Risk Management in the Supply Chain
The EDP Group procurement activity decisively contributes to ensure the recognition of EDP as a leader in sustainability, through the high ethical standards and environmental, social and economic responsibility of its practices, with the ongoing objective to increase productivity and develop competitive advantages.
The procurement activity promotes a low-risk and maximum efficiency business profile from a long-term perspective, and it is one of the pillars of the EDP's Strategic Update 2021-2025. Risk Management also complies with the Corporate Policy of Business Risk Management.
Approach to Risk Management
The goal of risk mitigation and maximum efficiency determines that the organizational model of the GPU is operated according to procurement categories and the decision making process obeys a strict procedural protocol. The risk mitigation goals can be viewed in the following diagram:
Contract Risk
The risk analysis begins by identifying the specific risks of the type of good or activity intended to be sourced. These risks may be technical, economic, reputational, environmental and social in nature and will define the requirements to be included in the specifications.
The EDP Group uses two main instruments to map the specific sustainability risks of each type of good or activity:
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Economic Activity Risk – European Bank for Reconstruction and Development - list of environmental and social risks associated with each economic activity organized according to the European Union’s activity classification system NACE 2.0, revision 2014.
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Impact Matrix – Matrix of risks that identifies potential negative impacts on EDP that should be mitigated by the specifications.
Supplier Risk
Companies invited to submit supply bids are selected according to the level of requirement of the specifications. The companies must be registered with EDP and, depending on the nature of the contract, may need to be qualified.
Greater value is placed on the following aspects, among others:
- Risk analysis of the suppliers to be consulted;
- Supplier assessment;
- Results of audits conducted;
- Information on Corporate Social Responsibility;
- Experience / results of similar contracts with other entities;
- Absence of litigation and / or debts to the EDP Group.
The EDP Group uses two main instruments to ensure the mitigation of risks in the selection of suppliers:
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Supplier Assessment – based on the Supplier Registration System that includes a self-statement system of each company, the results of external assessments and assessments carried out by EDP. This system generates a risk and sustainability rating for each company. The following sources of external information, among others, are used: Dun & Bradstreet, RepRisk.
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Supplier qualification and the good or service to be supplied – supplier qualification is the process of approval of suppliers with the skills for the supply of a particular category of goods or services in a context of greater technical, environmental, social and economic-financial requirements. Risk mitigation is pre-guaranteed in this way.
Country Risk
The country risk influences the risk assessment of the contracts and suppliers and has an impact on the procurement decision process. GPU uses Business Intelligence methods to access several credible external sources to develop an ongoing and sustained process of risk analysis. EDP favors the atypical crossing of risk information that complements conventional rankings. Two external sources for risk analysis are:
- RobecoSam – this entity develops the Country Sustainability Ranking for the purpose of providing a new level of information to support investors' decisions in sovereign bonds. EDP uses this source to generate an inverse map of country risk and identify analysis subtopics.
- RepRisk – this entity continuously monitors news for any negative economic, social and environmental impact and allows a country risk vision to be obtained related to business activities, covering the Global Compact topics. EDP uses RepRisk for both the risk assessment of companies and to assess country risk. RepRisk establishes a contrasting, up-to-date and very detailed view compared with the conventional rankings.
Risk Management Measures
The information obtained from the risk analysis, when appropriately handled, serves as support for the negotiation processes managed by the GPU and is shared through the procurement management systems and other complementary means with the business units and LPT in different markets, to measure the risk and sustainability of each selection process and to establish the risk management measures for contracting suppliers.
– Suppliers that are evaluated as critical at EDP through a critical awareness score that accounts multiple criteria: annual value spend; supply frequency; access to EDP’s customers; access to EDP’s technical equipment; access to EDP’s sensitive data; supplier substitutability; component substitutability; supply failure consequence; strategic relevance of the supplier
The technical and sustainability evaluation of suppliers' bids is performed without knowledge of the price bid. Only bids complying with the rules set out in the specifications advance to the negotiation stage.
Set of rules governing conflicts of interest and transactions with related parties.
EDP has an internal Audit Department that fosters compliance with legislation, with internal rules and external commitments freely undertaken.
Ethical rules applicable to all employees having a relationship with suppliers.
EDP has a Customer Ombudsman. The system favors the monitoring of potential impacts on customers by suppliers acting on behalf of EDP.
Besides the Supplier Code of Conduct, the contracts establish particular conditions that impose obligations concerning information sharing and the specific performance of sustainability rules.
EDP has an Ethics Ombudsman. The system favors the monitoring of the impacts generated by the activities of suppliers acting on behalf of EDP.
– Audits are conducted according to the specifications, either for the purpose of Qualification or for checking the information collected.
A company that develops an assessment system and audits suppliers which integrate the EDP supplier registration system.
For all supplies that pose risks, certification requirements according to ISO 9001 - Quality, ISO 14001 - Environment and OHSAS 18001 are established.
Association of companies of the energy sector, in which EDP participates, which audits coal mines.
http://bettercoal.org/
All employees of suppliers acting on behalf of EDP and/or on its premises must have adequate training to perform their roles. Supplier Assessment System (SAF) is a system that establishes the assessment criteria and rules and registers the performance of suppliers. This system aims to:
- Reduce risk in supplier selection;
- Increase the performance of EDP Group suppliers, from a continuous improvement perspective;
- Meet the requirements of quality and environmental standards;
- Feed the Supplier Registration System.
The specifications require the prior qualification of the Supplier for certain types of supply. Qualification is a key measure for mitigating risk.
Corrective plans and, where necessary, improvement plans are established depending on the results of audits and inspections.
