PJSC Inter RAO evolves to a large integrated energy enterprise from an electricity exporting and importing company.
Inter RAO is a diversified energy group with various assets both in Russia and abroad. Inter RAO is one of the largest players in the Russian electric power industry.
1 032.1 bln
Data for 2019 (as of 11.02.2020).
Excluding the negative effect of «Engineering» and «Corporate center» segments at the level of 6 billion rubles.
GLOBAL TRENDS AND CHALLENGES
- Restoring growth of the global economy, improved economic activities of Russia;
- Lingering geopolitical tension between Russia and the Western countries;
- Commissioning of new intragovernmental HVTLs, and the striving of Baltic countries to withdraw from the parallel work with Unified Energy System of Russia;
- Continued development of smart energy;
- Search for new sources of energy and new energy-generating technologies.
COUNTRY-SPECIFIC TRENDS AND CHALLENGES
- Significant deterioration of the basic equipment of power plants and heat supply networks;
- Elaborating financing mechanisms for modernization of the generation equipment, and introducing relevant changes into the Russian legalisation;
- Potential tariff increase above the cap for the citizens for housing and communal services within the target heat market model is restricted by the resolution of the regional authorities;
- Introduction of the mechanism for regulating sales premiums of suppliers of last resort based on the comparative method ("benchmark sale") beginning from 2018;
- Discussion of the new model of the retail market functioning;
- Development of the united information-computing centers in regions for reducing indebtedness in the utilities industry;
- Contraction of the engineering market, potential growth due to the possible launch of the mechanism for modernizing the electric power industry;
- The industry's persisting need in creating and utilizing new innovative technologies for improving operational efficiency of electricity generation facilities;
- Speeding up of innovative processes across the globe — an additional stimuli for Russia's participation in the global innovative process;
- The need for improving the legislation in part of supporting investment activities.
FOCUS ON THE EFFICIENCY OF EXISTING ASSETS AND ORGANIC GROWTH
- Realization of potential for increasing asset efficiency
- Optimization of investment activity
- Promoting offerings concerning the market model
DECREASE IN M&A ACTIVITY IN FOREIGN MARKETS IN THE NEXT 2 TO 3 YEARS
- Considering options of managing assets in foreign markets
- Focus on markets within the Group's footprint
FOCUS ON INCREASING VALUE
- Participation in projects aimed at promoting Russia's strategic interests with the use of state funding within frameworks that have no negative impact on the Company's shareholder value
- Efficiency of current projects > WACC
BY 2020, INTER RAO is expected to become A GLOBAL COMPANY — A KEY PLAYER IN THE GLOBAL ENERGY MARKET AND THE LEADER IN THE RUSSIAN ENERGY INDUSTRY
- Retaining leadership in the Russian energy industry
- Ensuring leading positions among Russian energy companies in terms of efficient management of energy assets with a focus on integrating innovation and increasing energy efficiency
- Increase in shareholder value
- Expanding the Company's presence in key foreign markets as well as promoting Russian energy practices and solutions abroad
- Assuring energy safety and promoting Russia's strategic interests
|KEY TARGET INDICATORS1||2020|
||>RUB 100 billion (>RUB 130 billion)3|
|Installed power generation capacity||
||>34.6 GW (> 36.6 GW)3|
|Share of the Russian supply market||
|Marginal profit from foreign trade operations||
||RUB 3.6 billion|
|Efficiency of current projects||
|EBITDA (in accordance with IFRS)4||
||RUB 97.6 billion2|
≥ 25% of net profit in accordance with IFRS
(in case of changes in legislation,
if there is free cash flow)
Hereinafter target indicators are provided for the existing assets of Inter RAO at the time of strategy development.
In accordance with consolidated management.
By using free investment resources, by 2020, the Group may achieve additional EBITDA of at least RUB 30 billion / additional installed power generation capacity of up to 2 GW; Inter RAO's share of the supply electric power market may exceed 20% (provided that Inter RAO management bodies make relevant decisions on acquisition / construction of new assets).
