Proving Energy Efficiency and Smart Grid Program Analysis - Admission/Application Essay Example

Ameren Corporation Section I: Introduction/Background Ameren Corporation is a public utility operant in the United States and is of today a holding company for a number companies this includes both the energy and power companies, currently situated in St. Louis, Missouri, it has a customer base line of 2.4 million in the electric sector and approximately 900,000 customers in the natural gas sector. Ameren is known to operate a nuclear power plant facility, three hydroelectric plants, and also on top of this Ameren have a number of coal-fired plants together with the inclusion of turbine combustion facilities. Ameren is also involved in purchases of power, which in this case refers to wind power. Ameren’s operations are based in generally three parts this includes: Ameren Missouri located in Missouri together with Ameren Illinois and the Merchant generation, but its current headquarters are based in the city of St. Louis, Missouri. The company engages in electric generation, electric transmission and the distribution business, with the inclusion of merchant electric generation businesses. The company in the broader sense has the primary role of rendering its services to the residential, commercial and industrial customers (Jerry 2010) Ameren Corporation came into being as of December 31, 1997; this was a result of the merging of Missouri’s Union Electric Company with the immediate neighboring Central Illinois Public Service Company. Ameren traces its history as early as of 1929, this was the time when the Bagnell Dam located in on the Osage River was completed and equally ended producing approximately 175 of megawatts for the Missouri’s Union Electric Company. Significantly in 1931 the Union Electric Light and Power was in need of additional generating sources and this saw the company immediately began to buy power from the then Keokuk, IA Dam, later the dam ended up being bought by the Union Electric. Consequently this saw the dam significantly providing 134 megawatts of hydroelectricity, this was equally a significant achievement (Ameren 2011). As of 1950 the Union Electric was actually in possession of gas operations, this lead it to being the third largest distributor in Missouri. Ameren Missouri alone supplies its electric and gas services to an approximately 24,000 square mile area, this equates to a population of almost 2.8 million and 1.2 million electric customers and 127,000 gas customers. Ameren Illinois supplies its electricity to 1.2 million customers and its gas supplies to 806,000 customers in a population toping up to approximately 3.4 million (Ameren 2011). The company’s annual revenue is estimated to be around $6,828 and generally has a generating capacity of 16,000 MW. Ameren attributes its significant achievement to diversity, in form of its mentoring and training programs; an initiative that saw Ameren’s being ranked among the best utilities in nation for diversity four times in a row. This is achieved by its steadfast leadership commitments, contracts with a diversify suppliers and the company policy of hiring diverse candidates. Section two: EFE   Key External Factors: Ameren Corporation’s EFE         Opportunities Weight in % Rating Weighted Score in % 1. The economy demanding individuals to trade down in that they end up choosing cheaper options. 15 3 0.45 2. A total demand for more competitive energy choices among the United States population. 5 4 0.60 3. Amongst the company’s competitors such as Enel S.P. A. do not have the electric extension options 15 4 0.14 4. Approximately 57% Ameren’s located outside the United States of America absorb the country’s loss 7 2 0.14 5. The entire United States of America together with the global market welcome the Ameren’s products 9 3 0.27 6. Ameren’s competitors inspire total return to customers and a brand of loyalty. 5 2 0.27 7. Full demand for a totally free extension services against the charges set by competitors. 9 3 0.27 8. The demand for other natural alternatives choices of energy supply 9 3 0.27 Subtotal 2.25 Threats 9. The demands for environmental pollution results to erosion of many sales. 4 3 0.18 10. The attention of the media to the negative effects electric supply 3 2 0.08 11. Price wars 2 2 0.16 12. A steady trend of unemployment in the united states of America 3 2 0.06 13. A relatively increasing costs of resources. 3 2 0.06 14. The total count of electric and gas and a posted value in gain 5 2 0.18 15. Company future estimates 4 2 0.01 16. Company Dividend 4 2 0.02 100 Total: 3.00 Section three: IFE key internal factors: Ameren’s IFE Weight in % Rating Weighted Score in & Strengths 1. The quality of electric and gas services offered. 