and network build-out, Mr. Kou believes Jiangsu Power has the intrinsics to achieve its goal.
Furthermore, Jiangsu Power believes partnering with <insert company name will accelerate the realization of its company vision because it can learn and benefit from <insert company name’s first-rate managerial processes, technology, and operational best practices to continuously elevate the quality of Jiangsu Power’s people and processes.The company also believes that <insert company name could benefit from cooperation with Jiangsu Power by gaining the following:
Opportunity to participate in China electricity industry’s rapid development – China is already the world’s second largest consumer of electricity at 1,326bn KWh, and its power consumption is growing at 10+percent every year, far ahead of the pace of other nations.On the supply side, China experienced a dramatic build-out of its generation capabilities over the past decade; by 2002, installed capacity stood at 350 GW, having grown at a compounded annual growth rate of 8.1% since 1989.The speed and scale of the expansion in China’s electricity industry is unprecedented.Foreign enterprises can already invest in generation projects today.In the future, it is anticipated that there is potential for the transmission & distribution businesses to also be opened to foreign investment.For an international transmission and distribution company like <insert company name, this creates numerous investment and cooperation opportunities.In order to prepare and position for this impending opportunity, international companies need to start now to develop a deep understanding of China’s market conditions.Establishing relationships with a leading Chinese partner such as Jiangsu Power will help <insert company name create an important foothold in China, heightening its profile to regulators, government officials, and other key stakeholders.
Potential savings in joint sourcing/purchasing– Jiangsu Power is one of China’s best transmission and distribution companies.Its rapid growth (power consumption in Jiangsu Province increased by 15% in 2002 vs. 2001) has compelled the company to spend a total of EUR1.4bn in grid infrastructure.From now to 2005, Jiangsu Power expects to invest EUR4.0bn in network infrastructure.<Insert company name can cooperate with Jiangsu Power to jointly source/purchase equipment and achieve cost savings through economies of scale.In addition, Jiangsu Power can also help <insert company name gain access to low-cost, high-quality Chinese suppliers.
Opportunities to provide services– Jiangsu Power’s business is undergoing fast growth, providing many opportunities for project based cooperation between the company and <insert company name.For example, Jiangsu Power has a growing demand for quality professional services such as consulting and training.
PROPOSED PROGRAM OF WORK
Specifically, Jiangsu Power proposes the following elements of cooperation to be refined over the course of discussion:
Holding of high-level CEO meetings and the creation of management seminars and workshops for purposes of enhancing mutual understanding.The meetings and seminars would provide both insight and information on China and <insert company country’s market and help both companies build a basis of mutual understanding.We envision holding one CEO meeting and two management seminars annually.
Conducting benchmarking along multiple dimensions.Jiangsu Power would like to engage in a one-on-one benchmarking exercise with <insert company name whose scope should include, dispatch, grid planning, production (e.g. safety, efficacy, and reliability), managerial processes (e.g. human resources, strategic planning, budgeting and financial control, capital allocation, project management), and customer service.Jiangsu Power believes that both itself and <insert company name will benefit greatly from this undertaking as it concretely illuminates areas for improvement for both companies and further deepens mutual trust and understanding.Jiangsu Power would like to kick off this benchmarking exercise in July of this year.
The establishment of an employee exchange program.Jiangsu Power would like to send ten to twenty senior managers and technical experts to <insert company name for on-the-job training and exercise for between three to six months.This employee exchange program can be targeted to address areas for improvement identified from the benchmarking exercise mentioned above; in addition, Jiangsu Power is also interested in other functional areas such as regulatory management and risk management.All related expenses will be funded by the company.For its part, Jiangsu Power would be happy to host the same number of managers and technical experts from <insert company name.
Joint sourcing of software and hardware equipment.Given Jiangsu Power’s purchasing scale and its unique access to high-quality, low-cost Chinese suppliers, there should be ample opportunities to realize joint savings in sourcing costs.
Payment for professional services.Professional services provided by <insert company name to Jiangsu Power, such as con