PwC Vice Chairman,
Client and Markets
Message from Robert Swaak, Clients & Markets: PwC
PwC’s clients range from some of the world’s largest multinationals to many small and medium-sized enterprises. And they are based in almost every country in the world, each with its own business environment and trends.
Despite this huge diversity, our clients across the globe often face very similar challenges in achieving sustainable growth and delivering value.
When we surveyed business leaders in our 16th Annual Global CEO Survey, we found they were continuing to refine their operations, looking to cut costs without reducing value as they managed through sluggish times. They were seeking growth opportunities organically, avoiding large outlays that could strap resources for the future. Most important, they had a clear focus on customers, working with them more closely than ever on programmes to stimulate demand, loyalty and joint innovation.
Helping our clients rise to these challenges and find the growth they are seeking is what PwC does best.
And we are very proud and encouraged that companies around the world continue to turn to us for help and advice in meeting their challenges. For example, in FY 2013, PwC firms provided services to 421 of the Fortune Global 500 companies and 452 companies in the FT Global 500.
The UK is committed to using more low-carbon fuels to support global efforts to tackle climate change. It’s a commitment shared by EDF Energy, one of the largest energy suppliers to UK homes and businesses. EDF Energy has acted on its determination to reduce carbon emissions by creating a range of ‘Blue’ energy products, based on low-carbon generation from its nuclear power stations.
EDF Energy sees the benefits of nuclear power and wants its customers to do likewise. It believes a diversified energy mix will offer society an energy supply that’s secure, affordable and low carbon. It recently launched a range of ‘Blue’ products with tariffs based on low-carbon generation sourced from nuclear power stations. The idea was to help customers engage with the source of their electricity and be aware of the impact of their choices on carbon contribution and the future energy mix.
At a time when the public’s faith in the UK energy industry has been strained by concerns around pricing and service levels, EDF Energy turned to PwC UK because of our extensive industry experience and strong track record in environmental reporting.
Our role was to evaluate EDF Energy’s procedures and controls to make sure it met its commitment to customers to match their energy supply to nuclear-sourced generation. We tailored our traditional financial audit methodology to fit this entirely new area and applied the framework provided by the International Standard on Assurance Engagements (ISAE 3000) and the Institute of Chartered Accountants in England & Wales’s (ICAEW) Code of Ethics, to design an assurance approach that considered how the concept of materiality could apply to a promise that was either kept or broken.
Sid Cox, EDF Energy Business 2 Business Director, sees the value in the project: “The processes underpinning these products are extremely innovative and complex. So the role of the external assurance provided by PwC, in simply conveying the rigour with which the products are delivered, was a critical component of the work and has played an important role in its success.”
The PwC UK performance assurance leader, Richard Porter, and his team spent 12 months working with marketing, operational and legal teams at EDF Energy to create the vision of how the assurance would work and how it would be shared with customers on the EDF Energy website.
Richard says: “This is a stand-out example of a major energy supplier – or any business for that matter – recognising the potential that building trust with their customers has.”
Now in its 42nd year of operation, Dallas-based Southwest Airlines carries more domestically-originated passengers than any other airline in the US. From its first flights in June 1971, the company has made air travel more affordable than ever before, driving fares downwards and passenger traffic upwards on every route it serves. In late 2010, Southwest announced its commitment to “spreading low fares farther”, and said it would start building its gateway to the future by acquiring and integrating AirTran Airways.
This deal was a huge undertaking for Southwest. At a stroke it would increase its reach from 72 to 97 destinations and its fleet size by 25%, while also seeing it officially enter international markets – an absolute game changer for a carrier that historically provided domestic-only services. Executing the deal would be complex, time consuming, and require unwavering focus from all areas of Southwest’s business. The effort would also face headwinds ranging from widely differing business processes to ageing technologies.
Overall, the proposed merger highlighted the need for the help and support of a strategic partner Southwest had come to trust: someone that understood Southwest’s culture, a proven champion of Southwest’s strategic initiatives, and a seasoned advisor with deep understanding of the airline’s business. Southwest turned to PwC US.
The US firm hit the ground running, pulling together several high-performing teams committed to helping Southwest achieve its goals. First, the team built an IT integration planning team to draw up a technology roadmap spanning corporate, commercial, operations, and infrastructure. Next, it formed an integration programme management team to support technical integration across applications including reservation systems, agent applications, loyalty and web, supported by dedicated project management and solution development teams for high-risk applications. Finally, it established a technology deployment management function to ensure all the necessary technical changes were executed as planned.
On 28 January 2013, through the combined efforts of the Southwest and PwC teams, the integration efforts were completed with the successful sale of flights spanning the combined Southwest and AirTran flight network.
“PwC adds real value. They genuinely care about the success of your business and will see you through to success.”
Kathleen Wayton, Vice President Technology, Business Transformation Solutions — Commercial, Southwest Airlines
Montes del Plata (MDP) is a forestry company founded in Uruguay in 2009 to produce and export eucalyptus cellulose pulp to major markets worldwide. The business was created through a merger between the local operations of two major forestry companies – Arauco, a leading producer of woodpulp, sawn timber and panels; and Stora Enso, a leading manufacturer of paper, board and wood products.
MDP made significant investments in technology, research and plantation improvements, to develop a sustainable forestry base that will supply the new pulp mill that is currently being built in the Colonia Department of Uruguay. The industrial complex under construction includes a state-of-the-art mill powered by a biomass-based generation unit, and a port terminal to handle exports and incoming supplies.
MDP´s pulp mill is the biggest private industrial project ever undertaken in Uruguay. The company estimates that the investment will total around US$2 billion, boosting Uruguay´s gross national product by 2%. When setting up the project, MDP chose PwC Uruguay as its tax consultants, because of our depth of experience in similar forestry and industrial projects, and our strong background in cross-border investment initiatives.
The PwC team worked closely with MDP’s management to provide tax advice for the construction process and future operational phase. Our support included introducing the project to the Uruguayan government, and providing high-level professional services from the start of the project. In particular, we played a decisive supporting role in the negotiations with the Uruguayan government that led to the signing of an investment agreement authorising the creation of a privately-owned Free Zone for the industrial project.
Further tax matters handled by the PwC team included assisting MDP in its negotiations with its contractors and the multinational institutions that ultimately financed the project.
Daniel Garcia, PwC Uruguay tax partner and Forest Paper & Packaging leader, comments: “Through the combination of our multidisciplinary team specialising in the Forest, Paper & Packaging sector, our extensive knowledge and expertise in these types of projects, and our continuing investment in long-term relationships, we have been able to deliver high-quality services within the challenging deadlines that the project required”.
MDP Chief Financial Officer Diego Wollheim adds: “A project of this magnitude requires a careful analysis of the tax issues and to work together with the government to secure sustainable conditions for the development of the project. At PwC, we found a professional team with the knowledge and experience to cope with these challenges that can be considered unique in the history of the country.”