contents - rustocks.com · the management of scelectrosilaoffers a regular report on 1999 results...

A N N U A L R E P O R T 1 9 9 9

SC Electrosila196105, St.-PetersburgMoskovsky Prospekt, 139Telephone: +7 (812) 298-4717

298-2075Fax: +7 (812) 298-9510E-mail: [email protected]

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Message from Director General . . . . . . . . . . . . . . . . .р. 2

The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .р. 5

The Products . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .р. 17

The Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .р. 29

Requisites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .р. 39

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Contents

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The management of SC Electrosila offersa regular report on 1999 results of thecompany work for your consideration. The publication of past-year productionand financial results has become a tradi-tional and mandatory task in terms ofpublic relations.

We have been creating Electrosila fromanew in order to be a leading enterprisenot only in Russia, but also in the worldmarket. We are expanding our businessmastering the new fields where we shalloccupy the leading positions, and we with-draw from the market sectors that will notguarantee our success.

By today SC Electrosila has not only preserved its historic ability for innova-tions, but has considerably increased theoutput of new competitive products andthe pace of their development. The shareof new equipment within the 1999 com-modity output is over 50%, while therespective figure of the previous years wasabout 30%.

The results achieved in 1999 prove thatwe are moving in the right direction, withacceleration necessary to ensure the stableinnovative development. The efforts of thecollective body of the enterprise in the fieldof marketing strategy (publicity andimage) as well as production and financial

activity made it possible to increase thepayment turnover by more than 1.7 times(711.0 mln roubles – 1998, 1213.3 mln roubles –1999), at the same time the monetary con-stituent grew by 2.3 (263.3 mln roubles –1998, 604.1 mln roubles – 1999), thefinancial in-payments from export expand-ed making 250.5% in relation to 1998figures (195.0 mln roubles – 1998, 488.0mln roubles – 1999). The commodity outputmade 113% compared to 1998 (676.0 mlnroubles – 1998, 764.0 mln roubles – 1999).

The growth of production volumedemanded the increase in the number ofworkers employed – from 4367 to 4727, at the same time the monthly average

Message from Director GeneralDear Shareholders, Partners and Clients!

Gennady I. Vinogradov Chairman of the Board of Directors

Ravil A. Urousov Director General


salary grew by 81.5% making 2946.7 roubles (1623.6 roubles in 1998).

Without stopping at the achieved leveland considering itself by right an up-to-date-standard world-recognised producerable to stand the competition on the partof the largest trans-national corporations,SC Electrosila decided not to pursue theway of “reanimation” (repairs and renova-tion) of unused available capacities, butfollowing the specially developed businessforecast up to the year 2005 and the planof technical re-equipment it has started thetransition to high technologies in engineer-ing, designing and production spheres atthe cost of internal funds.

The increase of capital investment morethan by 6 times compared to 1998 let usachieve a breakthrough at the weakestpoints by shifting to the most up-to-datetechnologies in the field of designing,procurement and impregnation work.

Strengthening of Electrosila’s positions inhigh technologies orientated at knowledge,experience and development of services willlet us strengthen our reputation at theRussian and the world markets even more inthe nearest years, taking such top-impor-tance products as:– traction electric drive for rolling-stock;– turbogenerators and hydrogeneratorsfor large electric power plants;

– turbo-, hydro- and diesel generators forsmall stationary and mobile power plants;– large electric machines for all majorindustries: extractive, processing, ship-building and other industries.

Due to the correctly chosen and efficient-ly realised enterprise development strategywhich has already brought some noticeablepositive results, as well as the existing pre-requisites for the further intensive growth,SC Electrosila has a real opportunity toenter the XXI century as a modern-stan-dard, dynamically developing enterprisewith a high scientific, technical and labourpotential.

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Director General R. Urousov

We are firmly confident of our potential.


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THE COMPANYThe CompanyDevelopment History . . . . . . . . . . . . . . . . . . . . . . . . .р. 6

Organisational Structure . . . . . . . . . . . . . . . . . . . . . .р. 8

Executive Board of SC Electrosila . . . . . . . . . . . . . . . .р. 10

Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . .р. 12

Quality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .р. 13

Personnel Training . . . . . . . . . . . . . . . . . . . . . . . . . . .р. 14

Social Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . .р. 15


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Development History

April 3, 1898 is normally considered to bethe date of foundation of the enterprisewhen the Russian Emperor approved thecharter of the Joint-Stock Company of theRussian-based Siemens-Halske electro-tech-nical factories in St. Petersburg.

The founder of Siemens-Halske Companywas Werner von Siemens who opened theworkshops for telegraphic printer repairs inthe 1st Line of Vasilyevsky Island inSt. Petersburg as early as in 1853. The devel-opment of the present-day territory of theplant started in 1911 when the productionof electric machines, transformers and otherhigh-voltage equipment was transferredfrom St. Petersburg centre to the new blockslocated by the other side of Moscow Gates.In 1912 after the merger of the companiesSiemens-Halske and Schukkert & Co. inGermany two companies were set up –Siemens-Halske and Siemens-Schukkert, withrespective division of production (high-volt-age and low-voltage equipment). In connec-tion with that reorganisation the factory inSt. Petersburg got the name of Siemens-

Schukkert Dynamo Works, its new specialisa-tion was the production of electric machines,traction electric motors, transformers, andlater – high-voltage equipment. At that timethe personnel of the factory numbered 900.

Soon after the beginning of the FirstWorld War the German management ofthe company left the plant which was laterpassed into the state ownership, and L. Krasin was appointed general managerof the works. Thanks to his activities thefactory was able to develop and involveyoung talented specialists.

In 1922 the factory got its historical nameElectrosila. That time marked the initialdevelopment of scientific and technicalschool of Russian electric machine-build-ing. The specialists of that school took anactive part in the realisation of GOELROplan by developing the first national hydro-generators for Volkhov Hydro-electricPower Station, turbogenerators with thecapacity of 500 kW for Gomel ThermalPower Plant and capacity of 1500 kW forOmsk Thermal Power Plant.

Due to its rapid development Electrosilastarted exporting its products as early as inthe 1930-s.

In the subsequent years the enterpriseexpanded the production of generatorsbeing engaged at the same time inresearch and engineering development.

