®ilina, June 2004

Patric Luccioni has become the SSE Chairman after Electricité de France (EDF) entered Stredoslovenská energetika, a.s. (SSE). A professional with long-term experiences in the industry has become a key person in the restructuralization process in the company. Mr. Patrik Luccioni comments on his one and a half year long activities in ®ilina.

How long have you been to Slovakia?
Well, for more than one and a half year now, because our work has not started the day we signed the contract with the Slovak Government, which happened in 2002, but a lot sooner when we began mapping Slovakia. Slovakia has entered the field with privatization of the distribution networks and invited all the important world players to compete. We were one of them and we fought a good fight for our place on the Slovak market. When I think about it today and see the result we achieved in ®ilina, there are two things that come to my mind. First, I think that the approach of your government throughout the privatization process was highly professional and correct. We were not given anything for free and it was a very fair and tough contest. That´s the first thing. Second, we found excellent professionals in ®ilina, they know their trade and they are very easy to cooperate with. On the whole, we are very satisfied.

What have you (EDF) brought to ®ilina and to Slovakia?
Consider this. EDF is a really huge company; it is so huge that some of our competitors tend to say that our size makes us ineffective. At the end of the day, the real size of EDF is hidden in its ongoing expansion and professional management, which are, as you may admit, not the indicators of ineffectiveness. So, to make the long story short, I can say we brought the entrance ticket to the EDF family. This practically means that SSE is part of the EDF family, which is active in 27 countries in the world, it is a leader on the European electrical energy market, has more than 50-years-long history, employs around 160 000 people and has a yearly turnover of more than 47 billion euros. In other words, this family makes 470 TWh of electricity a year, it achieves installed output of 140 000 MW, out of which 103 000 MW happen in France and 37 MW abroad. Apart from that, we make another 65 000 MW in our 56 nuclear power plants. We currently have 42 million customers, out of which 31 million are in France and the rest is abroad. Of course, we have 700 000 new clients in Slovakia in the Central Slovakia region. You see, I wanted to be brief, yet my answer turned out to be pretty long, and I was not even being specific.

Okay, so be specific - how is your presence reflected in the company?
I can start talking about the reconstruction of the company, which took place in 2003 and it was performed in line with our experience from the EDF family, which has already been active on a liberalized market (which is even the case of SSE now).

Since market liberalization also means battling for customers and safeguarding their permanent satisfaction, our efforts were focused mainly this way.

This, for example, goes for the quality of our services, i.e. supplies of electricity. Thanks to the call center, we are able to manage planned and unplanned outages in the network and we were able to reduce their overall number and duration. It was last year that we started to implement the call center (which is already fully functional), which gives us online information on the nature of a given outage, the clients affected and measures necessary to be taken. SSE also maps its network via Geographical information system.

Many new things have been introduced towards our customers. For example, each major client has his personal SSE sales representative, who informs him on anything that goes with the supplies of electricity (payments, savings measures, recommended tariffs etc.) This particular person also solves any problems happening to the client. The system of accounting managers has proven effective because SSE has not lost a single customer last year.

Relating to small and mid-sized clients, we extended the capacity of the call centers, employing more than 30 employees, which means any client has the chance to consult anything 24/7.

We have strengthened the marketing department, which works in line with the aims of the whole company and it helps us communicate any changes out of the company, because these are eventually meant to improve the customer services and they need to be put as clearly as possible.

But restructuralization, that also involves laying people off, right?
Not only that. I would like to touch the issue from a different angle. Restructuralization, which started right after we entered SSE, followed from the contract on Technological help and cooperation between SSE and EDF. This is how the project of competitiveness and integration of SSE into the EDF group began - the Project for Competitiveness and Integration, PCI for short.

PCI basically covers the first stage of our entry into SSE. To implement it, the EDF managers cooperated with their Slovak SSE partners. I could also mention a series of measures, or Priority actions, i.e. measures to be implemented immediately. I have touched this in my previous answer, but I can be more specific now, namely in the area that was my own responsibility, or the team that I managed. The deal was to diversify the electricity sources with the aim to keep all existing customers. The whole project had a number of stages; the most important were the long and difficult talks to Slovenské elektrárne, where we were able to agree on better conditions than the ones that were set in the decision made by the Network Regulation Body (URSO). The money we saved helped us prepare a draft of a more favorable pricelist for our valid customers. I would like to reiterate the fact that we have not lost a single customer.

Another priority action within PCI was the preparation of new tariff price structure, which followed from the URSO decision. All the project activities (In-depth Evaluation of all Tariff Structure Components) were managed by an expert form the sales department in cooperation with EDF experts. Furthermore, we performed the Improvement of Invoicing and Revitalization, where we lowered outstanding debts, improved cash flow, count off quality and individual handling of major customers. The next step was Rationalization of Regional Sales Offices, the abovementioned Marketing Reinforcement and the last priority action - Introduction of New Methods to Measure Electric Energy.

