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At Hamburg Wasser cash flows run optimally – thanks to a bespoke IT-based treasury system
Overview
It is the oldest public water supply utility in continental Europe: today's water supply and sanitation utility Hamburg Wasser This long tradition is based on excellent financial management. Today, this is performed using an innovative IT-based treasury system. In Hamburg, water management has always been driven forward by innovative ideas. In 1842, William Lindley from the UK designed the European mainland's first sewerage network here. The investment paid off – 250 km of the old brick sewers remain in use to this day.
[Translate to English:] © Hamburg Wasser
Background
Then as now, sewers are a cost-intensive investment with a long life expectancy and depreciation period – usually 70 to 80 years. This poses a challenge, as even the longest bank loans have terms of 20 or at best 30 years. Prolongations or follow-on financing is therefore required – even as the banking market continues to shrink. This entails financing risks. Moreover, costs for working capital must be kept as low as possible.
In March 2006 Hamburg's water supply and sanitation utilities were brought together in a single group. The group comprises a total of six companies including subsidiaries. It covers the entire range of possible water supply and sanitation services. The group is wholly owned by the municipality.
Objectives
The municipality is obliged to guarantee reliable delivery of general interest services. Therefore, in order to satisfy the public interest in fees and charges that are as low as possible, in its financing strategy Hamburg Wasser has set itself the target of bringing together short- and long-term financing arrangements within a single integrated system. The options this generates can then be put to optimal use to ensure strategic and operational liquidity. This also guarantees solvency in day-to-day business at all times.
[Translate to English:] © Hamburg Wasser
Activities
Although Hamburg's sanitation and water supply utilities remain independent corporate entities under the umbrella of Hamburg Wasser, their administrations were merged in December 2011 – not least in order to facilitate integrated financial planning, which was introduced four years later.
The group bases all it decision-making on a detailed real-time analysis of financial flows for all business divisions and subsidiaries, especially where investment is concerned. To make exhaustive use of all the options created by the mix of financing instruments, the cash flows, assets and liabilities of all major corporate entities within the Hamburg Wasser group are analysed precisely on a daily basis, and the data made available for use in global corporate liquidity planning. This involves consolidating twenty separate bank accounts into a single account every day. This is achieved using a treasury suite with a modular structure.
Effects
Liquidity management has been improved significantly as a result. Working capital is now available reliably at all times – at the lowest possible financing costs.
This means that sanitation costs can be passed on to the citizens of Hamburg, as well as industrial and commercial enterprises, on favourable terms. The system also guarantees process stability. The treasury suite enables users to predict precisely how much working capital needs to be borrowed against interest. It also expedites cash flows and avoids errors. All information is available at the press of a key, and is visualised.
This means it is now easier to align the financing strategy with money market trends and with an environment that can sometimes change rapidly. Potential investors also appreciate the newly acquired transparency of cash flows.
[Translate to English:] © Hamburg Wasser
Conclusions
Hamburg Wasser specially developed the treasury system from scratch based on its specific requirements and a precise process analysis. One particular challenge was adjusting to the processing of mass payments in a major city with over a million inhabitants whose advance payments, final bills and arrears need to be recorded.
The sophisticated treasury system is now enabling this public enterprise to use the best interest rates the market has to offer.
weitere Information
https://unhabitat.org/books/guide-to-municipal-finance/
Ade ( 2007), Finanzcontrolling im neuen kommunalen Haushalts- und Rechnungswesen, in: controller magazin, 2007, S. 264–272.
Arnold ( 2005), Corporate Financial Management.
Back (1997), Corporate cash Management: Strategy and practice, 1997.
Ertl (2004), Aktives Cashflow-Management – Liquiditätssicherung durch wertorientierte Unternehmensführung und effiziente Innenfinanzierung, 1. Auflage.
Gleich; Horváth; Michel (Hrsg.; 2011), Finanz-Controlling. Strategische und operative Steuerung der Liquidtät. Heesen (2014), Cash- und Liquiditätsmanagement, 2., aktualisierte Auflage.
Keuper; Häfner (Hrsg. 2008), Die moderne Finanzfunktion – Strategien, Organisation und Prozesse.
Klepzig (2010), Working-Capital und Cash Flow – Finanzströme durch Prozessmanagement optimieren.
Lies (2011), Erfolgsfaktoren des Working Capital Managements: Optimierungsansätze der Financial Supply Chain.
Michaelis; Million; Portermann (2009), Optimierung des Zahlungsverkehrs mit SAP1 In-House Cash.
Pfaff; Skiera; Weiss (2004), Financial Supply Chain Management.
Seethaler; Steitz (Hrsg. 2007), Praxishandbuch Treasury-Management.
Stadler (Hrsg. 2004), Die neue Unternehmensfinanzierung– strategisch finanzieren mit bank- und kapitalorientierten Instrumenten.
UN Habitat (2009), Guide to municipal finance, Nairobi.
Werdenich (2008), Modernes Cash-Management. Instrumente und Maßnahmen zur Sicherung und Optimierung der Liquidität, aktualisierte Auflage.
Published: 09/04/2018
Kontakt
jan.brinkmann(at)hamburgwasser.de
Jan Brinkmann
Financial Management
Billhorner Deich 2
20539 Hamburg
Text: Sabine Hammer
Images
Categories:
Municipal services
Water supply / sewage
Regions:
Europe
Germany
Hamburg
