...GRADUATE SCHOOL OF BUSINESS STANFORD UNIVERSITY S HR-3 FEBRUARY 1997 HUMAN RESOURCES AT THE AES CORPORATION: THE CASE OF THE MISSING DEPARTMENT Dennis Bakke, the CEO of AES, a company that develops, builds and operates electric power plants, sat in his office late in 1996 and thought about the question that was perennially posed to him: could AES, soon to have some 25,000 people located literally all over the world following a recent purchase of power plants in Kazakhstan, continue to operate with virtually no staff functions and, specifically, without any human resource staff anywhere in the corporation? The absence of centralized staff — or, for that matter, much staff at all — had been one of the themes guiding the design and operation of the corporation since its founding. The company, in addition to having no personnel department, had no public relations, legal, environmental, or strategic planning departments. Its chief financial officer, Barry Sharp, saw his job not so much as running a centralized finance function but rather as helping all the AES employees as they made important decisions about financing and investments in a very capital intensive business. But the company was becoming much larger and increasingly geographically dispersed. Perhaps those early decisions needed to be rethought. Could what worked for so long continue to work as the corporation grew and operated increasingly on a global basis? Could the advantages of flexibility and having virtually...
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...If Venerus implements the suggested methodology, what would be the range of discount rates that AES would use around the world? Does this make sense as a way to do capital budgeting? Venerus framework consisted of fairly simple set of rules in which a 12% discount rate was used for all the projects and he felt that this model worked fairly well in a world of domestic contract-generation projects. After AES’s international business expansion the model become increasingly strained with the expansions in Brazil and Argentina because hedging key exposures such as regulatory or currency risk was not feasible. Based on the facts of 15 sample projects in different countries in the world, in order to calculate the range of discount rates around the world, we should find the highest and lowest WACC in 15 samples, which should be the WACC of USA and WACC of Argentina, because USA has the highest credit rating and Argentina has the lowest credit rating in 15 sample projects. First, we identified unlevered beta for USA and Argentina from Exhibit 7b are 0.25 for USA because its contract generation project and 0.5 for Argentina because of competitive supply project. We found the Debit to Capital Ratio for USA and Argentina in Exhibit 7a are 39.5% and 40.8% respectively. By substituting those values we calculated leverages bête for USA and Argentina. Second, we calculated Cost of Equity by using Risk Free (10 years US Treasury bond), Risk Premium (US Risk premium) and Leveraged beta. ...
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...1. Consider the Global Sourcing Initiative from an overall perspective. How effective has the effort been so far? Is AES applying a truly strategic approach? Phase I of the global sourcing initiative has been successful so far. Naqvi reported that the cost savings from Phase I implementation are somewhere in the 7%-10% range. Phase I efforts focused on only 16 of the 36 identified categories, and included building the global sourcing team, designing the program, conducting spending analysis, and establishing a procurement function and internal controls. The success of the whole initiative will depend upon the successful completion of phases II and III, and whether or not the global sourcing team is able to achieve its goal of reducing annual external purchases by $150 million. AES is certainly moving towards a strategic approach by focusing on centralization. While the global nature of AES’s business and the presence of suppliers worldwide makes the transformation to a centralized structure difficult, it is definitely a step in the right direction. The decentralization approach early on allowed AES to grow rapidly and capitalize on regional developmental opportunities, however, recent loses, and price and currency pressure in major markets, such as Brazil, has forced AES to think about reducing cost by employing reduced capital expenditure, controlled business developmental spending, exits from nonperforming businesses, and a centralized organization structure that makes...
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...and developing countries, for appropriate behaviour standards are sterner, penalties for international laws and rules offences are severe. Those against this view I perceive are for monopolistic enterprises and purely to gain profits no matter the means. From the Independent Lens website, the documentary film “Power Trip” by Paul Devlin depicts the challenges faced by the AES Corporation, an American energy company, during its attempt to operate an electric company in Tbilisi the capital of the former Soviet Republic of Georgia, a country that offered substantial economic potential. I strongly believe throughout this particularly interesting film there are several management lessons that relate these issues to the legal business environment, and can help me to be more appreciative of the corporate world mechanisms, my co-workers and business associates who are of different countries, culture and political background. AES, headquartered in Arlington Virginia, USA is one of the world’s largest independent energy companies and utilizes competitive supply, growth distribution and ethical management techniques. AES spent $35 million in 1999 to acquire Telasi, Georgia’s privatized power distribution Company which was formerly state-run. Georgia is strategically positioned in the unstable Caucasus region bordered by the Black Sea, Turkey, Armenia, Azerbaijan and the Russian Federation, and at the time of the film, was led by President Edward Shevardnadze. As seen in the film, the country...
