In early 2020, the COVID-19 virus began to spread globally. Considering the number of countries affected and deaths recorded, the spread of the virus was officially declared a pandemic by the World Health Organization on 11 March 2020.
In the context of the health emergency that has arisen, the governments of the affected countries have placed restrictions on the movement and assembly of people, quarantines, and limitations on economic activities. In Italy, after the so-called "lockdown" period, which ended in May 2020, restrictive and emergency measures are still in place, differentiated according to risk levels at territorial level.
When the seriousness of the pandemic became evident, also with specific reference to the territories in which the Group operates, Iren implemented first measures to protect its employees, using individual protection devices and promptly adopting, where possible, forms of remote work on a large scale thanks to the level of digitalisation achieved. In addition, service operations were structured to minimize the risk of exposure to contagion, particularly with regard to waste collection, network businesses and customer service desks, while ensuring the continuity of the service provided.
In the macroeconomic context, the slowdown in domestic industrial production and commercial activities following the emergency situation affected the Group's revenue performance, which nevertheless maintained stable margins. In particular, the contraction in industrial demand affected the disposal of special non-urban waste, the sale of electricity and gas to the small and large business segments and the quantities of electricity produced, especially in the thermoelectric sector. In this scenario, electric power prices, which were lower on average than in the previous year, were accompanied by a significant decrease in gas prices, influenced in part by mild weather conditions and lower demand in the European and global markets.
In the regulatory area, ARERA introduced measures to support end users of natural gas, electric power and water services during the lockdown period, reducing some rate components for electric power and halting the issuance of default proceedings and suspensions of supply to households and small businesses, providing subsequent instalment plans to make up for lateness in paying debt.
Given the persistence of the emergency situation, in November 2020 the Group also decided to stop until the end of the year, for small commercial activities in the so-called "red" or "orange" areas, the new actions of suspension/reduction of gas, electricity, water and district heating supplies due to arrears. At the same time, it made it possible for all customers in objective financial hardship to access payment instalments.
With reference to the possible liquidity difficulties of the customer portfolio linked to the measures to combat the pandemic and measures implemented to mitigate the economic and social impact of the crisis, the Group increased the provision for bad and doubtful debts by € 25 million due to the assessment of expected losses, particularly in the electricity and gas sales and integrated water service sectors.
Notwithstanding the above, and in spite of the emerging costs linked to the extraordinary situation, the impact on the economic and financial results for the year was on the whole limited, thanks to actions taken at all levels, to the financial strength of the Group and to its resilience due to the nature of the businesses in which it operates, including those of an essential nature (over 70% of margins are achieved in regulated or semi-regulated sectors). In fact, a reduction of € 15 million in EBITDA was recorded, in addition to an increase of € 25 million in the provision for bad and doubtful debts (see above), and an increase in trade receivables of approximately € 60 million.
The margins of the Group's operating chains recorded substantial overall stability, and planned investments did not slow down and were instead significantly higher (+30%) than in FY 2019.
These results confirm the resilience of Iren Group's multi-business model, also with reference to new opportunities deriving from energy efficiency incentives (e.g. 110% superbonus) issued by the Government in the emergency context to accelerate economic recovery; moreover, the liquidity generated by operating activities and that deriving from recent bond issues is sufficient to cover the needs deriving from management and planned investments, as well as to face the risk of non-collection of customer receivables. Finally, reference is made to the information contained in the "Goodwill" section of the Notes to the Financial Statements concerning impairment tests and the recoverable value of assets.