G1_00232 KẾ HOẠCH KINH DOANH CHIẾN LƯỢC CỦA CÔNG TY ĐIỆN LỰC NINH BÌNH GIAI ĐOẠN 2011-2015 STRATEGIC BUSINESS PLANNING FOR NINH BINH POWER COMPANY IN PERIOD 2011-2015

G1_00232 KẾ HOẠCH KINH DOANH CHIẾN LƯỢC CỦA CÔNG TY ĐIỆN LỰC NINH BÌNH GIAI ĐOẠN 2011-2015 STRATEGIC BUSINESS PLANNING FOR NINH BINH POWER COMPANY IN PERIOD 2011-2015

GRIGGS UNIVERSITY GLOBA-,ADM;ANGED MASZER:GBiBUSSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

STRATEGIC BUSINESS PLANNING FOR NINH BINH POWER

COMPANY IN PERIOD 2011-2015

Group 7 - GaMBA01.X0409

Names of Students: 1- Bui Quy Hung

2- Ta Huu Son 3- Vu Tien Duc 4- Hoang Dinh Thuat

June 2011

GRIGG

UNIVERSITY

Group T= Cai BAO 0409

A CKON OW DEDG EM ENTS

lirst we would like to express our gratitude to the Center of Training Technology and Employment System — Ha Noi National University and the US Griggs

University have jointly delivered the course for the training of Masters of

International Business Administration in Viet Nam In this training program, we have the opportunity to access to the advanced knowledge on Business Administration drawn from the studies of the world-renowned economists With the advanced and efficient learning approaches utilized in the course, we have been provided with a comfortable learning environment that enables us to grasp the best knowledge

Next, we own our embedded thanks to the management of Ninh Binh One-member Ltd Power Company, who has Supported us in our access to the information and data of the Company’s business Operations in the past period to finalize this assignment

Lastly, our assignment would not be possible without the timely and enthusiastic guidance from the lecturers of the course, of the Center of Training Technology and Employment System, as well as the support of the staff at Ninh Binh Power Company

We thank you all for your kind support!

Assignment Co-writers

(=2 Global Advanced Master of Business Administration

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I.4.1 NBPC”s Business Activities 0 He 26 1.4.2 Business Performance of Products and Services 27

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3.6.2 The Formation of the QSPM Matrix to 57 3.6.3 The BCG Tool - Growth-Share Matrix 2t 59 CHAPTER HI - BUSINESS STRATEGY ORIENTATIONS AND PROPOSALS FOR THE DEVELOPMENT OF NINH BINH POWER COMPANY IN PERIOD AOD LOS opscvnssceisopsoacennne persenneosnnsoseaseasersincrassexoceisevesieeseaiondivbelsiosonessescceessseeeses, 62

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LISLE QE FABLES-AND, FIGURES

lable 1.1: Internal Factors Evaluation Matrix

‘Table 1.2: External Factors Evaluation Matrix

Table 1.3: SWOT Matrix

‘Table 1.4: QSPM Matrix

Figure 1.1: BCG Matrix

figure 1.2: Positions of the components in the BCG matrix

igure 2.1: Organizational and Management Structure of NBPC

Table 2.1: Business Performance of NBPC’s Products and Services in 2008 — 2010 igure 2.2: Breakdown of Telecommunications Service Market Shares in Ninh Binh province in 2010

Figure 2.3: Breakdown Market Share of Electricity Pile Supply in Ninh Binh province in 2010

Table 2.2: Sales of Pre-stressed spin-cast concrete electricity poles in Ninh Binh in 2008-2010

Table 2.3: EFE Matrix for NBPC

Figure 2.4: The Flowchart of Production Process of Spin-cast concrete Poles

Table 2.4: NBPC’s General Business Results in 2008-2010

Table 2.5: Revenues by Business Segments

Table 2.6: After-tax Profits by Business Segments

Table 2.7: NBPC’s Targets for Liquidity in 2008-2010

Table 2.8: NBPC’s Targets for Assets Management Capacity in 2008-2010

‘Table 2.9: NBPC’s Targets for Profitability in 2008-2010

‘Table 2.10: NBPC’s Targets for Loan Management Capacity in 2008-2010

‘Table 2.11: NBPC’s Personnel Structure by Professional Qualifications

‘Table 2.12: NBPC’s Personnel Structure by Age and Gender

fable 2.13: IFE Matrix for NBPC

Table 2.14: SWOT Matrix for NBPC

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a La en oF Compredb MES Vase! C's Production of Electricity Poles and Pre E“ 1D nip: Box 1 Yw De ae vn "““_: g Tô,

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Figure 2.5: BCG Matrix for NBPC’s Products

Table 3 1: Contents of the Monitoring and Assessment of Strategy Implementation

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iciaied segments:

ˆ Electricity sources — power generation plants;

- Power transimission — institutions in charge of managing the transmitting systems;

- Power supply — electricity suppliers to customers:

Rapid economic growth and increased living quality requires corresponding growth of the country’s electricity industry to ensure sufficient power supply to meet the increasing socio-economic and domestic uses Over the past years the imbalance between power supply and demands is a real problem The current electricity prices do not reflect the real costs, and the technology and technical infrastructure of the industry remains a constraint To solve these problems and create foundation for sustainable growth of the electricity industry of Viet Nam, the Government has taken various measures, one of which is to restructure the industry With the foreseen continuous national economic growth, it is required that the local electricity industry respond by continuing its rapid growth The State has started to

‘transform the local electricity industry by diversifying the power companies (Electricity and Petroleum Corporation, Electricity Corporation of the Coal Business Group, and a series of power generation plants beyond the EVN’s (ownership,) with the ultimate goal towards a more competitive local electricity

Griccs) Group 7 — GaMBAOL.X0409

To ensure sustainable business development of the Compnay and meet the demands of the business owners, employees and the local economic growth, building effective business strategies is critical to Ninh Binh Power Company

3 Objectives

To set out business strategies of Ninh Binh Power Company with suitable products for iproved efficiency over those power supply companies that have not undergone restructure Such improvement will help the company better meet the demands of its customers, employers, shareholders and local economic growth More importantly, it will contribute to increased share prices of the firm

The business strategies to be built for Ninh Binh Power Company can be used for other provincial power supply companies of similar conditions to improve the business efficiency of these firms

4 Scope of Study

4.1 Location

The study is conducted in Ninh Binh province and other related markets where Ninh Binh Power Company supplies it power products Its key products and services are electricity, electrical engineering, spin-cast concrete poles, telecommunications services and trading

4.2 Timing

The assignment will look into the business performance of Ninh Binh Power

in period 2008-2010 to provide comments on their achievements and constraints IBased on their success and constraints, and the identified opportunities, threats, strengths and weaknesses, the study group will provide some forecast of the (Company's future business situation to propose business strategies for the Company

Ln period 2011-2015 to enhance its efficiency and effectiveness beyond the industry "s average level

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GRIGG UNIVERSITY

Group 7 — GaMBAO0L.X0409

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The group uses mixed methodology for this assignment that includes descriptive analysis, data collection, synthesis and forecast to analyze the business performance of Ninh Binh Power Company

6 Structure of the Assignment

Apart from the annexes, tables and figures and attached images the assignment is composed of the following components:

- Chapter 1: Theories of business strategic planning

- Chapter 2: Analysis of the business performance of Ninh Binh Power Company in period 2008-2010

- Chapter 3: Business strategy orientations and proposals for the development of Ninh Binh Power Company in period 2011-2015

1.1 Concepts of Corporate Business Strategies

A common question raised in business world is why some firms are successful

in their businesses, why ctkers fail? In deed, each firm has its own means to exist and grow It is unnecessary that all the firms compete with the others in serving a group of customers in the same way to respond to the changes that influence their business operations Therefore, it is essential that each firm develop its own business strategies for its business operations

The term ‘strategy’ is originated from the ancient Greek time in the military area that depicts the role of a colonel in the army Later, it was developed to “the tactics of military leaders” when indicating the skills and sentiment of these leaders Over the many historical upheavals of the mankind, the term ‘strategy’ is gradually used in other fields or areas, and brings much success to those leaders who can flexibly use it, especially in the area of business production and operations Strategies have been gradually recognized as an orientation and a management approach, which is decisive to the production and business efficiency of a firm

There are different viewpoints and concepts of strategy Each of these viewpoints and concepts is appropriate and correct during the studied period of the assignment Each strategy consists of five factors:

|) Objectives:

2) Implementation schedule:

3) Strategic decision making process:

4) Environment:

5) Weaknesses, strenghts, opportunities and risks

Based on the foregoing analysis, a condensed concept of business strategies can be drawn as follows: Corporate business strategies are a unified combination of

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1.2 Typical Features of Corporate Business Strategies

The typical features of business strategies of each business sectors and areas vary To develop effective corporate business strategies, it is essential that business leaders or strategists have thorough understanding of the typical features of their firms, and the key lines of business and services they are dealing in They are also required to distinguish between the typical features of the strategies and other related concepts and definitions In general, corporate business strategies have the following characteristics and functions:

- to identify the key objectives and business orientation for each enterprise in a certain period, and advocate such orientation in all the aspects of the business operations of the firm to ensure its continuous and sustainable growth;

- to ensure full current and future mobilization and utilization of a firm’s resources, bring out its advantages and grapse Opportunities to predominate the market:

- it is a continuous — process, ranging from strategy development, implementation arrangements, monitoring, review and revision of the Strategies to adapt to new developments;

- to make full use of the firm's advantages and strengths, and mitigate weaknesses that can be abused by the competitors to gain advantages and win in the business competition:

- business strategies are often developed for a specific period or cycle of three

to five years or longer, depending on the business lines or environment;

In short, the striking functions of a business Strategy are orientating and determining solutions and key policies to achieve specific corporate objectives Business strategies steer all the operations of a firm Corporate business development orientation in certain periods is different from business plans, which

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Iocupcnuiplgidtet @bJSvJycs In a cycle, or a short period (of less than one

y Car)

2.1 Review of Current Mission, Objectives and Strategies

[ach organization has a sole goal and reason for its existence If grasped this,

it will help the organization to set out its objectives According to Peter Drucker, the

founder of the modern 21“ century management theories, the question “What is our business?” is identical with the question “What is our mission?” A mission statement is a continuous presentation of the objectives to differentiate one

organization with the others The business mission statement is an announcement of

the “reasons for existence” of an organization It answers the central question “what

is our business” Via the mission statement, the vision of the organization can be visualized It is advised by King & Cleland that organizations should develop a mission statement with clear tasks as the strategies should

reflect unanimous internal consensus of the organization;

create foundation to mobilize resources of the organization;

set criteria for the allocation of resources of the organization;

play the key role in gaining consensus from everyone in the organization on its business objectives and orientation:

- facilitate the conversion of the corporate goal into suitable objectives;

- facilitate the conversion of the corporate objectives into other strategies and specific activities:

2.2 Analysis of Internal Factors

2.2.1 Finances

The financial health is the best measure of the competitiveness of a firm, and the key to attract investors To build an effective business strategy for a firm, it is essential that its financial strengths and weaknesses be taken into account Such Consideration is often exercised through the financial analysis Some of the key

indicators of central interest are:

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- Liquidity indicators: current and accelerated liquidity:

- Performance indicators: inventories turnover capital turnover, accounts

receivable turnover, average collection period:

- Indicators of returns: ROI (return on investment), ROA (return on assets),

ROE (return on equity), EPS (earnings per share):

- Apart from these indicators, growth rate indicator shows the growth percentage of the business targets and indicators over the years,

2.2.2 Technology Technology has become an increasingly important factor and an advantage of

a firm It helps save the costs and time, and facilitates more smooth coordination

among the different divisions and units in a firm (via an effective information

system) The importance does not lie in the total costs incurred for the purchase of the technology, but in its efficiency Some firms have made Significant investment

in technology, which undermine much of their resources, but the achieved results are conversely modest This is due to the failure to study thoroughly the potential efficiency and suitability of the technology in their current operational system

2.2.3 Human Resources

The human resources are decisive to the success for an enterprise Human being always plays a central role in all the steps, from information collection, to implementation planning and strategy review The selection of the right people to achieve the corporate objectives is essential In his well-known book “From good to great”, Jim Collins has suggested that “Find the right person to invite to your car (and ask the wrong one to get off), then think about where to drive the car to” This Statement stresses the importance of the grey matter, which is one of the most sustainable competitive advantages of a firm

2.2.4 Marketing

The marketing function of a firm is composed of the research of business environment to identify market opportunities, market segments, the selection of

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2.2.5 Operational Administration and Organizational Culture The administration capacity of an organization is reflected in the fact whether the operations of the Board of Managers and Board of Directors are efficient or not This is expressed in the two aspects — leadership and management Leadership is expressed in whether the “business ship” is directed and steered to the set direction

or not Management is the coordination of the business work precisely and efficiently to generate profits to the firm Organizational culture is the religion, values and habits developed throughout the history of the organization These factors are reflected in the operational style and behaviors of the members in the organization Organizational culture is not only useful in coordinating the implementation of different strategies, it, together with the compensation scheme, helps retain employees

2.2.7 Developing IFE Matrix

The development of an IFE matrix covers five steps:

- Step 1: Based on the analysis of the internal factors, make a list of the key strengths and weaknesses that can influence the firm’s operations, and its set objectives

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PDE€9 mi press Ivtbesetachors by their degree of importance, ranging from 0.0 (not important) to 1.0 (very important) The degree of importance of these factors depends on the extent of the influence to the firm in the industry The total rating of the importance of all the considered factors

must be 1.0

Step 3: determine the weighted point for each factor in the range from |

to 5, using Linker scale In this scale, 5 points mean very strong, 4 points mean relatively strong, 3 points — strong, 2 points — fairly weak, and | point — very weak;

- Step 4: multiply the degree of importance of each factor by its weighted point to determine its rating:

- Step 5: add up the rating of all the factors to determine the total rating of the matrix;

Table 1.1: Internal Factors Evaluation Matrix

- If the overall rating is below 3 points, the company is internally weak

- If the overall rating is above 3 points, the company is internally strong

2.3 Analysis of External Factors

ccongmic Eni inflation, Yaemployment basic bank interests, exchange rates,

Which are primarily important as they will affect directly the demands for the

products and services of a business line and the Strategy that the company is

pursuing The factors of the economic environment of interest are:

- Economic growth rate: the business cycle of an economy will decide the demands of a service or an industry When the economy is healthy and grows sustainably, it will bring about improved life quality to the local people, reduced unemployment rate, and increased per capita income Increased per capita income is associated with higher demands for recreational services, and consumer goods Morcover, when their income surplus increases, they will respect their time more This factor is critical

to the service industry, where the competition takes place among the intangible factors such as utilities, service attitude

- Inflation: high inflation rate is considered an underlined tax imposed on the personal income, which enables them to be more economical in their expenditure Moreover, inflation influences the choices of strategies of an enterprise For instance, when inflation rate rises causing the prices of inputs to increase, the question is whether the low-cost Strategy will work

- Exchange rate: changes in the exchange rate will have direct impact on the prices of the input materials (of those firms dealing in exports such as steel, plastic seeds, which in turn affects the costs and prices of the

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- Concepts of ethics, aesthetic, lifestyles, career and consumption habits of local people:

- [Traditional customs and practices:

- Interests and priorities of the Society: for instance, nowadays, people are more aware of the environment and health, which creates many Opportunities to those firms in the sectors or business lines related to these issues Such raised awareness sets stricter requirements for hygiene and safety conditions of the products and the existence of plants and factories

- General public intellectual and education level:

- Cultural traits also influence the preparation and execution of corporate business strategies

Technological Factors

The technological advancements in recent years have created strong impacts

on the structure of business sectors A vivid example is the replacement of typewriters by computers that use MS Office software In the electricity generation and supply industry in particular, the presence of advanced technology has made the electricity generation and supply more efficient and safer, and increased

productivity of the labourers

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Bargaining Power of Suppliers

It is common practice that firms establish partnership with suppliers to purchase raw materials, equipment, labour and capital Suppliers can cause pressure

on the firms by increasing or reducing their supplies in the prioritized context or any circumstances The suppliers are strong influencers if:

- There are only a few of them

- Substitute products are not available and the products of the suppliers are critical inputs to the operations of the firms:

- The firms have to bear higher cost if they change their suppliers

Bargaining Power of Customers

Customers are indispensable factors in the competitive environment of a firm Customers decide whether the firm will succeed or fail when launching its products and services to the market The assessment of the degree of influence of customers

to the operations of a firm covers two key aspects:

- Customers’ trust to the firm and their products/ services;

- Tendency and degree of demands of customers for high-quality and low-cost products; the possibility that customers can have reduced costs increases when:

The purchased quantity makes up a significant share in the total sales turnover of the firm:

The consumers can buy similar products easily elsewhere:

The customers have full information of the products of the firm on the market;

The firm’s products have little impact on the products of the customers Besides, the structures of sales agents, demography, consumers’ sentiment and attitude also have effect on the operations of the firm and its business strategies

Threat of Existing Competitors

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PU CAINE, ousipess, Was dparket economy one will certainly face with competition In competition, some firms will win because of their comparative advantages over other competitors in prices, product quality, distribution system sales promotion, while others lose because of sales failure risks, and trimmed business scope The analysis of the competitors within the industry is vital to a firm

It 1s essential that the firm analyze its key competitors to project their reactions to the firm’s business strategies To conduct reliable analysis of key competitors, it is required that the firm monitors and updates the information of their competitors, particularly their financial health, production capacity, physical resources, human resource management in the form of consolidated monitoring records It is also essential for the firm to analyze its current and potential competitors, and develop a set of proposed reactions to predominate in all the circumstances

Threat of New Entries

New entries to the market can have significant impact on the operations of a firm, causing the firm’s profits and market shares shrunk by launching new production capacity to gain market shares and necessary resources The degree of potential competition to the firm will be determined by the threat of the new entries The threat of new entries into an industry depends on the entrance barriers, or the reactions of the existing competitors that can be forecast by the new entries To create the key barriers to new entries, it is required that the existing firms develop their advantages:

- Customers’ loyalty to the firm’s products;

- Absolute cost advantage;

- Economies of scale:

Threat of Substitute Products

Pressure of substitute products restricts the profitability of the industry as the pressure of the highest prices is curbed If failed to pay attention to the substitute products, the firm may stay dealing in small markets Therefore, it is essential that

the firm continuously conduct research for new products and review of the

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subs(Wte Coes con Free ego! the new substitutes are the results of the

technological boom To succeed in their business, the firms need to earmark resources to develop or apply new technology in their business strategies