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...PROLOGUE Fortress of the Light Pedron Niall's aged gaze wandered about his private audience chamber, but dark eyes hazed with thought saw nothing. Tattered wall hangings, once battle banners of the enemies of his youth, faded into dark wood paneling laid over stone walls, thick even here in the heart of the Fortress of the Light. The single chair in the room heavy, high-backed, and almost a throne - was as invisible to him as the few scattered tables that completed the furnishings. Even the white-cloaked man kneeling with barely restrained eagerness on the great sunburst set in the wide planks of the floor had vanished from Niall's mind for the moment, though few would have dismissed him so lightly. Jaret Byar had been given time to wash before being brought to Niall, but both his helmet and his breastplate were dulled from travel and battered from use. Dark, deep-set eyes shone with a feverish, urgent light in a face that seemed to have had every spare scrap of flesh boiled away. He wore no sword - none was allowed in Niall's presence - but he seemed poised on the edge of violence, like a hound awaiting the loosing of the leash. Twin fires on long hearths at either end of the room held off the late winter cold. It was a plain, soldier's room, really, everything well made but nothing extravagant except for the sunburst. Furnishings came to the audience chamber of the Lord Captain Commander of the Children of the Light with the man who rose to the office; the...
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...#3 After we calculated the weighted average costs of capital (WACC) for each project one can clearly see that the costs of capital are increasing. The increase in costs differs though from project to project. The methodology used assumes that every project has got a different business-risk specific score which then leads to different adjustments on the cost of capital. For example the project “Andres” which is located in the Dominican Republic has got, according to the score, the highest risk. Having a risk score of 3 the adjustment in that case was 15 %. So to the former discount rate of 14.94 % we had to add 15 % leading to a new discount rate of 29.94 %. Other projects, like the “Red Oak” project in the United States had a lower risk and therefore the adjustment was low as well. In this case 3.20 %, leading to a new discount rate of 9.66 %. This is the lowest discount rate for all projects. So the discount rates are ranged in between 9.66 % and 29.94 %. All the results are shown in Table 1. Project | | | WACC | Adjusted WACC | Andres | 14.94 % | 29.94 % | Caracoles | 22.23 % | 31.36 % | Drax | 9.05 % | 16.35 % | Eletropaulo | 14.38 % | 25.26 % | Gener | 8.88 % | 12.63 % | Haripur | 12.93 % | 16.88 % | Kelvin | 9.83 % | 15.18 % | Lal Pir | 15.95 % | 23.08 % | Los Mina | 14.61 % | 27.44 % | OPGC | 10.66 % | 18.11 % | Ottana | 8.65 % | 10.77 % | Red Oak | 6.46 % | 9.66 % | Rivnoblenergo | 15.56 % | 18.58 % | Telasi | 15.86 % | 28.51 % | Uruguaina | 14.10 %...
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...Descripción AES Gener S.A. (constituida el 19 de Junio de 1981), es una sociedad anónima abierta cuyas acciones se transan en tres bolsas de valores: Bolsa de Comercio de Santiago, la Bolsa de Valores de Valparaiso y la Bolsa Electrónica de Chile. Gener está orientada fundamentalmente a la generación de electricidad en Chile. Su mayor accionista corresponde a Inversiones Cachagua Limitada con él 70,67% de las acciones. Con su parque generador*, proporciona al Sistema Interconectado Central, SIC, energía eléctrica generada a través de cuatro hidroeléctricas de pasada, dos centrales turbogas a petróleo diesel, todas pertenecientes directamente a Gener. También entrega energía eléctrica al SIC mediante una central de ciclo combinado que opera indistintamente con gas natural o diesel, y una central a diesel, ambas pertenecientes a su filial Sociedad Eléctrica Santiago S.A., y por una central termo eléctrica a carbón, perteneciente a la a la filial Empresa Eléctrica Ventanas S.A. Adicionalmente entre energía eléctrica al SIC a través de una central termoeléctrica a carbón perteneciente a la coligada Empresa Eléctrica Guacolda S.A., que opera cuatro unidades a carbón en la isla Guacolda, en Huasco, Región de Atacama. La compañía también es proveedora de energía eléctrica al Sistema Interconectado del Norte Grande, SNG a través de sus filiales. Adicionalmente a su participación en el sector eléctrico en Chile, AES Gener es productora de energía eléctrica en Colombia a través...
