mosenergo june 2002 mosenergo a leader in the russian electricity sector
TRANSCRIPT
MosenergoJune 2002
Mosenergo
A Leader In The Russian Electricity Sector
MosenergoJune 2002
Contents
Mosenergo - A Leader In The Russian Electricity Sector
Mosenergo On The Verge Of Restructuring
Reforming Moscow’s Electricity Sector
Appendices
MosenergoJune 2002
Mosenergo - A Leader In The Russian Electricity Sector
MosenergoJune 2002
Russia’s Largest Regional Energo
By Electricity Production
By Heat Production
By Size Of Territory Served
• Mosenergo has an installed electricity capacity of 15,020 MW, or 7% of Russia’s total. • In 2001, the company generated 71.4 billion kWh, or 8% of Russia’s total.
• Mosenergo is one of the largest heat producers in the world. • The company has an installed heat capacity of 34,800 Gcal/h. • In 2001, the company produced 69.1 million Gcal of heat, or nearly 5% of Russia’s total.
• Mosenergo supplies electricity & heat to the Moscow region, which has an area of 47,000 square metres and a population of 16 million people. • The company serves in excess of 4 million customers.
MosenergoJune 2002
Russia’s Largest Regional Energo
By Composition & Asset Base Value
By Key Economic Indicators
Mosenergo’s asset base includes 21 power stations, including Russia’s only hydro pump station located in Zagorsk. The company’s fixed assets are valued at US$ 3.2 billion. The average life of the company’s generation assets is about 15 years, with an operational useful life of 30-35 years.
In 2001, Mosenergo’s net revenues were US$1,487 million, including US$985 million from electricity sales and US$448 million from heat sales.
MosenergoJune 2002
Company Structure
GENERAL DIRECTORGENERAL DIRECTOR
Electricity Generation
Electricity Generation
3 Repair & Maintenance
Units
3 Repair & Maintenance
Units
10 Services Units
10 Services Units
8 Non-core Units
8 Non-core Units
12 PowerPlants
12 PowerPlants
13 Electricity Transmission
Line Units
13 Electricity Transmission
Line Units
Heat TransmissionNetwork
Heat TransmissionNetwork
Electricity SupplyElectricity Supply
MosenergoJune 2002
Strong Reputation In The International Investment Community
Depositary Receipts
Foreign Loans
Eurobonds
The first Russian company to place ADRs in 1995, with total proceeds of US$22.5 million.
In 1997, the company issued a 5-year eurobond in the amount of US$200 million. Mosenergo has met all its eurobond obligations.
EBRD-MFK US$50 million loan for financing of construction of Zagorsk hydro pump station; maturity date – August 2009.
International Audit
International Credit Rating An international credit rating of B-/Stable outlook by Standard & Poor’s.
Publication of annual US GAAP financials and independent audits since 1995, аs well as semi-annual unaudited financials.
MosenergoJune 2002
Shareholder Structure
Russian Citizens10.75%
Individuals 7.87%
UES 50.87%
ADR Holders & Foreign
Companies27.56%
Department of State &
Municipal Property of the
Moscow City Government
2.95%
Mosenergo’s charter capital stands at RUB28,267,726,000 and includes 28,267,726,000 common shares
Mosenergo has over 25,000 shareholders
MosenergoJune 2002
Mosenergo:On The Verge Of Restructuring
MosenergoJune 2002
Factors Affecting Business Results
Factor Weight Related To:
Tariffs Inflation / Political Motives
Demand Level of Industrial Production
Costs
- Depreciation Charge
Inflation/Company’s Need for New Equipment
- Fuel Inflation/Regulated by FEC
- Spare Parts, Repairs & Maintenance
Inflation/Company’s Need for New Equipment
- Wages Tariff Agreement With Sector’s Trade Unions
MosenergoJune 2002
Tariff Forecasts
TARIFF REFORM
CREATION OF A UNIFIED TARIFF-SETTING UNIT
TERMINATION OF CROSS-SUBSIDISATION
CURRENT TARIFF-SETTING MECHANISM
Setting of economically sound tariffs, stimulating the development of energy-saving technologies
The Federal government implements tariff reform
Removal of political influence on tariff setting
REC’s expert group analyses the data & gives its conclusion to RECs
RECs consider proposed tariff increases
Residential tariffs are considered by Moscow City & Moscow Region Governments
RECs approve tariff increases
The company provides its costs data to the REC