With time the produce of SC Electrosilabecame focused on large electric machineconstruction – the manufacture of turbo-generators with the capacity up to 1200MW, hydrogenerators up to 700 MW, DCmotors for the fleet, rolling mills and othertechnologies with the capacity of 25 MW,AC motors for mineral resource and metallurgy industries.

In conformity with production develop-ment plans in 1950-1970-s Electrosila,being the leading enterprise in the field,not only developed and manufactured newstructural units and products, but alsoshared its experience with other enterpris-es. This way the similar production of tur-bogenerators with the capacity up to 220MW, small-capacity electric machines and


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some other types of products was startedat other plants by transfer of specialists,drawings, technologies and tooling.

By late 1980-s the factory had the scientificand research potential highest in the indus-try, with highly qualified personnel and thelargest production capacities.

In 1992 the enterprise was transformedinto SC Electrosila. In the new environ-ment, the situation of crisis – aggravatingstate of economy, recession of industrialproduction, inflation and reduced purchas-ing capacity of regular customers – SC Electrosila lost most of its domesticconsumers. We started the survival strug-gle – by stopping some particular produc-tion lines, departing from replacement offixed assets, cutting the number of per-sonnel, introduction of shortened workschedule and long leaves. All that resultedin certain loss of independence, especiallyas far as marketing strategy, sales andfinancial operations are concerned. Asa result, by June 1998 we found ourselves

in the situation of unjustified reduction ofworkers (nearly by half), liquidation of themetallurgy production line and someexpensive technologies. The situationaggravated even more because of the largecustomers’ recession from contracts signedearlier because of the overpriced commis-sion fees. The customers demanded therecovery of direct ties.

It was only the recovery of SC Electrosilaas an independent enterprise with a well-known trade-name that made it possible toattract the regular clients back. We managedto retain the qualified personnel, the fixedassets, the technology of traditional productsmanufacturing, and to extend as well therange of top-priority products. The restruc-turing, development of new products (trac-tion electrical equipment, small- and mediumcapacity turbogenerators with air cooling, etc.)as well as expansion of export created the con-ditions for more efficient work.

Today SC Electrosila as a free-marketindependent subject manufactures high-

quality customer-oriented individual andserial production providing the post-pur-chasing service. Electrosila has occupieda stable leading position within a large seg-ment of power equipment world market.The trademark of Electrosila is a symbolof quality and reliability of its output and iswell known in Russia and abroad.

Currently the generators produced by SC Electrosila are used in Russia (CIS) bythermal power plants 80% (60%) of theinstalled capacity, hydroelectric powerplants 90% (70%) and nuclear powerplants 100% (100%). Over a third ofnational enterprises in such industries asmetallurgy, shipbuilding, chemistry, oilindustry use the electric motors with thetrademark of Electrosila.

The products made by the company areknown in 87 countries of Western andEastern Europe, in the Middle East, South-East Asia, South and North America andAfrica.


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Organisational Structure

The principles of the company’s organi-sational structure did not change in 1999.The top management body of SC Electrosilais the General Meeting of Shareholders.In between the meetings the generalmanagement of the company is carriedout by the Board of Directors. The man-agement of current activities of theenterprise is performed by a single-per-son executive organ (Director General)and the collective executive body –Executive Board. The executive organs ofthe enterprise are responsible for theimplementation of decisions of theGeneral Meeting of Shareholders and theBoard of Directors.

The company comprises a number ofproduction divisions, design depart-ments, technical equipment divisionsand auxiliary departments that ensurethe production efficiency. The functionsof operative planning, development ofroute specifications, material, technical,transport and storage supply, shippingof ready products, quality control andpersonnel training are centralised andperformed by specialised divisions.

In 1999 over 50 well-grounded andexpedient changes were introduced in themanagement structure of SC Electrosila.The improvement of organisation waseffected within the directions thatrequired the solution of most topical orinnovative tasks.

In order to ensure the open characterof information in the Russian and inter-national markets, the creation of ade-quate image and publicity to bepresented to certain groups of people,to attract investors and provide the suc-cessful promotion of the company prod-ucts, a new independent MarketingDepartment was set up in 1999 withinthe organisational structure of SCElectrosila responsible for the compa-ny’s ties maintained not only with theregular and future customers, but alsowith the public and mass media.

In 1999 a new structure was formed –the Commercial Department, the goalsof which were to increase the monetaryconstituent of the enterprise’s budgetfor account of efficient realisation ofmaterial resources and other assetsincluded in the contractual agreementswith the suppliers and the customers.

The Purchase Department structurewas improved: separate departmentsdealing with procurement of materialsand semi-finished goods were liquidat-ed, while some warehousing and trans-port divisions were set up.

In order to provide structural unifica-tion in expenditure management, devel-opment of income and expenditurebudget, cost value calculation, marketconditions research and price calculation,the existing Pricing Department was

transferred from the Sales Department tothe Finance and Economy Department.

The expansion of traction equipmentproduction resulted in the appearance ofsome specialised divisions – within theChief Engineer’s Department, produc-tion-, quality-, and sales departments –that are held responsible for tractionelectric equipment for railway rollingstock.

The main optimisation principle of theproduction structure of SC Electrosila in1999 is still the same – development ofproduction complexes to ensure theirgrowing efficiency and the adequateresponsibility of these divisions’ headmanagers.

We have retained the existing tendencyto produce complete complexes specialisedby types of basic products manufactured(turbogenerator, hydrogenerator com-plexes, large electric machines, tractionelectric motors). The maximum possiblespecialisation of the complete complexesfacilitates the solution of quality issuesand improvement of products’ structure,while the concentration of auxiliary pro-duction facilities makes it easier to pro-vide their mechanisation using the mostup-to-date technological solutions.