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...AES Corporation historically used a very simple method that was used for all projects being examined, regardless of geographical location. The method worked well when implemented in the U.S., but when it began to be used to evaluate international projects, it was giving the company false NPV values. This evaluation method also failed to take into account increased WACC, currency risk, political risk, and sovereign risk, which resulted in projects that began to fail in the early 2000’s. By counting to use this flawed evaluation method the company destroyed its stock price and market capitalization, losing millions in stockholders equity in the process. This debt structure caused significant currency risk for both AES and it subsidiaries. Exhibit 6 shows that debt was denominated in USD for the subsidiaries, while they were bringing in revenues in foreign currencies. AES also lost cash flows when depreciation occurred since the money made by its subsidiaries was worth far less after devaluation of foreign currencies. Venerus evaluation method was a vast upgrade to what AES had been using in the past. His method took into account many more factors than the previous model. It allowed for the company to create a WACC for each project. Which allowed AES to capture the country-specific risks for each foreign market. This was a good idea because it allowed AES to also consider the market risk of each country. It does a much more adequate job in predicting...
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...Introduction AES faces an ethical dilemma. India’s power plant development team can choose between using expensive technology, meeting U.S. environmental standards, or a cost cutting technology meeting local and less stringent standards yet allowing for contributions to other community needs surrounding the projected plant. “Although many people at AES felt that the company would be “selling out” if it did not maintain its strict commitment to the environment in the narrow senses, others felt that AES should expand its concerns to include people and their quality of life” (AES Global Values, 2000). This presents a major ethical dilemma of whether or not the company should continue its traditional focus on meeting “social responsibility” values through CO2-offset programs as the company expands worldwide. Summarize the various issues regarding AES’s commitment to social responsibility There are many issues regarding AES’s commitment to social responsibility, a core part of AES’s culture is the commitment to their shared principles or “corporate values.” These principles describe how the individuals at AES endeavor to commit themselves to the Company’s mission of serving the world by providing “safe, clean, reliable and inexpensive energy.” The first and largest issue of AES’s commitment to social responsibility is that team members “felt that accepting a lower environmental standard in India - even one consistent with local and World Bank requirements - would be abandoning...
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...Analysis of Business Issues, Writing In the Disciplines (WID) BADM 2003W (93752): BADM_2003W.SEC.11 Monday Combined Class: SEMESTER: Spring 2014 LOCATION & TIME: Funger 209, Monday 2:20 PM-3:35 PM PROFESSOR: Dr. Bret Crane Department of Management Office: Funger Suite 315N Email: bretdcrane@gwu.edu Office Hours: Tuesdays 1:00-2 PM or by appointment TEACHING ASSISTANTS & WRITING LABS: | | | |Section # |Begin |End |Day |TA |Email | |30 |08:00 AM |09:15 AM |Wed |Mark De Cicco |mdecicco@gwmail.gwu.edu | |31 |09:25 AM |10:40 AM |Wed |Mark De Cicco |mdecicco@gwmail.gwu.edu | |32 |10:50 AM |12:05 PM |Wed |Tess Strumwasser |tstrumwa@gwu.edu | |33 |12:15 PM |01:30 PM |Wed |Tess Strumwasser |tstrumwa@gwu.edu | |34 |01:40 PM |02:55 PM |Wed |Daniel Berkhout |berkhout@gwmail.gwu.edu | |35 |03:05 PM |04:20 PM |Wed |Daniel Berkhout |berkhout@gwmail.gwu.edu | |36 |04:30...
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...With these developments, it is obvious that conflicts between parties of different nationalities occur and liability to tax on income of foreigners especially among those engaging in trading venture. Whilst the laws affecting domicile and residence may be sufficiently settled, it is paramount for courts to pursue a detailed analysis to ascertain specific preliminary issues so as to avoid controversial rulings. Courts often handle numerous financial cases that involve what can be best described as foreign or international elements. In such cases, court must decide whether it has the jurisdiction under the Family Law Act 1975 to make a decision on such cases. In the event that it is determined that the court is invested with the jurisdiction to determine the case, the court has to consider whether there is a system of law in foreign country that also has the jurisdiction to handle the case. As it was addressed in the case Attorney General of New Zealand v Ortiz [1984] AC 1, these benefits and costs to either party if the case resolution is made in foreign country as compared with the apparent country should also be a subject of concern. [1] Legal systems in most countries around the world adopt community property regime, which takes effect at the inception of marriage or at the time of divorce. For instance, California and Massachusetts in the United States have adopted community property regimes that support equal division of assets upon divorce. However, this provision...
