Gas distributor ENN seeks huge efficiency gains from new ‘smart’ management system

Company hoping it will slash admin costs by 30pc, and help identify those stealing its gas

PUBLISHED : Sunday, 28 August, 2016, 8:08pm
UPDATED : Sunday, 28 August, 2016, 10:31pm

ENN Energy, one of China’s largest and oldest natural gas distribution businesses, is turning to the internet and “big data” to improve management and operational efficiency across its sprawling network of city-gas subsidiaries, and to clampdown on corruption.

The Hebei province-based firm, controlled by mainland tycoon Wang Yusuo, has already started trialling a new “smart” corporate management system, which is expected to cost less than 10 million yuan, said vice chairman Cheung Yip-sang in an interview.

He said the system, created by Shanghai-based Bocom Smart Network Technologies, is expected to save 30 per cent of its administration costs, which totalled 1 billion yuan in the first half of this year.

ENN delivered underlying recurring profit of 1.65 billion yuan, up 19 per cent year-on-year, in the first half of the year.

“We have several hundred people at our headquarters managing various regional offices, which in turn manage over 150 city-level subsidiaries,” he said.

“Each level of administration has its own technical, project management, safety, finance and human resources departments.

“Our Dongguan regional office, alone, has over 30 subsidiaries ... this has slowed information flow and decision making, and some customers have complained it takes a week to get a response.”

Cheung said the new system will allow customers to access original operating data on a real time basis project by project, encompassing data on design, materials procurement, engineering and finance.

Every year, we have detected corrupt behaviour, such as the stealing of our gas by staff who conspired with external parties and doctored internal records to hide their crime ... now all the data will be transparent, via a smart phone app and cannot be changed easily

Cheung Yip-sang , ENN Energy vice chairman

“With this sort of transparency and big data, we can eliminate bureaucracy and enable our customers to appraise our staff’s performance,” he said.

“We can also improve safety and risk management through faster discovery of problems and corruption prevention.

“Every year, we have detected corrupt behaviour such as the stealing of our gas by staff who conspired with external parties and doctored internal records to hide their crime ... now all the data will be transparent, via a smart phone app and cannot be changed easily.”

The system has already been deployed on a trial basis in some ENN’s subsidiaries and Cheung expects 18 of its 158 city-level operating companies to have adopted it by the end of the year, with full deployment by the end of 2018.

Describing his business as among China’s “old economy” industries, he added: “The country’s

economic slowdown will likely continue for a while longer, and the traditional economy will be challenged.

“Many industries are in a transformation stage in terms of business model, customer interaction and management methods ... and a common requirement [in future] will be information digitisation and interactiveness,” said Cheung.

He noted Beijing’s gradual ending of state-owned electricity retailing monopolies, and growing popularity of so-called “distributed energy” systems to meet local demand, have opened up new opportunities for traditional gas and energy distributors, including ENN.

Such systems, he said, typically involve the generation of energy within an industrial park, office complex, hospital or university compound, from cleaner burning sources like natural gas or renewable energy.

Energy is distributed through “micro-grid” systems, which can be connected to the state-owned power grids for back-up supply, to meet end-users’ multiple energy needs, including heating, cooling and electricity.

They are more efficient and environmentally friendly, he said compared with traditional systems that require large-scale fossil fuel burning and long distance energy transmission.

ENN has so far completed seven such projects, with four others being built, and six more contracted projects where work has not started.

They typically cost 100 million to 200 million yuan of investment, which can either be invested by the estate owner or by ENN, according to its chief financial officer Wang Dongzhi.

“Within these smart microgrids, we can complement the different energy usage patterns of our industrial and commercial customers, and achieve even greater efficiency,” Cheung said.