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Sergey V. AlesukDirector for Quality Member of Executive BoardMember of the Board of Directors

Victor A. KunshenkoDirector for Personnel and Social Issues

Natalia B. OkunevaHead of Legal DepartmentMember of Executive Board

Nikolay D. PinchukChief EngineerMember of Executive Board

Vladimir N. RabchenyaDirector for ProductionMember of Executive Board

Executive Board of SC Electrosila

Ravil A. UrousovDirector GeneralChairman of Executive Board of SC ElectrosilaMember of the Board of Directors


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Sergey N. BagrovDirector for Finance – Chief Accountant

Member of Executive Board

Andrey V. KabanovDirector for Purchases


Anatoly M. OleinikovDirector for Security


Vitaly L. RubinDirector for Sales


Sergey S. SiryDirector for Commerce


Mikhail N. TsitrinDirector for Reconstruction, Repairs and

Maintenance Member of Executive Board

Valentin A. PetersonDirector for Service



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As regards the consumption qualities ofequipment produced, SC Electrosila is atthe same level with the world leaders, andthere are not any negative or discreditabletendencies or signs of distrust regardingthe quality of the manufactured goods.The competition on the world market withother producers of similar goods takesplace only in the sphere of pricing policy.

SC Electrosila is normally a winner inmost tenders where it participates. Thefactors accounting for success areElectrosila’s trademark (its reputation ofsupplier and high quality) and lower pricescompared with those of foreign competi-tors.

SC Electrosila adheres to the strategy ofcontinuous, operative and comprehensiveinforming of its customers and potential

consumers about its products and services,as well as extension of the range of com-modities produced, development andintroduction of new production and man-agement technologies. The company isactive in promoting its trademark andforming the image of enterprise havingnew technologies, producing high-qualitygoods and concerned about its businessreputation.

Marketing Strategy


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In order to create the positive publicityand image of Electrosila for the perma-nent and prospective customers, muchwork was done in 1999, using the internalresources, to renovate the premises ofdesigning departments and equip themwith modern computing machinery. Wehave developed and inculcated a specificcompany style for the uniform of workersand foremen. Active work was undertakento renovate and repair the shops, developand improve the factory territory.

Dozens of presentations were organisedin Russia and abroad as well as a confer-ence with participation of mass media, thecompany worked with authorities, publicorganisations to form the “circle offriends” and develop partner relations withsuppliers, customers and competitors(public relations).

We prepared and issued the 1998 annualreport and the report for the first sixmonths of 1999. A booklet on excitationsystems and a catalogue of company products were issued. The business plan“Organisation of batch production of elec-tric equipment kits for electric trains ЭД-9Тtype, 25 kW, 50 Hz” was developed for thefirst time, as well as the business forecast“Production plan of SC Electrosila for aperiod of up to 2005”.

The high quality of products manufac-tured by SC Electrosila is ensured by thequality system complying with the con-cepts of ISO 9001 international standard.In 1998 the enterprise was awarded withSovASK certificate (ZAO Intercerting) andthe certificate of German Society forTechnical Supervision (TUV NORD); in 1999the quality system was certified at theRussian Maritime Register of Shipping andOboroncertifica.

The developed and manufactured equip-ment used in nuclear power industry, inrailway rolling stock traction electric drives,in highly explosive environment and otherspecific conditions is covered by qualitycertificates of respective organisations.

All the company activities, including thework of each of its subdivisions, are carriedout in accordance with this new quality policy.

SC Electrosila is a free-market independ-ent subject manufacturing high-qualitycustomer-oriented individual and serialelectrical engineering products providingits warranty and operation servicing andmaintenance.

The enterprise with its own historicaltrademark develops its business due tocontinuous improvement of consumerproperties of its products and services.

The main target of business managementis to create conditions securing full satis-faction of customer demands.

The innovation process management iscarried out by a team of directors andmanagers on the grounds of motivatedtargets and a flexible organisational struc-ture adapting to specific circumstances.

The quality of products and services isprovided by concrete participation of theentire company personnel in the quality

system meeting the concepts of the inter-national standard ISO 9001 and built on theprinciples of present-day reliable informa-tion and its analysis.

The quality system is permanentlyimproved and has additional goals toreduce all kinds of expenses connectedwith the development of products andservices, to increase the sales volume andthe productivity, to reduce the period ofdevelopment, preparation of production,manufacture, shipping. In order to achievethese goals, all subdivisions permanentlyimprove the quality and the culture of theirwork.

This policy is implemented by the qualitysystem, is obligatory for the entire enter-prise personnel and is subject to strict per-formance in any subdivision management.

Director General is a person generallyresponsible for quality, he delegates therespective rights and obligations – as toeffective work and improvement of thequality system – to Director for Quality.

Quality


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Electric machine building is a permanent-ly developing field of electrical engineeringwhere the accumulated experience is ofmajor importance. The physical principle ofelectric machine operation discovered inthe first half of XIX century does not infact change, but each newly-developedconstruction of separate functionallyimportant elements if often a “revolution-ary” breakthrough making it possible to cre-ate machines with new attractive qualities.

The expertise build-up started from thetranslation of German documents intoRussian and their adaptation to the Russianenvironment. The translation work wasdone by young Russian engineers who by1920-s created their own school of calcula-tions and design.

Personnel selection and training is animportant strategic direction of enterprisedevelopment. The quality of work at theenterprise starts with the training of staff.

In 1999 over 280 employees of Electrosilaimproved their professional qualificationat special courses and seminars. Sevenyoung specialists were trained inSwitzerland.

Apart from educating the staff workersthe company has resumed the practice ofprofessional training of college studentsand the students’ research work. InOctober 1999 we arranged a presentationof research projects executed by under-graduate students. In 1999 over 400 stu-dents had a practical training in differentdepartments of SC Electrosila. In December1999 an agreement was signed on long-term cooperation between SC Electrosilaand the Professional Lyceum of ElectricMachine-Building.

The money spent on personnel training in1999 amounted to 1163 thousand roubles,while in 1998 the similar amount wasnearly 5 times less (244 thousand roubles).

Personnel Training

Personnel training costs


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Apart from the wage increase special careis given to health issues. The enterprise allo-cates finance to maintain a polyclinic anda sanatorium with prophylactic treatmentthat helped 1500 workers to improve theirhealth in 1999. In order to enhance thetechnical equipment of the medical centrewe bought additional dental and ophthal-mological equipment, several new appli-ances for treatment halls.

Despite some negative processes thattook place in the preceding periods SC Electrosila has preserved some impor-tant social projects and currently invests alot in their development, namely the recre-ation centre for children and the sportingcentre for mothers with children.