FORTHCOMING CHANGES
MosenergoJune 2002
Consumption Forecast
72.5773.36
75.4376.93
78.26
68.55
62
64
66
68
70
72
74
76
78
80
2000 2001 2002 2003 2004 2005
kWh bln
69.13
73.22
75.00 75.00 75.1075.80
64
66
68
70
72
74
76
78
2000 2001 2002 2003 2004 2005
Gcal, mln
Electricity Consumption Forecast Heat Consumption Forecast
MosenergoJune 2002
Cost Forecast
40.4%
17.8%
12.0%
11.5%
7.1%
11.2%
Cost Structure Type of Costs Forecast Comments
Fuel Gas tariff increases are regulated by FEC; Mosenergo strives to optimise its fuel balance
by reducing losses
Wage The company has controlled its wage Costs; staff reductions
Materials & Spare Parts Contract prices; increase in share of purchases by tender
Repair & Maintenance Price determined by tender
Depreciation Equipment reaching end of useful life
Other costs Cost control; cost optimisation
MosenergoJune 2002
Necessity For Restructuring
Fixed Assets Wearing Out: up to 50% wear-out level of key equipment
Insufficient Level of Investment: absence of private investment - lack of economic incentives
Cost-plus Price-setting Mechanism
Lack of cost reduction incentive as a result of absence of competition & current imperfect tariff-setting mechanism
Cross-subsidising
MosenergoJune 2002
Reform & Restructuring of the Moscow Region Electricity Sector
MosenergoJune 2002
Mosenergo’s Restructuring Strategy
Strategic Goals
1. Create a high level of competitiveness in the electricity, capacity and services markets
2. Expand client base by attracting consumers from other regions
3. Create conditions that attract investment into the company, and insure investor profits
4. Ensure stable electricity and heat supplies to Moscow region consumers
Separationo f M on o p o lis t ic & N on -co re
B u s ine sses
R a ise L eve l o f P ro d uc tionE ff ic ien cy. C o s t C u tt in g .
A ttrac t In ves tm e ntIn to E co no m ica lly V ia b le
P ro je c ts
P ro tec t th e R ig h ts o f S h are ho ld e rs &
In ves to rs
MosenergoJune 2002
Implementing Restructuring
Tariff Reform
Necessary legal condition for Mosenergo’s re-organisation
Protecting the rights & interests of Mosenergo minority shareholders
Creating positive economic conditions for the split of Mosenergo into core companies
KEY TASKS
To Be Completed Prior To Launch Of Reforms
Creating Asset Transfer Mechanism
Eurobond Redemption
Reaching an Agreement With Minority Shareholders
Define the legal & economic conditions and the order of transferring Mosenergo’s assets
MosenergoJune 2002
Stages Of Restructuring
OPTIMISATION(Preparatory)
By 2003
REORGANISATION(Structural Changes)
By 2004
INTEGRATIONAfter 2004
Introduction of separate accounting by line of business
Selling (transfer) of social sector assets
Exiting non-core businesses
Registration of ownership rights
Decreasing payables & receivables
Elimination of non-core expenses
Implementing restructuring by way of separation of generation, supply, repair & maintenance, & services companies
Distribution of receivables & payables among the newly created companies
Participation in the formation of the Federal Grid Company
Organisation of the management process & creation of new economic relations
Participation of the newly created companies in the inter-regional integration
Participation in the formation of the structure of the System Operator
MosenergoJune 2002
Mosenergo Restructuring Model
Generation Companies
Moscow City Generation Company
Moscow Region Generation
Company
Supply Companies
Supply Company 1(based on Energosbyt)
Supply Company 2
Moscow Transmission
Company
Service Companies
Mosenergoremservice Mosenergoproyekt
Assets To Be Included In Federal Grid Company
Assets To Be Included In The Wholesale Gencos
Non-core Companies(Agriculture, Trade, etc)
MosenergoJune 2002
Generation Restructuring
UES - 50.87%
Minority Shareholders 49.13%Moscow City
Generation Company
Installed capacity 9,758.8 MW
Moscow Region Generation Company
Installed capacity5,341 MW
Separation with distribution of shares on a pro rata basis
Separation with distribution of shares on a pro rata basis
Separation with distribution of shares on a pro rata basis
Assets to be included in wholesale gencos
?