10 2 0.20 2. The appeal of advertisements 15 3 0..45 3. The choices or options on the on energy industry 10 4 0.40 4. Competiveness of prices 10 2 0.20 5. Additional services that adds value to the organization 5 3 0.05 6 A stable management 10 3 0.30 7. Total loyalty of customers. 10 3 0.30 8. Worldwide expansion of the entire firm. 10 3 0.30 9. The firm’s share in the market 5 3 0.15 10. Ameren’s financial position. 10 3 0.10 Weaknesses Financial Analysis: Section four Company: Ameren Year Ratio Category Ratio Name Ratio Purpose Formula Equation with numbers Results Favorable? 2012 2011 2010 Leverage Debt to Total Asset Leverage, alternatively known as total debt to total assets ratio gives a measure of a company’s financial risk through determination of to what extent the company’s assets have been financed by debt. Calculated by adding the long term and short term debt and dividing the sum by the total company assets. (3700+ 1212)/31870M (366.6 + 12130)/32990M = (8.3+11500)/31980 = 0.154 0.378 0.359 Yes Year Ratio Category Ratio Name Ratio Purpose Formula Equation with numbers Result Favorable? 2012 2011 2010 Liquidity Current Ratio Current ratio determines the ability of the firm to be able to pay back its short term liabilities mainly debts with its short term assets composed of cash and inventory We divide current assets by current liabilities 4.502B/3.713= 4.403B/3.509B= 4.368B/2.925B 1.212 1.2548 1.4933 yes Year Ratio Category Ratio Name Ratio Purpose Formula Equation with numbers Result Favorable? 2012 2011 2010 Asset Management Total Asset Turnover Shows the total sales generated for every dollar’s worth of assets in a bid measure the efficiency of the firm in using the assets to generate revenue sales We divide revenue against assets 30.1/33.98 27.01/32.99B 24.0731.98B 0.951 0.818 0.752 No Year Ratio Category Ratio Name Ratio Purpose Formula Equation with numbers Result Favorable? 2012 2011 2010 Profitability Net Profit Margin Measures the overall effectiveness of the management to return sales and investments. Dividing revenue or net profits by sales (5.913*100)/29.98 (5.503 * 100)/27.01 = (4.946 *100)/24.07B = 19.72% 20.37% 20.54% yes Year Ratio Category Ratio Name Ratio Purpose Formula Equation with numbers Result Favorable? 2012 2011 2010 Growth Price-to-earnings ratio Price-to-earnings ratio evaluates the current share price of the company in comparison to its per-share earnings Calculated by dividing market value per share with earnings per share 72.52/5.92 74.44/4.74 = 100.32/1.16 12.25 15.70 18.57 yes Year Ratio Category Ratio Name Ratio Purpose Formula Equation with numbers results Favorable? 2012 Liquidity Leverage Asset management Profitability growth Current Debt to total asset ratio Total asset turnover Net profit margin Price to earnings ratio As stated above As stated above 5,661,364/2,029,568  = 6,510,488 /14,152,059 = 19,429,273/14,152,059= 504,619/19,429,273= 19,429,273-20,023,564/20,023,564= 2.79 0.46 1.37 0.026 -0.3 Yes Yes Yes Yes No Comparison # 1: Center Point Energy, Inc. Year Ratio Category Ratio Name Ratio Purpose Formula Equation with numbers Result Favorable 2011 Liquidity Debt management Asset management Profitability Growth Same as above 746.936M/368.268M=2.0282 (6.597+1350.402)/4300.668M= 2431.358/4300.668M/4300.668M= 124,000 / 19,328,000 = (9.875*100)/2431.358M= 4.41/1.11 1.80 0.378 1.27 0.565 0.41% 3.97 YES NO Comparison Company #2: Exelon Corporation Year Ratio Category Ratio Name Ratio Purpose Formula Equation with numbers Result Favorable 2011 Liquidity Debt Management Asset management Profitability Growth Same as above 5,374,000 / 2,990,000 = 11,740,000 / 15,217,000 = 19,328,000 / 15,217,000 = 124,000 / 19,328,000 = 19,328,000 - 19,884,000 /19,884,000 = 1.80 .77 1.27 . 006 -.028 YES YES YES NO NO Section Four: Financial Analysis The value of the current ratio of Ameren indicates that the company is comfortably able to pay back the short-term liabilities in there balance sheet, this is despite the fact that the company recorded a drop in the financial year 2011. This is also quite evident also in Center Point energy Inc. which realized an improvement in the ratio between 2010 and 2011 financial period (Stock Analysis on Net 2012). The low ratios in the company’s asset management indicates a sluggish in Ameren’s sales. Comparing the values for Center Point Energy Inc. and that of Ameren enables us to realize that Center Point Energy is relatively insufficient. This we can attribute to factors such as either the company’s products not selling fast compared to competitors products or the company holding obsolete inventory amongst many more others. We could also analyze this from the perspective of the debt collection period. The average collection period can be said to be the time period