To set the strategic objectives apart from the analysis of the key foregoing factors, other factors associated with the business operations conditions need to be taken into account as a chain This will allow the firm to have profound and comprehensive insight of its operational environment opportunities, challenges and risks in the markets

2.3.3 Developing EFE Matrix The development of an EFE Matrix covers 5 steps:

- Step I: Based on the analysis of the external factors, make a list of the key opportunities and threats that can influence the firm’s operational success in its selected business lines or sectors

- Step 2: classify these factors by their degree of importance, ranging from 0.0 (not important) to 1.0 (very important) The degree of importance of cach of these factors depends on the extent of its influence to the firm’s business lines or sectors The total rating of the importance of all the considered factors must be 1.0

- Step 3: determine the weighted point for each factor in the range from |

to 5 points, depending on the degree of reactions from each firm to the factors In this scale, 5 points mean very good reactions, 4 points mean relatively good reactions, 3 points — good reaction, 2 points — fairly weak reactions, and | point — very weak reaction:

Table 1.2: External Factors Evaluation Matrix

- If the overall rating 1s below 3 points, the company fails to react properly to the external factors

- If the overall rating is above 3 points, the company reacts very well to the external factors

2.4 Developing and Crafting Strategies

2.4.1 Developing SWOT Matrix SWOT matrix is one of the common tools used by the firms to have business managers tailor such strategies as:

- SO strategies that promote the firms” internal strengths to make use of the external opportunities:

- WO strategies that improve the firms’ internal weaknesses by making use of the external opportunities:

- ST strategies that use the firms’ strengths to avoid or mitigate the external threats;

- WI strategies that are protective against the firms’ internal weaknesses and

avoiding of the external threats

The development of SWOT matrix covers 8 steps:

Step 1: list out the key external opportunities and number them (À1, O2 cos)

- Step 2: list out the key external threats and number them (11; 122)

Step 3: list out the firm’s key external strengths and number them (S1, $2 ) Step 4: list out the firm’s key external weaknesses and number them (WI, W2 )

Ghicos) Group 7 — GaMBAOLX0409

Table 1.3: SWOT Matrix

2.4.2 Crafting Strategies using OQSPM Matrix Alter using SWOT matrix to develop the suitable strategies, business managers will make a list of potentially feasible strategies that the firm can execute

in the immediate future At this stage, a tool can be used to craft the right business Strategies is the quantitative strategic planning matrix (QSPM) QSPM matrix use the input data from the analysis in the steps to establish the IFE and EFE matrices to help strategists to objectively decide which of these strategies can be replaced and the most attractive for the firm to pursue to achieve its set business objectives The process to develop QSPM covers six steps:

- Step I: list out the key external Opportunities/ threats and internal

strengths’ weaknesses in the column (1) of the matrix These factors are

taken from the EFE and IFE matrices

- Step 2: In column (2) of the matrix key in the respective rating of the each

factor categorized in the EFE and IFE matrices

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toà 3È 0J;gJnatrices and identify those substitute strategies

lor execution, and note down these

Strategies in the top line of the QSPM matrix The selected strategies can

be grouped together (if any),

Table 1.4: QSPM Matrix

Substitute strategies

Basis of Strategy Z Strategy 3 attractive

= 2, fairly attractive = 3, attractive = 4 and very attractive

ratings show the degree of comparative attractiveness of each strategy over other strategies in one group of substitute strategies

Step 5: Calculate the overall attractiveness rating of each separate strategy

to the important success factors indicated in column (1) by multiplying the classification point with the attractiveness point in each line

Step 6: Add up all the attractiveness rating to get the aggregate attractiveness rating for each strategy taking into account all the relevant internal and external factors that can influence the strategic decisions The higher the overall rating, the more appropriate and worth of choice for

implementation the strategy:

principle a QSPM matrix can be composed of any group of substitute and cach of these groups can consist of any number of strategies Yet,

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only Bisescuatggics gn fae Se 2rOup can be compared to each other For instance

the group of diversification strategies can consist of centered diversification

strategies, connected diversification strategies while other groups can consist of vertically or horizontally linked (backward or forward) strategies These groups of Strategies have different characteristics and QSPM matrix only looks into the strategies in the same group

2.4.3 BCG Matrix BCG matrix is another form of the growth/share matrix which was built in

the 1960s The basic principle of this matrix is the possibility to generate

money/income via the analysis of the product portfolio of a firm and put in the

Relative market shares

The respective names of the four components in the matrix are Star, Question, Cow, and Dog These components are described the Figure 1.2 below:

+) Build: the firm’s products need more investments to maintain current

market share and for further market expansion In this strategy, sometimes the firm has to sacrifice its short-term profits to achieve longer-term goals This strategy applies to those products placed in the Question Mark box

+) Hold: this strategy is applied to those products placed in the Cash Cow box

to maximize the firm’s profitability and income generation

+) Harvest: this strategy focuses on achieving the objective to gain profits in the short term by cutting down costs, and increasing prices, even if it may influence the long-term goals of the firm's products or not This strategy

applics to those products placed in the Cash Cow box but with lower growth

rate than usual or uncertain future The strategy can also apply to those products placed in the Question Mark box, but not to those in the Star or Dog

boxes

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PBR RSS! pftesqthlseevdrdliiiisratcey is to divest those products or business

units that are unprofitable to concentrate the firm's resources on those more profitable products and business units This strategy applies to those products placed in the Question Mark box, and cannot be used for those products in the Star or Dog boxes

BCG matrix simplifies strategies via two factors the growth rates of the firm’s products and market shares It is assumed in the matrix that to achieve high growth rales, more resources (finances) need to be used The tool can be used not only for product strategies, but also to analyze the performance of a business unit or subsidiary of a company to allocate its overall resources

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PDF Compressor Fre’ MMARY OF CHAPTER 1

In Chapter 1, the co-authors have been able to summarize all the relevant theories on corporate business strategies and strategic planning To develop a

business strategy it is essential that the firm’s internal strengths and weakness, and

external opportunities and threats be analyzed Based on this analysis, different tools like IFE EFE competitiveness) SWOT and QSPM matrices can be established BCG can also be used a tool to determine the business strategies at the business unit level These are important theories to assess the business performance and strategies of Ninh Binh Power Company in the next Chapter, and to propose

‘appropriate solutions for the firm’s business expansion in Chapter 3

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PERFORMANCE NBPC IN PERIOD 2008-2010

1 Overview of NBPC

1.1 General Information

- Company name: Ninh Binh One-member Ltd Power Company

- Short name: Ninh Binh Power Company (NBPC)

- Full name in English: Ninh Binh One Member Limited Power Company

- NBPC was originally Ninh Binh Provincial Department of Power, which was split from the former Ha Nam Ninh Provincial Power Department as stipulated

in Decision 120NL/TCCB-LD dated 10 March 1992 of the Ministry of Power On

16 May 1992 Ninh Binh Provincial Department of Power under Power Company | officially came into operations, and was renamed to Ninh Binh Power Company in

1995,

- In accordance with Decision 42/2003/QD-TTg of the Prime Minister issued

on 28 March 2003, Ninh Binh Provincial Department of Power was renamed to Ninh Binh One-member Ltd Power Company as the pilot performer of this

moda ie Cmcans dhe umRany will operate as the wholly state-owned enterprise

with independent accounting regime under Viet Nam [:lectricity Corporation (now

Viet Nam Electricity Group - EVN)

- In 2010: to exercise the instructions of the Government on_ the establishment of Power Supply Corporations, one-member limited companies are re-merged as independent accounting subsidiaries under the Northern Power Corporation from 1 April 2010

- When newly split from the former Ha Nam Ninh Provincial Power Department, Ninh Binh Provincial Power Department was composed of two units: +) Ninh Binh power branch: deals with power supply in Ninh Binh provincial town and the North Western adjacent areas of the province

+) Tam Diep power branch: deals with power supply in Tam Diep provincial town and the South Eastern adjacent areas of the province

- Along the general growth of Ninh Binh province, and to perform the political tasks of the province and power industry, Ninh Binh Power Department had gradually established other power supply units in every districts, and provincial towns throughout Ninh Binh province By 2002, power supply units had been established in all the districts and communes of the province

- In 2004, with the growth of the power supply network and sources to meet the economic growth demands in the province, the 110kV power supply workshop Was set up by merging the company’s four 110kV stations and the team managing

1 10kV high-voltage power grids

- To perform the multi-sector operation guideline of Viet Nam Electricity Group, in 2005 the Telecommunications and Information Technology Center was established to provide public telecommunications, Internet and cable TV services in Ninh Binh province This is a significant achievement of NBPC, opening new business directions to the Company in the context of integrity and economic growth

- In 2007 with the endorsement of Ninh Binh Provincial Party Committee and People’s Committee, the Company acquired all the assets and human resources of

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L2 roe Gust dlouse the Lormer guesthouse of Ninh Binh Provincial Party Committee for commercial operations in the province, which is a new business line for the Company

