Presentation by Anatoly B. Chubais, Chief Executive Officer RAO Unified Energy System of Russia at the Dinner Debate at the European Parliament - PowerPoint PPT Presentation

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Presentation by Anatoly B. Chubais, Chief Executive Officer RAO Unified Energy System of Russia at the Dinner Debate at the European Parliament

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Title: Presentation by Anatoly B. Chubais, Chief Executive Officer RAO Unified Energy System of Russia at the Dinner Debate at the European Parliament


1
Presentation by Anatoly B. Chubais, Chief
Executive Officer RAO Unified Energy System of
Russia at the Dinner Debate at the European
Parliament
Brussels
June 18th, 2002
2
The RF and EU states Energy Dialogue Outlook
for Cooperation
  • Power energy integration
  • Creation of new power industry, technology and
    equipment markets
  • Cooperation in technology
  • Mutual energy resources trading based on
    long-term deliveries
  • Improving energy transmission systems
    reliability

3
RAO UESR on a Countrys Power Sector Scale
2,7 mln. km of power transmission lines 96 of
total Russias extent
Total 2001 sales amounted to 18,20 bln. euros,
current market capitalisation 6, 25 bln.
euros


627 bln. kWh of electricity generated - 72 of
the overall generation in Russia
668,000 employees
4
RAO UESR - Current Ownership Structure

Other minority shareholders
Minority shareholders
Russian Federation
48
52

RAO UESR
51
49
from 50 to 100
100

72 regional power companies
Generation
Distribution grids
Sales
High voltage grids
System operator
28 federal power stations
Dispatching services

Subsidiaries
5
Modern Management and Business Procedures in
Russia
Business planning
Budgeting, budget execution via Treasury,
separate accounting
Increase of associated companies profitability,
operational transparency, attractiveness to
investors
Income and cost balancing, transition towards
duly cash settlements
International audit
  • An opportunity to access international markets of
    capital (listing procedure at NEWEX
    stock-exchange (Vienna, ?ustria) is completed)
  • Allows to compare the performance of the company
    to other world power companies

Corporate management
  • Changes introduced to RAO UESRs Statutes, giving
    wider powers to the Board of Directors
  • Corporate Governance Code is adopted (Board of
    Directors Resolution of 09.11.2001)

6
Tendency of Last Years - Increase in Power
Generation Power Consumption
Energy Consumption
In 1999, for the first time after the crisis
power consumption grew for 2,8 or
22,9 bln. kWh
Bln. kW/h
1074
1062
1100
1002
1050
1000
945
950
880
875
863
856
900
832
840
828
813
809
850
800
2002(forecast)
2001
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000

634,2
628,7
Bln. kW/h
700
622,8
602,2
600
Generated by RAO UESR
1999
2000
2001
2002 (forecast)
7
Solving the Non-payments Problem in RAO UESR
1998 - 2001
Total losses of RAO UESR on the cause of
non-payments and barter, mln. euros (according to
Deutsche Bank estimates)
112
104
101
120
15
14
100
13
12
96
80
7891
11
8000
48
92
10
7000
60
9
22
8
6000
40
17
7
5000
6
20
5
4000
4
0
3
3154
Q2
Q4
Q2
Q4
Q2
Q4
Q2
Q4
Q1
3000
2
9
1998
1999
2000
2001
2002
7
1
6
2000
3
0
2
cash payments for electric power supplied
0
1000
0
1998
1999
2000
8
IPS/UPS Operation Dynamics
97, 28 of the total operational time IPS/UPS
maintained within the UCTE standards

9
1990s World Trends in the Power Industry
Development
Complete liberalization of the power sector
California (1995)
Kazakhstan (1998)
Italy (1999)
Competition
EU Directive (1996)
Price liberalization
Russia (2001)
Moldova (1999)
Ukraine (1997)
State monopoly
Greece (2000)
France (2000)
SAR (2000)
Non-discriminatory access to grids
Private investments
10
Power Sector Liberalization East and West
European Parliament and Council Directive EC -
96/92
RF Governmental Decree of July 11th, 2001 N 526
  • free competition in generating sector,
    allowing alternative procedures for new
    capacities input (based on authorization and
    tender)
  • gradual opening of an energy supply market to
    final consumers in accordance with the mutual
    benefit principle
  • demonopolization and further emerging of
    competition in generation, sales and customer
    services
  • equal access to market infrastructure for all
    energy producers and consumers

Basic principles of liberalization in Eastern
Europe are similar to those in Western Europe,
but their implementation is one to three years
behind
11
Reform Base Separation of Monopoly and
Competitive Sectors
Market rules
GENERATION
Liberalisation of price-setting mechanisms and
stimulation of market participation
Competitive sectors
SALES
Securing equal access to grids. Establishment of
market technical and commercial infrastructure
Natural monopolies
DISPATCHING
Regulated tariffs
GRIDS
12
Legislative Base for Reforming
July 11th, 2001
April 26th, 2002
Basic guidelines of the power sector reforms were
approved by the Governmental Decree 526
The package of draft laws on power sector reforms
was introduced by the Prime Minister to the
Federal Assembly of the Russian Federation
The Federal Law On the Power Sector
December 17th, 2001
Amendments to the Federal Law On the State
Regulation of Tariffs
The Governmental Decree 873 establishes a
Governmental Commission responsible for power
sector reforms
Amendments to the Civil Code
Amendments to the Federal Law On Natural
Monopolies
April 2nd, 2002
Amendments to the Federal Law On Energy Saving
The Governmental Decree 226 approves
price-setting methods for electric power and heat
Amendments to the Federal Law On Competition
...
13
RAO UESR Reform in the Nearest Two Years
2002
2004
State 52
Minority shareholders 48
State
52/48
Federal Grids Company
Federal Grids Company

