The impact of Covid-19 in Energy and Utilities

Harrison Bridge has spoken to senior executives within energy and utilities to determine the impact of Covid-19.   Leaders have been faced with difficult decisions whilst under extreme time pressure and substantial uncertainties, such as not knowing what they are planning for, when it will end and what the impact will be.  The usual metrics of how you forecast future revenue do not apply.

For large organisations, they have had to complete the toughest change project in their history, mobilising an entire workforce to work from home in a couple of weeks, something that would normally take many businesses 18 months.  Lee De Souza explains the current reality for energy and utility companies.

B2B Suppliers face significant demand destruction whilst B2C Suppliers face backlash for chasing bad debt

Energy suppliers both B2B and B2C are facing a battle for their very existence due to a lack of sales, increased debt and decreased hedging consumption all whilst they try to maintain business as usual with a reduced staffing level.  In addition, government, regulators, consumer groups and the media are encouraging customers to ask for payment breaks whilst at the same time, suppliers do not qualify for business relief or loans.  Added to the challenge of debt collection, energy suppliers need to be seen to do the right thing morally and socially for the customer, eve when they may not be able to recover their losses.

The biggest outlay for suppliers is the power and gas they trade.  The vast sums involved mean running an energy supply business can get out of control very quickly.  As one executive from a new entrant supply business explained, ‘How do you make a profit when your customers do not pay?’

Covid-19 has underlined the importance of digital transformation within utilities.   Some energy suppliers who are over reliant on field sales have seen their field sales channel effectively die over night as they are no longer able to knock on doors due to the pandemic.

Expect increased M & A as energy consultants seek to take advantage of struggling competitors

The TPI (third party intermediary market) appear to be relatively resilient and does not have the high overhead that energy suppliers have. For those that are cash rich, they are seeing this as an opportunity for further acquisitions or to hire the best staff from competitors.  For those that do not have such deep pockets, the drop in revenue and income forecast is a scary reality if the tide does not turn soon.

Some energy consultants have continued to win new clients but for most, of greater importance is client retention and whether their customer base will still be here in 3 – 6 months (particularly SME customers).

Utility infrastructure and clean tech

In the utility’s infrastructure market, the water still needs to flow, and energy still needs to be provided.  Developments such as solar and wind farms still need to be built but may take 3 – 6 months to move forward.  Capital projects are still progressing but depending on the impact of Covid-19 and how long the lockdown lasts, the worry is that these will slow down.  For some of the big energy infrastructure companies, few deals are coming off but Covid-19 has meant that clients are looking at forward asset investments that won’t result in revenue right now but if they can close these deals, may provide revenue in the future.

For demand side response companies, if clients are not producing energy, there is not the load that can be sold to National Grid.   Cash is not so much of an issue for several clean tech companies, but they are using the investment gained from funding rounds to plug cashflow instead of growth.  The reality is that if you are not able to work on a client’s site, you cannot deliver the programme of work outlined.  Engineering design consultants that have had a back log of design work may be able to ride this out unaffected if onsite construction starts soon.

Those organisations that can provide services like data analytics which can be managed remotely are focusing more on this type of work but remain affected with nearly every business furloughing their staff.

Sustainability and the end user

For the end user in energy, Covid-19 is really testing their values on whether they put sustainability before profit.   There are those organisations where sustainability is intertwined with their strategy and they will see it through but there are those who are still paying ‘lip service’ to carbon net zero and do not see sustainability as economically viable.    What will be the public and private sectors response to climate change and what will be their urgency to focus on this?

The current and future impact of the furlough scheme

There is a concern by some that the worst effects of Covid-19 will not be known until the end of the furlough scheme. Some businesses will use the scheme as an opportunity to get rid of underperforming staff or will need to make wholesale redundancies.

The impact on those employees that have been furloughed has been mixed. For some, they are enjoying the time off to look after their family whereas others feel less certain about the financial stability of their employer, which is making them look elsewhere.

It isn’t all doom and gloom

Leadership:  We have seen great examples of leadership despite leaders having to making extremely difficult decisions through uncertainty.  Those that have got it right have communicated quickly, openly, transparently and with empathy.  This honesty about the challenges ahead has built trust and loyalty.

Zoom fun:  To maintain morale, businesses have been hosting weekly virtual pub lockdown challenges amongst staff involving singing, dancing and playing musical instruments, providing a welcome distraction from the anxiety of the pandemic.

A renewable energy recovery?  According to the International Renewable Energy Agency,  renewable energy could power an economic recovery from Covid-19 by spurring global GDP gains of almost (£80tn) between now and 2050.  The report goes on to say that accelerating investment could also lead to the number of jobs quadrupling over the next 30 years to 42m.

Agile working: People are working well from home and can tackle the big issues.   The way organisations have had to adapt and deliver goes to show that ‘transformational’ and ‘operational’ work streams that normally take years to complete, can be achieved rapidly if an organisation truly believes it has to happen.

Harrison Bridge outlook

Whilst many of our clients have been impacted and roles put on hold, a number of our clients are still hiring.  More than ever, organisations need the right senior talent to lead their business through uncertainty.

A new era is fast approaching and therefore requires new thinking and ways of working  because the old way of working no longer applies.  What is paramount is that we continue the positive change to adapt and thrive for the future.  When ‘normality’ returns, those businesses that insist on returning to office working five days a week, will lose key staff as workers question the wasted time, money and effort.

This article was written by Lee De Souza, Managing Director of Harrison Bridge, executive recruitment experts in energy and utilities. Lee has been the director of three recruitment companies and has recruited entire board and executive teams for energy suppliers, energy consultants and clean tech companies in the UK as well as recruiting globally.

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