Reference no: EM13965520
An investment group is considering a potential investment in Kudzu Energy (KE). The group has engaged YOU to provide a preliminary assessment of the business management practices to consider, based on the following profile of the company.
Kudzu Energy is a privately held company that owns and operates electric generating facilities in seven (7) States using various generation technologies and wholesales electricity. KE generating facilities include by percentage of generating capacity; wind (5%), natural gas (30%), coal (55%) and hydroelectric (10%). KE grew through acquisition of existing companies in each technology. Each technology group maintained its existing business practices and continues to operate as a business unit headed by a President.
KE profits are declining as demand for electricity is rising in their markets.
KE is considering expansion by acquiring a solar group and assessing the viability of a new nuclear power facility.
Asset utilization in all groups is approaching 70% of capacity and experiencing 20% downtime. Interest expense is rising. Senior management (CEO, CFO, COO) have attempted to mitigate profit decline by freezing middle management and employee wages with only cost of living increases. KE Senior management receives a bonus pool as a percent of profits. The company has not paid dividends to its stockholders for the past 3 years.
The wholesale group sells in the electric spot 30 day market and long-term (6 month – 1 year) fixed price contract markets. Sales managers in the wholesale group have complained about the inconsistency and timeliness of information needed for pricing.
KE has numerous citations from the EPA for emission violations from coal generating facilities, mainly related to maintenance issues. The Coal group is considering conversion to natural gas which will require significant investment to retrofit the generating facilities. Operations workers have been leaving the company over the past year.
KE has only been able to provide the investment group with consolidated financial information which is 3 months lagging but can provide current data for each operating group separately.
You need to provide an opinion regarding the management of this business including its efficeincy and effectiveness.
Management issues, if any, may be related
Determine at least five (5) recommendations regarding managment issues to consider if the investment group chooses to invest and why
Develop an organization chart.
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