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...Adapted from Bernhardt & Kinnear (1988). Cases in marketing management, pp. 6-16. Plano, TX: Business Publications, Inc. Pay careful attention to the following points. They are often used by instructors to evaluate either a written or oral analysis. 1. Be complete. Each area of the situation analysis must be discussed, problems and opportunities identified, alternative presented and evaluated using the situation analysis and relevant financial analysis, and a decision must be made. An analysis that omits part of the situation analysis or only recognizes one alternative is not a good analysis. Second, each area must be covered in-depth and within insight. 2. Avoid rehashing case facts. Every case has a lot of factual information. A good analysis uses facts that are relevant to the situation at hand to make summary points of analysis. A poor analysis just restates or rehashes theses facts without making relevant summary comments. 3. Make reasonable assumptions. Every case is incomplete in terms of some piece of information that you would like to have. A good case analysis must make realistic assumptions to fill in the gaps of information in the case. For example, the case may not describe the purchase decision process for the product of interest. A poor analysis would either omit mentioning this or just state that no information is available. A good analysis would attempt to present this purchase decision process by classifying the product and drawing upon real life...
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...are given. It is understandable then that we should seek out more opportunities to apply our skills and make more positive impacts within our jurisdictions. It is this general attitude that led us to get involved in investigating cold cases. How We Got Started Mark had, for several years, been consulting with our Coroner’s Division as a forensic anthropologist. During this time he came to learn that there were numerous coroners’ cases in which the identity of the decedent was unknown. These cases were kept in three-ring binders on a shelf in the Sergeant’s office. Over the years, in the course of this forensic work, we would discuss these cases and the progress that was being made on them. The conversation usually ran along the lines of us asking “any luck with that 1980 homicide victim?” and the sergeant answering “well, we’ve gotten so many new cases that I haven’t been able to even look at it yet.” This went on for a few years and through two different sergeants. One day we, as a crime analysis unit, were brainstorming about how we could broaden our “client base”, as it were. We had been successful in integrating ourselves into our Investigations Bureau and had been involved in numerous major cases. And, of course, we had always been active in producing tactical and strategic analyses for our patrol personnel. But we knew that we could be doing more, particularly given the size and responsibilities of our agency. It was during...
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...BUSINESS CASE Presented to the Accountancy Department De La Salle University In partial fulfillment Of the course requirements In ACCTBA2 (C33) March 2, 2015 A stakeholder is typically concerned with an organization delivering intended results and meeting its financial objectives. In general, a stakeholder can be one of two types: internal (from within an organization) or external (outside of an organization). The stakeholders in this situation are Lanie Marquez and Tim Rodriguez who are also partners in the retail distribution business and their capital contributions are as follows P500,000 and P300,000 respectively they are an internal stakeholder since they are also the owners. The total Capital of both stakeholders is P800,000 and with a monthly salary for both partners at P15,000 on the assumption that both of them will contribute to manage the business equally. Assuming that both managed the business equally the total salary for the year for Lanie and Tim are P180,000 each. They share profit and loss equally and no interest will be given on capital contributed. The problem for this situation is that Lanie is starting to get concerned with the behavior of her other partner Tim. He only manages the business 50% of the time, which will mean that his salary of P15,000 will need to decrease by also 50% since he does not manage the business equally with his partner. The business has seen a downturn in the profit outcome and for the current financial...
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...Ralph’s Grocery and United Food and Commercial Workers Union The case that I chose for the week 6 critical thinking assignment concerns Ralph’s Grocery Company, located in California. It applies to this week’s material due to the fact that the case involves unlawful suspension and discharge of an employee, as reviewed by the National Labor Relations Board. Background In May 2011, Vittorio Razi was an employee at Ralph’s Grocery and was suspended and terminated after he refused to take a drug test without first consulting with his UFCW Local 324 representative. The company (Respondent) says that on the day in question, Razi’s behavior was in question, acting nervous, anxious, agitated, and slurred speech. After a couple managers discussed the...
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