In 1999 over 1900 children had a good timein the children’s camp financed by the enter-prise, located at a nice place in LeningradRegion. Here we should note that

SC Electrosila takes part in the project thatis socially important for the city by invitingchildren from orphanages, from poor fami-lies, sport schools and organisationsengaged in social protection of children.

SC Electrosila invites as well its workers tospend their summer holidays in the sportingcentre for mothers with children which issituated in South Karelia, Gvardeiskoye set-tlement, on the territory bordering withFinland, abounding with beautiful lakes androcks. In 1999 1300 Electrosila workers and200 workers from the other power engi-neering enterprises of St. Petersburg hada good rest in the sporting centre.

One of the priorities of the social policypractised in Electrosila is financing of theMercy Fund (FOMEL) set up in 1998 inorder to provide material assistance to thestaff workers and retired workers. In accor-dance with the charity programme carried

out in the past year we organised freecatering for pensioners, distributed food,clothing and other items, provided financialaid for the purchase of medications,offered psychological consulting.

By putting the social partnership policyinto effect the management of SC Electrosilacreates the situation when the workers aremore motivated to work and are interestedto improve their efficiency.

To ensure and maintain the adequate levelof labour motivation and preservation ofaccumulated labour potential, SC Electrosilapursues a special policy of social partner-ship.

The basic principles of this policy are fixedin the collective agreement that representsa connecting link between the employees,the executive management and the busi-ness management of the company thatsets the correlation between the rise inlabour productivity and the growth ofwages and strengthening of social security.

The growth of production in 1999 not onlydemanded the rise in numbers of staff upto the figure of 4727, but also let the com-pany raise the average salary by 81.5% toreach the figure of 2946.7 roubles in 1999.

Social Partnership

Number of employees Average monthly salary


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THE PRODUCTSBasic Products Output . . . . . . . . . . . . . . . . . . . . . . . .p. 18

New Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . .p. 21

The Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .p. 22

The Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .p. 26

The Products


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Basic Products Output

In 1999 SC Electrosila proceeded withdevelopment of new competitive machinesusing modern progressive technologiesand expanded the range of its products.

The enterprise has mastered the produc-tion of new-generation air-cooled turbo-generators, type Т3Ф, with the capacity of63 and 160 MW, for Tyumen ThermalPower Plant-1; generator with the capacityof 50 MW for JSC Mosenergo.

Two new-type TA turbogenerators withthe capacity of 12 MW were manufacturedfor the Electric Power Plant in Yamalo-

Nenetsky Autonomous Region of theRussian Federation and for VologdaThermal Power Plant. A turbogeneratorof ТФ type was made with a capacity of110 MW for coupling with gas turbine atthe test rig of Ivanovo Electric Power Plant.A generator of TBB type, the capacity 350 MW,was manufactured for Florina ThermalPower Plant in Greece.

Commodity output structure

Turbogenerators output


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In 1999 the company carried out designwork to start the production of turbogen-erators rated 1000 MW for the nuclearpower plants Bushehr (Iran), Lang-Yung-Gan(China) and Kudankulam (India).

The bulk of hydrogenerators productionwas represented by export orders forhydro-electric power plants in Philippines(rated as 17.5 MW and 10.5 MW) and forthe Hydro-electric Power Plant Mingechaur(Azerbaidjan) (rated 70.4 MW). The facto-ry designed and started the technicalpreparation for the production of a hydro-

generator rated 12 MW for a hydro-electricpower plant in Iraq.

The commodity output of hydrogenera-tors fell in 1999 by 17%. It is accounted forby the fact that with the expiration ofhydrologic power resources the dynamicsof construction of new hydro-electricpower plants slows down. This results inthe diminishing number of orders forhydrogenerators. But with regard for thefact of ageing of generators and their sub-sequent replacement the situation mayradically change within the nearest 5 years.

In 1999 we built 750 large electricmachines for rolling-stock drives, excava-tors, hull integrated systems and othermechanisms; the other products includetraction electric motors for metro cardrives, tram and local train drives.

It was for the first time in Russia that aset of electric equipment for electric trains(ЭД-9T type, AC driven, voltage 25 kW)was manufactured within the programme

of withdrawal from import technology anddelivered to JSC Demikhovo Machine-Building Plant.

The commodity output of appliances forDC and AC electric drives, excitation sys-tems, technological control systems forgenerators, control equipment and com-mutation devices for electric machinesamounted to 194973 thousand roubles.

Hydrogenerators output

Large electric machines and traction motors output


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The investment of internal funds in newhigh-tech fixed assets is the most convinc-ing argument in favour of the perspective,fast-developing enterprise, well-known onthe world market.

The capital investments in 1999 were madein the development of highly-effectivetechnologies for design documentation, insulation impregnation for electric

machine stators and rotors, cuttingmachine parts from sheet material.

The installation is intended for the impreg-nation of turbogenerator stators andmotors rated to 20 MW as well as other AC and DC electric machines with specialcompounds and varnishes.

The installation ensures the impregnationtechnology that is the most advanced in theworld and makes it possible to improve con-siderably the quality of electric machines,shorten the time needed to make expensiveinsulation materials, reduce their consump-tion, decrease the labour-output ratio andenhance safety and attractiveness of labour.

New Technologies

Vacuum-pressure impregnation installation

The laser cutting unit is intended for opti-mum layout and highly-precise (± 0.1 mm/m)cutting of complicated-configuration partsfrom sheet metals (ferrous and non-ferrous)with the thickness up to 20 mm.The equipment comprises two centres

using the laser emission energy for cutting,united by the system of automated loadingand unloading. The laser cutting unit will sizeably cut the

time needed for the production of piecesthat were earlier handled using a variety of

pressing, milling and other machining facil-ities involving numerous operations, set-tings and adjustments, complicated andexpensive tooling. The control of cuttingprocess is effected through the computerprogramme, which not only makes it possi-ble to minimise the production waste, butalso opens broad potentialities for thedesign of new structures due to the elimi-nation of technological limitations inherentto metal-cutting machining equipment.

Laser cutting unit

The hydro-abrasive (water-jet) cuttingunit is intended for optimum layout andhighly-precise (± 0.1 mm/m) cutting ofparts from any sheet material (metal,fibre-glass plastic and others) with thethickness up to 100 mm, using a water jetunder pressure to 4000 atm., with additionof abrasive materials.