But this affected employment, didn´t it?
Yes, of course. We knew from the very beginning that based on the EDF standards, ®ilina was overemployed. The overall number of employees was lowered and the reduction was distributed over the 2003-2005 period.

In principle, we follow standard procedures and keys. For example this year, a number of skillful people left us voluntarily because we had no jobs for them and they could immediately get new jobs elsewhere. Another part of the layoffs had to do with retirement or early retirement. A reasonable part of the layoffs was caused by people leaving without golden parachutes, that is, due to material breech of discipline because this area has been made stricter. However, I would like to add that we did not make the criteria stricter to be able to lay people off, but because we wanted to improve the quality of our services. The last type of layoffs is caused by cancellation of workplaces due to their redundancy, which directly coincides with restructuralization. All the employees were given golden parachutes above the framework set forth in current legislation. We canceled 300 workplaces but we managed to uphold social peace and we also met all the conditions following from the union contract.

To the restructuralization itself...

The deal was to single out those activities of the company that do not go with the main subject matter of the company, i.e. distribution and sales of electricity. This was achieved by transferring the activities to daughter companies or to companies with no property connection to SSE.

What is the point of such moves? You singled out the canteens, security, cleaning, transport etc.
The reason is very simple. We sell electric energy; we know how to do it and how to do it effectively. We cannot be detained by activities which are necessary, but there are a lot of companies that can offer these for competitive prices. This is common in the developed world -everybody is doing what they can do best.

So you were canceling and removing, right?
Not at all. We created a lot of new sections, e.g. the central section for purchases and logistics, including public procurement, a standalone marketing section, live voltage section and we extended the call center. In all of the above, we created new workplaces, which were, as matter of principle, taken by SSE people, although we had to train and educate them at our expenses. I would like to add that all the new things we created lead to one single aim - improving the quality of our services in distribution and sales of electricity.

It is said that investments into human capital are the best ones. Do you invest into people?
This is one of the key indicators of companies belonging to the EDF group. Educating our staff is a priority. But let´s put it this way. We had to change the system of what we call "frontal education", which is pointless, because everybody is learning everything and nobody knows things perfectly. We prefer focused and systematic learning, stressing customer contact and introduction of new technologies. And, let me put it in a rather familiar tone, in a good family, people need to understand each other, so English language courses are in full swing. The thing has not only to do with communication within EDF but also with European Union in general, and this touches all Slovak citizens, not only SSE employees, who have entered the EU via EDF a long time ago. Concerning the education policy itself, as far as I am concerned, at the beginning of the previous year, there were 27 SSE employees graduating from University of ®ilina and studying with full support of our company.

There are other investments around. What does the investment plan look like?
SSE plans to invest 1, 005 billion Sk in 2004, which is 20% more than in 2003, when we were preparing the ground for such investments. The investments will be above all focused on distribution and corresponding information technologies in order to improve the quality of the SSE distribution network and to do away with its weak spots. So efforts will be made to improve the quality and reliability of electricity supplies to our customers. Some money will be used to extend the call center, which goes hand in hand with improving the quality of communication with minor customers. A huge part of the money will go to ecology, e.g. building underground distribution networks inside the towns and villages, as required by our legislation. I would like to stress that all the EDF members in the world have a strong commitment to ecology and ecological projects. It is one of the things which we never underestimated and we never will. It follows from the persuasion that our industry and the companies involved are usually the key ones in the regions. And being such, they need to behave accordingly. We cannot just do business and forget about where we live.

This directly touches sponsoring, doesn´t it?

Of course, companies of our kind cannot be inattentive to the needs of the weak or those who pursue non-profit activities, culture, education etc. We support and we will support a whole range of institutions, ranging from educational and cultural to sports and charity, including those in ®ilina and the Central Slovakia region. If I had to name them all, the paragraph would be really long, however, we think the best way is when they themselves know it and we do not need to show off.

If you were about to sum it all up, what do you want to achieve in Slovakia and what do you want to avoid?

We want our acquisition to become still another proof that EDF is a leader in the industry. We want our customers to feel that we are professionals serving them and not the other way round, that we care about their problems and needs and that we are governed by them. We want to support the region where we do our business and to contribute to improve people´s lives. And, of course, we want to be a still better supplier of electrical energy and to develop our business not only in ®ilina but in the whole of Slovakia.

And what is it that we do not want?

We do not want the people to think that we are a lazy and an introspective company with market monopoly that does not care about anything else but earning cash.

I would like to extend your question, if I can, because apart from knowing what we want, it is equally important to know what lies ahead. In order to meet our expectations on what we want and what we do not want, we need to be aware that there is still a lot to be done. We know that the privatization process will be finished, we know that we will face an ever growing competition in unified Europe; we know that the market will develop in line with clients´ requirements and we know that if we want to succeed, we will have to continually introduce new and progressive methods and to improve the quality of our services.

So, to sum it all up - there is still a lot of work that lies ahead.