The calculation does not take into account intragroup balance; EBITDA of jointly controlled companies is shown as a share of net profit
Increase in electric power supply
Decrease in the number of employees
Decrease in specific fuel equivalent consumption
-15g f.e. / 1 kWh
Electric power generation and the heat business
Foreign trade operations
Development of international operations
MAIN AREAS OF DEVELOPMENT
Services in energy conservation and energy efficiency
Promising business areas
Management of minority interests
ELECTRIC POWER GENERATION AND THE HEAT BUSINESS
- Promoting proposals concerning the market model;
- Implementation of long-term production programs and programs for increasing operational efficiency;
- Decommissioning of low-performing capacities;
- Implementation of construction / modernization projects;
- Acquisition of shares in generating companies / power plant assets1;
- Concluding long-term contracts for fuel supply;
- Switching to alternative coal brands;
- Increasing transportation efficiency;
- Consideration of fuel assets acquisition1.
SUPPLY BUSINESS IN RUSSIA
- Promoting offerings concerning the market model;
- Unification of the management system in electric power supply companies;
- Retaining customers and expanding the customer base;
- Expanding the list of additional fee-based services;
- Acquisition / taking control of utility enterprises1;
- Gaining of Guaranteeing supplier status if scheduled/unscheduled tenders or withdrawal of status from acting Guaranteeing suppliers in the region are taking place (when economically feasible).
SERVICES IN ENERGY EFFICIENCY
- Development of competences and technologies in the sphere of energy conservation and energy efficiency;
- Building partnerships with manufacturers of energy-saving and energy-efficient equipment, technologies and solutions;
- Provision of services for energy companies, industrial enterprises, public sector companies and housing and utilities sector business.
FOREIGN TRADE OPERATIONS
- Promoting offerings within the legal environment, including those aimed at improving the trade regimes;
- Expanding the product line and introducing new forms of trading;
- Development of export in Southeast Asia;
- Participation in the resolution of tariff issues in non-pricing zones in the Kaliningrad Region and the Far East;
- Wider representation in foreign markets1;
- Increasing the efficiency of existing assets;
- Elaborating options of asset management;
- Promoting offerings concerning state support measures;
- Participation in projects under intergovernmental agreements;
- Implementation of new construction and acquisition projects.1
- Development of competencies in the following areas: general contracting, design and commissioning;
- Equipment supply on a turnkey basis;
- Establishing consortia with international engineering companies;
- Organizing production of modern energy equipment in Russia.
- Implementation of the innovative development and R&D programs;
- Creating direct investment and venture capital funds;
- Development of an expert evaluation system for R&D funding;
- Promoting offerings concerning state support measures aimed at the development of innovation;
- Participation in the development of priority areas of science and technology in Russia;
- Cooperation with development institutions in Russia and participation in technology platforms.
PROMISING BUSINESS AREAS
- Participation in project implementation in the distributed generation segment;
- Consideration of expediency of participation in renewable energy projects;
- Monitoring of new solutions and products in order to assess the feasibility of entering new adjacent markets.
MANAGEMENT OF MINORITY INTERESTS
- Ensuring the realization of minority interests possessing no attributes of strategic ones.
In case of economic feasibility and availability of investment resources.
- Ensuring that the level of dividend payout is sufficient
- Economic efficiency (IRR>WACC, payback period corresponding to industry-average indicators)
- Systematic approach (securing a substantial market share / creating reserves)
- Synergy with Inter RAO assets
- Minimizing Inter RAO's debt burden (project financing)
- Using state support to implement projects that form part of the state policy
- Using interstate lending mechanisms to fund infrastructural projects
MAIN AREAS OF DEVELOPMENT
Engineering assets (including design and installation companies)
Innovative development companies (including research institutes / venture capital funds)
Repair and maintenance companies
Energy supply assets
- Change of corporate dividends policy of Inter RAO regarding the increase in dividend payments to at least 25% of net profit under IFRS (Provided that there are legislation changes/ if there is free cash flow);
- Improving the corporate governance system;
- Maintaining and increasing the liquidity of securities;
- Creating long-term investment attractiveness;
- Providing conditions for the growth of shareholder value.
Strategic investor or free float
Commissioning of 2,5 GW of new capacity
Decommissioning of 2,5 GW of inefficient capacity
CAGR + 14.1%
CAGR + 8.2%