RUSSIA POST ELECTIONS: GREAT EXPECTATIONS VIII ANNUAL INVESTOR CONFERENCE Moscow, Russia 22.06.2004 Speech of the Chairman of the Management Board of RAO «UES of Russia» A. Chubais RAO «UES of Russia»: The energy of the reform
Jan 23, 2016
RUSSIA POST ELECTIONS: GREAT EXPECTATIONSVIII ANNUAL INVESTOR CONFERENCE
Moscow, Russia
22.06.2004
Speech of the Chairman of the Management Board
of RAO «UES of Russia»
A. Chubais
RAO «UES of Russia»: The energy of the reform
2
TWh
Overview of Russia and Russian Electricity Sector
Positive Consumption Trend
Russia: 4th Largest Power Producer in the World in 2003
3,864
1,4721,033 889 588 580 577 546 383 328
01,0002,0003,0004,0005,000
US China Japan Russia Canada Germany India France UK Brazil
25.0% 9.5% 6.7% 5.7% 3.8% 3.7% 3.7% 3.5% 2.5% 2.1%
% of WorldTotal
TWh
Optimistic Scenario
Pessimistic Scenario750
1,000
1,250
1,500
1,750
1990 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2010 2015
1,073
841 828 813 809 832 863 875 879 889945
911
1,135
1,020
1,315
1,100
1,545
1,200897
2020
Source: IEA
Source: Energy Recearch Institut, Russian Academy of Sciences
3
RAO “UES of Russia” Today: Operating Highlights
Source: RAO “UES of Russia”, IEA
The World’s Ten Largest Electricity Companies (2003)
>156RussiaRAO UES
Capacity (GW)Home-baseCompany
42South AfricaESKOM
43GermanyRWE
45ItalyENEL
49FranceSUEZ
54GermanyE.ON
59JapanTEPCO
121FranceEDF
151ChinaSPCC
42USAAEP
Key Facts
Except for nuclear capacity
and several large independent generators,
UES controls the electricity industry in Russia
72% of Russia’s installed generation capacity
69% of Russia’s electricity output
32% of Russia’s heat production
96% of Russia’s power transmission lines
4
Russian Electricity Sector: Today’s Structure
Federal Grid
Company System Operator
44 FederalPower
Stations(incl. 8 power
station under
Construction)
Generation
Transmission &
Distribution Grids
SupplyDispatching
Services
RussianFederation
MinorityShareholders
of the Parent Company
IndependentAO-Energos:
Irkutskenergo
Tatenergo
Bashkirenergo
RosEnergoAtom
Government
10 NuclearStations
73 Regional Power Companies - AO-Energos
From 49% to 100%
52% 48%
100% 100%From 50 to 100%
RAO UES of Russia
5
RAO “UES of Russia” Today: Key Financial Data
2003 (Forecast Data): Revenue – around $19,6 bn
2002:Revenue – $15,83 bn
US$ m 9 months ended 30 Sept 2001
9 months ended 30 Sept 2002
9 months ended 30 Sept 2003
Revenue 8,474 10,328 13,720
Net Profit 909 669 543
EBITDA 1,070 1,494 2,720
EBITDA Margin 12.6% 14.5% 19.8%
Operational Margin 1.2% 0.6% 8.9%
Net Margin 10.7% 6.5% 4%
Fixed Assets 24,201 25,834 29,293
Shareholder Equity 14,404 16,730 19,733
6
Growth of the market capitalisation of RAO «UES of Russia» (RTS data)
440%420%400%380%360%340%320%300%280%260%240%220%200%180%160%140%120%100%80%
Capitalisation of RAO «UES of Russia»
RTS Index
08/0
6/20
04
02/0
9/20
02
In the recent two years the stocks of RAO «UES of Russia» were largely outperforming the Russian securities market as a whole
Oct-Dec 2002
Jan-Mar2003
Apr-Jun2003
Jul-Sep2003
Oct-Dec2003
Jan-Mar2004
Adoption of a package of laws on electricity industry
7
Power sector reform after adoption of a package of laws: restructuring of RAO «UES of Russia»
Approval of a configuration of Wholesale Generation Companies;
Approval of a configuration of Territorial Generation Companies;
Approval of a configuration of Interregional Distribution Companies and Interregional Transmission Companies;
Approval of the corporate strategy concept (“5+5”);
Ongoing consolidation of transmission and operational control assets (within AO “Federal Grid Company” and AO “System Operator”);
Adoption of restructuring decisions by 30 AO-Energos. Restructuring of the first utility (“Kalugaenergo”) has been completed;
Ongoing spin-off of repair and maintenance businesses;
A management company for AO “North-West CHPP” (an international consortium involving ENEL and ESN Energo) has been chosen through a public tender procedure.
