Delivering and demonstrating value-for-money in the management of the asset portfolio.

A major transformation programme to introduce asset management concepts and business processes, including new competencies, culture and tools, simply ‘because it is the right thing to do.’
Significant education, training and cultural change across all business units
Net service/Risk benefits valued at DKK 300 million ($489m) NPV for a total upfront investment of DKK 1 million ($162m)
Programme Manager, Lise Tarp-Johansen, awarded IAM Asset Management Achievements Award
Contract Objectives

HOFOR is the ‘Greater Copenhagen Utility’, a 1200-strong organization with responsibility for supplying power, water, wastewater, town gas, district cooling and district heating utilities, to the city of Copenhagen.  They own the Amagerværket combined heat and power station situated in Copenhagen and are also building wind turbines both within and outside the city.

HOFOR is Denmark’s largest utility company and it is facing a number of major changes.  The population is growing and there is an increasing demand for services.  At the same time, the climate is changing, and regional rainfall is increasing, so there is a growing need for sustainable ways to handle extremes of rainwater and wastewater, and benefit generations to come.  HOFOR is also behind the Copenhagen municipality’s ambitious plan to be a carbon-neutral country by 2025, including turning the City of Copenhagen into the world’s first carbon-neutral supplier of energy.

HOFOR is organized into seven very diverse business units, with assets ranging from thermal and wind power generation to water treatment, district heating, gas and water pipeline networks and metering.  They have various regulatory environments for the different business units – some are commercially competitive (thermal and wind power generation, district cooling), others are non-profit monopoly service providers (district heating, city gas, water and wastewater).

The motivation to adopt asset management usually requires a pressing business need, a regulatory or other external obligation, or a passionate senior executive ‘sponsor’.  HOFOR had none of these: it achieves good service levels, has generally benign regulators, adequate financing and a collegiate leadership group. Nevertheless, and largely owing to the insight, influencing skills and tenacity of the Programme Manager, Lise Tarp-Johansen, the company has adopted a major transformation program to introduce asset management concepts and business processes, including new competencies, culture and tools, simply ‘because it is the right thing to do.’

Overall, a strategic theme for the initiative was adopted to introduce asset management as the method of ‘delivering and demonstrating value-for-money in the management of the asset portfolio’.  This became HOFOR’s acknowledged need for change, with three clear business drivers

  1. ‘HOFOR has a particular obligation to demonstrate financial responsibility’,
  2. ‘HOFOR should be better at prioritizing activities’ and
  3. ‘HOFOR should strengthen its decision making’.
Activity Description

Development and rollout of a Risk Management Model together with the HOFOR Project Manager

Established a top management steering committee

Set strategic goals for governance and cross-disciplinary workstreams

Review of critically-targetted Supply Chain and Critical Spares Workstreams ranging across the different business units, on both over-and understocked items. Based on the SALVO process for optimal asset management decision-making, it created high-level processes for;

Establishing spares requirements
Strategic review of spares holding
Tactical review of spares holding.

The Woodhouse Partnership provided expert subject guidance and support, and was able to challenge robustness at each stage.  For example, this included developing a robust audit trail for the ‘aging assets’ workstream, from initial targeting of candidate cases and scoping criteria, through to problem definition, root cause analysis, solution options development, costs, and risks estimation, business case appraisal (using asset life cycle costing and optimization of asset renewal timing) and the consolidation of a 50- year total investment program with final validation.

Contract Project Outcomes

In 10 of the 19 cases, some investment was proven to be justified in new/additional spares, yielding net service/risk benefits valued at DKK 300 million ($489m) NPV for a total upfront investment of DKK 1 million ($162m).

The nine other cases concluded that reduced (or eliminated) stock was appropriate, represented a further net cost/risk-benefit of DKK 900,000 per year.

On completion of the pilot phase, there is now an acceptance of the new methods introduced, in some cases confirming a gut feeling, in others revealing unexpected opportunities to improve costs or service levels; but in all cases establishing a new mindset with respect to the risk implications of a good decision.

HOFOR has embraced better asset management practices because they are indeed the ‘right things to do’ if you are responsible for complex critical infrastructure. The critical success factors, however, have included the style of people-centric introduction, Lise’s project management and team energy, the home-owned workstream, and collaboration.

With the lack of a burning platform or other external imperative, there has been a lot of focus on ‘making asset management make sense’ in HOFOR; and establishing the necessary sponsorship at leadership levels.  This has yielded the necessary sense of importance and determination – the HOFOR imperative for Asset Management.

A large part of HOFOR’s employees recognize that the ‘asset management journey’ has only just begun, and there is widespread optimism, determination, and energy to be involved and make the transformation into a sustainable success.  So, raising asset management maturity can be a consensus-based process, provided that the right teams are established, supported, and empowered to drive it.

Lise was recognized internationally as she triumphed as the outright winner of the IAM Individual Award for ‘Transforming asset management despite the absence of any burning platform, business urgency or regulatory obligation’.

We selected the Woodhouse Partnership as our partners in our asset management journey and have been delighted to achieve such success and progress with their help. In particular, their approach to adapting core concepts of asset management to the context, culture, and priorities of our organization has been instrumental in the transformation we have achieved and continue to develop.”

Lise Tarp-Johansen
Project Manager, HOFOR, Denmark

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John Woodhouse

With 30 years’ experience in utilities, oil & gas, transport and other sectors, John is one of the most widely known experts in integrated asset management projects for some of the largest companies in the world.

John is a Founder and Life Fellow of the IAM; he has written 4 books, chaired the development of BSI PAS55 and represents the UK on the ISO55000 committee.

He also led the international MACRO and SALVO collaboration projects in optimised asset management decision-making.

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