Gearing up for the consolidation of the downstream energy market, particularly in view of the termination of the consumer higher safeguard mechanism commencing mid-2018. In addition, an attempt to comb for sales channels as an alternative to call centres and “unscrupulous” agencies which undermine consumer trust towards salespeople.
Such are the objectives of the cross-selling agreement signed by Green Network with Conad. A crucial step in the new strategy of the company, which envisages possible small acquisitions, over and above the development of the English subsidiary (QE 12/10).
“The demise of the safeguard mechanism and the consolidation which we expect over the next two years,” says the General Manager Giovanni Barberis to QE, “drives us to focus on a stable and loyal client base, and to exit from the ‘aggressive’ approach of call centres (including those abroad) and even of agencies, which will always have a role, but with higher attention to ethics”. All this to overcome “the distrust generated in the sector”. The barb is obviously pointed to the various investigations opened by the Antitrust authority regarding wrongful commercial practices often resulting in fines for operators. Including Green Network. “However, almost all operators were involved,” says Barberis, “and actually we weren’t even amongst those most impacted”.
The agreement with Conad, fully operational commencing mid-January 2017, aims at offering mass distribution clients a dual fuel tariff which is “stable over time and extremely transparent”, with a price equal or lower than the average of the five best offers available on the Authority's website Trova Offerte, comparable via a ‘tariff simulator”.
“We contacted several possible partners and then chose Conad, whom we have awarded an exclusive for the mass distribution segment,” Barberis points out, “but we have not excluded the possibility of similar agreements in other sectors”.
What results does Green Network expect from the agreement? Given that Conad has 8.3 million clients in 3,088 sales points, “our conservative estimate is to capture 10% in a couple of years, i.e. 800 thousand clients, around 500 thousand within the first 12 months”, says Barberis. Currently the company has 300 thousand clients in Italy. Considering that the average spend on light and gas is € 1,500 per year, the additional revenues are expected to be over € 1 billion”.
As mentioned earlier, the company is also focusing on acquisitions, to be made “without aggravating leverage” and therefore without weighing on debt. “We are looking at some targets with 50-70 thousand clients, even smaller municipal utilities, and we expect to close some acquisitions prior to leaving the safeguard mechanism”.
The group expects to increase its client base through the similar safeguard mechanism which rolls out on January 1 (“We have already been admitted”, adds Barberis). Not forgetting the continuation of the growth strategy in the U.K.: “Through the digital channel alone, over a couple of weeks, we have already acquired some thousands of clients, many of them English”, he enthuses, “We have been growing at a rate of a hundred thousand clients per annum over the last three years”.
Meanwhile, 2016 already stands out for its improvement in financials: “We have completed the clean-up of our balance sheet”, signs off Barberis, “and we expect to close the year in line with our budget at € 800 million revenues, € 35-40 million operating profits and € 5-6 million net profit (compared to € 1.34 million, editor’s note).”