The unit enables to raise the material utili-sation factor to 0.68 (instead of 0.56) andcut the time of piece manufacture by20-50%. The parts made do not requireany additional treatment.

The hydro-abrasive cutting unit will beused for treatment of components frominsulation materials; it lets the factory notonly get rid of hazardous waste resultingfrom processing, but also cut considerablythe manufacturing time.

Hydro-abrasive (water-jet) cutting unit


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The Sales

The principal factor accounting for theextension of sales volume was the growingdemand for large electric machines, traction electric motors, spare parts andservices.

The sales volume for turbogeneratorsincreased by 6.0% in 1999 compared to1998.

In 1999 the sales of thyristor converters,complete units and low-voltage equipmentrose by 1.5.

Sales volume

Sales volume: traction motors and electric drives

Sales volume: turbogenerators

Commodity structure of sales

The overall sales volume (income fromsales) grew by 23.0% in 1999 compared to1998 amounting to 729861 thousand roubles.

The share of traction equipment was11.6% in 1999 (2.8% in 1998).


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The volume of sales to the clients fromRussia and CIS countries, with regard forprovided services and spare parts, wasabout 590000 thousand roubles.

The commodity structure of sales in themarket of Russia and CIS reflects the tar-get-oriented marketing undertaken bySC Electrosila considering the demand forparticular kinds of electric machines andcontrol systems.

This is proved by the growth of the com-pany income achieved in the first place bythe sales of traction equipment the shareof which was 14.4% in 1999. The majorshare of income from sales is provided bythe marketing of turbo- and hydrogenera-tors – 36.6% and 12.5% respectively.Within the framework of the tendency toeconomic growth that was observed in theindustry in 1999, the rise in the share oflarge electric machines to 20.9% waspredictable.

Geography of sales

Commodity structure of sales in the market of Russia and CIS

The proportion of sale shares at theRussian and CIS markets vs foreign coun-tries that took shape in 1999 is charac-terised by the outlined tendency to gradualrecovery of the economic situation ofRussian enterprises-customers of SC Electrosila. The share of sales to theclients in Russia and CIS was 80.6% in thestructure of sales, which is 6 per centpoints higher that the similar index of1998.

In industry the recovery of positivedynamics is connected with the growingdemand for domestic products on theinternal market and intensive developmentof import renunciation processes. By theresults of 1999 almost all national indus-tries had positive results, and the share oflosing enterprises fell by 10 per cent pointscompared to 1998. The efficiency of

Russian economy compared to 1998results, taking all the industries, grew by6.8 per cent points. The improved indicesof financial activity in basic industrial sec-tors had a positive effect on the purchas-ing capacity of SC Electrosila’s customers.

Sales on Russia and CIS markets


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The regional structure of sales in 1999reflects the world-spread tendencies ofelectric power engineering development.

The growing development of power andindustrial sectors in the Asian segmentpromoted the rise in sales volume of Electrosilaproducts in this region (83.2% of the overallsales structure in the overseas market). A considerable share is represented by supplies to European countries, which isaccounted for by the increase in items ofequipment that has exhausted its operationresource and by the growing demand innew power capacities in some countries.Apart from that, in 1999 the company sup-plied its products to some countries ofSouth and Central America.

Regional sales structure in the overseas market

In the year under review SC Electrosilaenhanced its activities in the overseas mar-ket. The sales volume with regard for mar-keted services and spare parts amounted tonearly 140000 thousand roubles. The longproduction cycle of the principal companyproducts resulted in reduction in sales volume in the overseas market comparedto the preceding period. In fact the indexof 1999 sales volume is determined by thescope of product supplies under the earliersigned contracts, and its reduction will befully compensated by the size of exportorders portfolio formed by the enterpriseby the early 2000. The projected growth inoverseas sales volume of Electrosila prod-ucts is accounted for by stable demand forhigh-quality electric engineering equip-

ment and moderate prices in the Asiansegment of the market. The demand fornew power capacities is an inherent fea-ture of the economic growth observed inChina, India and in other target markets.

In 1999 the traditional structure of salesvolume within the overseas marketremained the same.

The major share in the sales commoditystructure comprised turbogenerators(33.1%) and hydrogenerators (24.9%) aswell as services and spare parts providedfor the renovation of earlier suppliedequipment.

Sales in overseas market

Commodity structure of sales in the overseas market


The company’s active efforts aimed atimprovement of product quality andattraction of foreign clients create thepre-requisites for the strengthening of

SC Electrosila positions in the overseasmarket.

This is confirmed by the great numberof contracts that are being worked over;

the scope of these contracts amounts to7 billion roubles (270 mln USD).

25

The total orders portfolio formed withSC Electrosila as of December 31, 1999amounted to 2635000 thousand roubles,which is much higher than the similarfigure of 1998. The increased volume oforders became possible due to the efficientpromotion of company products on theRussian and international market.

By the end of the period under review theagreements for products and services pro-vided by Electrosila in the market ofRussia and CIS were concluded for theamount of 1327000 thousand roubles, andfor the overseas market – for the amount of1308000 thousand roubles.

The share of contracts for the products tobe supplied to overseas countries was49.6%, which exceeds greatly the index of1998; it is explained by the fact that the

dynamics of demand at the power engi-neering market of overseas countriesexceeds the same dynamics at the marketof Russia and CIS.

SC Electrosila has a traditional stock oforders, as far as the commodity structure isconcerned, for the market of Russia and CIS.

The bulk of it are turbogenerators, hydro-generators and large electric machines

(over 80%). The high proportion of spareparts in the portfolio (12%) shows thegrowing demand for that type of produce.The development and innovative produc-tion of new-generation low-voltage electricmachinery made it possible to form a stockof orders for this commodity group to theoverall amount of 80000 thousand roubles(6%) within the accounting period.

The extension of export contracts con-cluded in 1999 took place due to thegrowth of demand for generatingcapacities in the countries of South-EastAsia, Middle East and some otherregions.

In 1999 the company had large exportorders for the equipment for electricpower plants in China, Iraq andPhilippines. The demand for equipmenton the part of customers-industrial com-panies of the Asian region traditionallyforms the core of the orders portfoliowithin the overseas market – 76.3%.

