Transcript Document
Presentation by Anatoly Chubais Chief Executive Officer Unified Energy System of Russia at 4th Annual Forecast Conference on Economy and Investment Climate in Russia RUSSIA: Building on Success
26 February 2003, Moscow
RAO UES of Russia
Highlights One of the world’s largest power companies 407 thermal and hydro power plants 2.5 mln. km. of power transmission lines 632,000 employees 617.4 bn kWh of electricity generated; approx. 70% of overall generation in Russia Key Data Market Capitalisation* Sales Volume in 2002 (US dollars, bn) ** * As of 21 February 2003 (US dollars, mln) ** Forecast 5,317 17.0
Installed Generation Capacity (MW) Thermal Power Plants Hydro Power Plants 121,100 34,500 5 4 1 0 3 2 3.9
1.2
Russia - 4th Largest Power Market in the World US % of World Total 26.5% China 8.4% 1.1
7.2% 0.8
5.7% 0.6
3.9% 0.6
Japan Russia Canada Germany India 3.7% 0.5
3.6% 0.5
France 3.5% 0.4
UK 2.5% 0.3
Brazil 2.2% 2
UES of Russia – Current Ownership Structure Russian Federation 100 % 52 % Minority Shareholders 48 % UES of Russia 100 % от 50 до 100 % System Operator Federal Grid Company 29 Federal Power Stations Other Minority Shareholders 49 % 51% 72 Regional Power Companies Generation Distribution Grids Sales Dispatching Services 3
IAS 1H02: Financial Results Revenues Operating and Net Profit Rb bn.
250 200 150 100 50 0 18 38 132 188 15 44 158 217 15 43 173 231 Rb bn.
17.8
18 16 14 12 10 10.38
12.42
8 6 4 7.15
2 0 - 0.45
0.96
-2 2000 1st half 2001 1st half 2002 1st half 2000 1st half Power Sales 2001 1st half Heat Sales 2002 1st half Other Revenues Operating Net 4
Power Sector Liberalization: Global Experience Countries that have their power industries already liberalized Power Sector Liberalization Determines a New Vector of Global Development 5
Reform Basics: Separation of Monopoly and Competitive Sectors Generation Sales Competitive sectors Market rules
Free price-setting
Stimulating to enter into market Transmission Distribution Dispatching Natural monopolies
Securing equal access to grids
Setting up market infrastructure Regulated tariffs 6
Reform Legislative Basis 9 October 2002 14 February 2003 21 February 2003 Energy reform package was passed by the Duma in first reading Energy reform package was passed by the Duma in second reading Energy reform package was passed by the Duma in third reading
Federal Law Electric Power Sector” “On
Amendments to Federal Law “On Natural Monopolies”
Peculiarities of Electric Power Sector during Transition »
Federal Law «On Amendments to Civil Code
Amendments to Federal Law “On Energy Saving”
Amendments to Federal Law Tariffs » «On State Regulation of Electricity and Heat
Unbundling of the Russian power sector into competitive (generation and supply) and monopolistic (transmission and dispatching) segments
New structure of wholesale and retail power markets, with an equilibrium price based on submitted bids
Guarantees for reliable electricity supplies, as well as insurance of the rights and concerns of minority shareholders and the State
21 02
7
UES of Russia Performance, January 2001 – September 2002 Cents 24 20 16 12 8 01 02 03 04 05 06 07 08 09 10 11 12 01 02 03 04 05 06 07 08 09 2001 2002
Factors of market negative response
UES of Russia Russian Trade System Index Under management control Beyond management control
Lack of due allowance for minor shareholders opinion
Final industry structure and the means of its regulation remain unclear
Insufficient communication with minor shareholders
Prospects for restructuring have grown more vague due to the delay in approval of draft bills from June to autumn Premature consideration of asset sales in uncertain sector conditions
A number of the Duma deputies support the plan for grid nationalization 8
Seven Steps of the Management for the Benefit of Minority Shareholders 1. Moratorium on sale of core assets and granting of options to purchase these assets until the mechanisms of fair valuation and proceeds distribution are established 2. No pledge of shares for loans 3. No asset transfers to Government other than at fair value 4. Pro-rata allocation of shares 5. Preservation of liquidity of shares at all levels throughout the process 6. Financial / operating results to remain a priority during restructuring 7. Substantial modification of the dividend policy for the benefit of shareholders 9
Implementation of «Seven Steps of the Management …» 1. On November 29 th , 2002 the list of the first part of the Company assets that are not subject to sale before the restructuring process is completed has been prepared and approved by the Board of directors 2. On November 1 st , 2002 the Board of Directors of RAO down the bargain with JSC “UES of Russia” turned recommendations of the “Russian Aluminium” and rejected its credit on the security of shares of Boguchanskaya Hydro Power Plant in accordance with the Company’s management 3. The common procedures for assets/business valuation are being worked out with the assistance of Deloitte & Touche 4. The draft laws approved by the State Duma in three readings provide that the pro rata allocation of shares during restructuring at all levels shall be carried out 5. On September 27 Holding and its th , 2002 the Board of Directors of RAO “UES of Russia” decided to consider as a priority task the following: preservation of the liquidity of the subsidiaries’ shares; preservation of the depositary receipt instrument for shares during the reforms. A working group was obliged by the Board to elaborate special recommendations for this issue 6. The cost-cutting program that has been implemented is the most important instrument of improving the financial performance 7. Budget for 2003 provides for two-times growth of RAO dividends “UES of Russia” Holding
The project of the Company’s strategy will soon be introduced to the shareholders at the Board of directors
10
UES of Russia: Growth of Share Market Value and Variation of Russian Trading System Index, 24.09.02 - 21.02.03
170% 160%
Presentation made by Anatoly Chubais at Brunswick conference
150% 140% 130% 120%
1 st reading
110%
Postponement of the 2 reading nd Approval of draft laws at RF State Duma in first, second and third readings
100%
September October
RTS index
November December January February
Ordinary shares UES of Russia Interviews among shareholders revealed that understanding of reforms and confidence with respect to company management have been growing during past months 11