RAO UESR
52/48
100
System Operator

100
System Operator
Energy Holding
Trading System Administrator
100
??-??????
??-??????
Regional energos
??-??????
Interregional grid companies
Local generating companies
Basic reform model
14
Principles of Conducting Transactions with RAO
UESR Assets
Possibility for shareholders to make their
propositions as to which appraisers to employ
Market asset prices based on the independent
valuation
Making tenders when selling assets
Possibility of shareholders participation in
founding daughter companies
Equality of conditions for every shareholder when
buying out securities
Not lowering the level of payables
Public disclosure of information
Independent valuation of assets to be transacted
Preservation of the shareholding structure and
amount of shares of each shareholder in newly
created companies as a result of restructuring
15
The role of portfolio investors in power
companies reforming
Key Decisions on Power Companies Reforming are
Made in Cooperation with Minority Shareholders
General Shareholders Meeting
Project application preparation
15
47
14
Minority shareholders
UESRs Project Committee
Boards of Directors of power companies

is functioning within corporate procedures
9


8
7
6
5
Governmental Commission on Russian Power Sector
reforming
4
3
8
2
5
4
Board of Directors of RAO UESR
Reforming Committee under UESRs Board of
Directors
1
1
0
reflects the position of the Government as a
companys shareholder
The Evaluation Committee is functioning under the
Board of Directors. The Committee has chosen
Deloitte Touche to elaborate the common methods
for evaluating power companies business
performance
16
The role of strategic investors in power
companies reforming
Potential Investors into Russian Power Sector
Suez/ Tractebel
EDF
RWE
E. On Energie AG
Enel
17
Short-term Investment Program 5000
?Wt Projects for 2002
Power sector reform investment opportunities
North-West TPS (CCGT), 450 MWt
Transaction goal - to attract a strategic
investor to complete the 2nd power generating
unit Transaction type tender for 251 share
with an option for other 25
Pskov CPS, 215 MWt
Transaction goal - to attract a strategic
investor Transaction type tender for 251
share with gradual increase of investor share in
the capital up to 51
18
East-West strategy power system integration
Change in the European Power Systems
Borderlines 1991- 2002
MIR
1991
USSR
1995
1997
1994
Spain
GDR
1997
Portugal
Russia
Poland
1996
Morocco
Hungary
Algeria
Slovakia
Russia intercond
Czech Rep.
Tunisia
1999
UCTE is expanding, Eastern interconnection is
restored. This has lead to the inevitable
alternative back-to-back station or global
synchronization
Planning
CIS intercond
Romania
Greece
2001
19
East-West strategy power system integration
Synchronous Operation vs. Back-to-back Station
Back-to-back station
Parameters
Synchronous operation
-
Transmission capacity
3 ? 600 1800 MW
3000 - 7000 MW (11 grids)

-
Transmission capacity increase cost
Cost of grid const- ruction B-B station
Cost of grid construction

-
Technology aspects
Technological separation
Technological unity

Recoupment
-
Over 10 years
Under 5 years (TACIS financed study 1998-1999
by RWE, CEZ, IVO, EDF )

System impacts drop in reserves, mutual
emergency assistance, decrease in relative
disturbance level
-
  • No

Yes

20
Technical Requirements Scope of the Problem
East-West strategy power system integration
  • Overall structure and regulation principles in
    Eastern and Western zones are quite compatible
  • Same frequency (50 Hz)
  • Allowed frequency deviation within UCTE /- 0.05
    Hz, within IPS/UPS /- 0.20 Hz
  • Actual quality of electric power in IPS/UPS is
    much higher than the existing requirements
  • Positive dynamics of fulfilling technical
    requirements in IPS/UPS

CONCLUSION TECHNICAL PROBLEMS ARE SOLVABLE. NOT
ONLY SYNCHRONISATION IS TECHNICALLY FEASIBLE, IT
IS EFFECTIVE AS WELL! NEW POSSIBILITIES FOR
ELECTRICITY FLOW
TWO-WAY
21
East-West strategy power system integration
CIS Power Companies Initiative - Reaction from
EURELECTRIC
Protocol of the joint meeting between CIS
Electric Power Council and EURELECTRIC
The most important strategic goal of the CIS
Electric Power Council is to organize a
synchronous operation of IPS/UPS with TESIS
  • To encourage the active development of the
    dialogue between involved network associations in
    order to identify the best solutions and
    necessary measures to promote interconnection
    development
  • To coordinate actions where possible and
    appropriate in promoting this dialogue in the
    political and energy spheres
  • To carry out annual joint meetings to follow-up
    and assess progress made in the fields of
    interconnections, market structure and
    environmental aspects and to identify actions to
    be taken if necessary

Resolution of the 21st Meeting of the CIS
EPC, 19 March 2002
22
Choosing between Alternative Ways of Power System
Interconnection is Vital and Inevitable
East-West strategy power system integration
recognizing that, for certain issues to be
resolved, a time-table needs to be established,
namely reciprocity in market access and
environmental and nuclear standards, the first
steps toward the facilitation of trade through a
sound legal base have been taken and a dialogue
has been initiated. A sound legal base is
necessary so that market operators can achieve a
technically possible interconnection which,
whilst bringing gains in trade to both sides,
retains the high level of system reliability
demanded by European consumers.
Russia-EU Summit
(May 29th, Moscow)
To solve this strategic task, the real support of
EU national governments and business community is
needed
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