Capital projects & infrastructure
Capital projects & infrastructure in the energy industry
By their nature, capital projects are not part of day-to-day operations. Whether related to infrastructure, construction of a new plant, buildings or systems, they require separate financing, management, governance and assurance. The scale of projects in the energy sector presents immense challenges at the best of times. In a world of economic downturn with uncertain demand and volatile commodity prices, these challenges are magnified.
Energy companies are faced with the challenge of balancing their immediate and short term response to the current economic downturn, constrained funding environment and lower market prices with their long-term need to develop capacity and prepare for future demand. The challenge is even greater when account is taken of the need to mitigate climate change and changes in the regulatory environment.
Critical questions project organisations should consider:
- What is the right contracting strategy to achieve the business objectives? What contractual provisions are critical for effective governance and control?
- Do I have the right resources, processes and systems to control my projects?
- How do I know if the estimated cost and duration of the project are right and how can I avoid delays and overruns?
- Do I have sufficient transparency to understand the cost drivers within my programme?
- How do I know that I have the right organizational framework, systems and controls in place to manage risk and ensure success?
- Do I have the right expertise and sufficient resources to manage and deliver my project?
- How will I oversee project performance and do I have the project systems to effectively collect and report the information?
- What are the potential risks to the project and the business and how might they be identified and mitigated early?
- Do I need independent due diligence?
How PwC can help
Risk, complexity and high costs are features of major capital projects. All too often projects are affected by cost and time overruns, or fail to meet business case objectives. These threaten the implementation of business strategy, divert management focus and may lead to re-financing or, in the worst case, insolvency. Our team of industry specialists have extensive experience of assisting clients in the review, understanding and improvement of capital project performance in a broad range of industry sectors.
- Implementation of project cost reduction and performance improvement programmes, including the use of Lean process improvement techniques.
- Development and implementation of project recovery plans for projects currently failing to meet the desired business objectives or those seeking performance enhancement.
- Expert Witness support to legal disputes including the preparation of an expert report and supporting causation, schedule delay and disruption analysis, quantum derivation and historical cost analysis.
- Technical support to project dispute resolution techniques including Mediation and Arbitration.
- Provision of project, programme and portfolio management support, including the establishment of a project management office and the integration of project information systems.
- The assessment, design and implementation of project governance, organisational structure and process.
- Design and implementation of project EVM and performance management techniques.
- Completion of Independent Financial Reviews, including benchmarking, cost modelling and forecasting, to support board or regulatory project review.
- Completion of Project Due Diligence that links Technical and Financial Due Diligence to identify risks/opportunities that are often overlooked and therefore not reflected in the deal value or leveraged to create post-deal value opportunities.