Operational risk

With regard to the energy market, the main operational risks linked to the activities of the AceaElectrabel Group companies may regard material damage (damage to assets, the shortcomings of suppliers, negligence), damage due to lost output, human resources and damage deriving from external systems and events.

To mitigate these operational risks, the companies have, since they began operating, entered into a series of insurance policies covering Property Damage, Business Interruption and Third Party Liability. Particular attention has been devoted by the companies to the training of their employees, as well as the definition of internal organisational procedures and the drafting of specific job descriptions.

The main risks falling under the energy networks market can be classified as follows:

  1. risks relating to the effectiveness of the investments in replacement/renewal of grids, as regards expected effects on the improvement of service continuity indicators;
  2. risks relating to quality, reliability and duration of the works carried out;
  3. risks relating to the ability to meet the terms in order to obtain the prescribed authorisations, regarding both the realisation and commissioning of plants (pursuant to Regional Law 42/90 and related regulations) and the carrying out of works (authorisations of municipalities and other similar authorisations), according to the need to develop and enhance the plants in light of growing demand.

The risk listed under letter a) above arises basically from the increasingly stringent regulation of service continuity of the Italian Authority for Electricity and Gas outlined in the previous sections.

To tackle this risk, Acea Distribuzione carried out the annual update of the “Road Map” project.

As far as the risk linked to work quality is concerned, Acea Distribuzione implemented operational, technical and quality control systems, including the creation of the Works Inspection Unit, which forms part of the Quality and Safety department. The results of the inspections, which are processed electronically and have been subject to statistical analysis, give rise to rankings (reputational indicators), that will be used in awarding contracts under a vendor rating system, developed in collaboration with the University of Tor Vergata (Rome).This system ranks contractors according to their reputations, scored on the basis of their ability to meet the quality and safety standards for contract work.

Furthermore, this system makes it possible to recognise and apply penalties which could even cause the contractor’s activities to be suspended.

The risk listed under letter c) above arises from the number of entities which have to be addressed in the authorisation procedures and from the enormous uncertainties linked to the response times by these entities; the risk lies in the possibility of denials and/or in the technical conditions set by the above entities (such as the realisation of underground instead of “above-ground” plants, with a subsequent increase in plant and operating costs). It should also be noted that lengthy proceedings result in higher operating costs, are difficult to deal with for operating structures (drafting and presentation of in-depth project examinations, environmental assessments, etc.) and require participation in service conferences and technical meetings at the competent offices. However, the risk is essentially linked to the non-obtainment of authorisations, with the result being the inability to upgrade plants and subsequent greater risk linked to the technical performances of the service.

In June 2010, Acea Distribuzione launched an organisational restructuring process aimed at better achieving the reduction of the above risks.

For the companies that operate in the Environment and Energy (formerly waste-to-energy) market, any interruption to the waste-to-energy activities carried out at the Terni and San Vittore plants or to the waste management activities of SAO and Enercombustibili, based on the fact that they are linked to the production of electricity under the CIP 6/92 regime and to the provision of public services, could have negative repercussions.

Any impact would be reflected in both the companies’ operating results (any lost output of electricity produced is not easily made up) and in terms of their commitments to public and private waste management customers. In this context, an unscheduled plant shutdown puts the companies’ ability to achieve their business objectives at real risk.

The waste-to-energy plants, but also, though to a lesser extent, the waste treatment plants, are highly complex from a technical point of view, requiring the companies to employ qualified personnel and organisational structures with a high level of know how. The need to maintain the plants’ technical performance levels and to prevent personnel with specific expertise (who are difficult to recruit) leaving the companies represent real risks.

The companies in this segment have mitigated these risks by implementing specific maintenance and management programmes and protocols, drawn up partly on the basis of their experience in managing the plants involved.

Moreover, the plants and the related activities are designed to handle certain types of waste. The failure of incoming material to meet the necessary specifications could lead to concrete operational problems, such as to compromise the operational continuity of the plants and give rise to risks of a legal nature.

For this reason, the company has adopted specific procedures for monitoring and controlling incoming materials via spot checks and the analysis of samples pursuant to the legislation in force.

In addition, from September 2010, the Terni plant will be involved in a revamping optimisation project which presents the normal risks related to the construction of complex industrial infrastructures. Said risks present the real possibility of delays in construction or imperfections in the execution of works commissioned.

Said risk has been mitigated by the implementation of the proper organisation aimed at controlling the times and quality of the work carried out.