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Infrastructure Contingency Plan eMeeting

8 MIN READApril 07, 2020
Every day companies around the world are facing challenges, which can be attributed to anything from slower consumption to setbacks due to public policies impacting their businesses. However, today we are seeing many issues combined in what seems to be the worst health and economic crisis in eighty years. 

What are investors, operators, concessionaires and lenders doing right now to ensure their activities can continue without exposing teams and users to the ongoing threat? This was discussed in detail during an eMeeting with GRI members from 10 different countries — from those who have not yet reached the highest level of contamination to those dealing with severe conditions. Large-scale quarantines can create considerable problems to operation of essential services which require staff working on-site.

Utilities and services like water, electricity, fuel, sanitation and waste management are essential and must not be interrupted, despite variation in the demand and payments flow, infrastructure companies must respond accordingly. Thus, contingency plans are crucial in order to avoid interruption and social distress.

This GRI eMeeting focused on operational, financial and public perspectives for infrastructure and energy. Different experiences and points of view were presented and discussed by executives during the online gathering, who shared their plans to minimize losses and how innovative strategies helped them in tough times. While seeking solutions, the group came up with efficient and safe strategies to make the best out of the situation and to overcome challenges never faced before.

The objective is to not only keep office and field staff safe along with business continuity, the target is to find common ground amidst uncertainties and learn from each other

Operational key points

In the short term, measures to be taken from the operational side are definitely linked to the nature of the sectoral activity itself but there are some key elementary actions that can be applied to different business categories and require special attention:
  • Crisis committee - first step when dealing with the critical scenario is to form a group of decision makers considering the variety of areas within the company's structure and all the business divisions. The group should mix both technical and strategic capabilities.
  • Contingency Plan - a master plan should be designed taking into consideration three levels of emergency — pre-alert, alert and emergency — based on the likelihood or certainty of contamination occurrence to people within the company's facilities.
  • Stress testing - the contingency plan must explore different levels of critical conditions. A simulation is the best way to predict what is the maximum level of stress the company is able to respond to in a scenario of drastic reduction of the workforce. This analysis could consider various scenarios. For example, contamination occurring at the same time in the control room, the maintenance team and in a specific operation site that requires continuous activity regardless if it is not able to retain an appropriate environment due to critical health reasons.
  • Segregation - surely on the top of keypoints, it is indicated as the first and main measure to be put in action.
    • Segregation requires a structural change in the way teams work and it is obligatory to be done before the company reaches a state of alarm, otherwise the number of employees that need to go under quarantine will increase drastically.
    • If any employee is identified with suspected contamination, it is also necessary to keep away from work all other employees who have a history of contact with that person.
    • Contagion occurs through teams, that is why it is so important to split teams into smaller groups that have the same assignments and keep them from having physical contact. That is a key factor of success to ensure the business continuity, given that in any case of contamination, the number of people that will be kept away from work will be reduced.
    • The smaller and more segregated the teams are, the greater the company’s chance of keeping healthy teams operating.
    • An extra challenge is the testing policy in different countries, as many of them are only testing people who present severe symptoms, while people with early or no symptoms are not tested — even if they have the same contamination potential.
  • Stand by - Reducing non-critical activities and keeping respective workers in quarantine is another important action to preserve team safety. For example, regular maintenance services should be avoided during a health emergency, acting only in case of needed urgent technical interventions.
  • Subcontractors and providers - Adopting internal contingency actions is as important as replicating the same practices to the outsourced teams and to make sure that they follow the same safety protocol, otherwise all measures taken by the company can lose effectiveness.
  • Logistics - It is extremely important to anticipate all special situation supplies such as PPEs. The purchasing and delivering of such materials has been a huge challenge to any kind of infrastructure operators, from airports to hospitals. Limited supply, enormous demand and logistics limitations due to closed borders are the main issues companies are facing to ensure safety and protective equipment to their employees.
  • IT - Another relevant aspect of the business continuity plans depends on the technical capability of the company to shift to remote mode providing data access and information security at the employee’s house. In addition, IT teams are expected to provide innovative and intuitive tools to connect employers and staff using different platforms. 
  • HR - New issues might arise as employees have to complete their work in reduced timelines. For office workers, balancing personal life with work hours can be challenging. While site workers should be careful about unnecessary contact with colleagues and hygiene practices. HR managers must keep teams united and with a growing sense of responsibility.
  • User’s end - Even if not directly related to internal stakeholders, measures for user’s safety are extremely important and play a double role both in the protection of the frontend employees and the community that accesses infrastructure services. Toll booths, ticket offices and airport desks are just some examples of a wide range of structures that require special sanitizing care to keep workers and users safe.