A large orders portfolio for the supplyof equipment to different regions ofEurope, in particular, for some power

engineering plants in Greece, Finlandand Bulgaria, was formed in 1999 due tothe active work with European customers.

The orders portfolio

The share of turbogenerators has expand-ed significantly in the commercial structureof the export orders portfolio (87.8% ofthe overall amount of contracts signed).

The development of services providedabroad resulted in the growth of spare partsshare to 4.2%.

Commodity structure of the orders portfolio in the market of Russia and CIS

Regional structure of the order portfolio in the overseas market

Commodity structure of the order portfolio in the overseas market


26

The volume of funds received from servicein 1999 increased to reach the figure of 5%of the total in-payments, the share of mone-tary constituent in customers’ payments inthis sphere exceeds 60%.

According to the forecasts of the RussianJoint-Stock Company UES (Unified EnergySystem) of Russia, by the year 2005 over43% of electricity generating capacities onthe territory of Russia will exhaust theirestimated resource and will need moderni-sation, reconstruction or replacement.With regard for the need of power systemsto have high-quality service, SC Electrosilahas developed a number of client servicingprogrammes that envisage complex exami-

nation, repairs and power enhancement ofturbo- and hydrogenerators within 5-15%range. The company provides services inrenovation, modernisation and adjustmentof turbo- and hydrogenerators excitationsystems as well as thyristor launching gearfor turbogenerators coupled with gas tur-bines.

The provided complex service accompa-nying the delivery of new equipment aswell as after-sale customer support andservice for those clients who use othermanufacturers’ electric power machineryenables us to strengthen considerably ourmarket positions in Russia and abroad.

The Service

One of the top-priority directions ofbusiness development of SC Electrosila in1999 was extension of service provided(services and spare parts).

The Service Department set up at the endof 1998 mastered new services demandedon the market, which made it possible toexpand the share of service in the com-modity output to 6.5% (49566 thousandroubles) in 1999.

The principally new, up-to-date approachtaken by SC Electrosila with respect to theorganisation of customer-oriented servicewas the key factor accounting for theincreased scope of provided services, thegrowth being 274% (17204 thousand roubles)compared to the figure of the previousyear. The volume of the spares output asper servicing agreements has increased by1.3 times compared with that of the yearof 1998 and amounted to 32362 thou-sands roubles.

Share of service in commodity output

Service volume


27

The 1999 commodity service chartshows a high percentage of turbo- andhydrogenerators covered by servicing interms of actual services and delivery ofspare parts.

The development of new line of pro-duction – traction electric drive forurban and suburban electric trains –accounted for the appearance of spareparts for traction electric motors in theservice structure. The development ofintegrated package of services is a top-priority concern in the company’s plansfor the future.

The volume of services relating to spareparts will increase for hydrogenerators asa commodity group due to their longerlife-cycle and respectively more acute needin service.

The predominance of the share of turbo-generators spare parts in the generalstructure of service is explained by thefact of ageing of machinery: the gener-ators have exhausted the normativeservice life and require replacement ofdifferent parts and units.

The service volume provided to theRussian and CIS customers in 1999 washigher than the same index for overseascountries (58.8% and 41.2% respectively).

The expected collapse of most genera-tors as a result of ageing makes us planmeasures for their operative servicing

including setting up service centres closeby the machinery in question, organisa-tion of regional warehouses for spare

parts and expendables, introduction ofsubscription service for the customers.

Service structure by sales markets

Commodity service structure

Distribution of service: turbo- and hydrogenerators


29

Financial Activities . . . . . . . . . . . . . . . . . . . . . . . . . . .p. 30

Production Indices . . . . . . . . . . . . . . . . . . . . . . . . . . .p. 31

In-payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .p. 32

Profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .p. 32

Capital Investment . . . . . . . . . . . . . . . . . . . . . . . . . . .p. 33

Shares and Dividends . . . . . . . . . . . . . . . . . . . . . . . . .p. 34

Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .p. 36

Profit and Loss Statement . . . . . . . . . . . . . . . . . . . . .p. 38

The FinanceTHE FINANCE


30

By the end of the accounting period thecapital of SC Electrosila was formed frominternal funds by 50.8% and from debtcapital by 49.2% and amounted to 1673690thousand roubles. The greatest share ofthe debt capital was formed on the basis

of advance payments received, indebted-ness to suppliers and contractors and otheraccounts payable.

The increased amount of advance pay-ments received by SC Electrosila in 1999 isan evidence of the growing trust on the

part of its business partners. This indexequalled 354158 thousand roubles by theend of the reporting period against 230133thousand roubles in late 1998, havingincreased by 54%.

Financial Activities

The financial activity of SC Electrosila in1999 was basically determined by the generaleconomic situation in the country. The grad-ual improvement of financial situation in theRussian industry had a positive impact on thebasic financial results of the enterprise.

The cumulative assets of SC Electrosilaas of 31.12.1999 amounted to 1673690thousand roubles. The growth of thisindex as compared to the similar figureof the end of 1998 reached 30.8%.

The fixed assets grew to make thefigure of 302041 thousand roubles (the growth is 3.6%).

Accounts receivable from customers andbuyers formed the major part in the struc-ture of the factory’s cumulative assets asof 31.12.1999 – 567642 thousand roubles.This indicator grew by 6.5% compared tothe previous period.

The company inventories grew by 55%and made 330911 thousand roubles as of31.12.1999. This item on the balance sheetshows the growing costs of incompleteproduction in the period under review,which is connected with the projectedcommodity output growth in 2000.

Structure of cumulative assets

Fixed assets

Accounts receivable from customers and buyers

Inventories


31

In the situation of rather complicatedfinancial position of many of its cus-tomers and potential clients SC Electrosilachooses not to rise the prices for itsproducts to bring them in compliancewith the rise in costs. In this situation theenterprise has to reduce the share ofprofits gained from sales. The sales profitability was 6.79% in 1999.

The growth in commodity output withinthe accounting period was, in the firstplace, a result of the company’s orientationat providing a wider spectrum of servicesand active development of the tractionelectric motors market.