Establishment of new market participants:
- 10 wholesale generation companies (WGCs),
- Up to 20 territorial generation companies (TGCs)
- 5 interregional distribution companies (IDCs);
! Sale of thermal WGCs and TGCs to private investors;
Completion of the restructuring of AO-Energos: by the end of 2004, 40 AO-Energos will have held restructuring shareholders meetings);
Completion of the consolidation of transmission and operational control assets;
Attracting initernationally recognized strategic investors into the Russian power sector
Results Plans
8
Power sector reform after adoption of a package of laws: formation of the market
Since November 2003, electricity trading sessions have been going on in the competitive sector 5-15
Within the first 7 months of its operation, the trading exchange of the Non-Commercial Partnership «ATS» became one the ten largest specialized trading exchanges of the world by trading volumes
The free sector of the market represents some 8% of the total electricity generation and consumption in European Russia and Urals
Implementation of the current model of the competitive wholesale electricity market throughout the Russian territory (with the exception of isolated power systems and the Far East)
Development of a new target model of the market
Establishment of regional liberalized retail market (subject to the elimination of the cross subsidisation practices)
Results Plans
9
0
20
40
60
80
100
120
140
160
180
Mln
.kW
t.h
100
200
300
400
500
600
Ru
b/M
Wt.
h
Trading volume
Price in the competitive sector
Price in the regulated sector
November December January February
522 1327 2616 4383
March
3781 3580
MayApril
493 490,85508,8 498,93
393,59
462,2
431,43
477,79 481,44
276,94
264,25 251,95
3987 2022
June (15 days)
483
Volume and price dynamics in the competitive sector of the wholesale market
Source: NP ATS
Power sector reform: formation of the market
10
Improvement of management
Corporate Center
Reform Management
Center
Business Unit
1
Business Unit
2
Business Unit
«Grids»
Business Unit
«Hydro Generation»
Business Unit
«Service»
SO-CDU Hydro WGCs(4),Hydro Power Stationsunder construction
Thermal WGCs(3),TGCs (8), CorrespondingRegional Energos
Thermal WGCs(3),TGCs (6),CorrespondingRegional Energos
Repair andService Companies
Management Board
The new organizational structure of RAO UES of Russia must stimulate the reform progress in the electric power sector of Russia
Federal Grid Сompany,IDCs,Export-import,Foreign assets
11
Participation in assets management,Export
In addition to the traditional exports, RAO «UES of Russia» has launched a new stage of its strategy abroad based on the acquisition of foreign assets. The company has acquired energy assets in Georgia and Armenia.
Expansion of the geographical scope of exports, attraction of investments into the export-oriented core business development projects.
Participation in assets management or acquisition or foreign assets in the CIS area (Moldova, Ukraine, Kazakhstan, Kyrgyzstan,Tadjikistan) and foreign countries (Slovakia, Bulgaria, Poland, Romania, Turkey).
Results Plans
Approval of the key parameters of the Feasibility Study of synchronous
interconnection by the European Commission.
The Union for the Co-ordination of Transmission of Electricity (UCTE) has prepared draft Terms of Reference for the development of a Feasibility Study of the synchronization project.
Synchronization of the electricity systems of Russia and European countries.
12
«OK, Mr. Chubais, I agree that a quality of your reform is more important than its terms… But… Time is money, isn’t it?!»
RAO “UES of Russia” Restructuring: Terms and Quality
13
RAO “UES of Russia” Restructuring: Wholesale Generation Companies (WGC)
• I stage: Wholesale Generation Companies are set up as 100 % daughter companies of RAO UES
(based on the assets and stocks of federal power plants belonging to RAO UES)
July-August, 2004: setting up of Wholesale Generation Companies №№ 1, 2, 4, 5, 6
• 2 stage: Auctions to sell out Wholesale Thermal Power Generation Companies
Auctioning mechanism should be approved by the Russian Government
14
RAO “UES of Russia” Restructuring: Territorial Generation Companies (TGC)
• April 2004: RAO UES Directors Board has endorsed the scheme of the Territorial Generation Companies being established on the basis of the rented generation equipment of AO-Energos.
• Based on this scheme Territorial Generation Companies №№ 9 and 14 will be set up.
• It is planned that Territorial Generation Companies №№ 9 and 14 will start operating since 01.01.2005.
• Territorial Generation Companies №№ 9 and 14 could be sold to investors after their formation has been completed (2006).
15
02.12.2004: Time to make a choice
Setting up and further splitting off WGCs and TGCs–
the biggest actors on the future electric power competitive market
in Russia
Breach of time schedule of setting up
electric power competitive market in Russia
- +
16
THANK YOU FOR YOUR ATTENTION