- In 2008, to meet the demands for conerete components used for the clectricity network construction and upgrade in Ninh Binh and the neighbouring Northern provinces, the electrical concrete and mechanical plant was set up The Company invested in a production line of pre-stressed spin-cast concrete peles in Gian Khau industrial zone The key products of the plant are pre-stressed spin-cast concrete poles, pre-stressed concrete piles, and other specialized electrical mechanical products

- The size of operations of NBPC has been basically stable with 14 units, including 11 production units and 3 supporting units:

11 production units are:

+) Ninh Binh city power unit;

+) Tam Diep district town power unit;

+) Hoa Lu district power unit;

+) Gia Vien district power unit;

+) Nho Quan district power unit;

+) Yen Khanh district power unit;

+) Yen Mo district power unit;

+) Kim Son district power unit;

+) Trang An Guest House;

+) Electrical concrete and mechanical plant;

+) Telecommunications and Information Technology Center;

And 3 supporting units are:

+) Electrical mechanical workshop:

As an SOF, the operations of the Company are managed by functional line (by one level) The top leader of the Company is the Chairman/ Director, who directly steers the functional divisions, power supply units, and production workshops The Director is assisted by four Vice Directors, each ef whom is in charge of one section

~ Technical, Business, Investment and Construction, and Telecommunications The units within the Company are closely connected and all under the leadership of the Chairman/ Director

Director: manages daily operations of the Company in line with the set Objectives and plans and the Company’s regulations The Director is the legal representative of the Company before the laws and held accountable to higher management

Vice Directors:

Vice Directors are appointed by the Chairman for termed assignments after the endorsement of the Company owner Vice Directors can be re-appointed or replaced Vice Directors assist the Director as assigned and authorized by the Director himself These Vice Directors are held accountable to the Chairman/ Director of the Company and the laws and for the assignments or authorization to them

Functional divisions: are synthetic and advisory units to the Company’s leaders on the assigned tasks, and in charge of guiding the performance of the related units

The organizational and management structure of the Company is presented in Figure 2.1

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Fucntional Subsidiary Supporting

Divisions power workshops

supply

units

Telecom Trang Electric

municat An al ions and Guest concrete

1.4 NBPC Business and Operational Performance

To have clearer picture of NBPC’s performance to propose its development Strategies in the near term, it is essential to review its business performance and financial, human resources status in period 2008 — 2010

1.4.1 NBPC’s Business Activities

- At present, NBPC has 13 production units and 3 supporting units under direct management of the Chairman/ Director of the Company assisted by the functional divisions located in its head office

- Power supply service and trading: Currently, NBPC is managing and O)perating the power supply network with the electric tension ranging from 0.4kV to

| 1OkV and five 110kV power stations with the total supply capacity of I4OMVA

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As °b5Äk 201 Mwsót HedWeEiuipany has a power consumer base of 219.22]

customers, including 203,876 civil customers and 15,345 commercial customers Depeading on the nature and scope of their uses, the management of these

customers will be delegated to local power units or the Company’s business division

- Apart from its core operations of power supply, to diversify its operations as regulated by EVN NBPC has recently entered other business sectors such as cable

TV aad telecommunications services, electricity posts and pre-stressed concrete

products

~) Telecommunications: the Company is currently the sole agent of EVN Telecom in Ninh Binh province, and receives the revenues proportional to their scope of service

~) Cable TV and Internet services: in joint venture with Viet Nam Cable TV service Center, the Company is supplying wideband cable TV and Internet services

in four out of eight towns and districts of Ninh Binh province The Center is an accounting unit independent from the Company, using a 50-50 profit sharing base

of its after-tax profits with Viet Nam Cable TV service supplier

+) Electrical concrete and mechanical plant: this is a subsidiary plant of the Company as a dependent accounting unit At present, the plant is concentrating on producing and supplying pre-stressed spin-cast concrete poles to the customers in the province, and those in the neighbourhood such as Ha Nam Nam Dinh, Thanh Hoa, Thai Binh and Hai Phong

+) Hotel and restaurant services: the Company is managing a Guest House of over 5.616 m? area in the Center of Ninh Binh city Trang An Guest House is run as

an independent accounting unit of the Company with 30 accommodation rooms and One restaurant that can serve over 600 dinners at a time, and an attached cafe — karaoke service bar in the Guest House lounge

1.4.2 Business Performance of Products and Services

biIkrecenL years, apart, from.the expanding electricity trading, other business

POE COMpressor Pee Wepaidhe expanding ỳ g

aclivitics of the Company have changed dramatically in terms of structure and turnover Table 2.1 describes in details the business performance of NBPC’s products and services recently

Table 2.1: Business Performance of NBPC’s Products and Services in 2008 -

3 Cable TV and Internet KH 3,202 4,71] 3252 564

4 Hotels, restaurants service 8,432 |

5 | Electrical mechanical concrete, | gp 8526| 12,310] | 16.655 20,115

(Source: Business performance reports of 2008-2010, PO02-NBPC)