MosenergoJune 2002
Restructuring of Supply & Transmission Businesses
UES – 50.87%
Minority Shareholders 49.13%
Separation with distribution of shares on a pro rata basis
Separation with distribution of shares on a pro rata basis
Separation with distribution of shares on a pro rata basis
Supply Company 1 To be formed based on Energosbyt’s assets & organisational structure
Supply Company 2 Create competition
conditions
Transmission CompanyTo be formed based on the transmission line assets (except for
assets to be transferred to the FGC), heat network
MosenergoJune 2002
Summary Of Moscow Electricity System Restructuring
Creation of the Moscow retail electricity market infrastructure
Creation of economically efficient & financially stable energy companies, attractive for direct and portfolio investors
Creation of conditions for development of energy supply business in the region
Attract customers in a competitive market by offering them high quality products & services at lower prices
Retaining government, corporate, & administrative control over the functioning of the Moscow region energy sector
Growth in the market capitalisation of energy companies
MosenergoJune 2002
Timeline For Moscow Electricity System Restructuring
MA
CR
OE
CO
NO
MIC
P
AR
AM
ET
ER
S
STAGES OF RESTRUCTURING
PREPARATORY
REORGANISATION
INTEGRATIO
N
MosenergoJune 2002
Appendices
MosenergoJune 2002
Russia’s Largest Regional Energo
Installed Electricity Capacity, MW ‘000 213.9 15 7%
Electricity Production, kWh bln 875.8 71.4 8 %
Heat Production, Gcal mln 1,451 69.1 5 %
Russia Total Mosenergo
Gas Turbines – 4%Hydro Pump
Stations – 8%
Steam Turbines – 21%
Thermal Power Plants – 67%
Structure of Generation Assets
MosenergoJune 2002
Electricity Production & Supply
54.22152.624
59.36
52.544
50.311 50.622
71.353
68.907
73.084
66.784
64.23865.509
40
45
50
55
60
65
70
75
1996 1997 1998 1999 2000 2001
Production
Supply
Demand in the Moscow region has been growing in the past two years, thanks to increasing consumption in the industrial & residential sectors.
Production & Supply Dynamics, kWh bln
MosenergoJune 2002
Heat Production & Supply
67.36
78.59
76.28
73.38
67.44
64.15
82.90
80.70
78.20
71.9569.13
73.22
60
65
70
75
80
85
1996 1997 1998 1999 2000 2001
Production & Supply Dynamics, Gcal mln
MosenergoJune 2002
Key Balance Sheet Figures
US GAAP Consolidated Balance Sheet, US$ mln
2000 2001 2000 2001
Non-current Assets 2261 2291 Charter Capital 2170 2172
Including: PP&E 2244 2277 Long-term Liabilities 282 208
Current Assets 678 502 Current liabilities 487 413
Including: Cash
45 82
Including:
Short-term Loans 50 218
Receivables 503 291 Payables 262 100
Inventories 123 108
Total Assets 2 939 2793 Total Share Capital & Liabilities 2 939 2793
MosenergoJune 2002
Key Cash Flow Statement Figures
2000 2001
Cash Flow From Operating Activity 84 115
Cash Flow Used For Investment Activity
(61) (165)
Cash Flow From Financing Activity 6 87
Increase In Cash 29 37
Cash Position At Beginning Of Period
16 45
Cash Position At End Of Period 45 82
US GAPP Cash Flow Statement, US$ mln
MosenergoJune 2002
Key US GAAP Financial Results
US GAAP Income Statement, US$ mln
2000 2001
Revenues 1 087 1487
Operating Costs (958) (1347)
Operating Income 129 140
Pretax Profit 55 87
Net Profit (Loss) (3) 9
MosenergoJune 2002
Financial Debt
Rouble Debt
Foreign Currency Loans
Eurobonds
RUB300 million – loans from Russian banks RUB2,041.98 million – other long-term loans Redemption date – December 2005
US$39.35 million. Redemption by 2009
EUR3.8 million. Redemption by August 2003
US$109.97 million Redemption Date - October 2002
Mosenergo services its debt obligations fully & on time