When analysing the plant’s basic produc-tion figures it is necessary to note theincreased performance calculated perworker in terms of commodity output andshipping. Compared to 1998 these figuresincreased in the period under review by31% and 12% respectively.

The growth in labour productivity atSC Electrosila is connected, first of all,with the measures undertaken in 1999 torenew and modernise the stock of industri-al equipment, including the purchase ofthe most up-to-date technological units; itis connected as well with the serious workin the sphere of advanced training andprofessional improvement offered to theworkers, specialists and top managers ofthe company.

The overall sales volume (income from sales)increased in 1999 by 23% making 729861thousand roubles.

Due to the sizeable rise in raw produce pricesas well as materials and component parts pricesand in connection with the increased produc-tion volume in 1999 the company’s productioncosts expanded nearly by 60%.

Production Indices

In 1999 the commodity output at the fac-tory grew up to 763771 thousand roubles,which is 113.0% in relation to the similarindicator of the previous year.

Commodity output

Performance calculated per worker in terms of commodity output

Performance calculated per worker in terms of shipping

Structure of production costs


32

In 1999 the enterprise was activelyengaged in optimisation of structure ofpayments for the products supplied andservices rendered. Despite the complicatedfinancial situation of customer enterprisesSC Electrosila achieved a significant rise in

in-coming payments as compared with thepreceding period.

Within 1999 the company received thepayments comprising 1213328 thousandroubles, which exceeds the relevant figureof 1998 by 1.7.

The monetary in-payments reached604099 thousand roubles exceeding therelevant figure of the past period by 2.3.

The in-coming payments from exportgrew by 293167 thousand roubles making250.5% of the 1998 level, their share in theoverall volume of in-comings being 40.2%.

The share of in-coming payments fromexport grew by 12.8 per cent points withinthe reporting period as compared with 1998.

In-payments

In 1999 the sales profit amounted to46385 thousand roubles.

The reduction in profit as compared to1998 is a result of a number of externaland internal factors, in particular, main-taining the level of product selling prices;rise in prices for raw produce, materialsand component parts as well asincreased costs of product promotionand management.

The balance profit of 1999 equalled65795 thousand roubles (the sizeablerate of balance profit in the precedingperiod was accounted for by consider-able differences in exchange rate follow-ing the financial crisis of August 1998).

The retained earnings in 1999equalled 35696 thousand roubles.

Profit

In-coming payments

Profit indices


33

The growth in production volumes fore-casted up to 2005 and confirmed by theworked-out business prognosis required aconsiderable renovation of fixed assets.

In 1999, in accordance with the approvedplan of technical re-equipment of produc-tion, SC Electrosila expanded noticeably,for the first time in the last 10 years, capi-tal investments in the production and non-production spheres. Their total volume rose

by over 6 times within the accounting peri-od and amounted to 121500 thousandroubles as at 31.12.1999 – that includes theadvance payments for the purchase ofhigh-tech processing equipment which willbe put into operation in 2000.

The basic spheres of investment in pro-duction included the purchase of modernunits for laser and hydro-abrasive cuttingof sheet materials, creation of new-standardwell-equipped workplaces for designers andtechnologists, acquisition of new toolingfacilities and modern office equipment.

The investment in non-production sphereequalled 171 thousand roubles in 1999,which is 5 times higher than the respectivefigure of 1998. The major funds wereinvested in the development of socialprojects and health services.

Capital Investment

Capital investments with regard for advance payments made

Structure of investment in production


34

The list of company shareholders as of31.12.1999 included natural persons(16.01%) and legal entities (83.99%).

No shares of SC Electrosila were in freecirculation by the end of 1999.

Shareholders of SC Electrosila

Major shareholders of SC Electrosila

In 1999 the enterprise pursued the policyof concentration of investments in thespheres of business that were most closelyconnected with its staple activities.Following that SC Electrosila reviewed theexpedience of its participation in several

enterprises and cut or excluded its stake inthem. Thus by the end of the yearSC Electrosila preserved its participationonly in several companies holding a largestock of their shares

Participation of SC Electrosila in other companies

Participation of SC Electrosila in other companies

In 1992 Electrosila was officially incorpo-rated according to the first of the twooptions accepted at that time and was reg-istered as an open-end joint-stock company(SC Electrosila). The share capital of thecompany amounted to 383.2 million rou-bles; it was divided into 383200 ordinaryshares with a nominal value of 1000 rou-bles each.

The splitting of shares effected in 1993simultaneously with reduction of theirnominal value, as well as the second emis-sion of 1994, resulted in significantchanges in the size of share capital and thenumber of company shares.

By the end of the period under review theshare capital of SC Electrosila was equal to451778 thousand roubles, with the total

number of ordinary shares being 9035560,the par value being 0.05 roubles.

In the last three years the General Meetingof Shareholders each time took a decisionnot to pay dividends with regard for theeconomic position of the company. Thedecision regarding payment of dividendsfollowing the results of 1999 will be takenat the General Meeting of Shareholders.

Shares and Dividends


35

Within the Russian Trading System RTS-2the company shares are known to havemedium liquidity, with moderate activity attenders, despite the permanently main-tained high demand. In 1999 66 dealsinvolving the shares of SC Electrosila wereregistered in RTS-2 to the total amount of1588 thousand USD.

From early 1999 one could observe thegradual growth in the purchasing andselling rates and in the volume of sales. Itis peculiar that the demand volume exceed-ed the supply volume significantly, whichconditioned the low amounts of deals.

