The strict lockdown adopted in Italy led to a number of changes in marketing and customer-service activities. On the other hand, consumption has also changed.
Hera has put into play the proven experience of Hera Comm to deal with the new situation in such a way as to ensure together the safety of people and the continuity of service.
In these first months of the year Hera’s scope expanded, as a reflection of the deal completed with Ascopiave. The integration of EstEnergy is already bearing fruit.
Let us deepen these issues by asking some questions to Mr. Cristian Fabbri, Group Market Director of Hera Group and CEO of both Hera Comm and EstEnergy.
Let us talk about EstEnergy. What impact did it have on the Group’s P&L in the first quarter?
I think that first-quarter 2020 results have already provided an opportunity to measure its value. EstEnergy’s contribution was particularly visible in terms of cash generation – out of 45 m€ of Consolidated Free Cash Flow, as many as 28 m€ represent its contribution. It was fundamental to be able to count on a significant incremental contribution of gas customers in the first quarter, which is the most important for this business during the year. Despite the unfavourable weather conditions and the restrictions for the Covid-19, EstEnergy’s contribution to EBITDA exceeded 29 m€.
How is the integration of the sales companies progressing after the closing of the agreement with Ascopiave? Has any appreciable synergy already emerged?
The value of EstEnergy has emerged leveraging on the solidity of the client portfolio and the synergies that could be extracted through the inclusion and integration in our structure. We could count on two factors: i) the experience gained over the years, which allowed for a continuously increasing trend in the number of customers and results coming from the marketing effort, and ii) the track record achieved during the numerous M&A operations, which helped us in promptly executing the initiatives aimed to extract synergies, following a process that we started to design already at the time of the Memorandum of Understanding in June 2019. At the end of last year, we had already prepared the plans to fully align the commercial salesforce, processes and activities, so that we could integrate all the skills, tools and organization that for years have characterised the way of working of Hera Comm with the peculiarities both of the territory and of the companies acquired.
Today we are the leading player of the North-East of Italy. But we believe that we can express a very significant added value in the coming years through our proven commercial capabilities in an area that still offers ample room for manoeuvre. In the Business Plan to 2023 we estimated a five-year increase in EBITDA of approximately 30 m€ due to extractable synergies; today, after the first months of management of this new reality and having carried out the first interventions, we consider the target within our reach.
What impact has the spread of Covid-19 had on the energy and gas sales business?
The impact mainly affected that part of the industrial and SME clientele which was forced to stop their activities due to the measures imposed by the authorities to contain the spread of the virus.
This is an impact that we have therefore recorded in terms of a fall in volumes in March and April, i.e. during the so-called Phase 1 of the lockdown. As far as household consumption is concerned, given that more people stayed at home even to work remotely, demand would actually have been higher if we had not had a particularly mild winter season, with temperatures on average 4% higher than in 2019. However, the decrease in volumes was reflected less than proportionally on margins, as the segments impacted by the lockdown are those typically with the lowest unit margins. Our performance in terms of volumes has in any case benefited from the contribution of the expansion of the customer base achieved in 2019 and the transaction concluded last December with Ascopiave, which allowed us to count on the essential contribution of EstEnergy customers – mostly gas customers and only 20% electricity customers.
What are the key objectives that have guided your decisions in the face of the spread of the virus?
We simply returned to our fundamental sense of purpose. Our mission says: “Hera aims at being the best multi-utility in Italy for its customers, workforce and shareholders. It intends to achieve this through further development of an original corporate model capable of innovating and forging strong links with the areas served by respecting the local environment.”
In there are all the elements of the policy that we have executed: to be the best, because we are able to offer innovative services and to meet the specific needs of customers and the territories in which we are present.
In this emergency, we have worked through three basic guidelines:
- The protection of employees’ health
- The guarantee of customer services and the protection of results
- Attention to customers and citizens.
What measures has Hera Comm taken to protect the health of people working in the commercial area in the face of the pandemic?
Securing people was our priority. Not only the 1,000 colleagues who make up the sales team, but also the hundreds of people working at our suppliers.
We did this by sensing from the very first days that the key would be the possibility of remote working for our colleagues and suppliers, so we started to make the Remote Working equipment available on February 24, bringing also our suppliers towards this condition. This allowed us to guarantee that the Group was fully operational in the following weeks and that the customers continued to be served.
On the counters and shops, before they were closed to the public as early as February 28, we put plexiglass and disinfectant gels. With the closure of activities in contact with the public, the 150 colleagues working at the counters were quickly trained to be converted to different activities: back office, chat management for online services and collaboration with call center operators in some of our locations. This has allowed us to support external services in managing the increased activity loads on call centres, web, apps and chat and to reduce the related costs.
The reorganization of activities in remote working were possible thanks to the collaboration of the Acantho information systems, which have made everyone quickly and fully operational.
Some suppliers for whom activities have been reduced (e.g. outsourced branches) have used the “Cassa Integrazione”, i.e. lay-off measures, and a factoring service which, made available through certain banks, allows our invoices to be paid in advance. Today they are all in good health and ready to resume in the coming days.
How has the relationship with the client changed in recent weeks?
We have encouraged customers to use digital channels, including to provide us with consumption reading data and to receive their bills electronically. The surveys we do daily tell us that customer satisfaction with the service that they have received in this last period is at very high levels, in line or higher than in previous months. It would therefore seem that we have also managed to “secure” the relationship with the customer.
We have had to adapt our operating methods, but we have also had to meet new requirements, dictated by the situation.
Although ARERA had adopted specific regulatory provisions to protect users, Hera had already proactively taken a number of initiatives, recognising an instalment payment to all customers on lay-off, beneficiaries of income support measures and business owners who remained closed due to the lockdown.
The instalment policies that we have initiated allowed customers to move payments forward, while still guaranteeing partial payment over the months. The benefits were guaranteed only to customers who needed them, leaving the deadlines unchanged for customers with no real financial problems.
Last but not least, we have formulated a number of new offers that allow customers to seize the moment of particularly cheap energy prices.
In order to stimulate the adherence to the electronic sending of the bill and at the same time help to alleviate the effects of a health crisis, which in the meantime had turned into an economic and social crisis for many families, we started a project with Caritas that provides for a donation from us of 2€ for each client who adheres to the electronic sending of the bill. By May, we want to donate 25,000 meals and collect 50,000 memberships: we are on track.