Success Cases

The public limited company Latvenergo Latvenergo AS) is a state-owned energy utility whose core business is the generation and sale of electricity and thermal energy.
Latvenergo is a key company of the Latvian national economy.

Latvenergo AS previously had cost models in MS Excel based on Activity- Based Costing (ABC) principles. ABC principles were used for the allocation of support function costs from Latvenergo to its subsidiaries as well as for separation and allocation of Latvenergo AS costs by its core business units - energy generation (in thermal stations, in hydro power stations) and electricity sale, enabling analysis as separate business units.

The main problems with the previous system were model transparency, flexibility related to structural changes and lack of built-in support for reciprocal costing. Therefore, in 2008 Latvenergo AS considered the acquisition of professional costing software to support ABC principles.

• MyABCM was selected as the best available solution, given its price and quality ratio
• One of the goals of model migration was to ensure model quality control and generate recommendations for improvement
• Model transfer to MyABCM and quality control was conducted in less than a month with the help of professional business consultants from Deloitte
• The initial model structure and allocation logic was maintained after the model migration to MyABCM
• Recommendations for improvement were communicated during the process, including recommendations related to model transparency, which were implemented during the migration
• It is currently possible to conduct a detailed analyses of all Cost Object types, examining all company activities, to arrive at a single total cost very approximate to the reality of the business.

The main benefits of MyABCM implementation are: an easy-to-use cost modeling tool, increased model transparency and analysis capabilities, facilitated model updates and capability to use the model by multiple users at the same time. Model transfer AS IS to the professional cost calculation and analysis system in MyABCM is the first step in the process of implementing Activity- Based Costing methodology for business purposes, such as cost control and reduction. ABC is a powerful methodology for accurate allocation of indirect costs in order to see the true costs of services provided. It has predominantly been used by companies in service, manufacturing and public sectors all over the world to support strategic decisions such as pricing, outsourcing and identification and measurement of process improvement initiatives.