- From the consolidated business structure and turnover of the Company’s products and services, the market shares and turnover of almost all of its business

lines have experienced growth in the reported period Power supply and trade is always the core operations of the Company The firm’s 2010 power turnover represents 95% of its total turnover in the same period The next major business line

is concrete — mechanical with 2010 turnover of over VND 20 billion This business line has experienced the fastest growth in the last three years Its output doubled in

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PTO BT SRO EO M0 Was )Zo: @lingst 1.3 higher than the national average rate At present, the province is undertaking economic restructure towards service and lourism-industry-agriculture centered, and its GDP growth rate in the coming period

Is expected to reach over 11%/annum

High GDP growth rate is a great opportunity for the Company to expand its power market by increasing the volume its commercial power products, developing new industrial, service and domestic consumption customer base Practice shows that GDP growth rate and the growth rate of commercial power prceduct volume are

in line Yet, over the past time, due to the transition of the province’s economic structure to service — industry — agriculture, the reality is vice versa in the province over elsewhere with lower growth rate of the power industry over the province’s GDP growth rate

As scheduled in the economic development plan for the province in period

2011 — 2015, some sizable projects will be implemented, including:

e Project for the expansion of ship building plant of Long Son limited Company;

¢ Construction of ship component manufacturing plant of Quang Trung Vinashin Machinery and Equipment Joint Stock Company;

¢ Construction and launch the operations of the ICD non-water port in Ninh Phuc industrial zone:

e Construction of Tuyen Khanh Cu brick factory with the production capacity of

300 million pieces/ year;

If calculated the consumption of these projects alone, the projected annual cominercial power volume will increase by roughly 40 - 60 million Kwh

In addition, the impressive GDP growth rate of Ninh Binh will create excellent Opportunities for the Company to invest and develop other business lines such as electrical engineering, telecommunications products trading, and other services for the tourism, services and industrial uses in the province It is reported by Ninh Binh

Provincial People’s Committee that until now telecommunications has become a

strong economic sector in the province, with increasing share in the province’s GDP

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+ Policy and Legislative System:

To the electricity products: over the past time, Viet Nam has promulgated many laws and subsidiary legal documents to govern the power operations such as the 2004 Electricity Law, Decree 105-106/ND-CP guiding the implementation of the Electricity Law and other related Circulars for more detailed implementation

guidance

On 26 January 2006, the Prime Minister issued Decision 26/2006/QD-TTg on the approval of the categorization of Viet Nam electricity market Viet Nam electricity market will develop to three levels:

Level | (2010 — 2014): competitive power generation market:

Level 2 (2015 — 2022): competitive wholesale power market:

Level 3 (since 2022): competitive retail power market:

At present, Ministries of Trade and Finance are developing the draft Regulations on electricity pricing and pricing adjustment to the market rate

In Ninh Binh alone, the provincial authorities have approved the development plan for Ninh Binh electricity industry in period 2006-2010 with a vision to 2015

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The PEC BPR! Py the Power Institute under EVN in conjunction with Ninh

Binh Industrial Department (now Industry and Trade Department)

Assessment: The legal framework for power market development in the country in general, and in Ninh Binh province in particular, is relatively adequate, which is favourable to NBPC’s business operations, especially power generation The new regulations on electricity prices will be favourable conditions for the existing firms to have profits and capital surplus for reinvestment

Telecommunications Products: In 2009, the Ministry of Information and Communications has issued license for NBPC’s investment and exploitation of 3G telecommunications service for EVN-Telecom as one of its general agents This is a great Opportunity for NBPC to exploit and develop the market shares of its new 3G telecommunications services in Ninh Binh province Until now, the Government’s policies on telecommunications industry has been more “open” as part of its WTO commitments, by which it allows the foreign telecommunications service suppliers

to enter the local market This is an opportunity, but also a challenge for local telecommunications firms in general, and to NBPC in particular

2.1.3 Socio-cultural Factors

Ninh Binh has a population of over 910,000 people, of which 60% are rural population, and the remaining 40% are urban (2010 figures) and an annual population growth rate of 1.04 % The province’s population is not properly distributed, with much proportion in Ninh Binh city (over 1,500 people/ km’) The population density in those districts and district towns crossed by highway | ranges from 200 — 400 people /km’

By 2010, the number of household users of electricity in Ninh Binh represents 99% of its population (or 378,000 out of the total 382,000 households in Ninh Binh have access to electricity) The local people’s income has been improved, which leads to increased demands for domestic electricity Besides, the urbanization rate in Ninh Binh province is on the increase, which is an opportunity for electricity trade and electrical engineering (electricity meter installation)

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