it takes for an entity to receive payments owed by the debtors hence a great measure of quality of debtors critical for the company if it has to eliminate bad debts. In its calculation, inefficiency is implied to by a longer collection period in addition to having a too liberal credit collection performance which will not be too good for a company wanting to become a market leader. From the study, it is evident that compared to Center Point Energy, Ameren has a longer collection period hence the company runs at a higher risk of running into high rates of bad debts. From the value of the total asset turnover, Ameren is performing poorly on debt management since their performance is less than one. We could alternatively employ the use of Times Interest Earned value to measure which determines the ability of the company to honor its debt payments. While Centre Point Energy Inc. shows a good position of meeting its obligations, Ameren performance exemplifies the ability of the company to meet its interest obligations hence an indication of a firm financial standing thus reducing any likelihood of bankruptcy since the company is able to sustain its earnings. Overall, it is evident that Ameren’s performance shows a balanced ability as regards its debt management since potential negative consequences may befall the company in cases debt accumulation. An analysis of the profitability of the company indicates that the profit margin is sizeable which by all means indicate that the company has better control measures on its costs and has great pricing strategies. On the other hand, low profit margins imply that Centre Point Energy Inc. that the company needs to make further measures to control costs. Consequently, due to the fact that having low profit margins show low margin of safety while a higher one indicates that a decline in sales and declining profits hence loses or a negative margin, then the profit margin of Ameren is ideal. On the growth front exemplified on the Market Value Ratios, the high price to earnings ratio from the value of Ameren implies that the investors in the company shares should expect an increase in growth as regards the increase in the future earnings of the company. Additionally, this will further attract more investors who are willing to invest in the company shares due to the high prospects and promising growth. Section Five: Problem Statement Ameren Missouri Policy Objectives Selection proc Ameren has recently faced decline in earnings hence the need to determine how the company can effectively compete both inside and outside the electricity industry. With the profits going down, the company has tried to seek for new and innovative means of remaining relevant. Resource plans needs to be ranked while taking into consideration the uncertainties in the industry. Other factors include the DSM costs, Plants finance and retirement plans. Section Six: Alternative Solutions Solution Enhanced marketing Innovativeness in production process Quality Improvement Product differentiation More product publicity, using the advertisement, updating the Apps on iPhone and Android, and holding the sale promote. Strategy name Target marketing Strategy Production innovativeness Enhanced ingredients, service and overall environment Diversification Market development Pros Provides to the target market what products they want, when they want the product and where they want it. Minimize production costs while at the same time maximizing revenue. Enhances innovation into development and provision of services Increase services convenient. Reduce complains, and more let customers satisfaction. Enhance profitability due to reduced costs. Service differentiations into meeting individual needs enhances efficiency Increasing the speed production; to speed up the delivery process Expand the brand awareness. Increase product sales, and attract more customers. Cons Target marketing is an expensive marketing strategy to implement and will cost McDonalds a fortune to implement. However, it the company wants success it will have to apply the strategy Times consuming because it utilizes more resources to communicate the company. Too much cost and high risky. More expenses in research and development. It is difficult to create the new market area; spend too much time and labor force. Can be risky or costly because utilizes more resources. Works Cited Jerry, Jackson, Improving energy efficiency and smart grid program analysis with agent-based End-use forecasting models, Energy Policy, Volume 38, Issue 7, July 2010, Pages 3771-3780 Ameren, Barclays Capital CEO Energy?Power Conference, September 8, 2011, Slide 4. S&P cuts Ameren Energy ratings,” Reuters, February 28, 2012, http://www.reuters.com/article/2012/02/28/idUSWNA118620120228 Read More