Electrica is the best model of attracting investments and expertise from abroad in the Romanian economy, Victor Grigorescu, Board member of the company, believes. A year after the entry in the capital markets, „figures show that we are on the right track”, Grigorescu says, who mentioned for energynomics.ro the priorities for Electrica group for the coming years: investment in network modernization and strengthening the core business – distribution and supply of electricity.

Results obtained by Electrica in the first half of 2015 are remarkable: increase in revenues (10%), increase in the profit attributable to shareholders (46%), increase in the quantities of energy supplied (2%). Mr. Victor Grigorescu, how do you explain these positive variations?

Electrica was listed to allow performance growth through capital inflow, by bringing new talents, by increasing synergies at group level. It happens and I believe we are on the right track. In the first half of the year, Electrica posted a consolidated net profit of RON 277mln, up 30% compared to H1/2014, in conditions in which the average selling price of electricity fell 3.8%. However, beyond profit, I would first stop to the operational side. We have an increase in operating income by 10%, to almost RON 2.7bn. While the market was stable or in slight decline, we supplied by about 2% more energy than in 2015.

How do you explain the increase in the amounts of electricity distributed and supplied, amid a modest economic growth?

First, we have an increase in demand coming from the general evolution of the economic environment in the regions we are present. Then, our efforts to keep and increase our share in the supply market. We have a market share of around 40% and approximately 3.59 million end-consumers, so a variation of 2% in operations is transferred in consistent financial results.

These are figures that allowed Electrica to pay to the consolidated state budget, in H1/2015, RON 672.9mln, i.e. approximately EUR 150mln (VAT, income tax, contributions related to salaries etc.) It means a contribution of almost EUR 1mln per day to the state budget.

Slight increase in volumes, slight decrease in prices and, however, the profit increased a lot. It means operational performance, cost savings…

Definitely, it means that we are doing a better business, that we do our job better. We are in a regulated market and basically the entire business model is set by ANRE. We respected the maintenance costs set by the regulator and we have a higher performance.

Then, we improved the way in which we spend money; we monitor better cost optimization and increase in productivity, but also integrity. Electrica had areas of inefficiency which we committed before investors to wipe out, mainly related energy services.

At the same time, we increased investments. In the first six months, investments in power grids increased by over 20% from the same period last year, to around RON 175mln. We are talking about the replacement of obsolete capacities, with high operating costs, the introduction of new transformer stations, connection of new consumers and increasing the distribution and supply capacity in areas where the market demands it.

By the end of the regulatory period (2018), ANRE approved an investment volume of RON 3.1bn, much below what we wanted, closer to RON 4.7bn. It’s clear that Electrica needs to update the technological level in many facilities so we eye even investments that are not recognized by ANRE at once, but bring additional performance. From this year we have investments planned that exceed the level approved by ANRE by 10%, but which from an economic point of view we believe to be extremely useful for improving our services.

What are Electrica’s plans to integrate the new technologies, mainly those related to computerization?

To modernize the distribution and supply networks, an important part is smart metering. In 2015, we have in progress projects to implement smart metering systems for 45,000 metering units. We have provided for the immediate future a pilot project for the management of smart metering systems for 200,000 metering units.

About what ANRE recognizes, the beginning of the year brought changes from the regulator, which caused discontent among shareholders. How does Electrica relate today to these changes?

Utilities depend on an independent regulator and I have to insist that we need a stable framework, we need predictability! Otherwise, we are not credible and chase the investors away. When ANRE sets all these economic parameters for an entire regulatory period, all our plans depend on them: investments, staff policies, market strategy etc. When there are changes, everything is changed.

I believe a fair balance should be found so that ANRE’s targets and objectives – which are related to the stability and modernization of the network, at fair prices for consumers – can be supported, and predictability is essential.

And there’s another important aspect. Electrica listing in Bucharest and London has been a successful exercise through which the Romanian state has communicated the following: „We are open to have partners in the shareholding structure!” And if this idea of predictability is maintained, Romania will continue to attract important partners, not only in the energy sector. And we are not talking only about the money attracted, but also freshening mentalities and importing the best practices verified in other economies.

In an enlarged perspective, what is the development strategy envisaged by Electrica?

Our objectives are to offer long-term value for shareholders, by the distribution and supply of electricity and by providing high-quality services to consumers, in a safe, sustainable and affordable manner. For that, Electrica has several strategic directions: sustainable economic growth, financial stability, operational efficiency, adopting the highest standards of corporate governance and actively managing the business portfolio.

An important part in the strategy is related to investments. In supply, we want to improve and expand the range of services and products offered to consumers. We want to include new services with added value, such as managing energy consumption, consulting on energy efficiency. In distribution, the investment program approved includes the modernization of the existing network infrastructure, mainly to reduce losses in network and operating expenses, but also network development in order to connect new electricity consumers. These are investments that we need to do promptly, but we need to make sure that they are efficient, that all good practice and integrity standards are met.

About it, this year you launched the whistleblowing platform, for employees and business partners. Why this initiative?

Electrica is in full process of reshaping in terms of corporate governance. We have a plan of measures that is related to the redesign of the organizational structure and integrity standards. I believe we are the first company of this type in Romania, where the Romanian state is a significant shareholder, which introduced the whistleblowing platform, operated in partnership with Transparency International. The employees and business partners thus help us to improve our business practices and reach an area of credibility and responsibility for company resources and before shareholders.

I would also recall the new Code of Ethics and Integrity, recently adopted, and the appointment of the first term directors. More specifically, we appointed three directors with term contracts, with validity of four years. It’s a different form of accountability with more independence, but also with a remuneration scheme based on performance criteria and variable salary components, which include virtual shares.

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The full version of this article can be read in printed edition of energynomics.ro Magazine, issued on September 2015.

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