Transcript Russian power sector reform Discussion materials for the
Energy aspects of the North-European region
Presentation to the Northern Dimension Business Forum by CEO of Unified Energy Systems of Russia and Vice-President of BALTREL Anatoly B. Chubais
4 April 2001 Tallinn
Iceland Northern Dimension — active element of cooperation in the North of Europe
Northern Dimension must make its contribution into the cause of peace and security in the region
Norway Estonia Latvia Lithuania Kaliningrad Russia Poland
Northern Dimension may act as an instrument of complex spatial development of North Western Russia 2
Establishment of well-balanced export of electricity high priority task of RAO UES of Russia Baltic states Belorussia and Ukraine RUSSIAN FEDERATION Transcaucasian republics Kazakhstan and Central Asia During Soviet times parallel operation was carried out within 11 USSR republics, 4 Central Asian republics were interconnected with each other...
…the decision of RAO UES of Russia restored synchronous operation with 9 of the 12 CIS countries and all the Baltic states - former USSR members
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Key markets for electricity deliveries from Russia Northern Dimension member countries account for 50% of Russia’s electricity exports Presumptive electricity exports structure for 2001
Turkey Georgia 2% China 1% 5% Kazakhstan 10% Finland 40%
Existing transmission capacity of RAO UES of Russia’s electricity connections with power grids of Latvia and Estonia allows to increase the exports by 3-4 TW per annum
Belarus 32% Poland Latvia 6% 4%
Total: 15,525 mn kWh
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70 60 50 40 30 20 10 0 2000 Exchange between power grids of Baltic countries future Exchange between power grids of Baltic countries in 2000 was 50-55 TWh per annum, in the future will be 65-70 TWh 12 TWh Russia’s share in the total volume of exchange with Baltic region countries is approximately 12 TWh per annum 38 TWh
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2000 saw continuation of efforts on several investment projects aimed at export expansion
Construction of the third 400 MW transmission line to Finland from the Vyborg transforming plant (Vyborg-Kymi) Installation of DC connectors allowing export of electricity from the Kola power grid to Finland Strengthening the 330 kV Lenenergo-Karelenergo-Kolenergo transit transmission line (1100 km) Final putting into operation of the first stage of the North-Western thermal plant consisting of 2 CCGTs with capacity of 450 MW each Construction of Kaliningrad No. 2 thermal plant based on the combined cycle technology with capacity of 900 MW 6
Conditions and advantages of power grid integration
Conditions
- parallel operation of power grids according to agreed upon rules and technological standards
Advantages
- increase in energy security - increase in reliability - possibilities of regulation - more even and therefore, more economical operation of power grids 7
Development of electricity exports from Russia to Western Europe has already begun. . . Example: Contractual deliveries of electricity to Germany
Framework agreement Contract
RAO UES of Russia Deliveries
(transit via Belorussia) Contract
Counterparty (Poland) Re-exports Counterparty (Germany)
Electricity deliveries to Turkey (transit via Georgia) already started Patterns of electricity contractual deliveries to Hungary, Yugoslavia and Italy under development 8
. . . however the choice of further cooperation pattern determines the necessity of the grid development . . .
If it is decided to retain the existing situation it is necessary to develop the back-to-back stations . . . However, if the strategic orientation towards parallel operation of power grids is adopted, the DC connectors are not needed
… and is determined by strategic plans of the partners
OUR STRATEGY IS RESTRUCTURING 9
Russian power sector reform implies introduction of competition into generation and supply of power Generation of power Dispatching High voltage grid Distribution Supply of power Segments, where development of competition is possible Natural monopolies
• Introduce free market pricing • Stop cross-subsidisation
Market rules
Re-organise the regulatory system
Regulated tariffs
• Reorganise commercial/ technological infrastructure for functioning of power market • Provide equal access to distribution network 10
Most countries have chosen a competitive model
Private
Russia (2000)
California (1995) Great Britain (1990) Hungary (1999) Argentina (1990) Skandinavia (1992) Thailand (1996) Moldova (1999) Kazakhstan (1998) Italy (1999) EC Directive for Power sector Brazil (1995) Ukraine (1997) Greece (2000) State owned State regulation France (2000) South Africa (2000) Liberalisation Competitive market 11
Basic principles of the Russian power sector reform correspond to key principles of EU Electricity directive (1996)
EU Directive’s principles
Liberalisation of electricity generation and supply through implementation of competition
Principles of Russian reform
Demonopolisation of generation and supply through restructuring of UES’ subsidiaries No constraints for third party access Community-wide Free access to customers Gradual opening of electricity markets over a period of 6 years Unbundling and strict regulation of electricity transmission and distribution systems Development of wholesale and retail electricity markets and conditions for private investments Separation and strict regulation of transmission; separation and regulation of distribution, third party access to the grid 12
In spite of increase in the capex volume...
823.9 MW In 2000 the amount of RAO «UES» investments in production was 1.4 times as high as it was in 1998 (RUR 34.9 bn against RUR 24.3 bn). 836.5 MW RUR 28.7 bn 1,116 MW RUR 34.9 bn North-Western Co-Generation Plant
Late in 2000 the first unit of the North-Western Co-Generation Plant was commissioned - first CCGT plant in Russia Total design capacity of the plant will be 1,800 MW Its efficiency rate will amount to 51.5%, while at conventional steam plants this rate does not exceed 40% Fuel consumption per 1 kW of generated power will fall by 20-25% Construction of the plant is financed by RAO «UES»
RUR 24.3 bn
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…internal resources are not sufficient to solve the key problem Assets of RAO «UES» have highly deteriorated
Over the last 15 years virtually no large power projects have been commissioned Annual retirement of capacities is 5 times as high as the introduction of new ones Annual amount of investments is 5-6 times lower than required
In particular, investments are needed for construction of units 3 and 4 of the North-Western Co-Generation Plant, Kaliningrad Co-Generation Plant-2
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«5,000 MW» Program: First stage of an investment breakthrough
Under the «5,000 MW» Program the capacities to be put in operation will provide for gas savings of up to 6.6 bn cub. nm per annum Corresponding budgeted investments will amount to US$ 1,737.4 mn Deadline for completion of pre-feasibility studies under the Program – 30 April 2001 15
Negotiations about possible attraction of investments are currently underway with largest international companies
On behalf of RAO UES of Russia the negotiations with 9 large electricity companies have been held, additional meetings are planned
30 largest electricity companies of the world by market capitalisation
US$ bn 80 70 Companies, with whom meetings have already been held 60 50 40 30 20 Second-tier strategic investors, with whom meetings are planned 10 0 Ed F* EN TO K E L YO E EO LE N C TR SL IC E P D O U W KE E E R N ER G Y AE S EX EL SO O U N TH ER KA N N R SA W I E E EN LE D C E SA TR D IC O P M W IN R IO .
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*approximately, based on the expert estimates 16
Reform will open up new horizons for international co-operation in power sector Expanded export and import of electricity Investment opportunities in generation Russian power sector reform Asset swaps between Russian and European companies New markets for power sector technologies Strengthening of European electricity security
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