Financially speaking (and doing)

The business continuity depends on the company’s financial capability and for many players this has been the most critical matter, especially considering medium and long term timeframes. However, the financial impact differs from one sector to another. For instance, aviation and roads may suffer the most in comparison with ports and rail transportation based on demand. While utilities may face different challenges essentially related to billing, payments and contract renegotiation.

Cash flow

Managing liquidity for the upcoming months seems to be the biggest challenge to most companies, hence saving on operational and capital expenses is extremely important. To have further control of expenditure, there is a simple group of measures to ensure the business' financial sustainability that finds unanimity among enterprises from different sectors:
  • Implementing cash flow stress tests and running different scenarios can be decisive to have more clarity concerning revenue, expenditure and the company's financial resilience. Those tests will bring to light what are the extreme limits of operating with critical budget resources.
  • To maximise financial resources, delayed payments should be negotiated with banks.
  • Some companies are requesting banks for a 3-month moratorium, paying only interest and not the principal financing resource.
  • A 3-month cash flow reserve is kept in mind by some organisations while making payments to vendors and banks.

Decreasing demand

On  top of the health crisis there are enormous implications in general transportation demand. The current scenario is changing dramatically the way we work, communicate and do business. Consequently the mobility patterns will also change, deeply affecting all the modes, from aviation to mass transportation and the impacts can be a larger than anticipated:
  • Roads are facing a deep reduction in traffic affected both by light vehicles, heavy vehicles and freight, resulting in a variation that ranges between 30 to 70 percent, depending on the asset. 
  • Airports and airlines are at the forefront taking the brunt of this global COVID-19 crisis, the volume of passengers is at its lowest level ever and in some cases reaching up to 100 percent of air traffic reduction.
  • It is not only the income from demand that is hitting transport operators but also accessory revenues from any kind — retailers, advertisement, etc — are at risk as well.
Reducing transportation and industrial activities, accompanied by energy and fuel demand decreases, will directly affect prices and shall require contract renegotiation in many cases. Economic studies of new projects are being reviewed and should be put on hold until the global economy starts to react.

Public affairs: endless dialogue

Very much like the nature of this scattered pandemic, relations with public authorities may pose an obstacle to operations — or can be supported by them. Dialogue and collaboration between authorities, investors, operators and concessionaires are key to reduce the social impact of this global health and economic crisis.

As the COVID-19 pandemic is an unprecedented emergency, no one is exactly sure when it will come to an end. Opinions coming from countries suffering with overloaded hospitals and an increasing death toll is that the crisis may end and return in a few months, lasting up to 24 months. Until we get a reliable and accessible vaccine, the scenario remains uncertain.

The private sector has demanded and is expecting support from the government during this emergency, but in the case of regulated sectors and essential services this dialogue between public and private sides is particularly crucial.

Labor, laws and incentives

Each infrastructure sector has its own issues to be addressed with public authorities but there are several common supportive initiatives for the public-private dialogue:
  • Firstly and most important is to ensure that all the activities related to infrastructure are formally classified by governments as essential services. Afterwards, employees shall be given letters stating that they work for an essential service, ensuring their free commute to work. 
  • Different lock down measures taken from countries, states or cities can mislead decisions. Mayors may implement opposite measures from that of governors and vice versa. Presidents and Ministers do not always set the same rules and regulations can be uncertain. It is important that the company keeps dialogue with different governamental spheres and settles a proactive negotiation with them, case by case to avoid further impact in the operation.
  • Coordinated claims among peers from the same sector can be more effective in terms of relief and flexibility measures from governments such as: 
    • Tax breaks 
    • Emergency credit lines with reduced rates
    • Reduction of labor costs without cutting labor force
  • To limit the social impact of an economic crisis some governments are temporarily suspending road tolls or in other cases cancelling utilitie's billing for poorer citizens. It severely affects the company's working capital and needs to be discussed with regulators and other public spheres so that an amicable solution can be reached and parallel actions to balance the financial impacts can be implemented.
  • From the contractual side of concessions it is important to observe the completion deadlines both for greenfield or brownfield projects and to ensure that the negotiation with the public sector establishes an extension of the initial deadlines, considering the consequences of this emergency to the construction activities.

Joining forces against the emergency

Another facet of public-private relations that can play a crucial role to mitigate the effects of this health emergency is related to the potential partnerships that concessionaires and the government can establish to implement activities that are not directly related to the PPP or concessions scope.

Many examples of how PPP premises and resources can be converted into support for the health crisis are popping up around the globe.Some examples include  stadiums or even trains being converted into temporary  hospitals for patient care, ice rinks converted into morgues for victims, hotels  as houses for medical staff, highway' medical staff has been deployed into hospitals to complement technical teams, roads concessionaires providing food facility to neighboring communities and migrant workers accessing concession areas, and many others.

Obviously there are relevant contractual aspects that need to be aligned and formalized between the involved stakeholders but it is also important to move fast to avoid losing response timing that the emergency imposes.
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