Shares of SC Electrosila on the secondary market

Tenders in shares of SC Electrosila within the RTS-2 system


36

ASSETS Line Year Yearcode beginning end

I. OUT-OF-CIRCULATION ASSETSIntangible assets (04, 05) 110 90 461

including:organisation costs 111 - -patents, licenses, trademarks (service marks), other rights and assets similar to listed 112 - -

Fixed assets (01, 02, 03) 120 291 512 302 041including:land plots and nature management projects 121 3 556 3 918buildings, structures, machinery, equipment 122 237 708 252 818

Construction in process (07, 08, 61) 130 75 982 153 480Long-term financial investments (06, 82) 140 21 313 21 275

including:investments in subsidiaries 141 17 343 17 343investments in dependent companies 142 - -investments in other organisations 143 - -loans furnished to organisations for a term exceeding 12 months 144 - -other long-term financial investments 145 3 970 3 932

Sundries out-of-circulation assets 150 - -TOTAL Section I 190 388 897 477 257

II. CIRCULATING ASSETSStocks 210 213 011 330 911

including:raw produce, materials and other similar values (10, 15, 16) 211 52 686 84 454livestock (11) 212 - -low-value and wearing items (12, 13, 16) 213 327 818costs of production in progress(distribution costs) (20, 21, 23, 29, 30, 36, 44) 214 57 629 123 001ready products and products for re-sale (40, 41) 215 54 529 110 219shipped goods (45) 216 47 695 9 854deferred charges (31) 217 145 2 565other inventories and charges 218 - -

Value-added tax on acquired values (19) 220 15 594 12 368Accounts receivable (with payments due after more than 12 monthsfollowing the reporting date) 230 - -

including:buyers and customers (62, 76) 231 - -bills receivable (62) 232 - -indebtedness of subsidiaries and dependent companies (78) 233 - -advance payments made (61) 234 - -other debtors 235 - -

Accounts receivable (with payments due within 12 months following the reporting date) 240 633 273 766 273

including:buyers and customers (62, 76) 241 533 009 567 642bills receivable (62) 242 7 915 16 490indebtedness of subsidiaries and dependent companies (78) 243 - -indebtedness of participants (founders) on contributions in the share capital (75) 244 - -advance payments made (61) 245 15 862 49 666other debtors 246 76 487 132 475

Short-term financial investments (58, 82) 250 17 484 78 289including:investments in dependent companies 251 - -own equity bought from shareholders 252 - -other short-term financial investments 253 17 484 78 289

Monetary funds 260 10 972 8 592including:cash (50) 261 79 16settlement accounts (51) 262 2 183 1 042

Balance Sheet (thnd RUB)


37

ASSETS Line Year Yearcode beginning end

foreign currency accounts (52) 263 8 127 6 671other monetary funds (55, 56, 57) 264 583 863

Sundries circulating assets 270 - -TOTAL Section II 290 890 334 1 196 433

III. LOSSESNon-covered losses of last years (88) 310 - -Loss of accounting year 320 - -TOTAL Section III 390 - -BALANCE (sum of lines 190+290+390) 399 1 279 231 1 673 690

LIABILITIES Line Year Yearcode beginning end

IV. CAPITAL AND RESERVESShare capital (85) 410 452 452Surplus capital (87) 420 463 989 462 646Capital reserves (86) 430 113 113

including:surplus funds formed in accordance with the legislation 431 113 113reserves formed in accordance with foundation documents 432 - -

Accumulation funds (88) 440 91 037 295 024Social sphere funds (88) 450 38 695 35 766Target financing and in-comings (96) 460 25 621 20 925Retained earnings of previous years (88) 470 239 519 -Retained earnings of the accounting year 480 х 35 696TOTAL Section IV 490 859 426 850 622

V. LONG-TERM LIABILITIESBorrowed funds (92, 95) 510 - -

including:bank credits liable to repayment after more than 12 months following the reporting date 511 - -other loans liable to repayment after more than 12 monthsfollowing the reporting date 512 - -

Other long-term liabilities 520 - -TOTAL Section V 590 - -

VI. SHORT-TERM LIABILITIESBorrowed funds (90, 94) 610 500 90 992

including:bank credits 611 500 90 992other loans 612 - -

Accounts payable 620 419 201 715 174including:suppliers and contractors (60, 76) 621 72 812 102 530bills payable (60) 622 - -indebtedness of subsidiaries and dependent companies (78) 623 - -in wages (70) 624 7 981 7 504in social insurance and security (69) 625 2 973 5 668indebtedness to the state budget (68) 626 34 579 45 823advance payments received (64) 627 230 133 354 158other creditors 628 70 723 199 491

Payments on dividends (75) 630 104 -Deferred income (83) 640 - -Consumption funds (88) 650 - 16 902Reserves for impending expenses and costs (89) 660 - -Other short-term liabilities 670 - -TOTAL Section VI 690 419 805 823 068BALANCE (sum of lines 490+590+690) 699 1 279 231 1 673 690


38

ITEM Line Period under Similar period code review of last year

Income (net) from sales of goods, products, work, services (less value-added tax, excise and similar obligatory payments) 010 729 861 593 138Cost value of marketing of goods, products, work, services 020 432 007 326 396Commercial costs 030 76 878 43 061Management costs 040 174 591 113 667Profit (loss) from sales (lines 010-020-030-040) 050 46 385 110 014Interest receivable 060 429 4 866Interest payable 070 - -Proceeds from participation in other organisations 080 - 26Other income from operations 090 484 355 443 428Other operations costs 100 462 663 287 074Profit (loss) from financial and business activity(lines 050+060-070+080+090-100) 110 68 506 271 260Other non-sales income 120 17 784 4 283Other non-sales expenditure 130 20 495 7 440Profit (loss) of accounting period (lines 110+120-130) 140 65 795 268 103Profit tax 150 28 858 28 258Withdrawn funds 160 1 241 326Retained profit (loss) of accounting period(lines 140-150-160) 170 35 696 239 519

Director General

Director for Finance – Chief Accountant

(R. Urousov)

(S. Bagrov)

Profit and Loss Statement (thnd RUB)


Full name:Open-End Joint-Stock Company Electrosila

Short name: SC Electrosila

Date of institution: April 1898Date of incorporation: 1992

Field: Electric engineering

INN: 7810220487

Size of staff: 4727 workers as of 31.12.1999

Legal and postal address:196105, St. Petersburg, Moskovsky Prospekt, 139

Telephone: +7 (812) 298-4717298-2075

Fax: +7 (812) 298-9510 E-mail: [email protected]

Auditor:ZAO MKD

Number of shares:9035560 ordinary shares

Number of shareholders:4607 (as of 31.12.1999)

Date of state registration and registration number:Reg. No. 250/AOOT-13-450-92 of 26.02.92

Official keeper of shareholders register:OAO North-West Registration Centre

For additional information go to the web-site of SC Electrosila at www.electrosila.ru


contents - rustocks.com · the management of scelectrosilaoffers a regular report on 1999 results...

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