Trade and Sale of Electricity in 2006

Liberalisation of the market of electric power naturally increases customers‘ requirements for the quality of services and products as well as the price. The volume of electricity that ZSE distributes is subject to fierce competition. We select our suppliers through tenders, and they provide more than half of the volume of our annual electricity supply. Translated into numbers this supply represents approximately 4.5 TWh or 8.5 billion SKK.

Knowledge of cutomers‘ needs and the effort to meet their requirements led the Company to start the project of customer segmentation in 2006.

Lack of production services, sales of electric power through auctions by dominant producers and a stronger national economy resulted in a significant increase in prices. Despite that we were able to obtain electrical power for our customers for reasonable prices even though average prices have risen by almost 20%. Increase in energy prices led to an increased interest in energy consulting services that we provide in cooperation with the Energy Centre Bratislava. The number of provided consultations grew by 49% compared to the previous year.

Year 2006 was also important because of significant internal organizational changes. On 1st July 2006, a new organizational unit – Customer Services - was created. This unit was created by separating the Call and Billing Centres from the Trade and Sales division. This step indicates the importance and attention that ZSE wants to pay to customer service.

Key Customers in 2006
Year 2006 brought new licensed merchants to the energy market. During the last four years we had a chance to gradually improve the personal approach to our customers who are sensitive to prices as well as to the level of customer service. We also used this time to analyse the market environment and customers’ needs, to prepare and implement an optimal determination of prices, to analyse methods of tenders, and to prepare and realize individual contracts.

Due to a very specific way of electricity consumption and its timeline, ZSE approaches its key customers through professional key account managers (KAM). This approach has brought the level of our customer service to the level comparable with sales of other goods and services that already operate in very competitive environment. According to a survey of our key customers, individualised customer approach is perceived very positively and was considered as significantly improved comparing to year 2005.

Key Customers in 2006

		Number	Consumption (TWh)	Share in Overall Consumption (%)
	Key customers (over 2 GWh)	283	3.55	48
	Of which: customers with individual price	60	2.27	30

Business and Retail Customers
Business and Retail Department sells electric power and related services to entitled consumers with the total annual consumption over 2 GWh. A decrease in receivables to maintain an even load on transit channels and corresponding technical centres was one of our main goals in 2006.

In cooperation with a selected consulting company and our Human Resource Department together with selected employees of business offices, we created the first twelve standards of our customer services. Currently, they are being implemented in our business offices with the aim of quality increase and creating more satisfied customers.

In spite of the market liberalisation for entitled customers from 1st January 2005, to the end of year 2006 we were able to maintain our market share in the segment of businesses at the level of 99.2%. We served this segment through seven business offices and twelve mobile sales personnel.

Increased Added Value to Electricity Sales
The goal of our innovation was to create added value through the online data service ElektroWeb. In its pilot stage we targeted our key customers. We also did not forget our household customers by providing Unikasa, a service that allows people to pay their electricity bills in COOP Jednota stores. We are also working on developing a complete offer of maintenance and operation services for electrical devices owned by our customers.

Development of prices and determination of individualised prices are a part of the continuous segmentation process of our customers. The aim is to optimally allocate the real costs related to electricity purchases and their incorporation into sales prices. Competition also intensifies in segments with a lower consumption. As a result, product management keeps adjusting its activities to be able to provide a competitive price to all market segments. A specific unambigious combination of parameters for choise of tariffed products allows customers to choose a product that enables them to pay the lowest possible price for electricity. Our two-year experience with the tariffed products supply shows that their number and composition are sufficient and that they fully reflect the needs of our customers. A good price along with customer service and expanding offers of auxiliary services are able to keep customers satisfied and loyal to Západoslovenská energetika, a.s.

Electricity Trade
In 2006 ZSE bought a total volume of 8,323,154 MWh of electicity. Purchases from domestic producers represented 6,371,267 MWh, which is 76.55% of the total volume. The Company purchased 1,951,887 MWh of electricity from foreign sources which represents 23.45% of the total volume. An important factor of these purchases was a thorough price and volume analysis. We did not face any problems in supplying our customers in 2006 and their electricity needs were met.

Cooperation with our daughter company E.ON Sales and Trading represents our competitive advantage. It enables us to reach European energy bourses including Scandinavian Nord Pool, Italian GME and British UKPX. However, the key bourse for the prices in Slovakia is German EEX.

In 2006 electricity trading in Slovakia enabled free short-term offset trades. As a result, ZSE was purchasing electrical power during its shortage and was selling it when surpluses occurred. Utilising such an approach, we were able to optimise purchases and lower offsets. During these short-term transactions, the Company bought 1,559,346 MWh and sold 1,491,267 MWh of electricity, which totals in 3,050,613 MWh representing a 190.63% increase, in comparison to year 2005. Purchases from renewable sources represented 122,412 MWh, which is 1.47% of total purchased volume.

Customer Services
Year 2006 brought about significant organizational changes. Customer Services was separated from the Trade and Sales division and became an independent organizational unit, directly overseen by a member of the Board of Directors. This year also brought a few new challenges that were reflected in an increased demand on efficiency of customer service employees. A lot of time was spent on preparation for the unbundling process and related issues.

After the implementation of the new customer service system ISU/CRM in 2005, in the second quarter of 2006 the notification of customers, whose bills were past due, was resumed. From May to December 2006, the Company sent over 202,000 notices and consequently stopped the electricity supply to 32,000 customers who did not pay their bills. By doing so, we were able to decrease our receivables by 37%. Also, 87% of unidentified payments from customers was analysed and allocated to respective take-off points.

This growth of activities resulted in an enormous increase in contacts with customers via phone, letters, faxes and e-mails. We recorded 575,000 phone calls in 2006 (of which almost 40% occurred from July to October). This is a 12% growth in comparison with 2005. As a result, we created 12 new positions in our Call Centre during 2006. We also launched activities that will help better respond to reports of power outages and other power emergencies or to respond to any unexpected situation in the future, using an external call centre.

To maintain the current trend of decreasing the volume of receivables for electricity consumption, we started working with external companies that specialise in receivables management. We also started working on incorporating customers’ comments into actions to improve our overall customer service.

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