According to the risk rating of each contract, a plan for monitoring supplier performance is defined. Typically, in addition to technical monitoring, there are audits and inspections conducted of environmental, safety and legal compliance. The results of this monitoring are used to update the Supplier Registration data, influencing their assessments.
The contract award criteria and respective weightings are set prior to publication of the market consultation. The price factor has a minimum weight of 50%.
Negotiation only occurs with the suppliers whose bid has been analyzed and approved to be in compliance with the specifications. The negotiator values, among the many aspects:
- The characteristics of the good or service to be acquired;
- Market situation, suppliers, price dynamics and overall costs (TCO);
- EDP Group savings goals;
- Expectations of the Business Unit and its budget;
- Mitigation of risk and sustainability of the suppliers;
- Volume of previous acquisitions and processes involving the same competitors.
The negotiator is supported by a protocol and decision making rules that protect him/her from any negotiation anomalies.
The specifications establish the minimum requirements for legal, technical, economic, social and environmental compliance that the supplier must meet.
– The risk analysis generates a risk rating for each supplier in terms of each contract. The risk of the Supplier varies depending on the country in which it is operating and the requirements of the specifications. The specifications require the prior qualification of the Supplier for certain types of supply.
Floating offshore wind-power generating platform
The WindFloat Project has developed an innovative technology to allow the exploration of wind potential at sea, at depths of over 40m. The project's innovation focus was the development of a floating platform, based on the experiences of the oil and gas industries, to support multi-MW wind turbines in marine applications.
The floating platform is semi-submersible and is anchored to the seabed. Stability is due to the use of "water trap plates" at the bottom of the three pillars, associated with a static and dynamic ballast system. WindFloat adapts to any type of offshore wind turbine. It is built entirely on land, including the installation of the turbine, thus preventing the work from having to be carried out offshore, which would have an impact on the marine environment.
WindFloat Atlantic starts supplying clean energy
The first of the three platforms of the WindFloat Atlantic project was successfully connected in December 2019, after the installation of the cable that runs the 20 kilometers of distance that separate the wind farm and the station installed in Viana do Castelo. This was an important step for the national and European energy sector, since, by connecting the first wind tower to land, the first floating wind farm in Continental Europe started to supply clean energy to the electricity system.
Departure of the third and last platform of the Windfloat
In May of 2020, the project took another decisive step with the departure of the third, and last, of the three platforms off the coast of Viana de Castelo. Since it became 100% operational, the wind farm, with 25 MW of installed capacity, will be able to generate enough energy to supply the equivalent of 60 thousand inhabitants per year. The structure of the floating platform - with a height of 30 meters and a distance of 50 meters between each column - allows the use of the largest installed wind turbines on a floating surface in the world, of 8.4 MW each.
With this technology, the park contributes to increasing the generation of renewable energy and promotes a considerable reduction in costs associated with its life cycle.
Precommercial phase: Windfloat Atlantic
After successfully testing the technology for five years, the next step in the development of WindFloat technology was the pre-commercial phase, called WindFloat Atlantic (WFA), the first floating wind power plant in continental Europe.
To support the development of this pioneering technology, the European Investment Bank (EIB) granted, in October of 2018, a loan of 60 million euros to Windplus SA, the company that develops the Windfloat Atlantic, and which is owned by Ocean Winds (OW) (54.4%) – a joint venture between EDP Renováveis and Engie -, Repsol SA (19.4%) and Principle Power Inc. (1.2%). In addition, the project was also supported with 29.9 million euros from the EU program, NER300, and up to 6 million euros from the Government of Portugal, through the Portuguese Carbon Fund.
The installation of the first WindFloat Atlantic turbine on the floating platform was carried out in July 2019, in the port of Ferrol, in Spain, constituting an important milestone for the WindFloat Atlantic project and for the offshore wind energy sector worldwide, given that it was the largest turbine ever installed on a floating platform.
The three turbines that make up the wind farm are mounted on floating platforms moored to the seabed, for a total installed capacity of 25 MW, equivalent to the energy consumed by 60 thousand families over a year. What's more, this technology has enormous advantages that make it more accessible and cost-effective, including mounting it using conventional land cranes on dry land (in port), and using common shipping methods such as tugs instead of more expensive offshore installation vessels.
WindFloat Atlantic uses advanced technology from Principle Power, which makes it possible to install floating platforms in deep waters, previously inaccessible, and where the abundant wind resources can be harnessed. The wind farm will be located 20 kilometers off the coastline of Viana do Castelo, where the waters reach a depth of 100 meters.
This project demonstrated the low risk profile and economic competitiveness of the technology, paving the way for future commercial offshore floating wind farm structures.
Installation of the Windfloat 1
The WindFloat 1 Project involved the development and construction of a demonstration unit, using a 2 MW commercial turbine. The unit was installed on the Portuguese coast, near Aguçadoura, and it was connected to the grid at the end of December 2011. The project is the first offshore wind deployment in the world, without using the traditional piles that are used in this type of infrastructure.
This was the first floating offshore wind turbine in the open waters of the Atlantic, and the first implementation of a semi-submersible structure to support a multi-megawatt wind turbine.
Windfloat 1 operated for five years with high availability, producing more than 17GWh, in a sea with waves of more than 7 meters and remaining operational even with waves of 17m.
See some photo of the WindFloat:
Labelec's participation description
- Project monitoring from the construction phase until its’ commissioning;
- Prototype operation and maintenance management;
- Facility performance indicators analysis;
- Collaborative initiative under the European FP7 Program for the development of pre-commercial technology.