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Covid-19 – impact and ESG initiatives

On this page we present an in-depth on the economic and financial impact from the Covid-19 emergency and on the ESG Initiatives put in place by A2A during the pandemic.

Economic and financial impacts

Net effect on 2020 results from the pandemic

The mitigation actions and the natural diversification of the Group’s businesses, some of which are not impacted by short-term outlooks (e.g. regulated or contracted business), made it possible to avoid generally suffering the effects of the epidemic.

In fact, compared with FY 2019, the estimated effects from COVID-19 on 2020 EBITDA, net of the recovery plan, are approximately -10 €M. This amount was, ultimately, offset by other developments, including external growth operations that made it possible to close the year with EBITDA in line with 2019.

Main economic and financial impact

  • Energy scenario effect: the worsening of the energy scenario brought about by a slowing of the international outlook and, in detail, the effects deriving from the reduction in the price of gas. The “scenario” effect, net of the company’s hedges, has had a negative impact of around 50 €M as compared with FY 2019.
  • Slowing of the following activities:
    • Commercial business related to the acquisition of new customers;
    • Waste collection and disposal activities, impacted by the temporary closure of economic activities;
    • Lower consumption of electricity, gas, heat and water, particularly by small-medium industrial/commercial businesses;
  • Direct costs to cope with the health emergency situation (generalised purchases of PPE, mass supplies for collective smart working, etc.).

Mitigation actions

  • Limitation of staff costs (social shock absorbers; replanning new hires scheduled; use of previously accrued holiday time)
  • Limitation of other non-essential operating costs, always assuring adequate safety standards and continuity of service.
  • Strengthening of liquidity position: A2A stipulated further loans and committed credit facilities during the first half, for a total of 550 €M

Impacts on cash flow

The effects of COVID-19 have mainly been seen in terms of the length of time necessary to collect payments from customers for energy and gas supplies. This impact, which is valued as an average delay of 5 days in June, thereafter progressively reducing until neutralising at year-end. The negative effect on the non-collection of receivables has come in below expectations. At 31 December 2020, the Group has a comprehensive liquidity position of 1,802 €M comprising 1,012 €M in liquid funds and 790 €M in unused loans and committed credit facilities.

Forecast effects for 2021

Forecasts for FY 2021, as set out and indicated in the 2021-2030 Strategic Plan unveiled to the market on 20 January 2021, are based on the hypothesis that the year just started will not be significantly impacted by the negative effects brought about by a continuation and/or worsening of the micro and macroeconomic scenario on both a national and international level, as compared with the situation seen at the close of 2020. Consequently, no measures have been considered to support the economy and/or businesses during the year.

In any case, with reference to the 2021 forecasts, different scenarios with alternative risk hypotheses and, for each of these, on the basis of the experience accrued by the action already taken in 2020, the related mitigating action they can take to protect the economic and financial situation.

Impacts on a2a share

During 2020, COVID-19 negative impact on A2A share price was relevant, especially in March. There was no negative impact on distributed dividend.

ESG Initiatives

Following Covid-19 outbreak in February 2020, A2A launched many initiatives to support our employees, our customers and the local communities hit by the pandemic. Here is a list with the most relevant ones.

For the Employees

As of March 2020

  • Crisis committees and Plan/li>
  • Enhancement of IT and security resources
  • Extension of Smart Working

As of April 2020

  • Centralized management of personal protective equipment (PPE)
  • Insurance scheme and extension of welfare
  • Safety and prevention
  • Thermal scanners and habitable containers near the main plants
  • Online training courses and new virtual spaces of social interaction
  • Prompt tracking – Rapid testing as of October

For the Customers

As of March 2020

  • Close engagement with ARERA, government and other stakeholders
  • High quality standards of customers service maintained
  • Full time operating service for clients (call center and web channel)
  • More digitalization for the interaction with clients and billing

From March to May 2020

  • Suspension of supply cuts and payment reminders
  • No penalties for payment delays
  • Flexibility of payment schedules and methods for clients in difficulty

As of May 2020

  • Management of the opening of customer front-offices with safety standards

For the Community

As of March 2020

  • Strong effort for boosting street cleaning and disinfection
  • >2M€ donations for the emergency to the Lombardy territory
  • A2A Smart City in cooperation with Italian Civil Protection providing sensors for first aid activities

As of April 2020

  • Microfinancing for hospitals and community initiatives to support vulnerable families
  • Production of valves for emergency masks in Cavaglià treatment plant